Mesothelioma Bill [HL]

Lord Howarth of Newport Excerpts

Monday 10th June 2013 Grand Committee

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)]

My Lords, before I address the noble Lord’s amendment, I shall clarify a couple of points that were raised when we last met on Wednesday, to put noble Lords’ minds at rest and to aid today’s discussions. In the case of people who contracted mesothelioma from exposure to asbestos fibres that were on another person’s clothes, or were brought into the household by other means, the question was raised whether these people, too, were covered by employer’s liability. This is a complicated area and I will do my best to be succinct.

In cases of secondary exposure, the claim will be of negligence against the person who exposed the primary victim. Theoretically, that person could have public liability insurance, employer’s liability insurance, or both, or none. We have contacted the ABI on this matter and I understand that it is not aware of any cases where anyone other than the employee has been compensated under the employer’s liability policy. Therefore, we return to the point that the scheme will raise funds from the employer liability market to cover those who would ordinarily have been covered by those insurers. In this case, it seems that, historically, instances of secondary exposure have not been covered by employer’s liability insurance, so the scheme cannot provide for them.

[Lord Howarth of Newport]

I am extremely grateful to the Minister for responding to the Committee on this point, which was the subject of an amendment that I tabled. As I heard him just now, he said that because historically no cases had turned up, in future employer’s liability insurance should not cover secondary exposure, even in a case where the secondary exposure occurred—I hope he agrees with this; I think the Committee agrees—to someone who did the family laundry and washed the overalls of the employee who was exposed to asbestos fibres and who therefore found herself exposed to asbestos and contracted the disease. Surely we cannot simply extrapolate from the past on the basis that there do not happen to have been any such claims. It is entirely imaginable that there could be such claims, and it is not enough, if I may say so, for the Minister to say simply that because it has not happened, the Government will make no provision for it to happen in future. We still have a class of people whose predicament is just as grave as the predicament of someone who was a direct employee. I hope that the Minister will be prepared to look further at this.

[Lord Moonie]

To follow up on that, was the Minister referring to claims or successful claims?

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Moved by

[Lord Howarth of Newport]

17: Clause 4, page 3, line 10, at end insert—
“( ) must ensure that applicants to the scheme are reimbursed in full by the scheme for reasonable legal costs incurred by them in their pursuit of payment from an employer or an employer’s liability insurer and from their application to the scheme, over and above any other payment from the scheme.”

[Lord Howarth of Newport]

My Lords, when the Minister introduced the Bill on Second Reading, he rather gave us to understand that the Department for Work and Pensions and the Ministry of Justice were on separate planets, and I think used the phrase that one was not beholden to the other. Indeed, it appears that, within government, the left hand is not at all clear what the right hand is doing and vice versa. It should not be like that, of course. There is a principle of collective responsibility in government. More importantly, it matters very much that there should be coherent policy-making in the interests of mesothelioma victims and their dependants. The way in which policy is developed should not be for the convenience of Whitehall but should have an unwavering focus on producing a scheme as soon as possible that will in every dimension benefit mesothelioma sufferers.

The legal, and possibly other, costs associated with getting to the point of making an application and then pursuing it are significant. The impact assessment issued on 7 May—only last month—indicated that legal costs associated with the scheme overall would be of the order of £24 million to £27 million. We were told that the legal costs incurred by an applicant to the scheme, in the event that he was successful, would be of the order of £7,000. However, in the previous debate, my noble friend Lord McKenzie drew to the Committee’s attention the new document issued by the department on 4 June—less than a month after the original impact assessment—which says that the published impact assessment,

“used a figure of £7,000 per individual for legal fees; here we have moved that assumption to £2,000 per individual (unless otherwise stated)”.

We have just talked about that, and I heard the Minister say that neither the £7,000 figure nor the new £2,000 figure had much solidity, and that it might end up somewhere in between. I would be grateful if he could explain to us what is going on, because it seems extraordinary that the assessment for an applicant making a successful application to the scheme should be £7,000 in legal costs one month and £2,000 the next. That shift is of a remarkable order of magnitude and leaves one a little anxious about impact assessments. I appreciate that they involve a whole mass of judgments and are very difficult to achieve with any precision, but there is extraordinary latitude here. Does the figure of £9,000 legal costs for an unsuccessful application still stand? As I say, does the overall figure that was given on 7 May still stand? As we go forward to Report, it would help the Committee to be given much more detail about how these figures are arrived at.

What costs will a claimant incur and what legal costs will he or she be able to recoup? I would be interested to know what happens about the preliminary legal costs that a claimant will incur before he reaches the door of the scheme. Following diagnosis, the claimant presumably has to make an appointment to see a solicitor. I do not know how this would work, but perhaps he would then be referred to a specialist personal injury solicitor. A lot of work must be done to determine whether a claim can be made against an employer or employer’s insurer, and to test whether that claim is strong enough to proceed in court. All these hoops must be gone through before the claimant is able to embark upon a claim against the scheme. Could the Minister in his response kindly escort the Committee along the path a claimant must take in legal consultation and legal process on his way to the scheme and to the completion of an application to it? We would then know much more about what the reality will be for claimants.

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[Lord Freud]

We will deal with this issue in some detail in debate on a later amendment. In practice, where the scheme decides that it is a sensible thing to do, it will of course by definition take on the costs of pursuing that application.

[Lord Howarth of Newport]

My Lords, I am very grateful to the noble Lord, Lord German, and to my noble friend Lord McKenzie for their precisely focused and apposite questions. I am also grateful to the Minister for what he has said in response to this debate, although I wish he had not set up an Aunt Sally in misrepresenting both my amendments, because I was very careful to include in the wording of each amendment that it was only reasonable legal costs that I contemplated should be met in these ways.

[Lord Freud]

Let me apologise for any misrepresentation that I may have inadvertently made.

[Lord Howarth of Newport]

The Minister is so engaging as he apologises that of course it would be churlish if I did not immediately say yes. I think it would be helpful if at some stage he would also elaborate on the circumstances in which the ECHR exception to the disqualification for legal aid might apply. Should we anticipate that people taking cases to tribunals would do so in pursuit of justiciable rights under the European Convention on Human Rights, because that could make a significant practical difference? I simply do not know the answer, but it would be interesting and helpful to have some advice.

The Minister did his best to defend his colleagues over the way at the Ministry of Justice, but when I inquired on Wednesday of last week when they expected to issue the consultation, I was told that it was going to be this week. He has just told us that it has slipped yet again to July. There would then be the consultation, and it is proper to allow a reasonable amount of time for people to respond to that. Finally, the Government’s response and determination of what they are going to do is not expected until the winter. That is a fairly elastic target.

I am worried that the MoJ might be holding things up so that mesothelioma sufferers and their families will be prevented from getting the benefits of the scheme as soon as they might. While we as parliamentarians seek to scrutinise this legislation properly, we are anxious to give it the speediest possible passage through Parliament. It would be rather sad and ironic if, because of the lumbering pace at which another department moves, it was not possible to get the whole scheme up and running as early as it otherwise might be. I hope the Minister will convey these thoughts to his colleagues in the Ministry of Justice.

The Minister brought us the good news that legal costs will be paid on top of the 70% payment under the scheme. That makes me very happy, and on that basis I beg leave to withdraw the amendment.

Amendment 17 withdrawn.

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Moved by

[Lord Howarth of Newport]

20: Clause 4, page 3, line 17, at end insert—
“( ) The Secretary of State may not seek repayment of that portion of any compensation or scheme payment made in respect of pain and suffering.”

[Lord Howarth of Newport]

My Lords, the amendments in this relatively large group are intended to enable us to probe the Government on their intentions behind the recovery of social security benefits and lump-sum payments from payments made by the scheme. I also offer some suggestions as to how a relatively lenient recovery regime might reasonably be applied to payments from the scheme.

Schedule 1 deals with these matters, but it is a prime candidate for the plain English prize for legislative opacity. It was beyond my wit to amend it for the purposes I had in mind. Therefore, I tabled the amendments to Clause 4 to establish some principles to constrain and guide the Secretary of State—and, in the case of Amendment 26, to provide him with an opportunity not to take away too much with one hand while he, or rather the insurance industry, gives with the other. I emphasise, as is the nature of amendments to the Bill, that we are talking only of the application of these proposed measures to the diffuse mesothelioma payments scheme or other schemes that might be set up under this legislation. I am not, needless to say, seeking to rewrite social security law; the Minister need not fear that that the ground will give way under his feet if he is willing to take an accommodating view of some of these amendments. It is an opportunity for the Minister to explain—relatively fully, I hope—what the spirit and practice will be of his department’s approach to recovery of benefits and lump-sum payments in these circumstances.

There is one principle, at any rate, that we all—I believe I can include the Minister—want to apply: the rules and the practice where the social security benefit arrangements and the scheme interact ought to be as generous as possible. That is more particularly the case in the situation in which the full, insured entitlements which a claimant ought to have have proved impossible to obtain because the documents are not there: a situation in which claimants have had to fight and wait for financial relief; and in which, when that relief then comes, it is discounted by 30% from the payments they might have secured from a civil court action. Of course, that discount of 30% might become less if Parliament in due course agrees with every noble Lord who spoke in our debate last week on Amendments 15 and 18 on whether the 70% measure should be raised.

The Minister might say that there is a deficit. He will not quite put it like this: that the further the Chancellor’s financial strategy goes astray, the more imperative it is that no opportunity is lost to reduce the deficit between what the Government raise and what they spend. In response, I say that, of all members of society, mesothelioma sufferers and their families should least be required to shoulder the burden of deficit reduction. On any reasonable scale of values, they surely should have priority for relatively generous treatment—before, for example, affluent individuals who can still get top-rate tax relief at 40% on their pension contributions.

However, the Minister might say that we must have regard for the interests of the generality of taxpayers. To that, I say that the British people are kindly and sympathetic. I believe that 99.9% would be positively glad to think that some minuscule part of the taxes they pay was going to help their exceptionally unfortunate fellow citizens who are mesothelioma sufferers or their dependants.

The principle that should govern the specifics of benefits recovery that are provided in the Bill should be that the DWP should be as generous and lenient as it can be. What, in particular, ought the Bill to provide? Amendments 20 to 22 and 27A offer alternative ways in which we might exempt from recovery payments from the scheme made on account of pain and suffering. This goes with the grain of DWP practice; indeed, it might even be in the law that the compensation recovery unit does not recover the element of an award made by a court that is in respect of pain and suffering, in contrast to the elements of a court award that are made on account of loss of earnings or costs of care where recovery occurs.

If it is going with the grain of existing DWP practice, the Minister might say that these amendments are unnecessary. To me, however, it is not clear that the rules that the DWP and the compensation recovery unit apply where court cases are concerned can simply be transposed to the scheme. The Minister at Second Reading was at pains to say with the utmost clarity:

“The scheme is not intended to be an alternative to civil damages, nor is it a compensation scheme”.—[Official Report, 20/5/12; col. 689.]

However, he then went on blithely to say that,

“an eligible applicant will receive a scheme payment after the deduction of relevant social security benefits and lump-sum payments, which the scheme administrator will repay to my department through its compensation recovery unit”.—[Official Report, 20/5/13; cols. 691-92.]

Setting aside the palpable contradiction there, the Committee ought to probe the significance of the Minister’s insistence that payments from the scheme are not compensation. I wonder whether what is going on here is that the DWP wants to be able to decree that no part of a payment from the scheme should be taken as compensation for pain and suffering, and therefore that the capital rules will, or should, apply to the whole of the payment, and that the compensation recovery unit, which henceforth should be better known as the MPR—the mesothelioma payments raider—would be able to help itself to a vastly larger proportion of a payment made by the scheme.

Under new Section 8A(2)(b), in paragraph 3 of Schedule 1, it is contemplated that the gross amount of the compensation payment—that is, the payment that the Minister said, in terms, on Second Reading, was not a compensation payment—

“is to be reduced to nil in any case where the amount of the recoverable benefit is equal to or greater than the gross amount of the compensation payment”.

There we have it. We need to amend the Bill to protect mesothelioma sufferers and their families from the compensation recovery unit predators. The law should not enable the Government to take away from an award made by the scheme that element of the award that, if it were a court award, would be designated as being made on account of pain and suffering and which the CRU therefore could not touch. The scheme is already unfair, with payments 30% less than they would be from the court. If the compensation recovery unit is to be let loose untrammelled on scheme payments, it will be even more unfair. The draft rules of the scheme, with which the Minister has provided us, make no mention of any of this. They say nothing about whether any part of payments from the scheme would be on account of pain and suffering, loss of earnings or costs of care. The rules say simply that payment must be made in a lump sum.

Amendments 20 and 21 would provide that the whole payment by the scheme would be regarded as being made on account of pain and suffering, and that the Secretary of State could not recover payment made on account of pain and suffering. In that way, the whole payment would be secured from the grasping fingers of the CRU. If the Committee thinks that is going too far, Amendment 22 would limit the protection on account of pain and suffering to the first £75,000 of a payment made by the scheme. Amendment 27A is more moderate still, and would provide that:

“The first £50,000 or 50% of any payment by the scheme, whichever is the larger amount”,

should be protected. I hope the Committee will look seriously at that proposition.

I will be brief on the other amendments, which are intended to probe the Minister’s intentions with regard to the recovery of means-tested benefits and non-means-tested benefits, recovery from the person diagnosed, carers and dependants, and of social security benefits paid before the grant of an award by the scheme and of benefits or lump sums paid after such an award has been granted.

The May 2013 impact assessment dealt with these matters on page 18, and anticipated that over 10 years the department would recover £71 million in social security benefits and lump sum payments. It would be helpful if the Minister would break down that £71 million as between social security benefits and lump sum payments. The £71 million would be reduced by £2 million of administrative costs and another £17 million for the smoothing costs over the first four years of the scheme, leaving a net £52 million going back to the department.

Paragraph 90 on page 23 of the impact assessment states that,

“under the Universal Credit … rules being developed, if a person suffering from mesothelioma received civil compensation or a payment from the scheme, it would not affect their means-tested benefits for at least a year (and would be ignored indefinitely for Pension Credit). If they put the compensation or scheme payment into a trust within that year, the value of the trust and any income from it would continue to be ignored”.

The paragraph goes on to note that bereaved relatives would not be so protected.

Amendment 25 would extend that period of ignoring from one to two years. Tragically, at the end of two years it may be anticipated that nobody who has been diagnosed with mesothelioma will still be alive, so they will not see benefits or lump sums taken from them.

Amendment 27B suggests an alternative route to protecting these payments via trust law. It would be extremely good if the Minister could look at this, having regard to the situation of the terribly vulnerable households, one of whose members has been diagnosed with mesothelioma. In effect, the amendment would protect social security benefits and lump-sum payments beyond that first year by deeming that the payments from the scheme had been made as payments from trust and should therefore be ignored. Of course, it deems that the money held by the scheme is held in trust for claimants.

An alternative way to approach this might be to have another amendment stating that the scheme should make all payments into trust on behalf of its beneficiaries. I am well aware that trust law is immensely complex, but I suggest that there might be a route that could reasonably be pursued by the Committee and by the Government through the use of trusts to protect recipients of payments in that second year.

Amendment 27 would protect lump sums altogether from recovery. In the normal course of events, I would endorse the principle that nobody should be compensated twice for the same thing. Indeed, my amendment is still consistent with that principle for two reasons. First, the Minister said that these payments were not compensation, so he cannot argue that people would be compensated twice. Secondly, as the payments are to be discounted by 30% from what the court would award, we can very properly take it that the lump-sum payments will fall into the 30% that will not be paid and therefore cannot be reclaimed.

I hope the Minister will explain very precisely his intentions in regard to the recovery of social security payments and lump-sum payments, and that he will seize some practical hints that I have offered as a way forward, so that he can protect mesothelioma sufferers from his own compensation recovery unit. I beg to move.

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[Lord Freud]

These amendments do not achieve their aim in many cases, and they could have some deeply unintended consequences. In particular, they would change the way in which the long-established benefit recovery system operates, and I therefore urge the noble Lord to withdraw them.

[Lord Howarth of Newport]

My Lords, I am grateful to my noble friends Lord Browne of Ladyton and Lord McKenzie of Luton, and the noble Lord, Lord Avebury, for participating in the debate and for the excellent points that they have made. I will study with great care what the Minister has said and see whether I can elicit from his words a clear and acceptable set of principles that the department will apply here. He seemed to say that nothing must shake or disturb the existing ways of doing things, and I am not in the least bit surprised that he has said, in his characteristically courteous way, that my amendments are variously defective, subversive or would create chaos. I am an amateur in these matters and I have simply sought to raise the pertinent issues. Merely because my amendments may not stand up to the rigorous scrutiny of this Committee does not mean to say that the issues are not very important and worthy of continuing consideration as we reach the later stages of this legislation.

I agree with the Minister that the term “compensation” is a pretty slippery and rather sloppy one. It becomes a fairly sickly euphemism, not least in the context in which it is often used, where it refers to bankers’ compensation. Those are remuneration packages worth many millions of pounds, and one wonders what the bankers are being compensated for, other than the opprobrium in which they are held in society. I am with him in being cautious about the use of the term “compensation”. However, as my noble friend Lord McKenzie indicated, there may be difficulties in the Government seeking to have it both ways. We should consider further whether the normal rules that apply to compensation recovery, which are entirely legitimate and we do not challenge, can actually be laid over this particular scheme with its very distinctive circumstances.

I detect between the lines of what the Minister has said and from his tone that he wants to be as flexible, constructive and generous as he can be. In that case, we should certainly look further at the use of the mechanism of trusts. I completely accept that we should not take a sledgehammer to crack a nut and that it would not be sensible or appropriate to drive a coach and horses through the existing provisions of trust law in relation to social security benefits. However, it may be possible to harness those provisions to provide slightly more extensive alleviation. Whether, for example, the scheme might be able to provide a hand-out package, which is a trust ready for use that it would be easy for people to pick up and use, I do not know.

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Moved by

[Lord Howarth of Newport]

40: Clause 13, page 7, line 10, after “Scheme” insert “, or any other scheme established under this legislation,”

[Lord Howarth of Newport]

My Lords, Amendments 40 and 45 in this group relate to the possibility of additional schemes being established. They would introduce that possibility into the Bill; perhaps I should say that they would clarify what has already been hinted at and may already be in the Bill. Amendment 40 would empower the Secretary of State to levy employers’ liability insurers in order to fund additional schemes comparable to the diffuse mesothelioma payment scheme. Amendment 45 would empower the Secretary of State to establish by regulation other schemes in relation to long-latency, asbestos-related diseases.

The difficulties of establishing entitlement to insurance payments after many years, when the employer has gone and the documentation is missing, are not confined to the circumstances of mesothelioma. If sufferers from asbestos-related cancer or asbestosis face the same barriers to securing compensation, if we call it that—perhaps we had better say “financial relief”—is it not right that they should be supported by analogous schemes?

I spoke at Second Reading about those two particular diseases as well as diffuse pleural thickening, pleural plaques, pleural effusion and rounded atelectasis. All of these are diseases of the lung and the pleura caused by inhalation of asbestos fibres. The Minister spoke encouragingly in that debate, saying:

“The issue of individuals who have developed other asbestos-related diseases through negligence or breach of statutory duty and are unable to bring a civil claim for damages of course needs to be addressed”.—[Official Report, 20/5/13; col. 690.]

Indeed, justice requires that where people have contracted one or another of these terrible diseases as a result of the negligence of their employer causing them to be exposed to asbestos fibres, surely they ought to be supported on a comparable basis.

Interestingly, the department has just produced a document entitled, Estimates of the Impact of Extending the Scope of the Payment Scheme in the Mesothelioma Bill to Include Other Asbestos-Related Diseases and Other Non-Asbestos Work Related Diseases. It expects that there will be some 2,000 asbestos-related lung cancer deaths yearly, 725 newly assessed cases of asbestosis and 821 cases of non-malignant pleural disease—around 3,500 cases a year of one sort or another. The department acknowledges that it may be more difficult to establish a causal occupational link where these other diseases are concerned and estimates that the levy on insurers to fund a scheme for asbestos-related diseases other than mesothelioma, if the new scheme were to be constituted on the same principle as the DMPS, would amount to £478 million compared with the £322 million cost of the levy for the mesothelioma scheme. That is a significantly larger cost than that of the mesothelioma scheme, but I think it is not impossible to contemplate at some point in the future. I certainly do not think that new schemes should be funded via the DMPS itself, nor do I think that anybody is in a position to create a new scheme immediately. However, it should be done in the fullness of time—indeed, as soon as possible. Therefore, while we are legislating to provide the basis for the diffuse mesothelioma payment scheme, it seems sensible that we should also be clear that we are legislating to make provision for further analogous schemes to be established on future occasions. I beg to move.

[Lord James of Blackheath]

My Lords, the problems of the Navy in this regard persist for that service. An MoD meeting has been called for 10 o’clock tomorrow morning. Will the Minister be present at that meeting? It would be helpful to know that.

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[Lord Howarth of Newport]

My Lords, I am very grateful to my noble friend Lord McKenzie for laying out the case in his customarily lucid and reasonable style. I strongly support Amendment 46, in his name, which wisely would require the Secretary of State to set out his plans to establish further analogous schemes within a year.

We will come back to the Minister’s refusal to contemplate doing that in a moment, but I will just comment on Amendment 47, concerning the Armed Forces, in the name of the noble Lord, Lord James of Blackheath. He has raised a massively important issue. Our concern has to be not only for sailors, for people doing highly skilled labouring jobs in naval dockyards and for other members of the armed services, but for people who could well have been directly employed by government in a whole host of other fields in publicly owned facilities of one kind or another, including of course civil servants. The Government self-insure, and there must be an employer’s liability in that situation. I cannot see how it could possibly be otherwise. Perfectly understandably, the Government do not go to the insurance market to take out employer’s liability insurance but absorb the risk themselves.

I can well understand that the Ministry of Defence has form and has sought, over many years, to resist what many very well informed people consider to be well founded claims for compensation against the Ministry of Defence. It digs in and goes into the trenches. However, there must be a strong case—not only a moral case, as the noble Lord, Lord Alton, very powerfully suggested, but, I would have thought, a strong legal case. The difficulty, presumably, is that potential claimants do not have the confidence to take on the MoD because it has infinite resources with which to defend itself in those trenches.

The noble Lord, Lord Alton, compared the Minister to William Wilberforce. The persuasive powers and techniques of the noble Lord, Lord Alton, are legendary, but I would join him more prosaically in simply encouraging the Minister not only to receive a report on the important meeting that is due tomorrow but to pursue this matter strenuously. I do not know whether the Bill would permit an amendment to be incorporated that was designed to achieve the purposes of the noble Lord, Lord James of Blackheath, with this amendment. However, I hope the Minister will do his very best to ensure that some such amendment is included.

This brings me back to my own amendments, which the Minister resisted despite saying that he was sympathetic to their purpose. How could he not be considering that he went so far at Second Reading? I assume that if the department was going to do the work to produce the estimates document to which I and others have drawn attention, it must be because it sees that there is a strong case for establishing other schemes in the future for other long-latency asbestos-related diseases.

I now know that this is his technique in debate, but the Minister has set up another Aunt Sally, as my noble friend Lord McKenzie spotted. He sought to interpret the purport of my amendments and my remarks as being that we have to stretch the mesothelioma scheme to encompass the payment of compensation in relation to these other diseases. That, of course, is not at all what I said. Amendment 40 would insert,

“or any other scheme established under this legislation”.

Amendment 45 says:

“The Secretary of State may by regulation establish other schemes in relation to other … diseases”.

I am not at all saying that the mesothelioma scheme should be expanded, inflated or stretched to do what he said. I am saying that, to the extent that the Bill clearly does not confer the powers requisite, we ought to amend it so that it would be possible to establish other schemes analogous to the diffuse mesothelioma payment scheme in future. This does not cost the Treasury a penny, and I cannot see what the conceivable difficulty should be. The Minister has given no reason why this should not be done.

[Lord Freud]

I apologise if I abused the Aunt Sally—if I did so, I did so unintentionally. I want to make absolutely clear that we have had recommendations from the Delegated Powers Committee that we are obviously taking with great seriousness. One of the two big recommendations is resisting widening this Bill in the context of the technical committee. The noble Lord in this amendment goes directly against the thrust of the Delegated Powers Committee, which said we should keep this specific rather than giving wider, extra powers to the Secretary of State. I neglected to put my finger on that point, but it is a substantial one for that amendment.

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[Lord Freud]

Perhaps I have opened up a completely new front. I am reluctant to go into that specifically. The point is that we are trying to draw up a specific scheme in this legislation. We would be most reluctant about other schemes with other rules having powers in secondary legislation, whether or not the Delegated Powers Committee were on the same page. I will resist; I cannot do that.

[Lord Howarth of Newport]

I am grateful to the Minister for his explanation. I yield to no one in my respect for the Delegated Powers and Regulatory Reform Committee, which does extremely valuable work in ensuring that the Government do not take outsized powers of a rather generalised nature when they present legislation to Parliament. However, I am not sure that an argument put forward by the Delegated Powers Committee on the proposed technical committee would have a bearing on whether it would be appropriate to take the opportunity of this scheme to make provision in primary legislation to be able in due course by regulation to establish further schemes that would be on the same model as Parliament will have approved in the primary legislation for the diffuse mesothelioma payment scheme, and which would of course have to be legislated in their specifics by way of regulation—as is quite explicitly stipulated in my Amendment 45.

I do not know what the Minister had in mind when he addressed the House at Second Reading and said that schemes to deal with these other terrible diseases should be brought forward, and that there were situations that needed to be addressed. If he was saying that he hoped he would have the opportunity to bring forward a Bill of one sort, then another and then another after that to establish further schemes, he must have known that that was not realistic. To secure legislative time is always a considerable problem, and I am afraid it would be pretty improbable that we would have the opportunity to embark on fresh primary legislation to repeat the process that we are going through now to create the mesothelioma scheme. Therefore, I can see no difficulty of principle that ought to deter us from amending the Bill to provide a clear legal base for establishing other schemes, so that it could accommodate the principle that the Secretary of State could by regulation establish further analogous schemes. In the mean time, I beg leave to withdraw the amendment.

Amendment 40 withdrawn.

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Moved by

[Lord Howarth of Newport]

43: After Clause 14, insert the following new Clause—
“Report on record keeping by insurers
The Secretary of State shall establish a commission to examine and report within one year of enactment on the history of record keeping by insurers who have provided cover against employers’ liability for mesothelioma and other long-latency asbestos-related diseases.”

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[Lord Howarth of Newport]

My Lords, the Committee will be relieved to know that this is the last amendment in my name, at least in Committee. It will introduce into the Bill a new clause to require that the Secretary of State commissions a report on the history of record-keeping by liability insurers. We are legislating for the scheme precisely because the insurance records are missing in a significant proportion of mesothelioma cases. It would be helpful if the Minister were able to give us figures on that. What proportion of mesothelioma sufferers who contracted the disease as a consequence of employer negligence will have to have recourse to the scheme because the documentation for their insurance has gone missing?

In its publications, the department has taken a bland tone on the matter. It has talked of poor record-keeping. In his speech at Second Reading, the Minister was restrained in his language. In Committee, too, he has been studiedly non-judgmental. He has spoken a number of times of “market failure”. He did so far unbutton himself at Second Reading as to speak of,

“a terribly damaging market failure”.—[Official Report, 20/5/13; col. 692.]

In Committee, he has urged noble Lords not to allow emotion to cloud pragmatism, nor allow moral indignation to frustrate practicality. He may be wise in those admonitions. However, I will say—very quietly, not in a sermonising tone but recording what I believe to be a matter of fact—that we are dealing with a major scandal.

At Second Reading, the Minister said that he hoped that noble Lords would agree that,

“the principles driving the Bill are right and just”.—[Official Report, 20/5/13; col. 692.]

He allowed himself to take a moral tone there. I put it to the Committee that justice entails not just making payments under the scheme that is proposed, but exposing wrongdoing and exacting punishment where there has been breach of contract or where criminality is in evidence.

[Lord James of Blackheath]

I might be able to ease the noble Lord’s concern on this. I believe that when the major reinsurances were written, they were limited as to the dates when an infection was identified and the reinsurance applied only to the names of those who had a registered claim at that time. That was all that was relevant for a claim; there is no question about that. Lloyd’s of London did not buy its first computer until 1986. It has nothing that goes back to this period.

[Lord Howarth of Newport]

I am always disposed to defer to the noble Lord as he has a depth of knowledge on this matter that I do not think is matched by the rest of the Committee. However, if Lloyd’s of London did not get a computer until a rather late date in the history of that august market, it none the less had brown cardboard files. It seems to me that strong procedural safeguards and impeccable record-keeping are always central to the upholding of property rights and the protection of people who enter into contracts. I cannot see how employer’s liability insurers at any phase of their history could ever have been justified in allowing the documents to disappear. There might have been a fire in the warehouse but we have not been told that there has been such a fire at any of these insurers. Other than in an extraordinary circumstance of that kind, it must be normal and basic practice to keep the documentation and to pass it on to the successor insurers and reinsurers. I cannot see how anything else could have been appropriate.

We are looking here at a spectrum of wrongdoing that runs from inefficiency and muddle through negligence to, very possibly, deliberate criminality in some places. Indeed, the scale on which the documentation has gone missing suggests that there could have been widespread criminal intention on the part of some people in an earlier generation of insurers. I say “an earlier generation”; they may no longer be active in the market but many of them may still be extant as individuals.

Another recent major scandal has occurred in terms of record-keeping. I refer to the sub-prime lenders in their Gadarene rush towards 2008. The banks, in issuing huge numbers of mortgages and eagerly selling them on, took to neglecting procedural safeguards. The combination of disregard for procedural safeguards with fraudulence led to the catastrophe of 2008 and in the years following, from which we continue to suffer. It reached a point where, with millions of mortgages in default, the banks abandoned the attempt to examine individual documentation to certify that a particular person owed a certain amount of money on a mortgage, which was the asset being sold on, and took to what was known in the trade as “robo-signing”. Instead of examining the individual records, they hired a person simply to sign masses of these documents without even examining the records.

The temptation for businesses not to keep full, accurate and proper records when it is convenient to do so clearly can be very great. We do not suppose—I do not think we do; I certainly do not—that the banks which were guilty of that systematic failure of proper record-keeping should be able to walk away from the scene of what they did and just get away with funding a token scheme. Equally, it seems to me that in the interests of justice and for exemplary purposes, there should be a proper investigation of what went wrong with the employer’s liability insurers. Of course, ELTO has been created and that improves the methodology of tracing claims and liability. However, a disastrous failure has occurred in this regard for a great many people. As I say, it seems to me that this is a major scandal. That is the reason why I have tabled Amendment 43—to require the Secretary of State to establish a commission to investigate and report on what happened in this history of inadequate record-keeping, which I do not think anything can possibly have justified. I beg to move.

[Lord Freud]

My Lords, the noble Lord has tabled this amendment to require that investigations be made into the record-keeping practice in the insurance industry which, to put it no more brusquely, we know has been insufficient in the past. It would also require us to legislate to protect those who cannot bring a claim against an employer or insurer because the records have not been traced.

I sympathise with the aim behind this amendment, which is to bring those culpable to account. Unfortunately, what we already know about record-keeping practices tells me that this simply will not be possible and that any investigation of this sort would be a costly addition to the scheme. One of the things of which the noble Lord may not have been aware, and inevitably would not have been aware of when he put down this amendment, is that on 4 June the FCA published details of its requirements for employer liability insurers to undertake effective searches for historic policies. Moreover, the employer liability tracing office, ELTO, is currently undertaking an audit of the record keeping of its 150 or so members, including Equitas. The number affected by the issue of records that were destroyed is broadly 300 out of the 2,400 people with relevant mesothelioma per year, which implies that one in eight cases is untraced—that is the proportion of the problem.

I hope that noble Lords will understand that we want to ensure that the maximum amount of funds possible go to helping those eligible people who come to the scheme and therefore there is not the flexibility to put resources into potentially costly investigations such as these. I have already spoken to noble Lords about the exercise that I conducted into what was likely to be available on a historic basis, and we already have measures to improve tracing. On that basis, I urge the noble Lord to withdraw this amendment.

[Lord Howarth of Newport]

I am glad that the Minister sympathises with my aim in tabling this amendment. I am sorry, however, that he thinks an investigation of the kind that the amendment would require is not practical. I think it depends on how important people think it is to do the detective work. Of course, it is not within the resources of his own department and I think it would be difficult for the employer’s liability insurers themselves to meet the full cost of this.

However, if we consider that an inexcusable series of abuses has occurred, I cannot see that it is right to allow those who perpetrated these abuses simply to get away with it. If as many as one in eight cases of insured people are untraceable, then something is going wrong on a very big scale indeed. It cannot be satisfactory to leave it at that. The noble Lord gives me a modicum of encouragement in telling me that from now on the FCA is going to intensify the requirements for effective search and that ELTO is going to audit its members. However, if we accept the position as stated by the Minister just now, we will be saying in effect that those generations of people in the insurance market who did not take the basic duty of care that they should have done in relation to the documentation of people who turned out to have contracted this most terrible of diseases should get away with it, I think we should be ashamed of ourselves. I will not say any more about this today and I beg leave to withdraw the amendment.

Amendment 43 withdrawn.