Equitable Life (Payments) Bill

Richard Fuller Excerpts

Wednesday 10th November 2010 Commons Chamber

[Mr Hamilton]

I thank my hon. Friend for making that very good point. We are talking about many hundreds of thousands of policyholders throughout the United Kingdom, but we know that there are about 37,000 or so post-1992 with-profits annuitants. We think there are about 10,000 pre-1992 such annuitants, but the further back we go the fewer there will be, so if it was a difficult, time-consuming exercise to work out relative losses for all policyholders, which it certainly was, which is why Sir John Chadwick was engaged, it will surely be a much easier exercise for the far fewer people who are with-profits annuitants prior to 1991. My hon. Friend’s point goes some way to answering the question.

[Richard Fuller (Bedford) (Con)]

I thank the hon. Gentleman for giving way again. This has been a long-standing issue, and perhaps he can help some of us who are new to the House. He mentioned a total of £100 million from subsequent years’ Budgets, plus £100 million from reserves to be allocated to pre-1992 annuitants who are not covered in the proposals. Is he making an estimate, or is that sum firm is in his mind? That is a key issue. The concerns expressed about computer records do not stand up against a point of principle, but it is important that we have a sense of how firm and solid the hon. Gentleman’s understanding is of the sums that might need to be paid.

[Mr Hamilton]

The hon. Gentleman makes a very good point, and I cannot give him a precise answer. The figures that I have quoted are estimates I obtained from the Equitable Members Action Group, which has quite a lot of good people working for it—people who have been in the financial services industry. I go on their expertise. This is the best estimate that we can gain.

The reality is that many of the annuitants are quite elderly. It is unlikely that in five years we will have the same number we have now. We already know, for example, that every single day since the disaster happened 15 policyholders throughout the entire spectrum of Equitable policyholders have died. We can therefore assume, unfortunately, that more will no longer be with us in the years to come, so the amount of money will be a diminishing sum. The best estimate that we can gain is £200 million, and that estimate comes from EMAG.

--- Later in debate ---

[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.

[Richard Fuller]

Like many of us, my hon. Friend is wrestling with this question of fairness and with the political obligation to find a fair payment scheme that was mentioned in the Public Administration Committee and that many of us have signed up to. Hon. Members from both sides of the Committee are caught between wanting to praise the Minister for the swiftness of his recommendations—we praise him for that—and finding, in these difficult times, £1.5 billion. We often talk about that figure in comparison with the Chadwick number. However, does my hon. Friend not accept that we should view the figure with respect to what the Government themselves have said about policyholders’ relative loss, which Towers Watson estimated at, I think, £4.3 billion? Does £1.5 billion represent meeting our obligation of fairness if it is set against the relative figure of £4.3 billion that the Government themselves have accepted?