Jeff Salway: Cameron and Co's compensation solution may prove less than equitable

THE names Abraham, Chadwick, Penrose and Baird all ring a painful echo for Equitable Life policyholders still waiting for compensation for the losses they suffered at the hands of the insurer.

Now the names Pomeroy, Tattersall and Howard will be added to the list of those who have sought through various papers, commissions and investigations to provide a solution for victims of the Equitable Life scandal. They will form the government's independent commission tasked with working out exactly how the compensation set to be paid out to Equitable victims will be allocated.

The figures to be scrutinised will be significantly smaller than they might have anticipated, however.

Sir John Chadwick on Thursday published his long awaited report on the amount of compensation that should be paid and concluded that while the absolute loss suffered by victims reached up to 3.7 billion, the payouts should be capped at between 20 and 25 per cent of that, slashing the payout fund to between 475 million and 650m. Consequently, after a decade of protests, investigations, commissions, reports and reviews, the policyholders still standing can look forward to payouts of less than 500 each.

In THE comfort of opposition, David Cameron had described Labour's handling of the Equitable Life crisis as "sick", accusing the governing party of "waiting for pensioners to die" before paying any compensation.

Cameron cannot be accused of that - not yet anyway - but his government is continuing in the previous administration's tradition of letting down the pensioners who lost savings when the insurer almost collapsed a decade ago. When the coalition came to power in May, there appeared a genuine prospect of a settlement that would finally bring the saga to a satisfactory conclusion, with an early pledge to compensate fully victims of the Equitable Life scandal. As I wrote at the time, the promise had to be taken with a pinch of salt and that cynicism has been all-too quickly justified.

While campaigners estimate that full compensation would cost the government about 5bn, the Equitable Members Action Group was realistic enough to expect a cap to about 1bn. But the figures set out on Thursday indicate that the eventual compensation will fall a long way short of even that.

Treasury Secretary Mark Hoban said total compensation would be considered "in the light of what is affordable" as part of the government's October spending review, when the final amount will be confirmed.

Did the government somehow make its original promises to Equitable Life victims in the belief that there would be no spending cuts with which to balance its compensation payments? Certainly not. The climbdown from the original promise was depressingly predictable, contributing to the nascent government's already burgeoning reputation for backtracking on its pledges (the election promise to scrap the national insurance increase for employers the most obvious U-turn to date).

Policyholders at least have the consolation of knowing there is a process underway that aims to produce tangible results by this time next year, but many will only feel like they have moved one step closer to the final insult.

While Cameron's government may yet deliver where the previous administration shamefully fell short, there will be no moral high ground for it to occupy.