MPs say Equitable Life payout plan is 'inadequate remedy for injustice'

The Guardian
Rupert Jones

The government is heavily criticised by MPs today for the "shabby, constitutionally dubious and procedurally improper" way it responded to a report into its handling of the problems at Equitable Life.

The Commons public administration committee said the scandal-hit insurer's policyholders had "good reason to be angry" about the way the government had "spun" its response to the parliamentary ombudsman's call for a scheme to be set up to compensate victims of the fiasco.

The MPs' report is likely to reopen the long-running debate over how much should be paid to those who lost money when the world's oldest mutual insurer came to the brink of collapse almost a decade ago.

A million customers saw their retirement savings slashed when Equitable was plunged into chaos by a court ruling. Campaigners have long battled for compensation, and last year it looked as if the government would have to pay out billions of pounds after the ombudsman, Ann Abraham, said she had found evidence of "serial regulatory failure" by the government departments and watchdogs that were supposed to be protecting the insurer's customers.

But when ministers made their response to her report in January, many customers were disappointed. In a statement to MPs, Treasury minister Yvette Cooper apologised to policyholders on behalf of regulators and successive governments for the "maladministration" that had led to the insurer's near-collapse. She said some policyholders who lost money may be entitled to redress, though payouts would focus on helping those investors who had been "disproportionately affected".

She rejected recommendations that the government offer compensation to all Equitable members. Instead, it decided to appoint a retired judge to study Equitable's books to work out which policyholders had been hardest hit and what proportion of their losses could be attributed to the maladministration accepted by the government.

In its report today, Justice Denied?, the public administration committee says the government's proposed payment scheme could help some policyholders, but is "inadequate as a remedy for injustice".

The MPs point out that the government acknowledged that public bodies were responsible for maladministration, and that some policyholders had suffered financial loss as a result. However, it was not proposing to pay these people compensation, but instead was setting up a "limited ex gratia payment scheme for an uncertain number of policyholders".

While the government's position might be legally valid, "we think most people would consider it to be a morally unacceptable one". They were concerned that the process ministers were following "looks set to be complex", and, therefore, probably "slow and onerous" for policyholders.

The report also said retired judge Sir John Chadwick's remit was "of limited scope" and, when his work was complete "the government, not Sir John, will decide who receives payments and on what scale".

They added that it was "shabby, constitutionally dubious and procedurally improper" for ministers to argue at the eleventh hour that parliament had accepted it was not generally appropriate to pay compensation even where there was regulatory failure.

They reserved some of their criticism for Cooper. While her January statement to MPs was not inaccurate, it had "left members and the public with an incomplete understanding of the government's position ... [She] should have been more explicit in her statement to the House about those findings made by the ombudsman which the government was rejecting or substantially qualifying".

Paul Braithwaite of Equitable Members Action Group (Emag) said MPs should insist on an urgent debate. "Emag wants proper compensation for all the victims of this scandal, not just charity handouts for a few. Parliament needs to stand up for the victims and for its own ombudsman, and make the government think again."

Equitable compensation scheme to be hit

Financial Times
by Andrea Felsted

A group of MPs will on Thursday attack the government's reluctance to paying compensation to 1m policyholders who lost billions of pounds in the crisis at Equitable Life.

Equitable policyholders in January won an apology from the government – its first - over regulatory failures over Equitable, but face hurdles to compensation.

It will also describe the scheme proposed by the government to provide compensation as "inadequate as a remedy for justice". Confidence in the scheme will be "fatally undermined" if it limits payments to policyholders.

It will call for the scheme to be simplified by removing a test of whether policyholders have been disproportionately impacted by the near collapse of Equitable more than eight years ago.

Paul Braithwaite, general secretary of the Equitable Members Action Group, said policyholders were pleased that the committee was "speaking up on their behalf against the injustice"

MPs condemn 'shabby' deal for Equitable Life fall victims

The Times
Miles Costello

The Government's treatment of victims of the Equitable Life scandal was "shabby, constitutionally dubious and procedurally improper”, according to a cross-party group of MPs.

In a report published on Thursday, the Commons Public Administration Select Committee calls on the Government to rethink its decision not to pay compensation to policyholders, more than a million of whom lost out when Europe's largest mutual insurer was brought to the brink of collapse.

Tony Wright, the chairman, said that the committee was deeply disappointed by the Government's rejection of a call by Ann Abraham, the Parliamentary Ombudsman, for a fund. "There is a very clear case for defined compensation where the State itself has caused injustice," Mr Wright said.

He added that the Government had acted as its own judge and jury in deciding to throw out several of the Ombudsman's central recommendations. In a long-awaited report published last year, Ms Abraham found regulators and three government departments guilty on ten counts of maladministration over a "decade of regulatory failure" by not spotting obvious warning signs that Equitable's finances were under pressure.

It was forced to close its doors to new business and was left with £1.5 billion of liabilities after the Lords ruled that it must meet its obligations under guaranteed annuity contracts.

Yvette Cooper, Chief Secretary to the Treasury, apologised before Parliament in January but said that the Government would pay out only to policyholders "who suffered a disproportionate impact".

Mr Wright said: "The Government's arguments seem to leave gapingholes in the way our regulators are held accountable, and this needs addressing."

Paul Braithwaite, of the Equitable Members' Action Group, said: "We want proper compensation for all victims, not just charity handouts for a few."

A Treasury spokesman insisted that the Government had carefully considered Ms Abraham's report and had set up a payment scheme that would be fair to taxpayers and policyholders.

'Shabby' response on Equitable Life

www.epolitix.com

The Commons public administration committee has said it is "deeply disappointed" with the government's "shabby" response to criticism of its handling of Equitable Life.

The government has stated it will establish a limited ex gratia payment scheme for a number of policyholders.

But parliamentary ombudsman Ann Abraham wrote in her report that an apology ought to be made and an independent tribunal set up to look into paying compensation.

The PASC report, published today, describes the government's proposed payment scheme as "inadequate as a remedy for justice".

It criticised the government for ignoring the majority of the ombudsman's advice and for "choosing to act as judge on its own behalf... for reasons which are not well explained".

And the report suggested that while the government might have a "legally valid position" not to pay Equitable Life policyholders compensation, it was not a "morally acceptable one".

The ex gratia payment scheme proposed by ministers for the worst-affected was described as the best that policyholders are probably going to get.

But the committee criticised ministers for choosing a "slow and onerous" process of means testing which would be "hard to access" and difficult to implement.

Tony Wright, committee chairman, said: "I give credit to the government for apologising, for producing a considered response, and for accepting the need for some kind of payments scheme.

"But the government has produced an essentially political response to a quasi-judicial investigative report from the ombudsman, and as a result has ended up satisfying nobody."

He added: "The government's arguments seem to me to leave a gaping black hole in the way our regulators are held accountable, and this needs addressing."

And speaking to the BBC this morning, Wright explained that the report was intended to show that Parliament takes the work of the ombudsman seriously.

He stated: "I think that we took a very dim view of the fact that the ombudsman had made this extraordinarily detailed report, which she had taken several years to produce.

"Right at the end, the government started saying, 'Oh, well. We don't compensate for regulatory failure anyway'.

"Had they said that at the beginning, we could have saved ourselves a lot of time and so could the ombudsman. The fact is that these people would have had no justice."

Instead, Wright called for a "straight-forward" compensation scheme run by an independent tribunal.

But he added: "What the government has said is that they will have an ex gracia scheme for people, the grounds of which are still unclear."

Paul Braithwaite, general secretary of the Equitable Members Action Group, praised the "fantastic" report.

He told the BBC that it would be "very welcome" by the millions of people who suffered as a result of the collapse of Equitable Life.

"The government has been spinning and has been absolutely shabby in its treatment," he said.

"One hopes that this report will provoke MPs to stand up on behalf of their ombudsman."

And when asked about rumours that the Equitable Members Action Group would launch a judicial review, Braithwaite replied:  "We are enclaved with our lawyers."

'Shabby' claim over Equitable

The Herald
Simon Bain

The government is accused today by a Labour-led select committee of a "shabby, constitutionally dubious, and procedurally improper" response to the issue of compensation for policyholders of Equitable Life.

The Public Administration Select Committee says it is "deeply disappointed" with the government's belated setting up of a hardship fund, which may eventually make payments to some categories of Equitable policyholder, and its rejection of the parliamentary ombudsman's key recommendation of an independent compensation scheme.

It says the proposed payment scheme could help to improve the lot of some policy- holders but is "inadequate as a remedy for injustice".

The committee also castigates the government for "a highly-selective and partial approach to its representation of our views (it has) simply taken our words out of context to support arguments of its own".

Treasury Minister Yvette Cooper is accused of "spin" in failing to tell MPs that she had rejected the ombudsman's key findings.

However, the committee says it "accepts that this scheme is probably the best that policyholders are going to get, and wants it to work as well as possible". It urges a simple and clear scheme that will pay out as quickly as possible, but says the process the government is following "looks set to be complex" and therefore probably "slow and onerous" for policyholders in difficult personal circumstances.

It concludes: "The government uses its general responsibility to taxpayers as an argument for not establishing a compensation scheme. If this argument were carried to its logical conclusion, compensa-tion would never be payable - even in part - where public bodies had been responsible for injustice resulting in substan- tial financial loss, but only where any financial loss was modest.

Such a position would be patently absurd and unfair."

Committee chairman Dr Tony Wright said: "The government has produced an essentially political response to a quasi-judicial investigative report from the ombudsman, and as a result has ended up satisfying nobody." It left "a gaping black hole in the way our regulators are held accountable".

He said policyholder campaigners might seek judicial review, but even if it were successful there was "no guarantee of a better outcome for policyholders".

Paul Braithwaite, secretary of the now 20,000-strong Equitable Members' Action Group, said: "EMAG wants proper compensation for all the victims of this scandal, not just charity hand-outs for a few. Parliament needs to stand up for the victims and its own ombudsman and make the government think again."

Equitable plan inadequate say MPs

BBC News

MPs backed the Ombudsman's criticism of the government

A committee of MPs has again denounced the government for disclaiming responsibility for the collapse of the Equitable Life pension company.

Last year, the Ombudsman called for the establishment of a compensation scheme for more than a million policyholders.

But the public administration committee says it is "deeply disappointed" with the government's response.

The government is planning a much more limited scheme, which the MPs says is "inadequate as a remedy for injustice".

Vanni Treves, Equitable Life's chairman said: "We are grateful to the select committee for a report which lays bare the disgraceful manoeuvrings of a government trying to wriggle out of its responsibility to address the failures of its regulators."

"In the light of this extraordinarily damning report, we call on the government to think again and to accept the findings of the Ombudsman," he added.

Denial

Equitable Life, one of the UK's largest private pension providers, came close to collapse in 2000.

The subsequent saga saw more than a million policyholders suffer large cuts to the value of either their prospective or current pensions as the society struggled to stay solvent.

The Parliamentary Ombudsman, Ann Abraham, investigated the issues and last year ruled that various government departments had been guilty of maladministration, contributing to the society's near collapse.

However the government continues to deny some of her findings, and is going only part of the way to carrying out her recommendation for compensation.

The public administration committee, in its latest report "Justice denied?", said the government's stance was "morally unacceptable."

And it said the government continued "to act as judge on its own behalf," echoing the view of Ms Abrahams that it had misrepresented the findings of her crucial report.

In January she told the MPs on the committee that the government had been "picking over and re-interpreting my findings of maladministration and injustice, re-arranging the evidence, re-doing the analysis and acting as judge on its own behalf".

Compensation?

A former Appeal Court judge, Sir John Chadwick, has been asked by the government to design a scheme that will probably give voluntary payments to only some of the Equitable's investors.

The committee chairman, Tony Wright MP, said: "I give credit to the government for apologising, for producing a considered response, and for accepting the need for some kind of payments scheme."

The committee said this was "probably the best that policyholders are going to get".

But it said they wanted it to be both simple and clear because the government's approach might be complex, "slow and onerous" for the policyholders.

They said the scheme should not rely on some form of means testing, which they believe will involve too much information being required before any compensation is issued.

Last year the committee published another report, criticising the government for its delay in responding to the Ombudsman's findings.

Equitable Life are at fault, but the regulators are responsible too

The Times
Peter Riddell

The Equitable Life scandal is not going away, nor should it. The Public Administration Committee of MPs today produces a coruscating analysis, entitled Justice Denied?, about the Treasury’s handling of the affair, notably its slippery response to last July’s damning report by the Ombudsman.

The Government’s response was evasive, appearing to embrace the thrust of the Ombudsman’s report, while, in practice, differing substantially. Ministers put most of the blame on Equitable Life. They offered only to make ex gratia payments on a complicated and still uncertain basis.

The MPs argue that, while regulators were not primarily responsible for the losses, they were responsible for injustice and should not be allowed "to escape liability for that injustice altogether". In particular, ministers’ argument that Parliament has considered that financial regulators should not normally be held liable in the courts for financial loss was introduced late in the day "in a way we find to be shabby, constitutionally dubious and procedurally improper".

There is a key issue of principle. The Government has accepted that public bodies were responsible for maladministration which caused injustice, but, at the same time, argues that it is under no duty to put right these wrongs. This, the MPs say, "may be a legally valid position, but we think most people would consider it to be a morally unacceptable one".

Much bigger questions have arisen now in view of the banking collapse and rescue. But some, at least, of the damage in the Equitable Life affair could be remedied by a rapid government decision on the timetable and basis for payments.

MPs slam govt plans to compensate Equitable victims as 'shabby'

FT Adviser
Gemma Westacott

A committee of MPs have slammed the government's plans to compensate victims of the Equitable Life as "shabby, constitutionally dubious and procedurally improper".

The comments from the Public Administration Select Committee (PASC) are included in a report published today (19 March), entitled 'Justice Denied?', that slams the government's response to a report by Parliamentary Ombudsman Ann Abraham.

The PASC has accused the government of choosing "to act as judge on its own behalf", and all "for reasons which are not well explained".

Earlier this year the government formally issued an apology to Equitable Life policyholders for the maladministration and poor regulation that has seen over a million people lose out on their savings.

However, it also said it would only set up a compensation payment scheme for those policyholders hardest hit by the problems at the beleaguered life company, arguing that it was not generally appropriate for taxpayers to pay compensation.

The PASC warned that this process "looks set to be complex" and therefore probably "slow and onerous" for policyholders in difficult personal circumstances.

Committee chairman Tony Wright MP added: "I give credit to the government for apologising, for producing a considered response, and for accepting the need for some kind of payments scheme.

"But the government has produced an essentially political response to a quasi-judicial investigative report from the Ombudsman, and as a result has ended up satisfying nobody.

"We have never argued that the taxpayer should have bottomless pockets, but there is a very clear case for defined compensation where the state itself has caused injustice.

"The government’s arguments seem to me to leave a gaping black hole in the way our regulators are held accountable, and this needs addressing."

Policyholder groups are said to now be considering asking for a judicial review of the Government’s decision.

Equitable response is 'shabby'

The Telegraph
Yvette Essen

The Government's response to the failure of Equitable Life has been branded as "shabby, constitutionally dubious and procedurally improper".

The Public Administration Select Committee (PASC), which has spent months looking into a report by the Parliamentary Ombudsman that found the Government guilty of "a decade of regulatory failure" in the lead-up to the mutual insurer's demise, said it was "deeply disappointed" with the Government's response to the Ombudsman's findings.

Ombudsman Ann Abraham published her damning report last summer, calling on the Government to compensate policyholders who lost up to half of their savings when Equitable was forced to close to new business in 2000 after being unable to pay guaranteed annuities.

Earlier this year, the Government agreed to establish an ex gratia payment scheme for some policyholders, but has failed to provide details of how and when money will be paid.

PASC accused the Government of spin, and said its payment scheme was an "inadequate" remedy and would be seen as "morally unacceptable". Committee chairman and Labour MP for Cannock Chase, Tony Wright, said: "There is a very clear case for defined compensation where the State itself has caused injustice. The Government's arguments seem to me to leave a gaping black hole in the way our regulators are held accountable."

In a hard-hitting report, PASC accused the Government of acting "as judge on its own behalf" by rejecting and qualifying some of the Ombudsman's central findings. It expressed concern that the Government's ex gratia scheme will probably be "slow and onerous"

U.K. Lawmakers Criticise Government's Plan For Equitable Life

Blomberg
by Gonzalo Vina

March 19 (Bloomberg) -- The British government’s decision to consider compensation for policyholders of the Equitable Life Assurance Society is too complex and may leave many struggling to claim money they have missed out on.

In January, the Treasury apologized to policyholders for failing to protect them and appointed a judge to rule on how much compensation they should receive from the 4.9 billion pounds ($6.9 billion) lost when the insurer collapsed in 2000.

The Public Administration Select Committee, including members of Parliament from all three main political parties, today urged the government to make the process simple so that policyholders wouldn’t be dissuaded from making claims.

The government "has ended up satisfying nobody," said Tony Wright, a lawmaker from the ruling Labour Party who leads the committee. "There is a very clear case for defined compensation where the state itself has caused injustice."

Equitable's financial crisis was brought on by unsuccessful investments in the 1990s and its commitment to pay an above-market annuity rate to some pension holders.

Government rapped over report

Press Association

The Government's response to a report into its handling of the problems at Equitable Life is "shabby, constitutionally dubious and procedurally improper", MPs have said.

The Public Administration Select Committee (PASC) said it was "deeply disappointed" with the way the Government had responded to the Parliamentary Ombudsman's report into its regulation of Equitable.

The report by Ann Abraham found 10 instances of maladministration by regulators and Whitehall officials in the period leading up to December 2001, prompting her to call for the Government to apologise to policyholders and set up an independent tribunal to calculate compensation for them.

But PASC accused the Government of acting as "judge on its own behalf" by rejecting and qualifying a number of the Ombudsman's findings, for reasons which were "not well explained".

In its highly critical report on the issue, Justice Denied?, the committee also said that the Government's plan to make limited ex gratia payments to certain policyholders, rather than following the Ombudsman's recommendation for compensation, was "inadequate as a remedy for injustice".

It said: "We are disappointed that the Government has decided that compensation is not warranted, arguing that it is under no duty to put right, even in part, wrongs that it admits the state caused. This may be a legally valid position, but we think that most people would consider it to be a morally unacceptable one."