Equitable Life (Payments) Bill

Jonathan Evans Excerpts

Wednesday 10th November 2010 Commons Chamber

[Jonathan Evans (Cardiff North) (Con)]

I have no reluctance in paying tribute to the hon. Gentleman for his independence of thought and the campaign that he has waged on this issue. He has been not a lone voice, but one of very few Labour voices addressing the matter. On pre-992 annuitants, how on earth could one calculate what their losses might be as at that time, bearing in mind the fact that it is very likely that in the late 1980s and early 1990s bonus payments that were probably much larger than was warranted, given subsequent events, were added to their asset share? In other words, they might well already have been overcompensated.

[Mr Hamilton]

I thank the hon. Gentleman for his kind words. I hope that in continuing my comments I shall answer his question.

I have long believed that the Equitable saga is a moral issue for us in Parliament. We sought, through the Financial Services Authority, to regulate financial institutions such as Equitable so that those who invested their valuable savings to ensure their future income were protected against fraud and maladministration. Our own ombudsman, Ann Abraham—she works for us—called the failure to regulate Equitable “catastrophic” and pointed to examples of savers encouraged to invest with that company long after it clearly could no longer meet its obligations.

If we as a nation want to encourage people to save and to provide for their retirement and old age, in addition to what they will receive in state pension, it is essential that the companies offering those savings products can be trusted and relied on. With hindsight, we can see that Equitable clearly could not deliver to the hundreds of thousands of investors who trusted it and those people have been badly let down as a result. We had an obligation to ensure that that could not happen and we now have an obligation—indeed, a duty—to ensure that those who have lost out are fairly compensated for all their losses. This matter is above crude party politics; it is an obligation to which 380 sitting MPs signed up before the last election when they put their names to EMAG’s pledge. We must not let the policyholders down now.

Let me relate some heartbreaking cases that will illustrate better than I can just how people have suffered as a result of Equitable’s failure. One of my constituents, Mrs B of Leeds, has written:

“I signed for my With Profits Annuity in March 1991, investing £57,000. I am really suffering just now with my husband now being disabled and I am still trying to work four days a week to make ends meet. I receive only £141 a month from Equitable and it will continue to reduce. Surely all With Profits Annuitants should be included in the compensation! Have I been harbouring false hopes all these months? If so, there does not seem any point in my continuing to write to my MP or the Prime Minister.”

Another policyholder, Mr D, who is not a constituent of mine as far as I am aware but will be a constituent of somebody in the House, writes:

“In his letter of 20 October Mark Hoban refers to the government’s concern with the plight of the WPAs. However, he fails even to mention the Government’s decision that those who started to receive their annuities before September 1992 are to get nothing. This is in spite of the fact that they too have not been allowed to get out, are continuing to suffer, year by year, reductions in their annuities and are older than any of us.

Fortunately Paul Braithwaite [the Secretary of EMAG] perceived from the first what was going on and has placed the matter of the treatment of the pre-September 1992 WPAs at the top of the agenda for a judicial review. However”—

this is the crux of what Mr D says—

“I think our MPs are fair minded enough to perceive for themselves how unjust the proposed action of the Government is. I am writing to my MP straight away.”

Whoever that might be should look out for the letter.

Once an annuity has been purchased it cannot be sold or changed, so the with-profits annuitants who took out annuities before the September 1992 cut-off date are trapped.

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[Jonathan Evans]

I am grateful to the hon. Gentleman, who is being extremely generous in giving way. I fully accept the moral argument that he is putting forward. That is why I was a signatory to the pledge as well. In response to the question I asked earlier, he certainly has a point about taking back the date to 1991. His amendment, though, would go back well before that, but he has not made the argument for going beyond 1991. My second question was how he would compute the compensation. That must be a central question, and in his argument so far I have not heard an answer to that.

[Mr Hamilton]

I thank the hon. Gentleman for his intervention. First, there would be relatively few annuitants from further back in time. Clearly, a person who retired in 1981 or 1985 would be getting on a bit in years now, so only a small number of people would be involved. Secondly, Equitable must have records showing what bonuses were paid at different times.

The further back the scheme goes before 1991, the fewer annuitants there will be who demand or need that compensation, but the need will be greater because of the frailty and the loss in the value of those annuities since then. Since 1991, those annuitants, even though they may have had bonuses before that, continue to see a decline because of the maladministration, which affects them as much as it affects post-1992 annuitants. I hope I have at least partly answered the hon. Gentleman’s point.

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[Mr Hamilton]

I thank the Financial Secretary for clarifying that point, which somewhat contradicts what I said earlier about the diminishing amount of money.

The best estimate that EMAG can give us is £200 million for the 10,000 existing pre-1992 annuitants. I confirm that I wish to press my amendment to a vote, and simply conclude that we owe some of our most frail and vulnerable pensioners no less. I urge all Members to support my amendment.

[Jonathan Evans]

I am very pleased to have the opportunity to participate in this debate, but may I begin by declaring an interest? I am the chairman of a life insurance company, but I have no connection whatever with Equitable Life, financial or otherwise.

The hon. Member for Leeds North East (Mr Hamilton), alongside many Conservative and Liberal Democrat Members prior to the election, fought hard to put forward the cause of Equitable Life policyholders, and I am pleased and proud of the position that my colleagues and the Minister adopted. Many of us, in the lead-up to the election campaign, signed a pledge to seek to put into operation a number of factors. The first was the recognition of all the individual provisions that the parliamentary ombudsman put forward. The hon. Gentleman will know that the previous Government only partially accepted the ombudsman’s report, and I am very pleased and proud of the fact that the Minister fully accepted all its points. I rather wish that EMAG had been a little more generous in its praise of him for having done so.

Secondly, the compensation that has been put forward will come as a disappointment to some, but the ombudsman made it clear that we had to take account of pressures on the public purse at the time. When we heard Sir John Chadwick’s proposals, there was virtual unanimity among those newly elected Government Members that £400 million was completely and utterly inadequate. I thought that the Government might put the figure up to about £1 billion and hope for the best, but we ended up with £1.5 billion.

[James Morris (Halesowen and Rowley Regis) (Con)]

Does my hon. Friend agree that we would not be in this situation, or have to have this conversation, if it had not been for the delay imposed by the previous Government?

[Jonathan Evans]

That is true, and the record of the outgoing Labour Government in that regard is inglorious, but I do not want to be partisan. In essence, Equitable Life policyholders do not want us endlessly to bash the Opposition; they want to know which way we can go forward. So I shall turn my remarks to the specific points made by the hon. Member for Leeds North East. He made a good moral case for not excluding people who ought properly to be included in the category to whom compensation could be paid, but, as I suggested in my intervention on him, some factors cause me some concern.

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[Stephen Hammond (Wimbledon) (Con)]

I have taken part in a number of these debates during my short period as a Member, and, unlike some hon. Members, I am not reluctant to praise the Minister. However, in my constituency surgery last Friday I saw an 80-year-old gentleman who accepts the points that my hon. Friend now makes, but makes the point himself that the pre-1992 group are still trapped and unable to take any action. Had they been able to take some action to mitigate or ameliorate their circumstances, they would have done so. My hon. Friend the Minister has done a great job in moving the issue forward so quickly, but I hope that he will at least listen to the concerns of the pre-1992 annuitants.

[Jonathan Evans]

I am grateful to my hon. Friend for that contribution. He approaches the issue with significant expertise, so he will know that, if we are to achieve justice, it is not just a question of treating all those pre-1992 policyholders in the same way as everybody after 1992. One would go back and assess the pre-1992 annuitants’ asset share to see whether they were paid 105%, 110%, 120% or 140% of asset share; and one would correct that, so that the pre-1992 and post-1992 annuitants were dealt with in a balanced way. The danger with the proposed approach is that there will not be that balance. It is already clear, from the question asked by my hon. Friend the Member for Bedford (Richard Fuller), that we do not have a basis for the figure of £200 million; it is a wet finger in the air in order to assess the situation.

The second factor that causes me significant concern is the lack of available actuarial information. I share all the concerns about the Chadwick process, and, although Sir John might have made an observation about the pre-1992 annuitants, he did not compute their liabilities. The danger, therefore, of being seduced by the strong arguments of the hon. Member for Leeds North East, is that we would enter into an open-ended commitment and have great difficulty realising its objective. During the debate, however, he has made a good case on behalf of those annuitants who go back to 1991. We should remember the judgment made by the ombudsman and her terms of reference. Most of the inquiries started looking at the period from 1999 onwards, but most of the condemnation about regulatory failure goes back to events prior to 1991. It is important that the Committee should take that factor into account when invited to say whether compensation should be granted going back very many years before that.

[Chris Leslie (Nottingham East) (Lab/Co-op)]

I should like to speak to amendment 2, which is grouped with amendment 1, tabled by my hon. Friend the Member for Leeds North East (Mr Hamilton) and amendment 7, tabled by my right hon. Friend the Member for Holborn and St Pancras (Frank Dobson).

In wishing you a happy birthday, Mr Evans, let me say that I do not have any registrable financial interests in the matter under debate. However, I want to place on record that 18 months ago, some while before I was returned to the House, I was occasionally commissioned to give advice and training on parliamentary and public policy matters, and on one occasion, I undertook a day’s work for a company whose clients included the former chief executive of Equitable Life; by then, of course, its fund had been closed for many years. I thought it important to disclose that encounter for the avoidance of any doubt. Although I had a day’s work indirectly related to Equitable Life some time before coming into Parliament, I have not had any financial or policy discussions on the matter subsequently.

I have held this brief for a couple of weeks, and it has been an extremely steep learning curve of reviewing history and policy that dates back well over 25 years, as my hon. Friend the Member for Leeds North East said. I was struck by the opening words of the House of Commons Library background note to the Bill:

“Describing the Equitable Life (Payments) Bill as the tip of an iceberg would be harsh on icebergs: at least they have 10% or so of their bulk above the water line. The Bill is but a tiny atoll below which lies the immense bulk of the Equitable Life tragedy.”

In general, I intend to be as supportive as I can of the Bill, as it is a positive step forward in the attempts to rectify a long and sorry saga. The amendment simply seeks to encourage the parliamentary ombudsman to

“report to Parliament on the implications for payments…of the findings of the Independent Commission on Equitable Life Payments, no later than one month after the publication of such findings.”

I do not want to go through the entire background that has brought us to this Committee stage today. By my count, eight separate inquiries, and possibly more, have done that, and there are conflicting and sometimes contradictory findings and accounts of what happened in the past and who should be responsible for rectifying the situation for policyholders. However, we know that in the spending review the Government accepted the ombudsman’s approach to maladministration and, more relevantly to this debate, to the framework for a compensation package. The Government say that they want to honour the interpretation of the ombudsman’s second report in full. That is their choice. There are clearly arguments in favour of that approach, as well as against it.

The Minister now places great emphasis—although it could be argued that he did so to a lesser degree before the general election, when there were a lot of loud campaigns on signing up to the EMAG pledge—on it being appropriate to consider the potential impact on the public purse of any payments of compensation in this case, as the ombudsman has said. The Treasury has concluded that it will initially focus on total relative loss as the basis for its payments and will cover those losses in full for post-1992 with-profits annuitants, to the tune of some £620 million. Some 37,000 individuals will be involved in that. That means that that group of with-profits annuitants will receive compensation equivalent to that which they would have gained had they invested in companies other than Equitable Life. However, because of the cap of about £1.5 billion that the Treasury is placing on the total payouts, the other 1 million or so policyholders, including annuitants with older policies—I presume, although I may be wrong about that—will have to have their compensation for relative loss adjusted to fit within the envelope available.

The Independent Commission on Equitable Life Payments, which is chaired by Brian Pomeroy, has been set up by the Minister to advise on the allocation of compensation to policyholders other than those with-profits annuitants, who will be getting 100% compensation. I am conscious of the words of Sir John Chadwick when I think through the technical challenge of administering a compensation payment scheme; it is important that its design and delivery are clear and efficient. I hope that we are not on the brink of a further failure that compounds the problems of the majority of policyholders by opting for a compensation scheme that could be so complex and opaque that it might risk grinding to a halt. We need a scheme that works in practice.

If the Minister is opting for the ombudsman’s approach—as I say, that is the Government’s choice—there are questions that need to be answered, and I would be grateful if he could reflect on those when he makes his comments. First, exactly how will the apportionment of the relative loss figures for other policyholders not receiving 100% compensation be calculated under the ombudsman’s approach, if we will not be following the Chadwick methodology given the Government’s acceptance of all 10 findings by the ombudsman?

Secondly, will the other policyholders—the vast majority—be classified into broad categories or subject to individual assessment of their cases? Will there be any burden of proof requirement on the other policyholders in the assessment of their relative loss, or is it likely that the compensation scheme will have some assumed automaticity in all cases? I ask that only because the ombudsman’s findings of loss are very specifically linked to a policyholder’s reliance on the regulatory return data. She said:

“I find that injustice was sustained by any policyholder who relied on information contained in the society’s returns between 1990 and 1996.”

I am trying to get a sense of precisely how that process will work.

Thirdly, how will the payment scheme take into account all the other maladministration factors for other policyholders that Sir John Chadwick’s methodology would not have covered, if we are following a classification scheme?

Whatever compensation scheme the independent commission eventually alights upon, it is an important starting point to establish that it is consistent with the Minister's intentions—in other words, that it encompasses all the parliamentary ombudsman’s conclusions. I gather that there are moves afoot by the Public Administration Committee to interpret whether the ombudsman’s model aligns with the payment scheme that eventually emerges. That might be a good idea, but perhaps it is a little circuitous. It would be far better, in my view, to give the ombudsman directly the right and the opportunity to say publicly whether the payment scheme is indeed in keeping with the spirit of her own findings. She could then say whether the total relative loss figures are accurate and whether the compensation scheme is fair, particularly given the controversy over the dates and whether some people will or will not be included in the 100% compensation for with-profits annuitants. The purpose of our amendment is simply to give voice to the ombudsman so that she can confirm her view.

It is worth noting at this stage that, far from granting the wishes of the Equitable Life policyholders regarding everything they wanted, the main pressure group formed to speak for their interests, EMAG, is angry and perplexed at the nature of the compensation scheme envisaged by Ministers and the constraints placed on the independent payments commission. EMAG says on its website:

“The independent Commission’s recently torn up terms of reference have not at this date”—

this was a week after the announcement in the spending review—

“yet been replaced.”

It says that the Minister’s letter of 20 October to the commission’s chairman

“makes clear that retrospectively the remit will now totally exclude”

the full class of with-profits annuitants. My hon. Friend the Member for Leeds North East alluded to that point. EMAG continues:

“So its remit now is to divvy up £775m between 600,000 and to suggest the prioritisation. This surely cannot be what the Parliamentary Ombudsman had in mind as the role for the independent Commission?”

Given this question mark over the parliamentary ombudsman’s intentions, we felt it important to table the amendment to try to give voice to that.

There is doubt about whether the compensation arrangements are as much in alignment with the ombudsman’s approach as the Financial Secretary would like to argue, and I hope that our amendment will give the ombudsman a chance swiftly to comment on the calibre of the scheme and clarify once and for all whether it fits with her approach. We believe that that can be done quickly, and there seems to us to be no reason why it could not happen within one month of the publication of the scheme’s proposals. There would not be any reason to delay payments, and it would aid transparency and confirm whether the Government’s arrangements via the commission’s payment scheme were the same as those envisaged by the ombudsman. Although amendment 2 may be a belt-and-braces approach, at this stage of the saga we need some cast-iron assurances all round.

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[Mark Durkan]

My point still stands: the test is a fairly easy one. The Chadwick report was so grossly inadequate as not to be a credible starting point for any Government. Many of us said that to the previous Government, including the hon. Member for Leeds North East (Mr Hamilton)—very bravely, loudly and consistently—and many of us have said it to this Government as well.

For us as Members of the Houses of Parliament, the test that many people will apply is: what regard do we have to the findings and recommendations of the parliamentary ombudsman? As the hon. Member for Angus (Mr Weir) stressed earlier, the public understand the parliamentary ombudsman to be a creature of Parliament and to have some weight and merit in Parliament’s considerations. However, the previous Government acted pretty dismissively towards the ombudsman. What we have in some of the amendments before us is an attempt to show clearly that this House will give proper weight to what the parliamentary ombudsman is saying.

We all received a letter from the parliamentary ombudsman about some of the Government’s proposals. Given that, is it wrong that we should reference the judgment of the parliamentary ombudsman—as the hon. Member for Nottingham East (Chris Leslie) is suggesting we do with amendment 2—perhaps as a way of moving on from the scandal and confusion that many feel surrounds the fact that the ombudsman was largely ignored by the Government and, in effect, by Parliament for so long?

[Jonathan Evans]

I am anxious to ensure that the hon. Gentleman does not undersell what the Minister has done. The hon. Gentleman will recall that every aspect of the parliamentary ombudsman’s report has been accepted by the Government and that, furthermore, the report said that whatever the overall compensation package should be, it had to take account of the impact on the public purse. Many of us on the Government Benches think that those are the two crucial tests.

[Mark Durkan]

That is what the hon. Gentleman is arguing. However, given that the money that we are talking about has been capped according to the Treasury’s judgment of what it believes is available—that means that the overall sum to be offered by way of remedy and redress will be a long way short of what all the other assessments say—I believe that it would useful for the Committee to accept an amendment that would allow us to ensure that the parliamentary ombudsman has some say in overseeing the measures. Under the circumstances, that is fair and reasonable, but if the hon. Gentleman is so content that the scheme as it stands meets everything that the ombudsman has said, he should see such an amendment as adding no particular stress or difficulty for the scheme. Such an amendment would be a way of offering public assurance after all the doubts that have been raised about how Government and Parliament have dealt with the issue.

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[Mark Durkan]

I thank the hon. Gentleman for that point, which quite properly brings me to amendment 1.

[Jonathan Evans]

I do not want to delay the hon. Gentleman, who is being very generous in giving way, but if he waits until Third Reading, he will hear what I have to say about the totality of the package.

[Mark Durkan]

What a trailer for Third Reading! We will all be waiting.

On amendment 1, the hon. Member for Leeds North East set out a compelling case for why it is not just the cap, but the cut-off that we need to be seen to address. We have seen in the past how dates set for various reasons have ended up creating unfair and unforeseen consequences that Parliament did not truly intend. That certainly happened with dates for schemes in previous pension Bills, for reasons that seemed reasonable and understandable to the House at the time. We are now struggling with the consequences that were never intended. We must be wary about such cut-offs.

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[Bob Blackman]

Clearly, if exorbitant bonuses were attached to certain policies, the policyholders would not be due compensation and they would not receive a penny piece. Remember, we are talking about compensation. We cannot take money off policyholders who have been receiving pensions. Parliament just cannot do that; it would be a retrograde tax and therefore unacceptable. Those who are due compensation should receive it, but those who are not due any would not receive any, and if they have benefited in the meantime, well, that is fine and dandy for them.

[Jonathan Evans]

In regard to the morality of the issue, I agree with many of my hon. Friend’s arguments. My concern, however, relates to the practicalities involved when people are policyholders with other companies. Many of them had large bonuses from the 1980s onwards, but get hardly any at all nowadays. We have to take account of this when we look at their asset share, compared with everyone else in the pool in a with-profits system. That is why many people believe that there is no future for with-profits business nowadays.

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[Mr Hoban]

The parliamentary ombudsman’s findings were clear: she said that the maladministration started in 1991, but that it would not have been obvious to policyholders until September 1992.

Let me deal with two issues that hon. Members should have take into account in assessing the point. First, as has been mentioned, there are challenges around getting information for the pre ’92 period. Secondly, there is the point made by my hon. Friend the Member for Cardiff North about the timing of losses. We recognise that pre ’92 with-profits annuitants were affected by how Equitable Life was run. Sir John Chadwick and Towers Watson looked into what those WPAs would have received from Equitable Life had there been no maladministration. They concluded that they received more from Equitable Life as a result of maladministration than they would have done had it been properly regulated. That was because Equitable Life paid out more to them in the early years than it would have done had there been no maladministration. Let me give an example to prove that.

If a with-profits annuitant had purchased their policy in 1989 and gained through that purchase an income of £7,200, by 1993 the policyholder would have been receiving an annuity of approximately £10,000 per annum. Part of that sum was a result of the bonuses that had been declared on the policy since commencement. It is recognised that Equitable Life was paying higher bonuses than it could afford during the late 1980s and early 1990s. If Equitable Life had not been over-bonusing during that period, Towers Watson has calculated that the policyholder would have received only £9,500 per year. It is a consequence of the maladministration that the policyholder is receiving £500 more than he or she should have during that period.

Equitable Life continued to overpay bonuses throughout most of the 1990s. As a result, by 2002 that policyholder was receiving £17,000 per annum. If the over-bonusing had not taken place, the policyholder would have received only £15,800, so he or she was still receiving more as a consequence of maladministration.

In 2003, Equitable Life cut the rate of annuity payments to its with-profits policyholders by about 20%. In the absence of maladministration, the value of payments to with-profits policyholders would also have been cut, although, owing to market performance, by only 18%. After the cuts in 2003, our example policyholder was receiving £12,900 per year from Equitable Life. Had there been no maladministration, he or she would have been receiving only £12,300. I hope that that example has helped to clarify the consequences of maladministration, namely that even after the cuts in 2003 policyholders are still receiving more than they would have if Equitable Life had been properly regulated. For a range of reasons, their plight is not as it has been represented.

The first question to be asked, then, is “When did maladministration affect policyholders and the decisions that were made?” The second relates to the practicality of extracting data pre-1992, which is well established and has been well aired in the Chadwick report and elsewhere; and the third concerns the consequence of maladministration in Equitable Life, which is that with-profits annuitants are receiving more over the lifetime of their policy than they would have received if that maladministration had not taken place.

[Jonathan Evans]

I was interested in the way in which my hon. Friend dealt with my point about over-bonusing, but I feel that he has undermined another point that I made: I suggested that it was not possible to make such calculations, but my hon. Friend has suggested that Towers Watson has done so. In a sense that also undermines the thrust of why the pre-1992 policyholders should be excluded. I had assumed that they might not have been disadvantaged and that it was too difficult to work out the numbers, but if Towers Watson has worked out those numbers and there is no relative loss, it seems a bit odd not to include them, at least for the purpose of calculating the position and telling them that there is no loss.

[Mr Hoban]

I was trying to make two points. First, those policyholders were excluded from the calculation of relative loss as a consequence of the ombudsman’s findings and her view on when maladministration had taken place. According to the example that I have given, they would not have suffered loss in any event. I am merely saying that, in my opinion, there is a strong case in principle for the exclusion of those policyholders, and in practical terms they have not suffered loss.

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[Mr Hoban]

That is an important point. I am sure that a range of issues will emerge as we move through the scheme’s design to payment. People who have had Equitable Life policies throughout the period and bought them post-September 1992 will receive compensation even if they have exited from Equitable Life’s current arrangements. I hope that that provides clarification.

[Jonathan Evans]

Will my hon. Friend take the opportunity, perhaps later, to issue a fuller statement on his very important announcement in response to my right hon. Friend the Member for Wokingham (Mr Redwood)? I intended to raise the matter on Third Reading. There is no doubt that many policyholders will be delighted to hear the news, and it should be made more widely available to all policyholders so that they are aware of it.

[Mr Hoban]

My hon. Friend is right. The old saying is that the best way of keeping a secret is to make a speech in the House of Commons. I am sure that those of my hon. Friends who are in contact with Equitable Life policyholders will take the opportunity to write to them, and I hope that the Equitable Members Action Group, which is the main lobbying organisation on behalf of policyholders, will also take the opportunity to pass the information on to its members. It is important information for them, and we will continue to make policyholders aware of it as we communicate further details of the scheme.

Before that series of interventions, I was reflecting on amendment 8, and I want to say a little about why we are treating the with-profits annuitants differently from others in regard to payments. We need to recognise that the nature of the policies of that particular group of people is very different from that of other Equitable Life policyholders. Their losses relate not just to what has happened in the past, but to what will happen in the future. They will continue to receive a stream of income over a number of years from their with-profits annuity policy. We are now able to match that stream of income with their historic losses and their future losses. It makes sense for them to receive their payments in a way that reflects the income stream that they have lost, which is why they will receive their losses in regular payments over their lifetime.

In the light of that, I hope that the right hon. Member for Holborn and St Pancras will decide not to press amendment 8 to a vote, because the approach that he suggests is not appropriate for with-profits annuitants. We are determined to make swift progress on making payments to other policyholders, however, and they will get lump sum payments that will be free of tax.

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[Chris Leslie]

I am glad that the Minister has been able to reiterate points that he did not make in his Third Reading speech. I do not necessarily want to reopen the box entirely, but it is important for both parties to recognise that mistakes have been made, and that things should and could have been done better by those on both sides. In particular, however, I think it is important not to gain the impression that failings did not occur on the watch of the Minister’s party. Lord Penrose found that Conservative Ministers

“argued against reform in the… 1990s”,

and that the United Kingdom “led the resistance” to Europe-wide attempts to update the third life directive. Those who argue that Labour alone fell short in respect of reacting to the Equitable Life debacle should realise that the ideological approach pursued by the Conservatives was absolutely central to causing the mess in the first place.

As Members know, the last Government would have chosen a different route to compensation. We were anxious that a poorly designed compensation scheme might entail a person-by-person review aimed at disentangling individual losses one by one, examining more than 30 million investment decisions by 1.5 million people over 20 years. That would have been a mammoth administrative task. Moreover, the ombudsman had implied that individuals would need to prove that they had relied on the regulatory returns and had been misled as a result. The last Government did not believe that such an approach could be feasible.

It was for those reasons that Sir John Chadwick was asked to explore a more realistic and reliable payment scheme methodology. He concluded that the Treasury should deal with the issue by grouping cases into about 20 broad categories of policyholders who were in similar circumstances. The payment scheme would then deduce the relative loss in each category in comparison with the outcomes of a basket of other policies that had not suffered from the same regulatory failings. The Government have clearly embarked on a different course, although they have taken up some of Chadwick’s pragmatic suggestions about the automaticity of compensation. We genuinely hope that that will work.

We are pleased that this short paving Bill is before the House, because we feel strongly that the matter should be resolved. The Committee stage gave us an opportunity to question the Government on several aspects of their approach, and I am glad that we have had an opportunity to draw them out further today.

Let me end by simply raising a question mark over the words of Ministers before May, when the general election took place, in comparison with their actions today. Many hundreds of thousands of Equitable Life policyholders—possibly as many as 1 million—were led to believe that in signing the EMAG pledge, Ministers were supporting a particular outcome that may not now arrive. Most Conservative Members signed that pledge. They pledged to their constituents 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.”

As the payment decisions are made in the next few years and the cheques finally start to arrive, EMAG members and policyholders who are not in line to receive 100% compensation for their full relative losses will have to draw their own conclusions as to whether the Government have fulfilled their promises. So far the signs are that many policyholders do not feel that those Members who signed the pledge are keeping their word. They feel that the scheme will fall short of proper compensation and a fair payment scheme.

[Jonathan Evans]

Will the hon. Gentleman give way?

[Charlie Elphicke (Dover) (Con)]

rose—

[Chris Leslie]

I will give way first to the hon. Member for Cardiff North (Jonathan Evans) as he has attended the entire debate.

[Jonathan Evans]

The hon. Gentleman seems to be suggesting that £1.5 billion does not amount to proper compensation. I came to watch the earlier debate when the Minister was the right hon. Member for East Ham (Stephen Timms), and he was standing by the Chadwick figure, but the hon. Member for Nottingham East (Chris Leslie) now seems to be saying that four times more than the position the Labour party were defending back then is not proper compensation.

[Chris Leslie]

The difference between the hon. Gentleman and me is that I did not sign the EMAG pledge. I always felt, as did many of my colleagues, that there were real and practical difficulties in raising constituents’ hopes in the way that the hon. Gentleman perhaps did. That is a matter for him and his constituents. It is up to him to convince them that the result of these deliberations has been to put in place full and fair compensation in accordance with the pledge. I am simply making the point that this is a matter of honour for those hon. Members who signed the pledge.

--- Later in debate ---

[Chris Leslie]

A reasonable point from the hon. Lady. All I am saying is that the pledge that some Members signed did not say explicitly, “As resources allow.” [Interruption.] No, it does not say that in the pledge. The pledge simply says that they will have a fair and transparent payments scheme. I doubt very much that the vast majority of those other policyholders who will not be getting the 100%—clearly it will be welcomed by those with-profits annuitants, who are receiving 100% of their relative losses—but may be receiving, I am told, between 15 and 20% of their relative losses will feel that hon. Members who raised their hopes are actually fulfilling them.

[Jonathan Evans]

I appreciate that the hon. Gentleman is new to his role, but I would have hoped that he had read the ombudsman’s report before representing the Opposition at the Dispatch Box. He would have seen that the ombudsman says that the compensation figure must take account of the effect on the public purse.

[Chris Leslie]

I completely accept that that is what it says in the detail of the ombudsman’s report, but it does not say that in the pledge that the hon. Gentleman signed. In an electoral context, he raised the hopes of many of his constituents. He may be able to face them and say, “Absolutely, I am fulfilling what I promised.” If he feels that and they are happy with it, they will re-elect him, and everybody will be happy and ride off into the sunset, but I have a feeling that some policyholders will continue to be discontented with the Government’s position. It certainly did not say, either in the manifestos or in the pledge that he signed, perhaps scribbled in a little addendum, “Oh, by the way, we are going to give you only a fraction of the £4.5 billion to £6 billion that you understand as the relative losses.” That is simply not there. I am not claiming, because I did not sign that pledge, to have raised those hopes, but Members on the Government Benches did.