The £1.5bn that the government has put on the table to settle the long-running Equitable Life saga is a good deal. I know the policyholders' groups don't see it that way but in the current economic climate the prospects of getting the £6bn plus they now say they were hoping for are remote.

The compensation demanded by the policyholders has steadily crept up in the many years I have been following this scandal. When the action groups first held meetings with MPs to lobbying for a settlement they were talking about £2bn. Then, as the campaign gained momentum this jumped to £4bn, a figure which although high, seemed to find some acceptance among those campaigning alongside the policyholders and which was broadly endorsed by the Parliamentary Ombudsman in her report in 2008. Now, the demands have jumped again and £6bn is being bandied around as a 'fair' settlement.

The trouble is no-one really knows as it depends on alot of assumptions and quite a few subjective judgements, key among which is how far the old maxim of caveat emptor (buyer beware) should have applied to a group of policyholders generally better off and better informed than the average investor when buying products that had some of that "too good to be true" lustre that is frequently found on so-called top-performing financial products. Beyond that difficult question, there is the almost insoluble problem of separating how far Equitable's demise was down to bad management (not compensatable by government) and how much was down to regulatory failure, for which the government should be expected to pick up the tab.

After years of debate and delay by the last government, we do at last have a substantial offer on the table, one that is three times the size of that recommended by Sir John Chadwick just three months ago in his report commissioned by the outgoing government. It is a decent offer and one that allows both the Conservatives and Liberal Democrats to say they have delivered their election manifesto pledges to compensate the policyholders and to do so quickly. This will mean largely ignoring last week's report from the House of Commons' Public Administration Select Committee which urged the government to re-engage Sir John Chadwick with revised terms of reference based on the earlier report by the Parliamentary Ombudsman. I really can't see where this would get anyone. If asked a new set of questions, Sir John would probably come up with a higher figure than the £400m to £500m in his July report but how long would that take and, if his recommendation was significantly above the £1.5bn now on the table, how likely would the government be to throw more money into the pot? Let me hazard some answers to those two questions: it would take too long and the government will not increase its offer when it is massively reducing public expenditure.

It is time to accept that this is the closing chapter of another sad story of failure in the UK financial services market.
 

Tuesday evening saw yet another debate on Equitable Life in the House of Commons. It was on a motion tabled by the Conservative front bench:

That this House notes that the Ombudsman published her report on Equitable Life in July 2008, that the Government did not make its response until January 2009, and that its rejection of some of her findings was successfully challenged in the High Court; believes that the delays caused by the Government since the publication of the Ombudsman's report have led to further and unnecessary hardship for Equitable Life's policyholders and have done further damage to the UK's savings culture; and calls on the Government to set a clear timetable for implementing the Ombudsman's recommendations and remedying the injustice suffered by policyholders.

There was an amending motion from the Government:

That this House recognises the vital role the Ombudsman plays in public life; reaffirms the duty of Parliament to support the office of the Ombudsman; notes that the High Court ruled that the Government's response to the Ombudsman's recommendations on Equitable Life, its establishment of an ex gratia payment scheme, and the terms of reference given to Sir John Chadwick were a rational response to the Ombudsman's report; notes that Sir John expects to produce his final advice in May; welcomes the Government's commitment to respond with details of a payment scheme within two weeks of receiving this advice; welcomes the Government's determination to establish a scheme administratively quicker and simpler to deliver than that envisaged by the Ombudsman; further notes that to abandon the Chadwick process so close to completion would add delay and hardship for policyholders; welcomes the Government's view that, while it cannot prejudge Sir John's final advice, there is a strong case for policyholders who have passed away to be included in the scheme and that it is neither desirable nor administratively feasible to means-test every individual policyholder; and recognises the impact and significant distress that maladministration and injustice have caused in respect of Equitable Life.

Despite several Labour MPs making speeches very hostile to the Government, with Barry Gardiner (Brent North) being the most forceful and eloquent, the Government motion was passed by 291 votes to 236 votes. Those are the hard facts and anyone who has followed the Equitable Life saga since the mid-1990s will be inclined to let out a sigh of despair and conclude that nothing much has changed and that the 1.5 million policyholders - average age now 79 - are still no nearer knowing what compensation, if any, they will receive. That would be an unduly pessimistic view.

The debate on Equitable Life in Westminster Hall yesterday ran along pretty predictable lines with MPs of all parties giving eloquent voice to the raw anger of their constituents over the length of time it is taking to get them any sort of compensation for the failure of Equitable Life. This was followed by further stone-walling on the part of the Treasury, this time in the shape of Sarah McCarthy-Fry who only found herself as a Treasury minister because Kitty Usher was forced to resign last week. I think it shows a degree of contempt for the Equitable Life policyholders on the part of the government that they send a different minister along every time this is debated, often to read out more-or-less the same speech as the previous minister.