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MPs debate Standard Life

Date: Wed, 04 Feb 04 Analysis

The Financial Secretary to the Treasury, Ruth Kelly, has denied that recent proposals to update life insurance regulation are part of a demutualisation campaign by the Financial Services Authority (FSA) or the Government.

Speaking in a Westminster Hall Debate, Ms. Kelly stated that the Government was committed to ensuring that mutuals continue to serve the best interest of their members and wider society. The Minister explained that the FSA commissioned a review by independent experts into the origins and implications of the significant divergence in the calculation of Standard Life's liabilities but was not being singled out by the FSA.

She acknowledged that in response to the new reporting and capital requirements of the FSA, companies may have to reassign existing capital or resort to capital markets. Regarding the legitimacy of mutuals, Ms. Kelly noted that they have specific advantages and diversity of ownership can deliver greater value to their members. Furthermore, the Minister declined to comment on the operation of the tripartite committee including the FSA, Bank of England and the Treasury but stressed that transparency was most prominent in the FSA's aims for the heightened regulations.

Earlier in the debate Mr Alex Salmon raised a series of concerns regarding the reported discussions between the FSA and Standard Life. He questioned whether the government had a prejudice against mutual ownership and if it acknowledged the company's substantial standing in the Scottish financial sector.

The Tory spokesperson, Mr. Andrew Tyrie, stressed the importance of not drawing simplistic parallels between Equitable Life and Standard Life so policyholders do not draw simplistic conclusions. Mr. Tyrie questioned the minister about the tripartite Committee and changes in FSA regulation, specifically CP207 and CP195.

Speaking for the Liberal Democrats, Dr. Vincent Cable wanted clarification if there was a bias against mutual ownership within the regulation system. He asked the minister about her views on the mutual sector in insurance and the intentions behind FSA interventions with companies.

Mr. Andrew Love stressed the importance of mutuality and its advantages of increased discretionary benefits and bonuses. Mr. John Barrett added that the future of Standard Life is of particular importance to Edinburgh and his constituents.

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