Committee reports on Equitable Life

15 December 2008

In a report published today, the Public Administration Select Committee (PASC) strongly supports the Parliamentary 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. PASC congratulates the Ombudsman on her "comprehensive and compelling" report, which paints a "damning picture" of the prudential regulation of Equitable Life for over a decade.

PASC calls on the Government to accept the Ombudsman’s findings of maladministration "without further delay" and supports the Ombudsman’s recommendation for a full and unreserved apology from the public bodies concerned. The Committee "would be deeply concerned if the Government chose to act as judge on its own behalf by refusing to accept that maladministration took place."

The Committee endorses the Ombudsman’s proposal for a compensation scheme that is independent, transparent and simple, administered by a tribunal. Despite the basic presumption that loss must be accurately assessed, the main priority must be prompt redress. Policyholders have already been waiting for almost a decade and substantial numbers have either died or are advancing in years. There is a grave danger that any further delay will turn last decade's regulatory failure into this decade's even greater failure to provide adequate redress: "Justice further delayed will mean justice denied to even more people." The personal circumstances of many policyholders will make it difficult for them to engage with a complex claims procedure. The compensation scheme should therefore avoid placing a burden on individual policyholders wherever this is possible.

Committee Chairman Tony Wright MP said:

"I and the committee are acutely conscious that over the last eight years many of the million or more members of Equitable Life and their families have suffered great anxiety. It is unacceptable that the situation has remained unresolved for so long. Many of those affected are no longer alive, and will be unable to benefit personally from any compensation.

"I am therefore disappointed to learn that the Government’s response to the Ombudsman’s findings has apparently been postponed again until the New Year. The one advantage of this delay is that Ministers will be able to take full account of our views.

"But justice in this case has been delayed for far too long already. The Ombudsman has shown in exhaustive detail how the regulators failed over a prolonged period and at a fundamental level. Under the circumstances, compensation should be a duty, not a matter of choice. However, like the Ombudsman, we are acutely aware of the substantial sums of money involved: billions of pounds potentially. This is why we emphasise the need to compensate only where loss is fairly attributable to regulatory failure. Not all policyholders suffered loss as a result of regulatory failure. As a result, this should not be a case of compensation for all. But it is a case where the State needs to make good its own serious failures.

"These are failures from which the Government needs to learn. Only by accepting responsibility will it genuinely begin to do so. In particular, the Government needs to review the way in which serious failures of this kind are investigated in the future. What was needed here was a comprehensive and fit for purpose investigation at the outset, which could have looked across the piece and decided who was responsible and to what extent. Instead we had a series of piecemeal investigations with limited remits.

"For this as well as for the failures of regulation, we hope to hear the Government apologise when it comes to the House of Commons to respond to the Ombudsman’s report."

PASC’s short inquiry heard evidence from the Ombudsman, from groups representing the interests of Equitable Life’s members, former regulators (including the Chair of the Financial Services Authority at the relevant time), expert commentators and HM Treasury. PASC’s report is being published now, to allow it to inform debate on the Government’s response to the Ombudsman, which was originally promised for "the autumn", then for before Christmas, but now appears to have been postponed again until January. PASC has said that it will return to the subject in the New Year if it needs to.

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