The Government provoked outrage yesterday as it abandoned a promise made by Gordon Brown to decide by the end of next week whether to set up a compensation fund for Equitable Life policyholders.

The decision, already delayed once, means that more than a million policyholders who lost an estimated £4 billion when Europe's oldest mutual nearly collapsed will have to wait until next year to learn their fate.

Equitable Life, which had called for a swift decision, reacted with fury. Vanni Treves, the chairman, said: “It is an outrage that the Prime Minister continues to treat our policyholders with such contempt.”

Harriet Harman, Leader of the House of Commons, told MPs yesterday that the Government would not be making a statement on Equitable Life until the week beginning January 12, when Parliament reconvenes after the Christmas break.

“These are very important issues,” she said. “If the Treasury is needing to dot the i's and cross the t's, surely it is more important to have the report properly considered rather than on any artificial timetable?”

The statement came just over a week after the Prime Minister pledged to respond before Christmas to a damning report into Equitable published in July by Ann Abraham, the Parliamentary Ombudsman.

And on Tuesday Ian Pearson, Economic Secretary to the Treasury, told a select committee of MPs that the Government would provide Parliament with a detailed response to the report “very shortly”.

Although he was consistently pressed by members of the Public Administration Select Committee, Mr Pearson refused to talk about the outcome because it was so close and required a statement to Parliament. He admitted that the Government had made no effort to establish the size of losses suffered by policyholders.

George Osborne, the Shadow Chancellor, said: “He has broken the promise he gave just days ago and betrayed thousands of Equitable Life savers waiting for justice.”

The delay, condemned by the Liberal Democrats as “inexcusable”, was all the more embarrassing for Ms Harman as she had repeatedly promised a statement “in the autumn”.

Equitable Life was brought to the brink of collapse in 2000 after a House of Lords ruling that it must honour guaranteed annuities sold to its customers.

The ruling left it facing liabilities of £1.5 billion and the society was forced to close to new business.

Ms Abraham, who said there had been a “decade of regulatory failure” around Equitable, found three government departments guilty on ten counts of maladministration for failing to spot obvious signs that the society was running into trouble.

She demanded that the Government apologise and set up a compensation fund for Equitable policyholders within six months. The Ombudsman noted that neither the Department of Trade and Industry, the Government Actuary's Department nor the Financial Services Authority took adequate steps to protect the society's customers.

Ms Abraham's office declined to comment on the delay.

However, campaign groups took it as an indication that there was now a chance that the Government was finally taking their case seriously.

Paul Braithwaite, general secretary of the Equitable Members Action Group, described it as an embarrassing U-turn, but added: “This is probably a tipping point. About 50,000 letters have been written to MPs. I have personally seen about 40 MPs. This is a patent injustice.”

Mr Braithwaite said an estimated 32,000 Equitable Life policyholders had died since the society shut its doors in 2000 and more than 2,000 of those deaths have been in the five months since Ms Abraham's report.

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