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9.53 pm

Lembit Öpik: As I said at the beginning of the Committee stage, in my many years as Liberal Democrat Northern Ireland spokesperson, I have seen Ministers come and go, each more brilliant than the last. Looking at the Minister, I can honestly say that I see a very nice man. Frustratingly, however, he does not listen. As other Members have said, I heard him congratulate himself on the fact that the Bill has changed very little; that made me think of an iron fist in a velvet glove, frightening Labour Back Benchers into supporting things which, if they had reflected for a moment, they would not have supported.

In the Chamber, the majorities in votes on this matter have been large, but in Committee, many Divisions were nine votes against eight. In terms of political parties, the Minister was losing votes by five parties to one on many of the arguments. The hon. Member for Belfast, East (Mr. Robinson) made the point that cross-community support has been garnered for many ideas which the Government have rejected. As a consequence, the Bill will not be as good as it could have been with the benefit of that input.

With regard to national insurance numbers, the Minister once again failed to justify his refusal to adopt the proposals made by so many people and so many parties. We had a debate on bar codes, then he had the audacity to say that we should now see that our proposals were unhelpful, but his arguments were not particularly robust. On time scale, his desire for flexibility made him inflexible in dealing with our proposals. Any business would set a time scale and regard that as a proactive gesture that would focus the team to achieve the launch date that had been outlined.

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I have learned a great deal in the debate. I have learned that although she challenged me on whether I know my national insurance number, the hon. Member for Cleethorpes (Shona McIsaac) knows hers by heart. I hope that the shame that she must now feel will cause her to encourage the Minister to think again. I have learned that our winning some of the arguments was insufficient to cause the Minister to think again. That is a matter of concern. I have also learned that there is cross-party support for the essence of the Bill. On occasions, that cross-party support, at least on the Floor of this House, has not been sufficient to convince the Minister to think again.

On balance, the Bill is good, but it could be even better. On balance, the Bill will have an impact, but not the full impact that it could have had with those further proposals. There is work to be done in another place, and no doubt the Government will be challenged on some of the familiar territory that we covered in Committee and on the Floor of the House. I congratulate the Minister on his ever-patient and ever-pleasant demeanour. In the words of Arnie Schwarzenegger, "We'll be back."

9.57 pm

Mr. McGrady: This is an important Bill to eradicate the scourge that has persisted for many years in the democratic system in Northern Ireland. It could have gone a wee bit further, but it is difficult to achieve a compromise between securing the integrity of the voter and not preventing legitimate voters from exercising their right. We will revisit many of these matters.

I do not agree with the Minister's comment at the start that no change has been made during the passage of the Bill. There may be no change in the wording of the Bill, but the Official Report of the Committee and the debate tonight is riddled with promises and undertakings, which the Minister will have to live up to, after he persuaded us to withdraw our amendments. We will hold him to that.

I offer the Minister, his predecessor and their current and past staff a great deal of thanks for the many, many hours of consultation that they gave us and other parties. However, the Minister did not take on board the fact that we and other parties in Northern Ireland had a unity of purpose and a unity of mind that were unique. He should have grasped the historic moment when it was available to him.

9.58 pm

Mr. Nigel Dodds (Belfast, North): This has been an important debate on an important Bill. I am only sorry that despite the many promises that were made by the Government and the previous Government to bring the matter to the Floor of the House sooner, and the consultation that was carried out, we have had to wait until now for the Bill to appear. We may need such legislation much sooner than envisaged in view of some of comments about the Assembly elections that are due in May 2003. Many people in Northern Ireland would welcome that prospect.

It is important that as well as new legislation to strengthen provisions against fraud, the necessary resources are made available to the chief electoral officer. We may have new provisions, but if we do not have the resources to implement them, we will be no better off.

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Lack of resources for the chief electoral officer has been one of the problems in tackling electoral fraud in Northern Ireland. One of the things that has struck me—

It being 10 o'clock, Mr. Speaker put the Question already proposed from the Chair, pursuant to Order [10 July].

Question agreed to.

Bill accordingly read a Third time, and passed.



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Civil Service (Maladministration)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Heppell.]

10 pm

Mr. Christopher Chope (Christchurch): In this short debate, I wish to concentrate most of my remarks on one example of maladministration in the civil service: the Government's regulation of Equitable Life. I want to comment on the welcome decision of the parliamentary ombudsman to begin his investigation and I also wish to address issues of financial compensation.

When I first wrote to you on 17 October, Mr. Speaker, seeking this debate, it was immediately after publication of the Financial Services Authority report on the review of the Equitable Life Assurance Society from 1 January 1999 to 8 December 2000. That report disclosed clear prima facie evidence of maladministration by the regulator. I intended to use this debate to examine the decision that the ombudsman had communicated to all MPs in September, which was that he did not intend to investigate until after publication of the Penrose inquiry. Fortunately, that is no longer necessary following the ombudsman's announcement on Monday evening.

It is worrying that the ombudsman seems to have been given the impression by the Government when they announced the establishment of the Penrose inquiry in August that they were not going to publish the FSA report until after Penrose had reported in the second half of 2002. However, I do not blame the ombudsman, because I suspect that he was the victim of Government spin and that the Government intended not to publish the FSA report until after Penrose but then had to change tack in the light of pressure from the Opposition, the engineering union and other union interests to which they sometimes listen.

I am delighted that the parliamentary ombudsman reconsidered his position when the FSA report was published and that he has now announced the terms of his independent inquiry, which are set out in his letter of 29 October to all MPs. The ombudsman's announcement came shortly before the Economic Secretary to the Treasury gave evidence to the Select Committee on the Treasury. Naturally, the members of that Committee pressed her on the issue of redress for policyholders. After considerable prevarication—I quote not the official record, which is not yet available, but today's press—the Minister eventually said:

Today's newspaper headlines went much further: "Treasury boosts hopes for Equitable payout", said The Guardian; "Treasury may help victims of Equitable", said the Daily Mail; and "Minister to consider redress for policy holders", said the Financial Times.

The Financial Secretary's statement to the Committee was a very welcome advance on the answer that she gave to the hon. Member for Brent, North (Mr. Gardiner) on 15 October. He had asked whether the Government would

The Minister replied:

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However, she did not offer policyholders anything yesterday that went beyond that which she is required to do under the Treasury's own rules on financial compensation for redress where it is recommended by the parliamentary ombudsman.

I shall quote some of the key paragraphs of the rules set out in the Treasury's own document, "Government Accounting 2000", at chapter 18, which is entitled "Losses and Special Payments". Paragraph 18.7.4 states:

Paragraph 18.7.5 states:

Paragraph 18.7.24 states:

Obviously, that is the paragraph under which the policyholders who will be seeking redress for maladministration will be looking.

Paragraph 18.7.27 states:

The paragraphs that I have quoted should ring alarm bells among policyholders who may have had their hopes raised by some of the headlines in today's papers. I hope that the Minister will be able to state clearly and unequivocally that if the independent parliamentary ombudsman recommends financial redress, the Treasury will pay up. Otherwise, people will rightly think that the compensation regime for maladministration is grossly asymmetrical with the penalty regimes operated by the Treasury and by the Financial Services Authority.

As ever, the Treasury is quick to take but slow to give. By way of an example, this week we have seen reports that the FSA has imposed fines on Prudential amounting to £650,000. That money is to be taken from the with-profits fund of Prudential and will go straight to the Treasury. It is extraordinary that the burden is being borne by the with-profits fund of Prudential rather than by the shareholders, but that is a separate issue. That £650,000 will go straight to the Treasury as a penalty.

Every day, individual taxpayers and VAT-registered businesses pay fines and penalties imposed by the revenue-collecting arms of the Treasury. Surely the least the Treasury can do is to accept that where its own maladministration leads to loss, those losses should be met in full.

Another example of asymmetry came out before the Select Committee on the Treasury. The Economic Secretary, when asked a series of questions about what

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the Treasury had been doing in relation to Equitable Life in 1998, said that all the papers relating to that period had been passed on to the Financial Services Authority as part of the service level agreement, and that she did not have the information to enable her to give an answer. Mr. Speaker, you and I know that we are required by the Inland Revenue to keep our tax records going back seven years. It is a pity that those same rules do not seem to apply to the Treasury itself, so that when the Economic Secretary is asked questions, she has the resources to enable her to answer them.

The next aspect on which I hope the Minister can help is the time scale for the investigation by the parliamentary ombudsman. We are told that the average time that it takes to carry out an investigation is 43 weeks. That is for an average case. In the case of Equitable Life—where the issues are complex and the potential compensation very significant—the time scale could be far longer. The parliamentary ombudsman is so far limiting his investigation to the period from 1 January 1999 to 8 December 2000. I hope that he will extend that period in both directions.

Nobody, least of all those policyholders who took out policies in 1999 and 2000, would want a decision on their cases to be delayed because of the limited resources of the ombudsman. That is why the Government—indeed the Treasury—should give the ombudsman all the resources he needs to do his job. Last year, the ombudsman had his second-highest work load ever and, from my constituency correspondence and my experience of rapidly plummeting standards of administration under this Government, I know that this year's referrals could be at an all-time high. Individual learning accounts, naturalisation, attendance allowance, war pensions, the Public Guardianship Office, housing benefit administration, foot and mouth, the Valuation Office; all of those feature in my constituency case load.

I do not believe that a Member of Parliament's role should be that of an expensive progress chaser for Government Departments. Surely our proper role should be to scrutinise policy and legislation. In all the years that I have been in the House, we have never been so overloaded with routine administration affecting our constituents. I spoke informally to the Minister earlier about a constituency case that has involved one problem after another. I hope that, if nothing else, he will be able to tell me that that has been sorted out and that such a case will not arise again.

The parliamentary ombudsman is understandably concerned about overlap of effort between his investigations and the work of Lord Penrose, but it is becoming clear that the Treasury neither expects nor wants the latter to apportion blame or consider issues of redress. Yesterday in the Treasury Committee, the Economic Secretary used the words:

She spoke as if she had not given him those terms of reference in the first place. Why did the Government specifically not instruct him to investigate allegations of maladministration and consider compensation?

Yesterday, the Economic Secretary even made the ludicrous suggestion that individual policyholders might take legal action against the regulators? Was she serious, one asks. It was pointed out to her that from the end of

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November it will not even be possible to sue the Financial Services Authority for negligence unless it can be established that there has been bad faith. The Government are putting this regulator beyond the law, and in so doing they are making the role of the parliamentary ombudsman even more crucial.

In my submission, one key issue that Lord Penrose and the ombudsman need to address is the letter issued by the Treasury insurance directorate on 18 December 1998. That guidance letter endorses Equitable's decision to seek to solve its problems by charging the costs of the guaranteed annuities to the with-profits bonuses of clients without guaranteed annuities. That was clearly a high-risk policy, given that there were two separate contracts covering with-profits bonuses and guaranteed annuities. Had the Equitable board decided in 1998 to follow a similar course of action to other mutuals with guaranteed annuity problems, such as Scottish Widows and Clerical Medical, its policyholders would now be substantially better placed.

While Scottish Widows and Clerical Medical decided to sell out to a major financial group capable of standing behind their businesses, the Equitable board decided not to do that. To what extent was that because of the Treasury guidance, which remained in place until it was suspended on 20 July 2000? It remained on the Treasury website right up to that date.

The 1 January 1999 start date for the period being examined by the parliamentary ombudsman seems increasingly artificial. The same people were regulating Equitable Life in 1998 and 1999, but from different locations. It must surely make sense to widen the ombudsman's area of inquiry.

I should be grateful for the Minister's assurance that he will look into the following specific issues that have been raised with me by policyholders. They are only some of many. Is it right that the Personal Investment Authority ombudsman should refuse to deal with complaints of mis-selling, as there may now be a compromise? The person who raised that with me invested almost £500,000 in Equitable during and mainly towards the end of 1999. He was assured by the Equitable Life field representative that he need do nothing to protect or preserve his investment. He wants his case considered by the PIA ombudsman. Does the Minister think that a reasonable request?

Is it right that the FSA should be giving no advice to individual policyholders about whether to accept a compromise? Is the FSA certain that, in the event of a compromise being accepted by the policyholders, Equitable Life will be able to withstand large class actions alleging general mis-selling of with-profits policies, brought by those who have left the society? Unless there is some certainty about that, even if the compromise is accepted, Equitable Life might go into insolvency.

What is the Minister doing about all those civil service pensioners who made investments under the civil service additional voluntary contribution scheme when one arm of Government, at least, knew that there were serious problems with solvency at Equitable Life?

One civil service pensioner has written to tell me that, as late as October 2000, Equitable Life was described in the relevant Home Office notice as a leading life

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assurance company. The Home Office permanent secretary told him that when his inquiry was raised with the Cabinet Office, as managers of the civil service AVC scheme, the reply was:

That may well be so, but—and this goes to the heart of the matter—why did the regulator keep to himself information that should have been shared with policyholders and investors?

The latest annual report of the parliamentary ombudsman highlights his concern at

Paragraph 1.9 of his annual report says:

What guarantee can the Minister give that the Treasury will co-operate enthusiastically with the ombudsman's inquiry, and that the ombudsman will be allocated sufficient resources to enable him to reach proper conclusions within a reasonable time scale?

I shall stop there, because otherwise the Minister will not have time to respond. However, this is an extremely complex subject, and I hope that he will lobby his colleagues to ensure that we can have a fuller debate on it in Government time soon.

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