Government Reaction To Penrose Is Total Whitewash

4.41.50pm GMT Mon 8th Mar 2004

Responding to the Penrose report into Equitable Life, released today, Vince Cable MP, Liberal Democrat Shadow Chancellor, said: "Equitable Life is a major scandal and the Penrose report has major implications not just for the 800,000 plus policy holders, but for future confidence in private pensions and the products of life insurers in general."

"Penrose has found failures in the regulation of Equitable Life. Although the report does not make recommendations on compensation it confirms that policy-holders have had much worry and distress with many experiencing real financial hardship."

"The Government reaction to the Penrose report is a total whitewash and seeks to distort Lord Penrose's findings. It ignores the specific criticisms of Government regulation by seeking to pretend the financial plight of Equitable Life policy-holders is solely the consequence of the regulatory system, which was in place from the former Conservative Government."

ENDS

Notes to Editors:

Lord Penrose in his report released this afternoon has given a damming indictment of the government's role in the regulation of Equitable Life.

In Lord Penrose's key finding he noted that the regulatory functions of the government failed in key areas.

• The regulatory regime did not keep pace with developments in the financial industry, basing its findings exclusively in regulatory solvency.

• No consistent attempts were made by the regulator to see how the reasonable expectations of policy holders would effect the liabilities of Equitable life.

• There was an over reliance in the actuary used by the Government who during the critical period from 1991-1997 was also the Chief executive of the company and thus had a conflict of interest.

• It failed to notice that many of the measures used to bolster Equitable's solvency was based on the assumption of future surpluses.

• There was a general failure to follow up areas of concern "Government actuaries did identify relevant issues but consistently these were not followed through and allowed to evaporate."

Commenting further, Mr Cable said: "Much as in the case of Barlow Clowes, where Sir Godfray Le Quense QC conclusions were equally damning of the Government's failures in regulation, the Government has a clear moral obligation to take the matter further. In that case the Parliamentary Ombudsman reviewed the report leading to compensation. In this case the Ombudsman should be asked to look at whether compensation is due and in what forms."

"The Government in its statement today is claiming the case of Barlow Clowes is irrelevant as it spoke of Maladministration where Penrose has not. This however is misleading. Maladministration was mentioned in the follow up Ombudsman's report as we are requesting not in the original report by Sir Godfray Le Quense."