Diffuse Mesothelioma Payment Scheme Regulations 2014

Lord James of Blackheath Excerpts

Monday 17th March 2014 Grand Committee

[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.

--- Later in debate ---

[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.