Julian Knight: No happy ending in sight for the victims of Equitable Life

This week will bring the latest twist in the seemingly never-ending saga of Equitable Life, the mutual life insurer that came to the brink of bankruptcy around the turn of the millennium. Ann Abraham, the Parliamentary Ombudsman, will release her long-delayed report on whether the Government was partly to blame for what happened.

Policyholder groups – representing thousands who have seen their life savings decimated – want to sue the Government for compensation. The main conclusion of Ms Abraham's report was leaked last week, and that is that the Government was guilty of maladministration.

However, we've been here before. Lord Penrose first reported on Equitable way back in 2004 and damned all and sundry, including the Government. The report was complex and over long, allowing the then Chief Secretary to the Treasury, Ruth Kelly, to draw the sting out of it in, what was frankly a masterful, but also a deeply amoral address to the House of Commons. The upshot was that the Government gave itself a clean bill of health and rubbished the idea that it should pay compensation.

This time around, despite the extra moral clout the Ombudsman has, the outcome will be the same. The policyholders will be left to fend for themselves – for two reasons. First, there is a deep-held view in Whitehall that the Government is not meant to compensate those who lose out through investment. This view was one of the stumbling blocks when the 125,000 people who lost their pensions in failed company schemes tried to get justice. After an age, the Government gave way on that occasion, but Equitable is seen as a very different kettle of fish. Although regulation was shoddy – the insurer should have been closed to new business far earlier than it was, to stop lots of good money going after bad – the real blame lies with its former management, who in turn were appointed by the members themselves.

Second, the Government simply doesn't have the money to pay an estimated £4bn in compensation. The UK's public finances resemble those of a banana republic more and more each day, and any reserves have been used up buying off Labour's 10p tax rebels.

Anyone who has followed the Equitable Life story as long as I have – nine years and counting – can't help but be struck by the sense of injustice felt by its policyholders. They signed up to the oldest, seemingly safest pair of hands in the business and were let down in a truly atrocious way. I well remember being buttonholed by one aged policyholder at the Equitable AGM a few years back. With tears in his eyes, clearly in ill health and weighed down with masses of paper relating to his case, he told me he wanted justice and at least some compensation "before they put me in a box". But whatever the Ombudsman says this week, I can't see these people getting their money back.