HC Deb 17 June 2004 vol 422 cc905-7
10. Mr Andrew Mackay (Bracknell) (Con)

What representations he has received from Equitable Life policyholders about the operation of the regulatory system with regard to Equitable Life. [179132]

The Financial Secretary to the Treasury (Ruth Kelly)

The Government have received several representations about a range of Equitable Life issues. I am announcing today, by written statement, the Government's decision on price caps for stakeholder products. For the deposit account product, the cap will be 1 per cent. below the Bank of England base rate. For medium-term and pension products, the cap will be set at an annual management charge of 1.5 per cent. for the first 10 years of the product and 1 per cent. thereafter. The consultation document is available in the Libraries of both Houses and the Vote Office.

Mr. Mackay

Perhaps we can revert to the subject of Equitable Life, rather than a reply to a question that I did not ask and a statement that should have been made separately. Has the Financial Secretary noticed that the grass grows very long at this time of year, and it is easy to kick problems such as Equitable Life into it? When will policyholders be properly compensated? When will the Government stop hiding behind others?

Ruth Kelly

First, I told hon. Members that I had tabled a written statement on stakeholder products. Secondly, that is fundamentally important to people who save in the pensions industry and to future trust in the financial services industry. It relates directly to Equitable Life, among other issues.

However, the right hon. Gentleman asked about compensation for Equitable Life members, so let me deal with that. We commissioned Lord Penrose to conduct an independent inquiry into the circumstances that led to the events at Equitable Life. He found no evidence of maladministration or negligence. He made no recommendation for compensation and, indeed, made it clear that: Principally the Society was the author of its own misfortunes … The regulatory system failures were secondary factors. Although I have every sympathy with the victims of events at Equitable Life, it would not be right, given the circumstances, for the Government to consider compensation.

Mr. Harry Barnes (North-East Derbyshire) (Lab)

Even if we were not to blame for the collapse of Equitable Life or the failure of the regulatory system, can we not have a compensation scheme based on need?

Ruth Kelly

I understand my hon. Friend's point. However, people who invested in Equitable Life did so of their own free choice. The position is different from that of members of failed company pension schemes such as Allied Steel and Wire, which we have debated long and hard in the Chamber. Investors in Equitable Life tend to have supplementary pension provision, and many members have large pension pots, though others have smaller pots. It is largely their expectations that have been disappointed. I sympathise with people whose expectations have been disappointed, but Equitable Life continues in business and continues to fulfil its guaranteed obligations. If insolvency were to occur, we have a clear mechanism for providing compensation.

Mr. Eric Forth (Bromley and Chislehurst) (Con)

May I give the Minister a chance to answer the question? She was asked what representations she had had from Equitable Life policyholders, and the House would like to know the answer. Can she also give us a positive response to the question that has so often been asked about the role of the ombudsman? When will she give the ombudsman an opportunity to look into this matter again, to satisfy so many frustrated Equitable Life policyholders?

Ruth Kelly

I have had many representations on the subject of Equitable Life. Indeed, I have met the action groups representing the policyholders. One of the points that we have discussed is the need for comprehensive, efficient regulatory systems. Through the formation of the Financial Services Authority, the single ombudsman scheme and the single comprehensive financial services compensation scheme, we have already put in place an advanced, forward-looking system to protect consumers. The right hon. Gentleman referred to the ombudsman. Yes, it is perfectly within an individual's rights to take their case to the ombudsman, but I am not here to stand up and offer advice to the ombudsman. People will have to make their own decisions.

Mr. Andrew Tyrie (Chichester) (Con)

I am very interested in that last remark—that the Minister is not prepared to offer advice to the ombudsman. As the whole House knows, the parliamentary ombudsman has invited submissions on whether she should reopen her inquiry. She must be aware that the hundreds of thousands of policyholders who have lost out now believe that the Government and the Treasury are quietly lobbying the ombudsman not to reopen her inquiry. Will the Minister tell the House whether she has made a submission to the ombudsman—yes or no? If she has, why has she not published it, and had she not better do so immediately?

Ruth Kelly

I am glad that the hon. Gentleman made it clear that he was referring to the parliamentary ombudsman. Of course, I was referring to the financial services ombudsman. The parliamentary ombudsman is an independent officer of the House and it would be inappropriate for me to try to push her in one direction or another. However, she has come to the Treasury and asked for a submission about our case, and we have put forward our view, as requested. She is perfectly at liberty to publish that submission if she so chooses.