Equitable Life (Payments) Bill

Mark Durkan Excerpts

Wednesday 10th November 2010 Commons Chamber

[Nadhim Zahawi]

The hon. Gentleman makes an interesting point. What I would say is that, in contrast to the quotation from Winston Churchill earlier, my observation as a new boy to this House over the past six months is that the Treasury has behaved positively. We must remember that we will be administering public money. The Government have no money of their own; rather, we collect money on behalf of the people and then we administer it. It would be foolhardy and perhaps even foolish for us to say, “Let’s have somebody else administer public money.” At the end of the day, people have to have someone who is accountable, and we are accountable, as is the Treasury.

Amendment 7 seeks to ensure that the Treasury takes into account a proper evaluation of the total relative losses when determining payments—that is, the figure should not be £4.3 billion, but could be much higher. I strongly disagree with that. Many EMAG members have written to me, lobbying me to see the matter differently, but I have to say that I disagree. Given the current economic hardship, we all face an incredibly difficult situation, in which we are all having to tighten our belts. To deliver compensation of £1.5 billion at this time is entirely fair.

Amendment 2 is in the name of the hon. Member for Leeds North East and all I would say to him is that I understand the thrust of his argument that we should consider what the ombudsman says about the behaviour and actions of the coalition Government in dealing with the issue. However, I would rather get things done and dusted, and have something delivered to the victims than procrastinate further and wait for longer.

[Mark Durkan (Foyle) (SDLP)]

I can fully appreciate what the hon. Member for Stratford-on-Avon (Nadhim Zahawi) said about the Government’s proposals being clearly better than what was offered by the previous Government. Frankly, that is not a very hard test to pass. The real test for us in this Committee is surely not whether what we have from this Government is better than what we had from the previous Government. It clearly is better. Rather, we as a Committee have to see whether it is as good as what is set out in the parliamentary ombudsman’s findings and recommendations.

[Nadhim Zahawi]

Just to offer some explanation, what the Government have delivered is not just better than what the previous Government were thinking about—or dithering about—trying to deliver. I also believe that there was a point in this Parliament when the coalition Government were seriously considering implementing only what Chadwick had recommended, but we have moved away from that. We have buried that, and we are now in a much better place for the victims of Equitable Life.

[Mark Durkan]

My point still stands: the test is a fairly easy one. The Chadwick report was so grossly inadequate as not to be a credible starting point for any Government. Many of us said that to the previous Government, including the hon. Member for Leeds North East (Mr Hamilton)—very bravely, loudly and consistently—and many of us have said it to this Government as well.

For us as Members of the Houses of Parliament, the test that many people will apply is: what regard do we have to the findings and recommendations of the parliamentary ombudsman? As the hon. Member for Angus (Mr Weir) stressed earlier, the public understand the parliamentary ombudsman to be a creature of Parliament and to have some weight and merit in Parliament’s considerations. However, the previous Government acted pretty dismissively towards the ombudsman. What we have in some of the amendments before us is an attempt to show clearly that this House will give proper weight to what the parliamentary ombudsman is saying.

We all received a letter from the parliamentary ombudsman about some of the Government’s proposals. Given that, is it wrong that we should reference the judgment of the parliamentary ombudsman—as the hon. Member for Nottingham East (Chris Leslie) is suggesting we do with amendment 2—perhaps as a way of moving on from the scandal and confusion that many feel surrounds the fact that the ombudsman was largely ignored by the Government and, in effect, by Parliament for so long?

[Jonathan Evans]

I am anxious to ensure that the hon. Gentleman does not undersell what the Minister has done. The hon. Gentleman will recall that every aspect of the parliamentary ombudsman’s report has been accepted by the Government and that, furthermore, the report said that whatever the overall compensation package should be, it had to take account of the impact on the public purse. Many of us on the Government Benches think that those are the two crucial tests.

[Mark Durkan]

That is what the hon. Gentleman is arguing. However, given that the money that we are talking about has been capped according to the Treasury’s judgment of what it believes is available—that means that the overall sum to be offered by way of remedy and redress will be a long way short of what all the other assessments say—I believe that it would useful for the Committee to accept an amendment that would allow us to ensure that the parliamentary ombudsman has some say in overseeing the measures. Under the circumstances, that is fair and reasonable, but if the hon. Gentleman is so content that the scheme as it stands meets everything that the ombudsman has said, he should see such an amendment as adding no particular stress or difficulty for the scheme. Such an amendment would be a way of offering public assurance after all the doubts that have been raised about how Government and Parliament have dealt with the issue.

[Mr Weir]

Does the hon. Gentleman not also agree that at no time did the ombudsman suggest that any group of annuitants should be debarred from receiving compensation, as is now being proposed?

[Mark Durkan]

I thank the hon. Gentleman for that point, which quite properly brings me to amendment 1.

[Jonathan Evans]

I do not want to delay the hon. Gentleman, who is being very generous in giving way, but if he waits until Third Reading, he will hear what I have to say about the totality of the package.

[Mark Durkan]

What a trailer for Third Reading! We will all be waiting.

On amendment 1, the hon. Member for Leeds North East set out a compelling case for why it is not just the cap, but the cut-off that we need to be seen to address. We have seen in the past how dates set for various reasons have ended up creating unfair and unforeseen consequences that Parliament did not truly intend. That certainly happened with dates for schemes in previous pension Bills, for reasons that seemed reasonable and understandable to the House at the time. We are now struggling with the consequences that were never intended. We must be wary about such cut-offs.

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[Mr Hoban]

When people made the decision on the information available to them, the relevant information was not in the public domain, and would not have affected their investment decision until September 1992. That is a clear, logical, sensible starting point, based on principles and on the ombudsman’s findings, for the maladministration, and that is the point from which we should calculate relative loss for policyholders.

[Mark Durkan]

The Minister is in danger of asking the Committee to accept the notion that customer ignorance can be a legislator’s excuse. That cannot be so. If the Minister is trying to say that what they did not know did them no harm, that is preposterous. They did not know, and they have suffered harm.

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[Mr Hoban]

I was trying to make two points. First, those policyholders were excluded from the calculation of relative loss as a consequence of the ombudsman’s findings and her view on when maladministration had taken place. According to the example that I have given, they would not have suffered loss in any event. I am merely saying that, in my opinion, there is a strong case in principle for the exclusion of those policyholders, and in practical terms they have not suffered loss.

[Mark Durkan]

Will the Minister give way?

[Mr Hoban]

I want to make some more progress.

The fact that with-profits annuitants who bought their annuities before 1 September 1992 have seen a reduction in the level of payments that they currently receive from their annuities is a result of poor investment market performance and the fact that their earlier annuity payments were artificially high. That was because of the structure of the policies that they bought, or because they received too much in the earlier years, as Equitable Life paid out more on a discretionary basis than it should have. Unlike the value of conventional annuities, the value of a with-profits annuity varies according to investment return. Although the reductions are regrettable, they are not instances of Government maladministration, and therefore Government should not be providing compensation for that group of policyholders.

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[Mark Durkan]

Obviously we are waiting to hear what the Government will say about their amendment, but the other amendments—including the new clause proposed by the hon. Member for Harrow East (Bob Blackman)—are in essence an attempt to ensure that there is a sense of competent independence in how the scheme is administered and payments made. In terms of making appeals available and ensuring that the design and administration of the scheme are independent of Government, the new clause offers a reasonable construct of what a clearly independent scheme would be.

In the debate on the previous group of amendments, there were plenty of references to pledges that many of us signed and how far the Government’s measures will mean that we have discharged those pledges, but I do not think that any of us signed pledges that said we would do the whole thing just according to Treasury lights and nothing else. The amendments are an attempt to ensure that it will be not only Treasury lights that govern the terms of the scheme and its performance.

[Mr Weir]

Does the hon. Gentleman not feel, however, that the problem remains that the whole thing will be governed by the ultimate cap? That is the difficulty that faces all Equitable Life policyholders.

[Mark Durkan]

Yes, I do. There is no escaping the constraints that the cap will create. In the last group of amendments, we considered the questions that arise when the cap comes together with the cut-off. That conspires to create a pretty selective injustice for a group of people who are then left with very marginal compensation.

Even a very independent process, such as that proposed in the amendments, will be constrained by the cap. However, people would trust a credible independent process applying that cap with due consideration for all the concerns, rights and needs of policyholders more than they would trust the Treasury. In the last debate some Government Members said confidently how impressed they had been with the Treasury since they came into the House. That might well be—we are in the early stages of this Parliament and this Government and the first few pages of the exercise book are lovely, neat, impressive and perfect—but degeneration creeps in later on and even the Treasury will revert to its traditional roots and habits.

[Mrs Anne Main (St Albans) (Con)]

I have confidence in the Treasury trying to sort this out—I am sure that the hon. Gentleman will not be surprised to hear that. However, I am concerned about anything that pushes this matter into the long grass. We do not need any more delays caused by trying to set up other bodies. That is why I would like to say, “Get on with it and get the Treasury doing it.”

[Mark Durkan]

I do not believe that the hon. Member for Harrow East, for example, is trying to sow or fertilise long grass. This is about getting something that is credible, competent and reliable and the Committee should try to help in that regard. That is the spirit of these amendments.

There has been much criticism of the underperformance, to put it mildly, of the previous Government on this issue over more than one Parliament. Let us remember that those Ministers were not deliberately ignoring the plight of their own constituents who were coming to them or the problems highlighted by many of us from constituencies across the United Kingdom. They were constrained by the advice that they were getting from the same Treasury that people are now so happy with. The Treasury was advising that serious precedents and problems would be created.

[Mr Nigel Dodds (Belfast North) (DUP)]

I understand what the hon. Gentleman is saying, but Ministers are there to take decisions. They listen to advice but it is up to them to make things happen. He and I, as former Ministers, know that only too well, so why is he making an excuse for the inaction of the previous Government and their failure to respond to the needs of Equitable Life policyholders?

[Mark Durkan]

If the right hon. Gentleman had been here for the debates on earlier amendments, he would know that I made no such excuses then. Indeed, in all previous debates, I have been very critical of the performance of previous Governments. We have both been the Finance Minister in Northern Ireland, as he says. When I held that position, I used the line, “I’m the Minister of Finance; I don’t suffer from depression but I am a carrier.” That is the effect: Treasury Ministers are put in that sort of position. They become aware of constraints and difficulties that they then have to put before everyone else and impose on them as well.

My point is not that Ministers were right or wrong to listen to the advice but that we, as a Committee, must choose whether to go along with the Bill and say that the scheme will proceed only according to Treasury lights or whether to say instead that it should go according to wider lights and be informed by the sort of considerations reflected in the various amendments that hon. Members have tabled and by the many good observations made by Members on both sides of the Committee. Either we want to trust the Treasury and leave the scheme entirely in its hands, with its considerations and constraints alone, or we want to honour the spirit of what we have all pledged to those who have lost out with Equitable Life and to act in the light of the sad experiences that we have heard about.

I commend the amendments to the Committee. I shall wait to hear what the Government say about their amendment, but it seems to reinforce the Treasury’s whip hand over the whole scheme.

[Mr Hoban]

I take the same view as the right hon. Member for Belfast North (Mr Dodds) on the responsibility of Ministers. Civil servants provide advice but Ministers decide and act and we cannot ignore that responsibility. We have taken this matter very seriously and have sought, over the past six months, to drive through a speedy resolution to the problem. I echo the remarks of my hon. Friend the Member for St Albans (Mrs Main) on tackling this matter.

On the amendments before us, the purpose of amendment 3 is to make the design and operational mechanism of the scheme “independent of government”. I understand the need for independence in the design of the payment scheme, which is why I established the Independent Commission on Equitable Life Payments. The commission’s advice will necessarily form the basis of the scheme’s design. It will advise on how best fairly to allocate payments among policyholders, with the exception of with-profits annuitants, and it will consider which groups, if any, should be prioritised. It is right that that process should be independent, so the scheme will be independently designed.

The Government have considered whether the scheme should also be operated independently of the Government, as amendment 3 proposes, and have concluded that that would not be appropriate for three key reasons. First, it would delay the commencement of payments. Our ambition is to start making payments in the middle of next year using our preferred delivery partner National Savings and Investment. I shall say more about that on amendment 6. If amendment 3 were accepted, NS&I, which is an Executive agency of the Treasury, could not be used as the delivery partner as it would not be operating independently of the Treasury, which would therefore have to establish a new, independent body or identify an existing such body that could operate the scheme. It is also likely that legislation would be required to task the independent body with the design and operation of the scheme, which would delay significantly the making of payments to policyholders.

Secondly, the Government have established an independent commission to advise on the allocation of payments. This function is independent of the Government and is key in determining a fair allocation of payments. Making the operational delivery provider, whose job is largely about sending out the payments and making sure that cheques get to the people who are entitled to receive them, independent of the Treasury would not add significant value to that task.

Finally, it is important to ensure that value for money is considered when deciding on a delivery partner. The Treasury has satisfied itself that NS&I has the capacity and the capability to deliver the scheme, while at the same time providing value for money. The Government consider that by establishing the Independent Commission on Equitable Life Payments on 22 July, we achieved the aim that is at the heart of the amendment.

I turn to amendment 4 and what policyholders should do if they consider that they are not being treated fairly under the scheme. The Government are committed to treating policyholders fairly. In line with that, there will certainly be a means by which policyholders can raise concerns about the incorrect application of scheme rules to individual cases. We have given much thought to how best to deal with complaints and have made a great deal of progress in putting together a process that is fair and thorough. Full details of this process will be included in the document that sets out the scheme design in full.

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[Mr Hoban]

The hon. Gentleman makes an important point, and it is vital that we are able to operationalise, as it were, the scheme design. That is why I have encouraged the payments commission to engage with NS&I to ensure that the scheme that the commission designs can be delivered. That is an important part of the process, and I expect the commission to do that during the course of its work. I think that addresses the hon. Gentleman’s point.

Let me turn finally to new clause 1 and the status of the independent commission. I have already spoken about the importance of the work of the commission, and I am not sure that the new clause, which would give it statutory footing, would add value to its work.

[Mark Durkan]

Returning to amendment 6, can the Minister assure us that it is there only to provide proper statutory cover to the director of savings and NS&I in relation to the scheme, and not to extend Treasury control or constraints in relation to it?

[Mr Hoban]

I can give the hon. Gentleman that assurance. We could not use NS&I if we did not include this power in the Bill. Its purpose is to enable NS&I to act as a delivery partner, not to give the Treasury some way of reaching back into the payments scheme. I reassure him, and others, that the power is there merely to deliver the outcome of the scheme.

The role of the payments commission will be key. It will advise on the distribution of payments to those other than WPAs, and I will take its advice extremely seriously. The new clause would introduce a requirement for the commission to consult key bodies in the development of its advice, but let me tell my hon. Friend the Member for Harrow East (Bob Blackman) that it would need no statutory encouragement to do so. The commission has already met Equitable Life and EMAG, and it has published a discussion paper asking for more views on the guiding principles for determining fairness in allocating and prioritising the funding. I do not believe that an amendment to the Bill would make it any more consultative and thorough in its task. My hon. Friend is aware that I have made the commitment to go along to the all-party group with the chairman of the commission to engage with parliamentarians on this matter. That is a very clear sign of the way in which we want to engage, or the commission wants to engage, with stakeholders to come up with the best design for the scheme. I encourage people to read and engage with the commission’s discussion paper, too.

The new clause would also introduce a statutory duty for the Government to lay the design of the scheme before Parliament in the form of a statutory instrument in order to allow full scrutiny. I entirely understand the thinking behind this, and transparency has been at the heart of our approach to developing the payments scheme. However, as I have said, I will publish and lay before Parliament a document setting out the scheme design in detail, which may then be debated as Parliament chooses. Again, I do not think that a statutory requirement will make my commitment to full transparency any stronger. The Government therefore resist the new clause.

Furthermore, including provision in the Bill as to the status and operation of the independent commission would pose a very serious risk to the timetable of the commission. The commission is already in operation and has been since July, and it is due to report at the end of January. Notwithstanding the speed with which the House is dealing with the Bill, it will still take several weeks for it to finish its passage through this House and the other place. If the commission had to be reformed after the Bill received Royal Assent, to restart its deliberations so as to comply with the provisions of the new clause, there would be a real risk of delay to its advice. This would, in turn, delay the making of payments to policyholders—something that I am sure none of us would want to happen. In the light of this, and given the comfort that I hope I have provided on the operation of the commission, I invite the hon. Member to withdraw his amendment.

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[Mark Durkan]

This is a Third Reading debate, and I do not believe that the House should, or will, divide on the Bill at this stage.

As we have rehearsed in debates not only today but on other occasions, this is a can that was kicked in front of the Government for a very long time, to the frustration and disgust of very many people. I am glad that although not everyone who has lost out will be doing handstands, we no longer have the degree of hand-wringing from Government that we had for too many years.

In the earlier debates, I, like others, had some questions and criticisms. Those criticisms were because of the inadequacies and arbitrary limits in the provisions that have been put in place. Some of us have genuine concerns that, notwithstanding how much better the provisions are than those the previous Government were going to make, we as a Parliament should be careful about creating a situation in which we have a cap one on hand and a cut-off on the other, which together will conspire to create a selective injustice against some people.

When the Financial Secretary responded to debates on amendments, he made it clear that assessments of pre-1992 annuitants could be made to allow cases to be identified in which people had benefited from the inadequate regulation rather than losing out. In those cases, we should better provide for a scheme that will deal with everyone on a case-by-case basis, rather than risk class exclusion by assumption, which is what the cut-off provides for. I ask the Government to consider that further as they take the scheme forward.

I appreciate the Financial Secretary’s indications that added consideration has been given to tax treatment and tax credits, and to the social care implications complications that could arise. I give the Government credit for that sensitivity and responsiveness.

My hon. Friend the Member for Nottingham East (Chris Leslie) rightly warned the Liberal Democrats to be careful not to make promises that they cannot keep. As a friend of the Labour party, but someone who was frustrated sitting on the Benches with Labour Members during the last Parliament, may I say that I hope Labour’s Front Benchers also learn to be careful about making arguments that they cannot sustain? He has unfortunately been left in a position of trying to criticise the Bill, but he could not even afford to divide the Committee on straightforward, pure amendments. I feel sorry for him that the last Government’s record put him in that position, and that he was left to make arguments that ended up, with all due respect, veering towards cynicism while the rest of us were trying to keep our arguments within the realms of legitimate criticism. However, I accept fully that he is not responsible for that position.

It is important to remember that this is not just a matter of what one Government or another did. The debates have shown that many Members of all parties have met constituents and carried their concerns. People have suffered compound distress, and that is what cannot be quantified. Someone might quantify what amount of money should be due to people and how much we can afford to give them, but we cannot calculate the compound distress caused to people not just by their loss but by the long indifference and inertia.

I acknowledged earlier the work in the previous Parliament done by my hon. Friend the Member for Leeds North East (Mr Hamilton), and we all acknowledge the work in this Parliament of the hon. Member for Harrow East (Bob Blackman), who has served notice that he will continue it. It is also appropriate to acknowledge the huge role played in the previous Parliament by the hon. Member for Shrewsbury and Atcham (Daniel Kawczynski). Perhaps it is right that a Member from one of the smaller parties says so; as he is currently a Parliamentary Private Secretary, he may not be in a position to participate in the active, vocal way that he so often did.

Many of us have criticised Sir John Chadwick today and at other times. I remember the hon. Member for Shrewsbury and Atcham reminding me of a line that I used to hear about Fanny Craddock. Apparently she used to offer some chicken recipe, and the first line of the recipe was, “First, catch your chicken.” The hon. Gentleman and the all-party Equitable Life group had that difficulty with Sir John Chadwick, in trying to get him in and ensure that he and the Government properly engaged with them. Although many people will see shortcomings in the provisions, the fact is they represent huge and welcome progress. Some redress will now be given to people, and the quicker that that can happen the better.

None the less, we need to iron out any inconsistencies. Some of us are worried about something the Minister said earlier and the sort of precedence that it might create. He said that because people did not know about the maladministration, they can be deemed not to have suffered the same loss as those who did know. That is not an argument that I would ever want to become a rule of thumb for any such scheme again.