HC Deb 08 July 1992 vol 211 cc359-71

'.—(1) Where a person has sold since 6th April 1986, more than ten investment bond related home income plans to individuals, the provisions of this section shall apply to them.

(2) A person falling within the provisions of this section shall be entitled to a reduction in their tax liability for 1992–93 of the amount specified in subsection (3) below if the condition of subsection (4) below is met.

(3) The reduction in tax liability referred to in subsection (2) above shall be £1.

(4) The condition referred to in subsection (2) above is that no more than 10 per cent of the investment bond related home income plans they have sold since 6th April 1986 have subsequently been terminated.

(5) The Board is empowered by this subsection to issue regulations defining the term "investment bond related home income plans".'.

Brought up, and read the First time.—[Mr. Boateng.]

4.56 pm
Mr. Paul Boateng (Brent, South)

I beg to move, That the clause be read a Second time.

The last time the issue of home income plans was raised on the Floor of the House was in March, during the debate on the Friendly Societies Bill. At that time, I registered my concern, that of my party and, indeed, that of hon. Members of all parties about the thousands of pensioner households which had been inveigled into making investments in wholly unsuitable home income plans. I also said that I had doubts about the effectiveness of the Government's response, which consisted of setting up a committee of regulators to examine problem cases.

We make no apology for bringing the House's attention to the subject again, because we see no evidence—and our postbags reflect this —that the problems have been dealt with adequately. Indeed, there are currently a number of early-day motions which have attracted widespread support from hon. Members of all parties.

The subject, which is of particular concern, has been raised during points of order and in the presentation of the Bill. It is of particular concern because of the warnings that have repeatedly been given, not least by my colleagues, that the Government's deregulation of the financial system has left the unsophisticated saver dangerously unprotected.

The issue should concern all hon. Members. It follows directly on something that the Prime Minister said at the previous Tory party conference. Some Conservative Members will remember that they were there, clapping like agitated penguins at the Prime Minister's words. He said: I want to give … every family the right to have and to hold their own private corner of life: their own home, their own savings, their own security for their future. They are fine words but they are, of course, belied by the number of home repossessions.

Home repossessions are especially tragic when they involve the victims of the home income plan scandal, victims who are in the main aged, in retirement and in the autumn of their lives. They find themselves on the verge of being flung out of their homes, and some are being flung out. A number of them have been driven to suicide as a result of their anxiety about the plans and the indebtedness into which they have fallen. Literally hundreds of people have written to me in the past nine months about their plight arising from the home income plans scandal. I know that hon. Members of all parties have received a similar postbag.

I will read to the House some letters that give a sample of the agony and concern that these elderly people face. Mrs. Vera Hawkins of Bromley in Kent writes on behalf of her husband: We are another elderly couple who are involved in the Home Investment Plan Scheme which went so distressingly wrong. My husband is 72 and I am 69. We are desperate because so far nobody has been prepared to stand up and be counted on our behalf. We understood that we were safely covered by FIMBRA the regulatory body. Can the Government tell us to what use or purpose these bodies exist? They are called 'Watchdogs.' Who are they watching? Not those devious firms who are their members! Not the clients who obviously so needed this! Did the number of clients increase their cash flow? Mrs. Hawkins describes writing to the regulatory body and the unsatisfactory answer. She tells of the crippling burden of debt that she and her husband face. She also tells of the plight of other elderly people who have gathered together in support groups for victims. They are doing all they can, even in old age, to fight back.

Mrs. Timperley writes from Northamptonshire. It is often the case that elderly women write because their husbands are too ashamed of the debts into which they have fallen to put pen to paper. Their distress is added to by the fact that they are of a generation for whom any indebtedness is a shame and a disgrace. They are often afraid to go to the local citizens advice bureau or to face their Members of Parliament at their surgeries.

Mrs. Timperley writes: I am 73 and my husband is 77. Three years ago we saw an advertisement in a magazine for the over-65s"— the sharks knew how to target their victims and where to go to attack the vulnerable and ill informed— regarding these schemes. We were put in touch with the Portman Building Society and applied for a loan on our bungalow of £ 10.000 or less. The minimum was £20,000 so we borrowed that amount. After about one and a half years, we repaid £8,000 thinking it would bring the basic mortgage down to £12,000. We received a statement earier this month and to our dismay find that we owe nearly £22,000 and are paying interest on interest. This means that in a few years time we will he homeless and they will have the property for £12,000. Mrs. Timperley describes how she trusted the good faith of the building society and how, as a result of what she describes as sharp practice—an understatement—she is in her present plight. She asks whether something can be done for all the elderly people who have been duped in this way and prevent it happening to others? Those are just two letters from a postbag that runs into hundreds.

The new clause is exploratory. We recognise that the procedural conventions of Finance Bills proscribe any amendment designed to increase revenue. They constrain us from our preferred course, which would be to levy a substantial charge on financial advisers engaged in selling the schemes. Instead, we are obliged to offer a reward to any adviser who can demonstrate a 90 per cent. success rate. We do so in the confident expectation that no one will come forward because no one will be able to exhibit such success in relation to the ill-fated schemes. If anyone did so, he would receive the princely sum of £1, which shows how high in the public esteem those who sell such instruments are held.

More importantly, the new clause provides an opportunity for the whole House, once again, to express its concern about the issue and to reassure the victims that they are not forgotten. It is also important to hear the views of the Economic Secretary, and we look forward to them.

I do not want or need to describe the details of the schemes again, or to explain why they were so unsuitable for pensioner households. Most hon. Members already know that the schemes involved remortgaging a home to invest the proceeds in broker bonds, and that they relied on a scenario of ever-rising house and stock market prices. That scenario in relation to house prices was actively fed by some Conservative Members and by the Government of the day. The schemes were always highly risky speculations and were suitable only for those with large amounts of capital to spare. Clearly the regulators agreed, albeit belatedly, with that assessment, because they banned the further sale of such schemes two years ago.

The Government have not been short of expressions of sympathy for those who are already trapped. The former Economic Secretary, John Maples, wrote to me on 12 March. He said that he could well understand the distress which has been caused by the inappropriate home income schemes. The relevant regulatory bodies have produced a straightforward system for handling, on a case-by-case basis, complaints which have arisen as a result of schemes which have gone wrong. He saw no need for the Government to press building societies to make any further undertaking.

That reply was not good enough, because a number of problems have arisen from the scheme established by the Government for complaints about home income plans. The procedure is complex; the system for handling complaints is far from straightforward. We accept that the victims' position was eased by the creation of a single port of call for the registration of complaints, but that is by no means the end of the story. To put their case, victims are obliged to fill in a mass of documentation. Elderly people, who are more vulnerable and more likely to be confused than others, often find writing a letter a strain. Simply to present the case is not enough, because they then have to get it resolved.

The method by which claims are subsequently processed is unwieldy and time-consuming. To put it bluntly, those elderly people do not have all that much time left. They have only a limited number of years left to them and they are entitled to some quiet and calm in those years. The speculators and sharks who sold them the schemes have denied them that calm.

The committee established is composed of seven different bodies, yet the previous Economic Secretary described it as straightforward. The bodies include the Securities and Investments Board, the Financial Intermediaries, Managers and Brokers Regulatory Organisation, the Life Assurance and Unit Trust Regulatory Organisation, the investors compensation scheme, the Building Societies Commission, the building societies ombudsman and the Law Society. Each body has distinct responsibilities, but crucially no one body is in overall control. That is where, all too often, the problem lies.

There is a suspicion that, if it were possible for a case to be solved by the regulators acting alone, the regulators would do so without the intervention of the Securities and Investments Board committee. For example, one accepts that LAUTRO has on occasion been able to deal speedily with its problems. Conversely, if responsiblity is not easily assigned, matters can be spun out indefinitely as the various regulators pore over the details of the case to determine who is responsible when none of them is empowered to insist that a decision is made. That is a time-consuming process. The victims do not have time, and the process is grossly unsatisfactory.

Secondly, the restitution offered to victims is inadequate. The victim cannot be certain of full restitution. Let us take a typical case of a pensioner who has been sold a home income plan by an independent financial adviser. The victim is not entitled to any recompense from the investors compensation scheme unless the financial adviser has been suspended from FIMBRA membership. Instead, the victims have to rely on FIMBRA's arbitration system, which is under-resourced and obliges the victim to forgo any other recourse against the FIMBRA member. Fears have been expressed about that in the House before, and I have no doubt that they will be expressed by my hon. Friend the Member for Manchester, Blackley (Mr. Eastham) in the speech to which we all look forward that he is to make in the Consolidated Fund debate early—at least I hope it will be early, for his sake—on Friday morning. So restitution is a problem.

Another problem is that, once access to the ICS is obtained, the rules restrict the payout. Compensation is limited to investment losses. No account is taken of legal or other costs already incurred, let alone damages for stress and inconvenience. A ceiling of £48,000 is placed on total compensation. That is often below the loss that victims face. The victim's claim is assessed as of the date when the FIMBRA member was suspended. That is clearly not appropriate in the case of investment bond related home income plans, in which interest on the victim's mortgage will continue to build up. It is in the nature of such plans that the interest will roll up during the period of up to one year while the ICS is assessing the relevant claim.

Furthermore, in order to claim funds from the ICS, the victim is required to assign to the ICS all rights to redress from third parties, even where he or she has received less than full restitution. In those circumstances, it is hardly any wonder that the victims and their solicitors have been wary of committing themselves to the procedures of the committee of regulators.

5.15 pm

Thirdly, the resources for tackling the issue are insufficient. The Government must acknowledge—we look for some sign of it this evening—that, even if victims are persuaded to come forward, the present system is simply not equipped to cope with the numbers involved. Age Concern has estimated that we are talking about more than 40,000 victims. The committee of regulators appears to consist of ad hoc meetings of staff, whose principal responsibilities lie elsewhere. They are brought together from other duties for the purposes of the meetings.

The problem is recognised by some of those involved. Almost all the problem cases involve building societies and to that extent are likely to require the attention of the building societies ombudsman. The ombudsman's annual report for 1991–92 published last month makes some reference to the matter. It says: We might find ourselves with a large number of cases which are difficult for us, as well as the parties, to process. That issue needs to be addressed. Surely it would be possible for the Government to ensure that resources of staff and support are available to process the claims that are being made and are expected to be made.

Another problem is non-co-operation from certain building societies. The committee of regulators relies on the co-operation of all the parties. That does not cause a problem where lines of responsibility are clear and established. As the SIB has other investment business, clearly there is not a problem where other parties are involved. Again, the principal problem lies with the building societies. As we have asked from the outset, who is to ensure that the building societies meet their obligation? The remit of the Building Societies Commission is "prudential supervision" of the societies.

The Economic Secretary's predecessor, Mr. Maples, was at pains to emphasise that the commission had insisted on additional capital adequacy requirements to reflect the risky nature of home income plan business. I do not doubt for one moment that that decision was sensible, but that is of no comfort whatever to the victims. It is of no comfort to them to know that the building societies have survived the experience. It is not the building societies that face the loss of their homes or destitution in old age.

The building societies ombudsman is responsible for complaints against societies, but even there a hitch has arisen. Leading counsel has told the ombudsman that the ombudsman has jurisdiction only where the complainant was a member of the society when the contract was signed. Typically, home income plan victims came to an arrangement with their financial advisers before the mortgage was formally arranged—that is the whole point —so the victims lie outside the ombudsman purview. Apparently, nothing can be done.

So the absurd position has arisen whereby building societies can be held to account by the committee of regulators only if they volunteer to be held to account. That is absolute nonsense, because it gives those building societies which are not prepared to adopt an altruistic and moral approach a way out. If the building societies were concerned with morality and prudence, they should never have become entangled in home income schemes in the first place. It is a shame and disgrace to those who became entangled that they did so. That is a matter of real substance, and we must have a response from the Economic Secretary.

Of the six societies initially identified for scrutiny by the SIB, three have not agreed to co-operate: the Bristol and West and the National Counties refused outright. That is disgraceful, and those responsible for their management have a great deal to answer for, not least when my postbag shows that there are a particularly large number of victims in the Avon area who have been lured into their schemes as a result of the reputation of a building society that seeks to trade on its probity. The West Bromwich building society has still to make up its mind. There is no question about those three societies and the position that they take —that is the report of the building society ombudsman. It is time that the West Bromwich made up its mind, and agreed to take responsibility and to accept the jurisdiction of the committee of regulators.

To their credit, the Cheltenham and Gloucester, Bradford and Bingley and Britannia building societies are co-operating. One would expect no less from societies of that reputation. The other three societies have some explaining to do. Let me make it clear that Opposition Members—doubtless many hon. Members on both sides of the House will take this view—will not hesitate to come to the House again and again to expose the failures of those building societies, as they have taken a grossly irresponsible course over the scandal, and have either refused to co-operate or have prevaricated in so doing.

The question remains about the other societies involved in the disgraceful business. Apparently, the list contains well over 20 names. It is not clear whether they will withhold their co-operation and what will happen to the Government's committee of regulators if they do. We understand that the SIB has recently forwarded a few more names to the ombudsman. We should like the Minister to tell us what the response from those societies has been. It is absolutely vital that such issues are out in the open.

It is vital that those building societies, which trade on their good name and reputation, should not be allowed to hide their response to Government action over the scandal behind a veil of official secrecy. If open government means anything, and if transparency in financial regulation is to have any meaning, we should know which societies are involved and what their response has been. Only when we know that can we judge the degree of responsibility, prudence and morality that guides their actions.

We make no apology for focusing our attention, and that of the House, on the role of the building societies. We have all been the recipients of missives from building societies. Some have sent them with more regularity than others; nevertheless, they have all been actively lobbying on their own behalf and on that of their members. They were among the most active in lobbying for deregulation in the 1980s. They fought to lend ever higher multiples of earnings and proportions of market value. One only has to open the papers to see that they continue down that route, even with the housing market in its present state. They complied in the practice of equity release to extend their borrowing still further. Now that the experience has turned sour, they have been distinctly lukewarm about helping customers who have hit difficulties. It is not good enough. They cannot have it both ways. They cannot hold themselves up as responsible lenders, and organisations deserving of special treatment, by virtue of their reputation, history and tradition of mutuality, while turning their back on the aged and vulnerable. We are entitled to expect a better response from the building society movement.

The Government also have some responsibility. Now is not the time to go into the inadequacies of the Government's mortgage rescue package. That has been discussed and I do not want, for one moment, to remove the focus of the debate from the plight of the elderly and the vulnerable who have been affected by the schemes, but it has to be said that the Government's rescue package simply has not bitten to assist those facing repossession.

However, it goes beyond that. Sir George Blunden, chairman of the Money Advice Trust and former deputy governor of the Bank of England, has criticised the building societies for failing to offer adequate help to the Government scheme. Home income plans, and the inadequacy of the building society's response to them, is simply an example—albeit the worst—of a generally lukewarm response to home repossessions. We intend to pursue the issue until we have had an adequate response from the Government and from the building society movement.

Time and time again, we argued with the Minister's predecessor that it required the Government's active participation to bring matters to a satisfactory conclusion. That remains the case—more than ever before. Only the Government, with the power and authority that lie at the disposal of the Treasury, are in a position to bring pressure to bear on all the parties. Nothing that the Government have said or done suggests that they appreciate the scale or the urgency of the problem.

Tonight we want to hear from the Minister how many cases have been solved through the existing apparatus. Is he satisfied with that number? Is he satisfied with the way in which the arrangements are working, and, if not, what will he do? What assurance can he give the House, and, more importantly, to the vulnerable, who face ruin and penury in their old age, that the Government will act? The penury they face is not a matter that the House could take lightly or would wish to. It is a matter of the gravest concern, and we expect a sufficient response—one that recognises that concern in a way that, to date, has been all too sadly lacking.

Mr. Paul Tyler (North Cornwall)

As the hon. Member for Brent, South (Mr. Boateng) said, all of us have received letters from constituents on this issue. A letter from two of my constituents in North Cornwall says: My wife and I are two of a large number of people throughout Britain who are now confronted with the dreadful possibility of losing our homes, and with it, the only asset of any substance to our name. Some poor wretches who have suffered were driven to suicide, and whereas I do not wish to appear over-melodramatic, it is important to convey to you the very seriousness of the matter. We are both pensioners, and as there was a need two or three years ago for us to increase our level of income, the scheme advertised in the national press seemed to be the ideal thing we were looking for, and we entered into it accordingly. As I hope you will appreciate, it does seem drastically wrong that people such as ourselves, who after a lifetime's hard work and having contributed to the 1939–45 war, should now be confronted with a threat of this kind through absolutely no fault of our own in the twilight of our lives. The letter concluded: would you please do all in your power to keep this matter constantly in the minds of whoever in Government is responsible in such matters? As the hon. Member for Brent, South said, someone in Government must be responsible for that situation and, therefore, responsible for finding the appropriate remedy.

5.30 pm

I do not wish, in a short speech, to refer in detail to the schemes. We all know them too well from experience passed on to us by elderly and vulnerable householders in our constituencies. However, three elements of each of the schemes have surely caused the difficulty, and Age Concern has accurately pinpointed them in the excellent briefing that it has given to many hon. Members: first, the independence evident in the advice given to customers; secondly, the extent to which that information was biased about the merits of the schemes—bias that may have been caused by eligibility for commission; and thirdly, the extent to which people taking out such schemes were warned of the possible risks, either from a reduction in property values or from a reduction in the value of equity holding.

It may be said that people should have known about all those three points, because, after all, similar schemes in the past have fallen foul in the same way. Age Concern's briefing makes it clear that nobody in Government or in the regulatory bodies at the time was adequately able to monitor what was being said or to add the "health warning" that should have been attached to those schemes.

In the Adjournment debate on 11 March, the then Minister for Corporate Affairs said: My hon. Friend said that he thought that some of these difficulties arise because we have a system of self-regulation. I cannot entirely agree. We do not have a system of self-regulation: we have a system of professional regulation under statute. There is practitioner involvement at board level, but the people doing the day-to-day regulation—those who have to go out and interrogate, investigate and bring suspicious circumstances to the public eye—are all full-time paid professionals who do this work and nothing else. If the system is not self-regulatory, some responsibility for what is described as "professional regulation under statute" must fall back on the Government. Later in that debate, the Minister said; My hon. Friend the Member for Romsey and Waterside asked why such schemes were permitted in the first place. With the benefit of hindsight, that is a good question."—[Official Report 11 March 1992; Vol. 205, c. 953–954.] Although several paragraphs follow thereafter, on that occasion the Minister never answered the question which he described as good.

Today, patience is wearing thin, for the reasons that the hon. Member for Brent, South described. Many of the people most hard-hit by those schemes are not— temperamentally, psychologically or because of their age —capable of putting up with the strains and stresses of what has occurred or of trying to find a way out of it. It is especially unfortunate that some of the building societies, with which many of those people had saved throughout their working lives, have now decided that they should try to sidestep their proper responsibility. Each month, week and day that passes, frustration and helplessness increase. Sadly, some of the victims must be disappearing from the list of complainants because they are simply no longer with us.

There seems to be a real danger of legal nit-picking and prevarication that does no credit to the regulatory bodies or the Government who stand behind them. Moreover, the fact that we must constantly return to discussing those issues does no credit to the House. We welcome the opportunity offered by new clause 12 further to investigate the full implication of those schemes. It is time to examine again the responsibility that lies on the Government and their self-reglatory bodies to clear up the mess.

Although the precise wording of the new clause may not be viable, we believe that Ministers must make a definitive statement this evening to show how they intend to help that vulnerable section of the community, strengthen the regulatory system and prevent a repetition of this matter in the future.

The Economic Secretary to the Treasury (Mr. Anthony Nelson)

The hon. Members for Brent, South (Mr. Boateng) and for North Cornwall (Mr. Tyler) have raised an important issue and have once again brought before the House the plight of many thousands of people who have suffered serious financial loss and face great uncertainty through the purchase of home investment bonds and home income plans.

I am the first to appreciate, listening to the letters that they have read out from constituents and other correspondents, the real financial difficulties that have been visited on people and the issues that must be addressed, not just by the Government but by those in the financial services, banking, credit and marketing industries. I hope that the subject of our debate will go well beyond the Chamber.

I shall not accept the new clause, which the hon. Member for Brent, South was the first to admit was exploratory rather than substantive. However, if it does not embarrass him too much, I wish to congratulate him on the way in which he has pursued the matter, not just today but with my predecessor. To his personal credit, he has championed the cause of many people. Since assuming my responsibilities, I have taken an interest in his previous correspondence and meetings and have sought to ask, in the Treasury and elsewhere, many of the searching questions that he has rightly posed this afternoon. Although I may not be able to give him all the satisfaction that he requires, nor that required by those who have suffered loss or are fearful for the future, I hope that my remarks will provide some reassurance.

May I make it clear that by no means all schemes that allow people to release equity tied up in their homes are bad. For example, under home reversion schemes the owner of a property can sell all or part of it to the scheme provider for an immediate cash sum and can continue to live there until he dies. That is a much more assured scheme and carries much less risk than the sort of schemes under consideration today. It has been, and no doubt will remain, of benefit to many of those who enter into it.

The purchase life annuity scheme is the most common method used by elderly people to release the equity in their homes and, crucially, is the only sort of scheme to receive encouragement through the tax system. That does not apply to roll-up mortgages or the sort of schemes covered by the new clause. Under a purchase life annuity scheme, the home owner takes out a mortgage loan on the property and uses the cash to buy an annuity, which services the loan interest and leaves an income.

Under the Income and Corporation Taxes Act 1988, relief of up to £30,000 is available on the loan used to buy the annuity. As long as people keep below that limit, they should enjoy a positive, if modest, income after meeting the interest due on the loan. As the interest is always covered, there should be no risk of the debt getting out of hand. It is estimated that about 2,000 such plans are taken out each year and, on that basis, there may be about 15,000 to 20,000 plans in existence.

Under investment bond-based schemes—the sort of scheme to which the hon. Member for Brent, South referred—the owner takes out a mortgage on part of the value of his or her home and invests the proceeds in an investment bond. It appears that several thousand such schemes were sold. Although borrowers were advised that the bonds would generate enough income to pay the interest and provide an income, the bonds were high risk and, in many cases, did not perform to their expectations.

I understand and fully sympathise with the concern expressed by hon. Members at the plight of elderly home owners who have been sold unsuitable home income plans. As the hon. Members for Brent, South and North Cornwall are aware, action is being taken to deal with that problem. I shall expand on that matter, on which I was quite rightly subjected to incisive questioning by the hon. Member for Brent, South.

The financial services regulators—the Financial Intermediaries, Managers and Brokers Regulatory Organisations and the Life Assurance and Unit Trust Regulatory Organisations—have amended their rules to prevent the further marketing of unsuitable and inappropriate schemes and have taken disciplinary action against the firms involved. In addition, action has been taken to help those in difficulty. Investors may be eligible for compensation from either the investment company or the investors compensation scheme, set up under the Financial Services Act 1986.

Firms regulated by LAUTRO have already paid £5 million in compensation to more than 400 investors, who have been restored to the position that they were in before they became involved in the scheme. I understand that the great majority of investors who took out such schemes on the basis of advice from salesmen of LAUTRO members have been compensated, although 60 further cases are being considered by the insurance ombudsman, a recognised complaints authority for LAUTRO. As the hon. Member for Brent, South appreciates, and it is important for the House to understand, LAUTRO generally compensates in cases involving tied company agents. LAUTRO's member firms and LAUTRO itself return people to their former position so that they are fully recompensed.

The position is different in relation to independent financial advisers under FIMBRA. They introduce, perhaps to an insurance company, not just the prospect of a buyer for an investment bond but a mortgage package that may be different from that which the company representative of a LAUTRO member would have offered. Unfortunately, it does not necessarily follow that people will be entitled to the same restitution and compensation as those covered by LAUTRO have received. Each case is subject to an examination of the package, the circumstances and the terms of the investment bond and mortgage proposed. The extent and admissibility of the application for compensation will depend on those factors.

Four of the independent investment intermediaries involved in marketing schemes who were members of FIMBRA have been declared in default under the investors compensation scheme. More than 1,000 claims involving those firms have been received, and I understand that payments have begun. Many cases are complex and many involve the responsibility of a number of different parties such as the financial adviser, solicitor or lender.

5.45 pm

In March, the liaison group set up by the Securities and Investments Board announced a one-stop procedure for handling complaints. Under that procedure, investors who invested in such schemes on the recommendation of a FIMBRA member, are in difficulties as a result and have received no satisfaction may pursue all their complaints through FIMBRA even if the complaint involves firms other than the FIMBRA member. That might include the insurance company whose investment bond was used or the solicitor who dealt with the mortgage documents.

Some building societies have agreed to co-operate with the building societies ombudsman in using the one-stop procedure, and discussions are continuing with other building societies with a view to encouraging them to do likewise. I am sure that societies will have noted the strong words used today by the hon. Member for Brent, South. I hope that the societies involved will feel able to agree to co-operate with the building societies ombudsman.

A number of building societies have been approached to join the one-stop procedure for complaints about the investment bond scheme, and three of the larger societies have agreed to participate. As the hon. Member for Brent, South knows, a number of other building societies have not. As I understand it, there is no legal sanction to force them to do so due to the limited remit of the ombudsman. However, I agree with the hon. Member for Brent, South and hope that those societies will feel able to co-operate.

I understand that, in addition to those cases where there are claims under the investors compensation scheme, a further 60 complaints are being considered under the one-stop procedure. Meanwhile, the building societies involved have made it clear that they want to enable elderly borrowers to stay in their homes, resolve their worries and avoid hardship. During the debate, some building societies have come in for criticism. It is only fair to say that most building societies have made it clear that they want elderly borrowers to stay in their homes and there is no question of parting them from their homes, which is an important assurance.

The consideration of complaints and compensation claims takes time. One of my concerns was to act as expeditiously as possible and encourage the responsible authorities to speed up their handling of applications for compensation and complaints, as uncertainty and worry are visited on people, many of whom are elderly and vulnerable. Therefore, I have raised the matter as often as I can.

It is sometimes difficult and time-consuming to obtain all the necessary information about what has happened. The investors compensation scheme and the regulatory organisations are aware of the concern of all hon. Members, which I share, that the matter should be resolved as quickly as possible. I am assured that every effort is being made to help investors provide the necessary details as quickly as possible so that their cases can be dealt with without duplication or avoidable delay.

The investors compensation scheme expects to make substantial progress in finalising claims in the next two months and hopes to have dealt by November with the bulk of claims so far received. I hope that cases being handled by the one-stop complaints procedure can be completed in a similar time scale.

In response to the pertinent points raised by the hon. Members for Brent, South and for North Cornwall on new clause 12, I shall conclude with a short personal homily that will provide little comfort to those who have lost, or face the prospect of losing, under such schemes.

The more I become aware of the marketing of schemes of this kind and the more I look at reports of what has gone wrong, the more I become aware of two aspects. One is that it is difficult, if not impossible, to devise a fail-safe system of investor and depositor protection. It does not matter whether there is a statutory scheme or a self-regulatory scheme or a statutory-based system of practitioner self-regulation, which we have. It is extremely difficult—I dare say impossible—to provide against every possible loss and ensure that people will not be ripped off.

We must do what we can, however, both in Parliament and in the City, to ensure that the risk for depositors and investors is limited as far as possible. At the same time, the investing and depositing public have a duty to remind themselves that they must not be encouraged by modern marketing schemes to abandon the basic common sense and prudential rules which have always been impressed on people.

The five golden rules are: buyer beware, spread investments, seek good advice, read the small print, and do not confuse authorisation with a guarantee. Investors must always consider not just the attractions and benefits of an investment scheme but the down side of the scheme as well. It is right to be cautious and to use common sense. People should not be misled by the attractions and by the statistics advanced in favour of schemes and their attractions.

There has been an increasing number of claims and of cases arising out of self-regulatory organisations standing behind firms, the Securities and Investments Board standing behind self-regulatory organisations and the Government standing behind the SIB. I do not think it practical, desirable or possible to have a guarantee or indemnity in all cases of misleading sales, faulty products or default on behalf of investment firms. Authorisation must not, therefore, be confused with a guarantee or an indemnity.

I have said what I have said about spreading investment and reading the small print, but despite the problems that sometimes arise, people should still seek professional or independent or reputable advice, as the circumstances demand. Ignoring these basic rules of investment or of incurring liability involves risks.

I have met constituents who lost large sums of money in Barlow Clowes. Like the hon. Member for Brent, South, I was impressed by how vulnerable many of them were. Not necessarily elderly, many of them were straightforward people who had, for instance, spent their lives in the armed forces and who, with a commutation retirement pension. had sunk all their money in one investment product offered by Barlow Clowes. It seems hardly credible that people who have held responsible jobs and saved securely throughout their lives should then abandon a basic tenet of safe investment: not putting all one's eggs in one basket. Yet people do that; and the elderly are even more vulnerable.

This is why it is right that we have introduced financial services legislation and other measures designed to protect such people. It is why it is right continually to re-examine whether these mechanisms are working properly. It is why it is right—without indulging too much in homily—to remind people from time to time that neither the Government nor the taxpayer can safeguard or indemnify investors in all circumstances. People must use their own nous; the buyer must continue to beware.

I hope that what I have said will encourage the hon. Member for Brent, South to believe that the Government take seriously the distress of those involved with home income bonds. We are encouraging expedition in dealing with claims for compensation and we will carefully watch the responses of the building societies and regulatory organisations to these difficult problems. On that basis, I hope that the hon. Gentleman will withdraw the motion.

Mr. Boateng

The care and thoughtfulness that have clearly gone into the Minister's response are welcome. We look forward to his continuing involvement as a Minister with responsibilities in this area. I am sure that I speak for all who have signed a variety of early-day motions on this matter when I express the hope that he will in due course agree to meet a group of us so that we can explore these issues further on behalf of those who have suffered from the marketing of these schemes.

When we meet the Minister—it will be sooner rather than later—we will expect greater clarity about the number of cases that have been resolved under existing arrangements and a greater willingness, in the spirit of open government, to inform us which building societies are proving recalcitrant about arriving at voluntary arrangements. By the time of our meeting, we will also expect a marked degree of progress on both relevant fronts in respect of compensation.

All hon. Members whose constituents have been affected by the tragedy that these schemes represent want to place on record our appreciation of the work of the victim support schemes set up as a result of the need to bring together the elderly and vulnerable people who have suffered as a result of the marketing of these plans. The schemes are designed to offer mutual support and to pool such resources as these people have to obtain proper advice and assistance. We should record our appreciation of those who organise and service these schemes. I think particularly of people like Mr. James Fielding of Essex, who has done so much to bring this matter to the attention of hon. Members. Many others have done the same.

We wish these people well in their continuing work of supporting those who have suffered at the hands of the unscrupulous persons who have marketed the schemes—and of those who stand behind them and who seek, regrettably, to shirk their responsibilities.

We will not tolerate it if building societies continue to avoid their responsibilities in this area. They will he exposed if they continue to be indifferent to the sufferings of the victims of the unscrupulous people who marketed the schemes, and they will be exposed to the full glare of publicity unless they are prepared to co-operate with the regulatory committee and arrive at a fair and reasonable settlement about outstanding claims.

We shall return to this issue in the fullness of time, but in the meantime I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

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