Equitable Life (Payments) Bill

Debate between Nadhim Zahawi and Frank Dobson

Wednesday 10th November 2010 Commons Chamber

[Frank Dobson (Holborn and St Pancras) (Lab)]

I shall speak very briefly in support of all three amendments in this group—those tabled by my hon. Friends the Members for Leeds North East (Mr Hamilton) and for Nottingham East (Chris Leslie), and even the one that I have tabled.

As drafted, the Bill leaves practically everything to the discretion of the Treasury, which I find objectionable. I remind the Committee of what Winston Churchill said about people at the Treasury—that they were

“like inverted Micawbers, waiting for something to turn down”.

The chance of their coming to any generous conclusion for people who suffered in the Equitable Life scandal is very small. The courts have held that bodies given discretion are not allowed to fetter their own discretion. It is therefore necessary for the House to fetter the discretion of the Treasury.

I strongly support the view that we should not allow a situation in which the most elderly people will be excluded from compensation. In view of the fact that everyone places so much weight on the ombudsman’s contribution, I strongly support the amendment tabled by my hon. Friend the Member for Nottingham East, which suggests that we should give her a further look at what is being proposed. It will be preposterous if, in trying to do what the ombudsman wants, we end up doing something that she thinks is unsatisfactory and inadequate. The reasoning behind the amendment in my name is the same.

I do not wish to say any more, but the House should do its proper job of telling the Treasury what the rules should be when it considers the matter. I am not getting at Ministers; I am getting at the Treasury as an organisation. It does not have a good record, and ethics and decency are not major considerations for it. They never have been, and perhaps they should not be its major considerations, but we should bear them in mind, so that we can bear down upon the Treasury.

[Nadhim Zahawi (Stratford-on-Avon) (Con)]

The hon. Member for Leeds North East (Mr Hamilton) made an impassioned and moral argument for amendment 1, to which I shall return later.

I have taken a very keen interest in this issue. It has affected a significant number of people in Stratford-on-Avon, to the extent that I have had hundreds of letters and e-mails about it. Like many other Members, I signed the EMAG pledge before the election, and I believe that backing the Government to get the Bill through is delivering on that pledge.

It is probably worth our spending just a few moments thinking about the economic landscape in which we are operating. We are borrowing about £500 million a day. Every time we go to sleep and wake up in the morning, we notch up another £500 million. To service the debt costs about £120 million a day—that is not to pay it down, but just to stand still. It is against that background that we must try to resolve the tragedy of Equitable Life.

Let me spend a couple of minutes on the timelines of the events. In 1988, Equitable Life stopped selling its guaranteed annuity rate policies and, in 1990, those policies became too expensive to honour because of the falls in interest rates and in inflation. In 1999, after the 1997 election, Equitable cut its bonus paid to 90,000 GAR policyholders. In July 2000, the House of Lords ruled that Equitable Life must meet its obligations to its GAR policyholders, thus leaving it with a £1.5 billion liability.

In February 2001, the Halifax agreed to pay £1 billion for the assets. In July, with-profits policyholders saw the value of their savings slashed by 16%—by almost one fifth. In August, Lord Penrose announced his investigation. In October, the then Economic Secretary to the Treasury told the Treasury Committee that the previous Labour Government might consider compensation for some victims if a grave injustice had occurred.

In January 2002, policyholders backed a compromise package. In March 2004, the Penrose report blamed Equitable Life’s management for the whole affair. Following the report’s publication, the Government ruled out compensation and were accused in this House of abandoning policyholders. In April, the parliamentary ombudsman announced that she would reopen her investigation.

In 2007, the European Parliament called on the UK Government to compensate policyholders. In January 2008, Equitable agreed to pay an undisclosed sum to 407 with-profits annuitants who launched proceedings in 2004. The ombudsman’s report was published in 2008. The previous Government said that they would respond by the autumn. When the deadline was missed, the then Prime Minister said that they would respond before Christmas. However, they did not respond until the new year.

In August 2009, Sir John Chadwick published his first interim report, and in March 2010—more than a year after his appointment—he published his third and final interim report with a promise of a final report in May 2010. That date was subsequently extended to July.

I go through these events in chronological order to demonstrate the pain that the victims of Equitable Life have had to go through. This is a true human tragedy. The hon. Member for Leeds North East talked about the e-mails and letters that he has received from his constituents, and the same is happening in all our constituencies.

The Government’s offer is a very good one. My hon. Friend the Member for Cardiff North (Jonathan Evans) said that, at best, he expected them to offer up to £1 billion. Many colleagues and I voiced our concerns the last time we debated this matter in the Chamber. When one makes a pledge, one must try to honour it.