The Equitable Life scandal was rightly prioritised by Conservative members, who leapt on Economic Secretary to the Treasury Ian Pearson, who had this to say:
"I am very disappointed that the Public Administration Committee should choose to obscure the real help that it accepts the Government’s payments scheme will deliver under extreme headlines, seemingly driven by an uncritical acceptance of the findings of the ombudsman’s report and by its unjustifiable and irresponsible characterisation of the manner of the Government’s response. [ Interruption. ] As a Government, we do not depart lightly from any of the ombudsman’s findings, but— [ Interruption. ]
Ian Pearson: The Government do not depart lightly from any of the ombudsman’s findings, but in such an important and complex case we have a clear duty to the taxpayer to ensure that our response is informed by a proper and comprehensive consideration of her report. That is what we have done and, as I have indicated previously, we want to move forward with an ex gratia payment scheme just as quickly as possible. We are talking to Sir John Chadwick about the advice that he is providing."
South Staffordshire's Sir Patrick Cormack (above right) was appalled:
"Is the Minister aware that he has just made one of the most shameful statements to have been made from that Dispatch Box in many years? He has rubbished a Committee presided over by one of his own greatly respected colleagues, and discounted the unprecedented second letter from the ombudsman that we all received this week. He has had no support from the Benches behind him, as not a single Labour Member has risen to echo his words. He should be deeply ashamed of himself, because he is bringing the Government and the whole system into disrepute.
Ian Pearson: I have a lot of respect for the hon. Gentleman, who has a very long track record of upholding standards in this House, but we have departed from the ombudsman’s findings only where we have clear and cogent reasons for doing so. We have applied scrupulously the terms of the Parliamentary Commissioners Act 1967, as interpreted by the Court of Appeal in the Bradley judgment. For no other reasons have we departed from those findings. I have to say that I remain very disappointed indeed that the PAC does not appear to have understood some of the arguments that we have made to it."
(The Public Administration Committee is chaired by Dr Tony Wright.)
Mark Field (Cities of London and Westminster) was similarly outraged:
"May I associate myself entirely with the words of my hon. Friend the Member for South Staffordshire (Sir Patrick Cormack)? I think he speaks for many people in the House, including many of the silent Back Benchers behind the Minister. What is the Minister now saying to all of our constituents? They are not unreasonable, and do not necessarily expect to get a share of the £4 billion that is being proposed, but are the Government simply waiting for many constituents across the country who relied on Equitable Life literally to die before there is any chance of getting any money on their behalf? Does he not find that a disgraceful state of affairs?
Ian Pearson: No, we are not saying that. We are saying that we want to move forward with introducing an ex gratia payment scheme as quickly as possible to help those who have suffered disproportionate impact as a result of losses through Equitable Life. We shall continue to do that. The fact that we have a disagreement with the Public Administration Committee will not deflect the Government from moving forward with all speed and providing a remedy for Equitable Life policyholders who have suffered disproportionate impact."
This matter has been going on for years, so it is absurd for the Government to suggest it is moving as quickly as possible.
Sir Nicholas Winterton, MP for Macclesfield, who (admirably) seems to attend every oral questions session, made a futher point:
"Is the Minister not aware that the way that Equitable Life policyholders are being treated is viewed—by the public, and not just the policyholders themselves—as another example of the way the Government treat people who have been responsible and prudent? Here are people who have tried to save for their retirement. The reports produced by the ombudsman have, in a way sadly, been critical of the Government, so is it not time that the Government speeded up the process to help people such as those who are losing out from virtually negative interest on their savings under the credit crunch, and to give them the benefit of their prudence and responsibility?
Ian Pearson: The ombudsman herself admitted that the issue was not clear cut. The hon. Gentleman will be well aware of the findings of the Penrose report, which said that the company was largely responsible for the demise in the situation. We will continue to move ahead with all the speed we can. We have asked Sir John Chadwick to provide us with advice; we want to introduce a scheme and we want to make sure that we can offer a remedy to Equitable Life policyholders. There is a technical dispute between the Public Administration Committee and the Government, because we clearly do not agree with its report and we shall respond in due course."
The phrase "The ombudsman herself" will please the politically correct brigade!
Shadow Treasury Minister Mark Hoban was also very cross:
"That was an extraordinary attack on an Officer of the House and a Committee of the House, and the Minister’s comments will be noted across the country. They typify the Government’s approach to the whole issue. At every step on the way, the Government have sought to block, frustrate and delay justice for Equitable policyholders. On Saturday, The Daily Telegraph nailed them completely. An early draft of the Treasury response to the ombudsman’s report said:
“Sir John will aim to provide his final advice to Government by June 2010.”
Ian Pearson: I and the Government have every sympathy for Equitable Life policyholders who have suffered genuine losses as a result of the failure of regulation, for which we have apologised. I have still not heard an apology from the Opposition for the period when they were responsible with regard to public bodies. Let us be clear. We have said all along that it is not normal practice for the Government to compensate for regulatory failure, and that is not the response just of this Government—it has been the response of successive Governments.
With particular regard to the date the hon. Gentleman gave, let me be very clear in response: we have said that we want Sir John Chadwick to advise us as quickly as possible and we want to make sure that we can introduce a payment scheme and make payments as quickly as we have the evidence, but we are talking about spending taxpayers’ money, and we have to have regard for the public purse. We have to do the right thing in the right way, and we will do that as quickly as possible."
Bromsgrove MP Julie Kirkbride asked about public sector finance:
"Why are the Government not open about the level of public sector finance initiatives, which should now be included in the national debt? If they were more open about that, we could see exactly the extent to which they have mortgaged our future.
Angela Eagle: To the extent that public finance initiatives have helped to increase and renew our infrastructure, they are to be welcomed. The hon. Lady knows that that is about 10 per cent. of capital investment, and that it has created jobs and new buildings. In fact, we have mended not only the roof, but the whole inside of the building, which was crumbling when we inherited it in 1997. Public investment is a good thing. It has completely renewed our infrastructure, and that means that we have modern and more efficient, effective and productive infrastructure for the future. I would have thought that she would welcome that."
Shadow Transport Minister and Canterbury MP Julian Brazier contrasted the British banking situation with the American one:
"Nobody doubts the Chancellor’s commitment on this issue, but in drawing parallels with the US recapitalisation, will he accept that because their preference stock was at 5 per cent. while ours was at 12 per cent., US banks have an incentive to rebuild their businesses, whereas British banks have an incentive to minimise their exposure to Government recapitalisation?
Mr. Darling: I am not sure whether the hon. Gentleman has noticed, but in the past six weeks we have converted the preference shares that we held in the RBS Group and the Lloyds Group into ordinary shares, because they needed the additional capital. The Financial Services Authority’s requirements were quite clear about that. I welcome what the hon. Gentleman says about supporting the banks, but what we are doing in supporting the banking system is complemented by what we are doing to support the wider economy.
I know that there is a difference of view about whether there should be any fiscal stimulus, but a substantial amount of money has gone into the economy, on which the Governor of the Bank of England fully agrees with us. I also agree with the Governor that it is necessary to continue to take action to support our economy. In particular, it is necessary to do everything we can, when people face losing their jobs, to get them back into work. That is one of the big lessons that people should have learned from what happened in the 1980s and 1990s."
Sir Peter Tapsell (who represents Louth & Horncastle) was a stockbroker. He asked banks too:
"Does the Chancellor agree that with the declining prospect of growth in the economy, the banks are faced with an inevitable deterioration in the quality of their loan books, so that far from increasing their loans to businesses, they are likely to be seeking the whole time to increase their capital? How will that problem be overcome?
Mr. Darling: The hon. Gentleman raises a quite reasonable point. All over the world, we have this problem. We need to ensure that banks strengthen their capital position, because in the long term that is essential. Of course, if banks did that and there was no other intervention, there would be less credit in the economy and the economy would shrink further. The result would be that the bank assets that are currently impaired would become even worse. That is why we have not only taken action to recapitalise the banks—in the case of RBS and Lloyds Group we have put additional capital in—but put in place schemes such as the credit guarantee scheme, which is working very well, the special liquidity support system, which has provided liquidity for the banks, and, in addition, the asset protection scheme, which, as I have said, will go down a similar road to the scheme in the United States. I am sure that the hon. Gentleman recognises that, as he is in a minority in his party in that he sees the point and the reason behind Government intervention in such extraordinary circumstances. Government intervention is absolutely necessary to complement the process that he and I agree has to take place if we are to maintain credit in the economy."
Shadow Chief Secretary to the Treasury Philip Hammond repeated the Conservatives' plan for a national loan guarantee scheme – and asked the Government why it won't support it:
"The simple way to get the banks lending to business again is the Conservatives’ national loan guarantee scheme. Yesterday, in Prime Minister’s questions, the Leader of the House criticised the scheme, claiming that there was no money behind it. The Chief Secretary said much the same thing a few moments ago. For the record, will the Chancellor confirm what the Economic Secretary told the House about the Government’s guarantee schemes on 14 January? He said:
“We expect the measures to be run on a break-even basis”.—[ Official Report, 14 January 2009; Vol. 486, c. 220.]
He said that for a very good reason, because the premiums that are being charged are expected to cover the losses. There will be no additional cost to public expenditure from those schemes. Is it not the truth that the Government’s only sustainable objection to the national loan guarantee scheme is that they did not think of it first? British businesses are suffering because the Prime Minister puts his political sensitivities ahead of their business needs.
“it does not add to public expenditure” —[ Official Report, 18 December 2008; Vol. 485, c. 1228.]
“the taxpayer will take some of the hit.”
How on earth does one square the Conservatives’ position that they would spend nothing extra with the fact that this scheme, even if it were workable, would cost the taxpayer money? That just shows the nonsense of the Conservative position."
Greg Hands, another member of the Shadow Treasury team, brought up a remark from former Cabinet minister Stephen Byers:
"Earlier this week, the former Cabinet Minister, the right hon. Member for North Tyneside (Mr. Byers), said that the VAT cut had “run its course” and should be reversed. Does the Chancellor agree?
Mr. Darling: No, I do not, because I think that putting £12.5 billion into the economy and doing it immediately was necessary. We are also—and I am grateful to the hon. Gentleman for allowing me to say this—taking other steps that will help the wider economy. Basic rate taxpayers will see a reduction in their tax, starting on 6 April. We have increased child benefit for the oldest child, and for other children as well. We have brought forward, too, a payment of £60 for pensioners, and the state pension itself will go up in April, so we are taking a range of measures to help. As for VAT, perhaps the hon. Gentleman should have a word with the shadow Business Secretary, who supported the reduction in VAT. Increasingly we are hearing a lot more sense and a lot more experience from that direction than we are from the shadow Treasury Front Bench."
Shadow Chancellor George Osborne was inevitably moved to bring up the split between the Government and the Governor of the Bank of England:
“the fiscal position in the UK is not one that would say, ‘Well, why don’t we just engage in another significant round of fiscal expansion?’”
Mr. Darling: As I have said on a number of occasions this morning, the Governor and I are in complete agreement in relation to the fiscal stimulus that I announced in the pre-Budget report last year. We are in complete agreement about the declaration that we both signed up to at the G20 meeting in Horsham a couple of weeks ago, when we said that countries needed to do whatever was necessary for as long as necessary. I also agree with him when he says specifically in the same evidence to which the hon. Gentleman refers that he would not rule out targeted and selected measures that help people faced with unemployment, something that the hon. Gentleman has turned himself against. The difference is not between me and the Governor—far from it. It is between me and the hon. Gentleman, who opposes doing anything to help people in these unprecedentedly difficult conditions. It is he who has the problem, not us.
Mr. Osborne: The Chancellor knows full well that the question is about a potential second fiscal stimulus in the Budget which the Governor of the Bank of England was warning against and on which the Chancellor has yet to express a view. Is it not a defining moment in the history of the Government’s handling of the recession when the Governor of the Bank of England pulls the rug on the entire fiscal approach pursued by this Government? We have the truly humiliating position of a Prime Minister lecturing Latin American economies about fiscal probity while the Governor of the Bank of England cuts up his credit card back home. Can I ask the Chancellor again, very specifically, does he agree with the Governor of the Bank of England that
“the fiscal position in the UK is not one that would say, ‘Well, why don’t we just engage in another significant round of fiscal expansion’”?
If there is no agreement between the Chancellor, the Governor of the Bank of England and the Prime Minister, what hope is there for any confidence that the Government can pull us out of this recession?
Mr. Darling: As ever, the hon. Gentleman is talking nonsense and he knows it. I have made it very clear—and the Governor and I have discussed this on many occasions—that it was and remains necessary for us to take the action necessary to protect jobs and get credit flowing again in the economy. The hon. Gentleman opposes that. I believe that it is right, because I believe that the Government should be in the business of helping people through what is an unprecedentedly difficult period.
In relation to this country’s position, the International Monetary Fund itself, as I said, has noted that we and other countries were able to put in place a stimulus. It called for countries to take action together. We have done that, but again it is something opposed by the hon. Gentleman. He has absolutely no policies, prescriptions or suggestions as to how we should deal with these things. Indeed, the only policy that he has, in relation to inheritance tax—a policy that he claimed was funded—was undermined yesterday when the shadow Business Secretary, someone who does have experience, said that he had no idea how much money could be raised by the proposals. Is that not another example of experience on the part of the Business Secretary triumphing over the youthful impetuousness that we see opposite?"