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Mr. Hammond: I am delighted to hear a Liberal Democrat using the currency of pounds, shillings and pence. I am not sure where that leaves the hon. Gentleman in the Liberal Democrat leadership stakes.
The hon. Gentleman said that he wanted to know what the extra cost of the measure to ordinary people would be. Does he not understand that the problem is that there is no single ordinary person--there is no average motor insurance payer? The impact will range from zero on some insured people to substantial on others. The figure that has been quoted of £9 or £10 as an average--
Mr. Deputy Speaker:
Order. I sometimes give leeway to those on the Front Bench, but I cannot allow the hon. Gentleman to get away with a speech during an intervention.
Dr. Harris:
I think that the hon. Member for Runnymede and Weybridge (Mr. Hammond) would have been helped by leaving out his preface, which I am sure hon. Members will be bored with in a few weeks. It is not my intention to digress on to those matters. You will note, Mr. Deputy Speaker, that Liberal Democrats have been careful not to rise to provocation from other hon. Members.
I understand the point that the hon. Member for Runnymede and Weybridge makes--that there is no single figure, but there will be ranges. We would like an undertaking from the Government that they will do their best to put their research capabilities to the task of giving a range, from zero to what the extra cost will be for each individual car insurance payer because of the charges. What is certain is that £160 million means nothing to people in terms of what they pay on their car insurance. The range of costs that the hon. Gentleman talks about--from zero to £20--would mean something.
I think that hon. Members on both sides of the House accept that it would be more sensible to have those figures collected in an orderly way, rather than hearing scare stories from the insurance industry, the AA or political parties of any persuasion about what those costs will be.
I return to my original proposition: it is important not only that the Government should be open about the amount of income that is raised by the measure--I accept the Minister's assurances on that--but that it be clear to individual taxpayers, drivers, voters and patients how much the Government's decision not to use this opportunity to abolish these indirect charges is costing them. I still look to the Minister for advice on that point. However, even if he is unable to give me any help, it is not our intention to divide the House on the matter.
Mr. Hammond:
I am happy to take what the Minister said at face value and to accept his good intentions.
Mr. Hammond:
The Minister nods. If we can accept that there is a genuine intention by the Government to make that data available regularly as fast as possible, we will be satisfied. I thank the Minister for that assurance.
Mr. Hutton:
I can give the hon. Member for Runnymede and Weybridge the assurance that he seeks.
Dr. Harris:
I beg to ask leave to withdraw the motion.
Motion and clause, by leave, withdrawn.
Dr. Harris:
I beg to move amendment No. 2, in page 3, line 43, leave out '2nd July 1997' and insert '1st April 1998'.
I am sure that the House is aware that the amendment is the last to be considered at this stage of the Bill. It seeks to right an injustice. It would leave out 2 July 1997 and insert 1 April 1998 as the date for which the charges will apply for in-patient treatment--and it should be out-patient treatment as well.
The Government have defended 2 July 1997 as the date from which the charges will apply on the basis that that was when the Chancellor of the Exchequer first said that the Government were going indirectly to raise additional money for the NHS from people, through their car insurance. Presumably, they thought that insurance companies could make provision to weight their insurance premiums accordingly from 2 July 1997, so that the extra income that was raised through the Bill could be collected from their customers through increased insurance premiums; that is the logical approach that one might imagine the Government were taking.
If that is the case, surely the Government must accept that there will be some lag time before the insurance industry is able to adjust to the more efficient way in which the Government are collecting the charge, and the increased amount of charge that the Government are collecting.
I think that hon. Members on both sides of the House will recognise that it would have been impossible for someone to change his car insurance premium on 2 July 1997 after he heard that car insurance premiums might be affected from 2 July 1997. The insurance industry has said reasonably that costing the effects of the measure outlined briefly by the Chancellor on 2 July 1997 might take about three months. Logically, assuming that insurance renewals come due evenly throughout the year, another six months would elapse before, on average, insurance companies were able to reclaim, or to build into their costing, the effect of the more efficient collection of charges--and, indeed, a higher overall collection of charges. That is why, by simple arithmetic, 1 April 1998 has been chosen by the Liberal Democrats as the date on which the new tariff should apply.
In Committee, we looked at 1 April 1999, so that everyone would be able to see car insurance premiums increase as the insurance industry adjusted to the new situation; but following debate in Committee, we felt that, on Report, a compromise of 1 April 1998 would be fair. It would not be seen retrospectively to penalise those insurance companies that were either no longer in a position to seek to redress the losses that they will make because of the new legislation and the Government's failure to build in a time lag, or that felt that they were unable to make provision in the marketplace to make up for the loss of income from premiums to pay the charges to which they would be due.
Mr. Hammond:
Conservative Members are always concerned about retrospection in legislation. From Second Reading and from reading the debates in Committee--I was not privileged to be a member of the Standing Committee that considered the Bill--the only argument that has been advanced for setting the start date at 2 July 1997 is that that is the day on which the Chancellor announced his intention to legislate.
I submit that, announcing an intention to do something, is not the same as doing it, especially when it relates to parliamentary legislation. Businesses should not be required to change their patterns of operation or, in some cases--in this instance it may be a relatively minor issue--make major changes to their businesses, on the basis of an announced intention by the Government of the day. That could have pernicious and unfortunate effects if it were carried into other areas.
We at least maintain the fiction that Government proposals are subject to scrutiny by both Houses of Parliament and to amendment during that process. The Government, and the Minister who is with us today, maintain the fiction that the Government listen attentively to the points raised in Committee and will consider any worthwhile amendments. It is perhaps not surprising that substantial amendments are not often accepted in Committee. The suggestion that, once the Chancellor or some other such estimable person has announced an intention to do something that requires legislation, everybody in the country should drop tools and act as if it were already the law of the land, displays a tremendous arrogance. It displays the Government's arrogant attitude towards the legislative process.
Even if the industry should have responded immediately to the announcement by so great a person as the Chancellor, by its very nature, the insurance industry could not have adjusted its prices immediately to take account of the additional effective burden being imposed upon it. I do not like to second guess the Minister, but no doubt he will say that the charges were always in
place and, in theory, could always have been collected. However, it is an essential part of the Government's argument for the Bill that they were not collected. It is beyond doubt that a reasonable commercial organisation will base its behaviour on what is happening and what will happen in the world rather than on what might be theoretically capable of happening.
Humble Back-Bench Members--Ministers have the privilege of being driven around--will be familiar with the process of purchasing motor insurance for themselves. They will know that, customarily, it is done on an annual basis. Indeed, annual motor insurance is the best deal available because cover for shorter periods tends to be more expensive. On 2 July, any insurance company faced with the Chancellor's announcement, would have had a portfolio of current motor insurances, some of which might have had only one day to run and some of which might have had up to 364 days to run. It would be impossible for an insurance company to respond equitably to an increased burden of costs imposed upon it by the Government on the day that the announcement is made, even leaving aside the question of whether business should feel obliged to respond immediately to a mere announcement of an intention to legislate.
When I say that an insurer would be unable to respond equitably, I mean that the insurance company needs to ensure that the relevant insured persons bear the additional cost of the measure. Inevitably, the only action open to an insurer will be to increase the premiums on renewal from the date of the announcement. That means that those who, by definition, are not covered for some part of the first year after the announcement, will gradually be forced to pay the additional cost of meeting the unrecovered portion of the extra premiums that that company would have charged had it issued policies--there are no such policies in the United Kingdom--that would enable it to make immediate changes and collect supplementary premiums from it policyholders.
The Liberal Democrat amendment appears to be illogical. The date mentioned should be 2 July 1998, the date by which all annual motor policies--the vast majority of policies--in force on 2 July 1997 would have fallen due for renewal. It would have been more appropriate for the amendment to have proposed the date of 2 July 1998 or a date after the Bill is enacted.
I note from the briefing presented by the Association of British Insurers that it supports the Liberal Democrat amendment. I suspect that, behind that lies the belief that something is better than nothing and that it is seeking to limit the damage done to the business by the element of retrospection involved in a start date of 2 July 1997.
Going beyond the motor insurance business, an important point of principle for the insurance industry is at stake. The industry operates on the basis of actuarial calculations of risks faced during the insured period. It would be a serious matter for the insurance industry in its broadest sense if the Government took to introducing legislation which impacted on the costs of that industry and which took effect from the date of announcement, notwithstanding the fact that, by its very nature the insurance industry needs a lead time in which to levy additional charges in the form of increased premiums on its customers. That would leave insurers facing risks that they had not taken into account when setting their premiums for a period up to one year for motor insurance or even longer for other forms of insurance.
A further anomaly can be seen in the treatment of the Motor Insurers Bureau. Under the Bill as currently drafted, the Motor Insurers Bureau will have this charge imposed upon it on a date after the Bill has become an Act. I accept that it may not have been clear at the time of the Chancellor's announcement that the Motor Insurers Bureau was to be included in the scope of the measure. For the Government to be logical and consistent, however, they should now be saying that the start date for the bureau should be the date on which it first became publicly recorded that the bureau would be subject to the charges under this Act.
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