Mark Hoban
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Equitable Life (Payments) Bill
Mark Hoban Excerpts(14 years, 3 months ago)
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The Financial Secretary to the Treasury (Mr Mark Hoban)
I beg to move, That the Bill be now read a Second time.
The Government want to see justice for Equitable Life’s policyholders and that is clearly reflected in the actions that we have taken since coming to office. In our programme for government, we pledged to implement the Parliamentary and Health Service Ombudsman’s recommendation to make fair and transparent payments to Equitable Life policyholders. As a constituency MP and as the Financial Secretary to the Treasury, I receive plenty of correspondence on this matter, I have answered a series of parliamentary questions about it and I have had a number of oral representations from colleagues on it, all of which have stressed the need for a fair resolution. I understand the strength of feeling and, given my role in the past five years in opposition and now in government, I hope that hon. Members will recognise my commitment to policyholders.
We need a swift resolution, but, vitally, one that is transparent and fair. I am pleased to report to the House that more progress has been made to address the plight of Equitable Life policyholders during the first few months of the coalition Government than was achieved over the past decade. We have published Sir John Chadwick’s independent report setting out his approach to calculating payments. I commissioned the first bottom-up estimates of losses suffered by policyholders, calculated at each individual stage of Sir John’s methodology, and published those estimates in July.
Dr Julian Lewis (New Forest East) (Con)
As one of the many people who signed the Equitable Life representatives’ pledge before the election, I am very concerned that there should be a fair settlement. Will the Minister comment on the statement by the parliamentary ombudsman in her letter to all MPs of 26 July that
“the Chadwick proposals seem to me to be an unsafe and unsound basis on which to proceed”?
Mr Hoban
My hon. Friend was one of a number of colleagues on both sides of the House, including me, who signed the pledge. I am determined to make sure that we honour the pledge and that justice is delivered to Equitable Life policyholders. I met the ombudsman yesterday to discuss her letter and her comments on Sir John’s report. That is one of a number of representations that I have received about the report. I shall talk about the others in more detail later, but let me say that the starting point of Sir John’s work is a basis for calculating external relative loss. That is the first such basis that has been proposed to us and we need to look at how it could work as a basis for calculating the losses. I am determined to make sure that in deciding the loss figure we should take into account all the representations that have been received, including those of the parliamentary ombudsman.
Dr Lewis
My hon. Friend is extremely generous in giving way a second time. Does he accept that whatever calculations are done, any outcome that results in only a small fraction of the relative loss being made good to the policyholders would be deemed unacceptable by the policyholders, and dishonourable behaviour by those of us who signed that pledge in good faith?
Mr Speaker
Order. Let the Minister develop the point. He will give way when he is ready. There is much competition on that front.
Mr Hoban
Before Opposition Members get to their feet, they should think about what happened over the past decade. The bill for the taxpayer would have been much less if rather than waiting till now, the matter had been resolved under the last Government. They had 10 years to resolve it. Nothing happened until the present Government took power.
Mr John Redwood (Wokingham) (Con)
I welcome the swift move to put right the injustice about which the Opposition did nothing for more than a decade. To reassure colleagues, will my hon. Friend confirm that there will be a discussion between the Chief Secretary representing the taxpayers, and himself or some other Minister representing the Equitable Life policyholders? There needs to be a balance and we look forward to a sensible balance being struck.
Mr Hoban
My right hon. Friend makes an important point. There are two decisions to be taken. One is on the loss figure and the other is on the amount of compensation that the taxpayer can afford to pay. It is right that those decisions are made in the context of the spending review. That decision will be announced on 20 October.
Mr Dave Watts (St Helens North) (Lab)
Is not the point made by his right hon. and hon. Friends this: when on the Government Benches we accepted the recommendations in principle—[Laughter.] Both the Liberals and the Tories in opposition gave policyholders the impression that they would be far more generous. Are they not now going back on their word which they gave before the general election?
Mr Hoban
I should not have given way to the hon. Gentleman. He has identified the problem. The previous Government could have dealt with the matter, but it is left to the present Government. We have to sort out not just this mess, but the mess that Labour left behind in the state of the public finances. That is the problem that we have to face in dealing with the Equitable Life issue.
Margot James (Stourbridge) (Con)
Might the state of the public finances guide the Chancellor in his autumn statement on the public spending review to advance a compensation pot that would be in line with the rest of the Government’s overview of public spending reductions, that being of the order of 25% for the majority of Departments, and nothing to do with the 90% reduction advanced by the Chadwick report?
Mr Hoban
My hon. Friend will recognise that the spending review is not simply a linear process. Some projects will be scrapped completely; some will suffer a small cut. We need to look at each case on its merits, rather than assume that an across-the-board measure will apply to all spending bids in the spending review.
Tim Farron (Westmorland and Lonsdale) (LD)
Without speculating what proportion of the £5 billion estimated losses will be compensated, does the Minister agree that, whatever payment is announced today, the Government will recognise that it is merely a first down-payment on returning the losses to policyholders, with a view to further payments being made in future years?
Mr Hoban
A number of hon. Friends have made that point, and a number of representations made to me put an alternative point of view—that what policyholders would like is rapid resolution and a swift payment scheme to bring closure to the matter. The spending review is to cover the lifetime of this Parliament, and the figure that is settled upon should reflect the coalition’s commitment to resolving the issue once and for all.
Philip Davies (Shipley) (Con)
Nobody is keener than me for the Government to save money and get the finances back on track, and I am happy to meet my hon. Friend to give him some of my ideas about how we can do that. However, I hope that the Government, having made commitments to people while in opposition, will not use the argument that there is no money in order not to pay a fair settlement. After all, we all knew that there was no money when we were in opposition.
Mr Hoban
That is why, when the ombudsman published her report, we highlighted her recommendation that we need to consider the impact on the public purse of any compensation scheme. We made that point when she published her report, and it was in the Opposition day motions on which we voted prior to the election. It has been a consistent strand in our policy to recognise the impact on the public purse of this compensation pot.
Mr David Davis (Haltemprice and Howden) (Con)
I take the noise from Opposition Members with a great pinch of salt, given the way in which they behaved.
My hon. Friend rightly cited the ombudsman, and in the central recommendation of her report she set the following criterion:
“The aim of such a scheme should be to put those people who have suffered a relative loss back into the position that they would have been in had the maladministration not occurred.”
Does my hon. Friend believe that he can get there—or close?
Mr Hoban
That is not a matter for me to decide; it is part of the spending review. However, I remind my right hon. Friend what the ombudsman also said. In paragraph 9.38 of her report’s summary, she said:
“I am acutely conscious of the potential scale of what I have recommended and that acceptance of my central recommendation might entail opportunity costs elsewhere through the diversion of resources.”
She recognised the potential impact on public spending of her recommendations, and that public interest is a relevant consideration, stating that:
“it is appropriate to consider the potential impact on the public purse of any payment of compensation in this case.”
I therefore point out to my right hon. and hon. Friends, who rightly put great store by the ombudsman’s work, that her recommendations are strongly qualified by the question of affordability, and we need to bear that in mind. Of course, it would have been far easier if the matter had been resolved when she published her report in July 2008, rather than having to wait until now.
Mr Brian H. Donohoe (Central Ayrshire) (Lab)
I thank the Minister for, at last, giving way. I have been a Member for some time and longer than he has, so I can tell him that this was an issue before 1997. The Conservatives, at that time in government, refused to pay any compensation to the Equitable Life pensioners. Under the terms that they now suggest, they will cut about £5 billion of the compensation that the ombudsman recommended for payment, but I heard the Minister in Westminster Hall say on many occasions that they, in government, would pay the pensioners in full. Why have they changed?
Mr Hoban
The hon. Gentleman should really direct his anger at his own Front Benchers, who for years blocked the investigation of Equitable Life by the ombudsman, who tried to delay her report and who took six months to respond to her findings. The real culprits are on the Opposition Front Bench, not on the Government Benches.
Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
The Minister, in his opening remarks, spoke of justice. Where does justice lie—at 10% of losses, 100% of losses or some random figure in between?
Mr Bernard Jenkin (Harwich and North Essex) (Con)
My hon. Friend will know that the Public Administration Committee, which I now chair, issued in the previous Parliament two reports on the subject, and unless we make progress discussing the Bill itself, it seems that much of this debate will turn on what exactly the ombudsman meant in her report. May I advise my hon. Friend and, indeed, the House that my Committee intends to hold a further inquiry as soon as the House returns in October in order to elucidate the exact differences between the ombudsman’s recommendations, Sir John Chadwick’s report and what the Government’s view may be at that time? We will issue a report on what we believe the ombudsman actually intended, and I hope that the Government will honour that interpretation.
Mr Hoban
I would be delighted to appear in front of the Committee to give the Government’s view. It is important that there should be scrutiny through the Public Administration Committee. My hon. Friend was right to highlight the work done by the previous Committee; I particularly commend the former Chair, Dr Tony Wright, who did a great deal, with other Committee members, to keep the issue in the public debate. They published two reports that were very critical of the previous Government. I am happy to take part in that process.
Esther McVey (Wirral West) (Con)
The fact that this matter has not been resolved for so long is an absolute disgrace, and I congratulate the coalition on the fact that it will deal with it so swiftly. It is vital that the compensation given should be suitable and satisfactory to all the victims of Equitable Life. Going forward and looking at the bigger picture, we need to consider pensions as a whole. What does this issue say about how far the general public can have faith in any pension scheme?
Mr Hoban
Indeed; my hon. Friend makes an important point. I would like to say two things in response to her. First, any compensation has to be fair to both the policyholders and the taxpayers who will foot the bill. No one else will foot the bill—no one involved, such as the previous management of Equitable Life, will pick up the tab. The taxpayer will foot the bill. We need to make sure that compensation is fair for the taxpayer and policyholders.
Secondly, my hon. Friend is right to highlight the issue of how we ensure that there is confidence for investors and savers in insurance and long-term saving in the future. That is one of the reasons why my right hon. Friend the Chancellor announced in June that we are going to reform financial regulation and set up a new consumer protection markets authority. That will strengthen the regulatory regime in this country.
We also need to make sure that we help improve financial capability for savers, so that they can understand some of the issues around the products that they take out. That is why we have proposed an annual financial health check, which will help savers understand some of those issues.
Nadhim Zahawi (Stratford-on-Avon) (Con)
As we have heard, many of us have signed the Equitable Members Action Group pledge. There is a wide gap between what Sir John Chadwick and the ombudsman are saying. Does the Minister agree that it is our duty to bridge that gap in a satisfactory way? Otherwise, all the good will that he has achieved in the past few weeks will be spent and the victims of Equitable Life will end up feeling hard done by.
Andrea Leadsom (South Northamptonshire) (Con)
I, too, congratulate the Government on getting to this issue so quickly, in line with the promise that we made before the general election. Will the Minister comment on the case of two of my constituents who between them had an annuity of about £11,000 a year? It is now worth roughly £4,000 a year and will continue to reduce; that is a loss of more than 55%. I should be grateful for the Minister’s comments on what I am to say to them.
Mr Hoban
I am not familiar with the policies held by every single Equitable Life policyholder. There are 1 million policyholders with 1.5 million policies, and 30 million policy transactions went through during the period concerned. That is why it is important that Towers Watson, which has provided actuarial advice to the Treasury, should look at the calculation of losses.
I suspect that my hon. Friend’s constituents may be part of one group for whom there is a great deal of sympathy. They are the so-called “trapped annuitants”—people who bought with-profits annuities policies. I have raised that topic with Towers Watson, to try to understand the losses that people in that category of policyholder have suffered, so we can understand the right approach in terms of compensation. Many people from that group believe that they have suffered quite significant losses, and we need to ensure whether that is the case. At the moment, I am trying to do some more work to establish that.
Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op)
The hon. Gentleman knows that I have spoken up for Equitable Life members represented on both sides of the Chamber. One of the issues that concerns everyone is speed—when people are going to get some money paid out. I do not expect him to give a specific day, week or month, but can he give some indication of when policyholders might expect to see payments beginning? I suggested in an intervention a few weeks ago that it might be well into 2011; what does he think would be a reasonable time scale?
Albert Owen
The hon. Gentleman may recall that when he made his statement to the House I asked him about an appeals procedure. Once a payment is recommended and the person does not agree with it, what kind of mechanism will be in place for appeals? Will it be independent? Will the Bill give a time scale indicating the length of time for the appeals procedure so that people can be clear about that?
Mr Hoban
The appeals mechanism is not in the Bill. However, I took on board the point that hon. Gentleman made during the statement about the need for an appeals mechanism, and I have raised that with my officials. I agree, too, that it is important that any appeal is dealt with quickly, but of course that requires co-operation both on the part of the person making the appeal and the body adjudicating on the appeal. Part of the problem that we all face is that we are talking about premiums that were paid back in the early ’90s, so clearly for some of those making appeals there may be an issue about the availability of paperwork and documentation. I am very mindful of that point, and we will pursue it.
Mr Hoban
I would like to make a little progress. I have been very generous in taking interventions from Members on both sides of the House, and I will take a few more in due course.
We will announce in next month’s spending review how much we can afford to pay to policyholders. We have established an independent commission to assess how best to allocate compensation to policyholders, and we have announced our goal of making the first payments towards the middle of next year. Today’s Bill is another step on the long road to a fair resolution of this situation.
The independent commission has already started its work, and the chairman, Brian Pomeroy, recently invited all interested parties to submit their views. That invitation extends to Members in all parts of the House; I know that many people have strong opinions on how compensation should be paid to policyholders once the final amount has been determined. I am keen that the commission should work as quickly as possible and that its establishment should not unduly delay payments beginning to be made to policyholders. However, the independence of the design of the payments scheme is a key matter of concern to policyholders, especially to the Equitable Members Action Group, so it is important to guarantee transparency and openness. It is therefore right to give the commission the remit to do this work.
I am also mindful of the fact that we need a tight timetable—one that gives enough time to consider all the issues properly but recognises that many policyholders are elderly and should not be required to wait a minute longer than is necessary for justice. Today, we have taken the opportunity to take another important step forwards to achieving resolution. The Bill authorises the Treasury to incur expenditure and make payments to those adversely affected by the then Government’s maladministration of the regulation of the Equitable Life Assurance Society. This is why, regardless of how a future scheme will look, passing the Bill today is vital to enable payments to be made. I should make it clear that the Bill does not set the maximum amount that can be paid or dictate the design of the scheme, but simply gives the power to the Treasury to make those payments.
Mr Hoban
If I may continue a little more about the Bill, I will take more interventions shortly.
The Bill allows for payments made to policyholders to be disregarded for certain purposes, including making them tax-free in the hands of the recipients. The Government will also be able to consider what effect the payments might have on individuals’ eligibility for certain types of means-tested state funding support, particularly tax credits, and how that might be mitigated. A final decision has yet to be made on whether those powers will be used, but it is sensible to include them in the Bill so that any arguments can be taken into consideration. It is essential that we take every action to avoid the scheme becoming unnecessarily complex.
Sir Robert Smith (West Aberdeenshire and Kincardine) (LD)
I welcome the fact that the Bill places no restraint on the level of compensation. I wish to reinforce the point that, to restore confidence in the market, there has to be a fair resolution. Is the Financial Secretary still open to submissions on the level of compensation in the run-up to the comprehensive spending review, and is it still possible for people to make points that will influence that level?
Mr Gareth Thomas (Harrow West) (Lab/Co-op)
As the Financial Secretary has just said, and as the explanatory memorandum makes clear, under the Bill eligibility for some state-funded, means-tested support may be affected by compensation payments. Will he confirm whether any Equitable Life policyholder who receives a compensation payment and who is currently on housing benefit, disability living allowance or income support might be affected in that way?
Mr Hoban
The Bill provides for matters within the remit of the Treasury. My understanding is that the Department for Work and Pensions has the power to take into account the impact of compensation on other means-tested benefits, and we will discuss with it how the matter can best be dealt with.
Nicola Blackwood (Oxford West and Abingdon) (Con)
I welcome the swift action that the Financial Secretary has taken, which puts the actions of the previous Government to shame. I particularly welcome the inclusion in the commission’s terms of reference of the estates of deceased policyholders, as that goes some small way to making up for the suffering of the more than 30,000 Equitable victims who died waiting for a Government who will bring them justice. Will there be an opportunity to debate in the House the decision on quantum that he will reach in the CSR?
Mr Hoban
I will have discussions about parliamentary scrutiny with the Leader of the House. Indeed, the Deputy Leader of the House is in his place on the Treasury Bench and will have heard my hon. Friend. A range of decisions will be made as part of the CSR, and Equitable will need to be taken into account along with other matters. The inquiry of the Public Administration Committee, chaired by my hon. Friend the Member for Harwich and North Essex (Mr Jenkin), will also provide an opportunity for parliamentary scrutiny.
Dan Byles (North Warwickshire) (Con)
I am grateful to the Financial Secretary for his generosity in giving way on this important topic. When it comes to identifying the affordability of any compensation scheme, does my hon. Friend agree that it is important to recognise the potential long-term cost to the taxpayer of a collapse in confidence in private pension provision and in people’s ability to save for their future?
Mr Hoban
That is an important point, but we also need to consider other factors such as the general state of the public finances and the other demands on public money in the spending review. We must also recognise that the Government have decided to introduce radical reform of financial regulation and to improve the regulation of retail financial services through the establishment of the consumer protection and markets authority. We can take a range of measures to help restore long-term confidence in savings, and people will have confidence in saving for the future if they recognise that the economy is on a stable footing, that we have got public spending under control and that we are tackling the deficit and keeping interest rates reasonable for as long as possible.
Charlie Elphicke (Dover) (Con)
I understand my hon. Friend’s desire to get full and final closure, but the consensus at a packed public meeting of my constituents in Dover and Deal was that it would be better to have staged payments over a number of years if affordability was a problem right now. Will he consider that very seriously?
Mr Hoban
I discussed that idea, but I received a strong representation from Equitable Life advising against it, because of the complexity that might be attached to staged payments. Some have suggested that we make payments into people’s pension funds, but some of the key criteria for judging the payments scheme will be simplicity, speed and transparency. People will be concerned that a series of small payments over a long period will not necessarily meet the simplicity, speed and transparency criteria against which a payments scheme ought to be judged.
Toby Perkins (Chesterfield) (Lab)
Will the Minister acknowledge that the broad range of issues that he now says he will take into consideration were entirely absent from his discussions in the run-up to the election or in the coalition agreement, which states that the coalition Government will implement the Parliamentary and Health Service Ombudsman’s recommendation? People in the Equitable Members Action Group will be extremely disappointed with the Minister’s tone when they compare it with the tone he took in the run-up to the election.
Mr Hoban
It is a bit rich for Labour Back Benchers to complain, when the Labour Government had a chance to resolve the matter but failed to do so. The hon. Gentleman should explain to Equitable Life policyholders in his constituency why his colleagues failed to take the action necessary to resolve the problem when they were in government.
Sajid Javid (Bromsgrove) (Con)
I am sure that my hon. Friend is as shocked as I am that, in five months, this Government have achieved more than the previous one did in 10 years? I welcome the Treasury’s swift action. The matter is extremely complex, as he said, not least because a number of financial regulators were involved during Equitable Life’s problems and because of the problems associated with the life insurance industry in general. Will he assure the House that, unlike the previous Government, we will not hide behind that complexity in trying to bring justice to Equitable Life policyholders?
Mr Hoban
That is why we are keen to ensure that we have a scheme that is simple, swift and transparent. That is important and it is the basis of the pledge that we signed. I was unsurprised that the Government made so much progress in the first five months because I have been following this issue for some time. What surprised me was how little progress our predecessors made.
Mr Hoban
I want to make progress because I am conscious that there is an eight-minute limit on Back Benchers’ speeches, and clearly many Members on both sides of the House are interested in the debate.
Once we receive the independent commission’s report, I plan to publish a document, early next year, showing clearly how the scheme will function. The ombudsman envisaged that any system of payments would need to be independent, simple and transparent. I agree with that thinking and I have tried to ensure that our approach meets those criteria. On independence, the Government have established the Independent Commission on Equitable Life Payments to advise on the design of the scheme; to ensure simplicity, we will ensure that the future system of payments is as straightforward as possible to avoid any undue burdens being placed on policyholders; and, on transparency, we have published Sir John Chadwick’s report, the actuarial advice from Towers Watson and representations made to Sir John. Interested parties therefore have access to information when making their representations.
In the spirit of transparency, I shall update the House on wider matters relating to Equitable Life and payments to its policyholders. It is worth reminding hon. Members that one outcome of Sir John’s work is that it enabled us to produce the first bottom-up assessment of relative loss, which we did by comparing the performance of Equitable’s policies against those of comparator companies. There are some reservations on the detail, but there appears to be some broad agreement on the general approach of comparing Equitable Life’s performance with that of a basket of comparator companies. I recognise that a number of Sir John’s recommendations were contentious, including his view that the majority of policyholders had to make the same investment decisions irrespective of maladministration, but I stress that Sir John’s review is just one of the tools at our disposal in looking to fix an incredibly complex problem.
Mr Edward Timpson (Crewe and Nantwich) (Con)
My hon. Friend mentioned the work of the actuary and the advice given to Sir John Chadwick to formulate his report, but, given the transparency that my hon. Friend is trying to bring to this matter, has he considered publishing the actuary’s calculations?
Mr Hoban
My hon. Friend makes an important point about transparency. The actuarial advice gives a clear demonstration of the methodology used by the actuaries, but 30 million premium transactions had to be compared with a basket of comparable companies from 1992 to the end of 2009. The publication of the model at that level of detail would not aid transparency. It would be more likely to confuse, given the complexity of the calculations. However, we have ensured that EMAG and ELTA—Equitable Life Trapped Annuitants—have had an opportunity to meet Towers Watson, the actuaries, to go through the calculations. Towers Watson has provided examples of its calculations so that the mechanics can be understood.
Stephen Timms (East Ham) (Lab)
The ombudsman states in her letter to every hon. Member that because the Government have fully accepted her recommendations Sir John Chadwick’s approach is no longer relevant. Why does the Financial Secretary disagree with her on that point?
Mr Hoban
It goes back to what the previous Government were prepared to accept. Sir John’s report is based on the terms of reference that the right hon. Gentleman’s colleagues gave him, which dealt with the accepted findings. Of course, the previous Government did not accept all the ombudsman’s findings, but that decision was overturned in the courts. It is important to recognise that the first stage—the calculation of external relative loss—is not dependent on the accepted findings because it covers the findings of Equitable Life as a whole across the period. The issue of the accepted findings becomes especially important when Sir John assesses what would have happened if Equitable Life had been regulated properly. The reconstruction of Equitable Life’s financial accounts was based on the accepted findings of the previous Government. The problem is that as we get further and further away from the calculation of external relative loss, what the previous Government accepted and did not accept becomes much more relevant to the calculation of compensation. That is one of the factors that we need to take into account when we assess the final level of loss.
Ms Gisela Stuart
The Financial Secretary has just mentioned 1992, so it is clear that this issue goes back not just to the Labour Government but to the previous Tory Government. All Equitable pensioners want a resolution as quickly as possible and they will be disappointed by this slanging match. I have a simple question: what did the parliamentary ombudsman say to him yesterday when they met? Was she satisfied with his proposals, and what did he say to her?
Mr Hoban
The ombudsman’s letter is clear. She said that she welcomed much of the Government’s approach, including the appointment of an independent commission, the publication of a clear timetable for the beginning of payments to those affected and our commitment to consider representations on the best way forward. I do not feel that I can give the House the outcome of a private meeting, but the ombudsman reiterated her findings, which were set out in the report that she published in July 2008 and which the previous Government sat on for six months before responding. She will also have the opportunity to make her views known when the Public Administration Committee works on this. I just want to do all that I can to ensure that the recommendations published by the ombudsman in July 2008 are honoured, and that is the task that we have to achieve.
Mr Andrew Tyrie (Chichester) (Con)
Does my hon. Friend accept that the six-month delay to which he alludes is just the tip of the iceberg? We faced years of delaying tactics, not least a calculated attempt to try to prevent the parliamentary ombudsman from even producing a report.
Mr Hoban
Indeed, and it was the work of my hon. Friend, who was characteristically modest in his intervention, that found a way in which the ombudsman could publish her second report into Equitable Life. Had he not found the way through, we would not be in this position today, so the House and policyholders owe him a debt of gratitude for getting us to this position.
My hon. Friend is absolutely right that the previous Government did everything they could to avoid a second ombudsman’s inquiry into Equitable Life. The Penrose report, published in 2004, demonstrated that there had been regulatory failure at Equitable Life over a decade covering both Governments—I have no problem accepting that. However, the previous Government could have acted in 2004, but instead they dug their heels in—and here we are in 2010 with policyholders still waiting for justice.
Mel Stride (Central Devon) (Con)
My hon. Friend was talking about the delays in the response to the ombudsman’s report in April 2008. Does he not also recognise, as we all do, I think, on the Government Benches, that the response of the then Chief Secretary to the Treasury was to start talking about those disproportionately affected by the saga but still without setting any time scale for compensation?
Mr Hoban
Indeed, and we have tried to bring to this matter a time scale and a sense of purpose and pace in resolving it. Of course, had it been resolved earlier, the compensation bill would have been cheaper and the pain suffered by Equitable Life policyholders far less. The previous Government dragged their feet, and we have to pay the price.
Geoffrey Clifton-Brown (The Cotswolds) (Con)
May I congratulate my hon. Friend on the progress he has made, given the complexities he alluded to of the time scale and the size of the calculations he has to make? He has already said that the commission will start work and first payments should be made to valid claimants next June. However, can he give any idea of the timetable by which all valid claimants, unless there is an appeal or other court procedure, might expect to receive a payment?
Mr Hoban
I cannot give that commitment yet, and we will not be able to do so until we see the scheme proposed by the independent commission. However, I am clear in my own mind that the time between the first and the last payments needs to be as short as possible, because these policyholders demand justice quickly—and that is what I am keen to deliver.
Mr Hoban
I want to press on.
On the progress that has been made, I should say that the letter produced by Towers Watson this July gave an estimate of losses, looking at comparable performance up until the end of 2007, and it has been working on a further detailed estimate over the summer to bring those numbers up to date—to the end of 2009—which should enable us to present a much more robust estimate of loss next year.
A number of hon. Members have mentioned the ombudsman. I have outlined the comments in her letter. We discussed with her yesterday her concerns about Sir John’s advice, and I have noted those concerns, but I reiterate to Members on both sides of the House that the ombudsman’s report set out some clear parameters for compensation. She talked about compensation and relative loss, but I reiterate that she was very mindful of the issue of affordability—and I refer to the paragraphs in her report that she highlighted. That has underpinned our response to this matter from the moment she published her report in July 2008.
In my statement on 22 July, I set out the next steps towards resolution, confirming that we would respond to the report and determine the value of the compensation as part of the spending review, and inviting interested parties to submit their representations to help inform the next stage of the process. I have received a number of representations and would like to thank everyone who has taken part in this process. We have met the board of the Equitable Members Action Group, which from the beginning has campaigned vigorously on behalf of policyholders, as well as the society itself and representatives of the Equitable Life Trapped Annuitants group. Their views are helping to inform the decisions that the Government are taking on Equitable Life in the run-up to the spending review.
As I said in opening, we have tried to be as open as possible in this process. We have sought to involve all interested parties to ensure that when a solution is reached it is fair to everyone, both policyholders and taxpayers. I personally want to see a swift end to this matter, so that policyholders who have waited in financial purgatory for so many years can receive the payments that are rightfully theirs. Although there is some way to go before we reach a final resolution, I believe that this Government have made more progress since May than our predecessors did from the time when the problems at Equitable Life first came to light over a decade ago.
The Bill before us today is a key milestone on the road to resolving those long-standing issues. It is a clear sign of the Government’s commitment to those who have suffered losses owing to the maladministration of regulating Equitable Life. Policyholders have waited over a decade for justice. Passing this important Bill is essential to achieving justice for them, so I commend it to the House.
Stephen Timms
Our policy is to proceed in the way we set out before the election—on the basis of what we promised our constituents on this matter—and to take forward what my right hon. Friend the Member for Birmingham, Hodge Hill (Mr Byrne) committed to: that when Sir John Chadwick’s report was submitted in May, within two weeks of publication he would publish the Government’s proposed scheme, including a timetable. Where we are now, four months later, is that nobody knows what the scheme is. There is a fundamental inconsistency in what the Financial Secretary is telling the House. Is he with the ombudsman or Sir John Chadwick? Nobody has any idea.
Stephen Timms
My right hon. Friend the Member for Birmingham, Hodge Hill set out before the election the process that we would adopt, which remains our view of the right way forward. What I have no idea about is what the right hon. Gentleman intends to do. We wait with great interest to find out.