The government is set to break its promise on Equitable Life, says Stephen Timms

Tory and Lib Dem MPs are about to betray a big group of supporters. The government will shortly announce compensation for people who lost out in the failure of Equitable Life ten years ago. Before the election, David and Nick promised the earth, claiming people would get a better deal by voting for them. But – and this is becoming a trend – they are going to break their pledge.

The pledge was drawn up by Equitable Life members action group (EMAG). It was signed before the election by the prime minister, deputy prime minister and chancellor.

But the pledge – like, I fear, many others – will not be fulfilled. EMAG was led up the garden path by Tory and Lib Dem MPs to increase their vote before the election.

The scale of the betrayal became clear in a Commons debate last week. Pre-election, the pledge was signed by all but 26 Tory MPs and all but six Lib Dem MPs. (It was also signed by a much smaller number of Labour MPs – 42.)

It committed signatories to “support and vote for proper compensation for victims of the Equitable Life scandal … as recommended by the Parliamentary ombudsman”.  Every current treasury minister signed, including Danny Alexander, now chief secretary, and Mark Hoban, the minister leading on Equitable Life. The coalition agreement committed the new government to the ombudsman’s recommendation. But EMAG is furious. The government is set to break the pledge.

In an extensive investigation from 2004 to 2008, the Parliamentary ombudsman, Ann Abraham, concluded that taxpayer-funded compensation should be paid. She found that regulators were partly to blame for the failure, and for the estimated £4.8 billion loss. She argued for assessing individually all 1.5 million policyholders, which she thought would take two and a half years. She implied that most – perhaps all – of the £4.8 billion should be paid in compensation.

In government, Labour argued that this was impractical – individual assessment would take much longer – and unaffordable. Many Equitable Life policyholders have suffered badly, but others are much better off than most taxpayers who would foot the bill. A Judge, Sir John Chadwick, was appointed to devise an alternative. He recommended more rough and ready assessment, and that compensation should be limited to about £0.5 billion.

Responding to Sir John, the new government said in July that it was “committed to implementing the Parliamentary ombudsman’s recommendation”, but described Chadwick’s recommendations as “one of the building blocks” for a solution.

The ombudsman immediately hit back. She wrote  to every MP on 26 July: “in the light of the new government’s commitment to implement [my] recommendation in full, the approach embodied in the Chadwick report has been overtaken by events”.

The amount set aside for payment will be announced in the spending review on 20 October. But EMAG has already concluded that the Government is set to dump the pledge. The prime minister, deputy prime minister and chancellor will break their promise – again, but not for the last time.

Stephen Timms is shadow financial secretary to the treasury.

Tags: , , , ,

One Response to “The government is set to break its promise on Equitable Life, says Stephen Timms”

  1. John Eastwood says:

    Perhaps it is worth recalling whose fault the whole mess is…

    Ah yes, step forward one Mr G Brown, who while at the treasury made, against much advice to the contrary, a massive taxation raid on the pension funds, which in turn brought down Equitable Life, thereby causing misery for thousands of innocent hard working folk whose pensions were with them.

    Then, when times were good, and cash was flowing, and even 4 Billion was small change, guess whose government refused to cough up full compensation.

    Now, with the finances torn to shreds by your parties profligate management, you have the nerve to call the Tories hypocrites for failing to cough up the same 4 Billion. I think, to quote the Bible… “behold the beam in your own eye”.

Leave a Reply