Equitable Life: The Government aren't the only ones to blame

Even the most placid watchdog will bare its teeth if provoked and the Parliamentary Ombudsman's patience has finally snapped.

For only the fifth time in more than 40 years, the independent adjudicator issued a "special report on unremedied injustice" this week.

Never mind for now that the specific case she complained of directly affects hundreds of thousands of savers – and many more besides, as I will explain later. The important point for every one of us is that the Ombudsman's office was set up to protect the public from the arrogance and incompetence that often arises after governments have clung to power for too long.

Or, as that indefatigable campaigner for justice, Ros Altmann of the London School of Economics, put it: "What is the point of Parliament appointing an independent adjudicator if ministers can simply keep on ignoring her decisions? It is like having a referee but allowing players to ignore red cards and stay on the pitch after being sent off."

Yes, as regular readers may have guessed, we are talking about the Equitable Life scandal again. But please don't turn away on what I hope will be a sunny Saturday morning. It was only because people like Ros kept on bashing away about failed company pensions, long after most of the media got bored, that more than 160,000 workers in bust schemes got their life savings back.

Here's the back story. Ann Abraham, the Parliamentary Ombudsman, reported last year that maladministration spanning several decades had led many savers to suffer injustice as a result of Britain's oldest mutual insurer being run as an over-promised fund. While Equitable boasted of low costs and high payouts, it failed to ensure it retained sufficient reserves to honour the guarantees it had issued. A series of regulatory authorities, principally the Department of Trade and the Securities and Investments Board, slept through it all.

The Daily Telegraph and other newspapers began reporting problems at Equitable in 1998 and I wrote about my decision to transfer a modest pension out of the fund just before exit penalties were imposed, a couple of years later.

Since then, the Government has ignored a series of official reports pointing out its responsibility for authorising an insurer that turned out not to have any insurance. Those shunned include a Parliamentary Select Committee, to which I was proud to be summoned to give evidence last December because it seemed genuinely keen to get at the truth.

Three years earlier, I wrote in this space: "Ignoring the recommendations of the Ombudsman seems to be habit forming.

"Nor is it entirely fair to blame the Government for all this. Those in power, after all, must make some very difficult decisions. No, the torpid Tories must bear their share of the blame for what is going on here. If we had a decent Opposition, we might have a better Government. Their failure to oppose has helped to support the arrogant governance we are suffering today."

This is not a party political point. Nearly 20 years ago, a Conservative administration tried to ignore an earlier Ombudsman's recommendation that it should compensate victims of the Barlow Clowes scandal. They had sent their money offshore and so were much less deserving of sympathy than today's victims.

Here's what the Shadow Chancellor at the time told the House of Commons: "Many pensioners have lost their life savings. Why have we had to rely on the Ombudsman to confirm the mismanagement, maladministration and incompetence that was widely known about more than a year ago?

"Does the Secretary of State agree that, while the need for compensation is agreed, the reason for the payment is not the fecklessness, gullibility or incompetence of the small investors but the fecklessness, gullibility and incompetence of the Government who, for months and years, ignored all the warnings that were available to them?"

Phew. Who was that young firebrand? Step forward, Gordon Brown. While it would be too much to hope he might retain his youthful lust for justice today, it would be good to see some of the current crop of Opposition MPs emulate those emotions. At least until they get their hands on the levers of power.

Next year, a Tory landslide looks as inevitable as it is unjustified by any policies they have announced to date. But the Opposition will benefit from a largely apolitical electorate's disgust with the Government and the genial feeling that it's time to give the other lot a go.

Here and now, the baleful example of Equitable has encouraged a generation to turn away from saving as a waste of time and money; a mug's game that does not pay. Unless this shameless administration can be encouraged to do the right thing by Equitable during its final months in power, even more people will retire in future with wholly inadequate savings to fund their final decades.

Ian Cowie, Personal Finance Editor, Daily Telegraph 9th May, 2009