Mesothelioma Bill [HL]

Lord Howarth of Newport Excerpts

Monday 20th May 2013 Lords Chamber

[Lord Howarth of Newport]

My Lords, I, too, thank and congratulate the Minister on bringing the Bill to the House. He is a good man who has fallen into bad company. He has had to present a number of pretty miserable policies to the House. However, we should recognise that he has worked long and hard to develop this scheme and today he brings us, by his standards, very good news indeed. We should also express measured appreciation of the insurance industry and the ABI. Goodness knows, the industry has been grudging and obstructive in the past, but it has established the Employers’ Liability Tracing Office and is willing to go along with this scheme. It is, however, a scheme that needs improvement.

Credit should certainly be given to the previous Government for the preliminary work that they did. The Minister was rightly generous to my noble friend Lord McKenzie, who published the consultation document in February 2010 on accessing compensation. Credit should also go to this Government for pursuing the process, and I think that means that credit should go to the permanent Civil Service. Credit should, of course, also go to the campaigners. It is right that we should do all we reasonably can to support those who are victims of the horrors of diffuse mesothelioma because of their employers’ negligence. This long-latency illness incubates for perhaps three to four decades but at the end inexorably causes great suffering and death. It is right that we should do what we can to support the dependants of people who contract the disease. It must be grim for all of them in the circumstances that follow diagnosis to struggle to achieve compensation. I am not convinced that that process will be much eased given that the new scheme is a scheme of last resort, but at least it will yield better financial outcomes for more people.

I also ask why the scheme is to be limited to mesothelioma alone. Other asbestos-related diseases of the lung and the pleura caused by the inhalation of asbestos fibres ought surely to receive equal consideration such as asbestosis, diffuse pleural thickening, pleural plaques, pleural effusion, rounded atelectasis and asbestos-related lung cancer. With all these illnesses, employers’ liability is equally disputed and equally hard to trace. Natural justice tells us that people who suffer from this range of asbestos-related illnesses should be treated alike. They all have in common that they suffer from their employers’ negligence in relation to asbestos. The Minister said in his opening speech that these problems also need to be addressed but he thought that if they were addressed straight away too many cases would spoil the scheme.

I echo the question asked by the noble Lord, Lord German, because I am not clear whether the Long Title allows the flexibility to introduce under this legislation further schemes to support people suffering from other asbestos-related diseases. If it does—I understand why the Minister is unable to proceed with introducing schemes in relation to other diseases now—will he indicate when he expects to do so? If the legislation does not permit it, and is not susceptible to amendment to enable it to do so, will he pursue his mission and introduce further legislation? As my noble friend Lady Taylor said, we need a comprehensive approach. In the mean time, we must address the project that the Minister has placed before us.

The Government have said that their overarching aim is to ensure that employees who are injured or made ill in consequence of their employment should not be denied fair compensation. The scheme, in providing compensation where the employer or the insurer cannot be identified or traced, goes a long way to achieving that objective but does not go far enough.

I would like to probe the Minister on a number of points. I would be grateful if he would clarify the position on legal costs which I do not understand very clearly. The Government’s aim in the Legal Aid, Sentencing and Punishment of Offenders Act 2012—the LASPO Act—was to remove personal injury from the scope of legal aid. On that basis, legal aid would generally not be available to a person diagnosed with mesothelioma who seeks advice from a solicitor, as he or she is bound to do.

Part 2 of the LASPO Act implements the Jackson reforms to no-win no-fee arrangements. However, the Government have deferred implementation of the measure in relation to mesothelioma claims pending the findings of a report which they have commissioned. When will we have the findings of that report? If Sections 44 and 46 of LASPO are applied in mesothelioma cases, as I understand it, lawyers acting under conditional fee agreements will be able to charge a success fee payable from the damages. Does the Minister think it is appropriate that that should be so in mesothelioma cases?

How does the new scheme that this legislation enacts take account of the new position on conditional fee agreements? The 2013 impact assessment assumes that a scheme payment would include an amount to cover legal costs in making an application. The 2012 impact assessment estimated that would be £7,000 for a successful case and £9,000 for an unsuccessful case. The overall legal costs for the scheme are put at £24 million to £27 million. As with civil actions, will they be paid out of the scheme award, which is already reduced to 70% of the level of civil damages, or will they be paid by the scheme over and above that 70% award? Will the payment take account of a personal injury solicitor’s fees incurred for work prior to the application being made to the scheme? Who decides these matters? As far as I can see from Clause 1, the Secretary of State does. There will be no legal aid for appeals to the First-tier Tribunal following the review scheme decision, unless they are exceptionally to secure the claimant’s rights under the ECHR or under European Union law. Are the Government content with that situation? Are the Government going to control the fees that the lawyers charge? The statement by the Minister for Employment, Mr Mark Hoban, on 13 May indicated that the Ministry of Justice is going to consult about a fixed-cost regime for mesothelioma claims. It would be helpful if we could be told what he has in mind. It would also be helpful if the Minister could give us, either today or in Committee, a clear statement in relation to what, if any, legal costs incurred under the new arrangements by claimants, either pursuing their own case against an employer or an insurer or claiming from the scheme, will be met under the arrangements that he has designed.

The interaction of the scheme with the benefits regime will warrant careful consideration. The Bill would permit the Secretary of State to recover benefits and other sums from scheme payments. The impact assessment tells us that the Government expect to recoup a net £69 million after the first year. However, in their briefing to us the ABI has stated:

“We have suggested that mesothelioma sufferers should be able to access financial support in addition to the benefits they are entitled to.”

What benefits will continue in payment after an award has been made? If an award under the scheme is to average £87,000, as we are advised it will, what benefits will be left for the claimant? Will income support and housing benefit be swept away? What will happen to industrial injuries disablement benefit, which is a major benefit, and very important in the budgets of such families? Is it correct that the payment of benefits would not be affected during the first year after an award? That is the case, I understand, where civil compensation is concerned. Would it still be the case with this scheme? Is pension credit to be ignored indefinitely? What will be the developing position under universal credit?

It would also be helpful if we could be told whether lump sums, payable for example under the Pneumoconiosis etc. (Workers’ Compensation) Act 1979, or the diffuse mesothelioma scheme under the Child Maintenance and Other Payments Act 2008, will be recovered where payments have already been made. Or will it only be the case that someone who receives an award under the scheme will no longer be eligible in the future for such payments?

Schedule 1 contemplates the recovery of benefits on a scale such that the whole award could be negated. However the schedule amends the recovery of payments legislation to permit, but not to require, the Secretary of State to claw back payments. What does the Minister intend? What scope is there for discretion? For example, will the DWP refrain from clawing back any payments that have been made in relation to pain and suffering? Is he able, and will he be prepared, to limit to a certain percentage the amount of benefits to be denied or recovered? Will he take a lenient view of the treatment of carers under the benefits regime in these circumstances? Past practice has been to an extent discretionary and compassionate. I am quite sure that the noble Lord will want to be as compassionate as he can in the appalling circumstances that these families face. I hope he will err on the side of generosity in relation to both benefits and legal aid.

I had hoped to have time—but I have gone on too long on these subjects—to say that I, too, can see no justification for the limit of 70%. I will just briefly say that it cannot be right to discriminate against claimants where employers and insurers have lost or destroyed the documentation. It is no fault of the claimant that the employers and insurers are in that difficulty. If all claimants are to go through a single portal to be followed by a rigorous search to trace the documentation, then surely all claimants ought to be treated equally. There will be a temptation for the industry not to trace the documentation if failure to do so means they will only have to pay 70% rather than the full amount of compensation they anticipate the court will award, so there is a real risk of the industry being conflicted here. Certainly employers’ liability insurers are not in a position to plead poverty. They did very well for decades. Up until 2008 they even kept the lump sums that were awarded by the tax payer, aggregating to over £20 million a year to offset the cost to them of compensation. We can be sure, notwithstanding what the Minister has said, as sure as eggs is eggs, just as soon as market conditions permit, the insurance industry will pass on the additional cost to them of this scheme by way of increased employers’ liability premiums.

So, pragmatism and practicality, as he said, are very important, but I am not convinced that the Minister has struck the best bargain that he could in the interests of mesothelioma sufferers and their dependants in agreeing to limit payments under the scheme to 70%.

--- Later in debate ---

[Lord Freud]

My Lords, I have been in this House long enough to have an expectation that this would be a high-quality debate. I can confirm that my expectations have been exceeded. This was a very good debate which showed that noble Lords have focused on the issues and is the precursor to a valuable process being undertaken as we go through Committee and subsequent stages of the Bill.

Clearly, the Bill deals with what I called a very damaging historic market failure. Various noble Lords, such as the noble Lords, Lord Avebury, Lord Alton and Lord Browne, implied that it might have been rather more than that. Indeed, it was implied that there might have been reckless behaviour. Observations have also been made about the way in which the paperwork was dealt with. To be blunt, many people in the insurance industry would admit that that was the case.

This is not the Bill I wanted to bring to the House. I will explain why that is the case because it is very important that noble Lords should understand that. I wanted to find a way of allocating responsibility to the companies that had engaged in the relevant business in the year in question so that we could levy a specific charge on those companies for the business for which they were responsible over the relevant period. We would thus have allocated the responsibility where it should lie. I spent a lot of time and, indeed, some of the DWP’s money, researching that proposition. However, I came to the conclusion that such a course of action was legally too risky in a most litigious environment. Therefore, we have moved to a second-best position, the implications of which are driving many of the shortfalls that noble Lords have pointed out vigorously tonight, because it is one thing to say that there is a moral imperative to look after the individuals suffering from this terrible disease and their dependants but it is another to pin the responsibility on companies which, frankly, had nothing to do with it. We are looking to insurers in the employers’ liability market to fund this provision through the levy and we are looking at the appropriate level of levy in that marketplace when direct blame cannot necessarily be attributed. That is why the scheme is designed in the way that it is and why various constraints are in place.

I think that I heard support for the principles of the scheme. We can get money to the sufferers regardless of whether the insurance records have been lost. In general terms it is right that we look to the insurance industry to provide this support, not least because this situation is a horrific blemish on its reputation which it will, and does, want to correct and mitigate.

We need to help the insurance industry to impose this levy. It cannot do it on a voluntary basis, which would have been the ideal position and the one which I would have preferred. It needs the legislative support because it is a disparate industry with very many different players in it.

We are clearly going to spend a lot of time going through the detailed questions raised. As I will be going through them in Committee, I do not intend to spend a lot of time going through everything now, but I will try to pick up the main themes. I need to add something that I omitted to do earlier, my thanks—which several Lords have mentioned—to the victims’ groups and the trade unions for all the work they have done and for which I am personally most grateful.

Before I get into the drier stuff of this, I must add that many noble Lords talked about the human stories. Nearly all of us will know someone who has gone through this, and there is an awareness here that in many ways this is one of the worst diseases to get. I acknowledge that. The noble Lords, Lord Giddens and Lord Monks, and many other noble Lords made that point and told us some stories to remind us.

One of the key issues raised by virtually all noble Lords—too many to mention individually—was about setting the figure at 70%. There was a real juggling act about what the right level of levy is, and that is something we can spend more time in Committee debating. If we set the levy too high, in practice what will happen is that it will just raise the amount to be paid and the insurers will pass on virtually all of it to British industry, which is something I was very keen not to see. There is a lot of economics around this, but if you set a small level in a reasonably competitive market, most of it will probably be absorbed by the insurance industry, which should do so, rather than by British industry, which should not be required to absorb it. There is a real balancing act in the amount of money that it is sensible to raise this way to get to the victims, and that is the main driver here. It is not, I want to emphasise, the behavioural incentives that have been floating around. That is not what we are doing here. We are trying to get a balance of funding.

The second issue is, because we went early—theoretically one can start doing a levy like this only at the time at which it becomes law—we have gone from the date of the formal announcement, from which point the insurance industry can start to reserve. However, one of the issues coming from that is that in the first year, we effectively have to make over three years’-worth of payments, and noble Lords will see the problem instantly. There is suddenly a very large levy in one year of the kind that is very difficult to absorb. That is the reason that we have worked to smooth that first year over four years, so that we do not get these sudden large amounts, but it is a constraint. I shall not go into the detail tonight of how difficult all this is to do, although perhaps in Committee I could be persuaded to open my heart a little about particular Treasury rules, levies that are treated like taxes and why the Treasury, which collects taxes, should give the DWP any money to make payments.

[Lord Howarth of Newport]

Even before the noble Lord opens his heart to us in Committee, will he look again at the question of the start date in the light of the figures we have been given? We have been told that the life expectancy of a mesothelioma sufferer following diagnosis is perhaps two years. We are told that around 2,400 people die each year, and that the insurance history can be traced in more than 50% of cases, which means that more than half are able to pursue their case against the insurer. That leaves around only 1,200 people who would benefit if the noble Lord were simply to remove the start date. I would have thought that that ought to be affordable and that the insurance industry ought to accept that quite limited extension of its responsibility. I hope that the noble Lord will think about that and perhaps even amend Clause 2 himself and not just leave it to us.

[Lord Freud]

Virtually all noble Lords mentioned the start date. The trouble is that, in principle, this is a sheep and goats situation. Any date, wherever it is set, as the noble Lord, Lord Monks, mentioned, is always arbitrary at one level. To pick up on the point made by the noble Lord, Lord Howarth, this concerns dependants as well, so if there was no start date and the date went back indefinitely, we really would be talking about a huge amount of money. We will spend a lot of time talking about this, but let us flesh out the areas of discussion.

I think that we might look in Committee at the point made by my noble friend Lord German and reinforced by the noble Baroness, Lady Taylor, about a cap or a different structure. Noble Lords can see my constraints, but we can look at shaping the structure in different ways. The noble Baroness, Lady Donaghy, asked when we would have the report on payments. It will be ready in the summer. In response to my noble friend Lord Courtown, I will say that we will have the scheme rules ready to be looked at by the time we reach Committee.

Extending this to other asbestos-related diseases was the other big issue of concern to virtually all noble Lords. The point about mesothelioma is that if you have it, you will essentially have contracted it doing a job in which there was negligence, and that it is fatal. You can fix a figure with a tariff level and you can go very fast. The objective is to reach a point within five months as compared with a typical period now of two years. Noble Lords will be conscious of the meaning behind those periods, given the prognosis of survival for up to 15 months. Getting something this quickly is really important. There may be schemes for other types of asbestos-related illness, but they could not be set up within this structure. We would have to look at something else; it could not be a simple extension.

My noble friend Lord Avebury and the noble Lord, Lord Alton, asked how many meetings have been held. Out of amusement, I counted them. There were 15 meetings with representatives of the insurance industry, of which seven were held in quite a tight period. You can imagine that they were being held during a time of heated negotiation. A total of 11 meetings were held with representatives of victims’ groups, lawyers and members of the all-party parliamentary group. It is not a complete balance but I took on board as much as I could as we built this.

I will not spend a lot of time tonight on the MoJ process. We will have time to do a bit more. The fundamental point is that the MoJ will launch a consultation shortly. It will go through all these issues and then come up with a scheme on the balance, taking on board all the responses. This is a major process and we will just wait for it to happen.

The noble Baroness, Lady Donaghy, raised the question of the scheme administrator. We are in control of this scheme and the DWP will drive the scheme rules. The scheme administrator will therefore be answerable to the Secretary of State, who will monitor whether it is doing the job that needs to be done. It is not a done deal with the ABI at this stage, though it is setting up a shadow company. If it does this successfully and if it is the administrator, it means that we can go very fast, but it is open at this stage.

My noble friend Lord German raised a key point about the assumption of negligence. What distinguishes mesothelioma from some of the other diseases is that there is no reason for it other than being exposed to asbestos in employment. There has been a general acceptance that if you were exposed to asbestos in the workplace it would be through negligence. The decision has typically been made on a balance of probabilities. We will spend more time in Committee on the important legal context of why one can do such a straightforward and rapid scheme.

I have had good warning from the noble Lord, Lord Alton, that I will get an amendment proposing that some of this levy should effectively go into research. I cannot tell the noble Lord how hard I have tried to produce that result for him. I have failed to do it and we will spend time on this in Committee. There are some really complicated technical reasons why that cannot happen, mainly because, formally, a levy is a tax and it cannot go to anyone but the victims. I have tried every single route round this. If noble Lords are cleverer than me and can work their way through it differently, I will be delighted.