26 Feb 2015 : Column 483

Jimmy Savile (NHS Investigations)

11.29 am

The Secretary of State for Health (Mr Jeremy Hunt): With your permission, Mr Speaker, I will make a statement on the NHS investigations into Jimmy Savile.

This morning, a further 16 investigations into the activities of Savile in the NHS were published. Those include the main report from Stoke Mandeville hospital and reports from 15 other hospitals. One report relates to Johnny Savile, the older brother of Jimmy Savile.

Although no system can ever be totally secure from a manipulative and deceitful predator such as Savile, we learned last year that there were clear failings in the security, culture and processes of many NHS organisations, allowing terrible abuse to continue unchecked over many years.

Some victims are sadly no longer with us and others continue to suffer greatly as a result of what happened. I apologised to them last June on behalf of the Government, and today I repeat that apology: what happened was horrific, caused immeasurable and often permanent damage, and betrayed vulnerable people who trusted us to keep them safe. We let them down. As one of the Stoke Mandeville victims said:

“There are so many messed up lives—although people have built up lives, you have children, you make a life, it ruins everything, your relationships with another human being—the things you are supposed to have.”

Today, we must show by our deeds as well as our words that we have learned the necessary lessons.

The new reports, like those released last year, make extremely distressing reading. In total, 177 men and women have come forward with allegations of abuse by Jimmy Savile, covering a period beginning in 1954 and lasting until just before his death in 2011. At least 72 people who gave evidence were children at the time of the abuse, the youngest only five years old. The allegations include rape, assault, indecent assault and inappropriate comments or advances.

Allegations have been made not in one or two places, but in over 41 acute hospitals—almost a quarter of all NHS acute hospitals—as well as in five mental health trusts and two children’s hospitals. Further investigations have happened at a children’s convalescent home, an ambulance service and a hospice. Three new investigations are under way at Humber NHS Foundation Trust, Mersey Care NHS Trust and Guy’s and St Thomas’ NHS Foundation Trust. Any further allegations that are received will, of course, be investigated as serious incidents.

In addition, the Department for Education has today published 14 reports on investigations in children’s homes and educational settings, and the review by Dame Janet Smith into Savile’s activities at the BBC is ongoing.

The investigations have been deeply harrowing for the victims, but also for the investigators. I put on the record my thanks to everyone involved, particularly Kate Lampard and those at the NHS Savile Legacy Unit, who have provided robust oversight and assurance in an incredibly difficult job.

I now turn to Stoke Mandeville—the hospital with which Savile was most closely associated. The report published today reveals some shocking abuse of 60 victims

26 Feb 2015 : Column 484

that took place over more than 20 years between 1968 and 1992. From the brave victims who have come forward, we know that Savile’s activities there included groping, molestation and rape of patients, staff and visitors. The victims were predominantly, but not exclusively, female. Twenty of them were vulnerable patients who were disabled with severe spinal injuries. One was a child as young as eight. Savile deliberately exploited those people because he understood their reliance on specialist care that they might only be able to receive at Stoke Mandeville, making it even harder for them to speak up. It was calculating behaviour of the most abhorrent kind. Victims included 26 visitors and six staff. Six victims reported being raped, one as young as 11 or 12. Most victims were too frightened to come forward, but there were nine informal complaints and one made formally. None was taken seriously.

There is no suggestion that Ministers or officials knew about those activities, but accepted governance processes were not followed in the decision to allow Savile to acquire and maintain a position of authority at the hospital. In particular, Ministers made the expedient decision to use Savile not just to raise funds to redevelop Stoke Mandeville’s national spinal injuries centre but to oversee the building and running of the centre, even though he had no relevant experience. Because of his celebrity and useful fundraising skills, the right questions—the hard questions—simply were not asked. Suspicions were not acted on, and patients and staff were ignored. People were either too dazzled or too intimidated by the nation’s favourite celebrity to confront the evil predator we now know he was. Never again must the power of money or celebrity blind us to repeated, clear signals such as those that suggested that some extremely vulnerable people were being abused.

I spoke last June about how changes to processes, policies and laws over the past 30 years have made it much less likely that a predator like Savile would be able to perpetrate these crimes today. Charity legislation is much tougher and sets out specific requirements for the auditing and examination of NHS charities’ accounts. The safeguarding system now in place is significantly improved. The Children Act 1989, the first child sex offenders register, Criminal Records Bureau checks and the Disclosure and Barring Service have all provided further protection. The Care Act 2014 will put adult safeguarding on a legal footing for the first time from 1 April, and safeguarding adults boards will ensure that local safeguarding arrangements act to help and protect adults. We have enshrined the right to speak up in staff contracts, and we are amending the NHS constitution and changing the law to make employers responsible if whistleblowers are harassed or bullied by fellow employees. We are also consulting on how best to implement the recommendations in Sir Robert Francis’s whistleblowing review.

However, proper policies and processes will not succeed if they do not go hand in hand with a change in culture whereby patients and staff alike feel able to speak out with any concerns, and can be confident that they will be listened to. It is particularly important that children and those with physical and mental illnesses are listened to, because they are the most vulnerable. Although we are proud to live in a society in which people are innocent until proven guilty, we have a collective responsibility to investigate all serious allegations properly in a way that simply did not happen time after time.

26 Feb 2015 : Column 485

In the light of these disturbing reports, I also asked Kate Lampard to outline key themes across all the NHS investigations and to consider any further action that needs to be taken. She considered the extent to which Savile was a product of the culture of his time and concluded that although he was “a one-off”, there are important improvements that need to be made to protect patients today. Hers is a thoughtful and comprehensive report, and I am today accepting in principle 13 recommendations that she makes, including on access, volunteering, safeguarding, complaints and governance. Trusts should develop policies on visits by celebrities, and on internet and social media access across hospitals. They should review voluntary service arrangements, safeguarding resources and the consistency of employment practices, ensuring clear executive responsibility. They should consider whether policies on the impact of volunteers on a trust’s reputation are adequate.

The Department, with its arm’s length bodies, will examine the possible development of a forum for NHS voluntary service managers, the raising of awareness of safeguarding referrals among NHS employers, and to what extent NHS trust staff and volunteers should undergo refresher training in safeguarding.

I know that some trusts that produced reports last summer have started to make improvements. One trust has already encouraged staff to raise concerns, updated its whistleblowing and complaints policy and published a policy on the recruiting and management of volunteers. It is that kind of sensible, swift action that I want to see across the NHS. I have therefore asked the chief executives of Monitor and the Trust Development Authority to ensure that all trusts review their current practice against the recommendations within three months, and then to write back to me with a summary of plans and progress at each trust. Those plans will be fed into the Government’s ongoing work to tackle child sexual exploitation.

One welcome practice that Kate Lampard’s report highlights is the growth in volunteering to support the work of the NHS. Overall across the NHS we estimate there are 78,000 volunteers, including 1,500 at just one trust—King’s—in London. They do a magnificent job in improving patient care every single day throughout the NHS. We welcome that civic revolution, and today need to ensure that any safeguards put in place support its future growth by helping to protect the reputation of volunteering as well as the safety of patients. Hard cases make bad law, and it would be the ultimate tragedy if Savile’s legacy was to hold back the work of the NHS’s true heroes who give so much to their local hospital by volunteering their time.

While I agree that all volunteers working in regulated activity—typically close or unsupervised contact with patients—should have an enhanced Disclosure and Barring Service check, I am not today accepting the recommendation that that should apply to all volunteers. As Kate Lampard acknowledges in her report, such a system may not in itself have stopped Savile. Instead, trusts should take a considered approach to checks on all volunteers, particularly using the enhanced DBS service if there is a possibility that someone will be asked at a future date to work closely with patients. They should also ensure that proper safeguarding

26 Feb 2015 : Column 486

procedures are in place locally, as well as the DBS process, because it would be wrong to rely on a national database as a substitute for local common sense and vigilance.

The report recommends that DBS checks are redone every three years. I believe the report is correct to say that trusts must ensure that their information on volunteers is up to date, but they can achieve that through asking volunteers to make use of the DBS update service that enables trusts to check DBS information regularly, and avoids volunteers having to go through the DBS process multiple times. We will be advising all trusts to do that.

Finally, I intend to take action in one area of great concern that the report highlights, namely the responsibility and accountability of staff working with vulnerable people to take appropriate action when alerted to potential abuse. As the report recognises, the Government have substantially strengthened safeguarding arrangements since these dreadful events, but it is clear that there should have been a much stronger incentive on staff and managers to pass on information so that a proper investigation took place. That is clearly unacceptable, and the Government have already said that we will consult on introducing a new requirement for the mandatory reporting of abuse of children and vulnerable adults. The outcome of such a consultation must take full account of the need to avoid unintended consequences.

Let me conclude with a tribute to the victims who have had the courage to come forward, because without them these investigations would not have been possible: it is our society’s shame that you were ignored for so long, but it is a tribute to your bravery that today we can take actions to prevent others from going through the misery you have endured. As a result, our NHS will be made safer for thousands of children and vulnerable adults as we learn the uncomfortable lessons from this terrible tragedy. I commend this statement to the House.

11.43 am

Andy Burnham (Leigh) (Lab): I thank the Secretary of State for his considered and thorough statement, and for his evident concern for the many lives that have been damaged by these vile acts and systemic failures. He was right to repeat his apology to Savile’s many victims and their families, and the whole House will support his decision to do so. I add my thanks to all those involved in compiling these reports, and particularly Kate Lampard and Ed Marsden for their “Lessons Learned” report. Through their diligent work, the full scale and horror of Savile’s sickening behaviour across the NHS has finally been laid bare. It beggars belief that abuse on this scale, known to so many people, was allowed to continue for so long. As the analysis of what happened becomes more complete and the full picture emerges, the question will grow in people’s minds: “Where is the accountability?” That is what victims are crying out for, and that is what must follow. It must be the single most important question occupying the Government in dealing with these matters, and it must continue to be a priority for the next Government and the next Parliament.

Much of what is revealed in the reports confirms what we already know about a pattern of criminal behaviour in hospitals where patients and victims were not listened to and staff felt unable or unwilling to challenge, but what changes with the Stoke Mandeville

26 Feb 2015 : Column 487

report is that it is now no longer possible to say that although the abuse was widespread, it was not known to people in senior positions. Nine verbal reports and one formal complaint were made, but none was acted upon. Why? The questions do not just extend to senior staff at the hospitals, and the Secretary of State was right to raise questions about the role of civil servants and former Ministers. To quote one of the main observations of the “Lessons Learned” report:

“As the investigations at Broadmoor and at Stoke Mandeville show, Savile’s involvement with those hospitals was supported and facilitated by Ministers or senior civil servants”.

We already knew that he was appointed by Edwina Currie to the taskforce that ran Broadmoor between 1988 and 1989, but today’s Stoke Mandeville report states:

“From 1980 Savile’s relationship with Stoke Mandeville Hospital underwent a significant change when he was appointed by Government Ministers…to fundraise for…the new National Spinal Injuries Centre”.

The “Lessons Learned” report concludes:

“In appointing Savile to these roles, and in allowing him the licence and free rein he had in exercising these roles, Ministers and/or civil servants either overrode or failed to observe accepted governance processes.”

That extremely serious finding needs to be acted upon.

I do not expect the Secretary of State today to answer these points in detail, and I welcome what he said in facing up to the findings, but does he agree that they point to the need for a more formal inquiry process involving senior people from that time—senior people in the hospitals concerned, senior people in the Department of Health and former Ministers? Knowing what we now know, we cannot simply leave this here. Victims must have accountability. That must be our shared goal across the House.

Alongside accountability, Savile’s victims need help. As the Secretary of State said, many lives have been damaged by what happened and will never recover. Nothing can be done to heal their pain, but there are things that could help them. In his last statement, he said that he would continue to explore the possibility of compensating victims using Savile’s estate to fund any claims. Will he update the House on that work? Is the value of Savile’s estate anywhere near enough to provide adequate compensation to his many victims? Has the Secretary of State made any judgment about whether public funding is needed to help compensate them? Today’s news will distress everyone directly affected. What steps are being taken to offer them counselling and other support?

Turning directly to the “Lessons Learned” report, while these appalling events come from a very different era, it would be a major mistake for the House or anybody reading the reports to think they have no relevance to today. To quote a chilling conclusion from the Lampard and Marsden report:

“The evidence we have gathered indicated that there are many elements of the Savile story that could be repeated in future.”

We know that a child cancer specialist from Addenbrooke’s was recently convicted for sexual offences against vulnerable boys as young as eight who were in his care.

Even though the world was very different in the 1970s and 1980s, it is impossible to read these reports without wondering how so many people could have known what was going on, yet felt they could not do anything about it. It must never again be the case that a member of staff

26 Feb 2015 : Column 488

should be made to feel unable to speak up for fear of “letting the hospital down”. They must feel fully supported at all times in reporting any act of abuse against anybody in the place in which they work. While we welcome the action the Secretary of State is taking to support NHS whistleblowers and strengthen their position, we cannot complacently think that this will be enough in these kinds of situations.

On Monday, the Government voted against the new legal requirement for those working in schools, hospitals and child care settings to report to the police child abuse in institutional settings. The purpose of such a requirement would be to make sure that no professional ever felt the protection of the reputation of the institution should take priority over the protection of a child or pursuing the truth. I listened carefully to what the Secretary of State said about this today. He said that there will now be a process of consultation on a proposed mandatory reporting duty. That is indeed a step forward, which I welcome. I understand why the Government would want to consult—because of the effect such a requirement could have on the working of an organisation. I want to push the right hon. Gentleman a little further and say that this consultation should not be open-ended, but a consultation leading to a firm commitment to legislate at the earliest opportunity—if not in this, in the next Parliament. I believe that that is the growing will of this House and I believe it will be the growing will of the next one.

On vetting and barring, the Secretary of State made some welcome proposals, and Kate Lampard has highlighted the need for a new focus on this area. There is a concern that changes to the vetting and barring scheme in this Parliament have significantly weakened its ability to protect children from convicted sex offenders. There is a concern that some offenders are being left off the list or that there is now a limit to the number of roles that offenders can be checked against, so that the potential for offenders to gain access to vulnerable people has increased.

Will the Secretary of State look again at the proposals put forward by my right hon. Friend the shadow Home Secretary, and ensure that every possible step is taken to close any possible loophole that could be exploited by a sex offender? As Kate Lampard rightly said, hospitals in the coming era are going to have to be more reliant on the work of volunteers and on fundraising. That is the context in which the NHS will operate for some considerable time and, in that context, there will be a need for a greater number of checks to ensure that those participating in the volunteering or the fundraising are appropriate people for roles in any hospital organisation. I ask the Secretary of State to ensure that the vetting and barring scheme is up to that task, so that we leave no loopholes for convicted paedophiles or sex offenders to exploit.

In conclusion, these are painful, appalling and sickening events that are a dark chapter in the history of the NHS and indeed of our country. We applaud the Secretary of State and the Government for their commitment and thoroughness in facing up to these events of our past. I can assure the right hon. Gentleman of our full support in bringing accountability and redress for the victims, and in ensuring that whatever can be done across the Floor of the House is done, so that these kind of events can never take place again in our national health service.

26 Feb 2015 : Column 489

Mr Hunt: I thank the shadow Health Secretary for his constructive comments. I think the whole House will unite to ensure that all the necessary lessons are learned. I echo the right hon. Gentleman’s praise for the 44 very thorough reports that involved such painstaking and difficult work, and the superb job done by Kate Lampard and Ed Marsden in bringing together all those reports and thinking about the lessons that needed to be learned.

As the right hon. Gentleman observed, Kate Lampard has stated very clearly that while she does not think that there will be another instance of this kind in the future, elements of it could come about. It would be a mistake to say that this is all about stopping another Savile. We need to think more broadly about how abuse could take place in a modern context, and ensure that we learn broader lessons—which, indeed, we are learning in the context of what has happened in Rotherham, in Rochdale and elsewhere.

The right hon. Gentleman is right about the role of accountability, which clearly needs to be greatly improved. Let me answer, very directly, his question “Why was nothing done?” I think the report makes clear why nothing was done, and this is the tragedy. It was Savile’s importance, because of his fundraising, to institutions such as Stoke Mandeville in particular, as well as his celebrity, that made people afraid to speak out—and we should remember that, in all likelihood, many people have still not spoken out—but also made it less likely that something would be done when they did speak out, and that is what must never, ever be allowed to happen again.

The report does not directly criticise Ministers and civil servants for the abuse. It says there is no evidence that they had any knowledge of it. We must recognise, however, that the system itself was flawed, which is why the fact of the abuse never reached the ears of Ministers and others who were making decisions about Savile’s influence. What the report does say is that it was questionable whether processes should have been overridden, particularly in respect of financial propriety. The role that Savile was given in the construction of the new spinal injures centre at Stoke Mandeville was smoothed over as quickly as possible, because people thought that he would be able to bring a lot of money to the table, and that he would “walk”—that was the word used by the civil servants—if any bureaucratic obstacles were put in his way. That was wrong, and we can see that. It is vital for us to learn the lessons.

The right hon. Gentleman asked about the value of the Savile estate. A total of £40 million remains under management in his charities. That money will be made available to meet claims made by Savile’s victims, and if it is not enough, the Government will meet any further claims through the NHS Litigation Authority. I can also confirm that any counselling that the victims need will be made available to them by the NHS.

I do not think that there is any disagreement in principle on the issue of mandatory reporting, but it is important for a proper consultation to take place, which is why it would not have been right to pass a law as early as last week. We all want there to be a proper, strong incentive for those who are responsible for the care of vulnerable adults and children to report any concerns that are raised with them, and to ensure that something is done if any allegations are made. However, we also want to avoid the unintended consequences that might

26 Feb 2015 : Column 490

follow if legislation were badly drafted. It is particularly important for us to protect the ability of professionals to make judgments based on their assessment of what is actually happening.

We want to avoid the risk that the processes that are followed, and the ultimate decisions that are made, will not be in the best interests of the children or vulnerable adults concerned because people are following a legalistic process rather than doing what is right on the ground. No one would want that to happen, which is why it is so important for us to get the legislation exactly right. I can tell the right hon. Gentleman, however, that following the consultation—which we will carry out as soon as possible—we will legislate if necessary.

It is also important to say that there is a role for the professional codes in this area; this is about the correct professional ethics. We changed the professional codes for doctors and nurses following the Francis report, to encourage them to speak out, and there may well be lessons that need to be learned in that regard.

On the operation of the disclosure and barring system, we will of course look closely at what the shadow Home Secretary is suggesting, but a big improvement has been made to the new DBS arrangements, compared with the old Criminal Records Bureau system, in the form of the update service. Volunteers can subscribe to that service, and we are recommending today that all trusts ask volunteers to do so as a condition of their volunteering—

Mr Speaker: Order. These are extremely important matters of the highest sensitivity, and I appreciate the solicitousness with which the Secretary of State is treating them, but we have two heavily subscribed debates to which we have to progress and, before them, a statement from the hon. Member for Maldon (Mr Whittingdale), who chairs the Culture, Media and Sport Select Committee. The Front-Bench exchanges have so far taken up half an hour, and that is too long. I should therefore be most grateful for the co-operation of the Secretary of State. If he could pithily draw his remarks to a close so that we can get on to the questioning by hon. Members from the Back Benches, that would be a great advance for the House and possibly for civilisation.

Mr Hunt: Thank you, Mr Speaker. I did want to give a full response to the shadow Health Secretary, but I am happy to address any other concerns he has at a later stage.

Dr Sarah Wollaston (Totnes) (Con): The Secretary of State has set out in the starkest terms the extent of the vile abuse perpetrated by Savile. It is also chilling to note in Kate Lampard’s excellent report that between 60% and 90% of child abuse is still going unreported. Those who perpetrate it are adept at adapting their mechanisms, and recommendation 9 in the report mentions the extent to which abusers use social media to abuse children on hospital sites. Can the Secretary of State tell the House whether he is going to implement recommendation 9, and if so, how that will happen?

Mr Hunt: Yes, we are; that is very important. We absolutely accept the principle that all hospitals must have explicit policies on the use of social media. We must do everything we can. It is difficult to stop people going on to Facebook, for example, but when it comes

26 Feb 2015 : Column 491

to internet access by children, there are things that we can do, and we will absolutely be implementing that recommendation.

Fabian Hamilton (Leeds North East) (Lab): I was Savile’s Member of Parliament and, as the Secretary of State can imagine, Leeds North East has its fair share of his victims. One such victim approached me recently in great distress. He had been abused as a child by Savile and had given his story to the police after decades, but it was not a complete story. When he was subsequently interviewed by NHS staff, they did not believe his story because it was inconsistent, owing to the fear that he had felt over the decades following the abuse. Will the Secretary of State reassure my constituent and the many others like him that they will not become victims twice?

Mr Hunt: The hon. Gentleman makes an important point, and I have great sympathy for his constituent. The information was not collated centrally. There were a number of reports about which we might have been sceptical if we had read them in isolation, but when we read them together with other reports, we see a pattern and we can conclude, as the investigation has done, that those incidents did indeed take place. That is one of the big learning points: we have to collate information that different victims provide at different times, to ensure that proper judgments can be made and that action can be taken.

Mrs Cheryl Gillan (Chesham and Amersham) (Con): It has been truly sickening to read in the report that over two decades, money, influence, celebrity and people being star-struck could allow Savile the licence serially to abuse so many people, particularly in our local Buckinghamshire hospital at Stoke Mandeville. I really welcome the apologies from the Secretary of State and from our local chief executive officer, Anne Eden, who has given a heartfelt apology and praised the courage of those who have come forward. May I press the Secretary of State further on mandatory reporting? It is exceedingly important that we start that consultation as rapidly as possible. It was obvious that the proposed clause in the Serious Crime Bill was flawed in many ways. When will he start the consultation, and when will the terms of reference be available? Will he now undertake to legislate as soon as the consultation has produced results?

Mr Hunt: I can certainly give that undertaking: we will start the consultation as soon as possible and if the conclusion is for legislation, we will legislate as soon as possible. I hope that my right hon. Friend understands that there is a great deal of complexity involved in getting this right. It is very important to talk to victims and to people who are looking at the evidence on mandatory reporting, which happens in other parts of the world, with very mixed results. Most importantly, we want to avoid the unintended consequence of a decision being taken against the interests of a child or vulnerable person because people are following a legalistic process which undermines the proper professional judgment made on the ground.

Kerry McCarthy (Bristol East) (Lab): The sheer scale of this—the number of assaults, and the range of victims and locations—is just horrific, as I am sure everyone will agree. As has been said, the report states

26 Feb 2015 : Column 492

that 60% to 90% of current assaults on children are probably going unreported. Does the Health Secretary not think that better—indeed, compulsory—sexual relationships education in schools would mean that children are more likely to come forward and, importantly, that once they have gone through that education at school their parents would be more likely to believe them?

Mr Hunt: I do think it is very important to have good sex education in schools and that we make sure that all children understand when a boundary has been crossed and when they need to speak out. That is an important lesson from this report.

Robert Jenrick (Newark) (Con): May I draw the House’s attention to another report published today, that concerning Rampton hospital in my constituency? Jimmy Savile was given almost unrestricted access to one of the UK’s most highly secure hospitals, which adds another layer to the matter. Rampton hospital contains some of the UK’s most dangerous patients. One of the most concerning issues in the Rampton report is that for staff his activities were described as an “open secret” but that management may not have known about them. If that finding is credible—it does not ring true with colleagues at the hospital I have spoken to—and is to be believed, would the Secretary of State give thought and resources to how we deal with whistleblowing and reporting in these most closed and secretive environments, where it seems to be the most important to have an open culture?

Mr Hunt: My hon. Friend speaks wisely. There were four separate disclosures of sexually inappropriate behaviour by Savile in separate incidents, not with patients, but with other people, including a young child. My hon. Friend is right: it is not just about mandatory reporting; it is also about making sure that when that reporting is done by a member of staff, something actually happens. That is part of the reason we need to do this consultation properly, because it is about making sure that the right actions are taken by people who are able to take those actions. That clearly did not happen in this case.

Paul Flynn (Newport West) (Lab): On 11 different occasions, Savile attended new year’s eve parties at 10 Downing street. He was honoured, knighted and lionised by the establishment. They might not have known, but the unanswered question is: why did the intelligence and security services not warn? Why did they constantly give him clearance, allowing him not only to mix with Prime Ministers and royalty, but to prey on these defenceless innocents?

Mr Hunt: The reason, I think, is that the security services would not have known about this. What the report makes clear is that where people did speak out about concerns, nothing was done. That is what is so unacceptable and what we have to change. Savile was a national celebrity, who was treated as such by the establishment at the time, the establishment not having any idea of this evil abuse that was happening.

Mr Dominic Grieve (Beaconsfield) (Con): I am very grateful to hear the Secretary of State’s statement, and I am sure it will provide reassurance in my constituency,

26 Feb 2015 : Column 493

which is also served by Stoke Mandeville hospital, that these terrible events and the underlying issues will be properly addressed. May I urge the Secretary of State on one point that emerges from the report, which is that common sense was suspended in this period? We may consider putting in systems, be it enhancing vetting or trying to make sure that volunteers are properly screened, but none of those will ultimately make a difference unless the overall culture that is there for the promotion and protection of the patient is so well ingrained that people exercise common sense in ensuring that that protection is provided. The most worrying aspect of this report is the way in which that was totally lost over a prolonged period.

Mr Hunt: My right hon. and learned Friend is right. That is why, if we change the law on mandatory reporting in any way, we need to be careful that we do not inadvertently give licence to the suspension of common sense. It is why we decided not to accept only one recommendation—the mandatory disclosure and barring checks on all volunteers in hospitals, even if they are not in close contact with patients. We believe that common sense and vigilance at local level will be one of the key ways in which we stop this happening again.

Tim Loughton (East Worthing and Shoreham) (Con): The Savile revelations never cease to amaze and shock, but are they in some respects a distraction from the bigger issues? The vast majority of abusers are not celebrities. Does my right hon. Friend agree that the bigger issues are the mindset that said, when concerns were raised, “Oh, it’s just Jimmy”, the fact that police were told to turn a blind eye, and suggestions that other doctors and clinicians were also active paedophiles and were complicit in the abuse in some way? Is not the bigger issue the institutional conspiracy to abuse? How will this report feed into the essential inquiry now under way with Justice Lowell Goddard?

Mr Hunt: What we are announcing today will be closely fed into the report that the Home Office is currently overseeing. My hon. Friend makes an important point. Clearly, some things in the report would not happen today. We can be confident that the culture across the NHS and social services has changed significantly in a positive way. There is much greater awareness of safeguarding issues. However, the report also said that elements of other things that it highlighted could happen today. That is why it is so important that we learn the necessary lessons.

Duncan Hames (Chippenham) (LD): The reports make it clear that Ministers’ appointment and use of Savile was improper and often contrary to advice from clinicians and officials. Former Minister Edwina Currie is quoted as telling the investigation last year:

“He knew how to pin people to the wall and get from them what he wanted. … he’d had a look at everything he could use to blackmail the POA … I thought it was a pretty classy piece of operation.”

Ministers Vaughan and Jenkin appointed Jimmy Savile to oversee the rebuilding of the national spinal injuries centre, contrary to advice, we are told in today’s report, from officials who thought that it would be better for

26 Feb 2015 : Column 494

those funds to be spent on centres of expertise around the country. Is it not critical that we understand the governance failures in this sorry saga, and that that insight feeds into the work of the Goddard inquiry?

Mr Hunt: Of course it is important that we learn the governance lessons, but the report is careful. It does not use the word “improper” in relation to the behaviour of Ministers or civil servants. It says that they acted reasonably. It raises some important questions, and I hope that the tone of my statement will reassure my hon. Friend that I do not seek to duck the fact that there are clearly questions about whether Ministers and civil servants behaved in the appropriate way. It is important that we learn the lessons from what went wrong.

Dr Phillip Lee (Bracknell) (Con): I represent the constituency that is home to Broadmoor hospital, and I worked at Stoke Mandeville for two years in the early part of this century, so I have taken a deep personal interest in the investigation. I find it difficult to comprehend or accept that senior managers and clinicians were not aware of the allegations. I can find no mention in the Stoke Mandeville report of any clinician by name as yet. Can the Secretary of State assure me that looking to the future, named individuals will be given the responsibility to prevent this from happening, and if they fail there will be an impact on them, their career, their pension and the like?

Mr Hunt: The report clearly says that every trust must have a named director who is responsible for safeguarding. One can draw one’s own conclusions about whether senior management knew or not. The report was unable to find evidence that that was the case, but nor did it say that it was not the case. One comes away with the clear suspicion that senior management may not have wanted to hear the things that they were being told because of Savile’s importance in fund raising and possibly his celebrity status. That is what we must make sure never happens again.

Steve Baker (Wycombe) (Con): With Stoke Mandeville serving my constituents, I was reassured to hear that in the present culture these appalling circumstances are not likely to be repeated. Can my right hon. Friend reassure me that it is now far more likely that we will see prosecutions within the lifetime of perpetrators rather than this horrific clean-up exercise after a perpetrator’s death?

Mr Hunt: I do believe that that is the case. I want to put it on record that Buckinghamshire Healthcare NHS Trust, which includes Stoke Mandeville, has made huge progress in turning round and improving its culture. It came out of special measures last year and the staff and management are to be congratulated. His constituents can be confident that, although things are not perfect, huge progress has been made to improve standards.

Tessa Munt (Wells) (LD): I welcome the report. I support mandatory reporting and I look forward to seeing some serious progress in this respect. Staff and volunteers in all sorts of settings need the ability to report outside their organisation. Where the state is a corporate parent or a carer, or a provider of an extended home setting, it is important that young and vulnerable

26 Feb 2015 : Column 495

people can find some way of reporting outside. Is the Secretary of State willing to strengthen the role, in conjunction with other Secretaries of State, of the local authority designated officer? Already we know that people in schools and colleges can go to the LADO, but surely that is also appropriate for health and care settings, homes, prisons, the armed forces and anywhere else where there are young and vulnerable people. The benefit is that the LADO is perceived as independent and is someone outside the employer’s strict reporting guidelines. It would give a better chance for victims to be heard, action to be taken and lessons to be learned.

Mr Hunt: I am happy to look into that, but hospitals have a responsibility to go to the LADO if there is an incident affecting one of their volunteers or staff. The report makes it clear that they should exercise that responsibility with great diligence, but I am happy to look into the idea that patients should have that access as well.

Dr Matthew Offord (Hendon) (Con): This morning a legal representative of the survivors group said that she had evidence that it had been reported to senior management that Savile had committed offences at Stoke Mandeville. Can the Secretary of State advise whether that opens up the NHS to compensation claims? Can he ensure that any damages claims fall on the Savile estate?

Mr Hunt: We have already paid compensation claims. Initially, those claims will be taken from the Savile estate and the money left in the Savile charities, but if those funds prove not to be enough we would pay from

26 Feb 2015 : Column 496

the NHS Litigation Authority. The report is not able to confirm the extent to which senior management knew or did not know about the allegations, so it is difficult to make progress on the specific points, but that does not stop people being able to make a claim and receive compensation.

Greg Mulholland (Leeds North West) (LD): I echo the Secretary of State’s praise from those involved in this meticulous investigation and report, but does he acknowledge the concern that the cases of many victims of sexual abuse in other organisations and institutions have not involved a celebrity? I have in my possession a letter from 1993 sent from a Barnardo’s project worker in Leeds to Leeds city council, which blames a constituent of mine for her own rape. Nothing was done to protect her. The abuse continued, and that offence was not reported to the police. Clearly, that would not happen now, but there are still victims whose cases are not being looked at and are not getting justice. What can be done about that?

Mr Hunt: A lot of things, and that is what this morning is all about. Mandatory reporting so that the reporting of incidents becomes the norm and not the exception is clearly an area where culture has to change. We have to find the right way to do that. Also, if we get this culture right, we should be able—this must be the ultimate objective of all this work—to stop such incidents happening in the first place. If people had acted earlier on their suspicions about Savile, a lot of victims would have been spared the torment that they subsequently had to endure. The biggest tragedy of all this is that it happened over decades and nothing was done. That is what we need to make sure never happens again.

26 Feb 2015 : Column 497

Future of the BBC

Culture, Media and Sport committee

Select Committee statement

Madam Deputy Speaker (Mrs Eleanor Laing): I will briefly remind the House of what is still a fairly new procedure. Mr John Whittingdale will speak on his subject for up to 10 minutes, during which no interventions may be taken. At the conclusion of his statement, I will call Members to put questions, and Mr Whittingdale will respond to these in turn, as is the case for any normal statement. Members can expect to be called only once, and their interventions should be questions that are—

Chris Bryant (Rhondda) (Lab): Lengthy.

Madam Deputy Speaker: Brief. The hon. Gentleman challenges me, but questions should be brief. Front Benchers may briefly take part in questioning, and we all look forward to that.

12.21 pm

Mr John Whittingdale (Maldon) (Con): I am pleased to have the opportunity to present to the House the Committee’s report “Future of the BBC”. Our major inquiry began well over a year ago, and I express my thanks to my colleagues on the Committee, our Clerks and our specialist adviser, Mr Ray Gallagher.

As is well known, the BBC charter expires at the end of 2016. The renewal process provides an opportunity to examine all aspects of the BBC—scale, scope, governance and funding. Since the previous charter renewal, huge changes have taken place to the way in which people watch television. At the time of that renewal, most households had access to only four channels, but since then we have had analogue switch-off, meaning that everyone has access to 40 or more digital channels. Many people also access catch-up television through the iPlayer or some of the new streaming services. The whole media landscape therefore looks very different from how it did 10 years before.

The Secretary of State has said that it will be for the next Government to consider the future of the BBC and charter renewal—I understand his reasons—but the Committee points out that at the time of the previous review, an independent panel led by Lord Burns conducted a long public consultation before reaching conclusions. We think that this matter is so important that a similar process should take place this time, and there is no reason why that could not be initiated as soon as possible. Either way, I hope that our report will set the agenda for the forthcoming debate.

There is no question but that the BBC produces many outstanding programmes. Many of our witnesses told us that it is the finest broadcaster in the world. Its reach is 96%, it has an unrivalled reputation for accuracy and impartiality, and it is hugely respected, but any organisation that gets £4 billion of public money should be subject to close scrutiny. There have also been significant failures in recent times: the episodes of executive pay-offs, pensions and severance payments; the loss of £100 million on the digital media initiative; the disastrous acquisition and

26 Feb 2015 : Column 498

then sale of Lonely Planet; and, of course, the editorial failures regarding programmes about Jimmy Savile and then Lord McAlpine.

When one looks at the BBC, one must first ask what it is there to do. There are six stated public purposes, which are pretty broad and uncontroversial, although we thought that they could be expanded to take in training and the development of skills, and the need for collaboration and partnership.

When we looked at the scale of the BBC—what the BBC does—we were unconvinced by the argument that it should continue to try to provide something for everyone. Instead, we say that its principal focus should be on its public service remit and that it should not be afraid to do less when the market is clearly providing a lot of existing content. The BBC has already embarked on some radical thinking, which we welcome. For instance, it has decided to make BBC Three a purely online service, which we generally support. BBC Three has cost something like £1 billion during the decade in which it has been in existence, yet it has not been especially successful at reaching its target audience, so it is right to consider other means of doing so. However, we do not support establishing a BBC One+1 service in its place, especially given that people can already see programmes that they have missed through means such as catch-up services on the iPlayer.

We welcome moves to remove the in-house production guarantee and to open up all BBC commissioning to competition. We also support allowing a separate BBC production house to compete for commissions from other broadcasters. However, if the BBC production unit is to remain within the BBC, there must be full transparency and no cross-subsidy so that there is fair competition with the independent production sector. We think that the time has come for the charter review to consider the terms of trade. There have been huge changes since those terms were originally put in place, given a large number of acquisitions of independent production companies by American studios, so they need to be looked at again.

We want more partnership and collaboration with the private sector, and we specifically want more support for local media. They play a vital role in supporting local democracy and ensuring that electors are aware of what happens in council chambers and local courts, but because of economic conditions, a lot of that activity is no longer happening. We think that the BBC could play a role in supporting that, perhaps by using some licence fee payers’ money for local media and by extending the independent production quota to cover local news.

The two key aspects, however, are governance and funding. On governance, almost every single witness from whom we heard was highly critical of the BBC Trust model. Not only is there an in-built conflict between the two roles of acting as a regulator and arbitrator of complaints, as well as providing the highest level of oversight and management of the BBC, but there is confusion about the trust’s responsibilities. There have been public arguments between the director-general and the chairman of the trust, as well as the management failures to which I referred.

The Committee is clear that the trust should be abolished and replaced by a unitary board with a non-executive chairman and a majority of non-executive directors. Responsibility for all aspects of the BBC’s

26 Feb 2015 : Column 499

operation would lie with that board, as is the case for many big organisations. We accept that there would need to be external scrutiny, but we are determined that we should not recreate the BBC Trust with a different name. We suggest that there could be a smaller public service broadcasting commission to scrutinise the overall strategic plan of the BBC and assess performance, as well as to determine public funding and perhaps withhold it, in the event of failure.

The National Audit Office should be given unfettered access. The Comptroller and Auditor General complained about the difficulties that he still faces and we see no reason why the NAO should not have statutory access. We also believe that Ofcom should have responsibility for all content regulation.

Funding was always going to be the most controversial aspect of the inquiry. The licence fee is simple and universal, and it arguably maintains arm’s length independence from the Government, but it is regressive, compulsory and expensive to collect, so we considered various alternatives. In the short term, we found that there is no realistic alternative to some form of licence fee or household tax, although we support a number of changes. The arrangements should immediately be amended to cover catch-up services as well as live broadcasting.

We also see the case for decriminalisation of failure to pay the licence. The penalties that are in place are anachronistic and disproportionate, but we think that decriminalisation may create a risk of much greater evasion, so we see the case for a move towards a household levy, perhaps similar to the German model, which will be simpler to collect and much harder to avoid.

In the longer term, we think that, as viewing habits change, the licence fee becomes harder to sustain and justify, and that we should at least consider introducing an element of subscription to give viewers the choice of whether they wish to subscribe to all the BBC’s services. There would still need to be public finance for the core services—radio, news, public service programming—but the more premium content would be available as a matter of choice for the viewer through a subscription model. That would need conditional-access technology in the home and it certainly cannot be put in place immediately, but that is the direction in which we believe the Government should look as we begin the process of the charter renewal.

Again, I thank my colleagues for their assistance and contribution. We had some fierce arguments in the Committee and we did not always obtain agreement on every point, but I hope the report will stand as a working document to allow the extremely important debate on the role of the BBC in our country. That debate is starting and will continue, I have no doubt, until charter renewal at the end of 2016.

Mr Ben Bradshaw (Exeter) (Lab): Does the hon. Gentleman agree that we in Britain do broadcasting and the creative industries more generally extremely well, and that politicians tamper with our successful mixed economy, with the BBC at its centre, at their peril? Will he therefore join me in urging all the political parties to make clear in their manifestos their intentions towards the BBC, so that the British public, who value the BBC and its public service ethos, can make an informed choice when they cast their votes on 7 May?

26 Feb 2015 : Column 500

Mr Whittingdale: I thank the right hon. Gentleman for the part he played in preparing the report, which was considerable. I agree with him about the importance of the creative industries, on which the Select Committee has concentrated. I do not entirely agree with his second point, because it is important that there should be a genuine debate and a public consultation. We recommended an independent review panel, and all that would be pre-empted if the political parties set out their conclusions in their manifestos, which are to be published in four or five weeks’ time.

Damian Green (Ashford) (Con): As chair of the all- party BBC group, I congratulate my hon. Friend and his Committee, particularly on their ideas for preserving a universal funding mechanism at a time when the licence fee is becoming technologically more difficult to justify, because it is that universal funding mechanism that has provided the basis for all the good things about the BBC that he and his Committee rightly praised. If universal funding is preserved, as I hope it will be, has he considered the importance of the BBC working more in partnership in future, especially with local newspaper groups, in order to preserve other aspects of the media culture such as local news, which are more fragile than they used to be?

Mr Whittingdale: I very much agree with my right hon. Friend. We made it clear that we see a greater role for partnership arrangements between the BBC and private sector organisations, and I welcome the fact that the director-general has already indicated that that is a direction in which he wants to move. As I suggested earlier, I also agree with my right hon. Friend about the need to find ways of supporting local media, which are under tremendous pressure, and the BBC has a very important role to play in that.

Mr Mike Weir (Angus) (SNP): I was slightly concerned by what the hon. Gentleman said about a household levy to replace the licence fee. Whatever the difficulties associated with the licence fee, there are many people who do not have a television licence or, for various reasons, do not want to watch the BBC. If we go down the household levy route, there is a real danger that we will be creating a BBC poll tax.

Mr Whittingdale: The household levy, which would be a short-term measure to deal with the problem of evasion, is just a small change to the way of collecting the licence fee. The licence fee is essentially a household levy, but there is quite a high evasion rate which could increase following decriminalisation. The one area where the hon. Gentleman is correct is that there are some people who say that they never watch the BBC, never listen to BBC radio and never go online to access BBC services, so they do not pay the licence fee. Since 96% of the population have BBC television and a lot more have BBC radio, the number we are talking about is very, very small. There is arguably a case for saying that the public service content that the BBC provides is good for society and for the nation and it is right that everybody should contribute towards that.

Angie Bray (Ealing Central and Acton) (Con): I congratulate my hon. Friend on his chairmanship of our Committee and the publication of the report. I am

26 Feb 2015 : Column 501

delighted to see that it recognises the inexorable move towards subscription television. I believe that people should pay for what they want to watch, rather than for what they do not watch, but may I express my reservations about some kind of household levy? I am uneasy about creating new taxes, which are easier to create than to abolish. Does my hon. Friend concede that there is some danger that that in itself could endanger the independence of the BBC and make it more dependent on politicians?

Mr Whittingdale: I do not want to overstate the household levy because it is essentially the licence fee by a different name. The reason that it is attached to a household is in order to make it easier to collect than the existing rather draconian process, which suffers from an evasion rate that could increase with decriminalisation. On the setting of the level, the report makes it clear that we see a role for the new public service broadcasting commission in assessing the amount needed to provide the services that the BBC is there to produce, and I do not think there is a greater danger of political interference or Government involvement than there is already under the process of setting the licence fee.

Paul Farrelly (Newcastle-under-Lyme) (Lab): This is the first time, sadly, that I have voted against a report in my 10 years on the Committee, and that was only because I disagree strongly with the proposed replacement for the BBC Trust. The preference of the Chair and the majority in the report is for an Ofbeeb, less involved up front, more of an after-the-fact regulator, but does the Chair agree that another possible model could be a strong ex ante regulator, as proposed by Lord Burns and reflected in my amendments printed at the back of the report? In the words of David Liddiment, a founding member of the trust, the BBC is simply too big and important a beast for light-touch regulation.

Mr Whittingdale: I share the hon. Gentleman’s sadness that he was unable to support us. It was interesting that three of my colleagues felt unable to support the final conclusions in our report, but I think it fair to say that each of them did so for entirely different reasons—it was not necessarily a meeting of minds. On the point that the hon. Gentleman makes, there is going to be a lot of argument about the different models, and we saw considerable attraction in the original proposals made by Lord Burns. Most—I suspect all—of us thought it a pity that the previous Government did not adopt the Burns model, rather than create the rather unsatisfactory BBC Trust. The BBC Trust has failed and we do not want to create a body that is basically another BBC Trust. His idea of the ex ante regulator is in danger of falling into that trap; personally I think there needs to be a very clear responsibility for the oversight and running of the BBC, and a single unitary board is the best way of achieving that.

Philip Davies (Shipley) (Con): I commend my hon. Friend as an outstanding Chairman of a Select Committee and a perfect illustration of why the two-term rule for Select Committee Chairmen should be scrapped immediately. He will be aware that I was in a minority

26 Feb 2015 : Column 502

of one in calling for the licence fee to be replaced by subscription. Given the number of channels that are now available, those of us who believe in freedom of choice must surely believe that people who want to watch the BBC should be able to do so and pay for it, and those who do not want to watch the BBC should not have to pay for it and should be able to exercise that choice too. Has not the time come for that? If the licence fee represents such wonderful value for money, as the BBC tells us, surely it has nothing to fear from moving to a subscription model, because presumably everyone will be queuing round the corner to buy their subscription.

Mr Whittingdale: I am grateful to my hon. Friend, who has always acted as my Thatcherite conscience on the Committee, and I have a lot of sympathy with what he has just said. However, I will make two observations. First, we are not yet able to move to a subscription model because that would require big changes, such as the installation of conditional access in every household. Secondly, I think that there will always be some content that should be provided and publicly financed, because there are certain things that might not be viable on a subscription basis but are nevertheless important for the public good. I therefore think that there will always be an element of public finance, but I can certainly see the attraction of moving in the direction of having a growing proportion of content paid for by subscription.

Dame Anne Begg (Aberdeen South) (Lab): The BBC is different, and that is why it should be funded differently, as I think most people accept. It has always stuck me that there are actually more negatives than positives to going down the subscription route, compared with the present licence fee arrangements. Did the Committee find that? What problems did it identify with moving to a subscription system?

Mr Whittingdale: We took evidence from many people, and certainly a number of our witnesses were not in favour of a subscription model. I think that their argument can best be summed up in the phrase “paying more and getting less”. That is the BBC’s argument, but I am not convinced. I agree that the BBC produces outstanding programmes that are extremely popular. Indeed, I tend to sympathise with the argument made by my hon. Friend the Member for Shipley (Philip Davies) that the vast majority of people would choose to go on paying in order to receive them. I do not think there would be a massive drop, but it is an important principle that, where possible, people should be able to choose whether to pay.

Mr John Leech (Manchester, Withington) (LD): We disagree with the long-term future of the licence fee and whether non-payment of the licence fee should be decriminalised. Does the Chair of the Committee accept that any moves to decriminalise non-payment before 2017 would be contrary to the agreement reached with the BBC in 2010, when it accepted the licence fee freeze in return for guaranteed funding? Given that the Committee found clear evidence that decriminalisation would lead to more evasion and therefore less money for the BBC, surely that contradicts the agreement reached in 2010.

26 Feb 2015 : Column 503

Mr Whittingdale: As my hon. Friend knows, the Committee has concerns about the consequences of decriminalisation, which is why we said that other measures would be needed to try to prevent an increase in evasion. The matter is now subject to consultation. It should certainly be part of the charter renewal process, and I think it probably will be. It will probably be for the next Government to decide whether to wait until the end of 2016 before decriminalising.

Paul Flynn (Newport West) (Lab): Does the report recognise the unique character of the BBC, which has made a priceless contribution to Welsh culture and language and given us the most trusted news service because of its duty of balance, which must greatly irritate the Daily Mail and the Daily Express? Can we take it that the report is not influenced by the scurrilous accusation made against the hon. Gentleman in a tabloid newspaper when he was first appointed to work for Margaret Thatcher, in which he was described as “Maggie’s Toy Boy”?

Mr Whittingdale: I am afraid that the hon. Gentleman is correct; it was a very long time ago and I had rather hoped that people had forgotten that particular headline. I did not mention this in my statement, but of course we recognise the BBC’s important role not only in providing BBC Wales and Welsh programming, but in supporting S4C, which was a creation of the Conservative Government. That is very important. The BBC’s reputation for accurate news reporting is absolutely essential, and no member of the Committee would ever want to see that put in jeopardy.

Robert Neill (Bromley and Chislehurst) (Con): Does my hon. Friend recognise that one advantage of decriminalisation is that it would be welcomed by many magistrates and their staff, because it would stop their work loads being clogged up with cases that are often uncontested and result in non-appearances, which wastes time and money? On the other hand, in relation to the household levy, does he recognise the concern among local authorities about one idea that was posited, which is that it might be collected using their resources, perhaps along with the council tax bill? Does he agree that it would be unfair to force hard-working local authorities that have kept council tax down to become the vehicle for passing on a levy over which they have no control?

Mr Whittingdale: I am grateful to my hon. Friend for both points. The collection mechanism currently costs about £100 million. If we moved to a different system, perhaps by attaching it to council tax, we could probably provide an incentive to councils to take on that responsibility and still save money. His point about magistrates courts is entirely right, as there are about 150,000 convictions every year for failure to have a licence, and that clogs up the courts. It is one of the many reasons why there is a strong case for decriminalisation.

Steve Rotheram (Liverpool, Walton) (Lab): I find myself in the invidious position of agreeing with something the hon. Member for Shipley (Philip Davies) said, which was that the hon. Member for Maldon (Mr Whittingdale) should be able to stand to be Chair of the Committee again—everything else he said was barmy. He actually argued that we should be looking at a voluntary subscription

26 Feb 2015 : Column 504

model. I am sure that would work well, because everyone likes paying taxes. The BBC would not exist in its current form under his proposal. We visited several European cities and looked at their models. Despite what has been said by those on the Government Benches, the public service broadcasters in Europe that have moved to a hypothecated tax system, such as the household levy, actually saw the amount of revenue they received increase. Does the Chair of the Committee agree that the model that we have suggested would strike a balance and give some time for a review of what might be better for taking the BBC into the next part of the 21st century?

Mr Whittingdale: I am grateful to the hon. Gentleman, who has just illustrated that—I think this is true of all Select Committees—although there might be strong disagreements within the Committee, they are conducted on a very friendly basis. I entirely agree that we were impressed by the model that has been adopted by Germany. Rather to Germany’s surprise, it has led to an increase in revenue, because the previous system had an even higher level of evasion than it had realised.

Dr Matthew Offord (Hendon) (Con): I worked at the BBC for nine years. In 2007 I moved from news production to the strategy side and tasked myself with asking whether the licence fee was sustainable in the digital age. I think the report gives me the answer—it is not. I found that the biggest roadblock to any kind of reform is the BBC itself, because there is a culture of dependency and entitlement to the licence fee that simply will not go away.

Mr Whittingdale: I have some sympathy with those comments. We found it slightly odd that the BBC officials who appeared before the Committee said that they had an open mind about the governance structure and the scope and scale, but that one thing they were absolutely certain about was that the licence fee had to stay. There is resistance, and perhaps that is reflected in the comments we have already heard from the BBC. My hon. Friend draws on his experience of working at the BBC, so I thank him for his support for what we have said.

Mr Philip Hollobone (Kettering) (Con): May I commend my hon. Friend for being an exemplary Select Committee Chair and for his superb report? The report confirms the power of BBC news. It states:

“Last year 82% of UK adults consumed BBC News… across television, radio and online.”

Given the power of the BBC’s news coverage, is it not even more important that the trust, or whatever the successor body is, enforces the BBC’s own guidelines on fair news coverage, particularly in relation to the BBC’s 2005 Wilson report, which found that the BBC needed to do far more to represent accurately the range of opinions on this country’s membership of the European Union and that the BBC’s news coverage was far too pro-European?

Mr Whittingdale: I am grateful to my hon. Friend, because he allows me to talk about another very important point made in the report. At the moment, complaints about accuracy and impartiality are dealt with by the BBC Trust, and I think that there is dissatisfaction with the fact that the BBC is judging itself. We have made it clear that we think that should change and that, with

26 Feb 2015 : Column 505

the abolition of the trust, responsibility for all content regulation, including complaints about accuracy and impartiality, should go to Ofcom. It already carried out that function for Channel 4, and we see no reason why it could not also do so for the BBC.

Dr Sarah Wollaston (Totnes) (Con): Following the point made by my hon. Friend the Member for Kettering (Mr Hollobone) about a diversity of views, does my hon. Friend the Chair of the Committee agree that too much of our news coverage has an entirely metropolitan focus? Will he elaborate further on what the report said about how we can encourage more resourcing for, and better coverage of, views from rural parts of Britain?

Mr Whittingdale: We did look at the slightly London-centric nature of the BBC, and we welcomed the move to MediaCityUK in Salford and the provision of resources. We also expressed the hope that more would be done particularly in relation to the other nations. Northern Ireland made a quite strong case to us that it was poorly treated by the BBC. The question of covering rural issues—like my hon. Friend, I represent a rural constituency—is more challenging. I shall certainly continue to put it to the BBC, because sometimes—my hon. Friend is absolutely correct—these areas do not get the prominence they deserve.

Chris Bryant (Rhondda) (Lab): At the risk of ruining the hon. Gentleman’s reputation as Thatcher’s gimp—I mean toy boy—may I enormously commend him for the work he has done as Committee Chair for the past 10 years? Everyone in the House, whether they have disagreed with him or agreed with him, is grateful to him for that work. He has been an exemplary Chair of the Committee. I put that on record on behalf of my hon. Friends.

The hon. Gentleman is absolutely right to say that changes in technology mean that there are significant new challenges for the BBC, which does of course

26 Feb 2015 : Column 506

remain one of the most loved and respected organisations in this country and around the world. That is why we believe that the licence fee will, at least for the short term, remain the best means of funding the BBC for the foreseeable future, and that it would be a mistake to undermine it without putting in place a viable alternative.

May I take the hon. Gentleman up on one point? The report says:

“We challenge the claim that the BBC needs to provide ‘something for everyone’.”

I do not want the BBC to be subject to a market failure argument only, because surely if everyone is paying for it, including my constituents, everyone should get something from it.

Mr Whittingdale: I thank the hon. Gentleman for his extremely kind remarks. I have to say that I am blushing throughout most of this session.

The hon. Gentleman’s point goes to the heart of the debate. I think the argument about providing something for everyone becomes weaker, given the huge increase in choice available elsewhere through the market. When we now have such a large number of channels for specific genres, the BBC should at least say to itself, “Is there really any need for us still to be in this area when there is already so much provision?” That does not necessarily mean that it should retreat into a ghetto—some have expressed that fear—but that it should take account of the huge proliferation of choice and concentrate its resources on the areas that have been poorly served by the market.

Madam Deputy Speaker (Mrs Eleanor Laing): It is perhaps inevitable, on a subject such as this, that my initial exhortation to brevity has been completely and utterly ignored. I have allowed the statement to run over time because I recognised that the feeling of the House was that there were many subjects to be dealt with—and the Chairman of the Committee has dealt with them more than adequately.

26 Feb 2015 : Column 507

Backbench Business

Equitable Life

12.53 pm

Bob Blackman (Harrow East) (Con): I beg to move,

That this House congratulates the Government on providing a scheme to compensate victims of the Equitable Life scandal; welcomes the Government’s acceptance of the Parliamentary Ombudsman’s findings in full; notes that the Parliamentary Ombudsman recommended that policyholders should be put back in the position they would have been in had maladministration not occurred; further notes that most victims have only received partial compensation compared to the confirmed losses; and calls on the Government to make a commitment to provide full compensation during the lifetime of the next Parliament as the economy and public finances continue to recover.

In the run-up to the 2010 general election, the Conservative party discouraged candidates from signing any pledges, with one or two notable exceptions, the most notable being that of seeking justice for Equitable Life policyholders. Having done some research, I was very proud and pleased to sign that pledge. After I was successfully elected, I was immediately elevated to become co-chairman of the all-party group on Equitable Life policyholders. I am pleased to be able to report that we now have more than 200 members. That demonstrates what an important issue this is for people in this House and beyond.

It is important that we look at what is different about Equitable Life policyholders compared with those in other such schemes. With the advent of private pensions and the encouragement of individuals to save for their future retirement, Equitable Life developed an almost Ponzi-like scheme whereby its representatives went out and sold policies for which they promised bonuses and pensions that were beyond belief, and people were convinced to sign up for them. When that was reported to the regulator and the Treasury, they took no action whatsoever. This was all very well while money was coming into the pot, but eventually the amount coming in would be less than that going out, and therefore the scheme would collapse. The scheme therefore became too big to fail, because had it failed, the Government of the day, of whichever party, would have had to pick up the full cost of compensation to the policyholders.

The whole scandal was covered up during the scheme’s entire period of 20 years. A position was reached of a cosy relationship between the company, the regulator and the Government whereby they would not unveil the situation. The Equitable Members Action Group had to drag the Government through the courts. Eventually, in 2004, we had the publication of the Penrose report, which made recommendations about the position of Equitable Life. That was not good enough, because it did not do anything to compensate the people who had suffered. Then the parliamentary ombudsman made clear recommendations that the policyholders needed to be moved from the position where they had suffered a relative loss back to the position they would have been in had maladministration not occurred. That was very important. Equally, the ombudsman accepted that it would be appropriate to consider the potential impact on the public purse of any payment of compensation.

I am delighted that almost the first legislative step by the coalition Government was to put in place a scheme

26 Feb 2015 : Column 508

to compensate the individuals who had suffered a relative loss. We had argued in this Chamber for justice for those policyholders. There are various types of policyholders who have received different types of compensation. The first—

Ian Paisley (North Antrim) (DUP) rose—

Mr Andrew Mitchell (Sutton Coldfield) (Con) rose—

Bob Blackman: May I specify the types first, and then I will take interventions?

The first set of policyholders were those who took out their policies and had an annuity in place pre-1 September 1992. They were specifically excluded from the compensation scheme. I will come on to what happened to them subsequently. Secondly, there were the with-profits annuitants, who were given compensation of 100% of their relative loss—quite right too. Then there were the normal policyholders, who received an element of compensation. Unfortunately, when the legislation was set up, the public finances were in a scandalous state, and there was little money to allocate. I am delighted that the Treasury nevertheless chose to allocate sufficient funding to provide some £1.5 billion in compensation. There was £620 million to compensate the 37,000 with-profits annuitants, but, with the contingency fund of £100 million that was put in place, plus the costs of administering the scheme, that left only some £775 million to be spread between the 945,000 other policyholders, who therefore got only 22.4% of the compensation that they were due. As a result, those individuals have not been put back into the position that they should have been in had they not suffered the relative loss.

Mr Mitchell: My hon. Friend is making an extremely good and most important speech. I agree that the coalition Government deserve considerable credit for having tackled this early on in their term in office. Since, sadly, I cannot be here for the Minister’s speech, will my hon. Friend pursue the issue of the speed at which these payments are being made? Many of my constituents have had to wait a considerable length of time. I would be most grateful for his and the Minister’s reassurance that everything is being done to make these payments as rapidly as possible.

Bob Blackman: It is fair to say that the all-party group and EMAG have been on the backs of the Treasury Ministers responsible. The current Minister is in her place. Her predecessor, my right hon. Friend the Member for Bromsgrove (Sajid Javid), was very helpful in making sure that the scheme was speeded up and that people got the compensation due to them. Most importantly, he decided that he would not close the scheme, which could have been done under the legislation, until we had traced every one of the policyholders due for compensation.

Philip Davies (Shipley) (Con): May I commend my hon. Friend on all his work on this issue over several years? Is not the crucial point in the motion that, with the public finances improving, the compensation already paid should not be considered the last word on the matter, and there should be more room to give proper compensation to people who need it? As I am sitting next to my right hon. Friend the Member for Sutton

26 Feb 2015 : Column 509

Coldfield (Mr Mitchell), may I ask whether my hon. Friend understands the frustration of many people that the Government seem to have plenty of money to spray on things such as overseas aid and aid to India, which might be better spent on such compensation to people in this country?

Bob Blackman: The clear issue is that when the assessment was made of the amount of compensation due to policyholders—this point is crucial—it was decided that £4.3 billion should be paid in compensation. Clearly, £1.5 billion has been allocated, although it has not all been spent, as my right hon. Friend the Member for Sutton Coldfield (Mr Mitchell) mentioned, meaning that a compensation bill of £2.8 billion is still outstanding.

The Prime Minister quite rightly said at the Conservative party conference that as the economy recovers and we fix this country’s problems, tax rates will come down, but I would say that there is a still a bill to be paid to the people who saved for their retirement. Therefore, as the economy recovers and the public purse allows, we should compensate policyholders who have suffered a relative loss, as we committed to do at the last general election.

Sir Edward Garnier (Harborough) (Con): May I congratulate my hon. Friend and the co-sponsors of the motion on bringing this matter before the House? I am a past and, I think, a continuing policyholder of Equitable Life; given yesterday’s debate, I suppose that is a matter of deep interest to the world. I am concerned that the amount of compensation to be paid to individual policyholders is relatively small. Does my hon. Gentleman agree that there is now a duty on the Government to get rid of these fairly small claims as quickly as possible? Many of my affected constituents are in their 70s and 80s, and they need satisfaction as soon as possible.

Bob Blackman: I completely concur with my hon. and learned Friend.

I should say that the Chancellor made a key and very brave move to compensate the pre-1992 trapped annuitants with a one-off payment of £5,000, which was doubled to £10,000 for those on pension credit. That was very welcome, but we are talking about the most vulnerable people trapped by the scheme, and my view is that they should receive total compensation. The estimate for total compensation for that element alone is £115 million, which I consider a drop in the ocean compared with the total pension bill due.

Mrs Cheryl Gillan (Chesham and Amersham) (Con): May I congratulate my hon. Friend on bringing the motion before the House? As we are rapidly approaching that time in the political cycle called the Budget, I suggest that this is a golden opportunity for our Treasury team and the coalition Government to show that they have a big heart and meet the demands we are all making on behalf of our oldest and most vulnerable constituents?

Bob Blackman: I am sure that my hon. Friend the Economic Secretary is listening, but she will clearly not announce the Budget measures today. After this debate, however, I will seek a clear commitment from the political

26 Feb 2015 : Column 510

parties about what they will do if elected to government on 7 May. Although it would be welcome if the Chancellor stood up at the Dispatch Box and agreed a full compensation package, the key issue is that if he cannot do so in this Budget, Members and people outside the House will want to know what the political parties would do to compensate those who have suffered.

Ian Paisley: I congratulate the hon. Gentleman on getting this matter on to the Floor of the House. He is in danger of being canonised by the many thousands of people in Northern Ireland who are watching this debate closely because of how unfairly they have been affected. I hope that those on the Treasury Bench are listening to the points that Members have raised.

There have been announcements this week about the bonuses to be paid to bankers in banks controlled by the public purse, and some bankers have taken the personal decision to refuse bonuses if they so wish. At least they have the choice. The people who have suffered under Equitable Life have not got a choice. I hope that Treasury Ministers are listening, and recognise that if they want the future support of Opposition Members, they should address this issue before the end of this term.

Bob Blackman: I will call the hon. Gentleman my honourable Friend because he has been stalwart in defending the rights of the people of Northern Ireland who have suffered in this scheme.

The key point is that, according to the published figures, the Treasury had a surplus of £8.8 billion in January, which was remarkable given that we were expecting £6.5 billion. Some proportion of the additional £2 billion surplus could be put towards compensation for policyholders who have suffered.

Iain Stewart (Milton Keynes South) (Con): My hon. Friend rightly mentions the surplus in January. We are coming to the end of the financial year, and many Departments may have an underspend in their allocated budgets. Would it not be a good idea to divert some of that underspend to the victims of Equitable Life?

Bob Blackman: I thank my hon. Friend for his suggestion. The Chancellor will be listening to such rumours, and will no doubt want to hoover up that money to dispense for appropriate good causes, of which this is clearly one.

Jenny Willott (Cardiff Central) (LD): Does the hon. Gentleman agree that people have been pushed into an extremely difficult position, and that some of them are extremely close to poverty as a result of the amount they have lost? In many cases, they are not at an age at which there is anything they can do to replace the funds they have lost. They face a very uncertain future, as they have for many years, but there is absolutely nothing they can do to make a difference.

Bob Blackman: I do not normally agree with the right hon. Member for Holborn and St Pancras (Frank Dobson), but he has said:

“They were not like the people who put their savings into outfits offering dubious and extraordinary returns, such as those who decided to chance their savings with the Icelandic banks.

26 Feb 2015 : Column 511

The Equitable policyholders are in their current position through absolutely no fault of their own.”—[

Official Report

, 14 September 2010; Vol. 515, c. 781.]

He went on to say that those at fault were Equitable Life, the Government and the regulator.

Mr Geoffrey Robinson (Coventry North West) (Lab): Like other hon. Members, I congratulate the hon. Gentleman on securing this debate and on keeping this very important issue live. He must be aware that there will never be a right time in the Government finances to put this matter right. The Treasury may have made a small budgetary surplus over and above what it expected in January, but the fact is that the Treasury debt is still huge. It is as simple as that.

The only way round this problem is to say that there will never be a financially right time, only a morally right time. That time is now, given the long lag, which has been characterised by denials and evasions. They also occurred in the contaminated blood scandal, which was perhaps even worse. The only way to deal with this is to pay the £115 million that the hon. Gentleman rightly mentioned, and to have a clear statement about future year-by-year reductions in the outstanding £2.8 billion, which the Equitable Life policyholders have wholly earned and wholly deserve. They should be awarded the whole amount, because that is the only way in which this dreadful ill can be rectified.

Bob Blackman: I thank the hon. Gentleman for that intervention. It is a great shame that my hon. Friend the Member for Leeds North East (Fabian Hamilton) was almost the sole individual on the Labour Benches during the Labour Government who promoted a compensation scheme. I commend him for his efforts to get his Government to introduce one. I wish that other Labour Members had promoted such schemes.

Paul Flynn (Newport West) (Lab): Will the hon. Gentleman give way?

Bob Blackman: I will make a couple of points and then give way for the final time.

We are clear about what we want the Government to do. Irrespective of which political party wins the general election, we want full compensation for the pre-1992 trapped annuitants. As I have said, it would cost £115 million to compensate those individuals. Those are the most vulnerable individuals because they retired a long time ago and many of them are very frail. It would cost a relatively small amount of public money to give them proper compensation. I am afraid that the longer we delay, the fewer of them will be around, because they are dying off almost daily.

Secondly, as the hon. Member for Coventry North West (Mr Robinson) said, we should commit to a graduated full compensation package so that the policy holders are compensated as the public finances continue to recover. Individuals who took out pension policies some time ago are not necessarily reaching retirement age. Topping up their pensions over four or five years would therefore enable them to retire in the way that they expected.

Paul Flynn: May I state that I have a close financial interest in this matter? I remind the hon. Gentleman that it was discussed at great length by the Public

26 Feb 2015 : Column 512

Administration Committee in the last Parliament. Does he have a formula, which is what we were looking for, that suggests who is responsible for losses made? Can we have a scheme that is consistent for all pension schemes that get in trouble, such as the Allied Steel and Wire scheme, which has still not been resolved? If he has such a formula, perhaps it could be agreed to between the parties now, so that what is national responsibility, personal responsibility and company responsibility is accepted and we have a resilient formula that can be used for Equitable Life, Allied Steel and Wire and all those that go broke in the future.

Bob Blackman: I note the hon. Gentleman’s intervention. The key point is that the Equitable Life policy holders have been through the courts and through the parliamentary ombudsman, and the matter has been found in their favour. Maladministration clearly took place and a key decision was taken to put those policy holders back into the position that they would have been in had that maladministration not taken place. Clearly, other pension schemes are in trouble. There are a lot of pension schemes in trouble because the previous Prime Minister, when he was Chancellor of the Exchequer, raided private pension funds and thought that that was a golden opportunity. We must take that into account. That is not the case with Equitable Life policy holders, which makes this a different matter. We have to be careful about broadening out this subject to other pension schemes.

Dame Anne Begg (Aberdeen South) (Lab): Does the hon. Gentleman agree that expectations have been raised and promises have been made? All that these people did was to invest in what they thought was a trusted company. They have done nothing wrong and they cannot for the life of them understand why it is taking so long to settle the matter.

Bob Blackman: These people have battled and struggled through the courts and through a long process to get justice. There are many of us, certainly on the Government Benches but also on the Opposition Benches, who say that all these people did was invest for the future and trust what they were told. They took a risk to a certain extent that the market would be appropriate, but they did not expect the level of maladministration that took place or the way in which they would be treated.

Sir Alan Haselhurst (Saffron Walden) (Con): My hon. Friend has made an eloquent case. He referred to the great disappointment that is felt by so many people who believe that they deserve compensation for what happened. He has not mentioned this, but does he agree that there is also considerable anger among people who feel let down? Is it not somewhat ironic and very uncomfortable that the Government who have started to do something about it are taking so much of the blame?

Bob Blackman: I have commended the Government for the action that they have taken to set up the scheme. At the time of the legislation, we tabled a cross-party amendment to ensure that the trapped pre-1992 annuitants would be compensated, but the Government resisted it. I am delighted that the Government saw sense after the lobbying that took place and provided a degree of

26 Feb 2015 : Column 513

compensation. The Government should be commended for ensuring that there is a compensation scheme. However, we have an independent assessment of the total amount of compensation that is due—it was not done by EMAG or by the Government, but is independent—and £2.8 billion is still due.

Mr Mike Hancock (Portsmouth South) (Ind): The hon. Gentleman is being extraordinarily generous in giving way. There is a unanimous feeling in the House that justice needs to be done for these people. We know how much is outstanding and there is a big difference between what people are due under the existing compensation scheme and what they are actually due. Surely what we need is not a five-year plan to pay the money back, but a one-off payment that is made as soon as possible. Many of these people will die before they get their just reward.

Madam Deputy Speaker (Mrs Eleanor Laing): Order. I appreciate that the hon. Member for Harrow East (Bob Blackman) has taken a lot of interventions and I have allowed him a lot more time than is normally the case in this sort of debate. I also appreciate that there will be further interventions and I am not suggesting that he concludes his speech immediately. However, I make a plea for very short interventions, because people who say that they are not going to make a speech, but that they would like to intervene, take up the time of people who sit here all afternoon with patience and politeness, waiting to make a speech. I will not be tolerant of long interventions, but I am tolerant of the hon. Gentleman, who is being very generous in taking so many interventions.

Bob Blackman: Thank you, Madam Deputy Speaker. I was going to draw my remarks to a close after that last intervention.

The issue before us is one of justice and fairness. Everyone believes in ensuring that the policyholders receive proper compensation for the injustice that they have suffered. These are people who did the right thing: they invested for their future. They expected a reasonable return on their investment and to be protected by the regulator and the Treasury. The fact is that they were badly let down.

This is the opportunity for all three major political parties and the smaller parties to give a commitment on what they would do if they were elected as the Government on 7 May for the 945,000 people out there who are still waiting for 77.6% of the compensation that they are due and for the trapped pre-1992 annuitants who deserve full compensation, which at £115 million would be a drop in the ocean, and who are the frailest in our society. If parties give them that commitment, they will give them their votes; if parties deny them that commitment, they may withdraw their votes.

Several hon. Members rose—

Madam Deputy Speaker (Mrs Eleanor Laing): Given the interest in this debate and the short time available, I shall impose a time limit on Back-Bench speeches of eight minutes. That is quite a long time limit and I make a further plea for short interventions, if there must be any.

26 Feb 2015 : Column 514

1.19 pm

Fabian Hamilton (Leeds North East) (Lab): It is a privilege to have secured the debate with my co-chair of the all-party group for justice for Equitable Life policyholders, the hon. Member for Harrow East (Bob Blackman).

I am sad that after so many years of debating this issue, we are once again back in the Chamber talking about the continuing losses suffered by hundreds of thousands of Equitable Life policyholders. As has been said, they invested in the world’s oldest life assurance company in the belief that they would be able to have a comfortable old age. Instead, after a lifetime of saving, many of them find themselves destitute, and they are certainly much poorer through no fault of their own. How have we arrived at that point, 15 years after Equitable Life closed its doors to new investors and five years after the current Government promised to ensure that losses incurred by Equitable policyholders would be compensated? If Members permit me, I will go back over some of the history of this sorry tale, to give the House and the public some answers.

My first involvement in the Equitable saga was to speak in an Adjournment debate that I secured in Westminster Hall on 24 June 2009. In that debate, I spoke about the serious issues facing all our constituents since the crash of Equitable Life, following its inability to meet its obligations and the promises that it had made to investors over the decades.

Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op): I may have been present at that debate. I congratulate my hon. Friend on his role in leading the campaign with other hon. Members. Like me and other Members, he will have had the experience of trying to update constituents on the issue but getting back a reply saying, “Unfortunately, my father”—or wife, or husband—“has now died”. That illustrates how important it is to take action now. Although I would like to hear pledges for after the election, as the hon. Member for Harrow East (Bob Blackman) said, we also need action now, ideally in the Budget. After an election, it takes time for things to happen. People need payment and good compensation—

Madam Deputy Speaker (Mrs Eleanor Laing): Order. We must have short interventions. Long interventions are simply not fair, because everybody must have a chance to speak on behalf of their constituents. Members must be polite to each other and make short interventions.

Fabian Hamilton: Thank you, Madam Deputy Speaker. Of course, I agree wholeheartedly with my hon. Friend the Member for Edinburgh North and Leith (Mark Lazarowicz).

Equitable Life was established in 1762 and started selling pensions as early as 1913, but it was not until 1957 that the society started selling its now infamous guaranteed annuity rate pensions, which promised a clear and unambiguous return on capital invested. That carried on until 1988, when it realised that its rates were so good and so far ahead of the rest of the market that they were totally unsustainable. In December 2000, Equitable Life was forced to close to new business, but by that time it had more than 1.5 million members.

26 Feb 2015 : Column 515

In July 2008, as the hon. Member for Harrow East mentioned, the parliamentary ombudsman published her first report on Equitable, entitled “Equitable Life: a decade of regulatory failure”. On 11 December that year, the Public Administration Committee produced a report entitled “Justice delayed”, in which it stated:

“Over the last eight years many of those members and their families have suffered great anxiety as policy values were cut and pension payments reduced. Many are no longer alive, and will be unable to benefit personally from any compensation. We share both a deep sense of frustration and continuing outrage that the situation has remained unresolved for so long.”

That is already seven years ago.

On 5 May 2009, Ann Abraham, the parliamentary ombudsman, published a second report, “Injustice unremedied: the Government’s response on Equitable Life”, in which she stated:

“I was deeply disappointed that the Government chose to reject many of the findings that I had made, when I was acting independently on behalf of Parliament and after a detailed and exhaustive investigation.”

There was certainly no shortage of reports, just a shortage of justice for those who, through no fault of their own, had suffered huge losses in their life savings, which they had accrued over many years of hard work.

How could Equitable Life have maintained a rate of return and a guaranteed annuity rate way beyond any competitor in the market? Ann Abraham addressed that question in her initial report of 2008, which took four years to complete. Her answers went to the heart of the anger expressed by investors through the Equitable Members Action Group. At the core of the problem was the fact that Equitable Life simply could not meet the obligations that it had made, because it had no provision for guarantees against low interest rates on policies issued before 1988. It therefore declared bonuses out of all proportion to its profits and assets.

Following a ruling of the House of Lords in 2000, the society stopped taking new business in December of that year, which effectively spelled the end for Equitable. More than 1 million policyholders then found that they faced cuts in their bonuses and annuities, which caused a huge loss of the income on which many small investors had totally depended. After all, the average investment for the 500,000 individual policyholders was just £45,000, which, according to EMAG, would have yielded no more than £300 a month even at its height.

In its December 2008 report, one of the Public Administration Committee’s many recommendations stated:

“We…strongly support the Ombudsman’s recommendation for the creation of a compensation scheme to pay for the loss that has been suffered by Equitable Life’s members as a result of maladministration.”

Ian Murray (Edinburgh South) (Lab): I am grateful to my hon. Friend, the co-chair of the all-party group, for his wonderful speech and for all the work that he has done. One of the people who lost out was Leonard Stuckey, in my constituency, who has run the EMAG group in Edinburgh South. Does my hon. Friend think that 22.4p in the pound is the right level of compensation, given what the parliamentary report that he has just mentioned said?

26 Feb 2015 : Column 516

Fabian Hamilton: I thank my hon. Friend. There are hundreds of thousands of people like his constituent. We all have constituents who have suffered losses, for whom 22.4p in the pound is a start but, as many Members have said, simply not enough. I will say something about that in my remaining time.

Zac Goldsmith (Richmond Park) (Con): The hon. Gentleman, like my hon. Friend the Member for Harrow East (Bob Blackman), is making a powerful speech. This is an issue of basic justice, but given the parliamentary cycle, it is inevitably also a political issue. I support my hon. Friend’s suggestion that all political parties put on record before the election their position on compensation, so that those caught up in the scandal know what impact their votes might have on this sorry saga.

Fabian Hamilton: I thank the hon. Gentleman, and I agree. With the election coming up, we need to put a clear choice to the electors and to the hundreds of thousands of pensioners and policyholders who have suffered through the collapse of Equitable to ensure that they know where we all stand as political parties and as individuals. I am not the only Labour Member who has stood up for the rights of Equitable members—I believe that more than 40 Labour Members are members of EMAG, and many more believe that justice should be served.

The Public Administration Committee’s report of 2008 went on to state:

“Where regulators have been shown to fail so thoroughly, compensation should be a duty, not a matter of choice.”

Unfortunately, despite pleas from many Labour Members, the then Labour Government failed to introduce any ex gratia compensation scheme and refused to follow the parliamentary ombudsman’s recommendations. Reacting to the Government’s lack of response to the ombudsman’s report, the then Conservative Opposition stated their determination to introduce the Equitable Life (Payments) Bill early in the new Parliament following the 2010 general election. That Bill offered 100% compensation to all with-profits annuitants who had taken out their annuities after 1 September 1992, and 22.4% compensation to every other policyholder. Many right hon. and hon. Members of all parties felt that that was inherently unfair, as that date was somewhat arbitrary and, as has been mentioned, the relatively small group of with-profits annuitants from before that date was the oldest and most vulnerable group. Many of them would not even live to enjoy the compensation or the £5,000 ex gratia payment to that group that the Chancellor announced recently.

I tabled an amendment to the Bill, which read:

“Payments authorised by the Treasury under this section to with-profits annuitants shall be made without regard to the date on which such policies were taken out.”

The debate on the amendment took just over two hours and was lost, by 76 votes in favour to 301 against, but it set out strongly the case for the pre-1992 with-profits annuitants.

The Bill received Royal Assent early in 2011, and the compensation scheme was set in motion. At first it was slow, but it began to pick up over subsequent years. As of 31 January this year, more than £1 billion has been paid to 896,367 policyholders, although more than 142,000 policyholders still have to be paid but cannot

26 Feb 2015 : Column 517

be traced. Some 37,764 post-1992 with-profits annuitants, or their estates, have been issued payments by the scheme, and those initial and subsequent payments total £271.4 million.

In conclusion, I must give credit to this Government for having introduced a compensation scheme from which the majority of Equitable policyholders have received 22.4p in the pound—a lot better than nothing. However, when we examine the compensation paid to Icesave investors, for example, following the collapse of the Icelandic banks in 2008, for which every investor received up to £50,000 of their losses in full, the Equitable scheme looks rather less generous.

Equitable policyholders have been patient. They understand that the recession meant austerity and that there was a huge shortage of money available for many parts of government and the state. What they cannot understand, however, is why, as the economy grows, they are denied any further payments against their very real losses. I have heard, as have all Members of the House, heartbreaking stories from individuals, some of whom have lost everything including their homes, all because of Equitable’s failure and the company’s “catastrophic” regulation.

As I have said in previous speeches on Equitable Life in the House, this is fundamentally a moral issue. When the Government are supposed to protect the life savings of individuals who have been encouraged to provide for themselves—as was the case with Equitable—they have a duty to ensure that losses incurred, such as those at Equitable, are adequately compensated. In my view that obligation should come above pet projects such as High Speed 2 and Trident renewal, or else the whole fabric of trust in the state will be damaged—I believe that that is exactly that has happened in this case. We have a moral duty and should not be afraid to carry it out.

1.31 pm

Nick Herbert (Arundel and South Downs) (Con): I congratulate my hon. Friend the Member for Harrow East (Bob Blackman) on securing this debate. I was pleased to support his application for a debate in Back-Bench time because of the importance of this issue to a large number of my constituents who, as Equitable Life policyholders, have suffered loss. They remain gravely concerned that, although in many cases they have been partially compensated for their loss, they have not been fully compensated or compensated at a level that they believe to be just. It is important to restate, as many hon. Members have done, that these are responsible individuals who invested and saved in good faith and with a reasonable expectation of a fair return. They have not in any sense behaved irresponsibly, and did not seek to make investment decisions that had an expectation of an element of risk. They found themselves suffering significant losses, many of which have resulted in hardship, through no fault of their own.

I wish to raise two points in addition to the excellent points raised by my hon. Friend and others. First is the issue of accountability. Regulatory failure was identified in the ombudsman’s report, and that single fact informs us all in this debate that there was maladministration. How is that regulatory failure to be dealt with, and how will future regulatory failure be prevented, if those who

26 Feb 2015 : Column 518

are responsible for that failure—ultimately in this case, the Government of the day—can evade liability for that failure? This is, of course, a matter of justice, as my hon. Friend the Member for Richmond Park (Zac Goldsmith) said, but it is also a matter of good governance and accountability, because when institutions for which the Government are responsible fail, the Government must accept responsibility.

The Government were, of course, obliged to step in when bailing out other financial institutions, because a risk to the economy would have arisen had they not done so. Nevertheless, for individual policyholders of Equitable Life there seems to be an unfairness, because while those who may have been depositors or shareholders in banks will receive compensation and redress, those who have saved in good faith but relied on the effective regulation of the vehicle in which they were investing are not receiving full compensation, and that cannot be right.

My second point is about reasonable expectation. It is not as if these policyholders have been told that they do not have a case; it is not as if we are coming to the House to plead, once again, on the issue of principle. The issue of principle has been addressed and settled. The ombudsman has said that there was maladministration, and the Government have accepted the issue of principle because of the level of compensation they provided.

We have the ombudsman’s report and the Conservative party manifesto that pledged compensation. I recognise that this Government set up the compensation scheme, and that they had to address the fiscal environment responsibly. Nevertheless, it remains a continuing source of concern that such a small proportion of many of my constituents’ losses have been addressed, and that they have complete uncertainty about whether there will be further compensation in future. Nobody turns around to my constituents and says, “We will not do this any more”, and they are left with the uncomfortable sense that it would be very convenient if they simply went away or, in many cases, actually died. Thousands of policyholders have died in the wait for compensation, and we have no finality to the situation. Given the reasonable expectation that was set up, the manifesto promise and the ombudsman’s report, it is entirely reasonable to ask on behalf of our constituents whether we can have a timetabled scheme to say, “We will bring closure to this matter.”

I am happy to stand up and say that that closure may not be for 100% of the losses accrued. Many of my constituents might disagree with that, but we must have regard to the fact that there is a continuing deficit and will be for the next three years, and that there are other spending priorities. Nevertheless, it seems that compensation of only 22%, and the ongoing uncertainty of whether there will be any further compensation at all, is deeply unsatisfactory.

Mrs Gillan: Does my right hon. Friend agree with my constituent who e-mailed me and stated:

“If we were to receive this money it would not be lost. I am sure it would soon find its way into the economy at large and would not languish in savings accounts because we’ve done the saving already!”?

Nick Herbert: My right hon. Friend’s constituent makes a good point and it is true that the compensation that the banks have had to pay, for example in relation

26 Feb 2015 : Column 519

to mis-selling payment protection insurance, has had a beneficial effect on the economy by putting cash into people’s hands, but that is by the bye. As many have said, this is a matter of justice, but also of accountability and good governance. We cannot allow a situation where the regulation of an institution such as Equitable Life fails and no one will step up to the plate and say, “We accept responsibility for that failure” even though thousands of people have been hurt by it. That is the long and short of the story. The Government have a duty. They had to balance the interests of taxpayers fairly, but there is a strong feeling in the House, and among many of my constituents, that more must be done.

1.38 pm

Mr Mike Weir (Angus) (SNP): It is a somewhat novel, perhaps unique, experience for me to be speaking in support of a motion that begins:

“this House congratulates the Government”.

However, credit where credit is due. Many of us raised this issue consistently with the previous Administration, who refused point blank to take any responsibility for the regulatory failures that led to the disastrous situation at Equitable Life, despite the fact that their own report by Lord Penrose pointed clearly to the regulatory failures in this case. This Government have grasped the nettle and introduced a scheme that has given some relief to many thousands of policyholders who have lost out.

Interestingly, in the last update on the scheme issued by the Treasury, it appears that some 160,000 policyholders have not come forward to submit a claim. A large number of people have still not taken advantage of the help that is offered at the moment, and we should continue to urge them to come forward. It took the report from the ombudsman to get the ball rolling on compensation, and I suppose the reason we are still debating it today was her conclusion that

“the diversion of scarce public resources is a relevant consideration which should be taken into account and weighed in the balance along with other relevant considerations”.

Despite what the hon. Member for Harrow East (Bob Blackman) said, there is a huge difference between the amount sought by the action group, which is about £5 billion, and the amount originally proposed by the Government, which was as little as £500 million. EMAG’s website quotes two vastly different figures, and the Government came down in the middle with a figure of £1.5 billion. I agree with much of what the hon. Gentleman said—we need to deal with the issue of compensation—but first we have to negotiate the sums involved.

The action group has consistently campaigned for full compensation. Its members thought it unfair that “affordability constraints”, as the Government put it, meant they did not get the full compensation to which they were entitled and that they only received 25% of the full amount. Its paper calls it a double injustice that Equitable pensioners should not only bear the cost of the Treasury’s inability to regulate Equitable Life in the 1990s, but be denied the full compensation owed to them because the Government’s inability to regulate the banking sector

“blew a hole in Government finances”.

There is some justice to that.

26 Feb 2015 : Column 520

As the action group points out, policyholders have received compensation amounting to only 22.4% of their losses, and it argues that people’s pension savings, carefully accumulated over decades, should be safeguarded in exactly the same way as funds deposited in banks and building societies, but that is a dangerous argument to make, because funds protected in banks and building societies are subject to a maximum, so it is not complete protection.

Roger Williams (Brecon and Radnorshire) (LD): I am sure that like all right hon. and hon. Members, the hon. Gentleman and I have constituents affected by this matter, and what they fear most is uncertainty. Mr and Mrs O’Meagher, who are 80 and live in my constituency, have to travel to London so that Mrs O’Meagher can give music lessons in order to top up their income, but they cannot continue to do that, and with their losses from Equitable Life, they see their life in terrible trouble.

Mr Weir: The hon. Gentleman makes a valid point, and I agree that this matter needs to be tackled—I shall say something about that shortly. In a follow- up report, the ombudsman was unable to conclude that the Government’s proposals complied with her recommendations for the establishment of a compensation scheme. Even the ombudsman says that more needs to be done.

Like most Members, I had many Equitable Life policyholders in my constituency, and I have had a considerable postbag on the issue from the outset. Many of the policyholders were elderly, and sadly some have died as the saga has ground on, but there remains a great sense of injustice among those still living. Equitable Life was touted as a long-established steady company —when I was a practising solicitor, it was seen as a gold-standard company. No one realised the problem lurking below the surface.

Sir Alan Beith (Berwick-upon-Tweed) (LD): Many solicitors told their clients that they themselves had their pensions with Equitable Life and recommended it.

Mr Weir: I never had my pension with Equitable Life, but the right hon. Gentleman makes a good point. Many solicitors, accountants and other professionals invested in Equitable Life. It was popular with financial advisers because it was seen as a safe, steady company, but it turned out not to be, and people lost a lot of money because it was not properly regulated.

The Government need to consider future pension provision. Increasingly, we are being urged to invest in pension provision to augment our state pensions, and with the recent revelations that less than half of new pensioners will receive the whole new single-tier pension when it is introduced next year, that is more relevant than ever. The new rules granting much greater freedom for pension holders to access their pensions savings will greatly alter the pensions landscape and the attitude of savers towards pensions, but it might also make it more difficult for company investment strategies. It is imperative in this new environment that there is confidence in the stability and worth of pensions investment—it is not the same as putting money in a bank or building society, where the rate of interest is known, pitiful though it might be at present; it depends on fluctuations

26 Feb 2015 : Column 521

in the market and the type of investment made. Admittedly, there is no guaranteed return—there is always an element of risk—but for most people it is a major investment, so the risk should be as small as possible.

Mr Alan Reid (Argyll and Bute) (LD): I agree with the hon. Gentleman. The public need confidence that the pension industry will be regulated properly, and in this case it obviously was not—the Government Actuary’s Department failed. Now that the public finances are in a better state, I think the Government should pay up in full, as recommended by the ombudsman, otherwise people will not have confidence in the future.

Mr Weir: I agree with most of what the hon. Gentleman says. We have to grasp the nettle because it is becoming ever more important that we have confidence in our pension provision. If we fail to give people that assurance, we risk them not having the confidence to invest in pensions, or taking their money out at the earliest opportunity, leading to even greater pressure on the public finances. Equitable Life remains a running sore, and so long as that is the case it risks damaging the whole industry and the attempts to encourage future pension savings. It was not simply a bad investment; the regulator failed to do its job, and that led to substantial losses.

We accepted that people were due compensation on the basis that the amount offered would be determined by the state of the public finances, but, as I said, there remains a gulf between the various amounts suggested. Before we come to any agreement, therefore, we must be clear about the amount involved, but it would be unwise to make it a party political issue just because there is an election around the corner—voters base their decision on many issues, including, in some cases, Equitable Life—but if the public finances are improving, of which some of us are less convinced than others, it is right that Equitable Life policyholders be considered anew. I urge the Minister to consider greater compensation.

1.46 pm

Mr Robert Syms (Poole) (Con): I congratulate hon. Members on bringing this debate to the Floor of the House. Since my entry to the House in 1997, this matter has come up repeatedly. I look forward to the day when we no longer have to debate Equitable Life. In 2004, I was one of the more than 100 Members who wrote to the parliamentary ombudsman urging her take up the case, following earlier failed attempts. We finally got a report and we finally got action, but unfortunately it took a long time, and in the meantime many constituents in their 70s and 80s have seen their prospects of a comfortable retirement disappear with this sorry saga.

In 2010, I argued that we needed to get a compensation scheme up and running to get money out as quickly as possible and that the question of how much was an argument for another day. I thought that if we got hung up on an argument about how many billions, it would probably delay the whole process again. As it was, the Government acted quickly in 2010: the scheme started operating in 2011, £1.5 billion having been allocated, and by the end of January 896,367 people had received some compensation. Given the complexity of these

26 Feb 2015 : Column 522

issues and the difficulties of tracing people, on the whole I think the Government have done a good job delivering those funds.

Nevertheless, 22.4% will have been a disappointment to many constituents. I do not want to get into an argument about the appropriate level of compensation, but like many Members I think the Government should contribute more as the public finances improve.

Annette Brooke (Mid Dorset and North Poole) (LD): The last Government’s lack of action was described as “shabby”, and it would be a tragedy if this Government, having taken that brave decision in 2010, were to be regarded as shabby too, but unfortunately 22% sounds a bit shabby.

Mr Syms: I agree. For many of us, it is a start rather than the finish.

The constituents I see in my surgeries have a quiet dignity about them but still feel aggrieved and think that the Government ought to move some more. My main plea today is for the Treasury to consider the issue. The public finances are still a challenge and will be a challenge for the next Government, but I think that as things improve, the Government should be able to provide further funds.

Mr Mark Williams (Ceredigion) (LD): Will the hon. Gentleman give way?

Mr Syms: I will in a moment; I just want to make a few more points.

The reality is that most of those affected do not have the ability to earn money or to improve their particular circumstances. They made decisions predicated on certain estimates, and they have been badly let down. I am glad that the coalition Government have moved as they have. We have a good story to tell so far, but it could be an even better story if they listened to the concerns of Members on both sides of the House and made further movement.

The fact remains that £1.5 billion has been allocated, and we have heard that £1 billion has already been paid out to 896,367 policyholders, but that 140,000 have been untraced. On the assumption that many will inevitably remain untraced, it must leave a balance in the fund of £500 million. At what point, then, does the scheme conclude that it will not trace some of these people? At that point, will some of the £500 million be available for further distribution to the 896,000 or so who have already received some money? We can argue about whether there should be more money, but if £1.5 billion has been allocated and not all of it has been sent out, that provides quite a strong argument for making a decision at some point to allocate more of the money available in the Treasury to help these people. I hope that the Government will address that issue first.

The second issue is whether we could top up the £1.5 billion in due course to provide a much more satisfactory conclusion. Like many colleagues, I have retired constituents in my constituency—Poole—who are prudent and sensible people. Most of them made provision for their retirement in the best way they could. They did not go on gambling cruises and they did not go to Las Vegas: because they were responsible, they decided to invest. This provides a very strong case

26 Feb 2015 : Column 523

for a Government who believe in the ethics of people acting responsibly to stand by those people when they have been let down.

1.52 pm

Kate Green (Stretford and Urmston) (Lab): I, too, congratulate the hon. Member for Harrow East (Bob Blackman) who opened the debate on securing time for it this afternoon. As we have heard, this is an issue of justice and accountability; and it is also one of confidence in the financial markets, confidence in the regulatory system and confidence that political promises and commitments will be honoured. It is particularly on the issue of confidence that I wish to focus.

Let me start by declaring a personal interest. For a few months in 2000, I paid into an Equitable Life pension scheme offered by my then employer. Shortly after I joined the scheme, Equitable Life closed to new business and the company collapsed. I was lucky in that I lost, I guess, only a few hundred pounds, whereas many of my colleagues, like many of our constituents, lost considerably more. In the organisation for which I worked—this was typical for many policyholders—salaries were pretty modest, so it was people on modest incomes who had set money aside, in some cases for many years, to provide for their retirement who were left significantly out of pocket as a result. In fact, the organisation I worked for was a charity. Equitable Life had made a particular effort to take a substantial share of the charities’ pensions market. That is why, as a result of the important shares and securities market, a number of former and retired charity workers are now paying the price.

From my own experience at that time, I view it as important to remember that in taking firm and clear action now, we send a very clear signal about the importance of tight and effective regulation. When I joined the scheme in 2000, I remember seeing advertisements all over the London underground, encouraging people to take out Equitable Life policies. It could only have been a matter of weeks before the schemes collapsed, and it is quite beyond belief that regulators and, indeed, the company’s managers, were not aware at that time that they were advertising on the basis of an utterly false premise. I can only assume that this was a desperate attempt to bring money in as rapidly and to as great an extent as possible to shore up what was well known to be a collapsing business at that time.

However, that was not known to customers at the time. I did not know it, as a relatively financially literate and savvy customer, so it is crucial now publicly to recognise that regulation was seriously deficient. One signal we want to send strongly from this afternoon’s debate is that we will not tolerate that kind of lax regulation again.

My second point about confidence and why it matters so much as we act now in response to the failure at the time is that after the collapse of Equitable Life, the organisation for which I was working—in fact, I was the chief executive—attempted to set up a new group personal pension scheme for our employees. A substantial proportion of those employees refused to have anything to do with this. They could not see the point of investing in another pension scheme when they had been so badly let down the first time. We are talking about people largely in

26 Feb 2015 : Column 524

their 30s who were absolutely turned off providing for their own retirement. I suspect that the damage to confidence in the financial markets at that time was much more widespread, going beyond just the immediate impact on the policyholders who lost out.

Thirdly, we need to be honest and open today about where we are going in the future as regards compensation for these policyholders who have suffered so disgracefully. All Members have constituents who feel that they were very much misled by what they understood to have been a commitment to follow through the parliamentary ombudsman’s recommendation that they should be placed in the position that they would have been in had Equitable Life not failed. They feel that what they have received in compensation falls a long way short of that. I have to say that this mismatch between the promises these people felt they had secured and the situation in which they find themselves today is contributing considerably to a loss of confidence in our regulatory system and in our political response to regulatory failure. That is important, and senior politicians need to do all they can to put it right.

I know that many colleagues want to contribute. I am grateful for the opportunity to participate this afternoon. I hope that a strong message will go out to my constituents and other policyholders across the country of the deep seriousness with which this House treats this matter. I know that our debate is being watched very closely by thousands of policyholders in all constituencies across the country.

1.57 pm

Stephen Lloyd (Eastbourne) (LD): I apologise for being a few minutes late at the beginning of the debate. It is a pleasure to co-sponsor it with my hon. Friend the Member for Harrow East (Bob Blackman) and the hon. Member for Leeds North East (Fabian Hamilton). I would like to compliment the latter on being as active during the last Government as he has been during this Government to fight the Equitable Life pensions corner. I pay tribute to him for that.

Many have spoken today, and this issue has been going on throughout the term of this Parliament and for many years before that. I am keen not to repeat what others have said. Let me make it clear what we are asking for through this debate, which is for

“the Government to make a commitment to provide full compensation during the lifetime of the next Parliament as the economy and public finances continue to recover.”

That wording was deliberate. We recognised, as we always recognised on the all-party parliamentary group, that we inherited a catastrophic economic situation so that providing the full amount of money would cause real problems. I believe that we have been reasonable and sensible all the way through. We understand the challenges faced by the Government, and the motion, as I have clarified, recognises that. We are fully aware of the challenges with our own economy and the global economy, so we are not asking for everything appropriate to be paid immediately. Rather, we advocate achieving doing that over the next few years as the economy recovers, which is fair and reasonable.

Ann Abraham was the parliamentary ombudsman all those years ago, producing the final report in 2008. She said: