Equitable Life (Payments) Bill

Debate between Andrew Murrison and Frank Dobson

Tuesday 14th September 2010 Commons Chamber

[Frank Dobson (Holborn and St Pancras) (Lab)]

I support the Bill because it will enable Equitable Life policyholders to start getting paid. Those people put their savings into what was Britain’s oldest and, as far as they were concerned, most reputable savings institution. 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. The Equitable policyholders are in their current position through absolutely no fault of their own.

So who was at fault? First, clearly, the people who were running Equitable Life were at fault. I do not think that anyone is going to dispute that. Secondly, the House of Lords was at fault in its judgment in the case of the guaranteed annuity rate beneficiaries. When it reached its decision, it knew what the consequences were likely to be for Equitable Life and other policyholders who would not benefit from that judgment. Rather ironically, the House of Lords showed no sense of what was equitable and not a grain of common sense. It decided that it would award justice to one small group of people, almost automatically resulting in injustice for a much larger group. In view of the dubiety of certain organisations with which people put their savings, we need to look at the law to see whether we can enable the courts to come to what might be described as an adjudication rather than a judgment, where a judgment in favour of one group of innocent people might be very damaging to another group of innocent people. The Treasury, the Financial Services Authority and others were clearly at fault. Nobody can deny that, but at the time that the first ombudsman’s report came out, I believed she was wrong as well. In my judgment, her judgment did not give enough weight to the primary shortcomings and primary fault of Equitable Life, and attributed too much fault to the regulators.

Clearly, the Government were at fault in their response to that report. It was understandable that they did not fancy the establishment of the principle that people could seek compensation from a regulator. That is not an unsound concern on the part of a Government, who might not want to be subjected to all sorts of court actions—for example, when somebody decides that the police have failed to prevent burglaries in their area and seeks to bring a case against them. The financial services industry is keen always to blame regulators, as it has done in a big way.

Things changed at the time of the credit crunch. All questions about protecting the taxpayer fell away. All the old restraints fell away. The banking and savings industry, run by people of infinite greed and stupidity, was so hopeless that it was decided on both sides of the House that not only the people who had put their savings in them, but the institutions themselves, were entitled to be bailed out. From that moment on, I was convinced that had the Equitable Life issue arisen in 2007, 2008 or 2009, there would have been no doubt: we would all have agreed that the people who had lost their money should be properly compensated, and by the taxpayer. That is what we now have to do if we are to give people a sense of security in their pensions and savings.

[Dr Andrew Murrison (South West Wiltshire) (Con)]

Will the right hon. Gentleman give way?

[Frank Dobson]

No, I do not want to. We must get on.

As my right hon. Friend the Member for East Ham (Stephen Timms) said, the Conservatives and Liberal Democrats attacked the Labour Government—as far as I was concerned, quite rightly—and said in opposition that they strongly supported the ombudsman’s recommendations. I do not recall my opponents at the last election getting up and saying, “Well, there were a few caveats in the ombudsman’s report,” and I doubt whether that crossed Tory or Lib Dem lips anywhere else in the country.

Before, during and after the general election, the two parties that now form the Government thrice promised that the ombudsman’s report would be implemented, and they had better get on with it. However, their form of getting on with it is to establish yet another commission. That may work swiftly; I do not know. I have a question which I hope the Minister will answer. If the commission comes up with a scheme that EMAG does not like, will he send it back to the commission and insist that it comes up with a scheme acceptable to EMAG? I am happy to give way to him if he would like to contribute to the debate.

Once everyone has been paid, the situation is still not sorted out. We need to look closely at better regulation of those who are taking in people’s savings. We need to look at the regulatory system to see whether that can be strengthened in various ways. Finally, as I suggested, we need to change the law so that in circumstances like those that originally arose in Equitable Life, the courts can adjudicate between two innocent parties, not help one lot and hammer the other.