Equitable Life (Payments) Bill

I should like to speak to amendment 2, which is grouped with amendment 1, tabled by my hon. Friend the Member for Leeds North East (Mr Hamilton) and amendment 7, tabled by my right hon. Friend the Member for Holborn and St Pancras (Frank Dobson). In wishing you a happy birthday, Mr Evans, let me say that I do not have any registrable financial interests in the matter under debate. However, I want to place on record that 18 months ago, some while before I was returned to the House, I was occasionally commissioned to give advice and training on parliamentary and public policy matters, and on one occasion, I undertook a day's work for a company whose clients included the former chief executive of Equitable Life; by then, of course, its fund had been closed for many years. I thought it important to disclose that encounter for the avoidance of any doubt. Although I had a day's work indirectly related to Equitable Life some time before coming into Parliament, I have not had any financial or policy discussions on the matter subsequently. I have held this brief for a couple of weeks, and it has been an extremely steep learning curve of reviewing history and policy that dates back well over 25 years, as my hon. Friend the Member for Leeds North East said. I was struck by the opening words of the House of Commons Library background note to the Bill:"““Describing the Equitable Life (Payments) Bill as the tip of an iceberg would be harsh on icebergs: at least they have 10% or so of their bulk above the water line. The Bill is but a tiny atoll below which lies the immense bulk of the Equitable Life tragedy.””" In general, I intend to be as supportive as I can of the Bill, as it is a positive step forward in the attempts to rectify a long and sorry saga. The amendment simply seeks to encourage the parliamentary ombudsman to"““report to Parliament on the implications for payments…of the findings of the Independent Commission on Equitable Life Payments, no later than one month after the publication of such findings.””" I do not want to go through the entire background that has brought us to this Committee stage today. By my count, eight separate inquiries, and possibly more, have done that, and there are conflicting and sometimes contradictory findings and accounts of what happened in the past and who should be responsible for rectifying the situation for policyholders. However, we know that in the spending review the Government accepted the ombudsman's approach to maladministration and, more relevantly to this debate, to the framework for a compensation package. The Government say that they want to honour the interpretation of the ombudsman's second report in full. That is their choice. There are clearly arguments in favour of that approach, as well as against it. The Minister now places great emphasis—although it could be argued that he did so to a lesser degree before the general election, when there were a lot of loud campaigns on signing up to the EMAG pledge—on it being appropriate to consider the potential impact on the public purse of any payments of compensation in this case, as the ombudsman has said. The Treasury has concluded that it will initially focus on total relative loss as the basis for its payments and will cover those losses in full for post-1992 with-profits annuitants, to the tune of some £620 million. Some 37,000 individuals will be involved in that. That means that that group of with-profits annuitants will receive compensation equivalent to that which they would have gained had they invested in companies other than Equitable Life. However, because of the cap of about £1.5 billion that the Treasury is placing on the total payouts, the other 1 million or so policyholders, including annuitants with older policies—I presume, although I may be wrong about that—will have to have their compensation for relative loss adjusted to fit within the envelope available. The Independent Commission on Equitable Life Payments, which is chaired by Brian Pomeroy, has been set up by the Minister to advise on the allocation of compensation to policyholders other than those with-profits annuitants, who will be getting 100% compensation. I am conscious of the words of Sir John Chadwick when I think through the technical challenge of administering a compensation payment scheme; it is important that its design and delivery are clear and efficient. I hope that we are not on the brink of a further failure that compounds the problems of the majority of policyholders by opting for a compensation scheme that could be so complex and opaque that it might risk grinding to a halt. We need a scheme that works in practice. If the Minister is opting for the ombudsman's approach—as I say, that is the Government's choice—there are questions that need to be answered, and I would be grateful if he could reflect on those when he makes his comments. First, exactly how will the apportionment of the relative loss figures for other policyholders not receiving 100% compensation be calculated under the ombudsman's approach, if we will not be following the Chadwick methodology given the Government's acceptance of all 10 findings by the ombudsman? Secondly, will the other policyholders—the vast majority—be classified into broad categories or subject to individual assessment of their cases? Will there be any burden of proof requirement on the other policyholders in the assessment of their relative loss, or is it likely that the compensation scheme will have some assumed automaticity in all cases? I ask that only because the ombudsman's findings of loss are very specifically linked to a policyholder's reliance on the regulatory return data. She said:"““I find that injustice was sustained by any policyholder who relied on information contained in the society's returns between 1990 and 1996.””" I am trying to get a sense of precisely how that process will work. Thirdly, how will the payment scheme take into account all the other maladministration factors for other policyholders that Sir John Chadwick's methodology would not have covered, if we are following a classification scheme? Whatever compensation scheme the independent commission eventually alights upon, it is an important starting point to establish that it is consistent with the Minister's intentions—in other words, that it encompasses all the parliamentary ombudsman's conclusions. I gather that there are moves afoot by the Public Administration Committee to interpret whether the ombudsman's model aligns with the payment scheme that eventually emerges. That might be a good idea, but perhaps it is a little circuitous. It would be far better, in my view, to give the ombudsman directly the right and the opportunity to say publicly whether the payment scheme is indeed in keeping with the spirit of her own findings. She could then say whether the total relative loss figures are accurate and whether the compensation scheme is fair, particularly given the controversy over the dates and whether some people will or will not be included in the 100% compensation for with-profits annuitants. The purpose of our amendment is simply to give voice to the ombudsman so that she can confirm her view. It is worth noting at this stage that, far from granting the wishes of the Equitable Life policyholders regarding everything they wanted, the main pressure group formed to speak for their interests, EMAG, is angry and perplexed at the nature of the compensation scheme envisaged by Ministers and the constraints placed on the independent payments commission. EMAG says on its website:"““The independent Commission's recently torn up terms of reference have not at this date””—" this was a week after the announcement in the spending review—"““yet been replaced.””" It says that the Minister's letter of 20 October to the commission's chairman"““makes clear that retrospectively the remit will now totally exclude””" the full class of with-profits annuitants. My hon. Friend the Member for Leeds North East alluded to that point. EMAG continues:"““So its remit now is to divvy up £775m between 600,000 and to suggest the prioritisation. This surely cannot be what the Parliamentary Ombudsman had in mind as the role for the independent Commission?””" Given this question mark over the parliamentary ombudsman's intentions, we felt it important to table the amendment to try to give voice to that. There is doubt about whether the compensation arrangements are as much in alignment with the ombudsman's approach as the Financial Secretary would like to argue, and I hope that our amendment will give the ombudsman a chance swiftly to comment on the calibre of the scheme and clarify once and for all whether it fits with her approach. We believe that that can be done quickly, and there seems to us to be no reason why it could not happen within one month of the publication of the scheme's proposals. There would not be any reason to delay payments, and it would aid transparency and confirm whether the Government's arrangements via the commission's payment scheme were the same as those envisaged by the ombudsman. Although amendment 2 may be a belt-and-braces approach, at this stage of the saga we need some cast-iron assurances all round.