Equitable Life

Gordon Marsden Excerpts

Thursday 31st January 2019 Commons Chamber

[Gordon Marsden (Blackpool South) (Lab)]

I join in congratulating the hon. Member for Harrow East (Bob Blackman) and his co-chair, my hon. Friend the Member for Leeds North East (Fabian Hamilton), who spoke earlier, on bringing this debate to the House today. I commend them for their longevity in this process, because this has been the “Bleak House” of the bleak house of scandals. I cannot remember how many people from the beginning of Charles Dickens’s novel were still alive at the end, but this makes the point sharply.

I, too, think about all those people who have lost money in this process, with more than 2,000 of them in my constituency. My hon. Friend the Member for Stretford and Urmston (Kate Green) said that she had had a modest plan with Equitable Life, and so did I, probably along with lots of people in this House. But it is the people we have heard about this afternoon—those who thought this was a safety net, not a passport to riches or even comfortableness, in some cases—who have missed out and been let down. We have heard of the sorts of people that group included. I am not going to go through the whole list, but I do wish to pick up on the reference to small business owners and the self-employed, because this is a specific and important issue for my constituents.

In my constituency, we still have more than 400 guest- houses, bed and breakfasts, holiday flats, people in the visitor economy and hoteliers. We are talking about precisely the sort of people who would want to put money into a company like Equitable Life when times gave them a little extra money. Why shouldn’t they? After all, one could look at the nice little crest on the front and everything else. This was a company founded, I believe, in 1759. I am told by the briefing from EMAG—I did not know this before today—that even Coleridge and Wordsworth were early investors in it. For someone looking for something that might do what it said on the tin, this was the sort of company to go for, but, sadly, as we have heard, that was not the case, so many of these people have missed out—the people who did that sort of thing.

Over the years, I have had dozens of people come to my surgeries who wanted to retire from their hotel or small business background but simply did not have the money to do so. Inevitably, that was not to do with Equitable Life for all of them. One of these people has written to me saying:

“I came to Blackpool 17 years ago with my wife and granddaughter to open and run a new Care home for mental health rehabilitation…For health reasons (and I was well past retirement age) we had to close the business…I really would appreciate any input you could bring to the debate”

with my example.

He continues:

“It would change our lives from having no spare money whatsoever every month. I suffered a seizure 7 weeks ago and am no longer allowed to drive. My wife is suffering from acute nerve pain…and is on morphine.”

Another constituent wrote to me saying:

“In my own case, my losses…were £28,942.

I received a payment of £6,483.

This means that the money I am still owed amounts to £22,459….The token 22.4% payment is a good start but does not solve the drastic depletion of my retirement funds....A debt is a debt and if the government sidesteps every obligation by claiming unaffordability there would never be any public expenditure. The government regularly chooses where and when to shake the magic money tree.”

I absolutely concur with my constituent’s indignation in that area.

I also want to pay tribute to the local co-ordinators, who have worked hard to identify those involved and keep their spirits up. The Blackpool South EMAG co-ordinator, Mr William Fray, has written to me to ask me to press these points today.

[Matt Rodda (Reading East) (Lab)]

Will my hon. Friend give way?

[Gordon Marsden]

I will but briefly, because we do not have a lot of time.

[Matt Rodda]

I fully concur with the points my hon. Friend and Conservative Members have made about the importance and dreadful nature of this scandal, and about the hard work that has been done by many local people. We have a group in my constituency, and its co-ordinator wrote me a moving and poignant letter about the problems that local people have has as a result of the Equitable Life scandal: some 2,000 people in my constituency have suffered. Once again, I concur with what he is saying and thank him for making this valuable point.

--- Later in debate ---

[Gordon Marsden]

My hon. Friend makes a point of which everybody in the House will be cognisant. It is important to recognise the people who, totally off their own bat, giving their time and, in some cases, at their own expense, have taken this process forward.

I am not going to repeat the sorry history of the comings and goings and everything else. It is true that the coalition Government did accept the ombudsman’s report, but neither they, nor their successors, including the current Government, have complied properly or fully with the ombudsman’s judgment. I have been in this place for a long time, under Governments of all persuasions, and one develops a certain amount of cynicism as to when the shredder comes out. It is really important that the Minister guarantees today, in plain English, that the Government and their relevant agencies will retain the necessary data indefinitely. I would not like people to come back to the House in three or four years’ time only to be told, “I’m terribly sorry, we thought we had the data but somehow it got shredded.”

The Government have sold their interest in Lloyds and are reducing their stake in RBS, as we have heard. It would be fitting to use a small portion of the money recouped finally to settle the acknowledged debt to Equitable Life victims. From what we have heard today, it is absolutely clear to me that we need to deal with the people in an annuity situation. It is important that the Treasury does not leave money in its back pocket. It has great form in this area: I know from my Front-Bench role about the advanced learning loan money, only half of which has been spent by the Department for Education, with the other half now sitting in the Treasury’s back pocket, to use the expression we heard earlier. One wonders what “affordability” means, and whether it is simply a case of the Government waiting for many of the people affected to become too enfeebled or no longer able to press their views. This issue is not only terrible morally, but foolish practically, because of the negative vibes it sends out.

Let me give the House an anecdote from many years ago, when I worked as a public affairs consultant for a number of clients. As part of the process, we very often employed self-employed people—perhaps journalists doing a public awareness campaign—or small businesses. I was relatively young at the time, so it took quite a bit of pluck to go and talk to our director of finance, but I had a distinguished medical journalist who had not been paid for ages for doing these public things for my clients. I went along and explained the situation, and I was told, “Well, we pay large businesses within around 30 to 40 days, we pay smaller suppliers within 60 to 90 days, and we pay self-employed people when we feel like it.” I am not casting aspersions on any particular Minister, but for many of the people affected by this, it must feel like that is the case now.

I concur absolutely with the three demands made by the hon. Member for Harrow East at the beginning. Pensioner poverty is a key issue for so many of my constituents in Blackpool South, for a whole range of reasons, and for those in many other parts of the country, too. If we make progress in this area, those people will at least receive some of that safety net comfort that they should have had a long time ago.

--- Later in debate ---

[The Economic Secretary to the Treasury (John Glen)]

It is a privilege to respond to the debate. First, I congratulate my hon. Friend the Member for Harrow East (Bob Blackman) and the hon. Member for Leeds North East (Fabian Hamilton) on their tireless work on this issue, which has helped the Government to achieve so much. I attended a meeting of the all-party parliamentary group for justice for Equitable Life policyholders last September, and the respect of colleagues on both sides of the House for those Members’ work was clear.

This well-documented topic has been explored once again in detail today, with 10 eloquent and measured speeches by Members on both sides of the House. I need to declare an interest. My father worked in a glasshouse nursery all his life and paid in modest sums each month to Equitable Life. He received the compensation of 22.4% to a bond that he was paying into. Sadly, he died of mesothelioma aged 69, just two years ago. I know that it was a matter of grave concern for him, and he took the money and invested it somewhere else. I am very familiar with the long history of this case.

I want to take this opportunity to remind Members that, on this issue, this Government have taken more action than any previous one. Using the ombudsman’s findings, we determined the reduced returns that policyholders received to be £4.1 billion. That is significantly more than the £340 million arrived at by the previous Labour Government in the Chadwick review, which was then dismissed. That increase is because we generously assumed that every new investor consulted the incorrect regulatory returns and, on the sole basis of those returns, made an investment.

In 2010, we announced that up to £1.5 billion would be made available for payments. Those payments were tax-free, which increased their value even more. Out of that £1.5 billion, following representations from groups such as the Equitable Members Action Group, we decided to pay the group of with-profits annuitants in full. The total cost of those annual payments was estimated to be around £625 million. As several Members have mentioned, there is an additional £100 million contingency fund in place to provide for annuitants should they live longer than their actuarial forecast, and we expect the contingency to be drawn on from the middle of the next decade. The remaining funding was distributed pro rata to remaining eligible policyholders. The scheme operated successfully for around five years, and in 2016 the operation was wound down.

There has, reasonably, been a degree of repetition in the asks made today, and three key points were raised. I have listened closely to those representations, and I would like to deal with some of them in turn. First, I have received suggestions that all policyholder records should be retained indefinitely, in case further payments are made. There has been correspondence between the Treasury and the APPG on that matter, and I can assure Members that relevant records are currently retained and will continue to be as long as it is legal. I can reassure the House that there are no plans to destroy any records.

Secondly, I am aware that some are dissatisfied with the £1.5 billion and suggest that it is incompatible with the ombudsman’s report. However, Members will be aware that the ombudsman wrote to the APPG on that issue and said that the Government’s decisions could not be said to be incompatible with her report. That spending decision was taken in the wider context of other spending priorities. I recognise that there is a whole range of opinions about spending priorities. That is what we do—we make relative decisions. This decision needed to be fair to the taxpayer, who funded these payments, and £1.5 billion was, on balance, judged to be the most appropriate figure.

I want to be clear: when this settlement was made, it was not subject to future review by the Government. I note the inference by the APPG and Members from the statement at the time, but no specific commitment was made to return to that calculation. No obligation linked it to the future state of public finances. There have been representations that this issue should be reopened and that a further £2.6 billion should be paid to policyholders. The Government’s position on this is clear, and I have set it out in my letters to the APPG and my meeting with it last year. Being in government is about making difficult decisions. Our decision was to spend £1.5 billion, reversing and multiplying by four the previous Government’s dismissal of a commitment to £340 million. These difficult decisions are about how to be fair to both hard-working taxpayers and those in receipt of public spending and services, and where the need to spend public money is greatest.

I acknowledge the point made by my right hon. Friend the Member for New Forest West (Sir Desmond Swayne) concerning the imperative to provide for the next generation and, as several Members said, to restore trust in pensions and pension savings. There is cross-party consensus on that, and both parties have worked hard to achieve a lot in terms of auto-enrolment. There is more work to be done in that space. None the less, the House will recognise that the opportunity cost to the Exchequer of paying a further £2.6 billion is funding the salaries of 67,000 teachers, or 112,000 new nurses.

[Gordon Marsden]

I am listening with some concern, as I am sure other Members are, to what appears to be an edging further and further away from the commitments that we have all asked for this afternoon. The Minister talks about priorities. We could spend three hours in this Chamber talking about the priorities that this Government have given to tax cuts and other things. He needs to choose his words carefully in responding to what has been said.

[John Glen]

I will choose my words carefully, but it is undeniable that after 13 years in government, the previous Labour Government—

[Gordon Marsden]

Stop playing party politics.

[John Glen]

It is not about party politics; it is about saying that when we came into government, in the absence of a resolution to this matter, we increased the figure from £340 million, which the last Labour Government were proposing, to more than £1.5 billion. In the light of those facts, it is a bit unreasonable to criticise what I am saying. While I appreciate and empathise with the fact that some policyholders who have invested their funds have not received the funds that they hoped for, like my late father, and that this impacted on their plans and futures, we have taken the best action that we could have to resolve the Government’s part in these reduced returns. We have done more than any previous Government.

I draw colleagues’ attention to Equitable Life’s own research from 2011, which suggested that their policyholders wanted the Government compensation to draw a line under this issue. I agree with them. The Government’s view is that this issue is now closed, and as a Minister I have never been in the business of offering false hope.