Equitable Life

Lord Goldsmith of Richmond Park Excerpts

Thursday 26th February 2015 Commons Chamber

[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 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.