Government survived Equitable Life vote as Labour MPs stayed loyal. What now for the policyholders?

- David Worsfold
- 22 Oct 2009
- Indicative reading time: 3 minutes

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The parliamentary arithmetic speaks for itself. 337 MPs, including 113 Labour MPs, had signed Vince Cable's Early Day Motion calling for a better deal for Equitable Life policyholders by adopting the recommendations of the Parliamentary Ombudsman. Yet, when the Liberal Democrats came to press an almost identical motion to a vote yesterday it was defeated by 294 votes to 269 votes with the majority of Labour MPs siding with the Treasury. This was despite the failure to extract vital reassurances about when compensation payments would actually get into the hands of policyholders.

Among those Labour MPs voting with the government was Fabian Hamilton (Leeds North East) who is joint chairman of the All Party Group set up to press the claims of Equitable Life policyholders. He unashamedly admitted that he was going to vote along party lines regardless of the issues or the course of the debate, saying that because the debate was being held in opposition time (using a Liberal Democrat slot) this would have "certain implications for the way in which members vote". He didn't address the problem of just how this issue, the subject of two reports by the Parliamentary Ombudsman, was ever going to get debated in the face of the government's stubborn refusal to allocate any time in the House of Commons. Mr Hamilton wasn't the only Labour MP to speak out in favour of policyholder demands for speedier, more comprehensive compensation but then admit he wouldn't vote for it. Denis McShane (Rotherham) said: "Obviously, in the division, which will be on party political lines, we will vote as we will".

Having been undone once in this session by the Liberal Democrats over the Gurkha issue, the government had put the word out to its MPs that this mustn't happen twice and most chose to comply.

So, where does this leave the Equitable Life policyholders?

They are in a better position than they were a week ago. Their victory on points in the High Court last week has been accepted by the government. The Chief Secretary to the Treasury, Liam Byrne, confirmed on Tuesday that the government would not appeal against the judgement and will expand the scope of the brief being given to Sir John Chadwick, the former High Court judge charged by the government to devise a scheme to help those policyholders worst affected. The most significant element of this change is that the starting point for working out the losses has been extended backward by four years to July 1991.

The two biggest disappointments for the policyholders over yesterday's failure to wrest anymore concessions from the government will be on the nature of the compensation and the timing of any payments.

The government made it clear on Tuesday and yesterday that it will not change its brief to Sir John that he should consider what payments should be made "to people who have suffered disproportionate impact arising from maladministration and resulting in injustice accepted by the government". The policyholders, backed by the Ombudsman, believe that compensation should be paid according to the "relative" impact of the failure of the company on them which would mean compensation paid by right and without any attempt to look at individual circumstances.

On timing, some very modest progress was made. The Treasury ministers speaking in the debate, Liam Byrne and Sarah McCarthy-Fry, said that Sir John's "scheme design" should be ready by the spring. Despite intense pressure to clarify what was meant by spring, neither minister would be drawn. Former Conservative cabinet minister John Redwood did challenge Mr Byrne on whether this could mean that it will not be delivered until after the General Election to which the minister responded: "I hope we will not be in that position".

Of course, having a design for the scheme of ex gratia payments that Sir John has been asked to administer is not the same as actually paying any money, as several MPs observed. The best guess is that it will be this time next year before any money is paid although there is some vague talk of interim payments in cases of severe hardship.

The policyholders will obviously continue to protest and will definitely target those Labour MPs who signed Mr Cable's motion but then voted with the government. It is hard to see what this will achieve as it is crystal clear that there will be no further concessions from the government in advance of Sir John reporting in the spring. This will, at best, be on the eve of the election campaign so the real decisions will have to be taken by the new government. With the Tories backing the Parliamentary Ombudsman's recommendations from the front bench yesterday, the Liberal Democrats clearly on the policyholders' side and the Scottish National Party also lining up in support it will take an unexpected election result not to give the policyholders real hope of progress after the election.

What they will have to hope for is that the design of Sir John's scheme lends itself to easy adaptation to an extended compensation settlement. The last thing that the now elderly, and sadly dying, policyholders want is a "back to the drawing board" exercise that takes another two years to get any money to those who lost out through the failure of government regulation.

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