Ombudsman Ann Abraham yesterday accused the regulators of watching Equitable Life sailing towards disaster and doing nothing to prevent it. Giving evidence to the Public Administration Select Committee, she compared Equitable in 2001 to a ship about to go over a waterfall, while the regulators - the Department of Trade and Industry, the Government Actuary's Department and Financial Services Authority - looked on complacently.

They were mesmerised, she said, and appeared to be convinced that the ship would somehow manage to perform a miraculous u-turn.

"Here was a long-established, extremely well thought-of, highly successful society that had been that way since anybody could remember," Ms Abraham said. "Somehow, although the stark facts were in front of them, they couldn't quite believe it. There was a sort of sense that 'somehow it will come right'.”

These words were the first that Ms Abraham had uttered in public about the Equitable debacle since the publication in July of her 2,819-page report into Equitable’s near-collapse, entitled A Decade of Regulatory Failure, seven years ago. The society, which had 1.5 million policyholders, was forced to close to new business after finding that it was unable to pay out guaranteed annuities.
 
The select committee was beginning its examination of the report yesterday. They have to consider her finding that the regulators were guilty of "comprehensive failure", and her recommendation for the Government to set up and fund a compensation scheme for policyholders.

This is probably the best chance policyholders have of securing winning compensation: some of them lost up to half of their life savings. An estimated 30,000 policyholders have died since Equitable was forced to close to new business in 2001.

When the Abraham report was published in July, the Government said it would respond "in the autumn". It may be an encouraging sign that it has not rejected the recommendations outright.

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