Finance Bill
Frank Dobson Excerpts(13 years, 7 months ago)
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Mr Chope
I absolutely agree, but I think that my hon. Friend the Member for Mole Valley, who tabled the new clauses, is a gradualist by nature; that goes back to his time as leader of Wandsworth council, when he was preparing for his time in Parliament and knew that things could not be done immediately but must be done gradually. He can speak for himself when he contributes to the debate, but perhaps that gradualism is part of his thinking.
I will finish soon, because many Members wish to contribute, but let us first put this suggestion in perspective by thinking about roughly how much it would cost. Let us suppose that an average health premium is about £2,000, which a pensioner or pensioner family would be faced with paying, and which previously their employer had paid as part of a contributory or non-contributory occupational scheme. Many pensioners would not pay that, but if we gave them the tax relief, which would amount to more than £400, I submit that many of them would carry on paying for their insurance, thereby contributing towards the cost of the health service, which would be a benefit.
The last time I spoke in a debate on a Finance Bill on Report it was about insurance premium tax. The insurance premiums paid for health insurance are already subject to tax, which the Treasury keeps increasing, so an alternative way forward might be to abolish the insurance premium tax paid on health insurance contributions. That is a separate argument and not the subject of this group of new clauses, but it serves as an example. The Financial Secretary to the Treasury would obviously say that we could not afford that—but does he realise that if we increased the number of people taking out health insurance, the Treasury would receive a lot more in insurance premium tax? I am sure that he will take that into account when he—in due course, having done the proper research—tells us the costs and benefits of the proposals in the new clauses.
We should not forget that the dynamic effect of these taxation changes could deliver great benefits and dividends. It is important to send a strong message to those who can afford to contribute towards their health care costs but who currently do not do so, that this would enable them to contribute at a lower cost than would otherwise be the case. I think that it is a well-rounded and sensible proposal, and I am delighted that it is getting so much support from colleagues on the Government side of the House.
Frank Dobson (Holborn and St Pancras) (Lab)
I am sure that people across the country would be astonished to discover that the first priority of Back-Bench Tories on health spending is to give a tax concession to people who pay, on average, £2,000 a year towards health insurance, because most people over 65 are in no position to pay such a sum towards health insurance. Most people across the country, including many pensioners, and perhaps even those pensioners who have private health insurance, think that the first priority for spending should be to avoid some of the cuts that the Government are already introducing and to direct spending to the national health service.
Mr Redwood
I just want to correct the record, because our first priority was to have a wider range of drugs to treat cancer, as we thought that the previous system was too meanly constructed, and we were proud of the Government when they made that the No. 1 priority for extra spending.
Frank Dobson
But that decision has been and gone, and I do not think there was any opposition to it across the House, but we are now talking about the Bill. The Government now propose that the first priority should be to spend the best part of £200 million to give a subsidy to people who are already sufficiently well off that they can pay £2,000 on average towards their private health care costs. I do not think that that is a sensible priority for anyone concerned about health care. I hope that no Tory Members, or Lib Dem Members if they support this proposal, will parade outside their local hospitals saying, “Please don’t get rid of 200 nurses, or some of the doctors, or our ambulance and emergency service, and please don’t take away our maternity unit.” That will be because some of their colleagues thought that the first priority was to spend £200 million on people who are considerably better off than the average.
Government Members have said that the rich can afford to buy private health care and that most rich pensioners already have it. Some extreme marketeer right-wingers both here and in the United States think that health insurance should be abolished because, if people have to pay for health care costs out of their income or savings, they will be a source of pressure to bring down those costs, but Government Back Benchers have not reached that extreme marketisation approach yet.
Mr Bone
The right hon. Gentleman is being very generous in giving way, and I should say something nice about his speech, but I cannot think of anything. This Government’s first priority on health, however, was to make sure that we increased health spending at more than the rate of inflation. It was something that his party would not guarantee.
Frank Dobson
Let us turn to a bit of history. When the previous scheme was introduced, neither the Department of Health nor the Treasury made any calculation whatever of what it would cost the taxpayer. It was a decision flying blind—[Interruption.] I notice the Financial Secretary looking to the Box, but if those in the Box give him an honest answer, he will have to confirm that the Treasury made no calculation of the cost of introducing the scheme originally and neither did the Department of Health. When I had the scheme abolished, I found it very difficult to discover how much it had cost. It took the Treasury quite a bit of time, too, because it had not logged the effect of the scheme—which it introduced.
The proposition is that, if people have private health insurance, they will not place any demands on the national health service. First, however, they would get the tax concession most of the time, but, during the years—one would hope that there were many of them—when they did not need any health care at all from anybody, they would not be relieving demand on the national health service because they would not have any demand to supply.
Secondly, as my hon. Friend the Member for North Durham (Mr Jones) has already pointed out, large numbers of people—certainly if they have a difficult or complex operation—do not resort to their private health insurance, because private providers are not up to providing them with the quality of care that is needed, so they resort to the national health service.
I remember a proposal to build a private hospital on the Odeon site on Tottenham Court road, and the brochure that the projectors of this brilliant scheme provided had a paragraph that can be summarised as stating, “It doesn’t matter if anything goes wrong in our private hospital, because you’ll be next door to the world-famous University College hospital, so you’ll be transferred there and then you’ll be okay.” Almost all intensive care is provided in the national health service; private sector providers do not generally provide it, so when things go wrong people are shifted.
Mr Kevan Jones
Does my right hon. Friend agree that, if we wanted to move to the market-led initiative that some Government Back Benchers have put forward, we would find that private hospitals had to train all the nurses and doctors whom they currently get through state-subsidy and training in the NHS?
Frank Dobson
The private sector creams off the straightforward, relatively simple and less risky operations for people who are otherwise healthy, leaving the national health service to provide similar operations for people who are unhealthy, which can be much more complex. For instance, if someone needs their hip joint replaced, and they are okay apart from their bad hip, that is fairly straightforward, but, if they have a dickey heart or something wrong with a kidney, it is altogether more complex, and you can bet your boots that that operation will take place in an NHS hospital. Similarly, an NHS hospital will provide intensive care, accident and emergency care and emergency beds, and it will carry out the training that by and large the private sector does not.
All those burdens stay with the NHS, none of it transfers to the private sector, and we are being asked to provide a tax incentive for people to do something that they do already. There was no evidence in the 1990s of any increase in the use of private health insurance as a result of the Government’s tax benefit.
Charlie Elphicke
The right hon. Gentleman is being extraordinarily generous in taking interventions, and he has a long-held principled position on the national health service. On the private sector creaming off, as he would say, the easy cases, does he agree that, first, he would not have acceded to the independent sector treatment centres programme and, secondly, that it was wrong for the private sector in that case to charge for operations which were not carried out?
Frank Dobson
When I was Health Secretary, I agreed to the establishment of national health service units that undertook diagnostic and straightforward treatment on straightforward conditions. I thought that it was a sensible idea, but unfortunately my successors decided to privatise it, and it has to be said that then, John, now Lord, Hutton was not good at getting bargains for the taxpayer. He agreed a scheme whereby on average the private sector was paid 11% more per operation than the national health service, and the private providers were also paid when they did not do all the operations that they were contracted to do. Some got 11% more for operations that were not actually carried out, so I am no fan of such arrangements, but, having opposed them right from the start, I do not recall any cries of “Hosanna!” from the Tory party when I attacked the proposition. My memory may be false, but the Tories seemed to be wild enthusiasts for that ridiculous scheme.
Noticeably, however, unlike putting money into the private sector or, in the case before us, a bit more money into the hands of pensioners who have quite a bit to start off with, investing in the national health service had a dramatic effect. When we took office, national health service hospitals performed 5.7 million operations a year; in the most recent year for which figures are available, they performed 9.6 million. If we want to look after the interests of people who get sick, we will find that the way to do so is to ensure that everyone has access to a massive increase in the number and quality of operations, and there has been a massive increase in both.
Barry Gardiner
When considering the situation in 1990, does my right hon. Friend recall that part of the rationale for those people having private health care was that the queues in the health service were so long that it was effectively a way of getting the same care and the same consultant but doing so in the private sector much faster? Does he share my fear that the reason why the proposal is being made now is that Tory Back Benchers know that waiting lists are already going up and will go up still further, so they want to give their friends exactly the same opportunity?
Frank Dobson
Yes, my hon. Friend is quite right. Government Members are obviously anticipating the expected decline in national health service output, and that decline is the reason why the national health service is going to stop collecting figures on waiting lists and waiting times. One is always rather suspicious of any organisation that collects figures and then stops. One wonders why, and the idea that those figures might be embarrassing is a good explanation.
Andrew Gwynne (Denton and Reddish) (Lab)
My right hon. Friend is coming on to precisely the point that I want to make. This week, my local hospital, Tameside general hospital, announced 200 job losses among front-line staff, and its waiting times have shot through the roof. Is not this the real picture of what is happening in the national health service? If money is available, should we not be prioritising care in hospitals such as Tameside, not giving a tax hand-out to people for medical insurance?
Frank Dobson
I agree with my hon. Friend. I am sure that he will draw this proposition to the attention of the electors of Tameside, who are facing valuable staff being got rid of and reductions in the number of operations being carried out. I hope that he will also point out, as I did at the beginning of my short contribution, that apparently the first priority of a lot of Back-Bench Tories, who seem to represent the true core of Tory opinion, is to bung £200 million into the hands of the best-off pensioners, some of whom will not agree with it either.
Charlie Elphicke
I respectfully put it to the right hon. Gentleman that our priority is not to bung £200 million at people, as he describes it, but to see real increases in NHS spending as against the cuts that were in the last Budget of the Government whom he long supported.
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. I let the hon. Gentleman’s previous question go, but he is drifting way off the mark. This debate is about medical insurance.
Frank Dobson
Let me return to the point. The proposition before us is to divert £200 million of taxpayers’ money to a group of pensioners—not to the national health service, or even to the private health care sector, but to those particular pensioners. I cannot believe that many people in this country, at this moment, believe that that is the first priority of anyone sensible—it is certainly not my priority—but that is what we are being asked to say by those who want us to vote for this new clause.
I can remember the claims that were made when the old scheme was introduced. Despite that, nobody was able to adduce any evidence that it added to the number of pensioners who took out health insurance or stayed as pensioners who had health insurance. When it was abolished, the predictions from the national association of scaremongers, led by Bupa and others, created the impression that the whole system would collapse, that hardly anybody would keep using private health insurance, and that legions of the formerly insured would be pouring into every hospital, clinic and doctor’s surgery. That did not happen. The main function of the scheme was to put a few bob in the pockets and handbags of the better-off pensioners, and that is what it did. It had virtually no impact whatever on health care either in the national health service or in the private sector, and I suspect that the situation would be similar today.
If we have £200 million to spare—apparently we do—and we want to put it into health care, I would be very happy to see some of it go into my local hospitals so that they were not laying off nurses and doctors and other staff in the next couple of years while having to put up with the ridiculous marketising shambles that the Health Secretary has wished on the country. In case it has not been clear, I am opposed to this proposition and, given the opportunity, will vote against it.
Mr Bone
It is a great pleasure to follow the right hon. Member for Holborn and St Pancras (Frank Dobson), who has been very consistent in his views over the years and, I think, represents the real views of the Opposition.
I congratulate my hon. Friend the Member for Mole Valley (Sir Paul Beresford) on proposing—
Frank Dobson
The hon. Gentleman is trying to justify this on the grounds that people should be rewarded if they place a lesser demand on the national health service. Is he suggesting tax cuts for people who stay slim, do not drink too much or do not smoke, because that would have a much bigger impact on demand on the national health service?
Mr Bone
Some of those things were tried in the past by the previous Administration—incentives for people to stop smoking, for instance. That is not what I am talking about, and I think you might well say, Mr Deputy Speaker, that I was out of order if I started to drift on to those subjects. One of the great things about today’s debate, of course, is that we have all night to scrutinise the Bill. One of the benefits of having no programming is that nobody can stop our discussions, and so far there has not been any filibustering.
Mr Redwood
That is exactly what successive Ministers and Secretaries of State for Health in the Labour Government concluded, with the honourable exception of the right hon. Member for Holborn and St Pancras (Frank Dobson). After him came the modernising Secretaries of State and Ministers who felt that they had to turn to the private sector to achieve better standards—in terms of offering people treatment in a timely way—and to expand the total capacity of the system.
Frank Dobson
My successors, to whom the right hon. Gentleman refers, sometimes make rather wild claims about the number of cataract operations that are carried out by the private sector. When Labour came to power, the NHS did 167,000 cataract operations a year, and in the last year for which figures are available it did 346,000. The private sector made the massive contribution of 16,000 in its best year.
Mr Redwood
The right hon. Gentleman may well be right. It is quite obvious that the NHS is the dominant health provider in our country—it has been for the many years since its foundation, and it will continue to be so under any schemes proposed by any governing party or parties in this House of Commons.
I wanted to concentrate on the cost and benefit of the proposals. I am an agnostic on this issue, which may come as a surprise to the House, because I am far from being a deficit denier, and I believe that we must weigh carefully any proposal for tax relief against other such proposals. In this case, I would be interested to know more about what the savings would be. There could be significant savings. If Ministers do not adopt the proposed scheme, they need to introduce others to promote more private health care of the right kind, because we will need a lot more of that to meet our targets and requirements, alongside the very large, and rightly favoured and supported, NHS.
Perhaps my hon. Friends the Members for Mole Valley (Sir Paul Beresford), for Christchurch (Mr Chope) and for North East Hertfordshire (Oliver Heald), who have spoken so strongly for the new clauses, wish to move closer to the Liberal Democrat coalition partners. Perhaps they had ringing in their minds the words of the right hon. Member for Yeovil (Mr Laws), who set out a comprehensive universal insurance scheme for health in the Orange Book. We will have to disappoint him today, because the proposal is modest, and it will not cover nearly as many people as he would like. Were he here, we could debate that with him, and perhaps he would see that caution and moderation is the hallmark of Conservative approaches to such things. This proposal might be the way to get started on the journey that he wished to make.
Michael Connarty
I hear my right hon. Friend say that 40 million people in the United States of America exist without adequate health care insurance or provision. A friend of mine tried to set up a dental care service in New England based on Medicare, and found that the money was not available. Many people in New England are denied any form of dental care when they end up in private nursing homes in their old age. Something is seriously wrong with that. I commend President Obama’s attempts to at least moderate that.
Let me return to the debate. People should not be deluded into thinking that the proposal will encourage more resources into the health service. It will encourage more companies to demand the services of the limited number of available surgeons to carry out operations for their private patients, instead of allowing the surgeons to do the job they should be doing. I would commend a scheme of private health care payments that provided the NHS with new equipment, doctors and other staff on top of those already trained in this country to work in the NHS.
Those who say that this proposal could do that should look at what happened with a hospital built for the private sector on the west coast of Scotland. The idea was to build a huge hospital with private money and to have people come from around the world to use it, but eventually it had to be sold to the Scottish Government when Jack McConnell was First Minister. We bought the hospital at a knock-down price because, in reality, the private sector could not generate new and fresh talent and equipment. That is not going to happen. It will just suck out resources needed by my constituents, who believe that the NHS should be paid for through taxes.
Mr Hoban
I want to make some progress. I appreciate that my hon. Friend the Member for Wellingborough (Mr Bone) has said that the debate may go on until any hour, but I do not want to be the cause of delaying the House’s tackling subsequent new clauses.
The vast majority of the cost of providing the proposed tax relief would go to those who already have private medical insurance, and there is therefore no obvious need for a new incentive. The case for introducing tax relief rests on the proposition that it would encourage significant new take-up of private medical insurance and ultimately be self-financing. However, at this stage we do not have any strong evidence to show how much additional take-up of private medical insurance a tax relief would generate, or how much pressure on NHS resources would be relieved as a result.
Indeed, when a similar relief existed between 1990 and 1997, it had little apparent effect. It is estimated that take-up of medical insurance increased only from 500,000 to 550,000 individuals over that period. The hon. Member for Bristol East (Kerry McCarthy) said that that increase was a demonstration of people’s lack of confidence in the NHS under the previous Conservative Government, but she ought to be aware that the take-up of private medical insurance under the Labour Government of whom she was a member went up from 550,000 to 1.7 million, so I do not think that her argument is particularly strong.
Frank Dobson
I congratulate the Minister on at least producing an estimate of the cost of the proposed measure. When the original scheme was first introduced, neither the Treasury nor the Department of Health made any estimate whatever; they were flying blind.
Mr Hoban
I thank the right hon. Gentleman; there are times when I am happy to accept congratulations from the other side of the House. We want to ensure, especially given the constraints that we are working under in these times of fiscal austerity, that measures can be well justified.
An Institute for Fiscal Studies report published in 2001 questioned how far the take-up of private medical insurance would ever respond to tax relief. It also suggested that the dead-weight cost would make it unlikely that tax relief could be self-financing.
Equitable Life (Payments) Bill
Frank Dobson Excerpts(14 years, 3 months ago)
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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.
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.
Frank Dobson (Holborn and St Pancras) (Lab)
I shall speak very briefly in support of all three amendments in this group—those tabled by my hon. Friends the Members for Leeds North East (Mr Hamilton) and for Nottingham East (Chris Leslie), and even the one that I have tabled.
As drafted, the Bill leaves practically everything to the discretion of the Treasury, which I find objectionable. I remind the Committee of what Winston Churchill said about people at the Treasury—that they were
“like inverted Micawbers, waiting for something to turn down”.
The chance of their coming to any generous conclusion for people who suffered in the Equitable Life scandal is very small. The courts have held that bodies given discretion are not allowed to fetter their own discretion. It is therefore necessary for the House to fetter the discretion of the Treasury.
I strongly support the view that we should not allow a situation in which the most elderly people will be excluded from compensation. In view of the fact that everyone places so much weight on the ombudsman’s contribution, I strongly support the amendment tabled by my hon. Friend the Member for Nottingham East, which suggests that we should give her a further look at what is being proposed. It will be preposterous if, in trying to do what the ombudsman wants, we end up doing something that she thinks is unsatisfactory and inadequate. The reasoning behind the amendment in my name is the same.
I do not wish to say any more, but the House should do its proper job of telling the Treasury what the rules should be when it considers the matter. I am not getting at Ministers; I am getting at the Treasury as an organisation. It does not have a good record, and ethics and decency are not major considerations for it. They never have been, and perhaps they should not be its major considerations, but we should bear them in mind, so that we can bear down upon the Treasury.
Nadhim Zahawi (Stratford-on-Avon) (Con)
The hon. Member for Leeds North East (Mr Hamilton) made an impassioned and moral argument for amendment 1, to which I shall return later.
I have taken a very keen interest in this issue. It has affected a significant number of people in Stratford-on-Avon, to the extent that I have had hundreds of letters and e-mails about it. Like many other Members, I signed the EMAG pledge before the election, and I believe that backing the Government to get the Bill through is delivering on that pledge.
It is probably worth our spending just a few moments thinking about the economic landscape in which we are operating. We are borrowing about £500 million a day. Every time we go to sleep and wake up in the morning, we notch up another £500 million. To service the debt costs about £120 million a day—that is not to pay it down, but just to stand still. It is against that background that we must try to resolve the tragedy of Equitable Life.
Let me spend a couple of minutes on the timelines of the events. In 1988, Equitable Life stopped selling its guaranteed annuity rate policies and, in 1990, those policies became too expensive to honour because of the falls in interest rates and in inflation. In 1999, after the 1997 election, Equitable cut its bonus paid to 90,000 GAR policyholders. In July 2000, the House of Lords ruled that Equitable Life must meet its obligations to its GAR policyholders, thus leaving it with a £1.5 billion liability.
In February 2001, the Halifax agreed to pay £1 billion for the assets. In July, with-profits policyholders saw the value of their savings slashed by 16%—by almost one fifth. In August, Lord Penrose announced his investigation. In October, the then Economic Secretary to the Treasury told the Treasury Committee that the previous Labour Government might consider compensation for some victims if a grave injustice had occurred.
In January 2002, policyholders backed a compromise package. In March 2004, the Penrose report blamed Equitable Life’s management for the whole affair. Following the report’s publication, the Government ruled out compensation and were accused in this House of abandoning policyholders. In April, the parliamentary ombudsman announced that she would reopen her investigation.
In 2007, the European Parliament called on the UK Government to compensate policyholders. In January 2008, Equitable agreed to pay an undisclosed sum to 407 with-profits annuitants who launched proceedings in 2004. The ombudsman’s report was published in 2008. The previous Government said that they would respond by the autumn. When the deadline was missed, the then Prime Minister said that they would respond before Christmas. However, they did not respond until the new year.
In August 2009, Sir John Chadwick published his first interim report, and in March 2010—more than a year after his appointment—he published his third and final interim report with a promise of a final report in May 2010. That date was subsequently extended to July.
I go through these events in chronological order to demonstrate the pain that the victims of Equitable Life have had to go through. This is a true human tragedy. The hon. Member for Leeds North East talked about the e-mails and letters that he has received from his constituents, and the same is happening in all our constituencies.
The Government’s offer is a very good one. My hon. Friend the Member for Cardiff North (Jonathan Evans) said that, at best, he expected them to offer up to £1 billion. Many colleagues and I voiced our concerns the last time we debated this matter in the Chamber. When one makes a pledge, one must try to honour it.
Equitable Life (Payments) Bill
Frank Dobson Excerpts(14 years, 5 months ago)
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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.
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.
Economic Affairs and Work and Pensions
Frank Dobson Excerpts(14 years, 8 months ago)
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Frank Dobson (Holborn and St Pancras) (Lab)
At the recent general election, the Tories gleefully asserted that under the Labour Government, inequality had increased. That was true, and it was a major embarrassment to Labour candidates and supporters, but in fact, the gap widened despite the Government’s introduction of the national minimum wage and tax credits, and their targeting of health, education and pre-school resources on the most deprived areas and families. The gap widened not because the Labour Government ignored the plight of the worst-off, but because the best-off kept paying themselves more and more.
The Prime Minister has said that his Government’s proposals will change our way of life, but they are very unlikely to reduce inequality. His Tory-Lib Dem Government are positively drooling at the prospect of slashing public services, when we all know that the living standards of the poorest in society are, as they always will be, the most dependent on public funds and public services. Cutting pay and pensions and slashing public services will not narrow the inequality gap, but widen it.
As we all know, increasing the share of national wealth going to the worst-off is not of itself sufficient to narrow the inequality gap. We must at the same time reduce the share going to the wealthy. The principal target for such a reduction must be the bloated finance sector, which has been taking an ever greater share of the nation’s wealth while devoting a great deal of talented effort on tax avoidance to benefit the people who work in it. Indeed, in the recent banking crisis, far from being a wealth creator, the financial sector proved to be a wealth destroyer. Its record was deplorable. Today, KPMG has given us the benefit of its wisdom on how to improve efficiency in the public sector. I do not know why we give any credence to KPMG, however; after all, it was the auditor of HBOS and Bradford & Bingley and it did not spot that anything was going wrong when those outfits were going bust, even though that was its primary task.
Banks are supposed to act as a conduit between savers and borrowers, providing capital for individuals and firms who want to produce useful goods and services for the rest of us. Over the years, that function has increasingly taken a back seat to speculation that is referred to, in deferential terms, as “the market”. These markets, both national and international, often have nothing to do with supply and demand, however. Fluctuations in the price of oil are a good example. In July 2008, the price of Brent crude reached $146 a barrel; by December that year, just five months later, the price had fallen to $36 a barrel, almost exactly a quarter of its top price. That was not the product of changes in supply and demand; it was the product of speculation.
The price of rice shot up from about $280 a tonne to $1,015 a tonne in April 2008. Apologists for “the market” denied that that was the product of speculation. They said it was because the Chinese were eating more rice. If so, the Chinese must have started eating something else since then, because the price of rice has halved to $500 a tonne today. Such speculation always hurts the worst-off and lines the pockets of the people who are already rich. The G20 should be taking concerted action to tackle such speculation, because while it does not do so everybody else in the world will be vulnerable.
Of course, the main sources of wealth for the finance industry are the costs it imposes on the rest of us for its services—its handling charges and transaction costs, or what would be referred to in any decent above-board casino as the “croupier’s rake-off”. All large financial transactions involve a host of advisers, consultants, lawyers, fund managers and the like, all pocketing a percentage. Let us consider the recent abortive effort by the Prudential to buy part of AIG at an original estimated value of £25 billion. If the scheme had gone through, the transaction costs had been expected to total about £1 billion, or about 4% of the value. Although the proposal has fallen through, it has still cost the Pru approaching £500 million, including a lot of fees for expensive City advice—presumably bad advice.
The current proposal to sell off the channel tunnel rail link and St Pancras station illustrates how the finance industry failed in its self-proclaimed task of providing private capital yet is now creaming off some of the value. No City institutions were prepared to invest in the channel tunnel link, so the taxpayer had to step in and take the risk. Now that it is operating successfully however, the private sector is sniffing a profit, and it is to be sold off. Citigroup and UBS are involved. They did not design the link, transform St Pancras or manage the building project, and they certainly did not take any of the risk, but they are now advising on the sale and will pocket substantial fees for that advice. One can only hope, on behalf of taxpayers whose assets are being sold off, that those two firms will do a better job than they did in the banking crash, when Citigroup lost $55 billion and UBS lost $44 billion. We need to ensure that the drain of finance and of talented graduates into the City is stopped, so that the money can be devoted, and those people can devote their lives, to doing something a lot more useful and promoting British industry. That is what we all want to see.