Preparing Legislation for Parliament (Constitution Committee Report)
Lord Hunt of Wirral Excerpts(5 years, 5 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Hunt of Wirral (Con)
My Lords, I declare my interests as set out in the register, in particular as a partner in the global commercial law firm DAC Beachcroft and of course as a member of the Constitution Committee. I very much welcome this debate. It is hard to believe that more than 18 months have passed since the publication of the fourth report, The Legislative Process: Preparing Legislation for Parliament, and more than six months since the 16th, The Legislative Process: The Delegation of Powers. I am proud to be associated with both excellent reports, but I hope the House will forgive me if my remarks focus on the latter and on the thorny question of the proliferation of secondary legislation, which has just been dealt with so effectively by my colleague, the noble Lord, Lord Beith, whether it matters and what to do about it if it does.
I pay tribute to my fellow committee members and to the excellent team, led by our clerk, who did such sterling work gathering evidence and drafting the report. I also pay tribute to the work of what I describe as our sister committee, the Delegated Powers and Regulatory Reform Committee, which frequently cuts off inappropriate and excessive proposals for delegation of powers at the pass, saving us all a lot of time, energy and aggravation later in the process. My noble friend Lord Blencathra, who I am delighted to see is to participate in this debate, together with his colleagues, has made that committee a vital part of our system of governance and proper accountability.
Of course, our 16th report makes some detailed recommendations that are well worth consideration, but it also touches on and draws on wider, deeper themes—vital themes for us all. Paramount among these is the great challenge we all face, and the responsibility we all share, of rebuilding public confidence in our institutions. Noble Lords will be relieved to hear that I have no intention of producing an extended exposition on the interminable matter of Brexit. However, I am relieved that the House of Commons has just rejected by 309 to 298—a majority of 11 votes—what I thought was an irresponsible Motion to try to rewrite the Standing Orders. I am sure it was right to reject that, but all of us in public life need to do everything in our power not only to understand the feelings that induced 17 million people to vote for Brexit in 2016 but now to address those profound concerns earnestly, comprehensively and with genuinely open minds.
For some time now, our nation has been suffering a serious and deepening loss of confidence in our social and political institutions. The causes of that are certainly economic as well as political—arguably, primarily economic—but the time has surely come for us to go back to first principles and examine why we are all here in this place and how we might best fulfil our responsibilities to the British people.
Some might grandly dub this a new constitutional settlement. I see it more as a reassertion of time-honoured and tested values and processes. Even before the great deluge unleashed by Brexit, the volume of legislation coming to this House and the other place had become daunting—even overwhelming and, dare I say it, excessive. As a consequence, the process of serious and effective scrutiny has become grievously overloaded.
I was first elected as a Member of Parliament in March 1976. I served in that office for 21 years, and the duration of my service in this House has just overtaken that. Soon after coming into Westminster I found myself appointed a party spokesman, on the Front Bench straightaway, and after the Conservatives won the 1979 election I spent 16 years without a break in various roles on the government payroll, for which I thank the public very much indeed. I recount this not in praise of myself, but to tease out an argument about the role and responsibility of parliamentarians, especially in a system such as ours where members of the Executive are also members of the legislature.
Through all those years, I hope I never lost sight of the primary role of the legislature as distinct from the Executive, of which I was also part. We are here principally to hold the Executive to account. Those dogged maverick Members whose relationship to Ministers is rather like that of a dog to a bone are heroes of our system, relentlessly tiresome to those whom they pursue but vital to the operation of our democratic system. I am glad to see one or two in their places in this House today.
Ultimately, both reports are about ensuring that we have a system of effective accountability that is both methodical and, when the occasion demands, operates in the buccaneering spirit of those great free-spirited parliamentarians. Yes, there is far too much legislation and a concomitant danger of overload, but there is no excuse for the Executive seeking to push significant measures—including some, as my noble friend Lord Norton pointed out, that create new criminal offences or yet more public bodies, as my colleague the noble Lord, Lord Beith, has just pointed out—into the parallel, all too convenient and faster track of secondary legislation.
Whether or not Brexit happens, and regardless of the shape it ultimately takes, we must realise that our parliamentary system has largely lost its former reputation, domestically and internationally, as the very model of how a free nation should govern itself. We now have to rebuild our systems of accountability, our will to challenge in the public and national interest and, thereby, our collective reputation.
As part of that process of restoration, the clear and discernible upward trend in the accretion of delegated powers must stop now and be clearly reversed. Otherwise, our task of holding the Executive to account will simply become impossible. Of course, it is only human that we worry about these matters much more when we are in opposition. When it is our own noble and right honourable friends who take the decisions, perhaps we have tended to become too blasé.
That makes it all the more important that we should take this question as far as possible out of the normal jousting match of partisan politics. I well know from experience that precedents matter and they carry across from one Administration to the next, regardless of party. That is why we must all, regardless of affiliation, take an honest and open look at how and why these so-called Henry VIII powers are creeping back into our lives on a worrying scale.
As our report reminds us, unlike our system for primary legislation, that for statutory instruments contains no mechanism at all for making amendments. We can, of course, reject them, but only Ministers can revise them. The reality is that, for a number of reasons, we hardly ever do reject them. According to the report, since the last war, the two Houses combined have done so in fewer than 0.01% of cases—just 16 out of 169,000. In practice, except where an eagle-eyed Member happens to spot something offensive or deleterious and divides the House, the passage of SIs is little more than a weary and routine process of rubber-stamping.
I was particularly disappointed with paragraph 7 of the Government’s response to our report on delegated powers, in which the Leader of the House of Commons said:
“It is not always possible to set a clear dividing line as to what amounts to a matter of policy and what constitutes ‘filling in the detail’”.
My answer is: of course it is possible—and vital, too. Why on earth cannot Governments see that, whatever their complexion? As the Secondary Legislation Scrutiny Committee of this House—I pay tribute to my noble friend Lord Trefgarne and his colleagues who are setting the gold standard in producing reports of this nature—warned in paragraph 26 of the 51st report of Session 2017-19,
“significant policy developments should not be merged with a mass of minor adjustments to the extent that they risk being overlooked”.
Quite right.
In conclusion, I am well aware that replacing secondary legislation with primary legislation will necessitate more work, both here on the Floor of the House and in Committee. However, in some instances I believe that it is simply vital to the good function of our system of accountability—our very democracy—that this happens. We must step up and make it happen. As we state:
“This House has exercised a remarkable degree of constitutional restraint in this matter”.
I am sure it is also correct to warn that this restraint cannot be taken for granted indefinitely.
I warmly commend both reports to the House. I hope that in their small way they contribute to the restoration of the good name of our great Parliament.
Financial Guidance and Claims Bill [HL]
Lord Hunt of Wirral ExcerptsWednesday 13th September 2017
(7 years, 2 months ago)
Lords ChamberRead Full debate Financial Guidance and Claims Act 2018 View all Financial Guidance and Claims Act 2018 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 1-IV(Rev) Revised fourth marshalled list for Committee (PDF, 77KB) - (12 Sep 2017)
Lord Hunt of Wirral
“(ba) arranging the provision of temporary replacement motor vehicles,”
Lord Hunt of Wirral (Con)
My Lords, these amendments in my name seek to extend the scope of regulations in the sphere of personal injury claims. Before speaking to them, I remind the Committee that regulation should always remain proportionate—something on which the Government have always been very clear and which I strongly support.
The problem we face and the reason why extension of regulation should be considered at all is that we continue to be in the grip of what the Government themselves describe as a “rampant compensation culture”. Noble Lords may recall that I set out a brief history of the regulation of claims management companies during the debate on Second Reading. The reason why we are back debating, and I hope supporting, more effective regulation of CMCs is that this insidious, divisive and potentially ruinous problem continues to grow. There is a serious danger that our civil justice system, which has long been the envy of the world, could be overrun and reduced to a laughing stock by the waves of claims generated by these cynical and ruthless companies.
I will return to this point on another amendment to refer the Committee to the latest phenomenon of holiday sickness claims. For now, perhaps I may just quote from the decision of Lord Justice Jackson last week in the Court of Appeal case, Thomas v Hugh James. It stated:
“The civil justice system exists to enable injured parties to recover compensation for genuine wrongs. It does not exist to service artificial claims stirred up by advertisements”.
Lord Justice Jackson, who has done so much brilliant work producing recommendations for containing legal costs and whose latest proposals on fixed costs in cases up to £100,000 in value were published on 31 July, struck right to the heart of the matter with characteristic precision and candour. Noble Lords will know that I have long been an insurance solicitor, having started life as a solicitor for the Transport and General Workers’ Union, so I have quite a history and declare my interests in this matter. This growing culture of artificial claims really is the tail wagging the dog.
When we first dealt with the regulation of CMCs in 2006, we were very conscious of the effect of the self-serving mantra of the CMC sector: “Where there’s blame, there’s a claim, and it won’t cost you a penny”. I am keen to establish that where there is a claim, there should be proportionate and effective regulation in the public interest. Many participants in the injury claims industry are already regulated: solicitors, insurers, brokers, doctors, even claims management companies. The amendments would close loopholes to ensure that control by regulation extends to all those with a financial interest in the damages and legal costs pursued in the name of injured claimants.
This is not just about controlling the cost of insurance claims, although ultimately that restraint is good for society as a whole as well. It is also an essential part of consumer protection. Amendment 69A would address something known as “credit hire”—I have used the term “temporary replacement … vehicles” because that is a term understood within the industry to cover all relevant arrangements.
A motorist whose vehicle is damaged through the fault of another may recover damages for the loss suffered as a result of their vehicle being out of use. That may, where reasonable, involve recovering the cost of a hire vehicle. This straightforward concept has spawned an industry of “credit hire organisations”. “Credit hire” allows customers to hire on “credit” terms, which are offered with the expectation that a recovery will be made from the at-fault driver’s insurer. The hire rate charged by the credit hire organisation is usually much higher than the prevailing rate on the high street. This is, in effect, the cost of the credit risk, but it is not badged as a charge for credit and therefore is completely unregulated. Nor is the customer told how much of the price might represent the cost of credit.
The whole concept has been the subject of much litigation over the years and formed a major part of an investigation by the Competition and Markets Authority into the cost of private motor insurance in 2014. The CMA actively considered greater regulation as a solution, but ultimately decided it lacked the authority to impose such a remedy.
Many credit hire providers are already FCA authorised and all are likely to be licensed by the FCA for provision of consumer credit. This core activity of credit hire is, however, delivered through the use of exemptions which circumvent the consumer credit regime. This market affects many people. Consumers often sign up to credit hire without understanding that they had other options. They are all too frequently unaware that, when they agree to accept a credit hire vehicle, they are signing a contract that makes them bound to pay the full price for the vehicle. They are not protected from unclear terms for payment or cost.
Amendment 69A would make all the activities of such organisations subject to regulation by the Financial Conduct Authority. Not all the attendant problems can be addressed by extending the scope of regulation but it would be a positive step in the right direction. These companies provide a consumer service but it should be done in a properly controlled environment.
Lord Young of Cookham (Con)
My Lords, Amendments 69A and 69B, which my noble friend Lord Hunt has put forward, seek to include credit hire agreements and the commissioning of medical reports within the scope of claims management regulation. He seeks to do that by amending the definitions in Clause 16. The Committee is grateful to him for the powerful way in which he put forward his case. I am sure we all agree with his quote from Lord Justice Jackson about artificial claims.
I understand my noble friend’s concerns and agree there are links, as the noble Earl, Lord Kinnoull, said, between these issues, not least in terms of the impact they can have on the cost of insurance premiums and other fees for consumers. However, credit hire and medical reports are separate from the issue of claims management regulation. They are important issues which are being considered through other government work, taking into account the broader context of the market. In both cases, CMCs are a very small part of the overall market. To revert to my aeronautical analogy, they are on a separate flight path from the measures in the Bill, but they are none the less important.
As my noble friend explained, credit hire is the supply of a like-for-like replacement hire vehicle on a credit basis to a not-at-fault vehicle owner following a road traffic accident. This can, of course, be part of the overall insurance claim process, but it is not in itself a claims management activity. Similarly, some CMCs are involved in medical reporting, but the market is far broader than CMCs, with most reports sourced by claimant lawyers and/or insurers. Medical reporting organisations provide services organising the provision of medical reports, as my noble friend explained, for personal injury claims, but they do not pursue claims themselves.
That is not to say that these issues are not important. It is clear from the interventions of noble Lords on all sides of the Committee that they are. They should be addressed, and the Government will address them. The Government are considering what more can be done on credit hire. We sought views on this issue in the call for evidence section of the whiplash consultation that closed in January 2017. Responses are being considered, and the Government will make an announcement in due course.
With regard to commissioning medical reports, as my noble friend noted, MedCo is an industry-owned, not-for-profit company that was established to enhance the quality and independence of initial medical reports in support of whiplash claims. As my noble friend said, attempts to subvert government policy in relation to the introduction of greater independence in medical reporting have resulted in firm enforcement action by MedCo against medical experts, lawyers and medical reporting organisations who have breached MedCo’s user agreements. Good-quality medical evidence supported by the MedCo system is, and will continue to be, an integral part of the Government’s whiplash reforms going forward.
I shall pick up some of the points made in this debate. My noble friend Lord Trenchard asked whether the FCA is qualified and resourced to take on the responsibilities in CMCs. The independent review, which I will refer to again in a moment, concluded that stronger regulation is necessary in order to deliver a step-change in the regulation of the sector. It recommended transferring regulatory responsibility for claims management companies to the FCA. All the costs of regulation will be borne by the CMC market through the FCA’s levy-raising powers, which we discussed at our previous session.
The noble Lord, Lord McKenzie, asked whether firms might get round the regulation by turning themselves into another body, such as a solicitor. Currently, the CMRU, which is in the MoJ, regulates CMCs while the Solicitors Regulation Authority regulates firms of solicitors that conduct claims activities. The full scope of claims management services for the purposes of FCA regulation, including the extent of any exemptions, will be defined through secondary legislation. We want to make sure that there is a tougher regulatory regime and greater accountability for CMCs while ensuring that solicitors are not burdened with unnecessary regulation. The scope and nature of exemptions will be drafted to reflect these priorities, and we will, of course, take on board the point which the noble Lord made.
The noble Lord, Lord McKenzie, then mentioned tax refund companies. I think we all believe that too much tax is being deducted from our income. He is quite right to say that tax refund services are currently unregulated, but they will be subject to trading standards. I can tell the noble Lord that we will further consider and consult on secondary legislation to ensure that the definition of claims management activities is both proportionate and relevant. I would like to reflect on the points that he made about tax refunds and perhaps write to him in more detail.
The thrust of the Government’s case in response to these amendments goes back to the independent review of claims management, which recommended the transfer of claims management regulation to the FCA—that is the foundation of the Bill. However, the review did not consider the extension of scope to credit hire and medical reporting, as suggested by the amendment. CMCs are only part of a larger market in the case that my noble friend has raised, and this wider context needs to be considered, as credit hire and the commissioning of medical reports are separate issues to those under consideration within the Bill. As they are being dealt with separately by government, I would encourage my noble friend to withdraw his amendment. If he wants a further discussion about the action the Government are taking on this, I would be more than happy to meet him.
Lord Hunt of Wirral
My Lords, I accept the offer of a further discussion. I am very grateful to the noble Baroness, Lady Kramer, the noble Earl, Lord Kinnoull, my noble friend, Lord Trenchard, and the noble Lord, Lord McKenzie of Luton. I am intrigued by the idea of my noble and learned friend Lord Mackay of Clashfern that perhaps we ought to go a step further and find out ways to stop all this happening in the first place by making it impossible to bring such claims. No doubt we will be delving further into how we control what I have described as this insidious, nasty part of the marketplace when we come to the civil liability Bill and through various other opportunities. I know my noble friend has said that this Bill is on a separate flight path, but I am dealing with drones, and these drones are criss-crossing all the flight paths and creating new flight paths. With that acceptance of the offer of a further meeting, I have no hesitation in saying this problem will not go away and that we have to sort it out. But in the meantime I beg leave to withdraw the amendment.
Lord Hunt of Wirral
Lord Hunt of Wirral
My Lords, I declare my interests as set out in the register.
Who does not enjoy a holiday in the sun? But your Lordships should be warned, for the ingenious claims farming industry has us all in its sights—or at least those noble Lords who take package holidays to Spain or other more exotic destinations. ABTA, the Association of British Travel Agents, records that, since 2013, its members have reported an increase of more than 500% in the number of holiday sickness claims, with no corresponding rise in reported sickness levels in resort.
We now hear stories of CMCs targeting holidaymakers while still in resort to make claims, and of claims being made long after the holiday—the time limit is up to three years—when no real verification of the facts is possible. No doubt many such claims are the result of cold calling, although I suppose touting for business in a Spanish resort might more properly be dubbed hot calling. At the heart of this new surge of claims is the ability of CMCs to obtain a commercial return from a combination of deductions from the claimant’s damages and from side arrangements with solicitors and medical report providers.
Amendment 70A proposes to extend Clause 17 to cap the fees that CMCs can charge in claims for personal injury, as well as in claims for PPI and financial mis-selling. Most of Part 2 of the Bill deals with transferring existing powers to the FCA, but Clause 17 represents an extension of those powers. It gives the FCA power to cap the fees charged by CMCs in certain types of claim.
Clause 17(2) requires the FCA to make such rules to cap fees only in respect of claims relating to financial products or services. I respectfully suggest that that is not wide enough and we should extend that now. This amendment would extend the requirement to cap fees to claims for personal injuries—beyond holiday sickness claims, which is wholly intentional, as I will explain.
Lord Young of Cookham
My Lords, I am sure the noble Lord, Lord Stevenson, will find himself on “Yesterday in Parliament” because I am not sure there is much else to report from your Lordships’ House today apart from that moving explanation of a very unfortunate holiday.
My noble friend’s Amendment 70A seeks for the duty on the FCA to cap fees on financial services claims to include personal injury claims. I am grateful to my noble friend for outlining the reasons behind his amendment and to all noble Lords who have taken part and shared with us their various experiences on holiday. It has given us the opportunity to discuss the different types of claims management services that the FCA will be responsible for regulating.
Like other noble Lords, I am irritated by the advertisements on some radio stations encouraging me to recollect what happened three years ago and to apply for compensation. Other noble Lords made it clear that they are against this claims culture and want to see action taken.
CMCs manage claims in different ways. Those dealing with personal injury claims, such as holiday sickness claims, typically focus on marketing activities—we have heard how people are approached overseas—and refer clients to lawyers. They do not usually charge consumers directly, so the opportunity to provide customers with poor service and charge high fees is greatly reduced. To that extent, they are different from some of the activities that we have been talking about.
In the financial services claims sector, CMCs tend to represent clients through the claims process and charge them directly for this service. Evidence suggests that the average completion fee for financial services claims is 28% of the claim value, despite there being very little work involved in processing many financial services claims. The most common example, as we have heard, is PPI, where the consumer only needs to complete and submit a form to the lender. In 2015-16, 95% of complaints about CMCs related to financial services claims; only 2% related to personal injury. However, I recognise that markets and business plans can change. That is why the Bill provides the FCA with a broad power to restrict fees across the range of claims management services it will regulate. It will be up to the FCA to decide whether to exercise this power, based on evidence about how the market is operating, so it could extend it to holiday sickness, which we have heard about in this debate.
My noble friend and other noble Lords referred specifically to holiday sickness claims and the apparent propensity of Brits to be ill overseas more than other Europeans. The Government are concerned about the apparent recent increase in this type of claim. Tackling fraudulent claims is a key priority, and the claims management regulator and the Solicitors Regulation Authority have taken significant steps to deal with abuses in this area. I recall reading in the press that a case is imminent in this country regarding an alleged fraudulent claim, and I also read that prosecutions are taking place in Spain, I think.
The Claims Management Regulation Unit recently cancelled the licence of a CMC responsible for pressuring people into making holiday sickness claims. On top of this, the Solicitors Regulation Authority recently issued a warning making it clear that any solicitor handling holiday sickness claims must carry out proper due diligence. They must make sure they advise clients properly and are dealing with a genuine case where the client is seeking legal help of their own accord.
There is a difference between personal injury and financial services claims management services, so it is logical to impose a duty on the FCA to cap fees for financial services CMCs only. As I said a moment ago, it does have a broad power to restrict fees across the range of claims management services that it regulates.
Amendment 70B provides a useful opportunity to discuss some of the recommendations put forward in the Independent Review of Claims Management Regulation. My noble friend’s amendment would provide for a 0% cap where free alternative claims routes are available, except if it can be shown that the claimant was provided proper information on alternative free methods to claim.
As the Committee is aware, and as my noble friend reminded us, we accepted the recommendations of the Brady review, including the one my noble friend refers to, which was to ensure better signposting to alternative claims resolution channels in order to enhance consumer awareness and help consumers make informed decisions. I am confident that the FCA will take the independent review’s recommendations into account as it develops the new regime.
I would also note that the FCA already has the power to make rules requiring firms to signpost customers to free alternatives, and that power will be available, when the Bill hits the statute book, in relation to claims management companies. It has already made rules to that effect in relation to debt counselling, debt adjusting and the provision of credit information services. In each of these cases, firms must indicate that free services are available and that customers can find out more by contacting the Money Advice Service in their first oral or written communication with their customers. In addition, their websites must provide a link to the Money Advice Service. The FCA already has the power to make rules that would signpost customers to free alternatives, as well as substantial powers to enforce those rules.
I return briefly to the issue of the small claims threshold, which was recently changed. I think it best to write to the noble Lord on the impact of the change to that limit. On overseas claims, the Bill gives the Treasury a power to define when a person should be treated as carrying on claims management activity in England and Wales. The intention is that CMCs approaching consumers in England and Wales and taking forward their claims will be subject to FCA regulation as far as possible. In relation to holiday sickness claims, a CMC carrying out all of its marketing and advertising in Spain is outside of the England and Wales jurisdiction, but if it refers the details on to a UK law firm, that action would be captured by CMC regulation. I hope that answers the noble Lord’s query.
Against the background of what I said earlier, I repeat my acceptance of my noble friend’s offer of a meeting and hope he might feel able to withdraw his amendment.
Lord Hunt of Wirral
My Lords, I am grateful to all those colleagues who participated in this debate. I always want the noble Earl, Lord Kinnoull, to participate in debates in which I have spoken because he supplies all the information which I lack. His statistics were staggering and worrying, and once again an indication that something has to be done. I am also very grateful to my noble friends Lord Trenchard and Lady Altmann. I would just say to the noble Lord, Lord Stevenson of Balmacara, that his story will follow us for a long time to come. It is the sort of nightmare from which fresh and better laws are born.
We must find ways of ensuring that genuine claims are dealt with properly. ABTA would say that it has now set up this free service which will deal promptly and well with that sort of situation. No doubt the Minister is overwhelmed by the Cross-Bench, Liberal Democrat, Conservative and Opposition support that has come today for the amendments I have had the honour to table. I detect that there is already a willingness on his part to find a solution, which is why, in anticipation of the many meetings we will hold between now and Report, I so readily beg leave to withdraw the amendment.