House of Commons Hansard Debates for 13 May 1993

Column 980

work out with the Commission. My view is that, as the reinsurance cover is not available at the moment, this measure acts to increase cover. There are thus difficulties ahead for the Government with the European Commission. As Harry Truman said, perhaps the buck stops here, with the DTI. In this case, I prefer the words of Dean Inge, who once said that, although he had had a great many problems, most of them had never happened. I hope that the same will apply to article 85.

I am convinced that the Commission will not want to intervene to prevent the Bill from being fully operative or to prevent the gap in the reinsurance market from being closed. There is another difficulty for the Government, who are setting the premiums for the insurance companies through Pool Reinsurance. The hon. Member for Brentford and Isleworth (Mr. Deva), who has left the Chamber, asked the Minister about that. [Interruption.] I am sorry. For those who read Hansard assiduously, let me make it clear that the hon. Gentleman is still in the Chamber. He asked the Minister about the impact of premiums. The danger for the Government would be if they set the premiums so high that the pool did not grow sufficiently to fulfil the purpose for which it was created. However, if the Government set premiums high, that would encourage competition from other reinsurers and bring them back into the market place.

Mr. Tim Smith : The hon. Gentleman said that the Bill was retrospective to 1 January. That is my understanding, but I can see no reference anywhere in the Bill to 1 January, or indeed to any commencement date. In those circumstances, my understanding is that the Bill commences when it receives Royal Assent and not before.

Mr. Bell : I am grateful to the hon. Gentleman for bringing that to my attention. However, all the guidelines that I have received from the Department of Trade and Industry say that the Government's intention is that the Bill, when enacted, should be retrospective to 1 January. That will cover the niche in the market place caused when the reinsurers withdrew their cover at the end of last year. That is my understanding and I hope that the Minister will confirm it. As far as I can tell from the Bill, the Minister has eschewed a policy of a compulsory levy on companies in designated areas. Having listened to the Minister with care, I would subscribe to that view. It is a matter for those involved to take out insurance as and when they wish, and how they wish. I am glad that my hon. Friend the Member for Tottenham (Mr. Grant) is in the Chamber. No doubt he will elaborate on that from the point of view of his constituents if he catches your eye, Mr. Deputy Speaker.

It is right and proper that the Government should not, through their ultimate reinsurance cover, pick up the tab for looting, about which we have read a great deal in the newspapers. The Labour party has always believed, and still believes, in value for money. We have no intention of disbursing taxpayers' money gratuitously or abundantly in such a situation. What is remarkable is the number of people who come forward with a claim on insurance, and certainly on Government insurance, if they feel that they can. However, compensation for looting should be covered by general insurance policies. I am sure that, if those involved were to make a proper claim to their insurance companies, they would find that that was the case.

Column 981

The Bill covers both damaged property and consequential losses arising from the interruption of business, so is not limited simply to the former. I agree with the Government on the point raised in the other place on 15 February this year, through a written question at column 62. The question was whether that cover would include premises closed as a result of the threat of terrorism.

Mr. John Bowis (Battersea) : I seek clarification--perhaps from the hon. Gentleman, perhaps from the Minister--about compensation for looting. Looting is a risk that is not due to terrorism. If the building were left open, a claim for compensation for looting might be subject to question. If it were left open as a result of terrorist action, might not terrorist action be joined to the insurer's defence when resisting any such claim? There may be more complications here than meet the eye.

Mr. Bell : I am grateful to the hon. Gentleman. I had anticipated that point. One of the great things about speaking from the Dispatch Box is that one can sometimes anticipate interventions. The answer is that, in law, the claim would lie against the security firm rather than the insurance company. Victims of looting can make claims, but compensation does not necessarily lie through the route of the insurance policy.

I agree with the Government's view about the vacating of premises under threat, as expressed in the other place. They are also right to have the insured deal only with the insurers and to keep themselves at arm's length. That is sensible.

The scheme has the merit of keeping the Government's commitment to the minimum required by reinsurance. It places the burdens upon the insurance companies, when working out policies for commercial and industrial companies, and enables them to add on to the premium cover specific loss arising out of terrorist action. The Minister was right to say that that has been part of general insurance policies in the past. It will now be an add-on--to use a computing term--and provide for an additional 10 per cent. from insurance companies that are members of Pool Re and also for the realisation of investment income before there is a charge on the Exchequer.

The balance of the scheme is such that it should encourage other reinsurers to come into the field. It permits the insurance world to show the flexibility that is required in a fast-moving world with a fast-moving insurance market. It also gives the insurance world an opportunity to assist those in the community. One of the themes that the Opposition are developing is the role of insurance companies within the framework of the community. Rather than withdrawing from the community by withdrawing cover for such claims, the insurance world will come back into the community, with the Government as last-resort insurers. That means that business will be as usual in the complex world in which we live.

I would not wish to bore the House too much with technical detail, but I noticed the convoluted manner in which the total premium to be paid to the Government as the reinsurer of last resort will be calculated. It is a relief that the Government would not normally be entitled to require Pool Re to make premium payments unless the surplus in Pool Re exceeds £1,000 million, and that the

Column 982

sum paid at any time will be limited so that the surplus remaining in the fund will not be reduced to below £1,000 million.

I have seen a number of pessimistic forecasts in the press as to how much premium income the pool is likely to attract, but I am confident that the framework and the guidelines of the scheme will rectify a weakness that has developed in the reinsurance market, caused, as I have said, by a shortfall in capacity. This modest Bill involves the Treasury in modest terms and will show our determination that it will be business as usual for the City of London, as it will be elsewhere.

I shall end my remarks where I began. The Minister said that there is an infinitesimal likelihood that terrorist attacks will succeed. The Opposition say that there is a non-existent prospect that they will succeed. The message we give to the terrorists is the message with which we began--death and destruction may follow from their actions, but political decisions will not.

6.8 pm

Sir John Wheeler (Westminster, North) : I am glad to follow the hon. Member for Middlesbrough (Mr. Bell), and to support what he has said. It is a particular pleasure that the House should be attended by hon. Members from all the component parts of the United Kingdom--Northern Ireland, Scotland, England and Wales. It is also a pleasure that the House is in whole-hearted agreement on the necessity for the measure, for the reasons given so eloquently by the hon. Gentleman.

The Bill is, in one sense, interventionist, but it comes from a Government who are pragmatic in the way that they administer the governance of the United Kingdom. The principal reason for the Bill is to underline our determination that illegal acts of terrorism shall not be the means by which political changes occur. It is important that the House is united in that endeavour, since that will lead inevitably to the defeat of terrorism in the United Kingdom. I am also glad to welcome the speech of my hon. Friend the Minister and to comment upon some of its aspects. First, however, I shall refer to the report of the commissioner of police for the City of London, published a few days ago, which makes it clear that, despite the incidence of terrorist attacks in the City--St. Mary Axe in 1992 and, sadly, more recently the Bishopsgate bomb--the fact of the matter is that the City of London police force has achieved what few police forces in the United Kingdom have so far achieved, in that its overall recorded crime figures show a decrease of 10.6 per cent., which, as the report says,

"is very much against the national trend and a greater decrease than any other Force in the country, many of which are in fact showing an increase."

The report says that the City of London, despite those isolated and horrific bomb incidents,

"is still a relatively safe and civilised area in which to live, visit or do business. It is important to keep that perspective as, given the hundreds of thousands of people who frequent the City daily, the statistical chance of being harmed by criminal or terrorist activity is still extremely low."

We should bear that point in mind.

I take this opportunity to commend the City of London police, a small but special police force that has rendered exceptional service under difficult circumstances and has built up a remarkable expertise in dealing with the problem of terrorism. For example, although the St. Mary Axe

Column 983

bomb blew the bomb car to smithereens, the City of London police scene of crime officers managed to scour through every fragment to discover sufficient evidence to identify the vehicle, which in turn led them to a suspect, and an arrest and charge have been made. Terrorism can be defeated, and one of the purposes of the Bill is to emphasise our support for the police service in that determination. During the recent outrages, both in 1992 and this year, the citizens of the City of London, in common with the whole country, I believe, have greatly admired the leadership of both the previous and the present lord mayors of the City of London, and the determination of the corporation as a whole to rally and organise the commercial community so that the people who commit terrorist outrages do not succeed in their primary endeavour.

The proposals before us are necessary and welcome. I know that the Association of British Insurers was greatly concerned about the difficulties that it faced, to which my hon. Friend the Minister rightly referred. The mechanism that we propose to put in place will be both fair to the taxpayer and reasonable in its objective. I thank my right hon. Friend the President of the Board of Trade for the way in which he has responded to my concerns on behalf of my constituents in the city of Westminster who live in expensive blocks of flats which, as the Minister has explained, would have been treated as commercial properties, on which there would have been an especially high premium to pay. Many elderly people and people on lower than average incomes would have found the additional premiums hard to bear, and it was important that they should not become the victims of terrorist outrages by virtue of a substantial increase in their insurance premiums.

I am grateful to my right hon. Friend for his practical and sensible response to that problem. As my hon. Friend the Minister has explained, for many people living in blocks of flats in my constituency, the additional premium, on a flat rate basis, may be no more than about £14. That is indeed bearable and, on behalf of my constituents, I am glad to thank the Government.

As for the commencement of the Bill, it is right on this exceptional occasion that the House should depart from its regular objection to retrospective legislation and ensure that the measure be made effective from 1 January this year. We breach no precedent in doing that ; this is an exceptional measure to deal with a particular situation, and it is right that we should allow an element of retrospective legislation.

The Prime Minister responded to a question that I asked him after the Bishopsgate bomb by saying that the House would have such a measure before it at the earliest opportunity. My right hon. Friend has honoured that pledge in bringing the Bill before the House, and it is a matter for great satisfaction to us all that both sides of the House should be united in the endeavour to take the Bill speedily on to the statute book in the interests of defeating terrorism and supporting the British people.

Column 984

6.16 pm

Mr. Malcolm Bruce (Gordon) : I am certainly glad to add my voice and that of the Liberal Democrats to welcome the proposals, especially as they end a degree of uncertainty that needed to be resolved in a constructive fashion. As a Member who represents a Scottish constituency and who believes that the United Kingdom needs some fundamental political changes, I must also say that such changes must be brought about by the democratic process.

There is no doubt that such a measure was essential, because there was a danger that the terrorists might have been given another target, in the sense of being able not only to maim and injure people but to seek to bring down corporations, too, and thus to create more economic disruption than the mere disruption of offices that results from the damage that they inflict.

The Government were right to seek a balance. We could not have witnessed too prolonged an exchange in which the Government were saying, fundamentally, that it was the responsibility of the insurance industry to take the risks, and the insurance industry was saying that it would withdraw altogether from that risk area. That gap could not have been allowed to continue for long, and we welcome the fact that the Government have understood that, and have introduced a scheme that seeks, in a sense, to go back into partnership with the industry and to ensure that the industry and the ultimate buyer of insurance make their contribution in terms that appear fair, balanced and reasonable.

There are people far better equipped than I to rake over the details and raise concerns and anomalies. The Minister said that the measure had been carefully thought through, but that the Government were willing to consider any representations that might be made. In view of the spirit in which the Bill has been introduced, I am sure that any such representations will be welcomed and accepted constructively.

There is justice in what the Government are trying to do. I cannot calculate exactly whether they have got the balance completely right, but the thrust is certainly right. Making the Government the insurer, or reinsurer, of last resort is the right approach, rather than providing blank-cheque compensation. The Minister made it clear that the virtue of that approach was that it retained the inherent merits of continuing to operate a proper insurance scheme that will probably function on normal commercial lines, with the consequent speed of response. Clearly that was necessary, and one hopes that it will eliminate wrangling.

I welcome the fact that the Minister made it clear that, while the objective of the Government's scheme is ultimately to achieve no cost, the guarantee is absolute, and the objective of no cost will not lead to any possibility of their failing to honour their reinsurance obligations. That is absolutely crucial, because the Government are the last resort, and if those obligations are not honoured there is nowhere else to turn.

The hon. Member for Upper Bann (Mr. Trimble) mentioned taxi drivers, and the Minister responded robustly and in a constructive way. Although the hon. Member will pursue his case, and I encourage him to do so and hope that he will secure a sympathetic response, it is very important that it is understood that, when this Bill becomes law, nobody is absolved of the obligation to make

Column 985

the calculation of insuring or not. It must be made very clear to people that, while it is regrettable that the climate in which we live has increased the costs that we have to bear, that calculation must be made. One cannot be foolhardy and try to cut corners, consequently leaving oneself exposed.

Nobody can be in any doubt that anybody who fails to take that necessary step will not be entitled to seek compensation from outside. It is important, and I am sure that the Government will make it clear, that that is fully understood as widely as possible. The different scheme in Northern Ireland may be interesting as a comparison, because it is troubles arising from Northern Ireland that have made this scheme necessary. It unites all Members in the commitment to ensure that neither by commercial nor by physically violent means can terrorism prevail. I believe that some practical common sense and ingenuity has been shown here, and that the insurance industry has responded.

I spent a day at Lloyd's a few weeks ago, when I was made very well aware of the concern there about the fact that 3,000 people have effectively been ruined by that operation, and that many jobs will now be lost. It was made clear to me that, in addition to the large risks which the hon. Member for Middlesbrough (Mr. Bell) has already identified, the consequences of climatic change have had a serious effect upon Lloyd's, because it has led to a number of violent wind storms, for which Lloyd's was the reinsurer.

It may well be that, in its heyday, Lloyd's could have taken up the risk with which the Government are now faced. However, in the circumstances in which it is now placed, it would be very foolhardy indeed to add that risk to those from which it is still trying to recover.

I therefore welcome the fact that, after what might be described as initial spats--perhaps understandable and justifiable--between the Government and the insurance industry, the position taken by the Department of Trade and Industry in this Bill has prevailed, uncertainty and anxiety have been laid to rest, and a properly orchestrated scheme on a proper insurance basis will now be put in place to fill the gap from the day the insurance company withdrew the original cover.

I hope that the Bill can make speedy progress and that it will be noted outside the House that it had total all-party, all-Member support.

6.23 pm

Mr. John Greenway (Ryedale) : I begin by declaring some interest as having been involved in insurance for 20 years, as an adviser to the Institute of Insurance Brokers and as an elected member of the Insurance Brokers Registration Council. Perhaps more important on this issue, although it is not an interest to declare, we have an all-party insurance financial services group, which I chair and which has been very active in discussing with the Government and the industry how to deal with this dreadful problem of terrorism cover. I pay a tribute to my hon. Friend, the Under-Secretary of State and to my right hon. Friend the President of the Board of Trade. They will know how difficult it has been for all of us, given the sensitivity of this issue, to discuss--I think that this will be taken in the right way--how to bring pressure to bear on the Government to recognise that something needed to be done. It was very late in

Column 986

December before we finally reached agreement on how to proceed, but the reception that our approach received was not just extremely courteous, but very understanding. The fact that this Bill and the scheme that it underwrites so closely reflect the general principles that we put to my hon. Friend and his colleagues and officials at the DTI clearly indicates that they listened very carefully to the representations of the industry.

I have said that I am a member of the Insurance Brokers Registration Council. Our office has been affected by both bombs. I was in Bishopsgate last week and I have seen the devastation caused by the second explosion. It left me with very mixed feelings. Above all, it strengthened my belief that, when we stand up in the House and say that terrorism will not prevail, that the bullet and bomb will not change the course of British politics or politics in Northern Ireland, it is not just because that has to be the way, but also because it is an absolute outrage that such acts should be perpetrated. I was moved by the way in which the people who work in the City, the police and the contractors putting right the damage carried on. They deserve the highest possible praise and support. We have all said, in the wake of these two outrages in the City of London and others elsewhere throughout the United Kingdom, that the terrorists will not win ; life goes on. This measure is designed to ensure that life can go on, that businesses can be up and running as quickly as is humanly possible.

In the discussion that we have had already, some concern has been expressed about whether the Bill as drafted can be retrospective to 1 January. I am in no doubt about that. As I understand it--perhaps my hon. Friend will confirm this in winding up--the Bill gives Parliament's approval to the Treasury paying out of public funds the money needed to underwrite Pool Re : in effect, to pay out money to support any agreement entered into by the President of the Board of Trade. He made that agreement at the end of last year, so what we are doing here is providing the funding for the agreement that he has already freely entered into.

Again, I pay a tribute to the Governmentecause we had not yet passed the Bill through Parliament.

In his introductory speech, my hon. Friend talked about all those who consider themselves to be at risk and said that it was in their commercial interest to insure. I suggest that we should go further. I believe that we should discourage selection on the basis of whether people ought to have terrorist cover. It is a simplistic argument, but one does not say to one's insurance company that flood damage should be excluded because the house is on the top of a hill. The whole principle of insurance is one of mutual cover, mutual risk and mutual funding. What we have seen in the past year or so must tell us all that no one can be sure where terrorists will choose to strike. Yes, there are some potential targets--we all acknowledge that-- but I feel strongly that it is the duty of the House to discourage selection. I take my hon. Friend the Minister's point that there should not be compulsion, but I think that we should encourage businesses to avail themselves of the Pool Re facility. The Minister gave a vivid example of the fact that,

Column 987

in the full context of the overall picture of business costs, the costs of taking advantage of Pool Re in extra premium terms are very small.

There are two principles that business men ought to acknowledge : first, that it can happen to them, and, secondly, that, if it does, it will not affect their ability or the resolve of their businesses to continue. That means that every business needs a strategy for management of the risk that terrorism represents. That strategy embraces three elements. First, it must mean increased vigilance. My right hon. Friend the Member for Westminster, North (Sir J. Wheeler) rightly paid tribute to the work of the police in the City of London. Indeed, the police throughout London have done a tremendous job in the face of terrorist activities and we ought not to forget that many potential bomb threats have been intercepted with tremendous skill and with the use of intelligence. We need to get across the question of vigilance to the public and to the business community. I do not want to dwell on that point today because I know that my right hon. and learned Friend the Home Secretary has made it clear that everything that can be done will be done in that regard.

Secondly, businesses must have an emergency plan. After the St. Mary Axe bomb, everybody was overwhelmed with admiration for the speed with which Commercial Union, the worst affected by the bomb, was able to respond. There has been no real impact on its business because it had an emergency plan ready to put into operation. Following that, many other businesses in the City of London did the same and those plans were put into effect speedily and with tremendous skill during the recent outrage in Bishopsgate. That is a lesson that businesses throughout the country need to take on board. Thirdly, the element in the strategy on which I place the greatest reliance is the need for insurance. The Bill makes that possible. It is largely an enabling Bill and there is much detail still to be thrashed out. I know that the Department of Trade and Industry is approaching the Bill in a constructive way. I am sure that my hon. Friend the Minister acknowledges that if there are still some issues to rehearse in detail--issues that might have been rehearsed during the Committee stage of a similar Bill--such rehearsal would not be appropriate tonight. There will be an opportunity to raise concerns directly with him and his officials will be available at a later stage.

Will my hon. Friend think again about the need for a separate certificate of insurance for terrorism? I should have preferred us to deal with the issue in the following way. Everyone has made it clear that unless one takes advantage of the Pool Re facility or makes some other arrangement, one will not be insured. It is clear to the policyholder on the renewal documents, which have been sent out by insurance companies since the end of last year, that the £100,000 limit per item of claim is clear and that everything else is excluded. For that reason, we can perhaps avoid the need for a separate certificate of insurance for terrorism when people buy cover in future.

I was also encouraged by what my hon. Friend the Minister said about the need to contain bureaucracy and to make the scheme as simple as possible. There is a problem about the degree of information that has to be

Column 988

provided to obtain quotations. However, I welcome the fact that the Department has agreed to review its requirements in that area. Commission is another relevant point. When we put the scheme together and asked the Government to be reinsurers of last resort, I argued strongly that there should not be a commission element on the extra payment into the pool. With hindsight, I think that that was a mistake. I believe that there should be some element of commission for two reasons. First, it is important that businesses take up the cover, so we need to have some incentive. Secondly, brokers may try to seek alternative markets for cover which pay commission and that would undermine the viability of the Pool Re scheme. I shall come to the point about alternatives in a moment. There is a significant work load in relation to the scheme itself and in relation to claims. I believe, therefore, that we should re-examine the commission argument.

Other reinsurance schemes are being considered. The hon. Member for Middlesbrough (Mr. Bell) raised the point about potential problems with the EC over competition policy. We have agreed that there should not be compulsion. No one suggests that every business man is being compelled to insure through the scheme. Alternatives will be provided--indeed, I understand that that is happening already. For that reason, I encourage everyone to take advantage of Pool Re. Over three to five years, there is no reason why the scheme should not be in equilibrium in terms of funding and there is no reason why the objective that we all sought to achieve at the beginning of the exercise--that there should be no ultimate cost to the taxpayer--should not be achieved.

I give a warm welcome to the Bill. I again thank my hon. Friend the Minister for his work so far and for the work that he will continue to do on this important matter.

6.37 pm

Mr. Bernie Grant (Tottenham) : I, too, welcome the opportunity to raise matters pertaining to insurance in this debate. It is clear from the number of hon. Members who have remained to take part in the debate that the subject is serious, especially because the problems of Northern Ireland are now transferring to the mainland. Many people are extremely concerned about what is happening. I have no time for terrorism, as I have stated in the past. What is happening will cause severe grief unless serious action is taken to try to resolve the situation in Northern Ireland. However, I am here to speak not about the position in Northern Ireland, but about insurance claims. In the past year in my constituency and in my area, we have had several problems with terrorism. A bomb was left at White Hart Lane station in my constituency and a bomb went off in Wood Green shopping city in my area. Garages in Muswell Hill have been raided and explosives have been found. So the situation is serious and I for one am angry that the IRA should seek to use terrorist methods at all, but certainly not in working-class areas where the people are poor and must struggle to make a living. It is particularly in this regard that I wish to look at the question of insurance.

I welcome the Bill and I support what my hon. Friend the Member for Middlesbrough (Mr. Bell) said. I was interested in his point about the Government's intervention in this specific area. I, too, am pleased that they are

Column 989

intervening. It is not usual for this Government to intervene--they talk about market forces taking care of everything--yet here we see them directly intervening. I believe that one of the reasons for their intervention is their moral obligation to look after the security of everyone--big business, my constituents and everyone else. So they feel that they must do something to protect people's security.

The Government must protect not only the interests and property of rich people in the City, but the interests and property of people in my area, working-class people. It is in this regard that I mention two of my constituents who were the minicab drivers involved in incidents on the same night as the NatWest tower and other buildings in the City were blown up.

One of my constituents was approached by two men, one of whom held a gun to his head. The second man got into the seat beside him and they ordered him to drive towards various destinations. The driver of one of the minicabs told me that the person sitting next to him was priming the bomb, putting the wires together, setting the timer and so on, right next to him in the same vehicle. After they had been going some time, they placed the bomb, now live, underneath his seat and, with a gun to his head, told him to drive to 10 Downing street. They took away the wing mirrors and inside rear mirror and told him that they would be driving behind him and that if he tried to stop or leave the vehicle they would shoot him. Then they got out. My constituent then set off for Downing street, but after he had gone about 50 yards he stopped his cab, got out of it, hailed a bus driver who was passing and, with his help, contacted the police. He himself stood in the road, waved people down, told them that there was a bomb in the car and stopped other people being injured. After some time the police came, the place was cordoned off and the car blew up. Roughly the same thing happened to my second constituent whose car stopped somewhere in the King's Cross area.

I mention these points because this was not just a case of people abandoning their cars and running for their lives. The two people concerned acted in a very public-spirited manner and saved not only their own lives but the lives of others in the vicinity. In doing so they were able to prevent any destruction of property as well as of lives.

Since the incident my constituents have experienced a number of problems. First, they are unable to claim compensation. This is where we come to the question of the insurance. I understand that, for various reasons, these drivers took out a hire and reward insurance third party only, which means that if they have an accident and the other party suffers damage they are covered for that, but their own vehicles are not insured and they get no compensation from the insurance company for them.

That is what concerns me because, while the Minister may say that they have the option of going for comprehensive insurance, which would have given them compensation, the fact is that when my constituents took out insurance they did not expect that the IRA would hold a gun to their heads, put bombs in their cars and blow them to bits. It is not, therefore, a normal, everyday risk, and that is my argument. They acted properly in getting third party insurance as required by law. They had no idea that they would be in this situation. It is not an everyday occurrence. It may be that in Northern Ireland, where such things happen fairly regularly, minicab drivers will accept

Column 990

the possibility of being forced to take on board a terrorist bomb and will see the need to insure against it specifically. But here on the mainland it is not a regular occurrence, so we cannot expect drivers to take on such liabilities. Now that it has happened on at least three occasions, minicab drivers will be well advised in future to take out comprehensive insurance, but at the moment, because such things have seldom happened, they feel it unnecessary to take out the full insurance.

On that basis, I appeal to the Minister to find some way of getting compensation for these drivers. They are self-employed people whose livelihood has been totally destroyed, and because they cannot claim compensation they cannot work.

I asked the Library to give me some advice on compensation. I was told that if the drivers' cars had been burnt during a riot or looting or something like that, under the Riot Act they would have been compensated. If a person's car is set on fire by a bunch of football hooligans, for example, he can get compensation from the police, but if it is blown up by the IRA and set on fire he cannot claim compensation.

Mr. Neil Hamilton : The hon. Gentleman has answered his own point. The purpose of the Bill is not to provide compensation but merely to provide at a commercial premium rate an insurance service which otherwise would not be available. Similarly, in the case of damage to real property, in circumstances where an insured had not taken out an insurance policy covering it for the particular kind of damage which was suffered, the provisions of the Bill would not provide retrospectively compensation to pay for the damage suffered. So we are not treating the owners of commercial real property in any way differently from the owners of motor cars, as in the case that the hon. Gentleman has brought before the House this afternoon. We are seeking to plug a gap in the market, although the Bill will apply to contracts of insurance entered into as from 1 January. We are not bringing in a compensation scheme.

Mr. Grant : I thank the Minister for that. I understand and support what the Bill is doing. What I am demonstrating to the Minister is that there is a loophole in insurance law generally. I do not say that an amendment could not be tabled--I do not know how things are done--but, although I support the Bill, I am suggesting that this is something else to be looked at. Not only have problems arisen about compensation and loss of livelihood, but the men concerned have been offered no protection. One suspected person has been identified and arrested and, at some stage, my constituents will be called on to give evidence against the people concerned, but no protection has been provided for them.

Those men are totally traumatised, but have had no counselling. One of my constituents is a refugee from Ethiopia. He told me yesterday that he had run away from a traumatic situation there only to arrive in Britain and find himself in another traumatic situation. Perhaps it was because of his experience of dangerous situations in Ethiopia that he was able to act in a public-spirited manner and prevent a further tragedy.

The hon. Member for Ryedale (Mr. Greenway), who spoke for the insurance groups, rightly talked about how brave the City workers were to go back to work and about the good work of the fire brigade and the police. I agree

Column 991

with him, but my constituents have also had a very traumatic experience. No one has said that they are brave. No one has been to see them ; the Prime Minister has not written to them to thank them for not delivering the bombs that they were ordered to deliver. When we give praise to people like the workers who turned up for work the next day, I hope that the people in high positions will also think about my constituents who also had a very traumatic experience. I hope that there are no more incidents, but, being pragmatic and the situation being what it is, I suspect that there might be. I would like the Government to consider whether there is a way in which my constituents, who have only third party insurance, can be helped. People in my constituency are working for £80 per week ; they have to struggle to pay the insurance premium before they can go out and earn their living. I am not talking about people who have a lot of money and can afford to pay £2,000 for comprehensive insurance. One of the cars which was blown up was worth only £1,500, so paying £2,000 for comprehensive insurance is just not worth it. I would be very pleased if some arrangement could be made whereby the Government make an ex gratia payment in recognition of my constituents' actions. The owners of the minicab firm--Alan's Minicab Services--have set up a trust fund for the people concerned because they, other minicab drivers and the local people feel that something should be done for them. I hope that the Government can find a way in which to ensure that people who are caught, by poverty, with third party insurance obtain some compensation or relief from the problems that they have been forced into facing.

6.53 pm

Mr. Tim Smith (Beaconsfield) : I am sure that the whole House will have considerable sympathy for the two constituents of the hon. Member for Tottenham (Mr. Grant), both of whom acted in a completely publicly spirited manner.

I congratulate my right hon. Friend the President of the Board of Trade and my hon. Friend the Minister on introducing the Bill. Towards the end of last year they responded very quickly to the situation that arose, when it became clear that there would be no possibility of reinsurance in the market. I know that the way in which they responded to events in the market has been widely welcomed by insurance companies and insurance brokers. I am an adviser to the British Investment and Insurance Brokers Association and I can tell the House that it, too, welcomes the Bill.

We are all very conscious of the background against which the Bill is introduced. I reiterate what every hon. Member has already said--that a measure of this kind is essential if we are to demonstrate to the IRA our determination that they will not win under any circumstances.

I shall ask my hon. Friend the Minister one or two questions about the Bill. In some respects, the Bill could be described, I think he might agree, as a bit of a blank cheque. It does not have a date on it and I would like a date to be inserted, even if the agreement has the date 1 January 1993, which I understand to be the case.

Column 992

When my hon. Friend responds to the debate, will he give some information about how he will report on financial progress? If we give the Government a blank cheque in this respect, we will need regular information about how the scheme is progressing. My hon. Friend described the Bill as a market solution. I welcome the fact that it is as near to a market solution as we can achieve, given that it involves Government intervention, as has been recognised. I believe that Government intervention is justified where there is market failure, as in this case, and I commend my hon. Friend's scheme. I take my hon. Friend's point that, in the long run, there will be no cost to the taxpayer. That is what we hope and believe. It is just not the case that it is a market solution, with low costs and, in the end, no cost to the taxpayer. There may be considerable costs to the taxpayer in the interim period because of cash flow disadvantages. The Government may sometimes have to pay out large sums of money and be unable to recover them until some subsequent, unspecified time.

For that reason, it would be helpful if we could hear a little more about the arrangements for reporting on what happens to Pool Re, which is a company limited by guarantee, as my hon. Friend the Minister explained. Presumably, like any other limited liability company, it will, in due course, file accounts at Companies House. We will then be able to judge the position of the company, some months after the end of its financial year. Does my hon. Friend have other proposals in mind for reporting on how things go?

Perhaps my hon. Friend can tell us how things have gone so far, because we are now in month five of the new arrangement. It would be helpful to know about the extent to which, to date, people have participated in the new arrangement and the amounts of premiums that have been paid into the company. It would also be helpful to know whether my hon. Friend believes that it may be necessary to pay any claims arising from the Bishopsgate bomb.

Those factors are important when one reads the financial memorandum, which states--I understand why it could say nothing else--that "no precise estimate is possible" of the cost to the Government of the arrangements envisaged. Although my hon. Friend has said that the costs to the taxpayer will be low and that, in the end, the taxpayer will not lose out, I should like to hear about the arrangements for reporting on progress.

I reaffirm my support for the Bill, which has the universal support of the House. In the circumstances, the Bill is essential and I wish my hon. Friend every success in implementing it.

6.58 pm

Mr. David Trimble (Upper Bann) : In common with every hon. Member who has spoken in the debate, I support the Bill. Although it is not the right measure to deal with the issue, I accept that it is necessary that something should be done. The Bill and the scheme that it underwrites at least have the merit of being put into operation speedily. In an ideal world, however, I would suggest that the Government should adopt a different scheme.

The event that finally galvanised the Government into acting on the problem was the bombing last year of the Baltic Exchange. The subsequent events were not surprising, but at the time of the bomb, what struck those

Column 993

of us who represent Northern Ireland were the incredible estimates of loss that were produced. People immediately produced estimates of £700 million and more. At that time last year the total bill for all the bombing incidents in Northern Ireland over 20 years, in terms of criminal damage payments, was significantly less than that. I do not have the precise figures with me, but I think £400 million to £500 million would be on the high side. Yet so-called insurance experts produced such incredible figures.

As Mr. McKittrick, The Independent correspondent, rightly said recently in a newspaper article, after the Baltic Exchange bomb the Republican leadership was "surprised and delighted" at what was said--surprised because, evidently, it did not expect the bill for damage to be so high, and delighted at the panic-stricken reaction. It was inevitable, in the light of that, that there would be more bombs in London. It is further inevitable following the reaction after Bishopsgate, for we saw the same degree of exaggeration. That applied to reaction in terms of estimates, with people talking straightaway about a bill of £1 billion, and making exaggerated comments about the scale of the damage.

I wish London journalists would learn to tell the difference between structural and superficial damage. There was serious structural damage to the church outside which the bomb was placed, but it was obvious to anybody looking at the huge photographs in the newspapers, which occupied far too much space, that the damage to the office blocks was entirely superficial. I was in London on that Saturday morning. I was travelling to Liverpool street station when the bomb went off. Lest people are curious about that, I should perhaps explain that I was travelling for the entirely innocent purpose of going to Essex for an Orange parade. The following day I was in Belfast and had a chance to catch up with the papers and look at the photographs. It was clear to me and my colleagues there that the damage was superficial.

I wish that people would be more restrained in that respect. They should also accept that businesses must learn from the regrettable experience of their counterparts in Northern Ireland, who have had to deal with the situation for far too long. It is possible to have contingency plans. Businesses should gear the way in which they operate to enable them to get back into operation quickly. Regrettably, we in Northern Ireland have had to get back to business quickly. It can be done. It is not the end of the world. Indeed, that is one way in which the man in the street and the ordinary business man can do his bit to beat terrorism. He can demonstrate that it is possible to get back to business quickly and without any undue fuss. Although there have been two major bombs, Bishopsgate and the Baltic Exchange, the point must be made--this is why I said that we are debating a belated measure--that the danger of major incidents such as those has existed for a long time. That danger still exists and it is greater than people in England realise. For some time, the Provisional IRA has probably- -I say "probably" because I cannot be precise--been putting greater resources into its bombing campaign in England than into its entire terrorist operation in Northern Ireland. By greater resources, I mean the commitment of skilled manpower, money and the rest.

Over the years, the IRA has built up an infrastructure in England which enables it to conduct a sustained campaign. Last year, more than 20 tonnes of home-made explosives were recovered in London alone--and every

Column 994

last ounce of that was probably manufactured in London. I asked the Home Secretary a question about that in the middle of last year, and although he did not disagree with the estimate he did not do what he should have done and make the public aware of the position. Manufacturing home-made explosive takes time and a large number of people. If the public are properly alerted about what to look out for, it should be possible for them to play their part in suppressing the campaign, but they must be told how to be vigilant and how to assist the authorities. It does no good in the current situation to pretend that there is not a problem and thus fail to involve the public fully in the fight against terrorism. A tremendous resource is available in terms of potential public support, but it is not being fully utilised.

The Minister referred to comparable arrangements in Northern Ireland and said that legislation had existed both in Northern Ireland and in Ireland to deal with costs arising out of this kind of situation, and he is right-- it has existed for not far short of 300 years. I should welcome the opportunity to dilate on some of the advantages of that 18th century legislation, which contains some interesting features. Any hon. Member who wishes to discuss the matter with me is welcome to do so after the debate.

The Bill applies to Great Britain and its provisions do not extend to Northern Ireland. May I be assured that in no circumstances will the provisions be extended to Northern Ireland, that the existing Northern Ireland legislation will remain substantially in place and that the cover and provisions for compensation will not be diminished by any temptation to extend provisions of this type to Northern Ireland? I want that assurance because I consider the provisions in the Bill to be inadequate. They are not good enough, and they are certainly not so good as the statutory provisions in Northern Ireland. I should hate to see the Northern Ireland position undermined as a result of the introduction of measures such as these. We in Northern Ireland do not want to be driven back into taking a market-based approach, particularly in view of the record of some English financial institutions in regard to the problems of Belfast over the years. Apart from that, I am referring to a matter of general principle.

Hon. Members may have gathered that I regard the provisions in Northern Ireland as better than those in the Bill. They are better because the statutory provisions in Northern Ireland are comprehensive. This reinsurance arrangement will not be comprehensive. Under the existing provisions in Northern Ireland, wherever property is damaged as the result of violence or terrorist activity there is provision for compensation. Under the reinsurance arrangement before the House, compensation insurance will be available only to people who first take out insurance to cover the terrorist risk.

I made that point in an intervention in the speech of the Minister, and it was made by the hon. Member for Tottenham (Mr. Grant) when he referred to people who lost out in the incident of which he spoke. He paid tribute to those people, and I underwrite that tribute. They behaved in a highly responsible and brave way, but even if they had not behaved so bravely I should have thought that they would still have a good claim on the public purse for compensation. And it is not just taxi drivers--the same could happen to anyone. Any driver could find his or her car being hijacked and used for a similar purpose. Must every person who owns a car in Britain stop and think about the risk? The Minister said that people who felt

Column 995

themselves to be at risk should take out additional insurance. How can the man in the street or the ordinary business man assess the risk that he may be facing?

It is wrong to think that the risk exists only in the City of London. We know how adept the Provisional IRA is at switching from one area to another. As soon as it is anticipated that the IRA will do one thing, it switches and does the unexpected. That is the way terrorist organisations operate--the risk could be anywhere. We have reason to suspect that there is a significant terrorist infrastructure in London. There is also reason to suspect that there is a significant terrorist infrastructure in the north-west of England. There may be others elsewhere. We do not know what structures have been set up. We do not know what sleepers there are elsewhere. The risk is not confined to certain geographic locations or to certain categories of persons. The risk is more general. It is inadequate to say to the public, "You should take action only if you feel yourselves at risk." The reason why legislation was originally introduced for Ireland in the 18th century, which was not a period of Government interventionism, was that it was recognised--correctly--that there is a particular responsibility upon Governments to maintain public order. That is one of the primary purposes of Government. What we are dealing with here are the risks and the damage which affect people as a result of a failure to maintain public order. That is why there is compensation for riot damage, and that is why there ought also to be compensation for damage caused by terrorists.

The primary advantage of the legislation in Northern Ireland is that it is comprehensive. Another of its advantages is that there is a degree of governmental control. Because the compensation scheme is administered by the Government, they have a measure of control over its operation. After major terrorist incidents, one serious danger is that there will be fraudulent claims. What measures will be taken, in terms of the Pool Reinsurance agreements, to cover that ? Will the Government just rely upon the insurto the insurer of last resort, the Government?

Under the criminal damage legislation, there is a statutory framework within which one can determine the extent of consequential loss. What will be the position under these arrangements ? Will the extent of cover for consequential loss differ from one insurance company to another, with the Government merely picking up the tab through the pool, or will policies contain standard terms to ensure equal cover ?

What will happen about betterment ? That is a significant problem. When there is damage of this nature, the person whose property is destroyed gets new for old when he rebuilds, and in some respects is better off. One suspects that some businesses in Northern Ireland have prospered because of the number of times that they have been blown up. I am thinking of hotel businesses. The result is that now they have much bigger and better hotels than they ever had to begin with. An ironic consequence of the campaign is this question of betterment. What provision will be made by insurance policies to deal with it ? There may be other factors, too.

Next Section

Home Page