Equitable Life debate 24th June 2009

Equitable Life

The text of this debate has been extracted from the official record carried by Hansard

Mr. Fabian Hamilton (Leeds, North-East) (Lab): It is a pleasure to see you in the Chair, Mr. Caton.

So much has been written and said over the last few years about the collapse of Equitable Life that I begin this debate with some trepidation, especially as the previous debate in this House was barely a month ago and was introduced by the right hon. Member for Haltemprice and Howden (David Davis). Although our political perspectives are very different, he is a Member of this House for whom I have the greatest respect.

Today, I wish to make a further attempt to advance the just cause of many of my constituents who have been so badly affected by what has happened to Equitable Life, and whose lives have been altered radically as a result. I am certain that I am not alone in that. The debate of 19 May showed how many hon. Members take a close interest in the issue. My aim is not simply to repeat that and other debates, but to add something new from the experiences of my constituents, and to give other hon. Members the chance to make contributions.

My most important aim is to persuade the Government to agree to the recommendations of the parliamentary ombudsman's original report, "Equitable Life: a decade of regulatory failure", which was published in July 2008. Since the publication of that report, the Public Administration Committee has produced a report entitled, "Justice Delayed" on 11 December 2008 and just last month, on 5 May, the parliamentary ombudsman published a further report, "Injustice unremedied: the Government's response on Equitable Life". There is no shortage of reports, just a shortage of justice for those who, through no fault of their own, have suffered huge losses in the life savings that they accrued over years of hard work. Surely that cannot be right.

I admit that, like many hon. Members who until recently knew little about how all this came about, I was not very sympathetic at first. However, as it became clear that, as much as the world's oldest mutual insurance company had overstretched itself, the real issue was poor regulation, I became more and more concerned and so more and more interested in what my constituents were telling me. I suspect that that experience has echoed around the whole House and that there is not one hon. Member who has not received correspondence from their constituents about Equitable Life. That is reflected by the attendance at this debate.

It may be helpful if I reiterate a brief history of how this disaster came about before I recount some of the personal tragedies that resulted from the poor management and disastrous regulation of Equitable Life.

Sir Paul Beresford (Mole Valley) (Con): I suspect that the hon. Gentleman is right that every MP has constituents with such difficulties. I probably have more than most because of the spread and make-up of my constituency. The damage that this matter has done to people who have worked and paid for their retirement is enormous. I have two points to make. First, we should move the compensation and have it early. Secondly, we should take the partiality of the scheme away.

Mr. Hamilton: I hope that the hon. Gentleman will listen carefully to my speech because it will include many of the points that he has rightly raised. I hope that he will be satisfied that I am pressing for the same things.

Equitable Life was founded in 1762 as a mutual insurance company, based on the ideas of Charles Dodson, a fellow of the Royal Society and a man well ahead of his time. It started selling pensions as early as 1913, but it was not until 1957 that the society started selling its infamous guaranteed annuity rate pensions, which gave a clear and unambiguous return on capital invested, depending on the age at which the policyholder decided to start taking the annuity. That carried on until 1988, when the society realised that its rates were so good and so far ahead of the rest of the market that they were unsustainable. In December 2000, Equitable Life was forced to close to new business. By that time, it had more than 1.5 million members. That is why so many hon. Members have so many constituents who have suffered.

The introduction to the December 2008 Public Administration Committee report stated:

"Over the last eight years many of those members and their families have suffered great anxiety as policy values were cut and pension payments reduced. Many are no longer alive, and will be unable to benefit personally from any compensation. We share both a deep sense of frustration and continuing outrage that the situation has remained unresolved for so long."

Last month, on 5 May, frustrated that little had happened since her long-awaited initial report in July 2008, the parliamentary ombudsman, Ann Abraham, published a second report, "Injustice unremedied: the Government's response on Equitable Life". It was scathing about the inaction on her initial recommendations of July 2008:

"I was deeply disappointed that the Government chose to reject many of the findings that I had made, when I was acting independently on behalf of Parliament and after a detailed and exhaustive investigation."

Sir Alan Beith (Berwick-upon-Tweed) (LD): I must declare an interest as a small policyholder with Equitable Life, although my policy was nowhere near as large as that of many of my constituents who have been affected.

Is not part of the significance of the ombudsman's report that it stated that regulatory failure was only part of the cause, and that another part was the appalling mismanagement of Equitable Life, to which the hon. Gentleman has referred? In identifying regulatory failure as a separate matter, she provided the Government with an avenue for what would be reasonable compensation. The Government's refusal to implement her report is appalling.

Mr. Hamilton: I thank the right hon. Gentleman for that intervention. I will go on to talk about the regulatory failure and why I think that there should be a proper compensation scheme. I hope that I will cover some of the points that he rightly raised.

The conclusion of the parliamentary ombudsman's report of 5 May stated:

"In this case, I am satisfied that the injustice I found in my report to have resulted from maladministration on the part of the public bodies responsible for the prudential regulation of the Society has not so far been remedied."

I said earlier that I would highlight some of the many cases that have been brought to my attention by my constituents, and I am sure that we could all raise such cases. The majority of the public, who have had no contact with or money invested in Equitable Life, would be forgiven for thinking that only those who had considerable investment in the company have lost out over recent years. The reality is different, as the examples will show. I have protected the names of my constituents by using initials.

Mrs. H of north Leeds told me that her modest £200 a month income was reduced overnight to less than £100 a month, although it is now back up to about £120. She is 83 and was completely dependent on that £200 a month. When it was reduced by more than half, she found it hard to cope financially. It was only the help of her ex-husband that kept her going. She still struggles every month because of the continued shortfall in her income.

At the other end of the scale, Mr. A is a retired solicitor who started investing in a pension policy with Equitable Life in his mid-30s. Given the record of the company and the projections for growth over succeeding years, that would have given him a fund large enough to pay a substantial income from the annuity that he would have started aged 65. He is now 61. Not only has he seen no growth in his fund over the past few years, but the annuity he was guaranteed is no longer possible. He lost out twice: first, when his investment failed to reach its promised level and, secondly, when he discovered that the guaranteed annuity rate had been abolished. The fund was far lower than he had planned.

Mr. A provided the following example. Say he had invested a total of £100,000 in 1997. According to Equitable Life's plan, that sum should have grown to about £133,000 by 2000. However, because the society had frozen all investments by that time, his fund would have remained at £100,000.

In order to halt the reduction in the value of his investment, Mr. A decided to move the fund to another company and paid a penalty of £20,000 for the privilege. That is a high penalty, but is sadly not uncommon in the industry. In 1997 he had an investment of £100,000, which he could have reasonably believed would have helped to provide part of an annuity that would have guaranteed him a good pension income. Three years later, he had only £80,000 to invest-a loss of £53,000 compared with what he might have expected, or a reduction of just under 40 per cent. in the value of his fund.

Dr. C is a retired consultant who lost more than £25,000 after investing £100,000 in Equitable Life. He spread his investments carefully, so although he is angry at his loss, he has not been left destitute. However, he blames the regulatory regime that allowed this to happen in the first place.

Miss Julie Kirkbride (Bromsgrove) (Con): The hon. Gentleman is right to say that some people have experienced considerable loss and that others have had less of a loss. Nevertheless, people have still lost an important income on which they were relying for their old age. The terrible thing about Equitable Life is that, in seeking to look after themselves in their old age, the 1.5 million policyholders were doing the right thing by themselves and for society, yet they have been very badly let down. That is why Parliament has to act.

Mr. Hamilton: The hon. Lady is right. Later in my remarks, I shall address the points that she has made.

Why is the regulator to blame? Surely investors must have understood that their investments could decrease as well as increase. How could Equitable Life have maintained a rate of return and a guaranteed annuity rate that was way beyond any competitor in the market? Those are the questions that Ann Abraham addressed in her initial report of July 2008, which took four years to complete. Her answers go to the heart of the anger expressed by investors through the Equitable Members Action Group, or EMAG.

At the core of the problem is the fact that Equitable Life simply could not meet the obligations that it had made for itself because it made no provision for guarantees against low interest rates on policies issued before 1988. It therefore declared bonuses out of all proportion to its profits and assets. Following the ruling of the House of Lords in July 2000, the society stopped taking new business in December of that year, which effectively spelt the end for Equitable. More than 1 million policyholders then found that they faced cuts in their bonuses and annuities, which caused a huge loss of income, on which many small investors had depended. After all, the average investment for the 500,000 individual policyholders was just £45,000, which, according to EMAG, even at its height yielded no more than £300 a month.

In July 2001, the new board of directors slashed policy values by 16 per cent.-about £4 billion-and proceeded to effect a compromise scheme to deal with the guaranteed annuity rate issue. However, Equitable Life's problems were too deep-seated, so the scheme was not enough to enable it to ride out the stock market falls of 2001-02. In 2002, policy values were cut by another 10 per cent. and the society was forced to invest almost exclusively in fixed interest stocks. Almost none of its money was invested in equity shares, so it could not operate as a with-profit insurer and its policyholders did not benefit from the stock market's substantial rise between 2003 to 2007.

As I am sure we all remember, in 2004, Lord Penrose carried out an investigation into Equitable Life. However, he had no power to apportion blame or recommend compensation. He highlighted the society's unsustainable bonus policy and the

"practices of dubious actuarial merit"

that it used to discourage action by the regulators. He concluded:

"Principally, the Society was the author of its own misfortunes."

However, crucially, he went on to say:

"but it may be appropriate to comment that the practices of the Society's management could not have been sustained over a material part of the 1990s had there been in place an appropriate regulatory structure adapted to the requirements of a changing industry that happened to manifest themselves in an extreme form in the case of Equitable Life."

He also found that

"the standards of scrutiny still impress me as complacent, lacking challenge, and hesitant in criticism and in following up on any criticism made."

In its December 2008 report, one of the many recommendations of the Public Administration Committee stated:

"We strongly support the Ombudsman's recommendation for the creation of a compensation scheme to pay for the loss that has been suffered by Equitable Life's members as a result of maladministration. Where regulators have been shown to fail so thoroughly, compensation should be a duty, not a matter of choice."

Although the Select Committee fully acknowledged the huge sums of money that might be involved and the need to strike a careful balance between the interests of the taxpayer and the policyholder, it went on to conclude:

"Not only did the regulators fail, but they failed over a prolonged period and at a fundamental level. The impact has been severe for many of those who were worst affected; it would be unacceptable for current financial pressure to override failings which took place seven or more years ago."

Mr. Oliver Letwin (West Dorset) (Con): Like the right hon. Member for Berwick-upon-Tweed (Sir Alan Beith), I declare an interest in that my wife was an Equitable Life pension holder at the time. When the Penrose report came out and we debated that issue, I remember the reluctance of the ombudsman to take on the task. At that time, Ministers made it clear that they did not believe that there was administrative and regulatory failure. Does the hon. Gentleman agree that it is still a mystery why Ministers have rejected most of the ombudsman's recommendations, given that the ombudsman was so clear that there was administrative and regulatory failure?

Mr. Hamilton: Yes, I certainly agree with the right hon. Gentleman. Again, I will go on to highlight that matter further on in my remarks-I am afraid that we are not quite at the end of them yet.

The Public Administration Committee also said:

"It would also be wrong for the Government to refuse compensation on the basis of Lord Penrose's conclusion that Equitable Life was 'principally...the author of its own misfortunes.'"

Paragraph 50 of the report begins:

"The decision to compensate must not, however, be the equivalent of signing a blank cheque on taxpayers' behalf."

But the Committee concludes:

"We also highlight the Ombudsman's conclusion that not all policyholders suffered loss; this should not be a case of compensation for all."

I am sure that many hon. Members will recall that, on 15 January this year, the then Treasury Minister, who is now the Secretary of State for Work and Pensions, delivered a fulsome apology in the House. She implied that there was a comprehensive acceptance of the Parliamentary ombudsman's report and said that she would provide the services of a retired Lord Justice of Appeal, Sir John Chadwick, to deal with the technicalities of the recommendations.

Jo Swinson (East Dunbartonshire) (LD): Does the hon. Gentleman accept that, nearly a year on, the recommendations are not being dealt with? Indeed, I understand that Sir John Chadwick has refused to meet 140 members of the all-party group on justice for Equitable Life policyholders. Does he not think it is absolutely shocking that somebody whom the Government have appointed to deal with the recommendations will not even listen to a large group of MPs who have constituents with concerns?

Mr. Hamilton: Yes, I agree with the hon. Lady. I will address some of her points in a minute. I am not quite sure where I got to. The Secretary of State for Work and Pensions, who was the then Treasury Minister, delivered a fulsome apology-[Interruption.] It was a fulsome apology-these are the words of EMAG, in fact.

Susan Kramer (Richmond Park) (LD): I am grateful to the hon. Gentleman for giving way twice on the same point. Does he not agree that many Equitable Life policyholders felt great hope when they heard of the appointment of Sir John, but having seen his June publication-his proposals on the approach to be adopted-they are now shattered to find that he believes his terms of reference allow him to look only at a limited and narrow number of issues? Few people will therefore receive any compensation, and those who do are likely to receive a minimal amount.

Mr. Hamilton: I thank the hon. Lady for her comments. Again, I hope to address some of those points in a few minutes. I have some proposals that I hope the Minister will respond to positively. I live in hope-[Interruption.] One has to be an eternal optimist to be in this job.

It appeared that compensation was on the horizon for the victims of the Equitable Life scandal; but sadly, that was not the case. What was not said was that the Command Paper released later that day-15 January-was totally at odds with the tone of the statement. In the small print, the apology, the ex gratia payments scheme and the Treasury's instruction to Sir John Chadwick were all restricted to those findings of the parliamentary ombudsman that the Treasury accepted. However, it rejected three out of four of the most expensive of the ombudsman's recommendations.

Earlier this month, Sir John Chadwick published a document, "Equitable Life ex-gratia payment scheme", with the subtitle, "My proposals as to the approach to be adopted and the issues to be addressed". In the document, he repeats that the Government accept the ombudsman's finding that the injustice suffered by policyholders should be looked at on an individual basis. He states that he is satisfied that his terms of reference do not require him to engage in any form of means-testing in relation to individual policyholders, but that they oblige him to disregard any of the ombudsman's findings of maladministration and injustice, which are not accepted by the Government.

Surely, the fatal flaw in the Treasury's proposals is that Sir John Chadwick cannot satisfy either the policyholders represented by EMAG, the parliamentary ombudsman, the Public Administration Committee or, indeed, what remains of Equitable Life itself unless he has a remit to address all the recommendations made in Ann Abraham's original report of July 2008. That is why she published her further report last month, and that is one reason why I requested this debate in the first place.

EMAG tells me that, ultimately, the amount of compensation is a matter for Parliament, rather than the ombudsman or a court. EMAG states:

"Like Ann Abraham, we know that theoretically Parliament could decide upon compensation of any amount, from billions of pounds down to nothing. Indeed, we have suggested that Parliament sets the total compensation amount and lets the Parliamentary Ombudsman's proposed Tribunal get on with distributing it fairly and swiftly."

Along with many countries in the western world, we have a growing problem of an ageing population that needs to be encouraged to make greater provision for its own retirement and old age. The state simply will not have sufficient resources to provide enough money in statutory pension payments. The problem will only become worse as the years pass and the proportion of younger people in work reduces in relation to those in retirement. It is already clear that my generation, now in our mid-50s, will have to work longer before retirement. However, unless we can save more and see our savings growing securely, there will be little confidence that there is any point in saving at all.

The Equitable Life scandal has severely reduced the confidence that the people of this country have in the principle of saving for retirement. If investing a large proportion of earnings results in it either disappearing or greatly reducing in value, the lack of trust in the system will remove any incentive to make personal provision from a lifetime's earnings and lead to increased poverty in old age.

Bob Spink (Castle Point) (Ind): I declare an interest: like many MPs, I had an Equitable Life policy. We know that even with the ombudsman's public and formal indictment of the Government, they will continue to prevaricate. Is it not time that Parliament, on a cross-party basis, took hold of the issue and forced it forward, as it did with the Gurkhas? Is that not what we should be doing now?

Mr. Hamilton: There is a reasonable spread of Members here from all parties. I would hope that perhaps Parliament could do that, under the leadership of our new Speaker. Let me finish my remarks, and perhaps the hon. Gentleman will want to come in, if he is able to.

In the end, of course, the state will have to foot the bill, thus increasing the cost to all of us through higher taxation. It is imperative that we are able to save, and able to save reliably, knowing that our money will not be wasted or disappear through incompetence.

It has been said that this scandal affected only the well-off and that ordinary people with relatively small savings were not involved. Let me remind hon. Members and the Government that EMAG told the Public Administration Committee that

"the majority of Equitable Life's policyholders had modest sized pensions and were not 'fat cats' who 'risked their money to get above average returns'. In particular, the average investment of the half million individual policyholders amounted to £45,000 each, which in today's money would buy a pension paying around £75 per week."

To conclude, I ask the Minister these questions. Will she amend Sir John Chadwick's terms of reference to include all the recommendations of the parliamentary ombudsman's report, "Equitable Life: a decade of regulatory failure"? Will she agree to implement the proposal put by EMAG that Parliament sets a total amount of compensation for individual policyholders affected by the collapse of Equitable Life, and then allows the proposed tribunal to get on with the job of distributing the money quickly and fairly? Will she accept that the delay caused so far has meant that many policyholders, who suffered through no fault of their own, have either endured financial hardship or have died in the meantime? I believe that up to 15 people die each week.

Bob Spink: Each day.

Mr. Hamilton: Sorry-each day. That is even worse. I will say "each week," because that is the statistic that I was given, but even that is unacceptable.

David Davis (Haltemprice and Howden) (Con): I am sorry to interrupt the hon. Gentleman's conclusion, but he made a comment earlier that may not be true. He said that it will cost more if the Government take a long time to deal with the issue. The very fact that he just mentioned a death rate of 15 a day-thousands a year-may mean that this gets cheaper over time. Would he ask the Minister how much is being saved as a result of the mortality rate of Equitable Life policyholders, so that we can know what the incentive to the Treasury is to take a long time over this?

Mr. Hamilton: I give way to the hon. Gentleman.

Bob Spink: The Library note said 15 per day.

Mr. Hamilton: Per day-okay, I shall correct the record and say "per day," if that is what the Library note says.

I thank the right hon. Member for Haltemprice and Howden for his remark, but my point was based on the fact that, if few of us save for our retirement because we have no confidence that the system will yield sufficient return, it will cost the Treasury and the state considerably more. I was not referring to those who die each day.

Finally, does the Minister accept that the phrase "injustice unremedied" has real meaning to many people and that it is about time that hundreds of thousands of investors received real justice? If she were able to answer those questions positively, I believe that this injustice could be brought to an end rapidly and that the Government would receive credit for their resolution. If not, I fear that resentment and bitterness will continue, at huge cost to the individuals who have suffered and to the country as a whole.

Dr. Richard Taylor (Wyre Forest) (Ind): I am staggered but absolutely delighted to be called so early, Mr. Caton. As an independent, I have not had to choose where to go this afternoon, because other independents are speaking, I hope, in the debate in the main Chamber. I relish this opportunity and thank you for calling me.

Like many hon. Members, I have a large number of constituents who have suffered from the situation under discussion. The number of letters that I have received on the matter competes with that on any other affair in which I have been involved. The correspondence goes back a long time, and many of the people who have been writing have been persistent.

What makes the situation so bad is that it has been such a rollercoaster. There have been moments of deep gloom, and moments of slight optimism. When the ombudsman's report came out after four years of investigation, there was hope and optimism, but it was transient. There was an apology, but, as we know from the health service, an apology is easy to give but means nothing if it does not lead to action. Action and, obviously, compensation are needed.

In the few minutes available to me, I want to read some quotes from some of the letters that I, like the hon. Member for Leeds, North-East (Mr. Hamilton), have received. I wish to remind the House and the Minister of people's anger and complete frustration.

This is from a letter dated 19 January that was written following the Commons statement:

"Yes I would like to comment but will keep these comments brief least my disappointment makes my 'pen' run red. I consider the statement, some 10 years in the making was abysmal. It was deliberately vague, timescales are non-existent and it depends on public finances...Maybe they hope that if they can defer any payment for another 10 years, the remaining members will have died or will not be able to remember that Equitable Life even existed."

Another long letter, of which I will read only a little, mentions the personal loss by a couple who had put all their savings into Equitable Life on the advice of various Governments and trusted regulatory bodies. Their pension expectation is now less than 20 per cent. of what they thought it would be. They make a cutting comment:

"While the government merely sat back and absolved itself of all responsibility, its only action was to resolve the issue as far as their own members were concerned granting all MPs, many of whom had entrusted their own pensions to Equitable Life, a generous and secure pension funded by myself and other taxpayers."

The letter continued:

"I also find it sad that the cost of any request for justice must inevitably fall on the taxpayer and am therefore reluctant to pursue this issue."

Sir John Butterfill (Bournemouth, West) (Con): Does the hon. Gentleman agree that the present position not only undermines people's faith in their ability to invest for their future, but significantly undermines the office of the ombudsman and the public's belief that they may obtain some redress for wrongdoing by going to the ombudsman? We have a brave ombudsman, and she should have had better recognition.

Dr. Taylor: I am grateful for that intervention, and that will be one of my main concluding points.

Other letters that I have received emphasise how much and how many people had put all their savings into Equitable Life, because they were probably not brought up to know that one should not put all one's eggs in one basket. They put them all in one basket, and they have lost vast amounts. One investor transferred funds from his company's final salary scheme as recently as 2004. He asks:

"Could it be possible that the society was insolvent when my funds were transferred in 2004 from my company's final salary scheme? Probably I will never know."

Another correspondent, who has written frequently for many years to the Prime Minister and the Chancellor of the Exchequer, and has copied every one of his 30 or 40 letters to me, drew attention most recently to the state pension, which when he wrote was only 31 per cent. of average earnings, compared with an average 59 per cent. in other OECD countries. That compounds the outrage felt by Equitable Life members.

The final letter that I will read is short and to the point. It was written on 22 June and says:

"My wife and I have suffered appallingly at the hands of both Equitable Life and the Government's refusal to compensate. Please let me know what positive action you are taking in this direction.

This is far more important to us than your wretched expenses debacle and who the next speaker is."

That sums up the situation.

The anger, frustration and disappointment are immense. Obviously, I would like the Minister to answer the questions posed by the hon. Member for Leeds, North-East. Would compensation have to come from the taxpayer? I am sure that the Government have some secret money somewhere, tucked under someone's mattress. I like to think that the money could come from somewhere else. Would paying compensation to people who have suffered so badly from proven maladministration form a totally unaffordable precedent? Are there any exact replicas of the Equitable Life situation? The Barlow Clowes affair was mentioned in a previous debate, but at the time maladministration had not been proven for Equitable Life. I hope that the Minister will offer a constructive and rapid way forward.

I shall conclude with two points. The first, to which reference has been made, is about the ombudsman. I thought the word must come from Greek and I looked in Webster's dictionary. Webster had not heard of it, but it had the word "ombu", which is a tree with a broad trunk that is isolated in the south American pampas. I thought that that was the origin of the beginning of the word because the ombudsman is isolated, on her own, works against many people, and has a tremendously broad base. But when I looked in Chambers and the Oxford dictionary, I saw that it is a Swedish word, which I am sure all hon. Members know. I like the Chambers definition of the Swedish meaning, which is "grievance man", and it adds, importantly, that he is "independent".

What have the Government done? They have disregarded all the ombudsman's recommendations, vitally undermining her position as an independent critic of the Government who must be listened to.

Mr. Letwin: I believe that the Government have accepted four of the ombudsman's recommendations, but the gist of what the hon. Gentleman says is right. Does he agree that the position is even worse than he says, because the Government have not only rejected the recommendations, but failed to explain why they rejected them? They have not even treated the ombudsman seriously enough to explain.

Dr. Taylor: I thank the right hon. Gentleman. Such behaviour by the Government towards the ombudsman has occurred at a time when she is vital.

I cannot resist returning to the subject of the NHS. Its complaints system has been dramatically changed because the Government have removed the second stage, which was the automatic independent review by the Healthcare Commission, so there is now no promised independent review without going to the ombudsman. She is now the Parliamentary and Health Service Ombudsman, so the Government are broadening the trunk on which she must work. What extra resources will the ombudsman have, and how will the Government restore confidence in her power and effectiveness?

I hope that my final point will not be too unpopular. Remembering the bitter comment about MPs feathering their own nests with their pensions, what are we, as MPs, going to do? Are we going to think of other people when we discuss our parliamentary pensions, and are we going to remember the people who are so much worse off than ourselves?

Barry Gardiner (Brent, North) (Lab): There is, "clear and unmistakable evidence in the ombudsman's report of five significant areas of maladministration by the Department... Many pensioners have...lost their life savings... I must ask why we have had to rely on the ombudsman to confirm the mismanagement...and incompetence that was widely known about more than one year ago... Does the Secretary of State agree that the House will find it strange that he...continues to deny the Government's responsibility for mistakes and does not even apologise for his Department's role?"-[ Official Report, 19 December 1989; Vol. 164, c. 204.]

Hon. Members will realise that those are not my words, or even those of my correspondent, Mr. GKB of Mount Stewart avenue. They are the words of the Prime Minister when he was a Front-Bench spokesman commenting on Barlow Clowes. Sadly, they are equally relevant to today's debate.

Mr Robert C of Churchill avenue, Kenton wrote to me simply saying:

"I am an 81 years old with-profits annuitant who has seen his annuity decrease by almost one-half over the past few years."

One of his close neighbours-I am sure that they are unconnected and unknown to each other-Mr. Harold G of Grendon gardens, Wembley Park, tells that he suffered a 53.34 per cent. drop in his income. In the light of the comments of the hon. and independent Member for Wyre Forest (Dr. Taylor), I calculated just what that would mean for a Member of Parliament. Instead of our salary of £64,000 a year, we would have an income of £34,000 a year-about a 53.34 per cent. drop-but the incomes of Mr. Harold G and Mr. Robert C are nowhere near those levels. Indeed, the 53.34 per cent. drop that Mr. Harold G was talking about results in a loss of £4,740 a year. His income-much less than £10,000 a year-has been cut in half.

Lorely Burt (Solihull) (LD): Does the hon. Gentleman agree that despite the perception that these pensioners had huge amounts of money in Equitable Life and other places, the vast majority are real people who are in real difficulty at the most vulnerable time in their lives? Indeed, at a recent EMAG meeting, I met a lady and a gentleman who now live in a caravan because they have lost their home, which they could no longer afford to pay for when the Equitable Life pension that they expected was not forthcoming. Does the hon. Gentleman agree that we really need to get across to the Government that we are not talking about people with huge amounts of money? People all over the country are being reduced to living in basic, dire circumstances.

Barry Gardiner: The hon. Lady speaks eloquently about the situation. I absolutely agree that these people are not rich-they are not fat cats and they have not salted away great quantities of money for their old age. They have simply done what they believed was right by making provision from their normal, average incomes when they were in work, so that they could support themselves when they were not in work. Sadly, through no fault of their own, they have sometimes found themselves trapped. One constituent wrote to me, saying:

"We 'trapped' Annuitants have fared inexcusably badly, especially after assurances at the outset of Government surveillance. We couldn't leave, and did not have any options other Policy Holders had, such as only AVCs. We have also borne the brunt of losses with E.L., continuing through to Prudential, with no relief from the E.L. calculation system, and probable further reductions".

That is what people have been faced with.

The point has already been made that we are talking about people who are in the later years of their lives. Many have been pensioners for seven, eight or more years and have found themselves in this nightmare at a time in their lives when they should be able to feel that they have got away from the stress of working life and careers. They should actually be enjoying some form of retirement, but they have not been able to do so. The hon. Lady's comment about her constituents who have been forced to move into a caravan displays exactly the problems that people now face.

I do not wish to speak at great length. I simple wish to say that all of us come to the House because we are propelled in some way by a sense of justice, and I know absolutely that my hon. Friend the Minister also has that at the core of her political being.

For far too many years, we have been meeting in this room to discuss this issue-indeed, I remember our first debate, which I attended with other hon. Members who are present today-and we have had subsequent debates on the Floor of the House. We have gone over so much of the same ground, but officialdom has prevaricated and tried to weave in and out of the complexities.

I absolutely accept that the Government should not put themselves in a position where every failure by financial organisations becomes a matter for Ministers. Of course none of us would wish to see that. That would be to write a blank cheque to financial institutions and encourage them not to take care in their management and procedures.

Annette Brooke (Mid-Dorset and North Poole) (LD): Does the hon. Gentleman not agree that basic principles of fairness, timeliness and transparency would be much appreciated at this stage?

Barry Gardiner: The hon. Lady is absolutely right. She goes to what we all believe is the central point: the situation has gone on too long. People are dying, having spent the last years of their lives worrying and being unable to afford the little niceties that they would have liked to buy for their grandchildren's birthdays. That is the fundamental injustice here, and officialdom and bureaucracy must take that on board. A Government who are in listening mode must not simply acknowledge that point-they must do something to redress it. That is why it is essential that the Treasury move with speed and certainty to make full compensation available quickly, before any more people are unable to benefit because of the time that has elapsed while the Government have dithered.

Mr. Alan Reid (Argyll and Bute) (LD): I congratulate the hon. Member for Leeds, North-East (Mr. Hamilton) on securing the debate and giving us another opportunity to try to persuade the Government to do the right thing by Equitable Life policyholders.

The title that the ombudsman gave to her report-"Equitable Life: a decade of regulatory failure"-sums the situation up very well. When Equitable Life was forced to default on its obligations to policyholders in 2000, it is estimated that more than 1 million policyholders lost part of their savings. Therefore, we all have victims in our constituencies. I share the hon. Gentleman's outrage at the fact that the situation is still unresolved nine years later.

In the nine years since 2000, about 30,000 policyholders have died. As we heard earlier, the Library estimates that another 15 people die each day. It is important to remember that the victims of the collapse are elderly people who now face hard times. They did what successive Governments recommended they do, by making provision for their retirement. They made sacrifices earlier in their lives to make provision for their old age. These are the victims that we are talking about.

Paul Holmes (Chesterfield) (LD): I apologise to the hon. Member for Leeds, North-East (Mr. Hamilton) for not being here at the start of the debate, but I was in a Delegated Legislation Committee at the time. Have constituents approached my hon. Friend to tell him about the double whammy that they face? One constituent, who lives in a terraced house close to my constituency office-she is certainly not a fat cat with lots of assets-faces a double whammy. She is a pensioner who has been denied the Equitable Life investment that she prudently saved for all her life, but she also cares for her two elderly parents, one of whom has Alzheimer's and the other of whom has Parkinson's. She can no longer get attendance allowance, because she is a pensioner. She is being hit on every side. All she ever did was prudently save for her old age, but she has been denied her investment.

Mr. Reid: My hon. Friend is quite right. I am sure that a lot of elderly people are in that situation.

The parliamentary ombudsman concluded that there had been maladministration and injustice, yet the Government are fiercely resisting paying the compensation that the ombudsman said was due to policyholders.

Mr. Letwin: Does the hon. Gentleman agree that a remarkable feature of the scene is that the ombudsman made it clear that she thought that it was reasonable for the Government to take into account fiscal constraints? She was not even asking for total compensation, but for compensation that was reasonable under the circumstances.

Mr. Reid: The right hon. Gentleman is right about what the ombudsman said, and I agree that the Government should take that into account in implementing the ombudsman's recommendations.

The case for compensation is straightforward. The maladministration by the regulator was a direct cause of the injustice suffered by policyholders. The regulator was a Government responsibility, so the Government should accept the ombudsman's recommendations to establish a compensation scheme to pay those who suffered the injustice. That injustice was caused by the failure of public bodies. The aim of such a scheme should be to put those who suffered a loss back into the position that they would have been in had the regulator's maladministration not occurred.

The ombudsman said that it would be reasonable to expect a compensation scheme to be established within six months of any decision by the Government and Parliament to establish such a scheme. Given the advanced age of many of the policyholders, it is important that the Government and Parliament should aim to meet that timetable. However, the remit that the Government gave to Sir John Chadwick is utterly inadequate. It is greatly restrained by the fact that Sir John is allowed to take into account only those recommendations that the Government accepted. I believe that that breaks the link in the chain between maladministration, injustice and compensation.

David Davis: I have been contrasting the approach that the Government have taken in the case of Equitable Life with the much better approach that was taken over the state earnings-related pension scheme disaster, which the hon. Gentleman may remember. One reason for the difference in approach was that, after the SERPS disaster, two Committees of the House-the Public Accounts Committee and the Public Administration Committee-received evidence and made strong recommendations. It was their thrust that made the Government spend some billions-I think it was £3 billion; the hon. Gentleman will remember, because he served on one of the Committees. A problem now is that Chadwick is reporting not to the House but to the Treasury, whose primary interest in the present economic disaster is saving money. The issue is a moral one, as all the speeches this afternoon have highlighted. Therefore, should not Chadwick report first to the House, not the Treasury? The House is the moral guardian in the matter of Equitable Life.

Mr. Reid: The right hon. Gentleman is perfectly correct. It is important also to remember that the ombudsman is the parliamentary ombudsman, and not the Government ombudsman. Parliament, not the Government, should take the decisions. I hope that, through the deliberations of the Committee that we shall set up tomorrow, we may get to a situation in which individual hon. Members can initiate motions in the House-I believe that that used to be the situation, long before I entered the House-as early-day motion 1423 on Equitable Life, which many hon. Members have signed, could then be debated and voted on in the House.

In May, the ombudsman used what has been described as the nuclear option. She used her ultimate sanction of laying before Parliament a short report expressing her gross dissatisfaction with the Government's inadequate response to her original report. Like that original report, her follow-up report is accurately titled: "Injustice unremedied". She used the phrase "deeply disappointed", which is strong language from an ombudsman. I hope that the Government will reflect on it and implement the recommendations.

I also ask the Government to reflect on the signal that they are sending out. Unless compensation is paid, what is there to encourage people of working age to save for their retirement? The regulatory failure is the Government's responsibility, so natural justice demands that they implement the ombudsman's recommendations.

Mr. Martin Caton (in the Chair): I will call the hon. Member for Richmond Park (Susan Kramer) now, but I should be enormously grateful if she would sit down at 3.30, so that we can hear the winding-up speeches.

Susan Kramer (Richmond Park) (LD): I shall take that as absolute direction, Mr. Caton; in fact, I am being instructed to take an even shorter time, perhaps to allow one more hon. Member a couple of words, if possible.

I particularly want to congratulate the hon. Member for Leeds, North-East (Mr. Hamilton) on obtaining the debate, because debates keep up the constant pressure. Although relatively little that is new happens between each of the Westminster Hall debates on the subject under discussion, the Government must know that the Members of this House are not going to go away. That is a critical message.

I also congratulate the Equitable Members Action Group, whose activities have made it clear that pressure from policyholders is not going to go away. It will continue, and they will have their day in the High Court, pursuing their judicial review, towards the end of July. I wish them the best. Perhaps most importantly I congratulate the 272 Members of Parliament who have signed the early-day motion. That is practically a voting majority in the House, particularly if we take into account the number of hon. Members who simply do not sign EDMs. I think it is the No. 1 EDM, if one can calibrate them in that way. That carries through the incredibly important message that were the motion to be put to the House, which, it seems to me, should be the ultimate decision maker, it would almost certainly pass, and would uphold the ombudsman and her report, and the decision for compensation. I join the others who have argued that as we look, now, to reforming the House, a crucial message is being given, to drive us towards creating opportunities for the House to have its say on such crucial matters.

I read with dismay the proposals from Sir John Chadwick on the approach that he would adopt and the issues to be addressed in his work on the Equitable Life ex gratia payment scheme. I know that I am putting words into his mouth, but between every line one discerns a great sense of virtual despair as Sir John repeats again and again that he is limited by the terms of reference that require him not to address any issues that have not been accepted by the Treasury. Going through the document one gets his sense that his work is practically pointless because it covers so few issues and can bring about so little compensation.

There have been discussions of the cost of compensation, but they come in the context of a banking crisis in which the Government have stepped in to rescue many individuals facing hardship, often, again, because of regulatory failure. The underlying principle that the Government should compensate for regulatory failure seems to me fundamental for a civilised society. We are not asking the Government to compensate for market failure.

The issue is one on which the House is exercised not only because of the victims- the Equitable Life policyholders-but because it represents the dismissal, once again, of Parliament's voice, in Parliament's ombudsman. If that role is to have importance and strength Members of Parliament must stand behind the ombudsman. If we choose not to do so in a situation of this kind, where the case is so evident, we shall be ceding powers that should be retained by Members of the House, and not transferred even to so important a body of Government as the Treasury.

Mr. Martin Caton (in the Chair): I call the right hon. Member for Berwick-upon-Tweed (Sir Alan Beith) with the same appeal to conclude at 3.30.

Sir Alan Beith (Berwick-upon-Tweed) (LD): Yes, Mr. Caton; I am very grateful to my hon. Friend the Member for Richmond Park (Susan Kramer). I declared earlier a tiny interest in respect of a small pension policy of my late wife.

Why did people save with Equitable Life? It seemed the right place for people of a cautious disposition. It was a mutual. Its elegant notepaper claimed that it was the oldest mutual in the world. It was the choice for their own savings of many of the professionals who gave advice to others. It was a body that seemed the appropriate choice for people who simply wanted to make cautious and prudent provision for their retirement.

I want to enunciate some principles. First, compensation is compensation, and should not be means-tested, which is the real implication of the statement by the Minister referred to so often today. Secondly, compensation is an essential discipline of the regulatory and governmental system. If no consequences follow from regulatory failure, either for the regulating body or the Government, there will be much more regulatory failure in the future. Just as the market has its disciplines, so must the regulatory system.

No one is suggesting that what happened is all down to regulatory failure. The ombudsman has provided the Government with a basis on which to proceed to an assessment of how far regulatory failure affected the savings and stake of policyholders, compensating only for regulatory failure, and even taking account of the fiscal position. The ombudsman has done a very careful and responsible job.

What is our position now? The credibility of the ombudsman system is at stake-that system that we recommend to people as a way of putting their case, which we take to the ombudsman on their behalf. With it the credibility of Ministers is at stake. It is not satisfactory to appear to be responding to ombudsman's recommendations, but not to carry them out, particularly when that affects those who have been so vividly described by hon. Members during the debate, whose vulnerability has been clearly set out, and who deserve a great deal better than they currently get.

Mr. Jeremy Browne (Taunton) (LD): Thank you, Mr. Caton, for giving me the opportunity to contribute to this extremely important debate. I start as is customary but also appropriate by offering my congratulations and gratitude to the hon. Member for Leeds, North-East (Mr. Hamilton) on raising the topic. I welcome the Exchequer Secretary to her position. She is new to the Treasury. I hope that I do not sound churlish when I say that it would have been better had the Economic Secretary, who continues to serve in the Treasury, been present, because that would have offered greater continuity with the many previous debates in which he has given statements or replied on the Government's behalf. Nevertheless, we look forward to hearing the Exchequer Secretary's response.

The background to this matter will be familiar to most if not all hon. Members present. The Government, through the then Department of Trade and Industry, the Financial Services Authority and the Government Actuary's Department, had responsibility for ensuring that the company Equitable Life acted properly and prudently. There have been no fewer than 13 reports on the failure of Equitable Life. The ones cited most often include those by Lord Penrose and by the FSA on its role from 1999 to 2000. Even the European Parliament issued a report on the subject.

However, the report that everyone concentrates on and that has been mentioned repeatedly during this debate is by the parliamentary ombudsman. It cost, I am told, £3.5 million and took four years to bring to a conclusion. An extremely thorough report, it is entitled "Equitable Life: a decade of regulatory failure". The report does exactly what it says on the tin. We almost do not need to read the report; the title itself tells us the verdict that was arrived at. Nevertheless, it is worth pulling out a few quotes. The ombudsman said that the Government's restrictions on earlier inquiries were "iniquitous and unfair". The DTI's oversight of Equitable Life had been "passive, reactive and complacent". The FSA's regulatory efforts had been

"largely ineffective and often inappropriate".

The policyholders had

"a justifiable sense of outrage".

The language is stark. We are used to reading official reports in which some of the criticisms are couched in more guarded terms, but the ombudsman's conclusions could not be more explicit.

I had the opportunity, from the exact position in which I stand now, to debate the situation, as it then existed, in this Chamber in November 2008, and many of the hon. Members present today were also present at that debate. We were assured by the Government and later by the Prime Minister himself that the Government would respond to the ombudsman's report by the end of 2008. I think that the Prime Minister said that it would be by Christmas 2008, rather than by the end of the year, but we would have been willing to grant him the extra week. In fact, the Government did not respond to the report within the timetable that they had promised, and when they did respond, the response was, by common consent, wholly inadequate.

Since the debate in this Chamber in November 2008, there have been further contributions on the matter. The Public Administration Committee undertook an inquiry into the ombudsman's findings. Its report, entitled "Justice denied? The Government's response to the Ombudsman's report on Equitable Life", said that the Government's excuses were

"shabby, constitutionally dubious and procedurally improper"

and that the ex gratia payment scheme looks "slow and onerous". It is a constant theme that the Government appear to be playing for time and dragging their feet. We heard earlier that that has consequences for all our constituents who are affected by this matter, who are dying on a daily basis without having the financial remedy that they rightly feel that they are owed.

The ombudsman published a further report on 5 May 2009-very recently-entitled, "Injustice unremedied: the Government's response on Equitable Life". We have already discussed that to some extent. It made a number of points, all of which were critical of the Government-no, to be fair, many of them were critical of the Government. The overall tone was critical of the Government's approach. Even the Equitable Life chairman, Vanni Treves, asked in relation to the Government's response,

"why haven't our policyholders been treated as well as Northern Rock and RBS depositors have? At any other time this would have been regarded as an absolute scandal."

The Government have put in place yet another review. There is a lot of frustration on behalf of Equitable Life policyholders. To use the familiar phrase, the matter continues to be kicked into the long grass. We have yet another review and more institutional delay. The review is under the auspices of Sir John Chadwick. By common consent, that review is inadequate. There is no definite timeline, unless the Minister can offer us one this afternoon. Very few resources are available to Sir John Chadwick to carry out the review in a way that many, including possibly him, would regard as desirable. The reporting process itself has been called into question. Ann Abraham, the ombudsman, said:

"Whatever the outcome of the work that Sir John Chadwick will undertake, it is clear that the injustice I have found to have resulted from maladministration will not be remedied."

We could not have a more unequivocal response from the ombudsman than that.

The question now is what can be done, given that track record of reports and the Government's lamentable record in responding to them. It is worth saying first that the Equitable Life fiasco was caused by systemic failures that go back a reasonable way. To pre-empt what the Exchequer Secretary might say, the seeds of the problem, according to both the Penrose report and the ombudsman's report, date back to a period before Labour was in government. I do not want the debate to be unduly party political; I want the Minister to respond on behalf of the Government of the day, rather than us having a debate along party lines. On that basis, let me concede that the Labour party could say with some justification that the problem did not start on 1 May 1997, when it came into government, although the problem has mainly been apparent and has grown since that date.

It is imperative that the Government undertake a period of negotiation with policyholders. Why? We have just heard from my right hon. Friend the Member for Berwick-upon-Tweed (Sir Alan Beith) that many people sought to behave responsibly and Equitable Life was seen as the gold-standard saving option. It was seen as beyond a normal commercial decision with the inherent risks that such investments inevitably involve. It was seen by our constituents as the cautious, safe, prudent way to save for retirement. The point was made earlier that we must incentivise people, as the population grows older, to save for their retirement, and it is precisely the people who are heeding that call and seeking to behave responsibly whom we should be seeking to assist, rather than deter from saving.

More than anything else, we need to act with speed. The greatest frustration for most of the policyholders is the Government's inability to come to a speedy resolution. The money given to policyholders ought not to be means-tested, because that is not the nature of the arrangement. I say as a concluding note and in a conciliatory spirit-I hope that the Minister will engage on that basis-that no one or very few people are saying that they expect the compensation to be 100 per cent. There is recognition that improper or ill-advised judgments were made by those directly responsible within Equitable Life. There is also-this is a mature contribution to the debate-recognition that we are, as a nation, borrowing £480 million every single day and that that backdrop must be taken into account when considering whether the Government can be expected to commit to additional public spending.

Nevertheless, even with those two important caveats, the Government have a responsibility, as the regulator, to compensate for regulatory failure. The Exchequer Secretary must bring this issue to a head now on behalf of the scores of constituents that I and all hon. Members have whose quality of life has been severely affected at the most vulnerable time of their life, because of the loss of savings due in large part to the regulatory failure over which the Government presided.

Mr. Mark Hoban (Fareham) (Con): I congratulate the hon. Member for Leeds, North-East (Mr. Hamilton) on securing this debate. It is vital that we continue to put pressure on the Government to respond properly to the report of the ombudsman, and to ensure justice for Equitable Life policyholders. We have had four debates on the subject and today's is the third in which I have taken part as a Front Bencher, but I fear that it will not be the last. It has a long way to run. The longer it takes, the more will policyholders be denied justice.

Sir George Young (North-West Hampshire) (Con): My hon. Friend is right to point out that this is the fourth debate, but none of the debates has ended with a vote. Would not the right way to resolve the matter be for the Government to put a proposition to the House, and to see whether the House supports them in a vote?

Mr. Hoban: My right hon. Friend makes an interesting proposal. The Government are seeking to renew the House to make it the centre for decision making, and to increase interest in Parliament. Using a long-running issue such as Equitable Life would be the ideal way for the Government to demonstrate their commitment to democratic renewal. I hope that Labour Back Benchers would encourage the Prime Minister, the Chief Whip and the Leader of the House to have the debate in Government time, to make the point that they want to see Parliament making such decisions. The problem reflects on Parliament more broadly. As a number of right hon. and hon. Members have said, the ombudsman is an officer of Parliament. She is not a government ombudsman but a parliamentary ombudsman. In undermining her report by cherry-picking the conclusions that she made nearly a year ago, the Government are undermining Parliament and the way in which we should resolve such matters.

Sir John Butterfill: Does my hon. Friend agree that that would give the Government an opportunity to explain to the House and the nation why they believe that depositors in Northern Rock and other failed banks are more worthy of support than the long-term savers in Equitable Life?

Mr. Hoban: I am sure that the debate will provide the Government with an opportunity to respond not only to that question but to questions on what has led to the delay in compensation to Equitable Life's policyholders. It will be important for the Government to set out their case on how they have sought to deal with the matter.

A number of Members referred to the statement made in January by the then Chief Secretary to the Treasury, now the Secretary of State for Work and Pensions, and the mismatch between that statement and the Command Paper published shortly thereafter. The matter has not been properly debated on the Floor of the House in Government time in a way that would allow us to address that inconsistency of approach. It is time for the Government voluntarily to make themselves accountable, rather than us having to raise the matter in Westminster Hall in order to maintain pressure on them.

The hon. Member for Taunton (Mr. Browne) said that he rather hoped that the Economic Secretary to the Treasury would respond to the debate. Although there may be virtue in continuity, continuing to do the wrong thing is not virtuous.

I appreciate that the Exchequer Secretary has been in post only for a few days, and that she has been on a rollercoaster, but I hope that she will not box herself in when responding to the debate. I hope that she leaves herself enough wiggle room to look afresh at how the Government have handled the matter and to see whether anything can be done to speed up the resolution of the issue. Each day longer means fewer policyholders receiving justice.

Several Members spoke of their constituents' concerns. They are not alone; constituents have been writing to me since I was elected in 2001, setting out their problems in coping with the financial problems that have arisen as a consequence of what happened at Equitable Life. They want to see justice. Like the hon. Member for Brent, North (Barry Gardiner), they cited the Prime Minister's statement on Barlow Clowes. The Prime Minister was as tenacious then in fighting for justice as he is tenacious now in trying to avoid giving justice to Equitable Life's policyholders. That attitude needs to change. The disparity in his approach is clear to all.

A point needs to be made about confidence in the pensions system. People entrust their money to pension companies. They want to make provision for their retirement. They want to ensure that they have a reasonable income in retirement. However, they expect the regulator to perform its duty by regulating those pension companies. What we have had, of course, is a decade of failure.

The hon. Member for Taunton was right that the problem lay not only with the Labour Government from 1997; the regulatory issues started under the preceding Conservative Government. At each stage, whether the regulator was the Department of Trade and Industry, the Treasury or the Financial Services Authority, those policyholders were let down. The ombudsman seeks to address that in her report-to recognise that there was maladministration, that the maladministration led to injustice, and that payment must be made to reflect that injustice. It undermines people's confidence in the entire regulatory system that, where there is evidence of maladministration and injustice, payments to policyholders do not seem to flow from that. It leads people to question whether their money is safe, and to ask whether those institutions are well regulated. That important point needs to be resolved.

Mention has been made of Sir John Chadwick. I believe that Sir John has been dealt a difficult hand. He was given terms of reference with a narrow focus, which restricted his ability to consider various issues. The Government have clearly set out the findings. However, Sir John produced his first issues paper last week. He hopes to receive conclusions in mid-July and to produce a further report in August. My understanding of what Sir John said in his report is that there will be many stages to the process before policyholders receive the justice that they deserve.

I wish to ask the Minister some questions about progress. During our last debate, it was suggested that Sir John was in the process of recruiting an actuarial adviser. Has that been completed? Is an actuarial adviser in place? If so, who is it? In the statement made by the then Chief Secretary to the Treasury in January, she suggested that Sir John's work would go in tandem with work that the Treasury had undertaken. Will the Minister outline what the Treasury has been doing since January?

At the time of the previous debate, Sir John had had one brief meeting with Equitable Life. Will the Minister tell us how many more meetings Sir John has had with Equitable Life since then? Based on the work done by Sir John and the Treasury to date, does the Minister have a better estimate of how long it will take before the first policyholder receives the first compensation cheque? It is nearly a year after the ombudsman published her report, and still there is no sense of who will receive compensation, how much they will receive and when they will receive it.

Will the Minister confirm Sir John's comments on means-testing? When the then Chief Secretary said in January that the Government were seeking to compensate people on whom Equitable Life had had a disproportionate impact, it was suggested that that meant means-testing. Sir John said in paragraph 3.10 of his report:

"I am satisfied that the Terms of Reference do not require me to engage in any form of means-testing in relation to individual policyholders."

Will the Minister confirm that means-testing is no longer on the agenda?

In recent weeks, the Government have been clear in their use of language about policies to help with the recession. They talk about "real help now". That rings hollow for Equitable Life policyholders. They have been awaiting justice, have suffered a decline in their income and have been struggling to make ends meet. I believe that they deserve real help now.

The Exchequer Secretary to the Treasury (Sarah McCarthy-Fry): It is a pleasure to welcome you to the Chair, Mr. Caton. I congratulate my hon. Friend the Member for Leeds, North-East (Mr. Hamilton) on securing this debate. It is a testament that the events surrounding Equitable Life continue to command a lot of attention from many hon. Members, as it should.

Although this is the first time I have been called upon to appear in a ministerial capacity at a debate on Equitable Life, I have spent a considerable time getting up to speed and I am fully aware of the previous debates. Having looked through them, I think that it is fair to say that we are not covering much new ground today. Many of the arguments have been heard many times in this House. However, I thank all hon. Members, all of whom spoke eloquently on behalf of their constituents, for their contributions this afternoon. The Government always welcome healthy debate and continuing scrutiny, but I must be clear from the start: our position has not changed. We have made our response to the ombudsman's main report and we stand by it. We explained our reasons behind every rejection of her findings, and we believe that we had cogent reasons for doing so.

Reflecting the limited extent of her jurisdiction, the parliamentary ombudsman's second investigation into the regulation of Equitable Life's with-profits fund under the Insurance Companies Act 1982 regime, which has now been superseded, looked exclusively at the role of the prudential regulator and the Government Actuary's Department. It was not permissible for her to consider the actions of Equitable Life or any other party within the private sector. The substantial report published by the ombudsman in July last year was the culmination of her four-year investigation. The factual and technical complexity of the issues that she investigated, which themselves contributed to the length of her investigation, are the reasons it has been necessary for the Government to take time to consider the report. Indeed, the Government would have been rightly criticised had they not considered the report carefully before giving their response.

I repeat that the Government accept that maladministration occurred in some areas and that in some cases, but not all, that might have led to injustice for policyholders. The ombudsman welcomed the Government's acceptance of maladministration and of the fact that some policyholders will have been adversely affected by regulatory failures. We have apologised for that-and I do so again today-on behalf of the public bodies and successive Governments responsible for the regulation of Equitable Life between 1990 and 2001.

We also accept that some policyholders might have suffered a disproportionate impact as a consequence of the maladministration and injustice accepted by the Government. We have looked in detail at the ombudsman's central recommendation for a compensation scheme. Several hon. Members suggested that the Government are at fault in not accepting the recommendation that we should establish and fund a compensation scheme with the aim of restoring those Equitable Life policyholders who suffered a loss as a result of the maladministration. However, such views fail to take account of the important principle, recognised by Parliament, that it is not generally appropriate for the taxpayer to pay compensation, even in the event of regulatory failure. The regulator is not the guarantor of the regulated and the taxpayer does not stand as the insurer of last resort. The responsibility to minimise risk and to prevent problems from occurring in a particular institution lies, first and foremost, with the people who own and run that institution, as was pointed out in Lord Penrose's report. Lord Penrose also found regulatory system failures-I do not disagree with him-but concluded that they were secondary.

The ombudsman recognised in her report that the Government have to consider first the public interest and secondly their responsibility to taxpayers generally to balance competing demands on the public purse. The Public Administration Committee's report stated:

"The decision to compensate must not be the equivalent of signing a blank cheque on taxpayers' behalf."

That is why we have set up a process that will establish the facts on relative losses experienced by different groups of policyholders and the factors affecting those losses.

Mr. Hoban: Is the Minister saying that the Government decided to restrict the number of findings made by the ombudsman because of the constraints on public finances?

Sarah McCarthy-Fry: Categorically not. The right hon. Member for Haltemprice and Howden (David Davis), who is no longer in his seat, made an intervention on this point. We are not delaying our response, and did not disagree with the findings, in order to save money.

Barry Gardiner: I, and many other hon. Members, accept that the Government's intention is not to delay simply to reduce costs. That would be an abhorrent allegation. None the less, that is the effect of what is happening. The Government must seriously address that point and speed things up to avoid that impression.

Sarah McCarthy-Fry: We intend to find a resolution with our scheme as quickly as possible, but we also need to get it right.

My hon. Friend the Member for Leeds, North-East mentioned the recent approach proposed by Sir John, which he intends to operate, and the issues to be addressed. My hon. Friend and others said that Sir John should be able to consider all cases raised by the ombudsman, and not just those that the Government agree with. We have cogent reasons for accepting only those cases of maladministration and injustice set out in our response. However, we had equally cogent reasons for departing from others, and it would be irrational to ask Sir John to consider those. It is important that we get this process under way as quickly as possible where we have accepted maladministration and injustices. For those cases, we want Sir John to get on with the scheme.

We all agree that this is a complex matter. The ombudsman accepted that any scheme would take a considerable time-two and a half years, she said-but we are not setting a time limit. We need Sir John to do the work, but we share everybody's concern that the scheme pay out as swiftly as possible.

The hon. Member for Fareham (Mr. Hoban) asked about progress. Sir John has established his office and appointed its key staff, and has met and corresponded with Equitable Life. I do not have to hand the number of times, if any, he has met it since the first meeting. However, I shall write to the hon. Gentleman with that information. Sir John has established a website through which interested parties can keep informed of his work. Equitable Life has now provided him with records about policyholders. He has issued his document setting out his proposed approach and the issues to be addressed. He has asked interested parties to comment on those proposals by 17 July. That is quite a tight time scale, but we are trying to get the scheme under way as quickly as possible. If any hon. Members wish to comment on his proposed approach and issues, they should get that information to him.

The hon. Member for Taunton (Mr. Browne) said that Sir John has few resources available, but actually he is assisted by a team of office staff, ranging from counsel to administrative support and a private secretary, and the team has recently been joined by the expert actuarial services of Towers Perrin-that answers another point made by the hon. Member for Fareham.

As the Economic Secretary has stated, our preference is not for a means test, and we are certainly not asking Sir John to advise us on whether there should be one. However, we shall consider Sir John's advice if, when he has finished the process, he comes to a different conclusion. We are giving him a wide remit to consider how we can deliver the desired outcome.

It is regrettable that the parliamentary ombudsman felt it necessary to lay her further report recording her view that the injustices that she found will not be remedied. We have the greatest respect for the office of the ombudsman, and where we departed from her findings in the main report, we did so only after very careful consideration. When she announced the Government's response in January, the then Chief Secretary explained that there is no easy solution to the problems at Equitable Life and the faults that were found. She also made it clear that the Government believe that their response to the ombudsman's report is the right one. I agree with that.

The new help for policyholders announced is fair to them and to taxpayers. The need to resolve this matter is acknowledged on both sides of the House, including by hon. Members today. I restate the Government's commitment to introduce their ex gratia payment scheme as quickly as possible.