Mesothelioma Bill [HL]

Lord Browne of Ladyton Excerpts

Monday 10th June 2013 Grand Committee

[Lord Freud]

I am not sure whether they are claims or successful claims. My understanding is that there have been no cases where there has been compensation. My interest today is obviously not to re-run the debate that we have already had. We will have another chance to do this. I just wanted to get this on the record for the convenience of Members of the Committee at subsequent stages.

[Lord Browne of Ladyton]

The noble Lord is generous with his time. I listened carefully to his words. If they were a direct quotation from what the Association of British Insurers told his officials, and therefore him, it said that it had no record of any claim of that secondary nature having been settled through the employer’s liability insurance, not no record of any claim having been settled. I ask the Minister to go back to the question: since the association clearly has comprehensive data, has it any record of claims having been settled? If so, through what form of insurance were they settled and—this is the important question—were the insurers and those who carried the risk the same companies that carried the risk for compulsory employer’s liability insurance in respect of the circumstances of the cases?

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[Lord McKenzie of Luton]

My Lords, I should explain that this amendment was tabled before we had a chance to peruse a draft of the scheme rules, but there are some issues still worth pursuing. It is a probing amendment and is, I hope, precisely focused for the benefit of my noble friend. Clause 4(3)(a) states that the scheme may make payments “subject to conditions”, and paragraph (b) gives,

“the scheme administrator power to decide when to impose conditions or what conditions to impose”.

To the extent that these conditions are to be covered in the scheme rules and that those scheme rules are to be subject to some parliamentary process, we are perhaps more relaxed about the position. However, paragraph (b) appears to give a wide discretion to the administrator, which is likely to be an arm of the insurance industry. The draft scheme rules throw some light on this by identifying that the conditions that might be imposed include requiring that a trust be established and that a deputy or guardian be appointed. The draft rules also authorise the meeting of costs to this end by the administrator. The thrust of this seems to be a concern in situations relating to the capacity or legal competency of the claimant or a dependant. However, there is nothing that requires the imposition of conditions to be for the benefit of the applicant or dependants rather than that of the levy payers.

A key point in the draft rules is that conditions can be imposed to ensure that that payment is used for the benefit of the applicant. That requirement does not appear in primary legislation. There would be merit in it doing so to tie down this potentially wide discretion. I await the Minister’s response on that. We might return to this quite narrow point on Report to embed the concept that is in the draft rules, which we have now seen, into primary legislation. I beg to move.

[Lord Browne of Ladyton]

My Lords, I rise to reinforce the points made by my noble friend Lord McKenzie. It is easier to understand what lies behind Clause 4(3) now that we have the draft scheme rules. To understand the Government’s thinking one has to read that subsection along with Rules 15 and 16(3)(e)—I think—and presumably also the review provisions and the appeal provisions that will apply all the way back to any conditions that may be imposed, set out in Rule 19 and those following it. It is by no stretch of the imagination straightforward to determine what exactly the combination of this provision and the rules will mean in practice. I have just a couple of specific questions, which I hope are relatively simple.

The primary legislation, if enacted, will allow conditions to be imposed on any payment. There appears to be no limit to the conditions that can be imposed. The rules, to some degree, limit them. Rule 15, in particular, says that this rule—that is, the decision to impose conditions on making a payment—applies when the scheme administrator first decides to make a payment under the scheme but considers that there is good reason to impose one or more conditions in making a payment in order to ensure that the payment is used for the benefit of the applicant.

The next paragraph, paragraph 2, says that the scheme administrator may impose such conditions as it considers appropriate. We appear to go back into a very broad power immediately after a limiting power. It is not clear to me that the limitation in the first part of that rule applies to the second part of that rule. If it is intended to do so, clarification from the Minister might be of some assistance.

I reinforce the point made by my noble friend Lord McKenzie that if that restriction on making conditions is to apply to all conditions, it would be better for that restriction to be reflected in the primary legislation rather than in the rules. There is at least one possible interpretation of this at the moment—I have not had time to work out all the possible interpretations—that is, that the power to make the rules requires the scheme administrator to come to the view that rules are necessary to ensure that the payment is used for the benefit of the applicant. Once they pass that hurdle, the administrator can make any rule that it considers appropriate. It is not clear that all rules have to pass the test of being rules made to ensure that the payment is used for the benefit of the applicant. That is intended, but it would be helpful if that was clear.

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[Lord Freud]

I take on board my noble friend’s point. As I said, I shall look at this and the other points made by this Committee. The rules are only in draft form, and we may look at them to lock that down.

[Lord Browne of Ladyton]

I am sure that the Minister will do this, but perhaps I may check that he will consider whether it would be better to reflect that restriction in primary legislation rather than allowing it to appear for the first time in the rules.

[Lord Freud]

I will look at that, but I remind noble Lords that primary legislation sets a framework, and what matters here is how the rules work. In this case, the rules that we have agreed will go before Parliament in the form of regulations, so there will be a chance for oversight of that issue. Therefore, it does not matter too much where we make sure that the matter is under control.

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[Lord Browne of Ladyton]

My Lords, I am strongly in favour of the principle that informs the amendments in this group, which has been set out in such detail by my noble friend Lord Howarth of Newport. At Second Reading, the Minister in explaining—and, I dare say, in justifying—the part of the Bill that allows for the recovery of benefits, relied on the principle, with which we all agree, that nobody should be compensated twice. However, until then he had explained in some detail, in order to explain the 70% of average as a payment to mesothelioma sufferers and to defend it against the argument that it was insufficient, that we were dealing not with a compensation scheme at all but with a payments scheme. As I pointed out strongly in my contribution at Second Reading, it is inconsistent to have the same two arguments in relation to the same legislation. Either this is a compensation scheme or it is a payment scheme.

My noble friend Lord Howarth of Newport, in trying to devise a justification or a reason for this, was being generous to the Government. He has observed from a sedentary position that he did not mean to be; I know that, but he was. This is a payment scheme until we come to compensation recovery, because if it were a compensation scheme, all the justifications for averaging and for taking percentages of averages would fall away. They would be intellectually incapable of being defended. However, one comes to the point at which it is clear that the Treasury wants to try to recover some of this money as if it was compensation, so it has to become compensation or quasi-compensation to justify that. One can then deploy the high-minded principle that no one should be compensated twice for the same loss. I have some sympathy for the Minister in having to ride these two horses, and I hope that he is not torn apart by them. However, as I said at Second Reading and as someone once said to me when I was a Minister, if you cannot ride two horses at once, you should not be in the circus.

The truth is that that is what lies at the heart of this issue. The justification for recovering benefits paid to people through the compensation recovery process is not because people cannot be compensated twice, it is just because the money is there and it can be recovered. It is because it can be done. To some degree, given that the Treasury has inadvertently been subsidising the insurance industry through a genuine compensation scheme in the past, perhaps there is some justification for trying to get some of the money back, and of course we are living in difficult financial times. I understand that, but I would like the Minister to explain in simple terms why this is being done rather than by seeking some justification in the principle that informs compensation recovery.

The compensation recovery system is set out in quite complicated law called the Social Security (Recovery of Benefits) Act 1997, as now amended, and in a variety of subsequent Acts of Parliament. It applies throughout the United Kingdom. I was not present for the earlier debate about the calculation of the average that would inform the payment, but there are substantial differences between awards for mesothelioma in Scotland as opposed to the rest of the United Kingdom. The Scottish courts are much more generous to mesothelioma sufferers than are the English courts and award substantially more in damages. However, compensation recovery law is consistent throughout the United Kingdom.

If Amendments 20 and 21 were to be accepted, my noble friend Lord Howarth would have created a device to defeat the Government’s ability to recover compensation at all by designating all payments as being for pain and suffering, and through the second of the two amendments would discount all payments for pain and suffering from recovery. He is wise to do this because that is the way the Act operates at the moment. However, thanks to some of my colleagues in the legal profession in Scotland, I have a pretty exhaustive list of all the heads of damages litigation that are not offsetable in relation to benefits. The list is the best part of half a page long. I will spare noble Lords the whole list, but it moves from pain and suffering to loss of future earnings, and it goes into some detail. All of them are component elements that one would look at if one were calculating the level of compensation payment due to a mesothelioma sufferer as a possible head of damages.

The thing about this list is that it lies behind all the settlements that form the history of the settlements that in turn have informed the average, from which the Government will take the 70%. They are not irrelevant to the calculation of the payment that will be made; they are at the heart of it. If the payments were made through a court process of compensation, a very small number would allow for benefit recovery: substantially, they would not allow it. There is a lot to be said for treating these payments, which are informed in that way, in the same way as one would treat compensation. Not the least that can be said in favour of that proposition is the fact that the Government cannot justify recovering any benefits unless they can use the word “compensation” against the payments.

I will make a final point to the Minister that is not reflected in an amendment. I would like to know his justification for this situation. If, having gone through a process of looking at historical settlements and averaging them one is then justified in making a payment that is 70% of that average, why is one justified in taking 100% of the benefits of that 70% settlement? Why do we not at least restrict the recovery of the benefits to the same percentage that we apply to the calculation of the payment?