Mike Wood
Main Page: Mike Wood (Conservative - Dudley South)Department Debates - View all Mike Wood's debates with the Home Office
Riot Compensation Bill
Mike Wood Excerpts(8 years, 5 months ago)
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Mike Wood (Dudley South) (Con)
I beg to move, That the Bill be now read a Second time.
As elected representatives in this House, it is our responsibility to take forward legislation that protects the most vulnerable from all types of harm. I am privileged to promote this Bill, which will help individuals and businesses recover from the devastating impact on communities of widespread public disorder. I am the promoter of the Bill, but much of the work has been done by others. I owe a particular debt of thanks to officers and staff of this House and of the Home Office for the advice, help, support and industry that they have provided in preparing the Bill.
There are many features of this place that come as a surprise to newly elected Members, even those of us who took a close interest in Parliament before getting here. One of the most surprising of all is just how popular a Member who appears high up in the ballot for private Members’ Bills suddenly becomes. Unfortunately, that popularity dissipates almost as quickly as it arrived once the Member has settled on a Bill. Nevertheless, I am pleased to bring forward this Bill today.
As I am sure all Members will agree, this is a Bill that I hope will never be used, but it is better to prepare now by ensuring that we have the necessary rules, procedures and structures in place during a time of calm, rather than putting off such thoughts until those measures are urgently needed.
This issue has a particular personal relevance to me. Growing up as the son of a west midlands policeman, I was all too aware from a young age of the impact of riots on local communities and on those responsible for policing them. I remember as a nine-year-old child waking up to see the horrific footage of the Handsworth riots in September 1985. It brought home in the most literal sense the terrible reality of a breakdown in law and order. My father, as a mounted policeman, had been called into work early in response to the violence and destruction that I was then seeing on television. I remember coming home from school just as my father returned home earlier than usual, his hand bandaged and his face pale. I am sure that Members can imagine what was going through my mother’s mind.
As we are among friends—and, perhaps more importantly, as my father is not a regular follower of BBC Parliament—I might be safe in letting Members into his little secret. That day, he had gone into the police stables to prepare his horse, where I am afraid he was bitten by a squirrel. Fortunately, that was the most serious injury my father suffered in those riots.
Tragically, others were not so lucky: two brothers were brutally burned to death in the post office they ran. Two other people were unaccounted for and a further 35 were injured. More than 1,500 police officers were drafted into the area, potentially put in the line of danger. They each have families who I am sure are every bit as proud of them as I remain of my father. About 45 shops were looted and burned, and lasting damage was done to community cohesion in Handsworth. Other riots across the country that autumn, including the Broadwater Farm riot in London, showed similar violence and destruction.
Twenty-six years later, a series of riots, starting in Tottenham and spreading across much of London and then into other major cities, were a horrible reminder of just how fragile public order can be. The August 2011 riots left many vulnerable communities counting the cost of some of the worst and most destructive public disorder in a generation. The human and social cost was immeasurable, nowhere more so than in the senseless murder of Haroon Jahan, Shahzad Ali and Abdul Musavir, who were deliberately run down while trying to protect their community in the Winson Green area of Birmingham.
Here in Greater London we saw horrific images of the Reeves furniture store burning down. This family run business had been built up over years, but it was destroyed in minutes. The image was broadcast all over the world and it continues to haunt us. Elsewhere around the country, large cities experienced similar destruction, with businesses destroyed, property wrecked and dreams up in flames.
In the heat of the riots, many people were surprised to learn that, under current legislation, responsibility for compensating victims of riots lies entirely with local police forces. The legislation dates back to 1886 and is basically a consolidation of legislation going back to the 18th century, so the word “current” does not seem entirely appropriate. The system requires polices forces—the Metropolitan Police Authority, the common council of the City of London and, elsewhere in the country, police and crime commissioners—to pay out millions of pounds in riot compensation, much of it to large businesses and insurance companies, while lacking the flexibility to respond effectively and promptly to the needs of individuals and small businesses that need their payments, and need them quickly. Against a background of tight budget constraints, potentially limitless liability for police forces is unfair and unsustainable.
James Berry (Kingston and Surbiton) (Con)
I thank my hon. Friend for promoting the Bill. If the police are to be held liable for the acts of third parties—of rioters—would it not be fairer for the victims to have to prove that the police were themselves at fault before compensation could be paid out of the public purse?
Mike Wood
I will respond to my hon. Friend’s intervention in more detail later in my speech. Although I have some sympathy for that argument—the causes of riots can be extremely varied and in many cases they are not the direct result of police action or inaction—I think there are both principled and practical reasons to maintain the current principle of strict liability. One such practical reason is that, if someone is unable to afford insurance and has suffered losses during a riot, it is very unlikely that they would have the means to bring a court action to establish that the police had been negligent and thereby claim damages through the usual legal means.
Mr David Burrowes (Enfield, Southgate) (Con)
My constituency was a victim of the riots in 2011, when there were huge disturbances on the streets of Enfield. For some businesses in my constituency and in Enfield North the problem was not just liability and who would pay, but the time it took to be paid. The delay was an ongoing victimisation of those businesses and their prospects of continuing. Will the Bill help to improve the decision-making process and lead to such businesses getting the money they deserve?
Mike Wood
A key purpose of the Bill is indeed to have a more effective, streamlined and clear mechanism or procedure to enable those businesses and individuals to get the compensation they need within the timeframe necessary to make a difference in getting their lives and businesses back on track.
In 2011, the coalition Government responded to the riots by agreeing to cover the costs incurred by the police in compensating homeowners and businesses under the Riot (Damages) Act 1886. That was one part of the package that the then Government announced in response to the scale of the destruction suffered in some of our major cities. I am sure that Members on both sides of the Chamber recognise the importance of the creation of a high street recovery fund immediately after those riots, which helped local communities to decide for themselves on measures, specific and relevant to their area, that would get their high streets back on their feet. However, we cannot necessarily rely on future Governments choosing to underwrite police force liabilities or investing additional moneys in rebuilding areas hit by riots.
Julian Knight (Solihull) (Con)
This issue is not just about the riots of 2011; many other localised riots have led to very extensive and expensive bills for local police forces. For instance, the total bill for the rioting in Bradford in 2001 amounted to £450 million, even though it was a localised riot.
Mike Wood
I fully agree. In the region we both know best, the west midlands, there were the Handsworth riots in 1985, which I have already mentioned, and of course the riots in the same part of Birmingham in 1981 and 1991. Such localised riots have a huge impact on the local community, and cause huge cost to businesses and individuals directly affected.
We need to act now to build a new compensation system that works. As my hon. Friend the Member for Enfield, Southgate (Mr Burrowes) said, that system needs to be fair to the people and businesses affected by riots and fair to the taxpayers who, ultimately, will always foot the bill.
In the wake of the 2011 riots, work was conducted by the independent Riots Communities and Victims Panel, which looked at both the root causes of the disturbances and the prevention of future riots. Other studies were conducted specifically to examine the response of the police. Although the Government have done a lot of valuable work on the causes and the immediate responses to the riots, now that we have had time to reflect on and learn from those terrible events, it is right and necessary to ensure that the current legislation is updated to make it fit for the 21st century and to enable the victims of riots to be adequately compensated.
Recognising criticisms of the limitations of the 1886 Act, the Home Office undertook an internal review, and my right hon. Friend the Home Secretary then commissioned a full, independent review of the legislation. The reviewer, Neil Kinghan, spent months collecting evidence from riot victims, the police, insurers, loss adjusters and many others before publishing his conclusions. He made recommendations concerning a number of areas of the existing framework. Many of those recommendations are brought forward in the Bill.
Neil Kinghan accepted that there remains a need for legislation that provides for riot compensation to victims, but that the existing legislation is simply not good enough. Fiddling around the edges of the legislation would not be enough to make it work for the 21st century. We need to repeal the 1886 Act and replace it with new legislation that reflects the world as it is now, rather than the world as it was in the 1880s. The Bill seeks to make that change by updating the legislation and modernising the compensation system, making it fit for purpose in today’s world.
This is not the first time that changes to the Riot (Damages) Act have been considered. Under the last Labour Government, there was a public consultation on full repeal of the Act, but in the end, no changes were made. I do not believe that simply repealing the 1886 Act is the answer. While there is a superficial attraction in removing the strict liability that police forces have for damage to property suffered during a riot, there is general acceptance that there are principled and practical reasons for its retention.
Neil Kinghan’s review agreed that the first duty of the police is to maintain law and order. When that law and order breaks down, resulting in a riot, it is right for the police to be held to account and to pay appropriate compensation. On a practical level, strict liability provides simplicity for the victims of riots and a clear framework for the police. Requiring victims to demonstrate negligence or other direct fault would not be equitable in the circumstances. It would require evidence that is often extremely difficult to collect in the immediate aftermath of a riot and would inevitably lead to increased conflict between local police forces and the communities that are hit by rioting.
The 2011 riots underlined the importance of maintaining this historic protection for the public, as it provided a number of people with a vital means of support when they needed it most. It is right that people are provided with the financial means to repair, renew and recover so that they have the confidence to return to their roles at the heart of our communities.
The independent review found near consensus in favour of retaining the police’s strict liability—a finding backed by the report of the London Assembly’s budget and performance committee on the aftermath of the riots. It is right that we protect communities from such shattering losses by doing what we can to help them back on their feet. However, what cannot be right are the lengthy bureaucratic delays suffered by those who need our help, to which my hon. Friend the Member for Enfield, Southgate referred, and the idea that the country has a bottomless purse to draw from to pay for damage caused by criminals.
The Bill makes much-needed changes to address those concerns, while still supporting households and businesses affected by rioting. Although, as I have said, I accept the arguments for retaining the principle of police liability for riot damages, I do not accept that we can continue with limitless liability. Whether through police budgets or central Government, the public purse cannot be expected to pick up costs that are the reasonable responsibility of private insurance.
The Bill proposes to end the unlimited compensation afforded through the 1886 Act. Instead, it will set a cash cap, set at the appropriate level of £1 million, on each individual claim. The Government determined in their early review that if such a cap were in place in 2011, 99% of the claims made after the riots would have been compensated in full, but the limit would have saved the public purse tens of millions of pounds in compensation for the very largest claims.
As prudent homeowners, most people hold some form of insurance for their property. The same is true of most business owners. In the most recent cases, more than 80% of the compensation has been paid as reimbursement to insurance companies. Despite that, measures to cap compensation have been supported in principle by their largest representative body, the Association of British Insurers.
Antoinette Sandbach (Eddisbury) (Con)
Clearly, property values will differ throughout the country, and many members of the public do not read the fine print in insurance documentation. What is to stop insurance companies excluding riot from their cover? If that does happen, what will happen to those who suffer losses greater than the ones mentioned in my hon. Friend’s Bill?
Mike Wood
Of course we recognise the difference in property values around the country, but we have to accept that basic responsibility for buildings insurance, and indeed contents insurance, needs to be with private insurers. I would certainly hope that we can work together with the insurance industry to make sure that there is a fair response so that the premiums that most people believe they are paying to cover them for damage, however it is caused, really do cover them.
These new provisions are not just about saving money; they are also about improving and modernising the claims process. The short timescales in the old Act for submitting and evidencing a claim were not feasible for many potential claimants. The original 14-day period was extended to 42 days under the Government’s emergency amendment for the 2011 riots. Those riots demonstrated that the period was not long enough in certain cases. Many homes and places of business were inaccessible because they were designated crime scenes. In a number of claims, full details could not be provided because of a dependency on external processes as seemingly unrelated as planning permission.
The Bill will allow regulations to be made to extend those periods. Initially, a claimant need only lodge notice of a claim 42 days after the incident. By lodging notice of a claim, they will then have another 90 days to gather the evidence to substantiate the quantity and nature of the losses. That means that riot victims can focus on their most immediate needs in the shortest term and worry about paperwork further down the line when they are in a better position to deal with it.
Regulations to the Bill will change the way that compensation is calculated from the old-for-old replacement payments system, based on the current value of property, as depreciated, to a new-for-old system to allow people in the majority of circumstances to replace their property in full. That will considerably ease the decision-making process.
Mr David Lammy (Tottenham) (Lab)
Does the hon. Gentleman accept that the areas that experience riots are often the most deprived in our country? In those communities, increasingly, particularly in London—in the constituency of my hon. Friend the Member for Croydon North (Mr Reed), and certainly in mine—many constituents speak English as a second language. I can think of a constituent who had a heart attack after the riots. Forty-two days is still a very short time after experiencing shock of this kind.
Mike Wood
I recognise the right hon. Gentleman’s point. It is important that alongside any new legislation and regulation we have the co-ordination at a community level to support the people he mentions, who, as he says, are often in our most vulnerable communities.
The basis for switching from old-for-old to new-for-old is one of basic fairness for riot victims. It cannot be fair for them to be expected to engage in extensive negotiations on the book value of a three-year-old dry cleaning machine, as was the case in one claim in 2011, and then to have to search for such a machine at the specified price just at the point when they are trying to rebuild their homes or their businesses. A new-for-old system is already used in most private insurance policies, and it would mean that victims could set about the important business of getting their lives, homes and businesses back on track.
Mr David Nuttall (Bury North) (Con)
My hon. Friend is right to say that new-for-old replacement will be welcomed by businesses that are affected by a riot, but often the most worrying and biggest problem for such businesses is the consequential losses that arise from that destruction and loss of property. Will he explain why those losses will not be covered, and why they are expressly excluded?
Mike Wood
As my hon. Friend says, the Bill would explicitly restrict a police force’s liability to direct losses, and it would exclude the consequential losses to which he refers. This is a question of fairness and affordability, because the potential impact on the public purse would be enormous should the riot compensation scheme be extended to cover full consequential losses.
Mr Nuttall
There is a cap, so any claims would be limited and caught by that cap. Bearing in mind that that exclusion exists, does my hon. Friend agree that it is extremely important that all businesses—especially small businesses—are made aware of the limitations of the Bill, and the need for them to take out insurance to cover otherwise uninsured losses?
Mike Wood
My hon. Friend makes an excellent point, and businesses need to do as he suggests. This is about what private insurance should reasonably cover. Although direct losses tend to be relatively easy to quantify, consequential and other indirect losses can be more difficult to quantify, and they cause much more difficulty for public authorities when assessing and paying for those claims.
Kevin Foster (Torbay) (Con)
It has been interesting to listen to my hon. Friend’s contribution so far. Does he agree that the limit is about finding a balance between what is legitimately covered by private insurance, and compensation for those who were caught up in a riot through no fault of their own? Does he also agree that not many people would have been aware of the Riot (Damages) Act 1886 until after the 2011 disturbances?
Mike Wood
My hon. Friend is right, and in conversations I have found that a surprising number of right hon. and hon. Members from across the House were similarly unaware that police forces bear those liabilities. We should be under no illusions that most members of the public are much better informed.
Let me return to the principle of switching to a new-for-old system. From the perspective of public finances, much of the additional cost of such a change can be expected to be offset through savings on spending on the loss adjusters needed to calculate second-hand values. It is much simpler and more efficient to assess the cost of a new replacement product, which is why so much of the insurance industry has moved to such a process.
Mr Steve Reed (Croydon North) (Lab)
Was the hon. Gentleman referring to the case in Croydon North of Mr and Mrs Hassan? They had recently bought a dry cleaning business with old dry cleaning machines. It was burned to the ground, but because they were offered only like-for-like funding they could not re-establish their business or get their livelihood going again. They went into serious arrears and were threatened with the loss of their home because they could not pay the mortgage. Surely that is unacceptable and needs to change.
Mr Lammy
I am grateful to the hon. Gentleman for giving way again. His point about new for old is incredibly well made.
There are many small business owners in areas that have experienced riots. I think of my area in particular, which is unfortunately one of the few areas of the country to have experienced two riots in a generation. Those small businesses are under-insured because of the cost of insurance, which is because those areas have had riots. Unless we want such areas to be completely boarded up, like cities in the States such as Detroit, we ought to think carefully about consequential loss. We should not place further insurance burdens on the private sector. After all, the fact that a riot has occurred is not the fault of a business.
Julian Knight
Does my hon. Friend hope, as I do, that if the Bill moves forward today it will encourage the industry and the Association of British Insurers to engage further with business owners and make them aware of such things as business disruption cover? In addition, they could make them aware of the Bill’s provisions.
Mike Wood
That is precisely what I have been calling on the ABI and other insurance bodies to do leading up to today’s debate.
I turn to the Bill’s provisions on a riot claims bureau. It sets out that the Secretary of State may assume responsibility for managing riot compensation claims. That is appropriate if rioting spreads across more than one police force area, as it did in 2011. It may also be appropriate at the request of a local policing body, particularly in one of the smaller police force areas, should the volume of compensation claims prove challenging to manage and be beyond its capacity. It is not about taking away local policing bodies’ financial autonomy. It is merely about providing capacity, consistency and additional oversight where necessary.
Mr Steve Reed
I am grateful to the hon. Gentleman for being so generous with his time. He mentions compensation being paid to victims. Is he aware that when local communities came together to raise and distribute funds to support businesses, families and individuals who had been financially affected by the riots, those funds were then deducted from the more official compensation payments? Does he agree that that was completely wrong and went against the intentions of people who generously donated to help their fellow citizens recover from the terrible circumstances in which they found themselves?
Mike Wood
I would certainly hope that money raised to support local communities would be used for that purpose. Of course, we would want to avoid double compensation, with damages being repaid twice so that people were not just put back in an equivalent position to before the riots but received additional payments on top of that. I do not think that that would be appropriate. I do think that after a riot money should be retained more at a community level and invested in rebuilding community cohesion.
The structure of a riot claims bureau would include, in its running and financial decision making, a role for a police and crime commissioner or equivalent, or their designated representative, as well as insurers and loss adjusters. The Bill would allow local policing bodies to place the day-to-day management of claims into the hands of experts in the loss-adjusting profession. That is clearly a better alternative to expecting police forces to retain such responsibility in-house. Companies already have the capacity available to manage major insurance-related incidents, as has been seen in their response to major weather-related events. Moving responsibility for the management of the process to those who understand it best would allow police and crime commissioners to utilise fully industry experts, while retaining full control of the financial decisions for which they are democratically accountable.
The Bill provides, for the first time, cover for some motor vehicles. Understandably, motor insurance and damage to motor vehicles was not considered in the 1886 Act. It is time, nearly 130 years later, to address that. Most insurance companies cover riot damage in comprehensive motor vehicle policies, the type held by the overwhelming majority of the country’s motorists. The Bill would not seek to replace that coverage. The intention is to provide compensation for motorists not covered by comprehensive insurance. Where the vehicle is held in accordance with the law, it would be covered under the Bill: it would cover third-party claims that meet basic minimum legal requirements for insurance, or vehicles that are exempt from requirements for insurance.
Kevin Foster
My hon. Friend is being extremely generous in giving way. Does he agree that part of the reason for updating the legislation is to address its core purpose, which is to compensate those who might lose their business and equipment? In the modern era, as opposed to 1886, many people will have their tools and their business based in a motor vehicle.
Mike Wood
My hon. Friend is absolutely right. In fact, I wonder if he has read the next passage of my speech. The Bill is indeed about creating a safety net not only for vulnerable people but small businesses and the self-employed.
The purpose of the compensation scheme is not to pick up unlimited bills related to criminal activities, but to provide a vital safety net. We should recognise the serious implications for communities recovering from major public disorder. They include many of my constituents who work in Birmingham and were affected by the 2011 riots and earlier riots. It is the role of Government to protect the most vulnerable and ensure they are not unduly disadvantaged, whether at home or operating their businesses. It is not reasonable to expect a statutory compensation scheme backed by the taxpayer to provide the same coverage as insurance for which one pays considerable insurance premiums. Since 2011, the Government have done significant work on the causes and effects of the riots, but it would be wrong to hand over millions of pounds of public money to individuals and businesses that should have insured themselves against losses, and likewise, insurance companies that benefit from the premiums paid by millions of households every year should not expect the public purse to indemnify them against limitless losses.
The Bill would allow for a balance between the responsibility of the police to maintain order and the responsibility of the Government to protect the vulnerable and make adequate provision for insurable risks. It would retain the principle that the police are responsible for maintaining order, provide that local accountability remains in place and ensure that communities have the right mechanisms in place to recover quickly from serious disorder. It seeks to make an outdated 19th century Act relevant to the world in which we live, and to create a fairer, faster and more affordable system. I commend it to the House.
Dr Huq
Thank you, Madam Deputy Speaker. I will continue.
Now the place is half the size and split into two units, although the takings are thankfully back to normal. As my hon. Friend the Member for Croydon North said, further follow-up financial support should be considered at local government level. I have not found any measure proposing that in the Bill, although perhaps I have not looked at it closely enough. Ealing council’s panel report said that larger sums were available in subsequent phases—£157,426 of allocations in total.
I accept that the problem with these sort of events is that they are unforeseeable. Nobody would have guessed on 7 August that this would have happened by 8 August: these things occur out of the blue. We are living in a time when local government budgets are being squeezed like never before, so I would be interested to hear how this Bill fits with local government provision. Ealing is losing £96 million in this parliamentary term.
Clause 8 sets the limits for damages at £1 million, as the hon. Member for Dudley South described. Disappointingly, however, subsection (2) states that the
“compensation must reflect only the loss directly resulting from the damage”
to the property and
“not…any consequential loss resulting from it.”
That is disappointingly short of what Ravi and others said would have made a real difference. Perhaps in extreme cases such as these, an agreement could be reached with the insurers for a limited amount more. It need not all come as a burden to the public purse, as some allowance could be made for special cases.
Mike Wood
I certainly understand the hon. Lady’s point on behalf of her constituent, but will she recognise that the independent reviewer specifically considered the issue and concluded that extending the scope of the Riot (Damages) Act 1886 to cover consequential losses would be a step too far currently and might leave the door open for far greater liabilities?
Dr Huq
I thank the hon. Gentleman for his intervention. I would feel happy if this issue were addressed to some limited extent. One would expect the Association of British Insurers to be on the side of the insurance industry, but it has found this aspect left wanting in this legislation—it could perhaps be explored at future stages.
Mike Wood
I strongly agree with what the right hon. Gentleman is saying, but does he recognise that the key part of this Bill, putting the riot claims bureau on a statutory footing, will address exactly the kind of issues that he identifies, such as the unnecessary and unacceptable delays in getting the money that is needed to the people who are trying to rebuild their lives and their businesses?
Mr Lammy
The hon. Gentleman is right, of course. The riot claims bureau will be a step forward, but let us be absolutely clear about it. It sounds good, does it not, the riot claims bureau? We get the sense of bureaucrats hard at work somewhere in the Home Office as we speak. No one is staffing the riot claims bureau as a result of the Bill; I suspect it will be brought together rapidly in the event of a riot.
It is important to ensure that the expertise and knowledge are present, that there have been practice exercises and that there is understanding of the sorts of communities that experience such things. There must be a sense that we must put small businesses first on these occasions, because often the big businesses can defend themselves. Members might remember from the riots the atrocious behaviour of the head of JD Sports, who said that it was great that people were breaking down windows to grab trainers because it showed how important his products were. I would suggest that that chief executive can defend himself, but he was in a very different position from those on the high street.
I pay tribute to Sir Bill Castell, chair of the Wellcome Trust and one of the great industrialists of our country. He was chair of the High Street Fund, which did so much to support small businesses across the country. I will never forget Sir Bill ringing me up just a day after the riots, determined to make a difference and to bring big business together to support small business and to bring those funds to individuals. I will also not forget Bill’s consternation that months later funds had not been paid out under the Riot (Damages) Act and that when those funds were paid out, despite the fact that the High Street Fund was a charity relying on contributions from big business, they were discounted against that money. I say to the hon. Member for Dudley South, will we see that happen again?
In these circumstances, when there is philanthropy and charity and when human beings come on side and say that they will support somebody, that should not be discounted against the obligations of the state. We should not be saying that it is for charity to pick up the tab and reduce the burden that we all face as taxpayers when consents break down in this way. I know that Sir Bill felt very strongly about that and I hope that we might get an answer about what will happen in the future in this regard.
I come back to the point about the expertise. Will the bureau have the expertise? How many people will staff it? How will it be brought together? How will it be different from the patchy performance we have seen? For example, I understand that the police in Manchester performed quickly and were able to pay out quickly, although they had a smaller group of businesses involved, whereas the Met were woefully slow in paying out. That led to the then Leader of the Opposition coming to the Dispatch Box during Prime Minister’s questions and asking when businesses would receive their funds. He did that well over a year after the riots—the Met’s performance was that poor. It is important to understand what the bureau will look like and to make sure that it is not just a fancy name, but will work effectively.
I come to the role of loss adjusters. The hon. Gentleman is right that new-for-old compensation will mitigate some of the insensitivity that so many business owners said they experienced as they were quizzed about the age of their products, whether they were sure those products were in the premises, where they were in the building, why they could not get into the building, why their English was not good enough to fill in a form, and so on. I hope new for old will lead to a better system.
In these circumstances there should be a loss of earnings component. If we were able to pay out relatively quickly, the loss of earnings component would be reduced, which was not the case last time round when the process was so poorly handled. Many of us may not be here for the next set of riots in our country. I hope we are not here—I hope it is that far away—but if the claims process goes on for a long time, there is a terrible loss of earnings for small businesses. I can think of a wonderful mechanic’s business that was burned to the ground. It sat next to the iconic Union building in Tottenham that was also burned to the ground. I think of the wonderful Cypriot owner. He came to see me, devastated by the flooding and destruction of his family business. The road was shut off, the building next to it had been burned down and it was months before he could get into his business premises. He had a heart attack. He was laid low at home, panicking about the pressure of finance and money. I will remember that man and his family for the rest of my life. So I believe that loss of earnings should be a component of the compensation. Consequential earnings are also fundamental when the state breaks down in this way.
The cap of £1 million is right and totally understandable. It is important, though, that that cap is sufficiently high to compensate the vast majority of businesses. I think that that probably is the case, but I would like reassurance that it is index-linked and will rise. It is £1 million today, but what will it be in 50 years or 100 years? In areas of the country that are fragile, where there is deprivation or pockets of deprivation, we must not scare big business away because it fears that it would not be adequately compensated in the event of a riot. We must not do what has happened in other parts of the world, particularly the United States. It is important that private insurance is available for larger businesses for which, if they were to suffer a loss, it would be substantially more than £1 million.
It is easy to see how a relatively small business with stock could lose more than £1 million over several months in the circumstances. I am a little bit nervous about what the effect of the cap may be and whether it will harm regeneration and the prospect of those communities moving forward towards prosperity through regeneration. On the whole, people do not tend to riot if they have a job and a mortgage, but in parts of the country that cannot always be guaranteed, so it is important that big business is there, small business is supported, the £1 million cap is not too low, and that we are sure the insurance industry will provide support beyond that £1 million.
We need to be clear that under-insurance is common in the kind of communities that saw rioting in 2011 and communities where riots have historically taken place in this country. Because of the delicate margins with which businesses operate in such communities, there is often under-insurance. It was the people who were under-insured who paid the heaviest price last time round. They were able to claim from the High Street Fund, but that was discounted down the line. They were the ones who found it hardest to get payments under the Riot (Damages) Act in good time.
The 42 days feels like a long period. People know the riot has happened to them. They must know that there is some means of compensation. People say that on the news, but it does not reach them because they are in shock, because everything they own has been burned to the ground, and they have no paperwork, they have no ID, they do not know who they are. This is not just about shops; it is about homes as well. I am worried about the 42-day period. I can think of many constituents who would not meet that.
Kevin Foster
My hon. Friend makes a strong point. That partly reflects the change of era. There was terrorism in the 1880s, but its impact was very different from what a Semtex explosion would do today. The nature of terrorism has changed so greatly, as we saw in the recent attacks in Paris, with the use of automatic battlefield weaponry. In 1886, an automatic weapon was a Gatling gun, which needed a crew to operate it. Sadly, today’s automatic weapons can be carried quite easily. It is therefore absolutely right that we update the legislation. We should give the Bill a Second Reading and then in Committee look in detail at how we can make it suitable for the modern era. On political activity, for example, were the recent events at the Cereal Killer Cafe a disturbance or a riot? My hon. Friend sums up the issues perfectly. In Committee we will look in detail at where we should draw the lines, using modern language, not language that was suitable in the late 19th century.
It is also worth dwelling on the fact that the current legislation—it seems laughable to describe something from the 1880s as current—means that there is strict liability on the police. As has been mentioned, the areas that have been affected by rioting tend to be those areas that rely most on their local police force. If the local police force ends up picking up the bill for a very large amount of riot compensation, ultimately that is likely to be paid for either by putting additional taxes on communities that are least likely to be able to afford them, or by cutting police provision, and that would be in an area that had just suffered rioting and might therefore require more police provision. I respect the Government’s intervention after 2011 to prevent that from happening, but that is not guaranteed for the future. That is another reason why it is vital to update the legislation so that it is not just one community taking the risk.
As we heard in an earlier speech, some police forces could be bankrupted by a large-scale riot that affected particular commercial interests in their area. That is just not a sensible position to be in. That could also act as a disincentive to have economic activity in the local area. If we know that for some reason there might be a public order disturbance—even a once-in-100-years scenario —and that a particular economic interest could be damaged or destroyed, we would know that ultimately we might end up copping the whole bill for compensation. A review of that situation is long overdue.
Therefore, I also think that it is right to include the £1 million cap. Statistics from the House of Commons Library suggest that about 99% of claims made in 2011 would be covered under these proposals. To be clear, this will not be denying justice to thousands of interests; it is about having fairness between the large interests that are the most able to protect themselves and the smaller interests that find it the most difficult.
Mr David Nuttall (Bury North) (Con)
I draw the House’s attention to my entry in the Register of Members’ Financial Interests. I hope that none of the properties I own is ever affected by a riot, but that is a theoretical possibility.
I rise to speak briefly in support of the Bill. I congratulate my hon. Friend the Member for Dudley South (Mike Wood) on introducing it this morning. It is a pleasure to debate a Bill that does not seek to add further cumbersome regulations or which creates more problems than it seeks to solve.
We have heard a lot about what happened in London in 2011, but, as the right hon. Member for Tottenham (Mr Lammy) mentioned, Manchester and Salford were also affected by riots in the summer of 2011. In August 2012, it was reported that Greater Manchester police had paid out £442,000 for uninsured claims and £584,000 for insured claims under the Riot (Damages) Act 1886. It was a very big story locally. The right hon. Gentleman mentioned JD Sports, which has its headquarters in the borough of Bury. It was one of the companies affected when its store in Manchester was looted.
As hon. Members have said, the riots demonstrated the need to look again at the 1886 Act and to update what is widely accepted to be archaic and out-of-date legislation. While updating it, however, we will still maintain the principle that as the police are responsible for the maintenance of law and order, they should be liable if law and order breaks down and a riot breaks out. The Kinghan review, which was set up to look into how the 1886 Act could be improved, decided that maintaining such a statutory principle was the best way forward, but we could have provided for these losses to be dealt with as losses for uninsured motorists are dealt with through the Motor Insurers Bureau. I agree that we should maintain the existing principle from 1886.
The legislation has to deal with the competing interests of taxpayers, whom the Government want to protect by restricting the amount that is paid out, and uninsured businesses and individuals, who need to be protected when they are affected by loss. It makes absolute sense in the 21st century that the legislation should cover vehicles.
I agree that there is a simplicity in having a cap on claims of £1 million, but the amount needs to be kept under review. We do not want to think in 40 or 50 years’ time, “Oh dear, we should have reviewed that £1 million limit because it is woefully inadequate.”
Mr Nuttall
My hon. Friend is right that that ability is written into the Bill, but it requires the Government to take a proactive approach and make use of it.
Mike Wood
With the leave of the House, I would like to thank right hon. and hon. Members from both sides of the House for the positive and constructive points they have made in the debate. I will certainly reflect on those points, and I look forward to discussing them in more detail should the Bill proceed.
Given that the debate has already run for rather longer than I expected, I will not repeat the important points that have been made in the debate and in my right hon. Friend the Minister’s response to it, except to say that we all pray that the measures in the Bill will not be needed, but we must never allow hoping for the best to prevent us from preparing for the worst. I hope that Members will support the Bill, and I commend it to the House.
Question put and agreed to.
Bill accordingly read a Second time; to stand committed to a Public Bill Committee (Standing Order No. 63).