Northavon MP Steve Webb attacked the Government over its promise to compensate Equitable Life victims, claiming: "We've been had."

Mr Webb, the Liberal Democrat Work and Pensions spokesman, secured a debate in the Commons to highlight the 9,000 Bristol savers who lost out when the firm collapsed.

The debate sparked angry outbursts from MPs, who described the Government as "mean-minded" and "disgraceful" for only setting up a limited scheme to compensate those who lost pensions.

"Every single Member will go away from this debate more worried than when they arrived and more determined to do something about it," said Mr Webb.

The Government has ordered an independent tribunal to calculate compensation after the Parliamentary Ombudsman published a report that found 10 instances of maladministration by regulators and Whitehall officials.

The report recommended a compensation scheme be set up swiftly to correct these injustices – but the Government said it would only set up a limited hardship scheme, for those who were "disproportionately affected".

Treasury minister Angela Eagle said MPs should understand there was a "lack of clarity about individual circumstances and losses" that had to be looked at before payments could be made.

Mr Webb said: "I appreciate that there is a range of circumstances, but some policyholders are scrabbling to get by and are seeing their real-terms income declining year on year. I had not appreciated that until I talked to the Equitable Members Action Group."