Equitable Life (Payments) Bill

Mike Weir Excerpts

Wednesday 10th November 2010 Commons Chamber

[Mr Mike Weir (Angus) (SNP)]

If the hon. Member for Leeds North East (Mr Hamilton) presses his amendment, we will certainly support him.

I have been debating Equitable Life in the House ever since I was first elected, and I well remember endless debates in the two previous Parliaments in which I was joined by Conservative Members in trying to get the Labour Government to take action. I recognise that some Labour Members also pushed their own Government for action. It was a long battle, and frankly we did not get very far.

When the new Government were formed, I cannot say I had any great enthusiasm for the thought of the coalition, but I did at least think that perhaps we could get an end to this saga, which had brought so much unfairness to so many people throughout the country, many of them elderly.

One difficulty has always been what the final compensation bill should be. It is easy to get lost in figures, as they range from Chadwick’s £500 million up to EMAG’s latest figure of more than £6 billion, but the generally accepted figure seems to be in the region of £4.6 billion. The Government have set a figure of £1.5 billion, which is about a third of that generally accepted figure. I understand their reasoning that that is all that can be afforded, but sorting out Equitable Life could have been one of their great early achievements. It is being undermined by arbitrary decisions, the worst of which is the overall cap on the amount. Rather than an independent commission considering the matter and recommending a figure, a figure has been put in place and all the independent commission can do is decide how it is divided among policyholders.

[Mr Fabian Hamilton]

As I mentioned in my contribution, about half the overall £1.5 billion package will be consumed by the 100% compensation for the 37,000 post-1992 with-profits annuitants. Does the hon. Gentleman agree that the remaining balance will provide a considerably smaller sum in the pound to the rest of the policyholders?

[Mr Weir]

The hon. Gentleman is quite right. I understand that the figure quoted by EMAG is about 15% of their loss, which is a very small amount for people who have suffered.

What could have been a very good outcome seems to have been undermined by arbitrary decisions. I hope that the Financial Secretary will explain the rationale behind excluding the 10,000 pre-1992 annuitants from compensation altogether. I do not understand the logic of that. I do not see any suggestion that it should be done in the ombudsman’s recommendations.

I have said in previous debates that it is important that this Parliament supports its independent ombudsman, and there seems to have been a major deviation from what the ombudsman recommended. The hon. Member for Cardiff North (Jonathan Evans) made some interesting and relevant points about how compensation for pre-1992 annuitants should be calculated, which is undoubtedly a difficulty. I am not an actuary and cannot give him the answer to that, but I do not think it is beyond the wit of man—or even an actuary—to work out a figure.

Ultimately, this is a matter of principle. I raised that point on Second Reading. We are dealing with a situation in which many thousands of our fellow citizens have lost out through maladministration. The Government are ultimately responsible for that maladministration—the previous Government, not the present one, but they are the heirs to that. We should not accept the principle that the Government can say, “Okay, there has been maladministration. We are responsible, but we will set a cap on how much compensation we give and then arbitrarily decide which of the group who have suffered will be compensated.” That is a very bad principle. In no other case in which there has been loss and there is liability would anyone be entitled to say, “I’m only paying a proportion of that. That’s all I can afford.” The Government should not go down that route.

I believe that we will debate an amendment later to set up a totally independent organisation to consider the matter. We need that to be done independently, not with a cap and not with some people arbitrarily excluded. We will support amendment 1 if it is pressed, because it is only reasonable. We have to right what has been a terrible injustice going back well over a decade.

[Frank Dobson (Holborn and St Pancras) (Lab)]

I shall speak very briefly in support of all three amendments in this group—those tabled by my hon. Friends the Members for Leeds North East (Mr Hamilton) and for Nottingham East (Chris Leslie), and even the one that I have tabled.

As drafted, the Bill leaves practically everything to the discretion of the Treasury, which I find objectionable. I remind the Committee of what Winston Churchill said about people at the Treasury—that they were

“like inverted Micawbers, waiting for something to turn down”.

The chance of their coming to any generous conclusion for people who suffered in the Equitable Life scandal is very small. The courts have held that bodies given discretion are not allowed to fetter their own discretion. It is therefore necessary for the House to fetter the discretion of the Treasury.

I strongly support the view that we should not allow a situation in which the most elderly people will be excluded from compensation. In view of the fact that everyone places so much weight on the ombudsman’s contribution, I strongly support the amendment tabled by my hon. Friend the Member for Nottingham East, which suggests that we should give her a further look at what is being proposed. It will be preposterous if, in trying to do what the ombudsman wants, we end up doing something that she thinks is unsatisfactory and inadequate. The reasoning behind the amendment in my name is the same.

I do not wish to say any more, but the House should do its proper job of telling the Treasury what the rules should be when it considers the matter. I am not getting at Ministers; I am getting at the Treasury as an organisation. It does not have a good record, and ethics and decency are not major considerations for it. They never have been, and perhaps they should not be its major considerations, but we should bear them in mind, so that we can bear down upon the Treasury.

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[Mr Weir]

Does the hon. Gentleman not also agree that at no time did the ombudsman suggest that any group of annuitants should be debarred from receiving compensation, as is now being proposed?

[Mark Durkan]

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

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[Mr Hoban]

The hon. Gentleman makes an assumption that the scheme is open-ended, but it is designed to compensate policyholders who invested in Equitable Life from 1 September 1992. With regard to the implications of that, I shall respond to the intervention by my hon. Friend the Member for Cardiff North (Jonathan Evans).

[Mr Weir]

Will the Minister explain further, as I do not quite understand? He seems to be saying that only those who became aware of a regulatory failure in 1992 are affected. However, am I not right in thinking that that suggests that the regulatory failure goes back prior to 1992, and would have affected people then, although they would not have been aware of it? Are those people not entitled to compensation?

[Mr Hoban]

The ombudsman is concerned about people who invested in Equitable Life who might not have done so had they been aware of that regulatory failure. That regulatory failure would not have been known to them until September 1992, so there is a clear, rational argument for 1 September 1992 being the right date to start the calculation of losses.

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[Mark Durkan]

Obviously we are waiting to hear what the Government will say about their amendment, but the other amendments—including the new clause proposed by the hon. Member for Harrow East (Bob Blackman)—are in essence an attempt to ensure that there is a sense of competent independence in how the scheme is administered and payments made. In terms of making appeals available and ensuring that the design and administration of the scheme are independent of Government, the new clause offers a reasonable construct of what a clearly independent scheme would be.

In the debate on the previous group of amendments, there were plenty of references to pledges that many of us signed and how far the Government’s measures will mean that we have discharged those pledges, but I do not think that any of us signed pledges that said we would do the whole thing just according to Treasury lights and nothing else. The amendments are an attempt to ensure that it will be not only Treasury lights that govern the terms of the scheme and its performance.

[Mr Weir]

Does the hon. Gentleman not feel, however, that the problem remains that the whole thing will be governed by the ultimate cap? That is the difficulty that faces all Equitable Life policyholders.

[Mark Durkan]

Yes, I do. There is no escaping the constraints that the cap will create. In the last group of amendments, we considered the questions that arise when the cap comes together with the cut-off. That conspires to create a pretty selective injustice for a group of people who are then left with very marginal compensation.

Even a very independent process, such as that proposed in the amendments, will be constrained by the cap. However, people would trust a credible independent process applying that cap with due consideration for all the concerns, rights and needs of policyholders more than they would trust the Treasury. In the last debate some Government Members said confidently how impressed they had been with the Treasury since they came into the House. That might well be—we are in the early stages of this Parliament and this Government and the first few pages of the exercise book are lovely, neat, impressive and perfect—but degeneration creeps in later on and even the Treasury will revert to its traditional roots and habits.

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[Mr Weir]

No one is going to oppose the Bill’s Third Reading, for the simple reason that, if it fell, no one would receive any money. None the less, dealing with the Bill has in many ways been a frustrating experience. It is a paving Bill, as others have said, and the big elephant in the room is the cap and its effect on the overall amount of money available.

It would be churlish not to acknowledge that the Government have moved swiftly, and that is welcome. After 10 years spent arguing about the matter, we are finally getting somewhere with it, but to some extent the Bill is a missed opportunity, because of the cap and the inability to do anything about the Treasury’s decision to introduce one. The effect will be dramatic. Nobody is arguing that, in the current situation, everybody should receive all the money to which they might be entitled. Even EMAG accepts that there will be, as the group put it, a “haircut”, but some people will lose 80% of the compensation that they should have received, and that is not fair.

There are other inequities involved. I was frankly baffled by the Minister’s mental contortions over the exclusion of pre-1992 with-profits annuitants. As I understand his remarks, we are now in the position where maladministration is okay as long as one does not know about it and where it becomes an issue only when one does know about it. That seems utterly perverse. By resorting to these measures, the Government have undermined what could have been a very good end to this long-running matter.

The hon. Member for Harrow East (Bob Blackman) is right—had the previous Labour Government grasped the nettle at an early stage, this issue could have been dealt with much more cheaply. A lot of the fault over the cost lies with the previous Government’s unwillingness to do anything about it. Many of us have spent years in this House arguing that they should have done so; I have not changed my position over that period.

I think that there should be compensation, and I welcome what has been done. It is not sufficient, however, and many policyholders will still feel very aggrieved, and rightly so. It could have been dealt with better had it been done differently, perhaps with a larger cap or payments over a longer period. I can give half a thanks for the Bill, but I think that the Government will face problems in future because of their failure fully to deal with the issue.