Bob Blackman is MP for Harrow East. He is Co-Chair of the Equitable Life APPG.
Enough is enough. That is the message to the Chancellor from 60 of my Conservative colleagues on the Equitable Life APPG – and why we have written to him, to demand that the Government’s £2.6 billion debt to Equitable Life victims is finally repaid in the Budget later this month. This scandal cannot be ignored any longer.
Almost 20 years ago, just before Christmas in 2000, Equitable Life, the world’s oldest mutual insurance company, collapsed following a decade of mismanagement and proven regulatory maladministration.
Since 2000, there have been countless debates, inquiries, and investigations into what went wrong. In 2008, the Parliamentary Ombudsman blamed “serious, serial regulatory maladministration”. The Coalition Government later accepted this in full, agreeing that victims of the scandal were owed £4.3 billion. Indeed, in a meeting that the APPG had with the City Minister last month, he again confirmed that the Treasury does not contest its culpability.
Over a million policyholders – typically nurses, teachers, factory workers and small business owners – lost a huge proportion of their pensions. The regulators knew what was going on. So did the government, Bank of England, Financial Services Authority (FSA) and the Treasury. The FSA and the Treasury even conspired to prevent it becoming public knowledge, so people carried on paying in their money.
The collapse remains one of the most serious scandals of financial regulation in modern political history. For me and many others, it continues to undermine confidence in government and our financial institutions. Until it is resolved, responsible savers, as well as their families and friends, will rightly lack any confidence in our political and regulatory system.
While a few policyholders have rightly received their full “relative losses” in compensation, hundreds of thousands have received only 22 per cent of this loss – a gross injustice. £2.6 billion of the sum the government accepted as the compensation owed has still not been paid.
A decade on from the Parliamentary Ombudsman’s report, MPs from all parties continue to campaign for this missing sum. The APPG now has 238 members, drawn from every party in the Commons. Despite this incredible support, the Treasury has done nothing but twist the facts and try to cover its own backside.
As Conservatives, we recognise the importance of fiscal restraint. We know that sustainable public spending has underpinned our strong economic performance which permitted the Prime Minister to officially announce an ‘end to austerity’ in her Conference speech. This year, more than a decade on from the crash, the Office for Budget Responsibility expects the public sector to borrow just one quarter of what it borrowed in 2009-10.
Back then, the partial compensation allocated to Equitable Life victims was explicitly justified on the basis of the extreme pressures on the public purse. These hardworking and responsible pension savers took a hit, while the big banks and building societies were bailed out. So ten years after UK Financial Investments was set up to manage the taxpayer’s shareholding in these bailed out banks, we believe a small portion of the money raised through its sales should be used to settle the Government’s outstanding debt to our pensioners.
As the Prime Minister said in Birmingham, after a decade of austerity, people need to know that their hard work has paid off. With public debt starting to fall, the Budget is the right time to settle this debt. The age and financial profile of the victims means that the money would be put straight back into the economy – if there is ever to be a Budget at which this debt can be repaid before it’s too late, it is this one.
In doing so, the Government would be sending a signal that it is right to save prudently for retirement. In the public’s perception, the Equitable Life scandal shows that pension savings are not safe, and you that cannot trust the Government or its financial regulators. It is vital to show that if such a scandal were to happen again, government would swiftly step in to protect those who have saved prudently for their retirement.
Tragically, an estimated 15 policyholders die every day without ever receiving proper justice. The longer this matter is unresolved, the more the death rate will increase. To have 60 Conservative colleagues, including 16 former Ministers and four current Select Committee Chairs, write to the Chancellor shows just how strong feelings remain on this matter.
The Chancellor should be in no doubt – there is no parliamentary majority for the Treasury’s current approach. This is a debt of honour, which must be settled now.