Enterprise and Regulatory Reform Bill

Lord Browne of Ladyton Excerpts

Wednesday 6th March 2013 Lords Chamber

Before sitting down, I wish to pay tribute to the Minister. Last week I explained my concerns in detail to the noble and learned Lord the Advocate-General for Scotland because I was anxious that the Minister should have the opportunity in advance of this debate to contemplate what I have been saying. I am grateful to the noble and learned Lord the Advocate-General for Scotland for the time and consideration that he gave me. He undertook to convey my concerns to the noble Viscount and has confirmed today that he did so. I look forward to hearing the response from the Minister, and I urge him to withdraw this clause or withdraw subsection (3).

[Lord Browne of Ladyton]

My Lords, it is a privilege and a pleasure to follow the contribution of the noble and learned Lord, Lord Hardie, to your Lordships’ debate on these provisions this afternoon. He has done a great service to your Lordships’ House by his considered and detailed contribution. Watching the body language of Members of your Lordships’ House, I have the impression that he has alerted many noble Lords to consequences of this provision of which they were unaware, and that he has, perhaps, concentrated minds in a way that may be helpful both to noble Lords in their consideration and to the Government in determining the correct course of action.

I agree with all the arguments in favour of this group of amendments, and I wish to be associated with them all, but I will make a few additional points to reinforce some points that have already been made. As my noble friend Lord McKenzie of Luton said, the justification for Clause 62 is that there is a perception among some employers that a compensation culture exposes them to a risk of unjustified damages claims by employees, and—this is where the briefing that the noble and learned Lord referred to comes in—that this perception prevents employers from taking on new workers and is a barrier to growth. However, no such compensation culture exists. The Government’s own statistical evidence shows that claims arising from workplace accidents are going down. The Health and Safety Executive’s impact assessment of these provisions suggests that this is the case, too, as do the figures published by the Government’s Compensation Recovery Unit.

In Grand Committee, I asked the Minister to point me to the evidence that existed—even the evidence of a perception—and argued at the same time that legislating in response to a perception, which was in fact a misperception, was a poor basis for making law. The Minister was gracious enough at our meeting to confess that, try as they might, neither he nor his officials could find evidence even of the perception—although, to be fair to the Minister, he said in effect, “We know it is there but we cannot find it”.

This is supposed to be a deregulatory measure. Therefore, the test of whether it is a proper policy is whether it will result in any deregulation. Frankly, the evidence in relation to that suggests otherwise, too. It will not remove the complexity of the challenges faced by employers, particularly if they are concerned about possible civil claims by employees. Indeed, it will add to that uncertainty by making the law less clear than it is presently. In particular, the issue of whether these reforms will leave the law incompatible with the European body of law that it has to be compatible with, will inevitably lead to complicated legal argument. I can hear the smacking of lawyers’ lips in anticipation of the cases that will come from this provision if it is enacted in its present form.

We on these Benches provided the Government with a detailed senior counsel’s opinion which set out just how complex the arguments will be. With respect to the noble Viscount, his reply to our correspondence, which was a short paragraph, suggested that his officials had not thought about the consequences that the senior counsel argued were inevitable. Perhaps they have now had the opportunity to do so and, in summing up this short debate, the noble Viscount will be able to give us a better and more considered answer than the one with which his officials provided him in response to the detailed arguments set out in the senior counsel’s opinion.

The Government’s plan is to require all those who wish to claim in the civil courts for compensation arising from workplace accidents to claim by way of a common-law negligence case. I am grateful to the noble and learned Lord, Lord Hardie, for setting out at least some of the potential complexity of such a claim. The component elements of a common-law negligence case will inevitably mean that cases will be prolonged. The health and safety regulations that the Government seek to skirt around will not become irrelevant to such claims, as the Government intend. They will add to their complexity because persons claiming will rely on them to show what a careful employer would have done—what was reasonable and feasible. So we have added an unnecessary layer of complexity to a set of claims that now proceed by way of reference only to the statutory regulations.

Neither will this reduce insurance premiums for employers. It will shift burdens but it will not reduce insurance premiums. Presently, the employers’ liability compulsory insurance regime is well settled and it works. It was in spasm in about 2004, but it has settled down again and it works. The law compels all employers to have insurance. Employers pool the risk of being employers through the employers’ liability compulsory insurance process. Everyone has to have insurance by law and the premiums are shared fairly and in a proportionate fashion across all employers.

Employers’ liability compulsory insurance represents a small percentage of the overall general insurance market and traditionally it is a loss leader for the industry, which does not make any money out of it. In fact, there is a suggestion that claims outstrip premiums. But that has been the case for a long time, and it has been absorbed into the general insurance market. If anyone believes that the consequence of a change in the law—even if it does shift the burden from the insurance market to the public sector—will result in reduced premiums, frankly, they are living in cloud-cuckoo-land. The premiums do not cover the payments.

Finally, the justification has been put forward that it will reduce necessary record keeping and paperwork. The noble Viscount defeated that argument himself in Grand Committee. In summing up the debate on this issue he reassured my noble friend Lord McKenzie of Luton that employers would still have to keep the same records because the requirement of record keeping was related to obligations that are enforced by criminal law and nothing at all to do with civil liability. So record keeping will not go down.

The Government's measures go beyond what Professor Löfstedt recommended, and he has said so. They set the clock back 150 years in terms of health and safety, which is an area of public policy of which we in the United Kingdom are rightly proud. They have the flimsiest of justifications and even then the Government themselves cannot find any evidence even of the perception —perhaps because the perceived facts do not exist. Apart from all that, they do not even meet the Government’s own limited objective of being deregulatory. The Government should take them away and think again.

[The Earl of Erroll]

My Lords, I rise to put the opposite opinion. I live in the world of small and medium-sized businesses. The SMEs and the micros employ half the workforce out there. As one of them, I feel it is totally unfair that, even if you took all the precautions you could, if something happened that you could not foresee and could not know about, you are held to be guilty. This is wrong in natural justice. The fact is that you can then be put out of business. I hate to disagree with the noble Lord, Lord McKenzie, and the noble Baroness, Lady Turner, but they are not all well funded.

We talk about big businesses, big organisations and corporations, government, and things like that. They may be well funded, but a lot of small businesses out there are struggling and on a knife-edge. It only takes one of those things with the Health and Safety Executive cracking down and you have had it. I invite noble Lords to look at some of the cases—I will send you pointers to the websites that will detail them—where the Health and Safety Executive, for instance, gloats over how much it has managed to get out of someone at a tribunal. I know that is not the exact case here, but the perception is out there, I am afraid, and it does restrict people. My wife, who is a small employer, is very careful about taking on extra people because of these sorts of regulations.

Regulations also start to conflict because of their complexity. You may well find that you cannot comply with them all. If you are then held to be in breach of one of them, which you did not and could not know about because you could not know that the employer was breaching it without your knowledge and against your instructions, you are still going to be held liable, because it is an absolute offence. I think that is wrong. We should remember that it is not just big businesses out there. We will be bankrupting some small businesses and putting other people out of work—and when we put them out of work, there will be other unintended consequences and damage to other families.