Correspondence: 24/01/2005 - Andrew Tyrie to Tory MPs
All Conservative Members of Parliament
House of Commons
London SW1A 0AA
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Equitable Life
A number of colleagues have asked me to update them on Equitable Life.
Conservatives have been doing everything reasonable that can be done to bring justice for the hundreds of thousands of Equitable Life policyholders and annuitants who have been affected by the Society's problems.
The Government's climb-down
On 22nd July 2004, after a sustained period of pressure, the government conceded a change I had been demanding in the terms of reference of the Parliamentary Ombudsman, to enable her to investigate the Government Actuary's Department (GAD). Ruth Kelly, the Minister responsible, tried to fob me off at the Dispatch Box by claiming that investigating the GAD could not help policyholders already hit, because that would involve retrospection. She was wrong, subsequently climbed down in a letter to me and has since been forced into making the change.
I am most grateful to all those MPs, which included 80 per cent of all Conservative colleagues, who helped by writing to the Parliamentary Ombudsman to persuade her to reopen her inquiry.
The Conservative position has been consistent throughout: we believe that, where they may have been maladministration, it should be fully investigated. If maladministration is found, there is a prima facie case for compensation to be paid to those policyholders and annuitants affected.
Further Government foot-dragging
Prior to the July climb-down, the Government had been engaged in a period of calculated obstruction to prevent a thorough investigation of these issues. A chronology is set out in the Annex.
Since her U-turn on the GAD, Ruth Kelly MP has been replaced as Financial Secretary by Stephen Timms MP. I had hoped that he might be more co-operative than Ms Kelly, but first signs are disappointing. I wrote to him over the Government's commitment, in response to the Penrose Report, to remove the possible liability of policyholders and annuitants to Equitable's creditors in the event that Equitable became insolvent. Ruth Kelly MP had told the House of Commons that "the Government intend, at the earliest opportunity, to publish and consult on draft legislation to protect policyholders in the event that that were ever to become material."
Unfortunately, replying to my call for such legislation to be brought forward at the earliest opportunity, Mr Timms claimed that "The [Treasury's] consultation paper made it clear that any need for this legislation was dependent both on an insolvency having taken place and on a particular legal interpretation having been applied to policyholder liabilities. Neither of these circumstances is in place so there is no necessity for a Bill at this time."
The consultation paper stated that "The Treasury therefore proposes to bring forward, when Parliamentary time allows, legislation which confers a discretion on the Financial Services Authority (FSA) to give a direction in certain circumstances which extinguishes the liability of contributories to have calls made on them and the liability to meet any calls which have been made." Mr Timms' reply is therefore extremely disappointing, and I will be pursuing him on this issue.
The need for prompt work by the Ombudsman
In addition, I have been trying to ensure that no more time is lost in the Ombudsman's inquiry. I wrote to her on 10th November 2004, asking that she set out what period she intends to investigate, when she will finalise the terms of reference of her investigation, and when she hopes to have the investigation completed. She has since published the terms of reference, and I am concerned that they do not give any indication of the urgency with which the inquiry should be conducted. The Ombudsman has stated that she hopes to have the inquiry completed during 2005, and I will be doing everything I can to keep her to this.
ANDREW TYRIE
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