The independent action group for current and ex Equitable Life policyholders, funded by contributions.

Equitable Members Action Group

Equitable Members Action Group Limited, a company limited by guarantee, number 5471535 registered in the UK

Correspondence: 15/03/2005 - Stephen Timms to EMAG

Mr Paul Braithwaite
42 Bartholomew Villas
Kentish Town
London NW5 2LL
15 March 2005

Dear Mr Braithwaite

Thank you for your letter of 8 February enquiring about the Labour Party's policy towards Equitable Life. I apologise for the delay in my replying. I will respond to the points in the order your letter raised them.

Response to the Ombudsman and her recommendations

The Ombudsman is currently considering the evidence available to her, and I can't indicate acceptance or otherwise of findings which have not yet been made. As the Ombudsman said in her report to Parliament of 19 July 2004: "a decision that a complaint is worthy of investigation does not mean that a finding of maladministration causing injustice will follow. The outcome of a detailed investigation by my Office may be that I do not uphold the complaint."

Consumer protection and market confidence

The Financial Services Authority has to strike a balance between its objectives to protect consumers and to maintain market confidence. We do not believe there is any irreconcilable conflict between them. The FSA is responsible for delivering on its objectives with a view to producing a result that fulfils all of them. We have no plans to amend the FSA's statutory objectives.

Accountability of the FSA

We think the structures and mechanisms in place currently to ensure the FSA's accountability are satisfactory. We have no plans to extend the accountability arrangements to include the Parliamentary Ombudsman or the National Audit Office.

The FSA is required to provide HM Treasury with an annual report explaining how it has met its objectives, and also how it has met the principles of good regulation which are contained in the legislation. The report is presented to an Annual Meeting, open to the public, and is laid before Parliament. It is also subject to consideration by the Treasury Select Committee, which may hold a formal hearing with the FSA about it. The Treasury Select Committee (and other Select Committees) may also call the FSA to give evidence in relation to inquiries on financial services and financial regulation.

The legislation provides HM Treasury with the power to hold an in-depth inquiry into both the operation of the FSA and that of the regulatory regime in cases of possible major regulatory failure. HM Treasury also has the power to commission an independent value for money review of the FSA's operations.

The legislation also provides for an independent Complaints Commissioner, who can investigate complaints about the FSA's exercise of any of its functions (apart from legislative functions for which a consultation mechanism exists). The Commissioner can recommend that the FSA make a compensatory payment to the complainant. The Commissioner produces an annual report, published alongside the FSA's annual report and subject to the same scrutiny arrangements.

Financial Ombudsman Service

The FOS is funded by levies and case fees that financial firms have to pay. It receives no government funding. At the beginning of each year the FOS consults publicly on its proposed budget, including the amount to be raised in its general levy and the amount of the case fee.

The FOS operates under the terms of the Financial Services and Markets Act, but it is not a government body. It answers to a board of non-executive, public interest directors appointed by the FSA. The chairman is appointed by the FSA with the approval of the Treasury. The chairman and directors are not appointed to represent the interests of any particular group or sector. They are appointed to ensure a wide range of experience, knowledge and skills. The board has no involvement in individual complaints. They take a strategic overview of the service. They have to ensure it is properly resourced and can carry out its functions effectively and impartially, free from influence by those whose disputes it resolves.

The FOS meets the criteria for recognition of ombudsman offices set out by the British and Irish Ombudsman Association (BIOA): independence from those whom the ombudsman has the power to investigate; effectiveness; fairness and public accountability.

The FSA and the FOS are operationally independent and have distinct functions, but they need to co-operate and communicate constructively with each other to carry out their functions effectively. The Memorandum of Understanding simply sets a framework for the relationship between them.

Thank you for taking the trouble to raise these matters with me on behalf of EMAG.

Yours sincerely,