Equitable Life (Payments) Bill

My Lords, I am very pleased to contribute to this important Second Reading debate. It is a tall order to expect a two-clause Bill to bring closure to this saga. It has been going on for a long time and I have not been studying it to the extent that other colleagues have, but it is a complete and total tragedy from beginning to end. It has ruined the retirement prospects of thousands and thousands of our citizens and it must never be allowed to happen again. A sum of £1.5 billion may not sound like a lot if you are suffering reduced compensation but it is a lot to the taxpayers in the circumstances in which we find ourselves. I apologise for going into what are really Committee stage questions. However, this is a money Bill and we have no option but to put detailed questions at this point. I concur with many of the questions that have already been raised and look forward to hearing the answers. If the Minister cannot deal with them all, perhaps he will write to us. I should like an assurance that the Government are comfortable that they have got this matter covered. By today’s standards, anyone trying to offer a guaranteed annuity rate would be completely misguided and accused of misjudgment. As I understand it, they would not get across the door before they were brought to book by regulators. The tragedy was partly brought about by the fact that the Equitable Life situation straddled two different sets of regulatory authority: the whole system before 2000, which was the SIB regime, and then the FSA regime. I think that some of the problems were caused by the fact that there was a fault line between those two regimes. Although I support the Bill and think that it will go a long way towards achieving closure, I think that the British public would like an assurance that, if this is not closure, we can be absolutely certain that these circumstances will not arise again. The length of time that this has taken to sort out is unconscionable. It is pointless allocating blame but it has covered two previous Administrations. The second ombudsman report, which was produced in July 2008, pointed out—I did not realise this until I went back to it—that five of her findings in fact which she complained about were before 1997 and five were after. We are all in the dock together, as it were. It has taken an unconscionable time and that suggests that we now have a duty to get on and sort this out. I commend the coalition Government for dealing with this as expeditiously as I think they have. I hope that the Minister is absolutely confident that he can deliver a start payment date as early next year as he can reasonably manage. NS&I is a very sensible vehicle for payment. It is tried and tested; people trust it; it knows what it is doing and all it needs is the money. If he can sign a cheque as soon as it comes across his desk, that would be very welcome. There is still no agreement about the losses which were suffered and the proportionality of the blame. I think I am right in understanding that this is an ex gratia payment—merely an ex gratia payment—so the Government can control what they do with the money. Clearly, there is a discrepancy, as the Minister acknowledged, in the difference between £1.5 thousand million and £4.3 thousand million. That is quite a gap to try to bridge. As I said earlier, I do not think that £1.5 thousand million from the taxpayers’ purse is an insignificant amount of money. Getting that paid will be the best thing we can do to start to make amends for some of these issues. It seems to me that the Equitable Members Action Group still has some pertinent questions. I do not understand some of them as they are so technical and quite a long way above my pay grade. Perhaps the Minister can give an assurance that this is a paving Bill—a perfectly adequate description of it—but that it is not the end of the story. I hope he will continue to have an open-door policy for members of the action group who are still deeply affected by this and who still might, if they spend some face time together, get a better resolution, given the decisions that have been taken by the Government to date. If he can undertake that this is not the end of the ongoing discussions—it may be wrong to call it negotiations—and that they should certainly be carried forward, that would be extremely useful. Obviously, the Treasury needs two things to pay this money which it does not have at the moment and which it gets through this Bill: one is the power to pay the money and the other is the resource itself. I notice that there is no figure in the Bill, unless I have missed it. Therefore, when the Bill gets Royal Assent, the Treasury will have the power to pay the money, which will not be restricted necessarily, at law, to £1.5 thousand million. Therefore my question is: if over the two CSR periods that this money will be spent, which is quite a considerable time in any political calendar, circumstances change substantially in terms of bond yields and other things that have a bearing on some of these contingent and other losses, what scope is there in the Bill for looking again at £1.5 thousand million by way of compensation? It appears to me that there is some scope for thinking about that, should circumstances change over the period of the payments that are envisaged in the Bill. There is a subsidiary question to that. Once the Treasury has this power, under the appropriation rules it can spend £1.5 million—not billion, million—each year without further parliamentary recourse, normal standards being accepted. Even I know that £1.5 million might not go very far towards bridging a gap between £1.5 billion and £4.3 billion, but what scope is there for flexibility in the future? If, for example, in the fullness of time, the independent commission—Mr Pomeroy and his colleagues, who have a responsibility to look only at allocation, which is a big enough task; if they can complete it by January they will be doing quite well—came back to Ministers looking for a little extra flexibility to the extent that the appropriation rules would accommodate it, would that be considered as a way of increasing the flexibility available to Ministers? The final point I want to make is on capital thresholds. I understand the Minister’s ruthless logic about how capital thresholds will be applied to some of those who receive compensation. Many of them will be very elderly households. The Minister knows as well as I do that capital threshold has been static for years—I think that it is still £16,000. If the independent commission does its work in January and these people get some money later in the year, this money will be top-sliced for many of them. That will add insult to injury. Although I immediately concede the Minister’s strict logic in saying he will apply capital thresholds in dispersing this money, I would just ask him to think about that very carefully again and not to make a final decision until he has looked at the impact and consequences for some of the elderly households who will receive this money. Having said all that, I welcome the Bill. It has been done in good time, and not before time. However, in the haste to get some of this money into the domestic accounts of individuals who have suffered the loss, I hope we do not grab at things like capital thresholds too quickly and end up prejudicing some of the entitlements from these richly deserved ex gratia payments. I hope the negotiations will continue to see if further refinements can be made to deal with some of the outstanding questions legitimately being raised by the Equitable Members Action Group. On that basis, I am very happy to support this Second Reading.