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
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Media Stories: 20/12/2008 - Observer Articles on Government Report delay
Observer Articles on Government Report delay
MPs demand an Equitable settlement
Tonight's parliamentary report will back a bail-out for the mutual's clients, writes Neasa MacErlean.
Pressure on the government to launch a compensation scheme for Equitable Life members will intensify tomorrow with the release of a report that will give considerable support to the bail-out case made by Parliamentary Ombudsman Ann Abraham in the summer.
Expectation is also growing that the Treasury, which in a controversial move last week postponed making a statement on Equitable Life, will now have to find money to bail out policyholders.
The Equitable, Europe's oldest mutual, came to the brink of collapse in 2000 when the House of Lords ordered it to meet £1.5bn of expensive guarantees it had made to certain annuity policyholders. Equitable's one million policyholders are estimated to have lost over £4bn as a direct result. It closed to new business and some parts were sold to other financial institutions. Many younger policyholders with additional voluntary contribution schemes or other plans transferred elsewhere, but others either remained voluntarily or had no choice but to stay on.
A report by a select committee of MPs, to be published just after midnight tonight, will give more ammunition to policyholders. 'The failings that have been revealed in this case appear to be on a spectacular scale,' said Labour MP and committee chairman Tony Wright when he announced the committee's investigation in the summer. 'The Ombudsman has made 10 serious findings of maladministration leading to injustice. We trust that her report will receive the considered and respectful response from government that it deserves.'
But just as it was preparing to publish its response to the Ombudsman, the Treasury announced last week that it would delay doing so until after Parliament returns from its Christmas recess on 12 January. Only this month Gordon Brown had himself committed to publishing a response by Christmas.
'I am hugely disappointed by the delay in the government's announcement,' says Liberal Democrat MP Paul Rowen, also a member of the select committee. 'In common with hundreds of other MPs, I have written to constituents to tell them that. The government has a moral duty to compensate people.'
The fact that the Treasury report is being delayed, and a Prime Minister's promise is being broken, makes some sort of positive response to Equitable members more likely. A delay in order to prepare a restatement of the current position would make the government look absurd.
Until last week, signals from the Treasury strongly suggested they were going to reject all claims for compensation; it had, however, floated the idea of a hardship fund. Brown is believed to be involved in the discussions - and rows - over what can be afforded. Now that the government has poured £37bn into rescuing the banking sector in October alone, it becomes much harder for ministers say they cannot afford to help Equitable members.
Paul Weir of the Equitable Members Action Group (Emag) says: 'Until now the government had not been able to make its mind up. This delay is, actually, quite encouraging. It means it's not all over. One of the things we are saying to policyholders is: "The pressure is working. Keep it up".'
He describes the Treasury's hardship fund proposal as a 'kite-flying exercise' and believes that, over the recess, the government will be studying various formulas for giving compensation: 'They can put a figure on it and say they will pay that. They can say they will do it in principle. Or they can commit to paying a percentage.' The big headache is that, without examining the Equitable Life figures in detail - which they appear not to have yet done - they cannot be sure what the cost is.
There have been various inquiries to establish what happened at Equitable and who should pay for it. Abraham's 500-page report in July put the possibility of compensation firmly back on the table when she highlighted a catalogue of errors over a decade in four government departments that supervised the life insurer. These were the former Department of Trade and Industry, the Financial Services Authority, the government Actuary's Department and the Treasury itself.
Equitable members have been highly determined and articulate in making the case for compensation. 'If the government paid up, they would save what they now have to pay us in benefits,' says 82-year-old Anthony Breen, a retired administrator in the shipping industry from the Wirral. His with-profits annuity has fallen from £500 a month in 2000 to £220 now. As a result, he qualifies for Pension Credit and help with paying council tax, assistance he would barely have qualified for if his annuity had stayed at £500-plus. 'I'm receiving the guts of £2,000 a year because of this affair, and am not paying income tax. A lot of people are in the same position.'
David Harrison, a part-time agricultural estate manager, believes that the argument for recompense became much stronger when the government saved Northern Rock. 'It would seem they are using one set of rules for one set of investors and a totally different set for another,' he says. 'But both came about because the Financial Services Authority did not monitor carefully enough.'
He transferred his funds into Equitable six weeks before it was forced to close to new business, at a time when regulators did know about the problems there. 'We still have red meat on the table on a Sunday,' he says. 'But I have lost tens of thousands of pounds from my pension.' Now 55, he had hoped to retire at this age but will continue working.
One clear sign that the Treasury was not ready to launch a compensation or hardship scheme last week was its admission that it has not done its own calculations as to how much compensation might cost. 'The government is reluctant to admit fault,' says Weir, adding that the setting up of an ex gratia fund would be a 'token' gesture.
Campaigners have made contingency plans in case the government takes a tough line. Judicial review is a serious possibility. 'I'm sure we could get the money to do it,' says Liz Kwantes of the Equitable Life Members Support Group. 'But it is difficult: the government can throw money at it while we are just pensioner-policyholders.' The Ombudsman's report would be influential in a judicial review hearing, particularly if the Treasury rejects it next year without giving detailed reasons.
A general election in 2009 or 2010 could also be significant. Conservative MPs tend to support the principle of compensation when replying to constituents' letters, though they usually put in a caveat about the level having to be affordable.
Far from going away, the Equitable Life campaign has gathered momentum in 2008. Emag did a mailshot of 200,000 Equitable members after the Ombudsman published her report in the summer, with the result that its membership increased from 11,000 to 18,000. It estimates that MPs have received 50,000 letters about Equitable since July.