Select Committee on Trade and Industry Fourteenth Report


The Department of Trade and Industry is responsible for the administration of the two largest personal injury compensation schemes in the world—one for Chronic Obstructive Pulmonary Disease (COPD) contracted by exposure to coal dust, the other for Vibration White Finger (VWF) for hand injuries caused by the use of vibrating tools. The DTI took on these liabilities from British Coal on 1 January 1998 under the Coal Industry Act 1994, and introduced the schemes following court judgements in 1997 and 1998. There are nearly 770,000 claims registered under the two schemes, which are both now closed to new claimants. To date, more than £2.3 billion has been paid in compensation and the Department has estimated that total costs will exceed £7.5 billion once all claims have been settled.

Although the Government failed initially to recognise the scale of the problem and therefore the likely demand for compensation under the schemes, it is not clear to us how a better estimate could have been produced. Had it been possible to do so, those involved in negotiating the details of the schemes—claimants' representatives and the DTI—might have recognised that the complexity of the compensation arrangements, based as they were on common law, was not suitable for schemes of such size. With the benefit of hindsight it is clear that the original underestimate of the scale of the problem meant that the resources allocated to the compensation schemes were inadequate from the outset and that mistakes were made. Since then, however, the Government and its contractors have invested heavily to address the original shortcoming and all of the stakeholders in the process have made significant efforts to make the system work better. Unfortunately, there remain issues still to be resolved.

We welcome the efforts that have been made by both the Government and claimants' solicitors to accelerate the settlement of claims made under both schemes, as the courts have instructed. Unfortunately either disagreements between solicitors and the DTI or its contractors, or the way in which the Department has chosen to implement changes, appear to have delayed the improvements or prevented such efforts from being fully effective. For example, it seems unlikely that agreement will be reached on any system which would deliver a minimum COPD payment to claimants. This is to be regretted as such a scheme could have reduced administrative costs and accelerated the settlement process for many claimants.

The activities of claims handling companies in the settlement process provoked concern and criticism from virtually all of our witnesses. We feel that better and more direct regulation would have curbed the worst behaviour exhibited by such companies in respect of the coal health compensation schemes.

The transparency with which the DTI and its contractors operated was questioned not only by claimants' solicitors but also by the monitoring groups established by Ministers to provide an independent source of advice on the implementation of the two schemes. We are particularly concerned that the monitoring groups feel that they are being denied information and access to Ministers. This defeats the object of their existence.

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