Claims Management Companies

Jonathan Evans Excerpts

Thursday 8th November 2012 Westminster Hall

[Jackie Doyle-Price (Thurrock) (Con)]

It is a pleasure to serve under your chairmanship, Sir Alan. I am pleased to have secured this debate, which is particularly timely given the Government’s recent consultation on reforms to the regulatory system affecting claims management companies.

As we all know, the Ministry of Justice has been regulating claims management companies since 2007, but the industry has grown significantly during the intervening years, and many firms have become much more aggressive in chasing up new business leads and opportunities, to the detriment of consumer interests and the insurance industry more generally.

Since securing this debate, I have been contacted by numerous organisations. Claims management companies have achieved a unique feat in uniting the consumer lobby and the financial services industry lobby. I have heard from the British Bankers Association, Which?, the Association of British Insurers, the Building Societies Association and the Finance and Leasing Association, all of which endorse the call for stronger regulation of the sector. There is general support for the measures in the Government’s consultation, but the consensus view is that those proposals do not go far enough.

We are witnessing practices that cause considerable consumer detriment. The cost to the insurance industry, often from questionable claims, is inflating insurance premiums considerably. We have debated the increasing volume of whiplash claims and the disproportionate legal costs they generate. Those costs will inevitably be passed on to the consumer.

In the case of payment protection insurance claims, consumers are often charged high fees by the claims manager, who has done absolutely nothing for them. As we all know, following the High Court judgment, banks are required to pay refunds and have set aside billions of pounds for that purpose. All the consumer needs to do is fill in a form; they do not need the intervention of a claims management company. I believe that many consumers have been misled into entering into contracts with claims management companies, as they have been falsely led to believe that they need such companies to do it for them or that they will receive a higher refund by doing so. That appears to be a breach of existing rules, which state that claims management companies should advise clients to pursue a case only if it is in the client’s best interests. Clearly, in the case of PPI refunds, that is not the case. In addition to implementing the recent proposals for regulatory reform, the MOJ could also consider whether it is properly enforcing existing rules when claims managers have clearly been overly aggressive in securing a consumer contract, in contravention of the rule that they should act in clients’ best interests.

I should acknowledge that there is a role for claims management companies in securing appropriate settlement for consumers. However, as I said, the industry has grown significantly, and we must ensure that the regulatory firm that takes action against wrongdoers is fit for purpose. Good, responsible claims managers have nothing to fear from tighter regulation. In the last 48 hours, I have received a number of representations from reasonable and well-behaved claims managers supporting the proposals for regulation and drawing attention to rogue operators. They all have much to gain from a tighter system of regulation, which will improve the industry’s current ambulance-chasing reputation.

I broadly welcome the Government’s proposals, but they were modest in sneaking out the consultation over the summer. Hitherto, the Ministry has done a reasonably good job, although I qualify that by saying that the industry has grown more quickly than the regulatory team can reasonably manage. I am not arguing for a bigger regulator, but for tighter rules and for the regulator to have the tools to do the job expected of it.

Currently, approximately 3,000 claims management companies are authorised by the Ministry, which has been active in trying to weed out rogue operators. This year, 50 have had their authorisation cancelled; last year it was 96, and the year before that it was 115. It is evidence that the Ministry is taking appropriate action. None the less, the scale of the problem is bigger than the current team can reasonably manage. I draw attention particularly to the PPI claims industry, which will be the focus of my remarks. Other colleagues might wish to refer to other types of claim, but PPI highlights most of all where the real consumer detriment is taking place.

I would like to set the scene by describing what the Ministry is up against before addressing whether the Government’s proposals go far enough and what other actions I would like them to take. The Sunday Times reports that the industry is earning £1 billion from PPI claims alone. That estimate actually appears rather conservative to me when the issue is examined in detail. We are also witnessing a period of much more aggressive business-seeking. I am aware of an exchange in the other place during which Justice Minister Lord McNally revealed that he received five or six such texts a day. If the Minister responsible is being chased in that way, it shows what a challenge less able and more vulnerable consumers face in keeping such people at bay.

[Jonathan Evans (Cardiff North) (Con)]

I congratulate my hon. Friend on drawing attention to this important issue. On her £1 billion estimate of the income from PPI claims management companies, she will be aware that the latest indications from the banks are that some £15 billion may have been set aside for PPI, yet some claims management companies charge more than 25% of compensation in fees. Does that not make her point about the £1 billion being a severe underestimate of the industry’s likely income?

[Jackie Doyle-Price]

My hon. Friend has articulated the point far better than I have. The evidence shows that the average cost of a claim through a company is 30% of the refund plus VAT. That is a significant bill. His other point is that the banks have set aside a particular figure to settle PPI claims. Able and savvy consumers who realise their rights have already filed their claims directly, but a significant pot of money remains. The companies know that it is sitting there, and they will go out and get as big a share of that income as they can. I completely endorse his view that £1 billion in fees is a considerable underestimate.

As I said, PPI claims management companies are totally superfluous. Consumers are simply being ripped off. Citizens Advice has also highlighted the detriment caused by such companies; in fact, it goes out of its way to say that such companies deliberately prey on the elderly and those out of work. I do not know whether hon. Members have much opportunity to watch daytime television, but if they do, they will see the advertising behaviour in which such companies engage. During a typical morning TV show, the commercial breaks generally consist of ads for debt consolidation companies, personal injury claims companies and one or two PPI claims companies. Clearly, consumers watching TV at that time will often be the very vulnerable, including the elderly and those out of work. They provide easy prey. They are being sold a product on the premise, “You don’t have to do anything; we’ll just send you a cheque.”

In pursuit of such easy money, claims management companies are engaging in very aggressive marketing practices based on misleading consumers. I am afraid I have a rogues’ gallery. Gladstone Brookes took £25 million in fees during the first half of this year. Gladstone Brookes has been reprimanded by the Advertising Standards Authority on more than one occasion for misleading advertising on PPI claims.

A complaint was made about a TV ad which stated:

“Reclaiming PPI takes up your time—Fact”,

next to a ticking clock. The Advertising Standards Authority ruled that, while the ad did not state that reclaiming PPI takes a lot of time, the ticking clock was designed to imply that that was the case, so it ruled that the ad could no longer be used. Gladstone Brookes, however, did not let the subject drop there, and it continues to use advertising that leads consumers to believe that they have only a limited amount of time in which to submit their claim. Frankly, that is misleading. Another company, Mitchell Farrar has earned £50 million so far this year and is currently spending £1 million a month on advertising, which shows how lucrative the business is to such companies, because they are prepared to spend that amount of money chasing up such opportunities.

People are being hounded daily by text and e-mail. Which? has found that a staggering 74% of people in this country have been contacted directly by claims management companies. I am sure that everyone in the Chamber has received at least one tiresome text message. In the past week I have received two, one of which read:

“We have been trying to contact you regarding your PPI claim, we now have details of how much you are due, just reply POST and we will post you a pack out”.

That statement is clearly untrue. The second text read:

“Records passed to us show you’re entitled to a refund of approximately £2,130 in compensation from mis-selling of PPI on your credit card or loan”.

Such a tactic is common among those companies. They use a four-figure sum in a text message that is clearly designed to seduce the recipient into replying, because who would not reply to the offer of free money? [Interruption.] I see that the hon. Member for Dumfries and Galloway (Mr Brown) has just received one—good evidence that the firms are being aggressive in chasing business leads. In fact, the ability to use text messages is a cheap and risk-free way of doing it, particularly if intermediaries are used to dispense the texts. The Government need to look at the whole area, which I am aware goes beyond the narrow scope of the Ministry’s interest and involves regulators such as Ofcom and the Information Commissioner. We need to join up their activity to ensure that consumers are protected.

That is the marketing, but those practices are nothing compared with what happens to consumers who actually jump at the bait and engage with a claims manager. Which? tells me that it is regularly contacted by consumers who have had negative experiences when dealing with claims management companies to retrieve mis-sold PPI. One case involved a company called We Fight Any Claim, which approached a consumer about claiming back mis-sold PPI on his credit cards, and asked for £420 as an up-front fee. He agreed to the payment, but it then proceeded to take up to £10,000 from his credit cards. It later transpired that he had never had PPI in the first place, but We Fight Any Claim retained his money. Only when the Ministry of Justice intervened was most of his money refunded, although We Fight Any Claim still retained a £735 admin fee, which he has been unable to get refunded, and he had never been compensated for the financial difficulty caused by the removal of £10,000 from his cards. It is shocking that companies have the audacity to behave in such a way, and we need to ensure that we have the regulatory system to prevent it from happening.

The industry is less than transparent about fees and charges when engaging with clients, so consumers are approached aggressively, told that they can get hold of some money and left in ignorance about the potential costs they are incurring. I have a constituent who was approached about PPI, and that led her to initiate a claim with the Halifax, netting her a refund of approximately £2,000. She was staggered to receive an invoice for more than £700, when all the company had done was send her the form, while she had engaged with the Halifax directly. That is not unusual, as I said, and the fees are typically 30% of the refund plus VAT.

The time is certainly right to revise the rules. The existing rules predate the PPI claims industry and have been shown by it to be deficient. I am pleased that the Ministry has now proposed that all contracts need to be signed physically by the consumer, which hopefully will deal with the issue of consumers suddenly being faced with massive, unanticipated bills. I encourage the Government to enact that provision without delay. Also, claims management companies need to be clearer about their fees, so that people are not faced with a bill they were not expecting. The Government should go further and ban up-front fees across the board. Which? and some industry bodies have called for that. I referred earlier to a consumer who was cold-called and then charged £8,000 up front. In no way could a regulated system that protects consumers allow that to happen.

As I said, the industry preys on the vulnerable. Which? told me of the case of an elderly gentleman who is 87 years old, deaf, housebound, frail, on the telephone preference register and with no PPI or debts. He was cold-called by a claims management company and persuaded to give his credit card details; it then proceeded to take £250. I call that theft, and I hope the Government will consider banning up-front fees across the board.

The Government have also proposed to improve consumers’ ability to get redress and have their complaints managed effectively by passing responsibility to the legal services ombudsman—a move that I understand was intended to take effect next April, although there is concern that the timetable might have slipped. Can the Minister give us some clarity and a firm reassurance as to when that will occur, so that the ombudsman can prepare to take on such complaints? Clearly, the volume of such cases, which we have all witnessed, has resource implications for the ombudsman. At present, the ombudsman expects to investigate 4,000 claims a year, of which 95% are likely to be PPI-related, as well as a spike in claims at the beginning of its responsibility as consumers become aware that there is somewhere to go with a complaint. The ombudsman needs to make plans so that the right resources are in place. I am told that it needs to know this month, for planning and recruitment purposes, if it is to take responsibility from April. I therefore invite the Minister to confirm whether that will be the case.

It is also important that claims management companies make consumers aware of their debt recovery procedures before entering into a contract. Obviously, they are dealing with people who are taking on substantial volumes of credit and have debt issues. We have seen examples of lenders that have refunded customers’ PPI but, rather than send a cheque, have offset the amount against outstanding debt liabilities. That is sensible and in the interests of the consumer, but then, the management company still sends an invoice to the customer demanding a significant refund, which can add to debt problems. We encourage the Government to oblige claims management companies to fall under the terms of Office of Fair Trading debt collection guidance, so that such aggressive behaviour towards consumers is not tolerated by the regulatory regime.

Other agencies have an interest in the better regulation of claims management companies. The key responsibility falls to the Ministry of Justice, but Ofcom and the Information Commissioner have an interest in how the companies are marketing, while the financial ombudsman service is challenged by the often vexatious claims. I am told that of the more than 5,500 groundless claims brought to the FOS—only 2.5% of the total complaints it deals with, but nevertheless generating resource implications for the industry as well as the FOS—the majority were from claims management companies and 99% were about PPI policies that had never been sold. The companies have a risk-free opportunity to seek a refund. All they need to do is to submit a form to the FOS, for which the industry bears the cost, and if they get lucky they earn some commission, and if they do not there is no cost.

I want the Government to consider whether the companies should be faced with a bill for pursuing vexatious claims. The normal fee for a case handled by the FOS is £500. If it was clear that the companies would bear the cost of submitting those claims, they might try a little harder to ascertain whether customers had PPI in the first place. That is important, not least to ensure that all the agencies involved in regulating the sector have recourse to funds from the industry to deal with the malpractice that it is causing.

I encourage the Minister to join up with other agencies to ensure that everything is covered when regulation is tightened. I also encourage her to look more closely at what more can be done to tackle the problem of unsolicited text messages and uninvited phone calls. The companies’ actions are risk free, and they often use intermediaries so they can distance themselves from activities falling outside the scope of their regulators. We must make them more responsible for the partner organisations they deal with and the detrimental behaviour they undertake.

I am pleased to have had the opportunity to raise this matter now. I know the Government are considering action shortly, and I hope this debate will encourage them in the right direction, and to do more. I look forward to hon. Members’ contributions.

--- Later in debate ---

[Yvonne Fovargue]

I agree. Quite often, the texts are from abroad from what is almost a harvesting service. Although companies should not be sending unsolicited texts and making unsolicited phone calls, they will go back years and years and say, “Well, you gave us your details. You didn’t tick the box years ago to say that you didn’t want to receive marketing texts.” It is very hard to disprove that. There is a system whereby people can forward spam texts to their mobile provider to get them blocked, but there are different numbers for different mobile providers, and people have to remember the code to forward them and actually take action to do that. I do not want to do that; I just do not want to get the texts in the first place.

[Jonathan Evans]

Analogous to unsolicited texts are unsolicited e-mails. One can see that many such e-mails come from abroad—in my case, from New York, curiously enough. Surely, though, what we should look for in terms of regulation is where those introductions end up. In other words, if anyone takes up cases that have been harvested in that way, should there not be some regulation to try to tackle the people who are then accepting the reference?

[Yvonne Fovargue]

I agree. In this new world of electronic communications, there need to be new regulations to stop people being bombarded with texts, phone calls and e-mails that they spend their time deleting.

Let me move on. The consumer has contacted the claims management company; they have had the text and believe that they might get some money. As we have heard, some companies immediately demand an up-front fee in addition to a win fee. I have spoken many times in other debates of the detriment that up-front fees cause in the area of debt management plans. That applies equally in the claims management area. People are being persuaded—I hesitate to use the word “conned”, but it could well be appropriate—to give their credit and debit card details, as we have heard, and deductions are being made before any agreement has been signed and before people even know what they are signing up for. Indeed, the agreement is often vague to the point of misrepresentation.

Citizens Advice has seen clients who signed documents stating unequivocally that the service was free, but when they queried a service charge of 25% plus VAT on the award, they were sent a second, unsigned document that set out the service charge, which they had never seen before. The claims management company has then started court action to recover the service charge of about £300 from the award of approximately £1,000. The person in question believed, according to the document that they had seen, that it was a free service. I repeat that they had never seen the document that said that there was a service charge. It is obvious that all contracts should be written in clear English, be displayed on any websites and be valid only if signed by the consumer. I agree with the 81% of consumers in the Which? survey who say that up-front fees should be banned.

Some people do choose to use the services of a claims management company rather than claim themselves, despite the fact that it is an easy process. At this point, I would like to put in a plug for the MoneySavingExpert website, which has a very clear guide to claiming. It is completely free and very quick to do.

However, people should not be bullied and harassed into signing up. They should understand the terms of the contract that they are signing and be happy to accept them. They should not be subject to up-front fees and they should be able to complain if the service that they receive is not satisfactory, which it is not in a number of cases. I hope that the legal ombudsman will be able to take such complaints very soon.

Those of us who do not wish to take out a payday loan, a debt management plan or a claim against mis-sold PPI, and hopefully never will wish to, and those who have not had an accident should not be harassed by unsolicited phone calls and texts and should not need to take action to avoid them. We should simply be able to opt in to receive texts and calls if we want them. The default position should be the status quo: no call, unless requested.

The claims management industry is out of control. It preys on vulnerable people by promising large sums of money and often failing to deliver. At the moment, it is operating to the detriment of the consumer by charging up-front fees and unwarranted service charges for providing very little service. Claims management companies are getting money for old rope, as my mother would have said. It is our job to ensure that they are strictly bound and tied up in regulation.

[Jonathan Evans (Cardiff North) (Con)]

I draw hon. Members’ attention to the Register of Members’ Financial Interests. I am chairman of a large life insurance consolidator. It is not open to new business, so is not directly involved in the claims management sphere, because much of its business comes from many years ago. Hon. Members should be aware of my position, because it sets some context for the remarks I will make. I am also chair of the all-party group on insurance and financial services, and, as my hon. Friend the Member for South Derbyshire (Heather Wheeler) said, the group has been heavily engaged in looking at claims management companies. Over the past year or so, we have heard from representatives from the Ministry of Justice, the legal ombudsman and claims management companies. It is important that hon. Members are aware that I speak from that perspective.

When we engage in a debate about such issues, it is important to remember the context. We heard a great deal about the actions of claims management companies in pursuit of payment protection insurance claims. In my remarks, I will add to those criticisms and suggest ways that practice can be improved. Let us not lose sight of the fact that bankers engaged in selling PPI to a lot of people who did not need it. The hon. Member for Makerfield (Yvonne Fovargue), who had a long career in Citizens Advice, drew attention to the fact that people’s rights needed to be identified. That is the context. The banking industry did not respond quickly or adequately enough. Too often, it dismissed the claims made by wronged consumers, and we must focus on the impact on consumers.

I say to the Claims Standards Council and those who represent claims management companies that we are on the side of consumers and we want people to have access to justice. We are not protecting the insurance or banking industries from having to compensate properly. If people have been wronged, it is surely unacceptable that they should be wronged a second time and that people who want to get rich quick can siphon off up to 30% of their compensation.

[Jackie Doyle-Price]

My hon. Friend will be aware that widespread mis-selling of PPI was identified as far back as 2004, but it took until 2010 for a regulatory intervention, which provided redress to consumers, to be enforced. Does that not make the case for being much fleeter of foot in dealing with such wrongdoing and underline the case for dealing with claims management companies now?

[Jonathan Evans]

That is absolutely right, but my hon. Friend’s point also endorses what I have said, because if the banks had been quick enough post-2004, the problems with claims management companies would not have developed. In a sense, the companies are taking advantage of the banks’ recognition of the liability, and the recognition more generally, to siphon away as much of the money as they possibly can.

Hon. Members have already drawn attention to some misgivings. Mr Kevin Rousell from the Ministry of Justice, who has responsibility for the relevant portfolio, addressed our all-party group. He said that the Government intended to change the rules on advertising on television because they recognised that many of these companies used the label “Regulated by the Ministry of Justice”, as though it were some sort of Government endorsement. Many companies that have had complaints raised against them, including some that my hon. Friend the Member for Thurrock referred to, use the fact that they are regulated by the Ministry of Justice as a badge of honour. The Ministry of Justice recognises that it is used misleadingly: people think that the Ministry of Justice in a sense endorses the activities of such companies, whereas the reality is that it is in the process of getting a grip on their activities.

The hon. Member for Makerfield referred to the Which? survey, which I was also going to draw attention to, primarily because it was undertaken more than a year ago, so we have known for 13 months that up to 60% of claims management companies were probably completely ignoring the rules. I reiterate that this is not an attack on claims management companies. I wish that the 40% who obeyed the rules had been the example for the whole industry. It is not good enough for the Claims Standards Council to say that debating the problems would withdraw access to justice, because it places itself in the position of excusing the failure of 60% of its members to comply with the rules.

[Yvonne Fovargue]

Does the hon. Gentleman agree that the fact that 60% of companies are failing demonstrates that there should be powers to suspend companies that act to severe consumer detriment? We should not allow them to have a business plan predicated on being able to carry on for a couple of years, then drop and start up again with another name.

[Jonathan Evans]

I not only agree with that point but think that it makes the case for taking much more severe action. The flow of PPI cases will undoubtedly work its way through the system and people will look for other sources of revenue, so by the time we catch up, I fear that the horse will have bolted. For that reason, we must have firm regulation.

The problem is that there is confusion about who regulates this field. We have a claims management regulator within the Ministry of Justice, but that was set up to approve, as it were, or otherwise, people engaged in the business. It has been responsible for the industry increasing from 40 companies to 3,007, according to its last annual report. As my hon. Friend the Member for Thurrock indicated, the regulator’s powers are limited, which is why the Government have been rightly looking at how they can firm up the process, including introducing an independent complaints process and placing the responsibility for it with the legal ombudsman. The chief ombudsman, Adam Sampson, also appeared before the all-party group. Hon. Members who were present will know that he is enthusiastically looking forward to looking at such complaints.

[David Mowat (Warrington South) (Con)]

My hon. Friend is making good points about regulatory failure and the Ministry of Justice “kitemark”. A large part of this shoddy industry is in effect administered by solicitors, who are supposed to be regulated by the Law Society. The Government have given it particular powers, including monopoly powers, so it should be in a good position. Does he agree that the Law Society has failed to manage its people effectively in respect of this shoddy industry?

[Jonathan Evans]

My hon. Friend puts me in a difficult position. Although I am no longer a member of the Law Society, I am a solicitor of the Supreme Court, albeit no longer in practice. As I will go on to say, people in this area should be regulated. His complaint about the effectiveness of the regulation in relation to the legal profession is one thing; the difficulty about claims management companies is that, for the most part, many people introducing the business are not regulated at all.

I move on to the point that I raised with the hon. Member for Makerfield, whose support I am grateful for.

[David Mowat]

I did not realise that my hon. Friend was a member of the Law Society. I apologise for putting him on the spot.

[Jonathan Evans]

No, I am a non-practising solicitor.

[David Mowat]

My hon. Friend makes the point that some regulation is better than none whatever, but I am not sure that that is true: if regulation is so weak and ineffective and the public think that responsible, professional people are acting in this shoddy way, I simply do not think that that is good enough.

[Jonathan Evans]

I am not sure that the legal profession figures as highly in the activities of claims management companies as it might in other cases. For instance, in the context of the position of solicitors in injury claims and such things, he and I may well have a more productive exchange, but I am not aware that they figure so heavily in the context of claims management companies.

I return to my earlier point, which I intend to develop. For cases to come through and claims to be made, a body of introductions has to be generated, which is done through texts and e-mails. The Minister in the Lords said that he had received a number of texts, and our e-mail accounts are full of such unregulated approaches from outside the United Kingdom. It is very difficult to know how on earth people can try to stem that flow of unsolicited approaches, without the removal of the financial incentive. The all-party group heard from a representative of the claims management companies, and I challenged him on that by suggesting that those companies accept batches of introductions that may well come through illegal routes. His response was, “Well, we are in a market. If we do not buy those introductions, somebody else will.”

This is an area in which I, as a Conservative, might favour regulation. Claims management companies putting forward such claims must not only be regulated by the Ministry of Justice, but should not take on claims introduced by those who are not regulated, for instance by a professional body or the Ministry of Justice. I am absolutely sure that the outcome of that would be no more need for the Information Commissioner. The texts would dry up, because people would not send them if there was no financial return. The reason why we have all the texts is, of course, because there is a return.

Consumers’ heads must be spinning with all this: we have the Ministry of Justice, the legal ombudsman, the Information Commissioner—we have talked about his responsibilities—and the Financial Ombudsman Service, to which all PPI claims have to go, as we know. I have looked at the various representations: The Government have now proposed a process whereby complaints go to the Legal Ombudsman, while the Association of British Insurers has suggested that they should go to the Financial Conduct Authority of the Financial Services Authority. I know that the hon. Member for Makerfield understands that wealth of complication. I will only say that if we are looking for effective regulation, I have much more faith in the FCA, which is being set up under Martin Wheatley. That would send a certain message, if I may use that expression, to the industry.

Let me turn to some areas where we need to see progress. The first is that, as has been mentioned by nearly every speaker, we should not have up-front fees. The Government are in a position to regulate on that, which would very swiftly remove one of the serious concerns raised by several colleagues. My hon. Friend the Member for Thurrock, whom I again congratulate on raising this important issue, gave a clear constituency example. The second is the introduction of a cooling-off period. That would clearly be helpful in the case that the hon. Member for Dumfries and Galloway (Mr Brown) talked about—he spoke earlier, but has now had to go elsewhere—and in others that have been cited in this debate.

One area that has not been mentioned, but which I believe would be appropriate, is the introduction of a sector-wide compensation scheme. Something that is not widely understood in the world of financial services is that a whole range of financial companies that are regulated within the United Kingdom maintain funds for paying to the Financial Services Compensation Scheme. In the past, I have criticised the scheme because the people who administer it like to suggest that the money it pays out is somehow provided by the Government. A former Chancellor of the Exchequer boasted about funds being made available through the scheme, which he had ensured were paid, as though that was central Government spending.

In reality, whether they are insurance companies, insurance brokers, bankers or financial intermediaries, all such companies, as a condition of their being regulated, have to take their place in the Financial Services Compensation Scheme, so that if someone goes bust, they can stand behind the liabilities of that individual and ensure that a fund of money is available in the scheme to meet such liabilities. One can imagine, in the context of what has happened in financial services in the past few years, that that is a real liability, to which people must give a lot of attention.

Yet an industry of claims management companies has developed. My hon. Friend the Member for Thurrock rightly indicated that, at £1 billion, its income is a massive understatement. She is right because, annually, it is likely to be two or three times that figure. Surely, we have the opportunity at the moment to ensure a sector-wide compensation scheme, so that people who want to get rich quick and disappear tomorrow are not in a position to do so, because a fund will have been created to meet the liabilities that they leave behind.

To return to the sourcing of introductions, which I mentioned earlier, it would be very simple to impose a requirement not only that all claims management companies must be regulated, but that they can accept introductions only from those that are similarly regulated.

Finally, we must see claims management companies conform to regulatory requirements. I return to the point made by the hon. Member for Makerfield about the Which? report, which I referred to earlier. We already have very clear rules in place, but 12 or 14 months ago, 60% of claims management companies were clearly ignoring them. On that basis, there must be a consequence—that is not only my view—about seeking redress: we should put such people out of business and, at the same time, ensure that they have the funds to meet any liabilities they may have to wronged individuals. My view is that it is quite right that those who have failed in financial services, be they bankers, insurers or insurance intermediaries, must compensate consumers. Here we have a real scandal, in which our constituents are today seeing up to 30% of their compensation being sliced away. In my view, action is urgently necessary by the Government, and I have great confidence in the Minister’s ability to tell us what that action will be.

[Mr Andy Slaughter (Hammersmith) (Lab)]

It is a great pleasure to be here under your chairmanship this afternoon, Sir Alan. It has been an interesting and well informed debate, and I thank the hon. Member for Thurrock (Jackie Doyle-Price) for securing it. We have heard some eloquent speeches on this substantial problem that have called on both professional expertise and personal experience—either directly or through constituents. The hon. Lady was right to concentrate her comments on payment protection insurance because the legal ombudsman brief for this debate says that when it takes over responsibility for dealing with consumer complaints, it expects 95% of them to be related to PPI. I was alarmed to hear that that transfer may be delayed, and I hope the Minister will deal with that and tell us when it will take place.

PPI is not the only area of concern, and I will go on to mention some other worrying aspects of CMCs and their operations. There have been other abuses in the financial services sector, such as endowment mis-selling and bank charges. My hon. Friend the Member for Makerfield (Yvonne Fovargue), who has huge experience in this area and in consumer protection through her role with the Citizens Advice service, alluded to the fact that CMCs have been let in thanks to the appalling performance of the financial services sector in this country over the past few years. If the banks had not mis-sold PPI and overcharged, and if insurance companies had not mis-sold endowment policies, there would have been no opportunities for the CMCs.

In the informative briefing that we had this afternoon, the building societies pointed out that they were responsible for a mere £200 million of mis-selling, whereas the banks have set aside £12 billion for mis-selling one financial product. That fact alone shows the extraordinary depth to which this country’s banking industry has sunk over the past few years. Effectively, the opportunity for CMCs was created by the poor regulation—and, more importantly, by the poor performance—of the financial services sector. Furthermore, the problem was also encouraged by the poor performance of the Ministry of Justice, which has not taken these matters seriously.

At the back of the debate pack are a whole series of questions that I asked in 2011 and earlier this year. In reply to one, the Minister’s predecessor, the hon. Member for Huntingdon (Mr Djanogly), said:

“At the end of July 2011, eight employees and 39 contracted staff work in the Department's claims management regulation unit. Three employees and seven contracted staff handle consumer advice matters, including complaints.”—[Official Report, 5 September 2011; Vol. 532, c. 273W.]

That is not an adequate provision for the degree of mis-selling and abuse that has taken place. That position has now changed, and the Minister will update us on current staffing and operational levels. None the less, those previous levels reflected, at the very least, complacency on the part of all those involved.

Two consultations are under way—only one is still open—on claims management companies. The second one relates to fees, and the Government are quite properly consulting on whether regulation fees should be raised, so that the costs of regulation are better covered by the CMCs, which theoretically make substantial profits. I am also pleased that the legal ombudsman will be taking over responsibility for the matter, and I hope it will do a good job.

We have an interesting brief from the legal ombudsman laying out the various considerations and concerns. The common theme among the concerned parties who lobbied Members before today’s debate is that the Government’s consultation on the regulation of CMCs is not going far enough. It is right, as the August consultation asked, that contracts should be in writing and that CMCs should be required to inform clients of any supervisional variation to the business authorisation once in effect. It is also right that when CMCs refer to their regulatory status, they should say that they are regulated by the Claims Management Regulation unit rather than the Ministry of Justice; many have been suggesting that they have Ministry of Justice endorsement.

Although all those points are welcome, they do not, however, deal with fraudulent claims or the recycling of claims. I should like to see a requirement that claimants must disclose whether they have previously interacted with other law firms or CMCs. More importantly, the whole area of cold-calling, SMS texting and so on, is not dealt with. The main problems that have been raised this afternoon, such as the 25% to 30% that CMCs are raking off from claims—the no-sale claims—have not been addressed. In any other walk of life, it would be extraordinary for a major industry to establish itself on the back of pursuing non-existent claims. In many cases, the parties who receive the texts or respond to the adverts are not fully aware of all the issues. Part of the problem with mis-selling to people who are vulnerable—both in an orthodox and a financial sense—is that they do not have the financial education or skills to deal with the hard sell in the first place, or indeed the hard sell of the CMCs in the second place.

[Jonathan Evans]

Lest it be thought that one is against those people who are unsure whether they have PPI, the Financial Ombudsman Service has made it clear that there is an obligation on all financial services companies to respond to a request to find out whether someone had a PPI contract. Therefore, all those CMCs could easily make that inquiry first before submitting a claim.

[Mr Slaughter]

They could, but they clearly do not. CMCs see a lucrative industry, because there is relatively little cost to them. I am not quite sure what they hope to get out of it in the end, other than perhaps nuisance payments both to make the claim and to make the reference to the financial ombudsman. Given the sharp practice that is clearly involved in the sector, I am not sure whether the Ministry of Justice’s proposals are up to the mark in dealing with it. We have heard some good examples of companies that simply disappear overnight and reappear in another guise. I am not sure whether enforcement is dealt with sufficiently in the current proposals.

--- Later in debate ---

[Mr Slaughter]

That is a good point. We have not spent a lot of time discussing whiplash today; I had thought that we might spend a little more. The situation is exactly the same: there is fraud in the area of whiplash claims, particularly soft tissue injury claims. The figures compiled by APIL show that 80% of sufferers of such injuries either report their symptoms accurately or underplay them. That means that 20% are perhaps not reporting their symptoms accurately or are exaggerating them. That puts things into perspective. I do not believe that a massive amount of fraud is going on, but a significant amount is going on and it needs to be tackled.

[Jonathan Evans]

The hon. Gentleman gives the view of APIL, but its briefing also says that 80% of these victims have an accurate medical diagnosis. Yet the all-party group on insurance and financial services, which I chair, heard evidence from doctors saying, “You can’t diagnose whiplash. It’s actually impossible.”

[Mr Slaughter]

Some of us may have qualifications in some areas, but I have to say that I have no medical qualification and I do not know whether the hon. Gentleman has one to add to his other distinguished qualifications. We will not resolve the issue of whiplash this afternoon, but to write off soft tissue injury and say that there is no such thing is taking matters too far the other way.

I will quote one other statistic. As we know, almost 30% of claims are encouraged by insurers. I have one or two examples here from constituents of mine who had minor road traffic accidents, and who then had their details sold on by their insurers. So we have insurance companies that—presumably to make a profit—either own or co-own claims management companies, and that are selling on details and engaging in third-party capture, which of course means they are paying out money without any medical evidence whatsoever.

I am not saying this is a black and white issue. I am saying, “Let us identify who the rogues are, crack down on them and not be distracted by them from our other purposes.”

Criminal Injuries Compensation Scheme

Jonathan Evans Excerpts

Wednesday 7th November 2012 Commons Chamber

[Sadiq Khan]

There are many words that I would use to describe the former Justice Minister, but “ignorant” is not one of them. He will know that people are eligible for this compensation only if the offender cannot pay the compensation because he has not been found or has no insurance. I will come to that point shortly, and the hon. Gentleman will be able to rectify the error in what he has just said.

The compensation cut will cover injuries such as significant facial scarring, punctured lungs, permanent brain injuries affecting balance and fractured joints that lead to continual significant disability. Those are not minor scrapes, as the Government Front Bench would have us think—far from it. Some 60% of the victims of the 7/7 attacks who received compensation would be subject to these reductions. Only 9% of them would have their compensation protected under these plans. Government Members know this. Indeed, at the delegated legislation Committee that initially discussed the changes, the right hon. Member for Wokingham, who deserves credit for being part of the Cabinet that put this scheme on a statutory footing, said:

“I have never been shy about saying that I would like us as a Government to spend less overall, but I have never once thought that it had to be done by cutting something so sensitive or giving a worse deal to the disabled, the poor or the most vulnerable. I hope that the Government will think again.”

He also said:

“I want Members to understand that the last place I would look for savings would be benefits and payments to the vulnerable, injured and incapacitated—indeed, I would not look there at all. If anything, we should be more generous. I did not come into Parliament to see those things cut.”—[Official Report, First Delegated Legislation Committee, 10 September 2012; c. 19-22.]

To be fair to the right hon. Gentleman, I should say that he also suggested where savings could be made in the administrative costs of the scheme—as one would expect from him.

What about the hon. Member for Ealing Central and Acton (Angie Bray)? She said that

“rowing back on compensation for postal workers seems strange”.—[Official Report, First Delegated Legislation Committee, 10 September 2012; c. 5.]

If the hon. Member for Cardiff North (Jonathan Evans) will forgive me, I will not read his entire speech, but, with his permission and the indulgence of House, I will read two paragraphs:

“The aspect of the greatest concern to me is dog attacks, certainly upon postal workers but particularly upon children. I will mention just one case, which relates to a Labour councillor in my constituency, Councillor Dilwar Ali—the hon. Member for Llanelli probably knows him, as he is very active in Welsh political circles. His young son was the victim of an horrific dog attack that has been the subject of widespread press and television attention. Reconstructive surgery was needed on this poor young child’s face. The person in charge of the dog did not set the dog on the child but failed to exercise any sort of control over it, and he was subsequently sent to prison. He will therefore not be in a position”—

the hon. Member for Reigate (Mr Blunt) may want to listen to this—

“to be sued in the civil courts. Criminal injuries compensation is the only resource available to that child. I say to my hon. Friend the Minister that I do not want to be asked to vote today in favour of a change that says to that child, ‘From now on, because of the difficulties of the deficit, you’re not going to get any compensation.’”

The hon. Member for Cardiff North went on to say to his Front Bench:

“I have the greatest respect for my hon. Friend, and I congratulate her on her appointment, but she has just assumed the post and this is an inheritance—some would say a hospital pass—from her predecessors in the Department. I ask her and the Secretary of State to reconsider the proposal and examine the points made in this debate.”—[Official Report, First Delegated Legislation Committee, 10 September 2012; c. 19.]

[Jonathan Evans (Cardiff North) (Con)]

May I just say to the right hon. Gentleman that I have never sat in the House and heard somebody from the Opposition Benches quote me with approval at such length? Let me make it clear to the House that I do not withdraw a word of what I said. I stand by every one of them. However, I am sure that he would not want to mislead the House either. In the course of my remarks, I made it clear that I was prepared to accept the Minister’s arguments regarding the need for a change in the scheme and for a more efficient system. I also made it clear that the budget currently bears no relation to the number of people who would be eligible for compensation. It was for that reason that change was necessary. The Opposition’s motion, as I understand it, would result in no change.

[Sadiq Khan]

The hon. Gentleman has been very fair. At the outset, I said that I accept that there should be a reduction in the budget and that I am willing to work with the Government if they reconsider the draft scheme, which, as he knows, is identical to the one that gave him so much difficulty.

--- Later in debate ---

[Sadiq Khan]

I can understand why the hon. Gentleman is so emotional about his legacy, which I will come to shortly. More money will not go to victims as a consequence of the Government’s plans. More money will be wasted on commissioning services for victims around the country, but more money will not go to victims.

The £50 million cut arising from the draft scheme is not being added to compensation for the most serious injuries. Not a single award is increasing. Even the hon. Member for Westmorland and Lonsdale (Tim Farron)—the president of the Liberal Democrats, who is not in his place—who sat on the most recent Delegated Legislation Committee, repeated the myth. He is wrong. He said:

“Many of us feel that it is fair to redistribute money within the pot to the victims of crime with the most serious injuries,”

so that most of it goes to those

“who have suffered the most incapacitating injuries with the longest lasting impact.”—[Official Report, Seventh Delegated Legislation Committee, 1 November 2012; c. 19.]

That is another example of somebody being misled by the myths from the Front Bench.

[Jonathan Evans]

Will the right hon. Gentleman give way?

[Sadiq Khan]

I want to make some progress, because others want to speak.

We know what the spreading of these myths and untruths is really about: building up a narrative that says that cuts must be made to the scheme if it is to survive, but those cuts are nothing to do with the sustainability of the scheme. Rather, they are part of a wider political narrative pursued by this Government—one that is as far from the “We’re all in this together” line that they espouse as we can get—in which, as has been demonstrated, innocent victims are left without support to see them through the difficult times after serious and violent crime.

The hon. Member for Reigate talked about his legacy for victims, so let us talk about it and about what the Government have done since May 2010. We have had the aborted attempts to introduce 50% sentence reductions for early guilty pleas, simply to reduce the prison population and save money. Then we had the abolition of indeterminate sentences for the most serious and violent offenders at greatest risk of reoffending. The Government have failed to accept the previous victims commissioner’s recommendation for a victims law. We have also seen the role of the victims commissioner left vacant for more than twelve months and cuts to support for victims. It is hardly surprising that the hon. Gentleman gets so emotional when these things are brought to his attention, and today we have cuts to compensation for innocent victims of crime.

Legal Aid, Sentencing and Punishment of Offenders Bill

Jonathan Evans Excerpts

Tuesday 1st November 2011 Commons Chamber

[Mr Straw]

I absolutely agree. I began this journey because of constituents’ concerns about motor insurance, and my private Member’s Bill specifically concentrates on that, but I accept entirely what the right hon. Gentleman has been saying for such a long time and what his Justice Committee said in the report that it published two weeks ago—that the ban on referral fees must be extended beyond personal injury cases.

[Jonathan Evans (Cardiff North) (Con)]

I am anxious for the right hon. Gentleman to reflect on his point about the change in the solicitors rules in 2004. It is important that the House considers the fact that up until that time, referral fees were banned by the Law Society. It was the intervention of the Office of Fair Trading that resulted in the Law Society changing that rule and recommending the creation of a marketplace, which he has rightly described as later becoming a full-scale scam.

[Mr Straw]

I said earlier today outside the House that I believe the reason why the OFT has decided rather late in the day to hold an investigation into market conditions in the motor insurance industry is that it is deeply embarrassed by the position that it took in 2004. In no sense could it be said that referral fees encourage fair trading. They are essentially a fraud on the consumer. Lord Justice Jackson, in his magisterial report, completely demolished the OFT’s case in favour of referral fees.

The other body that should examine its processes is the Legal Services Board. I accept readily the reason why the Secretary of State felt obliged to wait for its consideration of referral fees, but its consumer panel released the most extraordinary report stating that referral fees worked in the public interest. If we examine the basis of its research, we find that a third of the people whom it surveyed had received compensation for things like whiplash.

On any objective consumer evidence, and there is plenty of it, it is perfectly plain that the public collectively do not like what they are learning about how the wider insurance industry operates. They reckon they are being defrauded, and that is absolutely true. In motor insurance, for example, a conservative estimate is that at least £2 billion of the total premium income of £9 billion is additional costs caused by the merry-go-round of referral fees.

Justice and Security Green Paper

Jonathan Evans Excerpts

Wednesday 19th October 2011 Commons Chamber

[Jonathan Evans (Cardiff North) (Con)]

Does my right hon. and learned Friend recognise that there remains a high level of dissatisfaction with the degree of parliamentary scrutiny covering issues in relation to, for instance, extraordinary rendition, which was investigated in Europe in an inquiry that I was associated with but which here in this House was dealt with only by an all-party committee? In those circumstances, does he think that the changes that he is proposing will enable the Intelligence and Security Committee to look into these matters more effectively?

[Mr Clarke]

Yes, indeed; I entirely agree with my hon. Friend. I remind him that we are going to look into rendition and a lot of the other allegations once we get the Gibson inquiry under way. It is clear that that inquiry will go into all the things that have troubled my hon. Friend and other people for some years. Again, we try to do these things in parallel. We are trying to draw a line under the past and then make sure that practice in future attracts less criticism because there is less ground for it. We cannot start the Gibson inquiry until the police have completed their investigations, which are still ongoing; as soon as they have concluded them, the whole question of rendition, among other things, will be looked at by the inquiry.

Interpretation Services (Ministry of Justice)

Jonathan Evans Excerpts

Monday 10th October 2011 Commons Chamber

[Mr John Leech (Manchester, Withington) (LD)]

I am delighted to have secured this end-of-day Adjournment debate on the proposed outsourcing of interpretation services by the Ministry of Justice. I wish that it had not been necessary and that the coalition Government had recognised the mistakes made by the previous Labour Government in not taking action to stop police forces around the country outsourcing interpreting services to agencies, which has resulted in a poorer level of service not only to defendants but to police forces and the criminal justice system around the country. This is not the first time that I have raised this issue in Parliament. Back in March 2009, I secured a Westminster Hall debate in response to the north-west police forces planning to outsource their interpreting services. Unfortunately, it fell on deaf ears; I hope that it will not do so this time.

I would like particularly to thank my constituent Marc Starr, who originally brought this issue to my attention, and Geoffrey Buckingham, the chairman of the Association of Police and Court Interpreters, for providing me with a lot of information for the debate, and to recognise colleagues who have contacted me about this issue, including my right hon. Friend the Secretary of State for Business, Innovation and Skills and the hon. Member for Bromsgrove (Sajid Javid), who is in his place.

A framework agreement to regulate the supply of police and court public service interpreters has been brokered by the Ministry of Justice. Its intentions are to endeavour to ensure that interpreting services to the judiciary and police are delivered to a high standard via qualified interpreters in a way intended to save about £18 million annually against the current £60 million budget. The Ministry of Justice has decided that the best way to do so is to let a contract to a single self-regulating commercial organisation that will book interpreters, individually or through agencies, to service the police and courts; determine a rate for the job; and monitor not only the quality of the interpreters’ work and need for further training and review, but its own performance. However, it is highly questionable whether this framework agreement and Applied Language Solutions, which is the agency that will provide interpreters, will be able to meet the Ministry of Justice’s requirements.

The plans introduce three tiers of interpreters, and the intention is to rank interpreters into one of three categories, with a rate of pay of £22 for tier 1, £20 for tier 2, and £16 for tier 3. Interpreters will be ranked according to their qualifications, but also subject to the agency’s own assessment, to which already fully qualified interpreters would be expected to subject themselves at their own personal cost. These rates of pay, along with severe restrictions on travel expenses and an end to travel-time payments, will result in interpreters refusing to sign up to the agency, or to take specific jobs, because of the low rates of pay. I have received evidence from one interpreter in Greater Manchester whose current net pay after travel expenses for a typical magistrates court job in Greater Manchester is £103.75 for anything up to a three-hour job, whereas under the proposed framework agreement it would be £10 for a one-hour job or £50 for a three-hour job, which equates to £4.44 per hour for one hour, rising to £11.76 per hour if the job lasts three hours.

Perhaps an even starker example is that of a Lithuanian-speaking interpreter who sometimes has to travel to Plymouth Crown court from Surrey because of a lack of qualified Lithuanian-speaking interpreters. Under the current agreement, they would receive £246.25 after travel costs for the 11.5-hour return trip. Under the new framework agreement, this would be minus £65.10 after travel costs. Does the Minister seriously think that that is acceptable, and does he really think that this will be an incentive to accept that particular job?

[Jonathan Evans (Cardiff North) (Con)]

I assure my hon. Friend that the worries that he has outlined are shared by interpreters in Wales, whose concern is not so much the finance but the fact that the service is going to deteriorate because of the quality of interpreters who will work at these rates.

[Mr Leech]

I thank my hon. Friend for that contribution. That is a common issue that has been raised with me by interpreters around the country, in England and in Wales.

When one adds in the additional disincentives of no pension, holiday pay or sick pay, as well as no job security and no increase in interpreters’ rate of pay since 2007, it is unthinkable to assume that these proposed rates of pay and costs are suitable. It also seems perverse that the new framework agreement encourages the use of an interpreter’s car rather than public transport. Currently, standard-class fares are reimbursed in full, while the car mileage rate is 25p a mile. A higher rate of 45p a mile, which is more in line with the true cost of running a car per mile, along with parking costs, is payable only if the interpreter can show that there was no public transport option. However, under the new arrangements all calculations will be based on the use of a personal car and public transport costs will not be covered—not much of an incentive for interpreters to reduce their carbon emissions and travel on public transport.

One of the stated aims of the framework agreement is increasing the number of suitably qualified and vetted interpreters to meet the demand. There are currently around 2,300 interpreters registered with the national register of public service interpreters. Applied Language Solutions claims that 1,000 linguists have signed up to its Linguist Lounge recruitment website. That means a cut of around 1,300 qualified interpreters available to the courts system, assuming that all 1,000 are NRPSI-qualified. If they are not, the cut in qualified interpreters will be even greater. The failure of ALS to reach agreement with at least 1,300 qualified interpreters shows the level of opposition to the proposals, in spite of evidence to suggest that ALS has sought to pressurise interpreters into signing up, with thinly veiled threats that the registration is closing soon. Does the Minister think that that is appropriate behaviour for a company purporting to implement the legal interpreting and translation register, which surely must be consistently open to applicants as a public resource?

Does the Minister also think that closing the list when more than half the NRPSI-qualified interpreters have refused to sign up will increase the availability of suitably qualified and vetted interpreters? Of course it will not. We should look at the evidence from where outsourcing has already taken place and at its impact on the quality and availability of interpreters. The Ministry of Justice claimed on 6 July that “collaborative authorities” had

“concerns that NRPSI registration does not necessarily guarantee quality. The evidence for this is anecdotal, but has been consistent enough to warrant action.”

I would prefer to rely on hard evidence, and there is significant evidence that the outsourcing of interpreting services by police forces has resulted in the use of unqualified interpreters.

When Cheshire constabulary outsourced to ALS, only 34% of the interpreters provided by ALS were on the NRPSI. In Lincolnshire, outsourcing led to a reduction of registered interpreters from 68% to less than 30%. Where outsourcing has taken place there has been a significant reduction in the number of registered interpreters being used—clear evidence that the quality and availability of interpreters is reduced.

Legal Aid, Sentencing and Punishment of Offenders Bill

Jonathan Evans Excerpts

Wednesday 29th June 2011 Commons Chamber

[Sir Alan Beith (Berwick-upon-Tweed) (LD)]

The Bill deals with two important issues on which the Justice Committee has reported. Sentencing was at the core of our report on justice reinvestment towards the end of the previous Parliament, and it has been the subject of several reports on Sentencing Council guidelines. The Government’s legal aid proposals were also examined in detail in our March report.

The content of the Bill was originally the product of two major and conflicting factors: the need to respond to the financial crisis and the Lord Chancellor’s determination to make the criminal justice system more effective in preventing crime and more cost-effective in the use of resources. We recognise the financial circumstances and we welcome the willingness to think radically. Recently, however, the Bill got ambushed, and some of its content and a lot of its presentation—not to mention its title—were the subject of No. 10’s preoccupation with getting favourable tabloid headlines. Evidence-based policy does not tend to prevail in those circumstances. It is not clear, for example, that the knife crime provisions will add anything to the existing practice of the courts, which take threats involving knives very seriously, and rightly so. Personally I am not so concerned about the dropping of the 50% discounts, which had nothing to do with encouraging appropriate sentencing. The problem is, however, that, although it was unlikely ever to achieve the £100 million of savings that were canvassed for it, the Department is now expected to find alternative savings to replace them.

Thankfully, the baby has not been thrown out with the bathwater. The Lord Chancellor is still pursuing his objective of making community sentences strong and effective enough to win more confidence from both the judiciary and the public. Furthermore, payment by results will, as part of the reform of the probation service’s vital work, continue—we will be reporting on that subject shortly. We are also getting rid of the disastrous indeterminate sentences and replacing them with life sentences in the most serious cases.

The Bill could, however, have begun a process leading to the commissioning of prison and probation services more locally and by the same body. Until we do that, we will not encourage rational sentencing. Resources will not be available for things such as drug treatment and intensive supervision if they are automatically taken up by the constant expansion of the prison system. Members have a responsibility to use money effectively to prevent crime—that is what we are engaged in—and not to give people the answer that seems the most obvious one. We have a responsibility to prevent them from suffering from crime in the future by spending money as effectively as we can.

The Committee recognises the need to contain and reduce spending on the world’s most expensive legal aid system, but it has serious concerns about some of the groups affected. We suggested alternative ways of making savings, including better court and case management and restrictions on legal aid for judicial review—we welcome the Government’s moves on aspects of that latter point. We were particularly concerned that citizens advice bureaux and neighbourhood law centres would be flooded by demands for legal advice without the resources to help, so we welcome the Government’s initial response to the transition fund and debt advice. However, more will be needed. We welcome the agreement to secure savings in the wastefully inefficient administration of the Legal Services Commission, and we agree with the wider objective of discouraging unnecessary litigation. We are also glad that the Government have responded to our concerns about the definition of domestic violence.

The Government have missed an opportunity in not taking up our recommendation on the “polluter pays” principle. If Departments faced a financial penalty for having too many decisions overturned on appeal, they would change their behaviour and public money would be saved. The Government’s response concentrates on individual cases. This is an overall proposal under which, if Departments rose above a certain threshold, they would have to pay money out of their budgets. That is the only way we will effect the behavioural change and get the right decisions first time.

As I have indicated, I have particular concerns about clinical negligence cases in which determining liability is a complex problem, particularly those concerning children with serious handicaps arising from birth injury. The Under-Secretary of State for Justice, the hon. Member for Huntingdon (Mr Djanogly) wrote to me about this and said that the Department was discussing with the national health service litigation authority and other stakeholders how the commissioning of reports could be improved with joint reports, and the Secretary of State has also referred to that. However, I understand from my discussions with the NHSLA that that is not proceeding or is not proving to be practical. I hope that the Minister, when he winds up, will explain what is happening on that front. The other element in the Government’s attempt to deal with this problem was retaining after-the-event insurance for cases of this kind, but it is not clear to those who understand the system that there would be a viable market in after-the-event insurance in such a narrow field, when it has been abolished in other areas.

The Bill introduces some of Lord Justice Jackson’s proposals but not others. The proposals are a package, so if bits of them are missed out there is a real danger that they will not achieve the intended effect.

[Jonathan Evans (Cardiff North) (Con)]

Does my right hon. Friend share my concern, which has also been expressed by the right hon. Member for Blackburn (Mr Straw), about the absence of proposals on referral fees, which have been properly described as a “scandal”? They were a scandal at the time of the miners’ compensation scandal, which resulted in 27 law firms being disciplined. Does he think that that is a missing part of the Bill?

[Sir Alan Beith]

Yes I do, and I was just coming to that as my final point. First, just let me complete my earlier point by saying that the absence of qualified one-way cost shifting leaves an imbalance in the implementation of the Jackson proposals. It is not even clear from the Bill precisely what the Government are doing.

Finally, let me address what I, too, have described as the scandal of referral fees under which insurance companies and some other bodies, such as trade unions, make money from selling the details and claims of the victims of accidents. It will not be enough merely to ban referral fees, because the Government and the industry must deal with a system of fees that has a fundamental fault. If there is a system of fees in which a lawyer can still make a profit from a relatively small claim having paid hundreds of pounds for the privilege of pursuing that claim, then we have to address the fixed costs as well as the referral fees.

--- Later in debate ---

[Mr Straw]

I am afraid that I have had my ration of interventions.

Let me move on to the proposals for civil litigation reform. I established the Jackson review and fully endorsed its conclusions in January 2010. I welcome the fact that this Government are implementing it, but they are doing so only in part.

I want to pick up on the points made by the right hon. Member for Berwick-upon-Tweed (Sir Alan Beith) and the hon. Member for Cardiff North (Jonathan Evans) about referral fees and associated matters. As colleagues will know, on Monday I published the results of an investigation into what I can only describe as a racket in the motor insurance industry in which almost everyone in the chain, from recovery firms, claims companies, medical experts to insurers themselves, is paying between £200 and £1,000 in referral fees. Everybody in this chain is on the take, and the total is running into billions.

Since Monday, I have been overwhelmed by e-mails, which I am very happy to supply to the Lord Chancellor if he wishes, from members of the public and professionals with even more horrifying detail about the dodgy practices, frauds and near-frauds that are now endemic in this industry, including one from a lady who explained that she “had had an argument with her bicycle”. She was the only person present at the time, she went to hospital and ever since she has been pestered to make a claim.

[Jonathan Evans]

Will the right hon. Gentleman give way?

[Mr Straw]

No, I am sorry.

One solicitor wrote to me saying that referral fees are no more than a “form of legalised bribery”. He is right. They are the parasites eating away at the integrity of the whole of the motor insurance industry and associated professions, including lawyers. Their effect is to drive up costs, and therefore premiums, and actively to encourage individuals—

Oral Answers to Questions

Jonathan Evans Excerpts

Tuesday 15th June 2010 Commons Chamber

[Mr Clarke]

That could be a good argument, and we will look at it; evidence of that is, I think, one of the things that my hon. Friend the Under-Secretary said we would consider. We are trying to have a look at the Worboys case, which is always cited, to see how far the response to that was caused by publicity about the name of the accused person and how far it was a result of the police investigation into the nature of the rape. We can come back to that in later debate. It is not a conclusive argument. A very large number of rape cases do not involve multiple offenders; essentially, they often involve people who are well known to each other and have a history of a consensual sexual relationship.

[Jonathan Evans (Cardiff North) (Con)]

Does my right hon. and learned Friend agree that it is important that the appropriate counselling is available for victims coming forward? That counselling has recently been withdrawn in my constituency and that of the hon. Member for Cardiff West (Kevin Brennan). It is now provided by volunteers. Will my right hon. and learned Friend look at ensuring that appropriate funding is put in place for that service?

[Mr Clarke]

I certainly will. I have already referred to our commitment to try to provide new rape crisis centres, preferably using the proceeds of crime when they are recovered from criminal offenders. I strongly agree with my hon. Friend that we are long past the stage at which a woman complaining of rape is treated as if she were complaining about a handbag robbery. There is no doubt that all these cases have to be treated with considerable sensitivity because it is very difficult for a woman to bring herself to complain and not enough do so, even in the present climate of opinion.