Equitable Life

George Kerevan Excerpts

Thursday 11th February 2016 Commons Chamber

[Peter Heaton-Jones]

I entirely agree. The Government have done a great deal to support savers and to support and encourage those who invest for the future, and have done a great deal for pensioners as well. That is undeniable. I hope that, as part of the package, there will be some movement on the issue, and that it will be kept under careful consideration.

The letter that the Treasury Minister wrote to me in response to the letter that I wrote on behalf of the EMAG representatives in my constituency contains the welcome information that she is open to submissions in relation to the Budget. She also points out that the Parliamentary Ombudsman’s report was published in 2008, and that—as we heard from the hon. Member for Angus (Mike Weir)—it is only since the Conservative-led coalition Government came to office in 2010 that any compensation has been paid. It is important to remember that this Government started the ball rolling.

[George Kerevan (East Lothian) (SNP)]

I appreciate everything that the hon. Gentleman is saying, but there is clearly a difference between banks that have been mis-selling having to pay up for their misdeeds, and the Treasury, regardless of party—and the state, regardless of who are the Government of the day—paying for a regulatory failure. It is not a question of charity from a Government to the individuals who have suffered under Equitable Life. People suffer as a result of a regulatory failure, and therefore it is the Treasury’s duty to pay full compensation, just as it is the banks’ duty to pay full compensation to those who have suffered as a result of mis-selling.

[Peter Heaton-Jones]

I take the hon. Gentleman’s point, but let me return to a point that I made earlier. He refers to the Treasury paying compensation. The Treasury has no money; it is all taxpayers’ money. We need to strike a careful balance. There must be fairness, not only to Equitable Life policyholders but to taxpayers in general, because it is they who will ultimately have to foot the bill for any compensation.

--- Later in debate ---

[Huw Merriman (Bexhill and Battle) (Con)]

I thank my hon. Friend the Member for Harrow East (Bob Blackman) for initiating the debate, and I have been asked by my constituents to thank him for everything that he has done on their behalf over the years.

In 2010, when standing for election in North East Derbyshire, I engaged with many Equitable Life policyholders. They were your constituents, Madam Deputy Speaker, and they were full of praise for the work that you had done on their behalf. I added that to a lengthy list of reasons why you were returned and I was not. Having served my apprenticeship, I put some of those best practices to good effect when I was selected for the constituency of Bexhill and Battle, and was subsequently elected.

All the constituents with whom I have interacted have put their positions with clarity and with understanding of the economic challenges that the Government face in balancing the books. Given that those people had planned to save so sensibly for their own retirement, it is clear that prudence and budget-planning were second nature to them. I pay tribute to my hon. Friend the Economic Secretary to the Treasury, who has responded to my numerous items of correspondence on this subject both in person and in writing. Her explanations, and the time that she has given to explaining, have helped me to communicate with my impacted constituents, and for that I am very grateful.

As I interpret a recent letter from the Treasury, prompted by one of my constituents, I understand that the Government have closed the scheme to new compensation claims, and will reallocate unclaimed moneys remaining in the pool to policyholders who are receiving pension credit. I had understood the words

“I am sorry to say that no changes to the funds allocated to the Scheme are planned”

to mean that no new moneys would be added to the pool, and that the £1.5 billion paid out would be the final payment, in the light of the Parliamentary Ombudsman’s direction that the Government should have regard to the impact on public finances. However, one of my more eagle-eyed constituent policyholders has read those words to mean that, while the manner in which the funds within the pool are to be allocated is fixed, that does not expressly rule out the possibility that new funds could be added to the pool, and go towards the £2.6 billion shortfall, during the current term.

I should be grateful if the Minister made it clear whether any further funds for the pool are expressly ruled out for this term, so that I can pass on that clarification to my constituents. It may sound perverse, but many of them would accept that position, because they have reached a stage at which they would like to have absolute finality, and to know whether it makes sense for them to continue funding the fight.

I also want to say something about the stated position for with-profits policyholders. The letter that I received from the Treasury states that they were compensated in full. I understand that the proxy value of the pensions of pre-1995 with-profits policyholders was calculated by virtue of a benchmark from the Prudential, which was considered to be a similar proxy for their own policies. However, I understand that in the case of post-1995 with-profits policyholders, the proxy value was calculated by the benchmarking of not only Prudential, but Scottish Widows. The appropriateness of the latter as a benchmark was disputed by some of my constituents on the grounds that it was a poorly performing policy. Those policyholders dispute the claim that they have received full value, and have drawn distinctions between their own policy and that of the Prudential, and the policy of Scottish Widows. I should like the Minister to tell me whether my understanding is correct. Perhaps he will also comment on why the Scottish Widows policy was seen as a fair benchmark for this exercise, if my contention is indeed along the right lines.

I should add that I empathise hugely with all the policyholders who have been impacted by the losses to their policies. However, I am also conscious that this matter was determined before my election, and that I was elected on a manifesto which promised to deliver a budget surplus. Adding a further £2.6 billion would mean that other constituents of mine would have to provide for it. I have explained that difficult concept in person to my impacted constituents, because I believe in being direct when a resolution is unlikely to be arrived at, and I am indebted to them for the manner in which they have responded to my direct approach.

[George Kerevan]

Is the hon. Gentleman saying that he prefers delivering a budget surplus to delivering justice?

[Huw Merriman]

I was elected on the basis that there would indeed be a budget surplus. I think that it would be wrong of me to stand up and try to proclaim—this was mentioned earlier—that £2.6 billion could be found down the back of the sofa. If only it were that easy. I also believe in being direct and straight with my constituents, and I hope that the hon. Gentleman thinks that I am doing so now.

I support the Government in their approach to this difficult issue. Let me end by asking the Minister, on behalf of my constituents, whether the funding of the scheme is indeed final for this term, and whether the use of the Scottish Widows policy benchmark was justifiable.