Cost of Living: Support for Young People

Fabian Hamilton Excerpts

Tuesday 18th October 2022 Westminster Hall

[Fabian Hamilton (Leeds North East) (Lab)]

I beg to move,

That this House has considered cost of living support for young people.

It is a pleasure to serve under your chairship this afternoon, Ms Ali.

This debate could not come at a more important time, as everyone’s bills are skyrocketing, the cost of food and other basic items seems to be increasing exponentially, and our country’s Government are in utter turmoil. Young people across Britain, who have had to live through the pandemic, are now faced with a cost of living catastrophe. In north-east Leeds, young people are facing the huge impacts of the crisis, with 6,712 16 to 24-year-olds on universal credit. Of those, 32% are in work. It is shameful that the Government have still not committed to increasing universal credit in line with inflation.

[Janet Daby (Lewisham East) (Lab)]

I thank my hon. Friend for securing the debate. He is talking about the point that I want to mention: the Government really should be increasing universal credit in line with inflation. Many young people and children in my constituency are having to go without breakfast and, in some cases, without lunch as well. No Child Left Behind recently said that 26% of households experience food insecurity. Does my hon. Friend agree that that is absolutely wrong?

[Fabian Hamilton]

I thank my hon. Friend for her intervention, because I am just about to describe what a difference it makes to increase universal credit in line with inflation, rather than in line with wages. Her point is very well made indeed. If universal credit rose in line with wages, young people in my constituency and throughout the country—

[Rushanara Ali (in the Chair)]

Order. We have to suspend for Divisions in the House. There will be 15 minutes for the first Division, and then 10 minutes for each subsequent Division. Today’s final debate will have injury time added for those Divisions.

--- Later in debate ---

On resuming—

[Fabian Hamilton]

As I said earlier, it is a pleasure to serve under your chairship this afternoon, Ms Ali, in spite of the interruptions. I shall continue where I left off an hour and a quarter ago.

The fact that the Government still have not committed to increasing universal credit in line with inflation is shameful. If universal credit rose in line with wages, young people would receive just £7.42 extra per month. If, however, it rose in line with inflation, they would receive an additional £21.49 per month. Given the huge difficulties young people are facing at the moment, does the Minister think that failing to commit to an inflation-linked increase is morally acceptable?

The stark reality of this crisis could not be clearer for Jack, who attends YMCA sessions in Leeds. Jack is not his real name, of course. Jack is 10 years old and lives with his parents and two siblings. He has been quoted at YMCA sessions as saying that

“we’ve got no food at home.”

The fact that a child as young as 10 has been put in this position is unforgivable. It is a humiliation for our country not only at home but abroad. With wages squeezed more than ever, Jack’s family also receives support at school, through the uniform exchange, because they cannot afford to buy new school uniforms. The pressures of the current crisis are now causing issues between family members at home.

I commend the activists in Leeds for pioneering school uniform exchanges across the city, but it is outrageous that their brilliant work is even necessary in modern Britain. I ask the Minister what he would like to say to Jack and his family after yesterday’s day of shame for the Government, when the Prime Minister and her new Chancellor effectively gave the green light for energy bills to go up to a predicted average of £5,000 a year for most households from April.

The failure to provide cost of living support to young people often affects their parents as well. A report released by UNICEF today states that 59% of parents with children under five say that they are struggling with their mental health, and 66% have been negatively affected by the rising cost of living. That amounts to a total of more than 2 million families in the United Kingdom. The status quo is simply unacceptable, and this crisis will only deepen as we approach winter and enter the new year. Among parents feeling the pinch from the rising cost of living, the report also found that just under half have already cut back on their electricity and gas usage, with one in 10 unable to adequately heat their home as winter approaches. As we know, that will be hugely detrimental to the development and education of young people.

As I said earlier, the cost of living emergency, coupled with covid, will amount to a disaster for many families up and down the country, especially young people. Public Health England data shows that across the first three quarters of 2021-22, nearly one in three children aged between two and two and a half were assessed as having missed out on reaching their expected level of development. That contrasts with around one in six in the first three quarters of 2019. A recent YouGov poll pointed to the fact that over a quarter of people aged between 18 and 24 feel unable to cope with the cost of living crisis owing to the stress that it is causing, so I ask the Minister what plans are in place to ensure that the mental health problems in parents and elder siblings do not have a knock-on impact on younger people and children.

I turn now to university students, who have also missed out on learning because of the pandemic and are currently facing huge financial problems, but who risk being a forgotten group of people suffering from the impact of the crisis.

[Paul Blomfield (Sheffield Central) (Lab)]

My hon. Friend is making a powerful speech, and I am glad that he is including students. There will be mixed experiences in terms of students’ ability to fall back on family support, but is he aware that recent research conducted for Universities UK indicated that over half of students were considering whether they would be able to continue with their studies as a result of the pressures they are under? Does he recognise that university students cannot draw down the support that is generally available through the council tax system, because they do not pay council tax? Is he aware that other countries, such as Germany, are treating students in the same way as other low-income groups—for example, pensioners—by giving them additional grants? Does he recognise that the Government need to make some sort of national intervention on this issue, and not rely on a patchwork of different measures that are being introduced by some universities and some councils?

[Fabian Hamilton]

I thank my hon. Friend, who is a very old friend of mine and has a great reputation for standing up for students and universities—certainly in this place and before he came into the House. I was not aware of many of those facts. I did not realise that half of students were considering giving up their courses, and I can only imagine the detrimental effect that it will have not just on their futures, but on the future of our whole country.

From my time on the Foreign Affairs Committee, I recall visiting South Korea and asking people how they could account for their massive success since the second world war. That was 15 or so years ago, and since then South Korea has become even more successful and has risen higher up the scale of G20 countries to become one of the most powerful industrial nations in the world. The Korean Education Minister at the time said to me, “It is one very simple fact. We took a decision after the Korean war that the only future for our country, as a rural agrarian economy, would be to invest in our young people, and educate them to such a level that that education would follow through in terms of our industry, our scientific research, our know how and our intellectual property.” We can see that that has happened.

A country that relinquishes the potential of its young people to develop, not just themselves but the economic future of that country, is one that is in trouble. I do not want to see that happen to this great nation—it would be absolutely tragic. I think we can learn from our economic, social and geopolitical partners, in countries such as Germany, as to how we can handle a crisis like this. They have the right idea. Not everything that happens in Europe is bad, believe it or not; there are some really good policies there. I think we should learn from those, and I hope that the Minister will begin to address that question.

Those university students who have missed out on learning because of the pandemic and are currently facing financial problems risk becoming a forgotten group of people suffering from the impact of the cost of living crisis. As my hon. Friend the Member for Sheffield Central (Paul Blomfield) has said, it has serious implications for the long-term job market in the UK. Recent polls suggest that 55% of those who felt concerned about managing their living costs were worried that it might prevent them from continuing their studies. That rises sharply—up to three quarters—for those students who are severely disadvantaged or from poorer backgrounds. We simply cannot afford for more than half of our young people to drop out of university before graduation. I would be grateful if the Minister told us what support the Government are providing to universities, centrally, to tackle the issue before it is too late.

It is increasingly clear that urgent action is needed to prevent more young people from sliding into poverty. In a recent Barnardo’s report, one young person was quoted as saying that

“mentally, it’s taken a massive toll. I was thinking of seeing a counsellor, but I don’t want to because of the fear of how much it would cost. I haven’t been able to get the correct help”.

I am the president of Leeds UNICEF, and through that group I have heard first-hand about the horrific experiences of my young constituents, as well as of the many people across the city of Leeds who are struggling.

I conclude by strongly urging the Minster to look closely at extending free school meals, at improving mental health provisions for schools, and at backing the Labour party’s call for a breakfast club in every primary school in England and Wales. Those measures would at least give parents and young people some of the support they so desperately need.

--- Later in debate ---

[Fabian Hamilton]

I thank all who have contributed this afternoon, from the hon. Member for Bath (Wera Hobhouse), who made some very important points, to the hon. Member for East Dunbartonshire (Amy Callaghan), to the SNP spokesperson, the hon. Member for Glasgow Central (Alison Thewliss). I also thank my colleague the shadow Minister, my hon. Friend the Member for Ealing North (James Murray), as well as my hon. Friend the Member for Sheffield Central (Paul Blomfield), who is a good friend.

The debate should have been far longer in many ways, because there is so much more to say. Let me conclude by saying this: if we ignore investment in children and young people, we will pay a price, but if we invest in young people and their welfare, education and mental wellbeing, we will all benefit. Our society will be stronger. Our country will be better, and it will deliver the growth we are all after.

Question put and agreed to.

Resolved,

That this House has considered cost of living support for young people.

Equitable Life

Fabian Hamilton Excerpts

Thursday 31st January 2019 Commons Chamber

[Fabian Hamilton (Leeds North East) (Lab)]

I start by paying tribute to my all-party parliamentary group co-chair, the hon. Member for Harrow East (Bob Blackman), who has given an excellent introduction and who has worked very hard indeed in the nine years that he has been in the House to try to bring about the justice that we all want for the victims of the Equitable Life scandal. I am sad that, after so many years of debating the issue, we are back here again today talking about the continuing losses suffered by hundreds of thousands of Equitable Life policyholders. They invested in the world’s oldest life assurance company in the belief that they would be able to live a comfortable old age, but instead, after a lifetime of saving, they find themselves sometimes destitute and often much poorer through no fault of their own.

How have we arrived here, nearly 20 years after Equitable Life closed its doors to new investors and nine years after the Government promised to ensure that the losses incurred by Equitable Life policyholders would be fully compensated? I hope that hon. Members will permit me briefly to go back over some of the history of this sorry tale in order to give the House and the public some answers to these questions. My first involvement in the Equitable Life saga was to speak in a Westminster Hall debate that I led on 24 June 2009. In that debate, I spoke about the serious issues facing so many of our constituents since the crash of Equitable Life following its inability to meet obligations and promises made to investors over decades.

In July 2008, the parliamentary ombudsman published her first report on Equitable Life, entitled “Equitable Life: a decade of regulatory failure”. On 11 December that year, the Public Administration Committee produced a report entitled “Justice delayed”, in which it stated:

“Over the last eight years many of those members and their families have suffered great anxiety as policy values were cut and pension payments reduced…Many are no longer alive, and will be unable to benefit personally from any compensation.”

[Alex Sobel (Leeds North West) (Lab/Co-op)]

I should like to thank my hon. Friend and neighbour for making the case for Equitable Life members. I should also like to pay tribute to my constituents, Ray and Marjorie Dunn, who have been brilliant campaigners for the Equitable Members Action Group. They have made these exact points: this has been going on for a very long time, and many pensioners are now well into their retirement and living in pensioner poverty because the Government have only partially compensated them. Is it not time for the Government to make up for their past mistakes?

[Fabian Hamilton]

Yes, indeed. I thank my hon. Friend and neighbour for making that point. I know Ray and Marjorie Dunn very well—they correspond with me regularly—and I know that my hon. Friend has been a champion of their case and of many other cases in his constituency. I will go on to say a bit more about how I think they should be compensated.

[Dr David Drew (Stroud) (Lab/Co-op)]

Would my hon. Friend accept that one of the biggest problems is that we have had so many investigations into Equitable Life, and that it was not helpful that the previous Government did not accept the case of the financial ombudsman, right at the beginning? There was a lot of, dare I say, confusion and deliberate misleading, but that report was very clear on where the blame should lie. This has not helped the case of the Equitable Life fundholders.

[Fabian Hamilton]

I thank my hon. Friend for making that point. The ombudsman’s report did indeed make it clear that this was a catastrophic failure of regulation, and that the Government bore considerable responsibility for compensating those who had lost out. I will go on to say more about that in a minute.

The Public Administration Committee also stated:

“We share both a deep sense of frustration and continuing outrage that the situation has remained unresolved for so long.”

That was more than 10 years ago. On 5 May 2009, Ann Abraham, the then parliamentary ombudsman, published a second report, “Injustice unremedied: the Government’s response on Equitable Life”, in which she stated:

“I was deeply disappointed that the Government chose to reject many of the findings that I had made, when I was acting independently on behalf of Parliament and after a detailed and exhaustive investigation.”

She concluded:

“In this case, I am satisfied that the injustice I found in my report to have resulted from maladministration on the part of the public bodies responsible for the prudential regulation of the Society has not so far been remedied.”

There was certainly no shortage of reports—just a shortage of justice for those who had, through no fault of their own, suffered huge losses in the life savings they had accrued over years of hard work.

[Joanna Cherry (Edinburgh South West) (SNP)]

I congratulate the hon. Gentleman and his co-chair on pursuing this issue so assiduously. As he says, the difficulty is that there have been so many reports. I have one constituent who is 84 and whose wife died three weeks ago. I have another who is 80 and who has just been diagnosed with dementia. Does the hon. Gentleman agree that those constituents need to know today that they will be compensated fully and soon, before they suffer further bereavement or illness?

[Fabian Hamilton]

I thank the hon. and learned Lady for that intervention. The story of her constituents is reflected up and down the country, in every constituency represented in this House, and I hope that we will get some answers from the Minister at the end of this debate.

[Alex Chalk]

Does the hon. Gentleman agree that the approach being taken seems inconsistent with the approaches taken in different contexts? For example, if someone is the victim of a crime, they can be compensated by the state for something that is not the state’s fault at all, and yet the state is more reluctant in circumstances where there was complicity, or certainly fault, from the state. Does he agree that is a troubling inconsistency?

[Fabian Hamilton]

Indeed, and if I am able to complete my contribution this afternoon, I will add to the hon. Gentleman’s point.

At the core of the problem is the fact that Equitable Life simply could not meet the obligations that it had made for itself, because it had made no provision for guarantees against low interest rates on policies issued before 1988. It declared bonuses out of all proportion to its profits and, indeed, its assets. Following the House of Lords ruling in July 2000, the society stopped taking new business in December that year, which effectively spelled the end for Equitable Life. More than 1 million policyholders then found that they faced cuts to their bonuses and annuities, which caused a huge loss of income on which many small investors had depended. After all, the average investment for the 500,000 individual policyholders was just £45,000 which, according to EMAG, even at its height would have yielded no more than £300 a month.

The then Labour Government unfortunately failed to introduce any ex gratia compensation scheme and refused to follow the recommendations of the parliamentary ombudsman. Reacting to the Government’s lack of response to the ombudsman’s report, the then Conservative Opposition stated their determination to introduce an Equitable Life (Payments) Bill early in the next Parliament should they form a Government after the forthcoming general election of 2010.

One of the coalition agreement’s plans for legislation did indeed include such a Bill, which became the Equitable Life (Payments) Act 2010. It was introduced early on in June 2010, shortly after the new Government took office. On 10 November, I tabled an amendment to the Bill in Committee that would have included the pre-1992 trapped with-profits annuitants—WPAs—who had been specifically excluded, as the hon. Member for Harrow East said earlier, from the proposed compensation scheme. The Bill offered 100% compensation to all with-profits annuitants who took out their annuities after 1 September 1992, and 22.4% to every other policyholder. Many right hon. and hon. Members on both sides of the House felt that that was inherently unfair, because the 1 September 1992 date was somewhat arbitrary. Many of the policyholders would unfortunately not even live to enjoy the compensation were it to be paid.

I tabled another amendment to that Bill, which read:

“Payments authorised by the Treasury under this section to with-profits annuitants shall be made without regard to the date on which such policies were taken out”.

The amendment took just over two hours to debate and the vote was lost by 76 to 301, but it strongly set out the case for including the pre-1992 with-profits annuitants. Although that amendment failed in 2010, I still believe that it is vital to give equality of treatment to those who took out with-profits annuitant contracts before 1992 and who are still alive. As we have heard, those people are the oldest and the most vulnerable victims, and the cost could be met from the £140 million underspent from the £1.5 billion originally allocated by Parliament.

Rectifying the injustice would cost in the region of around £100 million. The lifetime payments to the post-1992 WPAs are 11% less than forecast, and there is no reason to expect that the total amount of £620 million allocated for those payments will ever be needed, let alone exceeded. That means that the separate contingency fund should now be released and distributed to victims, rather than remain in Her Majesty’s Treasury’s back pocket. Will the Minister confirm this afternoon that every last penny of the £1.5 billion already allocated by Parliament will reach victims as intended?

The Bill received Royal Assent in 2010, and the compensation scheme was set in motion. It was slow at first, but it began to pick up over subsequent years. By 31 August 2016, when the scheme’s final figures were published, over £1.2 billion had been paid out to 932,805 policyholders, although more than 107,647 have still to be paid but cannot be traced. Tragically, 15,516 policyholders have died, and their estates did not claim the payments despite attempts by the scheme to contact them. In addition, 894,507 non-with-profits annuity investors have been issued with lump sum payments totalling £751 million.

To conclude, when we examine the compensation paid to investors following the collapse of the Icelandic banks in 2008, for which every investor received up to £50,000 of their losses in full and quickly, the Equitable Life scheme looks rather less generous. Given that the average policy involved a total sum invested of £45,000, it seems rather unfair to me and to Equitable Life policyholders that they did not receive more, which is why EMAG continues to campaign for full compensation for all policyholders and why so many Members on both sides of this House support that view. I urge all Members—this is the last bit, Mr Deputy Speaker—current and future to take up the cause of Equitable Life policyholders to try to restore their faith in the ability of this House, as the elected representatives of the people, properly to secure compensation for the victims of one of the greatest financial scandals of our age. We have a moral duty and should not be afraid to carry it out.

[Several hon. Members rose—]

Equitable Life Policyholders: Compensation

Fabian Hamilton Excerpts

Thursday 23rd March 2017 Commons Chamber

[Fabian Hamilton (Leeds North East) (Lab)]

It is a pleasure to follow the hon. Member for Harrow East (Bob Blackman), with whom I have worked for the past few years as—I should declare this—the co-chair of the all-party group on justice for Equitable Life policyholders.

I am very sad that after so many years of debating this issue in this House, we are back once again talking about the continuing losses suffered by hundreds of thousands of Equitable Life policyholders. As we have heard, they invested in the world’s oldest life assurance company in the belief that they would be able to have a comfortable old age, but instead, after a lifetime of saving, they find themselves sometimes destitute, and often much poorer through no fault of their own.

[Andrew Selous (South West Bedfordshire) (Con)]

Does the hon. Gentleman agree that the issue is not just one of restitution for our constituents who have lost out, but one of confidence in the whole savings culture for future generations, which is very important, and that the two issues are linked?

[Fabian Hamilton]

Indeed, I do agree, and I will go on to say something about that, but there is also a third dimension, which is that we have a moral duty to ensure that the Equitable Life policyholders are compensated.

How have we arrived at this situation at this point in time, 17 years after Equitable closed its doors to new investors, and seven years after the previous Government promised to ensure that the losses incurred by Equitable policyholders would be compensated? My first involvement in the Equitable saga was to speak in an Adjournment debate that I secured in Westminster Hall on 24 June 2009. In that debate, I spoke about the serious issues facing all our constituents since the crash of Equitable Life, following its inability to meet its obligations and the promises it had made to investors over the decades. Equitable Life started selling pensions as early as 1913, but it was not until 1957 that the society started selling its now infamous guaranteed annuity rate pensions, which promised a clear and unambiguous return on the capital invested. That carried on until 1988, when the society realised that its rates were so good and so far ahead of the rest of the market that they were, in reality, totally unsustainable. In December 2000, Equitable Life was forced to close to new business.

[Sir Peter Bottomley (Worthing West) (Con)]

In that year, there was the, to me, rather surprising Appeal Court judgment regarding those who had contracts saying that if they put in more money, they would get greater rates of return. The judgment totally missed the fact that all the policyholders were members of the society. The senior judges did not fully understand the consequence of what they were doing, and it was unfair to too many.

[Fabian Hamilton]

I completely agree with the hon. Gentleman. Unfortunately, the time available limits what I can say about the judgment, and I want to talk about what we need to do now.

By the time Equitable was forced to close, it had more than 1.5 million members, and was one of the biggest societies in the world.

[Kate Green]

Does my hon. Friend agree that many of the members were in modest employment with modest earnings, often in the public or voluntary sector?

[Fabian Hamilton]

I certainly do agree, and I will go on to make that point. It is the very reason I took up this cause in the first place. Like many of my colleagues, I had believed that only the wealthy invested in Equitable—people with hundreds of thousands of pounds to put into their pensions seeking to make a huge return—but I discovered that, in fact, the average pension pot was just £45,000. Ordinary people, saving £20 or £30 a month over a working life, were investing in Equitable.

[Alex Chalk]

Does the hon. Gentleman agree that there is an important business case, as it were, for the Government to do more? If people cannot support themselves without the income that they expected, the burden of doing so will fall on the state, which means there is all the more reason to do more now.

[Fabian Hamilton]

Absolutely. That is a very good point. People were encouraged to save for themselves exactly because neither the state nor the individual wanted people to have to depend on the state always coming up with the money necessary to enable them to have a full and enriching retirement. It was about self-reliance, which has been at the core of the arguments today and over many years in debates in this House. The people who were helping to provide for themselves and who were encouraged to invest in Equitable are the very people who have been let down. They are not the wealthy, but the ordinary people who were putting aside a little bit more for their retirement so they could have a comfortable retirement, and that money has now gone.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

The hon. Gentleman mentions that over 1 million people subscribed to the Equitable Life pension funds. Over 900 of them are in my constituency, many of whom, as he says, are people who are just about managing. They have done the right thing, but they are now, at the very best, just about managing. This is about maladministration under previous Governments, so is it not incumbent on this Government at least to open the door a little more to an improved offer that will possibly improve over time to give such savers a fair deal?

[Fabian Hamilton]

I thank the hon. Gentleman for his intervention, because one of the great things we do in this House is to work on moral issues such as Equitable together, across party lines. I am proud to work with the hon. Member for Harrow East—I hope he will allow me to call him an hon. Friend—because he has done an awful lot, and I pay tribute to him for the work he has done. I have done my best to work collectively and collaboratively as the co-chair of the all-party group, because we need to do this together. This is a moral issue, as I shall come on to elaborate.

In July 2008, the parliamentary ombudsman published her first report on Equitable Life, “Equitable Life: a decade of regulatory failure”. On 11 December that year, the Public Administration Committee produced a report entitled “Justice delayed”, which said:

“Over the last eight years many of those members and their families have suffered great anxiety as policy values were cut and pension payments reduced… Many are no longer alive, and will be unable to benefit personally from any compensation. We share both a deep sense of frustration and continuing outrage that the situation has remained unresolved for so long.”

Well, there has certainly been no shortage of reports, just a shortage of justice for those who, through no fault of their own, suffered huge losses in the life savings they had accrued over years of hard work.

At the core of the problem is the fact that Equitable Life simply could not meet the obligations it had made for itself, because it had made no provision for guarantees against low interest rates on policies issued before 1988. It therefore declared bonuses out of all proportion to its profits and assets.

Following the ruling of the House of Lords in July 2000, the society effectively stopped taking new business in December of that year, which spelled the end for Equitable. More than 1 million policyholders found that they faced severe cuts in their bonuses and annuities, which caused a huge loss of income on which many small investors were depending. After all, as I have said, the average investment among the 500,000 individual policyholders was just £45,000, which even at its height, according to the Equitable Members Action Group, would have yielded no more than £300 per month.

In its December 2008 report, one of the many recommendations of the Public Administration Committee stated:

“We strongly support the Ombudsman’s recommendation for the creation of a compensation scheme to pay for the loss that has been suffered by Equitable Life’s members as a result of maladministration. Where regulators have been shown to fail so thoroughly, compensation should be a duty, not a matter of choice.”

Reacting to the Government’s lack of response to the ombudsman’s report, the then Conservative Opposition expressed their determination to introduce an Equitable Life (Payments) Bill early in the next Parliament, should they form a Government after the general election of 2010. The legislation planned in the coalition agreement did, indeed, include such a Bill and it was introduced in June 2010, shortly after the new Government took office.

On 10 November 2010, I tabled an amendment to the Bill in Committee, supported by my hon. Friend the Member for Harrow East, that would have included the pre-1992 with-profits annuitants—WPAs—who had been specifically excluded from the proposed compensation scheme contained in the Bill. The Bill offered 100% compensation to all with-profits annuitants who had taken out their annuities after 1 September 1992 and, as we have heard, 22% compensation to every other policyholder. Many Members from all parts of the House felt that that was inherently unfair, as the date of 1 September 1992 was somewhat arbitrary. That relatively small group of with-profits annuitants were the eldest and by far the most vulnerable policyholders. Many of them would not even live to enjoy the compensation, were it to be paid. Indeed, that has been borne out in reality.

My amendment to the Bill simply read:

“Payments authorised by the Treasury under this section to with-profits annuitants shall be made without regard to the date on which such policies were taken out.”

The Public Bill Office helped me to draft that amendment. The debate on the amendment took just over two hours, but the Division was lost by 76 votes in favour to 301 against. The debate did, however, strongly set out the case for including the pre-1992 with-profits annuitants.

The Bill received Royal Assent in early 2011 and the compensation scheme was set in motion. At first it was slow, but it began to pick up over the subsequent years. By the end of January 2015, more than £1 billion had been paid out to 896,367 policyholders, although more than 142,000 policyholders were still to be found and could not be traced. The scheme, as we know, has now closed. We also know that 37,764 with-profits annuitants, or their estates, were issued payments by the scheme. Those initial and subsequent payments totalled £271.4 million.

In conclusion, I have to give credit to the coalition Government for introducing a compensation scheme from which the majority of Equitable policyholders received 22p in the pound. I am sure we would all agree that that is a lot better than nothing. However, when we examine the compensation that was paid to Icesave investors following the collapse of the Icelandic banks in 2008, from which every investor received up to £50,000 of their losses in full, the Equitable scheme looks rather less than generous. Given that the average policy involved a total sum invested of £45,000, as I have said, it seems rather unfair to Equitable policyholders that they did not receive more. That is why EMAG continues to campaign for full compensation for all Equitable policyholders in a reasonable way—in line with the growth of the economy, not all at once—and why so many Members from all parts of the House continue to support that view.

Equitable policyholders have been very patient. They understand that the recession, at the time, meant austerity and a huge shortage of money for many parts of Government and the state. What they cannot understand is that, as the economy grows, they are denied any further payments against their very real losses. I have heard, as many right hon. and hon. Members will have heard, heartbreaking stories from individuals and constituents, some of whom have lost everything, including their homes, all because of Equitable’s failure and the company’s “catastrophic” regulation.

I have said in all my previous speeches in the House on Equitable Life that this is fundamentally a moral issue. When the Government are supposed to protect the life savings of individuals who have been encouraged to provide for themselves, as was the case with Equitable, they have a duty to ensure that the losses incurred are adequately compensated. That obligation should I believe, come above pet projects such as, perhaps, HS2 and even Trident renewal; otherwise, the whole fabric of trust in the state is damaged, which I believe is exactly what has happened in this case. Finally, I urge all Members of this House to continue to uphold the cause of Equitable policyholders and to try to restore their faith in the ability of Members of this House, as the elected representatives of the people, properly to compensate the victims of one of the greatest financial scandals of our age. After all, I believe we have a moral duty and we should not be afraid to carry it out.

[Sir Peter Bottomley]

On a point of order, Madam Deputy Speaker. I would like to correct an oversight. When I intervened on the hon. Member for Leeds North East (Fabian Hamilton), I should have declared that I have a small Equitable Life policy.

--- Later in debate ---

[Simon Kirby]

I repeat that this is about striking the right balance between the position of the public finances and fairness to all taxpayers, and I will cover that point in more detail as I proceed.

I was talking about further funding being made available to the scheme, but with debt at its highest level since the second world war, tackling the deficit and getting debt falling are challenges that call for long-term discipline, which is why we have no plans to reopen the payment scheme or to review its level of funding.

[Fabian Hamilton]

I thank the Minister for giving way because I realise that time is short. I spoke earlier about Icesave and the £50,000 maximum compensation ceiling. Those who lost money with Icesave and other collapsed banks in 2008 received up to £50,000. Given that most of the investments in Equitable Life totalled around £45,000, will the Minister consider looking at those particular individuals who have suffered most?

[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.

Equitable Life

Fabian Hamilton Excerpts

Thursday 26th February 2015 Commons Chamber

[Fabian Hamilton (Leeds North East) (Lab)]

It is a privilege to have secured the debate with my co-chair of the all-party group for justice for Equitable Life policyholders, the hon. Member for Harrow East (Bob Blackman).

I am sad that after so many years of debating this issue, we are once again back in the Chamber talking about the continuing losses suffered by hundreds of thousands of Equitable Life policyholders. As has been said, they invested in the world’s oldest life assurance company in the belief that they would be able to have a comfortable old age. Instead, after a lifetime of saving, many of them find themselves destitute, and they are certainly much poorer through no fault of their own. How have we arrived at that point, 15 years after Equitable Life closed its doors to new investors and five years after the current Government promised to ensure that losses incurred by Equitable policyholders would be compensated? If Members permit me, I will go back over some of the history of this sorry tale, to give the House and the public some answers.

My first involvement in the Equitable saga was to speak in an Adjournment debate that I secured in Westminster Hall on 24 June 2009. In that debate, I spoke about the serious issues facing all our constituents since the crash of Equitable Life, following its inability to meet its obligations and the promises that it had made to investors over the decades.

[Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op)]

I may have been present at that debate. I congratulate my hon. Friend on his role in leading the campaign with other hon. Members. Like me and other Members, he will have had the experience of trying to update constituents on the issue but getting back a reply saying, “Unfortunately, my father”—or wife, or husband—“has now died”. That illustrates how important it is to take action now. Although I would like to hear pledges for after the election, as the hon. Member for Harrow East (Bob Blackman) said, we also need action now, ideally in the Budget. After an election, it takes time for things to happen. People need payment and good compensation—

[Madam Deputy Speaker (Mrs Eleanor Laing)]

Order. We must have short interventions. Long interventions are simply not fair, because everybody must have a chance to speak on behalf of their constituents. Members must be polite to each other and make short interventions.

[Fabian Hamilton]

Thank you, Madam Deputy Speaker. Of course, I agree wholeheartedly with my hon. Friend the Member for Edinburgh North and Leith (Mark Lazarowicz).

Equitable Life was established in 1762 and started selling pensions as early as 1913, but it was not until 1957 that the society started selling its now infamous guaranteed annuity rate pensions, which promised a clear and unambiguous return on capital invested. That carried on until 1988, when it realised that its rates were so good and so far ahead of the rest of the market that they were totally unsustainable. In December 2000, Equitable Life was forced to close to new business, but by that time it had more than 1.5 million members.

In July 2008, as the hon. Member for Harrow East mentioned, the parliamentary ombudsman published her first report on Equitable, entitled “Equitable Life: a decade of regulatory failure”. On 11 December that year, the Public Administration Committee produced a report entitled “Justice delayed”, in which it stated:

“Over the last eight years many of those members and their families have suffered great anxiety as policy values were cut and pension payments reduced. Many are no longer alive, and will be unable to benefit personally from any compensation. We share both a deep sense of frustration and continuing outrage that the situation has remained unresolved for so long.”

That is already seven years ago.

On 5 May 2009, Ann Abraham, the parliamentary ombudsman, published a second report, “Injustice unremedied: the Government’s response on Equitable Life”, in which she stated:

“I was deeply disappointed that the Government chose to reject many of the findings that I had made, when I was acting independently on behalf of Parliament and after a detailed and exhaustive investigation.”

There was certainly no shortage of reports, just a shortage of justice for those who, through no fault of their own, had suffered huge losses in their life savings, which they had accrued over many years of hard work.

How could Equitable Life have maintained a rate of return and a guaranteed annuity rate way beyond any competitor in the market? Ann Abraham addressed that question in her initial report of 2008, which took four years to complete. Her answers went to the heart of the anger expressed by investors through the Equitable Members Action Group. At the core of the problem was the fact that Equitable Life simply could not meet the obligations that it had made, because it had no provision for guarantees against low interest rates on policies issued before 1988. It therefore declared bonuses out of all proportion to its profits and assets.

Following a ruling of the House of Lords in 2000, the society stopped taking new business in December of that year, which effectively spelled the end for Equitable. More than 1 million policyholders then found that they faced cuts in their bonuses and annuities, which caused a huge loss of the income on which many small investors had totally depended. After all, the average investment for the 500,000 individual policyholders was just £45,000, which, according to EMAG, would have yielded no more than £300 a month even at its height.

In its December 2008 report, one of the Public Administration Committee’s many recommendations stated:

“We…strongly support the Ombudsman’s recommendation for the creation of a compensation scheme to pay for the loss that has been suffered by Equitable Life’s members as a result of maladministration.”

[Ian Murray (Edinburgh South) (Lab)]

I am grateful to my hon. Friend, the co-chair of the all-party group, for his wonderful speech and for all the work that he has done. One of the people who lost out was Leonard Stuckey, in my constituency, who has run the EMAG group in Edinburgh South. Does my hon. Friend think that 22.4p in the pound is the right level of compensation, given what the parliamentary report that he has just mentioned said?

--- Later in debate ---

[Fabian Hamilton]

I thank my hon. Friend. There are hundreds of thousands of people like his constituent. We all have constituents who have suffered losses, for whom 22.4p in the pound is a start but, as many Members have said, simply not enough. I will say something about that in my remaining time.

[Zac Goldsmith (Richmond Park) (Con)]

The hon. Gentleman, like my hon. Friend the Member for Harrow East (Bob Blackman), is making a powerful speech. This is an issue of basic justice, but given the parliamentary cycle, it is inevitably also a political issue. I support my hon. Friend’s suggestion that all political parties put on record before the election their position on compensation, so that those caught up in the scandal know what impact their votes might have on this sorry saga.

[Fabian Hamilton]

I thank the hon. Gentleman, and I agree. With the election coming up, we need to put a clear choice to the electors and to the hundreds of thousands of pensioners and policyholders who have suffered through the collapse of Equitable to ensure that they know where we all stand as political parties and as individuals. I am not the only Labour Member who has stood up for the rights of Equitable members—I believe that more than 40 Labour Members are members of EMAG, and many more believe that justice should be served.

The Public Administration Committee’s report of 2008 went on to state:

“Where regulators have been shown to fail so thoroughly, compensation should be a duty, not a matter of choice.”

Unfortunately, despite pleas from many Labour Members, the then Labour Government failed to introduce any ex gratia compensation scheme and refused to follow the parliamentary ombudsman’s recommendations. Reacting to the Government’s lack of response to the ombudsman’s report, the then Conservative Opposition stated their determination to introduce the Equitable Life (Payments) Bill early in the new Parliament following the 2010 general election. That Bill offered 100% compensation to all with-profits annuitants who had taken out their annuities after 1 September 1992, and 22.4% compensation to every other policyholder. Many right hon. and hon. Members of all parties felt that that was inherently unfair, as that date was somewhat arbitrary and, as has been mentioned, the relatively small group of with-profits annuitants from before that date was the oldest and most vulnerable group. Many of them would not even live to enjoy the compensation or the £5,000 ex gratia payment to that group that the Chancellor announced recently.

I tabled an amendment to the Bill, which read:

“Payments authorised by the Treasury under this section to with-profits annuitants shall be made without regard to the date on which such policies were taken out.”

The debate on the amendment took just over two hours and was lost, by 76 votes in favour to 301 against, but it set out strongly the case for the pre-1992 with-profits annuitants.

The Bill received Royal Assent early in 2011, and the compensation scheme was set in motion. At first it was slow, but it began to pick up over subsequent years. As of 31 January this year, more than £1 billion has been paid to 896,367 policyholders, although more than 142,000 policyholders still have to be paid but cannot be traced. Some 37,764 post-1992 with-profits annuitants, or their estates, have been issued payments by the scheme, and those initial and subsequent payments total £271.4 million.

In conclusion, I must give credit to this Government for having introduced a compensation scheme from which the majority of Equitable policyholders have received 22.4p in the pound—a lot better than nothing. However, when we examine the compensation paid to Icesave investors, for example, following the collapse of the Icelandic banks in 2008, for which every investor received up to £50,000 of their losses in full, the Equitable scheme looks rather less generous.

Equitable policyholders have been patient. They understand that the recession meant austerity and that there was a huge shortage of money available for many parts of government and the state. What they cannot understand, however, is why, as the economy grows, they are denied any further payments against their very real losses. I have heard, as have all Members of the House, heartbreaking stories from individuals, some of whom have lost everything including their homes, all because of Equitable’s failure and the company’s “catastrophic” regulation.

As I have said in previous speeches on Equitable Life in the House, this is fundamentally a moral issue. When the Government are supposed to protect the life savings of individuals who have been encouraged to provide for themselves—as was the case with Equitable—they have a duty to ensure that losses incurred, such as those at Equitable, are adequately compensated. In my view that obligation should come above pet projects such as High Speed 2 and Trident renewal, or else the whole fabric of trust in the state will be damaged—I believe that that is exactly that has happened in this case. We have a moral duty and should not be afraid to carry it out.

Finance (No. 4) Bill

Fabian Hamilton Excerpts

Thursday 19th April 2012 Commons Chamber

[Ben Gummer]

My hon. Friend is right in two senses. Everyone is concerned about their standard of living. That is the nature of recovering from this terrible recession, which has many causes. As a Government, we are in the position of having to make very difficult decisions. Again, it is a point of great pride to me that we are being brave enough to make those decisions and to spread the load throughout the entire taxpayer base. It is a matter of extraordinary difficulty, but the group that has been hit least so far by the savings, efficiencies and cuts that the Government have had to make has been pensioners, because they have benefited from the triple lock and a whole series of other interventions by the Government, and because they are not recipients of other benefits. As a result, this measure is probably the most modest incursion into pensioner income.

[Fabian Hamilton (Leeds North East) (Lab)]

Modest to you.

[Katy Clark]

Will the hon. Gentleman give way?

Equitable Life (Payments) Bill

Fabian Hamilton Excerpts

Wednesday 10th November 2010 Commons Chamber

[Mr Fabian Hamilton (Leeds North East) (Lab)]

I beg to move amendment 1, page 1, line 7, at end insert—

‘(2A) Payments authorised by the Treasury under this section to with-profits annuitants shall be made without regard to the date on which such policies were taken out.’.

[The First Deputy Chairman of Ways and Means (Mr Nigel Evans)]

With this it will be convenient to discuss the following:

Amendment 2, page 1, line 7, at end insert—

‘(2A) The Parliamentary Commissioner for Administration shall report to Parliament on the implications for payments to which this section applies of the findings of the Independent Commission on Equitable Life Payments, no later than one month after the publication of such findings.’.

Amendment 7, page 1, line 7, at end insert—

‘(2A) In determining the amount of the payments that it is appropriate for the Treasury to authorise under subsection (2), the Treasury must have regard to such matters relating to the adverse effects of that maladministration on those persons and the proper calculation of their resulting losses as have been determined by the Parliamentary Commissioner for Administration to be relevant to and appropriate for that calculation.’.

[Mr Hamilton]

I tabled my amendment because, although I am well aware that the Bill is an enabling measure, I feel strongly that a group of Equitable Life policyholders has been unfairly excluded from the compensation scheme that the Government have put in place. You will be pleased to know, Mr Evans, that I will not rehearse the entire history of the Equitable Life saga, because I do not think that we have the time this afternoon. However, to put my amendment into context, it might help right hon. and hon. Members if I remind them of some of the background to the case that I am about to put for the with-profits annuitants who took out their policies before 1992, for whom the Government’s proposed scheme will not offer any compensation at all—in stark contrast to the post-1992 with-profits annuitants for whom 100% compensation is now proposed.

Founded in 1762 as a mutual insurance company based on the ideas of James Dodson, a fellow of the Royal Society and a man well ahead of his time, Equitable Life started selling pensions as early as 1913, but it was not until 1957 that the society started to sell its infamous guaranteed annuity rate, or GAR, pensions, which gave a clear and unambiguous return on capital invested depending on the age at which the policyholder decided to start taking the annuity. That was to carry on until 1988, at which point the society realised that its rates were so good and so far ahead of the rest of the market that they were unsustainable.

In December 2000, Equitable Life was forced to close to new business. By that time, it had more than 1.5 million members. In the last Parliament, the Select Committee on Public Administration said in its introduction to its December 2008 report:

“Over the last eight years many of those members and their families have suffered great anxiety as policy values were cut and pension payments reduced. Many are no longer alive, and will be unable to benefit personally from any compensation. We share both a deep sense of frustration and continuing outrage that the situation has remained unresolved for so long.”

In June 2009, following many complaints from constituents over the past few years I introduced an Adjournment debate in Westminster Hall on Equitable Life. In it, I was critical of the then Labour Government —my own party’s Government—and although I loyally and strongly supported almost all the previous Government’s policies, I felt that we were wrong on this issue and should have done far more to implement the parliamentary ombudsman’s full and damning report of July 2008 entitled “Equitable Life: a decade of regulatory failure”. Needless to say, that did not make me very popular with my colleagues on the Front Bench at the time. My right hon. Friend the Member for Birmingham, Hodge Hill (Mr Byrne), the then Chief Secretary to the Treasury, tried his best at the end of the last Parliament to implement what I believe to have been a flawed exercise to bring in some sort of compensation scheme by employing Sir John Chadwick to design a system, but that took so long that it was overtaken by the general election in May.

The new coalition Government decided initially to continue the Chadwick process, to the disappointment of the Equitable Members Action Group. However, I must thank my right hon. Friend for his courtesy and the help that he tried to give me when he was Chief Secretary. He clearly understood the moral imperative that Parliament and the Government had to Equitable’s policyholders, but his hands were tied and no compensation scheme was forthcoming under the previous Government. That was a great shame.

When Sir John Chadwick finally published his long-awaited report on 22 July, his recommendation on the total compensation to Equitable policyholders was for just £400 million to £500 million, or about £400 to £500 per person, out of the estimated total losses of approximately £4.8 billion, as calculated by the actuaries Towers Watson almost two years ago. I am reluctant to give praise to the Government parties, but I was delighted when the Chancellor of the Exchequer, in his speech to the House on the comprehensive spending review on 20 October, scrapped the Chadwick report and proposed a compensation package amounting to £1.5 billion. That figure was a threefold increase on Sir John Chadwick’s initial proposal but was still insufficient to make up for the losses incurred by Equitable policyholders. More importantly, however, the Government accepted at long last the report of the Parliamentary and Health Service Ombudsman in full. Again, I must reluctantly give credit to the Government for having done something that I wish my Government had done long ago.

Any delight that surviving Equitable policyholders and I felt at the Chancellor’s announcement was soon clouded by the details of the proposed compensation package. All the 37,000 post-1992 with-profits annuitants will eventually receive 100% compensation for their losses since then, but none of the estimated 10,000 pre-1992 with-profits annuitants will receive any compensation. Let me explain how my amendment goes to the heart of this issue.

[Jonathan Evans (Cardiff North) (Con)]

I have no reluctance in paying tribute to the hon. Gentleman for his independence of thought and the campaign that he has waged on this issue. He has been not a lone voice, but one of very few Labour voices addressing the matter. On pre-992 annuitants, how on earth could one calculate what their losses might be as at that time, bearing in mind the fact that it is very likely that in the late 1980s and early 1990s bonus payments that were probably much larger than was warranted, given subsequent events, were added to their asset share? In other words, they might well already have been overcompensated.

[Mr Hamilton]

I thank the hon. Gentleman for his kind words. I hope that in continuing my comments I shall answer his question.

I have long believed that the Equitable saga is a moral issue for us in Parliament. We sought, through the Financial Services Authority, to regulate financial institutions such as Equitable so that those who invested their valuable savings to ensure their future income were protected against fraud and maladministration. Our own ombudsman, Ann Abraham—she works for us—called the failure to regulate Equitable “catastrophic” and pointed to examples of savers encouraged to invest with that company long after it clearly could no longer meet its obligations.

If we as a nation want to encourage people to save and to provide for their retirement and old age, in addition to what they will receive in state pension, it is essential that the companies offering those savings products can be trusted and relied on. With hindsight, we can see that Equitable clearly could not deliver to the hundreds of thousands of investors who trusted it and those people have been badly let down as a result. We had an obligation to ensure that that could not happen and we now have an obligation—indeed, a duty—to ensure that those who have lost out are fairly compensated for all their losses. This matter is above crude party politics; it is an obligation to which 380 sitting MPs signed up before the last election when they put their names to EMAG’s pledge. We must not let the policyholders down now.

Let me relate some heartbreaking cases that will illustrate better than I can just how people have suffered as a result of Equitable’s failure. One of my constituents, Mrs B of Leeds, has written:

“I signed for my With Profits Annuity in March 1991, investing £57,000. I am really suffering just now with my husband now being disabled and I am still trying to work four days a week to make ends meet. I receive only £141 a month from Equitable and it will continue to reduce. Surely all With Profits Annuitants should be included in the compensation! Have I been harbouring false hopes all these months? If so, there does not seem any point in my continuing to write to my MP or the Prime Minister.”

Another policyholder, Mr D, who is not a constituent of mine as far as I am aware but will be a constituent of somebody in the House, writes:

“In his letter of 20 October Mark Hoban refers to the government’s concern with the plight of the WPAs. However, he fails even to mention the Government’s decision that those who started to receive their annuities before September 1992 are to get nothing. This is in spite of the fact that they too have not been allowed to get out, are continuing to suffer, year by year, reductions in their annuities and are older than any of us.

Fortunately Paul Braithwaite [the Secretary of EMAG] perceived from the first what was going on and has placed the matter of the treatment of the pre-September 1992 WPAs at the top of the agenda for a judicial review. However”—

this is the crux of what Mr D says—

“I think our MPs are fair minded enough to perceive for themselves how unjust the proposed action of the Government is. I am writing to my MP straight away.”

Whoever that might be should look out for the letter.

Once an annuity has been purchased it cannot be sold or changed, so the with-profits annuitants who took out annuities before the September 1992 cut-off date are trapped.

[Stephen Lloyd (Eastbourne) (LD)]

I, too, pay tribute to the hon. Gentleman for his work. It has been a pleasure to work with him on this issue and I support his amendment. In a nutshell, on the moral case, the parliamentary ombudsman and Sir John Chadwick both said in writing in advance that all the annuitants should be treated equally and that these annuitants should not be excluded, not least because they are the oldest and most frail.

[Mr Hamilton]

I thank the hon. Gentleman for his kind remarks about the work I have done but, as the Committee will know, he is the secretary of the all-party group on justice for Equitable Life policyholders, and I thank him for his efforts in this regard. He is absolutely right: Sir John Chadwick did say that, as I shall mention later.

The with-profits annuitants who took out annuities before the September 1992 cut-off date are as trapped as those who purchased them after that date and their incomes diminish each year. Having taken out policies that they believed would allow them to make ends meet in old age, they now face increasing poverty because Parliament did not act soon enough to prevent the collapse of Equitable. That is why we owe them the compensation that they deserve as much as the post-1992 with-profits annuitants.

What is so important about September 1992? Let me give further reasons why this is an artificial and unfair cut-off date, which I seek to stop with my amendment. First, annuities could not be exchanged once bought, so every annuitant has suffered from the consequences of regulatory failure irrespective of when their annuity was taken out or what extra bonuses were added. The cut-off date ignores the views of the parliamentary ombudsman, Ann Abraham, and Lord Chadwick in their reports. Even Chadwick, who came up with a much smaller overall compensation package than the £1.5 billion now on the table, agreed that the pre-1992 with-profits annuitants should not be excluded, as the hon. Member for Cardiff North (Jonathan Evans) pointed out.

It is said that because of the changes to the computer system, Equitable’s records prior to late 1992 were not available, but the current chief executive of Equitable, Chris Wiscarson, who has been extremely helpful, has previously stated that this is a problem that could be surmounted. The parliamentary ombudsman has previously made it clear that nobody would sensibly have invested in Equitable after 1 July 1991 had the regulator acted effectively and transparently. If that situation had been made apparent to the media and the public at that time, nobody would have sensibly invested after that date.

It seems clear to me that anybody who took out a policy between July 1991 and September 1992 is being unfairly penalised simply because of a change in Equitable’s computer system. This is exacerbated by the fact that policies brought out in this period had the longest exposure to the adverse effects of maladministration. The coalition Government gave a commitment to

“implement the Parliamentary and Health 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.”

My amendment would ensure that this commitment could be carried out properly and at a relatively small additional cost.

Let me be clear. I am not recommending that we take some of the compensation from the 37,000 who have already been promised 100% compensation, which amounts to about 50% of the total offered by the Government. I am suggesting that we bring forward the £100 million of the total package that was proposed to be given in the next Parliament, and that we add to that a further £100 million from current, albeit limited, reserves.

As I said earlier, I believe that this is a moral obligation and that Equitable pensioners are looking to us, their recently elected representatives in this Parliament, for justice, which is why I intend to press the amendment to a vote so that there can be no discrimination between with-profit annuitants according to when they purchased those annuities.

[Andrea Leadsom (South Northamptonshire) (Con)]

Does the hon. Gentleman accept that there might be more support for the amendment if it did not incur further cost to the taxpayer, bearing in mind the current severe financial constraints?

[Mr Hamilton]

Yes, of course the amendment would attract far more support if there was a net zero cost. However, this is an important moral issue. Many of my hon. Friends and other Members know my views, for example, on the Trident replacement, which I know has now been shelved for a while, and on various schemes that take a huge amount of capital expenditure. The sum that we are discussing now is relatively small. I believe there are other savings that may be made, particularly in defence spending, which could pay for this.

That is a decision that the Government and the two parties that make up the coalition will have to grapple with, but I believe that the policyholders look to us to ensure that the justice they have been promised is delivered. It is a moral obligation, and it overrides many of the other areas of expenditure to which any Government are committed.

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

Does my hon. Friend agree that if there is a moral case to compensate anybody, there must be a moral case to compensate everybody, and not leave some people out because of some mess-up over a computer system?

[Mr Hamilton]

I thank my right hon. Friend for that. He is right. It is galling when the very vulnerable and frail pensioners who are the ones suffering most because they are the pre-1992 with-profits annuitants look, for example, to the quite correct compensation given to Icesave investors of up to £50,000 per investor, and to some of the other compensation schemes in which the Government have been involved over the years, and find that they, who might not have much longer to live, are going to be without compensation at all.

[Jonathan Evans]

I am grateful to the hon. Gentleman, who is being extremely generous in giving way. I fully accept the moral argument that he is putting forward. That is why I was a signatory to the pledge as well. In response to the question I asked earlier, he certainly has a point about taking back the date to 1991. His amendment, though, would go back well before that, but he has not made the argument for going beyond 1991. My second question was how he would compute the compensation. That must be a central question, and in his argument so far I have not heard an answer to that.

[Mr Hamilton]

I thank the hon. Gentleman for his intervention. First, there would be relatively few annuitants from further back in time. Clearly, a person who retired in 1981 or 1985 would be getting on a bit in years now, so only a small number of people would be involved. Secondly, Equitable must have records showing what bonuses were paid at different times.

The further back the scheme goes before 1991, the fewer annuitants there will be who demand or need that compensation, but the need will be greater because of the frailty and the loss in the value of those annuities since then. Since 1991, those annuitants, even though they may have had bonuses before that, continue to see a decline because of the maladministration, which affects them as much as it affects post-1992 annuitants. I hope I have at least partly answered the hon. Gentleman’s point.

[Jim McGovern (Dundee West) (Lab)]

Actuaries are sometimes disdainfully referred to as people who found accountancy too exciting, but surely a good actuary would be able to calculate the sums in question, whether for pre-1991 or post-1991 annuitants.

[Mr Hamilton]

I thank my hon. Friend for making that very good point. We are talking about many hundreds of thousands of policyholders throughout the United Kingdom, but we know that there are about 37,000 or so post-1992 with-profits annuitants. We think there are about 10,000 pre-1992 such annuitants, but the further back we go the fewer there will be, so if it was a difficult, time-consuming exercise to work out relative losses for all policyholders, which it certainly was, which is why Sir John Chadwick was engaged, it will surely be a much easier exercise for the far fewer people who are with-profits annuitants prior to 1991. My hon. Friend’s point goes some way to answering the question.

[Richard Fuller (Bedford) (Con)]

I thank the hon. Gentleman for giving way again. This has been a long-standing issue, and perhaps he can help some of us who are new to the House. He mentioned a total of £100 million from subsequent years’ Budgets, plus £100 million from reserves to be allocated to pre-1992 annuitants who are not covered in the proposals. Is he making an estimate, or is that sum firm is in his mind? That is a key issue. The concerns expressed about computer records do not stand up against a point of principle, but it is important that we have a sense of how firm and solid the hon. Gentleman’s understanding is of the sums that might need to be paid.

[Mr Hamilton]

The hon. Gentleman makes a very good point, and I cannot give him a precise answer. The figures that I have quoted are estimates I obtained from the Equitable Members Action Group, which has quite a lot of good people working for it—people who have been in the financial services industry. I go on their expertise. This is the best estimate that we can gain.

The reality is that many of the annuitants are quite elderly. It is unlikely that in five years we will have the same number we have now. We already know, for example, that every single day since the disaster happened 15 policyholders throughout the entire spectrum of Equitable policyholders have died. We can therefore assume, unfortunately, that more will no longer be with us in the years to come, so the amount of money will be a diminishing sum. The best estimate that we can gain is £200 million, and that estimate comes from EMAG.

[Jim Shannon (Strangford) (DUP)]

Can the hon. Gentleman clarify that last point? Obviously, since our last debate on the subject in the Chamber way back in July, some people have passed away. Is there any provision in the amendment for the next of kin to take advantage, in the absence of those who have passed on?

[Mr Hamilton]

That is a good point, and it was made during the previous Parliament, in February, at a packed meeting with the former Chief Secretary to the Treasury, my right hon. Friend the Member for Birmingham, Hodge Hill, and Sir John Chadwick. My right hon. Friend made a commitment, which I am not sure the Financial Secretary has made, so perhaps he will clarify the situation in his contribution, that the estates of those who had passed away would receive some compensation. The point that I have just made may be contradicted, but it depends on what the Financial Secretary and the Treasury want to do.

[The Financial Secretary to the Treasury (Mr Mark Hoban)]

Before the hon. Gentleman continues, let me just make it clear that long ago we established the fact that, under any compensation scheme designed, we would make payments to relatives of those who were deceased, and that there would be no means-testing.

[Mr Hamilton]

I thank the Financial Secretary for clarifying that point, which somewhat contradicts what I said earlier about the diminishing amount of money.

The best estimate that EMAG can give us is £200 million for the 10,000 existing pre-1992 annuitants. I confirm that I wish to press my amendment to a vote, and simply conclude that we owe some of our most frail and vulnerable pensioners no less. I urge all Members to support my amendment.

[Jonathan Evans]

I am very pleased to have the opportunity to participate in this debate, but may I begin by declaring an interest? I am the chairman of a life insurance company, but I have no connection whatever with Equitable Life, financial or otherwise.

The hon. Member for Leeds North East (Mr Hamilton), alongside many Conservative and Liberal Democrat Members prior to the election, fought hard to put forward the cause of Equitable Life policyholders, and I am pleased and proud of the position that my colleagues and the Minister adopted. Many of us, in the lead-up to the election campaign, signed a pledge to seek to put into operation a number of factors. The first was the recognition of all the individual provisions that the parliamentary ombudsman put forward. The hon. Gentleman will know that the previous Government only partially accepted the ombudsman’s report, and I am very pleased and proud of the fact that the Minister fully accepted all its points. I rather wish that EMAG had been a little more generous in its praise of him for having done so.

Secondly, the compensation that has been put forward will come as a disappointment to some, but the ombudsman made it clear that we had to take account of pressures on the public purse at the time. When we heard Sir John Chadwick’s proposals, there was virtual unanimity among those newly elected Government Members that £400 million was completely and utterly inadequate. I thought that the Government might put the figure up to about £1 billion and hope for the best, but we ended up with £1.5 billion.

--- Later in debate ---

[Mr Fabian Hamilton]

As I mentioned in my contribution, about half the overall £1.5 billion package will be consumed by the 100% compensation for the 37,000 post-1992 with-profits annuitants. Does the hon. Gentleman agree that the remaining balance will provide a considerably smaller sum in the pound to the rest of the policyholders?

[Mr Weir]

The hon. Gentleman is quite right. I understand that the figure quoted by EMAG is about 15% of their loss, which is a very small amount for people who have suffered.

What could have been a very good outcome seems to have been undermined by arbitrary decisions. I hope that the Financial Secretary will explain the rationale behind excluding the 10,000 pre-1992 annuitants from compensation altogether. I do not understand the logic of that. I do not see any suggestion that it should be done in the ombudsman’s recommendations.

I have said in previous debates that it is important that this Parliament supports its independent ombudsman, and there seems to have been a major deviation from what the ombudsman recommended. The hon. Member for Cardiff North (Jonathan Evans) made some interesting and relevant points about how compensation for pre-1992 annuitants should be calculated, which is undoubtedly a difficulty. I am not an actuary and cannot give him the answer to that, but I do not think it is beyond the wit of man—or even an actuary—to work out a figure.

Ultimately, this is a matter of principle. I raised that point on Second Reading. We are dealing with a situation in which many thousands of our fellow citizens have lost out through maladministration. The Government are ultimately responsible for that maladministration—the previous Government, not the present one, but they are the heirs to that. We should not accept the principle that the Government can say, “Okay, there has been maladministration. We are responsible, but we will set a cap on how much compensation we give and then arbitrarily decide which of the group who have suffered will be compensated.” That is a very bad principle. In no other case in which there has been loss and there is liability would anyone be entitled to say, “I’m only paying a proportion of that. That’s all I can afford.” The Government should not go down that route.

I believe that we will debate an amendment later to set up a totally independent organisation to consider the matter. We need that to be done independently, not with a cap and not with some people arbitrarily excluded. We will support amendment 1 if it is pressed, because it is only reasonable. We have to right what has been a terrible injustice going back well over a decade.

--- Later in debate ---

[Nadhim Zahawi]

My hon. Friend makes a good point. However, having listed that extraordinary chronology of debacles, it is clear that there could be a problem if we left things open and said, “We might be able to revisit them at some other stage.” We would be opening up other doors, and that may cause further delay. I come from a world of business rather than of politics and I believe that, if we try to put a line under a terrible situation and compensate people, we should do it quickly and completely.

Mr Evans, I take on board your remarks. All I will say is that the Minister should be applauded. There will be no means-testing and the dependants of the deceased policyholders should be included in any compensation. I have had a number of heartrending letters in which relatives have written, saying, “It is too late for us because our loved ones have passed away.”

I understand the passion that the hon. Member for Leeds North East has shown through amendment 1. The problem with the amendment was outlined by my hon. Friend the Member for Cardiff North (Jonathan Evans), who said that it was very difficult to put a quantum on what that number should be. In the current economic climate, I would find it hard to support it if we said, “Oh well, maybe it is £100 million extra from reserves; maybe it’s £100 million that we can bring in from future years.” None the less, the hon. Gentleman made a strong point about the annuitants from 1991 going forward, and I hope that the Minister was listening carefully.

[Mr Fabian Hamilton]

Does the hon. Gentleman not agree that creating an arbitrary date—which is what the cut-off point would be—would lead to a great deal of anger and distress among some of the oldest and most vulnerable policyholders?

--- Later in debate ---

[Mr Fabian Hamilton]

I accept the Minister’s point about the date not being arbitrary, but does he not accept that the regulatory failure affected those annuitants who could not change their annuities, even if they were purchased before September 1992? Along with those annuitants who purchased policies after September 1992, they continue to see a decline. Therefore, they were affected by regulatory failure.

[Mr Hoban]

The hon. Gentleman makes an assumption that the scheme is open-ended, but it is designed to compensate policyholders who invested in Equitable Life from 1 September 1992. With regard to the implications of that, I shall respond to the intervention by my hon. Friend the Member for Cardiff North (Jonathan Evans).

--- Later in debate ---

I encourage my hon. Friends to reject any amendments in this group that are put to a vote. We have come up with a fair scheme that is based on the ombudsman’s findings; the loss reflects her calculation. I therefore think this is a good scheme, representing a balance of fairness between policyholders and taxpayers.

[Mr Fabian Hamilton]

I am grateful to the Minister for his clear explanation of his rationale for the compensation scheme. I am afraid, however, that I still do not accept the argument that the cut-off should be absolute and rigid and that those who took out annuities before 1 September 1992 should not receive any compensation or be eligible in any way. As I do not fully accept his argument, I will press amendment 1 to a vote.

Question put, That the amendment be made.

--- Later in debate ---

[Mr Fabian Hamilton]

Given the shortage of time I shall be brief. The hon. Member for Stratford-on-Avon (Nadhim Zahawi) reminds us of the daily interest payments on the current national debt and I could respond that if we delayed payments by two days, we might have enough, by his calculations, to pay the pre-1992 annuitants, but I shall not be frivolous.

In Committee, I might have been a little churlish in my introductory remarks on my amendment, because I really do want to congratulate the Government on what they have done. They have not gone far enough, but they have made progress and I do not want to appear reluctant in congratulating them. Many hon. Members thought I was being reluctant, but my remarks were slightly tongue in cheek. It is good that the Government have introduced a scheme quickly, that payments will be made from next year and that the quantum is now roughly £1.5 billion instead of £0.5 billion—about three times more than Chadwick suggested. That is progress, and many Equitable policyholders will be very pleased.

I hope the Minister will accept that there is still some injustice, not least for those pre-1992 annuitants, for whom 76 right hon. and hon. Members voted for my amendment. As the Minister knows, I do not accept his argument on that. I hope he will understand that injustice still exists, that we will have to deal with it in some way or another if we can, and that EMAG will continue to fight its corner, as it must, until it sees justice for all policyholders and annuitants who took out policies with the discredited Equitable Life.

I and my co-chair, the hon. Member for Harrow East (Bob Blackman), together with the secretary of the all-party group, have written to Ann Abraham, the ombudsman, asking her a number of questions. We hope that in due course we will receive a response, which we would want to share with the House or at least with the rest of the all-party group. On that subject, I hope the Minister will be able to accept my previous invitation to attend one of our meetings at a time convenient to him, so that we can discuss the details of the scheme, understand more clearly how it will work and perhaps add some thoughts of our own on how to make it work more effectively.

Finally, I hope that in passing the Bill today and making it become law, and in paving the way for the compensation scheme, we as parliamentarians all appreciate the lessons that have been learned from the poor or non-existent regulation of companies such as Equitable Life so that future annuitants and policyholders never have to suffer in this way again.

Equitable Life (Payments) Bill

Fabian Hamilton Excerpts

Tuesday 14th September 2010 Commons Chamber

[Mr Fabian Hamilton (Leeds North East) (Lab)]

Before I start, I have an apology to make to the House. Owing to a prior, long-standing commitment, I shall not be present at the winding-up speeches and the conclusion of the debate.

Like so many Members on both sides of the House, I have tried over the past few years to champion the cause of my constituents who have suffered—through no fault of their own—because of a catastrophic failure of regulation by the Government of a previously sound and trusted financial institution. I do not want to rehearse yet again the history of how that failure, which has blighted so many lives, came to pass. I am pleased to see that this afternoon we are debating the Second Reading of a Bill that will pave the way for compensation, now long overdue, to be paid to long-suffering Equitable policyholders, especially the trapped annuitants.

Since my Adjournment debate on 24 June 2009, I have spoken in the House without fear or favour on behalf of so many who did not have a voice of their own. I have also spoken in this House to put the case that is so well presented by the Equitable Members Action Group, or EMAG.

I dare say that I have not made myself very popular with my Labour colleagues and friends who, until 6 May, were members of the Government. Sometimes, however, even politicians have to put personal ambition aside and embrace an important principle. Never more so than in this case; the question is one of a moral obligation to a group of people who not only wanted to provide for their own retirement but were actively encouraged to do so by the Governments—both Conservative and Labour—of the day.

Therefore the only people who are important in today’s debate are those who have already waited more than nine years for recompense and are still waiting. I am thinking of constituents such as Mrs Ivy Robinson, who lives in Roundhay in my constituency of Leeds North East. She contributed all her working life to save for a personal pension, which promised to give her just over £400 a month, but she is now having to manage on less than £180 because of the failure of Equitable.

As we have heard time and again in debates in this House and elsewhere, the vast majority of Equitable policyholders are not rich people, but ordinary folk who simply tried to be careful with their hard-earned money in order to ensure a comfortable retirement. The average investment was only £45,000—enough to yield, according to EMAG’s calculations, just £300 a month. They have been badly let down.

Ann Abraham, the parliamentary ombudsman, could not have been clearer in her recommendations and has spoken out on many occasions to tell the Government what was necessary to put right the wrongs caused by Equitable. The Government have largely ignored her sound advice. The former Chair of the Public Administration Committee, Tony Wright, already quoted this afternoon although no longer a Member of the House, was outspoken during the last Parliament in his support for Equitable Life policyholders. In part of the introduction to his Committee’s report to the House in December 2008 he stated:

“Over the last eight years many of those members and their families have suffered great anxiety as policy values were cut and pension payments reduced. Many are no longer alive, and will be unable to benefit personally from any compensation. We share both a deep sense of frustration and continuing outrage that the situation has remained unresolved for so long.”

The then Conservative Opposition were vocal in their support for Equitable policyholders, as were many Labour and Liberal Democrat Members, and in October 2009 the Conservatives used an Opposition day debate to raise the issue once again in the House. They did so again in March this year, shortly before Dissolution. I spoke in both those debates and have been consistent in my support for the moral obligation that we owe those who have suffered and continue to suffer. In November 2009, EMAG organised a rally in Westminster Methodist central hall, which was very well attended and at which the Financial Secretary and I spoke, among many others.

On 24 February this year, the former—now shadow—Chief Secretary to the Treasury attended a meeting of the all-party group on Equitable Life in one of the Committee Rooms upstairs, together with Sir John Chadwick and around 90 Members of this House. In 13 years, I have never seen so many MPs attend an all-party group. What a shame the room was far too small and everyone was squeezed in with standing room only, just like the underground during the rush hour. Sir John attempted to justify his terms of reference—for which he was not responsible, of course—and tried to answer questions about his forthcoming interim report during some very angry questioning by Members. However, as my right hon. Friend the shadow Financial Secretary said, in July the ombudsman wrote to every Member about the Chadwick process, making it clear that

“Sir John’s terms of reference included the rejection or qualification by the previous Government of many of my findings of maladministration and injustice and the rejection of my recommendation. In the light of the new Government’s commitment to implement that recommendation in full, the approach embodied in the Chadwick report has thus been overtaken by events and cannot provide a basis for the implementation of the recommendation.”

So now we come to the Bill. It is of course fairly innocuous, as it tries to pave the way for a scheme of compensation as yet unpublished; that is why Labour Members are not opposing it today. I support my right hon. Friend’s suggested amendments, which I believe will go much further towards the delivery of a compensation scheme for policyholders, especially trapped annuitants, who have waited for so long. Unlike him, however, I have never supported the Chadwick process, and I am in complete agreement with the parliamentary ombudsman, who says, again in her letter of 26 July, that

“the Chadwick proposals seem to me to be an unsafe and unsound basis on which to proceed.”

While I have always been determined to try and ensure that this issue is lifted above crude party politics, I have to admit to being very uncomfortable at the EMAG rally last November when the hon. Member for Fareham (Mr Hoban), now the Minister, made a scathing attack on the then Labour Government. In the spirit of cross-party support for the victims of Equitable’s failure, I have always refrained from attacking the Conservatives, so let me simply say that I am disappointed that the Chadwick process continued after pledges were made to abandon it, especially in the light of the ombudsman’s criticisms. I am also upset that a ceiling of roughly 10% of estimated losses has been placed on any compensation scheme. This appears to go against the EMAG pledge that many right hon. and hon. Members—including, I believe, the entire Government Front-Bench team—signed before the election, and which committed each signatory to

“vote to set up a swift, simple, transparent and fair payment scheme—independent of Government—as recommended by the Parliamentary Ombudsman.”

We are not there yet by any means. This Bill might be a building block, but it is only Lego-sized at the moment. I hope that the Government will think carefully and adopt the helpful Labour amendments very quickly in order to show our constituents that, at last, Parliament means to right this wrong.

Equitable Life

Fabian Hamilton Excerpts

Thursday 22nd July 2010 Commons Chamber

[Mr Hoban]

I am grateful to my hon. Friend. She is not the only Member with a bulging postbag as a consequence of the issue. I am surprised at how many more of my constituents have announced that they are Equitable Life policyholders since I became the Minister responsible. I believe that there is good news in the statement, and I hope that hon. Friends will contact their constituents who have policies to let them know about the coalition’s progress.

[Mr Fabian Hamilton (Leeds North East) (Lab)]

I think that my right hon. Friend the shadow Chief Secretary deserves some credit for his work on the issue. However, I thank the Financial Secretary for his helpful statement. Will he attend a meeting of the all-party group when it is re-formed so that a more detailed discussion can take place, given the shortage of time here and all hon. Members’ interest in the issue?

[Mr Hoban]

I pay tribute to the hon. Gentleman’s excellent work as one of the joint chairmen of the all-party group. I note that the shadow Chief Secretary spoke to its members early this year, and I am happy to do the same. We have a good story to tell and I will not turn down any opportunities to tell it.