Equitable Life (Payments) Bill

Debate between Stephen Timms and Rob Wilson

Tuesday 14th September 2010 Commons Chamber

[Stephen Timms]

Let me make a little progress and then I will gladly give way again.

I want to go back over the events of the period since 1990. The problems of Equitable Life occurred between 1990 and 2001. Lord Penrose concluded that it was principally the society’s own actions that precipitated its downfall in the summer of 2000, but that regulatory system failures were secondary factors. The view of the previous Government, and my own, is that any scheme of payments needs to reflect that. Regulatory factors certainly did contribute: for example, a reinsurance treaty entered into by Equitable Life did not justify the credit that the company’s regulatory returns took for it in 1998 to 2001, so the returns gave a misleading picture of the society’s regulatory solvency position. Equitable Life’s regulatory returns in 1990 to 1996 gave a misleading impression and should have been queried by the public bodies with regulatory responsibility at the time—but they were not.

I have referred to the clear apology to policyholders given by my right hon. Friend the Member for Normanton, Pontefract and Castleford (Yvette Cooper) when she was Chief Secretary in January 2009 on behalf of the public bodies and successive Governments responsible for the regulation of Equitable Life for the maladministration that took place. My right hon. Friend the present shadow Chief Secretary did the same. I have yet to hear, however, any apology from Conservative Members for the shambolic system of financial services regulation that preceded the establishment of the Financial Services Authority. As many will remember, we had numerous little regulators of differing characters and sometimes overlapping powers. The deregulated financial markets of the early 1990s made a great deal of money for some, but, as we are reflecting on today, brought misery to many others. That was when, under the Tory watch, things started to go very badly wrong at Equitable Life.

[Mr Rob Wilson (Reading East) (Con)]

May I remind the right hon. Gentleman what the former Chief Secretary said when she was in charge of this matter? She said that she would compensate only policyholders who had suffered disproportionately. There was no timetable for that compensation, and there was no explanation of what “disproportionately” meant. Is it still the view of the right hon. Gentleman’s party that policyholders should be means-tested?

[Stephen Timms]

My right hon. Friend the Member for Birmingham, Hodge Hill made it clear before the election that he thought that that was entirely inappropriate, so the answer to that question is no.

Parliament has recognised for many years that it is not generally appropriate for the taxpayer to pay compensation even when there is regulatory failure. The responsibility to minimise risks and prevent problems from occurring in a particular financial institution lies first and foremost with the people who own and run it. The Financial Services and Markets Act 2000 reaffirmed the long-standing exemption of financial regulators from liability for negligence in the courts. There would be serious repercussions for the taxpayer, and for the relationship between Government and financial markets, if the taxpayer were to provide a remedy for all losses every time the regulator failed to prevent a financial institution from getting into trouble.