UK - The Parliamentary and Health Service Ombudsman has warned the UK government's 'alternative' proposal to make ex-gratia payments to members of Equitable Life who suffered "disproportionate impact" of losses will not remedy the injustice resulting from maladministration.

In a special follow-up report, entitled 'Injustice unremedied: the government's response on Equitable Life', to the findings of her earlier investigation, Ann Abraham argued the government had only complied with one of the two recommendations put forward by her office.

She said: "The government's response to my report was deeply disappointing. It provided insufficient support for the rejection of my findings of maladministration and injustice. It also begged a rather larger question as to what the purpose of regulation was supposed to be."

Abraham had concluded in July 2008 that the government should apologise to members for the "serial regulatory failure" that resulted in maladministration and that it should also establish and fund a compensation scheme to provide appropriate compensation within a period of two years.

While the government did issue an apology to members, albeit only on the findings of maladministration that it accepted, it rejected the idea of a compensation scheme and instead appointed Sir John Chadwick to provide advice on the extent of losses suffered by policyholders and what proportion could be attributed to the government, ahead of the introduction of ex-gratia payments. (See earlier IPE article: Gov't offers Eq Life apology but limits compensation)

Abraham said: "There is no detailed timetable for this work; the link between maladministration, injustice and the remedy to be provided has been broken; and there is no definition of the concept of "disproportionate impact" which is to govern eligibility for a payment."

As a result, she stated: "Whatever the outcome of the work to be done by Sir John, it is clear that not everyone who has suffered injustice will be eligible for a payment and that not all of the injustice suffered will be put right. The injustice I identified in my report will not therefore be remedied as a result of the government's response."

The special report is only the fifth time in the Ombudsman's 42-year history that it has issued a document detailing why the injustice identified by an investigation would not be remedied by the government.

Although Abraham confirmed she has "no power to compel a body within jurisdiction to provide an appropriate remedy for any injustice I have found", she considered it appropriate to draw the issue to Parliament's attention, "given the scale of the injustice I have found and the nature of the government's response".

She added: "Whether the response of the government to my report is adequate or whether instead it constitutes an inappropriate attempt to act as judge and jury in its own cause is now a matter for Parliament to consider and debate."

The latest report follows confirmation last month that the Equitable Members Action Group (EMAG) is filing a judicial review against the government over its failure to fully implement the compensation recommended by the Ombudsman. (See earlier IPE article: Gov't faces Eq Life legal challenge for compensation)

Abrahams revealed in the document "the lawfulness of the government's response is of course a matter for the courts" and confirmed she had been served papers as an 'interested party' in the judicial review. 

But she added" "It is not my present intention to take an active part in the proceedings, although I reserve the right to take part in the event that I consider it appropriate to do so in the light of submissions made on behalf of the claimants and/or the defendant".

Paul Braithwaite, general secretary of EMAG, said: "With the Ghurkas, Parliament has shown it has moral fibre and teeth when something is manifestly wrong.  We hope that MPs will do the same for us and the next step must be for Parliament to hold the Executive to account in the wake of the Ombudsman's damning new report. Ann Abraham has done everything that she can - now it's down to Parliament."

If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email nyree.stewart@ipe.com

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