Equitable Life Policyholders: Compensation

Debate between Robert Neill and Simon Kirby

Thursday 23rd March 2017 Commons Chamber

[The Economic Secretary to the Treasury (Simon Kirby)]

I start by associating myself with the earlier comments about yesterday’s terrible events. I congratulate my hon. Friend the Member for Harrow East (Bob Blackman) and the hon. Member for Leeds North East (Fabian Hamilton) on securing this important debate. It is fair to say that their tireless work on this issue and their involvement in the all-party parliamentary group for justice for equitable life policyholders are of great importance to many of our constituents up and down the country. Hon. Members from across the House have done a great deal for their constituents on this matter. It has been a thoughtful debate, and I have listened carefully to the individual cases that have been mentioned. I am also grateful for the opportunity to set out what the Government have done to address this long-standing issue.

This topic has a long and well-documented history, which I do not propose to go over in my limited time. Instead, I will focus on the action we have taken to make payments to the people affected, and these figures are well known. The ombudsman’s findings assess the loss from Government maladministration to be £4.1 billion, and it is worth noting that that is significantly more than the evaluation commissioned by the then Labour Government. That report, known as the Chadwick report, rejected some of the ombudsman’s findings and concluded that only £340 million should be paid to policyholders.

This Government, in contrast and despite the constraints facing the public purse, have agreed that £1.5 billion will be made available, tax free, for payments to eligible policyholders. We consulted carefully on how that £1.5 billion should be paid out and reached the conclusion that we must pay the with-profits, or trapped, annuitants in full. As a result, that group will receive an annual payment for life, with the total cost of those payments assessed to be around £625 million. The £100 million contingency fund, which is often referred to, is to ensure provision for policyholders who exceed the life expectancy forecast. On the advice of an independent commission, the remaining £775 million of available funding was distributed pro rata to other policyholders, representing a payment of some 22.4% of their relative loss. I recognise that, for many, that was disappointing, but it is about striking the right balance while also taking into account the position of the public finances and fairness to all taxpayers.

The point about affordability was raised explicitly by the ombudsman in her report, in which she stated that it was appropriate to take into account the impact on the public purse when considering the funding of the payments. Indeed, the ombudsman has written to the all-party parliamentary group on Equitable Life about the level of funding and said that the Government’s decisions on affordability cannot be said to be incompatible with her report. I also understand it has been suggested that, as the economy improves, further funding should be made available to the payment scheme.

[Robert Neill]

I accept that the decision on funding is not incompatible with the ombudsman’s report, but that is not to say that the decision follows the spirit of the ombudsman’s report or that it is right.

[Simon Kirby]

I repeat that this is about striking the right balance between the position of the public finances and fairness to all taxpayers, and I will cover that point in more detail as I proceed.

I was talking about further funding being made available to the scheme, but with debt at its highest level since the second world war, tackling the deficit and getting debt falling are challenges that call for long-term discipline, which is why we have no plans to reopen the payment scheme or to review its level of funding.