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Dr. Norman A. Godman (Greenock and Port Glasgow): Hear, hear.
Mr. Lilley: I do not often get that sort of response from the Opposition Benches, but I welcome it. I had a helpful meeting with John Monks of the TUC. I hope that he, too, found it fruitful.
The consultation revealed a wide consensus for the reform of the scheme, in particular the protection of damages for pain and suffering, although there were differences on the details of how that could best be achieved.
Our proposals offer a full and workable solution. They strike a balance between the views of practitioners and the protection of taxpayers. They place liability on the compensator to repay 100 per cent. of the benefits paid to an injured person in respect of accident, injury or disease. They allow the compensator to reduce compensation payments pound for pound only in respect of corresponding benefits repaid to the Department. That will enable victims of accident, injury or disease to receive full compensation for pain or suffering. Those changes are in the Bill.
I also propose to remove the small payments limit, which is set in regulations as part of the current scheme. However, I intend to retain the power to set a limit in case it should be needed in future. Other measures in the Bill will simplify the appeals system, while still protecting the rights of parties to settlements to challenge benefit recovery decisions.
The anticipated cost to insurers of implementing the new arrangements will be marginal. This area of the Department's work is specialised, and is set against the background of the insurance industry in which premiums for insurance against the sectors concerned exceed £8 billion a year. That is why we commissioned independent consultants to produce a compliance cost assessment. Fifteen major insurers were closely involved, and I should like to place on record our gratitude for their support and for the valuable assistance that they provided.
The cost of operating the new arrangements is likely to be between only £3 million and £7 million a year. The compliance cost assessment estimated that insurers would face increased claims costing between £52 million and £72 million in each year following reform. If passed on to policyholders, the increase in costs is likely to produce only moderate increases in premium rates. The assessment concluded that employers' liability insurance premiums could rise by around 5 per cent. and public liability premiums by around 3 per cent. Motor insurance premiums are expected to rise by no more than 0.5 per cent. We believe that such a rise in premiums will be seen as acceptable, given the protection that the Bill offers to victims and to the taxpayer.
The change that we are making is relatively straightforward, but the Bill may appear long and somewhat complicated. Rather than making piecemeal amendments to the existing statute, the parliamentary draftsman has restated the relevant part of the Social
Security Administration Act 1992 in its entirety. That will make it easier to see the proposed new scheme in the round without constantly having to refer back to a previous Act. Furthermore, if enacted in this form, it should prove easier for practitioners to absorb the changes that we are making. It should also help the scheme to run smoothly in the years following the reform.
Naturally, the Bill contains the necessary amendments to effect an important shift in responsibility for the repayment of benefit, but we have thought it right to disturb as little of the detail of the present scheme as possible. I believe that there is widespread consensus that it works well, and we do not want to put that at risk.
Subject to parliamentary approval, reform of the scheme will take effect from October 1997. Insurers will by then have had a year to prepare. The reforms will apply to cases settled from the date of implementation, including those in the pipe line. That is fair to accident victims. Otherwise, two accident victims in similar circumstances could receive different compensation on the same day simply because their claims were not initiated at the same time.
Ms Harriet Harman (Peckham):
The Bill was introduced in another place and was the subject of thorough discussion there for more than seven hours. I pay tribute to our noble Friends for their effort in scrutinising the Bill. Important issues were raised and questions answered, so I do not need to go through them again. I shall merely point out that the matters considered included the relevant period for the recovery of benefit, issues of certificates of recoverable benefit, heads of compensation and appeal.
We support the Bill and look forward to seeing it on the statute book. It involves issues of principle and practicalities. If someone is injured and cannot work, the social security system must protect that person, but it is also right that those who are negligent should pay compensation. The state should not be required to pay instead of, or indemnify, an individual or organisation that, through negligence, injures another.
The triangle of the taxpayer, the victim of negligence and the perpetrator of the negligence--or their insurance company--has presented us with problems. The system in operation since 1989 has been confusing and inconsistent, has been unfair to individuals and has discouraged them from making claims. The problem arises when, as a result of an injury, the social security system supports the victim--as is right--but then, sometimes many years later, the victim obtains a sum in compensation from the person who was negligent.
The compensation, or a large part of it, will already have been paid out in social security benefits, so much of the money is owed to the social security system, not the individual. The current system claws back benefits from the total amount of compensation above the limit of £2,500--not only the money awarded for loss of earnings, but that awarded for pain and suffering. The whole of a
compensation payment can be clawed back, and individuals can feel that they have taken on a case for nothing. The Social Security Select Committee, to which I also pay tribute, pointed out that that is revolting to any sense of justice. It is a disincentive to claiming--if the victims end up with nothing, why should they bother to sue?
We should remember that taking legal action is quite an undertaking: it might involve many meetings with lawyers; it might take many years; it might mean being subjected to an allegation of contributory negligence; it might involve having to give evidence in court and having that evidence criticised and challenged; and, without legal aid or the backing of a trade union, it might cost a great deal in legal fees. Many victims of negligence would rather stay away from the whole business, particularly if they stand to gain little from it. However, if they do not sue, the state gets no money back and the perpetrator of the negligence gets off scot free.
It is in the state's interest that the individual should sue. By allowing the individual to keep the compensation for pain and suffering, the Bill goes some way towards ensuring that the victim has an incentive to sue, because that person will keep some of the money won in damages.
That is right in principle. As the Secretary of State said, of course benefits do not compensate for pain and suffering and therefore any sum awarded in compensation for pain and suffering should rightly belong to the individual who has suffered and should not be clawed back by social security.
A wider issue is the human and monetary price of accidents. It is unacceptable that, as we head towards the end of the 20th century, when we know so much about what causes injury and ill health and how to avoid it, accidents and ill health caused by work cost between £11 billion and £16 billion a year, according to the Health and Safety Executive. A number of my hon. Friends will raise issues concerning the shameful neglect of health and safety at work. It is unacceptable that there should be such high tolls of accidents at work and of personal injuries in road traffic accidents; the Department of Transport estimates that road accidents involving personal injury cost £9.5 billion a year.
On behalf of the taxpayer, the Department of Social Security claws back part of the bill for accidents. Even taking into account the £130 million clawed back in compensation for those admitting to or being found guilty of negligence, however, the Department still pays out millions of pounds to maintain those who have lost their income or suffered permanent disability, mostly through injury at work or on the roads.
Prevention is better than compensation. What is needed and is long overdue is a cross-departmental approach to accident prevention. Such issues are all profoundly affected by Government policy. If the Government take insufficient action to cut accidents at work or to make cars and roads safer, the individual suffers and the taxpayer picks up the Bill--yet many such accidents are preventable. It is in the interests of taxpayers and the Department of Social Security, as well as the individual concerned, to challenge other Departments to reach for yet higher safety standards and not simply talk about apportioning the bill for the cost of the accidents.
The Secretary of State should be taking action to ensure that people claim wherever there is good cause of action. Unlike cases of medical negligence, where there is a very
low success rate and it is very difficult to predict which cases are likely to be successful, cases of traffic and work accidents are often very clear. According to the Association of Personal Injury Lawyers, more than 90 per cent of such cases, where there has been advice that there is a good cause of action, succeed.
How can the Secretary of State encourage justified claims? As I have said, it is in the interests of the individual and the taxpayer--and it penalises those who have been negligent--that he should do so. I should like to ask some questions to which the Under-Secretary could respond in his winding-up speech.
Has the Secretary of State considered whether he could do more to provide information about making a claim for personal injury? What information do benefit offices have and what information do they give people about the possibility of claiming for personal injury? Has the Secretary of State considered ensuring that information on claiming is given to all those who suffer injury at work or in traffic accidents? Has he considered whether such information could be available in general practitioners' surgeries and hospitals, where it could be picked up by a relative?
Only one in three victims of accidents make a claim for compensation. Although, clearly, not all accidents are a result of negligence, it is clear that many more than one in three are the result of it. Clearly, good cases are being dropped because the individual feels that there is no incentive to sue. In fact, my hon. Friend the Member for Edinburgh, Central (Mr. Darling) wrote to the Secretary of State on 20 February about a constituent of his who has a very good case but is not bothering to sue because it is not felt to be worth while. A problem has clearly been identified. Encouraging claims contributes to public policy objectives in two ways: it holds to account and penalises those who have been negligent, and therefore acts as a deterrent; and it recoups money on behalf of the taxpayer.
As well as considering giving more information to claimants, have the Government ever considered piloting a system--I hope that, if he is bothering to listen, the Under-Secretary will respond on this point--in which legal aid rules have additional flexibility for people claiming where the DSS will be the ultimate beneficiary? The difficulty lies where there is a good claim and the DSS has a big interest in it being made but the person concerned is not eligible for legal aid.
As I have said, although many claims have a good chance of success, they are not proceeded with because the plaintiff does not qualify for legal aid or, in the case of injury at work, have the legal backing of a trade union, and is not prepared to use his or her own money for a case where he or she sees little benefit. In its compliance cost assessment, Price Waterhouse estimated that every 1 per cent. increase in successful claims for personal injury--bearing it in mind that there is a 90 per cent. success rate--would save £21 million for the DSS in recoverable benefits.
Although the measures in the Bill go some way towards solving the problem, how can further progress be made? How do we deal with a situation in which the one who stands to gain--the DSS--has no locus standi as the plaintiff, and the person with locus standi as the plaintiff does not stand to gain? The pain and suffering exemption goes only some way towards dealing with that problem.
There is a strong argument for the DSS looking for further action to ensure that claims that are likely to be successful are pursued.
Has the Secretary of State considered, for example, that, with the agreement of the plaintiff, the DSS could step into the plaintiff's shoes? Has he considered that, in some cases, the DSS could indemnify individuals against costs? Those proposals would bear looking at. They would have to be evaluated, and might even need to be piloted, but cases are clearly being dropped and the exemption for pain and suffering goes only part of the way towards solving the problem.
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