Equitable Life Policyholders: Compensation

Debate between Desmond Swayne and Simon Kirby

Thursday 23rd March 2017 Commons Chamber

[Simon Kirby]

I was going to cover the issue of Icelandic banks later, as might be expected, but there is a big difference between the two. Those ex gratia payments were different from the Equitable Life scheme in that the Government expected to recover, and indeed did recover, all the money paid to UK depositors as the banks were wound up. It is not fair to compare the two.

I will now address some of the specific issues that have been raised. My hon. Friend the Member for Harrow East said that the payments were not transparent. Transparency is one of the core principles of the scheme, and the methodology of calculation was published in full along with a simplified explanation for the layperson. I am also aware that Her Majesty’s Treasury has met EMAG to discuss the matter and found there to be no errors.

My hon. Friend sensibly asked why the Government cannot commit to paying Equitable Life policyholders in full when the economy has fully recovered and the debt starts shrinking, and it is right that the Government balance the needs of affected policyholders against those of taxpayers, and of public service users more generally. The Government have to tackle a debt of nearly £1.7 trillion, or almost £62,000 for every household in this country, which is a salient point. He also said that the cost of paying the pre-1992 annuitants would be less than £100 million. No assessment has been made of the pre-92 losses, but the Government recognised the hardship faced by the group so paid lump sums of up to £10,000, at a cost of around £50 million. That was new money over and above the original £1.5 billion.

Several hon. Members, including the hon. Member for Bootle (Peter Dowd), mentioned the failure of regulation and the need to stand behind any failure in a financial services group. It is fair to say that this Government, and the coalition Government before us, have fundamentally reformed financial regulation, including, importantly, through the expansion of the financial services compensation scheme.

The hon. Member for Leeds North East, who has moved places and is confusing me only very slightly, said it was unfair that we excluded pre-92 policyholders. I have every sympathy with the position such policyholders find themselves in during retirement, but the policies commenced before any maladministration could have affected investment decisions. Pre-92 policyholders have instead been affected by falling comparative annuity rates in the light of the issues at Equitable Life. I have already referred to the ex gratia payments of £5,000, or £10,000 for those in receipt of pension credit, that were made in December 2013.

The hon. and learned Member for Edinburgh South West (Joanna Cherry) said that the Government have not done enough—a point also made by others. I sympathise with the plight of her constituents. I am glad she recognises that the coalition Government did more to address the issue than any Government who preceded them. She asked about the Chancellor of the Exchequer; he was clear in his spring Budget that the scheme is closed and no more money is forthcoming.

My hon. Friend the Member for Stafford (Jeremy Lefroy) made some eloquent points about regulation. I agree that trust is vital, and I am proud of the reforms made to the regulatory system. Many people say we have too many regulations; I always think that financial services are there for everyone so it is important that we provide an appropriate level of protection for everyone, big or small.

The hon. Member for Ellesmere Port and Neston (Justin Madders) suggested that the Government had ignored the ombudsman’s recommendations. The ombudsman’s report was the foundation of the payment scheme. As I said, the ombudsman subsequently wrote to the all-party group. Whether or not we agree about the term “incompatible”, the ombudsman said that the Government’s decisions on affordability and eligibility cannot be said to be incompatible with her report. The hon. Gentleman also mentioned the 2010 manifesto. It is worth saying that payments were fair to both the taxpayer and policyholders, with the most vulnerable groups receiving 100% of their losses. The whole scheme is based on the ombudsman’s report.

[Sir Desmond Swayne]

I hate to interrupt the Minister’s flow, but I wish to take him back to my intervention on my hon. Friend the Member for Harrow East (Bob Blackman) about the regulator’s failure to identify problems. My hon. Friend said in response that the Treasury itself was aware of Equitable Life’s problems long before they emerged; does the Minister know whether that is true?

[Simon Kirby]

It is fair to say that there were a lot of issues and that a lot of things were done that we would do differently today. All that was taken into account in the vast number of reports and inquiries, and is now represented in a fair and equitable scheme for payments.

Connaught was mentioned by the hon. and learned Member for Edinburgh South West. As I understand it, I will be meeting her in the very near future to discuss that issue, and I am very pleased to do so. The matter is currently being investigated by the Financial Conduct Authority.

I thank the hon. Member for Strangford (Jim Shannon) for his understanding. He made a very thoughtful contribution in which he mentioned children. I say to him that we must be careful to strike the right balance and that we do not saddle our children and grandchildren with unfair levels of debt. It is about making sure that those people affected receive a fair amount.

The hon. Member for Angus (Mike Weir) set out cases in which constituents have a reduced annuity in their retirement. I have a great deal of sympathy with them, as I know the difficulties that a reduced income in retirement causes. The Government recognised that, which is why annuitants should receive 100% of their losses.

I will, if I may, finish with some figures, because I need to clear up the confusion. To date, the Government have paid out £1.12 billion. They will be paying out another £355 million, totalling £1.47 billion, leaving a balance, for those who can add up, of £25 million. We intend to provide a safety net to ensure that payments to the most vulnerable are maintained as they live longer—let us hope that they all live longer—and so I do not recognise the £140 million figure that was cited.

In conclusion, I appreciate that some policyholders who have carefully invested for their retirement are now not receiving the income they expected, but we have done more than any other Government to resolve the Government’s part in the Equitable Life issue. We have committed £1.5 billion. We have paid out the £1.12 billion, with more to come, and we have struck the right balance, which is fair to the British taxpayer and supportive to those most vulnerable policyholders.

Money Laundering: British Banks

Debate between Desmond Swayne and Simon Kirby

Tuesday 21st March 2017 Commons Chamber

[Sir Desmond Swayne (New Forest West) (Con)]

Does the commitment expressed in our hosting of the anti-corruption summit not a year ago still exist to drive forward its agenda?

[Simon Kirby]

Absolutely. This Government are fully committed to ensuring that taxpayers are fully protected and that we do all we can to stamp out illegal money laundering activity.

Sale of Annuities

Debate between Desmond Swayne and Simon Kirby

Wednesday 19th October 2016 Commons Chamber

[Sir Desmond Swayne (New Forest West) (Con)]

It is the right decision for the circumstances, but does my hon. Friend think that there is any connection between poor value in the annuities market and the Bank of England’s monetary policy?

[Simon Kirby]

Mr Speaker, I acknowledge your sound advice, as ever, and apologise if I have been anything other than my usually well-behaved self.

My right hon. Friend the Member for New Forest West (Sir Desmond Swayne) raises an interesting point, but this is about people, many of whom are older and more vulnerable, making the right choices, and the Government making sure that the market is there to support them. That is not the case, which is why we have changed tack.

Oral Answers to Questions

Debate between Desmond Swayne and Simon Kirby

Monday 20th February 2012 Commons Chamber

[Mr Desmond Swayne (New Forest West) (Con)]

12. What plans he has for defence deployments to the Falkland Islands; and if he will make a statement.

[Simon Kirby (Brighton, Kemptown) (Con)]

15. What plans he has for defence deployments to the Falkland Islands; and if he will make a statement.