Equitable Life (Payments) Bill

Alan Reid Excerpts

Wednesday 10th November 2010 Commons Chamber

[Bob Blackman]

That is clearly where our moral duty arises. If policyholders are trapped and cannot adjust their position, they are unable to rectify the damage that has been done.

I want to speak briefly to amendment 7. The Government have accepted that £4.26 billion should be the full amount available to policyholders, 37,000 of whom will receive 100% compensation. That clearly involves a huge amount of money, which will come out of the £1.5 billion. The policyholders who are not trapped annuitants would therefore get something like 15% of the compensation due to them, which seems pretty unfair and unreasonable. We should set up a commission to devise a payment scheme, then look at the results. Instead, £1.5 billion has now been set aside, and an independent commission will set up the mechanism for distributing that money. That could have very serious consequences indeed.

Parliament has a problem in this regard. I applaud the Government for moving swiftly to settle this matter once and for all, but we are setting up a method for distributing the money and creating expectations out there. About 1.4 million policyholders have been affected by the scandal, and 37,000 will receive full compensation while 10,000 will not get a penny. That leaves rather a lot of policyholders among whom to divide a relatively small amount of money. When the Minister responds to the debate, I trust that he will be able to set out how the calculations were made, so that we can be clear about them.

Amendment 7 would allow us to review the position in five years’ time, when the economy has recovered and the benefits of this Government are clear for all to see, and to top up the compensation further for those people who will be retiring in five, 10, 15 or 25 years’ time. We also have a moral duty to honour our pledge to those people. This is one of those cases in which we have set out to do something in the proper way, and I applaud those on the Treasury Bench for moving swiftly to bring the matter to a conclusion so that payments can be made as soon as possible, but we must ensure that we fulfil our moral duty to those policyholders.

[Mr Alan Reid (Argyll and Bute) (LD)]

I start by putting firmly on the record my belief that the Government have implemented the parliamentary ombudsman’s report and have honoured the pledges made before the election. It was always part of the parliamentary ombudsman’s report that this would be a political decision for the Government to make, taking the public finances into account when they set the cap. The Government have set the cap at £1.5 billion. I wish it could have been more, and I hope that it will be possible to revisit this in future when the public finances are in a better state.

I have sympathy for amendment 1, but let me state my understanding of how it would work in practice. It does not alter the cap that has already been set, so if the pre-September 1992 with-profits annuitants were to be compensated to the same level as the post-September 1992 with-profits annuitants, there would be less for the latter group of people. If the cap remains the same, and the amendment does not alter the cap, giving more to some people would mean giving less to others. I ask the Financial Secretary and the hon. Member for Leeds North East (Mr Hamilton) who moved the amendment to comment on that when they respond.

I want to press the Government on why they have chosen the date of September 1992. As other hon. Members have said, the maladministration started in June 1991. Penrose found that when the Equitable Life Assurance Society’s board papers were sent to the Government Actuary’s Department on 11 June 1991, there was information in those papers showing that the society was not in a good position. Had the Government Actuary’s Department publicised that information at that time, investors would have been deterred from investing in the society. There is a strong argument for saying that the date should be not September 1992 but June 1991.

On 30 July 1992, in an internal briefing, the Government Actuary’s Department described the society as being one of the

“companies on whom we have been keeping a close watch for a number of years”

and said that Equitable Life remained a company “which caused serious concern”. There was evidence in July 1992—in fact, before July 1992—that the Government Actuary’s Department was aware that Equitable Life had problems. Surely that should have been made public and investors should have been deterred. In his response, will the Minister clarify why the date of September 1992 was chosen, because it certainly seems to me that an earlier date—say June 1991 or possibly even earlier—would have been more appropriate?

[Mr Marcus Jones (Nuneaton) (Con)]

I would like to speak mainly about the position of with-profits annuitants and the pledge that I and other Members of all parties made before the general election—that the Government should make fair and transparent payments to those who had suffered as a consequence of the debacle of Equitable Life. I am talking about 350 local people in my constituency who are part of the Equitable Members Action Group. Those 350 include people associated with many companies that were in the Equitable Life scheme. Many hundreds of other people are affected. For some, Equitable Life provided their only private pension to supplement their state pension provision.

I welcome the fact that for a number of my constituents, that pledge has been made good, and I understand that the trapped annuitants in the post-1992 cohort will receive 100% of their compensation. I am delighted about that. Needless to say, I am also very concerned for the pre-1992 Equitable Life investors for whom, it seems, there will be no compensation at all. That seems contrary to the recommendations of the parliamentary ombudsman, contrary to EMAG’s suggestions and contrary to the views of Sir John Chadwick, for whom not many Members have a great deal of time.

I understand that it is difficult to quantify the losses, but, if the Government have the will, the losses of the pre-1992 annuitants should be explored. The people to whom we made a pledge before the general election in May were not necessarily concerned whether they were pre-1992 annuitants or post-1992 annuitants. Their concern was as Equitable Life policyholders looking for justice.

If the Government and the Treasury have the will to deal with this situation, they should do so; if not, they should explain how I justify the position to constituents who have been wronged.

If the Government and the Treasury are prepared to look at compensating the pre-1992 annuitants, there has to be a health warning, because there is a law of unintended consequences, should we be stuck at the compensation figure of £1.5 billion. Many of my constituents who are post-1992 annuitants might be unaffected by any decision to include the pre-1992 annuitants.

Amendment 7 deals with that position and the relative losses. The Treasury should consider it, although I am concerned about whether it could be taken into account within the current comprehensive spending review or would need to be considered after the current CSR period expires.

I would like to ask the Minister several questions. First, will he look again at how to compensate the pre-1992 annuitants, and at how that might be quantified? Will he commit to working with his Treasury colleagues to take into account payments beyond the CSR period to enable the pre-1992 annuitants to be compensated without prejudicing the position of the post-1992 annuitants and that of Equitable Life policyholders generally?

I implore the Minister again—I did so in the last debate on this subject—to recognise that the Government’s decision over Equitable Life raises questions not only about the integrity of the current Government, but about the integrity of savings and investments for one’s retirement. I am well aware that many of my constituents do not have their own retirement provision. The Government should encourage people to provide for their retirement, but if we do not ensure that there is a safety net for people who have invested and done the right thing for their retirement, they will think that it is not worth putting themselves out by investing money for their retirements during their early years of work.

I ask the Minister to consider those points extremely carefully before any decisions are taken this afternoon.