Victims of Equitable Life scandal are refused quick payout, despite watchdog's demands

A million victims of the Equitable Life scandal have been refused immediate compensation despite a watchdog's report ordering the Government to pay them.

The Parliamentary Ombudsman has blamed 'serial regulatory failure' for the loss of investors' money.

Last night, however, the Government refused to listen to the demands for compensation to be paid out immediately.

Equitable Life  -  Britain's oldest mutually owned insurer, set up in 1762  -  came close to collapse after making goldplated promises to its policyholders which it could not afford to keep.

Before the implosion of the company, it was seen as one of the safest places to invest in Britain.

Rather than management failure, however, the Ombudsman has blamed the official institutions that were meant to oversee the company.

The report concluded that three Government bodies  -  the former Department of Trade and Industry, the Government Actuary's Department and the Financial Services Authority  -  are guilty of ten counts of maladministration.

Ombudsman Ann Abraham said compensation, which experts estimate could total £4.5billion, must be paid within two years and a full Government apology made to victims. Last night, the Treasury said that it 'expects' to make a 'full response' after Parliament's 11-week summer holiday. No decision on a payout is expected before the break.

This is despite the fact that a draft of the report was sent to the Government in January 2007.

It would be almost unprecedented to ignore the Ombudsman's findings, which have been rejected only a handful of times in its 41-year history.

In 2006, the Ombudsman found the Government guilty of misleading 85,000 workers into believing their pensions were safe.

Labour initially ignored the demand for compensation, but eventually agreed to make a payout two years later.