Equitable Life (Payments) Bill

Mel Stride Excerpts

Tuesday 14th September 2010 Commons Chamber

[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.

--- Later in debate ---

[Yasmin Qureshi (Bolton South East) (Lab)]

I congratulate the hon. Member for Congleton (Fiona Bruce) on making her maiden speech. As a fellow north-west MP, I am sure that we will work well in future for the betterment of the north-west region.

Mindful of what you said earlier, Mr Deputy Speaker, I will keep my speech short. I shall not go into the history of Equitable Life, because everyone in the Chamber is aware of the history, nor shall I go into the merits or demerits of Sir John Chadwick’s report or the ombudsman’s report. I want to talk about my constituent, Mr Barri Sharrat, who was made redundant by his company and whose pension was moved to an Equitable Life policy, which was to be his main source of income on retiring. Mr Sharrat put his trust and faith, along with years of savings, into the hands of Equitable Life to build a secure retirement. I want Mr Sharrat and millions like him to be compensated.

I agree with the ombudsman’s view that people should be put in a position similar to that which they would have been in had Equitable Life not collapsed. I welcome the Bill and would urge the Government not to short-change the people on a promise that they made before the general election. However, I am afraid that the argument about money just does not carry any weight, because before the general election there were many debates about the country’s finances. Therefore, the level of debt was well known to everyone. Knowing that information, Members who are now in government made a promise that they would honour the ombudsman’s recommendation. I would ask them to continue to honour that promise, and then all those present who have taken a sanctimonious approach to the issue can be properly sanctimonious about it.

I urge the Government to make the Bill fair and effective. To make the legislation effective, they should put the independence of the compensation scheme on a statutory basis. There should be an independent appeal process, and a timetable—a short one—for making payments should be set out. The criteria by which compensation is to be paid should be made clear and simple. Again, I urge the Government to accept the ombudsman’s recommendation that people should be put into the position that they would have been in had Equitable Life not gone bust.

[Mel Stride]

Will the hon. Lady give way?

[Yasmin Qureshi]

I have actually finished, but the hon. Gentleman may intervene.

[Mel Stride]

I just wanted to say that it is my understanding that the ombudsman’s report contains the recommendation that the public finances should be taken into account when coming up with the final compensation to be paid.

[Yasmin Qureshi]

The public finances may be taken into account, but it is my understanding that the Bill proposes to go along with Sir John Chadwick’s proposal, which was not a very good one. As my hon. Friend the Member for Ochil and South Perthshire (Gordon Banks) said, the compensation does not have paid in the next few months or even the next year; it can be spaced out over five years or perhaps even 10 years, so that people can be given the compensation that they deserve. As has been said, the ombudsman has made a recommendation, but it is for us here in Parliament to do right by our constituents, and that means going back and giving the appropriate level of compensation.

--- Later in debate ---

[Mel Stride (Central Devon) (Con)]

Like many other Members who have spoken this evening, I welcome the Bill. It is timely—it has certainly not come before time—and I congratulate the Financial Secretary on introducing it so early in the life of this Government.

I too signed the EMAG pledge to stand up for fair and appropriate compensation, and like many other Members, I too have had many individuals in my constituency come to me in a terrible state because of what has happened to their pensions and their future as a consequence of maladministration and regulatory failure. For each one of those individuals that is a tragedy, but when we consider that 1 million policyholders and 1.5 million policies are involved, we see that it is not a tragedy; it is a national catastrophe, because it hits saving. We have now come out of one of the worst recessions in modern times—one of the worst since the second world war—and one of the things we must now do as a nation is get back into the habit of saving. Nothing in the previous Government’s approach to the Equitable Life saga has done anything to encourage that habit.

I have sat through most of today’s debate and I have been disappointed and slightly irritated by the synthetic anger from Labour Members—I felt that particularly at the beginning of the debate. They have suggested that in some way we have been responsible for the delays and for the fact that these payouts are not happening more quickly, but we know of the previous Government’s attitude and approach to Penrose, of how they obfuscated on the second parliamentary ombudsman’s report and of the, in my opinion, cynical way in which they set up Chadwick to report after the general election so that it would be us who would be standing in this Chamber addressing these issues as we are today.

[Neil Parish (Tiverton and Honiton) (Con)]

I thank my hon. Friend for the powerful points that he is making. May I reinforce the fact that this is about the message we send to all those who are saving for their old age in order to give themselves a good quality of life? If we do not sort out the Equitable Life situation, it will send exactly the wrong message to hard-working people. I congratulate the coalition Government on having the political will to sort it out, given that the previous Labour Government had no such will. In fact, they used taxpayers’ money to fight policyholders. I urge our Front-Bench team to get this sorted.

[Mel Stride]

I thank my hon. Friend for making a very important point, with which I entirely agree. I welcome the coalition’s commitments on several important matters, and they must not be overlooked in all the discussion about what the final payout is. The first is that there will be no means-testing. As we know, means-testing, when applied appropriately, can often provide resources to those who are most needy, but in this instance it will do nothing other than to punish those who have acted responsibly and have saved, putting something away for their future.

I too am very pleased that the Financial Secretary has stated that the estates of the 30,000 people who have died since this saga began will benefit through this scheme. I also welcome the transparency that has been proposed and the independent commission, which is so important in terms of designing and administering the scheme. I am happy that it will report so early in 2011, in time to make payments for the middle of next year. I am also particularly pleased that Brian Pomeroy has been appointed to that independent commission and that that was acceptable to EMAG.

I do not believe that interim payments should be made, because I accept what the Financial Secretary has said—I think he talked about this in his statement to this House on 22 July—about how that would overly complicate matters. What hon. Members must now concentrate on is making sure that we hit the end date—a final point at which justice is done in this matter.

Many hon. Members have also rightly recognised the complexity of the task facing the independent commission in deciding on the payments and administering them. We are talking about 30 million pension transactions over the period that we are considering. I urge the Financial Secretary to ensure that he does everything possible to ensure that no delay now occurs as a result of that task.

As we know, the Bill is enabling legislation—it is not designed to determine the final payout. That is part of the comprehensive spending review, and the report back to this House will be made on 20 October. EMAG suggests that £5 billion should be the amount. Chadwick’s remit was distinctly different from that of the parliamentary ombudsman, and because of the assumptions that he made about the proportion of people who were likely to have invested in Equitable Life, irrespective of the maladministration—in other words, if they had known of it at the time—he is perhaps looking at 10% of that figure.

We should not dismiss the Chadwick report’s methodology and much of the hard work that was done, which took more than a year to put together in that report. However, I agree with this statement made by the Financial Secretary:

“I am aware that some of his findings will be contentious”.—[Official Report, 22 July 2010; Vol. 514, c. 577.]

Furthermore, I contend that they will be more than that if they result in 10% payouts; they will be wholly unacceptable.

I have been impressed by one aspect of today’s debate, which is that members of EMAG have sat patiently watching our debate; I recognise one of the gentlemen in the Public Gallery at the moment. We owe it to them—we owe it to the individual policyholders—to do the right thing. We have a moral duty to them and we have a national imperative in terms of re-establishing the trust between government and people, which hangs on the decision that the Financial Secretary will take later this year.