Government lashed over Equitable

Ann Abraham accused the government of twisting some of her findings

The Parliamentary Ombudsman has criticised the government's approach to compensating investors in the Equitable Life assurance company.

Ann Abraham told MPs the government had misrepresented the findings of her report on the Equitable last year.

The government has finally agreed to offer compensation to some investors who lost money in the society.

But Ms Abraham said she was "astonished" at its "unsatisfactory" response to her report.

Disappointed

Ms Abraham welcomed the government's recent acceptance that there had been some maladministration which had led to injustice at the Equitable.

And she rejected a suggestion that the government had been malign or malevolent in its approach to her recommendations for compensation.

But she told MPs on the Public Administration Committee that the government had twisted the findings of her report.

"I am disappointed to see the government picking over and re-interpreting my findings of maladministration and injustice, re-arranging the evidence, re-doing the analysis and acting as judge on its own behalf," she said.

"The government appears to be suggesting that whatever the regulators had done, it would have made no difference to the events which followed and frankly I find that astonishing," she added.

Compensation scheme

Her report last year found that government departments and regulatory bodies had been responsible for maladministration in relation to the Equitable, amounting to a "decade of regulatory failure".

The response says I said something different to what I actually said, and then says it disagrees with something I didn't say Ann Abraham

This contributed to the crisis at the society which, over the past nine years, has seen more than a million policyholders suffer large cuts to the value of their investment funds.

Last year, Ms Abraham recommended that the government set up a compensation scheme for those savers, a proposal the government had been resisting since the society closed to new business in 2000.

The precise form of the scheme will now be considered by a former Appeal Court judge Sir John Chadwick.

However the government wants it to compensate mainly for hardship, rather than all losses due to maladministration by the authorities.

Red herring

Ms Abraham said the government's introduction of a new concept of "relative loss" for Sir John to consider - by comparing the losses due to maladministration to those caused by the society's management - was a "complete red herring".

"The remedy I recommended was for injustice resulting from maladministration and not for anything else," she said.

The Ombudsman said the government had failed to give "cogent reasons" for rejecting some of her findings, and was scathing about its continued efforts to deny them.

"The response says I said something different to what I actually said, and then says it disagrees with something I didn't say," she told the MPs.