Equitable Life

Stephen Lloyd Excerpts

Thursday 26th February 2015 Commons Chamber

[Stephen Lloyd (Eastbourne) (LD)]

I apologise for being a few minutes late at the beginning of the debate. It is a pleasure to co-sponsor it with my hon. Friend the Member for Harrow East (Bob Blackman) and the hon. Member for Leeds North East (Fabian Hamilton). I would like to compliment the latter on being as active during the last Government as he has been during this Government to fight the Equitable Life pensions corner. I pay tribute to him for that.

Many have spoken today, and this issue has been going on throughout the term of this Parliament and for many years before that. I am keen not to repeat what others have said. Let me make it clear what we are asking for through this debate, which is for

“the Government to make a commitment to provide full compensation during the lifetime of the next Parliament as the economy and public finances continue to recover.”

That wording was deliberate. We recognised, as we always recognised on the all-party parliamentary group, that we inherited a catastrophic economic situation so that providing the full amount of money would cause real problems. I believe that we have been reasonable and sensible all the way through. We understand the challenges faced by the Government, and the motion, as I have clarified, recognises that. We are fully aware of the challenges with our own economy and the global economy, so we are not asking for everything appropriate to be paid immediately. Rather, we advocate achieving doing that over the next few years as the economy recovers, which is fair and reasonable.

Ann Abraham was the parliamentary ombudsman all those years ago, producing the final report in 2008. She said:

“The central story of this report is that this robust system of 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”.

All of us who are present today, as well as the 200 or so members of the all-party parliamentary group, recognise that the ombudsman herself saw that the regulatory framework had failed, and we understand the financial challenges. However, the reason we are here, and the reason the all-party parliamentary group, with the support of EMAG, has not stopped lobbying and campaigning throughout the current Parliament—I was privileged to become its secretary literally within weeks of being elected in 2010—is that this is a matter of not just probity, but honour. The regulator failed, and this was Government regulation.

[Mr Mark Williams]

My hon. Friend is right to say that it is a matter of honour, but it is also a matter of urgency. He is making his case in a very modest way. May I invite him to endorse what was said earlier about the urgent need to settle individual claims—I think that the figure we heard was £115 million—and to address the issue of elderly people whose cases may well not be settled before they die unless we act now?

[Stephen Lloyd]

My hon. Friend is absolutely right. A number of people are now reaching an age when something needs to be done extremely quickly. A constituent of mine, Billy Murphy, a variety artist for 70 years, had been lobbying me patiently, and I had been supporting him, until he sadly passed away in January. He had been making contributions for many years, and he was a very good example of the people to whom my hon. Friend and many others have referred: decent, hard-working people who were prudent and put money aside. Those people have lost out, not because of their own inadequacy —not because they took a punt, or played the stock market—but because they invested in a well-established and respected pensions company that was regulated by the Government. It was regulated by the Government: that is the whole point, and that is why we as a nation, whichever Government are in power, have a real responsibility to do what is right.

[Chris Heaton-Harris (Daventry) (Con)]

I am a former Equitable Life policyholder myself. I had a company pension policy. I distinctly remember questioning the person who sold me the policy about how Equitable Life was regulated, and being told that there was no chance of its failing because it was acting well within the regulations that existed at the time.

[Stephen Lloyd]

That is a very important point. The whole system—from the perspectives of finance, prudence and proper rule of contract law—fell apart under Equitable Life. It completely collapsed. When something like that happens in a country like the United Kingdom, the duty of the Government, irrespective of some of the broader issues, is to provide proper compensation, because otherwise the whole fabric becomes extremely vulnerable.

I find it bewildering that none of the senior managers of the old Equitable Life—and none of the people who were in charge of the marketing side or the investment side—went to jail. If I, as a Member of Parliament, find that bewildering, I can imagine the profound frustration that so many of our constituents must feel, given that they were doing the right thing. This was a company that was regulated, regulated within an inch of its life—that was the whole point of the sector—yet, through no fault of their own, it collapsed, and, a few years later, the parliamentary ombudsman said that there had been a systemic failure of regulation. All those senior managers and executives, whom we all knew, must have been aware of what was happening.

I greatly appreciated what was said earlier by the hon. Member for Stretford and Urmston (Kate Green). When she bought an Equitable Life pension which she kept for a few years, all the marketing suggested that the company was rock solid and the purchase almost a steal. She was told “You really must invest in this.” Those people must have known what was happening, and I fail to understand why they were not penalised.

[Geoffrey Clifton-Brown (The Cotswolds) (Con)]

My hon. Friend is putting his case very articulately. When Mr Ralph Williams, along with a large group of my constituents, came to see me about this whole matter, one of the points that they made most strongly was that they were nearly all elderly. According to a parliamentary answer that I received on 10 February, only £990 million of the £1.5 billion total has been paid out. The Government are profiting from people who are dying at this very moment. Is it not only fair for everyone, including the annuitants, to be paid whatever the Government have agreed, in full, now?

[Stephen Lloyd]

I thank my hon. Friend for his powerful intervention, and I look forward to hearing what the Minister has to say in response to it. People are dying: there are no two ways about it, because of the age profile.

Another constituent of mine, David Stevens—a distinguished teacher for many years in Eastbourne, a former mayor and, as it happens, a Conservative councillor, who is also a very decent chap—lost out hugely in the Equitable Life debacle. He lost just under 80% of the worth of the pension in which he had invested for all those years.

This issue is about real people. That is why we are here, and why the all-party parliamentary group receives so much cross-party support. It is not just that we all know many constituents who are suffering and have experienced a profound loss despite having done the right thing, and despite being led to believe that the industry was heavily regulated. As I stressed at the beginning of my speech, I have believed—as others do—that this is a point of honour ever since I was elected in 2010, which is why I joined the all-party parliamentary group.

In a civilised country like the United Kingdom, people are often rightly encouraged to save and be prudent so that they are less of a burden on the general taxpayer. Hundreds of thousands of people did that on the basis of an absolute assurance that this was a properly regulated industry, and then lost out through no fault of their own. I have always believed that senior figures in the Treasury must have known that Equitable Life was wobbly, but many people have received 80% less than they should have received, and that is unacceptable.

I was delighted to speak today. I hope that both the Government and the Opposition will provide some succour.

[Several hon. Members]

rose—

--- Later in debate ---

[Robert Neill]

I am sorry to disagree with the hon. Gentleman, but he misunderstands what I was saying. Regardless of party, there is an obligation on Government, and I must say that the 13 years for which there was a Government of which he was a distinguished member cannot be entirely ignored. We all must pick up what we inherit from our predecessors, of whatever party, and we must put them right. That is the key and that is why I agree that having done the history we need to move on and find a sensible way forward.

[Stephen Lloyd]

One of our profound frustrations was that the ombudsman made the ruling under the previous Government, which was sitting on a heck of a lot more money than this Government.

[Robert Neill]

My hon. Friend makes an entirely fair point. This should all have been sorted out before the Government came on to the scene. The question of who was to blame and why ultimately requires almost a Crichel Down sort of approach—we must all accept responsibility for what happens under regulators who were not politicians. We must accept that it was done and must now resolve it. Had it been resolved sooner, there might have been more money around to deal with the issue. However, given where we are now and that the economy is improving, we can certainly do justice to people through a sensible series of staged payments, starting with those who are in the greatest need and who are most vulnerable. It is reasonable to ensure in the course of the Parliament that proper justice is done.

Let me give a sense of the impact on individuals. I have one constituent who makes the point that having invested sensibly his income has effectively been cut by some £20,000 a year. To a pensioner, that is an awful lot of money and they have had to downsize from their long-established family home. Another constituent has an acknowledged loss of £61,000 and is some £47,000 adrift with the payments out. That is not fair for somebody who has worked hard and is now in no position to supplement their income for the future.

Another very elderly gentleman had to wait some 18 months—because, frankly, of ineptitude and lost correspondence—to even receive acknowledgement of his entitlement. He should not have to come to his Member of Parliament to escalate these matters. That is something that any sensible and well-run compensation scheme should deal with as a matter of course. I am sure we all hope eventually to overcome the difficulties for our constituents, but they should not be happening in the first place.

--- Later in debate ---

[Greg Mulholland (Leeds North West) (LD)]

It is a pleasure to speak in the debate. I congratulate my hon. Friend the Member for Harrow East (Bob Blackman), my neighbour the hon. Member for Leeds North East (Fabian Hamilton) and my hon. Friend and colleague the Member for Eastbourne (Stephen Lloyd). I am proud to be a member of the all-party parliamentary group for justice for Equitable Life policyholders, which has shown how powerfully we can campaign when we do so collectively and collaboratively on a cross-party basis. I congratulate the co-chairs and officers for leading us in that endeavour.

I start by welcoming the progress that has been made. I remember the early meetings that took place towards the end of the last Parliament and the frustration that, at that stage, there was no compensation at all. We finally got the announcement of compensation, and I welcome the fact that payments surpassing £1 billion have now been made to 896,367 policyholders. That clearly represents great progress, but the clear message from the House today is that it is not enough. This debate itself shows that this is not the end of the matter, however convenient it might be for the Treasury—either side of the election—were that to be the case.

I strongly support the motion today and I shall carry on campaigning on behalf of my constituents as part of the group. About 40 of my constituents have raised this matter with me over the past few years, and many have told me of the hardship that they have experienced. Virtually none of them are wealthy people. They are people whose modest and very well planned retirement incomes have been drastically affected, and that has had a huge impact on their quality of life at a time when they should not have to face that and can do nothing about it. I pay tribute to all of them, and to the way in which they have campaigned as members of the Equitable Members Action Group. They include Ray and Marjorie Dunn, who have worked closely with me and played an important role in bringing people together. It has been a pleasure to work with them and all my constituents.

[Stephen Lloyd]

Would my hon. Friend also acknowledge the outstanding work that the members of the Equitable Members Action Group have done for us in Parliament? They have kept us informed and provided a secretary, and they have ensured that we pulled together on their behalf.

[Greg Mulholland]

My hon. Friend makes an important point. EMAG has done a wonderful job. Working together, inside and outside the House, has been an exemplary way of getting positive change.

One thing has not been raised in this debate so far and I am pleased to raise it strongly, as a member of the Public Administration Committee in this Parliament. One contributor today said it was disgraceful that neither the previous Government nor this Government had fully abided by the clear view or the will of the ombudsman, because they thought, “What’s the point?” I urge right hon. and hon. Members to look at the Public Administration Committee’s reports in this Parliament, because we are calling for a radical overhaul, part of which should be that Governments are bound by such decisions so we would never have this nonsense.

We have an absurd situation, because we are talking about the Parliamentary and Health Service Ombudsman, with the responsibility to Parliament. The Public Administration Committee has a view, as the Select Committee that oversees the ombudsman, and it wants a radical overhaul, The ombudsman’s office wants a radical overhaul, as does the ombudsman herself and the public, but we cannot have one because Parliament cannot reform its own ombudsman—only the Government can do so because it requires primary legislation. That is absurd and we need to find a way to enable Parliament to introduce legislation for matters that are parliamentary and not to do with the Government. I urge the Government in the Parliament—whoever is in government—to listen finally to that, to let go and allow Parliament to reform its own ombudsman in a way that is so clearly needed.

I am glad that this Government have come up with more than Sir John Chadwick proposed, which we all strongly said was not enough. I am also pleased with the campaign launched in October 2013 to find the 400,000 lost victims of the Equitable Life scandal. There are now approximately 142,000 policyholders who are due a payment but the scheme has not yet been able to trace or validate their address, so I hope that work will continue. This is taking too long, given that these people are in their retirement, need this money now and simply cannot wait. Tragically, some of them have died, and some will die without having had the chance to get that money they are clearly owed as a result of the maladministration and lack of regulation.

What is particularly galling is that there has been a double failure of regulation: the failure to regulate the banks properly led to the catastrophic collapse in the banking sector, which then led to vast amounts of money going to bail out those banks, and that is one reason there is not the money in the pot to compensate these people. That is a bitter pill to swallow, which is why there is no justification for not backing today’s motion and not coming forward, finally, after all these years, with the solution that is clearly the right and moral one.

Let me give an example to illustrate that point. After the giving of £620 million to 37,000 annuitants, 945,000 Equitable Life policyholders have shared the remaining £775 million, which of course is the 22% of their losses. Yet when we look at how much money has gone into the banking sector—we still have publicly owned banks—we see that there is a discrepancy that simply does not sit right and must be addressed.

We must finally draw this matter to a close. We must finally see a fair and final resolution. I share the passion of right hon. and hon. Members in not wanting to have to debate that; we must not be debating this issue at the end of the next Parliament. I hope we shall see some progress in the Budget. It is realistic to say that it will be some and not all—the latter would not be realistic—but it absolutely must be in the next Parliament. Let us now have a cross-party convention, let us take this out of the electioneering and have a genuine, firm policy commitment that the next Government will honour this pledge, as should have been done. It is an obligation on the British state, an obligation on this House and an obligation on this Government and the next one. It is an obligation that must finally be honoured.