Correspondence: 18/11/2004 - EMAG to Stephen Timms
Stephen Timms, MP
Financial secretary to The Treasury
1 Horse Guards Road
London SW1A 0AA
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Equitable Members' Action Group (EMAG)
42 Bartholomew Villas
Kentish Town
London NW5 2LL
18 November, 2004
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Dear Mr Timms,
Equitable Life: Protecting the members.
We read with surprise the article in the Sunday Telegraph (14 Nov) which reported that the Treasury has now dropped its plan to legislate to protect Equitable Life (ELAS) members from their current unlimited liability exposure.
Policyholder groups have received a number of calls this week from anxious annuitants and members as a direct consequence of the newspaper article.
EMAG had meetings and exchanges with your predecessor Ruth Kelly which were not productive. We deplore the way she misled the House in her summary of Lord Penrose's 800-page report, the contempt she showed by refusing to do anything (other than commission a couple of reviews) for the million plus households that have suffered and her callous suggesting that policyholders should sue themselves. The Treasury subsequently wrote to the Parliamentary Ombudsman in May, recommending her not to conduct a further investigation.
Ruth Kelly misinformed the House on March 24 that it was simply not possible to add GAD retrospectively to the PCA 1967, and also stated in the House, incorrectly, that: "There is no issue after 1997 in Lord Penrose's report that has not been considered by the parliamentary ombudsman." (Official report, 8 March 2004; Vol. 418, c. 1270). The PO's report actually examined only prudential regulation (not conduct of business), excluding GAD, for 1999 and 2000.
Ms Kelly's persistent misrepresentations of Lord Penrose's apparent conclusions about "light touch" regulation, compensation and maladministration were a travesty. All we can say is that during the 11 weeks that the Treasury enjoyed to process the Penrose report behind closed doors, she memorised her lines well.
However, we start our relationship with you afresh and with an open mind!
The Treasury spokesman was quoted in the Telegraph as having said:
"We have done exactly what Ruth Kelly told the House she would do."
We have checked Hansard for 8 March and find that what Ruth Kelly said was:
"Nevertheless as a result of his (Lord Penrose's) findings, we will be publishing and consulting on draft legislation to remove any possible concerns relating to unlimited liability potentially facing Equitable Life and some other policyholders."
And again, in the full Commons debate on Equitable Life (which I commend you to take the trouble to read) on March 24, Ruth Kelly's concluding words were:
"We have also pledged to consult shortly on legislation that will protect policyholders from unlimited liability-an issue raised in the Penrose report that we are determined to address."
Neither EMAG nor any other ELAS policyholder group is aware of any such consultation having taken place. The spokesperson's comments seem not to be consistent with these quite specific commitments by Ms Kelly. Could you let us know what form any consultation took and why the groups were not engaged?
There is currently an offer on the table from ELAS to buy back, at a discount, any or all £346m of its subordinated debt, which represents the greatest known threat of exposure to liability for the members. The offer is open until 6 Dec, but early indications are that many of the bondholders may prefer to retain their bonds, thus perpetuating the risk entailed. EMAG believes that it would be sensible and humane to proceed with the legislation as promised, to provide peace of mind and to pre-empt any unforeseen events at ELAS or in any other life company.
Has the Treasury dropped the prospect of legislation because it has received a satisfactory assurance from the FSA that ELAS will not be put into receivership? If this is so, EMAG suggests that any such commitment is above and beyond the prerogative of a regulator whose job is not just the preservation of confidence in the industry that funds it, but also the protection of policyholders and investors.
EMAG asks you to write to us and explain exactly on what basis the Treasury has committed this apparent U-turn, please.
Yours sincerely,
Paul Braithwaite
General secretary of EMAG
Tel: 020 7267 5938 Email: emagpr@yahoo.com
Cc Andrew Tyrie MP
Dr Vince Cable MP
EMAG committee and EMAG website
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