Diffuse Mesothelioma Payment Scheme Regulations 2014
(10 years, 8 months ago)
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Lord Freud
That the Grand Committee do consider the Diffuse Mesothelioma Payment Scheme Regulations 2014.
Relevant document: 21st Report from the Joint Committee on Statutory Instruments
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, I thank all those who worked so closely with me while the Bill was being considered by the House. We had a series of valuable debates and I am indebted to all those who followed and studied the Mesothelioma Act with such great dedication and focus on the detail. It was a collaborative act to get this legislation on to the statute book. Noble Lords will remember that there were quite a few significant adjustments made as a direct result of those debates. I was pleased to receive those ideas and to apply them in real time. Without the efforts of everyone the Act would be in poorer shape. To the extent that I did not do everything that noble Lords asked, I apologise, but I suspect that they all know how these things work.
As Members of the Committee will know, the problem of untraced employers or insurers in mesothelioma cases has for many years left sufferers and their dependants without recourse to the compensation that should be their due. It is a huge step forward that we now have concrete provision for those people who fall foul of the insurance industry’s market failure to keep proper records. The Act finally guarantees that they will be able to access payments that will support them in a most difficult and distressing time. The Mesothelioma Act represents a huge achievement and I hope that noble Lords will share my pride in that achievement.
We are here today to debate the substance of the regulations that dictate how the scheme will be run. I will briefly outline what the regulations set out but, first, I would like to mention the recent announcement that payments have been increased from 75% to 80% of the average civil damages. On 6 March, the DWP announced that payments would move from 75% to 80% and that this was possible because scheme administration costs were now confirmed to be lower than expected. This means that we can afford to pay people more while keeping to a levy of no more than 3% of employers’ liability gross written premium. I hope that noble Lords will welcome this good news.
This announcement posed a slight problem in timing. The draft regulations had already been laid in Parliament, including a payment tariff of 75%. I give my commitment that as soon as these regulations come into force a negative instrument will be laid to amend that tariff. For the purposes of today’s debate, however, I hope we can continue as normal.
The payment tariff is a schedule of these regulations and has no material impact on the substance of the regulations, which deal with how the scheme operates. To withdraw and relay amended draft regulations at this stage would simply rule out the possibility of having the scheme operational by April of this year. I know that noble Lords are sympathetic to the need to get the scheme running as soon as possible and I hope they are assured that our debates will not be affected by the increase in payments. I will of course share with noble Lords a copy of the revised table that we intend to bring forward with the higher tariff.
I come now to the reason why we are here: the regulations. These regulations deal with the duties of the scheme administrator and with the duties of the applicant. They set out details relating to making an application, how that application will be decided on, and the right to ask for a review and a subsequent appeal. They also deal with slightly more specific issues that may arise during the scheme’s running, such as repayments in the case of misrepresentation of information in an application and imposing certain conditions on a payment—for example, requiring it to be put into a trust fund for a person who cannot manage their own financial affairs. I am sure that we will go into much more detail on the key points during our debate but, before that, I hope to clarify a couple of possible questions and mention three points.
First, noble Lords who have kindly commented on draft versions of the regulations will notice that they no longer deal with the £7,000 contribution towards legal fees. I give an assurance that successful applicants will still receive a fixed contribution of £7,000 included in their payment. Following internal legal checks, we have removed mention of the legal fees payment and will instead include these in the regulations that deal with compensation recovery.
Secondly, I wish to mention the date of commencement. Regulation 2 explains that Regulation 7(2)(c) will not come into force at the same time as the other regulations. This is simply because that regulation refers to another enactment—the third parties Act 2010, which has not yet come into force. This does not affect the rest of the regulations or the commencement of the scheme.
Finally, I should like to give a little more detail relating to the chosen scheme administrator. The commercial process to select the administrator was a topic that occupied much debate in this House last summer. I assure noble Lords that a full and open tender process was conducted—indeed, I distinctly remember giving assurances on a number of occasions that that would be the case. Gallagher Bassett won the contract because, of all the bidders, it scored highest against the published commercial criteria. Gallagher Bassett is a claims-handling company well used to delivering government contracts and it has been carrying out personal injury claims-handling on behalf of the MoD for several years. I am confident that it will deliver the high-quality service that this scheme requires, and I am delighted that, as a result of its appointment, we are able to raise scheme payments.
I hope that I have helped a little here with my introduction, and I will endeavour to answer as many questions as I can as we have this debate. Of course, where I cannot do so from the Dispatch Box, I commit to write with a full account. I commend these regulations to the Committee.
Lord Alton of Liverpool (CB)
My Lords, the Minister has been generous in thanking Members of the Grand Committee for the work they put in when the 2014 Bill was being considered on the Floor of the House. However, it would be churlish at this juncture if Members of the Grand Committee did not pay tribute to the Minister for the work that he did tirelessly throughout. Although we had our differences on details of the Bill, we all committed to seeing it through its stages here and in the other place because we knew that this legislation was long overdue. It sets in place a scheme that will respond compassionately to people who are given a death sentence when they learn that they have mesothelioma. It is also based on justice, and I know through the contact that I have had with the Minister that he is always keen to see that things are dealt with expeditiously. He deserves warm thanks for the personal efforts that he has made. It is not easy to get legislation through Parliament, and he has done that deftly, while also working with the insurance industry. I think that all of us are sufficiently worldly wise to know that balancing all of those things at once is no mean achievement.
The United Kingdom, as we have heard, has the highest rate of mesothelioma in the world, with a further 60,000 people in the UK predicted to die from this disease in the next 30 years—as the Minister said, more than 2,000 people annually. The need is paramount constantly to urge greater attention to how we assist victims and keep focus on the insurance industry as well as how we better fund and pool research in finding causes and cures for this lethal disease. I was struck by a reply that the Minister gave to me in response to Parliamentary Question HL3144, where he said:
“The statistical model suggests an uncertainty range of 55,000 to 65,000 deaths on that estimate. However, the true uncertainty range may be wider as longer-range predictions are reliant on assumptions about asbestos exposures that cannot currently be fully validated”.—[Official Report, 19/11/13; col. WA194.]
We can add to that the trends in many of the developing BRIC countries, which are going through many of the same experiences that we have gone through, although the figures worldwide are not collected; in answer to another Question that I tabled asking for worldwide statistics, I was told that none were available. Given our own experience as the country with the worst rate of mesothelioma in the world, we should be at the cutting edge or, to mix my metaphors, in the driving seat in insisting that there is a collaborative global approach to this horrendous problem.
The Minister will be aware that I have tabled a Private Member’s Bill, the Mesothelioma (Amendment) Bill, on research. Today gives the Minister the opportunity to say whether the Government intend to facilitate the Bill’s progress and accept the principles that underpin it. The Bill mirrors the all-party amendment defeated here on a whipped vote by a mere seven votes, which was tabled again in the House of Commons by the late Paul Goggins and the Conservative Member of Parliament, Tracey Crouch. On 7 November, the Minister in reply to a Parliamentary Question recognised the importance of research, saying:
“As you are aware there is a cross-Government commitment to support more quality research into mesothelioma. The work that the Department of Health are taking forward on this issue is designed to encourage researchers to pursue projects that will hopefully benefit sufferers of this terrible disease”.—[Official Report, 7/11/13; col. WA69.]
Can we be told today how that work is progressing? Inter alia, I commend to the Minister Early Day Motion 995, moved by Tracey Crouch in another place, which has now been signed by more than 60 Members of the House of Commons. It says:
“That this House notes with concern that mesothelioma is an invasive form of lung cancer caused primarily by prior exposure to asbestos”.
It goes on to give the kind of statistics that I have just given and ends by paying tribute to the,
“great work of the former hon. Member for Manchester, Wythenshawe and Sale East, the late Paul Goggins, to raise the profile of the need for long-term investment into mesothelioma research; and calls on the Government to facilitate the establishment of a long-term sustainable mesothelioma research scheme funded by the insurance industry”.
I would simply add to that the point that I made in the previous debate. Given that some £71 million will come into the Government’s coffers in the next 10 years, less the £17 million that will be given to insurers, surely it will be possible to use some of that money to create a pound-for-pound research fund, where we work collaboratively with the insurance industry.
On the Floor of the House, I recently asked the noble Earl, Lord Howe, about a breakthrough in mesothelioma research which has taken place in Canada. In reply, he said:
“Mesothelioma is a devastating disease, and I certainly undertake to look at the material that the noble Lord has sent me”.—[Official Report, 27/2/14; col. 1005.]
This is probably the most hopeful small breakthrough that I have seen over the years that I have been following this and I wonder, having spoken privately, very briefly, to the Minister, whether he is in a position today to tell us what follow-up has been done by the Department of Health in looking at that breakthrough and what the initial conclusions are. Will he say whether his department and the Department of Health are not only collaborating across government in the United Kingdom but working with others to try, not to duplicate work that has already been done or to reinvent the wheel, to bring together the best practice and knowledge that there is worldwide?
Perhaps I may ask about a reply that the noble Lord gave to me to Parliamentary Question 14/5095, which concerned the extensive tables he produced for the House about the occupations of people who die from mesothelioma. In that reply he said:
“The latest available analysis of citizens dying from Mesothelioma in Great Britain is based on deaths between 2002 and 2010 at ages 16-74. Only the last occupation of the deceased is routinely recorded”.
It is not the last occupation that we need but the data on all the occupations that someone has had. If we are going to get any kind of idea about tracking the causes of mesothelioma we need to know where the hot spots are with this disease.
The Minister continued:
“It is important to note that, for those Mesothelioma cases that are caused by occupational exposure, the last occupation of the deceased which is recorded on the death certificate may not reflect the source of exposure due to the long latency of the disease.—[Official Report, 11/2/14; col. WA 122.]
That begs the question of what use are the tables in those circumstances. Would it not be better to acquire data that would help us?
I was about to turn to the Questions from the noble Lord, Lord Wigley, but as he is about to intervene, perhaps he will save me doing so.
Lord Wigley (PC)
I am grateful to the noble Lord for giving way. Given that it is the last employment that is detailed in the Written Answer, of which I have a copy, does that not camouflage any cases that may arise from the armed services? There are indications that the premises in which many members of the armed services live have asbestos. That raises the question of the incidence and whether or not those families are notified of the dangers with which they are living.
Lord Alton of Liverpool
My Lords, I did not have a chance to compare notes earlier with the noble Lord, Lord Wigley. He has a copy of my parliamentary reply and I have a copy of a reply that he was given on 11 February by the Under-Secretary of State for Defence, the noble Lord, Lord Astor of Hever. After a Written Answer from the noble Lord, Lord Astor, on 4 February, the noble Lord, Lord Wigley, asked about the accommodation of families working for the Armed Forces and whether those living in accommodation that is known to contain asbestos are systematically informed of that fact and the outcome of the regular inspections undertaken of such premises. I was struck by the reply:
“However these reports are not automatically made available to occupants”.—[Official Report, 11/2/14; col. WA 122.]
What value are such reports if they are not made available to occupants?
In reply to another Question asked by the noble Lord, Lord Wigley, about the prevalence of asbestos materials in Ministry of Defence buildings and married quarters, he received a reply saying that some are known to contain asbestos and that the ministry keeps a register of all buildings which are regularly inspected. Surely anyone living in such buildings has a right to know these things.
My noble friend Lord West of Spithead said to me recently—he said that it was perfectly proper for me to repeat this remark in public—that 10 of the cohort that were at Dartmouth with him died of mesothelioma. This relates to a Question that I tabled to the Ministry of Defence. I hope that the Minister will pursue this matter, not only with the Department of Health but with the Ministry of Defence. I asked about the number of annual fatalities caused by mesothelioma involving members of the Armed Forces. I asked what data are kept on the cause of death of former servicemen and what research it planned to commission into the incidence of mesothelioma among former servicemen. I received a long reply on 11 February but the first sentence states:
“Data on the number of annual fatalities caused by mesothelioma does not identify those who were former members of the Armed Forces”.—[Official Report, 11/2/14; col. WA 124.]
Again I ask the question: why not? These are people serving in our Armed Forces who are willing to risk their lives on our behalf. Surely we owe a duty to them to ensure that, if they are in any way being placed at risk as a consequence of exposure to asbestos, everything possible is done to avert that.
Lord Wigley
I apologise to the noble Lord, Lord Alton, for intervening when I did. It clearly shows that we have not been comparing notes, because he was coming on to the very point to which I referred.
Perhaps the Committee will indulge me for a moment if I refer to the debate that we had in this Room on 16 January when I referred to a good friend of mine, Peter Wolfe of Cork in Ireland. Within a matter of days of that debate, he died. He had learnt of his mesothelioma only a few weeks before Christmas. That underlines how quickly this insidious disease kills people. I was at his funeral in Cork on 27 January. That casts a shadow over my contribution to debates on these matters.
The fact that the scheme under consideration today has been set up is a very positive development for victims of diffuse mesothelioma who cannot trace their employer’s insurance. I, too, pay tribute to the Minister for his perseverance in responding to the points raised during the passage of the legislation. I was especially glad to discover earlier this month, and to hear the Minister reiterate today, that claimants under this scheme will be able to gain 80% of the value of compensation claims, up from the 75% threshold which the Government seemed determined to stick to during debates at earlier states. I understand that claimants can now expect to receive an average payment of £123,000 before benefits are recovered, together with £7,000 towards their legal fees.
However, in my usual Oliver Twist fashion, I remain to be convinced about why claimants under this scheme should expect any less than 100% of the average compensation award for this type of disease. Those suffering from diffuse mesothelioma will be in debilitating pain, yet the Government insist that they are limiting the amount of compensation that can be claimed in order to ensure that claimants exhaust all other avenues before coming to the scheme. Surely this is grossly unfair. In effect, it penalises victims of the disease for the negligence of their employers. For the purpose of comparison, it is worth noting that the Pneumoconiosis etc. (Workers’ Compensation) Act 1979 scheme was designed to award 100% of the value of compensation claims to claimants and, as we debated a few moments ago, it is reviewed annually. Why victims of diffuse mesothelioma should not have the same recourse available to them is beyond me, but perhaps that is another battle to be won at some stage.
It is also astounding that claimants under this scheme will have 100% of their benefits recouped from the compensation that is awarded, even though they receive only 80% of the damages. Claimants will thus lose out financially even more, and the Government surely must look again at that aspect.
There were other problems aside from the amount of compensation to be awarded, which were likewise highlighted during the debates on the Mesothelioma Act—problems that have yet to be erased. Principally, it is at best short-sighted that the Government have decided to place an arbitrary cut-off date for eligibility under the scheme. A draft of this compensation scheme was published, as we all know, by the previous Government shortly before the 2010 election, and consultation closed in May of that year. The present Government made no announcement on taking the scheme forward until 25 July 2012, which is the date that they have set as the earliest time when a patient can have been diagnosed with diffuse mesothelioma for these purposes. Individuals who had the misfortune of being diagnosed between February 2010 and July 2012 thus fall between two stools through no fault of their own—a matter that we on all sides of this Committee have emphasised, as well as in previous Committees and in the Chamber during the passage of the legislation. Surely the Government must look at this again.
Furthermore, it is disappointing that the scheme is open only to individuals suffering from diffuse mesothelioma, which is only one of a number of asbestos-related conditions that can come about as a result of exposure to this deadly substance. I would welcome any clarity that the Government can give as to the steps that will be taken to protect the interests of those suffering from asbestosis and other asbestos-related lung cancers.
Finally, I know that many individuals will be grateful if the Government can confirm when people will be able to start making applications under this scheme. I am not sure whether the Minister mentioned that in his comments—I did not catch it if he did—but that would be useful.
Lord Howarth of Newport (Lab)
My Lords, I add my thanks to the Minister and congratulate him on achieving this legislation and bringing in these regulations. I thank him for his compassion, for the collaborative way in which he worked with noble Lords on all sides of the House, and for his strong determination to get to where we have now reached. It is a very significant achievement and he deserves our admiration and gratitude. Like other noble Lords, I am grateful to him for raising the level of compensation to 80% of average compensation awards. That is a significant improvement that will make a lot of difference to families when they find themselves in such dire need.
I want to ask the Minister just one question. Will he clarify that it is his intention that the overall value of the scheme should continue to be set at 3% of gross written premiums after the peak year for claims? He has told us that we are to anticipate perhaps 2,500 claims in 2018, after which the numbers may reduce—although the noble Lord, Lord Alton, told the Committee that it is projected that there will be another 60,000 cases over the next 30 years. There will continue to be a significant volume, and I put it to the Minister that it is important that that 3% of gross written premiums is not reduced in the years after 2018. We all hope that after a long period of Labour Government, starting in 2015, the Minister may still have an opportunity to play some part in these affairs. I appreciate that it is difficult for him to bind his successors but it would be helpful if he would say on the record that he, as the architect of this scheme, envisages that the employers’ liability insurers should continue for the whole future life of the diffuse mesothelioma scheme to have to provide 3% of gross written premiums. If that was the case while the numbers of claimants or beneficiaries of the scheme were falling, it would make it possible to move the level of compensation up from 80% towards, or perhaps to reach, 100%. That would be one very important possibility.
There are other good things that it would be possible to do were funds to remain available while the total number of claims fell. It would become possible to backdate the eligibility for the scheme beyond July 2012 to February 2010 or even further. It would also be possible—I tabled an amendment to this effect in Committee on the Bill—provided that the legislation allows it, which of course is questionable, to adapt the regulations to cover family members who themselves contract mesothelioma even if the person who was exposed to asbestos in the workplace did not personally contract the disease. We talked about the case of a member of the family—most likely the wife—who washes the overalls of the person who has been exposed to asbestos fibre in the work-wear and she contracts the disease. As I understand it, the Minister has still not been able to bring those people into eligibility. However, if we had a slightly less tight financial envelope, then, through keeping the 3% of gross written premiums to fund the scheme, it would be possible to help those people.
Of course, it would also be possible to mitigate benefits recovery. I know that the Minister’s department, for theological reasons, will set its face against that, but, as the noble Lord, Lord Wigley, said, it seems very hard and unreasonable to claw back 100% of benefits from people who are receiving only 80% of average compensation. So there would be further latitude there. There would of course be further latitude to provide additional funding for research, the case for which has been so consistently and eloquently made by the noble Lord, Lord Alton. Among the range of options, it would also be possible to extend the benefits of the scheme, or perhaps a newly created parallel scheme, to victims of other long-latency industrial diseases whom we want to help.
I do not know what sorts of permutations might be possible but one could envisage this range of possibilities, and I hope very much that this afternoon the Minister will at least be able to tell us that there will not be a tapering of the overall value of the fund. The industry having treated mesothelioma sufferers so very badly over many decades, it seems to me that it should not be let off the hook. I appreciate that the current generation of employers’ liability insurers are not the worst culprits, and perhaps not the culprits at all in individual cases, of the failure to honour the policies that were written. However, I think that the industry as a whole has to continue to bear its share of responsibility and—I know that this is the spirit in which the Minister has always approached this whole issue—we should do the very best that we can for people who at the moment the scheme is not intended to help but who it would become possible to help if we maintained the value of the fund past 2018.
Lord James of Blackheath (Con)
My Lords, I apologise for not having been present at the beginning of this debate but I should like to make two points, the first arising directly from what the noble Lord, Lord Howarth, has just said. Three per cent of premiums seems to be the wrong way to come to this issue. Three per cent of the total reinsurance value backing asbestosis would be a nice round sum. It is about £6 billion of my money that I put in from Lloyd’s of London, and it is much nicer to get 3% on that. That coming in each year would give a lot of leg-room.
My other point is that I have been keeping in close contact with the Royal British Legion on this. At present, it has 42 cases—although, rather ominously, it has said that it expects that number to fall very quickly to 38—where it is providing care at its own expense and at considerable cost. Will the Minister explain what the crossover would be between this scheme coming in and either taking out or supporting the British Legion? I am concerned that when this comes in, it does not result in a hiatus, out of which the poor sufferers get nothing at all, whereas now they get support from the Royal British Legion. We need to know with some clarity what will happen in that respect. Those are the only two points I would like to make on what I have heard so far.
Lord McKenzie of Luton (Lab)
My Lords, like other noble Lords, I join in praising the Minister for all his efforts on this Bill. Without his leadership, we simply would not have this legislation on which we can debate these regulations.
Lord Howarth of Newport
When I was praising the Minister, I wanted to say that, of course, he built on the foundations created by my noble friend. I hope that he will also accept the gratitude and praise of the Committee and everybody in a much wider community who have been concerned about the predicament of mesothelioma sufferers.
Lord McKenzie of Luton
My noble friend is too kind, but I am conscious of the fact that this Bill has been forged in very difficult economic circumstances, and it is a splendid result that we are where we are. Like others, I also welcome the increase in the level of payout. As I remember it, when we were discussing this during the passage of the Bill, there were two versions of the gross tariff: one from the ABI and one from the DWP. I think the difference between them was based on the projections of the age profile of those who contract mesothelioma. We focused on the higher, DWP, one. Will the Minister confirm that this is still the gross tariff that we are working to and that it will be 80% of that?
A number of noble Lords have raised the 3% of gross written premiums. I am not sure that I heard the Minister actually say that this is where the levy is going to start, and it will be helpful if he could confirm the position. I thought his expression was “within that 3%”, but it would be good to know when we will see the levy regulations and whether the expectation is that it will be fixed, initially, and thereafter, as my noble friend Lord Howarth said, at 3% of gross written premiums. Obviously, this is to the extent to which they did not produce more than a 100% payout.
The Minister confirmed that the legal fees at £7,000 per case would be paid on top of that. I am not quite sure that I followed the reasoning of how that will be dealt with in alternative regulations. I would appreciate it if the Minister reiterated what he said. The noble Lord, Lord Alton, has been steadfast on the issue of research. Will the Minister take the opportunity to tell us where he thinks the insurance industry now stands, and what the prospects are of getting extra funding from it one way or another?
I have a couple of technical questions. Can we have an update on the oversight arrangements? I do not think there is a specific reference in these regulations to the oversight committee and whether there should be any obligation on the administrator. I should say that the Minister has been true to his word in terms of the process of appointing the administrator of the scheme, but I do not think there is anything in these regulations which requires co-operation and engagement with the oversight committee. Perhaps the Minister will say how he sees that working.
There was an issue over Schedule 3 to these arrangements, which deals with the application. This sets out all the information that needs to be provided and includes the names of all the person’s employers and the description of the arrangements under which the person was engaged by each employer. One of the issues that cropped up just at the tail end of the Bill’s consideration in the other place was HMRC policy on work histories and the extent to which a court order is now necessary for HMRC to provide them. I hope that this issue has gone away, but I would appreciate an update from the Minister on that point.
On a smaller point, will the Minister clarify where the administrator can impose conditions on a claimant? I think we understand why that would be but, as I understand it, there seems to be some differentiation. Conditions can be imposed where a dependant is an applicant, but where the applicant is deceased and the payment goes to the personal representative I am not sure that the constraints or conditions on that payment would apply. Maybe that is not necessary because it would be the role of the personal representative to make sure that that was effectively dealt with. Can the Minister confirm that?
Finally, I just ask about the Ministry of Justice procedure for reforming mesothelioma claims. In a sense, the Government backed up what was originally proposed but paragraph 39 of their response to the consultation on these proposals states:
“The stated purpose of the Secure Mesothelioma Claims Gateway was to support the proposed Mesothelioma Pre-Action Protocol. As the Government has declined to take forward the MPAP supported by a fixed recoverable costs regime, the ABI will no doubt want to consider whether and how it would wish to take forward its proposal for funding and hosting a SMCG and how claimants and defendants might voluntarily make use of it”.
Could the Minister give us an update on that and what it means in the current situation?
Baroness Sherlock (Lab)
My Lords, I thank the Minister for his explanation of these regulations and all noble Lords who have spoken. I am reminded of what an effective Committee process we had during the passage of the Bill. The Minister must feel a certain sense of déjà vu that he is back here yet again being interrogated quite so effectively about the detail. I join other Members of the Committee in congratulating the Minister on pioneering this and pushing it through. I also thank my noble friend Lord McKenzie. I am grateful that my noble friend Lord Howarth included him for all his sterling work in getting this show on the road in the first place and helping to steer it through Committee.
It is very good to see the progress made towards the introduction of the scheme. I am very pleased by the decision to raise the level of payment to 80% of average civil compensation. I also place on record a tribute to all those who campaigned for a higher payment, not only Members from all sides of this House, including my noble friend Lord McKenzie and many Members of this Committee today, but also victims’ groups, trade unionists and Members of another place such as my honourable friend Kate Green and other MPs, including the late and still very much missed Paul Goggins, who was such a strong fighter on these issues. Many in this field will be very grateful.
Clearly, as we have heard, the amounts of scheme payments in Schedule 4 do not now represent the levels of payments we expect, but I thank the Minister for explaining that we may expect imminently some negative orders to come into force to affect that. The Minister said that the Government are able to increase payments because of savings in administration costs. We are indebted to my honourable friend Kate Green who suggested that in the Public Bill Committee in another place—something acknowledged by the Minister there—but it would be very helpful if the Minister here could explain to the Committee precisely where those savings were found.
The impact assessment produced last November indicated that an uplift in payments from 75% to 80% would cost an extra £11 million in the first four years of the scheme and an extra £22 million over the first 10 years. With payments set at 75%, it also stated:
“The costs of the scheme are split between a levy of £371m on the insurance industry and £17m in government funding. This covers scheme payments direct to individuals (£261.4m), benefit recovery (£72.2m), applicant legal fees (£24.6m) and admin of £30.0m (including case legal fees of £24.2m, set up of £1.4m and running costs of £4.4m)”.
To focus in on that, that impact assessment showed two sets of legal fees provided for: applicants’ fees at £24.6 million and case legal fees at £24.2 million. There was some debate as to what the case legal fees covered but the Minister in another place assured the Public Bill Committee that they were for the benefit of applicants. Originally, claimants’ legal fees were set at £7,000 a case, when payment was at 70% of average civil damages. During the passage of the Bill through this House, that payment rose to 75% and legal fees were reduced to £2,000 per case.
In the Public Bill Committee in another place, legal fees reverted to £7,000. The Minister there said that he had had discussions with the Association of Personal Injury Lawyers and felt £7,000 to be a reasonable figure after all. Crucially, he also said that if cases could be conducted more cheaply, applicants would none the less receive the full £7,000. We now know that extra moneys have been squeezed out of administration costs to fund this uplift but can the Minister explain where they come from? I presume that they do not come from a further squeezing of legal fees. He also confirmed—and this was very helpful—that £7,000 per head remains the sum allocated to applicants for their legal fees. Can he confirm for the record that, if the legal fees in some cases fall short of this amount, applicants will still receive the difference in cash up to £7,000?
Assuming that there are no changes in respect of the position relating to applicants’ legal fees, can the Minister tell us where the additional £11 million or £22 million to pay for the uplift has been found? On the face of it, it must have come in some combination from other administration costs. Can he also say what he assesses the running costs and set-up costs of the scheme now to be? Can he also tell us how much is now allocated for case legal fees as opposed to applicant legal fees? If those case legal fees have been reduced and, as the Minister in another place explained, they were to be for the benefit of applicants, will the applicants suffer in any way as a result of that? If the extra money is not coming from there, where is it coming from?
Can the Minister also confirm that payment at 80% is to be met within the planned levy of 3% on the industry, including in the first four years of the scheme? I will turn in a moment to the levy and the points raised by various noble Lords, but I want to talk briefly about a few other aspects of the scheme.
Regulation 5(4) requires the scheme administrator to ensure that there are sufficient numbers of suitably qualified persons to determine applications under the scheme. Does the Minister have any more information that he could share with the Committee about the likely professional background and qualifications of those people and, in particular, about their independence and how they will be employed? Will they be employees of the scheme administrator or might they work on a freelance basis? In particular, if they are freelance, is there any possibility that there could be a conflict of interest if they have other roles within the industry at the same time? The crucial question is: if that is the case, how will such conflicts be identified and dealt with so that the public and the applicants can be reassured of the independence of the people making the determinations?
I welcome the provisions in Regulation 9(2)(a) regarding time limits for applications. It makes it clear that applicants would have three years from the date of diagnosis or, if diagnosis is after 25 July 2012 but before the regulations come into force, three years from the date they come into force. However, there are still some concerns about time limits when we look across to Regulation 18. Generally, if a claimant dies before the case is determined, a payment may be made to his or her personal representative if the claimant leaves no dependants, but that still leaves a small group, admittedly, of mesothelioma sufferers without dependants who were diagnosed on or after 25 July 2012 but who died before they could make an application simply because the forms to do so were not yet available. I understand that they will be available from April, and perhaps the Minister could confirm that. In those cases, I understand that payment will not be made to the deceased’s personal representative. Can the Minister clarify that? If that is so, it seems unjust. It has been quite clear that the Government’s firm intention was for claims to be backdated to 25 July 2012 in all circumstances, but I should be interested to hear the Minister’s response.
I welcome Regulation 11, which sets time limits for the provision of additional information—a suggestion from my noble friend Lord Browne of Ladyton. I am sure that he will be very glad to hear it, and I shall make sure that I communicate the information to him. I am very grateful to my noble friend Lord McKenzie for raising the question about HMRC and the fact that it needs a court order to release the employment records of deceased claimants. This is really serious. I understand that a letter from the Minister to my honourable friend Kate Green in the other place suggests that progress was not being made very quickly on this. I look forward to hearing whether this can be resolved before the scheme is launched.
I also welcome the provision in Regulation 18 which provides for the applicant to request a review of a determination. That was another suggestion from my noble friend Lord Browne, about which I predict he will be even more pleased.
Finally, two important commitments made by Ministers do not appear in the regulations before us today. The first concerns the levy, which was raised by my noble friends Lord Howarth and Lord McKenzie and others, and, in particular, the absence of any reference at all to it in the regulations. I confess that I was a bit surprised about that, but I may have misunderstood where it is to be dealt with. Will the Minister explain whether there is a reason why the levy and the rate at which it is to be set are not included in these regulations? It is important that people are reassured that 3% is to be the amount, although if the Minister wants to adopt the formulation offered by the noble Lord, Lord James of Blackheath, I am sure we will all be very keen to hear that today.
Lord Freud
My Lords, I thank noble Lords for a highly informed debate and for the kind words that were addressed to me personally, which I appreciate. I thank the noble Lord, Lord McKenzie. Without the little present that he left me on my arrival, things would perhaps not have been sorted out with quite such alacrity.
A number of noble Lords asked about the timing. The noble Lord, Lord Wigley, was the first. Our intention is that applications will be accepted from April with the first payments in July. These regulations will come into force on 6 April, subject to this process. We intend to lay the negative instrument the next day, 7 April.
I shall now deal with research, on which we spent a lot of time. Noble Lords around the Room are very sympathetic to the point made by the noble Lord, Lord Alton, about improving it. That debate, which I shall not replay because it is a long and complicated situation, as noble Lords know, stimulated a substantial increase in research activity in this country on mesothelioma. I shall go through the four things that we committed to do. First, we set up a partnership to identify the priorities in research. A survey has now begun and is currently open, asking patients, families and healthcare professionals for their unanswered questions about mesothelioma treatment. The partnership will then prioritise the questions, and the end result will be a top 10 list of mesothelioma questions for researchers to answer. It is planned that that list will be ready by the end of this year, when it will be disseminated and work will begin with the National Institute for Health Research to turn the priorities into fundable research questions.
Secondly, the national institute will highlight to the research community in the spring of this year that it wants to encourage research applications in mesothelioma. Thirdly, the national institute’s research design service continues to be available to help prospective applicants to develop competitive research proposals. Finally, the National Cancer Research Institute has made excellent progress in planning a workshop for leading researchers to discuss and develop new proposals for mesothelioma studies. This event will take place on 2 May.
I know that we are not going along with the specific structures suggested by the noble Lord, Lord Alton, but I want him to feel that we are really pursuing this with energy, getting results and getting this focus within the structure of how research is managed in this country. Just because his specific proposals may not have been accepted, he should not feel that we have not taken his point thoroughly on board or that we are not grateful to him for keeping up that pressure.
Lord Alton of Liverpool
I urge the Minister to add a fifth point to his four other points with regard to the remarks that I made earlier about the importance of global collaboration through the World Health Organisation, also looking at best practice and innovations being promoted elsewhere in the world and the need to draw that information together. We may have the highest rate of mesothelioma in the world but many other countries face the same challenges as we do.
Lord Freud
That is a very powerful point from the noble Lord. I have not yet had a chance to talk to my colleagues in the Department of Health but I shall pick up that issue specifically.
On the suggestion as to where to spend the recoveries money, it is the same core point. There is a process for funding research, and it does not work to direct other moneys around in that mechanical way. The money will go into research as the right propositions come up. That is the reason why, fundamentally, we will not be able to provide support for his Private Member’s Bill. It is a difference not in aspiration but in the structures that we can accept. I know that he will be disappointed in that, but he may not be surprised.
The point that the noble Lord raised on the causes of mesothelioma and the last occupation is one that requires reflection, and I shall write to him on that particular set of points. I will also pick up the related point from the noble Lord, Lord Wigley, on the technical issue of the MoD advising tenants. On the noble Lord’s point about widening the coverage of the 2014 Bill, clearly we will continue to operate the 1979 scheme, but I have dealt in enormous detail with why we would not widen this scheme and why we are in no position to make any such commitments now.
Lord McKenzie of Luton
I gather that the noble Lord has moved off the research issue, but will he say whether there is any commitment from the insurance industry, the ABI, to continue contributing, as it has in the past?
Lord Freud
I have been in discussion with the insurance industry. There is currently no commitment to go ahead with its funding, but I do not think that this is the end of the story. We are still talking about various options.
Lord Alton of Liverpool
Before the noble Lord leaves that point, I do not want to return to the arguments that we had on the amendment that I moved in the House, but he will recall that the noble Earl, Lord Howe, in replying to those debates, made a number of substantive remarks about the important role that the industry was playing in supporting research into mesothelioma through financial contributions. If we had been aware at that time that the industry was not going to step up to the plate and provide those resources, I wonder whether some noble Lords might have voted in the way they did having been given those assurances.
I shall not press the Minister further today but I hope that he will return to the intervention from the noble Lord, Lord McKenzie, perhaps by writing to keep us informed about the progress he has made. Certainly, I know from my own meetings with the industry as recently as last week that it would much rather have a scheme where the cost is shared beyond the six companies that previously funded research. Those six companies feel that the whole burden should not just fall upon them.
Lord Freud
We are in danger of rerunning the debate. Clearly, we were not able to help the insurance industry to spread the burden using this mechanism, for complicated reasons which are on the record. Discussions are going on with those companies that have a sense that contributing to research is desirable and we shall see what comes out. On the question raised by the noble Lord, Lord Alton, about the extent of recoveries, over 10 years according to the impact assessment we are expecting £72.2 million.
In response to the leading and very clever question from the noble Lord, Lord Howarth—I would expect nothing less from him—we have committed to keeping the tariff under review and we will carry out a review of it after four years, once the smoothing period has finished.
Lord Howarth of Newport
Allow me to emphasise once again that it is imperative that the Minister, his department and successors maintain the pressure on the industry. We have just heard the noble Lord, Lord Alton, describe how there is no assurance that there will be continuing funding from the industry for research. We have seen the whole history of the neglect of the legitimate interests of mesothelioma sufferers by the employers’ liability insurance industry. Sadly, we cannot take it on trust. I am sorry that the Minister has not written that requirement of 3% of gross written premiums into these regulations—though I can perhaps understand why not. It would be very helpful and really the least that the Minister could do if he expressed this afternoon very strongly on behalf of the Government and mesothelioma sufferers his expectation that we will continue to have the substantial contribution from industry to fund this scheme and that he expects industry to continue to provide not less than 3% of gross written premiums after the moment of peak claims passes in 2018, for all the reasons that noble Lords indicated earlier in this debate.
Lord Freud
My Lords, I am not in a position to bind a future Government over what happens in four years’ time. However, as the noble Lord appreciates, there is now a context for that Government to take a view at the right time on what should happen beyond then. The figure we have at the moment, which is publicly on record, is 3%. In response to the question asked by the noble Lord, Lord McKenzie, that is based on DWP forecasts. Clearly, to that extent, we are committed to a tariff level. If those forecasts are wrong for one reason or another, there could be variation round that 3%. That is the best we can do to set the level today. However, when that process has gone through—we thought the right point for that was after four years because we will have done the smoothing and seen how it actually works and if people change behaviour as a result of the scheme—we will clearly know exactly what is happening. We can then have a much more specific forecast of expectations, once the scheme is in and has been rolling for some time.
Lord McKenzie of Luton
Are we to see some regulations come forward round the mechanics of that levy? There is an absence of a reference to that here, but that does not mean that that is the end of it. Something could come forward to explain how it must all work, who will be levied and on what basis.
Lord Freud
I am sorry but I am confused: Schedule 4 has the levy rates. That was also a question from the noble Baroness, Lady Sherlock, who said that they were not in there. There will be further regulations to come, and there will be negative regulations adjusting these figures.
Lord McKenzie of Luton
Schedule 4 sets down the tariff, which is based on the gross starting point, but presumably there is a separate starting point for the levy on the insurance companies. Is that going to come forth? On the four-year review of the tariff, must we not have regard to the fact that civil compensation claims are likely to rise over a period anyway because of changes in the claims process?
Lord Freud
Yes, that is one of the moving features here. We are moving the tariff up. We have committed to moving it up by CPI in this interim period. That is a sensible enough period after which to take a new look at where civil compensation has moved, if indeed it has, and to reset. However, at that stage other factors could also be looked at. Although the noble Lord, Lord Howarth, is enticing me in his skilful way, that is all I can say on the review. I am deeply impressed.
Lord James of Blackheath (Con)
The noble Lord, Lord Howarth, was enticing the Minister into a quicksand. We need to get this matter clearly understood. There is no such thing as a pot containing the premiums that were originally paid for this cover. All those moneys were taken by the companies who then went bankrupt. It is not there. The only pots that exist are the reinsurance pots. Basically, with our £6 billion liability, we took £3 billion to Zurich Re and £3 billion to Swiss Re, and that is where it stands today. If you go for those and can negotiate that they are allowed to reduce their balance sheet liability by the 3% you get each year, they will be very interested. However, you will not get the 3% and the reduction in their balance.
Lord Freud
My Lords, we are moving now into the arcana of the insurance industry, which the noble Lord, Lord James, knows better than anyone in the Room. When I first had discussions with the insurance industry, they centred around something that would have affected its balance sheets. It was a structure which went to the historic issues. However, for reasons that are too complicated to go into, they ended up with this scheme which, as the noble Lord, Lord Howarth, pointed out, affects the current writers of liability insurance, who may or may not be the villains of the piece. It is not perfect, but it is the best we can do. This is where we are.
To pick up on the point made by the noble Lord, Lord James, much as it would be attractive to go after reinsurers, we simply do not have the information to do so. Even the noble Lord, Lord James, I am sure, could not find that information.
Lord James of Blackheath
Do you want phone numbers, my Lords? They are there. They have the money and, in the case of the Swiss Re, it is backed by the Swiss Government, who have not yet gone bankrupt. They are working on it, but not yet.
Lord Freud
Noble Lords could go on about this, but I cannot.
On the other point made by the noble Lord, Lord James, about the crossover between the schemes supporting the Royal British Legion, I am not aware of the issue he raises, but I shall look into it for him.
On the point made by the noble Lord, Lord McKenzie, on the oversight committee, we are not legislating for that, but we have discussed the matter with the AVSG, the TUC, insurers, personal injury lawyers and accident insurance lawyers. We are agreeing with those groups how the committee could operate. We intend that it will look at various aspects of the running of the scheme, particularly in the early period. We envisage it considering complaints against the scheme, redacted claims and decisions. It will then send a report to the Secretary of State, who will include the issues raised by the committee in his published annual report. It will be quite transparent.
On the point made by the noble Lord, Lord McKenzie, about HMRC, we continue to work with other departments to seek a resolution to this issue. Regrettably, that is still ongoing work. We have encouraged the ABI to continue to engage with the MoJ as they look to improve the process for mesothelioma cases in regard to the portal.
In response to the question asked by the noble Baroness, Lady Sherlock, the reason we can increase the payments to 80% is because the scheme administrators have now been selected and the costs have been finalised. Those costs fall well below projected costs, and this allows us to increase the payments while keeping the levy the same.
In the November impact assessment the net benefit to lawyers was expected to be £2.69 million over 10 years. That has reduced to £1.6 million. The reason for this difference is that the original scheme administration costs used in all previous versions of the impact assessment assumed that some legal administration costs would benefit lawyers working on the scheme. These costs were estimated to be £23 million from successful cases, £1.7 million from unsuccessful cases and £1.2 million from ad hoc legal administration costs. Due to further understanding of the way in which the scheme will be administered, it is now recognised that these legal administration costs are not necessary, meaning that overall it is expected that lawyers will benefit by less. I can confirm that applicants will still receive the difference between the £7,000 and the legal costs, if there is a positive difference.
Baroness Sherlock
Before the noble Lord leaves that point, can he confirm that the figure that was previously £24.2 million has now either disappeared or is in single figures and that there will be no other loss or additional costs for the applicant as a result of those costs being taken out of the scheme altogether?
Lord Freud
Yes, I can confirm that. In the tendering process resulting in the appointment of Gallagher Bassett, the company was required to demonstrate that it had sufficient resources to process the expected volume of claims. We have reviewed its tender to ensure that it is accurate and realistic and have satisfied ourselves that it can deliver as part of our due diligence. The administrators will be employees of the scheme administrator. If the person with mesothelioma dies before an application can be made, their dependant can make the application. If the person dies after making an application but before a payment is made, the payment is made to their personal representative.
Baroness Sherlock
I thank the Minister for clarifying that point. I was talking about people who have died who do not have dependants. It seems that the Minister was saying that the personal representative can receive a payment even in the circumstances that I have described: when people were diagnosed on or after 25 July 2012 but had not made an application because the process was not available to them.
Baroness Sherlock
Can the Minister please explain why? These are people who the scheme is explicitly designed to cover. They simply had the misfortune to die before the Government had been able to put the scheme in place and give them an application form to fill in. Why should they be excluded?
Lord Freud
I think it is because they do not have dependants. However, I will write to justify what that difference is and why we have designed the scheme in that way. Our estimate is that the 80% payment will be within the 3%, but that is clearly based on our figures. As to the final question on the setup and running costs of the scheme, I cannot go into too much detail for reasons of commercial confidentiality. I will write carefully and provide as much information as I safely can.
Lord McKenzie of Luton
On one last point, can the Minister say when we are likely to see the levy rate because, presumably, if people are to start to make payments under the scheme, the cash will have to be obtained from the insurers? That will not necessarily be a straightforward process.
Lord Freud
It will be within the next Session. In the initial period the DWP will be putting in funding, so we do not have a funding issue because we are the underwriters of the scheme and are managing the smoothing process which, I can assure the noble Lord, is more complicated than it might appear to be from outside.
I am confident that these regulations will underpin a robust and fair scheme which all noble Lords agree has been needed for some time. This Government are committed to improving the situation faced by mesothelioma sufferers, and the establishment of the diffuse mesothelioma payment scheme is a huge achievement. I commend these regulations to the Committee.