A finding of regulatory negligence in the Equitable Life inquiry could lead to compensation for Independent Insurance's creditors, Barry Gardiner MP has said.

The government announced an independent inquiry into Equitable earlier this week and the Treasury has not ruled out the possibility of compensation for policyholders.

The inquiry's findings are not expected to be published until mid-2002.

In July, Gardiner called for an independent inquiry into the role of the Treasury and the Financial Services Authority (FSA) with regard to Independent's collapse. At the time, the government said it was “inappropriate” while the Serious Fraud Office (SFO) was investigating the case.

However, the Brent North Labour MP said any evidence of negligence uncovered by the Equitable Life inquiry would affect the Independent situation.

“Should the independent inquiry determine that there was negligence or fault on the part of the Treasury or Department of Trade and Industry (DTI) during the period when they regulated the industry, then the government should now, in advance of its publication, say publicly that they will give compensation to anyone affected by that negligence,” Gardiner said.

He said there had been far greater public pressure pushing for an inquiry into Equitable than there had been for an inquiry into Independent.

A Treasury spokeswoman said the stance regarding an inquiry into Independent was unchanged, as the SFO investigation was ongoing.