Equitable Life (Payments) Bill

Lord Beith Excerpts

Wednesday 10th November 2010 Commons Chamber

[Mr Hoban]

My hon. Friend makes an important point. There are two aspects to it. First, in respect of Equitable Life, the speed with which we have acted demonstrates our commitment to a resolution of the problem. The second is a forward-looking and prospective issue, which is why we have brought forward proposals to improve the regulation of retail financial services through the establishment of the new Consumer Protection and Markets Authority. That will be a boost to regulation and give confidence to savers that the market will be better regulated. It is important, and we have introduced measures recently, to ensure that if anything goes wrong, there is a proper process in place to tackle that.

I was commenting on the scheme appeals mechanism, which will be published before the scheme begins making payments and will be made available for parliamentary scrutiny. If a policyholder believes that the rules of the scheme have been incorrectly applied to their data, they will be able to raise a query with the delivery body, stating the nature of their concern. The query will be pursued by the delivery body.

If there is merit in the challenge and it is upheld, a recalculation will take place. If the challenge is not agreed by the delivery body, the policyholder will have the option of taking their case to the review panel. The review panel will consider the case in full and be able to make a fresh decision based on the facts of the case. It will be independent of the original decision-making process. If a complainant’s case is upheld, the review panel will ensure that a recalculation is carried out. If the complainant remains unhappy with the review panel’s decision, they will be able to challenge that decision in court by way of judicial review.

[Sir Alan Beith (Berwick-upon-Tweed) (LD)]

My hon. Friend referred to cases in which the rules of the scheme might not have been correctly applied, but such are the complexities of Equitable Life policyholders—for example, a constituent of mine whose policies were additional voluntary contributions in a pension scheme which has been wound up—that someone might wish to argue that their particular type of case had not been envisaged in the way the rules were formulated, and that a specific decision needed to be made in that case. Will the scheme be wide enough to make that possible?

[Mr Hoban]

My right hon. Friend makes an important point. I would expect the payments commission to design a payments scheme that would be sufficiently comprehensive to ensure that all groups of policyholders were covered by it, so any appeal would be on the basis only of any data used to calculate the losses, rather than an appeal in principle against the design of the scheme. I will bear in mind the point that my right hon. Friend makes and encourage the commission, when it takes representations from people, to think as widely as possible about the different groups of policyholders that need to be taken into account.

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[Mr Hoban]

I thank my right hon. Friend. When designing the scheme, we considered seriously how to ensure that policyholders would benefit as much as possible from the payments. If we had been less generous, we would have been accused of clawing back money through the back door, and that is an impression that we want to dispel.

[Sir Alan Beith]

I welcome that announcement, but there is a group of people who are affected in multiple ways: those who have funds in Equitable Life that are not yet in payment and who have been given transfer values substantially below what they believe the fund to be worth, even now. If they are waiting up to three years, and take the money out, accepting the transfer penalty, will they invalidate their entitlement under the scheme?

[Mr Hoban]

That is an important point. I am sure that a range of issues will emerge as we move through the scheme’s design to payment. People who have had Equitable Life policies throughout the period and bought them post-September 1992 will receive compensation even if they have exited from Equitable Life’s current arrangements. I hope that that provides clarification.

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[Chris Leslie]

I completely accept that that is what it says in the detail of the ombudsman’s report, but it does not say that in the pledge that the hon. Gentleman signed. In an electoral context, he raised the hopes of many of his constituents. He may be able to face them and say, “Absolutely, I am fulfilling what I promised.” If he feels that and they are happy with it, they will re-elect him, and everybody will be happy and ride off into the sunset, but I have a feeling that some policyholders will continue to be discontented with the Government’s position. It certainly did not say, either in the manifestos or in the pledge that he signed, perhaps scribbled in a little addendum, “Oh, by the way, we are going to give you only a fraction of the £4.5 billion to £6 billion that you understand as the relative losses.” That is simply not there. I am not claiming, because I did not sign that pledge, to have raised those hopes, but Members on the Government Benches did.

[Sir Alan Beith]

Is it the hon. Gentleman’s position that he did not promise anything, he was not going to give anything, Chadwick was the maximum and he might as well vote against the Bill?

[Chris Leslie]

Liberal Democrats need to learn that people should not make promises they cannot keep. There is a suggestion that Liberal Democrats in particular have been growing used to making promises that they cannot keep, so the right hon. Gentleman should pause for a moment because his political arguments are haemorrhaging on a number of fronts. That is because some Members raised a series of aspirations before the election, making suggestions and promises, and there are some who will feel that he is now falling short of that. That is the only point that I seek to make. I am not claiming perfection for my behaviour, nor am I claiming in any way that I could fulfil all the hopes of the policyholders, but my point is that Members on the Government Benches did, and they should be hoist on their own petard for signing that EMAG pledge.

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[Sir Alan Beith]

I must declare an interest in that I have a very small Equitable Life policy—so small that I do not think I will qualify for any repayment. My concern is for the large number of my constituents whose entire retirement is dependent on Equitable Life policies. The list of the people who write to me includes many of those who have contributed most to the community over the years: that is a striking feature of the names that I see in the correspondence. Many of them will still be angry at how little they are going to get for all the savings they put by.

The first thing to remember is that the primary responsibility for this situation rests with the utterly irresponsible management of Equitable Life. In many ways, that was a disgrace to the mutual movement. It underlines a weakness in the mutual movement, of which I am very supportive in general, which is that executives who want to advance their own careers favour the acquiring of new members at the expense of the interests of existing members. It happened at Equitable Life, it happened at Northern Rock, and it happens in building societies; it is something that the mutual movement has to watch very carefully.

The regulatory failure that occurred is the basis of the Bill, which I hope we shall give a Third Reading. That regulatory failure has not led to action within anything like the time scale that it should have done. A decade has gone by: people have got older and people have died while action should have been taken.

I very much welcome the action that the Government have taken, very quickly, within a short time of their coming into office. I welcome the further announcements that the Minister has made in saying that there will be no tax liability and no effect on tax credits, and that special considerable will be given to the social care situation, bearing in mind that quite a lot of Equitable Life policyholders are now in social care, either at home or in residential care, and their cases need to be considered very carefully. I am grateful to the ombudsman for the work that she has put into this matter, and for her persistence in doing so, and to EMAG, which has done such a tremendous job.

This is not full redress even for all the regulatory failure that occurred, and I would not expect policyholders to be satisfied that they have got all that they are morally entitled to. However, the fact that the Government have moved quickly to ensure that payments will be made makes me feel entirely justified in going into the Lobby in support of the Bill. I am rather depressed that the response of Labour Front Benchers has been to say to the Government, “You gave people the impression that they might get more, and even though you’re giving three times more than Labour would even have contemplated, we, the Labour party, did not promise anything at all.” We had to act, and I am grateful for the fact that Ministers are doing so.