Government’s position on Equitable Life scrutinised

19 March 2009

"Shabby, constitutionally dubious and procedurally improper" - Public Administration Select Committee (PASC) reacts to Government position on Equitable Life. The Government’s proposed payment scheme "could help to improve the lot of some policyholders", but is "inadequate as a remedy for injustice"

In a report published today the Public Administration Select Committee (PASC) analyses the Government’s response to the Parliamentary Ombudsman’s report on Equitable Life. The Committee is "deeply disappointed" with the Government’s response, which rejects and qualifies some of the Ombudsman’s central findings. PASC sees this as the Government choosing "to act as judge on its own behalf ...for reasons which are not well explained".

The Government also claims that compensation to Equitable Life policyholders is not warranted, even where it admits that the State has caused injustice. "This may be a legally valid position," PASC states, "but we think that most people would consider it to be a morally unacceptable one". PASC rejects the Government’s reasons for its decision.

The Government has said that it will establish a limited ex gratia payment scheme for an uncertain number of policyholders. Whatever its criticisms of the Government’s position, PASC accepts that this scheme is probably the best that policyholders are going to get, and wants it to work as well as possible. The Government needs to ensure that it "makes a tangible difference to policyholders as soon as possible" through a scheme which is "simple and clear".

PASC is therefore concerned that the process the Government is following "looks set to be complex" and therefore probably "slow and onerous" for policyholders in difficult personal circumstances. There has been a "basic failure" on the part of the Government to take these circumstances into account. Any scheme needs to be "workable and simple to implement", should not "rely on information which will be hard to access" such as means testing. An indicative timetable for the scheme is needed as soon as possible.

Looking at the broader issues raised by this case, and in the light of the current banking crisis, PASC calls for a debate on how regulators can best be held accountable to ensure honest and full learning from past mistakes.

Committee Chairman Tony Wright MP said:

"I give credit to the Government for apologising, for producing a considered response, and for accepting the need for some kind of payments scheme. But the Government has produced an essentially political response to a quasi-judicial investigative report from the Ombudsman, and as a result has ended up satisfying nobody. We have never argued that the taxpayer should have bottomless pockets, but there is a very clear case for defined compensation where the State itself has caused injustice. The Government’s arguments seem to me to leave a gaping black hole in the way our regulators are held accountable, and this needs addressing.

"I also know that policyholder groups are thinking about asking for a judicial review of the Government’s decision. Only they can decide whether to take this step, but they do need to think hard about whether it will be in the best interests of the people they represent. As we say in our Report, a successful judicial review could lead to a better process, but with no guarantee of a better outcome for policyholders."

This is the second report that PASC has published on Equitable Life. Justice delayed: The Ombudsman's report on Equitable Life was published in December 2008 before the Government’s response was available.

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