Equitable Life

Julian Lewis Excerpts

Thursday 21st January 2021 Commons Chamber

[Dr Julian Lewis (New Forest East) (Con)]

An 84-year-old widow in my constituency writes as follows:

“In the year 2000 our pension was £11,120, it is now £3,187. When my husband died in 2015 it was reduced by one third, so this accounts for some of the loss. It continues to go down annually. With inflation, of course, my loss is even greater than this. The state pension increases because of inflation, yet the Government give no consideration to EL annuitants who invested savings to ensure a decent standard of living in retirement.

When we heard that EL were having problems we were not that worried as we assumed the Government would step in. Why was not the same concern given to EL victims as to those now suffering financially because of the covid pandemic? The effect on us is just as great, and probably more long term. It is twenty years since this debacle began.

My life is very different to that we planned when we put our savings with EL: no holidays, no treats.”

This is the sort of issue that gets politics and politicians a bad name, although 280 Members of this House have been trying through the good auspices of the all-party group on Equitable Life policyholders to put matters right.

In his able introduction to the motion, my hon. Friend the Member for Harrow East (Bob Blackman) referred to the miscalculation for one pensioner who, it was said, was due £17 when the actual figure was over £8,500. He could also have referred to another mis-calculation discovered by the Equitable Members Action Group: £58 was awarded, instead of over £7,000.

When mistakes are being made on this scale and of this magnitude, it stands to reason that the Treasury should not be sheltering behind any sort of argument or excuse as to how these sums are calculated. The methodology should be out there, and it should be capable of objective independent verification; it should not be necessary for appeals of this sort to go forward. [Interruption.]

My hon. Friend the Minister, chuntering from a sedentary position, anticipates that I was about to come to him next, and despite his obvious dissatisfaction with the point I have just made, I would like to say that he is a very sincere and fair-minded fellow, but he is the latest in a long line of Ministers who have had to defend the indefensible.

On interrogating my own website, I find that the Exchequer Secretary to the Treasury in June 2010 was Mr David Gauke, and he said then:

“The coalition Government have pledged to make fair and transparent payment to Equitable Life policyholders, through an independently designed payment scheme, for their relative loss as a result of regulatory failure.”—[Official Report, 8 June 2010; Vol. 511, c. 167.]

I said to him at the time how glad I was that that was going to happen. A little later, however, the Financial Secretary to the Treasury, Mark Hoban, had to defend the fact that it appeared that only a fraction of the losses were to be paid. I know that the ombudsman said that it would not be a matter of the entire sum being paid, but who can honestly believe that paying just 22% of a loss is a fair outcome? Both parties are to blame. Like me, the Minister, my hon. Friend the Member for Salisbury (John Glen), was elected in 2010 on a manifesto pledge to settle this matter. It needs to be settled, and that has not yet happened.

--- Later in debate ---

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

Let me start, as others have done, by acknowledging the role of my hon. Friend the Member for Harrow East (Bob Blackman), his long-standing work on the issue and his success in securing the debate. I also need to declare an interest, as I did when I responded to the debate on 31 January 2019: my late father was an investor in Equitable Life and, therefore, I am keenly aware of the history and the importance of the issue to all concerned.

As we have heard and grasped again today, this is a complex and technical subject, the history of which has been very well documented over many years. I should also remind Members that the Equitable Life payment scheme closed to new claims over five years ago, so nothing has changed since that previous debate two years ago. Many of the speeches made today have covered the long and sad history of this matter. I do not propose to revisit all of that this afternoon. I do, however, want to remind hon. Members that the Government took more action than any of their predecessors to resolve this issue and committed significantly more funding than any other.

I appreciate that some investors remain disappointed by the steps that we took and would like to see further funds made available, but the Government have been clear and consistent in saying that this issue is closed and no further money will be paid out. This is in line with the ombudsman’s report, which was explicit about having no expectation of the full amount being paid.

[Dr Lewis]

Will the Minister give way?

[John Glen]

I will not, because of time. Indeed, the ombudsman wrote to the APPG to clarify that position. Today, we have heard additional representations on the transparency and accuracy of the payments made by the scheme. I heard very clearly that point from my right hon. Friend and his reference to me during the debate, and I shall respond to that now.

First, the Treasury published the calculation methodology in full in 2011, as well as a simplified explanation to assist members of the scheme who were anxious about how it would work, with worked examples of the calculation. These explain how every payment made by the scheme was calculated. In addition, the Treasury has also incurred actuarial fees well in excess of £100,000, answering the questions reasonably posed by the actuarial representative of the Equitable Members Action Group, in an effort to ensure that there was maximum transparency to that group and to those members who were concerned, but no errors were found in the methodology. The group confirmed to their members that the payments to annuitants were accurate, and all this was set out in detail to the Public Accounts Committee in 2018.

Some hon. Members have spoken about policyholders who have received increased payments from the scheme, but given the closure of the scheme to new claims, I can only assume that these are historical cases. The Treasury is not aware of any corrected payments having been made to policyholders since the scheme closed, but I recognise that it may be helpful to go into some more detail on this point. The most critical determinant of the value of any payment is the input data received from Equitable itself, including payments in, payments out and the type of policy bought. Actuaries checked this data carefully and made any obvious corrections automatically before payments were made. But then the scheme also gave policyholders the opportunity to verify their own input data, which would be a significant driver of any errors, and where an error was found, the scheme corrected it and recalculated the payment. That is likely to have been what happened in specific cases that Members have raised today, and I believe that they show that the system that the scheme established to ensure accurate payments worked well.

The Government have taken significant action to resolve this issue and to balance the expectations of the policyholder with the needs of the taxpayer. The scheme was fully transparent, as I have set out. We published the calculation methodology in full. We made significant resources available to explain it. And we put systems in place to ensure that where there were errors in that input data and, therefore, payments, they were remedied swiftly. I appreciate investors’ desire that the scheme should pay out more, but the Government’s position has always been clear and consistent, both since the original announcement back in 2010 and since the scheme was wound down over five years ago. I am afraid that that position remains and will not change.