Equitable Life

Daniel Kawczynski Excerpts

Thursday 11th February 2016 Commons Chamber

[Gordon Henderson (Sittingbourne and Sheppey) (Con)]

Much of what I wanted to say has been mentioned already by other hon. Members, including my hon. Friend the Member for Harrow East (Bob Blackman), who has been a fierce and consistent champion for Equitable Life policyholders. I wish to make very clear my continued support for the Equitable Life policyholders in my constituency, and I believe the best way to do that would be to resurrect some comments I made in a speech in this House almost six years ago. That speech was one of my first after being elected in 2010, and it brings into sharp relief just how long some of us have been trying to get justice for those of our constituents affected by the collapse of Equitable Life, some of whom lost thousands of pounds.

I pointed out the following in that speech:

“Several hon. Members have suggested today that the Equitable Life scandal—and a scandal it was—is complicated, but for me it is actually quite simple. It is about fairness to a group of people who were badly let down by the regulatory failures of their Government. I went into the recent general election supporting a Conservative manifesto that made a promise to Equitable Life policyholders in my constituency. It said:

‘We must not let the mis-selling of financial products put people off saving. We will implement the Ombudsman’s recommendation to make fair and transparent payments to Equitable Life policy holders, through an independent payment scheme, for their relative loss as a consequence of regulatory failure.’”

[Daniel Kawczynski (Shrewsbury and Atcham) (Con)]

My hon. Friend refers to that manifesto commitment in 2010. May I tell him that in the previous Parliament I helped to set up the all-party group and that we interviewed the then shadow Ministers at that juncture and they promised they would do everything to help the people affected? My constituent, Mr Meinertzhagen has lost half his pension as a result of this terrible tragedy.

[Gordon Henderson]

I am grateful to my hon. Friend for bringing that to my attention.

I continued that speech by saying:

“I wish to take this opportunity to assure policyholders in my constituency that I for one do not intend to go back on that election pledge.

Most people accept that Equitable Life policyholders were the subject of Government maladministration, and that is certainly the view of the ombudsman, Ann Abraham. There is some dispute on all sides, however, about the level of compensation that should be paid to policyholders. Sir John Chadwick’s report established that the relative loss suffered by Equitable Life amounted to between £4 billion and £4.8 billion, and the Financial Secretary, in his statement to the House this July, supported that figure. However, Sir John then used a series of convoluted calculations and speculative assumptions that allowed him to suggest a cap on the total amount of compensation that should be paid. He then went on to reduce that cap figure to just 10% of the relative loss figure that he himself originally calculated.

One of Sir John’s most telling assumptions was that the majority of policyholders would have invested in Equitable Life irrespective of maladministration. That is a very big assumption that cannot be proved or disproved…

Like many Members, I have been in touch with many of those policyholders, and all they want is fairness, because they are fair-minded people. However, they are not stupid people, and they recognise that in these times of austerity even they must shoulder some of the burden needed to bring down the country’s massive debt mountain.”—[Official Report, 14 September 2010; Vol. 515, c. 834-35.]

That was my position in 2010 and that position has not changed.

The Government went some way towards compensating those who lost money in the Equitable Life scandal, but that compensation met only part of the loss, so the Equitable Life investors in my constituency received partial justice. In truth, partial justice is no justice at all, and I urge the Government to give people justice now.

--- Later in debate ---

[Crispin Blunt]

My hon. Friend makes an extremely pertinent point.

On being returned in 2010, I found myself a member of the Government and obliged, at one level, to support their decision to limit the compensation to £1.5 billion. At the time, as the Prisons Minister, and the prisons budget being rather less than the total compensation required, I could understand, in the circumstances, why they decided to limit the overall compensation. I resolved, however, to speak in this debate and to re-examine the letters I sent out defending the Government’s position, and to re-evaluate my position to see whether it was reasonable.

I was much taken with the comments from the hon. Member for West Bromwich West (Mr Bailey), the former Chairman of the Business, Innovation and Skills Committee. This is about confidence in the entire savings system. I can remember Labour’s first Budget in 1997 and the consequences—unreported from the Dispatch Box—of IR35, which saw £5 billion cheerfully lifted from investors in pension funds through a tax on dividends. If a £5 billion change can be made in a Budget, announced not in the House of Commons but by press release, we need to be aware that we are dealing with vast numbers when it comes to pension policy. I tell the Economic Secretary, who is replying to the debate, that I believe we are on the verge of a substantial—and, for me, very welcome—change in pension policy. As part of that, we need to acknowledge the point made by the hon. Member for West Bromwich West that this issue is about confidence in the system as well as fundamental fairness to our constituents.

I congratulate my hon. Friend the Member for Harrow East (Bob Blackman), who introduced the debate so effectively, on securing it. I also congratulate my hon. Friend the Member for Shrewsbury and Atcham (Daniel Kawczynski) on setting up the all-party group in 2006-07 to reinforce the efforts that were already under way. He attempted to corral those efforts, make them more effective and secure from the Conservatives and the Liberal Democrats an undertaking that the issue would be addressed in their manifestos leading into the 2010 election. It is important to highlight that as a simple issue of fairness we need to revisit the sum of £1.5 billion and decide whether or not we have discharged our duty.

[Daniel Kawczynski]

I just wanted to remind my hon. Friend of my constituent Mr Meinertzhagen, whose living standards are suffering. He is now worried about the consequences for his wife when he departs from this world. It is a real struggle for him, and I hope my hon. Friend will join me in urging the Economic Secretary to find money and set it aside to help these people in desperate situations.

[Crispin Blunt]

My hon. Friend is entirely right. This is why these artificial divisions—between 31 August 1992 and 1 September 1992—are so unfair on the people involved. My constituent Derek Burton estimates his losses at around £175,000 as a consequence of his having invested before the cut-off date in 1992. That shows the impact on him of the changes that were subsequently made. These are enormous sums of money that have destroyed the planned retirements of thousands of my constituents—an average of 2,000 of every Member’s constituents have been affected.

Frankly, we have to grasp this problem and address it. I hope it can be done through the Budget and through further substantial and welcome changes to pension policy, on which the Chancellor absolutely deserves our support. By those means, he can address this lingering unfairness so that people can be given the confidence to invest in pensions again. The lesson I took from my little episode with Equitable Life was that I was simply not going to undertake any extra investment in pension schemes thereafter.

On the figures, I do not know whether we will get an answer from the Minister on whether £2.7 billion remains the sum required to put this right. In trying to do the mathematics, that figure does not seem to work out precisely to me, given that about £1 billion went to 890,472 policyholders who received only 22.4%. Provision should now be made for us to address this issue.

Maladministration was recognised and a clear recommendation was eventually made by Ann Abraham in her report, after various other people had looked at the problem. I have a lingering sympathy for some of the Equitable Life administrators at the time. The original legal challenge to their policies always struck me as ludicrous. It lost at every conceivable stage until the last one, when there was no possible course of appeal. Provision had not been made, as it should have been, for the possibility that they might lose the action. That was how the maladministration came to be identified in all the reports.

If we—the system—have overseen people not doing their job properly and not protected people who were wholly innocent, including those who were investors before 31 August 1992, it is right that we do our duty —out of fairness to them and to restore confidence in the whole pension system. If people find that they have invested resources other than their house in the biggest single asset they are going to invest in, and encountered circumstances utterly beyond their control, or utterly beyond any reasonable duty of care they would have taken to find out about what they were investing in; and given that Equitable Life was the most reputable pension provider around at that time, we need to put things right. We are now able to afford to compensate these people, and we should be able to do so by continuing significant pension reform to put this right properly and fully.