Equitable Life

Bob Blackman Excerpts

Thursday 11th February 2016 Commons Chamber

[Bob Blackman (Harrow East) (Con)]

I beg to move,

That this House congratulates the Government on providing a scheme to compensate victims of the Equitable Life scandal; welcomes the Government’s acceptance of the Parliamentary Ombudsman’s findings in full; notes that the Parliamentary Ombudsman recommended that policyholders should be put back in the position they would have been in had maladministration not occurred; further notes that most victims have only received partial compensation compared to the confirmed losses and that the compensation scheme is now closed to new applicants; and calls on the Government to ensure that the entire existing budget allocated for compensation to date is paid to eligible policyholders and to make a further commitment to provide full compensation for relative losses to all victims of this scandal.

I draw Members’ attention to the fact that I am the co-chairman of the all-party parliamentary group for justice for Equitable Life policyholders. I share that honour with the hon. Member for Leeds North East (Fabian Hamilton), who regrettably has to be in another debate, otherwise he would have been here. I hope that he will be able to get here and put his point of view before we conclude. The all-party parliamentary group is one of the largest groups in Parliament, if not the largest group, with 195 members drawn from all political parties.

When I was elected in May 2010, I signed only a limited number of pledges. One that I was very happy to sign, having investigated the matter fully, was a pledge to seek justice for Equitable Life policyholders. There is no doubt that this has been an outrageous scandal in respect of the length of time it has lasted and the repeated failure of Governments of all persuasions adequately to compensate people who were the victims of a scam. These were hard-working people who invested their life savings in a pension scheme that they believed was secure.

We all know that when one invests on the stock market or in such schemes, the market can go up or down. The difference between this scam and other such schemes is that Equitable Life went round inducing people to put their life savings into it, promising huge bonuses and payouts. It swept up enormous amounts of money and numbers of people who thought that it was a great scheme. In reality, the scheme could not finance itself. It could never meet the commitments that it had made. That was very dangerous, but the regulator knew that it was going on, as did the Government and the Treasury. They conspired to prevent it becoming public knowledge so that people carried on investing their money and losing money.

To make matters worse, it took not only court action, but the Parliamentary and Health Service Ombudsman to bring to the attention of the public that this was maladministration of the worst kind. The last parliamentary ombudsman made it clear in her excellent report that Equitable Life policyholders who had suffered a relative loss should be put back in the position they would have been in had they not suffered as a result of this scam. I seek to ensure in this Parliament, as we did in the last, that all Equitable Life policyholders are given the compensation they are due.

[Sir Edward Leigh (Gainsborough) (Con)]

After all the debates, the truth is that 95% of Equitable Life with-profits policyholders have received just 22% of their relative losses. That is the bottom line, is it not? The Government have a responsibility, given the maladministration that clearly happened, to help the many elderly people who have faced such appalling losses.

[Bob Blackman]

I thank my hon. Friend for that clear statement.

There are three sets of policyholders: the pre-1992 trapped annuitants, who were to get not a single penny under the compensation scheme; the with-profits annuitants, who were to get 100% compensation; and the pension holders, who got 22.4% of their relative losses, as my hon. Friend said. The coalition Government set up a compensation scheme, which I was pleased to support. However, it is a scandal that if someone purchased their policy on 31 August 1992, they got nothing, but if they purchased it on 1 September 1992, they got 100%. The rationale was that if the pre-1992 trapped annuitants had looked at the regulated accounts, they could have seen that there was a problem and that it was a scam. The reality is that when people sign up to such schemes, they do not expect to have to do that. I applaud the Government for taking steps, following the legislation, to partly compensate the pre-1992 trapped annuitants.

[Robert Neill (Bromley and Chislehurst) (Con)]

My hon. Friend has done great work with the other members of the all-party parliamentary group. I apologise, Madam Deputy Speaker, for the fact that, as you know, for a number of reasons I will not be able to stay for the whole debate. Many of my constituents were victims of this scam. Does he agree that when there has been a failure of regulation, as there was in this case, the Government essentially stand behind the regulator, so the moral responsibility ultimately falls on the Government, regardless of party? Although the coalition did something, the financial constraints that enabled it to argue that it was not able to do as much as we would have wished at that time are beginning to ease. Do not decency, honesty and equity demand that we revisit the amount of compensation that is due to these people, who saved and did the right thing, and who, frankly, have been let down by Government agencies as much as by Equitable Life?

[Bob Blackman]

I thank my hon. Friend for that clear conclusion.

The Government allocated £1.5 billion of compensation to policyholders who had lost money. Some £45 million was then promised and delivered to the pre-1992 trapped annuitants. The Chancellor accepted at the Dispatch Box in November 2010 that the total loss was some £4.1 billion, so the shortfall in compensation is £2.6 billion.

[Mr Adrian Bailey (West Bromwich West) (Lab/Co-op)]

I congratulate the hon. Gentleman on bringing this issue forward for debate in the Chamber. I am sure that, like me, he has received representations from elderly decent people who have done the right thing throughout their life and who invested in Equitable Life in order, they thought, that they had a secure pension in the long term. The Government need to foster a savings culture and promote pensions. Does he not think that the failure to compensate people in full for what they did responsibly and in good faith risks undermining the culture that we need to develop for the future of this country?

[Bob Blackman]

When people make an investment decision, they understand that the market can go up or down. What made this scheme different from other investment choices was that it was a scam, and we should recognise it as such. It was a scandal. There is a moral duty, as hon. Members have said, on the Government to provide full compensation.

What has changed is that the Government set a time limit for the submission of new applications for compensation and said that they had to be in by 31 December 2015. Therefore, we now know the total number of people who are due compensation and can look at how the compensation scheme is operating. I have no doubt that the Minister will outline the progress that has been made in compensating individual policyholders.

I want to draw attention to two elements. A contingency fund of £100 million was deliberately set aside because, at that time, it was not known how many policyholders would need to be compensated. Also, because it has not been possible to trace a large number of policyholders—I think it is about 110,000—there has been an underspend of some £39 million. My first ask of the Minister is that that £139 million goes to the people who have suffered loss. That would not cost the Treasury anything because it has already allocated that money.

[Rachael Maskell (York Central) (Lab/Co-op)]

I thank the hon. Gentleman for securing this debate. This is an important matter for my constituents, particularly those who worked at the carriage works in York, which has closed, many of whom have suffered from mesothelioma. For some of them, it is too late. Is not expediency an important criterion for the Government to consider so that the survivors have the opportunity to receive compensation?

[Bob Blackman]

I thank the hon. Lady for that intervention.

Because of the different categories of policyholder, the pre-1992 trapped annuitants—of which 9,000 are still alive—have a minimum age of 88, and most are in their late 80s or early 90s. They are coming to the end of their lives, and it is right that they should seek and receive compensation. It is wrong and reprehensible that some of those individuals who invested their money have had to exist on pension credit, when they expected to have a proper pension scheme. Those 9,000 people should receive the £100 million contingency fund, which would lead roughly—I will leave the Minister to consider the detail—to an average of about £12,000 compensation each. That would be a dramatic change for those individuals who are coming to the end of their lives.

[Julie Cooper (Burnley) (Lab)]

I thank the hon. Gentleman for securing this important debate on a matter that affects a number of my constituents. The Government have cited affordability constraints as a reason for not bridging the gap and providing full compensation. Given that we are now in 2016, and the Chancellor constantly tells us that the economy is in a far stronger position, should we urge him to look again at the issue, so that those who have been so badly affected and who have worked all their lives and invested in a prudent fashion, should be compensated?

[Bob Blackman]

I agree wholeheartedly with the hon. Lady. We now know how many victims there are, and what the payouts have been. For with-profit annuitants, 38,135 victims have received £336 million, and those payments will continue over the next few years. However, 890,472 victims have received only 22.4%, and it has been difficult for members of the scheme to understand the basis on which that has been delivered. As has been mentioned, the Government said that they could not afford all that money to pay people out, but people who are in that position will need compensation over several years. They do not need all the money to be put into the scheme upfront; they need it to be spread over a number of years while they are pensioners. As the economy recovers, the Government should supply additional funds, as the Treasury can afford it, to top up the scheme and ensure that those who suffered relative loss receive the full compensation package due.

[Mr Charles Walker (Broxbourne) (Con)]

My hon. Friend mentions the hundreds of thousands of people who are waiting for full compensation. How much additional money does he feel that the Government will have to come up with over that compensation period?

[Bob Blackman]

We must find a further £2.6 billion to meet the commitment that all of us signed up to. Those of us who made that pledge said that we wanted full and fair compensation, and the Chancellor made it clear at the Dispatch Box that that was the figure, although he was only able to come up with £1.5 billion at the time. The shortfall is now £2.6 billion. I could go through a whole list of other things that the Chancellor has found money for but that have perhaps less merit than the plight of those elderly people who invested their money.

I do not expect the Minister suddenly to say, “Don’t worry, we’re going to provide all the money. Here it is”—it would be good if he did—but the Chancellor will be at the Dispatch Box on 16 March to deliver the Budget, and I hope that he will announce further compensation for the pre-1992 trapped annuitants so that they receive full compensation. I also hope he will confirm that none of the money that has already been pledged will be clawed back at the end of the scheme, and that further moneys will be made available as and when that is allowed in the Treasury forecast.

[Mr Christopher Chope (Christchurch) (Con)]

I am grateful to my hon. Friend for all his work on behalf of the victims of the Equitable Life saga. It surprises me that the Treasury has not yet conceded that it will have to spend the £139 million that it has in its coffers on this compensation, as it expected to, rather than take it as a windfall. Surely that is the starting point.

--- Later in debate ---

[Bob Blackman]

I completely agree with my hon. Friend—that is the starting point, but to be fair to the Treasury, we expected and hoped that the agency would be able to trace more victims of the scandal so that they could receive the compensation due. Tracing has taken place over an extended period, and I applaud the Government for using many different means to try to trace those individuals. Some people will have died, some have moved multiple times, and some were in all sorts of pension schemes that then moved on. Some people had small pension policies and may not have seen any point in requesting compensation. However, we now know exactly how many victims there are, and there is no excuse for retaining the contingency or the underspend.

I know that a number of Members wish to speak, so in conclusion, this is all about justice for people who have suffered loss. Indeed, not only did they suffer that loss, but it was avoidable. The Government, the company and the regulator knew that the scam was going on, but it was too big to fail because had it done so, the Government would have had to come up with all the compensation straightaway. This is a matter of justice, and on behalf of the all-party group for justice for equitable life policyholders, I pay tribute to the Equitable Members Action Group for its wonderful work over the years in bringing the plight of those people to light in both the public eye and in Parliament. The fight will go on until every single policyholder who suffered relative loss is receiving full compensation. I invite the Minister to receive comments from across the House, and to do the right thing by people who have suffered injustice.

--- Later in debate ---

[Bob Blackman]

I thank hon. Members and all three Front-Bench speakers for the constructive and fair way in which the debate has been conducted. Almost 2% of the population have been affected by this scandal, and we have a duty to ensure that they are given full compensation for the loss they have suffered.

I thank the Minister for laying out his argument, and I thank those who have contributed on the personal views of different constituents. I listened carefully to the Minister, and the Treasury accepts that the compensation bill for Equitable Life policyholders is £4.1 billion. Of that, £1.5 billion has been paid out, which leaves a balance of £2.6 billion.

The Minister rightly said that compensation payments will be made well into the next decade for those who have suffered loss. It therefore seems reasonable to me and, I think, to Members across the House—the Chancellor will no doubt be listening to this—that as the economy recovers, our long-term economic plan comes to fruition and we reach a position where the budget is in balance, those who have saved for their retirement are given full and proper compensation.

As the economy recovers, therefore, the Government can top up the scheme if they choose to, and I urge the Chancellor to pledge to do that in his Budget speech on 16 March. As we reform pensions in other ways, we can then send out the signal to young—and not so young—people that it is right to save for the future and for retirement and that if such a scandal were ever to happen again, the Government would step in to protect the retirement incomes of those who do the right thing and save for their old age.

Question put and agreed to.

Resolved,

That this House congratulates the Government on providing a scheme to compensate victims of the Equitable Life scandal; welcomes the Government’s acceptance of the Parliamentary Ombudsman’s findings in full; notes that the Parliamentary Ombudsman recommended that policyholders should be put back in the position they would have been in had maladministration not occurred; further notes that most victims have only received partial compensation compared to the confirmed losses and that the compensation scheme is now closed to new applicants; and calls on the Government to ensure that the entire existing budget allocated for compensation to date is paid to eligible policyholders and to make a further commitment to provide full compensation for relative losses to all victims of this scandal.

[Madam Deputy Speaker (Natascha Engel)]

Order. Before we come on to the next debate, I inform Members that I am going to raise the speech limit on Back-Bench contributions to seven minutes, in order that they are aware that they have a little more time than is shown on the annunciator.