Government attacked over Equitable Life

SIMON BAIN, The Herald March 20 2007

The government is facing a twin attack from the European Parliament and the UK parliamentary ombudsman over its supervision of Equitable Life.

In Brussels last night MEPs on the European Union committee of inquiry into the issue revealed the report is likely to be critical of the government's failure to implement European directives which should have protected policyholders.

The report is likely to be followed by that of the parliamentary ombudsman, which has been delayed for more than a year, and which is likely to find the government guilty of maladministration over Equitable.

Diana Wallis, a Liberal Democrat MEP, presented a draft of the EU report at a closed meeting of MEPs. Afterwards, she said changes could be made before publication of the final version, but it would be critical of the UK authorities: "This is the first such committee of inquiry in 10 years, which demonstrates the importance of the issues raised by the failure of Equitable Life across Europe, not just in the UK," Wallis said.

She went on: "The report will be critical of the UK government's implementation of EU law in relation to the Equitable Life crisis, and will also call on the European Commission to take a more proactive approach to monitoring member state implementation.

"The report will also criticise gaps in the effectiveness of redress systems available to victims in these circumstances, in particular in cross-border incidents."

Wallis said UK and Irish regulators giving evidence to the inquiry had assured MEPs that they had complied with EU law in the supervision of Equitable Life. But she added: "They failed to explain how so many policyholders fell through cracks in the system.

"In too many cases, this resulted in a denial of justice, either through complete lack of redress or through the policy holder being cut off by a limitation period."

Conservative MEP Neil Parish said it was clear the UK government should have intervened much earlier in the Equitable Life affair.

More than 15,000 policy holders in other EU countries, including 8300 in Ireland and 4000 in Germany, lost pensions, savings and investments in the meltdown of Equitable Life, as well as one million UK policyholders.

However, the European Parliament committee has no power to order compensation, only to propose tighter controls if MEPs feel changes in EU law could prevent the same thing happening again.

Similarly, the parliamentary ombudsman Ann Abraham can only urge the government to pay compensation, as she did in her report on occupational pensions. The government, however, disputed her report and recommendations, and is appealing to the House of Lords against a High Court judicial review ruling which found in favour of the ombudsman, and against the pensions secretary John Hutton, on key points.