Equitable Life (Payments) Bill

Debate between Bob Blackman and Chris Leslie

Wednesday 10th November 2010 Commons Chamber

[Chris Leslie]

I shall speak to amendments 3 and 4, which stand in my name and the names of my hon. Friends. Amendment 3 would enshrine in the Bill the fact that the design and administration of any payments scheme should be independent of Government. It is pretty straightforward and simple—in fact, it would be difficult for it to be more straightforward and simple—but we think it important to try to encourage the Government to enshrine in the Bill the Minister’s pronouncements so far that the design of the compensation scheme should be independent of Government. That is an extremely important point, especially as it was part of the conclusions drawn by the parliamentary ombudsman herself.

The Minister has asked the independent commission, chaired by Brian Pomeroy, to report by the end of January, but there is too much wiggle room for the Minister then to take those recommendations and bring the design and the administration of the subsequent payments scheme in-house within the Treasury. I see no clear reason why the Bill does not contain clarity on the next steps forward, particularly in relation to the daunting task of creating a payments scheme to cover upwards of 1 million policyholders not falling into the 100% compensated with-profit annuitant category.

Many other policyholders are still sceptical of the Government’s intentions and EMAG, which is the body representing many of those policyholders, is voicing its discontent with those who, before the election, signed up to their pledge to create “fair and transparent” payment schemes, which they now attack as akin to asking 1 million people—to quote the words of EMAG’s Paul Braithwaite—to

“share a pack of Smarties”.

Obviously, EMAG is making its point in its own particular way, but clearly there is some doubt and some cynicism about the approach that the Minister is taking. I am sure, having heard what he has had to say before, that he indeed wants a level of independence in the payments scheme as far as possible, but I do not understand why that commitment has not been included in the legislation. That would seem to me to be the best way forward.

Amendment 4 seeks to tackle the issue of any appeals procedure that might be necessary for policyholders in the compensation scheme. We suggest that no later than three months after the commencement of the Bill the Treasury be required to spell out quite how that appeals procedure would operate for the policyholders who are not content with the judgments made in the compensation scheme that eventually ensues. Several hon. Members argued for an appeals procedure on Second Reading on 14 September—my hon. Friend the Member for Ynys Môn (Albert Owen) among them—and it was also raised by my right hon. Friend the Member for East Ham (Stephen Timms).

In that debate, the Minister stated that he had raised the issue with his officials but that there were clear problems. He said he would pursue it, so the purpose of the amendment is to find out whether he has had the opportunity to do so and what the appeals process will look like. I certainly expect that there will be complexity, not just in the payment scheme but in any subsequent individual appeals adjudication, and that could be quite difficult to imagine at this stage. However, it needs clarification given the route that the Minister has chosen, moving away from the ex gratia model in the Chadwick methodology and instead accepting the ombudsman’s approach to compensation.

I was glad that the Minister said there were components of the Chadwick methodology that he favoured bringing into any compensation scheme—specifically that there would be no burden of proof on individual policyholders to show that they had been misled by the regulatory returns. That would certainly make the scheme simpler. Will the Minister take this opportunity to tell us whether the independent payments commission will eventually metamorphose into an authority for administering the payments? If so, will it be asked to design an appeals system, or is it the Treasury’s intention to undertake that part of the design?

Perhaps the Minister could say whether he sees any parallels with the appeals system set up when the former Department of Trade and Industry introduced an appeals mechanism in respect of the ill-health complaints about what was then known as vibration white finger. He will remember that a series of complex compensation payments were made in those cases, but an appeals system was set up that had a route into a judicial process and eventually to the High Court. If some policyholders might become involved in a judicial process, it would be useful to have clarity about whether the same will happen.

Will the Minister also confirm not only, as I think he said, that the administrative costs of operating the compensation programme will be separate from the compensation fund, but that any appeals costs will also be separate from the compensation fund? I am sure that the Committee will welcome any clarification of the Government’s intentions, and in the meantime we felt that the amendment was a reasonable device to ensure that those answers are forthcoming.

[Bob Blackman]

I shall speak to new clause 1, which I tabled, but I made a long speech on the earlier group of amendments and I do not want to repeat all the points I made then.

We need to make the whole process clear, transparent and independent of Government so that the money that has been set aside to compensate the victims of this scandal is seen to be distributed so that they receive their due compensation in a manner that is independent of the Treasury. The dead hand of Treasury officials should not mean that the scheme is designed in a particular way. I do not necessarily need to press the new clause, but I seek assurances from the Minister that we have a full, independent, transparent way to compensate the victims, who have been so badly treated over the past 10 years.

--- Later in debate ---

[Chris Leslie]

The amendment is intended to draw out more information specifically about the timing of the compensation payment scheme that the Financial Secretary envisages. In particular, we wish to ensure that the Treasury will lay before Parliament details of the timing and planned dates for payments no later than three months after the commencement of the Act.

We know that this long saga has involved many raised hopes, which have often been dashed. Although there were very good reasons for the last Government’s detailed consideration of complex issues, I accept in hindsight that decisions could and should have been taken more quickly and handled better. There were sound reasons why Ministers took a different approach to that of the Government today, but we are where we are, as the saying goes, and I wish to the ask the Financial Secretary a few questions about how the matter will progress from here onwards.

I am aware that table 3 in the spending review document, on page 12, sets out the phasing of the total finance set aside as being £520 million in 2011-12, £315 million in 2012-13, £210 million in 2013-14 and finally £100 million in 2014-15. As the explanatory notes to the Bill state, that comes to a total of £1.1 billion that has been set aside for this spending review period. Clearly there is a discrepancy with the £1.5 billion figure that we have been talking about, which presumably goes beyond the spending review period. I have a number of questions for the Financial Secretary, and I hope that he will expand upon the details.

First, on what basis have those figures been arrived at? Do they represent the expected phasing of payments, or are administrative costs included, for example, distorting the apparently higher first-year figure set out in the spending review document? I presume that the administration costs have to be set out somewhere in the budgetary figures. If so, will the Financial Secretary clarify his intentions? I do not want policyholders to labour under the misapprehension that they will necessarily receive the bulk of their compensation up front, as those figures might suggest.

At what stage will the timing and phasing of payments become clear? Does the Financial Secretary expect that the independent commission will set out those details early on, and will there be any opportunity to enshrine the timing of those arrangements in law, perhaps through regulations, even though they will be designed independently of Ministers? In other words, will the commission come back to Parliament and say, “This is how we are going proceed”?

There have been reports that three tranches of payments are expected over a four-year period. Can the Financial Secretary clarify whether that expectation is broadly reasonable for the policyholders involved? The Government are clearly about to hand over many of the arrangements to the independent commission and to National Savings & Investment, but it is still important that we know the broad parameters that they will use. That is the purpose of the amendment—we are seeking a public commitment and transparency about the timing of the payments.

[Bob Blackman]

I rise to support amendment 8. I do not want to go over all the ground that we covered in debating the previous amendments, but the purpose of the amendment is precisely what we talked about earlier. Hon. Members intervened to say, “Let’s get this done. Let’s get it over with and ensure that policyholders are properly compensated as quickly as possible.”

It is clear that trapped annuitants will receive their compensation in staged payments over the life of their pensions. However, we get into complex territory again when discussing the other policyholders and the difference between with-profits and other annuities. As I understand it—I hope that the Financial Secretary will clarify this—tranches will be paid out over the life of the comprehensive spending review period. The third tranche will be paid only in 2013, which still leaves some £500 million to be paid out in the next comprehensive spending review period. As we understand it, this will be a long-drawn out affair, so perhaps we can have further clarification on the issue.