Equitable Life (Payments) Bill

Mike Weir Excerpts

Tuesday 14th September 2010 Commons Chamber

[Mr Hoban]

The hon. Gentleman makes an important point. Speed is of the essence, and we want to make sure that payments start to be made as quickly as possible. There is quite a lot of work to be done before we get to that point; I will say a bit about that work later on.

[Mr Mike Weir (Angus) (SNP)]

rose—

[Ms Gisela Stuart (Birmingham, Edgbaston) (Lab)]

rose—

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[Mr Weir]

We cannot object to anything in the Bill, but the detail on quantum is not in it. Does the Minister intend to provide details on the scheme to the House so that we can debate it before it is introduced?

[Mr Hoban]

I shall come to that in a minute, but the Bill simply gives the Treasury the powers to make the payments. It is right that the Treasury takes those powers, but it needs to do so now so that we can move on to the procurement process and identify who will make the payments.

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[Mr Weir]

I am listening with interest to the right hon. Gentleman’s comments. As I understand it, the Labour party’s position is that it still supports Sir John Chadwick’s work. If that is the case, can the right hon. Gentleman confirm that Labour would support whatever compensation package Sir John comes up with, or would it follow the coalition and put an arbitrary cap on that?

[Stephen Timms]

Sir John has, in fact, reported. He did so in July. That was rather later than he was going to report; he would have reported in May, and my right hon. Friend the Member for Birmingham, Hodge Hill (Mr Byrne) said that we would have produced a scheme within two weeks. As I have said, our view would have been that we should proceed as we had intended, and as we set out before the election, on the basis of the report that we commissioned.

The new Government delayed publication of the report until July, and we still do not know what the scheme will be. We know almost nothing about the timetable, but I am afraid it will not be what EMAG has been demanding, which it thought current Ministers were signing up to when they signed all those pledges. A great many people feel very let down indeed.

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[Mr Mike Weir (Angus) (SNP)]

I am pleased to follow the maiden speech of the hon. Member for Congleton (Fiona Bruce). Ann Winterton will be a very difficult act to follow, but I am sure that the hon. Lady will be a fine representative of the people of Congleton in years to come.

On the Bill, the Scottish National party and Plaid Cymru have always supported the campaign to bring justice to the victims of Equitable Life. I am clearly pleased that we have before the House a Bill that will bring compensation a little closer, and we will support its Second Reading. The real problem, however, is that it simply sets up a mechanism for which a scheme can be introduced, presumably, through secondary legislation. I tackled the Minister on the question of whether the scheme would be debated on the Floor of the House, but I received no answer. Given the significance of the matter, it is important that it comes to the Floor of the House so that we can have a good look at the proposal.

Given the further fact that the independent commission is not due to report until early next year, it appears that the victims of Equitable Life will have to wait another year or so before they know what, if anything, they will receive in compensation. That is also a problem, as members still do not know the specifics of the scheme. The huge concern of my affected constituents is that recent Government statements point to a watered-down scheme that is not that different from what the previous Labour Government proposed, except for the innovation of an overall cap on payments. That proposal will cause fear among many victims because if that cap is imposed, it will heap injustice upon the great injustices that those people have already suffered.

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

Does my hon. Friend agree that it is essential that the scheme rules out the Chadwick report’s proposal of a payment cap for each policyholder, which would limit compensation to between only £400 million and £500 million?

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[Mr Weir]

The policyholders are entitled to due compensation, and I shall address that point in a moment.

I remind Government Members that the coalition agreement clearly states:

“We will implement the Parliamentary and Health Ombudsman’s recommendation to make fair and transparent payments to Equitable Life policy holders, through an independent payment scheme, for their relative loss as a consequence of regulatory failure.”

Will the Minister tell us how that statement can be reconciled with the letter that the ombudsman has sent to all Members, in which, referring to Sir John Chadwick’s recommendations, she states:

“I also explained to him the basis on which I had come to my conclusions and what my recommendation for compensation involved. I am very disappointed therefore to discover that Sir John has explicitly rejected those explanations and that assistance and has substituted his own interpretation of these matters without seeking my further comments.”

That is a fairly damning indictment of what is now proposed. I stated in the previous debate on the matter that the failure to support our own ombudsman brought great shame on the previous Parliament, but, if we do not act now to re-establish trust in the system and listen to what our own independent ombudsman says, it will bring shame on this Parliament as well.

Prior to the election the Conservatives were clear in their view, and in March the motion before Members specifically stated that the House

“calls on the Government to set a clear timetable for implementing the Ombudsman’s recommendations and remedying the injustice suffered by policyholders.”

Regrettably, that does not seem to be what is now proposed; the new Government seem to have pretty much jettisoned the ombudsman’s recommendations and adopted the process that the previous Labour Administration were putting in place—a system that the Conservatives roundly condemned prior to the election.

I do not quite share the indignation of Labour Members on this matter, because, if one reads carefully the speech given in the March debate from the now Minister, one discovers that the seeds of the current situation were already sown. He stated:

“The hon. Gentleman refers to the bill for compensation, but no one knows how big that will be. That figure will be part of the outcome of the process that the Government launched back in January last year. He will know, from reading the ombudsman’s report, that her recommendations on compensation had two important caveats—that payments to policyholders should reflect relative loss but that the impact of any compensation bill on the public purse should be borne in mind.”—[Official Report, 16 March 2010; Vol. 507, c. 744.]

It seems to me, however, that only the second part of that statement is now the overriding consideration, and that the question of the amount of compensation has little to do with relative loss, being concerned purely with the perceived state of the public finances. We have moved on from means-testing the victims to means-testing the Government before deciding the level of compensation.

The problem with that approach is that it sets a very dangerous precedent. The Government, through the regulator, were responsible for what happened at Equitable Life, and the maladministration that occurred led directly to the losses suffered by the policyholders. However, the Government are effectively going to cap the amount of compensation at what they think that they can afford and, worse still, as part of a comprehensive spending review that is expected to impose swingeing cuts on all Departments.

I wonder how I would get on if I drove my car into a Porsche, causing many thousands of pounds worth of damage, and said “Sorry for your loss, but I can only afford to pay a small proportion of the damage.” I suspect that any court in the land would give me very short shrift. It is a principle well established that those who have caused the damage are due to make recompense. That principle appears to have been watered down in the case of Equitable Life policyholders, and, as the right hon. Member for Holborn and St Pancras (Frank Dobson) said, that is not the case for other victims of financial circumstances.

In previous speeches, the Minister has praised the Equitable Members Action Group for its excellent work in keeping the matter in the public eye, and rightly so. Given that, we should take on board the very real concerns about what is now proposed. The group has made clear its concerns in three main areas, including the continued reliance on the Chadwick process, the remit of which was devised by the previous Government and clearly intended to minimise payouts. Indeed, the previous Administration did not accept many of the ombudsman’s findings, coming up instead with a system of ex gratia payments to which many of us objected at the time. We in the SNP and Plaid Cymru supported Liberals and Tories in that objection. The important point is that the basis on which Sir John Chadwick was carrying out his work was that adopted by the previous Government. I remind Government Members that they supported the recommendations of the ombudsman in their manifestos and the coalition agreement.

The losses are to be calculated by the Treasury and not by the independent commission, and indeed the very basis on which that is to happen is moving from the relative loss identified by the ombudsman to an absolute loss method adopted by Chadwick. That reiterates the importance of debating the terms of the scheme on the Floor of the House. Furthermore, the commission is left with the unenviable task of distributing inadequate compensation, having had no say in calculating the true losses.

The policyholders of Equitable Life were treated shamefully by the previous Government. In opposition, the coalition parties promised to take action, but unless they tackle the concerns raised by policyholders and the ombudsman, this issue will continue to undermine the standing of this Parliament, faith in our ombudsman service and, as was pointed out, the continuing faith of all our constituents in saving for their futures; they might not be assured that their savings will be protected when investing with apparently reputable companies.

I urge Ministers, even at this late stage, to address these issues and come forward with a scheme that will bring this sad debacle to a just end. We should be given the opportunity to debate the scheme on the Floor of the House, so that we can be assured, and we can assure our constituents, that everything possible is being done for the unfortunate victims.

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[Justine Greening]

I know that my hon. Friend the Financial Secretary has met representatives of EMAG over the past few days. EMAG will have the chance over the coming weeks to make representations to the commission about what it considers the fairest way to allocate payments. The independent commission must be independent of everybody and must be allowed to get on with its job. That is what we propose to let it do. We should not prejudge it. We should allow it to proceed with the work that has been set out. As I said, the approach recommended by the ombudsman in her report was that the setting up of the scheme should be looked at independently. We have decided to follow her recommendation. It is important that that should now happen.

Members asked about an appeals process. That is a fair question. We are still considering the details of how such a process might work. I am sure that the independent commission will also consider how that could become part of the process. The key requirement is that any appeals process is independent of the initial assessment of an individual’s claim.

One of the other issues that has come up is why we have not put more detail about the scheme in the Bill. Although that it a fair question, it prejudges what the independent commission might propose. As I have said a number of times, we need to allow it to get on with its work so that it can propose the design of the scheme. It is wrong to prejudge that by baking into legislation steps that the commission may consider unnecessary.

[Mr Weir]

When the Minister was introducing the Bill, I asked him whether the details of the scheme would be debated on the Floor of the House. Those details are important. We all understand that this is an enabling Bill, but we must have the opportunity to examine the scheme in more detail.