Equitable Life - Public Administration Committee Contents

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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