Equitable Life Policyholders: Compensation

Jeremy Lefroy Excerpts

Thursday 23rd March 2017 Commons Chamber

[Jeremy Lefroy (Stafford) (Con)]

I am grateful to my hon. Friend for all the work that he has done, over many years. He deserves huge credit for that. Does he agree that when we are quite rightly seeking to show that the United Kingdom is the world financial centre, we need to show that we have the best possible regulation and that we are prepared to stand behind people who have been let down by regulation in such cases?

[Bob Blackman]

I thank my hon. Friend, and I trust that he will make a further contribution to the debate later. The position is as he has set out. We should ensure that the City of London remains the financial centre of the world, and we must show that we can be trusted to look after people’s investments.

--- Later in debate ---

[Jeremy Lefroy (Stafford) (Con)]

I will be brief because we have heard so much wisdom and common sense from all hon. Members who have spoken. I wish to make three points, the first of which is about equity. People have spoken about the proposal being the right and moral thing to do. My hon. Friend the Member for Harrow East (Bob Blackman) said that it is the equitable thing to do—indeed it is. We are about to enter negotiations with the European Union about our future responsibilities towards EU pensioners. As a Government, we will take the right and responsible attitude and fulfil our commitments, as the Prime Minister has said. If that is the case, the principle should also apply to our Equitable Life pensioners.

I have heard from many constituents about the problems that have arisen because promises and commitments made to them were not fulfilled, principally because of a massive failure of the organisation, but also of the regulators. Let us not forget that when we invest in organisations such as Equitable Life, we place our reliance on the regulators. As ordinary investors, we do not have the knowledge or experience to know whether the promises being made and, in small print, underwritten by the regulator can be carried out. We expect them to be carried out.

If my memory serves me correctly, the situation at Equitable Life occurred after the Bank of Credit and Commerce International debacle in the 1980s when, for instance, the highlands and islands lost something like £20 million. Many others lost money. I remember clearly from the time the phrase, “If it looks too good to be true, it is too good to be true.” One would have thought that, if I and others took that message on board, the regulators would have done so. It is absolutely equitable for us to do whatever we can and more than has been done for the Equitable Life investors.

I pay tribute to the coalition Government for the action they took in difficult times to set aside £1.5 billion partially to right this wrong. We should not forget that, but I want the Government to build on that as the economy improves.

The second issue, as other hon. Members have said, is confidence in financial services. The UK is a world centre for financial services, whether they are in London, Edinburgh, Leeds or Birmingham. As my hon. Friend the Member for Bromley and Chislehurst (Robert Neill) said, many of our constituents—not just in London and the south-east, but right across the United Kingdom—depend on financial services for their living. Behind all financial services lies one simple word: “trust”. If a country or an organisation cannot be trusted, it will fail. Fortunately, the United Kingdom has a long and excellent reputation for the trustworthiness of its financial services sector. It is therefore all the more important for any blemishes to be set right quickly and properly.

My third point is about long-term security. People rightly want to even out their wealth over the course of their life, which is why they invest in pensions. They forgo spending now so that they will have money to spend later on, when they do not have an income from employment. That is a very worthy thing to do. We should support that. We do support that through the tax system and we also support it through regulation, which is why it is vital in cases such as this. As hon. Members have said, it would be one thing if this was a matter of an investment fund or a hedge fund for people with millions to invest, who know what they are getting into and the risks involved, but this is another situation entirely. As we have heard, this concerns people who were expecting pensions of, on average, about £300 a month. That is not at all the kind of money that allows someone to go on lots of cruises around the world, but it is money to top up the basic state pension, as every Government have wanted people to do for almost the past 100 years.

I believe that the country needs to do something similar. I have long advocated our country investing in a sovereign wealth fund, whereby we put aside money every year and do not just rely on a pay-as-you-go attitude—if you like, a Government-operated Ponzi scheme—for the national health service and state pensions. We need to consider operating our public finances in the same way that we expect pension funds to run their operations, whereby future liabilities are met with future assets. That would in turn allow us, when we get hiccups such as this, to compensate for them in full.

[Several hon. Members rose—]