Quote of the Week:
Equitable Life payout report 'is unsound'.
"A government-commissioned report that said victims of the Equitable Life scandal should receive compensation of just £266 each has been branded 'unsafe' and 'unsound' by the Parliamentary Ombudsman. The verdict yesterday by Ann Abraham has given fresh hope to the victims, who feared they would be left with a 'scandalously' low amount if the Coalition adopted the proposals.
Many of the victims of Equitable Life's near collapse lost most of their life savings. However, Sir John Chadwick's report, published last week, recommended that they receive just £400million compensation in total – about £266 per policyholder.
This was despite a report from a consultancy firm, published at the same time, which suggested losses sustained by policyholders were between £4billion and £4.8billion.
Ms Abraham wrote to all MPs yesterday saying the Chadwick report was an 'unsafe and unsound basis on which to proceed', and accused Sir John of 'explicitly rejecting' her help when deciding on the level of compensation that should be paid.
Equitable Life victims fear the Coalition will adopt the Chadwick Report despite assertions from the Treasury Minister Mark Hoban that the Conservatives would abide by Ms Abraham's own report in 2008, which found the Government guilty of maladministration and recommended a full compensation scheme.
Paul Braithwaite, head of the Equitable Members Action Group (EMAG), said the ombudsman's stance had 'vindicated EMAG's assertion that the Chadwick Report was a Treasury dirty trick to cheat Equitable Life policyholders'.
Ms Abraham said of the Chadwick Report: 'These proposals, if acted upon, would not in any sense enable fair and transparent compensation to be delivered.'
The Labour government agreed to set up a limited scheme that would compensate only those who had lost the most, and instructed Sir John to proceed on that basis. Mr Hoban said at the time that the Tories would accept the ombudsman's findings and pay out on that basis.
However, when he published the Chadwick Report last week, Mr Hoban said it would be an 'important building block' in deciding how much compensation victims would receive. He also indicated that the amount would be constrained by Britain's economic woes."
Daily Telegraph, by Rosie Murray-West - 27 July 2010
Click here to view previous quotes
29/07/2010 - The PO reject's Chadwick outright!
Monday 26 July was a good day for Equitable victims: The PO, Ann Abraham, wrote a stonking put down on the inappropriateness of Chadwick's report to honouring her findings.
You only have to read Annex H of Chadwick's report to see what contempt the 'black letter' lawyer displays in ultra-partisan fashion against the PO's findings. Chadwick completely ignores that the PO's modus operandi is one of dispensing 'natural justice'. She is the independent arbiter for Parliament of whether maladministration warranting compensation has occurred. Chadwick was not independent. He was the partisan hired gun for the Treasury, whose task was to come up with a limited hardship scheme only for findings the Labour government had accepted. It was certainly not his prerogative to re-try the case, as he has.
Read Ann Abraham's letter to all MPs
See Press headlines.
And the full press coverage
And EMAG's press release.
29/07/2010 - The Statement to the Commons
Mark Hoban, Financial Secretary to the Treasury, made his Statement to the House at lunchtime on Thursday 22 July - almost the last day of MPs' term. The Treasury sprung an ambush on us. The Chadwick report, having been mysteriously delayed for seven weeks for no good reason, was published along with ancilliary annexes, running to 2,500 pages. Also a new Commission was announced, to devise a scheme and distribute a sum to be announced by the Coalition on 20 October.
Notwithstanding the deplorable content of his Statement, Hoban did preface it with an unequivocal commitment on the Coalition's behalf to make fair payments to Equitable's policyholders for their relative loss as a consequence of regulatory failure. This is incompatible with his Chadwick-based quantification articulated to the House.
Read Hansard
EMAG will be issuing guidance asap to explain the actuarial alchemy of Chadwick's entirely hypothetical model of a properly regulated Equitable in the 1990s and such salami-slicing terms as 'external relative loss'. It's like a modern movie with marvelous computer generated images of something that has no reality!
Read some of the very many supportive press articles on July 23 – 25
29/07/2010 - Chadwick's actuarial alchemy
The way that Sir John Chadwick manages to trickle down admitted comparative losses of £4.8 billions to a proposed payout of £400 million in compensation is masterful – but incomprehensive. See P 7 (of 10) in actuaries Towers Watsons' quantification of Chadwick's methodology
29/07/2010 - The new Commission's questionable terms of reference
The new three-man commission of Brian Pomeroy, John Howard and John Tattersall only gets to divvy up a sum to be set in the Autumn Spending Review (20 October). Its now proved-to-be toxic terms of reference include:
- The Commission will have regard to the work undertaken by Sir John Chadwick on the methodology for calculating relative loss and base its allocation to policyholders on the relative loss figures provided to HM Treasury by Towers Watson.
- In the interests of speed and of the public purse, the Commission should ensure that it does not unnecessarily replicate existing analysis determining relative loss.
- It will have regard to, but need not be bound by findings on disproportionate impact carried out by Sir John Chadwick.
Reminder - The Coalition's promise is to:
"implement the Parliamentary and Health Ombudsman's recommendation to make fair and
transparent payments to Equitable Life policyholders, through an independent payment scheme, for their relative loss as a consequence of regulatory failure."
So, having regard to 'disproportionate impact' is directly contrary to the Coalition's commitment. Read the Commission's TORs.
29/07/2010 - An excellent Equitable debate by MPs
It seems like long ago, but at lunchtime on Tuesday 20 July, immediately after four EMAG directors met Mark Hoban in the Treasury the was a Westminster Hall debate. It was sponsored by the new 31-year-old MP for Abingdon, Nicola Blackwood MP. With extensive briefing from EMAG we think you'll agree, she did wonderfully well. Read her speech in Hansard
09/07/2010 - Ominous silence from minister
EMAG has written two recent letters to minister, Mark Hoban. The one on 25 June was constructive but asked for specific answers to WHAT other building blocks are being considered, asked again for the 'Head A' Calculations. Where answer was there none, a follow up on 5 July asked for written responses to both letters (15 and 25 June) a meeting by 9 July and confidential sight of the Chadwick Report which will be public within one week. No response. What does this mean? It is not the transparency promised.
Read EMAG's constructive letter of 25 June.
09/07/2010 - EMAG's 11th hour lobbying
EMAG asked its members to explain to their MPs why building on Chadwick is not appropriate and why the validation of our true comparative losses should be established, as envisaged by the PO, by the new Commission. At present it looks like the Treasury will be the body that tells us we really lost much less than previously claimed. Well, they would say that...
Read EMAG's letter sent to all MPs on 8 July explaining why 'The Chadwick Process' should be sidelined.
17/06/2010 - "Robust" exchanges with minister Mark Hoban
Four EMAG directors met Mark Hoban, first secretary to the Treasury, on the eve of the Queens Speech. It emerged soon after that it is the government's current intention to publish the Chadwick Report, with unchanged terms of reference set by Labour to minimise payouts, simultaneously in mid-July with a figure for the quantum of compensation and the names on the independent commission. The commission, contrary to the PO’s intentions, is currently NOT to going to be remitted to establish independently the true measure of comparative loss. This just looks like more of the same dirty tricks by the Treasury and EMAG has pointed this out to Mark Hoban in writing and asked him to pull back and reconsider.
Read the exchange, particularly the most recent at the end of the file.
17/06/2010 - Press backing for EMAG
The EMAG board met on 9 June and concluded that we should alert the press and our members to the ambush which we believe the Treasury is plotting.
EMAG circulated a press release.
Read the newspaper coverage.
17/06/2010 - E & Y let off lightly
On 4 June the accountancy profession’s appeal panel announced its findings on the case against E & Y. The result was a derisory fine of £500,000. The only upside to this is that it denies Sir John Chadwick the prerogative to slice his recommendations for the negligence of the auditors. E & Y are now subject to another investigation over its role in Lehman Brothers. No doubt that will end in another whitewash in a couple of years time,too.
Read the highly critical press.
04/06/2010 - Whither Chadwick?
For many months the report of Sir John Chadwick to his Treasury masters was promised to be delivered in May 2010. Two weeks after the election Sir John Chadwick asked for, and was granted a six-week extension, thus making his study 18-months long – designed to delay or what? A cynic might think that Sir John wants the extra time to customise his report to please the new administration. The fact remains that his terms of reference are unchanged. He has been tasked to advise on five specific questions about how to cut back already limited charity payments by a number of dubious devices and to identify those who have suffered “disproportionate impact”. That is not compensation for injustices found. His remit is blatantly incongruent and now obsolete when compared to the coalition government's new commitment to:
“ …… implement the Parliamentary and Health Ombudsman's recommendation to make fair and transparent payments to Equitable Life policy holders, through an independent payment scheme, for their relative loss as a consequence of regulatory failure."
Read Treasury-appointed actuaries Towers Watson's letter to Sir John, dated 25 May
04/06/2010 - Breakthrough!
Post the general election, on 17 May, EMAG wrote to the new financial secretary to the Treasury, Mark Hoban, suggesting that enabling legislation should be in the Queen's Speech. Four EMAG directors met him in the Treasury on 24 May. The next day, the Queen's Speech including a bill to facilitate swift compensation was included. Promises kept. Win, win! Read the national press coverage.
16/04/2010 - Two fantastic triumphs for EMAG
EMAG started working on the opposition political parties at the autumn conferences, seeking manifesto commitments to honouring the PO’s actual recommendations for compensation. Those efforts were rewarded in w/c 12 April when both the Conservatives and the Lib Dems did include Equitable. This is a terrific achievement which virtually guarantees that “The Chadwick Process” will not be the limiting factor.
Page 18 of the Liberal Democrat Party manifesto:
"We will make pensions and benefits fair and reward savers by: Meeting the government’s obligations towards Equitable Life policyholders who have suffered loss. We will set up a swift, simple, transparent and fair payment scheme."
Page 12 of the Conservative Party manifesto:
"We must not let the mis-selling of financial products put people off saving. We will implement the Ombudsman’s recommendation to make fair and transparent payments to Equitable Life policyholders, through an independent payment scheme, for their relative loss as a consequence of regulatory failure."
16/04/2010 - A massive EMAG mailshot
In w/c 12 April, more than 350,000 letters from EMAG were delivered to old Equitable Life policyholders who have not so far ever joined EMAG. The letter encouraged the recipient to take an active political interest and ask their local aspiring MPs what is their commitment to compensating Equitable Life victims. This should serve to increase pressure on all candidates. EMAG is, of course, politically neutral.
Read some of the weasel words reasons given for NOT signing EMAG’s Pledge
06/04/2010 - Why 'The Chadwick Process' just won’t do
Since mid-March EMAG has succeeded in convincing the opposition parties that the Government’s fudge, 'The Chadwick Process', is discredited.
The debate by MPs in the Commons on 16 March caused EMAG such concern that we wrote letter immediately to every single MP explaining exactly what we believe is wrong with 'The Chadwick Process'.
The central defect is that the remit is a distortion of the PO’s recommendations. Sir John’s brief is severely constrained so as to salami-slice proposed charity payments to a minimum and only to those 'disproportionately impacted' – not the justice intended by the PO. His final Report, due after the general election, is merely advice to a scheme that this Government determined should be designed by the Treasury – one of the regulators found to be maladministrative by the PO! The final straw tocause EMAG to break off working cooperatively with Sir John was our careful reading of his third Interim Report (4 March), which revealed his true colours and how much in thrall he is to the Treasury.
