David Prosser: On alert for Equitable backsliding

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Outlook Oh dear. Just a month after the Government raised the hopes of the long-suffering victims of the Equitable Life scandal that justice might finally be theirs, with the coalition agreement explicitly promising a speedy compensation settlement, fears are growing that the deal on offer may not be quite as attractive as suggested.

Emag, the victims' action group, puts the cost of full compensation for all those affected by the collapse of Equitable at around £4.7bn. It fears that the Treasury is going to veto any settlement that offers more than £1bn, the equivalent of just 20p in the pound for savers who lost money.

If that suspicion proves right – and the Government wasn't falling over itself to contradict Emag yesterday – it would be a cruel trick. It was a surprise to see the coalition agreement addressing something as specific as the Equitable situation, but the assumption amongst savers since then has been that the Government would not have brought the issue up had it not intended to substantially improve on its predecessors' offers of redress.

Since then, moreover, the case of the Equitable victims has actually been strengthened. Last week, the accounting regulators published a final adjudication against Ernst & Young, Equitable's auditor, fining it £500,000 for its role in the affair. Further proof that it was a regulatory failure that let down Equitable's members.

For now, we must give the Government the benefit of the doubt, since we haven't had a definitive offer. But having dangled a deal in front of Equitable savers, who have, after all, been waiting 10 years for recompense, this is shaping up to be an early test of the coalition's integrity.