Members of Equitable Life will tomorrow win a partial victory in their fight to secure compensation following moves by the government to set up a hardship fund for pensioners badly affected by the near collapse of the mutual insurer in 2000.

In a statement to MPs Yvette Cooper, the chief secretary to the Treasury, will outline plans for an independent tribunal to calculate payments that could run into hundreds of millions of pounds.

Cooper will also apologise for regulatory failings during the 1990s that she will concede played a significant part in Equitable’s downfall.

The statement is in response to a scathing report into the debacle by the parliamentary ombudsman, Ann Abraham, who found that regulators responsible for monitoring insurance companies, including the Treasury and Financial Services Authority, made significant mistakes.

Abraham called for the establishment of an independent compensation scheme for policyholders who have faced almost a decade of uncertainty since the firm closed to new business in 2000.

Around 1 million policyholders were affected when Equitable Life slashed payouts following a court ruling which confirmed it was legally obliged to meet promises it had made to some pension holders.

Ministers apologised publicly in December for further delays to their response to the calls, which Gordon Brown had said would be ready by Christmas. At the time, the chance of a payout appeared slim, with the government reluctant to admit culpability.

However, following the direct involvement of Brown and the chancellor, Alistair Darling, there now seems to be more hope that some financial aid may be available in the form of a hardship fund.

Apology urged

Last month, an influential committee of MPs urged the government to accept the ombudsman’s findings and to apologise for the failures of regulation and for its failure to conduct a comprehensive investigation after Equitable Life’s difficulties first became apparent.

Recognising the potential cost to the taxpayer, the committee stressed that any tribunal should award payouts only in cases where loss was fairly attributable to regulatory failure.

Labour MP Paul Flynn, one of the group of MPs on the public administration select committee, told the Guardian: “I believe the government might well find it an attractive proposition to consider a hardship fund because of the age and circumstances of some of the people involved. A hardship fund would be financially manageable.”

A Treasury spokesman gave no details of the decision on a payout, but confirmed: “A statement will be made to parliament this week.”

Paul Braithwaite, general secretary of Equitable Members Action Group, said his organisation wanted the government to “come clean and pay proper compensation”.

“We have learned from bitter experience to totally mistrust the Treasury,” he said. “They are still seeking to orchestrate ‘compensation lite’, but it should not be the prerogative of the Treasury to determine the level of compensation.

“The ombudsman proposed that it should be for a truly independent tribunal to establish the process of compensation. We will watch with interest the choice of chairman.”

Braithwaite claimed the Treasury’s months of “prevarication” and attempts to seek to minimise any payouts were “obscene”.

The Conservative MEP Sir Robert Atkins, who instigated the European parliament’s special committee of inquiry into the collapse of Equitable Life in 2006, said providing compensation at this stage was “too little, too late”. He said the parliament’s report had been “highly critical of the undeniable failures of supervision and regulation in Equitable Life.”

“Chancellor - and now prime minister - Gordon Brown has fought tooth and nail to avoid any responsibility for the gross regulatory incompetence that has characterised this financial scandal, and now he wants to set up yet another inquiry to investigate the scale of compensation,” he said.

“Many families will have to fall back on savings as the recession bites, but for around a million policyholders at Equitable Life, that may not be possible. Savers have waited the best part of a decade now for proper redress and while the government is right to be offering some compensation, this will be seen by many savers as too little, too late.”

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