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The Equitable Life chairman, Vanni Treves, has warned that ministers will look like "complete idiots" and bring the function of the parliamentary ombudsman into disrepute if they do not announce compensation for victims of the failed insurer before Christmas.
Both Treves and policyholder action groups had expected the Treasury to announce its decision on redress early this week. But Whitehall sources have downplayed that suggestion and the Equitable camp now fears that policyholders may face further delays and that any compensation will be severely limited.
Gordon Brown has said there will be a statement to the Commons before MPs leave for the Christmas recess on December 18. Action groups and the company's management, led by Treves, hoped Treasury minister Ian Pearson would make an announcement before his scheduled appearance in front of the public administration select committee this week. Now, however, they fear that Pearson will not throw any new light on the issue when he appears before the committee.
The government was due to respond by the autumn to a damning report from Ann Abraham, the parliamentary ombudsman, which found there had been a decade of failure by regulators, who had been "passive, reactive and complacent". That deadline was extended to Christmas because of the credit crunch, but the ombudsman's report had already taken three years longer to publish than first planned.
Abraham recommended that the government apologise and set up a compensation scheme for victims. Ministers have been reluctant to do so, taking the view that the insurer was the author of its own misfortunes and its policyholders were largely wealthy individuals who ought to come low on the list for help from the public purse.
Treves said: "My belief was that the government's response to the ombudsman would come this week. It will be extraordinary if not. I find it hard to believe that the committee can grill Ian Pearson without there having been a statement first. If he has nothing more to say they will look complete idiots. The Treasury has seen endless drafts and has had plenty of time to consider this.
"A failure to accept the ombudsman's recommendations in this particular case, considering the coruscating criticisms in the report, would be morally indefensible and would bring the whole system into disrepute. The government should establish a commission to pay compensation."
Paul Weir, a spokesman for the Equitable Members Action Group (Emag), said he believed the government would attempt to duck the issue by setting up a means-tested hardship fund to help the poorest victims only. He said Emag would consider launching a judicial review unless ministers offer full redress.
"We want justice, not charity," he said. "They bailed out relatively well-off savers in the banks, so why should it be different for Equitable?"
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