Webb, Hunter and Heath on Equitable Life

5.26.28pm GMT Wed 28th Jan 2009

Jan 27]: • Steve Webb: ' . . WE are not talking about fat cats or people on the take; we are talking about ordinary, decent people who saved and trusted. They deserve justice.'

Steve Webb: I quote: "I attended many of the public meetings convened by Equitable Life and found them truly depressing. I could see the fear and despair in elderly members' faces though they invariably tried to put on a brave face. I particularly remember a frail couple in their seventies. They were only 30 feet from me and I could see that as the man spoke his wife was squeezing his hand in silent support. It is not easy to speak in front of hundreds of people. He explained that until the collapse they had been advised that their pension would be around £75 a week. They now had to take their pension and (six months later) it was to be £35 per week. Could anything be done? Charles Thompson solemnly explained that not only could nothing be done but the £35 may actually decrease in future years. The man thanked him and sat down. The expression on the couple's face is seared in my memory. Both trying to be brave for each other. Both terrified."

I wanted to start in that way because there is a human face to the Equitable fiasco. In the course of this debate, we will discuss parliamentary process, ombudsmen, Select Committees and all the rest of it, but we risk losing sight of up to 1 million people who trusted the Government and a financial institution, and have been profoundly let down. I contend-as, I suspect, do other hon. Members, of whom there is a good turnout today-that they will still feel let down, not just by Equitable Life and the regulators, but by the Government's response to what the ombudsman said.

On 17 July, the ombudsman published her second report on Equitable Life. Almost six months later, on 15 January, the Chief Secretary to the Treasury gave a statement to the House setting out her response. I wonder whether, like me, other hon. Members did not follow it very closely. I just got a vague sense that the Government had said sorry, admitted a bit of maladministration and set up a compensation scheme. I thought, "Well, maybe that's the end of it," but my instinct was that it was not, and that that was not what had in fact happened. I believe that I am right in saying that none of the hon. Members who heard the Chief Secretary's statement that day had yet had the opportunity to read what was behind it: Cm 7538, which gave the details.

The statement sounded reasonable. We heard an apology and the Chief Secretary sounded understanding. She thanked the ombudsman and the Public Administration Committee, and she even asked a retired senior judge to come up with a fair payment scheme. What could be better than that? However, the reality of the situation is very different.

Michael Weir (Spokesperson (Business, Enterprise and Regulatory Reform; Energy; Work and Pensions); Angus, Scottish National Party): Does the hon. Gentleman accept that it was obvious even then that there would be a further several years' delay before anyone received compensation? The Chief Secretary said at the time that it would probably take two and a half years but might take longer.

• Steve Webb: The hon. Gentleman is absolutely right. The phrase "justice delayed is justice denied" applies in this case. It was apparent even in the statement that although the ombudsman wanted action to start within six months and to be completed two years later, what would actually happen was delay piled on delay. Many of the people affected have already died, and there are questions about whether estates and widows will benefit. Many families have had to live with such unanswered questions for a decade.

Annette Brooke (Mid Dorset & North Poole, Liberal Democrat): Does my hon. Friend agree that the proposals could not be further from what the Public Administration Committee recommended, which was an independent, transparent and simple compensation scheme to provide swift redress to those who had lost out?

• Steve Webb: My hon. Friend is absolutely right. As I hope to explain, there are many facets of the Government's response that do not meet what either the ombudsman or the Public Administration Committee said.

Daniel Kawczynski (Shrewsbury & Atcham, Conservative): The hon. Gentleman mentioned the judge appointed to oversee the matter. Does he agree that that judge's remit has been deliberately restricted by the Government to ensure that compensation is limited and takes considerable time to be delivered?

• Steve Webb: There is a good deal of prescience in Members' interventions. The hon. Gentleman is absolutely right. The process is fundamentally flawed in many respects, one of which is that the judge can answer only the question that he is asked, and that question is being circumscribed overwhelmingly and unfairly.

Alan Duncan (Shadow Leader of the House of Commons, Parliament; Rutland & Melton, Conservative): I congratulate the hon. Gentleman on raising this important topic, and I note that Opposition Members outnumber Government Members by about five to one. Does he agree that the simple message that we need to send from this Chamber is that many people feel that the Government are quite simply hoping that people will die off before they have to meet their obligations? The Government have a pressing moral obligation to do something immediately to compensate some of the most cautious and responsible investors in the country.

• Steve Webb: I certainly agree with the hon. Gentleman about the need for speed. I have received a copy of a letter that one of his hon. Friends sent to a constituent, and I am a little worried about what that Member wrote. They said that the Government had announced that they would establish a payment scheme and that they had made an apology, adding:

"I hope that these developments will lead to a resolution of the outstanding issues."

One of my worries, not only about the hon. Gentleman's colleagues, but about the whole House, is that we have been had. We heard a statement that sounded mellifluous and gave reassurances about feeling people's pain, but I hope that every hon. Member present will leave this debate more worried than when they arrived, and more determined to do something about what the Government propose.

Gisela Stuart (Birmingham, Edgbaston, Labour): May I put it on record that the Government side is represented and that there are Labour Back Benchers in the Chamber? One thing that has troubled me-I have asked everyone who has written to me about Equitable Life to come and see me-is the difficulty of teasing out which losses were incurred as a result of maladministration and market failure. Does the hon. Gentleman accept that rather than squabbling with each other and scoring party political points, we could try to find a way of taking the matter forward positively?

• Steve Webb: I agree that no one is suggesting that people should have a free ride, or that they should not be subject to the same stock market variability as everyone else. The analogy that has been drawn to my attention is the comparison with investment in "Elsewhere Life": what people might reasonably have expected had their money been with a similar company of similar status, but elsewhere, and how what they actually got differed, particularly because of regulatory failure. We need to focus on those issues.

Several hon. Members:

rose-

• Steve Webb: Let me make a little progress and then I shall give way again. Everyone present knows that there has been a series of reports. The ombudsman's second report involved four years' work, at the end of which she made 10 findings of maladministration and five findings of injustice. The Government's response-this was published repeatedly-said either that there was no maladministration, or, if there was, that no injustice had arisen from it. It is worth considering the list of findings. On finding one, about the dual role of the chief executive and the actuary, the Government's response said: "finding of maladministration not accepted".

On finding two, the Government's responses were: "Valuation interest rates...finding of injustice not accepted" and "Affordability and sustainability of bonus declarations...finding of injustice not accepted".

Neither have they accepted finding three of injustice, or finding four of injustice about valuation rates. One would never know any of that from listening to the Chief Secretary's statement.

Mark Simmonds (Shadow Minister, Health; Boston & Skegness, Conservative): The hon. Gentleman makes a powerful case and is being generous by giving way yet again. Is he aware that because of the reasons that he has just articulated, it is estimated that perhaps more than 90 per cent. of those who have lost out through the Equitable Life scandal will not be compensated at all? Will he join me in expressing concern for the people of Lincolnshire and those where his constituency is? This issue is causing people major concern that needs to be rectified as swiftly as possible.

• Steve Webb: It is all right; no one knows where Northavon is. The hon. Gentleman makes a serious point: the process has curtailed massively the people who might be even potentially eligible. It is interesting that the ombudsman says in her report: "My second-and central-recommendation is that the Government should establish and fund a compensation scheme".

However, I have read the Chief Secretary's statement word for word, and I cannot find the word "compensation" anywhere in it. What we are discussing is a hardship fund that will work on a charitable basis and probably be means-tested, and that is the fundamental problem.

• Mark Hunter (Cheadle, Liberal Democrat): Is my hon. Friend as struck as I am by the contrast between the Government's approach on this issue and the swiftness of their decision to bail out the bankers in their hour of need? They acted with great urgency to assist the banking industry, while many hundreds of hard-working families who have investments in, or are policy holders with, Equitable Life feel that they are being asked to wait an extraordinary length of time for what is simply natural justice.

• Steve Webb: My hon. Friend is absolutely right. Other bail-outs have been provided-one thinks of the situation involving Icelandic banks-but this case is dragging on and on with no obvious end in sight. As we have heard, the worry is that people are dying as it goes on. Even if that is not the case, the situation is causing constant anxiety. I appreciate that there is a range of circumstances, but some policyholders are scrabbling to get by and are seeing their real-terms income declining year on year. I had not appreciated that until I talked to the Equitable Members Action Group, to which I pay tribute for its tireless campaigning. One of my constituents says:

"My Equitable Life pension has fallen from £7306.79 per annum, when I took it out, to £5525.76 now, despite being transferred to the Prudential...To add insult to injury, I understand that it will continue to fall year on year until it dwindles to nothing, if I don't die first."

The situation is not even static-it is getting worse.

Bob Spink (Castle Point, Independent): The hon. Gentleman will be aware that the Government are relying on the earlier Penrose report, which stated that Equitable was the author of its own misfortune. However, even Penrose pointed to serious shortcomings regarding the regulators, which failed policyholders. The Government's policy, with its reliance on Penrose, is flawed. Even if we go back to the first report, we find that the Government should be giving compensation. Some 30,000 affected pensioners have already died.

• Steve Webb: They have indeed. The Chief Secretary has quoted selectively from Penrose. Penrose goes on to say that "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".

It is a both/and situation: clearly the society's management and operation were at fault, but the regulatory regime should have picked that up and did not.

Peter Bottomley (Worthing West, Conservative): Does the hon. Gentleman agree that one necessary task for the Prime Minister is to explain why the Chief Secretary did not give the House the information in the report or the Government's publication that followed shortly afterwards? Does he also agree that it would be suitable for the Liaison Committee to concentrate on that the next time the Prime Minister comes before it, in order to show that Parliament will not be treated in that way, especially when there is an issue of injustice?

• Steve Webb: If members of the Liaison Committee raised the point with the Prime Minister, I would welcome that. I am sure that we would get an answer.

Andrew Turner (Isle of Wight, Conservative): The sorry saga of Equitable Life has rumbled on for eight years. The Chief Secretary to the Treasury said that when blame rests with the owners of a financial institution, "it is not generally appropriate for the taxpayer to pay compensation". However, the ombudsman made it clear that the Government should pay up. Those Equitable Life policyholders who are left cannot afford to wait another few years while the Government procrastinate.

• Steve Webb: The hon. Gentleman is quite right. The waiting has gone on long enough; it is time for justice.

This is the fundamental problem. We have a process involving a parliamentary ombudsman who is independent and to whom our constituents, through us, can go for redress where maladministration has occurred. For many decades, what the ombudsman said went, and that was an entirely good thing. Sometimes when I have complained to the ombudsman, she has not found in the way that I wanted, and sometimes she has. The point is that we accept the outcome in either case. I am worried that the Government are essentially being defendant, judge and jury simultaneously. They do not like the verdict, so they are simply saying, "We'll have this bit of it, but not that bit." What is the point of an ombudsman process if the Government behave in that way?

Let us consider what Sir John Chadwick has been asked to do. I do not know a great deal about him, but I understand that he is a retired senior judge and I am sure that he is an expert. However, I feel instinctively uneasy that the whole process has been handed over to a good chap. We are asking a good chap to go away and think deep thoughts; to set up, presumably from scratch, an office and a structure to gather data; and to report not to Parliament, but to the Treasury. As far as one can see, he will report privately and in secret. I do not imagine that the Minister will say much that is helpful this morning, but if she can at least say that we will have access to what Sir John says to the Treasury and that we will see his findings and recommendations as we go along, that will offer a little transparency to the process that might otherwise be totally lacking.

Susan Kramer (Richmond Park, Liberal Democrat): Does my hon. Friend agree that nothing in Sir John's remit addresses the issue of justice? Justice lies at the foundation of the claims of Equitable Life policyholders. If regulators cannot be held to the standard of justice, we can have no confidence in our financial system generally.

• Steve Webb: My hon. Friend raises an important point about confidence in the financial system. One of my constituents wrote to me:

"My own children, seeing what has happened to me, have decided not to bother saving for pensions."

The Government's response is so worrying because there is a presumption among the public that when they invest in the private sector, there is a regulatory framework to protect them. It may not protect them from all risk-nor should it-but at least it should ensure that companies are properly run. However, it did not do so in this case. If the Government walk away from their responsibilities, why should anyone else trust those institutions, especially given that Equitable was a gold-plated mutual with a nice crest on the letterhead, and all of that? If people cannot trust Equitable Life and the Government do not help, why would they ever invest?

Brian H Donohoe (PPS (Lord Adonis, Minister of State), Department for Transport; Ayrshire Central, Labour): I congratulate the hon. Gentleman on securing the debate. I have had the opportunity in the past to partake in such debates.

The hon. Gentleman has just mentioned the Government's not giving a commitment to Sir John. However, I understood that they had given such a commitment. Indeed, Equitable Life states just that, noting, "the commitment by the Chief Secretary to the Treasury to relay this information back to Parliament at regular intervals."

• Steve Webb: There is a difference between what Sir John says privately to the Treasury, which is then filtered and relayed to us, and direct access to what he is saying-in other words, the incoming material not filtered through the Treasury. That is my point. If what Sir John says to the Treasury is placed in the public domain, I shall be delighted, and if the Minister can confirm that, I am happy with that. We need to hear what is said at the time, rather than what is filtered some time later.

Gregory Barker (Shadow Minister, Energy and Climate Change; Bexhill & Battle, Conservative): What angers my constituents in particular is that the payment of compensation, as was made clear by the Committee, is not a matter of charity but a requirement of justice to redress a wrong, yet the Government have concluded that compensation will be paid on a means-tested basis. That is their whole remit. Can the hon. Gentleman think of any other case where justice has been dispensed on a means-tested basis?

• Steve Webb: The two concepts certainly do not sit well together. Clearly, if someone has suffered an injustice, the matter of whether they have other means or are still of working age and can earn money from somewhere else does not seem material in remedying that injustice.

Many Members want to contribute to the debate, so I shall just run through the fundamental flaws of the Government's approach to Sir John Chadwick's work. First, to assess people who have suffered disproportionately -although I do not think that is the right question to ask-an assessment of their circumstances and those of other household members, along with their other incomes, would be needed. A complicated household means test of some sort would be needed, which would be bureaucratic and time-consuming, and money that should be spent compensating people would be spent on bureaucracy. I do not recall the ombudsman saying that the compensation scheme should just be for those disproportionately affected and I am concerned that that element has been allowed to creep in. As the hon. Gentleman says, if the scheme is about justice, I cannot see why there should be a test for disproportionate effects.

Secondly, Sir John will be asked to apportion blame between the management of Equitable Life and the regulators, but I do not see how he can do that. If the company messes up and the regulators fail to stop it and alert policyholders, whose fault is that? It is both their faults. However, the Government are responsible for the regulatory regime. Why should the policyholder receive less compensation for the injustice that they have suffered from the failure of regulation just because somebody else was the ultimate cause? I do not follow the logic of that. How can Sir John put a number on it? I assume that he will have to do that and then say, "It was half the regulator's fault and half the company's fault, so we will pay half compensation." It does not make sense.

Thirdly, we have talked about speed, which is so much of the essence. I understand that the average age of annuitants is 80, so the consequences are obvious. There are already plenty of Equitable widows-and widowers, for that matter-who simply need to know where they stand. I hope that the Minister will reassure us today that the estates, and thus widows and survivors, will benefit. It is not their fault that their loved one-the policyholder-died. Why should they suffer again because of delay in the process?

Jo Swinson (East Dunbartonshire, Liberal Democrat): I congratulate my hon. Friend on securing this important debate.

On the issue of speed, eight years have passed already, and even the ombudsman has suggested another two years, which would take the period to more than 10 years. However, the Government, dragging their feet, suggest that it will be even longer. Can my hon. Friend think of any other case in which justice has been so long delayed? Let us compare Equitable Life with the Icelandic banks situation, where the Government acted quick as a flash. Why does the Equitable case not require urgency from the Government?

• Steve Webb: I congratulate my hon. Friend on the leadership that she has shown on this matter and on the debate she introduced in this Chamber some months ago. Sadly, there are other examples in which justice has been similarly delayed, but of course that does not justify the situation that faces us today. That is the key point.

A further point about Sir John's study is how independent it will be. Crucially, the ombudsman wanted an independent tribunal, but Sir John has been appointed by, and is answerable to, the Treasury so how can he be fully independent? Let us bear in mind that he will be advised, presumably by the Treasury, which is ever so slightly implicated in this whole thing, and by the Government Actuary's Department, which also has ink on its hands-I suppose that is the phrase. Surely, if such a structure is to be used, at the very least we need involvement from a policyholder representative. Just asking one decent chap to do the decent thing and give some advice does not seem up to the scale or urgency of the problem. Surely the Government should have acted on what the ombudsman said, not invented yet another structure and delay.

Anne Main (St Albans, Conservative): I congratulate the hon. Gentleman on securing this important debate. Will he expand on the point he was making? The lack of transparency in the original process led to what my constituents have called a cruel deception-when Equitable Life was technically insolvent, but they were still encouraged to invest. Without the involvement in the process of such good men as the hon. Gentleman described, people will have no faith either in the Government or the transparency of the process that they are trying to put in place.

• Steve Webb: There has been a series of regulatory failures under consecutive Governments, the answer to which has always been transparency. Had we known what was happening inside Equitable Life, many of those things would not have happened, but now we need to get inside Sir John's mind. The whole business seems extremely strange to me. The structure that the Government have adopted is a new creation and another way of kicking the matter into the long grass. We need an open process to respond positively to what the ombudsman said.

Anne Begg (Aberdeen South, Labour): Every Member is in the Chamber today because they have constituents who have suffered as a result of the situation being discussed. They will be looking for something a little more concrete. I have not yet heard the hon. Gentleman say how much he thinks it will cost to put right this wrong. Without quantifying the amount that hon. Members think the Government should invest in a compensation scheme, all we are hearing today are warm words.

• Steve Webb: I have to disagree with the hon. Lady; she is starting in the wrong place. She asks how much we can afford and says that afterwards we should tweak the scheme to meet the bill. We are talking about an injustice that needs to be righted. She knows that figures of up to £4 billion have been talked about. That is one estimate. However, we do not have access to data on scheme members-how much they have lost and the different categories-so it is difficult to know how much the bill would be. The starting point must be to remedy the injustice. Of course, we will have to put a bill on that, but to start by asking what we can afford is not the way to remedy the injustice.

My final concern about the John Chadwick process is the following fundamental issue: is it about hardship, charity and discretion, or about righting injustice? Surely it must be the latter, which is why the ombudsman process was involved. Was there maladministration leading to injustice? The ombudsman said yes. The Government said, "Well, probably not." However, they excluded most of the ombudsman's expensive findings. The Government say that they agree with five in 10 of the findings, but those are the cheap five. The position is so constrained that it is not acceptable.

Tim Farron (Westmorland & Lonsdale, Liberal Democrat): One of the Government's objectives must be to draw a line under the whole case. If Sir John draws further conclusions with which hon. Members and, more important, policyholders, are not satisfied, it will leave the matter up in the air and it will return to the Government's desk time and time again. Justice must be achieved quickly and with an end.

• Steve Webb: My hon. Friend is right. I suspect that the parliamentary process will not produce justice, so again the courts will probably have to do it. The winners will be the lawyers, and the losers-we hope-the Government. Sadly, the taxpayer will have to pay more money so that the case can be fought in the courts. I hope that Equitable policyholders get justice, but I have a nasty feeling that it might be in the courtroom rather than through Parliament. That is depressing for all of us who have gathered here today.

I shall end with a quote from a constituent: "My husband is 80 in May and is suffering from dementia and Parkinsonism and is unable to cope any longer... his pension diminished by a quarter to a third several years ago when all the problems became apparent. Although the monthly amount we received is extremely small that little extra that was deducted makes a difference."

We are not talking about fat cats or people on the take; we are talking about ordinary, decent people who saved and trusted. They deserve justice.

. . Susan Kramer (Richmond Park, Liberal Democrat): Does the hon. Gentleman not think it is a disgrace that a strategy of dividing people seems to underlie the Government's position? That means that those who face extreme hardship are so desperate that they will accept any mechanism that might get them something, instead of banding together to fight for full justice. Considering the people concerned are so elderly, such an attempt to break, divide and conquer is even more despicable.

Derek Wyatt (Sittingbourne & Sheppey, Labour): I agree. I am reminded-this was mentioned previously-that we had miners' compensation and compensation for dock workers who had cancer of the throat. There were loads of incidents in relation to which the Conservative party did not pay compensation for 18 years. It seems that this is in exactly the same territory-we are going to push and push, but, at this rate, there will not be a single cheque paid until 2012. That is just not acceptable. I agree entirely with what the hon. Lady says.

The issue is moral, which is exactly what the occupational pensions people said in 2002 and 2003. Ultimately, that is what Ministers came round to agreeing with and the money was paid. The Government must reconsider their response, and I hope that the presence of so many Members here today will make the Minister take back to the Treasury the fact that the initial response was inadequate and, to be frank, showed that nothing had been learned from the occupational pensions campaign. I believe that, in the end, Equitable Life members will win, however painful and slow the process may be.

. . Mark Hunter (Cheadle, Liberal Democrat): It is a pleasure to contribute to this important debate under your chairmanship, Lady Winterton, and I compliment my hon. Friend Steve Webb on securing it. I say that with particular regard to the fact that the Government have so far steadfastly refused to allow such a debate in Government time. Just last week, I asked in business questions whether the Leader of the House would consider making time available in the Government's timetable.

Many Members are interested in bringing their constituents' concerns to the attention of the House, but in a Westminster Hall debate, no matter how brief we make our remarks, there simply is not time for everybody to participate. That adds to the general feeling that the Government are hoping to put this issue to one side, so that people will not have the chance to raise their concerns in a meaningful way. Perhaps they are even hoping that a general election will intervene before they have to make the difficult decision.

Bob Spink (Castle Point, Independent): The hon. Gentleman will be aware that Sir George Young called for such a debate, and that the Leader of the House said that she would refer the matter to the business managers. However, we have heard nothing since. Will the hon. Gentleman encourage the Minister to commit to such a debate? Does he believe that in such a debate-in Government time and on the Floor of the House-the Government should introduce hard proposals for an interim payment scheme, so that those suffering terribly, and who might die before a scheme comes on stream, can receive compensation?

• Mark Hunter (Cheadle, Liberal Democrat): I concur with the hon. Gentleman. The response received by Sir George Young was probably exactly the same as the one I received from the Leader of the House last week.

Alan Reid (Argyll & Bute, Liberal Democrat): My hon. Friend is correct in saying that this matter should be debated on the Floor of the House. The ombudsman's report was to Parliament, not to the Government, and Parliament should take the decision. It should have the chance to vote and to decide whether to implement the ombudsman's report in full by paying compensation, without means testing, to everybody who lost out.

• Mark Hunter (Cheadle, Liberal Democrat): My hon. Friend makes a very important point and is, of course, absolutely right. There is no clearer demonstration of how isolated the Government have become on this issue than how Members here-a few have had to leave-have chosen to seat themselves. With great respect, it would not have been possible for the Labour Members here at the start of the debate to have sat any further away from the Minister than they chose to do. It was almost as if they were frightened of being tainted by the Government's pathetically inadequate response to date.

I want to speak out on behalf of the many constituents who have contacted me about their policies held in Equitable Life and the many more who, I am sure, have been adversely affected. My constituents, and those of hon. Members around me, have waited long enough-years, in fact-to hear their fate and whether their savings will be returned to them. Despite the Government's announcement, they are still none the wiser. They are left waiting in limbo. That is disgraceful, particularly in the current economic climate, when people find things so difficult.

The Government announced that they would fund a compensation scheme only for those who had been "disproportionately affected". That is the term used in their response. The Government would decide who those people were by checking "the extent of somebody's losses, how great the losses were but also perhaps looking at how great they were as a proportion of their income".

As we have already heard, that is tantamount to means testing. Does the Minister really believe that that is fair to all policyholders, who have been waiting so long to hear whether their pensions will be saved?

The ombudsman's report also made it clear that the aim of any compensation scheme should be "to put those people who have suffered a relative loss back into the position that they would have been in had maladministration not occurred."

That is not what the Government propose. They decided to disregard the ombudsman's recommendations by helping only those whom they decide are worthy. When will the Government accept the ombudsman's report in full and put in place appropriate compensation for all those who are affected?

After the Government acted so promptly and with such urgency to bail out bankers in their moment of difficulty, and acted promptly for other depositors, who lost money in the Icelandic and other banking situations, does not the Minister believe that the same treatment should be afforded to Equitable Life policyholders?

• David Heath (Somerton & Frome, Liberal Democrat): It is a pleasure to participate in the debate and I congratulate my hon. Friend Steve Webb on introducing it so ably. I am sorry that my hon. Friend Dr. Cable cannot be here as he is involved in other parliamentary business.

I take hon. Members back to a time not long ago when we had sound financial institutions in this country and mutual societies that were seen as rock solid in their propriety. Some of those, such as Equitable Life, had been in existence since the 18th century. Then came the get-rich-quick age, when all those institutions were torn apart and put together again, and management acted to maximise their profits rather than safeguard the interests of their depositors. That is the legacy of Equitable Life.

Bob Spink (Castle Point, Independent): Will the hon. Gentleman give way?

• David Heath: Let me just say a few words; the hon. Gentleman has made a couple of interventions. I do not to diminish the role of the management and the pseudo-Ponzi scheme that they were operating within Equitable Life, or their culpability in creating the circumstances that came about, but we must and do also accept the role of the regulators-the Department of Trade and Industry, until 1997, and then the Treasury, and after January 1999 the Financial Services Authority and the Government Actuary's Department. With all those taken together, there was a toxic mix of rule-bending within a financial institution and failure by the safeguarders of the public interest to do their job properly. That is why we ended up in a mess.

Since that time, we have had endless debates on the subject. I reread a speech made by my hon. Friend the Member for Twickenham on 27 November 2002, at column 67WH of Hansard. It was a superb exposition of the position at that time. My hon. Friend looked forward even then to the ombudsman's report and to what he hoped would be the resolution of a sorry saga. Since then, as we know, the Government have decided to play it long. We have had a succession of questions, speeches and interventions. I participated in a Westminster Hall debate just before Christmas, and the Minister answering on that occasion, the Economic Secretary to the Treasury, cut a sorry figure. He was unable to answer any question cogently.

Daniel Kawczynski (Shrewsbury & Atcham, Conservative): Feeble.

• David Heath (Somerton & Frome, Liberal Democrat): I think that is an accurate description of the Minister's position. When the House resumed in January, we finally had a statement from the Chief Secretary to the Treasury, which was the culmination of eight years of waiting. We have had 13 reports on Equitable Life. In 2001, there were reports from the Corley Institute of Actuaries, the Treasury Committee and the Financial Services Authority. In 2003, there was the parliamentary ombudsman's first report. There was the Penrose report in 2004, Paul Myners's review of corporate governance of mutuals and Sir Derek Morris's review of the actuarial profession.

In March 2007, we had the Faculty of Actuaries consideration of Ranson and Headdon. There was an FSA report on Penrose in July 2004, a Financial Ombudsman Service report in March 2005 and a report by EQUI, the European Parliament's Committee of inquiry into the matter, in June 2007. We also had the report in relation to the joint disciplinary scheme for the Institute of Chartered Accountants, which has not yet been published, and in July 2008 the parliamentary ombudsman's second report. Therefore, although we have had no shortage of reports on the issue, the Government have effectively announced yet another review and yet another report. They issued an apology, but it was partial, not an apology for the things for which an apology was needed.

Uniquely, after an ombudsman's findings of maladministration and injustice, no compensation was offered. Ex gratia payments were made to a few people who were affected. We had this concept-again unique in response to an ombudsman's report-that the money was not to go to those who suffered the injustice or the maladministration, but to those whom the Government considered needful of support. That cannot be right.

I have a series of questions to put to the Minister. Why is Sir John Chadwick's brief so restricted? Why has it been pared down to such a point that he cannot consider what many of us feel to be the crucial questions? Will that not ensure that the payments are minimal? Sir John Chadwick's review is designed to ensure that the minimum amount, not the right amount, is paid out as proper compensation.

What has happened to the oft-quoted precedent that the Government cannot compensate everybody who finds themselves at a disadvantage, when they are prepared to compensate the depositors of Icesave without any culpability on the part of the regulator? No one is suggesting that the regulators were at fault in the circumstances of the Icelandic banks, yet the Government were prepared to make compensation. In this example, in which the ombudsman has clearly demonstrated that the regulators were at fault, the Government are trying every technique that they have in their armoury to avoid payment.

What estimate has the Minister made of the proportion of with-profits annuitants who will receive ex gratia payments? Many feel that it will be a small proportion of those who should be compensated. Has she even made such an estimate? Are the Government walking into this with their eyes closed?

Does the Minister believe-this is the crucial question with regard to the role of the ombudsman-that the payments will put individuals in the position they would have been in had maladministration not occurred? That is the whole point of the ombudsman system. It is not the role of the ombudsman to compensate for commercial losses; everybody accepts that. The question is, will everyone who has suffered an injustice and a loss-not just those who find themselves extremely hard up-be placed in the position they would have been in had the maladministration not occurred? The answer is transparently clear-they will not.

Why have the Government conceded the findings of maladministration but not injustice? Why do the Government take this pick-and-choose approach to the ombudsman's report, which enables them to assess that the ombudsman is absolutely right when the findings are inconsequential, but absolutely wrong when the findings are damaging to the Government's reputation? If the Government take the view that they can pick and choose from the ombudsman's findings, what future is there for the ombudsman?

I have asked that crucial question in a couple of debates on this subject. What is the point of having a parliamentary ombudsman-an Officer of the House, not of this Government-if the Government are found wanting and to have created maladministration and injustice, but then walk away from those findings and are prepared to ignore them?

What is "disproportionate effect"? How are we going to assess the consequences of this review if we do not know what factors Sir John Chadwick will be asked to take into account in assessing what "disproportionate effect" means? Is a person's losing half their life savings disproportionate? I would say it is, but I suspect that the terms of reference will mean that, unless someone is virtually destitute, they will not receive compensation and their loss will not be considered as having disproportionate effect. That is wrong.

Anne Main (St Albans, Conservative): The hon. Gentleman mentioned the word "destitute", but as we know many pensioners who are affected are in the benefits system in a way that they may not have been before. I am not sure whether the Government have truly assessed the impact of deciding to give money to some people and the effect that that will have on their benefits, or even on their tax burden. It is worrying that, in deciding who they award compensation to, the Government have not considered the impact on the future benefits of pensioners.

• David Heath: I am grateful to the hon. Lady for that intervention. There are two interpretations: either the Government know precisely what they are doing but are not prepared to tell us or the people who were investors in Equitable Life, or they are blundering around finding yet more delaying tactics to stave off the evil day when they finally have to do something, rather than talking about possibly doing something at some time in the future. I suspect that it is the latter, but we may hear the Minister say which of those two interpretations is so.

I have another question to ask on a point that has, I think, been raised this morning. What is the position of the estates of deceased members? The Chief Secretary was unable to answer that question when the statement was made. Perhaps the Treasury has now thought about it and perhaps the Minister will tell us today whether the estates can benefit from the compensation that would have been paid to the person were they still living. That will affect a lot of people, as we have heard.

Will the process be open? That key question was asked by my hon. Friend the Member for Northavon. Will we know what is happening with regard to Sir John Chadwick's considerations or will that be a matter between Sir John Chadwick and the Treasury, to be filtered, bowdlerised and released at convenience and, probably, to be delayed, as has been the case with the history of this whole episode?

Why are there to be no interim payments? That is a fair way to deal with people who are very elderly and are waiting-and have waited so long-for justice in this matter. Why must they wait yet another two or three years, or however long it is going to take to conclude this protracted process?

It seems that most hon. Members feel that this episode smacks of injustice to those who are not necessarily, as some might caricature it, rich people who chose to invest their money, but are ordinary people who invested their life savings in an institution that they trusted. There has been injustice done to those people. This Government find themselves in the shameful position of having so devalued the parliamentary ombudsman that I am not sure we can see a genuine future for that office. That makes the Government look extremely shabby. That is not my concern, although it makes politics looks shabby, which is something we should be worried about.

This episode gives the impression that regulators can fail without consequence, which undermines the whole system of regulation. After all, over recent years we have built up a pantheon of regulators that govern so much of public business. If we do not trust the regulators, we do not trust the system. Not trusting the system discourages people from taking sensible decisions about their money, discourages them from saving and makes the economic situation in this country even more parlous. The Minister has a lot of answers to give us. A lot of questions remain outstanding.