Mesothelioma Bill [HL]
Lord McKenzie of Luton Excerpts(11 years, 4 months ago)
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Lord Ahmad of Wimbledon
Perhaps I may clarify matters. The noble Countess is quite correct. This is Report and we should be addressing the amendment. I would ask my noble friend to make his point when we reach the relevant amendment.
Lord McKenzie of Luton
My Lords, I start by thanking the noble Lord for the amendments, which we support. Putting the scheme on a statutory basis responds to the debate that we had in Committee and to the recommendations of the Delegated Powers Committee. I thank him for that.
Perhaps I may be allowed the opportunity to pick up a few points from the noble Lord’s opening statement—again, the thrust of which we are very happy with and supportive of, particularly the open competition for the scheme administrator. That is a very positive move. In addition, the improvement to the record-keeping, the progress of ELTO and the engagement of the FCA are to be welcomed. We knew the Minister’s view on the oversight committee and hoped that it would be possible for him to table amendments for today. However, as that has not proved possible, we hope that there will be a commitment to do so when the Bill goes to the House of Commons.
We support the 75% as an improvement on the opening position. I hope that the noble Lord will not misinterpret subsequent amendments that we have tabled as being ungrateful for the efforts that he has made but I think that we have an obligation to pursue the matter further. The noble Lord put an important issue on the record concerning the scheme, its uprating and the review. The CPI uprating is to be welcomed, as is the review based on the practice and outcomes of the smoothing period. The key issue here, certainly after the initial—
The Countess of Mar
Again, I am sorry to interrupt the noble Lord but I wonder whether he will address Amendment 1 moved by the noble Lord, Lord Freud.
Lord McKenzie of Luton
My Lords, I have addressed it and was simply taking the opportunity to pick up a few points from the Minister’s opening statement, with which I think he was trying to be helpful in setting the scene for this. I was also trying to be helpful by saying what our position is on that. It seems to me that that is my responsibility at this Dispatch Box on behalf of the Opposition. We have tabled an amendment, so we can pick that up in due course. The key thing for us is whether the levy rate will be reduced at the end of that four-year period or whether it can be maintained at its opening level. Obviously that will have beneficial implications for the rate of payments in due course, but perhaps we will come to that on some of our later amendments. However, I support the amendment moved by the Government.
Lord Freud
My Lords, perhaps I may quickly touch on some of those issues. The point raised by my noble friend Lord Avebury will be dealt with in the third group of amendments, but, as he shrewdly spotted, the figure of 75% comes out at £75 million of costs.
Lord Kerr of Kinlochard
I had not intended to speak but I am moved to do so by the austere and Robespierre-like logic of the noble Lord, Lord Howarth. He was supported by the noble Lord, Lord Deben, who I strongly agree with in his advice to the Minister to eschew the hypothecation arguments. My advice would be to also eschew the Robespierre argument advanced by the noble Lord, Lord Howarth. The Minister is actually in such a good mood today that I rather hope he is going to accept this amendment.
I do not think that the noble Lord, Lord Howarth, is right. From my passing experience of being involved with and watching the noble Lord, Lord Tugendhat, who I see is in his place, playing a principal part in a university medical research programme, medical research does not seem to have any difficulty in accommodating well placed money from foundations, trusts, charities or private philanthropy. I do not see why a levy should be any different and I reject the reference to Stalin. It seems that this levy could go direct, but if the research councils need to be involved in this at all, it does not follow that the awards displaced would necessarily have been of higher quality.
I do not accept that the purity of the system is affected if money comes in from other streams. Universities seem to have managed to cope with that very well over the years, so we do not need to follow such an austere argument as that of the noble Lord, Lord Howarth. Although I accept that there is a worrying logic to it, in practice it does not work like that.
Lord McKenzie of Luton
My Lords, this has been a wide-ranging debate. I do not think I will be drawn into issues of hypothecation, although it is a tempting subject for debate. Throughout our deliberations on the Bill and before, the noble Lord, Lord Alton, has been passionate and convincing about the case for funding mesothelioma research. He has been supported in this by many noble Lords, including those who have added their names to his amendments, particularly the noble Lords, Lord Walton and Lord Pannick.
The case that the noble Lord makes is thorough and incontestable. Despite knowledge of this terrible disease and its long latency over many decades, research spending by Governments has been derisory. The noble Lord contrasted the levels of research on diffuse mesothelioma with other cancers to reinforce his point but he acknowledges, as does the noble Lord, Lord Walton—and as indeed do we—that the insurance industry has funded such research in the past. The ABI has made it clear to us in discussion that it stands ready to do so again in the future, if the Government are prepared to play their part. They had said that they would match-fund. I hope that we will hear from the Minister in a moment that the Government will play their part, and how they will do so.
We all recognise that the noble Lord, Lord Alton, has made his case about the need for a national research effort, so the issue is not whether but how this outcome is to be achieved. His approach is focused on the insurance industry’s contribution, which, as he explained, is set down by Amendment 24 as a “Research supplement” raised under regulations under the levy provisions. That supplement could not exceed 1% of that required for payments under the scheme. The proposed regulations must cover how such amounts are to be applied and the role of the scheme administrator. Of itself, the amendment makes no reference to the Government’s obligations. I think that we will hear a different approach from the Minister about the plans that he would wish to develop to attract quality research funding for mesothelioma. If this is right, we need to understand the parameters of this: how much is involved and what is expected of the insurance industry. We also need to understand whether the approach is inconsistent with that of the noble Lord, Lord Alton, which is to raise a levy on insurers.
We have thought long and hard about this and which is the best way forward. Our shared objective is, I believe, to get properly funded research under way as quickly as possible and on a sustainable basis. We all acknowledge the commitment and integrity of the Minister and his desire to fulfil this objective. After hearing the Minister again, the noble Lord, Lord Alton, may consider that he has sufficient reassurance that his objectives will be met, albeit by the administrative route rather than the legislative one. Perhaps he has already concluded that from the extensive discussions he has had to date. If the noble Lord, Lord Alton, is not reassured, and presses his amendment, we are minded to support him in the Lobby.
The Parliamentary Under-Secretary of State, Department of Health (Earl Howe)
My Lords, it may be a slight surprise to see a Minister from another Department of State responding to this amendment. However, my noble friend Lord Freud has asked me to speak to it as a reflection of the importance that he and I place on promoting research into mesothelioma. We are both sympathetic to the view that more money should be put into research on this disease. Indeed, before this amendment was tabled, my noble friend and I spent some time exploring possible routes for funding. It is the fruits of those discussions that I shall now cover. However, the mechanism proposed in this amendment is not the best way to achieve the objective that the noble Lord, Lord Alton, is aiming at.
There are a number of reasons for this. In Committee, my noble friend set out some technical but none the less important arguments as to why the Government are resistant to the idea of a supplementary levy for mesothelioma research. I will not rehearse those arguments again and my noble friend Lord Deben need not worry as I am not going to rely on them at all. I need to stress that any additional research charge of the kind proposed by the noble Lord, Lord Alton, would, like all taxation, have to be paid into the Consolidated Fund and, if hypothecated, would then have to be paid out by the Treasury for a specific purpose. The Treasury does not normally handle tax income in this way, and there would need to be more convincing arguments before it could consider doing so for mesothelioma research.
The more substantive problem with the amendment is to do with research policy. As noble Lords will be aware—and the noble Lord, Lord Howarth, pointed to this—there is a fundamental, widely accepted principle that the use of medical research funds should be determined not just by the importance of the topic but by the quality of the research and its value for money. There is a good reason for this. There will always be more proposals for high-quality medical research overall than there are resources available for funding, and it is arguably unethical to support second-rate work in a particular area at the expense of higher-quality work in another equally important one. Noble Lords will understand that this is why, as a rule, public sector funders of research do not ring-fence funds for particular diseases. It was the same principle that prompted Dame Sally Davies to restructure the research funding that the Department of Health was putting into the NHS over many years, so that funds would flow, as they now do, to the most important, highest-quality research.
In the case of mesothelioma, the real issue is not just the money; it is the quality of the research being proposed. How can we try to ensure that the research proposals in this field reach the quality threshold required to secure funding? If that threshold is reached, funding is much less of a difficulty; indeed there is no need to think about the forcible gathering of funds from insurers. If noble Lords agree, the goal is how we stimulate high-quality research proposals without undermining the country’s strategic research mechanisms.
Lord McKenzie of Luton
My Lords, the amendment stands in my name and that of my noble friend Lady Sherlock. I shall also speak to Amendment 8. The two amendments are linked, and we see Amendment 8 as being consequential.
The amendment addresses one of the major bones of contention with the legislation: its start date. The payment scheme, which we all applaud, is applicable only to those first diagnosed with diffuse mesothelioma on or after 25 July 2012. This is, as we know, the date when the Government responded to the consultation published by the previous Government. It was more than two years after the consultation closed. Over that period, some 600 individuals will have died from diffuse mesothelioma without them or their dependants receiving proper compensation.
We were told in Committee that it took so long to move from consultation to response because of the complexity of the issues and the intense work with stakeholders, including the insurance industry. We accept this, but it can hardly then be argued that the insurance industry did not know what was coming. It would surely have been on notice as to the likely parameters of the scheme, because it was a key participant in the negotiation, which in effect required some degree of agreement. It is not as though the scheme was somehow sprung on the industry from out of the blue.
We had some debate in Committee about the date on which insurers could reserve against liabilities. As my noble friend Lady Sherlock exposed in her usual forensic analysis, it is not a matter of reserving against liabilities. The levy is apparently a tax and should be provided for in the usual way when it arises.
It has been suggested that the February 2010 date, the date on which the consultation document was issued, was insufficient notice to create the expectation of the introduction of a scheme that would have to be funded by the insurance industry. We disagree. It is an entirely appropriate start date. Paragraph 60 of the document states clearly:
“Having considered this carefully, the Government are persuaded that an ELIB”—
an employer liability insurance bureau—
“should form part of the package of measures to improve the lives of those who, for whatever reason and through no fault of their own, have been injured or made ill”,
by work.
That was clearly putting people on notice that the then Government were intent on introducing an ELIB broadly on the terms of the Motor Insurers’ Bureau. Moreover, this intent was not limited to a scheme to cover diffuse mesothelioma; it was a broader intent to cover those more generally who were missing out on justifiable compensation. Although a very valuable scheme, what is now provided for in the capital is a smaller, less costly scheme than was signalled in the February 2010 consultation. It should have been no surprise for insurers. The arguments in favour of a July 2012 commencement are flimsy to say the least. In its briefing for today, the Law Society states: “There is little justification for disqualifying cases diagnosed between the announcement of the consultation in February 2010 and July 2012”.
Of course, the Minister will tell us that there is greater cost, that it could tip all this finely balanced negotiation over the edge, and that co-operation from insurers would recede, but the cost originally presented to us for a February 2010 start date was an extra £190 million. It is now transpired that that assumes payment at 100% and presumably took no account of any additional compensation recovery that might ensue and assist with smoothing. It would be dependants rather than sufferers who would mostly benefit from this, because many of the latter would, sadly, not have survived, but that is no reason to deny justice. I beg to move.
Lord Freud
Yes, my Lords. That specifically is what the state provision is there for. In particular, the 2008 mesothelioma scheme was set up to make payments to people, such as wives, who worked with asbestos. It is a smaller payment but that is what it was designed to do. I ask the noble Lord to withdraw his amendment.
Lord McKenzie of Luton
I thank the Minister for his response, and all noble Lords who spoke in favour of Amendments 4 and 8. I also thank my noble friends Lord Howarth and Lord Browne for addressing the issues in Amendments 5 and 6.
To pick up the Minister’s reply, if the response to everything we have discussed tonight is basically that the scheme is locked down and there have been negotiations—this point was made by the noble Lord, Lord Stoneham; as well—we might as well go to the bar because I am not sure that we are going to shift anything tonight. We pay tribute to the Minister—
Lord Freud
I must come in on that. The group—huddle?—of noble Lords who have been working on this Bill have made enormous changes to what we are doing. Noble Lords’ concerns have fed straight in and we have made a series of changes. I do not want any Peer to feel that their views and the work they have done has not been taken, absorbed, acted on and gone right to the edge of what is possible. I assure the noble Lord that the bar is not the place for him.
Lord McKenzie of Luton
I am grateful to the noble Lord for that explanation although it is a pity about not being allowed to go to the bar. I want to make it clear that we have acknowledged, I hope fulsomely, the work the Minister has done on this. I acknowledge also the acceptance that what we have deliberated on in Committee and in meetings has influenced the Bill but if we are now saying that in a sense we have come to a full stop, I wonder what progress we can make. However, I will carry on with the argument.
As far as the start date is concerned, I simply do not accept the point that the insurers did not know until July 2012 that there was the expectation that a scheme would be set up. From what the Minister has told us, there have been two years of intense negotiations, generally with the ABI, which has had to discuss matters and negotiate with a range of insurers. There was an intense process under way, as we understand it, and therefore it must have been very clear to insurers that something was very likely to come from this and that was going to be the sort of scheme that has now emerged. I do not accept that the first insurers knew about it was the point when we said: “Here is the document. This is what we are going do”.
Lord Freud
I just want to clarify the point about the expectations or otherwise of the insurance industry. From our negotiations, which went on for a long time —more than a year; I cannot remember exactly—it would have been anticipating that the specific insurers with historic liability would have been pinned down in a completely different way from this levy. We spent an enormous amount of time working on that. As I have already told the House, my first instinct was to try to get the actual insurers that wrote the liability to find the money out of their balance sheets. I judged that the legal risks to that approach were high—not impossible, but high—and we therefore switched to this other approach. Actually, the expectations that the industry might have had would not have been set anything like as early as noble Lords might think.
Lord McKenzie of Luton
Again, I am grateful to the Minister for that explanation, but it seems to me that the expectations were not set only at the point of July 2012. On the cost that the Minister has outlined, I understand that it has reduced from the original figure of £119 million. I do not think that the figures that the Minister has given reflect any additional benefit recovery potential that would come from having two more years in the scheme, or know whether that was fed in to any analysis of how it might impact on the spreading that would arise from that. Maybe we will have to have that discussion on another occasion. I do not think that we are going to see eye to eye on this.
On Amendments 5 and 6, the noble Lord prayed in aid a technical deficiency of the drafting. I have done it myself; I think it was the noble Lord, Lord Deben, who advised generally against that. The thrust of the point made by the noble Lord, Lord Browne, was that, whether it is the employer liability route or the public liability route, you are basically coming back to the same insurers. Obviously, the Minister’s point about there being some hope for the self-employed —being able to argue that in certain circumstances they were de facto employees—is helpful.
We do not accept the proposition that the start date should be the 2012 date. February 2010 is a better date. That was when the expectation was effectively created. In fact, when you look at it, the insurers ended up with a lesser scheme than was proposed in February, so their expectation should have been of a higher obligation arising from that. A broader bureau was consulted on at that time. Having said all that, I wish to test the opinion of the House.
Lord McKenzie of Luton
My Lords, I shall speak also to Amendment 13. Amendment 11 requires that those diagnosed with diffuse mesothelioma and eligible under the scheme should receive payment of an amount no less than 100% of the average actual damages recovered in mesothelioma cases. Because the scheme under consideration is a payment scheme rather than a strict compensation scheme, it has been agreed that a tariff based on average compensation levels taken over recent periods should be taken as a reasonable proxy for compensation amounts. The tariff, which we will discuss in subsequent amendments, is comprised of bands depending on age at date of diagnosis. It is understood that the starting tariff is accepted by the Government, the insurance industry and the Asbestos Victims Support Groups. What is not agreed is the percentage of the tariff that should be paid.
The amendment proposes that it should be 100%, a full compensation equivalent. Hitherto, the Minister has referred to payment levels of 70% of the tariff and today we heard the good news that he has been able to negotiate this a little higher with the ABI, with the proposition that it now be 75%. These amounts are of course separate from the payments towards legal costs and any research supplement, should that re-emerge. We should make clear again that we consider that the Minister has done a first-rate job in bringing the scheme thus far. We have no doubt that he has had to endure many painful engagements with the insurance sector, whose failure—or market failure in his terms—is at the root of the problem that this Bill seeks to address. I wish him to go further. I do not wish to seem ungrateful for these efforts but we have an obligation to speak to the victims to see it from their point of view.
The payment scheme provided for in this Bill operates when somebody has been negligently exposed to asbestos and has consequently contracted diffuse mesothelioma. This is, as we have heard, a terrible disease, invariably fatal, which inflicts untold suffering on those who contract it and on their families. In Committee, a number of noble Lords spoke of their own harrowing experience of witnessing the awful pain that mesothelioma causes. The only thing that prevents individuals in these circumstances getting proper compensation—the government schemes fall far short—is the inability to trace the employer that caused negligent exposure to asbestos or the insurance company which provided employer liability insurance cover. No blame can be attached to mesothelioma sufferers for this. It is not their fault that, because of the passage of time, records have been lost or destroyed. Many can trace those responsible and the new tracing office will help more in the future. That is good news. That is as it should be. However, for those who cannot, why should they not be treated in an equivalent manner? They are the victims. If I may, I will quote from an e-mail received from Tony Whitston, who, as many will know, has been a tireless campaigner for asbestos victims. Tony said:
“For mesothelioma sufferers and their families, compensation isn’t about money per se. For mesothelioma sufferers, compensation provides solace that their loved ones will have some financial security when they die. For their families, compensation is about justice. No one will stand in the dock and answer for the terrible suffering and loss of life, past, present and to come. Compensation stands in for justice. To diminish compensation is to demean the pain and suffering families have witnessed and cheapens the justice they thought they had obtained”.
If we are encouraged to look at this through the eyes of the insurance industry, we will be told, as we have been, that a discounted payment is necessary to encourage individuals to trace an employer or insurer. We will be told that not all employers in the employer liability market will have been in the market or on risk over the years when people were exposed. That is notwithstanding that tracing or accessing the scheme has to follow the same routes. References to public liability policies not being traced are, by and large, a red herring. Collectively, over the years, the industry would have had premiums for liability that it has not had to meet, and it still has the benefit of premiums for other exposures that remain outside this scheme. If there has to be some rough justice at the edges of these arrangements, clearly the justice should go to the sufferers. The insurance industry should make amends for its failures of the past.
Our Amendment 13 seeks to take the insurance industry at its word. It has expressed concern that a levy rate of more than 3% could tip matters over to a situation where the levy costs would have to be passed on to industry. The noble Lord referred to that in his opening remarks. We are sceptical about whether pricing of employer liability policies would work collectively for all 150 or so market players in this way. However, accepting that 3% is a tipping point for the sector, Amendment 13 requires that the levy is a minimum of 3% or such lower sum as would provide for 100% of the tariff.
For the initial four years of the scheme, the industry would doubtless claim that at 75% of the tariff it is already at 3%, or perhaps above it, in which case the amendment should not cause it a problem. On the Government’s figures, the levy would be close to 3% for a 75% payout over the initial four years of the scheme but below 3% for the latter six years if the tariff is to be paid in full. Given that no one, we hope, is arguing that the percentage levy will reduce in future, except to the extent of avoiding paying more than 100% of the tariff, the amendment should be readily acceptable.
If the Minister is unable to accept the amendment as it stands, could he at least confirm that it is not the intention to reduce the levy rate in real terms after the smoothing period unless that produces more than 100% of the tariff? Amendment 13 sits perfectly well with that in the name of my noble friend Lord Browne and the noble Lord, Lord Wigley. I beg to move.
Lord McKenzie of Luton
My Lords, I thank all noble Lords who have spoken in favour of Amendments 11 and 13. Perhaps I may deal briefly with the Minister’s reply. We agree that we want to get the maximum possible out of this. We acknowledge the improvement in the incentive for tracing that the noble Lord announced earlier, and I think that all noble Lords accept the increase from 70% to 75% in the level of recovery. However, we always come back to analysing this from a justice point of view: what is fair to insurers and what is fair to people who have contracted diffuse mesothelioma because of employers’ negligence. We cannot get away from the fact that justice for them has to be 100% of the compensation that they would otherwise receive if there were formal compensation arrangements rather than the tariff. One hundred per cent of the tariff is justice; anything less is not.
I am not sure that we heard a compelling argument as to why the 3% minimum was not appropriate, particularly if it is where insurers are at the moment, certainly over the initial period. That would seem to be an easy one for the Minister to accept. However, given the hour and given the business that we have left to do, I should like to test the opinion of the House on Amendment 11.
Mesothelioma Bill [HL]
Lord McKenzie of Luton Excerpts(11 years, 4 months ago)
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“(2A) The average damages recovered by claimants in mesothelioma cases shall be determined by reference to the gross tariff, as set out in Schedule (Tariff).
(2B) The gross tariff will be up-rated annually by the general level of prices as measured by the Consumer Price Index and reviewed at least every five years.”
Lord McKenzie of Luton
My Lords, in moving Amendment 15 I shall speak also to Amendment 19. These address aspects of the levy. That subject was covered in large measure by the noble Lord in his introductory statement, so I hope that I can be brief. However, given that we have not yet seen a draft of the levy regulations, nor will we by the time the Bill leaves your Lordships’ House, we need as much clarity as possible on what they will contain.
Amendment 15 sets out a gross tariff as a schedule to the Bill. It is based on the national institute analysis that sought to determine average civil compensation awards for mesothelioma cases based on recent experience. It is set out in yearly age bands and stretches from age 40—that is, at date of diagnosis—to age 94. The tariff is intended to be a proxy for levels of compensation that would have been awarded had individual compensation assessments been made. It is expressed in gross amounts, so if payments are made at less than 100%, the relevant percentage would apply. The tariff excludes the legal cost of reimbursement. I understand that the amounts included in that gross tariff, reflected in the proposed new schedule, are not contentious and are accepted by the Government, the ABI and the Asbestos Victims Support Group campaigners and its professional advisers. However, it would be good to have the Minister’s specific confirmation of that.
The Government may resist the tariff going in a schedule to the Bill, although we would contend that that is where it belongs. An alternative approach is acceptable to us, as long as there is certainty on the gross starting tariff. The amendment also calls for the tariff to be uprated annually by reference to inflation. We have adopted the CPI measure and the Minister has already said that that is the intent. However, again, it is important to have that on the record.
The amendment further calls for the tariff to be reviewed at least every five years. Not only is this reasonable in terms of generally ensuring that the tariff is aligned with reality, but it implicitly recognises the changes that might ensue following the uprating of civil compensation claims following LASPO deliberations. It would be helpful to have confirmation from the Minister that it would be the intent to align the tariff with the outcome of any such review. I beg to move.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, I thank the noble Lord and the noble Baroness for their amendments. As I understand it, their purpose is to set out the exact tariff to be used by the scheme and to require that the growth tariff would be uprated annually in line with the consumer prices index. I support the intention of the amendments, although I do not think that they are necessary. I shall explain why.
I put on the record that it is our intention to uprate the scheme payments annually in line with the CPI. If we were to put that in the Bill, we would have no flexibility to uprate by any other amount in future. For instance, we have given an undertaking to review the scheme’s operation and the rates of payment at the end of the smoothing period. Obviously I cannot pre-empt the findings of the future review, but were any review to show that a gap had developed between average civil damages and scheme payments, we would want to address that. If we were required by the Bill to uprate only in line with the CPI, we would be unable to do so.
Regarding the proposed tariff to be included in the Bill, I confirm that we have published an ad hoc analytical publication that sets out the same figures that are included in the table attached to the amendment. These are the figures that we will be using as a baseline when we calculate the percentage level of damages. If we included the table as a schedule, as the amendment proposes, we would need either annual primary legislation or a regulation-making power to make any change to the schedule. As I say, I am happy to go on record to say that the figures contained in the report that we have published will be used when we calculate the amounts that individuals will receive. We will publish in regulations the amounts that people will receive from the scheme.
I hope that I have covered these issues in adequate detail and have put the position on the record without the need for these amendments, which I understand were intended to tease out these issues. I hope that the noble Lord will feel able to withdraw the amendment.
Lord McKenzie of Luton
I thank the Minister for his reply. It dealt satisfactorily with the purpose of the amendment, which I beg leave to withdraw.
Lord McKenzie of Luton
My Lords, we have Amendments 25 and 29 in this group and we support Amendments 17 and 30 in the name of my noble friend Lord Howarth, although there is some overlap between the two sets of amendments. I will be brief as I believe we are pushing at an open door from what the Minister told us earlier today. Amendment 25 calls for the establishment of an oversight committee to monitor, review and report to the Secretary of State on the overall arrangements touched on by this legislation. It would undertake this task in relation not only to the scheme and the technical committee but to the tracing office and the electronic information gateway. They fit together, and we know that the insurance industry sees them as an integrated package.
The idea of an oversight committee was originally prompted by concerns over the extent to which the insurance industry may be engaged in all of this, possibly as a scheme administrator—although we welcome the news announced earlier today about the open competition—and certainly on the technical committee, running the tracing office and devising the portal. An oversight committee properly constituted would provide a level of reassurance for those whom the scheme should benefit and would be a counterweight to the level of engagement of a powerful industry with clear financial interests in how it all works, as my noble friend Lord Howarth so powerfully demonstrated. That is why we believe that the oversight committee should include representatives of asbestos victims support groups and the trade unions which have supported them, with an independent chair. Effective oversight would, we suggest, help the hard-pressed DWP resources, and an annual report from the committee could be incorporated with an annual report to Parliament by the Minister.
In Committee and in meetings thereafter, the Minister has expressed support for an oversight committee. We heard it again today and I know that he has considered various options. While disappointed not to see a specific amendment from the Government today, we hope for an assurance that they will introduce an amendment when the Bill passes to the House of Commons. I was not quite sure that it was clear enough in the noble Lord’s opening statement, so I hope he will clarify matters. It would be good if that assurance spelt out at least the bare bones of what is intended.
Amendment 29 is a return to the issue of support for sufferers of other asbestos and long-latency diseases. The payment scheme in this Bill relates to those diagnosed with diffuse mesothelioma. It therefore excludes other asbestos-related diseases such as asbestos-related lung cancer and asbestosis. It also includes other work-related, non-asbestos diseases such as pneumoconiosis. The DWP’s June 2013 analysis quotes the Health and Safety Executive data on industrial diseases, which has an annual estimate of sufferers of asbestos-related diseases of some 3,500—that excludes those suffering from mesothelioma—and of non-asbestos-related industrial diseases of some 4,200. Many of these will face the same problem in identifying a negligent employer or an employer liability insurer. The DWP’s June note acknowledges that many of the diseases covered do not share the same characteristics as mesothelioma, and that their severity and progression may vary, depending on the heaviness of exposure to asbestos.
It also highlights the fact that, for example, only a small proportion of asbestos-related lung cancers are compensated through government schemes, because of the range of different causes of lung cancer that mask an asbestos cause. Notwithstanding this, and perhaps somewhat strangely, in computing the effect of extending the scheme, it has been assumed in the data that the same proportion of those with diffuse mesothelioma who can access the scheme proposed by the Bill will be able to access an extended scheme, that the same level of scheme payment will be received, and that the same amount of benefit will be recovered. These are fairly broad-brush assumptions, to say the least. In resisting this amendment, the Minister will doubtless point to the costs of bringing forward an extension of the scheme. On the basis of their estimates over a 10-year period, they suggest that there will be 5,100 successful applicants for other asbestos-related diseases and 6,100 with non-asbestos work-related diseases. There will be additional levy on insurers of £478 million and £564 million respectively.
At face value, these figures are shocking. It is not so much the amounts as the suggestion that over the 10-year period some 11,200 people will miss out. By how much will depend on benefit recovery arrangements, but they could miss out to the tune of £1 billion. If the concentration were just on the other asbestos-related diseases, not expanding the scheme will deny 5,100 people, who will miss out just because an employer has gone out of business or cannot be located and a relevant insurer cannot be established.
The amendment requires the Secretary of State to bring forward proposals within a year to establish other schemes to cover these other diseases. We have been clear that we do not want the pursuit of broader coverage to hold up the scheme for diffuse mesothelioma, and there is no reason why acceptance of the amendment should cause this to happen. It is accepted that it will be difficult to graft onto the mesothelioma scheme the tariff approach, given the varying degrees of suffering that some of the other diseases entail, and that there may be convoluted issues around causation. Therefore, while continuing to acknowledge the merits of the mesothelioma scheme, we should no longer look aside from those people—many thousands on the Government’s own figures—who face terrible suffering because of the negligence or breach of statutory duty of an employer. This is all the more important where access to the state lump sum and social security support is more difficult, as it is for some.
The Minister has come thus far and we have supported and congratulated him on doing so. Indeed, he has expressed sympathy for a broader scheme. Accepting the thrust of these amendments would add to that journey, which I beg him to undertake. If he cannot, he will of course be aware that the campaigns will go on.
Lord Freud
My Lords, it would be most convenient to deal with these amendments in their original order. If I may, I will start with the amendment moved by the noble Lord, Lord Howarth, on the scheme administrator, and then turn to the two amendments tabled by the noble Lord, Lord McKenzie, and the noble Baroness, Lady Sherlock, which relate to an oversight committee and future reports on further schemes. I will then turn to the amendment of the noble Lord, Lord Howarth, on annual performance.
Amendment 17 is intended to make certain that the body chosen to administer the scheme is able to operate in a wholly objective and unbiased manner. I know that there has been concern among noble Lords about the insurance industry’s involvement with this scheme, especially its administration. I agree that it is paramount that the administrators of a scheme that is intended to help its applicants must be able to do so in a fair way. I am confident that the necessary safeguards are in place to ensure this without the need for an amendment on the matter.
First, I remind noble Lords of the commercial procurement strategy that I spoke about earlier. The scheme administrator will be chosen through an open procurement competition that will be launched in time to meet our aim of taking the first applications in April 2014 and making payments next July. Members of the insurance industry will be allowed to tender, as will the shadow body created by the ABI. Legal specialists may also tender. The body will be chosen through this exercise according to our commercial criteria, which include being able to administer the scheme as set out by the scheme rules.
Secondly, I refer noble Lords to the scheme rules, which set out clearly every aspect of the scheme administration and specify how the administrator may or may not act. Compliance with the scheme rules will form an integral part of scheme arrangements.
Lord McKenzie of Luton
Before my noble friend withdraws the amendment, perhaps I may clarify one point with the Minister. I was slightly less reassured about the oversight committee than I expected to be, partly because it looks as though it might be a fragmented effort, given the ELTO structure. The noble Lord said that his preference was for a non-legislative solution, and we do not have a problem with that. However, will a conclusion be reached as to whether the non-legislative solution will be found by the time the alternative of a legislative solution passes in the Commons? It would be a pity if we had not concluded on this and decided in due course that we needed a legislative solution and the Bill had completed its passage.
Lord Freud
My Lords, my aim is to know where we are with the structure over this Recess. I think that I owe the noble Lord a letter at the end of the Recess setting out where we have got to on that so that he will be able to talk to his colleagues in the other place. If he thinks that a gap is developing, that is a way for me to handle that uncertainty.
Lord Freud
The amendments in this group concern the technical committee that will be established to make decisions regarding disputes about whether an insurer provided employer’s liability insurance to a particular employer at a particular time. The amendments do two things: first, they make clearer the definition of “potential insurance claimant”—in other words, those who could be in dispute with an insurer about cover and whose disputes might come to the technical committee for a decision—and, secondly, they remove the power of the Secretary of State to expand that definition in the future.
Currently, the definition of a potential insurance claimant includes those who allege that an employer is liable for damages and an employer or anyone else who is alleged to be liable for damages. Amendment 26 removes the phrase “or anyone else”. This phrase is not deemed necessary because we are not able to identify any further parties that could come to the committee, other than those already listed.
Amendment 27 removes Clause 15(10), which gives the Secretary of State powers to make regulations to amend the definition of potential insurance claimant. This could include extending the scope of the technical committee to cases concerning other diseases or bodily injury. Amendment 32 makes a consequential amendment to Clause 17 to reflect the fact that, with the removal of Clause 15(10), there will be no regulations under Clause 15.
The Delegated Powers and Regulatory Reform Committee, in its report, recommended the removal of the power to amend the definition of “potential insurance claimant” unless its purposes could be more precisely specified. Having considered the points made by the DPRRC about this power, we are persuaded that these amendments are necessary. Clause 15 as it stands potentially broadens the scope of the Bill in a way that is not consistent with the focused nature of the rest of the Bill. Furthermore, as we are not able to specify the exact circumstances in which the Secretary of State might choose to expand the classes of people about to bring disputes before the technical committee, we agree that such a broad regulation-making power is inappropriate.
I hope that noble Lords can support the wish to make the Bill as robust as possible, and support the removal of unnecessary regulation-making powers. I beg to move.
Lord McKenzie of Luton
My Lords, we have no difficulty in accepting these amendments. As far as Amendment 27 is concerned, we are a little unhappy to see this disappear but accept that, without broader schemes evolved and being brought forward, it does not make particular sense.
So far as Amendment 26 is concerned and the deletion of “or anyone else”, can the Minister just remind us who that was intended to cover or who the drafters originally thought ought to be covered?
Lord Freud
My Lords, I think that is the most difficult question I have had in the past three years. I simply do not know what was in the draftsman’s mind. I think it was a standard reflex to capture anything that may not have been in the list. When we had the chance to go over it in more detail, we really could not think of anything else so it became redundant. I think that is the explanation and I am deeply impressed by the question.
Lord James of Blackheath
My Lords, the sole purpose of this amendment is to make sure that we do not lose track of the very important but parallel issue of asbestosis that affects members of the fighting services. I remind noble Lords of the amendments made some six years ago by the former Government that were very much against the interests of former officers and servicemen, particularly in the Royal Navy. There was a very bad record of asbestos-related illness, particularly on ships such as HMS “Furious”, HMS “Albion” and, above all, the Royal Yacht “Britannia”, which was a floating death-trap.
The unfortunate consequences of the amendments made six years ago were that the amount of compensation one was entitled to was reduced very drastically; in addition, the period of claim was limited so severely that it could not possibly allow for the inevitable eventual development of the disease and the justification for a claim. Armed Forces people have been very poorly treated in this and although we are talking here of a different branch of asbestosis, I remind your Lordships that in the insurance world they would not make that distinction. Nobody ever wrote a policy for mesothelioma on its own any more than they wrote one for asbestosis without embracing the generality of it. This is an important factor that has sometimes been forgotten in this debate.
In the matter of the Armed Forces, these people have been left exposed—to a greater or lesser degree—to all the consequences we have been talking about that are associated with this disease. They are going to be somewhat perplexed when they find out that the Government have gone out of their way to pass this splendid Bill to help sufferers of a different form of asbestosis while doing nothing whatever to amend the drastic reductions made six years ago to the terms available to servicemen.
I was very grateful for a joint meeting between the Minister’s department and the MoD, from which I came away with the great expectation that there would be a thorough analysis of data of the actual exposure and the number of cases concerned, and that this would open the way for some sort of parallel accommodation to be agreed. There was no question of dipping into this Bill’s pot to pass money over but there was the suggestion of perhaps a separate pot being arrived at by the Ministry of Defence, which could help to close the gap between the have-nots of the Armed Forces and the haves who will benefit from this Bill.
The reason for this amendment is that, unfortunately, the MoD has not provided the expected data. I talked to the noble Lord, Lord West, about this matter earlier and he showed a keen interest. He was an officer on one of the ships that was greatly affected and had the responsibility of overseeing the engine room replenishment of one. He therefore regards himself as a prime candidate for the condition in time. We have not had those data and it looks as if it is the Navy that has been remiss; yet it is the Navy about which we are most concerned.
May I please send a message via the Minister to ask the Navy to stir its stumps a bit and do something about getting those data to us? We need them. The idea would then be to see what can be done to put together a programme that will not result in a Daily Mail headline such as, “Callous Government plan for the many and abandon their heroes of the seas”. We do not want that, and it would be unfair anyway. We need a commitment to do something for Armed Forces people who have had a very bad deal for the past six years. We need to do something to put it right.
I have tabled this amendment in order to keep people interested in the possibility of having that debate, which we cannot do until we know the data and what can be done. I do not wish to press this amendment tonight but I certainly wish to roll it over to Third Reading, in exactly the same wording, in the hope that by then we will have a more positive approach to how we can arrive at a solution to give some parallel improvement to the terms available to former members of the fighting services. On that basis, I urge the Minister to do whatever he can to stimulate that dialogue. I would be happy to participate in any stage of it.
Lord McKenzie of Luton
My Lords, the noble Lord, Lord James, raised this issue with passion and commitment in Committee and, doubtless, previously. I am not sure that I understand all the detail of the proposition he is advancing and the background case but I certainly encourage him to continue with his campaign. I think that the noble Lord was seeking to advance the argument that some people are being dealt with under this Bill but that there are members of our Armed Forces who are not being dealt with on an equivalent basis. He keeps referring to asbestosis. This Bill relates to diffuse mesothelioma, which is different from asbestosis. In fact, we have just set our face against developing a scheme that has broader implications for people with asbestosis.
Lord James of Blackheath
I thank the noble Lord for that. I hope I made clear the distinction that I am looking at this matter from an insurance industry point of view; namely, that asbestosis covered everything and that six years ago we inadvertently disadvantaged the Armed Forces so severely that we have put them way below the benchmark that we are seeking in this Bill for sufferers of mesothelioma. A comparison is bound to be struck. Veterans’ groups are bound to pick it up and there will be people who are very unhappy to see this deficiency on their part.
Lord McKenzie of Luton
I am grateful to the noble Lord for that clarification, and I accept the point. If he is comparing people with diffuse mesothelioma who are not being treated on an equivalent basis, it seems that there is a case. I think that I would hang on to my point that asbestosis is different and that we have not sought to address that in this Bill.
Food: Food Banks
Lord McKenzie of Luton Excerpts(11 years, 4 months ago)
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Lord Freud
My Lords, I must emphasise to my noble friend that food banks are absolutely not part of our welfare system, in which we have other means of supporting people. There is local provision, and following the devolution of part of the Social Fund to local authorities, local authorities are now responsible for setting up local welfare provision. To the extent that they are interested in using third-sector groups, including food banks, that is entirely up to them.
Lord McKenzie of Luton
My Lords, April this year saw the demise of the discretionary Social Fund and the passing of responsibilities to local authorities. We know that funding for local authorities was not ring-fenced and we learnt last week of a further 10% cut in their budgets. Does the Minister not accept that this, taken together with harsher benefit sanctions regimes and a longer wait for benefits, will mean that the use of food banks will only increase? Despite what he said, is it not a fact that under this Government food banks are looking to be a permanent part of the welfare provision of this country?
Property: Under-occupancy Charge
Lord McKenzie of Luton Excerpts(11 years, 4 months ago)
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Lord Freud
My Lords, we rely very heavily on discretionary housing payments to ensure that we have a way of dealing with the difficulties and challenges faced by particular groups and families. That is the way we have chosen. Local authorities can look at the particular circumstances and apply those funds as appropriate.
Lord McKenzie of Luton
My Lords, the bedroom tax does not take account of the size of a bedroom. Two children under the age of 16 of the same gender are expected to share, whether or not the room is a single, and indeed even if only a single bed will fit in it. Can the Minister tell us what behavioural response is expected from families in those circumstances, other than to buy bunk beds?
Lord Freud
My Lords, clearly there has been slight exaggeration about some apartments and homes. Local authorities will look very carefully at particular homes to make sure that they are in the right category, but it is up to a family that is in such circumstances to look for a more appropriate place to switch into. I must make the point that the turnover of people in the private sector is enormous by comparison to the very low turnover in social housing. This is not healthy for anyone, and certainly not for the economy.
Children: Contact with Fathers
Lord McKenzie of Luton Excerpts(11 years, 5 months ago)
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Lord Freud
My Lords, we are clearly talking about fundamental social trends which have been going on for many decades. There are two ways of looking at family breakdown: in some ways it is a liberation, and in some ways it is an unnecessary tragedy when you have children involved. Clearly, we have various prevention measures, a fund to get counselling practitioners trained and support for people so that when they separate, that separation is as amicable as possible.
Lord McKenzie of Luton
My Lords, is it not the case that, for many young people with separated parents, overnight stays are made expensive, if not impossible, by the bedroom tax?
Lord Freud
We are clearly in a position where we have a huge deficit and we need to find ways of reducing it. One thing about the spare room subsidy is that if we were to make double provision for children—in other words, a room in two different places—that would cost the state another £50 million. There are lots of desirables that we would all like to see, but we have really got to go to the essentials when we are running the kind of deficit that we are.
Homeless People: Night Shelters
Lord McKenzie of Luton Excerpts(11 years, 5 months ago)
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Lord Freud
My Lords, this is a very particular ruling on what is a dwelling for which housing benefit is payable. Clearly, there are other ways to provide support for night shelters where they are not dwellings. As I said, that is in the Supporting People programme and in the homelessness prevention budget, which are the two large budgets. There may be a small number of the 9,000 or so bedroom spaces where one has to look carefully at what is the appropriate funding, but a large amount of effort is going into supporting rough sleepers and to make that provision. If the effect of this is to upgrade the provision of beds for those who are sleeping rough, that might be a rather good outcome.
Lord McKenzie of Luton
My Lords, the Minister said that homelessness was a priority for the Government. It is interesting to note that, after years of declining trends, 2010 marked the turning point when all forms of homelessness began to rise. Does the Minister accept that for many, a period of stay in a shelter is the first step to being able to obtain and keep a home? It is an environment where they can begin the transition from a chaotic lifestyle to something more stable. In those circumstances, why does not the Minister take up the suggestions that noble Lords have made to look specifically at statutory guidance or a tweak in the regulations so that the types of provision caught by this ruling are put back in the position where people assumed that they were before the judgment was made?
Lord Freud
My Lords, I emphasise that there is absolutely no change here in what is the kind of home for which housing benefit is appropriate. Where that is, in the case of Anglesey, a hall where the showers for those people are half a mile away, it may be that other forms of support, such as the Supporting People programme or homelessness prevention are more appropriate. The No Second Night Out programme, which is now being introduced throughout the country, is beginning to make some impressive moves to make sure that people in the state of rough sleeping are caught early and got back on to the path, as the noble Lord said, out of a chaotic lifestyle into something where they can get themselves organised.
Mesothelioma Bill [HL]
Lord McKenzie of Luton Excerpts(11 years, 5 months ago)
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“( ) Regulations under subsection (1) shall require the periodic review of average civil compensation amounts in mesothelioma cases, such review to be conducted by an independent body.
( ) Regulations under subsection (1) shall require an annual report to both Houses of Parliament and a review of payments made under the scheme.”
Lord McKenzie of Luton
My Lords, Amendment 16 requires an independent review of average civil compensation for mesothelioma cases, an annual reporting to Parliament and a review of the payments made under the scheme. We know very little of how the payment arrangements and levy amounts will work in practice and trust that a draft at least of the regulations for payments under Clause 4 and the levy under Clause 13 will be available in good time before Report. Can the Minister give us an assurance on this? We are grateful for the additional documents covering these matters that were circulated on Thursday, which do provide some additional analysis. It is a pity, frankly, that we did not have sight of them in time for the Committee session last week.
Although the Minister told us that his negotiation had been about the levy rate, it seems, inevitably, that payment amounts will be determined by the tariff. The levy rate will be set at a level that is presumably estimated to be sufficient to meet the projected numbers of those diagnosed and their age profile, together with admin and legal costs. If this is the case, the computation of average civil compensation is fundamental to payment levels and it is important that compilation of the tariff is current, hence the call for an independent, periodic review. The period between reviews might depend on an interim uprating—perhaps based on CPI—and maybe the Minister can tell us what is intended in that respect. Amounts payable under the statutory schemes are in practice uprated on an annual basis. We need to know more about the intent when the levy produces more, or less, than is required to cover scheme payments and administration. When it produces more, has the Minister’s negotiation focused on this being used to enhance the percentage payout—to the extent that it is not already 100%—or on it being carried forward to reduce the levy in subsequent periods? What is the insurance industry’s expectation of the position from the negotiations? Indeed, what is the Treasury’s position?
Clearly, to the extent that it has not already been achieved, we would expect to see any surplus used to enhance payments. If levy shortfalls could be borne, in whole or in part, by those diagnosed with mesothelioma, we will resist this. What consideration has been given to the possible avoidance of the levy by insurers, by bundling products and/or loading premiums on other business lines such as public liability? The additional information provided last week indicates a significant change to the estimated amount of legal fees which the scheme will fund. It reduces from £7,000 to £2,000, a benefit of £5,000 per case for the insurers. What is the reason for that reduction? It is also noted that the percentage of average civil compensation taken is calculated before any benefit recovery, which depresses the net amount received by claimants. Can the Minister let us have a note of the overall savings to government from these proposals—not only the estimated benefit recoveries but from not having to make payments under the 1979 scheme in the first instance?
There is much we need to know about these matters before we sign off the Bill. As well as ensuring proper updating, will the Minister tell us why the proposed percentage of civil compensation amounts payable under the scheme has been reduced from the original impact assessment of, I think, 76% to 70%? Which of the various averages or means from the national institute’s calculations has been used to drive the tariff in the new document, and why? The levy rate for the first four years is calculated in that document at 2.61% at the 70% payout rate. Is this consistent with an overall average of 2.24%, which is in the updated impact assessment? Further, the updated impact assessment puts overall cost as a percentage of GWP at 2.74% for the first four years. The current impact assessment, in a footnote, suggests that this was due to basing the average only on settled and withdrawn cases. Why is this, other than the fact that it is to the advantage of the insurers? Our concern is that even in the past few months the insurance sector has been chipping away at the scheme in order to reduce its obligations. That is why we need to strengthen the primary legislation. I beg to move.
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 Freud
In the interests of time, the best thing I can do today is to accept the fantastic offer of future forgiveness for anything I may say, and in return I promise to reflect on the consequences of the change.
Let me move on to all the other points that have been made. I promised to write to the noble Baroness, Lady Golding, about the Prison Service’s work, to the noble Lord, Lord Browne, on Clause 2, and to the noble Lord, Lord McKenzie, on three counts. A letter is now being sent to Peers and a copy has been placed in the Library. Judging from some side conversations that I have overheard, I am sure there will be further discussion on one or two of those matters. Having dealt with those issues, let me turn to the subject under discussion as set out in Amendment 16.
I understand noble Lords’ wish to ensure that if we are to express payment amounts in relation to civil damages, the data we hold on average civil damages in mesothelioma cases should be current. However, I must reject the proposal to require a yearly review on the grounds that it would not be fruitful due to the volume of mesothelioma cases. Reviewing civil cases on a yearly basis would be too frequent to show any trends or changes in the awards. Indeed, the data that we hold on the initial trawl for the period 2007 to 2012 show this. In this case, it takes a bit longer for meaningful trends to appear.
It should also be said that gathering the data is pretty costly, and in the interests of value for money we need to make sure that they are gathered at intervals that allow us to identify change. One year is too short a period for this, so a review of the data every five years is more appropriate. If we were to accept the amendment, costs would be incurred from gathering data on an annual basis, and further costs would be involved through the requirement for these reviews to be carried out by an independent body. As part of the monitoring planned, civil compensation amounts in mesothelioma cases will be reviewed, but there is no need for a separate body or for annual reports. Furthermore, I can give my assurance that this area will not go ignored.
I also offer the reassurance that we shall not just assign a fixed tariff to this and then ignore it. Far from it. Along with the monitoring of data from civil cases that I have just mentioned, I can confirm for the noble Lord, Lord McKenzie, that we intend to uprate the tariff on an annual basis in line with the consumer prices index. The noble Lord went on to put a vast number of specific questions to me, and we shall touch on quite a few of them later. However, perhaps I may pick up the point about legal fees, although we will deal with them in due course. A figure of £7,000 was mentioned, and more recently £2,000 was mentioned. In practice, it will probably come in at something in between, but we will deal with fees in the fullness of time.
A set of questions was based on what will happen if we collect more or less than we expected. The DWP will underwrite any under levy after the first four years through smoothing. Any over levy will be paid to the Consolidated Fund, as required by HMT.
Clearly, we will be setting a figure initially, then reviewing it. That is our best guess of the right kind of figure that we will be using. We moved the 76% figure to 70% on the basis of what the likely amount was that would minimise the risk of those costs being passed to British industry. This became clearer during the process of negotiation. Rather than go into the specifics about the 2.61% being consistent with the 2.24%, I will add that to a letter.
I hope with the commitments that I have made on how we are planning to set this levy, I reassure both the noble Lord, Lord McKenzie, and the noble Baroness, Lady Sherlock, on this matter, and I urge them not to press their amendment.
Lord McKenzie of Luton
My Lords, I thank the Minister for his clarifications on some of our earlier debates. I am sure we will return to each of the substantive issues about who should be entitled under this scheme and, indeed, about the start date. I am grateful for what he has said this afternoon.
Perhaps the purpose of the amendment was not as clear as it might have been and the Government did not anticipate or expect that there would be an annual updating of the civil compensation analysis. That would have to be done periodically, and how often that would be done might be driven in part by what is going to happen on annual uprating. The noble Lord has reassured us that there will be an annual uprating of the starting tariff by CPI. I think that is consistent with the statutory schemes at the moment. I took it that he was also supportive of a periodic updating of the data that underpin the tariff. I think that meets the purposes of the amendment.
I note that any over levy will accrue to the Consolidated Fund and make the Treasury happy, I am sure. The noble Lord said that the move from 76% to 70% was driven by the assessment of whether amounts were going to be passed on to the customers of the employer liability insurance providers. I take it from the impact assessment that it was to do with quite what cases were included in the analysis and those that were not. Perhaps I need to look at the record and go back on that analysis. It seemed that for no justifiable reason there has been a 6% reduction in the support that is going to be available for those availing themselves of this scheme, quite apart from the further loss, because of the change in the support for legal costs. We will come on to these things later this afternoon. Having said that, unless the noble Lord has anything further—
Lord Freud
That is a good point. I should have made it in response. Just to make it absolutely clear, the legal costs, whether they are £7,000 or £2,000, will be on top of the levy that we are talking about.
Lord McKenzie of Luton
I am grateful for that, and I understood that position. I guess that the insurer in that respect have to pay £5,000 less per case than they otherwise would have done, so they are in pocket as a result of this change.
Lord Freud
There are two points there. We have not determined the £2,000. We are looking at those two figures and have not yet made a decision. There are two bits of clarification there.
Lord McKenzie of Luton
I look forward to the final figures when they do come out. Can the Minister assure us that we will get at least a draft of the levy regulations before we get to Report? Without carping too much, if we are going to do that, it would be really helpful to have it at least in time so that we can spend a few hours getting our minds round what it all means.
Lord Freud
With the smallest of caveats, I am most hopeful that I will get that information to the noble Lord before Report.
Lord McKenzie of Luton
I am most grateful to the Minister, and I beg leave to withdraw the amendment.
Lord McKenzie of Luton
My Lords, we have Amendment 42 in this group, about which I can be brief. Before speaking to it, I will say that I support the thrust of the amendments moved by my noble friend Lord Howarth and the questions posed by the noble Lord, Lord German. Specifically, the amendment seeks to ensure that the definition of the costs of the diffuse mesothelioma payment scheme includes legal costs incurred by a person bringing proceedings, including appeal costs, and in particular that it covers the costs of proceedings brought as a consequence of Clause 10. Where Clause 10 proceedings are facilitated, can the Minister confirm that the financial help referred to will cover the legal costs of proceedings, including appeal costs? How is the funding for this to be organised? Presumably it will come from the levy but, like other amounts in respect of legal costs, not in a way that reduces the tariff amount. I will not probe further the issue of the reduction in estimated legal costs as the Minister has enough queries about that already. However, I look forward to the answer.
Lord Freud
My Lords, these amendments look to allow for legal fees to be paid by the scheme without limit. Amendment 17, tabled by the noble Lord, Lord Howarth, looks to reimburse in full all legal costs incurred either through applying to the scheme or through bringing proceedings against an employer or insurer. The noble Lord, Lord Howarth, has also tabled Amendment 28 to cover the cost of legal advice obtained in respect of appeals to the First-tier Tribunal. Amendment 42, in the name of the noble Lord, Lord McKenzie, and the noble Baroness, Lady Sherlock, also seeks to cover any legal costs, including the cost of appeals.
The introduction of the scheme is aimed at making the receipt of payment as quick and simple as possible. The amount that a successful scheme applicant is paid will include an amount for legal costs. This will be a fixed amount and will be included as part of the scheme payment received by an applicant and specified in the regulations. In the impact assessment, we used the working assumption of roughly £7,000 to go towards legal fees for each successful application. Since then, we have revised the numbers, using the working assumption of £2,000. The final amount will likely fall somewhere between the two. For clarity, the schedule will show the amount of the actual payment and the amount of legal fees, which will be on top of the 70% figure, to be absolutely clear in response to the question from my noble friend Lord German and the noble Lord, Lord Howarth.
I reassure the noble Lord, Lord Howarth, that the MoJ and the DWP are at least on the same planetary system—some of the time, anyway. The specific regulations will be laid after the Bill receives Royal Assent. The MoJ will conduct elaborate, complicated consultation. To update the noble Lord, Lord Howarth, on timing—I hear his strength of feeling on this—the consultation will be launched in July 2013, next month, and will contain specific options. Clearly, it is recognised that this is a complex issue. The consultation period will last 12 weeks as it will go through the summer, and the response will be published in the winter of 2013. Some of the issues around the right kind of fixed costs will be dealt with in that consultation.
The aim of the scheme is to make the receipt of payment as quick and simple as possible. In response to my noble friend Lord German’s question about the level of information that is required, the eligibility criteria are specified in Clauses 2 and 3 of the Bill. The scheme is not a no-fault scheme, so the applicant will be required to establish the eligibility criteria. However, they are in practice much simpler and more straightforward than in a civil claim. Rather than go through all the specifics of that, in the interests of time I would prefer to set it out in writing.
The reasons for wanting to set a fixed amount of legal costs that can be recovered by lawyers are threefold. First, it is important that applicants are not charged unreasonable or disproportionate legal costs by their lawyers, as we have seen happen in other instances. Any legal work would be in respect of an application to a statutory scheme, which is non-contentious and much quicker and simpler than civil litigation. Secondly, we hope that fixed costs will deter scheme applicants being pressured into entering no-win no-fee agreements, potentially reducing the amount of scheme payment paid in respect of their disease. Thirdly, it is important that the scheme is not overburdened with high legal costs, which would raise the levy and jeopardise the scheme in its entirety.
In respect of any legal costs associated with appealing to the First-tier Tribunal, if these were to be paid in every case that could act as incentive for anyone who was unsuccessful in receiving a scheme payment launching an appeal, even if the appeal was without merit. This would significantly increase the amount of money needed to fund legal fees, requiring the levy to be set higher. Any significant increase in costs could prevent the scheme being set up. It could also overburden the tribunals system with unnecessary appeals.
Lord Freud
It is important to highlight that higher rights are not required in the First-tier Tribunal or the Upper Tribunal as they are in civil courts. That means that scheme applicants could represent themselves, or that their solicitor could conduct any advocacy on their behalf; they would not need to instruct expensive legal counsel. There will be no legal aid for appeals to the First-tier Tribunal following the review scheme decision unless exceptionally it is necessary to make legal aid available to avoid a breach of an individual’s rights under the ECHR or under European Union law relating to the provision of legal services. This will keep costs to a manageable level.
Picking up on the point about the tribunal system, it is traditionally an inquisitorial rather than adversarial system and is designed to make things easier for those representing themselves. For those who do wish to obtain legal representation, it is hoped that lawyers will charge a fair and proportionate rate. The work will be non-contentious and there will be no defendant as there is in a civil case. The tribunal system is there to assist appellants. There is therefore every incentive for lawyers to carry out work on scheme appeals required efficiently and in a way that keeps costs proportionate.
Picking up the question from the noble Lord, Lord Howarth, on the level of fixed fees, clearly the MoJ consultation will consult on both the principle and the structure of such a regime to support a dedicated pre-action protocol. I hope noble Lords can see the need for pragmatism here—the need to keep costs at a proportionate amount and to protect the money that an applicant receives in respect of the disease from high legal costs, as far as possible. I urge the noble Lords not to press the amendment.
Lord McKenzie of Luton
Could the Minister deal with the point about proceedings that could arise under Clause 10? These are proceedings which the scheme administrator may help a person to undertake,
“for example, by conducting proceedings or by giving advice or financial help”.
Presumably the costs of that help would be outside the fixed fee arrangements. Would the levy make some sort of provision for those costs? Otherwise that would come off the tariff announcement.
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 McKenzie of Luton
My Lords, I should explain that this amendment was tabled before we had a chance to peruse a draft of the scheme rules, but there are some issues still worth pursuing. It is a probing amendment and is, I hope, precisely focused for the benefit of my noble friend. Clause 4(3)(a) states that the scheme may make payments “subject to conditions”, and paragraph (b) gives,
“the scheme administrator power to decide when to impose conditions or what conditions to impose”.
To the extent that these conditions are to be covered in the scheme rules and that those scheme rules are to be subject to some parliamentary process, we are perhaps more relaxed about the position. However, paragraph (b) appears to give a wide discretion to the administrator, which is likely to be an arm of the insurance industry. The draft scheme rules throw some light on this by identifying that the conditions that might be imposed include requiring that a trust be established and that a deputy or guardian be appointed. The draft rules also authorise the meeting of costs to this end by the administrator. The thrust of this seems to be a concern in situations relating to the capacity or legal competency of the claimant or a dependant. However, there is nothing that requires the imposition of conditions to be for the benefit of the applicant or dependants rather than that of the levy payers.
A key point in the draft rules is that conditions can be imposed to ensure that that payment is used for the benefit of the applicant. That requirement does not appear in primary legislation. There would be merit in it doing so to tie down this potentially wide discretion. I await the Minister’s response on that. We might return to this quite narrow point on Report to embed the concept that is in the draft rules, which we have now seen, into primary legislation. I beg to move.
Lord Browne of Ladyton
My Lords, I rise to reinforce the points made by my noble friend Lord McKenzie. It is easier to understand what lies behind Clause 4(3) now that we have the draft scheme rules. To understand the Government’s thinking one has to read that subsection along with Rules 15 and 16(3)(e)—I think—and presumably also the review provisions and the appeal provisions that will apply all the way back to any conditions that may be imposed, set out in Rule 19 and those following it. It is by no stretch of the imagination straightforward to determine what exactly the combination of this provision and the rules will mean in practice. I have just a couple of specific questions, which I hope are relatively simple.
The primary legislation, if enacted, will allow conditions to be imposed on any payment. There appears to be no limit to the conditions that can be imposed. The rules, to some degree, limit them. Rule 15, in particular, says that this rule—that is, the decision to impose conditions on making a payment—applies when the scheme administrator first decides to make a payment under the scheme but considers that there is good reason to impose one or more conditions in making a payment in order to ensure that the payment is used for the benefit of the applicant.
The next paragraph, paragraph 2, says that the scheme administrator may impose such conditions as it considers appropriate. We appear to go back into a very broad power immediately after a limiting power. It is not clear to me that the limitation in the first part of that rule applies to the second part of that rule. If it is intended to do so, clarification from the Minister might be of some assistance.
I reinforce the point made by my noble friend Lord McKenzie that if that restriction on making conditions is to apply to all conditions, it would be better for that restriction to be reflected in the primary legislation rather than in the rules. There is at least one possible interpretation of this at the moment—I have not had time to work out all the possible interpretations—that is, that the power to make the rules requires the scheme administrator to come to the view that rules are necessary to ensure that the payment is used for the benefit of the applicant. Once they pass that hurdle, the administrator can make any rule that it considers appropriate. It is not clear that all rules have to pass the test of being rules made to ensure that the payment is used for the benefit of the applicant. That is intended, but it would be helpful if that was clear.
Lord McKenzie of Luton
My Lords, I thank the Minister for his response and his consideration of this matter. I am not sure that we had formally heard that the rules will go before Parliament by way of regulations. We had anticipated that from our debate last week, but I am grateful for the assurance.
Lord Freud
My Lords, I must withdraw that completely. I meant to say that we are considering very deeply the suggestion made by the Committee that the rules will go into regulations.
Lord McKenzie of Luton
I am most grateful to the Minister for his further clarification. Of course, this was a probing amendment, and we have common cause in seeking to make sure that vulnerable people are safeguarded in relation to these payments. I thank my noble friend Lord Browne for his support—he made a very telling point about the interpretation of things as they stand—and the noble Lord, Lord Avebury. I am grateful for the fact that the Minister will take this away and give it further thought. I hope he will consider putting a provision into primary legislation that will make clear the intent of this decision-making power and the conditions that could be imposed by the administrator. Even if the rules are to be dealt with by regulations, they are likely to be dealt with by the negative procedure, which is what the Delegated Powers Committee recommended. Obviously, that is a less satisfactory forum in which to address these details. Having said that, I beg leave to withdraw the amendment.
Lord McKenzie of Luton
My Lords, my noble friend Lord Howarth opened up an important area for consideration, and was strongly supported by my noble friend Lord Browne. I start by asking the Minister about the computation of the benefit recovery amounts in the impact assessment. Does he have an analysis that distinguishes between the recovery of lump sums and the recovery of a benefit, and, if so, what is included in the second list?
In principle, we should seek from the Bill a scheme that will place claimants in the same position as they would have been had they received compensation in the normal manner, notwithstanding the fact, as my noble friend outlined, that it is a payments scheme. This position is fettered in two key respects. First, average compensation in age bands is used as a proxy for actual compensation. We accept this as a practical matter. Secondly, only a percentage—70% is the figure that is currently suggested—of relevant average compensation will be used. We strenuously reject this and will continue to press for 100% payment.
On benefit recovery, we do not challenge the current broad approach in the benefits system, although there is always scope for a review to see how it is working in practice. However, I suggest that any change should not be fundamentally a matter for the Bill. However, neither should we see it as a mechanism to redress any shortfall in the payments scheme. That should be addressed by paying at 100%. To do otherwise would relieve insurers of their obligations and impose a cost on the state. However, it is absolutely right, if our benchmark is normal compensation arrangements, to ensure that a scheme payment should attract no greater benefit recovery than a payment received as compensation. If our benchmark is 100% payment, we would not want to see any compensation recovery that was greater than it would be with a formal compensation scheme.
One key difference is that a scheme payment, absent my noble friend’s amendments, is not allocated over various heads. We received a helpful note on this from the Bill team with some illustrative examples, and were grateful for a further meeting this morning that helped to clarify some issues. As for lump sums recoverable in respect of the 1979 and 2008 Acts, it is understood that there is no difference between the payment scheme and normal compensation, although if paid at less than 100% there might in extremis be a shortfall for a scheme payment. The recovery of other benefits is more convoluted, and a whole range of benefits are potentially recoverable. The rules were helpfully summarised in the briefing note, which says:
“The compensator may reduce the amount of payment he makes to the injured person to take into account … any amounts he is required to pay the SoS. The injured person is never required to repay the SoS recoverable benefits or lump sums. If the compensator cannot reduce the compensation he is still required to repay the SoS”.
Two things are happening here: there is an amount that has to be paid by the compensator to the Secretary of State, and there is a second question about the extent to which any of that can be recovered from claimants. The note continues:
“Compensation can only be reduced to offset amounts to be repaid to the SoS where the compensation and the benefit are both paid to meet the same need”.
So,
“compensation paid for loss of earnings can only be reduced to offset benefits paid for loss of earnings”,
such as IIDB, while,
“compensation paid for cost of care can only be reduced to offset benefits paid for cost of care”.
Further, compensation paid for general damages such as pain and suffering—the thrust of a number of my noble friend’s amendments—cannot,
“be reduced to offset any recoverable benefits”.
On principle, since what is being paid here is not allocable over any of those amounts, it would seem difficult to justify any benefit recovery as a result. I think it was suggested in our meeting this morning that this is a practical matter and that these things are somehow fixed by the insurers in how they allocate payments. I am bound to say that I struggle to see how that might happen.
There is a further issue. Again, I am grateful for a note from the officials on this. I just want to press a point of principle to clarify the situation. If the scheme payment was 100% for pain and suffering, would the compensation recovery work as follows? If the scheme payment was £100,000, the claimant received IIDB of £10,000, and a 2008 scheme payment of £10,000, the benefits of IIDB could not be recovered from payments for pain and suffering but the 2008 scheme lumps could be, so the outcome would be that the claimant received £90,000—that is, the £100,000 scheme payment minus the £10,000 deduction for the lump sum—but the cost to the scheme administrator would be £110,000: the £20,000 to DWP and the £90,000 to the claimant. In those circumstances, the claimant actually meets more than the gross cost of the scheme payment. I do not know the extent to which that is factored into the noble Lord’s calculations. It seems that we need clarity about how this will all work. We would be reluctant to go down the path of tweaking the benefit recovery as a means of letting insurers off the hook. It is their obligation to pay 100% compensation. If we do otherwise, we in effect ask the state to meet that shortfall, when insurers should be doing that.
Lord Freud
My Lords, I thank the noble Lord for these amendments. Clearly, the general intention behind them is to place restrictions on the ability of the Secretary of State to recover both social security benefits and existing lump-sum payments made in accordance with the 1979 and 2008 Acts. This would then prevent the scheme administrator from reducing scheme payments to offset the cost of repaying recoverable benefits and lump sums to the Secretary of State. Actually, it may be the case that two of the amendments would restrict the scheme administrator from seeking repayment where sums were paid incorrectly due to error, mistake, misrepresentation or fraud. Clearly, where a scheme payment is falsely claimed it is only right that it should be repaid. Broadly, we think—as the noble Lord pointed out in his cogent remarks—that the amendments are aimed at restricting the recovery of benefits from scheme payments.
Lord Freud
That is clearly the theoretical position. The reality is that, of course, in practical terms, the payments in the scheme we are introducing dwarf any other payments that have already been made and any of the lump-sum and other benefit payments. They absolutely dwarf them, given that typical payments under the 2008 Act run at, I think, approximately £15,000. It would inevitably be worth anyone’s while, in terms of money, to go after a promising claim.
On the trusts mechanism, we are using the existing mechanisms to protect these kinds of payments, or to isolate them and see what they are. As the years stretch out, it would be taking a sledgehammer to crack a nut to change all that legislation. As noble Lords know, I am trying to do my best to keep the benefits system coherent and as simple as possible.
With that, I hope that I have covered most of the ground there—
Lord McKenzie of Luton
I think that the Minister is about to wind up his remarks. Can he confirm that if one is dealing with benefits, not lump sums, a scheme payment can only be reduced to offset amounts to be repaid to the Secretary of State where the scheme payment and the benefit are both paid to meet the same need? As the scheme payment is not allocated to meet any particular needs to do with mobility, the cost of care, loss of earnings or pain and suffering, it would seem logically to follow that there can be no withholding from the scheme payment in respect of those benefits. Is that correct? It is a different issue for lump sums.
Lord Freud
I shall speak slightly off the cuff. We do not look backwards to those payments anyway, so only the payments in respect of mesothelioma would be offset. Looking ahead, there may be some payments, but they would have to be specifically for mesothelioma. I do not think that I have misrepresented the position, but I will write to get it precisely right for the noble Lord.
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 McKenzie of Luton
My Lords, in moving Amendment 29, I will also speak to Amendment 30. Clause 7 provides for the Secretary of State to administer the payment scheme or to make arrangements for a body to administer the scheme. The arrangements can allow the body to arrange for somebody else to administer the scheme or any part of it. Amendment 29 would ensure that any further delegation which is permitted has the approval of the Secretary of State. This is a straightforward issue. Administering the scheme is an important undertaking, and the Secretary of State should be satisfied that those involved are fit for purpose.
It may be that the Minister will say that the Secretary of State should not have to be bothered if somebody is appointed to administer, say, a routine part of the scheme such as the processing of payments. However, as it stands, an appointed body would appear to be able to cause the whole of the operation practice to be transferred to somebody without any recourse to the Secretary of State. Our concerns in this matter might be negated if we knew what arrangements the Minister envisages for membership of any company or other body which it is expected will run the scheme. We know the insurance industry view but, by now, the Government must have arrangements in mind. Perhaps the Minister will share these.
This leads on to our Amendment 30, which requires the administering body to be constituted from members who are demonstrably independent of any active insurers. As levy payers, clearly they have an interest in the numbers and the profile of successful claims. The Minister may again say that they may also have an interest in helping people bring proceedings against individual insurers. That may be so, but it does not negate the fact that active insurers have a direct financial interest in the outcome of the scheme.
Of course, it is accepted that claimants have a right of appeal, but we have already touched on the costs and time of this, and it is not a sufficient answer. In the draft scheme rules it does not appear that there is a requirement for any specific insurance expertise to be brought to bear—or, if there is, it does not seem to be the driver of the scheme. What discussions have taken place with the insurance sector about administration? I beg to move.
Lord Freud
I thank the noble Lord and the noble Baroness for their amendments. I assure them that all diligence will be observed during the setting up and monitoring of the administrative body. Irrespective of the background of the scheme administrator, the body will have to administer the scheme in a way that satisfies the requirements of the legislation and apply scheme rules that will ensure that the administrator is sufficiently tied to a set of rules as determined by the Secretary of State and not by the insurance industry. What matters is not whether the body administering the scheme is formally independent of the insurance industry but whether it is controlled by the arrangements put in place by the Secretary of State and whether it is properly monitored. The arrangements will achieve that.
The insurance industry is setting up a company to meet the requirements of the scheme rules. There would be time advantages to using such a body, with it potentially being able to make payments more quickly than if the Government had to establish a body. However, any body with which the Secretary of State makes arrangements will be subject to the standard call-off contract that gives us the power to change a supplier should it fail to operate as required.
I make it clear that we will undertake due diligence in ensuring that whoever ends up delivering the scheme does so in compliance with the rules that we set out. If any body does not meet our requirements, we will not make arrangements with it, and, if it fails to deliver, we will make arrangements with another one. I will respond to Amendment 32 when the noble Lord moves it. It may be relevant, and I will make a further statement at that point.
Lord McKenzie of Luton
My Lords, I thank the Minister for his response and am grateful to the noble Lord, Lord Wigley, for his support. He said it was important that the administrator was seen as, and respected for, being impartial and particularly important that he had the confidence of beneficiaries. I was less than satisfied with the Minister’s response. He said that it might be quicker to get things under way because the insurance industry was actively engaged in putting together a body now, but that does not cut much ice because it will be April 2014 before any payments are made, which gives ample time to set up all sorts of bodies in the interim.
Also, we still do not have a response as to who the members of the body are likely to be. I do not know whether the Minister can at least share his initial thoughts on that. We accept entirely that, ultimately, it is the Secretary of State who must be satisfied that the scheme is being run properly but that is quite different from having someone with overall responsibility and having confidence in the routine operation of the scheme. As the noble Lord, Lord Wigley, said, both the beneficiaries and the industry itself must have confidence in the way its routine operation is undertaken.
I think that this is outstanding business that may overlap in part with the next amendment but, for the time being, I shall withdraw the amendment after the noble Lord has dealt with the issue of the likely membership of the vehicle, whether it is set up by the insurance companies or someone else.
“Oversight Committee
(1) The Secretary of State must establish, by statutory instrument, an Oversight Committee to monitor, review and report to the Secretary of State on the overall arrangements comprising—
(a) the scheme;(b) scheme administration; (c) the Technical Committee;(d) the Employers’ Liability Tracing Office; and(e) the Electronic Information Gateway.(2) The Oversight Committee must include representatives of—
(a) the Asbestos Victims Support Groups;(b) trade unions;(c) active insurers;and must be chaired by an independent person.”
Lord McKenzie of Luton
My Lords, this amendment calls for the establishment of an oversight committee to monitor, review and report to the Secretary of State on the overall aspects of the scheme and related arrangements. Those arrangements cover not only the scheme, but its administration.
Lord Freud
My Lords, in the interests of time, I thought I might pre-empt the noble Lord on this, although I think that he must move the amendment first.
The Deputy Speaker
The noble Lord, Lord McKenzie, must beg to move the amendment, and I will then put the question. If that is in order, the noble Lord, Lord Freud, can then speak.
Lord Freud
I apologise to the noble Lord for cutting him off in full flow. I understand that the level of independence of the scheme administrator is of some concern and clearly it is one of the things that have prompted the amendment. I can reassure the noble Lord that whoever the Secretary of State makes arrangements with to administer the scheme will be bound by agreements to comply with the scheme rules and departmental standards of implementation and administration. However, I am attracted to the idea of having some oversight of the scheme set out more formally. We could, for example, put something about reviewing and monitoring the scheme in the scheme rules and set this out in more detail in the arrangements for the scheme administration. I am minded to do more work on this to consider further whether we should bring forward an amendment on oversight of the scheme. I am not able to agree to the amendment today because I need to do the work first, but I would be grateful if I could consult the noble Lord, Lord McKenzie, and get his wisdom on this. I shall then come back to noble Lords at a later stage. On that basis, I urge him to withdraw the amendment.
Lord Freud
To answer in just one minute: I will take the whole package and look at it. That is what I am committing to do.
Lord McKenzie of Luton
My Lords, just before I formally withdraw the amendment, I should say that I am grateful to the noble Lord for his offer to take this away and consider it. I am happy to engage with him in doing so, as I am sure are other noble Lords who have spoken in support of this: the noble Lords, Lord Wigley and Lord Avebury, and the right reverend Prelate the Bishop of Ripon and Leeds. To make the point clear: I see this as an oversight not only of the scheme but also the wider components of the ELTO technical committee. We know that the insurance industry sees all these arrangements as an integrated package. It is important that the oversight that we set in train covers all the components. I would certainly be keen to see those people involved in the victim support groups having some role in this, as well as the insurers.
Lord Freud
I can assure noble Lords that I will enter negotiations with them without any preconditions. Basically, we will have a look at this issue and then discuss it with noble Lords to determine the best way forward.
Lord McKenzie of Luton
I am grateful to the Minister and beg leave to withdraw the amendment.
Lord McKenzie of Luton
My Lords, I will speak also to Amendments 34, 35 and 44 in this group. Clause 10 gives the power to the scheme administrator to help a person bring proceedings. However, this is only the case where a payment is first made under the scheme. Under Clause 2(1)(c), eligibility for the scheme depends on a person not bringing or being unable to bring an action against a negligent employer or insurer. Perhaps the Minister would expand on the circumstances envisaged where a payment has been made but proceedings may now be possible. Is it to do with the subsequent discovery of the possibility of proceedings in light of new information? Why is there the requirement that a payment be made before these provisions apply?
On Amendment 35, the Bill suggests an enabling power for the administrator to help a person bring proceedings. Our amendment requires the administrator to give this help, provided they have the agreement of the claimant. In pressing the point, we are mindful of the prospect of the insurance sector itself running the scheme, and thus of potential conflicts of interest. Where proceedings are possible that might garner a higher reward for the claimant, then, unless the claimant stipulates otherwise, that help must be provided. I accept that it may be necessary to stop any spurious or vexatious requirements by claimants, but that could be built into any amendments.
The proceedings in question can be brought against an employer for negligence or breach of statutory duty, or against an insurance company. Amendment 34 includes those against whom proceedings might be taken, such as the Financial Services Compensation Scheme. I am bound to say that this is rather a tentative amendment, but it is understood that the FSCS compensates those covered by insolvent insurers. However, perhaps that is what the Minister has in mind in Clause 10(5).
Amendment 44 in this group addresses a different point. It requires the arrangements for establishing a technical committee to be in accordance with regulations; that is, that the committee should be subject to a parliamentary process. The Delegated Powers and Regulatory Reform Committee has addressed this point, but having seen the Government’s response to it, I am minded not to press the amendment. I beg to move.
Lord Freud
I thank the noble Lord and the noble Baroness, Lady Sherlock, for these amendments. Amendments 33 and 35 cover the scheme administrator’s ability to help a person bring relevant proceedings through the courts. The amendments allow the scheme administrator to help a person bring relevant proceedings against particular employers or insurers whether or not a scheme payment has been made. They also provide that the Secretary of State’s scheme rules may include the circumstances where the scheme administrator is required to help a person bring proceedings with that person’s consent.
Where bringing relevant proceedings will benefit both the applicant and the scheme by allowing a scheme payment to be recovered from an award of civil damages, it is right that the scheme should be allowed to help a person bring relevant proceedings. We want to allow flexibility in the scheme so that the scheme administrator can decide, based on an individual’s circumstances, whether it is in the interests both of that person and of the scheme to help that person bring proceedings. We want to avoid inflexibility where a scheme administrator is obliged to help a person bring proceedings with that person’s consent. It is also not appropriate for the scheme administrator to use scheme funds to bring proceedings where the scheme may not benefit from such action.
Amendment 34 allows the scheme administrator to help someone bring a claim against the Financial Services Compensation Scheme where they have already received a scheme payment. The Financial Services Compensation Scheme makes compensation payments when insurers are insolvent. In cases prior to 1972, the Financial Services Compensation Scheme will pay compensation only where both the employer and the employer’s liability insurer are insolvent. Where both an employer and insurer are insolvent, a person may also be eligible for a payment under the Bill. So it is possible for a scheme payment to be made where a person may also be eligible for compensation from the Financial Services Compensation Scheme. If a scheme payment has already been made and it is subsequently established that a Financial Services Compensation Scheme payment can be made, it could be in the interests of the scheme to help a person make an application for an FSCS payment so that the scheme payment can be recovered from the FSCS payment.
This amendment is an interesting proposition. I am minded to do more work on it to consider further whether we should bring an amendment to allow the scheme administrator to help a person make a claim to the Financial Services Compensation Scheme. However, since I have not done the work, I am not able to agree to the amendment today.
Amendment 44 means that regulations will be needed for the Secretary of State’s arrangements with a body to establish a technical committee. The committee will make decisions on questions arising between a potential claimant and an insurer as to whether an employer maintained employer’s liability insurance with that insurer at a particular time. The technical committee is separate from the scheme and will decide an issue prior to any application being made for a scheme payment. The scheme may in fact never be involved with some cases, if insurance cover can be determined by the committee. The committee is therefore still essentially determining a private dispute between two parties, albeit facilitated by legislation, and is not directly making any decision about the allocation of public money to individuals. For that reason, it is appropriate that it will be outside government and that it should be set up under non-statutory arrangements.
We also want the procedure of applying for a technical committee decision to be simple, straightforward and as flexible as the law will allow. We believe that the best way to achieve that is for the Secretary of State to make arrangements with a body that will have the expertise to decide questions on insurance, rather than to enshrine the technical committee’s functions in statute. I therefore urge the noble Lord to withdraw the amendment and to not press the others.
Lord McKenzie of Luton
My Lords, I am grateful to the Minister. As I think I said in moving the amendment, I had already gone cold on Amendment 44. The exchanges with the Delegated Powers Committee have dealt with that. I am grateful to the Minister for taking away the point about the Financial Services Compensation Scheme and I hope that we will see an amendment on Report. On the other amendments, I am not totally convinced that there should be a “may” rather than a requirement but I am not minded to press the matter and beg leave to withdraw the amendment.
Lord McKenzie of Luton
My Lords, I hope we can be brief with this. In moving Amendment 36, I will speak to the other amendments in this group; namely, Amendments 37, 38 and 39. I have raised the issue with the Bill team, so this is an opportunity to put something on the record.
Schedule 2 precludes an individual from claiming benefits under the 1979 and 2008 state compensation schemes if an application is made under the mesothelioma scheme provided for in the Bill. Equivalent exclusions are added to the parallel Northern Ireland legislation. This probing amendment simply adds the word “successful” to the reference to “application”. As it stands, if somebody should apply to the mesothelioma payment scheme unsuccessfully, Schedule 2 would seemingly prevent access to the 1979 or 2008 statutory schemes. I cannot believe that that was intended and it would not be particularly fair. I beg to move.
Lord Wigley
My Lords, I will speak briefly in support of this amendment for the same reason: to try to get clarification with regard to the interplay with the 1979 scheme. I raised this matter at an earlier stage and would be very interested in some clarification from the Minister.
Lord McKenzie of Luton
My Lords, I am again grateful to the Minister. I accept from what he has said that there is a route to at least the equivalent, even if the 1979 Act would be barred under these circumstances. I am a bit less clear as to why the 1979 provisions could not be amended in the way suggested in the amendment.
On the 2008 Act, I accept entirely that compensation under that scheme is currently paid at the same rate as the 1979 scheme, but that was not always the case—certainly not in the early years of the scheme. I do not think there is anything that technically links the two to require each to be paid at the same rate. Although people will currently be able to put themselves in the same position as if they could have claimed under the 1979 Act, I am not convinced that that would inevitably be the case if the route is to have to look at the 2008 Act. However, perhaps we can reflect on the Minister’s response and return to this at a later stage; or maybe we could have some more detailed, technical discussions on this before the Report stage so as to make sure that we understand precisely why the 1979 scheme cannot be amended as suggested. In the mean time, however, I beg leave to withdraw the amendment.
Lord James of Blackheath
Perhaps I may ask the Minister if he will have a meeting with me after I have been to the MoD so that I can get his advice and guidance on what to do next?
Lord McKenzie of Luton
My Lords, our Amendment 46 is in this group. I will say at the start that I thoroughly support the amendments of my noble friend Lord Howarth. I agree with the noble Lord, Lord Alton, that the Minister has almost made a rod for his own back in raising hopes and expectations. Those are challenges that he will have to face, and I am sure he is well up to the task. The noble Lord, Lord James, should not apologise for having brought forward his amendment. He is right to say that what he seeks is not an insurance-based solution, but there are issues around inviting comparisons with the progress that has been made.
As we have discussed, the payments scheme relates to those diagnosed with diffuse mesothelioma. It therefore excludes other asbestos-related diseases such as asbestos-related lung cancer and asbestosis. It also excludes other work-related, non-asbestos diseases such as pneuomoconiosis. The DWP’s June 2013 analysis quotes the HSE data on industrial diseases, which has an annual estimate of sufferers of asbestos-related diseases of some 3,500—that excludes those suffering from mesothelioma—and of non-asbestos-related industrial diseases of some 4,200. Many of these will face the same problem in identifying a negligent employer, or an employer liability insurer. The DWP’s June note acknowledges that many of the diseases covered do not share the same characteristics as mesothelioma, and that their severity and progression may vary, depending on the heaviness of exposure to asbestos.
It also highlights the fact that, for example, only a small proportion of asbestos-related lung cancers are compensated through government schemes, because of the range of different causes of lung cancer that mask an asbestos cause. Notwithstanding this, and perhaps somewhat strangely, in computing the effect of extending the scheme, it has been assumed in the data that the same proportion of those with diffuse mesothelioma who can access the scheme proposed by the Bill will be able to access an extended scheme, that the same level of scheme payment will be received, and that the same amount of benefit will be recovered. Those are fairly broad-brush assumptions, to say the least. In resisting the amendment, the Minister will doubtless point to the costs of bringing forward an extension of the scheme. On the basis of their estimates over a 10-year period, they suggest that there will be 5,100 successful applicants for other asbestos-related diseases, and 6,100 non-asbestos work-related diseases. There will be an additional levy on insurers of £478 million and £564 million respectively.
At face value, the figures are shocking. It is not so much the amounts as the suggestion that over 10 years, some 11,200 people will miss out. By how much will depend on benefit recovery arrangements, but they could miss out to the tune of £1 billion. If the concentration were just on the other asbestos-related diseases, not expanding the scheme will deny 5,100 people, who will miss out just because an employer has gone out of business or cannot be located and a relevant insurer cannot be established.
The amendment requires the Secretary of State to bring forward proposals within a year to establish other schemes to cover these other diseases. On reflection, limiting this to diseases covered by the 1979 Act may not be the most appropriate approach, and we might seek a different definition on Report. We have been clear that we do not want the pursuit of broader coverage to hold up the scheme of diffuse mesothelioma, and there is no reason why acceptance of the amendment, or my noble friend’s variations, should cause this to happen. It is accepted that it will be difficult to graft on to the mesothelioma scheme the tariff approach, given the varying degrees of suffering that some of the other diseases entail, and that there may be convoluted issues around causation. Therefore, while continuing to acknowledge the merits of the mesothelioma scheme, we should no longer look aside from those people—many thousands on the Government’s own figures—who face terrible suffering because of the negligence or breach of statutory duty of an employer. This is all the more important where access to the state lump sum and social security support is more difficult, as it is for some.
The Minister has come thus far and we have supported and congratulated him on doing so. Indeed, he has expressed sympathy for a broader scheme. Accepting the thrust of these amendments would add to that journey, which I beg him to undertake.
Lord Freud
My Lords, I thank the noble Lord for these amendments, and clearly I am sympathetic to the desire to provide for as many people as possible. Let me deal with the amendments tabled by the noble Lords, Lord Howarth and Lord McKenzie, and the noble Baroness, Lady Sherlock, in the first instance, and then perhaps I may turn to the amendment tabled by my noble friend Lord James regarding members of the Armed Forces.
I recognise the wish to provide for other groups of people who fall foul of poor record-keeping by the insurance industry and so cannot bring a claim for civil damages. There could be another scheme for these people in the future, but as the noble Lord, Lord McKenzie, has just acknowledged, it cannot and will not be this particular scheme. It is neither possible nor realistic to extend it in this way, and that is the reason I must reject these amendments.
The remit of the Bill is strictly related to mesothelioma. However, like many noble Lords, I hope that the momentum generated by this legislation will not dissipate and that further work will be done in the future. Perhaps I may explain why we cannot be flexible on this. I should start by reminding noble Lords about the distinctive characteristics of mesothelioma. The Bill allows for a relatively straightforward and quick scheme to be established. The key points are mesothelioma’s undeniable link to asbestos exposure and lack of co-causality with other factors such as smoking. The unique elements of diffuse mesothelioma allow us to establish a tariff payment scheme of this nature. A streamlined scheme like this would not work for other long-tail diseases. The law of causation is favourable to mesothelioma victims in the sense that it is an indivisible injury. It does not matter who exposed the victim or how many people exposed him, they will all be jointly and severally liable for the same damage. This allows for simplicity when assessing whether someone is eligible for a payment. Assessing liability for other diseases where the causation rules are not the same would involve a degree of complexity that this scheme has not been designed to allow for.
I join noble Lords in their hope that, in the future, other people will be provided for. Until such time, there remain state payments that sufferers of other long-tail diseases can apply for, such as payments made under the 1979 and 2008 Acts. I hope that I have explained and made it clear why this scheme will succeed only if it deals exclusively with mesothelioma, and I urge the noble Lord to withdraw his amendment.
Let me now turn my attention to the amendment tabled by my noble friend Lord James of Blackheath regarding the creation of a scheme to cover retired or current members of the Armed Forces who were exposed to asbestos and have since developed a related disease. I should clarify that, when I denied the 10 o’clock meeting, one of my representatives sitting behind me today will be at that meeting, and so I will be given good intelligence on what happens.
Lord Freud
The noble Lord has put that on the record. Clearly, there is a difference in the sense that the MoD as a public authority does not use employer liability; it effectively self-insures. The noble Lord is concerned about the terms of when it pays compensation; I know that he is looking to address that issue with the MoD.
I share the concern of noble Lords in the Committee to help to provide for as many people as possible who have a terrible disease through absolutely no fault of their own. However, this scheme is addressed precisely at one part of that. It is not stretchable in that way.
Lord McKenzie of Luton
My Lords, I do not think that anybody is suggesting that we should stretch the scheme in the Bill to encompass other arrangements. Certainly, however, Amendment 46 would require a commitment from the Government that they will bring before Parliament within a period of time other arrangements to deal with these other situations. It is accepted that it cannot be readily grafted on to the existing diffuse mesothelioma scheme for the reasons that the Minister has advanced. We are looking for the commitment to saying, “Let us move on and bring forward a scheme or schemes to deal with these other issues”.
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.
Lord McKenzie of Luton
If my noble friend will allow, is that a fair representation of what the Delegated Powers Committee said? I thought its point was that, in the context of this Bill, the reference to other kinds of disease or bodily injury when it referred specifically to a definition of a potential insurance claimant was too broad and could be made more specific. Indeed, if the noble Lord felt able to adopt one or more of the amendments before him, that would tie nicely in with that. I did not think the committee’s point was that a broader reference was inherently inconsistent with the Bill, simply that the specifics of this clause were not specific enough to identify the other kinds of disease that might be involved. If the problem is not being specific about the other types of disease that ought to be covered by the scheme, that could be rectified quite readily by drafting. Would the Minister be more comfortable with that?
Lord McKenzie of Luton
My Lords, I wish to be brief and I am slightly hesitant about whether I should move the amendment. It was pressed on us by ACOR. It concerns the definition of dependants, and the suggestion is that rather than live with the definition we have, which I think is based on what is set out in the 1979 Act, we should pick up the definition used in the Damages (Scotland) Act 2011, which ACOR suggests is fairer, more flexible and less prescriptive. It includes, for example, siblings, grandparents and grandchildren. It seems to me that this can cut both ways. The wider the group of dependants, the less each will get, although the wider the group, the more likely it is that a dependant will be spotted and available to benefit. On balance, living with the existing definition is probably the better route, but perhaps the Minister will give us the benefit of his wisdom. I beg to move.
Lord Freud
My Lords, I think I will treat this as an extremely probing amendment, and in that spirit I am happy to go through our thinking; indeed, there is some value in doing so. The amendment seeks to replace the definition from the Pneumoconiosis etc. (Workers’ Compensation) Act 1979 that we have used in the Bill with the definition of “relative” set out in Section 14 of the Damages (Scotland) Act 2011.
The definition in the 1979 Act provides an order of priority and is not just a straightforward list. In other words, the first dependant on the list is a spouse or civil partner and it is that person, if they exist, who must make the application for a scheme payment. If there is no spouse, the next on the list is a child or children and they must make the application, and so on. The scheme payment would then be made to that applicant or applicants, and it would be up to those applicants if they wanted to share the scheme payment with any other relatives further down the list.
The definition in the 2011 Act is a straightforward list. The effect of the amendment would be that anyone on the list may make an application for a scheme payment. The 2011 list includes some relatives who are not defined as dependants in the 1979 Act. They are uncles, aunts, nephews, nieces, cousins, and former spouses or civil partners. If all these people make an application for a scheme payment, the payment made in accordance with regulations under Clause 4 under the scheme must be divided equally between them. It is right that there is a hierarchy of those who can make an application for a scheme payment as it provides certainty to those who may want to make such an application, and certainty to those administering the scheme who would not be in a position to identify all the other relatives who might want to make an application.
Most applications for a scheme payment are likely to be made by a surviving spouse or civil partner. In these cases, the amendment would dilute the amount available to that spouse or civil partner by compelling the scheme payment to be divided up between other relatives who are less close, either legally or by blood, to the deceased person with mesothelioma. That could mean that a former spouse or cousin, for example, would receive the same amount as the current spouse. Without the amendment, the current spouse would receive the whole payment. I do not think that it is right that a scheme payment should be divided up in this way so that those closer to the deceased person with mesothelioma would receive less in order that a proportion could be paid to more distant relatives.
I can tell that the noble Lord was already concerned about the effects of the amendment. With this explanation, I hope that he will be encouraged to withdraw it and that we will perhaps not see it again.
Lord McKenzie of Luton
My Lords, I thank the Minister for his explanation of and response to the amendment. I beg leave to withdraw it, and I can assure him that he will not see it again; not from us, anyway.
Mesothelioma Bill [HL]
Lord McKenzie of Luton Excerpts(11 years, 5 months ago)
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Lord McKenzie of Luton
My Lords, we have added our Front Bench names to Amendments 1 and 4 and concur with the two amendments of my noble friend Lord Howarth. I think that the arguments have been fully and effectively made and I do not think that I need to add anything. I take the Minister’s reply to be, “Yes, but not quite yet”, and that is comforting. It is a good way to start our deliberations today.
We are all grateful that we have now seen a draft of the scheme. It arrived this morning at 11.55 am, according to my machine. I wish to make the point that should there arise, after we have had a chance to study it, issues that we might otherwise have parsed today as these amendments go through, we could perhaps use our next opportunity to revisit them. This is not to slow up the overall process but to ensure that we make best use of the draft that we have.
We have also added our names to Amendment 6, about the annual report to Parliament. I concur with my noble friend’s list of issues to be covered. I would add that later in our deliberations we will consider our broader amendment which refers to the possibility of an oversight committee to oversee very much the same type of issues as my noble friend raised, in particular to deal with the issue that the noble Lord, Lord Avebury, raised. One of the concerns that we have throughout the Bill is the extensive engagement and powers that the insurance industry has—the administrator, the technical committee, ELTO setting up the portal. The oversight committee would be one way of at least addressing that scope in the interests of the sufferers. I think that that is for debate on Monday.
My noble friend’s Amendment 3 requires the Secretary of State to publish proposals and make a Statement to Parliament before establishing the scheme. Clause 1(3) currently requires the Secretary of State to,
“publish the scheme as amended from time to time”.
Does the Minister take this requirement as covering my noble friend’s aspiration in Amendment 3? If so, will he put that on the record?
Lord McKenzie of Luton
My Lords, I would like to add a few points to the very extensive and knowledgeable debate that has taken place. It seems that some very telling points have been made and pressed upon the Minister about the scope of the scheme before us, which it seems reasonable to address. I would just say that we would want to be doing so in a way which does not hold up the core of this scheme. I hope that we have common ground on that issue.
In relation to the self-employed, can the Minister clarify quite what definitions we are using here? Over the years in various circumstances, the differentiation between somebody who is employed and somebody who is self-employed is quite narrow. We know that in some industries—the construction industry in particular—self-employment arrangements were, in a sense, manufactured when the reality was that there was an employment. That might have been done for tax reasons or for other reasons, so clarification of the definition of “employee” and “employer” for the purposes of the Bill would be helpful.
The issues raised by my noble friend Lord Browne are of particular interest in relation to those who were not necessarily formally employed but for whom the negligence of an employer might have caused them to contract mesothelioma. That is important because through the Child Maintenance and Other Payments Act 2008—it was the other payments that related to mesothelioma—the last Government introduced a support scheme for those who contracted mesothelioma but not directly because of employment. If those employers or their insurers can now or could in the future be reached, it seems that the Government themselves have an interest in recouping some of the compensation paid, which I hope can be redeployed to improve those schemes for others.
In relation to Northern Ireland, as I understand it this provision in the Act does apply there. I also understand that the two statutory schemes which we have, in the 1979 Act and the 2008 Act, are in fact replicated by legislation in Northern Ireland. Certainly, that was negotiated at the time. There have been some very important issues raised, which I know will create some challenges for the Minister. In doing so, I hope that we will keep our eye on ensuring that we make progress on the scheme that is before us.
Lord Freud
I thank the noble Lord, Lord Howarth, for these amendments. Clearly, their intention is to make the payments under this scheme available to a wider group. The two groups, specifically, are the self-employed and those who caught it on a secondary basis by living in the same household as a person exposed to asbestos.
The way in which Clause 2(1)(a) works is that it requires the person with diffuse mesothelioma to have been an employee of an employer who was required, at the time of the person’s exposure to asbestos, by the compulsory insurance legislation to maintain insurance covering any liability arising because of exposure to asbestos, or who would have been had that legislation been in force at the time. I hear my noble friend Lord Empey saying, “Solve the whole thing once and for all”, but this Bill is, regrettably, designed to fix a market failure. There is a failure of insurers and employers to retain adequate records of the employer’s liability insurance, and to make sure that those employees who cannot trace through in order to bring a civil claim actually get a payment. So, widening the list of people who receive payments beyond the legal position would impose a disproportionate burden on the employer liability insurers who will fund the scheme through a levy.
Lord Freud
What happens is that insurers have to provide that they have sufficient funds to meet their liabilities. The levy is a hypothecated tax that they have to pay so that their ability to meet their liabilities is monitored by the Financial Conduct Authority, the FCA—or the FSA, to those of us using old money. The insurer could not pre-empt the outcome of the consultation. That was something that they could not do and did not do, as I understand it.
Lord McKenzie of Luton
Can the Minister expand on that point? I understand the need to provide for liabilities, but is that not separate from the scheme payment? We only get a scheme payment if in fact the insurer is not liable, or only liable in respect of paying the levy. I do not understand the analysis that he has just made.
Lord Freud
What the insurer has to do, as I understand it, is to provide for future liabilities. Through an elaborate process with its accountants and the FCA, it has to provide the appropriate amount on reasonable assumptions. It is quite a formalised process. That is the process that we are looking at here.
Lord Freud
That is one of the central issues with imposing a levy based on the existing market share. There is a risk that that will happen if we push up the levy too much, particularly if there is a sharp increase. As noble Lords are aware, the way in which these matters normally work is through a sharing of the levy. The likelihood is that some of the levy may be passed on in the marketplace. However, the levels at which we have established the levy—and the smoothing mechanism to which the noble Lord, Lord Browne, referred was part of it—were achieved by taking some of those other payments and circulating them in the first year to give us the best possible chance that the insurance industry will absorb the bulk of the levy.
I shall now provide the figures that noble Lords have been waiting for so incredibly patiently. If this scheme started on 20 or 21 February 2010, the extra costs would be £119 million. As to the undated amendment of the noble Lord, Lord Howarth, our best estimate is that if we went back to 1968, the figure would be £747 million. Clearly, a large number of assumptions were made in reaching that figure.
I would just like to finish off the figures. I am not going to spend too much time going over the noble Lord’s “cornucopia” argument. I just want to make this simple point: one of the things that the insurance industry does, at least when it is in a competitive position, is look to build in what the returns on its reserves and its income may be when it sets rates. It is not just a kind of a surprise—“We got all this extra money out of those returns!”—but is built into the marketplace. Otherwise, everyone in the whole world would become an insurance operator, and we would all have been wasting our time because it would have been a free lunch. There is some competition in the market. Clearly it is a very interesting and complicated market, and it depends on how much capital goes in and out of it. Let us not go into that. We have had a lot of debate about the more general issues, but I just thought that I would touch on that.
As insurers were able to start the reserve only from 25 July last year, any attempt to back-date eligibility further could jeopardise the scheme and bog it down in legal challenges from insurers on the costs. I know that noble Lords would like to do more, as indeed would the Government, but we need to consider the effect of an open-ended scheme against one that can be afforded whose costs can be absorbed as much as possible by the insurance industry without putting pressure on it to increase insurance premiums and transfer the extra costs on to current employers.
Clearly, any date will mean that some people miss out. Choosing the dates in the amendments would mean that more people received the payment, but there would still be people who did not. On balance, I believe that pinning eligibility to a date when people with diffuse mesothelioma had a reasonable expectation of payment and insurers knew when they needed to start to reserve the levy, represents the best that we can do. I am not in a position to provide or mention anything on legal advice that we may or may not have received by convention, which noble Lords will be fully aware of.
I need to make the point that social security benefits and existing lump-sum schemes will continue to provide early support for people with the disease who were diagnosed from before the 25 July date. I therefore urge the noble Lord—
Lord McKenzie of Luton
Will the Minister confirm whether the £119 million is gross or net of benefit recovery?
Lord Freud
I think that it is net, but I will have to write with the right answer to that. I urge the noble Lords and the noble Baroness to withdraw the amendment.
Lord Empey
My Lords, I hope that the Minister did not think that I was being flippant in my earlier intervention when I said that I hoped we could finish off all the related issues. I understand what the Minister is confronted with. It is a serious business. He has put a lot of work into it and there is no doubt that there is advancement here. With so many people here supporting this amendment and talking in favour of it, he might also feel that it is not necessarily for him alone, in that there are other departmental interests to be taken into account. Perhaps between now and Report he could consult with some of his colleagues, because the contributions that have been made by people who really know what they are talking about have been very impressive.
It is amazing that as a nation we have not taken this issue sufficiently seriously, but at least we have an opportunity to spark a change. The noble Lord, Lord Alton, with his track record on this, has been trying to achieve this for a long time. Perhaps we have a confluence of events here that might actually bring this about. The levy issue is not an issue. It can be dealt with. I am unclear whether this is the right mechanism, or even the right Bill, but there is something here to be achieved and I think it can be done without a huge drain on public resources. I accept that the Minister is trying hard. Perhaps this is not the moment for him to respond to us, but perhaps he will discuss it with his colleagues in the Government.
Lord McKenzie of Luton
My Lords, we support the concept of insurers contributing to fund research to find new treatments for mesothelioma. Indeed, three years ago we were involved in encouraging the industry in what was originally a £3 million commitment over three years. However, we do that principally because of the passionate, compelling and authoritative case that we have heard over the past hour, led by the noble Lord, Lord Alton, and stimulated by the comparison between the stark number that this dreadful disease kills and the funding that has gone to address and ameliorate it. The issue of stimulating a national research effort is hugely important.
Like other noble Lords, I do not know whether this is the appropriate mechanism and I shall be interested to hear the Minister’s comments, but the noble Lord, Lord Alton, seems to have covered all the issues on hypothecation, the Human Rights Act and a fee rather than a levy. That is a pretty impressive effort. Like the noble Lord, Lord Wigley, I support a variable approach rather than a fixed amount, but those are points of detail.
Will the Minister share with us his discussions with the Department of Health, which he has referred to before? In particular, have any of his extensive negotiations with the insurance industry about the payment scheme focused on ongoing contributions to research? What is the current attitude of the industry?
Lord Freud
Well, my Lords, I feel like adding my name to the amendment.
I have spent an enormous amount of time on this issue, for exactly the reason that noble Lords have all focused on. Something very odd is happening here when so little money has gone into research in this area. Bluntly, I was pursuing the concept of a one-for-one match, where the insurance industry and the state would come in. I will go into why I have hit a brick wall at every turn on that, which is why it is not in the Bill.
However, rather than being negative, I have talked to everyone but, in particular, tried to understand why we have not had state research on this. I have talked to Dame Sally Davies and the Department of Health, trying to work a way through. There is currently a bit of a chicken-and-egg situation as, before the Medical Research Council will accept research, it has to be of what the council calls “high-quality propositions”. I buy the point made by the noble Lord, Lord Kakkar, on some of the quality research that is now on offer, so there is an opportunity to go forward there. The odd thing is that this is a Bill about the insurance industry and its contribution to that particular levy, when it is actually the insurance industry that has ponied up £3 million of its money and got this research going. What seems odd to me is the way that this is not happening on the other side.
I will now do what I do not want to do, which is to go into why that is so difficult with this Bill and why I have not been able to incorporate something like this. I was going to have a strap on the levy that we could just throw in and match up, but the limitation is that my department is allowed to raise funds only within its own remit, and medical research lies within the auspices of the Department of Health. We do not have the freedom to raise funds for research within a DWP-sponsored Bill. One of the issues with hypothecated research like this is that, from the point of view of the Department of Health, that cuts across its strategy of directing funds at quality research. This is how we have ended up in this odd chicken-and-egg position. I have simply not been able to find a way, in terms of the levy, to get this into the Bill.
So what is to be done? I have discussed this with my noble friend Lord Howe at considerable length. There needs to be a kick-start process to get research going here. We are proposing to get a conference going, which we will jointly host—and I would welcome as much support as possible from noble Lords—to try to get this on the agenda so that it gets the kind of support that it should.
Lord Freud
I take from this a weight of feeling and, bluntly, the best thing that I can do is to take it back in to Government; my department is almost not relevant in this area. In a sense, I do not think that that is the issue. The irony is that those in the insurance industry are the only ones who have been paying anything of any substance in this area. This is, if you like, directed at the wrong area. As the noble Lord, Lord Kakkar, said, why is this not of some strategic importance?
My feedback from the Department of Health and Sally Davies is that they are aware that it is odd that so little is spent on this disease. However, I think that that is where the problem lies and that it is a kind of chicken-and-egg situation. In a way, the insurance industry is in the position of the gambling industry, which has a voluntary scheme and has been spending money voluntarily. It does not need this pressure. What we need to worry about is: how much, as a country, are we spending on this disease?
I hope that noble Lords can hear that I am enormously sympathetic to what lies behind the amendment, and I am not only sympathetic because I have had a hard time this afternoon; I have been spending six months of the year running around on this issue, a bit like a mad mouse in a wheel, trying to find a way through.
This debate has been valuable. The next stage is to have a major event—my noble friend Lord Howe and I even have a date in the diary—where we start to do something about this and get something going. That is really what we are looking for, rather than something more mechanistic, such as what is proposed here, which I cannot do.
Lord McKenzie of Luton
I think that we all recognise the Minister’s commitment to this issue. However, has any thought been given to whether this could be channelled through the HSE, which falls within the purview of the DWP?
Lord Freud
To be honest, I do not think that we have looked at that as an option. I will have another look around the wheel to see what there is, but where I have come out is that we need a mainstream effort with the people who are interested in this matter to push it up the agenda of the country. We need to say, “This needs research and it will take a decent share of the budget that is available for cancers in this country”.
Lord McKenzie of Luton
My Lords, this is, I hope, a brief and probing amendment. To be eligible for a payment under the scheme, Clause 2(1)(c) requires that a person has not brought an action against an employer or insurer and is unable to do so. The amendment requires that action to be successful. The implication is that an unsuccessful action would not preclude access to the payment scheme.
I have had some contact with the Bill team on this, and I think that the government response will be that if an action cannot be successful, it would necessarily preclude access to the payment scheme, because the conditions could not be met. I wonder whether that is necessarily so. What if an action were against an employer found not to be the right one but when the right one had gone out of business and the insurer could not be identified? Similarly, if an insurer were pursued by an action but proved to be the wrong one, why should that then preclude access to the scheme? I beg to move.
Lord Browne of Ladyton
My Lords, I support my noble friend’s amendment, although I think that there is a more elegant way of dealing with the issue. Frankly, and I hope that the Committee—particularly the Minister—will agree, I do not understand why Clause 2(1)(c) is there at all. It does not seem to make any sense.
The clause has two parts to it. The second part is that the person who is diagnosed with diffuse mesothelioma will be eligible for the payment only if he or she is unable to bring an action against an employer or insurer because the relevant employer or insurer cannot be found or no longer exists. I cannot envisage any circumstances in which anyone could have brought an action against some person who cannot be found or did not exist. I do not understand why that conditionality is there at all. I can envisage the sort of circumstances that my noble friend suggests, which are that an action was brought wrongfully against the wrong employer or the wrong insurer, but why should that disqualify someone from making a claim and receiving a payment from the scheme because they made a mistake in the past and thought that they had the right employer or insurer?
I urge the Minister to take that away and perhaps rephrase the clause to provide that a person who has been unable to bring an action against the relevant employer or any relevant insurer for damages in respect of the disease because the employer and insurer cannot be found or no longer exist, or for any other reason. That seems to be the answer. I do not understand why that part of the clause is there at all.
Lord McKenzie of Luton
My Lords, I am grateful to my noble friend Lord Browne for his intervention and for challenging the subsection more substantially than my probing amendment. Given that the Minister has promised to write, the best thing that I can do in the circumstances is to beg leave to withdraw the amendment and look forward to reading the correspondence in due course. It seems that we may return to this.
Lord McKenzie of Luton
My Lords, Amendment 13 is another probing amendment which addresses another aspect of eligibility. Under Clause 2(1)(d), it is a requirement that a person has not received damages or a specified payment in respect of diffuse mesothelioma, specified payments to be defined in regulations. This probing amendment is to clarify that any payments receivable under the Pneumoconiosis etc. (Workers’ Compensation) Act 1979 and Section 47 of the Child Maintenance and Other Payments Act 2008 are not to be treated as specified payments. Such payments may be recoverable under benefit recovery provisions, but their receipt would not deny access to the scheme.
From a discussion with the Bill team a few days ago, I understand that that is the case, but it would be very helpful if the Minister could put that on the record and say something about what other types of arrangement—I think that term of renewal has been mentioned—will be included in specified payments.
Amendment 41 is grouped and is another probing amendment. Clause 13(2)(b) enables the Secretary of State in setting the levy to deduct the amount of any recovery of benefits. That would therefore reduce the amount borne by insurers. Clearly, the principle which should apply generally is that any benefit recovery accrues to the Government, not to insurers. However, it is understood that this provision is to apply only to the initial period of the scheme, where benefit recovery in respect of cases diagnosed from July 2012 to March 2015 will be used to fund the scheme. If that is the case, again, perhaps we can have that on the record. In any event, perhaps the Minister can explain the analysis behind the government contribution and why in the scheme of things any contribution should be made. I beg to move.
Lord Freud
I thank the noble Lord for the amendments. The intention of Amendment 13 is to ensure that a person who receives a state lump sum payment under the Pneumoconiosis etc. (Workers’ Compensation) Act 1979 or the Section 47 of the Child Maintenance and Other Payments Act 2008 would not be excluded from receiving a scheme payment.
One of the conditions for entitlement for a payment under the scheme was that a person has not received damages or a specified payment in respect of diffuse mesothelioma and is not eligible to receive a specified payment. The meaning of “a specified payment” will be given by regulation. Broadly speaking, specified payments are those which are not compensation but are paid in respect of the person’s mesothelioma. That does not include government lump-sum payments. Therefore, the amendment has no effect on our intentions.
The amendment does not cover the equivalent Northern Ireland legislation, so it creates an imbalance between how applications in Northern Ireland will be dealt with compared to applications made elsewhere in the United Kingdom. To go through which payments will be specified, as the noble Lord requested—it may be easier for me to supply a letter—they are the naval, military and air forces, the Armed Forces and Reserve Forces, the UK Asbestos Trust and the EL Scheme Trust established in 2006. I will write to him to get that on the record.
Lord McKenzie of Luton
I am grateful to the noble Lord for his explanation. It has confirmed the position, which was the reason for the probe. Could he say a little more about the imbalance with Northern Ireland? I am not sure that I altogether follow the point that he was making.
Lord Freud
We do not have the legislation to match. I am not sure that, off the top of my head, I can be precise about what the practical implications of that are. Let me come back in writing on that. Northern Ireland has its own schemes. I must be precise on how they interrelate in responding to the noble Lord.
Lord McKenzie of Luton
I am grateful to the noble Lord and happy to receive a letter in due course. I beg leave to withdraw the amendment.
Lord McKenzie of Luton
My Lords, as the Minister will be aware, while I am supportive of the scheme that he brings forward, there is a need for key improvements. Foremost among these is the proposed level of scheme payments. We have seen nothing definitive, but the impact assessment suggests that it could be pitched at 70% of the tariff. The tariff will be set in age bands of one year and it is understood that it will be based on average compensation awards of claimants and dependants, in respect of those diagnosed with diffuse mesothelioma. The impact assessment also states that by linking payments to age, the overall cost of the scheme will be reduced because of the rise in age of those diagnosed.
The suggested likely level of payout of 70% is the component of the scheme which most noble Lords at Second Reading considered unacceptable. An increase in this level of payment is the most important change we can make to the Bill. It is difficult to pin this down in the primary legislation but we need to have something clear in the Bill. What levels of payment are actually made depends upon the computation of average compensation claims as well as the percentage award.
As to average compensation claims, we need to be assured that this is a fair basis for constructing the tariff and that it does not unfairly depress the amount of compensation claims which would have been payable to scheme beneficiaries had they been able to access compensation on an individual basis. There is no inherent reason why the cohort of scheme claimants should not reflect the average of those accessing compensation in the usual way.
We have seen the national institute’s statistical note, which merits more detailed scrutiny. However, we have not seen that translated into a tariff schedule which supports the impact assessment levy calculations. When might this be available? The national institute note sets out various measures of average compensation, including the arithmetic mean, the median and a variety of trimmed means. Which average is to be used?
Table 3.4 of the paper sets down some average compensation tabulations but it is unclear whether either of model 2 or model 4 will be adopted. Further, it would appear that in Scotland, for example, actual awards are on average some £60,000 higher than in the rest of the UK. Is this right and are there any other large regional disparities of which we should be aware?
At Second Reading the Minister referred to setting payment figures at 70% as a “real juggling act”. The argument runs that if the levy is small, in a reasonably competitive market providers will absorb it and not seek to pass the cost on to British industry. The impact assessment points to research both ways on this matter, although it also suggests that it is worth noting that even if insurers did pass the costs on to employers the impact on employer customers is likely to be relatively low.
The argument being used to significantly depress payments to sufferers of mesothelioma is thin to say the least. Where is the evidence that at a 3% level they will absorb the costs but above that they will not? Is it not the case that there is a variety of issues and costs which will feature in employer’s liability insurance pricing and that these policies might anyway be bundled with other insurance products? Even taking the Government’s argument at face value, their position cannot be justified.
Taking into account the government contribution in year one, the levy on insurers is, on average, estimated to be 2.24% of a 70% level of payment. This would imply an average level of some 3.2% if the payment were set at a 100% level, an extra 1% of gross written premiums, or £15 million per year over the 10-year period. From the point of view of the insurance industry, this would not appear to be an unmanageable additional amount.
It should be borne in mind that the industry is still not bearing the costs of other asbestos-related and long-term diseases where employer’s liability policies cannot be traced. The Minister has suggested that the diffuse mesothelioma scheme covers 70% of the payment amount that would fall due if there were full coverage, so there is benefit still accruing to the sector just because old policies have been lost or destroyed.
However, this aside, we should not be looking at this only from the point of view of the insurance sector. We need to give full consideration to those affected by this terrible disease. If their condition is a result of negligent workplace practices, why should support for them be discounted by 30%? Indeed, on a matter that we have to pursue in the future, we remain to be convinced that the scheme payment could not be subject to greater benefit recovery than a composite level of compensation payment. However, we will return to that issue.
If it is right—and it is—that payments should be made, they should be the full compensation equivalent. It has taken a long time for a scheme to be developed and we continue to pay tribute to the Minister for advancing this, but there is no excuse for now short-changing those who, we all agree, should get justice. I beg to move.
Lord Howarth of Newport
My Lords, my Amendment 18 is grouped with Amendment 15, just moved by my noble friend Lord McKenzie, and it drives at very much the same purpose. Both of us seek to ensure that the scheme payments will match the average of court awards for people in comparable circumstances, thereby lifting the figure from 70% of the tariff to 100%.
I have not been able to discern any principled basis for this figure of 70%. I think that it was the best deal that the Minister could secure. I do not underestimate his achievement in securing that deal against an insurance industry that for decades fought a rearguard action to try to escape from its proper liabilities. At Second Reading, the Minister told the House of the press investigations into the mesothelioma scandal in its various dimensions from 1965 onwards. As time went by, we understand that policies went missing wholesale. As the Minister also told us at Second Reading, it was not until 1999 that the industry created a code of practice for the better tracing of employer’s liability policies.
As I said in an earlier debate, I do not think that Parliament needs to feel that it is bound by the deal that the Minister has secured with the industry. We respect the Minister’s efforts in securing that deal but it is our duty to take a view on where the public interest lies, and I do not believe that it lies in palpable injustice or in the convenience of the insurance industry at the expense of mesothelioma victims. It is surely unacceptable that mesothelioma victims should be penalised because, through no fault of theirs, documents have gone missing, and it is unacceptable that the insurers, whose duty it was to keep proper files, should benefit to the tune of 30% in precisely those cases where they failed in their responsibilities.
The Minister will argue to us again, I think, that there needs to be a discount in order to incentivise claimants to go to the courts first. However, I am not persuaded by that argument because it seems to me that the procedures of the scheme—the portal and the remit of the technical committee—will all ensure that they do go to the courts first if they can and that they pursue that avenue until they find that they cannot proceed satisfactorily or successfully along it. Be that as it may, in any case a 30% discount is simply too large. The Financial Services Compensation Scheme provides cover for 90% of the liabilities of insolvent insurers where insurance is compulsory. That 90% should be the very minimum and 100% would be right.
Lord Freud
It is always a dangerous thing to base it on a moral argument, particularly in this area. It is a differentiated industry. There is a group which we are now looking at to shoulder this. There was an enormous amount of negotiation in getting to this level of levy. That then feeds into the amount that we can pay eligible people. You could have an infinite amount of levy but if we went too high, the risk would be very clear. The genuine danger is that it would just go straight to British industry. Many of the insurers who will be paying it were not in business at the time or may have kept good records, so there is a differentiation within the industry.
If we could pay people more, of course we would. This is a balancing act and 70% is the compromise that we have arrived at after long negotiations. I hope that noble Lords can appreciate that there is a real achievement here in getting very substantial payments to people who are eligible, if they are afflicted by this terrible disease. I urge the noble Lord to withdraw the amendment.
Lord McKenzie of Luton
My Lords, I thank the Minister for his reply, none of which comes as a surprise. I thank all noble Lords who have participated in this debate and supported the amendment. My noble friend Lord Wills urged the Minister to convey the strength of opinion about the level of payment. The noble Lord, Lord Wigley, referred to the fact that this sort of horse-trading did not go on when the 1979 Act scheme was being put in place. I think that my noble friend Lord Howarth dealt with the point about why it is not unreasonable for the insurers still in the market to bear the full costs of compensation. The noble Lord, Lord Avebury, reminded us that everybody who spoke at Second Reading opposed this 70% level. I was rather attracted to my noble friend Lady Donaghy’s proposition of 130%; perhaps we might try that.
The Minister says that it is wrong to deal with this as a moral issue. I am not sure that that is right or something that I would agree with. I took it from what he said that the negotiation was around the rate of the levy, which then drove the compensation levels, rather than the rest. In that case, I am interested in a negotiation that would end up with a levy of 2.24%. How on earth was that arrived at? Why was it not 2.25% or 2.26%, or 3%? To have that driving the outcome seems a little strange, but in any event it is unacceptable.
I am grateful for the fact that it looks as though we will get the tariff tables tomorrow. That is obviously a key part of this. The percentage is key, but it depends what it is a percentage of. We will have to see how that all works out and which of those averages have been taken in compiling that schedule.
Lord Freud
Perhaps I may quickly clear up that matter. When you look at the totals, you have to take into account the effect of the extra two years, because we are starting with two years in hand. So the first year counts as three years, which we are going to smooth over the first four years. Therefore, in practice we start off with a much bigger amount of money. The 2.24% is a raw figure, if you like; it is not going to affect how much the levy will be when it is smoothed.
Lord McKenzie of Luton
I accept that point, but is not part of the smoothing in the early years being done by government contribution?
Lord Freud
It is a very small amount. We will actually do the smoothing over the years. Turning round the recoveries is only one year’s work, so that is a small amount of it.
Lord McKenzie of Luton
I think that £17 million is the cost of the government contribution. I still do not think that we have had a definitive answer to the question of the impact on all this, if any, of what is happening in the pre-action protocol and all the negotiations that are going on there. From submissions that we have had from the ABI, it is clear that it sees that as part of a wider integrated package. I do not know whether the Minister can say anything about the extent, if any, to which the negotiations took account of what was happening there or was likely to happen and how that impacted on the negotiations.
However, ultimately we have heard nothing that convinces us that the 2.24% is where we stop in this calculation. We will continue to press for an increase. We will help the Minister in taking this back to the industry and making it understand how strongly we feel about it, and how it must not, and cannot, rest where it does.
The Deputy Chairman of Committees (Lord Colwyn)
Does the noble Lord wish to withdraw the amendment?
Lord McKenzie of Luton
I do not know whether the Minister has anything further to say.
Lord McKenzie of Luton
Before I do, is the Minister going to say anything about the MoJ consultation?
Lord Freud
There is not much that I can add to what I said at Second Reading. Clearly, there is a consultation on the level of costs, on the pre-action protocol and on the portal, but I cannot pre-judge what that might come out with. It is clearly an extensive consultation and it will be starting in a matter of months.
Lord McKenzie of Luton
Can the Minister just say whether any of that featured in the discussions and negotiations that he had around the levy?
Lord Freud
Yes. It was important to the industry that the MoJ undertook to look at those issues. That was reinforced by the amendment of the noble Lord, Lord Alton, to the LASPO Bill, which was predicated on there being a consultation ahead of pulling the mesothelioma cases inside the LASPO framework.
Lord McKenzie of Luton
I shall read the record on that and I may return to the point in due course. However, given the hour, I beg leave to withdraw the amendment.
Mesothelioma Bill [HL]
Lord McKenzie of Luton Excerpts(11 years, 6 months ago)
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Lord McKenzie of Luton
My Lords, I thank the Minister for his explanation of the Bill, for facilitating a briefing with officials and the follow-up notes, and indeed for his kind words. The core of the Bill, a lump-sum payment scheme funded by insurers for those diagnosed with diffuse mesothelioma who cannot otherwise access redress from their employer or an employer liability insurance policy, is one that we strongly support. The Bill has its shortcomings and we will outline our view on those in a moment, but they will come as no surprise to the Minister. Without this sounding too much like a love-in, we should acknowledge the Minister’s personal commitment to bringing forward this legislation, which I can well understand has involved difficult discussions with the insurance industry, which in times past has resisted such arrangements.
We must also take this opportunity to pay tribute to those who have campaigned tirelessly for those whose lives have been blighted and shortened by exposure to asbestos and other occupational poisoning, not least the trade unions and the Asbestos Victims Support Groups Forum. Doubtless the campaigns will go on, but their efforts have not been in vain.
Mesothelioma is a particularly pernicious disease of malignant cancerous cells in the mesothelium, creating great suffering. It is caused by exposure to asbestos, as we have heard, and is invariably fatal. Life expectancy post-diagnosis is between nine and 13 months. As we have heard, mesothelioma is a long-latency disease that might not be diagnosed until 30 or 40 years after exposure to asbestos.
As the Minister has explained, the passage of time between exposure and diagnosis might mean that the negligent employer cannot be located or might have gone out of business and, as important, that the employer’s liability insurance policy that should have covered the employee cannot be identified. Such individuals are currently thrown back on statutory schemes and benefits for support.
It is, then, entirely reasonable that the insurance industry, which has had the benefit of the premiums over the years, collectively funds by way of a levy a scheme that supports those who cannot make a civil claim. We have not seen the detail of the scheme and look forward to draft rules being available in Committee, together with some detailed indicative figures of payment values and the construction of the tariff, and indeed details of the technical committee.
However, on the basis of explanations given so far, we have some concerns and disappointment with the Bill. The suggested levels of compensation at around 70% of average damages awarded by the civil courts are too low and unfair; we reject the “careful balance” proposition. Coverage is inadequate; not all asbestos-related or other long-tail diseases are covered. The cut-off date for the scheme at July 2012 is too restrictive. And the prospect of the insurance industry running the scheme gives rise to possible conflicts of interest: on the face of it, insurers have been able to negotiate a proposal that excludes half of asbestos victims, liability for claims before July 2012 and a 30% discount on compensation levels. This must be challenged.
We should also like to see the insurance industry, through the scheme or otherwise, continuing with an earlier commitment to fund ongoing medical research into cancer. The ABI reminds us that in recent years the insurance sector has contributed some £3 million to the British Lung Foundation. Was the prospect of ongoing funding part of the negotiation surrounding the arrangements in the Bill? We make common cause with those who believe that the industry should commit to a further round of funding research.
The Government seek to justify setting payment levels at some 70% of average damage levels awarded by the civil courts. They argue that the level of the award should be below the 100% level as a means of encouraging claimants to seek to trace an employer or employer’s liability policy that could lead to higher compensation. We challenge this analysis, and certainly wish to examine in Committee the effect of using a tariff based on average civil compensation. The process for a claimant to establish exposure to asbestos and a relevant employment nexus and to seek to trace an EL insurance policy would be necessary for entry into the scheme, just as it would be for making a civil claim. Indeed, would not both have to go through the same portal in future?
That aside, though, it is surely indefensible to pay compensation at 30% less just because someone cannot identify an employer’s liability policy—a policy that existed but now, through no fault of the claimant, is lost or destroyed. As the briefing from the Asbestos Victims Support Groups Forum points out, reduced scheme payments are an invitation to individual insurers to see the scheme as a cheaper option. Why pay full individual compensation when you can pay 70% of average compensation? We will seek to get some improvement to the proposed compensation levels in Committee.
We support the imperative of getting the scheme for those diagnosed with diffuse mesothelioma in place as quickly as possible, and recognise that, in a way, the fact that the awful consequences of a disease that is invariably fatal must have been caused by exposure to asbestos and negligence, when an employment is involved, creates a scenario that makes for some administrative simplicity.
However, there is no moral reason why the scheme should just be limited to mesothelioma. For the future, the tracing office, ELTO, will improve access to compensation, although it is by no means yet perfect, but it will be a long while before it covers long-tail diseases. In Committee we will examine why the scheme cannot be extended to all asbestos-related and long-tail diseases, and at least see why the Bill does not provide for an extension of the scheme in future in a way that does not hold up the current proposals for sufferers of mesothelioma. Can the Minister say—I think he did in his opening remarks—whether the Bill currently precludes such an extension, and if so why, particularly as the technical committee can be expanded to cover diseases over than diffuse mesothelioma?
The Government have set the start date of the scheme as 25 July 2012, for the reasons which the Minister outlined, which is more than two years after the close of the February 2010 consultation. During that period, another 600 people will have died from this awful disease without them or their dependants receiving proper compensation. We will argue for an earlier commencement date but not an open-ended commitment. There are, of course, other things going on in this area. The ABI makes clear that it sees the pre-action protocol, fixed-cost arrangements, the central mesothelioma claims gate or portal, and improvements to ELTO as an intrinsic part of the overall arrangements.
Clearly, only a part of this package is before us when considering the Bill, so it is difficult to evaluate the overall effect. However, concerns have been expressed about whether the pre-action protocol might make matters more difficult for claimants by imposing a more onerous burden in upfront disclosure rather than streamlining the claims process. Can the Minister say how the emerging process will improve on the current civil litigation fast-track process operated by Senior Master Whitaker? Can he also say whether the Government see these other components as an intrinsic part of an overall package and how the terms of the support scheme might have been modified because of them?
Concerns in this area have been heightened generally by the Government’s tightened attitude to compensation for workplace injury, displayed by the denial of future claims of strict liability and breach of statutory duty for health and safety failures. The Bill allows for the scheme to be administered by the Secretary of State or for this to be undertaken by another entity. Our briefing sets out that the insurance industry itself is setting up a body to run the scheme, and this might have timing benefits because it can be developed while the legislation is proceeding through Parliament. This might be so, but we need to examine possible conflicts of interest as the scheme administrator is supposed to help claimants or their dependants to bring and conduct proceedings against insurers.
Moreover, the ABI expects the technical committee to be set up by ELTO, which has itself been set up by the industry. The technical committee will consider evidence of whether or not a particular insurer will provide cover. Its decisions in this regard are binding on insurers—active and in run-off—and claimants are subject to review and arbitration. Can the Minister say whether it is agreed that ELTO will set up the technical committee? We will want to test the balance of power in all this where the ABI expects that the insurance industry will administer the support scheme, has developed ELTO and expects to run the technical committee, and is developing and expecting to run the portal.
It is shocking to think that in this rich and sophisticated country of ours more than 2,000 people each year will continue to die from this terrible disease, which is a consequence of past negligent employer health and safety practices. It is also important to recognise that the problem has not gone away. We need to support the HSE and others in current awareness campaigns. Despite some misgivings, this Bill is a welcome step forward. It will get compensation to some 300 sufferers of mesothelioma or their dependants each year who previously could rely only upon support from the state. It will enable benefit recovery for the Government of some £50 million net. We will work with the Minister to seek to improve the scheme where we can but will do nothing to frustrate its speedy passage on to the statute book.
Enterprise and Regulatory Reform Bill
Lord McKenzie of Luton Excerpts(11 years, 7 months ago)
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Lord Pannick
My Lords, I supported the noble Baroness, Lady Turner of Camden, and the noble and learned Lord, Lord Hardie, on Report, and I continue to do so. The Minister said earlier in this debate that we are considering cases where the employer has done nothing wrong. With great respect, that is a fundamental misunderstanding. The employer is liable only if the claimant can prove a breach of health and safety legislation. The employer is liable only if the claimant can prove that the breach has caused the injury. To require the employee also to prove negligence would impose an unreasonable burden. I take the point made by the noble Lord, Lord Faulks, that it is not an impossible burden. However, I suggest that it is an unreasonable burden because the relevant information will normally be information in the knowledge of the employer, and the costs and delay of the litigation—a point which the noble Lord, Lord Faulks, did not mention—would surely be disproportionate in all these circumstances to any legitimate interest, especially when the reality is that the employer can, and normally does, have liability insurance. For those brief reasons I will support the noble and learned Lord, Lord Hardie, should he divide the House this evening.
Lord McKenzie of Luton
My Lords, we remain steadfast in our opposition to the Government’s position, and fully support the case led by the noble and learned Lord, Lord Hardie, and spoken to in support by my noble friend Lady Turner and the noble Lord, Lord Pannick. We are dismayed that parliamentary process has allowed so little time for consideration of this matter in the House of Commons and that more than a century—in fact, nearly 150 years—of settled law is being overturned on the basis of such brief deliberation.
The arguments to remove Clause 61 from this Bill have not of course changed in the few weeks since we last debated the matter. Nor have the serious consequences which will ensue should we not carry the day. Removal of the existing right of an employee to rely on a breach of health and safety legislation represents a fundamental shift, and one which is to the detriment of employees.
We heard before, and again today, that having to prove negligence will provide a more difficult route to getting redress. The burden of proof will shift to employees, or to the family in the case of a fatality at work, there will be a requirement for more evidence-gathering and investigation, and the incurring of greater costs. In that respect there will be no lessening of the regulatory burden on employers. This change goes well beyond the issue of strict liability which the Government’s own impact assessment accepts is likely to give rise to only a small number of claims.
The issue of a near impossible burden referred to by the noble Lord, Lord Faulks, I think in our previous debate, was not applied generally but specifically to those circumstances where strict liability has hitherto been in force.
Lord Faulks
I am grateful to the noble Lord for giving way. The point is that there is always a claim, as I am sure he will agree, in negligence. Whether there is a breach of a regulation will be strong evidence of a departure from an appropriate standard of care. All that is changing is simply that it is not actionable per se. I would like the noble Lord to say why he adheres to his suggestion that there is a near impossible burden.
Lord McKenzie of Luton
The point I sought to make is that in some circumstances it has been accepted, I believe, that there is a near-impossible burden. That is not necessarily the case, but even the route to proving negligence is a greater burden than the route to proving breach of statutory duty, which is what operates generally at the moment. The “near-impossible burden” description was particularly applied to those areas where strict liability applies in circumstances related to the provision of equipment, where purchased, maintained and sourced by the employer, and the employee is in a disadvantaged position in seeking to prove negligence.
The impact assessment recites the belief in a compensation culture which is having an impact on the behaviour of business. However, even if true, why on earth should it be a justification for reducing access to justice for employees injured or made ill by their work? This cannot be a rational basis for acting. Why should employees bear the strain of tackling these perceptions? Where is the evidence that unreasonable claims are being made and indeed settled? If there are fewer claims, the beneficiaries, as we have heard, will be the insurance companies, the providers of employer liability insurance. Where the Government are particularly remiss is in failing to see this from the perspective of the individuals who are injured at work, because one way or another they and their families will bear an increased burden. They may be forced to place greater reliance on the health, caring and benefits system. What does the Minister say to those families whose circumstances may have been eased by receiving compensation but who face a life on benefits in the future? Health and safety impacts on the lives of millions of individual employees every day of the week. It is not some distant concept related to red tape.
There is undoubtedly some overcompliance with health and safety requirements, but there are ways in which this can and is being tackled. The register for consultants is one route that the HSE is seeking to apply. However, there is also undercompliance. The noble Lord, Lord Faulks, asks what my evidence is for that. Let us look at the data. People are still being killed at work and hundreds of thousands of people are injured every year. I spent three and a half years as Minister for health and safety. We know those sectors where there is a struggle to get compliance. It does not operate across the board. There are some very good employers who try to do the decent thing, but there are some who do not. This undercompliance has been made worse by restrictions on funding, by limiting the regulator’s role in proactive workplace inspections, and by the portrayal of health and safety as red tape and its undermining by myths that bear no relation to reality. Promoting the changes in Clause 61 will also send the wrong message to those employers who would undervalue health and safety and cut corners, safe in the knowledge that their chances of being held to account are diminished. This is to the detriment not only of employees but of those many employers who do the right thing.
The Government’s position is untenable. It is changing the settled legal position of over a century on the basis of anecdote and perceptions. It is making it harder, sometimes impossible, for employees to access justice when they are injured at work. It is undermining the cause of health and safety. The Government have failed to consult properly on this or make reference to the EU. They offer an inappropriate remedy to any perceived compensation culture which can and should be addressed by other means. Most of all, they are careless of the personal cost to those who are damaged by their work. That is why we support the amendment of the noble and learned Lord.
Lord McKenzie of Luton
Before the Minister sits down, can he just help us with one issue? If it is the Government’s position that the problem to be addressed is the perception of a compensation culture, why should that be addressed by making the reality of accessing compensation claims more difficult?
Viscount Younger of Leckie
I reiterate that the balance is not right. We have been much helped by the report from my noble friend Lord Young and Professor Löfstedt, who have provided this perception and provided the evidence to allow us to act. This is the right approach for the Government to take.
Viscount Younger of Leckie
I am grateful for the points made by my noble friend. That is a very helpful intervention.
Lord McKenzie of Luton
Can the Minister give us some examples of where there is gold-plating of regulations under health and safety provisions?
Viscount Younger of Leckie
I believe that I covered in Committee and on Report all the aspects that I need to.