Equitable compensation is urged

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MPs have told the government to pay compensation to those who lost money when insurance company Equitable Life almost collapsed.

The Public Administration Select Committee says victims are due up to £4bn to make up for maladministration by regulators and Whitehall officials.

More than a million customers were left with reduced retirement savings after a key ruling in 2000.

A previous report by the Ombudsman said ministers should pay up and apologise.

MP's backed the report, by Ombudsman Anne Abraham, and recommended her recommendations be implemented at a possible cost of £4bn.

They said the former Department of Trade and Industry and City regulator the Financial Services Authority (FSA), had "failed over a prolonged period and at a fundamental level".

'Decade of uncertainty'

The government is due to announce its response to Ms Abraham's report in mid-January.

Policyholders hope it will bring a conclusion to almost a decade of uncertainty and anxiety since Equitable Life closed its doors to new business in 2000.

The committee said the government should apologise both for their failures of regulation and for its failure to conduct a comprehensive investigation promptly after Equitable Life's difficulties became apparent.

They said it should set up an "independent, transparent and simple" compensation scheme, administered by a tribunal, which can provide swift redress to those who lost out.

The government should apologise for the years of delay, anxiety and unanswered questions suffered by policyholders Vince Cable

Many policyholders have died while they waited for compensation, while others are advancing in years.

The report warned: "Justice further delayed will mean justice denied to even more people."

The committee's chairman Tony Wright MP said justice in the case had been delayed for far too long.

"The Ombudsman has shown in exhaustive detail how the regulators failed over a prolonged period and at a fundamental level. Under the circumstances, compensation should be a duty, not a matter of choice," he said.

Liberal Democrat Treasury spokesman Vince Cable said the report was "a damning indictment of regulatory failure".

"The government should apologise for the years of delay, anxiety and unanswered questions suffered by policyholders.

"Ministers have not only completely failed to regulate properly, but have proven themselves utterly incapable of establishing a proper investigation into this affair."

A Treasury spokesman said the government had taken the issue of compensation policyholders "very seriously."

"The government believes that the substantial report produced by the Parliamentary Ombudsman on this issue in the summer should also be fully considered before the Government responds."