MPs are asked if Equitable should be re-probed

Parliamentry ombudsman Ann Abraham has written to MPs to ask whether she should re-open her inquiry into Equitable Life. Parliamentarians have until 21 May to respond, after which she will make her final decision.

Parliamentry ombudsman Ann Abraham has written to MPs to ask whether she should re-open her inquiry into Equitable Life. Parliamentarians have until 21 May to respond, after which she will make her final decision.

The move now makes a further inquiry by the Ombudsman increasingly likely, with more than 100 MPs expected to agree that re-opening her report is the right way forward.

Norman Lamb, the Liberal Democrat MP and member of the Treasury Select Committee, said he would table an Early Day Motion next week to ensure as much support as possible for the re-opening of the inquiry. "I am of no doubt it is absolutely appropriate for her to re-open her inquiry following the publication of Penrose," he said. "What we need to look at now is what compensation flows from the findings in Lord Penrose's report. For the Government to say no compensation is due is disingenuous."

Pressure has mounted on Ms Abraham to take action after Equitable revealed on Monday it would not be pursuing plans to sue the Government. Its lawyers Herbert Smith said the insurer had "no realistic legal claims" either in the UK or European courts. Equitable's chairman Vanni Treves said he was now pinning his hopes on a further inquiry from the Ombudsman. Ms Abraham is expected to issue an update on Monday.

Her first report into Equitable, which was published last July, was heavily criticised by the insurer's members and opposition MPs after she concluded that the Financial Services Authority held no responsibility for the debacle, letting the Government and regulators off potential compensation payments. Furthermore, she refused to extend her investigation before the FSA was formed in January 1999, when the Treasury held responsibility for the sector.

However, Lord Penrose's report into the crisis, published last month, highlighted Government and regulatory failure as well as negligence among the Equitable board. In spite of the report, the Government denies the crisis was its responsibility and has so far refused to give compensation to the society's members.

The insurer and its members are now hoping Ms Abraham will re-open her inquiry. If she was to find the Government liable, she has the power to recommend compensation is paid. The Equitable spokesman Tony McGarahan said: "The Parliamentary Ombudsman is duty-bound to re-open its inquiry. Penrose highlights a litany of Government failure, and the reason it is so critical is that she has the statutory power to recommend compensation to Parliament."

Mr McGarahan said a new inquiry would be both cheaper and quicker than attempting to take the Government to court. "Even if she finds there is no case to answer to, or that there should be no compensation, I think most people will accept her study and conclusions as truly independent," he said.