Equitable Life (Payments) Bill

Frank Dobson Excerpts

Tuesday 14th September 2010 Commons Chamber

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

I support the Bill because it will enable Equitable Life policyholders to start getting paid. Those people put their savings into what was Britain’s oldest and, as far as they were concerned, most reputable savings institution. They were not like the people who put their savings into outfits offering dubious and extraordinary returns, such as those who decided to chance their savings with the Icelandic banks. The Equitable policyholders are in their current position through absolutely no fault of their own.

So who was at fault? First, clearly, the people who were running Equitable Life were at fault. I do not think that anyone is going to dispute that. Secondly, the House of Lords was at fault in its judgment in the case of the guaranteed annuity rate beneficiaries. When it reached its decision, it knew what the consequences were likely to be for Equitable Life and other policyholders who would not benefit from that judgment. Rather ironically, the House of Lords showed no sense of what was equitable and not a grain of common sense. It decided that it would award justice to one small group of people, almost automatically resulting in injustice for a much larger group. In view of the dubiety of certain organisations with which people put their savings, we need to look at the law to see whether we can enable the courts to come to what might be described as an adjudication rather than a judgment, where a judgment in favour of one group of innocent people might be very damaging to another group of innocent people. The Treasury, the Financial Services Authority and others were clearly at fault. Nobody can deny that, but at the time that the first ombudsman’s report came out, I believed she was wrong as well. In my judgment, her judgment did not give enough weight to the primary shortcomings and primary fault of Equitable Life, and attributed too much fault to the regulators.

Clearly, the Government were at fault in their response to that report. It was understandable that they did not fancy the establishment of the principle that people could seek compensation from a regulator. That is not an unsound concern on the part of a Government, who might not want to be subjected to all sorts of court actions—for example, when somebody decides that the police have failed to prevent burglaries in their area and seeks to bring a case against them. The financial services industry is keen always to blame regulators, as it has done in a big way.

Things changed at the time of the credit crunch. All questions about protecting the taxpayer fell away. All the old restraints fell away. The banking and savings industry, run by people of infinite greed and stupidity, was so hopeless that it was decided on both sides of the House that not only the people who had put their savings in them, but the institutions themselves, were entitled to be bailed out. From that moment on, I was convinced that had the Equitable Life issue arisen in 2007, 2008 or 2009, there would have been no doubt: we would all have agreed that the people who had lost their money should be properly compensated, and by the taxpayer. That is what we now have to do if we are to give people a sense of security in their pensions and savings.

[Dr Andrew Murrison (South West Wiltshire) (Con)]

Will the right hon. Gentleman give way?

[Frank Dobson]

No, I do not want to. We must get on.

As my right hon. Friend the Member for East Ham (Stephen Timms) said, the Conservatives and Liberal Democrats attacked the Labour Government—as far as I was concerned, quite rightly—and said in opposition that they strongly supported the ombudsman’s recommendations. I do not recall my opponents at the last election getting up and saying, “Well, there were a few caveats in the ombudsman’s report,” and I doubt whether that crossed Tory or Lib Dem lips anywhere else in the country.

Before, during and after the general election, the two parties that now form the Government thrice promised that the ombudsman’s report would be implemented, and they had better get on with it. However, their form of getting on with it is to establish yet another commission. That may work swiftly; I do not know. I have a question which I hope the Minister will answer. If the commission comes up with a scheme that EMAG does not like, will he send it back to the commission and insist that it comes up with a scheme acceptable to EMAG? I am happy to give way to him if he would like to contribute to the debate.

Once everyone has been paid, the situation is still not sorted out. We need to look closely at better regulation of those who are taking in people’s savings. We need to look at the regulatory system to see whether that can be strengthened in various ways. Finally, as I suggested, we need to change the law so that in circumstances like those that originally arose in Equitable Life, the courts can adjudicate between two innocent parties, not help one lot and hammer the other.

--- Later in debate ---

[The Economic Secretary to the Treasury (Justine Greening)]

In closing this important debate, I want to thank all Members who have participated. This has been a passionate debate, and I pay tribute in particular to the maiden speech of my hon. Friend the Member for Congleton (Fiona Bruce). I thought she did a fantastic job. She was right that she has some special shoes to fill, but we got a flavour from her tonight that showed that she will fill those shoes very ably. I congratulate her on that maiden speech.

There have been 43 speakers in today’s debate, the overwhelming majority of whom sit on the Government Benches. Most Opposition Members realise that their Government thoroughly let down the members of Equitable Life, and we agree with that. We think that this saga has gone on for way too long. It has affected all our constituents, including my own.

We managed to get out of those on the Opposition Front Bench that—I think—they support the findings of the Chadwick report. If they disagree with that, perhaps they would like to intervene. It is quite important to make the point about how much they would have been willing to pay out as compensation to Equitable Life policyholders. We can take it from their silence that the Chadwick report was commissioned by the previous Government and is now accepted by Labour’s Front Benchers in opposition. It shows that, in spite of the warm words, within two weeks of getting the Chadwick report they would have been quite happy to set up payments much lower than many members of EMAG were hoping for. It is fair to put that into context: that followed 13 years of zero payments from the previous Government.

We have decided to take a different approach, which has been guided by three core principles: fairness, swiftness and transparency. In fact, my hon. Friends the Members for Sittingbourne and Sheppey (Gordon Henderson), for Worcester (Mr Walker), for Wycombe (Steve Baker) and for Macclesfield (David Rutley), as well as the hon. Member for Llanelli (Nia Griffith), all mentioned those principles, which we share. Indeed, my hon. Friend the Member for Oxford West and Abingdon (Nicola Blackwood) made a speech about the need for transparency, and we agree with that. That is why we have tried to make the process as transparent as possible—to make sure that all the interested parties know what is driving the process and so that they have the opportunity to contribute towards our thinking.

Since coming to office, the coalition Government have clearly shown that reaching a resolution for Equitable Life policyholders is a real priority. I assure hon. Members on both sides of the House who seem to be under the impression that there is some delay—those of us who have been in the House for a longer time have been working alongside our Equitable Life constituents who have suffered losses for many years now—that this delay is to make sure that there is no more delay. We are going through this process to ensure that the payments we are able to make are fair and transparent and so that there is some genuine compensation for the people who have suffered.

In our programme for government, we pledged to

“implement the Parliamentary and Health Ombudsman’s recommendation to make fair and transparent payments to Equitable Life policy holders”,

and we have already taken the first steps towards honouring that pledge. We have established the Independent Commission on Equitable Life Payments, which is assessing the best way of allocating payments to policyholders. For those Members who asked how payments will be allocated, let me be clear: the independent commission will report in January on its assessment of the best and fairest way of allocating payments, including, as the hon. Member for Strangford (Jim Shannon) mentioned, to the relatives of people who are now deceased. It is one of the greatest tragedies of this whole saga that some people simply did not live to get their compensation payments, but this Government will make sure that their families nevertheless get redress.

In spite of what we have just heard from the Opposition spokesman, we are introducing a fundamental part of the process by which we can make compensation payments. The Equitable Life (Payments) Bill—that title would have been something of an oxymoron under the previous Government—was announced as part of the Queen’s Speech and we can all welcome it as a key step along the path towards making the payments that have not been made for the past decade under the previous Government.

Several Members, including the hon. Member for Angus (Mr Weir), have talked about having a clear timetable, so let me be absolutely clear: we want to start making the first payments to policyholders by the middle of next year. Today is all about having the chance to take a further step towards reaching a resolution. Our passing the Bill will enable policyholders to receive payments irrespective of decisions about exactly how the future scheme will look or the value of payments made.

I remind hon. Members across the House that the setting up of an independent commission was a key point in the ombudsman’s report. I think we all recognise that that independence is critical and we need to allow the independent commission to get on with its work, to consider the various representations, including the Chadwick report, and to decide how best we can ensure that payments are fair. There are many different views about these difficult issues and, although those key issues are not the subject of the Bill, they are important when deciding how we should progress.

Members across the House have raised a number of important issues which I will try briefly to address in the time that is left. First, let me reiterate the timetable and the next steps. As I have said, the independent commission has started its work. My hon. Friend the Financial Secretary, who should be congratulated on the pace at which he has brought forward the various steps we are taking, will provide a response to Sir John Chadwick’s report at the time of the spending review on 20 October. At that stage, it will also become clear how much it will be affordable to put into the scheme. The commission will then look at how it will all work and it has been asked to report at the end of January. Following that, we will set about putting its recommendations into action. As I have said, our ambition is to have made the first payments by the middle of 2011.

[Frank Dobson]

I gave the Minister’s colleague the opportunity to answer this question: will the Government proceed with the scheme put forward by the commission if EMAG says it should be rejected?

[Justine Greening]

I know that my hon. Friend the Financial Secretary has met representatives of EMAG over the past few days. EMAG will have the chance over the coming weeks to make representations to the commission about what it considers the fairest way to allocate payments. The independent commission must be independent of everybody and must be allowed to get on with its job. That is what we propose to let it do. We should not prejudge it. We should allow it to proceed with the work that has been set out. As I said, the approach recommended by the ombudsman in her report was that the setting up of the scheme should be looked at independently. We have decided to follow her recommendation. It is important that that should now happen.

Members asked about an appeals process. That is a fair question. We are still considering the details of how such a process might work. I am sure that the independent commission will also consider how that could become part of the process. The key requirement is that any appeals process is independent of the initial assessment of an individual’s claim.

One of the other issues that has come up is why we have not put more detail about the scheme in the Bill. Although that it a fair question, it prejudges what the independent commission might propose. As I have said a number of times, we need to allow it to get on with its work so that it can propose the design of the scheme. It is wrong to prejudge that by baking into legislation steps that the commission may consider unnecessary.