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I have some questions for the Minister. The Statement talks about some form of proportionate liability with the Government paying out for only the amount attributable to maladministration. What is the purpose of this, other than to leave policyholders with no remedy or a reduced remedy? As I understand it, there is no spare money, no reserves, in Equitable Life available for any further claims. The organisation has already settled quite a large number of claims which have been pursued through other routes. Remaining funds are, in effect, allocated to policyholders. Is it not the case that the Governments use of proportionate liability is nothing more than code for saying that
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I do not doubt the competence and integrity of Sir John Chadwick, but he appears merely to have been an adviser to the Government. Are the Government saying that there will be no independent body in the sense put forward by the ombudsman involved at any stage? Will the advice given by Sir John Chadwick be made public? Will he seek evidence from interested parties? Will he have open hearings? How will his work be made public? The Government cannot expect policyholders to have confidence in outcomes if the work of Sir John is to be intermediated through the Treasury and not conducted in the public domain.
Compensation, according to the Statement, will get a double hit. The first comes from the proportionate liability route, but the Statement goes on to refer to finding out which classes of policyholder have suffered the greatest impact and talks in terms of setting up a hardship fund, the so-called fair payment scheme, which will apply only to those who have suffered a disproportionate impact. Will the Minister explain what these terms are intended to mean? How is disproportionate impact to be measuredrelative to losses incurred on policies or relative to a policyholders financial circumstances? Do the Government intend to inquire into the personal circumstances of policyholders and use some form of means testing? The Government must have some ideas in this regard, having had so long to consider the ombudsmans findings.
What will be done for those who have already died? The Equitable Members Action Group, which has worked so hard to keep the plight of the losses incurred by policyholders to the fore, estimates that 30,000 have already died and that at least 400 are dying each month. Will the estates of these people be given priority?
Lastly, I expect that the policyholders will not be happy with todays Statement and will want to examine further ways of getting what they see as justice. Can the Minister give an absolute assurance that if payments are given on an ex gratia basis in due course, they will not come with strings attached, such as not supporting any other action around the ombudsmans report?
Lord Newby: My Lords, I, too, thank the Minister for repeating the Statement. We on these Benches are pleased that the Government have accepted the principle, at least to a degree, of compensation from public funds for Equitable Life policyholders. However, I am afraid that that is far as I can go in keeping company with the Government in approving the approach they have adopted. On timings, why has it taken well over six months for the Government to do little more than accept a principle and appoint an adviser? Why could not this Statement have been made when Parliament resumed in October, or even before? When we briefly debated the issue a couple of months ago, the Minister replying at the time said that the Treasury had other
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However, given where we are, have the Government given Sir John any indication of how long he might take? Have they specified when they would like to receive updates? If, when he starts looking at all the documentation, he finds it is extremely difficult and gets bogged down in it, what pressure will the Government seek to apply to try to ensure that months and months of silence do not pass as poor Sir John tries to deal with this issue? What resources has he been given to help him? Does he have a support team, and who are they? As the noble Baroness asked, what do the Government mean by disproportionate impact? Do they have a view on what proportion of Equitable Life policyholders might be included in that definition, and does that, by definition, mean that the bulk of policyholders who suffered equally will get nothing?
The Government say that, alongside Sir Johns advice, they will take account of the position of the public finances. We hope that the advice will be forthcoming in a matter of months rather than years. But the Government know about the position of the public financesthey are shot through. Why can they not make a Statement at this point about what the phrase means? Does it mean, in effect, that if at the time the finances are as bad as we expect them to beand as the Government expect them to bethey could simply disregard all Sir Johns advice completely? It is advice and the Government have given no indication of whether they will accept it in whole or in part.
Why can the Government not set at least an indicative timetable for even initial payments? When the ombudsman originally reported, she said that the whole process should take two and a half years. The Government imply in their Statement that they do not want to follow the route she proposed because that would take too long. If that is the case, what view do they have about what would be an acceptable period? If they believe that we are talking about a matter of years rather than months before the whole process is completed, is there any reason why there cannot be an interim fast-track system of payments to start the process of meting out justice to those who have sufferedor are we going to find ourselves in the same situation as with the miners compensation scheme, where it takes decades to make payments and as a result, in many cases, justice is actually negated?
When this issue was raised earlier in your Lordships House I contrasted the lack of speed of payment in this case with the speed of payment of depositors in Icelandic banks. The Minister chided me, saying that that was an unfair comparison. I disagree. The truth is that if a Government want to act quickly, they can. If they had wanted to act quicklyor at least significantly more quickly than this, in the case of Equitable Lifethey could have done so. They could now have started making payments, as the ombudsman suggested and believed was perfectly possible. The Governments failure
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Lord Myners: My Lords, the noble Baroness, Lady Noakes, has placed on record her admiration for the work of the Parliamentary Ombudsman. I support that. I note, however, that no apology has been forthcoming from the opposition Benches with regard to the maladministration that took place when they were in office, a serious omission which, I fear, was also the case in the other House.
The noble Baroness accuses me of repeating the mantra of Lord Penroses report. It is not a mantra but the core of his recommendation that Equitable Lifes problems were brought upon the society by its own board and management, that being a particularly interesting feature of a mutual. In many cases these policyholders were also the members or owners of the society. Penrose was right to identify that factor and to make it clear that regulatory failure was a secondary factor, while still an important one.
I reject the suggestion that we overloaded the ombudsman with information. Far be it from us to suggest that she would be capable of having her timetable so influenced. It seems to me that the quality and thoroughness of her report reflect the information that she received and the representations from many places, including from the Government, because there are many important public policy issues here that required recommendations.
We have accepted the findings of the Parliamentary Ombudsman in a number of respects, and we have properly made an apology to the policyholders of Equitable where they suffered as a consequence of that maladministration. We have proposed the establishment of ex gratia paymentsa model which, I may say, was also adopted in the case of Barlow Clowes when another Government were in office.
The use of proportionate liability and its relevance is a concept recognised by the ombudsman, who acknowledges that there are matters of public policy interest here. That is the point that I would refer to when responding to the good and balanced contribution of the noble Lord, Lord Newby. The Parliamentary Ombudsman made clear her view that public policy considerations had to be taken into account. I note that that view has also been strongly endorsed by the shadow Chancellor of the Exchequer.
The noble Baroness, Lady Noakes, asked about Sir John Chadwicks processes. Sir John is an eminent lawyer. His terms of reference do not limit his processes; they do not specify the manner in which he will work; they do not in any way limit the evidence that he may seek in the pursuit of his duties and responsibilities. If Sir John, of his own volition or in response to recommendations, decides that he wishes to issue public reports on an interim basis, or if he chooses to take evidence, that will be for him to determine and for him to report. In answer to a question from the noble Lord, Lord Newby, we have said that Sir John should press on with this as quickly as possible.
The noble Baroness and the noble Lord both asked about disproportionate ex gratia payments. This will be a matter on which we will seek to be advised and informed by Sir John, but we envisage that he will take into account the features of different policies. Holders of certain policies may well not have experienced as much damage as others. He will certainly take into account the contribution to any damage that was as a result of maladministration as opposed to any other circumstances, including investment market conditions. He will also, quite rightly, take into account the circumstances of policyholders. This is a matter on which we ask him to reflect; it is a matter on which we ask him to tender advice.
In response to another of the noble Baronesss questions, it will be for Sir John to advise us whether any conditions should apply to the payment of ex gratia amounts. I note that conditions were applied in the case of Barlow Clowes.
The noble Lord, Lord Newby, asked why this has taken such a long time. I understand his frustration, but these are extraordinarily complex issues. The commendable work of the ombudsman, which was endorsed by the noble Baroness, took four years. We took six months to consider her response. I think that that was an appropriate period, given the importance of the issues resolved. In so considering matters of this complexity with the care shown by officials and Ministers, we have managed to achieve a good position in which the apology that she sought has been tendered and the payment of ex gratia payments can be made. We are certainly not stringing this out; the language in the Command Paper indicates that Sir John has been asked to reply as quickly as possible. I am sure that he will ensure that he is appropriately resourced; I would not wish to see him in any way frustrated in that respect.
Whether an interim payment can be made is a matter on which we would seek Sir Johns advice. In another place, the Chief Secretary to the Treasury quite correctly drew attention to the possibility that the making of interim payments may lead to delays in final payments. That needs careful consideration.
The noble Lord, Lord Newby, made an observation about the Icelandic banks. The core difference is that the payment in that case was to protect against systemic risk, to ensure that we did not see the consequences of a complete collapse and failure of the banking system. Those steps were appropriate. I suggested earlier that there was a conflation of investment and depositors. The concepts are different, but the noble Lord was quite right to challenge me on the point. It is why one payment could be made swiftly and executed almost overnight. Here, we are looking at something which the Parliamentary Ombudsman has said will take two and half years using the model which she recommends, but about which the Public Administration Select Committee had some doubts.
I commend the Statement made by the Chief Secretary to the Treasury to the other place. I hope that I have answered the questions raised by the noble Baroness, Lady Noakes, and the noble Lord, Lord Newby, if not to their satisfaction then at least in terms of completeness.
Baroness Hollis of Heigham: My Lords, I welcome my noble friends Statement and declare a financial interestI, possibly like others, have suffered a financial loss. Does my noble friend agree that, the House of Lords judgment notwithstanding, a mutual society cannot privilege one group of members over another, which is why so many of us were taken aback by that judgment? Will he also confirm that the Parliamentary Ombudsman could investigate only the conduct of government, as she made clear, and not the conduct of the societyunlike Penroseand that there is therefore no way so far of estimating proportionate liability or for what fraction of loss government are responsible, hence the need for Sir John Chadwicks inquiry? Will he confirm the distinction, therefore, that needs to be drawn between ex gratia and full compensation payments? Does my noble friend agree that, as the noble Baroness pointed out, just because the Government alone have financial resources, unlike Equitable Life, it does not necessarily mean that they should take full responsibility for all losses?
Lord Myners: My Lords, the noble Baroness, Lady Hollis, again evidences her accomplished grasp of these complex issues. I shall not be tempted to comment on the Hyman judgment or preferential treatment between one set of policyholders and another. However, I absolutely endorse the correctness of her observation that the Parliamentary Ombudsman was limited to a review of the performance of public bodies and therefore could not have done the further stage of work which Sir John Chadwick will now do; namely, to seek to allocate proportionately the contribution of various bodies to any loss suffered, which is quite right and proper. Anything short of that would be an extraordinary abuse of the public purse, which is acknowledged by many, including the Member of Parliament for Tatton in another place.
Lord Pearson of Rannoch: My Lords, I should declare an interest as a former reinsurance broker and that I am now the honorary president of a medium-sized firm of reinsurance brokers, who are not, however, specialised in this sector. In that capacity, I ask the Minister to say a little more about the circumstances surrounding the reinsurance treaty, which does not appear to have performed satisfactorily. This factor was mentioned twice in Her Majesty's Governments Statement.
I cannot pretend to have followed this saga with the attention that it may have deserved, but I think this is the first time that I have heard of a reinsurance treaty playing a partperhaps a major partin this unfortunate case. The simple question is why this treaty did not perform. If the noble Lord does not have the details at his fingertips, could he write to me? I am sure that his answers would be valuable to the whole sector.
Lord Myners: My Lords, as with the noble Lord, I also have some experience of reinsurance, having been involved in establishing a reinsurance company in 2001, which subsequently went on to be listed on the New York stock exchange. I believe that this was in nature a time and distance policy, which did not
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While not in any way wishing not to write to the noble Lord on this subject, he may find it helpful to read Lord Penroses report. It is a lengthy document that goes into this matterfinding 6 under the Parliamentary Ombudsmans reportin excruciating detail.
Lord Lucas: My Lords, I must declare some interests. In the part of the motorist, I am a trustee of the Motorists Legal Challenge Fund and chairman of the London Motorists Action Group. As an impartial chairman, I chair the Enforcement Law Reform Group and, in the part of local authorities and the civil enforcement industry generally, I chair the Civil Enforcement Awards. So I have experience of looking at this matter from all sides.
This is a matter of great importance to us. Dealing with local authority parking regimes and their enforcement is one of the main ways in which citizens come up against local authorities and enforcement generally. Whether that is done in a way that makes us all happier and increases our sense of fairness and well-being or whether it is done unfairly, with an attitude to revenue that was shared by the Sheriff of Nottingham, matters a great deal to us.
The legislation was well intentioned when we passed it. Looking back at what we sought to achieve when we set up this regime, I believe that we were very much focused on the proper use of the streets, the fair apportionment of that benefit between the various users of the streets, and safetythose sort of attitudes. I do not think that money came into it, but money has come into it in a very big way over the past 20 years or so, to the point where it has come to dominate the thinking of many councils. The reason why it has come to be so prominent is that the Government over that time have failed to use their powers to curb the growth of that influence and to bring practice back to where it should have been.
In some parts of this country, there is, relatively speaking, no problem. Essex springs to mindI wonder whyas does Manchester. There are some councils with seriously good practices, but there are many that do not have them. There is a basic principle here, set out in regulation, that the civil enforcement of parking and traffic regulations should not be run with a view to profit, but no mechanism was set up to enforce that rule and the Government have made no effort to enforce it. The result is that many councils have allowed their thinking to become dominated by money.
I think that the worst example must be Camden, where the whole regime and tenor of enforcement have been designed to raise money. The council currently makes a profit equivalent to a 25 per cent increase in council tax and puts tens of thousands of its residents into the tender care of bailiffs every year. That is an outrageous denial of the intention of the law. The council is acting immorally against the social interests of its area and against our intentions when we passed the legislation.
Many other councils have been corrupted to a lesser degree. Were Westminster to look back at its practice four or five years ago, it would recognise that many things that it was doing were governed by a desire to raise funds. It has improved a great deal since then. I particularly welcome its decision to use bailiffs as little as possible. It has abolished clamping and done many other worthwhile things, although one could look at the decision to introduce mobile telephone-only parking systems as being driven more to protect and increase revenue than to be convenient for its citizens.
The Mayor of London has sent me a programme of changes that he wants to make to the previous rapacious regime. He is considering issuing warning notices rather than penalties. That Dont do it again, please attitude is wonderful. It is producing a human relationship between the local authority and the people with whom it is dealing. There will be a system where you can register to pay the congestion charge automatically; all you need to do is put your details online and then you need no longer worry whether you have remembered to pay by 10 oclock. The previous regime, certainly to begin with, was aimed at raising as much money as possible by fines. There are many other things that the Mayor of London is setting out to do, and I welcome them, although he has a way to go. Last year, 140,000 tickets were issued by the mayor in respect of loading bays. Traffic wardens are waiting for three minutes to see whether a commercial van is actually loading or unloading, when the allowance in legislation is 20 minutes. The mayor is moving in the right direction, but the authority has a long way to go.
The fundamental cause of this problem is lack of government oversight. The rules are there, but the Government need to do something to make local authorities pay attention to them. All they need to do is give the district auditor an instruction that it is his responsibility to look at this. Then the public would have someone to complain to, councils would have someone to beware of and we would see things moving in the right direction.
The worst examples of the influence of money amount to theft, if we define theft as taking what is not yours and keeping it. Many councils make honest mistakes in their signagethe way in which they sign cameras or design yellow box junctions. After a process in the court or in negotiation with the Department for Transport, they are brought to recognise that what they have been doing is illegal. They are faced with a situation in which they have extracted fines from tens of thousands of motorists, many of them their own residents, illegally.
In commercial life, if a clearing bank were found to have charged too much for letters telling customers that they had gone into overdraft, you would expect such an institution to pay that money back without question and to seek out the people whom it had extracted money from and pay it back to them. Councils up and down the land do not do this. There are some that do. I offer bouquets to Sheffield, South Tyneside, Sandwell and other councils that recognise that, where they have got things wrong, they should pay the money back. However, many others do not. They hang on to that money. Indeed, Haringey has gone as far as to have a vote. The members of the council voted to keep money that they know is not theirs as if they were not told when they were young that theft was not the thing to do. So corrupted have they become in public office that they think that theft is the right thing to do as a councillor. That is not how things should go on.
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