Equitable Life Policyholders: Compensation

Peter Dowd Excerpts

Thursday 23rd March 2017 Commons Chamber

[Peter Dowd (Bootle) (Lab)]

First, I should like to associate myself with all the comments that Members have made about the dreadful events that occurred yesterday. I send my condolences to the families of those who died and I wish a speedy recovery to those who were injured.

This has been an incredibly thoughtful and considered debate on both sides of the House. I should like to thank the hon. Member for Harrow East (Bob Blackman) for bringing this subject before us today. He has devoted a huge amount of time and commitment to this issue over the years. He and my hon. Friend the Member for Leeds North East (Fabian Hamilton) have pursued it doggedly, and I would like to thank them for that. The hon. Member for Harrow East set out the situation clearly today. Words such as “scandal” and “confidence” have been thrown in during interventions, and they sum up the issue for many people. I thank the hon. Gentleman for setting out the landscape for us today.

I should also like to thank my hon. Friend the Member for Leeds North East, who said that there was a moral duty to compensate the hundreds of thousands of people who have been affected over the years. He said that this was a moral issue and a question of trust in the state, and I think that that resonates with many of us. The hon. Member for Bromley and Chislehurst (Robert Neill) reminded us that people had been encouraged to save, and that that was the right thing to do. He said that they should not be dis-benefited as a result of that now. He also talked about the catastrophic regulatory and company errors that were made—I shall say more about that later—and about the alarm bells that were ringing. He said that the Government’s providing the necessary resource would be a gesture of confidence for the public.

The hon. and learned Member for Edinburgh South West (Joanna Cherry) also raised the issue of the failures in the system, and said that the unfairness was continuing. She spoke movingly about her constituents’ experiences, and about the trust that people must have in the system. The hon. Member for Stafford (Jeremy Lefroy) talked about equity, and I think that he probably meant equity not only with only a big E but a small one. He said that the regulations should not only be carried out but be seen to be carried out. He also talked about confidence and trust in the system, and the question of long-term security through confidence in the regulatory process.

[Sir Desmond Swayne]

It is alleged that when Gordon Brown was put under pressure by members of his own party in the early 2000s to compensate the policyholders, he retorted, “These aren’t our people.” Whether that is true or not, would the hon. Gentleman accept that they are very much his people, as indeed they are ours as well?

[Peter Dowd]

I have no doubt whatever that these people are all our people.

My hon. Friend the Member for Ellesmere Port and Neston (Justin Madders) talked about cross-party support and about the appropriate action that the Government need to take. He said that policyholders were still being short-changed. He, too, talked about the restoration of trust and confidence in the system, and referred to the WASPI women. He said that the erosion of confidence could cost more in the long run, and that justice delayed was justice denied. The hon. Member for East Renfrewshire (Kirsten Oswald) talked about her now elderly constituents who are in distress, and about the failed and toothless regulatory system. That saga cannot continue. The hon. Member for Strangford (Jim Shannon) talked about his constituency and looked to the Minister for solutions, saying that people are justified in their pursuance of full compensation.

[Mr Stewart Jackson (Peterborough) (Con)]

The hon. Gentleman is making a characteristically erudite speech. Does he agree with me, and possibly the hon. Member for Angus (Mike Weir), that it is important to redouble our efforts at the opposite end of the spectrum? It is imperative that young people receive financial education so that they understand the long-term benefits of securing a long-term and sustainable pension income.

[Peter Dowd]

That is an excellent suggestion—I would expect nothing less from the hon. Gentleman—but if people do take out a pension, they must have confidence in the system.

The Minister has heard the clear and unambiguous views of many Members from across the Chamber. The Opposition will not make any cheap party political points on this matter. We give credit where credit is due to the coalition Government for setting aside £1.5 billion in a compensation fund for those who invested in the Equitable Life Assurance Society, most of which was invested in pensions. The compensation scheme was set to close in 2014, but the previous Chancellor extended it to December 2015, with the fund set to close mid-2016. EMAG—the group that represents the policyholders—has called since February 2016 for £2.7 billion of additional compensation, arguing that that is the shortfall, and many Members have made the same point today.

The Conservatives committed in their 2010 manifesto to make fair and transparent payments to Equitable Life policyholders, and the debate continues about what that amount should be, but £4 billion is the generally accepted figure. In the previous debate on this subject, the then Minister, the hon. Member for East Hampshire (Damian Hinds), stated:

“The improvements our economy has made since 2010 are greatly to be welcomed and show that the Government’s long-term economic plan is working, but the plan is not complete and we have some way to go to fully restore the public finances.”—[Official Report, 11 February 2016; Vol. 605, c. 1186.]

The current Minister will also note that. The Chadwick report of July 2010 concluded that relative loss should be defined as those who have suffered financial loss, pointing out that the Ombudsman recognised that losses in policy values were only partly due to maladministration and that the backdrop to cuts in policy values was a sharp fall in world stock markets that all life insurance companies were forced to respond to. Similarly, the report also argued that compensation should be assessed on the cost of maladministration as opposed to the size of investor losses. However, we are politicians and we can make different decisions and choices, and the Minister has been asked to consider carefully whether we want to make different decisions or choices.

I want to make an important point that has been pushed time and again about regulatory failure. There is a broad consensus among the parties that compensation should have been paid out by the Government for maladministration, which has happened to a degree, but we are unsure whether regulatory failure continues to exist. We have to ensure that the regulatory frameworks that operate in this country are continually stress-tested and reviewed again and again. The regulatory organisations need the appropriate resources to ensure that proper regulation occurs. We have to consider that 100 or 150 people are looking at 200 insurance companies. I am not suggesting that there should be more staff; I am saying that we should take the resourcing of regulatory authorities into account.

This scandal does not relate to one particular Government. As Members have said, it was ignored by regulators throughout the ’80s. With the knowledge that the regulatory system did not work, however, it is all the more important that we continue to check it. The second ombudsman report states:

“The central story of this report is that this robust system of [financial] regulation was not, in respect of the Society, implemented appropriately—that is, consistently, fairly, and with proper regard to the interests of those directly affected—by the prudential regulators and those providing assistance and advice to those regulators.”

That is absolutely salutary. We have had scandals in the past, such as with PIPs and the 1980s endowment scandal, and we must always keep a lookout for them. There is the growing concern about the sale of leaseholds and some new properties, which we should not allow to become a scandal. There is even the problem of airlines refusing to pay people compensation for delays, so it is important to keep looking at the regulatory system.

I want to conclude by pushing the question about confidence in the regulatory system. What efforts are the Government making to trace policyholders who have still not been found after the scheme has closed? Can we have an update on the number of people who have received compensation from the £1.5 billion? How many policyholders does the Minister estimate are still affected? I know that this is a moveable feast. What are the broader steps that the Treasury has to take to restore faith in the financial regulatory system? In summary, it may be that the Government are not legally required to pay the compensation, but many Members have pushed the moral imperative, and the Government will have to consider that matter today and in the coming months and years.