17:32 - Division on Amendment 2 - Ayes: 192 / Noes: 199 - Amendment 2 disagreed.
18:42 - Division on Amendment 4 - Ayes: 152 / Noes: 187 - Amendment 4 disagreed.
19:46 - Division on Amendment 11 - Ayes: 119 / Noes: 153 - Amendment 11 disagreed.
Lord Freud
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, I thank noble Lords once again for their commitment to this Bill and for their amendments. Before dealing with this group of government amendments, I will make some general remarks and explain some of the work that has gone on since we last met in Committee.
In Committee, many noble Lords expressed concern at the close working with the insurance industry that this Bill has necessitated. The noble Baroness, Lady Masham, expressed particular concern that the appointment of a scheme administrator was already a done deal with insurers. I offer my assurance that this is not the case and that we intend to run an open competition for the contract of scheme administrator, which will be chosen through the open tender process according to our commercial criteria. I hope this reassures noble Lords.
Turning to the issue of poor record-keeping practice in the industry, I think we all agree that we must work not only to support those who have fallen foul of poor record-keeping and tracing in the insurance industry but to correct it and stop it happening in the future. The creation of the Employers’ Liability Tracing Office—ELTO—was a step in the right direction, but there are still insurers that are not tracing as they should be. Since we last met, I have had a very positive meeting with the Financial Conduct Authority. I have since received a very informative letter from the FCA. I found the following extract particularly positive:
“We are further strengthening our existing rules with new requirements for firms to have effective processes for conducting tracing searches for historical policies upon receipt of a request from a consumer or a consumer’s representative. These new rules will become effective from 4 December 2013. We therefore expect any firms that do not currently have adequate tracing mechanisms in place to develop them in advance of that date”.
In brief, if an insurer is expelled from ELTO for not tracing as it should or the FCA receives other intelligence suggesting poor or non-existent tracing, this will serve as an immediate red flag to the FCA. It will then put into place its enforcement action, which can include a supervision visit from the FCA.
One further step that the FCA is taking, which was detailed in the letter, gave me particular confidence that the appropriate mechanisms are in place to ensure compliance. The letter states:
“We also look to gather market intelligence to assist us in taking a risk-based view. We are exploring the possibility of a memorandum of understanding with ELTO that, subject to the legalities of this, would allow the FCA to access the data from ELTO’s own auditing process. This would allow us to concentrate our supervision resources on higher-risk categories of firms”.
I hope that noble Lords who have been following this so intently can agree that this represents very positive progress.
Another issue that we discussed in Committee was the establishment of an oversight committee. We welcome this proposal and have been exploring with stakeholders how it might operate. As ever, there is a range of options that we need to consider, and we continue to do so. We would prefer a non-legislative solution if possible but we are aware that noble Lords may wish to see something on a more statutory footing. I ask noble Lords to consider the issues associated with trying to establish a new non-departmental public body as we discuss oversight further.
Lord Browne of Ladyton
If your Lordships’ House will permit me to intervene, I do not intend to engage in debate with the Minister at this stage on any aspects of his commendable “pre-statement”, for which I thank him. It is consistent with the attitude that he has shown to this legislation and his handling of it in the course of our consideration. However, there is another matter which, as he knows, I have been discussing with the Bill team, which is not reflected in the proposed amendments on Report and which, therefore, will not be directly raised.
My concern is about the clarity of the drafting of Clause 2 and the interaction of parts of it. Without going into the detail of that, I have been in discussion and correspondence with the Bill team, and I am grateful to the Minister for allowing that to happen. We did not bottom-out our discussions about the fundamental issue but we revealed a number of things about the interaction between the draft rules and Clause 2. Before I came into the Chamber this afternoon, I got an e-mail saying that there was a recognised tension in relation to the issue of limitation between the draft rules and the current drafting of Clause 2. If the Minister is not in a position to say anything about this now, perhaps he will make time to say something on Report so that it will be on the record and will go to the other place to be considered.
Lord Freud
My Lords, I know that the noble Lord does not want me to go into detail, but I can commit to going on working with him on this issue, which is very technical. If we work out that something needs to be adjusted, we will have time to do it in the other place.
Lord Wigley
I express my appreciation for the increase from 70% to 75%, although a lot of us would have liked to see 100%. I would like clarification on the new matter that the noble Lord introduced with regard to the review. The mechanism for this might be introduced in another place. Will he shed some light on the means by which any changes could be implemented? Will order-making procedures be available, or will it be a matter of going back to primary legislation whenever such changes are needed in the light of developments?
Lord Freud
My Lords, I think that how we do this will go into secondary legislation. We are well covered. If we need to make an adjustment at primary level, clearly we will have an opportunity in the other place. However, my desire here, for reasons that noble Lords will understand, is not to have ping-pong between the two Houses, because I do not want to lose the extra weeks that could be taken up. If I am wrong in saying that this does not need primary legislation, I will write to the noble Lord. However, that is my view, without checking.
I turn to Amendments 1, 3, 7, 9, 10, 14, 31 and 33.
Lord Wills
I, too, thank the Minister for the work that he has done so far on the Bill. It represents an enormous step forward, for which the House is extremely grateful. The noble Lord, Lord Wigley, raised a very important point. It is infinitely preferable not to have to resort to primary legislation in future should changes be necessary under the review process. If the Minister feels that the Bill is not adequate in giving powers to the then Secretary of State to introduce any changes by secondary legislation, will such provisions be introduced at Third Reading or in the other place?
Lord Freud
Perhaps noble Lords will indulge me and allow me to reply to that question a little later this afternoon. It is a very technical question and I will double-check that my answer was reliable. I will come back to it. We will have another chance.
If there are no further interventions, I will turn to the rather drier amendments in this group. A number of noble Lords present today tabled amendments in Committee to require the rules establishing the payment scheme to be made by statutory instrument rather than having them simply published by the Secretary of State. The amendments in this group are aligned with a recommendation of the Delegated Powers and Regulatory Reform Committee. Again, I acknowledged the concerns behind these approaches. Today I am pleased to announce that this set of amendments aims to establish the diffuse mesothelioma payment scheme by statutory instrument rather than by publication by the Secretary of State.
Having made this change, a number of consequential amendments fall to be made to other clauses, so that previous references to “regulations” will now refer to “the scheme”. Before noble Lords suggest that I am taking a backward step by amending the Bill so that it refers to “the scheme” instead of “regulations”, I should add that the combined effect of the amendments will be that where “regulations” has been changed to “scheme”, it will mean the scheme as set up by regulations.
We have also removed the ability of the Secretary of State to amend, replace or abolish the scheme, or publish the scheme as amended from time to time, as these matters will now be dealt with in regulations—as will the definition of a “specified payment” in Clauses 2 and 3. In addition, provisions for the amount of a scheme payment, for payment amounts to be dependent on age, and for the division of scheme payments between dependants are all now to be determined in accordance with scheme regulations. The same applies to the circumstances in which a person is or is not to be treated as able to bring an action against the relevant employer or any relevant insurer for civil damages. These will now be dealt with in scheme regulations.
Amendment 31 provides for the first regulations setting up the scheme under Clause 1 to be subject to the affirmative resolution procedure, where the regulations must be approved by a resolution of both Houses of Parliament and for subsequent regulations to be subject to the negative resolution procedure. This approach follows a recommendation from the Delegated Powers and Regulatory Reform Committee. I thank noble Lords for their well informed views when we addressed this matter. I beg to move.
Lord McKenzie of Luton
My Lords, I have addressed it and was simply taking the opportunity to pick up a few points from the Minister’s opening statement, with which I think he was trying to be helpful in setting the scene for this. I was also trying to be helpful by saying what our position is on that. It seems to me that that is my responsibility at this Dispatch Box on behalf of the Opposition. We have tabled an amendment, so we can pick that up in due course. The key thing for us is whether the levy rate will be reduced at the end of that four-year period or whether it can be maintained at its opening level. Obviously that will have beneficial implications for the rate of payments in due course, but perhaps we will come to that on some of our later amendments. However, I support the amendment moved by the Government.
Lord Freud
My Lords, perhaps I may quickly touch on some of those issues. The point raised by my noble friend Lord Avebury will be dealt with in the third group of amendments, but, as he shrewdly spotted, the figure of 75% comes out at £75 million of costs.
The Countess of Mar
I am sorry to interrupt the Minister but would he please address his amendments and not the bits between?
Lord Freud
I have very little to say because very few points have been raised about the amendments, but I do want to make one point. I was asked whether the review needed primary legislation and I said that it did not. I confirm that it can be done in regulations, as I was fairly sure it could.
I would not call any Member of this House ungrateful. I have genuinely always gained an awful lot from noble Lords when we go through these really complicated matters, whether in relation to the Welfare Reform Bill or the Mesothelioma Bill. In this case, in Committee I gained an awful lot from what people were telling me and I did my very best to act on that. That said, and with the intention of satisfying the noble Countess, Lady Mar, I hope that noble Lords will agree the amendment.
Lord McKenzie of Luton
My Lords, this has been a wide-ranging debate. I do not think I will be drawn into issues of hypothecation, although it is a tempting subject for debate. Throughout our deliberations on the Bill and before, the noble Lord, Lord Alton, has been passionate and convincing about the case for funding mesothelioma research. He has been supported in this by many noble Lords, including those who have added their names to his amendments, particularly the noble Lords, Lord Walton and Lord Pannick.
The case that the noble Lord makes is thorough and incontestable. Despite knowledge of this terrible disease and its long latency over many decades, research spending by Governments has been derisory. The noble Lord contrasted the levels of research on diffuse mesothelioma with other cancers to reinforce his point but he acknowledges, as does the noble Lord, Lord Walton—and as indeed do we—that the insurance industry has funded such research in the past. The ABI has made it clear to us in discussion that it stands ready to do so again in the future, if the Government are prepared to play their part. They had said that they would match-fund. I hope that we will hear from the Minister in a moment that the Government will play their part, and how they will do so.
We all recognise that the noble Lord, Lord Alton, has made his case about the need for a national research effort, so the issue is not whether but how this outcome is to be achieved. His approach is focused on the insurance industry’s contribution, which, as he explained, is set down by Amendment 24 as a “Research supplement” raised under regulations under the levy provisions. That supplement could not exceed 1% of that required for payments under the scheme. The proposed regulations must cover how such amounts are to be applied and the role of the scheme administrator. Of itself, the amendment makes no reference to the Government’s obligations. I think that we will hear a different approach from the Minister about the plans that he would wish to develop to attract quality research funding for mesothelioma. If this is right, we need to understand the parameters of this: how much is involved and what is expected of the insurance industry. We also need to understand whether the approach is inconsistent with that of the noble Lord, Lord Alton, which is to raise a levy on insurers.
We have thought long and hard about this and which is the best way forward. Our shared objective is, I believe, to get properly funded research under way as quickly as possible and on a sustainable basis. We all acknowledge the commitment and integrity of the Minister and his desire to fulfil this objective. After hearing the Minister again, the noble Lord, Lord Alton, may consider that he has sufficient reassurance that his objectives will be met, albeit by the administrative route rather than the legislative one. Perhaps he has already concluded that from the extensive discussions he has had to date. If the noble Lord, Lord Alton, is not reassured, and presses his amendment, we are minded to support him in the Lobby.
The Parliamentary Under-Secretary of State, Department of Health (Earl Howe)
My Lords, it may be a slight surprise to see a Minister from another Department of State responding to this amendment. However, my noble friend Lord Freud has asked me to speak to it as a reflection of the importance that he and I place on promoting research into mesothelioma. We are both sympathetic to the view that more money should be put into research on this disease. Indeed, before this amendment was tabled, my noble friend and I spent some time exploring possible routes for funding. It is the fruits of those discussions that I shall now cover. However, the mechanism proposed in this amendment is not the best way to achieve the objective that the noble Lord, Lord Alton, is aiming at.
There are a number of reasons for this. In Committee, my noble friend set out some technical but none the less important arguments as to why the Government are resistant to the idea of a supplementary levy for mesothelioma research. I will not rehearse those arguments again and my noble friend Lord Deben need not worry as I am not going to rely on them at all. I need to stress that any additional research charge of the kind proposed by the noble Lord, Lord Alton, would, like all taxation, have to be paid into the Consolidated Fund and, if hypothecated, would then have to be paid out by the Treasury for a specific purpose. The Treasury does not normally handle tax income in this way, and there would need to be more convincing arguments before it could consider doing so for mesothelioma research.
The more substantive problem with the amendment is to do with research policy. As noble Lords will be aware—and the noble Lord, Lord Howarth, pointed to this—there is a fundamental, widely accepted principle that the use of medical research funds should be determined not just by the importance of the topic but by the quality of the research and its value for money. There is a good reason for this. There will always be more proposals for high-quality medical research overall than there are resources available for funding, and it is arguably unethical to support second-rate work in a particular area at the expense of higher-quality work in another equally important one. Noble Lords will understand that this is why, as a rule, public sector funders of research do not ring-fence funds for particular diseases. It was the same principle that prompted Dame Sally Davies to restructure the research funding that the Department of Health was putting into the NHS over many years, so that funds would flow, as they now do, to the most important, highest-quality research.
In the case of mesothelioma, the real issue is not just the money; it is the quality of the research being proposed. How can we try to ensure that the research proposals in this field reach the quality threshold required to secure funding? If that threshold is reached, funding is much less of a difficulty; indeed there is no need to think about the forcible gathering of funds from insurers. If noble Lords agree, the goal is how we stimulate high-quality research proposals without undermining the country’s strategic research mechanisms.
Lord Kerr of Kinlochard
We have heard from Robespierre. I hope we are not now hearing from Danton. Will the Minister accept that most foundation, trust, charity or philanthropic money for medical research is earmarked for particular diseases or research topics? What is the difference between that and a levy from the industry for this disease?
Earl Howe
My Lords, I accept that fully and I will come to that point in a second.
Certainly there was a blockage in the research process, but it was not total. There is good news. As the noble Lord, Lord Alton, informed us, spending on mesothelioma research is not as low as noble Lords might believe from the discussions in Committee. The latest figures from the Medical Research Council show that its annual spend on mesothelioma research rose from £0.8 million in 2009-10 to £2.4 million in 2011-12. We should not belittle those figures. That is in addition to the research supported by the £1 million a year donated by insurance companies to the British Lung Foundation, and research supported by the National Institute for Health Research. Therefore, on the ability of the system to support publicly funded mesothelioma research, we are not knocking at a closed door.
My noble friend Lord Stoneham is right that the issue that is holding back progress on research into mesothelioma is not lack of funding but the lack of sufficient high-quality research applications. This is an issue that we in the Department of Health, working with the National Institute for Health Research, have been seeking to address. I will now set out what we propose. There are four elements to it.
First, the National Institute for Health Research will ask the James Lind Alliance to establish one of its priority-setting partnerships. This will bring together patients, carers and clinicians to identify and prioritise unanswered questions about treatment for mesothelioma and related diseases. It will help target future research, and, incidentally, will be another good example of where patients, the public and professionals are brought into the decision-making process on health.
Secondly, the National Institute for Health Research will issue what is called a highlight notice to the research community, indicating its interest in encouraging applications for research funding into mesothelioma and related diseases. This would do exactly what the noble Lord, Lord Alton, wants, and what the noble Lord, Lord Empey, suggested. It would make mesothelioma a priority area.
Thirdly, the highlight notice would be accompanied by an offer to potential applicants to make use of the NIHR’s research design service, which helps prospective applicants to develop competitive research proposals. Good applications will succeed.
Finally, the NIHR is currently in discussion with the MRC and Cancer Research UK about convening a meeting to bring together researchers to develop new research proposals in this area. The aim is for the event to act as a catalyst for new ideas that will further boost research into mesothelioma. I was very interested in what the noble Lord, Lord McKenzie, told us about the offer of matched funding from the ABI. I look forward to hearing more about that.
As my noble friend Lord Freud mentioned, on 25 July in the Palace of Westminster precincts, he and I will co-host an event run by the British Lung Foundation that will focus on mesothelioma. I will take this opportunity to invite noble Lords to join us to hear about current research and to get a family perspective on the disease.
The four steps that I have set out offer a better and much more realistic way of achieving what we all want to see happen. The problem with the remedy that the noble Lord proposed is that it will not of itself deliver that objective. I could sum up the issue by saying that the availability of funds does not guarantee the spending of funds. Nor does it guarantee the quality of research on which such funds would be spent. It is also worth making the point that it would create a precedent that might encourage other and perhaps less deserving interest groups to seek special treatment for a disease about which they care passionately.
I hope the noble Lord will recognise that his amendment has galvanised the Government into action. He can credit himself with having achieved a valuable outcome by tabling it. I hope that he will consider not pressing it. I have given undertakings today that I will be keen to take forward with him and with all relevant stakeholders.
Lord Wigley
May I ask the noble Earl to respond to my earlier question on whether, in the context of the four proposals that he has brought forward, there might be a mechanism for some form of annual report on the progress of mesothelioma research so that we do not lose focus on this important issue?
Lord Walton of Detchant
Before the Minister sits down and before my noble friend responds, perhaps I may ask the Minister this question. Let us suppose that, in the light of the developments and proposals that he has outlined, the insurance industry—the ABI—decides, in the goodness of its heart and bearing in mind the importance of this problem, that it wishes to make an ongoing and regular contribution to research in this field. Would the National Institute for Health Research be precluded from accepting non-government funds or would such funding have to be channelled, for example, through the cancer research campaign?
Earl Howe
A very great deal of the research conducted in this country is funded by different sources. It is funded by the Government, charities, universities, and industry. Nothing in the arrangements that I have outlined precludes a joint arrangement for funding mesothelioma research, which is why I welcomed the indication that the noble Lord, Lord McKenzie, gave about the ABI and the possibility of augmenting whatever funds are forthcoming from the MRC or the NIHR. That is an important point to make. I think I have said enough. The ball is in the noble Lord’s court.
Lord Alton of Liverpool
My Lords, I am always grateful to the noble Earl and I know that the House will appreciate what he has said about the four steps that he intends to take. I think he would agree, though, that there is nothing incompatible in taking those very welcome steps and supporting the spirit of this amendment. I made it clear when I spoke at Second Reading, in Committee and again today that if the Government—during the many discussions that the noble Lord, Lord Freud, and I have had about this—had been willing to accept the principle and come forward with their own amendment, I would have been happy to withdraw my own. The principle that I have been trying to underline is the need for a statutory requirement to step up to the plate to deal with this killer disease, which we all agree will take any number of lives—an estimated 56,000 before the disease completes its first wave. We heard in the quotations I presented to the House earlier today that there is a possibility that, in the BRIC countries and with new forms of asbestos being used worldwide, it will not be 56,000 who die, but many more.
The noble Earl has suggested that if such a levy were imposed, it would be swallowed up into Treasury funds and there would be no guarantee that it would then be used for its intended purpose. I do not think that any of us really believe that that would be possible. If Parliament has legislated that a levy of up to 1% should be imposed—that is all; it is a levy inside a levy and what this entire Bill is about—there is no reason why that money should not then be used for this specific purpose. The noble Lord has already said that this should be a priority area.
The noble Earl has said that there should be competitive research proposals; very good research proposals have been put forward but, unfortunately, have not gained traction because the funding has not been available for them. It has been a Catch-22 situation. It was also said that it would be unethical to support second-rate work. Nobody in your Lordships’ House would suggest otherwise—of course we accept that there should be no second-rate work and, through the Medical Research Council and specified outside bodies, an evaluation would be made of the quality of that work and of the proposals that have been put forward.
The noble Earl said that around £2 million will now be made available, and that is welcome. However, the House should just bear in mind, for example, the £22 million being made available this year for bowel cancer, the £41 million for breast cancer, the £11.5 million for lung cancer and the £32 million for leukaemia. Those comparisons show the position in which mesothelioma still appears in this terrible league table.
The noble Earl also said, quite rightly—and the noble Lord, Lord Howarth, touched on this, too—that we should protect the purity of the system, but my noble friend Lord Kerr of Kinlochard dealt admirably with that argument and I can add nothing more to what he said. No one wishes to pollute the process but the Bill before the House is about one specific disease, and that is why this amendment is before your Lordships. It is not that we are being asked to set a precedent for any number of other things. Mesothelioma has a unique characteristic. The reason that the noble Lord has been able to negotiate with the ABI and the industry is that, for instance, smoking cigarettes cannot lead to mesothelioma. This disease is specific and that is why the industry has accepted its responsibilities in this regard. Therefore, it is different from other diseases, and that is why we were able not only to have this Bill but to exclude from it even other asbestos-related diseases, which cannot be said to be specific, as mesothelioma is. I think that that is a perfectly good reason for attaching to the Bill an amendment that deals specifically with this disease.
I am extremely grateful to everyone who has participated in this debate. I am sure that we listened with great care to my noble friend Lord Walton of Detchant, who said that this could make a massive contribution and that it could pave the way for a cure. The noble Lord, Lord Selsdon, was right when he asked why it was not done a long time ago. As long ago as 1965, the Sunday Times reported on work that had been done by the London School of Hygiene and Tropical Medicine. In cities such as Belfast, Liverpool, Glasgow and other epicentres of the disease, it had identified the nature of mesothelioma, as well as its very long hibernation period, alluded to by the right reverend Prelate the Bishop of Norwich, before it had its terrible impact.
I doubt that there are many of your Lordships who have not come across people who have contracted this disease and died within the two years—that is all it takes—from the time that it is diagnosed until death. The right reverend Prelate referred to the late Bishop of Peterborough. When we dealt with the LASPO legislation last year, the noble Lord, Lord McNally, told a deeply moving story at the Dispatch Box about his sister, who had died as a result of washing the dungarees and overalls of her husband, who had worked in the industry. This is something that can affect us all and we need to do something about it urgently.
The noble Lord, Lord Pannick, said that it might be claimed that the amendment is not viable. That has not been said in the debate today, yet it was said in the letter that was distributed on Monday. The amendment deliberately mimics Clause 13 of the Bill so that it does nothing that the Bill itself is not doing. It cannot possibly be challenged under the Human Rights Act, but perhaps we could be challenged under that Act by victims of mesothelioma if we fail to do enough or take the opportunity to provide for proper research to deal with this disease.
The noble Lord, Lord Wigley, said that the mechanisms that we have at the moment are not generating the research but he said that this vehicle is at hand. There is no reason at all why this should delay the legislation. As I told your Lordships in my opening remarks, I met with the ABI. The industry had expressed no opposition; indeed, it has been generous in providing what funds there have been in the past towards dealing with this disease. Therefore, there is already a precedent here. I am certain that if the Government were to say that they would make available matching money, even more funds would be made available by the industry. The noble Lord, Lord Howarth, touched on that point, and rightly so. Yes, there is a moral obligation. Because of the privileges issue, it would not be appropriate to include that here, but there is no reason why it could not be attended to in another place and there is no reason at all why this should become a matter for ping-pong.
The mortality rate for most cancers is falling while it continues to rise for mesothelioma. There are humane and altruistic reasons for supporting funding for mesothelioma research, but for the Government and the insurance industry there are straightforward financial considerations, too. It would be impossible to eradicate all asbestos from our homes, schools, hospitals, factories and offices.
The Bill represents a genuine desire to act justly to those who have been afflicted with mesothelioma, which is why I have supported the noble Lord, Lord Freud, throughout in placing the Bill before the House. However, the one certain way to prevent deaths from mesothelioma will be to find a cure. That will not happen without adequate resources and that in turn requires political will. That is why I thank all those who have spoken today in the debate and who have supported the amendment. I would like to test the will of the House.
Earl Howe
Before the noble Lord finally decides what to do with his amendment, may I just explain why the Government have not brought forward their own amendment, which was one of his criticisms? We do not believe that a legislative route is necessary. We believe—as the noble Lord, Lord Empey, indicated—that we can do this in other ways. We can give the process exactly the kind of kick-start that was referred to in the debate much more effectively than can this amendment. Funders for research build areas for research by bringing researchers and clinicians together, not by throwing money at a problem, which is, I am afraid, what this amendment would do.
Lord Alton of Liverpool
My Lords, this is not about throwing money at problems. That is certainly something that I have always eschewed throughout the whole of my time in politics. You have to demonstrate the case and there is a case here. If 56,000 of our countrymen are going to die of this disease over the next 30 years or so, we have to find adequate resources to tackle mesothelioma. That is not being done by this Bill. We have a rare opportunity to do something about it.
Lord Freud
Lord Wills
My noble friend makes an extremely important point. In Committee, he made some very telling points about all the ways, not just the direct financial ways that he has just calculated, in which insurers have benefited during the very long period when legislation such as this was not in place.
We then have to ask whether these increased costs can be justified. We should be looking at the expectations not of insurers but of victims. Victims certainly expected that the start date of a scheme such as this would be in February 2010. I hope that the Government will now satisfy the expectations of victims, not insurers.
I will speak briefly to Amendment 6, to which my noble friend Lord Howarth spoke very powerfully. We have heard all sorts of moving stories in this House, in Committee and elsewhere, of tragedies that have happened in precisely the way that he has described. I heard them in my own constituency surgeries when I was the Member of Parliament for North Swindon. My noble friend said—I hope I am quoting him correctly—that this amendment is necessary because the exposure of these people is a direct result of negligence by employers. I agree with him. It is a matter of common decency that these people should be covered by the scheme, and I hope that the Government will agree with this amendment.
Lord Freud
My Lords, I thank noble Lords for these amendments, which all share the same broad aim: to widen the scope of the scheme to get more people into it. I will take the amendments in turn and address first those tabled by the noble Lord, Lord McKenzie, and the noble Baroness, Lady Sherlock, regarding the start date for eligibility. I will then address the amendments tabled by the noble Lord, Lord Howarth, on the self-employed and household members.
We discussed the start date of the scheme at some length in Grand Committee. Clearly, it has received a lot of focus and continues to do so today. Under Amendments 4 and 8, once the scheme comes into force all living people who were diagnosed with diffuse mesothelioma on or after 10 February 2010 would be eligible for a payment from the scheme. They would also provide that any living dependant of a person with diffuse mesothelioma who had died on or after 10 February 2010 would be eligible for that payment.
Although it hurts to do this, I have to reject these amendments and ask that the noble Lord and the noble Baroness do not press them. I say that in the knowledge of the strength of feeling among all of us in this Chamber that the Bill should go as far as possible to help as many people as possible. The core issue is that this Bill was the subject of intensive negotiation. On top of that, it has been shaped by what I have felt to be innumerable obstacles that we have had to work around, and I need to restate why we cannot move the date as the amendments propose.
The start date of 25 July 2012 has been criticised for being arbitrary, but it is the date on which we announced that a scheme would be set up and it is the most legitimate date on which to commence eligibility. It is from that date that eligible people and insurers alike could expect that the scheme would be set up.
The proposed date of 10 February 2010 relates to the date when the previous Government published their consultation paper, Accessing Compensation: Supporting People Who Need to Trace Employers’ Liability Insurance. If noble Lords will allow me to correct myself, in Committee I said that that was published on 11 February, but other noble Lords were correct and it was in fact published on the 10th of that month. This was a consultation, not a decision in any particular direction, and did not create any expectation that people would be likely to get any sort of payment over and above what the Government provide for people with diffuse mesothelioma. I therefore cannot see that it is an appropriate start date for eligibility, and I fear that, were we to use it as such, it could be more reasonably criticised for being arbitrary than the existing start date.
We touched on the reasons why it took so long from the consultation being published to the scheme being announced to Parliament, so I will revisit them only briefly. I would have liked to have announced the scheme much sooner than 25 July 2012, but the issues involved were complex. We worked closely with stakeholders, including the insurance industry, claimant groups and solicitors, and all in all the process took longer to deal with than I had hoped. In addition to creating an expectation among people with mesothelioma, the announcement gave insurers notice that we intended to bring forward the scheme. From that date, those insurers will have had to factor the cost of the levy into their financial forecasts and plans.
There is one more point to mention that supports using the date of the announcement. Given that the insurers who are paying the levy to fund the scheme are not necessarily the same ones who took the premiums that paid for the historical insurance policies, we have to be able to demonstrate that the costs to them are fair and proportionate. Simply put, the earlier the start date, the higher the costs. If the scheme started on 10 February 2010, the extra costs, as I said earlier in response to the question from my noble friend Lord Avebury, would be £75 million.
Again, I need to take noble Lords from the figure of £119 million that I used in Committee. That figure was based on paying 100% of average civil damages to all claims, regardless of age. The £75 million figure that I am providing now is based on a tariff of 75% of average civil damages, which I have already talked about today, and takes the age of those making a claim into account. I think I owe noble Lords an apology to the extent that I have created any confusion.
I have spoken before about the risk that we take in raising the costs of the scheme. A litigious industry such as the insurance industry could easily delay the scheme with legal challenge if the costs were perceived as unfair. The other risk is that higher costs would be passed on to employers. I know that noble Lords would like us to do more, and indeed the Government would like to do more, but we cannot ignore these risks.
Lord Howarth of Newport
The Minister is worried that the employer’s liability insurers will default to the position of litigious opposition to the scheme if we attempt to improve it in these modest ways. Given that insurers have accepted the principle that they should fund a scheme, surely they would have no strong legal case to make in objection. Should he not simply say, “See you in court”?
Lord Freud
I have tried desperately hard not to end up in that position, because the “See you in court” line would just end up by tying us up for years with uncertain outcomes and would stop us getting payment to the people who need it from next July, which is when I want the payments to go out. I want this scheme up and running and working in April next year so that we can start making the first payments. I have tried in every way to ensure that we do not run into that kind of problem. The noble Lord may accuse me of not being robust enough, but I assure him that even to get to where we are it could be said that we have had to be as robust as possible.
The real problem is the technical difficulty with the four-year smoothing period that we have to use. We are going to have much higher costs in the first year as it in effect bundles up two years already and one year of running costs, so we are going to have substantially elevated costs in the first year that we have to find a way of smoothing, and we are doing that over a four-year period. If we extended that smoothing back even further to work in another two years’ worth of money—that £75 million—into the scheme, that would open up the whole agreement not just with the insurers but within the Government. On our assumptions, that would in effect push the levy rate up to approximately 4% in that period. That in itself would undermine what we are trying to achieve, which is to ensure as much as we can that these costs are not just passed on to British industry through higher current employer liability rates. That is the core reason. This is always about how much money you can get safely to people, and the adjustment in the amendment would undermine that.
Of course, any start date that we choose will exclude some people. The best possible way forward is to pin eligibility to the date when people with diffuse mesothelioma had a reasonable expectation of a payment and insurers knew that they would need to start factoring in the cost of the levy as an additional business cost.
I need to remind noble Lords again that the existing provision for sufferers of mesothelioma will remain in place for those who are not eligible to come to the scheme. I thank the noble Lord and the noble Baroness again for these amendments. I understand the reason behind them, but I have given the reasons why I would like them not to press them.
I turn to the amendments tabled by the noble Lord, Lord Howarth. These seek to be helpful to a wider group of sufferers, but we cannot extend the legislation to people who are self-employed or who were secondary-exposure cases. The Bill addresses a specific failure of insurers and employers to retain adequate records of employer’s liability insurance, and would provide payments to those affected by this failure who cannot trace a liable employer or employer’s liability insurer against which to bring a civil claim.
Following our discussion in Grand Committee, we talked with the Association of Personal Injury Lawyers, which advised us that an employer would have had to have specifically added elements to their employer liability policy to cover families of their employees. The association was not able to identify any specific cases where this has happened, which leads me to suggest that this is not a common occurrence. Family members who contract mesothelioma through coming into contact with asbestos as a result of someone working with it may have recourse to civil damages through public liability insurance, but our scheme is funded by the companies currently selling employer’s liability insurance and not by insurers more widely.
Lord Browne of Ladyton
My more fundamental point is that the insurers that sold employer’s liability compulsory insurance were the same insurers that sold public liability insurance to individual employers, because they were sold in a package. That was my experience when I was the Minister for employment between 2003 and 2004 when, the noble Lord will remember, there was a significant failure of the employer’s liability compulsory insurance market that had to be resolved. His letter of 5 July to me and others confirms that that is still the case, according to his research. These insurers are not separate insurers, they are the same insurers, and I suggest that the requirement to carry cover in relation to the specific risk of asbestos would have been irrelevant to public liability.
Lord Freud
I have just made the point that the public liability may have been bundled up with employee liability but it did not necessarily cover asbestos risk. That is the issue. If we start going into this, we are just blasting open and widening the position in a way that is very complicated and difficult to deal with under the timelines we are dealing with.
Moving to the second group about the self-employed, here the matter is not so clear-cut. Some people may appear to have been self-employed but if they are able to demonstrate when making their application that in fact they were employees, they may be eligible for a payment under the scheme. There is considerable case law amassed on this and we will ensure—I can commit to the noble Lord, Lord Howarth—that the scheme will reflect this when assessing applications.
I know it is not fashionable but I should point out that there is a technical problem with the amendment, which is cumulative, but I will not go through it. As drafted, this amendment does not work because you have to be an employee and self-employed. In our spirit of co-operation, if we wanted to take it we would adjust it, but there are good reasons in both cases why we do not want to.
Baroness Masham of Ilton
My Lords, what happens to the wife who has been contaminated by her husband’s dungarees? Will she get anything?
Lord Freud
Yes, my Lords. That specifically is what the state provision is there for. In particular, the 2008 mesothelioma scheme was set up to make payments to people, such as wives, who worked with asbestos. It is a smaller payment but that is what it was designed to do. I ask the noble Lord to withdraw his amendment.
Lord McKenzie of Luton
I thank the Minister for his response, and all noble Lords who spoke in favour of Amendments 4 and 8. I also thank my noble friends Lord Howarth and Lord Browne for addressing the issues in Amendments 5 and 6.
To pick up the Minister’s reply, if the response to everything we have discussed tonight is basically that the scheme is locked down and there have been negotiations—this point was made by the noble Lord, Lord Stoneham; as well—we might as well go to the bar because I am not sure that we are going to shift anything tonight. We pay tribute to the Minister—
Lord Freud
I must come in on that. The group—huddle?—of noble Lords who have been working on this Bill have made enormous changes to what we are doing. Noble Lords’ concerns have fed straight in and we have made a series of changes. I do not want any Peer to feel that their views and the work they have done has not been taken, absorbed, acted on and gone right to the edge of what is possible. I assure the noble Lord that the bar is not the place for him.
Lord McKenzie of Luton
I am grateful to the noble Lord for that explanation although it is a pity about not being allowed to go to the bar. I want to make it clear that we have acknowledged, I hope fulsomely, the work the Minister has done on this. I acknowledge also the acceptance that what we have deliberated on in Committee and in meetings has influenced the Bill but if we are now saying that in a sense we have come to a full stop, I wonder what progress we can make. However, I will carry on with the argument.
As far as the start date is concerned, I simply do not accept the point that the insurers did not know until July 2012 that there was the expectation that a scheme would be set up. From what the Minister has told us, there have been two years of intense negotiations, generally with the ABI, which has had to discuss matters and negotiate with a range of insurers. There was an intense process under way, as we understand it, and therefore it must have been very clear to insurers that something was very likely to come from this and that was going to be the sort of scheme that has now emerged. I do not accept that the first insurers knew about it was the point when we said: “Here is the document. This is what we are going do”.
Lord Freud
I just want to clarify the point about the expectations or otherwise of the insurance industry. From our negotiations, which went on for a long time —more than a year; I cannot remember exactly—it would have been anticipating that the specific insurers with historic liability would have been pinned down in a completely different way from this levy. We spent an enormous amount of time working on that. As I have already told the House, my first instinct was to try to get the actual insurers that wrote the liability to find the money out of their balance sheets. I judged that the legal risks to that approach were high—not impossible, but high—and we therefore switched to this other approach. Actually, the expectations that the industry might have had would not have been set anything like as early as noble Lords might think.
Lord McKenzie of Luton
Again, I am grateful to the Minister for that explanation, but it seems to me that the expectations were not set only at the point of July 2012. On the cost that the Minister has outlined, I understand that it has reduced from the original figure of £119 million. I do not think that the figures that the Minister has given reflect any additional benefit recovery potential that would come from having two more years in the scheme, or know whether that was fed in to any analysis of how it might impact on the spreading that would arise from that. Maybe we will have to have that discussion on another occasion. I do not think that we are going to see eye to eye on this.
On Amendments 5 and 6, the noble Lord prayed in aid a technical deficiency of the drafting. I have done it myself; I think it was the noble Lord, Lord Deben, who advised generally against that. The thrust of the point made by the noble Lord, Lord Browne, was that, whether it is the employer liability route or the public liability route, you are basically coming back to the same insurers. Obviously, the Minister’s point about there being some hope for the self-employed —being able to argue that in certain circumstances they were de facto employees—is helpful.
We do not accept the proposition that the start date should be the 2012 date. February 2010 is a better date. That was when the expectation was effectively created. In fact, when you look at it, the insurers ended up with a lesser scheme than was proposed in February, so their expectation should have been of a higher obligation arising from that. A broader bureau was consulted on at that time. Having said all that, I wish to test the opinion of the House.
Lord Freud
Lord Freud
Lord Freud
Lord James of Blackheath
My Lords, before the Minister replies, I should like to return to a point that came up in Committee and to try to set the industry context in which these misunderstandings, particularly those of the noble Lord, Lord Browne, are occurring. I should declare my interests. I was an elected member of the Council of Lloyd’s throughout the whole six years of its rescue; I was in the somewhat unhappy position of being chairman of its audit committee for those six years; and, finally, I was chairman of the committee that created Equitas. I have twice stood trial in America for the fraudulent signing of the audit certificate of Lloyd’s, of which I was fortunately acquitted each time, as it was a 25-year mandatory sentence. I therefore have some perspective on these affairs.
The noble Lord, Lord Browne, has a fundamental misunderstanding. There is no such thing as an insurance industry in the context in which all these liabilities were first conceived. Insurance companies do not exist. They have morphed into what is now, effectively, a vast international reinsurance market, where all these liabilities have been swept up and eventually reinsured with each other until they are all divided up against the entire global insurance market. Lloyd’s itself is now wholly owned by Berkshire Hathaway and the negotiations will, therefore, have to be entirely with Berkshire Hathaway and its chairman—good luck in getting charity from him.
The context, therefore, is not that there are a lot of companies waiting to have separate negotiations. You have to hold negotiations with something like Swiss Re, as it will represent the entire financial community which has come together to provide a collective bond to underwrite, first of all, Lloyd’s, and then everywhere else. The negotiation is very difficult for the Minister to undertake and it is in that context that I know he will now answer us.
Lord Freud
My Lords, I thank noble Lords for tabling these amendments. I will start with those relating to the rate of payment and then I will turn to the amendment of the noble Lord, Lord Howarth, on the recovery of payments over £110,000. The amendments tabled by the noble Lords, Lord McKenzie and Lord Wigley, and the noble Baroness, Lady Sherlock, seek to ensure a minimum level of scheme payment at either 100% or 80% of the value of an average mesothelioma civil damages claim. I completely understand and appreciate that noble Lords would like to see payment levels that are closer to, if not equal to or above, those of average civil damages. Equally, I take from our debates that I have noble Lords’ full support in wanting to guarantee that we get the maximum possible payment for people who, through no fault of their own, clearly cannot bring a case against an employer or their employer’s insurers. As we have often discussed, the funds to provide these payments are to be raised through a levy imposed on the active insurance market. The amount of levy to be imposed, and consequently the amount we can pay eligible people, has been determined following considerable work and negotiation.
Perhaps I may pick up the point about incentives made by the noble Lord, Lord Howarth. We have not made that argument. To the extent that it has appeared in some of the earlier texts on this Bill, I think it reflects a shape that was somewhat different when that argument might have applied. We have not made it. It is not relevant to this particular scheme. The noble Lord, Lord Browne, made the point in reverse. I actually give the credit for the 130% to the noble Baroness, Lady Donaghy, who proposed it originally. I have taken that point in a somewhat different way. That is what has driven the discussions with the FCA and led to its much tighter determination to have an effective incentive for insurance companies to do the tracing that they should do and to ramp up the tracing effect.
We have a duty here to do our best to ensure that costs are not passed on willy-nilly to British industry and that the levy works in that way. At that time, many of the insurers were not necessarily in the business on the same scale that they are today. I know that the noble Lord, Lord Browne, has asked for a full analysis. My noble friend Lord James gave him a picture of the kind of capital pools we are talking about. That is what insurance essentially is, with companies acting as agents. It is extraordinarily hard, but there is already a big split—I do not have reliable figures: I thought I had, but they are not reliable enough to quote in public—between a large number of run-off companies that are not active anymore, many of which are in run-off, which is the polite way of saying they have given up administration, because of some of the liabilities that they took. That needs to be monitored, which is difficult to do. There is also the matter of the market share of these companies. They may have been active for 50 years, but their market share may have changed dramatically. There is also the fact that some may have kept very good records while others have not, leading to a double whammy effect. Those that have paid up, because they have really good records, are probably those from which we are trying to take more money through this levy. I do not have a market analysis of the kind that the noble Lord, Lord Browne, wants, but I am confident in saying that nobody else has either.
Let us move on to where we have got to. Thanks to the combined and consistent pressure on the insurance industry from both the Government and noble Lords, we have secured what I could call a reluctant agreement from insurers that the scheme payments will now be set at 75% of average civil compensation. I emphasise again the important role played by noble Lords in getting that outcome. I am grateful for that. I have already talked about the different assumptions of the Government and the industry regarding the volume of applications. The insurers have based their calculations on their own figures, which they think will require a levy of close to 3% of their gross written premium.
This has been a tough negotiation and even those with whom the Government were negotiating have had a tough job persuading others in that industry that there is an affordable package here. We want more, but this is a significant move from the insurance industry. If we could pay people more, we would, but this is a balancing act. If we were to go up to 80% or 100%, we would be very concerned about the costs being passed straight on to British industry. Indeed, a key concern that I have had about the structure of the scheme is that that should not happen, or that the risks of it happening should be minimised, and that is what the smoothing mechanism for the first four years is about. I know that the noble Lord, Lord Browne, will not like me saying this but there could be delay and delay and a full renegotiation is quite a painful process, as I know he will understand better than virtually anyone else.
On the point about the 3% made by the noble Lord, Lord Wills, I have been fully on the record since the beginning of the afternoon about the two points relating to the CPI and, more importantly, about our intention to review the matter at the end of the smoothing period. I hope that he appreciates how far that goes towards meeting his concerns.
Your Lordships have been very generous in what they have said about this matter but I think that a real expression of gratitude here would be if the noble Lord did not call a vote on this. That is the kind of gratitude that I understand and appreciate.
Before I close, I shall turn quickly to the amendment tabled by the noble Lord, Lord Howarth, which would allow the scheme to recover a scheme payment already paid only if the amount of the payment was above £110,000. Clause 4 is intended to allow the scheme to recover any payment, or part payment, in specified circumstances. Those specified circumstances will form part of the regulations setting up the scheme and will be debated in due course. However, the intention is that a payment that has been made in error will be subject to repayment. This amendment would allow the scheme to recover a payment made in error only if that payment was above £110,000. Payments of £110,000 or less could never be recovered.
If someone receives a payment and it is subsequently established that the payment was made in error or obtained as a result of some fraud or misrepresentation—it does not happen very often but there are one or two examples—it is right that the person who received that sort of payment should be asked to repay it, regardless of the level of the payment. It would not be appropriate to allow someone to keep any payment if it had been established that they were not eligible for it. It would clearly be unfair to allow one person to keep a payment of £110,000 but to recover a payment of £110,000 and a penny paid to someone else.
It may be that the noble Lord’s amendment is intended to address the recovery of social security benefits and government lump sums from scheme payments, but the amendment as drafted does not achieve that. Provision for compensation recovery is dealt with in Clause 11 and Part 1 of Schedule 1, although I acknowledge that, like one or two other bits of the Bill, they are somewhat impenetrable.
The noble Lord’s intention may be to prevent the scheme administrator reducing scheme payments in order to offset the cost of repaying recoverable benefits and lump sums to the Secretary of State of £110,000 or less. Recovery of benefits legislation applies where a person makes any payment to or in respect of another person in consequence of an accident, injury or disease and specified social security benefits or lump-sum payments have been paid in respect of the same incident. This is the basic principle of not receiving money or being compensated twice—the use of the word “compensation” here is more casual than legal—and we believe that that principle should apply here.
The other effect is that a person could receive a scheme payment plus benefits and a lump sum. That would mean that some people could well end up in a more advantageous position than someone receiving the full amount of compensation directly from an employer or traced insurer, which clearly cannot be right. I appreciate the noble Lord’s intention to maximise the amount that people with mesothelioma can receive but this is simply not the way to achieve that end. Therefore, I urge him not to press the amendment.
Lord Freud