Cable, Smith and Gidley quiz Cooper on Equitable Life

• [Jan 16]: ' . . THE endless delay and dissimulation have angered up to 1 million of them, many of whom have lost up to half their pension . . '

• Vincent Cable (Deputy Leader and Shadow Chancellor; Twickenham, Liberal Democrat): I thank the Chief Secretary for her statement. I welcome the apology, and I welcome more guardedly-because we do not yet know the full details-the compensation principle. However, that comes after the long, shabby and disreputable treatment of policyholders. The endless delay and dissimulation have angered up to 1 million of them, many of whom have lost up to half their pension to the extraordinary extent that a period of maladministration that occurred largely under the previous Government has become a massive own goal for this Government. That makes it all the more surprising that the Conservative shadow Chancellor did not think it worth his while to turn up today-[Hon. Members: "What about the Chancellor?"] Well, I am here.

We are celebrating the 20th anniversary of the Prime Minister establishing his reputation as a parliamentary star by speaking for the then Labour Opposition in defence of Barlow Clowes's policyholders. He made a passionate speech in their defence. A question that has often been asked since is why the compensation that was eventually accorded to those investors was not reproduced for Equitable Life policyholders. The answer was always that nothing could be done without an ombudsman's report. We now have one, nine years after the company's collapse, and it is worth rehearsing the endless delays, many of which were deliberate.

The ombudsman said that, in 2001, the then Chancellor's delay in holding an inquiry was "iniquitous and unfair". There was then a long period before the Penrose report and the establishment of another ombudsman inquiry. Eventually, last year, even after the Maxwellisation process, there was a six-month delay before the matter came to the House. However, it is here, and the Government have announced a compensation scheme.

Has the Treasury doctrine of compensation not changed fundamentally following what happened last year with the Icelandic banks, when people who had chased yields in high-risk accounts were fully and promptly protected by the Treasury? In contrast, prudent, careful investors in Equitable Life have been kept waiting for a highly uncertain scheme for the best part of a decade. That matters, not just because many of them have retired, but because many of them have died. The issue would never have been maintained but for the persistence of the Equitable Members Action Group, which I commend.

Finally, can we try to bring the matter to a conclusion by having an early debate not just on today's statement and the ombudsman's report, but on the report of the Select Committee on Public Administration and the European Parliament's EQUI report, so that we can look forward to early settlement of many deserving cases?

Yvette Cooper (Chief Secretary, HM Treasury; Pontefract & Castleford, Labour): I welcome the hon. Gentleman's welcome for the key elements of my response to the report. Hon. Members asked about the whereabouts of the Chancellor, and he is in Prague talking to the European Presidency about international banking reforms and capital adequacy in advance of the next ECOFIN. Clearly, it is for the Conservative Front-Bench Members to explain the whereabouts of the shadow Chancellor and Chief Secretary.

David Gauke (Shadow Minister, Treasury; South West Hertfordshire, Conservative): Where is the Chancellor?

Yvette Cooper (Chief Secretary, HM Treasury; Pontefract & Castleford, Labour): Hon. Members on the Conservative Front Bench are clearly not listening. I have just explained the Chancellor's location.

Dr. Cable referred to what happened with the Icelandic banks and asked whether the approach to compensation has changed. That issue was different because it involved systemic risk. It arose at a time when there was considerable movement of money from one account to another, and significant anxiety about confidence in the banking system as a whole and in retail deposits and savings. In that climate, we believed that it was right, for reasons of financial stability, to put in place additional support for the existing financial services compensation scheme. He will be aware that that scheme is funded by the industry. We recognised that additional Government support was needed, just as additional Government guarantees were needed for Northern Rock because of the wider risk to financial stability. I do not think that that sets a precedent for other individual cases and institutions.

The hon. Gentleman asked for an early debate, and I will pass his request to business managers.

• . . Robert Smith (Shadow Deputy Leader of the House of Commons; Aberdeenshire West & Kincardine, Liberal Democrat): Earlier, the Minister mentioned that she could not take the route that the Government took with the banks, because in that case the Government were trying to restore financial stability. Surely we are trying to encourage investors once again to have confidence. Investors believe that they have been a victim of maladministration and have had an apology; surely that apology has to be followed up by a proper compensation scheme that is related to what they lost, not their circumstances.

Yvette Cooper (Chief Secretary, HM Treasury; Pontefract & Castleford, Labour): I think that a fair ex gratia payment scheme will take account of what people have lost, but it is also right to take account of the wider circumstances, as we have set out. I recognise the hon. Gentleman's point about people's approach towards their investments and the regulatory framework. However, the circumstances that we faced when it came to making decisions about the Icelandic banks, and the very serious financial stability problems that we faced in the autumn, were unique; that was a set of events the like of which we have not seen for many generations, and it was right to respond to those in a different way. I do not think that that necessarily has wider implications for how we deal with societies or companies in normal times.

• . . Sandra Gidley (Shadow Health Minister; Romsey, Liberal Democrat): Many people will welcome the compensation, but there is still uncertainty, because they will benefit only because of the disproportionate impact and the position of the public finances. What assessment has the Minister made of the proportion of policyholders who are likely to receive compensation?

Yvette Cooper (Chief Secretary, HM Treasury; Pontefract & Castleford, Labour): The hon. Lady makes an important point. We have simply been unable to make that assessment, because we do not know policyholders' circumstances at the moment. We have anecdotal evidence from individual members, but we do not have detailed information, which is why we have asked Equitable to provide us with it. We will work with the judge to answer the legitimate question that the hon. Lady has put to us.