City slickers did for my pension A nationalised insurance industry would have given me a better deal Special report: Equitable Life Paul Foot Tuesday September 4, 2001 The Guardian If you ventured into the law library at University College, Oxford, 40 years ago, as I did rather infrequently, you would be certain to encounter a rather dapper and precise student feverishly working away in a corner, surrounded by a huge pile of tomes. His name was Vanni Treves, and I'm rather ashamed to admit that he became the butt of college satirists, such as Richard Ingrams and I, who mocked him as a joyless swot. Now, 40 years on, Vanni is chairman of Equitable Life Assurance Co, and has had his revenge. He has cut my pension to ribbons. In 1986, my employer at the Daily Mirror, Robert Maxwell, told me I could join the Mirror staff but that I was, at 49, "too old" to join the Mirror's pension scheme. This turned out to be a merciful release. What should I do instead? Unanimously my friends who understood these matters told me that the safest and most principled private pension providers were "old mutuals" like Equitable Life, which did not waste any money on shareholders. So I invested in a modest pension with the old mutual. This fund, built up slowly and painfully over 15 years, has now been more than decimated by my old university chum. To be fair, Vanni is not solely or even directly responsible for the chaos at Equitable Life. He was brought in to save the firm after former directors tried to cut the guaranteed bonus for large numbers of investors and were told by the House of Lords that their cut was illegal. Ever since, the safe old mutual has careered down the drain. But even in adversity Vanni seems to have missed the point. "I am," he boasts, "a City creature and a City beneficiary, and this firm is a beneficiary of the City. Equitable Life has sullied the reputation not only of the financial industry but also of the reputation of the City. That is something I care about." The point, however, is that Equitable Life, like pretty well everything else in the City, runs on the first principle of free enterprise, namely the control of great enterprises by small groups of greedy and reckless individuals. Such people were in unchallenged and unchallengeable control of Equitable Life in the years of its demise. Their punishment is a tribute to another time-honoured maxim of the City - nothing succeeds like failure. As they left the sinking ship they made sure of their bonuses - and their pensions. Alan Nash, former managing director, who resigned last December, got £256,000 in lieu of notice - and a guaranteed pension of £90,400. Chris Headdon who replaced him lasted all of two months. When he stepped down he had accrued an annual pension of £94,200, and pocketed a bonus of £1,000 a week for the year 2000. Neither of these men, nor any of their predecessors, will have to pay a penny for what now emerges as their ludicrous guarantees, nor for their even more ludicrous decision to fight their accusers all the way to the House of Lords. They operated throughout without responsibility and free from all but the most derisory public control. In the days when the Labour party stood at least in part for labour, some concern was expressed about the power and responsibility of private monopolies in control of insurance. Labour's policy documents before 1945 (though not the manifesto) named insurance as one of the likeliest candidates for public ownership. In 1948 and 1949 the Labour party national executive was incessantly plunged into the argument. Two Labour secretaries of state, James Griffiths (National Insurance), and Aneurin Bevan (Health) argued again and again for nationalisation of the insurance companies, only to be rebuffed by Herbert Morrison, Stafford Cripps and Hugh Dalton, who were worried about the effect of such a move on the electorate. In the end, a compromise was reached whereby the insurance companies would be "mutualised" along the lines so gloriously vindicated at Equitable Life. In his history of the period, Kenneth O Morgan (now, sadly, a Lord) describes the 1949 compromise as heralding "a twilight period of uncertain, half-hearted commitment". It achieved the worst of both worlds: it infuriated the insurance companies without seriously threatening them. Whatever else could be said about a publicly owned insurance and pensions industry, its controllers are unlikely to have made the monstrous errors of the big pensions firms in the mis-selling scandals after 1988 or of the City slickers at Equitable Life, and even if they had, the public would have been protected. Half a century on, the very idea of nationalising the private insurance companies frightens New Labour leaders out of their wits. So terrified are they of the prospect of accepting responsibility for the victims of Equitable Life that they have set up an inquiry under a commercial law expert who cannot command anyone to give evidence to him and most of whose hearings are likely to be heard in private. Thus two other inalienable principles of free enterprise will be vigorously upheld: the freedom to swindle the public and the freedom to avoid public accountability for the swindling. [EMAIL PROTECTED]
