I am currently watching the head of Equitable Life, the UK life insurer that made massive losses a few years ago, demanding that you and I, the UK taxpayer, put our hands in our pockets to compensate EL’s policyholders for their losses. They are complaining that mistakes taken by government caused many of the problems it suffered.
Leaving aside the ins and outs of the case, in general principle, I think it is outrageous that anyone claiming to be a senior manager of a commercial business like Equitable Life should have the brass neck to demand that governments, ie, taxpayers, should bail them out. Yes, some of the rule changes made by governments can harm a business – the tax changes on pensions by Gordon Brown in the late 1990s are a classic case in point. There may, as a result, be something to be said for demanding repayment of taxes wrongly levied on a company, for example. But why should a taxpayer, say, who has no likelihood of a decent private sector pension, be taxed to save the blushes of business executives on six-figure salaries or affluent policyholders who have lost a portion of their pensions? There seems to be no awareness of the perverse, and often regressive, redistribution of wealth that is entailed when these demands for compensation emerge.
It is true that Equitable Life has done quite a bit to honour some of its debts. However, asking the UK general public to put right the rest of the mess is a step too far. And there is another reason for objecting to such corporate welfare, since every time taxpayers foot the bill for another financial Snafu, it creates a fresh moral hazard, and encourages financially inept firms to imagine that if anything goes seriously wrong, the taxpayer will put everything right.
You can’t blame them for trying.
Well, not everyone who had a pension with EL was particularly affluent, and certainly many of the policy holders now can’t look forward to an affluent retirement thanks to EL. However I certainly agree with your point – commercial businesses shouldn’t be asking the tax-payer to bail them out, especially well after the fact.
Looks like they’re trying to make use of the established rule of thumb for the financial industry: Screw-up small time and you’re on your own; Screw-up big time and you may get bailed out.
If there is no compensation then one might as well admit that these “pseudo” protection agencies run by the government are just run for the benefit of their employees as they are clearly not fit for any purpose other than featherbedding incompetents.
If there is no compensation then one might as well admit that these “pseudo” protection agencies run by the government are just run for the benefit of their employees as they are clearly not fit for any purpose other than featherbedding incompetents.
I heard the current Chief Executive of Equitable Life claim that it was only ‘partly’ the fault of Equitable Life that so many people lost their money- the Regulators should have seen what was going on and stopped it sooner – so it’s the Regulator’s fault! That, to me, is equivalent to the thief saying that the police always knew he was a villain so they should have watched him more carefully – in fact the directors of Equitable who walked away are indeed thieves and should be made to contribute to the compensation of their victims.