Daily Mail City & Finance, Saturday 14 February 2004

 

DUCK AND DIVE ON EQUITABLE

By Alex Brummer (City Editor)

 

The obstacles delaying publication of Scottish Judge Lord Penrose’s report into the events leading to the near collapse of Equitable Life are starting to breed suspicion.

 

If George Penrose, like Lord Hutton, were preparing to give the Treasury and the government a clean bill of health in its supervision of Equitable Life, one imagines that Financial Secretary Ruth Kelly would be urging her boss Gordon Brown out onto the steps of Downing Street to declare victory.

 

But events are not unfolding like that at all.   Instead, there has been a succession of ever-more puzzling announcements as to why publication of the 800 page treatise – in the hands of the Treasury since December 23 – is being held back.

 

Initially we were told that the text had to be looked at by government lawyers.  This was slightly curious, in that the report was written by an independent judge who must recognise the legal implications of his findings.   Then we were told that the document has been dispatched to the Serious Fraud Office for scrutiny.

 

Since we reported the SFO inquiry on these pages, together with regulatory action being taken by the Financial Services Authority, I have received heart-rending letters from elderly readers who have seen their life savings decimated bye vents at Equitable and cannot take much more uncertainty.

 

But now the Treasury appears to have uncovered a potential actuarial problem.  It is calling for independent actuaries to examine certain parts of the report.   It has also invited in the new management of Equitable Life in (sic) to look at certain passages.

 

It is thought that Penrose and his team of helpers at the Treasury may not have satisfied government scrutineers that the actuarial calculations used and the conclusions reached are as robust as they would have liked.

 

One of the disputes is thought to focus on Equitable’s bonus policy and claims that because Equitable overpaid and over-promised in the past, the case for compensation for the subsequent devaluation of the life fund is – as the Scots would say – unproven.

 

There is a deeper suspicion being put about by some policyholders that the delay ahs occurred because Penrose discovered some new financial horror at the heart of the company and it is, in fact, insolvent.   As far as can be ascertained this is not correct.

 

Whatever the reasons for the delay – political, technical or financial – it has gone on for too long and is unconscionable.

 

Up to a million elderly people have been kept waiting since last year for the answers on what happened at Britain’s oldest insurer.  Now they have been kept on tenterhooks for a further two months, right over the festive season, while the government apparently seeks to avoid as much blame as it can.

 

The Treasury has a duty to speed up publication as soon as possible after Parliament returns on February 23.

 

The Equitable boil needs to be lanced.   If necessary the Treasury should be prepared to apply a poultice and set a compensation procedure in motion.