Children: Contact with Fathers
Lord Freud Excerpts(10 years, 11 months ago)
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Lord Bates
To ask Her Majesty’s Government what assessment they have made of the finding by the Centre for Social Justice that around one million children in Britain grow up with no contact with their fathers.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, the Government’s commitment to supporting strong and stable families was most recently set out in our Social Justice: transforming lives—One year on report. Families are the bedrock of our society and the Government’s commitment to parental involvement in their children’s lives where this is practicable and safe is clear. This Government are rightly taking action, both to help families stay together and to support an ongoing relationship between parents and their children where breakdown is unavoidable.
Lord Bates
I am grateful to my noble friend for that Answer. Does he accept that this report confirms that the absence of a father figure in a child’s life results in a child being statistically less likely to achieve higher educational outcomes, more likely to encounter the criminal justice system, more likely to have health and emotional problems, to have a higher chance of teenage pregnancy and to be more likely to suffer from severe economic disadvantage? As we approach Father’s Day this weekend, will my noble friend reaffirm the vital role that fathers have to play alongside mothers in raising their children? Should he be in search of an appropriate gift for Father’s Day, I point him in the direction of the manifesto commitment to introduce a married couples’ tax allowance.
Lord Freud
My Lords, I congratulate my noble friend on the alacrity with which he has asked this Question, because I do not think that the CSJ has yet published the report, so I cannot respond in detail on what is in it. Clearly, however, the coalition agreement contained the transferable tax allowance. That remains the Government’s intention.
Lord McConnell of Glenscorrodale
My Lords, a lot of us are confused as to what has happened to the Prime Minister’s big society initiative. It seems that this is an area in which that initiative could find some traction. Will the Government look at the role model of grandparents to address some of the challenges in our society and at engaging grandparents as role models for young children whether they are in single-parent families or not? Those role models could teach young children an awful lot indeed.
Lord Freud
Yes, my Lords. There is huge value in the role of grandparents. One of the encouraging things in a project in which I have been involved is how enthusiastic retired people are in mentoring youngsters—particularly youngsters making that difficult transition to adulthood. There is a lot that older people can contribute.
Baroness Benjamin
My Lords, childhood lasts a lifetime, and far too many children are growing up as victims of family breakdown and lone-parenting households, which appears to be leading us towards a catastrophic social meltdown unless urgent action is taken. Does my noble friend agree that part of the solution is to encourage even more men to become primary school teachers and role models to the thousands of children who are growing up without any male influence in their lives, and put an even greater emphasis on the teaching of relationship, parenting and social and life skills in schools?
Lord Freud
Well, my Lords, there being very few males in primary schools is an important point, although clearly one off my brief. It is a valuable point which needs to be looked at.
Lord Elystan-Morgan
Does the Minister accept that for every case where a man is deprived of access by the courts to his child, there will be at least 20 cases where a father has no interest whatever in the upbringing of those children? Whereas no human agency can force a man to love, respect and be responsible for his children, it is nevertheless a human tragedy of such immense proportions as to demand the urgent action of government. Is there a specific plan that the Government are prepared to consider, and will they consider giving it ample and adequate resources?
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.
Baroness Knight of Collingtree
My Lords, referring back to the question about grandparents, does not my noble friend agree that it will be no use relying on grandparents in a few years’ time? Bearing in mind that the non-mixing and matching of parents, such as we have had in the past, is now disappearing, we will not be able to rely on a grandparental relationship when that extends to that generation.
Lord Freud
My Lords, one thing that happens today which has not happened so much in previous generations is that we have much more complex family networks, with in-laws and step-parents around. It is a more complicated position, but I suspect that it is possible to form relationships at both the parent and grandparent level, even if that is more complicated than it has been.
Child Support and Claims and Payments (Miscellaneous Amendments and Change to the Minimum Amount of Liability) Regulations 2013
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Lord Freud
That the Grand Committee do report to the House that it has considered the Child Support and Claims and Payments (Miscellaneous Amendments and Change to the Minimum Amount of Liability) Regulations 2013
Relevant document: 2nd Report from the Joint Committee on Statutory Instruments
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, this instrument was laid in draft before the House on 20 May 2013, and I confirm to the House that I consider it as being compatible with the European Convention on Human Rights.
The minimum amount of liability, more commonly known as the flat rate, is applied to non-resident parents whose gross weekly income is more than the flat rate itself and less than £100 per week. It also applies to all non-resident parents who are in receipt of certain prescribed benefits. The flat rate was set at £5 in 2003 and has not been uprated since. The Child Maintenance and Other Payments Act 2008 made provision for increasing the flat rate of child support for cases dealt with under the rules of any scheme established under the terms of the Act. The change has yet to be brought into force.
The increase provided for in the 2008 Act was from £5 to £7. However, because the 2012 scheme launched as a relatively small-scale pathfinder when it began on 10 December 2012, technical changes were applied to the 2012 scheme calculation regulations to ensure that the flat rate remained at £5. The flat rate for the 2012 scheme will remain at £5 for the duration of the pathfinder and will increase only once the 2003 scheme closes to new applicants. This is to ensure that all new cases will be subject to the same flat rate, regardless of whether they are directed to the 2012 scheme pathfinder or the 2003 scheme.
It is intended that the increase to the flat rate made by the 2008 Act will be brought into force later in the year, when the 2012 child maintenance scheme is opened to all applicants. This instrument makes certain consequential amendments as a result of that increase. The policy intention behind the increase is primarily that the value of the flat rate should be restored to its 2003 real value. This will reinforce the principle that parents have an obligation to support their children where they have the means to do so.
At £7, the increased flat rate will represent broadly the same value as the £5 flat rate when it began. For example, when the flat rate was introduced in 2003, £5 represented 9% of the benefit of a single person over 25 years of age on jobseeker’s allowance. The annual uprating of benefits has meant that the same £5 represents just 7% of the benefit of a single person over 25 years of age on jobseeker’s allowance. A flat rate of £7 represents 10% of the benefit of a single person over 25 years of age on jobseeker’s allowance, restoring the value of the 2003 flat rate.
The proposed flat-rate increase will also amend the percentages applied to the reduced rate of child support maintenance payable if the non-resident parent has an income of less than £200 but more than £100. This will mean that the maintenance liability of parents on the reduced rate will increase in order that the reduced rate continues to smooth increases in liabilities between the flat rate and the basic rate, which is used for those parents earning £200 or more. The Government are also committed to a wider review of the child maintenance calculation formula, with a particular focus on work incentives, once we have delivered the current raft of reforms.
The regulations before us also make miscellaneous amendments in relation to variations, which are those rules that allow for a deviation from the usual child maintenance calculation rules in certain limited circumstances. A variation could increase or decrease a child maintenance liability. For example, if a parent receives unearned income from property, savings and investments or casual earnings, this could increase their liability. On the other hand, if they incur special expenses, such as the cost of travelling to see a child, or boarding school fees, this could reduce their liability. I should make it clear that the changes contained in these regulations affect only those variations that increase liability.
The 2012 scheme is designed to work with historic income information obtained annually from HM Revenue and Customs. The changes proposed will allow that, where the information cannot be obtained electronically from HMRC, we will be able to determine unearned income by reference to information supplied by the parent in relation to the most recent tax year. This change will make for a more efficient means of obtaining reliable unearned income information and therefore allow for a more accurate calculation of maintenance liability.
In addition, the amendments will clarify that where a variation would decrease a non-resident parent’s income for child maintenance purposes to the point that their liability would fall to below the flat rate, even if the variation is agreed, the amount of maintenance that the parent will be liable for will none the less remain at the flat rate. This is in order to strike a balance between reducing liability to take account of special expenses and ensuring that children continue to benefit from some financial support. It puts children first. This will also ensure consistency between a non-resident parent who has their maintenance reduced to the level of the flat rate through a variation and a non-resident parent on the flat rate. A non-resident parent in the latter situation cannot apply for a special expenses variation.
As has always been the practice throughout the development of the 2012 scheme regulations, we have undertaken extensive stakeholder engagement. The proposed increase to the flat rate was subject to a formal consultation in 2011, and stakeholders made it clear that they believe that an increase in the flat rate to £7 is warranted. We have met stakeholder groups since that consultation, and on careful reflection we are persuaded by their arguments and have decided that the flat rate should increase to £7. We will closely monitor the regulations, along with other child maintenance policy changes, to ensure that all the activities in the new 2012 scheme are delivering the intended outcomes.
I hope that that short opening speech reassures the Committee that the changes we have proposed are sensible ones that have been developed with the aim of delivering an efficient statutory child maintenance system. These changes will ensure an appropriate increase in the amount of maintenance flowing to children. They will also make for a more efficient and accurate variations regime. I commend the instrument to the Committee.
Baroness Sherlock
My Lords, I thank the Minister for his introduction of these regulations. We could hardly oppose provisions enabling the increase in the flat-rate maintenance amount from £5 to £7, as they flow from the 2008 Act, which was the legislation of the previous Government. The Government were right to listen to stakeholders and to draw back from their original intent of increasing that to £10. As the Minister has indicated, the £7 figure will keep the amount at about 10% of the basic over-25s JSA rate, and the increase should therefore mean more money for children.
I understand from both the documentation and the Minister’s introduction that the regulations are not intended to come into force until the introduction of the 2012 scheme, so the utilisation of gross income in the calculation is used “for all purposes”. Perhaps the Minister could clarify that; otherwise I will have to read the record to see when exactly this is going to come into force. Is it intended to refer to the time when the 2012 scheme is open to all new applicants or the time when the 2012 scheme will have replaced the 1993 and 2003 schemes? If the latter, could he clarify now when the Government expect that to take place?
We have also heard that the regulations cover other “consequential” matters. As the Minister indicated, one of these is the revised rate calculation that applies where the non-resident parent has income of between £100 and £200. The rates in the regulations are lower than those provided for in the 2012 regulations, and perhaps the Minister could explain why. I imagine that it relates to the effect of raising the flat rate but it would be helpful if he could confirm that, as well as setting out the impact on the levels of child maintenance liability for non-resident parents earning between £100 and £200. I would be grateful if he could give some indication of the range of changes—what is the smallest and largest amount by which the future liability will differ from the past? That would give us an indication of whether they are indeed large or small in their impact. I would also be grateful if the Minister could confirm what would happen to someone earning precisely £200. Is there any danger of a cliff-edge when someone moves from below £200, where the reduced rate applies, to £200 where the standard rate will apply?
Lord Freud
My Lords, before I aim to answer most of those questions, it is worth briefly reflecting on where we are with the rollout of the 2012 scheme. As the noble Baroness said, we began a pathfinder in December which was open to new applicants with four or more qualifying children. That has allowed us to micromanage each case so that we are confident that our system and processes will work as we intend. As the noble Baroness will know, we are adopting that structure with all of our reforms so that we are really able to see what happens as we take each person through. By definition, in the early weeks, numbers are intentionally small. We are monitoring and observing the results of that pathfinder so that when we open it much more widely it will work efficiently. I know that the noble Baroness will be as keen as I am for all those systems to work smoothly when we do them in volume.
The timing is that we will open to new applicants with two or more qualifying children—in our jargon, Commencement 2—later in the summer. We will move to all new applicants—in our jargon, Commencement 3 —by the end of 2013. It is at that point that we will increase the flat rate of maintenance. As part of our wider reforms, we are making good progress in implementing the help and support for separated families initiative.
In November 2012, we launched the Sorting out separation web app, which directs people to information and support on the range of issues that they will face after separation. We have also launched the Help and Support for Separated Families mark, which helps parents identify the organisations that they can trust to help them work together; and an innovation fund, which will test and evaluate interventions designed to help separated parents work together and reduce conflict. The first contracts in this fund have recently been awarded to seven voluntary and third-sector organisations, and will give around 280,000 separated families creative and targeted help to collaborate in their children’s interests.
Last month we tabled a Written Ministerial Statement outlining important changes to child maintenance reform. As well as the announcement of our intention to use the £7 rather than the £10 flat rate for the non-resident parent, we announced a reduction in the proposed parent-with-care collection fee from 7% to just 4%. Both changes were the product of an extended period of consultation and reflection, and we have been at pains to ensure that our changes are seen to be fair to both parents. On the outstanding question of how the £100 and £200 figures work together, the reason for the different rates is that they are on top of a different basic amount. The calculation is done not as a pure calculation but on flat rate-plus. There are some variations, but broadly it comes out at much the same level. Let us take the example of a non-resident parent with one qualifying child and no other relevant children and put them in the middle of the range at £150. The current rate would be £14.50, which is the £5 flat rate plus 19% of the £50. That comes out at 9.7% of their gross income. Moving to a flat rate of £7, the same person would pay £16.50, or 11% of their gross income. That is how the sum works. It is impossible to absorb these sums verbally, so I would be very happy to lay them out in a letter to the noble Baroness. That would make them clearer—but broadly, that is one effect.
The noble Baroness asked a very subtle question about the difference between £199.99 and £200.01. There is no cliff edge there. There are quite a lot of factors, and some little bumps here and there. Again, the easiest thing would be for me to write with a few examples so that the noble Baroness can study them on paper. However, I can say that the structure is relatively smooth and that certainly there is no cliff edge. On how widespread we are expecting this to be, where there is a glitch in the system and, for whatever reason, we cannot get a particular piece of information, we are ensuring that there is another way through. We are not anticipating large volumes on this, but one has to have it as a baseline defence. Clearly, this is a different system to RTI. This system was created rather before universal credit was a gleam in anyone’s eye. We do not have this monthly process which UC depends on. It is a different annualised process. It will be up to a future Government at some stage to look at whether it makes sense to use similar systems. However, there is no relationship whatever between the systems under UC and this.
I have dealt with all the specific issues and look forward to getting some interesting tables in a letter to the noble Baroness. I hope that today’s discussion reassures noble Lords that the changes that we have proposed are sensible and have the aim of delivering an efficient statutory child maintenance system. They will ensure an appropriate increase in the amount of maintenance flowing and will make a more efficient and accurate variations regime. I therefore present to you a set of regulations which, if approved by noble Lords, will come into force when the 2012 scheme opens to all applicants later this year. I beg to move.
Homeless People: Night Shelters
Lord Freud Excerpts(10 years, 11 months ago)
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Lord Alton of Liverpool
To ask Her Majesty’s Government what provision they are making for homeless people left without access to night shelter provision following the Anglesey judgment on housing benefit and the funding of night shelters.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, local authorities are best placed to make local provision for homeless people and have been allocated £470 million from 2011-12 until 2014-15 to prevent homelessness and tackle rough sleeping.
Lord Alton of Liverpool
My Lords, if there were no material changes in the Government’s regulations concerning night shelters, why are homeless people who were in shelters now on the streets? In the light of the Anglesey judgment is there not an urgent need for the Minister to issue new guidance to close a revolving door which has sent vulnerable people, many of whose lives were, in any event, in freefall, back on to the streets, sleeping rough on park benches or in shop doorways or seeking hospital beds, and which in Salford precipitated the closure of Narrowgate, the only night shelter serving Manchester and Salford, which has, in the past, helped more than 2,000 people? To protect the homeless, do we not need to rapidly hammer out a humane and just solution, with new guidelines issued to local authorities and to charities working with the homeless?
Lord Freud
My Lords, clearly homelessness is a priority of this Government and we are putting a lot of resource into prevention. The most important area in which we are doing that is the No Second Night Out policy, which is proving very successful and is being run out across the country this year. This is an isolated example of how particular shelters are funded.
Lord Roberts of Llandudno
My Lords, how much consultation was there before this judgment was put into effect? Following the point of the noble Lord, Lord Alton, who has done tremendous work in this area, is it not time that we issued clear, simple guidelines? Will the Minister write to every local authority explaining that not only have benefits been paid in the past but, in spite of the judgment, they can be paid now and that no one need lose their place in a night shelter?
Lord Freud
My Lords, the actual finding was that a particular night shelter in Anglesey could not be treated as a dwelling because it was, basically, a converted hall. There was no reserving and the people there came on a first come, first-served basis every night. It was a particular finding which might apply to a few other places. However, that is about how local areas find the best possible funding for their support for homeless people.
Baroness Armstrong of Hill Top
My Lords, I declare my interests stated in the register. I know that the Minister understands that many homeless organisations are trying to move as many people as possible from hostel accommodation in to independent living. However, does he realise that that is now being put at threat because of the changes to the benefits system and, of course, the bedroom tax? In Newcastle, the local housing company has had to warn the Cyrenians, which is the biggest supplier, if you like, of work with the homeless, that it is coming to the stage where it will not be able to allocate any properties to the homeless because it will have to use them for people being transferred within their own estate.
Lord Freud
My Lords, that is clearly a very wide question and I find it hard to answer the specific point. On the point about hostels for the homeless, our best estimate is that there are about 9,000 bedrooms for people who are rough sleepers. A proportion of those may be affected by this particular provision. Authorities need to look at the other sources of funding, including the Supporting People programme, which received £6.5 billion in this spending review.
Lord Brooke of Sutton Mandeville
My Lords, can my noble friend remind your Lordships’ House how many spare bedrooms there are in the social housing sector and how many families live in overcrowded accommodation?
Lord Freud
My Lords, there are approximately a quarter of a million people living in overcrowded accommodation and 1 million spare bedrooms in homes lived in by people who receive benefits in the social rented sector.
Lord Avebury
My Lords, the noble Lord said that this was an isolated incident, but is he aware that local authorities are already cutting off housing benefit and that shelters are closing down? When will Homeless Link and Crisis have a reply to the representations that they made to DWP asking for an urgent clarification of this ruling?
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 Freud Excerpts(10 years, 11 months ago)
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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 Howarth of Newport
I am extremely grateful to the Minister for responding to the Committee on this point, which was the subject of an amendment that I tabled. As I heard him just now, he said that because historically no cases had turned up, in future employer’s liability insurance should not cover secondary exposure, even in a case where the secondary exposure occurred—I hope he agrees with this; I think the Committee agrees—to someone who did the family laundry and washed the overalls of the employee who was exposed to asbestos fibres and who therefore found herself exposed to asbestos and contracted the disease. Surely we cannot simply extrapolate from the past on the basis that there do not happen to have been any such claims. It is entirely imaginable that there could be such claims, and it is not enough, if I may say so, for the Minister to say simply that because it has not happened, the Government will make no provision for it to happen in future. We still have a class of people whose predicament is just as grave as the predicament of someone who was a direct employee. I hope that the Minister will be prepared to look further at this.
Lord Moonie
To follow up on that, was the Minister referring to claims or successful claims?
Lord Freud
I am not sure whether they are claims or successful claims. My understanding is that there have been no cases where there has been compensation. My interest today is obviously not to re-run the debate that we have already had. We will have another chance to do this. I just wanted to get this on the record for the convenience of Members of the Committee at subsequent stages.
Lord Browne of Ladyton
The noble Lord is generous with his time. I listened carefully to his words. If they were a direct quotation from what the Association of British Insurers told his officials, and therefore him, it said that it had no record of any claim of that secondary nature having been settled through the employer’s liability insurance, not no record of any claim having been settled. I ask the Minister to go back to the question: since the association clearly has comprehensive data, has it any record of claims having been settled? If so, through what form of insurance were they settled and—this is the important question—were the insurers and those who carried the risk the same companies that carried the risk for compulsory employer’s liability insurance in respect of the circumstances of the cases?
Lord German
Following that point, I will quote from a House of Commons document, Mesothelioma: Civil Court Claims, dated 22 March 2011. Under the section marked, “Claimants other than employees”, it reads as follows:
“In a number of cases, claims have been made by those, including family members, who have contracted mesothelioma following secondary exposure to asbestos. Each case is determined on its own facts”.
I dread to quote the following fact:
“For example, the Ministry of Defence admitted liability for the transmission of mesothelioma to Mrs Debbie Brewer, whose father died from small-cell lung cancer … after a career as a lagger at the Devonport Dockyard. He had greeted his daughter each evening whilst wearing dusty overalls from which she is believed to have inhaled the fibres that caused her disease”.
It goes on to cite another case. There have obviously been some cases. The one I have quoted admittedly has the Government as the employer, but there is one involving another company further on.
Lord Freud
My Lords, I am grateful for those observations. I am sure that we will have a chance to discuss this in more detail later. I now move to—
Lord Wigley
Before the Minister moves on, is he not going to respond to the point made by his noble friend, who has shown that there were cases, which is totally at variance with the lead the Minister gave to the Committee?
Lord Freud
My Lords, we could spend all day on one point. I am just trying to get a response on the record. We will have another chance to go through this again. I was making a clarification.
I turn now to the query of the noble Baroness, Lady Sherlock. When discussing the proposed start date of eligibility for this scheme, we talked about insurers being able to reserve against that liability from that date. The noble Baroness drew attention to the fact that the levy will be an annual running cost, not a liability to reserve against. She is of course correct: the payment is not the same as a liability. However, the impact is much the same. The levy is an additional cost to insurers that needs to be factored into their business plans. To do this, they need to have confidence in the timing and amount of the cost to be incurred. Therefore, on 25 July 2012, when the intention to set up a payments scheme was announced, this provided a sufficient level of confidence for insurers to start to factor the levy into their business plans for 2014. I ask the noble Baroness’s forgiveness for my incorrect use of terms, and for her recognition that this does not change the shape of things in this case.
Baroness Sherlock
My Lords, I thank the noble Lord for taking the trouble to look into that and for the gracious way in which he has acknowledged his error. Of course I am happy to forgive him for this and for any similar offences. However, can he reflect for a moment on the consequences of the change? Although I confess to a tendency to pedantry, on that occasion I do not think I was simply being pedantic. I was trying to draw a distinction between whether the matter was a liability for which the insurance company would wish to reserve or a running cost for which it would have to plan, because I understood that the Minister had used the fact that an insurance company would not be permitted to reserve before a certain date as an argument for why the scheme could not start before 25 July. Had that been the case, I would imagine that no such restraint would exist in the case of planning for a payment. An insurance company can plan for a future level of running costs based on its own judgment, not on any auditing limitations. Will the Minister respond to that?
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 Avebury
That takes care of the disincentive to bring claims to the First-tier Tribunal that have no merit, but what about the claims that do?
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 Howarth of Newport
My Lords, I am very grateful to the noble Lord, Lord German, and to my noble friend Lord McKenzie for their precisely focused and apposite questions. I am also grateful to the Minister for what he has said in response to this debate, although I wish he had not set up an Aunt Sally in misrepresenting both my amendments, because I was very careful to include in the wording of each amendment that it was only reasonable legal costs that I contemplated should be met in these ways.
Lord Freud
Let me apologise for any misrepresentation that I may have inadvertently made.
Lord Howarth of Newport
The Minister is so engaging as he apologises that of course it would be churlish if I did not immediately say yes. I think it would be helpful if at some stage he would also elaborate on the circumstances in which the ECHR exception to the disqualification for legal aid might apply. Should we anticipate that people taking cases to tribunals would do so in pursuit of justiciable rights under the European Convention on Human Rights, because that could make a significant practical difference? I simply do not know the answer, but it would be interesting and helpful to have some advice.
The Minister did his best to defend his colleagues over the way at the Ministry of Justice, but when I inquired on Wednesday of last week when they expected to issue the consultation, I was told that it was going to be this week. He has just told us that it has slipped yet again to July. There would then be the consultation, and it is proper to allow a reasonable amount of time for people to respond to that. Finally, the Government’s response and determination of what they are going to do is not expected until the winter. That is a fairly elastic target.
I am worried that the MoJ might be holding things up so that mesothelioma sufferers and their families will be prevented from getting the benefits of the scheme as soon as they might. While we as parliamentarians seek to scrutinise this legislation properly, we are anxious to give it the speediest possible passage through Parliament. It would be rather sad and ironic if, because of the lumbering pace at which another department moves, it was not possible to get the whole scheme up and running as early as it otherwise might be. I hope the Minister will convey these thoughts to his colleagues in the Ministry of Justice.
The Minister brought us the good news that legal costs will be paid on top of the 70% payment under the scheme. That makes me very happy, and on that basis I beg leave to withdraw the amendment.
Lord Freud
My Lords, I fully recognise that Amendment 19 is a probing amendment that would remove the possibility of the scheme making payments subject to conditions. It would therefore have the consequence that the recipient of a scheme payment would have full control over the use of the scheme payment.
Let me make the purpose of this part of the clause absolutely clear. In general, we fully expect that most scheme payments will be made to the applicant. This is for vulnerable people who might be mentally incapable of handling their own finances or who are unable to look after their own welfare by attending to basic financial transactions that adults normally carry out for themselves. It is important, therefore, that in those sorts of cases the scheme administrator is able to subject some payments to certain safeguards, such as how a scheme payment is to be used, and to decide when such conditions should be imposed.
We expect the scheme administrator to use this power to ensure that, where appropriate, payment is made to an appropriate person or fund to safeguard the beneficiaries’ interests. I am sure that the one thing on which we are all agreed in this Committee is that we want to avoid the recipient of a scheme payment having unsupervised control over the use of a large sum of money if they are incapable of managing such a sum. However, a number of valuable points are being made about the interplay between primary legislation and regulations, which we will take away and consider. Clearly, the rules are in draft and we will take the points made today as we look over them. With that assurance, I urge the noble Lord, Lord McKenzie, and the noble Baroness, Lady Sherlock, not to press their amendment.
Lord Avebury
Perhaps I may ask my noble friend why, if the only circumstances in which conditions are to be imposed are those that he has just outlined, where the recipient of the compensation is incapable of handling his own financial affairs, Clause 15 does not specify those circumstances and thereby reduce the breadth of the wording, which according to him is completely unnecessary.
Lord Freud
I take on board my noble friend’s point. As I said, I shall look at this and the other points made by this Committee. The rules are only in draft form, and we may look at them to lock that down.
Lord Browne of Ladyton
I am sure that the Minister will do this, but perhaps I may check that he will consider whether it would be better to reflect that restriction in primary legislation rather than allowing it to appear for the first time in the rules.
Lord Freud
I will look at that, but I remind noble Lords that primary legislation sets a framework, and what matters here is how the rules work. In this case, the rules that we have agreed will go before Parliament in the form of regulations, so there will be a chance for oversight of that issue. Therefore, it does not matter too much where we make sure that the matter is under control.
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 Howarth of Newport
My Lords, I am grateful to my noble friends Lord Browne of Ladyton and Lord McKenzie of Luton, and the noble Lord, Lord Avebury, for participating in the debate and for the excellent points that they have made. I will study with great care what the Minister has said and see whether I can elicit from his words a clear and acceptable set of principles that the department will apply here. He seemed to say that nothing must shake or disturb the existing ways of doing things, and I am not in the least bit surprised that he has said, in his characteristically courteous way, that my amendments are variously defective, subversive or would create chaos. I am an amateur in these matters and I have simply sought to raise the pertinent issues. Merely because my amendments may not stand up to the rigorous scrutiny of this Committee does not mean to say that the issues are not very important and worthy of continuing consideration as we reach the later stages of this legislation.
I agree with the Minister that the term “compensation” is a pretty slippery and rather sloppy one. It becomes a fairly sickly euphemism, not least in the context in which it is often used, where it refers to bankers’ compensation. Those are remuneration packages worth many millions of pounds, and one wonders what the bankers are being compensated for, other than the opprobrium in which they are held in society. I am with him in being cautious about the use of the term “compensation”. However, as my noble friend Lord McKenzie indicated, there may be difficulties in the Government seeking to have it both ways. We should consider further whether the normal rules that apply to compensation recovery, which are entirely legitimate and we do not challenge, can actually be laid over this particular scheme with its very distinctive circumstances.
I detect between the lines of what the Minister has said and from his tone that he wants to be as flexible, constructive and generous as he can be. In that case, we should certainly look further at the use of the mechanism of trusts. I completely accept that we should not take a sledgehammer to crack a nut and that it would not be sensible or appropriate to drive a coach and horses through the existing provisions of trust law in relation to social security benefits. However, it may be possible to harness those provisions to provide slightly more extensive alleviation. Whether, for example, the scheme might be able to provide a hand-out package, which is a trust ready for use that it would be easy for people to pick up and use, I do not know.
Lord Wigley
I am grateful for being curbed. I support the amendment. It will lead on to Amendment 32, which also addresses these issues, so I may come back to them at a later stage. It is immensely important that this body is seen and respected by those outside the industry as being at the very least impartial with regard to the way things will be conducted. It must have the confidence of the beneficiaries, their families and everyone else involved. This amendment, together with Amendment 32, which we will consider in a moment, needs to be taken on board, if not in this form of words then at least in a form of words that addresses what could be a weakness in the Bill.
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.
Lord McKenzie of Luton
That is fine. I beg leave to withdraw the amendment.
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 James of Blackheath
I will make one small comment about subsection (2) of the new clause proposed by Amendment 32: there are no longer any active insurers for asbestosis. You are really talking about the reinsurers. They are the people you should seek to have represented.
Lord Avebury
My Lords, I think the Minister said in replying to the previous amendment that when we came to this one he would give us some more information about the membership of the body that the industry proposes to establish. It would be very useful to know that, as it conditions the way we will think about monitoring and reviewing. Clearly, if the board established by the insurance industry contains people who have an association with that industry, the degree of intensity of monitoring and reviewing would have to be far higher than it would if the board were totally independent.
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 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 Freud
I thank the noble Lord and the noble Baroness for these amendments, which I understand are probing amendments. I am hopeful that I can give complete satisfaction on the matter. The intention of these amendments is to enable a person to apply for a payment under the Pneumoconiosis etc. (Workers’ Compensation) Act 1979, or under the corresponding legislation in Northern Ireland, after they have made an application for a scheme payment but before a scheme payment is made or where the application is unsuccessful.
One of the conditions of entitlement under the 1979 legislation is that a person has not brought any action or compromised any claim for damages in respect of a disablement, for example by issuing proceedings against a negligent employer or insurer, or by settling a potential claim out of court. The provisions of Schedule 2, which these proposals would amend, ensure that people who apply to the scheme and those who bring an action or claim for damages are treated equally under the 1979 Act. If a person is prevented from claiming under the 1979 legislation because they have made an application to the diffuse mesothelioma payments scheme, instead they may still be able to claim under the 2008 diffuse mesothelioma schemes established under Part 4 of the Child Maintenance and Other Payments Act 2008 and the corresponding Northern Ireland legislation.
Lord James of Blackheath
My Lords, the problems of the Navy in this regard persist for that service. An MoD meeting has been called for 10 o’clock tomorrow morning. Will the Minister be present at that meeting? It would be helpful to know that.
Lord James of Blackheath
I think it will be harder to make progress without the Minister. It seems to me that three very significant problems are emerging in any dialogue with the MoD at present, and they will not go away very easily. Each of them has been shadowed in the discussions this afternoon. For a start, of course, this is a compensation payment for a dying sailor. There is no argument about it. There is no way you can call it anything else. We are here talking of it not being a compensation payment and this gives rise to a total misunderstanding in the minds of the MoD people to whom I have been talking because they seem to think that what we have here is a great big government-funded handout that they can dip their hands in and have a share for their sailors.
Of course, the downside is that in saying no to them, we run the risk that this clever and inspired programme to force the compensation programme through for non-compensation payments will invite the dreadful comparison that the Government, who are concerned to prepare catch-up payments to all the sufferers of this disease for whom they can, should include responsibility for the Navy, which has deliberately discarded any responsibility for payments for people who are suffering similarly. I cannot imagine a more unfortunate juxtaposition.
The MoD has to understand that if it wants a solution to this problem, that must come out of its own resources. It cannot come from this scheme. When I first realised this, simply on the grounds that I did not know the answer I tabled my strange Amendment 47, which says that we have a problem for which we need an answer, and that we must find it when we get a sensible dialogue going with the MoD—which may or may not start tomorrow morning.
There are two other big problems with the MoD. First, it will have a hugely high percentage of what I call the household contamination problem. The sailors and workers will have gone home at night to their wives with their dirty washing from working in the boiler rooms of the intensely asbestos-lagged warships. We are going to have a huge problem of a different nature there.
Secondly, the MoD cannot run an insurance industry-based solution because it cannot insure its ships or people; that has to come from a different pot and a different source. It is absolutely unacceptable that we do not have a solution for the sailors in parallel with this, but it is not going to be compatible with this Bill. Forgive me for having put the clause in, which is completely wrong and irrelevant, but it really is a desperate call: we have got to have something instead. I want to put a marker down that the whole House must work towards this.
We must be totally intolerant of any fudge that does not give the Navy a fair deal. There are far too many affected persons out there. The way to get the MoD really interested in this is to threaten to write to the Queen and tell her how many of her crew of Royal Yacht “Britannia” have been killed by it. That will get the MoD’s undivided attention. I will continue to run that one.
I will withdraw my amendment as it stands, quite clearly, because I cannot run it here. I just wanted to leave it there for the moment. It is a hole into which I have got to get something put before we are through with this.
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 James of Blackheath
Can we have an indication by paw of who will be attending the meeting?
Lord Freud
The paw has been raised. I am more than happy to hold a meeting with the noble Lord after that meeting if he so desires.
Lord James of Blackheath
The noble Lord is taking a big risk in sending the best looking member of his staff to the Navy.
Lord Freud
The noble Lord must be very careful about making remarks like that. I think that we should strike them from the record.
The noble Lord was clearly referring in particular to those working in the boiler rooms of those three ships—HMS “Britannia”, HMS “Furious” and HMS “Albion”—a great many of whom would have been exposed to asbestos during the course of their service. We all in this Committee, I know, are deeply sympathetic to a tragic situation. However, as the noble Lord acknowledges, it is not possible for this Bill to be the solution for that, mainly because the MoD was not and is not covered by employer liability insurance. It would not be appropriate to raise finds for such a scheme from the employer liability insurance markets; they are entirely different issues. I know that the noble Lord has particular issues with the arrangements which the MoD has in place for compensation, so I will not go into those. They are dealt with by the MoD and I suspect that they will be the subject of conversation tomorrow.
Lord Alton of Liverpool
Before the Minister goes any further on that, would he accept that there is a parallel between people who slipped through the insurance arrangements for people with mesothelioma—and for whom there is therefore no known legal authority and so the Bill has been brought forward to plug that gap—and servicemen who have also fallen through a gap because there is no liability accepted by the Ministry of Defence and no insurance arrangements in place for them either? In parallel with this scheme, surely we should at least accept a moral responsibility for the obligations of the Government to people serving in our Armed Forces and risking their lives in the service of this nation, and therefore accept that it should in due course be met. Can the Minister at least tell us how many people are in those groups to which he has just alluded?
Lord Freud
My intelligence on this comes from my noble friend Lord James, who told me that the estimate was 300 people. However, I stand to be corrected by him.
Lord James of Blackheath
The provisional estimate is up to 300 dead already and 180 contaminated. However, the figure we need to be concerned about is the number of wives who have got it, too.
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
Regrettably, I am not in a position to make any kind of commitment along those lines. We responded to the consultation document which the noble Lord, Lord McKenzie, launched, and our considered view was that this was the most urgent thing to tackle. That is the only commitment that I am in a position to make today. Having urged other noble Lords to withdraw or not to press their amendments, I ask the noble Lord, Lord James, not to press his amendment either.
Lord James of Blackheath
For the sake of accuracy, I will just correct the figures to this extent. The Navy’s figures include subcontracted staff in naval ports.
Lord Howarth of Newport
My Lords, I am very grateful to my noble friend Lord McKenzie for laying out the case in his customarily lucid and reasonable style. I strongly support Amendment 46, in his name, which wisely would require the Secretary of State to set out his plans to establish further analogous schemes within a year.
We will come back to the Minister’s refusal to contemplate doing that in a moment, but I will just comment on Amendment 47, concerning the Armed Forces, in the name of the noble Lord, Lord James of Blackheath. He has raised a massively important issue. Our concern has to be not only for sailors, for people doing highly skilled labouring jobs in naval dockyards and for other members of the armed services, but for people who could well have been directly employed by government in a whole host of other fields in publicly owned facilities of one kind or another, including of course civil servants. The Government self-insure, and there must be an employer’s liability in that situation. I cannot see how it could possibly be otherwise. Perfectly understandably, the Government do not go to the insurance market to take out employer’s liability insurance but absorb the risk themselves.
I can well understand that the Ministry of Defence has form and has sought, over many years, to resist what many very well informed people consider to be well founded claims for compensation against the Ministry of Defence. It digs in and goes into the trenches. However, there must be a strong case—not only a moral case, as the noble Lord, Lord Alton, very powerfully suggested, but, I would have thought, a strong legal case. The difficulty, presumably, is that potential claimants do not have the confidence to take on the MoD because it has infinite resources with which to defend itself in those trenches.
The noble Lord, Lord Alton, compared the Minister to William Wilberforce. The persuasive powers and techniques of the noble Lord, Lord Alton, are legendary, but I would join him more prosaically in simply encouraging the Minister not only to receive a report on the important meeting that is due tomorrow but to pursue this matter strenuously. I do not know whether the Bill would permit an amendment to be incorporated that was designed to achieve the purposes of the noble Lord, Lord James of Blackheath, with this amendment. However, I hope the Minister will do his very best to ensure that some such amendment is included.
This brings me back to my own amendments, which the Minister resisted despite saying that he was sympathetic to their purpose. How could he not be considering that he went so far at Second Reading? I assume that if the department was going to do the work to produce the estimates document to which I and others have drawn attention, it must be because it sees that there is a strong case for establishing other schemes in the future for other long-latency asbestos-related diseases.
I now know that this is his technique in debate, but the Minister has set up another Aunt Sally, as my noble friend Lord McKenzie spotted. He sought to interpret the purport of my amendments and my remarks as being that we have to stretch the mesothelioma scheme to encompass the payment of compensation in relation to these other diseases. That, of course, is not at all what I said. Amendment 40 would insert,
“or any other scheme established under this legislation”.
Amendment 45 says:
“The Secretary of State may by regulation establish other schemes in relation to other … diseases”.
I am not at all saying that the mesothelioma scheme should be expanded, inflated or stretched to do what he said. I am saying that, to the extent that the Bill clearly does not confer the powers requisite, we ought to amend it so that it would be possible to establish other schemes analogous to the diffuse mesothelioma payment scheme in future. This does not cost the Treasury a penny, and I cannot see what the conceivable difficulty should be. The Minister has given no reason why this should not be done.
Lord Freud
I apologise if I abused the Aunt Sally—if I did so, I did so unintentionally. I want to make absolutely clear that we have had recommendations from the Delegated Powers Committee that we are obviously taking with great seriousness. One of the two big recommendations is resisting widening this Bill in the context of the technical committee. The noble Lord in this amendment goes directly against the thrust of the Delegated Powers Committee, which said we should keep this specific rather than giving wider, extra powers to the Secretary of State. I neglected to put my finger on that point, but it is a substantial one for that amendment.
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 Freud
Perhaps I have opened up a completely new front. I am reluctant to go into that specifically. The point is that we are trying to draw up a specific scheme in this legislation. We would be most reluctant about other schemes with other rules having powers in secondary legislation, whether or not the Delegated Powers Committee were on the same page. I will resist; I cannot do that.
Lord Howarth of Newport
I am grateful to the Minister for his explanation. I yield to no one in my respect for the Delegated Powers and Regulatory Reform Committee, which does extremely valuable work in ensuring that the Government do not take outsized powers of a rather generalised nature when they present legislation to Parliament. However, I am not sure that an argument put forward by the Delegated Powers Committee on the proposed technical committee would have a bearing on whether it would be appropriate to take the opportunity of this scheme to make provision in primary legislation to be able in due course by regulation to establish further schemes that would be on the same model as Parliament will have approved in the primary legislation for the diffuse mesothelioma payment scheme, and which would of course have to be legislated in their specifics by way of regulation—as is quite explicitly stipulated in my Amendment 45.
I do not know what the Minister had in mind when he addressed the House at Second Reading and said that schemes to deal with these other terrible diseases should be brought forward, and that there were situations that needed to be addressed. If he was saying that he hoped he would have the opportunity to bring forward a Bill of one sort, then another and then another after that to establish further schemes, he must have known that that was not realistic. To secure legislative time is always a considerable problem, and I am afraid it would be pretty improbable that we would have the opportunity to embark on fresh primary legislation to repeat the process that we are going through now to create the mesothelioma scheme. Therefore, I can see no difficulty of principle that ought to deter us from amending the Bill to provide a clear legal base for establishing other schemes, so that it could accommodate the principle that the Secretary of State could by regulation establish further analogous schemes. In the mean time, I beg leave to withdraw the amendment.
Lord Howarth of Newport
I am always disposed to defer to the noble Lord as he has a depth of knowledge on this matter that I do not think is matched by the rest of the Committee. However, if Lloyd’s of London did not get a computer until a rather late date in the history of that august market, it none the less had brown cardboard files. It seems to me that strong procedural safeguards and impeccable record-keeping are always central to the upholding of property rights and the protection of people who enter into contracts. I cannot see how employer’s liability insurers at any phase of their history could ever have been justified in allowing the documents to disappear. There might have been a fire in the warehouse but we have not been told that there has been such a fire at any of these insurers. Other than in an extraordinary circumstance of that kind, it must be normal and basic practice to keep the documentation and to pass it on to the successor insurers and reinsurers. I cannot see how anything else could have been appropriate.
We are looking here at a spectrum of wrongdoing that runs from inefficiency and muddle through negligence to, very possibly, deliberate criminality in some places. Indeed, the scale on which the documentation has gone missing suggests that there could have been widespread criminal intention on the part of some people in an earlier generation of insurers. I say “an earlier generation”; they may no longer be active in the market but many of them may still be extant as individuals.
Another recent major scandal has occurred in terms of record-keeping. I refer to the sub-prime lenders in their Gadarene rush towards 2008. The banks, in issuing huge numbers of mortgages and eagerly selling them on, took to neglecting procedural safeguards. The combination of disregard for procedural safeguards with fraudulence led to the catastrophe of 2008 and in the years following, from which we continue to suffer. It reached a point where, with millions of mortgages in default, the banks abandoned the attempt to examine individual documentation to certify that a particular person owed a certain amount of money on a mortgage, which was the asset being sold on, and took to what was known in the trade as “robo-signing”. Instead of examining the individual records, they hired a person simply to sign masses of these documents without even examining the records.
The temptation for businesses not to keep full, accurate and proper records when it is convenient to do so clearly can be very great. We do not suppose—I do not think we do; I certainly do not—that the banks which were guilty of that systematic failure of proper record-keeping should be able to walk away from the scene of what they did and just get away with funding a token scheme. Equally, it seems to me that in the interests of justice and for exemplary purposes, there should be a proper investigation of what went wrong with the employer’s liability insurers. Of course, ELTO has been created and that improves the methodology of tracing claims and liability. However, a disastrous failure has occurred in this regard for a great many people. As I say, it seems to me that this is a major scandal. That is the reason why I have tabled Amendment 43—to require the Secretary of State to establish a commission to investigate and report on what happened in this history of inadequate record-keeping, which I do not think anything can possibly have justified. I beg to move.
Lord Freud
My Lords, the noble Lord has tabled this amendment to require that investigations be made into the record-keeping practice in the insurance industry which, to put it no more brusquely, we know has been insufficient in the past. It would also require us to legislate to protect those who cannot bring a claim against an employer or insurer because the records have not been traced.
I sympathise with the aim behind this amendment, which is to bring those culpable to account. Unfortunately, what we already know about record-keeping practices tells me that this simply will not be possible and that any investigation of this sort would be a costly addition to the scheme. One of the things of which the noble Lord may not have been aware, and inevitably would not have been aware of when he put down this amendment, is that on 4 June the FCA published details of its requirements for employer liability insurers to undertake effective searches for historic policies. Moreover, the employer liability tracing office, ELTO, is currently undertaking an audit of the record keeping of its 150 or so members, including Equitas. The number affected by the issue of records that were destroyed is broadly 300 out of the 2,400 people with relevant mesothelioma per year, which implies that one in eight cases is untraced—that is the proportion of the problem.
I hope that noble Lords will understand that we want to ensure that the maximum amount of funds possible go to helping those eligible people who come to the scheme and therefore there is not the flexibility to put resources into potentially costly investigations such as these. I have already spoken to noble Lords about the exercise that I conducted into what was likely to be available on a historic basis, and we already have measures to improve tracing. On that basis, I urge the noble Lord to withdraw this amendment.
Lord Howarth of Newport
I am glad that the Minister sympathises with my aim in tabling this amendment. I am sorry, however, that he thinks an investigation of the kind that the amendment would require is not practical. I think it depends on how important people think it is to do the detective work. Of course, it is not within the resources of his own department and I think it would be difficult for the employer’s liability insurers themselves to meet the full cost of this.
However, if we consider that an inexcusable series of abuses has occurred, I cannot see that it is right to allow those who perpetrated these abuses simply to get away with it. If as many as one in eight cases of insured people are untraceable, then something is going wrong on a very big scale indeed. It cannot be satisfactory to leave it at that. The noble Lord gives me a modicum of encouragement in telling me that from now on the FCA is going to intensify the requirements for effective search and that ELTO is going to audit its members. However, if we accept the position as stated by the Minister just now, we will be saying in effect that those generations of people in the insurance market who did not take the basic duty of care that they should have done in relation to the documentation of people who turned out to have contracted this most terrible of diseases should get away with it, I think we should be ashamed of ourselves. I will not say any more about this today and I beg leave to withdraw the amendment.
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 Freud Excerpts(10 years, 11 months ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Avebury
My Lords, I am glad that these things happen to other people as well as to me. The Deputy Chairman need not apologise because everyone, however careful they are with their diaries, makes these mistakes from time to time. I missed an appointment myself this morning and I am still smarting from it.
On Second Reading, the Minister said that the Bill would establish a payment scheme to make lump sum payments to eligible sufferers from mesothelioma and their eligible dependants but he later amended that and said that it was a means to create such a scheme. Clause 1 gives the Secretary of State power to create, amend, replace or abolish the scheme within the certain broad parameters referred to in Clauses 4, 5, 6 and 10. Parliament has no say in the details of the scheme or in any variations made to the scheme, although of course it does on the regulations that are made under the Bill.
My noble friend Lord German and I both commented on this at Second Reading but the Minister evidently did not consider it important enough to pick the matter up in his winding-up speech, nor is there any explanation of the drafting in the Explanatory Memorandum. We are merely told that the clause confers these wide-ranging powers on the Secretary of State without saying why Parliament is excluded from all these processes.
If the Government consider it necessary to make changes in the system of employer’s liability insurance under the 1969 Act, obviously they have to come before Parliament and seek approval, as they did for the Act itself. Under this Bill the amount of any payment is determined by regulations, but in Clause 4 there is provision for the payments to be made subject to conditions, or for the payments to be repaid in whole or in part in specified circumstances. Again, these decisions are the sole prerogative of the Secretary of State. Similarly under Clause 5, the procedure for the making and deciding of applications is part of the scheme issued by the Secretary of State without having to obtain parliamentary approval.
There are further provisions relating to the scheme in Clauses 6 and 10 which are left to the unfettered discretion of the Secretary of State. These may not be in the best interests of claimants—we simply do not know—and it would be helpful if my noble friend could say whether, before any of these decisions, drafts will be published for consultation with the stakeholders. In the period leading up to the publication of the Bill, the Minister told us at Second Reading, there were 15 meetings with the insurance industry and 11 with representatives of victims’ groups, lawyers and members of the APPG. If the Government had to come back to Parliament they would have some incentive to continue with these consultations on the scheme and on the amendments to it which may be made in the future.
I hope that my noble friend can assure us that there will be no private consultation with the insurance industry excluding organisations representing the victims of mesothelioma. According to the Guardian, firms with insurance interests have given the Tories nearly £5 million since Mr Cameron became leader of the party. I am sure that the Government would not like it to be suspected that the industry’s largesse entitled it to any special favours. Your Lordships will bear in mind that all firms providing employer’s liability insurance have a vested interest in ensuring that, as far as possible, the details of the scheme create as light a burden for them as they can achieve. If, however, the industry passes on the costs to customers, as the Data Monitor survey quoted in paragraph 97 of the 2013 impact assessment suggests, it might be more impartial if it is asked to comment on a draft before the scheme is published.
The Delegated Powers and Regulatory Reform Committee says that this scheme is comparable in structure and content with the one governing a discrete, targeted social security benefit. It concludes that,
“only a most compelling explanation could justify the establishment of a scheme that is to determine rights to statutory payments, yet is not to be subject to any form of Parliamentary scrutiny”.
That says it all. I beg to move.
Lord Freud
My Lords, before there are any other contributions on this topic, it might save time if I respond rapidly to the last point mentioned by the noble Lord, around Amendments 1, 2, 4 and 5, about establishing the scheme on a statutory basis. Clearly that is the recommendation of the Delegated Powers and Regulatory Reform Committee. We acknowledge the concerns behind it. In the time between the recess and the Committee stage it has not been possible to do more than consider the proposed changes to the Bill. I am sure that noble Lords understand exactly what I am saying. I understand their concerns about the means by which the scheme is established and we are giving the matter due attention. I hope that those remarks might save a little time today.
Lord Howarth of Newport
My Lords, I hope the Committee will allow me to speak. I apologise for arriving late. My excuse is that the document issued by the government Whips’ Office informed us that business was to begin at 3.45. I am obviously lagging behind everyone else. I apologise particularly to the noble Lord, Lord Avebury, for missing the beginning of his remarks.
Obviously what the Minister has told us is strongly encouraging. It points us in the direction we all want to go—and certainly in the direction that the Delegated Powers and Regulatory Reform Committee wants the Government to go—and the noble Lord, Lord Avebury, was quite right to quote from that paragraph. As he says, it is very powerful on this point.
I am sure that Parliament will welcome it if the Government decide that this scheme is after all to be introduced under a statutory instrument. We received this morning the draft rules of the new scheme and while I congratulate the Minister on enabling us to have them, as he undertook to do, by the time we reached Committee, at the same time I grumble a little that we only had them during the course of this morning. We will want time to study them and no doubt revert to the issues contained within the draft proposals.
Lord Freud
Ah, I might say a few words. I hope that in my earlier intervention in the interests of saving a little time I effectively dealt with our approach on Amendments 1, 2, 4 and 5. I will turn to Amendments 3 and 6 in the name of the noble Lord, Lord Howarth.
Amendment 3 requires that before the scheme is established,
“the Secretary of State shall publish his proposals and make a statement to Parliament about them”.
This falls into the area of the recommendations from the Delegated Powers and Regulatory Reform Committee to make the scheme rules subject to negative resolution. The result of those considerations may serve to enhance in practice the level of parliamentary scrutiny, which would make this amendment unnecessary.
One or two questions were raised. I apologise for the late arrival of the scheme rules—everything seems to be just in time today—but I was keen to get them to Committee Members before we started. Of course, we will have another day of Committee, and further stages. They are a draft at this stage and a work in progress and we will be continuing to refine them during the passage of the Bill and indeed afterwards.
I ought to deal with the question from my noble friend Lord Avebury on the meeting with the insurance industry. Bluntly, this was a negotiation with the insurance industry and you have to meet people to negotiate with them. To get a working scheme going, that was an essential job. I would have liked to have done it with rather fewer meetings, but that is what it took.
Amendment 6 requires that:
“The Secretary of State must report annually to Parliament on the performance and progress of the scheme”.
I argue that it is not necessary to include this in the Bill. Scrutiny and reviews are already planned for the scheme without the need to include those in legislation. Indeed, we cannot know at this stage whether it is necessary or appropriate to report annually. We are aiming to determine the details of the reviews at a later stage. I am happy to commit to making a Statement to the House on the scheme’s performance. We will keep this under review as, over time, we expect the volume of scheme cases to reduce and for further information on the schemes to be readily available. The kind of information that the noble Lord, Lord Howarth, was talking about may become transparent effectively on a daily basis. I urge the noble Lord, Lord Avebury, to withdraw his amendment.
Lord Alton of Liverpool
Before the Minister sits down, perhaps he could put on the record a bit more about the imbalance of the meetings that he held with the industry and the victim support groups. He may recall that I raised this issue at Second Reading. I heard from the victim support groups afterwards and they said, quite categorically:
“We met the Minister three times, however at no time were we involved in any discussions about the scheme which was unveiled on 25 July 2012. The detail and architecture of the scheme was devised by the insurers and DWP”.
That has been a source of some discontent among those who represent the victims of this awful disease.
Lord Freud
My Lords, the difficulty in doing such a negotiation is that this was pretty price-sensitive stuff in the marketplace. We had to keep it tight. I did, however, explore the angles without being specific or laying it out by saying, “Here is the architecture”. I explored the elements of what we were aiming to do with, as I say, not just the victims’ groups but the lawyers and the APPG. Keeping a balance between a commercially complicated deal and ensuring that the other side is well informed is always difficult, but that is the balance that I tried to strike.
Lord Avebury
My Lords, I certainly was not objecting to the meetings that were held with the insurance industry in the lead-up to the Bill. I mentioned that at Second Reading the Minister told us how many meetings there had been not just with the victims support group but with various other stakeholders, such as the lawyers representing the victims. I had hoped that those consultations would have been extended into the period when the details of the scheme are being formulated. We would hope that there would be equality of arms between the insurance industry and the representatives of the victims in designing the details of the scheme and in looking at any amendments that may be necessary later on. However, we have to be content with what the Minister has said this afternoon and hope that, at least by Report, we will be looking at something a little more concrete than the Minister was able to say to us. In the meanwhile, I withdraw the amendment.
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 Wills
When the Minister talks about a disproportionate burden, does he accept that for years and years, those insurers—quite properly, because of judicial decisions—avoided making payments which we all now agree that they should have been making and which the Bill is designed to ensure that they will make in future? When he talks about a disproportionate burden, has his department made any estimate of how much money those insurers saved for all those years?
Lord Freud
My Lords, there is a deep and difficult history to this of which, I suspect, everyone in this room is aware. We are trying to ensure that we can get money to that group who have missed out. I am as dismayed as many of your Lordships that that has not happened earlier, but we are where we are. We are doing it now in a way to ensure that we can get those payments flowing rapidly. I apologise if I seem to be making a Second Reading speech. The problem is that this is such an emotive issue—the disease is so horrible—that it is very hard not to do so.
We have to come back to what is a specific deliverable. It is awful to sound so legally defensive, as I know that I am sounding here, but I am trying to get a deliverable, to get as much money as possible to people. I shall answer the specific questions. I know that I will not have the noble Lord, Lord Howarth, resounding with pleasure, as he wanted to be, but that is the underlying reason. My motivation is to get as much money as I possibly can safely, without risk—legal risk, in particular—to people.
Lord Avebury
I am sorry to interrupt my noble friend, but was it always clear whether a person was covered by the employer’s liability insurance? In the industries which have been mentioned, such as the construction industry, where the boundaries between the employed and the self-employed were not always clear, and a person comes forward and claims that he worked for such and such a firm and was employed at the time, but the employer’s liability insurance has been lost, how can the scheme be satisfied that he was qualified within the terms of the Bill?
Lord Freud
That is a very important point. As the noble Lord, Lord McKenzie, was querying, some people will appear to be self-employed where the reality is that that was an artificial, tax-driven construct. In that case, if they can demonstrate that in practice they were acting like an employee, they would be eligible for a payment under the scheme. That is specifically allowed for.
The noble Lord, Lord Howarth, asked about estimates of exposure to people who have been washing laundry—secondary exposure in the household. We do not have those data, I fear. We have data on general environmental exposure, which would include that, and I can give that information to the noble Lord. Clearly, people who catch asbestos outside the employer liability framework can get payments under the 2008 Act. Various noble Lords thought that they were inadequate, but they are state payments established since then.
My noble friend Lord James asked about the MoD and the Admiralty in particular. The state does not have employer’s liability—
Lord James of Blackheath
If the noble Lord will forgive me, the state does not have a liability because it pulled the dirtiest trick of all time when it repealed the 1947 Act and effectively put people in a Catch-22 situation where they could only claim if they had already been identified with the disease at that time. It was only 10 years into the period. It was ridiculous.
Lord Freud
My Lords, clearly I speak for the whole Government generally. The specifics of this are really for the MoD to pursue. There will be lots of issues around this but we need to get this Bill through. If we start going into these areas within this Bill, we risk endangering the start times and the processes. But I hear my noble friend and I know the depth of his feeling on this.
Lord Wigley
Before we move on, perhaps I can pick the Minister up on the words that he used a moment ago, that the Government do not have a liability. Is there not a plethora of cases where no liability exists? In most of the cases under the Pneumoconiosis etc. (Workers’ Compensation) Act 1979, despite the fact that there was not a liability, the Government accepted their responsibility to help these people. The Minister may not be able to do it in the context of this Bill, but can he give me an assurance that he will look at this again in the future?
Lord Freud
I am sorry; if I said that, I truncated some words. What I meant to say is that the Government do not take out employer’s liability insurance, so effectively they self-insure, and different departments have different arrangements to pay compensation. Clearly, my noble friend Lord James feels that the ones at the Admiralty are not adequate.
The noble Lord, Lord Howarth, asked about the self-employed. We do not have any data on that area. Again, the core reason that we are not including the self-employed here is that, for obvious reasons, they were not required to have employer’s liability insurance.
Lord Alton of Liverpool
On that point, has the Minister seen the ABI briefing, where it says:
“There will only be a very small category of people who have been solely self-employed and therefore not eligible for a payment from the untraced scheme”?
Clearly the ABI has the data. Before we come back to this issue on Report, perhaps the Minister will discuss with the ABI what it based that statement on and what the numbers are.
Lord Freud
Well, my Lords, if I am cleared to speak to the insurance industry again by this Committee, I will ask it for those data, and supply them to your Lordships.
The noble Lord, Lord Moonie, made the point about those who had washed the clothes. Again, that is not covered by employer’s liability. It could be a case of public liability, so there may be something to pursue. I will look into that before the next Committee day to see if I can get a little bit more information. I do not have very much information on the legal differentiation and what actually happens there. The same question was asked by the noble Lord, Lord Browne.
On the Northern Ireland question asked by my noble friend Lord Empey, the Northern Ireland legislation mirrors the legislation in the rest of the UK, with the 1979-2008 legislation prevailing, and the plan is to run this there as well.
I think that I have dealt with all the questions, but possibly not to everyone’s satisfaction.
Baroness Golding
Before the Minister sits down, I ask him to define what the present circumstances are.
Lord Freud
I really will have to come back on that. It sounds to me like quite a complicated legal position. The whole point of this scheme is to try to drive through a very rapid response. In this case, of course, these things are known. There should not be a problem of not knowing who is liable for what. That is what the Bill is trying to do. I will try to get an answer to the noble Baroness’s question, but it is by way of academic interest rather than core to what we are trying to do here. I ask the noble Lord to withdraw the amendment
Lord Howarth of Newport
My Lords, I thank all noble Lords who have contributed to what we knew would be an important debate but has also turned out to be a very impressive one. The debate has revealed complexities as well as possibilities that I hope we can all reflect on and look for ways to explore constructively.
No fewer than 11 noble Lords apart from the Minister contributed, and they came from all around the United Kingdom. My noble friends Lord Wills and Lady Golding gave us case studies from their own constituency experience that were significant and revealing. The noble Lord, Lord Martin of Springburn, told us about his own industrial experience, which was illuminating; the case of the mum who did the washing was particularly poignant. My noble friend Lord Wigley from Wales and the noble Lord, Lord Empey—whom I shall also call my noble friend, if I may—from Northern Ireland illustrated the range of this issue, as of course did my noble friends Lord Moonie and Lord Browne of Ladyton. The debate benefited very much from the medical experience and expertise of the noble Lord, Lord Walton of Detchant, and my noble friend Lord Moonie.
We have had a very valuable debate, with many issues raised. My noble friend Lord Browne of Ladyton probed most determinedly and effectively as to who exactly is covered. It may be that the Minister is fortified with legal advice that enables him to declare confidently, definitively and with the utmost clarity who is covered and who is not, but we suggest that there is more to look at here, particularly in the case of family members. It seems to contravene common sense to suppose that there is no liability where someone contracts the disease as a direct consequence of the predicament of the person who was employed and was, or should have been, covered by employer’s liability insurance. It is hard to believe that such people are not covered.
My noble friend Lord McKenzie raised a question that has become increasingly pertinent over the decades in which this whole problem has been gestating: the shifting nature of self-employment. With the increase not only in contracting-out by public departments but in subcontracting by major firms, and with the rise of such practices as zero-hours employment, it becomes very difficult to say with confidence who is employed and who is not, although no doubt there is case law on this. I hope that the Minister will want to satisfy himself that the definition of self-employment sufficiently overlaps with the definition of employment in a great range of relevant situations, such that we can appropriately bring self-employed people within the compass of this scheme. I think that it is worth investigating further.
Issues arose as to public liability. My noble friend Lady Golding’s case study raised it, and the noble Lord, Lord James, talked about what the responsibility of the Lords of the Admiralty may be. I was encouraged to a degree that the Minister seemed to be saying to us that the question of the liability of the Crown and of public departments does warrant further investigation. It may be that, in the interests of getting this scheme up and running as quickly as possible—which we all want—it may not be appropriate to try to redefine the scope of the scheme or the compass of this particular Bill to take account of everyone who was in a situation of being employed by the Crown or by some other public agency when they were exposed to asbestos negligently. However, if a parallel scheme can be created, I think that that would only be right and proper.
While I would never suggest that the Minister is meagre or defensive and I completely respect and applaud his motivation in bringing this Bill before us, I hope that he will not stand pat on the deal that he has negotiated. However, we can come back to that. It seems to me that, as legislators, it is our responsibility to take a view as to what the public interest is and to amend the scheme that he is proposing to us, which he has negotiated with the industry, so that it better satisfies justice and the requirements of the public interest. In the mean time, I beg leave to withdraw the amendment.
Lord James of Blackheath
I am sorry, but that is a true story.
We are worrying about whether we have the files on these, but Turner & Newall, which is the great case—the biggest of them all in this country—did not keep the records. We just had a general claim from Turner & Newall for everything. It was a blanket cover, which ensured that we would take any claims that came against them and sort them out according to their own merit at that time. The records that the DTI had are the best that still exist and should be taken on as part of this review. Some of them will have gone to Warren Buffett and he will be using them as part of his negotiations, probably against us. The records are not as bad as your Lordships think. They are meticulous in going back, but they are mostly blanket covers, not specific to individuals. That is the problem.
Lord Freud
My Lords, we could spend a lot of time on this. I was at Warburg when it helped to sort out Equitas, although I was not on that particular transaction—and I am grateful for that.
Amendment 9 would have the effect of ensuring that the scheme paid not only everyone with diffuse mesothelioma but any living dependant of a person who had died with diffuse mesothelioma at any time. Amendments 11 and 14 would have the effect that, once the scheme came into force, all living people who were diagnosed with diffuse mesothelioma on or after 10 February 2010 would be eligible for a payment from the scheme. They also provide that any living dependant of a person with diffuse mesothelioma who had died on or after that date would be eligible.
I think that the February 2010 date mentioned in these amendments is meant to be closely linked to the date when the last Government published their consultation paper Accessing Compensation: Supporting People Who Need to Trace Employers’ Liability Insurance. That was 11 February 2010, as the noble Lord, Lord McKenzie, will vividly remember. I remind noble Lords that on that date the Government were consulting on the best way forward. They were not proposing a specific course of action, so no one had any expectation that they would be likely to get any sort of payment over and above those that the Government provide for people with diffuse mesothelioma.
I would have liked to have announced the Government’s intention on paying people with the disease much sooner than 25 July 2012, when we did announce it, but the issues involved were complex. To ensure that we have got it right, we have been working intensively with stakeholders, including the insurance industry, claimant groups and solicitors, since that consultation closed to get to this solution. This took longer than I had hoped. However, when we announced on 25 July of last year that a scheme would be set up, from that date people have had a reasonable expectation that, if they are diagnosed with the disease after that date, they will receive a payment.
In addition to creating an expectation among people with mesothelioma, the announcement put insurers on notice that we intended to bring forward the scheme, giving them legal certainty and allowing them to start to reserve against the liabilities that are created by the scheme and its associative levy that they will be responsible for paying.
Baroness Sherlock
The Minister is again speaking of reserving for the liabilities. I am grateful to the noble Lord, Lord James, both for sharing his considerable expertise and experience and for helping me to understand that I clearly phrased my previous question poorly. I was trying to ask the Minister whether, when he refers to insurance companies reserving for the liabilities, he makes any distinction between the fact that an insurance company would in the ordinary run of things reserve against a future liability that would crystallise if and when somebody whose employer had been insured by that insurer were to develop mesothelioma, and the fact that what an insurance company will have now is arguably not a liability but a requirement to pay something that is more like a tax. Here, I declare an interest as a member of the board of the Financial Ombudsman Service. Is this situation not more like some aspects of the levy applied by the FCA on relevant financial services companies, which requires them to contribute, for example, to the cost of the Financial Services Compensation Scheme? In other words, it is an annual cost that is fixed by the body imposing the levy and not a liability that arises directly from activities of the company. Therefore, does the question of reserving not apply at all?
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.
Baroness Sherlock
I would like to offer the Minister a way of reassuring us on this because we may be talking at cross-purposes.
Obviously, if an insurance company finds that its annual costs of doing business by staying in the market and providing active employer’s liability insurance are going to be higher, it will need to make sure in its usual planning that it has the resources available to enable it to pay the annual costs of doing business to stay in that market. That is not the same thing as saying it must reserve formally against liabilities that it has. That, as I understand it, is the Minister’s main argument as to why they could not have begun this process earlier. If it were about reserving for liabilities, there are clear regulatory requirements and negotiations with auditors that would constrain the point at which the insurance company could start doing this.
However, if we are simply looking at a higher annual cost—and I am not suggesting that that is not a relevant or material consideration to the company—of remaining in the market which is unrelated to the nature of the specific policies that were written, there is presumably no reason why the insurance company could not have planned for that by reading carefully, as I am sure it did, the document published by my noble friend Lord McKenzie. This showed clearly that the Government wished to intervene in this area and the options on which they were consulting, all of which would clearly have required the industry to pay out. It was clear that that was coming down the track.
A way for the Minister to solve this would be to answer my other question. Could he provide—either now or by the next sitting—some evidence of an insurance company that has reserved since the announcement was made in 2012? There must be companies that have a 2012 financial-year end date. If the Minister is right, insurance companies will presumably have reserved. Perhaps he could share that with us.
Lord Freud
I will double-check, my Lords, but my understanding is that a reserve from an insurance company is not specified out. There would be a general sum overall and we would not be able to extract those elements. I have made clear that we are not talking about a general level of doing business but about a specific reserve created because of this particular liability. That is what we are talking about.
Lord Browne of Ladyton
If I understand correctly the background papers to this scheme, particularly the impact assessment, the Government have agreed effectively to fund this scheme from the period July 2012 until February 2015 by a process of using what will be paid to them in recovered benefits. The wording in the impact assessment is that the Government have agreed to do this. However, is not all of this argument utterly irrelevant if the insurers pass this on in the premium? Paragraph 97 of the impact assessment comes to the wrong conclusion. The argument clearly comes to the conclusion that that is what they intend to do.
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 Freud
I remind the noble Lord that Equitas and Lloyd’s were dealing with reinsurance, not primary insurance. There may be some information there, and it may be of great interest to the insurance industry—I am sure that it is looking at that—but, regrettably, I can assure him that there is no reason to pause the Bill because of that information.
Lord Howarth of Newport
I certainly accept that point, but I also noted what the noble Lord, Lord James of Blackheath, said about the incestuous character of the industry, how involuted it is and how they all insure and reinsure with each other. If we are to unravel what has happened—a later amendment to the Bill points us towards a further effort to unravel the past, the most deeply regrettable and scandalous past—in this area, the DTI archives may be an early port of call. I hope that the noble Lord, Lord Freud, will not dismiss the possibility that the documentation associated with Equitas which reposes in the DTI archives may enable more people to be able to make a claim for employer’s liability if they have access to those files.
The Minister told us that he fought to get his Statement out by 25 July 2012, and I can well believe that. We praise him and thank him for getting it out even at the last moment before Parliament rose for the Summer Recess.
On the question of reserving, I venture the observation that, whatever the rules and regulations may be, they do not prevent insurers from reserving prudently against liabilities that they can reasonably foresee. I am not impressed by the Minister’s argument that the scheme’s eligibility should run only for people diagnosed after the date on which he made the formal announcement that the Government would bring in a scheme, and that it is only from then that insurers could begin to reserve against that liability. I just do not accept that. We will need to think much more carefully about the obligations on reserving, but there was never anything to prevent insurers from reserving against something which they could and should have foreseen, not just from February 2010 but from the very first date at which they began to provide employer’s liability insurance.
As for the noble Lord’s fears that if the levy were increased to pay for a more expensive scheme, the insurers would simply pass on the extra costs to employers—well, they will pass on whatever they can to employers just as soon as they can. As I understand it, that is how insurers operate. They pitch their premiums at a level that they believe the market can afford. There is some downward pressure because of their need to compete with fellow insurers but collectively they will all rejoice in market conditions that make it possible to raise their premiums. Of course, they will use any excuse they can to raise their premiums because they want to maximise their profits. I do not see that holding down the levy is going to stop employer’s liability insurers raising their premiums just as soon as they can. Any additional costs from extending eligibility for this scheme to different categories of people or people who were diagnosed at an earlier date are not likely to make a material difference to the premiums that are sought in the market because there is a host of factors in the market that shape the level of premiums that insurers seek to be able to sell. This is only one and far from the most substantial among them.
We will return to these issues. In the mean time, I withdraw the amendment.
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 Pannick
To clarify, is the noble Lord saying that the only impediment to including a provision of this sort in this Bill is that this is a DWP Bill and research is a Department of Health matter? If that is the point, I think it will come as a great surprise to this Committee that it is not possible for two departments to liaise and come up with an agreed position to place within a Bill—not least because, as he will well know, as a matter of constitutional propriety, when a Bill talks about a Secretary of State, it covers all Secretaries of State. There is no division of responsibilities between Secretaries of State. Can the Minister think about whether it is really not possible to talk to his colleagues on these matters?
Lord Freud
I have done quite a lot of work on this, as I have said, and talked to the department. I am saying that this would have to be a Department of Health levy, but the Department of Health is not minded to legislate in this way on this matter because that is not how the structure of research provision in this country works. That is the position. I can get further clarification on this ready for Report.
Baroness Sherlock
The question of whether the Department of Health wishes to do this is a separate matter but, on whether the DWP can do this in its Bill, is the Minister saying that it cannot do it because it is not government policy that the DWP should create a levy that would be to the benefit of something that belongs to DoH, or is he saying that it is illegal for it to do so?
Lord Freud
I am not sure of the definition of illegality, but our powers are such that we cannot raise money for things that are not within our vote. Whether or not that makes it illegal, I am not sure. However, that is the position and we are held to it.
Lord Moonie
Perhaps I may add a small point from my own field in medicine. One of the problems with mesothelioma is that it is diagnosed so late that it is generally considered a hopeless condition. That was certainly the case with friends of mine who died of it some years ago. Gradually things are beginning to look a little brighter. It is important to get treatment early. We know largely who the potential case bodies are likely to comprise—those who have historically been exposed to asbestos—and the numbers should not really be added to at this stage. Therefore it ought to be possible to devise research, either through markers or through surveillance of the case load, to establish diagnosis of mesothelioma earlier and provide more hope to the patients who suffer from it. That might be a fruitful argument for the Minister to make to his colleagues in the Department of Health.
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 Howarth of Newport
When the Minister goes round the wheel again and has conversations with the Minister in the Cabinet Office responsible for the Office for Strategic Coordination of Health Research, and when he meets Professor Dame Sally Davies again, will he try to find out why the money has not been forthcoming so far? Is it political, because the view is taken that there are not terribly many sufferers from mesothelioma as a proportion of the population as a whole and therefore they are not a priority, or is it because this field is unfashionable among academics? We need an explanation because it is very puzzling. Given the existing structures, conventions and procedures, I cannot see any reason why the money should not already have been made available.
Lord Freud
I have actually got round to asking that question already, so I can answer it now. The reason is that it is an unfashionable area because it was believed that there was no hope. We caught it late, it was happening over a very short period and it was fatal. It was an unfashionable area to go into and therefore the people who wanted to make their careers in research turned to other cancers. As a result, good-quality research proposals were not coming in and therefore the research council did not feel that it could supply funds. That is the reason and it has been the reason for decades. With regard to breaking that cycle, the insurance industry and the voluntary groups working with the BLF have started rolling the stone down the hill, and I think that we are now in a position to get something moving. However, it is a bigger issue than just getting a little bit of money through this device.
Lord Alton of Liverpool
My Lords, the Minister said that he feels like a mad mouse going round in a wheel. Fortunately, we have some good medics on hand this evening, who, I am sure, will be happy to diagnose the problem. Whether they can come up with a cure, I am not sure, but it is the job of parliamentarians to come up with a cure to help Ministers who are clearly committed to the underlying principles enunciated in the amendment actually to achieve them. He said that he has been banging his head against a brick wall and that he has been dismayed at the failure to provide adequate resources to deal with these things. The one thing we can do for a Minister in that situation is to provide him with an amendment to the Bill, which he can then take back to the other departments involved, to the Treasury and to everybody else, saying, “In Committee, they gave me a hard time over this. We need to find some way forward”.
Although I am of course not pressing this to a Division today, the fact that 10 noble Lords participated in this debate and have spoken with such experience and conviction, all being in favour of the principles underlying the amendment, means that surely the Minister now has some ammunition in the locker to take away and use to try and promote this case.
I am indebted to everyone who has spoken in the debate. My noble friend Lord Walton of Detchant said that the amendment could be strengthened and suggested two ways of doing that. I particularly liked what he said about the National Institute for Health Research and the role that it might play. I will certainly consult him in redrafting this amendment between now and Report.
My noble and learned friend Lady Butler-Sloss said that if we could do it for gambling, why on earth can we not do it for this? The noble Lord, Lord Pannick, reminded us, as did the noble Lord, Lord Empey, that many other precedents can be invoked in such circumstances. Perhaps the Minister could ask his officials to look at the whole battery of precedents when going away to persuade those who, somewhere in the system, are clearly opposed to us putting these powers into the Bill.
My noble friend Lord Wigley reminded us of the scale and number of people affected by this horrible disease. He recognised, as did others, that a variable approach might be the right one to adopt as we recast the amendment.
My noble friend Lord Kakkar said there had there had been no strategic approach. He is right. He reminded us about the role of the meso-bank, which, as he says, will have global significance. He also referred to the possibilities that genetic research produces, but said that research has to be kick-started. In other words, there has to be some kind of seed funding—in the absence of state funding. Of course, austerity will inevitably be one of the reasons given when the Minister goes back to the Treasury or elsewhere. Other people will have their own priorities and projects, which they say that the money should be spent on. Again, we need to provide the Minister with something that overcomes those objections. The approach adopted in this amendment of a levy is one way of doing that. My noble friend Lord Kakkar also reminded us about something that I had not thought about previously: the importance of research into appropriate palliative medicines and palliative care, and the way in which we care for people during the last months of their lives. That was an important point for us to consider.
The noble Lord, Lord McKenzie, reminded us of the stark numbers, and the noble Lord, Lord Howarth, who, along with others, signed a letter sent to the Times, told us about the importance of leverage and asked why a greater volume of resources was not made available for research. I was prompted to think about this issue by two Questions asked in another place by a Member of Parliament, Mr Bob Blackman. I was surprised when I saw on one of his Questions just three dotted lines where figures should have been, detailing the resources available for research into mesothelioma. When he tabled a further Question, the column simply showed three sets of zeros. I was absolutely staggered that that could be the case, given that 56,000 British people will die of this disease before it is over.
My noble friend Lady Masham said that research means hope, and she is absolutely right about that. Without research, we can offer no hope. My noble friend Lord Pannick said that there is nothing novel about this approach and that it would be quite fanciful to suggest that the Human Rights Act could in some way be invoked. That Act ought to be invoked against the state authorities in this country for not having done something about this problem for so long.
My noble friend Lord Avebury was very generous in his remarks, but in fact I am just an apprentice compared to my noble friend. He and I have been friends for a very long time. He published a pamphlet on the subject of mesothelioma in the 1970s and has campaigned on this issue throughout the whole of his parliamentary life. I stand in awe of him on this and many other matters.
The purpose of my amendment was to start the debate. There are moments when Parliament, rather than the Government, can shape policy, and this is one of them. The Minister said that there is a chicken-and-egg cycle. In that case, let us break that cycle. Although I beg leave to withdraw this amendment now, I am sure that noble Lords would expect me to bring it back on Report.
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 Freud
My Lords, as I understand it, the purpose of the amendment is that a person may be eligible for a payment from the scheme if they have not brought a successful action against their relevant employer or insurer for damages. However, there is another condition attached: they must also not be able to bring an action for some reason, perhaps because the employer or insurer cannot be found or no longer exists.
A person should be eligible for a payment from the scheme if they have not brought an action against a relevant employer or insurer through the courts and there are very good reasons why they are unable to do so. It is a scheme of last resort. If a person can bring proceedings, they should do so. But a person should not be eligible for a payment from the scheme if they have brought an action against a relevant employer or insurer through the courts and they have not been successful in that action because they have not been awarded civil damages. This may happen for a number of reasons. For example, the courts may consider that the employer did not expose the person to asbestos as a result of negligence or breach of statutory duty, or that the person was not an employee. It is not right in these circumstances that the person should be able to make an application to the scheme. It is a scheme of last resort, not a no-fault scheme. The scheme is correcting a market failure where employer’s liability insurers failed to keep thorough records; it is not replacing the civil system.
Lord Browne of Ladyton
My Lords, I am reluctant to intervene on the Minister when he is reading a very carefully constructed argument but, with all due respect, what he has just read defies logic. Bearing in mind that the person must have been diagnosed with mesothelioma after July 2012 and, if the draft rules become the rules of the scheme, must have brought any claim within three years of that diagnosis. It is envisaged that in that period the person would have sued somebody despite the fact that they were unable to find the relevant employer or the relevant insurer. It cannot possibly have been the relevant employer or the relevant insurer that they sued so the determination of the case is an irrelevance. I do not understand how people can sue somebody they cannot find.
I am not sure that I understand the concern. This may be because of the way in which one reads the legal language. I think the best thing I can do is write a letter spelling out exactly how the language works.
Lord Browne of Ladyton
The reason we are able to deal with these cases in this way is because of the history of the way in which mesothelioma litigation has developed. In mesothelioma cases, one can sue any employer. So if one finds a relevant employer or insurer, one can sue that person—I think that is agreed. That is part of the reason why this group of people are able to have access to this payment scheme whereas people suffering from other asbestos-related diseases cannot so easily do so. We agree on that.
Any person who has found a relevant employer or insurer to sue is disqualified from the payment scheme—full stop. It is not a question of finding one and then saying, “I cannot find the other, therefore I want to claim through the scheme”, anybody who finds one and has somebody to sue is disqualified by the second half of the clause. The first half of the clause is unnecessary.
Lord Freud
As I said, let me write to noble Lords about the necessity or otherwise of the first half of the clause, because I suspect that we are in deep legal territory.
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 Wigley
I believe I am right in interpreting that there are cases that could get compensation for diffuse mesothelioma under the 1979 Act who might equally get compensation under this Act if they had not got it under the 1979 Act. That being so, I raised the question at Second Reading as to how the scales of compensation compared between the two. Is there any information that the Minister can give on that? If he has already included it in today’s letter, which I believe has been sent to my home, I apologise as I have not yet seen it.
Lord Freud
The noble Lord is raising a slightly different question. What we are looking at here is the question of whether one can claim on the scheme even if one has received the 1979 payment. We will be dealing in later amendments with the offsetting issue. It may be easier to leave this question until those amendments.
I ask the noble Lord to withdraw these amendments.
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.
Baroness Donaghy
My Lords, briefly, we are being presented with the alternatives of finding the paperwork, in which case the process is dealt with in one way, or not finding the paperwork, in which case this new levy will apply. As a fully paid-up administrator, I think there is a range in between about the effort that is put in to find the paperwork. If we are talking about incentivisation, I would argue for 130% instead of 70% because that might make some people try a little harder to find the paperwork. I really should have put an amendment in to make it 130%. I believe that there should be some incentivisation but I would turn the argument on its head: we should try to persuade the insurance companies to try a bit harder to find the paperwork.
Lord Freud
My Lords, the amendment seeks to set the rate of payment at 100% of the average civil award amounts. Many noble Lords expressed opinions about this at Second Reading as well as today. I know that I have the support of all present today in wanting to guarantee the maximum payment possible for those people who, through no fault of their own, cannot bring a case against a specific employer or that employer’s insurer.
To tidy up some of the questions asked by the noble Lord, Lord McKenzie, on the tariff tables, I think he caught that they were published in an ad hoc statistical report only today. I apologise that it is so late; we will circulate all of that to Peers tomorrow. It is based on a survey of civil compensation undertaken between 2007 and 2012 registered with the Compensation Recovery Unit, so it is a broad mix of cases. That is what the figures are based on.
To make a point that is really at the heart of this, and as many noble Lords have pointed out, if we were going after the people who should pay the money, it would be a very different proposition in terms of justice as opposed to our asking for money from a group of insurers that may or may not have been doing this business during the time. We are actually asking a group of active insurers to carry a particular burden when we know that of the industry as a whole, 40% are in run-off, including many of the biggest ones involved in mesothelomia. If one looks at insurance as one industry, all in one category, that is one way of thinking; if one starts to individualise what different insurers are doing, it becomes a different debate.
Lord Howarth of Newport
I understand that argument, but can I put two other considerations to the noble Lord? When the Lloyd’s insurance market ran into very severe difficulty on account of asbestosis claims—I forget when that was—it had to act collectively to rescue the reputation of the London insurance market. I think we are in a similar situation here. I also put it to the Minister that the active insurers are advantaged by the fact that other run-off insurers have either failed or given up the business. They are the insurers who are now in the market and dominate it. Considering that they benefit from the absence of those erstwhile competitors, they are in a perfectly strong position to shoulder the moral and indeed the practical responsibilities left behind by those who have abandoned the field.
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.
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 Freud Excerpts(11 years ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, every Member of this House can recognise that working people should have proper protection from personal injury or disease arising during their work. When this principle is breached through negligence or breach of statutory duty, it is right that a person should be compensated by their employer or employer’s insurer.
We find ourselves presented with a situation that undermines these seemingly simple assumptions. Many sufferers of diffuse mesothelioma, caused by exposure to asbestos, are unable to find an employer or insurer against whom to make a claim. These people were negligently exposed to asbestos and subsequently developed a fatal disease, yet they must go uncompensated for their immeasurable loss because sufficient records do not exist to trace the responsible insurer or employer. The need to address this is apparent and urgent.
Government, media and public interest in asbestos-related diseases is long-standing. In 1965, the Sunday Times brought this issue to the spotlight and reported on research showing the fatality of exposure to asbestos fibres. Since then, this spotlight has rightly not gone away. Asbestos-related diseases have featured in the press and on television repeatedly, with dedicated programmes produced in 1967, 1971, 1975 and 1982. In 1979, the then Government legislated to make payments to those with certain dust-related diseases who had been exposed to asbestos at work but who could not find an employer or insurer to sue, although lump-sum payments under that were lower than civil damages. In 1999, the insurance industry created a code of practice for better tracing of employers’ liability insurance policies. Although success rates for inquiries on difficult-to-trace policies increased, more needed to be done. In 2008, the previous Government introduced a scheme to make lump-sum payments to all people with diffuse mesothelioma regardless of whether they were exposed to asbestos at work. I pay tribute to the work of the noble Lord, Lord McKenzie of Luton. In 2010, as Parliamentary Under-Secretary for Work and Pensions, the noble Lord issued the consultation that has led us to where we are now. Without his efforts, this matter would not have had the profile that it so rightly deserves, and due credit must be given for his continued efforts to obtain support for sufferers.
The focus of this Bill is diffuse mesothelioma, a fatal disease caused almost exclusively by exposure to asbestos. Diffuse mesothelioma has a long latency period, often of 40 to 50 years. Once diagnosed, the average life expectancy of a sufferer is short: between nine and 13 months. The long delay between exposure and developing the disease, combined with inconsistent record-keeping in the insurance industry, means that individuals often struggle to trace an employer or insurer against whom to make a claim for civil damages. The insurance industry and this Government recognise that this is unjust and that provision must be made for these people.
Despite the recognition of this market failure, the insurance industry alone has not been able to put this right. Disputes between insurers and the different interests of companies that still offer employers’ liability cover, which I shall refer to as “active” insurers, and those that no longer do so—I shall refer to them as “run-off” insurers—have prevented the industry agreeing on a voluntary levy. Industry representatives have therefore asked for legislation to impose a levy to support a payment scheme.
The Mesothelioma Bill will establish a payment scheme to make a lump-sum payment to eligible sufferers of mesothelioma and their eligible dependants. The scheme will be funded through a levy on insurers active in the employers’ liability market, meaning that the active employers’ liability insurance market as a whole will bear the cost. Timing is key; the number of diffuse mesothelioma cases is expected to peak around 2015. My aim is to launch the scheme as soon as possible—ideally in April 2014.
We expect there to be roughly 28,000 deaths from mesothelioma between July 2012 and March 2024. If the Bill is passed during 2013, first payments could be made around July 2014 to those diagnosed with mesothelioma on or after 25 July 2012. Around 300 people a year could receive an average payment of approximately £100,000.
The Bill is first and foremost a means to create a scheme to provide for those people who would otherwise be unable to bring a civil claim against their employer. In other words, it is a scheme of last resort. The driving principle is that, where adequate records are not available, those who have developed this disease as a result of their employer’s negligence, or breach of statutory duty, should still be able to access payment for their injury, and the process of applying for this should be as straightforward as possible.
Secondly, the Bill is part of the ongoing commitment of this Government, previous Governments and the insurance industry to correct a market failure. The Bill includes measures which will improve the tracing of employers’ liability insurance policies through the creation of a technical committee that makes binding decisions on insurance cover.
It is at this point worth reflecting on the work that the Ministry of Justice, too, is doing to support sufferers of mesothelioma. In December, a Written Ministerial Statement was issued confirming the Government's intention to consult on a range of measures, including a specific pre-action protocol for mesothelioma cases, a portal and fixed legal costs for such cases. None of these elements is beholden on our Bill and, similarly, our Bill is not beholden on them, but together they demonstrate the desire across government to help people with this terrible illness.
I turn to the question of payments. The scheme will make payments on a tariff basis to eligible people with mesothelioma, or to an eligible dependant if that person has died, where they cannot trace either an employer who exposed them to asbestos or that employer’s insurer and where they have not received civil damages or some other compensation payment in respect of mesothelioma. The scheme is not intended to be an alternative to civil damages, nor is it a compensation scheme. The scheme will be set up by the Secretary of State, who will make arrangements for another body to be the scheme administrator.
The Bill allows for the payment amount to be determined in regulations that will set out a simple tariff, basing payments at roughly 70% of the amount of average civil damages. Payment amounts in the tariff will be linked to an individual’s age. Calculating the amount of civil damages that a person is to receive is complex. However, published research shows that awards in civil cases decrease with the age of the victim. Regarding the amount of the payment, I ask your Lordships’ support in understanding that the scheme strikes a careful balance and does so in a way that is fair and lawful. It ensures a substantial payment to people who have mesothelioma and cannot trace the liable employer or insurer, while ensuring that the contribution made by insurers is fair and not excessive, since not all of them were in business at the relevant time. It will ensure that the scheme can get on with helping sufferers and not get bogged down in legal challenges from insurers.
There are four main criteria for eligibility. The first is that an individual was diagnosed with diffuse mesothelioma on or after 25 July 2012. The second is that they were employed at the time of exposure to asbestos and that this was due to negligence or breach of statutory duty on the part of an employer. The third is that they have not brought a claim for civil damages against an employer or the employer’s insurer and they are unable to do so. The fourth is that they have not already received damages or other compensation payment in respect of their disease, nor are they eligible to. I should point out that individuals who have received a payment under existing state schemes will be eligible to apply, but any such benefits and lump sum payments will be recovered when a payment is made under the new scheme. Eligible dependants of sufferers of diffuse mesothelioma may apply to the scheme where the sufferer has died before making an application. Calculating awards of compensation for dependants in civil cases can be complex, but under the scheme it will be simple and quick. The scheme will pay eligible dependants exactly the same amount as the sufferer would have received. We will set out details of the application process in the scheme rules. The scheme will give a right to an applicant to request a review of decisions taken and confer a right of appeal to the First-tier Tribunal against a decision taken on a review.
A sufferer must have been diagnosed on or after 25 July 2012 to be eligible under the scheme. A cut-off date will always be unfortunate for those whom it excludes. However, we must be pragmatic. The costs to the active insurers funding the scheme would be prohibitive if we were to make the scheme open-ended. It was on 25 July 2012 that the Government announced that they would set up a payment scheme and so created a reasonable expectation that eligible people diagnosed with mesothelioma on or after that date would receive a payment.
The Bill does not—and cannot—look to respond to all asbestos-related disease. The issue of individuals who have developed other asbestos-related diseases through negligence or breach of statutory duty and are unable to bring a civil claim for damages of course needs to be addressed. However, this Bill is not the appropriate instrument to do that. Mesothelioma is distinctive, and its link to asbestos exposure is undeniable. This allows for the fast processing of cases because there is no doubt that asbestos exposure caused the disease. The Bill supports the administration of a simple and streamlined scheme. It could not cover other diseases, where there could ever be a question as to the cause, because the lengthy investigations required in order to prove these cases would choke the scheme, preventing the comparatively simpler mesothelioma cases being administered with the necessary speed. Again, I ask noble Lords to look at this emotive issue from a pragmatic perspective and focus not on what is impossible but on what can be achieved. This legislation is a huge step forward and should be recognised as such.
The establishment of a technical committee to handle disputes relating to cover is key. The technical committee will be distinct from the scheme and will deal solely with disputes related to insurance cover. If a question arises between an insurer and an individual about whether an employer maintained employers’ liability insurance with the insurer at a particular time, the technical committee will be able to make a binding decision on this issue. In practical terms, this means that if a person with diffuse mesothelioma has some evidence that an insurer was providing cover at the time they were negligently exposed but this evidence is contested by the insurer, they can ask the technical committee to make a decision. This will also benefit other mesothelioma sufferers exposed to asbestos by the same employer at the same time, who may wish to bring a claim against that employer in the future. The technical committee will ensure consistency in decision-making and allow more people to take a case to court, having had the issue of cover already decided. Where the technical committee decides that an insurer is not on cover in a particular case, and no other employer or insurer has been traced, the person with diffuse mesothelioma may then be able to apply for a payment under the scheme.
The Bill envisages a review process for any decision taken by the technical committee. Following a review, a person may refer a decision to arbitration, after which very limited recourse to the courts is possible under the arbitration legislation. Again, timing is key; undue delays in the decision-making process would prevent an eligible applicant taking further action while they are still alive, be it seeking damages in the civil courts or applying for a scheme payment. It is expected that the decisions and reviews will be undertaken by the technical committee with the utmost speed.
I now turn to the levy on insurers. The levy will be imposed on active employers’ liability insurers at large, not on the individual insurers who took the premiums and who were on cover in the cases that will come to the scheme. The levy will be fair and not excessive, and set at a rate that does not require the insurers to pass on increased costs to business. The scheme could be jeopardised if the levy were set disproportionately high, which might invite legal challenges from the insurance industry. This would delay the introduction of the scheme, preventing a payment mechanism being in place at the time of the peak of mesothelioma deaths around 2015. Once more, we must be pragmatic and recognise what can be achieved.
The cost of the scheme in the first year will be considerably higher than in subsequent years because of the number of cases dating back to 25 July 2012. To avoid the first period’s levy being unaffordable and risking costs being passed on to current employers through higher premiums, the costs will be spread over four years.
Existing government provision is available for those who are unable to claim damages or receive payments from elsewhere. Where a person has received government benefits or lump-sum payments for diffuse mesothelioma and subsequently becomes eligible for a payment under the new scheme, the benefits recovery legislation will apply. This is because people should not be compensated twice for the same condition or compensated in excess of their loss. This means that an eligible applicant will receive a scheme payment after the deduction of relevant social security benefits and lump-sum payments, which the scheme administrator will repay to my department through its compensation recovery unit. Similarly, the Bill includes amendments to the existing lump-sum payments legislation to prevent an individual receiving such payments after they have received a payment under this new scheme.
I hope that noble Lords can agree today that the principles driving the Bill are right and just; that it is right that we legislate to provide for people with diffuse mesothelioma who are unable to claim civil damages from an employer for negligence or breach of statutory duty; that it is right that the insurance industry bear the cost; and that it is right that we establish the scheme with the greatest possible speed.
The measures contained within this Bill will mean that people with diffuse mesothelioma or their eligible dependants will be supported financially at this most stressful time. Quick access to payments will allow victims to afford care and treatment costs so that they can die at home with dignity.
The Bill marks great progress and strikes a careful balance in a fair and lawful way between the rights of victims and the active insurers funding the scheme. Several active insurers funding the scheme will not have even existed at the time when the exposure to asbestos occurred. Several of these insurers will have also maintained good records for the periods when they were providing insurance services. The Bill demonstrates the commitment of the insurance industry to correcting a terribly damaging market failure, and I thank the Association of British Insurers for this commitment. I am encouraged by the support of the industry, and look to the Financial Conduct Authority to support this work further through vigorously pursuing any insurer that fails to comply with requirements relating to EL record tracing.
The Bill is timely and necessary. It is something that I believe we should all welcome, and I commend the Bill to the House. I beg to move.
Lord Freud
My Lords, I have been in this House long enough to have an expectation that this would be a high-quality debate. I can confirm that my expectations have been exceeded. This was a very good debate which showed that noble Lords have focused on the issues and is the precursor to a valuable process being undertaken as we go through Committee and subsequent stages of the Bill.
Clearly, the Bill deals with what I called a very damaging historic market failure. Various noble Lords, such as the noble Lords, Lord Avebury, Lord Alton and Lord Browne, implied that it might have been rather more than that. Indeed, it was implied that there might have been reckless behaviour. Observations have also been made about the way in which the paperwork was dealt with. To be blunt, many people in the insurance industry would admit that that was the case.
This is not the Bill I wanted to bring to the House. I will explain why that is the case because it is very important that noble Lords should understand that. I wanted to find a way of allocating responsibility to the companies that had engaged in the relevant business in the year in question so that we could levy a specific charge on those companies for the business for which they were responsible over the relevant period. We would thus have allocated the responsibility where it should lie. I spent a lot of time and, indeed, some of the DWP’s money, researching that proposition. However, I came to the conclusion that such a course of action was legally too risky in a most litigious environment. Therefore, we have moved to a second-best position, the implications of which are driving many of the shortfalls that noble Lords have pointed out vigorously tonight, because it is one thing to say that there is a moral imperative to look after the individuals suffering from this terrible disease and their dependants but it is another to pin the responsibility on companies which, frankly, had nothing to do with it. We are looking to insurers in the employers’ liability market to fund this provision through the levy and we are looking at the appropriate level of levy in that marketplace when direct blame cannot necessarily be attributed. That is why the scheme is designed in the way that it is and why various constraints are in place.
I think that I heard support for the principles of the scheme. We can get money to the sufferers regardless of whether the insurance records have been lost. In general terms it is right that we look to the insurance industry to provide this support, not least because this situation is a horrific blemish on its reputation which it will, and does, want to correct and mitigate.
We need to help the insurance industry to impose this levy. It cannot do it on a voluntary basis, which would have been the ideal position and the one which I would have preferred. It needs the legislative support because it is a disparate industry with very many different players in it.
We are clearly going to spend a lot of time going through the detailed questions raised. As I will be going through them in Committee, I do not intend to spend a lot of time going through everything now, but I will try to pick up the main themes. I need to add something that I omitted to do earlier, my thanks—which several Lords have mentioned—to the victims’ groups and the trade unions for all the work they have done and for which I am personally most grateful.
Before I get into the drier stuff of this, I must add that many noble Lords talked about the human stories. Nearly all of us will know someone who has gone through this, and there is an awareness here that in many ways this is one of the worst diseases to get. I acknowledge that. The noble Lords, Lord Giddens and Lord Monks, and many other noble Lords made that point and told us some stories to remind us.
One of the key issues raised by virtually all noble Lords—too many to mention individually—was about setting the figure at 70%. There was a real juggling act about what the right level of levy is, and that is something we can spend more time in Committee debating. If we set the levy too high, in practice what will happen is that it will just raise the amount to be paid and the insurers will pass on virtually all of it to British industry, which is something I was very keen not to see. There is a lot of economics around this, but if you set a small level in a reasonably competitive market, most of it will probably be absorbed by the insurance industry, which should do so, rather than by British industry, which should not be required to absorb it. There is a real balancing act in the amount of money that it is sensible to raise this way to get to the victims, and that is the main driver here. It is not, I want to emphasise, the behavioural incentives that have been floating around. That is not what we are doing here. We are trying to get a balance of funding.
The second issue is, because we went early—theoretically one can start doing a levy like this only at the time at which it becomes law—we have gone from the date of the formal announcement, from which point the insurance industry can start to reserve. However, one of the issues coming from that is that in the first year, we effectively have to make over three years’-worth of payments, and noble Lords will see the problem instantly. There is suddenly a very large levy in one year of the kind that is very difficult to absorb. That is the reason that we have worked to smooth that first year over four years, so that we do not get these sudden large amounts, but it is a constraint. I shall not go into the detail tonight of how difficult all this is to do, although perhaps in Committee I could be persuaded to open my heart a little about particular Treasury rules, levies that are treated like taxes and why the Treasury, which collects taxes, should give the DWP any money to make payments.
Lord Howarth of Newport
Even before the noble Lord opens his heart to us in Committee, will he look again at the question of the start date in the light of the figures we have been given? We have been told that the life expectancy of a mesothelioma sufferer following diagnosis is perhaps two years. We are told that around 2,400 people die each year, and that the insurance history can be traced in more than 50% of cases, which means that more than half are able to pursue their case against the insurer. That leaves around only 1,200 people who would benefit if the noble Lord were simply to remove the start date. I would have thought that that ought to be affordable and that the insurance industry ought to accept that quite limited extension of its responsibility. I hope that the noble Lord will think about that and perhaps even amend Clause 2 himself and not just leave it to us.
Lord Freud
Virtually all noble Lords mentioned the start date. The trouble is that, in principle, this is a sheep and goats situation. Any date, wherever it is set, as the noble Lord, Lord Monks, mentioned, is always arbitrary at one level. To pick up on the point made by the noble Lord, Lord Howarth, this concerns dependants as well, so if there was no start date and the date went back indefinitely, we really would be talking about a huge amount of money. We will spend a lot of time talking about this, but let us flesh out the areas of discussion.
I think that we might look in Committee at the point made by my noble friend Lord German and reinforced by the noble Baroness, Lady Taylor, about a cap or a different structure. Noble Lords can see my constraints, but we can look at shaping the structure in different ways. The noble Baroness, Lady Donaghy, asked when we would have the report on payments. It will be ready in the summer. In response to my noble friend Lord Courtown, I will say that we will have the scheme rules ready to be looked at by the time we reach Committee.
Extending this to other asbestos-related diseases was the other big issue of concern to virtually all noble Lords. The point about mesothelioma is that if you have it, you will essentially have contracted it doing a job in which there was negligence, and that it is fatal. You can fix a figure with a tariff level and you can go very fast. The objective is to reach a point within five months as compared with a typical period now of two years. Noble Lords will be conscious of the meaning behind those periods, given the prognosis of survival for up to 15 months. Getting something this quickly is really important. There may be schemes for other types of asbestos-related illness, but they could not be set up within this structure. We would have to look at something else; it could not be a simple extension.
My noble friend Lord Avebury and the noble Lord, Lord Alton, asked how many meetings have been held. Out of amusement, I counted them. There were 15 meetings with representatives of the insurance industry, of which seven were held in quite a tight period. You can imagine that they were being held during a time of heated negotiation. A total of 11 meetings were held with representatives of victims’ groups, lawyers and members of the all-party parliamentary group. It is not a complete balance but I took on board as much as I could as we built this.
I will not spend a lot of time tonight on the MoJ process. We will have time to do a bit more. The fundamental point is that the MoJ will launch a consultation shortly. It will go through all these issues and then come up with a scheme on the balance, taking on board all the responses. This is a major process and we will just wait for it to happen.
The noble Baroness, Lady Donaghy, raised the question of the scheme administrator. We are in control of this scheme and the DWP will drive the scheme rules. The scheme administrator will therefore be answerable to the Secretary of State, who will monitor whether it is doing the job that needs to be done. It is not a done deal with the ABI at this stage, though it is setting up a shadow company. If it does this successfully and if it is the administrator, it means that we can go very fast, but it is open at this stage.
My noble friend Lord German raised a key point about the assumption of negligence. What distinguishes mesothelioma from some of the other diseases is that there is no reason for it other than being exposed to asbestos in employment. There has been a general acceptance that if you were exposed to asbestos in the workplace it would be through negligence. The decision has typically been made on a balance of probabilities. We will spend more time in Committee on the important legal context of why one can do such a straightforward and rapid scheme.
I have had good warning from the noble Lord, Lord Alton, that I will get an amendment proposing that some of this levy should effectively go into research. I cannot tell the noble Lord how hard I have tried to produce that result for him. I have failed to do it and we will spend time on this in Committee. There are some really complicated technical reasons why that cannot happen, mainly because, formally, a levy is a tax and it cannot go to anyone but the victims. I have tried every single route round this. If noble Lords are cleverer than me and can work their way through it differently, I will be delighted.
Lord Alton of Liverpool
I am grateful to the Minister, who is obviously coming to a conclusion, for giving us a lot of his time in replying. Has he noticed that the British Lung Foundation proposal is not asking for money from the levy? It is suggesting a membership scheme for every insurance company, who would then contribute £10,000 as part of that scheme. This would raise £1.5 million each year. He will also recall that I made a point about the amount of money coming into the Treasury as a consequence of the proposals before your Lordships tonight.
Lord Freud
My Lords, if it was done on a voluntary basis by the insurance industry itself, that would be one thing. If it is done through legislation that is another thing and that is the problem, but I have not given up on research. There are quite a lot of issues here. The Government do not spend a lot of money in this area and there is a kind of chicken and egg situation because we commission research only if it is of high quality, yet if there is nothing to encourage it you do not get the bids. There is lots more and I am working with my noble friend Lord Howe on trying to get more there. The noble Lord is pushing on an open door, which I am afraid someone else has slammed in all our faces.
I will close by saying that the Bill is a really positive opportunity. It means that we can provide financial support to the sufferers who cannot bring a claim for civil damages. We can do it quickly, with the creation of an industry-supported payment scheme. I am grateful to hear that noble Lords may try to amplify the Bill in different ways but that the determination of the House is to not see a delay. If we achieve that collectively, and pass the Bill in 2013, we can set up the scheme in April next year and get the first payments to people in July, with 300 people receiving, each year, an average of about £100,000. It is an important and essential piece of legislation and I commend the Bill to the House. I again thank everyone who has contributed, in the very high-quality way that noble Lords have, to this debate and ask the House to give the Bill a Second Reading.
Housing Benefit
Lord Freud Excerpts(11 years ago)
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Baroness Quin
To ask Her Majesty’s Government whether they have any plans to make changes in the under-occupancy rule for housing benefit.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, we have no plans to make changes to the removal of the spare room subsidy. As well as conducting a formal evaluation of the policy over a two-year period, we have started an outreach exercise with a number of local authorities to monitor implementation and ensure that sufficient support has been provided to local authorities and claimants.
Baroness Quin
I thank the Minister, but the reply was disappointing. Many people feel that this is by far the worst of the welfare changes that the Government have made. There is mounting evidence not only of financial hardship but of families and individuals coming under severe emotional pressure. A particularly sad case was reported just last week in which there was a tragic outcome. It seems that the warnings of many noble Lords in our earlier debates on this subject have been borne out. I urge the Minister to reconsider this tax and, preferably, to abandon it altogether.
Lord Freud
My Lords, the policy as it stands is designed, first, to save money. We are looking to save £500 million a year here, which is within the context of the overall saving of £2 billion that we are trying to make over two years. The bulk of the burden has been on the private rented sector, on the LHA basis, and that has gone through reasonably safely. We are monitoring this particular change. All these changes have to be looked at very carefully and we need to keep a very close eye on this one, and we are keeping a very close eye on it. The change is designed to make sure that people can respond by trading down, pulling in lodgers or looking for work. People can make a behavioural response here, and clearly we are looking for that response.
Lord Martin of Springburn
My Lords, a couple were interviewed on television this morning by Eamonn Holmes. The wife had spina bifida and had to be in a special bed, which the viewers were able to see. The husband was therefore required to sleep in a second room. He stated that both of them will lose £60 per month and that they had made representations to the Minister’s department. Will the Minister look into this matter, which seems to me and many others to be very unjust indeed?
Lord Freud
My Lords, we are looking to protect people in difficult circumstances by looking to the local authorities to apply the discretionary housing payments, which have gone up enormously. Overall, they are running at £150 million this year, and at £360 million for the SRS. Our expectation is that these hard cases will be looked after locally.
Lord German
My Lords, as my noble friend the Minister has just explained, there are a large number of exemptions which are made through local authority discretion. The Government have, however, insisted on a certain number of exemptions, and one of the most welcome is the recent exemption given to a disabled child who was unable to share a bedroom. Will the Minister extend that commitment to include a disabled adult who is unable to share a bedroom, and so put this matter beyond doubt, rather than leave it to the discretion of local authorities?
Lord Freud
My Lords, we are looking for local authorities to deal with this matter with adults. We think that there is a difference between disabled children and disabled adults in that disabled children cannot know whether they pose a risk to themselves or to another child whereas adults and couples are able to exercise choice in how they run their lives.
The Lord Bishop of Ripon and Leeds
My Lords, I am told that estimates in Hull suggest that some 6,000 people there are affected by the under-occupancy rule and that there are something like 70 flats available for them to be moved to. I hear similar stories from all over the country. Will the Minister tell us just what people are supposed to do when no smaller accommodation can be offered?
Lord Freud
My Lords, there has been a substantial exercise by many local authorities and housing associations around the country to try to juggle people’s requirements. The figures on social-sector housing provision in England show that 31% of the housing has one bedroom, 34% has two bedrooms and the remaining 35% has three or more bedrooms. So there is provision. It is a question of getting people moved into the right accommodation. Let us not forget that 250,000 people are in overcrowded circumstances and 1.8 million people are on the waiting list for social housing.
Lord Tomlinson
My Lords, the Minister said very clearly that he was monitoring the situation carefully and keeping a close eye on what is happening. Will he tell us how many people have to commit suicide before he recognises that the policy is wrong?
Lord Freud
My Lords, clearly I am aware of the recent very sad case, and I wish to reiterate my condolences to the family. It is not appropriate for me to comment further on that because it is a matter for the relevant authorities to investigate.
Baroness Hollis of Heigham
My Lords, what advice would the Minister give to this chair of a housing association? We have a family consisting of a disabled couple who have two children and live in a house that has one double bedroom and two single bedrooms. They cannot move because there is no stock in rural Norfolk for them to move to. They cannot work because of their disability and caring responsibilities. They cannot afford the bills. They are applying for discretionary housing payments but that will run out by about September. At that point they will run into severe arrears. Would the Minister advise me as chair of that housing association to evict that family at that point and to send them into bed-and-breakfast accommodation at a higher cost to us all as well as to them?
Lord Freud
My Lords, the idea of providing discretionary housing payments is twofold. The first is to allow for the costs of making a change and a transition; and the other, in some cases, is to maintain the family in an appropriate home indefinitely. One of the most obvious examples of the latter is specially adapted homes where it does not make sense to move. So there should be a strategy of support for that couple regardless of whether it is in the short term or the longer term.
Child Poverty
Lord Freud Excerpts(11 years ago)
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The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, the IFS report is an interesting addition to the work on tackling child poverty in the UK, but the Government do not believe that it is possible to predict poverty levels with any certainty so far away. Poverty figures rely on the performance of the economy, on people’s behaviours and on government policy. As the report acknowledges, these cannot be predicted effectively over this timescale.
Lord Dubs
My Lords, it is disappointing that the Minister chose to brush aside a very sound piece of work, which I am sure he has read and looked at in great detail—or his officials have. Is it not alarming that a reputable organisation with sound analytical methods has predicted that child poverty is likely to increase by 1 million by 2020? Even if the figures are a bit out, the fact is that they are going up alarmingly, and child poverty is such a damaging blight on our society.
Lord Freud
My Lords, I have read the report with great interest and not relied on my officials. There are a lot of very valuable things in it. One of the most interesting things, as the noble Lord will be aware, is the uncertainty caused by the way in which absolute poverty is measured. The report says that because the rather unreliable RPI measure is used, the figure is 10 percentage points higher, whereas if the CPI measure were used it would be only 1.5 percentage points higher. The report states that we should look at that very closely, which we are doing.
The Lord Bishop of Birmingham
My Lords, notwithstanding the Minister’s scepticism about the report, would he be kind enough to tell us about some of the ways in which he and the Government are considering substantive measures to close the gap and reduce child poverty if the report’s predictions are proved right?
Lord Freud
My Lords, we are currently consulting on child poverty and we are committed to the Child Poverty Act and the targets in it, but we are looking at better measures for tackling it. The academic research tells us that the best predictors of poverty are worklessness in parents and low educational attainment, and that one of the most effective ways of getting out of poverty for those children is for them to achieve a better educational outcome.
Lord Kinnock
After the last two answers, is not the Minister going to conclude that he has been taking refuge in statistics and semantics rather than addressing the fundamental question raised by my noble friend, which relates to the level of child poverty in this relatively affluent country? Is it not clear that, even if the institute’s calculations were significantly wrong, we would still be talking about a rise of more than 500,000 in the number of children in poor families in the foreseeable future in the 21st century? Can the Minister give us his own objective view of whether that is morally, socially and economically acceptable, or whether it is appalling?
Lord Freud
What is vital with child poverty is that we decide on how to tackle it. Under the last Government, we found that enormous amounts of money were spent on tackling it without hardly moving a figure. In the last few years of that Government, it hardly shifted. The noble Lord can look at the figures himself. We spend 3.6% of GDP on children and families; we are the second highest in the UNICEF measures, and we get precious little bang for our buck. We end up well down the table in performance for how children do. We need to work out how to solve child poverty and not worry about income transfers, which do not achieve the outcome.
Lord Roberts of Llandudno
Is the Minister aware that child poverty and poverty generally are not evenly spread across the United Kingdom? We have areas that are totally desperate. For instance, the south Wales valleys have twice the level of poverty than other places in the UK. What are the Minister and the Government doing to bridge that gap and somehow even out the issue of child poverty and other poverty in the United Kingdom?
Lord Freud
Yes, my Lords, there is a lot of variation around the country on child poverty. Again, I go back to the UNICEF report, which came out recently and which I found fascinating. Finland, which spends only 2.5% of its GNP on children and families, comes out very near the top. One thing that is so special about Finland is the emphasis that it puts on early years education, which seems to have a big impact there. We have to get to the causes of poverty and not just look at the pure measure.
Baroness Massey of Darwen
My Lords, is the Minister aware, having quoted the recent UNICEF report, that other recent reports, including from UNICEF, concluded that under the last Government child well-being increased substantially? It is very worrying that more recent reports and evidence now suggest that, under this Government, child deprivation is increasing dramatically. Is it not a concern to him that jeopardising the chances of children is a serious matter?
Lord Freud
My Lords, I could not agree more. One of the most dismaying things that I have ever read is the 2007 UNICEF report that put us right at the bottom in terms of child well-being. The latest report from 2011 shows us crawling up four places, but we have a long way to go and we need to find the right ways in which to help children genuinely to get out of poverty.
Lord Flight
My Lords, is not the related problem of feral children who engage in gang warfare and drug dealing and whose parents are not parenting properly even more serious? The solution to that is shown to be provided increasingly by the new technical colleges which motivate such children and teach them a skill. They then start to want to learn generally. That is the sort of measure that really addresses our problems rather than just giving out money.
Lord Freud
My Lords, we are in the middle of a genuine consultation on how to tackle child poverty. Maintaining the income measure so that we know what is happening but getting at the measures that will make a real underlying difference to entrenched poverty is absolutely vital in that exercise.
Queen’s Speech
Lord Freud Excerpts(11 years ago)
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Lord Lang of Monkton
That an humble Address be presented to Her Majesty as follows:
“Most Gracious Sovereign—We, Your Majesty’s most dutiful and loyal subjects, the Lords Spiritual and Temporal in Parliament assembled, beg leave to thank Your Majesty for the most gracious Speech which Your Majesty has addressed to both Houses of Parliament”.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, it is a privilege to open this debate today, the fourth day of the debate on the gracious Speech.
I am delighted to welcome the noble Lord, Lord Berkeley of Knighton, the noble Viscount, Lord Ridley, and the right reverend Prelate the Bishop of Winchester to this debate. I am sure that the whole House looks forward to their maiden speeches today.
I am also pleased to welcome my noble friend Lord Howe, who will be responding to the many views, proposals and reflections that we will hear today.
The gracious Speech sets out the Government’s dedication to delivering positive change to the United Kingdom. We set out our commitment to landmark reform on social care and pensions, which will reward those who work hard. We look to improve services for vulnerable children and support strong families. The gracious Speech also covered the topics of culture, agriculture, and energy: we put the consumer first while taking decisive action to deliver economic growth.
This Government are committed to reforming the welfare system so that it is fair and affordable while ensuring that the most vulnerable get the support they need. With major reforms such as universal credit, the Work Programme and the personal independence payment already under way, we are helping people to find work, making sure that work pays and focusing support on those with the greatest need.
We now look to the Pensions Bill to apply the principles of modernisation to state pensions, providing a system fit for the 21st century. The Bill, introduced last week, contains provisions to set up the single-tier state pension—a simple flat-rate state pension for future pensioners that is set above the basic level of means-tested support. This will provide the clarity that is needed to help people to plan and save for their retirement. We will create a state pension system that reflects the lives and contributions of today’s working-age people.
Indeed, those who have historically done poorly in the current system—for example, people with caring responsibilities or those with broken work histories—will benefit. In the first 10 years, more than 700,000 women should receive, on average, £9 a week more in state pension through the single-tier valuation.
As life expectancy continues to increase, we are taking action to ensure that the state pension system remains sustainable over the long term. The Pensions Bill will bring forward the increase in state pension age to 67 by eight years, so that it gradually increases from 66 to 67 between 2026 and 2028. The Bill contains provision for a regular review of the state pension age, so that this issue is considered every Parliament. This will ensure that the state pension age remains sustainable and fair between the generations.
The Pensions Bill also contains a number of measures to strengthen private pensions. We estimate that the introduction of automatic enrolment into workplace pension schemes will result in between 6 million and 9 million people either saving for the first time or saving more into workplace pensions. However, without further reform, automatic enrolment will create more dormant pension pots as people move jobs. Therefore, we are legislating to introduce a system of automatic transfers of small pension pots. This will help consolidate pension savings into an individual’s current employer’s scheme, making it easier for people to keep track of their pensions saving, plan for retirement and secure a better retirement income. Finally, the Pensions Bill will make provision for the introduction of the bereavement support payment. This will simplify the current system by moving to a single benefit, with support focused on the period immediately following bereavement.
Continuing on the theme of support, the Government recognise that today’s care and support system often fails to live up to the expectations of those who rely on it. Many have good experiences, but the system can often be confusing, disempowering and not flexible enough to fit around individuals’ lives. The Care Bill takes forward our commitments to reform social care. This will make a reality of our vision for a modern system which promotes people’s well-being. Critically, the Bill will reform care and support funding by creating a cap on care costs, giving people peace of mind by protecting them from catastrophic costs. In providing a new right to deferred payment of care costs, it will also ensure that people do not have to sell their home in their lifetime to pay for residential care
We will refocus the law around the person, not the service, empowering people to take control over their care and support, and to understand their entitlements. We will strengthen the rights of carers to access support and we will introduce a new adult safeguarding framework. We will deliver a number of crucial elements in our response to the findings of the Francis inquiry, which identified failures across the health and care system that must never happen again. We will introduce a ratings system for hospitals and care homes, and a single failure regime, and we will make it a criminal offence for providers to provide false or misleading information.
Therefore, this Bill is vital in delivering our commitment to ensure that patients are,
“the first and foremost consideration of the system and everyone who works in it”.
I am pleased that public consultation and pre-legislative scrutiny has demonstrated widespread support for the principles and approach to law reform in adult care and support. Indeed, my noble friend Lord Howe and I are very grateful to those present who have already provided helpful and detailed scrutiny in draft through a Joint Committee of both Houses.
I turn to legislation with which I am personally involved. I am delighted that the Mesothelioma Bill was introduced in this House last week. Diffuse mesothelioma is a cancer of the lining of the lungs or abdomen caused by exposure to asbestos. The Government will act in the interest of people with diffuse mesothelioma and will set up a payment scheme for eligible people who can show that they were negligently exposed to asbestos by their employer and cannot trace an employer and insurer. It will be funded via a levy imposed on insurers currently selling employers’ liability insurance.
I shall now refer to the remaining subjects to be covered in today’s debate on culture, agriculture, energy and education. The gracious Speech outlined measures that will contribute to the economic growth of the nation while also putting the consumer at the heart of what we do. I shall therefore begin with the water Bill. I am pleased that my noble friend Lord De Mauley will be taking this important matter through the House. The water Bill will help us to achieve a future where water is always available to supply households and businesses without damaging the environment. We seek reform that will offer choice and flexibility to customers and help to keep bills affordable. That is essential for our economy.
The water Bill will also contribute to economic growth by encouraging the water sector to become more efficient, creating employment for new entrants to the industry and driving innovation. All business customers will be able to switch their water supplier so that they can achieve the best service and tariff. We will make it easier for water companies to buy and sell water from and to each other. New businesses will find it easier to enter the water market to provide new sources of water or sewerage treatment services, known as “upstream” services. Developers will also find it easier to connect new developments to the water mains and sewerage systems. We believe that this Bill is also the best vehicle for taking measures to address the availability and affordability of flood insurance.
The Gambling (Licensing and Advertising) Bill will enhance protection for consumers. An estimated 80% of remote gambling activity by British consumers takes place with operators that the Gambling Commission does not regulate. The Bill will change this. All operators selling or advertising into the British market, whether from here or abroad, will be required to hold a UK Gambling Commission licence. Under the new regime, all remote gambling operators will be subject to the robust and consistent regulation required to support action against illegal activity and corruption in sport. They will be required to contribute to research, education and treatment in relation to British problem gambling and to comply with licence conditions that protect children and vulnerable adults.
I turn now to children and education. The Children and Families Bill will continue its journey through Parliament, taking forward the Government’s commitments to improve services for vulnerable children and support strong families. It takes forward critical reforms to our adoption, family justice and special educational needs systems. It will support improved educational attainment for looked-after children and strengthen the role of the Children’s Commissioner so that children have a strong and independent advocate for their rights. It introduces a new system of shared leave for new mothers and fathers and contains measures to encourage growth in the childcare sector. I am grateful to noble Lords on the Joint Committee on Human Rights and the Select Committee on Adoption Legislation for the important contribution they have already made during pre-legislative scrutiny of the Bill. It is currently receiving thorough scrutiny in the House of Commons and we look forward to many expert contributions from across this House when it reaches us.
In addition, I am pleased that paving legislation will be introduced through this Bill to enable HMRC to develop the new tax-free childcare scheme that was announced by the Prime Minister and the Deputy Prime Minister in March. This will provide up to £1,200 per child. A further £200 million will be made available for those receiving universal credit, which is equivalent to covering 85% of childcare costs for households qualifying for the universal credit childcare element where the lone parent or both earners in a couple pay income tax.
Lastly, the Energy Bill will also be carried into the 2013-14 Session. This Bill will generate the biggest change to the electricity market since privatisation. It will deliver secure, clean and affordable electricity and ensure that prices are fair. It will attract the £110 billion investment that we need in this decade alone to replace our ageing energy infrastructure with a more diverse and low-carbon energy mix and respond to an increased risk to security of electricity supplies as a large proportion of our existing capacity comes offline.
Investment in new low-carbon generation and reliable capacity will significantly boost economic growth, generating skills and expertise and supporting up to 250,000 jobs across the energy sector, while also helping us to meet our ambitious climate and renewable targets to build a cleaner energy future for Britain and the world. These reforms will work with the market and encourage competition to minimise costs to consumers and deliver the investment the UK needs. We are also using the Energy Bill to ensure that all households get the best deal for their gas and electricity, putting consumers in the driving seat, giving them clear choices, and incentivising companies to compete hard for their custom.
I believe that the measures I have discussed today make a real contribution to delivering positive change and boosting economic growth. I look forward to the balanced and informed debates that will take place over the coming months on this legislative programme, alongside the wisdom and experience that will be shared today. I welcome the contributions of all who are to take part in this debate.
Jobseekers (Back to Work Schemes) Bill
Lord Freud Excerpts(11 years, 1 month ago)
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Baroness Hollis of Heigham
My Lords, I support my noble friend in his amendments. Timely and efficient appeals systems are always necessary and in these circumstances they are essential. The social security appeals system is under strain and that strain will be intensified as a result of what claimants will now be experiencing. What are those difficulties? The number of social security cases going to tribunals in general were 418,000 in 2010-11, 70% higher than just two years previously, while, as far as I can tell, this year’s statistics are up a further 14% or so, and appeals against sanctions as such are only a modest proportion of these.
Social security appeals represent half of all tribunal cases. The tribunals are receiving social security cases faster than they can clear them, so that although half of all cases take 14 weeks or less, one-quarter take between three and six months to be heard and 10% take between six months and a year, so only half of those cases meet the key performance indicator, the KPI, of 16 weeks laid down by the department. During that time—that extra long waiting period already experienced—claimants’ circumstances change, they lose oral evidence based on memory and above all they are left without any benefit, some of them for months, and suffer real hardship. Timeliness and efficiency, therefore, are key.
We need the Government to tell us what problems they will meet in unleashing the stockpile of sanctions cases into a system already under strain, with the inevitable appeals that will follow, and how they propose to resolve them. How many cases are currently outstanding? Do the Government have the capacity to increase sitting days beyond the 80,000 or so required at the moment to deal with the full backlog? How long does the Minister expect claimants to have to wait? How many, and what percentage, will be over the three-month KPI target?
The second issue is not about numbers but about verdicts and outcomes. Of those cases going to appeal, some 40% overall are won by the claimant. Former presidents’ reports on this are, frankly, an excoriating indictment of the DWP decision-making process and their findings over the years are confirmed by the recent November 2012 report analysing appeals. The main reason why appellants win is that they produce additional oral evidence not previously taken into account by DWP. However, the reports and the research have noted that tribunal judges were continually frustrated by the behaviour of decision-makers within DWP. In the latest statistics, about one-third of local decisions on sanctions were reconsidered by the decision-maker and, of those, half were in favour of the claimant. Of those not accepted by the decision-maker, just over one-third are going on to tribunal.
Why are those tribunal judges so continuously frustrated by decision-makers’ efforts within DWP? First, we are told by tribunal judges that decision-makers choose not to accept additional, usually oral, evidence without having any good reason for refusing it. That is because they have often failed properly to engage with the claimant. Something like 65% of all appeals come into this category. Secondly, there is little evidence that decision-makers reconsider cases at all. They were, the report said, reluctant to do so and did not bother to explore any discrepancies in evidence or to follow up requests for further information.
Thirdly, decision-makers did not weigh medical evidence at all appropriately, especially for mental health claimants, nor did they seek further information when dealing with a progressive condition. That applied to something like 15% of the appeals that went to tribunal. Most damning of all, they often made different decisions from the tribunal decision-makers on the basis of the same evidence presented to the tribunal, which meant that decision-makers got it wrong, according to law, in 30% of the cases lost by DWP. In other words, had the decision-makers within DWP done their job properly, these reports suggest that DWP would either not have had the appeal because the decision-maker would have rightly reversed the original decision, or at appeal the DWP would have won most of the appeals that it lost because the tribunals would have accepted that all the appropriate evidence had been properly assessed. That is a pretty searing judgment of the current system.
What are the implications for those caught by this Bill? The problem is clearly threefold. First, local offices are making flawed decisions, including on sanctions, and that is before we get on to the disgraceful area of targets. Secondly, decision-makers are not doing a proper job reviewing those local office decisions and are endorsing flawed decisions that they should have corrected. Thirdly, the tribunal service cannot keep up with the increased number of appeals coming its way. Of course, this will get far worse now that legal advice and support are withdrawn and, as a result and as we shall argue later, tribunal cases will take twice as long to process.
Will the Minister reduce the pressure on tribunals and better support claimants by requiring decision-makers to do a more conscientious review of the original decisions? It is clear that at the moment too many of them are not doing a professional job—bluntly, they need to brought face to face with the evidence. Are decision-makers informed of the tribunal’s findings and is their performance reviewed when their decisions are overturned by the tribunal? Could that perhaps be a KPI? What guidance and additional training will be made available to decision-makers to improve their performance? If the Minister is going to review any targets, could we please have a new performance indicator, a really useful target that reduces the number of successful appeals by claimants from the current 40% or so down to, say, 20% or even 15%? That would really transform decision-makers’ behaviour.
Given the trivial basis for sanctioning claimants uncovered by the Guardian, many of whom we can expect to appeal, thus increasing the backlog before eventually being overturned at appeal, as many of them will be, will the Minister ensure that cases going to appeal are pre-reviewed and re-reviewed by decision-makers to improve their own poor-quality decision-making? Will he also ensure that the number of tribunal sitting days is appropriately increased to meet the target of within 16 weeks, so that they are timely, and that—I am trespassing into a following amendment—sufficient advice is given to claimants, as my noble friend Lord Bach will argue, to reduce the number of unsuccessful appeals, given the delays? I hope that the Minister will be able to answer these questions and those of my noble friend tonight and in the process perhaps allay our very real concern for these claimants who are going to be caught up in an appeal system that is increasingly flawed and failing.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, the purpose of these amendments is to ensure that the reconsiderations and appeals arising from decisions relating to sanctions that are dealt with by the Bill are considered in a timely and efficient manner, and that appeals take into consideration the delay between the failure to participate and the issuing of the sanction.
I am happy to give a commitment to the House that DWP will process the stockpiled cases, and any reconsiderations and appeals that follow, in a timely manner. It is not in the department’s interest to procrastinate on these cases any longer than necessary. I also note that the department is already required by Article 6 of the ECHR to deal with social security disputes in a reasonable time, while the First-tier and Upper Tribunals are also bound to deal with appeals in a fair and efficient manner. When the Bill receives Royal Assent, I assure noble Lords that processing the stockpiled cases, including any appeals and reconsiderations, will be given a high priority. Purely from a business perspective, DWP will want to unwind these cases and any follow-up activity as quickly as possible so that it can utilise its resource in dealing with more current claims.
The associated amendment seeks to ensure that when the First-tier Tribunals and the Upper Tribunals are determining an appeal against a sanction decision issued in reliance on the provisions in the Bill, they have regard to the circumstances around the Reilly/Wilson case, particularly any delay resulting from the case. I understand, given the noble Lord’s statement at Second Reading, that he is concerned that, because there may have been longer than usual between the failure to participate and the issuing of a sanction, the claimant will be unable either to remember or to provide evidence of any good cause they had for the failure.
I will spend a moment describing the process that happens between a claimant failing to participate and the issuing of a sanction. When a claimant gets referred to a DWP decision-maker for a sanction decision, a letter is sent asking them to provide evidence of good cause. The letter says:
“Will you please contact me before”—
and then a date is inserted—
“to explain why you did not undertake this activity. You should note that unless you provide a good reason for not undertaking this activity, your benefit may be affected”.
So the stockpiled cases would, at the time of the failure, already have been asked once to provide good cause. The fact that we did not deal with these cases immediately will not have prevented these claimants from providing evidence of good cause at the time of the failure. The decision-makers will have all this evidence on the stockpiled cases already, so the risk that they have been unfairly treated is significantly minimised.
I know that not all claimants will have provided their evidence of good cause the first time they were asked for it, although this is of course entirely their fault. However, I reassure noble Lords that in these cases, where a claimant is attempting to argue that they had a good reason for a failure that occurred many months ago, decision-makers and First-tier Tribunals will make an objective decision based on the evidence before them. They would of course take into consideration any claimant’s argument that they had good cause, but that they cannot provide evidence because of the length of time since the failure. It would be up to those hearing the appeals to judge on a case-by-case basis whether they thought this argument was strong enough.
I also note that this amendment only seeks to ensure that the appeal, and neither the decision to issue the sanction nor the reconsideration, takes into account any time delay caused by the Reilly/Wilson case. I assume that this was not the intention of the noble Lord, Lord McKenzie. There is this oversight, and claimants in the stockpile would at the time have been asked for evidence of good cause. The tribunal is also already bound to have regard to all relevant matters.
Picking up the issues raised by the noble Lord and the noble Baroness on national insurance credits, prior to the changes to the jobseeker’s allowance sanctions regime from 22 October last year, national insurance credits were paid during the period of the sanction. National insurance credits are not paid when the benefit is sanctioned on or after 22 October. The Bill does not change these arrangements. The payment or not of national insurance credits with respect to stockpiled sanction decisions will therefore depend—
Lord Howarth of Newport
I wonder whether the Minister would reconsider the language habitually used by DWP. When he talks of a stockpile he is referring to human beings in very anxious circumstances who are waiting for their cases to be considered. Does not this language rather dehumanise them?
Lord Freud
The noble Lord makes the same point as JRR Tolkien, who did not think that “growth” was the right way to refer to hobbits at Bilbo Baggins’s birthday party. If the noble Lord can think of a better word than stockpile, I will happily use it. I cannot think of one off the top of my head. If the noble Lord finds that offensive—
Lord Freud
Yes, but there are six billion people around. I am trying to refer to a particular group. I hope that by the time we get to the next amendment I will have found a better word, so bear with me for a little while if I cannot work that one out on my feet.
On the point about people going into work: if a claimant has been off jobseeker’s allowance for longer than the length of their sanction then they will be deemed to have served their sanction, and therefore will face no penalty. I cannot go through the absolute detail of the proportionate amount but it is likely that we will do this proportionately for those who have been in work, so there will be a record of that.
On the points made by the noble Baroness, Lady Hollis, a lot of the issues surrounding what the tribunals are doing are in ESA cases, while we are dealing here with JSA cases. We are talking about rather small numbers; I will go into more detail on them. This is a very small group of people, and the concerns about how quickly they may go through the tribunals, and the pressure they put on those tribunals, are to that extent much more manageable than if theirs were the more complicated ESA cases. Likewise, much of the concern around those cases has been around the medical area and that, of course, will not arise in this particular instance.
The decision-makers receive in-depth training, including on the importance of impartiality, what constitutes evidence, and the balance of probabilities. Clearly a large number of their decisions—three-quarters—are upheld. By putting decision-makers in between, for instance, the WCA and the tribunal, we were trying to weed out those areas where the DWP considered that the tribunal would find against, and thereby reduce the volume. That is what has been happening, and clearly we watch that very carefully. Having dealt, I hope, with all the issues raised, I beg the noble Lord not to press his amendment.
Lord McKenzie of Luton
My Lords, I indicated at the start that these are probing amendments. That highlights part of the problem of having this truncated process: that we do not have the chance to take away and read the Minister’s comments. We have to try to absorb both what is said and what is not covered this evening.
In relation to deferred decisions, I will not use the term to which my colleagues objected. The Minister said that these would be dealt with in a timely manner. However, the thrust of the presentation made by my noble friend Lady Hollis was to ask whether there was the capacity to deal with this. Decision-makers are struggling under current arrangements, and adding this extra burden will make life more difficult.
On national insurance credits, I was trying to probe the point that when they are withheld because of sanctions, post October, in circumstances where the regulations that underpin the sanctions were originally found to be unlawful, the Bill switches lawfulness back on in respect of the sanctions component. Does that automatically run where national insurance credits have been withheld? What is the connection between the two? Does it automatically flow from whether a sanction has been levied, or does it require another process that authorises the withholding of the national insurance credit? If the original decision was based on an unlawful position in respect of the regulations, is the restoration of the lawfulness of those provisions under the Bill enough to authorise the withholding of national insurance credits? That was the point I was probing, perhaps not in sufficient detail.
On those cases that have been deferred where no decision has been made, I think that what the Minister said was a change from what we previously understood the position to be. I thought that the point had been made very clearly before that if somebody was in work, there would be no sanction. It seems that some nuances to that have been introduced by the Minister’s reply. Now it will depend on how long they have been in work in comparison to the length of the sanction that has been levied. That seems to be a new formulation, which we have not heard articulated before.
I did not hear from the Minister an assurance that we were seeking. Leaving aside the issue of making the regulations and notices retrospectively lawful, is it the Government’s intention that individuals should otherwise be in a worse position than they would have been had the regulations and notices been lawful ab initio? How does that interact with the appeals process? We have not unpicked all those issues this evening.
Having said all that, I do not think that we can get any further. I hope that the Minister will reflect on this discussion. If we could get something further in writing before we rise later this week, it might give us some reassurance. For the moment, I beg leave to withdraw the amendment.
Baroness Sherlock
My Lords, in responding to this amendment, I should like to pay tribute to my noble friend Lord Bach, who has fought tirelessly on this subject for many months.
As we have heard, it is currently possible for a claimant who meets the eligibility criteria to get free legal advice and assistance to cover preparatory work for a hearing. Legal aid may also be available for higher tribunals and courts appeals on a point of law. However, from 1 April, all welfare benefits will be out of scope for legal aid. The context for this Bill makes this all the more complicated because, as we heard from the Minister, the law on sanctions has changed, so claimants may struggle to work out what applies to their case. Further, since there may often be significant delays between alleged breach and appeal, claimants may also struggle to work out what good cause or recompliance mean so long after the event, subjects to which we will return on a later amendment. This brings me to my questions for the Minister. First, will he clarify the position? If a claimant would have been entitled to legal aid to help prepare his case had he appealed within a month of a decision to sanction him, will he still be entitled to legal aid on the same basis should he appeal after 1 April? If the answer is yes, how will this happen? Who will provide the advice and who will pay for it? If the answer is no, given that the Courts and Tribunal Service is likely to be inundated with cases once the deferred decisions pile is unleashed, what assessment have the Government done of the likely delays and the consequent additional cost to the Courts and Tribunal Service of having so many unadvised appellants arriving at once?
If the Government are unable to give satisfactory answers to all these questions, I suggest that the Minister should accept this very mild amendment. If he does not, and my noble friend Lord Bach chooses to press it to a vote, we on these Benches will give him full support. The very least that the Government should do is provide a considered view—impossible beforehand, given the timetable—of the effect on access to legal advice and support of a group which Parliament never intended to be affected by the provisions of the Legal Aid, Sentencing and Punishment of Offenders Act. We are pleased to support this amendment.
Lord Freud
My Lords, before I deal with this amendment, I ask the Committee to indulge me as I answer a couple of questions on the last round from the noble Lord, Lord McKenzie of Luton, which may be relevant.
On the question of what sanctions mean for national insurance, if the failure to participate was after 22 October 2012, national insurance is not credited but if it was before 22 October 2012 then it is. On going into work, no sanctions will be applied to people who no longer receive jobseeker’s allowance. That might save some writing.
Lord McKenzie of Luton
On the point about national insurance credit, I am not sure that the Minister’s answer deals fully with the issue that I raised. Perhaps the noble Lord will look at the record tomorrow and write in due course.
Lord Goldsmith
Does the Minister not think that what has just taken place illustrates how wrong it was to bring this Bill in and try to fast-track it through? He is answering, on the hoof, important questions in relation to the entitlement, not of stockpiles but of people. We have this problem because the Bill is being fast-tracked through. The amendments so far have been admirably moved. In relation to Amendment 2, the Secretary of State will, within a month of the Act coming into force, do something which we would normally expect the Minister to tell us before the Bill is passed. Will the Minister kindly reflect on that and consider whether it is not an absolute disgrace that the Bill is being passed in this way, as the Constitution Committee of your Lordships’ House, of which I am happy to be a member, said last week and other noble Lords made clear at Second Reading?
Lord Freud
My Lords, I may be to blame for moving off the particular amendment. We are not having a Second Reading debate now: we are dealing with a set of amendments. Amendment 2 seeks to ensure that the Secretary of State will have to publish, within one month of the Act coming into force, a report on whether claimants would have sufficient access to legal advice and support including legal aid. After 1 April, claimants who appeal to the First-tier Tribunal in England and Wales on welfare benefit issues will not, as a matter of course, be able to claim legal aid. This will be the position for all claimants affected by the legislation where they have applied for legal aid after 1 April. I hope that clarifies the position for the noble Baroness, Lady Sherlock. There will not be entitlement to legal aid after 1 April.
It is important to note that the change in legal aid in no way affects a claimant’s right to ask for reconsideration or appeal to the tribunal. This change in legal aid eligibility will have a limited impact on the claimants affected by sanction provisions in this Bill. Official statistics show that, of the 170,000 claimants sanctioned on ESE or MWA schemes, only around 5,000 appealed to the First-tier Tribunal. Based on these data, we therefore estimate that only between 1,500 and 2,000 claimants in the cases that have been stockpiled—cases, not people—will eventually appeal to the First-tier Tribunal. I also think that due to the nature of these cases it is likely that the vast majority of cases brought before the tribunal will be about a factual dispute where the claimant will need to present their case in plain language and will not require legal support. They will still be able to ask for support from, for example, a citizens advice bureau.
Lord Bach
My Lords, I thank the Minister for his reply. I thank other noble Lords who have spoken, all of them in favour of my amendment. I also thank noble Lords who have asked questions of the Minister in regard to this matter.
I have to say that I sometimes wonder whether the Government really understand how important these issues are. We enjoy a system of law that enjoys a reputation that is well deserved over many years. One of the jewels in the crown of the English legal system is that people, when they hear about it, know that it applies to everyone, not just to the rich and powerful but applies, sometimes to a limited extent, to those who are at the bottom of the pile. That is the glory of the legal system. What the Government do not seem to understand is that it does not matter whether there are 20 cases, 500 cases, or 5,000 cases; these are fellow citizens who should be entitled to the protection of the law like everybody else. Is the Minister really saying that if the numbers were much greater the Government would change their attitude? I do not think that that is what he is saying.
This measure is particularly unfair to those who, through no fault of their own, have been caught by the hiatus that has been caused by the Court of Appeal saying that the regulations put forward by the Government were unlawful.
Lord Freud
Perhaps I may make absolutely clear the point about the numbers. There was a lot of comment from noble Lords opposite that the system would be overwhelmed by the numbers because people did not have legal advice and the system could not therefore cope. The point I am making is that that argument does not stand in the light of the rather small number of cases—between 1,500 and 2,000—that might come towards the First-tier Tribunal as a result of the Bill.
Baroness Hollis of Heigham
If I may intervene, approximately 500,000 sanctions were issued last year. Something like 3,500 or 4,000 of those cases went to appeal. That was last year, before this additional provision hits them. The Minister may wish to reconsider his statistics.
Lord Freud
My Lords, I will address Amendments 4, 5, 5A and 6 together. The purpose of these amendments is to place in the Bill detailed requirements for the independent report set out in Clause 2.
I should be clear that Clause 2 provides for an independent review of the operation of provisions relating to the imposition of sanctions which would, without this legislation, be unlawful. The amendments could be seen to imply a much wider review; it is not a full review of the operation of sanctions, although clearly there could be wider relevance. At least one of the things covered in the amendment is not within the scope of the Bill: paragraph (d) asks about the number of penalties imposed upon claimants in receipt of employment and support allowance. I can answer that today, as the Bill is only concerned with JSA claimants.
The Government are happy to consider a wide range of areas for the review, but it would be unhelpful to lock down the terms of that review at this stage. Despite my earlier comments, the amendments list a number of areas the review could usefully consider. I am happy to confirm what I said on Thursday, and give a commitment that we will discuss further with the Opposition the scope of the review. Within that process, we can look at the point raised by the noble Baroness, Lady Lister, on provision for outsiders.
Amendment 5A would ensure that the independent reviewer makes an assessment of the extent to which senior managers in Jobcentre Plus have used targets in the operation of sanctions. This amendment is completely unnecessary. There are no targets for sanction referrals. The Government have made a point of removing the vast majority of targets within Jobcentre Plus. It is regrettable that loose drafting of an internal e-mail suggested otherwise. If noble Lords look at sanctions, there is no clear trend in the proportion of the caseload who receives them. Prior to 2007, the rate was running at around 4%; since then it has fluctuated between 3% and 5%. There is not the clear trend in the growth of sanctions which some people have been claiming.
Baroness Hollis of Heigham
My Lords, I do not doubt the Minister’s honesty and integrity in his statements about targets at all. However, the staff clearly do not believe him. It is clear from the evidence that we have seen—the leaked e-mails and all sorts of other examples coming to Members of Parliament and so on—that the staff in local offices believe, because they are told by their managers, that they have to increase the number of sanctions. In the e-mail, the manager of the particular jobcentre was criticised and told that she would be subject to first-stage disciplinary hearings because that office was something like 93rd out of 101 in sanction production; they should have been producing something like 25 a week and were only producing four or six a week. Therefore: “Guys, we should raise our game”.
The e-mail was not loosely drafted. It was very precisely drafted; we have all seen copies of it. That e-mail, from someone senior in the office to their staff, made it very clear that if they did not increase a number of sanctions, they, too, would be involved in a disciplinary process. That is believed by those staff and by staff across the country. I do not doubt the Minister’s word, or that he does not intend that to be the case. What is he going to do, therefore, to ensure that local offices no longer behave in this way?
Lord Freud
My Lords, let me make very clear the difference between having targets, having business or management information, and doing something with that information. Clearly, you collect these data not just to answer parliamentary questions but to run the business. It is used to look at where there are outliers and peculiarities, and what the norms are. When a particular jobcentre may be well outside the norm on either side, you might want to ask it why that was the case. Was it justifiable, and what were the dynamics of that? In some cases you are clearly looking at particular parts of the operation that are not operating in line with the norms. That is not having a target culture. A target culture—as the noble Lords opposite will know, because they were running one in many parts of the public services—is where you incentivise and drive performance based on particular targets. We do not do that. We do not have targets. We do, however, have management information and, as I say, we need to understand why outliers exist.
Baroness Hollis of Heigham
My Lords, will the Minister explain why this senior staff member—the manager of the office—told the staff underneath her that unless they increased the number of sanctions she would be subject to the first stage of a disciplinary procedure, and that that, in turn, would mean that she would have to discipline them? How does he explain that?
Lord Freud
My Lords, I am not going to pick up a particular case because I do not have the detail on it. It would not be appropriate for me to hazard a guess on what was behind a particular e-mail or a particular concern.
Lord Touhig
My Lords, I hear what the Minister has said, and he is held in high regard across the House. In view of what my noble friend Lady Hollis has said, will he therefore initiate an investigation into how this memo came about? Will he come back to the House to explain what action the Government are taking on this? Somebody is clearly acting against government policy, and it should be stopped.
Baroness Hollis of Heigham
Will the Minister also, therefore, ensure that all DWP local offices receive the same information—that this is to be deplored?
Lord Freud
My Lords, I must repeat what I have just said. Clearly, we have internal management information. It is vital that we keep it, and we publish a lot of it. We need to understand why some areas, some jobcentres, have higher rates than others and why some have lower rates. Some may have very good reasons for having lower or higher rates, while others may not. We therefore need this information to correct the anomalies, and that is normal business practice. It may be that in particular cases a jobcentre manager is told, “You are running very high or very low figures, and you cannot justify the reason for that, so you need to get more into line”. It may happen. I have not got the particular details.
Baroness Hollis of Heigham
In that case, what is the difference between coming more into line and targets?
Lord Freud
The noble Lords opposite know exactly how targets operate because they operated a target regime. Targets are when people are incentivised to perform to particular figures.
Baroness Hollis of Heigham
What if they are incentivised by the threat of being punished?
Lord Freud
They are usually incentivised to reach targets, and we do not run a target regime. The no-targets message has gone out repeatedly.
Baroness Farrington of Ribbleton
My Lords, I fail to understand the Minister. Surely if someone is asked to regulate their business, as he calls it, in order to get to the norm, what is the difference between that and a target?
Lord Freud
The difference is that where someone is not performing in line with the rest of the business for no good reason—in other words, where there is nothing different in the underlying constituency of the business—they are not operating the business in line with the standards that we have. That is entirely different from having targets, because it is understood that no figures are going out with instructions to achieve something. The message that there are no targets goes out repeatedly to jobcentre managers; there has been a reminder from the Work Services Directorate that there are no targets; and we will investigate if people have misunderstood that approach.
Baroness Farrington of Ribbleton
My Lords, this is Committee. Many of us are deeply distressed about the Bill. To seek to curtail a discussion where clearly the Minister is saying that people will be asked to comply with a norm if they have no good excuse not to, is to my mind—and, I suspect, to the minds of other noble Lords—little different from a target.
Lord Freud
My Lords, I have answered the question. I will re-emphasise that we do not have targets, we have management information. I may not have convinced noble Lords on the other side, but they should be very familiar with running targets because that is how they tried to run the economy. We do not run targets because they create perverse behaviours. We collect information in this area, not least because it is required for public purposes. Furthermore, we need to run a business and we need to understand what different areas are doing in order to do that.
Referrals for sanctions are made on the merits of each case. Decisions on sanctions are based on evidence presented that is independently reviewed by decision- makers. The fact that only three-quarters of decisions made are upheld by these decision-makers proves the robustness of the process. Furthermore, there is an independent appeals process against decisions, so even if a target regime were in place, which it is not, claimants who were wrongly sanctioned could successfully appeal.
The flexible business model means that managers need to understand the reason for outliers. While differences can be for good reasons such as local labour market conditions, senior managers need to monitor the overall situation in order to spot and correct anomalies.
Given what I have said, it would be odd to require the independent report to cover a sanctions target that does not exist. However, we are happy to give reassurances that we will make clear the position in respect of targets and league tables. I have done my best today, but clearly more may need to be done for some noble Lords.
Lord Rooker
At the risk of upsetting the Whip, I have a question. The Minister does not seem to have addressed one of the examples given by my noble friend. Will he give a personal guarantee that no office will open and call people in on Easter Sunday? How many offices are opening on Sundays? Are they in England, Wales and Scotland? What is the policy of offices opening on Sundays to call in people in the way we heard in the example earlier on? He must address that because this is obviously something quite new.
Lord Freud
My Lords, I do not have the information on Sundays, particularly Easter Sunday. The underlying issue is compliance checks using different days for attending the jobcentre, which are an important element of Jobcentre Plus’s toolkit to combat benefit fraud and confirm conditions of entitlement to benefit. That can include asking claimants to attend a jobcentre on a day other than their normal signing day. That is not something that is different under this Government.
Baroness Lister of Burtersett
I am sorry to intervene, but does the Minister think it is reasonable to ask a mother to come in on Mothering Sunday?
Lord Freud
My Lords, clearly, I cannot talk about examples when I am not familiar with the particular example. It may have been a strategy. As I said, there is a general strategy to prevent non-compliance by using the device of asking people to come in on different days. Sometimes people are asked to come in on every day of the week. The example I am thinking of is the five workings days, but I have seen examples of that. I saw that example under the previous Government to be honest. I do not know why noble Lords opposite are looking aghast as this was absolutely standard procedure under the previous Government and nothing has changed. It was standard procedure and has been maintained because it works in areas where we are concerned about benefit fraud.
On Amendment 4, it is worth noting that for sanctions more broadly much of the information that the noble Lord, Lord McKenzie, sets out in his amendment is already published by the department. For example, we have published, and will publish every six months, tables setting out the number of sanctions issued and the number of reconsiderations and appeals. The latest figures published for employment, skills and enterprise schemes and mandatory work activity show that up to October 2012 around 170,000 sanctions were issued. There were just over 50,000 reconsiderations, with claimants being successful in just over half of them. Following this there were about 5,000 appeals to the First-tier Tribunal, with claimants being successful in around a quarter of them. I hope that gives enough reassurance to the noble Lord and the noble Baroness that the independent review will be comprehensive and in the spirit of Clause 2. I therefore urge them to reconsider the position and not press their amendments.
The noble Baroness, Lady Lister, raised a point on hardship and the new hardship regime. The new hardship regime will not apply to these jobseeker allowance claimants. It will come into effect only when universal credit is in place. The lone parent’s caring responsibilities are taken into account when setting work search requirements. In the example used by the noble Baroness, they can be used in citing a good reason for non-compliance.
I turn now to the linked Amendment 6, the purpose of which is to ensure that there is an interim report on the operation of the provisions relating to the imposition of a penalty, as well as the report after 12 months that the Bill already requires. I am as keen as the noble Lord, Lord McKenzie, that the review is expedited and we will endeavour to complete it as quickly as possible. However, it may help if I set out why an interim report would be unhelpful in providing a complete picture. A claimant who has a sanction imposed on them has 13 months to bring an appeal against that sanction, so by imposing a six-month deadline for an interim report we would miss those appeals made at a later point. That could then give a misleading view of the overall picture in a way that could be unhelpful. As I said earlier, we are committed to producing a report as soon as is reasonably practicable and it would be far better to wait for the full annual report. I hope that the noble Lord will reconsider the position and not press that amendment.
Lord McKenzie of Luton
My Lords, first, I thank my noble friend Lady Lister for her support for this amendment. I believe that my noble friend made a powerful contribution and painted what I think we would all agree is a very troublesome picture of what is happening on the ground in too many instances. She specifically asked whether the review would receive evidence from outside bodies, and I do not think that the Minister has addressed that point. I thank the noble Lord, Lord Kirkwood, too, for his support, at least in spirit. I believe that he is absolutely right that the projected cost of £130 million is excessive. Of course, from the Government’s point of view, the higher that figure, the greater the weight given to the opportunity of retrospective legislation. But I think that the noble Lord’s analysis is right.
The Minister’s response was desperately disappointing generally. On the question of targets, let me be clear about what Amendment 5A says. It seeks a report that,
“will include an assessment of the extent to which jobcentre managers have applied targets on the issue of sanctions”.
I accept the Minister’s words—he would not wish to mislead us—on whether Ministers have targets, but the question is whether as a practical matter targets are being applied within certain Jobcentre Plus premises. The noble Lord says that it is about business information and that it is necessary to spot outliers, but the one document that we have as an example is worth reading. It says:
“I have until 15 February, along with other area managers, to show an improvement, and then it is a performance improvement plan for me”.
A PIP is the first stage of the disciplinary process, as my noble friend Lady Hollis identified. It goes on to say that,
“if I am on a PIP to improve my team’s Stricter Benefit Regime referral rate I will not have a choice but to consider implementing PIPs for those individuals who are clearly not delivering SBR within the team”.
It seems to me that there is an awful lot of pressure there, whether you label it as pressure driven by targets or by some other means. It is pressure, and it is changing the culture of the organisation. What does it lead to? It leads to advice like,
“listen for telltale phrases ‘I pick up the kids’, ‘I look after my neighbour’s children/my grandchildren’ or just ‘I am busy’—all of which suggest that the customer may not be fully available for work, even cases where a parent shares custody can be considered if the arrangement is informal. Not that I am suggesting you go there, but you need to consider each case individually”.
Is not the Minister troubled to understand that those sorts of memos are floating around within Jobcentre Plus? Is that not entirely contrary to what he himself has asserted? I cannot believe that he would feel comfortable about that happening. That is the purpose of the amendment—to find out what is happening or has happened in Jobcentre Plus generally. It is not a question of whether the Minister has set down a particular target but what is happening within those Jobcentre Plus premises and the impact that it is having on people being referred for sanctions.
Again, the hour is late, and I will withdraw the amendment, although when it is called I propose to test the opinion of the House on Amendment 5A, which is the key issue dealing with the sanctions and the revelations that the press have identified, because there is a pressing and clear need for that to be addressed.
Baroness Hollis of Heigham
My Lords, I should like to support my noble friend by saying that I am mortified about the additional numbers on the other side as the result of our strenuous debate. I thought that we might have persuaded a few more to abstain.
I hope that the Minister can agree to this amendment. There are three broad reasons why we need new guidance and clarity on the sanctions regime: the issue of targets/norms, good cause and compliance. The Joseph Rowntree research that came out in December 2010 shows that claimants have a low level of awareness of sanctions and that the more disadvantaged they are, the higher the risk of sanctions and the less knowledge they have about them. This applies to young claimants, those with a disability, those with a poor education, those with large families and those from an ethnic minority. The research shows that they are not out to flout the system but that they have poor information or non-intentional behaviour such as forgetfulness. In that context, I want us to support my noble friend’s amendment.
I turn first to the issue of targets. The Minister was at some pains to explain to us earlier that “targets” is a relevant word only where you are rewarding behaviour, but when you are punishing it, that is a “norm”. We know that if you exceed, you get a target, and that if you underachieve, that is a norm. It is clear that targets or norms, whatever we want to call them, are the enemy of mitigation. Using them to allow the Secretary of State to claim clean hands while the staff do the dirty work under pressure from above is completely unacceptable. We need clear evidence, guidance and clarity from the Minister on the sanctions regime to ensure that targets do not stand in the way of mitigation. If people are allowed to mitigate and sanctions numbers therefore reduce, so will the targets, and staff will obviously have an incentive to fail to ensure that claimants follow good procedure and appropriate behaviour because they themselves face disciplinary action. That is a moral, or immoral, position, into which they should not be put.
Secondly, we need this guidance to ensure that claimants are aware that they may be able to mitigate sanctions by establishing good cause. My noble friend gave the example of the lone parent unable to attend an interview. Every parent in this House has had a child who has been sick and they may have missed an interview as a result. There is no doctor’s evidence because, by the next day, the child is well. Certainly that happened to me on numerous occasions. However, in this new, suspicious, look-for-any-benefit-cutting-excuse, hunt-them-down culture, of course we all now assume that any lone parent will keep her child at home and away from school simply to avoid an inconvenient interview. She says that the child was poorly, but why believe her? As she can provide no evidence, the office has got her and another tick is put on the whiteboard.
The third reason for needing guidance on mitigation is that, as the courts have indicated, claimants need to know and have a right to know how they may end their sanction by complying with jobcentre requirements. This issue marks the crucial line as to whether we are using sanctions to reduce the benefit bill or whether we are using them to change behaviour. If it is the first, giving little information or hope for people to find their way back into the system, then the Minister risks creating a growing underclass without income, without much hope and without any help. But people, as Carlyle pointed out 150 years ago, will not starve quietly. Some may have families to help them, and they will be the relatively lucky ones. Some may beg, while others will cross the line into thieving, drug selling and semi-criminal behaviour. This is what the Rowntree trust warns us of. They will come to regard social security laws, in so far as they understand them, and increasingly other laws, as not applicable to them. We will all then pay a high price. If it is the second—that instead of simply trying to cut the benefit bill on any hook we can find, we want people to change their behaviour and sanctions are part of the tough love regime, as I believe they should be—then we absolutely must encourage people to end sanctions by complying with what they are expected to do. When they do so, we should rejoice, even though it means fewer ticks on the whiteboard of targets to be met.
Research evidence shows up that up to two-thirds of those sanctioned do not know the whys or wherefores, or what they can do about it. The Minister, whose integrity we totally respect, accepted at Second Reading that that was indeed the case and that therefore the issue of sanctions had to be revisited. If the issue has to be revisited, he should now accept my noble friend’s amendment, because it amplifies what he himself has already agreed. Mitigation means ending the culture of targets and, incidentally, protecting any whistleblowers in the process. It means ensuring that people have the help that they need to claim good cause where that exists and it ensures mitigation so that claimants will know how they can end the sanction by conforming to benefit requirements. I hope that all in this Committee agree on these three goals. In which case, I hope that the Minister will accept the amendment.
Lord Freud
My Lords, this amendment, which would require the Secretary of State to issue guidance on the way in which claimants can mitigate any penalty imposed under the ESE or MWA regulations after the Act comes into force, is unnecessary, as this information is provided to claimants as a matter of standard practice. When a claimant is issued with a benefit sanction, they are as a matter of course sent a letter explaining the decision made and what effect it will have. The letter clearly tells claimants that if they want to appeal the decision, they should fill in leaflet GL24, If you think our Decision is Wrong, and that claimants can,
“get this leaflet from your Jobcentre or Social Security Office”.
Attached to the sanctions letter are two leaflets: leaflet 1NF1, on appealing against a decision and leaflet JSA9, the hardship leaflet). I have both of these leaflets with me today.
The leaflet on appealing against a decision explains in plain English who the claimant should contact if they want to know more about the decision or, if they think the decision was wrong, how to appeal it and what support they may get in formulating that appeal. The hardship leaflet explains what financial support is available, the eligibility criteria and how to apply for hardship, and provides the form they must fill in to claim hardship. The whole process is done as a matter of course and, indeed, is on the record and available for anyone to see how those leaflets work.
I turn to the point raised by the noble Baroness, Lady Sherlock, on recompliance. If a claimant has been issued with a 26-week sanction but has complied in the intervening period, they will be served with a four-week sanction. Recompliance is not particular to any scheme and can include participation in any other scheme. Of course, the sanctions regime has changed, so if the failure to participate was before 22 October last year, the old regime, which includes the re-engagement, applies. However, if the failure to participate is after 22 October, the current sanctions regime, which has no engagement and which builds up, will apply. That goes on the time of the failure to participate.
The noble Baroness was concerned about the time between the failure and the sanction being imposed on the stockpiled cases. I am sorry that I have not yet found a better word than stockpiled but it is for cases not people. As I said on an earlier amendment, the process of finding that information takes place immediately on the failure. They receive a letter and need to provide good cause at that point. Clearly, where there is a problem and there needs to be amplification, and there is a problem of information or evidence, the decision-maker will have to take that into account in the normal way, given that there is a gap and it is a justifiable lacuna.
As a matter of course, the cases that we have stockpiled will get issued with a sanction and receive the standard letter, and those accompanying leaflets that I outlined. This amendment is therefore superfluous and I ask the noble Baroness to withdraw it.
Baroness Sherlock
I thank the Minister for that reply and, in particular, for clarifying that it will be the sanctions regime that was applicable at the time of the alleged breach that would prevail. I will just ask him to clarify one point more specifically. I was glad to hear him say that any subsequent direction can count as recompliance and that it did not have to be something specific to the particular scheme or course originally. It can count, but will it?
Lord Freud
If it fits the norms within which that re-compliance operates, then it will. I am not sure whether there is huge distinction, in this case, between the may and the will.
Baroness Sherlock
I am not trying to be pedantic, although I confess that it is a hobby. The reason it matters in this case is that normally, if I were sanctioned for not participating in a course, the obvious way to comply is to start going to the course. As the course has long since finished, there are all kinds of unrelated things that may have happened in between then and now, which would not be the obvious way for me to re-comply with a direction on something that has long since ceased. Therefore, the fact that these things could count does not necessarily mean that they will. The reason that I wanted guidance was precisely to make clear to jobcentre staff that in these circumstances they should interpret any form of compliance as being enough. I encourage the noble Lord to say that on the record.
Lord Freud
What I will say on the record is that we will ensure that guidance to jobcentre staff will make this absolutely clear.
Lord Freud
My Lords, we will make sure that the particular options here are laid out for jobcentre staff so that we do this consistently. I can add that recompliance will count if it is a scheme under the ESE regulations.
Baroness Sherlock
That was worth waiting for. I thank the Minister for that. I still think that this amendment is worth while. Although the Minister regards it as superfluous, the information that goes out to claimants actually relates specifically and only to complaints and hardships. The other obvious way to mitigate the effect of a sanction is recompliance and in fact none of that information does relate to recompliance. However, in the light of what he has just said, and given the lateness of the hour, I beg leave to withdraw the amendment.