Enterprise and Regulatory Reform Bill

Lord Browne of Ladyton Excerpts

Monday 14th January 2013 Grand Committee

[Lord Browne of Ladyton]

My Lords, I draw the Committee’s attention to my entry in the Register of Members’ Interests. I am a non-practising member of the Faculty of Advocates of Scotland. I have not practised for in excess of 15 years and I have no pecuniary interest in this piece of legislation. However, I have some knowledge of the application of the duties imposed by the Health and Safety at Work etc. Act 1974 and regulations made thereunder. I support the question in the name of my noble friend Lady Turner for many reasons, most of which have already been articulated.

My noble friends have produced valid arguments about the effect of the Government’s proposed change to the Health at Safety at Work etc. Act. It will shift the burden of proof in a significant number of cases following almost a century of struggle to establish a fair division of the burden under the law. As we have heard, it will—I may come back to this in a moment and pose some specific questions to the Minister—in future shift the burden of supporting many people who are injured in accidents at work from the private insurance industry and compulsory employer’s liability insurance on to the state. That seems to me significantly at odds with the Government’s overall ambition in relation to where the burden of costs should lie in the long term in relation to the public and private sectors.

Given my own practice and the information that many of us have obtained from those who still practise in this area, I believe that the measure will have a significant effect on the complexity that faces anybody who is injured in many accidents at work in the future. I think that the actual numbers are in dispute, but I will come back to the specific figures that have instructed this change. I understand from the Government that the relevant figure is 20,000 cases but I have no idea where that figure came from. As the Minister will realise in a moment when I draw his attention to some of his own publications, the Health and Safety Executive also has no idea how many cases this measure will affect but it will certainly shift a burden of complexity on to people. It will result in much more complex cases coming before the courts.

The information we have been given from the Association of Personal Injury Lawyers indicates that the measure will affect many thousands of cases, which will put a significant burden on the courts. We are already aware of the challenges faced by the courts in delivering public services and the delays that are being incurred. As I say, all the arguments that have been made are valid and I do not intend to repeat them. I certainly do not intend to repeat the argument made so effectively by my noble friend Lady Donaghy who mentioned the terrible circumstances in which people may be left, with no opportunity for redress in terms of placing the responsibility for compensation where it ought to lie following the sort of accidents that routinely happen in our workplaces.

The noble Baroness, Lady Brinton, is absolutely right: there needs to be a balance. However, with respect to her, I am not sure that the case that she brought to our attention had anything to do with the Health and Safety at Work etc. Act 1974. I am not sure that the individual case was exactly relevant, but that was not the point that she was making; her point was that there needs to be a balance. I agree with her, and would argue that, broadly, the balance is struck in the right place in relation to health and safety at work legislation between those duties that lie on employers for which the principle of reasonable practicability applies and those duties where there is strict liability.

The reason why it lies broadly in the right place is that this area of law has developed over a century. The HSE and all those who have worked in this area over that century have a real sense of where that balance should lie, broadly. It is not that difficult to explain why it is necessary. As my noble friend Lady Donaghy made clear, the relationship between employers and employees is not one of parity. There are very few workplaces where employees can say, “I’m worried about that machine and I’m not going to use it”, or alternatively, “I’m not going to use this piece of equipment you’ve given me, or these materials”. That is not how workplaces work; they work, normally, on the basis that people have an assurance that their employers will comply with the law and, if they are asking them to do inherently dangerous things, there will be a strict liability on them and the employer will carry the can if it goes wrong—maybe criminally, but certainly in terms of civil liability. Because that may be an unfair burden on an individual employer, we pool the responsibility. All employers accept all these responsibilities, and we have a principle called employers’ liability compulsory insurance. It is compulsory; you have to insure yourself for millions of pounds in possible liability to your employee. So we share the burden across society by that process.

Interestingly, over the years of employers’ liability compulsory insurance, the information that the HSE has published indicates that in 2010 it cost in total about £800 million, out of about £30 billion of general insurance in this country. So it is a comparatively small amount of money and the insurance industry has never made any money out of it. In fact, when I was Minister for Employment in 2004, it was in crisis, because the industry sought to do something with it that it had not done for some time and disaggregate it from the package of insurance that it was selling employers. The industry discovered that it was not making any money and that it was a loss leader. But it made a lot of money off the rest of the insurance, so they sell employers’ packages.

There is no reason to believe that from the point of view of any one individual employer the shifting of this burden from strict liability to reasonable practicability will make a jot of difference to any individual employer in terms of the regulatory burden of having to pay his insurance premium. It will not go down, because he is already getting it for less than it costs the industry. So we will not reduce regulation in any way by shifting this burden. All that we will do is shift the cost of the consequences of these accidents from that part of the market on to the public purse, which will have another consequence for the Government. I am sure that they have thought about it and that the Minister will be able to tell us his assessment of it.

At the moment, we have a set of laws in this country that mean that if you have an accident and you become a burden on the public purse for a period and then settle the claim, you have to pay back the benefits. So we have a Compensation Recovery Unit. In the last year for which there are statistics, 2011-12, the unit recovered £75,245,271.28 from accidents involving employer-employee relationships. In total, it recovered about £138 million, and some of those may also have been health and safety at work claims. But somewhere between £75 million and £138 million is being recovered by the Government from compensation that is paid because of health and safety at work claims. How much of this will now not be recovered because the claim cannot be made? Apart from the possible burden on the National Health Service and on local authorities in caring long-term for people who are injured, how much will that cost? How much of the Compensation Recovery Unit’s £75 million to £130 million a year will not be recovered by the Government because of this change. What estimate did they make of that?

Another point is: why are the Government doing this? We are given different arguments. One of them is that there is a compensation culture. I have made some references already to what the Health and Safety Executive has said about these changes but I draw your Lordships’ attention to the document I have in my hand, which is an impact assessment, Strict Liability in Health and Safety at Work Legislation. It is by the Health and Safety Executive itself. I assume that this document, which I got from the net, was presented to Ministers in the process of their assessment as to whether they should proceed with this change. It is not clear whether it was, because it is not signed or dated by the responsible Minister where it should be, but at the top it is dated 11 June 2012. It is a very instructive document because it goes through and assesses, in some detail, not only all the arguments for this possible change but all its potential consequences and tries to estimate them. It fails in every single regard.

I will read just one paragraph for the erudition of the Committee to make my point. It is paragraph 34, which is very germane. The Health and Safety Executive said:

“We assume in the absence of robust evidence that the existence of strict liability duties may contribute towards any over-compliance that exists as a result of the general perception of a ‘compensation culture’. We are however also aware that the network of influences on attitudes and behaviour towards risk is complex”.

In that one sentence, it shoots the feet from the only argument that the Government have to date put into the public domain as to why this is necessary. It is not that there is a compensation culture, because the Health and Safety Executive says in the introductory paragraphs of this report to the Government—and it is the Government’s agency—that it is not clear whether this actual culture exists. Paragraph 2 says:

“The ‘compensation culture’ (or the perception of it) in the UK has been the subject of several reviews over the last few years, but no clear evidence has been presented for its existence”,

so it kicks into touch the idea of a compensation culture and then says that it is a perception of that culture that is the argument.

As I understand it, the argument from Professor Löfstedt, which the Government have adopted, is, first, that even if there is not a compensation culture there is a perception among some employers out there that there is. They are overcomplying in relation to health and safety legislation, where there is strict liability, because they are concerned about the possibility of a compensation culture that they think exists. We are starting off on the basis that there is no proper evidence for the fundamental underpinning of this argument in the first place—at least, there is none that the Health and Safety Executive can find in the almost 40 pages of its impact assessment report to Ministers.

Secondly, if the problem is that some employers, particularly those whom Professor Löfstedt spoke to, have a perception that there is such a culture and that that is affecting the way they behave, the answer is to educate them. Of course, that is part of what Professor Löfstedt recommended. What is conspicuous by its absence in response to Professor Löfstedt’s report is a serious programme of educating employers not to be afraid of a compensation culture, which apparently does not exist, but to apply the law in the way in which they ought to.

What is the consequence of this? It is that Professor Löfstedt says, “There is a perception of a problem here”, and that if the problem is right we need—

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[Lord Browne of Ladyton]

My Lords, I was at the point in my argument where I was making the case for the basis for this change in the law being a perception of a set of circumstances which the Health and Safety Executive argues does not exist, or at least, if it does, there is no evidence that it exists. In order to reinforce this point, I refer the Minister to the Compensation Recovery Unit statistics, which he will find in the performance statistics on the DWP’s website. They show that, in relation to health and safety law, there is no compensation culture in the sense of an acceleration of claims by employees against employers. There has been an increase in claims for which benefits have been recovered, but they appear more to be motor accident claims, and there has been an increase in clinical negligence claims but claims under the employer category have gone down. Settlements recorded by the Compensation Recovery Unit have gone down from 215,000 in 2006-07 to 89,000 in 2012-12. So there are fewer than half of the claims that there were only five or six years ago. The number of cases registered by the Compensation Recovery Unit have gone from about 198,000 to 87,000 in the same period. If anything the trend is significantly down—not marginally—in relation to claims of this nature. There is no statistical evidence or other evidence that there is such a thing as a compensation culture out there in relation to health and safety at work.

Indeed, the contrary is the case, as my noble friend Lady Donaghy has made clear and as was alluded to by my noble friends. In fact, the civil process polices the health and safety at work regime because, for the very small number of cases that are prosecuted in the criminal courts as regards those accidents that happen in the workplace, the regime is policed and enforced by the ability of individuals to be able to claim against their employers. That is another shift that I suggest will happen. If this strict liability is removed, there will be significantly greater pressure on the Health and Safety Executive to prosecute cases in the criminal courts because people will demand some answer to what happened to their relatives who were either killed or injured at work. We see that in almost every other area of public life: a demand for an investigation, a trial or some form of proof. That will increase if we lose the ability for the civil courts to be able to police the health and safety legislative structure.

When Professor Löfstedt looked at this, he drew our attention to something that is very important: that we may not have precisely got the balance between reasonable foreseeability and strict liability absolutely right. Under the 1974 Act, we now have a regime in which, when regulations are made, they are strict liability regulations, unless the contrary is stated. I accept that maybe that has allowed some regulations to slip under the wire and we may have failed the test of the noble Baroness, Lady Brinton, to get the balance at precisely the right place. This is why the good professor made his recommendation that we review those regulations of strict liability. They are either in the tens, or at the very most 200; the Health and Safety Executive’s impact assessment which I referred to earlier suggests that there about 200 of them. If it is as many as 200, is that really too much of a burden for accepting the implication of the first part of his recommendation? That is, that between publication of the professor’s report and June 2013, the Government look at each regulation and see whether it was appropriate for a duty to carry the burden of strict liability, or whether we could appropriately apply reasonable forseeability to it, and therefore provide a form of defence for an employer.

The Government decided without any review, further discussion or consultation, that faced with the two options —one being to look at each of these either 20 or 200 regulations, depending on who you believe, and to decide how many of them needed still to be strict liability—they would take strict liability away from them all. They did this because it was perceived to be easier, but also because this process was all in the health and safety challenge, aptly named staff chamber process. This is apparently a process for deregulation set up by the Government in order to minimise the level of consultation on deregulation and to accelerate beyond the point of the early review to the point of decision and change. That is the answer to the questions of my noble friend Lord McKenzie of Luton about why the Government did not, after apparently accepting the professor’s recommendation, implement it. They were fixed on this staff chamber process.

I would like to be able to share with members of this Committee what really happened, but I cannot find out. Despite the fact that one can go on to the Cabinet Office’s website and click on “Health and Safety Challenge Starts Here”, “The Process, and “How it Works”, when one later clicks on something that says “Health and Safety”, it says that this consultation is now over and Professor Löfstedt has reported. It goes on to cover some other stuff that is ongoing, none of which is of any relevance to any of this. It does not say, in these circumstances of open government, what the Government actually did during the period between apparently accepting Professor Löfstedt’s review recommendation and deciding that they were not going to have what anybody else would call a review, but were just going to jump on to one of two possible alternative solutions to this problem that he suggested existed. That solution was the draconian measure of in the future taking away from a significant number of people the right to any compensation when injured at work through absolutely no fault of their own, and probably because they had been asked to do something inherently dangerous by an employer who is already insured for it and is already paying the insurance.

Candidly, I do not understand why after 100 years of progress, we are now in this situation following months of no proper discussion or consultation. I suggest that apart from a very small number, most people in this country have no idea of the significant effects that this change could have on their working circumstances. It may be inappropriate to do this, but I asked somebody from the House of Lords Library to research this for me. He immediately said that this will have an effect on our working circumstances, and that he had been unaware of this. He is absolutely right. Almost everybody who is in a working environment could be affected by this. If this law goes through and you are asked to work a dangerous and complicated piece of machinery, which probably your employer does not understand properly, and it goes wrong because of some latent defect that nobody could reasonably have foreseen, you will have been put in an inherently dangerous position and, if you are left with a life-changing disability, you could be in the position of not being able to get any compensation. I do not want to be responsible for that sort of change in the law and I venture to suggest that not one Member of the House wants to be responsible for that sort of change in the law, so why is this being pushed through in this way?

If there is a legitimate issue—a question of restriking the balance—why do we not work together in an open and transparent fashion to move the balance to the appropriate point, releasing employers from any quantifiable burden so that they can get to this great new world in which they will create lots more jobs because they do not have strict liability in relation to some of their employees? Why do we not work together to achieve that, because we all agree with those objectives?

I could make many other arguments, but I am conscious that I have spoken for too long. This Health and Safety Executive impact assessment is a veritable mine of arguments against this legislation. I recommend it to the Minister. I am certain that we will return to this issue on Report and I suggest to him that there is a way forward.

I have a series of questions, some of which may already have been asked, but the Minister needs to be able to answer them. One of them is: what is the evidence base for this change? It is not apparent in the impact assessment, so what is the actual evidence base? The question is not what the perception is; it is what the evidence is. What assessment have the Government made about the number of claims that will be affected? Is it a comparatively small number or is it a substantial number, as we are told by the Association of Personal Injury Lawyers? Are the Government in exactly the same position as the Health and Safety Executive in saying, “We haven’t a clue and we do not know; in preparing the impact assessment, unless we put a disproportionate amount of work into it, we have no way of working out how many claims are affected by this change in the law”?

What is the Government’s assessment of the cost of shifting the burden to the NHS and local authorities, as well as the loss of money for cover by the Compensation Recovery Unit? What is the Government’s assessment of the effect that this will have on employers’ liability compulsory insurance, if any at all? My view is that it will have none, so to that extent it will not reduce the burden or the regulation on employers. If the Government believe that it will reduce premiums that are already not covering the claims, what is the argument for that? Are there employers out there who believe that their insurance premiums will go down if they live in this brave new world? If they do, they are kidding themselves.

All these questions need to be answered but, much more important, the Government need to go back to Professor Löfstedt’s report and say, “There are two alternatives here. We could take a scalpel to this and we could identify and change the regulations that are inappropriate for strict liability, thereby creating the assurance and certainty that employers need to be able to move into this world of deregulation that apparently they told Professor Löfstedt they wanted. Alternatively, we could just take it away from everybody”. What is the argument for taking it away from everybody when it means taking it away from sets of circumstances in which that is an entirely inappropriate thing to do and where it will create massive injustice, as my noble friends have made clear? What is the argument for that? I say with respect to the noble Lord, who I know will try to answer these questions, that if he cannot answer them he is not entitled to change the law in this way.

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[Viscount Younger of Leckie]

I would need to refer back to the report to give the noble Baroness a full answer. Indeed I shall do so.

The effectiveness of the health and safety regulatory framework has also been highlighted by Professor Löfstedt, as has been mentioned today by several noble Lords, in his independent review, Reclaiming Health and Safety for All. Both my noble friend Lord Young of Graffham, whose report received much support across the House when it was debated, and Professor Löfstedt found that there is no case for fundamental change of the health and safety framework itself and that the existing regulatory requirements are broadly right. In fact, the biggest problem today is the way in which the regulatory requirements are interpreted and applied.

No one can be complacent. If we are to build on the steady progress made, we need to take action to tackle the current myths about health and safety, myths which the Health and Safety Executive see as such a problem that it has set up the Myth Busters Challenge Panel to provide a mechanism so that anyone who receives advice in the name of health and safety which they believe is disproportionate or inaccurate can challenge that advice.

Businesses consistently report that these myths lead to confusion about what the law actually requires and a fear of being sued, which, in turn, drives employers to overimplement the law in an effort to protect themselves and indeed discourages them from expanding their business. This in turn reinforces the perception that the application of health and safety law is unduly burdensome. I shall have more to add to that later.

This situation results in responsible employers taking an overly cautious approach, which has a detrimental effect on their approach to controlling risks properly in the workplace. For example, spending considerable resources on disproportionate paperwork and record-keeping, far in excess of what is necessary to comply with the law, diverts employers from taking a sensible approach to identifying the risks that actually affect their business and their employees, and taking sensible day-to-day precautions to protect their employees from those risks.

In the interests of both employers and employees, the aim is to improve understanding of what the law actually requires and to allay fears about possible litigation to help build employers’ confidence to take on new activities and further develop their businesses and to include recruiting new employees, which is so vital today.

To address these issues, the Government are implementing a package of measures, based on the recommendations of my noble friend Lord Young of Graffham and Professor Löfstedt, to reform both the civil litigation system and to restore a common sense approach to health and safety. This measure forms part of this package and I would reassure noble Lords that its introduction into the Bill at a later stage is purely due to the timing of the publication of Professor Löfstedt’s report and the Government’s desire to address the concerns he raised at the earliest opportunity.

We have already put in place a programme of work to improve understanding by simplifying the supporting guidance that explains what the law requires and to consolidate and clarify the body of health and safety regulation in a number of key industrial sectors. This programme builds on the work carried out as part of the better regulation initiative led by the previous Administration.

The clause does not change the duties placed on employers, but amends Section 47 of the Health and Safety at Work etc. Act so that in future, unless the legislation provides for an exception, it will be possible to bring a claim for compensation in respect of a breach of health and safety legislation only where it can be proved that the employer has been negligent.

Claims for breaches of the general duties of the Health and Safety at Work etc. Act can already be brought only for negligence. The change in this Bill simply extends this position to regulations made under the Act to create a consistent approach to civil litigation for all health and safety legislation. This means that if an employer fails in their duty of care towards their employee they can of course be successfully sued. However, where an accident has taken place and the employer could not have reasonably done anything about it, they should not be liable.

In the knowledge that they will not be liable if an accident happens which is totally outside their control, this change will support responsible employers, who take care to protect their employees, by encouraging them to take sensible steps to manage workplace risks. I am grateful for the speech made by my noble friend Lady Brinton and the example that she gave to support the helplessness that some businesses can experience where there is no defence for them. This will not assist irresponsible employers who fail to comply with the law as they will have no defence to an accusation that they did not take all reasonable steps to protect their employees.

This amendment to the Health and Safety at Work etc. Act has been adopted in preference to amending each strict liability duty, as Professor Löfstedt suggested, because an approach targeting each strict duty would be much more complex, and therefore complicated for businesses and their employees to understand.

The noble Baroness, Lady Turner of Camden, brought up the concern that the law would go backwards, which I think was her expression, and the employer would hold all the cards. I would like to assure her and all noble Lords that the provision will affect only a small number of duties that are unqualified. In any claim for negligence, the existing regulatory requirements on employers will remain relevant, as the courts will look to the statutory duties, approved codes of practice and established guidance to inform them about what risks a reasonable employer should be aware of and the steps they would be expected to take to manage those risks. I stress again that this change will only assist responsible employers who have done what is required of them and can demonstrate this.

This amendment reflects an adjustment to help rebalance the civil litigation system and, as part of the wider reforms of the system, is a proportionate response to the impact that strict duties currently have in the civil litigation system identified by Professor Löfstedt. It also has the benefit of creating a consistent approach to civil litigation for all health and safety legislation.

Currently, most claims are brought for both breach of statutory duty and negligence and, in practice, it is anticipated that the vast majority of claims will still be capable of being brought for negligence. For the small number of cases where this is not possible, as now, individuals will be able to claim for financial and other support through the state benefit system.

This measure is not about reducing the number of claims. It is about establishing the principle that an employer who has done nothing wrong should have the opportunity to defend themselves on the basis of having taken all reasonable precautions. Providing employers with this important reassurance will help them to manage health and safety risks in a sensible and proportionate way.

[Lord Browne of Ladyton]

At the heart of the noble Viscount’s argument there are general arguments about numbers. The Health and Safety Executive’s impact assessment says that this change will affect 200 sets of health and safety regulations. When it seeks to answer its own question about the number of cases that this will effect, it says that it has not a clue. In the light of that information, which I have here in this assessment before me, could the Minister please tell the Committee on what basis he estimates that this will impact on a small number of regulations and cases? If that is wrong, we are legislating here on a false basis. The HSE has no idea what the statistical base of this is.