Equitable Life (Payments) Bill

I beg to move, That the Bill be now read the Third time. The Government want to see justice for Equitable Life's policyholders, and this is clearly reflected in the actions that we have taken since coming to office. In six short months, the coalition Government have made real progress towards implementing their pledge to make"““fair and transparent payments to Equitable Life policyholders…for their relative loss as a result of regulatory failure.””—[Official Report, 26 May 2010; Vol. 554, c. 1WS.]" Since coming to power, we have published the first ever estimates of losses suffered by policyholders, considered representations on them, and endorsed a relative loss figure of £4.3 billion—in line with the parliamentary ombudsman's findings. We have set aside £1.5 billion to make payments, which is more than four times the amount that Sir John Chadwick's methodology produced. This strikes the right balance between fairness to policyholders and fairness to the taxpayer. We have announced that we will cover the full losses of those policyholders who have or have had with-profits annuities. We have established an independent commission to assess how best to allocate payments to policyholders. While giving the commission wide discretion, we have made it clear that we do not expect payments to policyholders to be means-tested and that we expect payments to be made to the estates of deceased policyholders. Our goal is to make the first payments to policyholders towards the middle of next year. This is a huge achievement, of which we can be rightly proud. The Bill is a vital part of this work. It gives the Treasury the authority to incur expenditure to make payments to policyholders. Without this Bill, redress for those who have suffered so long would be impossible. That is why we have moved so quickly. To delay further action would be unfair to those who have already waited over a decade for a resolution. The sooner this legislation is in place, the sooner we can bring their suffering to an end. I know that right hon. and hon. Members of all parties fully support us on that. We announced as part of the spending review that it was our intention to make these payments tax free. Today's Bill gives the Treasury the power to make an order allowing these payments to be disregarded for tax. The payments will also be disregarded for the purposes of tax credits. Finally, the Bill enables the Government to consider what effect, if any, these payments will have on people's eligibility for certain means-tested, state-funded support. I outlined in the debate on the final group of amendments how this treatment will apply to welfare benefits. We are still considering how the payments will affect support such as social care. We have concluded that lump-sum payments made as part of this scheme will be disregarded as income for the purposes of assessing eligibility for means-tested benefits. Instead, they will be classed as capital. Capital limits do not immediately cut off eligibility for benefits; they work on a sliding scale, gradually reducing support for individuals with larger assets. It is unlikely that many recipients who would otherwise have been eligible for means-tested benefits will receive payments that dramatically affect this eligibility. For with-profits annuitants, regular payments will be treated as income in a similar way to the lost income stream that these payments represent. Earlier today, hon. Members debated in detail a Government amendment that gives National Savings & Investments the power to deliver payments. That being a large and potentially complex task, it is essential that the delivery partner has the experience and expertise to do the job properly and cost-effectively. When judged against these criteria and the imperative for payments to begin as soon as possible, National Savings & Investments was the strongest candidate, which was the motivation for including this amendment in the Bill. I am aware of the concerns that hon. Members have voiced about the Bill's brevity. It is, indeed, a two-clause Bill and it does not include detail about the payments scheme that would allow Parliament to scrutinise and debate the issue. I would like to point out that there is no requirement for the Bill to do so; it is simply an enabling Bill to give the Treasury the power to make these payments to policyholders—and nothing more. The scheme design does not require statutory footing and, of course, before the scheme design is finalised, we first need to make progress on this Bill. If we had waited for the scheme design to be finalised before proceeding with the Bill, it would have taken far longer before we could start to make payments. What the Treasury has sought to do is to work on as many streams as possible in parallel, within the constraints of our legal powers. Let me reassure all hon. Members that I am fully committed to transparency at every stage of this process. I understand and sympathise with Members' concerns, and for this reason I will publish a document setting out the scheme design in detail and lay it before Parliament for full scrutiny. Following the independent commission's publication of its final advice, I will make a statement setting out the Government's response. I also know that Members are keen to discover whether a robust appeals process will be in place, one that will allow policyholders who believe their payment has been wrongly calculated to challenge this judgment. I am therefore pleased to confirm that we will be appointing a review panel, independent of NS&I, with full powers to consider any such challenges and to overturn any decision that it finds incorrect. As I said to the hon. Member for Nottingham East (Chris Leslie) in an earlier debate, the costs of that appeal mechanism will not be borne by the compensation pot. We want to ensure that policyholders get the full value of the money that we set aside for compensation payments. In the interests of transparency, I should like to set out the next steps in the process of resolving this long and complex issue. As a starting point, I hope that today's Bill will receive Royal Assent by the end of the year. That will allow the delivery partner to start preparations early in the new year, and to be well placed to make the first payments by the middle of the year, as is our ambition. It is important for the delivery partner to start work early, in order to accelerate the timetable to make those payments. The independent commission is due to report to me in late January and, following that, we will incorporate its recommendations in the design of the scheme, which will then be scrutinised by Parliament. As I said earlier, I would encourage hon. Members on both sides of the House, whether they are new to the issue or have run with it for many years, as so many of us have, to engage with the commission in its work. It is independent of the Treasury, and the three commissioners are very experienced. I believe that they have the expertise and skills to design a proper payments scheme for policyholders. However, they would welcome contributions from everybody who has participated in the debate, not just in the House but across the country over the past decade, to enable them to produce the best possible scheme design, which meets as far as possible the aspirations of people who have had policies with Equitable Life. Since the Government took office in May, we have come a long way. We have achieved far more in recent months than was achieved in recent years. We have quantified relative loss suffered because of maladministration. We have identified the losses that policyholders have suffered on a bottom-up basis, by groups of policies and by age. For the first time, a proper understanding has been established of the losses suffered. That is a tribute to the hard work conducted by Towers Watson and others to develop that estimate. As a consequence of the spending review, we have been able to assess the quantum of losses, to decide the loss figure that we accept. We have accepted the ombudsman's view that relative loss is the best guide. We set aside £1.5 billion of funding to cover the cost of the payments scheme. We have announced that the losses of post 1992 with-profits annuitants will be covered entirely by the Government. We have also established an independent commission to advise on the allocation of funding to not-with-profits annuitants policyholders. As a Government, we want to see a swift resolution to this matter. We want the many policyholders who have waited in financial purgatory for so many years, and who have campaigned so hard for justice, to receive the payments that are rightfully theirs. No one could disagree that policyholders have waited too long for justice. Although the debate has been relatively brief, it is not just the tip of the iceberg—to which the hon. Member for Nottingham East referred—as anyone who has participated in the debate will recognise. Passing this important Bill is essential to achieving justice, and I commend it to the House.