Equitable Life

(Limited Text - Ministerial Extracts only)

Tuesday 20th July 2010 Westminster Hall

[The Financial Secretary to the Treasury (Mr Mark Hoban)]

First, I congratulate my hon. Friend the Member for Oxford West and Abingdon (Nicola Blackwood) on securing the debate, the first in this Parliament on Equitable Life. I am certain it will not be the last such debate.

I want to respond to a couple of points made in interventions before returning to the main thrust of my remarks. My right hon. Friend the Member for Wokingham (Mr Redwood) asked about the quality and cleansing of the data. It is important to place on the record that there are 1.5 million policyholders holding 2 million policies, and that 30 million premium transactions have taken place over the period in question. The quality of data is a huge problem. I am grateful to EMAG for the offer of access to its database to help us cleanse the information. Equitable Life and others will be working with us to ensure the best-quality database. My right hon. Friend is absolutely right that such work needs to proceed in parallel with other work streams, so that we can make payments to policyholders as quickly as possible.

Reference was made to the importance of savings. The regulatory reforms that my right hon. Friend the Chancellor announced last month include the establishment of a consumer protection and markets agency, which will help to improve the regulation of our financial services, hopefully contributing along with other measures to rebuilding a savings culture in this country.

I did not need this afternoon’s debate to remind me of the importance of Equitable Life to so many of my colleagues, having received a number of letters, answered a number of written parliamentary questions and had a number of oral representations from colleagues about how important the matter is. I understand the strength of feeling, and I hope that, over the past four or five years in this role in opposition and now in government, I have come to be seen by policyholders as a strong advocate for ending the plight of those who have suffered as a consequence of Government maladministration. I want to see a swift response but, vitally, one that is transparent and fair to all policyholders and to the taxpayer.

[Andrea Leadsom (South Northamptonshire) (Con)]

Does my hon. Friend agree that the problem is that, because it has taken so long to get to the point we have reached today, we are in a worse position than if the situation had only recently occurred? Therefore, having promised to make good the damage left by Labour, we must put the matter to rest as quickly as possible—even quicker than in normal circumstances.

[Mr Hoban]

My hon. Friend makes an important point. The crisis has gone on for too long. Lord Penrose’s report was back in 2000, and the previous Government could have tackled the issue then. They blocked the ombudsman’s second inquiry into Equitable Life, and they took six months to respond to the ombudsman’s report. At every step in the process, the previous Government delayed. We want to make rapid progress, but fairly and transparently for policyholders and taxpayers.

In our coalition agreement we pledged to make fair and transparent payments, through an independently designed scheme, to policyholders for their relative loss as a consequence of regulatory failure. In the two months since we have been in office, we have made real progress and will continue to do so over the coming months. In May, in the Queen’s Speech, we announced an Equitable Life Bill, which will give the Treasury the statutory authority to incur expenditure in making payments to those who have suffered loss in connection with maladministration and the regulation of Equitable Life. The Bill will be introduced shortly and will be an important step towards resolving the issue.

Another important step will be the imminent publication of Sir John Chadwick’s final report on Equitable Life. It will give us a greater understanding of the losses that policyholders have suffered. Some have called for us to abandon the Chadwick process or to alter Sir John’s terms of reference. However, after careful consideration, I decided to allow Sir John to continue with his work under the current terms of reference. His work has been the culmination of almost 18 months of detailed analysis and evidence gathering. He and his actuaries have delved deeply into the issues, and their work has been informed by consultations with interested parties. For example, his flexible approach to establishing loss removes from policyholders the burden of proving what they would have done had they been aware of problems at Equitable Life. It is important to have his work available, as it will aid us in providing a swift response.

[Gavin Barwell (Croydon Central) (Con)]

The Minister certainly has the reputation with EMAG members that he mentioned earlier, but an issue of concern is the Government’s attitude to Chadwick. The Minister said that their response would be published imminently. Is there likely to be a statement before the summer recess?

[Mr Hoban]

I believe that there will be a statement before the summer recess. I recognise the concerns about Sir John’s work, but it is a useful building block in the process. To dismiss it and not give it due consideration would be an error.

[George Hollingbery (Meon Valley) (Con)]

Has the shape of the Minister’s thoughts on moving this issue forward changed from what he announced as the Conservative party’s plans in March?

--- Later in debate ---

[Mr Hoban]

My views have not changed in that period. An option one gets as a Minister is to drive the process forward further and faster, and to change the approach. What hon. Members will have seen over the past eight weeks, which will become clearer when Sir John’s report is published, is that we have adopted a much more transparent and open approach to the resolution of the problem.

As part of that transparency, I will publish with Sir John’s report the advice provided by his actuaries as well as correspondence he has received on the matter. In the light of the sensitivity of the issue, we must know how he developed his methodology and what has informed his thinking. To restore trust in the process, I want to be as open and transparent as possible about our approach and the losses suffered by policyholders. I believe that that is the best way to tackle the distrust that my hon. Friend the Member for Oxford West and Abingdon referred to in her speech.

[Dan Rogerson (North Cornwall) (LD)]

I am sure that people listening to this debate will be reassured by the approach that the coalition Government are taking, in contrast with that taken by the previous Government. Can the Minister confirm that, in taking into account what the Chadwick report says about the scale of the losses suffered by Equitable members, the coalition Government’s approach to how payments will be judged is new and not built on any of the previous Government’s work?

[Mr Hoban]

I will come on to the commission shortly, if Members will bear with me.

As I said, I want the process to be as open and transparent as possible. I have said to the House that when we publish Sir John’s report, I will provide a substantive update on the next steps in the process. We have already set out the important steps in how we will take the work forward, and some points about how the scheme will work.

My hon. Friend the Member for High Peak (Andrew Bingham) raised a couple of points in his intervention. I wish to make it clear that there should be no means-testing, and that the estates of deceased policyholders should be included in the scheme. We felt it important to clarify those two issues early on in order to settle some policyholders’ worries, and I am happy to reiterate those commitments today.

I will establish an independent commission that will advise on how best to allocate funds to policyholders and to help develop the scheme design. One of the key aspects of the ombudsman’s recommendations was that any scheme should be independent of Government, and I agree with the thinking behind that recommendation. The commission will be given a remit that will allow it truly to add value to the process.

The process will be time-consuming, and there is the potential that payments will be delayed if we ask the commission to start the process of determining relative loss from scratch. However, we want it to play a role in developing a fair outcome for all policyholders.

[Amber Rudd (Hastings and Rye) (Con)]

The Minister kindly mentioned how the funds will be paid out. In my constituency, a number of people are concerned that because it will take a long time to appoint the commission, which will then have to go through its own procedure, further delays could be added. Can he tell us how the commission will be put together and what his expectations are of the timing?

[Mr Hoban]

I am keen that the commission should work as quickly as possible. In many respects, the process would have been shorter without the commission, but it is an important guarantee of transparency and openness, and it is right that it be given a remit to do this work. Equally, I am mindful of the fact that we need to give it a tight timetable, so that it has time to think about the issues but is not seen as delaying the process of making payments to policyholders.

[Bob Blackman (Harrow East) (Con)]

One of the concerns is that, sadly, many policyholders have died or are dying. Can the Minister give some comfort on the issue of giving interim payments once the decision has been taken, so that people can receive payments before the commission has completed its work?

[Mr Hoban]

I am conscious of the fact that many policyholders are elderly, but there is a challenge: we need to ensure that the scheme is designed transparently and fairly, and that there is fairness between groups of policyholders as well as between policyholders and taxpayers. The commission should look at where priority payments should be made, but I am wary of the question of how we can make interim payments to people on a sound basis that will not lead to further problems later. I take on board my hon. Friend’s point, but there are some challenges in taking the idea forward.

A key issue for many policyholders and Members of Parliament is how much the scheme will cost. As the ombudsman said, it is appropriate to think about that, and we will consider the potential impact on the public purse of any scheme, and what is affordable, before we decide how much we can allocate to the scheme. We will ensure that fairness is at the forefront of our thinking when making those difficult decisions.

I would like to take a moment to mention the excellent work of EMAG, which has campaigned for many years for a fair resolution to the matter. In opposition and now in government, I have met members of the EMAG board, who have relayed to me their concerns about the Chadwick process. I will say to hon. Members what I said to them: Sir John is only a building block in our approach, and I am willing to listen to EMAG and other interested parties who can give useful and productive insight into this complex issue.

I remind hon. Members that no final decisions have yet been made on many of the important issues associated with the scheme. I want the decisions to be in the best interests of policyholders and taxpayers, and I encourage EMAG and others to be involved so that we can move the process on and find a resolution, for which policyholders have waited for many years.

I will give more details on our approach and the next steps in the process when Sir John Chadwick’s final report is published, but I can confidently say that we are moving towards our objective of resolving the issue. We are now reaching a crucial stage in the story of the Equitable Life payment scheme. What happens in the coming months will be decisive in laying out how the scheme operates and the quantum of payments that will be made to policyholders. I encourage all MPs to engage in the debate. This is certainly an issue that we must get right.