Equitable Life

Stephen Timms Excerpts

Thursday 26th February 2015 Commons Chamber

[Stephen Timms (East Ham) (Lab)]

I wish to acknowledge, again, as has been done throughout this good debate, the extent of the hardship and anxiety that all too many people have endured as a result of the failure of Equitable Life. I, too, pay tribute to the hon. Members for Harrow East (Bob Blackman) and for Eastbourne (Stephen Lloyd) and my hon. Friend the Member for Leeds North East (Fabian Hamilton) who have led the all-party group, spoken in the debate and championed the cause of the victims of the Equitable Life collapse over the years, and to others like them. Like the hon. Member for Leeds North West (Greg Mulholland), I also want to pay tribute to EMAG for its tireless campaigning on behalf of so many people who have lost so much. Its campaign has won real sympathy and support in Parliament and among the wider public.

My hon. Friend the Member for Coventry North West (Mr Robinson) rightly pointed out that the hon. Member for Bromley and Chislehurst (Robert Neill) seemed to be a little unsure of the history of this case. The problems at Equitable Life occurred between 1990 and 2001, so almost all occurred under the regulatory arrangements in place before the creation of the Financial Services Authority. The previous Government, of whom I was a member, issued an apology in January 2009 to policyholders, on behalf of the public bodies and the successive Governments responsible for the regulation of Equitable Life between 1990 and 2001 and for the maladministration that took place.

The consistent argument of EMAG has always been that the losses incurred by Equitable Life members are due to maladministration, as opposed to the bad investments and rash actions undertaken by Equitable Life. As we have heard in the debate, EMAG felt vindicated by the ombudsman’s reports. The previous Government did not agree with that view—with the view of the ombudsman. Members of the current Government stated clearly during the election campaign —we have heard about the pledges that were widely signed by Government Members—that they did agree. In government, however, they have not delivered.

The previous Government recognised that many policy- holders were disproportionately affected by the events at Equitable Life, and on that basis announced a commitment to a payments scheme to help. The ombudsman proposed a scheme entailing a case-by-case review, looking at 30 million investment decisions by 1.5 million people over 20 years. The ombudsman thought that would take two and a half years, but others thought it would be more. The previous Government asked Sir John Chadwick to advise on a simpler scheme. His report in July 2010, after the general election, referred to

“the obvious impracticability—if not impossibility—of determining these questions on an individual basis”.

The new Government, elected in 2010, explicitly accepted the ombudsman’s recommendation. Indeed, today’s motion, which I shall address in a moment, congratulates the Government on accepting the ombudsman’s recommendation in full. However, that announcement having been made by the new Government, the ombudsman then wrote to every Member of the House in July 2010, saying:

“In the light of the new Government’s commitment to implement”

my

“recommendation in full, the approach embodied in the Chadwick report has thus been overtaken by events and cannot provide a basis for the implementation of the recommendation.”

She said that her proposal and Chadwick were irreconcilable, but Chadwick, as we have heard in this debate—the hon. Member for Leeds North West mentioned this—was in fact what was done. During the election campaign in 2010, the then Opposition spokesman went around the country promising that, if elected, the Conservatives would deliver on the ombudsman’s recommendation. During the campaign, EMAG asked candidates to sign a pledge. The hon. Member for Harrow East was telling us that Conservative candidates were encouraged to sign this pledge. It said:

“I pledge to the voters of this constituency that if I am elected to Parliament at the next general election, I will support and vote for proper compensation for victims of the Equitable Life scandal and I will support and vote to set up a swift, simple, transparent and fair payment scheme—independent of government—as recommended by the Parliamentary Ombudsman.”

More than 90% of Conservative Members signed that pledge: the Prime Minister did, the Chancellor of the Exchequer did. Every Liberal Democrat MP signed it, including the Deputy Prime Minister, and Equitable Life members and EMAG expected that once the coalition took office it would be delivered, but it was not. Not surprisingly, EMAG felt and still feels utterly let down by so many who signed that pledge in 2010 and did not deliver.

My hon. Friend the Member for Leeds North East referred to his amendment in the House in November 2010. I was just looking through the list of the 76 Members who voted for it, which includes the hon. Members for Harrow East and for Eastbourne, and of course my hon. Friend the Member for Leeds North East, but it was mostly Labour Members who voted for it. Hardly any of the 287 Conservative Members who signed that pledge voted for my hon. Friend’s amendment.

The Government formally accepted the ombudsman’s recommendation, but described Sir John Chadwick’s recommendation as one of the building blocks for a solution. That infuriated the ombudsman who argued that as the Government had accepted her recommendation, Sir John’s report was no longer relevant. It is worth looking again at what the ombudsman recommended. She wrote:

“My second—and central—recommendation is that the Government should establish and fund a compensation scheme, with a view to assessing the individual cases of those who have been affected by the events covered in this report and providing appropriate compensation. The aim of such a scheme should be to put those people who have suffered a relative loss back into the position that they would have been in had maladministration not occurred.”

No one would claim to the House that that is what has been done. The hon. Member for Southend West (Sir David Amess) made the point—the ombudsman’s recommendation has not been delivered—so I am a little puzzled, if I can cavil, as to why the motion invites us to welcome the Government’s acceptance of the ombudsman’s findings in full, given that they certainly have not been implemented.

Legislation was enacted in 2011 for a scheme. It is not an easy thing to fashion a scheme that is both fair to members and protects the public purse. The Government came up with a scheme that was reasonable, although it fell far short of what was hoped for. I am sure that other Members who have spoken have seen the film on the EMAG website, “Time for the Treasury to Settle its Debts”, which features quotes from both the Conservative and Liberal Democrat manifestos—commitments referred to by my hon. Friend the Member for Airdrie and Shotts (Pamela Nash) and by the right hon. Member for Arundel and South Downs (Nick Herbert) earlier in the debate. The Government therefore formally accepted the ombudsman’s recommendations, but instead implemented Sir John Chadwick’s recommendation.

We all hoped that the new scheme would administer payments effectively and efficiently. The Public Accounts Committee has been critical of the administration of the scheme, referring to a series of administrative failures, including delays in making payments to policy holders and poor customer service. Then in the March 2013 Budget the Chancellor announced some welcome limited compensation for those who bought their with-profits annuity before 1992.

Many people have suffered, in some cases a great deal, as a result of the failure of Equitable Life. The hardship suffered is not in doubt. We support the steps that Ministers have taken to provide some compensation, but it falls very far short of what Equitable Life members thought they were being promised by Conservative and Liberal Democrat Members during the election campaign.

The Minister who will reply to the debate today signed that pledge. She made a commitment to her constituents to support and vote for the full compensation that the ombudsman called for. It is for her to explain to the House and to all those who have lost so much why that pledge has not been delivered.