Treasury and FSA ignored as Equitable inquiry is re-opened

Click to follow
The Independent Online

The Parliamentary Ombudsman, Ann Abraham, confirmed yesterday she would reopen her inquiry into Equitable Life, despite moves from the Treasury and the Financial Services Authority (FSA) to discourage her.

In a special 46-page report laid before Parliament yesterday, Ms Abraham promised to carry out a much more extensive inquiry than her preliminary investigation, including an examination of whether the Government was guilty of maladministration through its regulation of the insurer.

Bowing to pressure from MPs, policyholders and the new board of the insurer, Ms Abraham said that in the light of Lord Penrose's report into Equitable, she would look at the regulation of the society all the way up to 2 December 2001, and going back as far as necessary. Her original report, which looked at the period between 1999 and the end of 2000, during which time the FSA was responsible for the society's regulation, was criticised for its narrow scope.

The news, which comes after three months of consultation, provides new hope of compensation for the thousands of policyholders and annuitants who lost money after the society collapsed and was forced to close to new business at the end of 2000. Opposition parties, policyholder action groups and the current Equitable board, who all campaigned for a new inquiry, welcomed the news.

The inquiry will anger the Government, which could find itself with a multi-billion pound bill if it is found guilty of regulatory failure and maladministration. Included in her special report yesterday, the Ombudsman published responses to her consultation received from public and private bodies.

In a letter, Ruth Kelly, the Financial Secretary to the Treasury, said her department would co-operate with any new inquiry, but Ms Abraham should not begin an investigation into possible maladministration. She said Lord Penrose had made it clear that breaches of duty were a matter for the courts, not for the Ombudsman.

Ms Kelly also urged the Ombudsman not to go over the ground she had covered in her initial investigation - the period between 1999 and 2001 - another suggestion that Ms Abraham ignored.

The FSA also made a plea to Ms Abraham not to restart her inquiry, particularly in relation to the period during which it was responsible for Equitable's regulation. In a letter, Callum McCarthy, the FSA chairman, said: "I ... believe a further review would raise consumer expectations which in reality it could not meet ... it is unlikely to be able to conclude that there was maladministration."

Ms Abraham has now asked the Government to extend her remit to look at the Government Actuary's Department.