20/12/2008 - Has the worm has turned?
The turning point seems to have been on 10th December. The day before, Ian Pearson, the minister responsible,had been severely mauled for the second time in two weeks by MPs, many from Labour's own backbenches. At the select committee he would have realised that Dr Tony Wright's report would be entirely supportive of Ann Abraham.
On 11th December at midday Harriet Harman announced the delay in the Government’s statement. This, just nine days after Gordon Brown had promised the statement would be pre-Christmas. Given that EMAG received an embargoed advanced copy of the PASC Report mid-morning 12th December, it seems certain that The Treasury knew its content before the statement was postponed.
The PASC report was published on Monday 15th December and the Conservatives crowed every day until Parliament broke on Thursday at Gordon Brown’s word having been broken. Read all about it below!
20/12/2008 - PASC Report: Everything we hoped for.
The select committee held four sessions, including one from policyholders on 11th November, plus a number of written submissions that it has subsequently published. During th hearings the idea of means-tested hardship payments and discounting claims were aired, particularly by Chairman Tony Wright and Paul Fynn. The report comes down against ex gratia payments but leaves the discouting issue on the table. The 52-page report is well worth downloading and reading.
The written evidence , including two of the six submitted by EMAG to the committee can also be downloaded.
The four sessions have all bee transcribed and the press release of 15th December are downloadable here.
20/12/2008 - The press’s reactions
In general, the press reaction to the delay was knee-jerk “More bad news for sufferers”. EMAG believes that exactly the revers is the case and that the delay was evidence that the Government has finally blinked and has, at the 11th hour realised that brushing us aside won’t work.
There were two particularly insightful articles in the Observer on Sunday 14th December by Neasa MacErlean and Ruth Sunderland
The coverage on the PASC Report came on Monday 15th December And, arguably, the worm HAS turned!
20/12/2008 - Lib Dem MP Jo Swinson continued
Flushed with her success in sponsoring the Equitable Life adjournment debate on 25th November, Jo lodged a new Early Day Motion (EDM 215) on December 9th which read:
“This House notes the findings by the Parliamentary Ombudsman of 10 counts of maladministration by Government Departments in relation to Equitable Life; expresses concern at the Government's failure to respond to the Ombudsman's report within its own specified timescale; notes with concern that over 30,000 Equitable Life policyholders have died without seeing their situation resolved since the society's near-collapse in 2000; and calls on the Government to give a public response without delay to the Parliamentary Ombudsman's recommendations and set out a timetable for action.”
She had the good sense to get heavy hitter Tory and Labour MPs to be the first signatures and, in consequence, in the week up to recess on 18th December it had already gained 82 MP’s signatures, including 25 Labour MPs. Unfortunately the total will not now change until Parliament reconvenes on 12th January.
20/12/2008 - EMAG and Equitable deliver petition
On Friday 5th December, Equitable’s Vanni Treves and EMAG’s Paul Braithwaite joined Telegraph journalists to deliver the Telegraph’s list of 7,499 Equitable Petitioners for justice to Downing Street.
28/11/2008 - Parliament debated Equitable 25th November
The youngest MP, Ms Jo Swinson, Lib Dem member for East Dumbartonshire was lucky in the private members’ ballot and dedicated her 90-minute adjournment debate slot on the morning of Tuesday 25th November to Equitable Life. EMAG worked hard to brief her in the four days she had to prepare and she did brilliantly. John Newman and Paul Braithwaite attended and EMAG efforts received several plaudits from MPs. The number of letters in postbags was repeatedly commented upon. Keep it up!
It was an extremely well-attended debate with about three dozen MPs present, of which about 15 managed to get their name into Hansard. The new minister responsible, Ian Pearson, who had been in the Treasury for less than 50 days was up the creek without a paddle and nothing to say, for which he was shredded mercilessly.
MPs of all parties were very supportive and it was pleasing to hear the Tory old-guard speaking up so well – Messers Tyrie, Letwin and Chope.
Read Jo Swinsons speaking script.
Read the Harsard full transcript of the debate.
Watch it on the www (at about 90 minutes in for 90 minutes).
See the subsequent chaser letter sent by Ms Swinson to Alistair Darling on 28th November.
28/11/2008 - The 14th study into Equitable
EMAG's chairman, John Newman, pursued the actuarial profession post PO 2, to ask it finally and in the light of the PO's explicit findings of Maladministration AND damning evidence in the published chronology to investigate Chris Daykin, the Government Actuary (GAD). It is going to happen and well done John. You may recall the infamous Corley Report giving actuaries a clean bill of health in 2001. Followed by a report into Roy Ranson and Chris Headdon, finally published in March 2007 many months after the profession actually reported internally, when Roy Ranson was retrospectively kicked out of the "profession".
See the Guardian’s coverage.
And the press release, with notes to editors.
Meanwhile, back at the 12th Equitable Inquiry, the accountancy profession’s Joint Disciplinary Scheme (JDS) is rumoured to have found Ernst & Young guilty with a big fine destined to go to the profession's coffers. But Ernst & Young are in the process of appealing, again to be held in camera (transparency – wot?), so that's many more months delay. You couldn't make it up.
28/11/2008 - An apology? What’s the point?
Ann Abraham's "A Decade of Regulatory Failure" report calls for an apology from the public bodies that were found to have been Maladministrative but would it really mean anything? Elvis has left the building. The ones who should: Sir Howard Davies, Chris Daykin, Callum McCarthy, Michael Foot, John Tiner, David Strachan, Clive Briault, Martin Roberts, plus the host of nameless mid-level people who transferred from DTI to Treasury, to the Insurance Inspectorate and eventually on to the FSA have ALL moved on, retired and/or been paid off. Almost NOBODY remains.
Similarly with ministers. We’ve had half a succession of half a dozen ministers responsible for ELAS. We will forever have etched on our memories the travesty of a performance by Ruth Kelly misrepresenting Lord Penrose's excellent report. But will anyone remember the walk-on roles of Melanie Johnson, Stephen Timms or Kitty Ussher?
In theory it would fall to the newboy minister, Ian Pearson, who has been in the job thus far less than 50 days. IF he apologises, so what?
The ONLY person from whom an apology would have meaning is the one constant player since 1998, when the Treasury realised the can of worms that was Equitable Life, is Gordon Brown.
28/11/2008 - Another small earthquake in Chile
Surprise, surprise, the Equitable board had to announce on 24th November, after an intensive year of desperately trying with endless puffery and its “data room” to offload the remaining £6bn rump of Equitable, that it has failed. With-profits annuitants are now realising the sale to the Pru that Vanni lauded as such a good deal at the EGM one year ago was, as EMAG made clear at the time, far from a ticket to safe haven.
Press coverage says the Society will now go into simple run off. Which begs the question why it needs nine non-executive directors, a very fancy PR outfit and a milion pound man, Charles Thomson, when there’s nothing much to do and no investment freedom.
14/11/2008 - EMAG gave evidence to select committee
On Tuesday 11th November Paul Braithwaite and Colin Slater of EMAG, plus Liz Kwantes, Ann Berry and Peter Scawen gave evidence to Dr Tony Wright’s select committee on Public Administration on behalf of Equitable policyholders. See the 70 minute session here.
The uncorrected verbatim transcript is very worthwile reading.
Note how astonishingly unhelpful to investors past and present Vanni Treves was and wonder why that would be. He seems to be talking down the compensation to a matter of a few hundred millions.
EMAG made two written submissions. One from Paul Braithwaite on the wider perspective and another by Colin Slater on compensation quantum and how it should be paid.
Read the full transcript of the select committee on Public Administration’s session on Equitable (13th November 08) with so called experts on regulation.
24/10/2008 - Regional meetings
EMAG's regional groups are going well with a number of meetings: For example, Windsor on 26th September.
One was also held for Richmond (Surrey) at the Commons on 8th October – but the exemplar was in Norwich. There, EMAG’s regional organisers got more than 100 along to hear the views of three local MPs and three hopeful Westminster electoral candidates. The meeting succeeded in getting MP Charles Clarke off the fence. Read about it here.
Sittingbourne was the location of the fourth, held on 17th October.
All four have been well appreciated and EMAG directors have attended them all.
The next one will be in Reading with MP Martin Salter at the Victoria Hall – to be held in the Old Town Hall at 11.00am on Saturday morning 15th November. If you wish to be there, contact: email@example.com
EMAG anticipates several more across the country. Would you be willing to help organise one where you live? If so, contact: firstname.lastname@example.org
14/10/2008 - Contact your MP AGAIN
NOW would be a very very good time to visit your MP in his/her surgery or to write again and demand justice for Equitable Life sufferers on. Fair’s fair.
With the baleouts of Icelandic bank savers with an unprecedented commitment for 100% protection, there’s never been a stronger case than there is today for finally paying Equitble Life sufferers the compensation recommended in the Parliamentary Ombudsman’s report. The sum of money is very similar at £4bn, which seems like a rounding error in a week that £37bn of our money has been used to take the leading UKL banks into part-public ownership. HOW can the Government now resist? See EMAG regional organiser Brian Potter’s letter to Gordon Brown.
EMAG wrote an email to its members on 10th October containing a similar message.
14/10/2008 - Using Penrose to beat us?
Incredible though it may sound, there’s a new political message being used to try to talk down compensation expectations. On 8th October Alistair Darling articulated: “…..we also need to take account of the findings of Lord Penrose, who investigated what happened at Equitable Life at some length and concluded that that company was substantially the author of its own misfortune.” True, BUT: Northern Rock, Bradford and Bingley, HBOS, RBS et al could equally well ALL be described as having board’s who were authors of their downfall and also operating flawed business models. ALL have been baled out for billions. ALL were the result of failed reguators. But only Equitable Life has had 10 findings of MALADMINISTRATION warranting compensation and still we’re left swinging in the wind after seven years. As Brian Potter ewrote “Enough is enough!”.
14/10/2008 - Change of Treasury minister responsible
Four EMAG directors met with Kitty Ussher, the then minister responsible, on 1st October. We’d been asking for the meeting for 15 months. She complimented EMAG on our campaign but wouldn’t be drawn on exactly when she meant in her promise that the Government would repond to the PO in the Autumn. She seemed remarkably ill-informed on the detail of compensation. She was summarily removed from The Treasury four days later. The new minister respoinsible will be Ian Person, MP for Dudley South, with a majority of just 4,244. He is, however, a very close confidant and hard-line friend to Gordon Brown. Why not write to him too?
14/10/2008 - Select Committee hearings
The Commons committee which the office of the PO reports to is that of Public Administration (PASC), under the chairmanship of Dr Tony Wright. It has now been confirmed that PASC will review the PO’s Equitable Report with a series of three or four oral evidence-gathering sessions, commencing with Ann Abraham herself on Thursday 30th October. A report to the Commons is expected in early December.
14/10/2008 - Party Conferences
It already seems a long time ago but EMAG directors were in Manchester for three days lobbying Labour backbench MPs face-to-face. Along with Manchester’s new regional EMAG action group, we staged a demo which resulted in a colour photo in the Daily Telegraph of our local members carrying a real coffin to the Conference Centre, bearing the messages:
“It wasn’t an Equitable Life after all, Henry”
and “30,000 dead, waiting for justice”.
EMAG directors also spent three days at the Tory Party Conference in Birmingham. In the space of two weeks EMAG directors have briefed 30 MPs and four MEPs and won new support. At least a dozen more MPs have agreed to meet EMAG in the coming weeks.
On November 12th the all-party of MPs group on Insurance and Financial Services is seeing a presentation by Vanni Treves and Charles Thomson. Their plans to dispose of the remaining WP fund must have been set back by the market turmoil that has characterised the last two weeks
21/09/2008 - The Alex Henney Report
On September 10th EMAG published an important forensic analysis drawn from the Parliamentary Ombudsman’s day-by-day chronology. The author is EMAG’s ex-chairman and current director, Alex Henney. It paints a damning picture of the FSA’s behaviour in 2001. After 1st December 2001 the FSA has been self-policing and unaccountable. Read Alex Henney’s report.
20/08/2008 - Don’t accept platitudes from MPs
Many EMAG members are feeding back to us copies our their MP’s responses - and pretty pathetic they are. Most are “cookie cutters”, reproducing the party line. Labour ones say “It’s complicated” and we’ll have to wait (more waiting!) until the autumn. The Tories make a welcome commitment to paying up but go on to make inaccurate implications about what Ann Abraham has written, which may be the precursor to Tories short-changing the victims if we let them. EMAG is urging policyholders to engage with their MPs by writing back and saying the generalised answer isn’t good enough: that you’re seeking a personal commitment from the MP to support their own Ombudsman and that this is a vote-influencing issue.
22/07/2008 - EMAG’s submission to PO 2 (including redress)
EMAG was the primary supplier of evidence to the PO’s Report. The EMAG board’s confidential reading committee received the draft report on 23rd February. In the 10 following weeks, EMAG digested the draft and commissioned expert professional opinions from a QC, a leading actuary (Steve Dixon) and commissioned our accountantants, Burgess Hodgson, to make a formal EMAG response. Several of the suggestions were adopted.
The EMAG section of redress, quantification and how compensation should be administered is reproduced in full in the PO’s final report and is its only reference to the prospective scale of compensation.
If you read only one document, EMAG suggests it be this one.
Read EMAG's press release.
22/07/2008 - Parliamentary Ombudsman’s report: “Equitable Life, a decade of regulatory failure”
PO press release at: http://www.ombudsman.org.uk/news/press_releases/pr2008_07el.html
The PO's summary 48 pages to download.
Click here to download PDFs of whole report.
22/07/2008 - The fantastic press coverage
The coverage by the quality papers has been exceptional:
See The Daily Telegraph's
The Financial Times coverage was exceptional.
But many other excellent and supportive articles in every serious newspaper
Some correct anticipation in advance of publication. See some of the headlines.
However, the backlash on nay-sayers against the public purse per The Treasury’s spin is already present.
22/07/2008 - Equitable Life WAS unique
An oft repeated put-down used against the Equitable sufferers has been that ALL lifcos were over-bonusing and were over-exposed in equities, leading to big decreases in policy values after 2002 (a period outwith the remit of the PO’s report).
However, the others had shareholders or huge multi-billion pound orphan estates to fall back on and none had Equitable’s concentration on pensions or huge known-by-the-regulators exposure to GARs. Finally, unlike Equitable, none ran a negative “smoothing kitty” throughout the 1990s.
IF they were all the same, where then are the thousands of complaints against those other companies? Only Equitable has been subject to no less that THIRTEEN REPORTS since 2001. But this new thorough one from the PO is the very first to have Parliament’s authority to address blame and recommended compensation. See the list of Equitable Life Reports.
27/06/2008 - EMAG goes regional!
EMAG is setting up a network of regional action groups in anticipation that the Parliamentary Ombudsman may recommend compensation when her report is finally published in mid-July.
Click below to visit the new website and see how to join the campaign in your area. Even if you are already an EMAG member, logging your details on your regional site will enable you to keep in touch with action in your area or perhaps to join the regional team to help promote the campaign.
See EMAG’s press release announcement of regional groups.
02/06/2008 - The FSA and its AGM
On 29th May Lord Adair Turner was confirmed to be the new chairman of the FSA from September, replace Sir Callum McCarthy after five dismal years under his stewardship. The apppointment is welcomed by EMAG.
Read about Adair Turner’s task in this in-depth article in the Sunday Telegraph, by Katerine Griffiths.
Sir Callum will have the unenviable task of chairing the eigth annual public meeting of the FSA at the Q E 2 Conference Centre in Westminster on the morning of Thursday 24th July. Do try to attend. Find out how to register here.
Hopefully, Callum McCarthy will be held to account for the Northern Wreck AND the Equitable, post the publication of PO 2 one week earlier.
02/06/2008 - PO date confirmed
All MPs returned on 2nd June from their break to a letter from Ann Abraham, in which she confirms her report will be laid before the Houses of Parliament in the week commencing 14th July – just a few days before MPs long summer recess which starts on 22nd July. Read her letter.
28/05/2008 - Vanni and Lizzie
The Guardian printed an extensive hagiography on the Society’s chairman, Vanni Treves, on 9th May. Read about his charitable works.
It was heartening to observe that tireless campaigner for Equitable, Liz Kwantes, was honoured with an MBE by the Prince of Wales on May 16th at Buckingham Palace. See http://www.equitablelifemembers.org.uk/
28/05/2008 - Equitable for sale, blah blah
Predictably, a few days before the ELAS AGM, a raft of newspapers published the oft-repeated leaked story that maybe, just maybe, the Pru might buy the remaining £6.6bn WP fund. We have heard all about the prospective sale, the data room of info and the excitement of interest ad nauseum. The likelihood is that no bidder will proceed until PO 2 is in the public domain for fear of a possible new wave of litigation. So it’s unlikely that the Society will be sold in 2008.
28/05/2008 - Equitable’s AGM, 19th May
Held with all the usual razmataz in Westminster, with big screen, staging, autocue and computer logging of questions with roving mikes and a cast of probably two dozen, with the senior litigation partner at solicitors Lovells, Neil Fagan, present - why? And for what? Why are there eight non-execs? What do they do? The total number of member attendees was 70 – less than EMAG has ever had to any of our seven AGMs, without any of the gubbins. Equitable’s should have been in a village hall in Birmingham.
There are about 400,000 people with an ongoing interest in the £6.8bn with-profits fund. Of the 180,000 remaining voting members, approximately 16,000 bothered to vote. About 12% of these voted against the board’s remuneration package. Read the text of the chairman and managing director’s speeches at the AGM.
The Mail on Sunday’s financial editor certainly has a long knife out for MD Charles Thomson’s £1m remuneration. See his articles on May 11th.
And, after the event, pointing out the substantial votes against the board’s remuneration motion.
28/05/2008 - TreasCom grilled the FSA, 6th May
EMAG’s Paul Braithwaite attended the two hour session and observed that Hector Sants acquitted himself well. The most incisive MP was judged to be Labour’s Andy Love who asked such valid questions as:
Q 108: “Mr Sants, is the FSA independent enough from its contributing member firms to be able to deal with this problem adequately?”
Q 118: “One final question if I can, Chairman. Mr Sants, you said earlier on, and I agree very strongly with it, that your role is to look after the consumer. Is it the success of the SEC in the United States that there is a perception there that the authorities look after the little guy against what is happening in some of our city institutions, and should not the FSA be concentrating more on looking after the little guy in order that we achieve more success in this area?”
Find out the answers at the transcipt (towards the end).
03/04/2008 - ELAS 2007 figures
On 27th March, Equitable Life published its preliminary 2007 financial report. It was much the same story as before. A nominal amount invested equities. The with-profits fund in now down to £6.6bn (run down from £26bn in 2000). The bonus, non-guaranteed, remains the same at 5%.
Perhaps the most interesting para was this one:
“During 2008 we have been notified of 78 legal claims lodged in various regional courts in Germany. We will examine these claims in due course and consider them on their individual merits. As usual, we will resist any attempts by policyholders to obtain an unfair advantage at the expense of all other with-profits policyholders.“
The news was that there was no news. Trailed many times and oft that the remainder would be sold off (and that there’s a queue of bidders) has evaporated into the ether. It’s STILL all for sale. Did not Vanni and Charles promise in November 2006, when they were covered in opprobrium over their disastrous £50m waste on failed litigation, that there was no point in demanding that they go because they’d be gone by the end of 2007? See more deja-vu reporting of the recycled story.
03/04/2008 - The FSA report on itself
Surprisingly, the internal report by the FSA into supervision of the Northern Wreck, published on 26th March, was particularly self-critical. Download the 12-page executive summary and press release.
These were the four key failings identified in the supervision of the FSA:
- A lack of sufficient supervisory engagement with the firm, in particular the failure of the supervisory team to follow up rigorously with the management of the firm on the business model vulnerability arising from changing market conditions.
- A lack of adequate oversight and review by FSA line management of the quality, intensity and rigour of the firm's supervision.
- Inadequate specific resource directly supervising the firm.
- A lack of intensity by the FSA in ensuring that all available risk information was properly utilised to inform its supervisory actions.
It must be enormously helpful to EMAG’s cause of claimed maladministration by the FSA to be able to demonstrate that, six years after the Equitable’s problems became public, the FSA continued to fail investors in such chronic fashion. The FSA simply won’t be able to say that “lessons had been learned”. Hopefully, PO 2 will highlight the parallels between Equitable Life regulation and Northern Rock. See just some of the press coverage.
25/02/2008 - In the House of Lords
From Hansard 18th Feb 2008, Column 26, 3:56pm
Tory Lord de Mauley:
“My Lords, I thank the Minister for repeating this Statement on Northern Rock. I wish that I could say that I welcomed it, but I do not. I am sorry for the Minister for having to read it, as, indeed, I am sorry for the Chancellor, who is out of his depth and a puppet for a failed Prime Minister—a Prime Minister who created the conditions for the failure of Northern Rock in the first place.
Can the Minister confirm that the Bill gives the Government power to alter any Act of Parliament applying to banks in the United Kingdom by order? Can he confirm that it gives the power to backdate regulations applying to banks and building societies?
Why has the Treasury flung so much money at this company when with, say, Equitable Life, it slunk past on the other side of the road? What is the difference between one financial institution with an over-ambitious business plan and another?”
25/02/2008 - Nice stuff about Dr Cable
Vince Cable has been the stand-out politician who has had a clear grasp of Northern Rock all along. Incredibly, the chairman of the FSA, Callum McCarthy tried to shut him up in September and accused him of scaremongering.
Cable has been the subject of extensive press praise, in particular in the Guardian, with as very amusing Parthian Shot: “The government does seem to have an extraordinary search engine, which finds banana skins to fall on."
25/02/2008 - Northern Wrecked: official
The shock news came on Sunday afternoon 17th Feb:
Explaining the government's decision, Mr Darling said: "It is better for the Government to hold on to Northern Rock for a temporary period and as and when market conditions improve the value of Northern Rock will grow and therefore the taxpayer will gain."
There was a superb, hard-hitting TV documentary on C 4 “Despatches” on Monday18th February, presented by Jon Moulton, which took Gordon Brown to task for his dithering.
16/02/2008 - The Hunt Review of the FOS
In September of 2007, the Government asked a safe pair of hands, Lord Hunt of Wirral, to review the performance of the Financial Ombudsman Service (FOS). The focus is on:
“How to ensure that the FOS is as open, approachable and user-friendly as it can reasonably be expected to be”. Predictable submissions from all the financial service industry’s usual suspects can be found at: http://www.thehuntreview.org.uk/submissions/submissions.html
But do read EMAG’s succinct one prepared by Chris Carnaghan, referring Lord Hunt to the excellent and blistering critical report by Lord Neill and raising the issue of why the FOS is exempt from the FOI. Don’t hold your breath hoping that the FOS will be transformed!
Interesting, isn’t it that despite being handed a comprehensive dossier on the Lord Neill Report, Sir Christopher Kelly, the ex-chairman of the FOS has never commented on Lord Neill’s work and, ironically, has now been given Lord Neill’s old job - Chairman of the Committee on Standards in Public Life. Appointed by one Gordon Brown! It’s a small world.
16/02/2008 - Petition to Number 10
More than 500 people signed an e-petition to Number 10 Downing Street, written by Melvyn Gill. It read:
“This government has evaded its responsibility towards 1.25 million citizens of this country by rejecting both the findings of the Penrose report and the findings of the Parliamentary Ombudsman, showing a contempt of the P.O. office to the detriment of our Parliamentary institutions, and our right as citizens to justice against a Government that has set it face against any form of compensation for people who have paid into a pension all their lives, only to find that Governments of both parties have failed to properly regulate Equitable Life.”
EMAG was pleased to note that one Charles Thomson was a signatory, along with dozens of well known Equitable Life activists. See the other 536 names at: http://petitions.pm.gov.uk/Equitable-Life/?showall=1
The Government’s response was utterly predictable i.e. “Can’t say anything because of the PO”.
“The Parliamentary Ombudsman is currently carrying out an investigation into the prudential regulation of Equitable Life. The timetable for the completion of this investigation is a matter for her. It would not be appropriate for the Government to comment on matters related to Equitable Life until the Ombudsman's investigation is complete and her report has been published.”
It’s the favourite Government’ “get out of jail free card”, with an apparent shelf life measured in years!
09/02/2008 - Prudential WP annuitants tax shock
It was reported by Teresa Hunter that 2,000 of the 56,000 with-profits annuitants that are now administered by the Pru had an unpleasant shock with their first payment in 2008. Where they had several policies in payment the Inland Revenue has, in many cases, put all payments on an emergency tax code, resulting in some individuals suffering up to 50% reduction in their monthly pension receipts. The individuals need to contact their own tax offices to seek immediate rectification. Many ex-Equitable WPAs seem to be unaware that unless the Pru is able to declare annual bonuses in excess of 11%, their annuities can continue to be cut. Read the Telegraph article.
09/02/2008 - Damning TreasCom report on FSA
Finally, the FSA has been lambasted for incompetence in the Northern Rock. Here’s what Christine Seib in the Times wrote: “MPs demand new regulator as FSA stands condemned. A cross-party committee of MPs yesterday called for a new office to monitor British banks, saying that the Financial Services Authority should not be permitted any additional powers.
The Commons Treasury Select Committee’s report on the Northern Rock scandal said that the City regulator has “systematically failed in its duty” to oversee the troubled bank’s activities. “The FSA did not supervise Northern Rock properly,” the report said. “The failure of Northern Rock, while a failure of its own board, was also a failure of its regulator.”
The 183-page report will sour the exit of Sir Callum McCarthy, who is due to step down as chairman of the FSA in September. It recommends that a Bank of England deputy governor and head of financial stability be introduced to oversee a new protection scheme for bank deposits, keep a look out for banking problems and oversee the rescue or “orderly failure” of troubled banks.
To encourage “creative tension” in the system of financial regulation, the FSA should not be given responsibility for these new powers, the MPs said...
Read the whole damning report here.
09/02/2008 - The Court of Appeal ruling, finally
Although all the press has reported that the Government lost again in its attempts to avoid culpability for the Occupational Pensioners, the complex ruling of Sir John Chadwick, is far from good news for the office of the PO or democracy. The ruling states unequivocally that the PO’s findings are NOT intended to be binding and that ministers must have the right to come to Parliament and contest those findings, but they must bring cogent reasons.
Paragraph 91 reads: I am not persuaded that the Secretary of State was entitled to reject the Ombudsman’s finding merely because he preferred another view which could not be characterised as irrational.
As I have said, earlier in this judgment, it is not enough that the Secretary of State has reached his own view on rational grounds: it is necessary that his decision to reject the Ombudsman’s findings in favour of his own view is, itself, not irrational having regard to the legislative intention which underlies 1967 Act: he must have a reason (other than simply a preference for his own view) for rejecting a finding which the Ombudsman has made after an investigation under the powers conferred by the Act.”
The DWP had failed, even in the two subsequent Court hearings, to provide any reasonable rebuttal, which is why they lost on the PO’s first finding in this case.
Notwithstanding, the Court of Appeal has tipped the balance of power firmly towards the Government at the cost of the authority of the PO. A department of state found guilty of maladministration in a PO report is apparently under NO obligation to judicially review it where it contests the findings. This is a disaster. This makes a mockery of the no-cost Alternative Dispute Resolution (ADR) service that the PO is meant to provide, since to prevail against a reluctant Government will require a hugely expensive formal Judicial Review, with all the risks entailed.
It seems totally out of tune with contemporary well-warranted cynicism of politicians to enhance their omnipotence, rendering them arbiter in their own department’s confirmed maladministration against the finding of an independent evaluation. And how inappropriate is it to subject the PO’s reports, whose task it is to decide with Natural Justice whether maladministration has taken place, to the judiciary and its very different hurdles and formal framework? No doubt Dr Tony Wright’s committee on Public Administration will need to visit this ruling in detail. The consequence of this ruling may well be a further delay to the timing of PO 2.
Read the full 60 page ruling.
25/01/2008 - The Lord Hunt Review of the FOS
The FOS is the subject on a so-called “independent” review. It will be focused on “how to ensure that the FOS is as open, approachable and user-friendly as it can reasonably be expected to be; and also that it sets reasonable expectations of what it can do and what it can't do.”
EMAG has reminded Lord Hunt of the excellent Lord Neill devastatingly damning report of Lord Neill, one year ago.
See the Review’s website at: http://www.thehuntreview.org.uk/
11/01/2008 - A Tory MP speaks out
It was very pleasing to See a Tory MP Bob Spink raise the comparison in the Pensions Bill debate on 8th January thus:
“Pensioners see £25 billion thrown at the Northern Rock problem and wonder at the absence of the financial constraints that the Government always claim to be under when pensioners need help. What about the Government's failure on the Equitable Life debacle and their breach of trust on police pay? I put it to the House that this is no time for politicians to say, "Trust me, I'm a fairly straight sort of guy", as Mr. Blair once infamously did.”
11/01/2008 - Northern Rock and the FSA
The estimate of the public’s exposure to Northern Rock is now of the order of £40 bn, rising daily. The Treasury is rumoured to be seeking middle-eastern underwriting. Incredibly, the Chancellor proposes to reward the demonstrably incompetent FSA with much enhanced powers. You couldn’t make it up. The Treasury Select Committee has had two interesting evidence sessions with the FSA. 9th Oct, 2007: and 11th Dec, 2007
It is anticipated that TreasCom will report its views on the debacle in February. Will its chairman, John McFall, finally change habits of a lifetime and criticise Mr Bean’s regulatory regime?
11/01/2008 - ELTA's litigation resolved
On 10th January it was announced that the class action by 407 with-profits annuitants, coordinated by Bristol solicitors Clarke Willmott, had been settled just a couple of weeks before being due back in Court. They claimed, post-Penrose, that their annuities had been mis-sold to them.
The ELTA group defied the Society’s threats to see them off in Court and pursue them individually for multi-million pounds of legal costs if they dared proceed. ELTAs litigants are now believed to be going to receive very material compensation. The other 56,000 with-profits annuitants will receive nothing. But at least the fat-cat lawyers’ gravy train has been stopped.
This resolution echoes the situation of 12,000 Equitable late-joiners who, prior to the CONpromise were assured there was simply no point in leaving to preserve legal rights, because there was no valid claim for mis-selling, hence no reserves for any compensation. But 200 members of ELJAG, the late joiners group, are believed to have received back the equivalent of all their invested capital, recouping far far more compensation than the derisory sums subsequently recommended by the Society’s hired-gun barristers, Moss and Carr for the rest.
As Ian Hislop famously once said: “If that’s justice, I’m a banana.”
Given that a fundamental tennet of the FSA is to ensure fair treatment for all, one wonders how the 56,000 with-profits annuitants (now with the PRU) feel about Vanni Treves having settled ELTAs claim in secret for substantial compensation.
Read the press reports of the settlement.
Of course, this now clears the decks for the final sell-off of the remaining unfettered £7bn with-profits fund and the demise of the world’s oldest mutual life assurance company.
08/01/2008 - Comparrison with Northern Rock
The Motley Fool poster “matt404” (who is a retired actuary) wrote a prescient post (number 68444), drawing the analogies between the Northern Rock debacle and Equitable:
- both organisations were controlled by an autocratic chief executive
- both had a wonderful new (but, alas, flawed) business plan that took them to the top of their sector
- both claimed a moral superiority over their competitors: one gave no commission to greedy intermediaries, the other ran an internal charitable foundation
- when each hit the buffers, there were cries of: “ We are solvent! Don’t panic!”
- in order to create the impression that all was well, a dividend/bonus was then proposed to be paid out of money that did not exist (the fact that the NR dividend was withdrawn was a difference)
- both were then put up for sale
- several suitors came forward. Shareholders/policyholders both demanded the right to choose which of the offers should be accepted.
- a hedge fund investor/Stuart Bayliss then emerged who threatened to veto any proposal they did not like
- the FSA/Gordon Brown, in reply to Vincent Cable at PMQ on Dec 5th, said all would be well because the business is up for sale and was almost certain to be sold (with FSA this was explicit, with GB it was implicit)
- one by one, the suitors withdrew from the negotiating table, which is where we are now.
So, on the basis of the ELAS experience, we can all comfortably assume that
- all the bidders will have withdrawn before December is out
- taxpayers will have to pick up the tabs that correspond to those WP policy holders were saddled with
………..but it all means that LESSONS WOULD BE LEARNED!
08/01/2008 - A puff for Vanni Treves A puff for Vanni Treves
The Equitable saga has gone on so long that there is always a new gullible journalist for Vanni Treves to charm. See this piece of puffery in the Daily Telegraph by newcomer Yvette Essen. It contains such gems as:
“Having received death threats and had his house windows smashed three times, Vanni Treves is used to having people protecting him.
Thankfully, the three "policemen" surrounding the non-executive chairman of Equitable Life this time are of a different sort. And his trio of PRs have good reason to fuss - this is the 67-year-old's first profile interview in years….”
“Mr Treves can barely contain his excitement when he talks about how various advisers are preparing a dataroom of information…..“
"Mr Treves is tight-lipped about whether it would be his swansong should he succeed in selling Equitable. “If there is a deal to be done, I will personally give an enormous party," he promises. "I expect all of us to leave very drunk, and I insist - if I am still here - on putting out the lights."
08/01/2008 - Annuitants transferred to PRUAnnuitants transferred to PRU
On 1st January 56,000 with-profits annuitants left Equitable and are now under the wing of the Prudential. In consequence, having totally missed out on the doubling in the FTSE-100 in the last four years by being just 5% invested in equities, their £1.7bn will now be 75% invested in equities (and property). This may, however, not be a good time for such a switch. For annuities to not be cut further, the PRU needs to declare annual bonuses in excess of 11% pa – a tough target. See Guardian article.
08/01/2008 - Equitable for sale: Yawn
The silly season around Christmas was exploited with a clutch of placed stories about Equitable being for sale. As if we didn’t know that the FSA and the ELAS board are keen to nail the coffin on the oldest mutual Society, preferably before PO2 is published in the summer of 2008. Read the news coverage.
Notwithstanding, there were still some journalists with a three-dimensional perspective, Viz David Prosser at The Independent.