Equitable Life (Payments) Bill

Marcus Jones Excerpts

Wednesday 10th November 2010 Commons Chamber

[Bob Blackman]

I thank the Minister for his intervention. I was going to refer to that while I was responding to the intervention from my hon. Friend the Member for Devizes (Claire Perry). The clear issue now is justice for the people in the worst possible position—the trapped annuitants. I applaud the Government for honouring the pledge that 37,000 people who have been trapped as a result of the scandal will receive 100% compensation. I strongly support and endorse that.

We have a problem, however, and amendment 1 attempts to address it. The amendment has cross-party support; we must be seen to be acting not just as a party but as parliamentarians overseeing the Executive. The problem is that if someone took out a policy on a particular day, they would receive no compensation at all, even though the maladministration was taking place at the time; whereas someone who took out a policy on the following day would get 100% compensation. There are always difficulties when arbitrary dates are set, but that is neither fair nor reasonable.

I believe that we should set aside the date and review all the trapped annuitants to ensure that they get fair and proper compensation. The Chadwick report has been rubbished by EMAG, and by Members on both sides of the House, but even Chadwick proposed a scheme that would have compensated those trapped annuitants whose policies were taken out before the cut-off date.

[Mr Marcus Jones (Nuneaton) (Con)]

When my hon. Friend signed the EMAG pledge, as many hon. Members across the House have done, did he believe that we would end up leaving out about 10,000 pre-1992 annuitants from the compensation scheme?

[Bob Blackman]

I and all the others who are new to the House signed the pledge in the belief that, if we were elected, we would compensate everyone who had suffered as a result of the maladministration, rather than taking an arbitrary position to compensate some and not others. I have heard heart-rending stories from my constituents and from people all over the country who are now living on desperately low pensions, having expected much larger ones, and we have a very strong moral duty to all those people. We throw that away at our peril.

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[Mr Alan Reid (Argyll and Bute) (LD)]

I start by putting firmly on the record my belief that the Government have implemented the parliamentary ombudsman’s report and have honoured the pledges made before the election. It was always part of the parliamentary ombudsman’s report that this would be a political decision for the Government to make, taking the public finances into account when they set the cap. The Government have set the cap at £1.5 billion. I wish it could have been more, and I hope that it will be possible to revisit this in future when the public finances are in a better state.

I have sympathy for amendment 1, but let me state my understanding of how it would work in practice. It does not alter the cap that has already been set, so if the pre-September 1992 with-profits annuitants were to be compensated to the same level as the post-September 1992 with-profits annuitants, there would be less for the latter group of people. If the cap remains the same, and the amendment does not alter the cap, giving more to some people would mean giving less to others. I ask the Financial Secretary and the hon. Member for Leeds North East (Mr Hamilton) who moved the amendment to comment on that when they respond.

I want to press the Government on why they have chosen the date of September 1992. As other hon. Members have said, the maladministration started in June 1991. Penrose found that when the Equitable Life Assurance Society’s board papers were sent to the Government Actuary’s Department on 11 June 1991, there was information in those papers showing that the society was not in a good position. Had the Government Actuary’s Department publicised that information at that time, investors would have been deterred from investing in the society. There is a strong argument for saying that the date should be not September 1992 but June 1991.

On 30 July 1992, in an internal briefing, the Government Actuary’s Department described the society as being one of the

“companies on whom we have been keeping a close watch for a number of years”

and said that Equitable Life remained a company “which caused serious concern”. There was evidence in July 1992—in fact, before July 1992—that the Government Actuary’s Department was aware that Equitable Life had problems. Surely that should have been made public and investors should have been deterred. In his response, will the Minister clarify why the date of September 1992 was chosen, because it certainly seems to me that an earlier date—say June 1991 or possibly even earlier—would have been more appropriate?

[Mr Marcus Jones (Nuneaton) (Con)]

I would like to speak mainly about the position of with-profits annuitants and the pledge that I and other Members of all parties made before the general election—that the Government should make fair and transparent payments to those who had suffered as a consequence of the debacle of Equitable Life. I am talking about 350 local people in my constituency who are part of the Equitable Members Action Group. Those 350 include people associated with many companies that were in the Equitable Life scheme. Many hundreds of other people are affected. For some, Equitable Life provided their only private pension to supplement their state pension provision.

I welcome the fact that for a number of my constituents, that pledge has been made good, and I understand that the trapped annuitants in the post-1992 cohort will receive 100% of their compensation. I am delighted about that. Needless to say, I am also very concerned for the pre-1992 Equitable Life investors for whom, it seems, there will be no compensation at all. That seems contrary to the recommendations of the parliamentary ombudsman, contrary to EMAG’s suggestions and contrary to the views of Sir John Chadwick, for whom not many Members have a great deal of time.

I understand that it is difficult to quantify the losses, but, if the Government have the will, the losses of the pre-1992 annuitants should be explored. The people to whom we made a pledge before the general election in May were not necessarily concerned whether they were pre-1992 annuitants or post-1992 annuitants. Their concern was as Equitable Life policyholders looking for justice.

If the Government and the Treasury have the will to deal with this situation, they should do so; if not, they should explain how I justify the position to constituents who have been wronged.

If the Government and the Treasury are prepared to look at compensating the pre-1992 annuitants, there has to be a health warning, because there is a law of unintended consequences, should we be stuck at the compensation figure of £1.5 billion. Many of my constituents who are post-1992 annuitants might be unaffected by any decision to include the pre-1992 annuitants.

Amendment 7 deals with that position and the relative losses. The Treasury should consider it, although I am concerned about whether it could be taken into account within the current comprehensive spending review or would need to be considered after the current CSR period expires.

I would like to ask the Minister several questions. First, will he look again at how to compensate the pre-1992 annuitants, and at how that might be quantified? Will he commit to working with his Treasury colleagues to take into account payments beyond the CSR period to enable the pre-1992 annuitants to be compensated without prejudicing the position of the post-1992 annuitants and that of Equitable Life policyholders generally?

I implore the Minister again—I did so in the last debate on this subject—to recognise that the Government’s decision over Equitable Life raises questions not only about the integrity of the current Government, but about the integrity of savings and investments for one’s retirement. I am well aware that many of my constituents do not have their own retirement provision. The Government should encourage people to provide for their retirement, but if we do not ensure that there is a safety net for people who have invested and done the right thing for their retirement, they will think that it is not worth putting themselves out by investing money for their retirements during their early years of work.

I ask the Minister to consider those points extremely carefully before any decisions are taken this afternoon.

[Mr Hoban]

I start by referring to the closing question from my hon. Friend the Member for Nuneaton (Mr Jones). He will be aware that in July we published proposals to strengthen the regulation of retail financial services, including pensions, which I hope will go some way towards reassuring people that we have learned the lessons from the past and put in place a much more stable and robust framework for the regulation of long-term savings.

I am grateful for the opportunity to discuss, first, the role of the parliamentary ombudsman in developing our policy on the payment scheme. Her work has been central to our approach. I also want to focus on with-profits annuitants and those who took out their policies prior to September 1992. These issues have been raised particularly since our announcements in the spending review. I hope that I can bring some clarity to the treatment of different groups of with-profits annuitants.

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[Chris Leslie]

I am not going to claim that everything in the garden was rosy in the period that elapsed between the findings of the various commissions. Suffice it to say that Penrose spent some two and half years on his inquiry and the ombudsman spent nearly four years on hers. This was not simply a Government issue. There were very complex issues in which a set of decisions had to be resolved. There are perfectly good and sound reasons for some of the time that it took to come to conclusions on these questions. Things could certainly have been handled better; I have already said that this evening.

[Mr Marcus Jones]

Will the hon. Gentleman explain the inactivity on the matter while his party was in government, particularly during the demise of the Icelandic banking industry, when his Government bailed out many investors who were affected by that at the drop of a hat?

[Madam Deputy Speaker (Dawn Primarolo)]

Order. Before the hon. Member for Nottingham East (Chris Leslie) answers, may I remind the House that this is Third Reading and that it is timed, which means that it will conclude at three minutes past 5? Members who have sat through the debate this afternoon and who wish to speak on Third Reading might not get the opportunity to do so. I shall call Mr Leslie back to the Dispatch Box to respond to the intervention, but perhaps everybody in the Chamber could bear my point in mind.