MPs furious over 'flagrant' Equitable stance

Thursday, 7 May 2009 4:45 PM

By Alex Stevenson

Opposition MPs are backing parliamentary ombudsman Ann Abraham after the government's refusal to give compensation to policyholders at Equitable Life.

Concerns have been expressed about the legitimacy of the ombudsman's office, which was forced to issue a follow-up report to parliament for only the fifth time in its 32-year history yesterday.

Liberal Democrat Treasury spokesman Vince Cable told politics.co.uk Ms Abraham viewed the government's failure to act as "a threat to the whole concept of the ombudsman and indeed to parliament".

Ian Liddell-Grainger, the senior Conservative on the public administration select committee (Pasc), described the government stance as a "national disgrace".

Equitable Life nearly collapsed in 2000. It only survived by cutting one million customers' pension pots.

An estimated 30,000 policyholders have already died and campaigners say a further 15 die each day.

In July 2008 Ms Abraham said the government should compensate those who lost out as a result of the regulatory failure which led to the losses.

But Treasury ministers, reluctant to accept the multibillion payout she seeks, have instead asked a retired judge to investigate targeted compensation payouts for the worst affected.

Yesterday Ms Abraham said the government's response to her report was "deeply disappointing".

She continued: "It provided insufficient support for the rejection of my findings of maladministration and injustice. It also begged a rather larger question as to what the purpose of regulation was supposed to be."

Susan Kramer, secretary of the all-party Justice for Equitable Policyholders group, told politics.co.uk the government's response had been "rather limp".

"I feel as an MP it's absolutely crucial if there is to be integrity and value in the ombudsman system. we as members of parliament should be standing behind the ombudsman," she said.

"Because that's our role, isn't it, to hold government to account?"

Susan Kramer assesses the government's "despicable" Equitable Life conduct:

Dr Cable has tabled an early day motion noting "the vital role the ombudsman plays in public life" and the "unusual step" Ms Abraham has been forced to take.

"Injustice has been committed and yet there has been no commitment by the government to remedy this injustice," he said.

"It's very rare to be in a situation where the ombudsman is so clear and so unambiguous in her conclusions and in specifying remedies and for the government so flagrantly to diminish them and disregard them.

"And that's why I think there is now quite strong all-party support for the ombudsman on this matter."

Mr Liddell-Grainger said the Pasc committee, which described the government's plan as "morally unacceptable" earlier this year, would continue its campaign.

"We've totally supported the ombudsman all the way through," he said.

"And we're continuing to pressurise the government - we've been unanimous through this all the way through, regardless of party, and we will continue to be."

He said it was "absolutely ridiculous" that the government should consider it acceptable to assess which policyholders deserved compensation.

"They're all policyholders. Everybody has a right," he continued. "And I don't think there's any doubt this is a prelude, if this went through, to doing many other things when people would be means tested on compensation. We must stop that."

Ian Liddell-Grainger tells the government to "pay up":

Chief secretary to the Treasury Yvette Cooper told the Commons in January that the government accepted maladministration had taken place.

She apologised to policyholders for the regulatory failure but argued "it is not generally appropriate for the taxpayer to pay compensation even where there is regulatory failure".

Dr Cable and others have rejected this argument, however, expressing frustration that the government was "trying to change the whole basis" of compensation so only a small number of pensioners would receive it.

"Very often their priorities are completely wrong," he finished, reflecting on the government's wider management of the economy.

"Spending in general is going to have to be subject to serious discipline but this cannot get in the way of a basic principle of this kind."

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• regulation