Conclusions and recommendations
1. The
search for compensation for Equitable Life members has been heavy
on inquiries but light on solutions. We welcome the Government's
commitment to resolving matters speedily. It is no less than those
involved deserve. (Paragraph 1)
2. We welcome the
fact the Financial Secretary to the Treasury has made clear that
the Government accepts all findings of maladministration made
by the Ombudsman. (Paragraph 7)
3. There is a fundamental
incompatibility between the position of the Ombudsman and Sir
John Chadwick's approach. Sir
John's remit does not reflect all ten of the Ombudsman's findings.
Sir John and the Ombudsman may have reached different answers
because they addressed different questions. (Paragraph 9)
4. We regret that
despite the Government's commitment to meet the Ombudsman's recommendations
that it did not properly explore the possibility of amending Sir
John's terms of reference back in May. Had this change been made
then it would not have significantly altered the timescale for
delivering compensation. (Paragraph 15)
5. We therefore recommend
that the Government re-engages Sir John Chadwick to establish
what conclusions he would reach under terms of reference which
reflect all ten of the Ombudsman's findings. We believe this work
can be done in parallel with the Independent Commission's work
to design a compensation scheme. We think that this need not
delay payment to policyholders. It would however leave open the
extent of the Government's liability in the spending review, but
the timetable for the CSR should not be the driving factor. Alternatively
the Government must find some other way of resolving the incompatibility
between the Ombudsman's findings and Sir John Chadwick's existing
terms of reference. If the Government's proposals remain based
on Sir John's existing terms of reference, we concur with the
Ombudsman that they are, in principle, an "unsafe and unsound"
basis on which to proceed. (Paragraph 16)
6. We welcome the
broad consensus on the quantum of relative loss around the provisional
figures produced by Towers Watson of between £4 and 4.8 billion.
EMAG are of the view that this is still a considerable understatement.
The only way this disagreement can be resolved is if Towers Watson
are instructed to recalculate their estimate in line with the
Ombudsman's findings. (Paragraph 20)
7. There is no dispute
that the burden on the public purse must be taken into account
in assessing the level of compensation. It follows that there
must be some reduction of the compensation awarded. The reduction
must strike an appropriate balance between the interests of taxpayers
and the interest of policyholders. (Paragraph 25)
8. The Ombudsman's
objection was to the challenge posed to her idea of injustice,
not to the level of compensation that the Government finds to
be affordable. The fact the Government may not be able to afford
to compensate fully for relative loss is a separate issue from
the how relative loss is calculated. (Paragraph 27)
9. The Government
should be open with Parliament and the policyholders. It must
explain the basis for the final loss figure. It must also set
out how it has determined what is affordable. (Paragraph 28)
10. The Government
should provide an early opportunity for Parliament to debate the
announcement, and quantum, in government time. (Paragraph 29)
11. If the public
is to have trust in its elected representatives, we must keep
our promises. Expectations have been raised by many of those seeking
election. The coalition should focus on how to meet the political
commitment it has made. (Paragraph 38)
12. Given the circumstance
of this case, and that legislative changes mean that the FSA no
longer falls within the Ombudsman's jurisdiction, it is important
to note that the decisions the Government makes cannot set a precedent
for future cases. (Paragraph 39)
13. We welcome the
appointment of the Independent Commission and endorse the Government's
intention that it should work quickly and make the first payments
in the early part of next year. We seek an assurance from the
Government that the cost of administering the scheme should not
come out of the total compensation sum. (Paragraph 45)
14. We endorse the
principles that it should be transparent, fair, and independent
as well as swift. We encourage the Commission to design a payment
scheme which allocates compensation as fairly as possible and
strikes a balance between speed and proper compensation to individual
policyholders for their loss. (Paragraph 46)
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