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8.15 pm
I now turn to new clause 11 and the scandal that my hon. Friend the Member for Bassetlaw has already referred to in respect of the COPD scheme. The Government should be proud of bringing compensation to many tens of thousands of miners and their families, who were denied it for many years. However, that has been plundered by unscrupulous solicitors and, I have to say, certain trade unions. Is it a scandal? Yes it is. It has been given some attention by some national newspapers, but not a great deal. If the scandal had taken place in the leafy suburbs of Surrey, I am sure that it would have been on the front page of every national newspaper throughout the country. It is worth bearing in mind that it is because it has taken place mainly in poor former mining communities that it has not received a lot of attention, although I, and other hon. Members, have tried to publicise the issue.
There are two separate aspects of the scandal. The first is about the way in which certain solicitors have seen this as a quick way to make a lot of money. I first raised the case of Mark Gilbert Morse over three years ago. Those people were not content with getting their fees paid by the Government; they added 25 per cent. on top as a success fee, and they got people to sign agreements saying that they would have the money deducted. As my hon. Friend the Member for Bassetlaw said, the reaction of many constituents was, “I’ve signed the agreement so I have to pay that money.” Well, they did not have to pay it.
I am pleased to say that Mark Gilbert Morse quickly decided to pay the money back, but I am still not satisfied. That company and a number of other companies have said that they have paid it back. We have their word, but I suspect that unless someone has complained about the fee being deducted, the money will not have been returned. That is why the new clause is important. We should force solicitors to pay back all the money that has been deducted unlawfully.
I give credit to the Law Society individual case officers, because some are very good and work very hard in pursuing some of the rogue elements involved in those scandals, but as my hon. Friend said, thatcan be done only if someone makes an individual complaint; otherwise, people will not get justice. Some firms of solicitors have started paying money back, irrespective of whether complaints have been received. Obviously, they feel guilty and think that they will be exposed later, but we are not talking about small amounts of money; we are talking about millions and millions of pounds. That has been taken by firms of solicitors regulated by the Law Society. Clearly, self-regulation has not worked. That is why I have been one of the strongest advocates for independent regulation of solicitors. I am glad that the Government are taking that on board.
The Bill will cover two other consumer rights issues that need to be addressed. I am not afraid to say this about claims handling companies: I hope that the Bill kills off that industry altogether, because in my opinion there is no need for those companies. They are simply middlemen that have preyed on people and take a cut. If people want legal advice, they should go directly to their solicitors or their trade unions. That should be the best way forward.
To date, there are no ways of getting at claims handling companies, apart from going to their solicitors. The only way to get at the solicitors is through the Law Society, case by case, because many claims handling companies are still holding on to money that was deducted unlawfully. I took up the case of one of my constituents, Mr. Jobes, who had been contacted by Industrial Disease Compensation, now FreeClaim IDC. Ironically, it was one of the founder members of the Claims Standards Council, which was set up supposedly to regulate the sector. I am pleased that my hon. Friend the Minister has not fallen into the elephant trap and allowed the CSC to be the regulatory body for claims companies.
IDC took £3,600 from my
constituent, but all it did was get him to sign a form—which
purported to indemnify him against legal costs, when the company knew
full well that he would not need to lay out any money at all under the
COPD scheme—and pass it on
to a firm of solicitors in Liverpool, Silverbeck Rymer. The case went
through the process, the money was paid out and the solicitors deducted
£3,600 and passed it on to IDC. What did IDC do for that money?
It did nothing except pass on the information. It had led Mr. Jobes to
believe that he was being indemnified against legal costs.
Mr. Jobes and the other constituents who have come to see me are not, with no disrespect to them, used to dealing with solicitors. Some are widows, others are in very poor health—including Mr. Jobes—and do not know what to do with legal documents they get sent. Some have even been sent threatening letters saying that if they withdraw from the agreement they will end up with huge liabilities. That is a disgrace.
I pursued Silverbeck Rymer through the Law Society, which ruled that it had to repay the full amount. Silverbeck Rymer lost the appeal and had to pay the money back, but I hate to think how many other cases there have been in which money was deducted by solicitors and paid to IDC. How much money is sitting in the coffers of IDC for which it did nothing?
IDC knew that it was doing something wrong. Not long after the publicity on the issue, it changed its agreement so that all that was payable was an administration fee of £100. It was still doing nothing for that £100 except passing information on to solicitors.
Another scandal remaining to be unearthed is the collusion of former NUM officials and others who had access to membership lists. They prostituted any trade union principles that they had by going to work for IDC and helping it to make a quick buck out of the COPD scheme. The scandal of the £100 administration fee is that all IDC did for the money was pass on information to solicitors, which deducted sums from the final award to pay to IDC. I am pursuing several cases with the Law Society questioning the role of the solicitors in acting as collection agents for claims companies. These scams have cost people tens of thousands of pounds, but they could not have happened without the collusion of solicitors’ firms, including some well known high street names. I would have thought better of those firms.
As well as acting as collection agents, the solicitors are failing to advise their clients that there is no need to pay the £100 administration fee. In fact, if people had gone direct to the solicitors, they would not have paid any fee. The solicitors were not acting independently. They saw IDC and the other claims handling companies as a way to gather hundreds of claims and paid the £100 fee with no questions asked.
Another issue is quality of service. IDC’s website talks of a panel of solicitors, as though they have been vetted or specialise in such claims. In fact, they are high street solicitors who are looking for work. That has meant that not only have some people been ripped off by the fees, but some of the solicitors have taken a sausage machine approach to the cases. They have put the claims through their administration system and, in many cases, accepted the first offer from the Department of Trade and Industry. The work has not been checked and so the firms have settled the cases for much less than other solicitors could have achieved. That is another scandal that the Law Society should address.
Mr. Philip Hollobone (Kettering) (Con): I agree with the hon. Gentleman that the Bill would be successful if it drove unscrupulous claims management companies out of business. However, does he agree that there are some honourable exceptions, not least the National Accident Helpline, which is based in my constituency? I believe that he has been sent details of how it operates, and it has helped thousands of people successfully settle claims for compensation.
Mr. Jones: No, I do not. If people want legal advice, they should go directly to solicitors and cut out the middle man. There is no need for such organisations. Trade unions can be a good source of advice and support for people seeking access to justice, and most people have legal insurance through their home contents insurance. I look forward to the day when the Bill puts claims handlers out of business.
Another scandal involves the way in which some trade unions have acted. I know that 99 per cent. of trade unions do a fantastic job. They pioneer work and they secure access to justice for many thousands of people that they would not get if they were not members of a trade union. However, Durham NUM and Thompsons solicitors have acted as claims handlers. They are not providing support to existing or retired members but operating a scam in which people who have very little connection with the NUM—often widows of former members—with a COPD case were asked to pay £20 a year to become an associate member of Durham NUM. I have asked what an associate member is, and it is clear that such members have no rights under the trade union legislation. Thompsons told me that it gives people access to the NUM’s legal aid scheme, but that does not seem to exist. It appears that people pay £20 a year to Thompsons solicitors, who deduct another 7.5 per cent. from their compensation, if their case is successful. People are never told that they could go elsewhere to pursue their case. Even worse, the NUM and Thompsons have sent out letters telling people that if they stop paying their £20 a year, their case will be withdrawn, and that is just not true.
8.30 pm
I have been denounced in many quarters, some of which I shall refer to shortly, for feeling so strongly about all this. I feel so strongly, though, because the ladies and gentlemen who have come to me have no connection whatever with the NUM, are often very poor and are not used to dealing with solicitors. Yet the NUM has acted as a claims handler, joining people up for a success fee, which is all that that 7.5 per cent. is. The £20 a year is nothing other than an access point to justice.
I commend the work the NUM has done in some areas, and there is a contrast in the north-east between Durham and Northumberland, where the NUM does not charge anything. It does not matter there who anyone is—an existing member of the NUM or, as my hon. Friend the Member for Midlothian (Mr. Hamilton) said, a member of the community—because they can go to the NUM without it costing them a penny. If they want to make one, Northumberland NUM asks for a voluntary donation afterwards. That is fine: what people do with their compensation after they get it is up to them—they can give it to a cats home, give it to an individual or spend it, but if they want to make a contribution back to the NUM, that is laudable.
That is not what happens in Durham. There, 7.5 per cent. is taken off the compensation by Thompsons solicitors, then passed to the NUM. It is being suggested that that 7.5 per cent. will fund future litigation and keep the NUM going. I have no problem with that, but Thompsons, who seem to act differently in Durham than in other areas, has had nearly £100 million out of the Government in costs.
John Mann: More than that.
Mr. Jones: And more, as my hon. Friend says. I cannot see why Durham NUM could not have received a success fee or other fee from Thompsons. I think it totally wrong that poor individual claimants should have to fund Durham NUM.
I understand I have been denounced in several quarters, including in the upper House last week in a debate on miners’ compensation by Lord Sawyer, a former general secretary of the Labour party. To be fair to him, he says:
“Since standing down from my main roles in the labour movement, I have become the non-executive chair of the supervisory board for Thompsons Solicitors and I declare that interest.”
That is fine, and I have to say I agree with much of his speech, which attacks the way in which unscrupulous solicitors have deducted moneys. However, he went into the territory of the Durham NUM, on which he has certainly never spoken to me, making comments for which the evidence, I have to say, is weak to non-existent. He says that funds are being used in the Durham area to fight miners’ knee cases and possible surface worker cases that have not yet been funded. I am aware of only one case that Durham NUM has funded for surface workers, but the red herring about miners’ knee cases seems to have come up only since I began to raise these issues.
Lord Sawyer seems to condemn what has been said here:
“In reading the debates in another place on this issue and looking at some recent comments, it is possible to think that this is all about individual consumers in cases against big employers or insurers without trade union backing. That would be a big mistake. Let us condemn law firms and claims companies who exploit workers’ cases by all means, as we are doing tonight, but let us not in the process damage trade unions and their trusted lawyers who are, at the end of the day, the only ones with the commitment, capability or expertise to fight the major cases”.
It worries me that Lord Sawyer is an individual who is supposed to be on the supervisory board of Thompsons solicitors but who has not even taken the trouble to see how those solicitors are acting with the NUM in Durham. If he was doing his job properly, he would be asking the questions I am asking. That raises the question of what he is being paid for—I assume he is paid—as a member of the supervisory board; or is he just being paid to be an advocate for Thompsons solicitors in this place?
Mr. David Hamilton: For clarification, let me say that the issue of knee litigation has been on the cards for some years. The Scottish NUM, south Wales NACODS, Derbyshire NUM and, I think, Durham NUM are four unions that have combined to raise£1.2 million on that. I do not see Northumberland among them, and I do not see the other areas.
When we talk about the trade union movement, we mean more than 6 million trade unionists. Tonight, we are talking about the Compensation Bill, and it clouds the issue to talk about single areas within the NUM. We should talk, as my hon. Friend did, about 99 per cent. of the trade unions being extremely good. That was the correct thing to say.
Mr. Jones: I agree. I have no problem with that, but I challenge Durham NUM to publish a breakdown of what it has done with about £3.5 million, which it has had under the scheme. I also ask why, if Thompsons solicitors is so good and pioneering, it is not contributing, too. It has done very well out of the mining industry in the past 10 years.
I take exception to a point made by Lord Sawyer:
“If there is a dispute about deductions by the union in any mining community, it should be resolved within that community rather than be made into a political football, as it has been by some.” —[ Official Report, House of Lords, 11 July 2006; Vol. 684, c. 662-64.]
I have tried to resolve this issue in the mining communities, as the noble Lord would know if he had taken the trouble to speak to me. I wrote to the general secretary of Durham NUM, David Hopper, on3 February 2005; to date, I have had not a reply. In that letter, I finished by saying that if he wished, or his executive wished, for me to address them in any way, they should please contact me:
“I am more than willing to speak to either yourself or your committee.”
To this day, I have not heard anything.
What I have heard is many mutterings behind the scenes in the trade union movement about how Kevan Jones is selling out the movement and his past. I was also, apparently, condemned, by name, from the podium last week at the Durham miners’ gala. The gutless individuals who could do that there are not prepared to meet me or talk to me directly about the issues.
It is vital that we press the new clause. I want assurances from the Minister that if she cannot accept it, she will undertake on behalf of the Government to put the utmost pressure on the solicitors and claims handlers who have deducted moneys to pay it back. My great fear is that without pressure from the Government individual solicitors will hang on to the money and give it back only when complaints are made, and that claims handlers who have already deducted money will not be prepared to pay it back. At the end of the day, those who will suffer will be individual consumers, for whom my hon. Friend has been a strong advocate throughout the passage of the Bill, and who are the reason for its introduction.
Simon Hughes: On a point of order, Madam Deputy Speaker. I am conscious of the fact that we have had debates on two groups of amendments and that there are three groups to go. Would you be prepared to accept an amendment to the timetable motion to allow us to continue consideration and start Third Reading later if it had the agreement of all three parties represented in the House?
Madam Deputy Speaker: I understand the point that the hon. Gentleman is making, but it is not within the power of the occupant of the Chair. The timetable motion is not before the House this evening; it has already been decided.
Bridget Prentice: Concern about trade union exemptions has been a key issue in our debates on Second Reading, in Committee and again today. If we are to protect consumers it is vital that an effective and proportionate mechanism applies to those who provide claims management services. We believe that the best approach is to exempt independent trade unions that provide claims management services to their own members and their members’ families, but the exemption will be subject to the condition that trade unions comply with a code of practice that we will develop in consultation with the TUC.
We have taken a risk-related approach because we believe that full regulation is an unnecessary and disproportionate burden on both trade unions and the not-for-profit sector. Regulation is aimed at commercial claims management companies. The Better Regulation Task Force recommended that course of action and the regulator’s initial focus will be on authorising companies that provide a regulated claims management service and tackling companies that attempt to evade it.
The code outlines the key principles that would apply where a trade union deals with a claim on behalf of a member, and it covers the key issues raised in earlier debates. We have had constructive engagement with the TUC general secretary and his colleagues on the issue, but obviously there is much more work to do. Nevertheless, I hope that the draft gives Members some indication of the approach we are taking.
May I point out to the hon. Member for North-East Hertfordshire (Mr. Heald) that the code of practice will be issued by the Secretary of State? The Secretary of State will be the judge of the union’s behaviour in relation to the code; the TUC and the unions will have a vital role in policing union activities, but the ultimate decision about exemption will be for the Secretary of State. Those principles are fundamental to provide a good service to trade union members, and we shall hold consultations about the code later this year.
We believe that the enforcement provisions are effective. If an exempt trade union falls below the standards outlined in the code of practice, the Secretary of State will withdraw the exemption. Once the exemption is withdrawn, the trade union concerned will have to stop providing the services unless it successfully applies for authorisation by the regulator. If it carries on providing the services, or even offers to provide them, without authorisation, it will be committing an offence and will be liable to prosecution.
Once the exemption for an individual trade union or any other organisation has been withdrawn, the full range of enforcement powers in clause 7 will be available to the regulator. If the organisation is suspected of continuing to provide services, the regulator can require the provision of information and documents, seek a warrant to enter and search premises and apply for an injunction restraining the organisation from providing the services. I hope that reassures Members that the full force of the law will be available to the regulator if people fall below the standard required. The actions of a very few unions, which have been well described during the debate, should not detract from the excellent work of the overwhelming majority of trade unions on behalf of ordinary hard-working people.
Mr. Heald: As the Minister knows, if complaints are made against ordinary claims handling companies—not trade unions—a whole range of investigatory powers come into play, such as search and so on. Why does she think they are unnecessary for trade unions?
Bridget Prentice: I thought that I had just made it as patently clear as I possibly could that, if the trade union falls below the standard set out in the code and continues to offer the services, all the enforcement powers under clause 7 would apply to it, too.
New clause 1 is unnecessary because we do not need further definition of the criteria in legislation and it would militate against the purpose of exemption. It would be too rigid and might mean, for example, that an individual citizens advice bureau would have tobe assessed against the criteria. That would be unnecessarily bureaucratic and disproportionate.
New clauses 2 and 5 are also unnecessary. As I have explained, if the behaviour of an exempt organisation falls below the required standard, the Secretary of State can withdraw the exemption. Once it is withdrawn, an exempt organisation that continues to provide the service without authorisation will be committing an offence under clause 6 and can be prosecuted. The separate offence that the hon. Member for North-East Hertfordshire proposes is superfluous, as is a separate power to seek an injunction—it is already contained in the Bill. What he proposes would also make the penalty for failing to comply with the code of practice attached to an exemption more stringent than the penalties for authorised persons who break the rules. That seems to be to be the wrong way round.
8.45 pm
I agree with my hon. Friend the Member for Hendon (Mr. Dismore) that trade unions play an extremely valuable role in assisting ordinary hard-working people. They have a long history of championing the rights of workers in relation to health and safety at work and employment. They are also among the most regulated organisations in the country, which is another reason why it is unnecessary to make them immediately part of the regulatory issue in the Bill. However, we have to recognise the concerns that my hon. Friends the Members for North Durham(Mr. Jones) and for Bassetlaw (John Mann) raised about a small number of trade unions in relation to the coal health compensation scheme. I take those concerns very seriously and have been working with them and the Law Society to ensure that those issues are resolved. I hope that my hon. Friend the Member for Hendon understands the reasons for this approach. We want to do something that is proportionate for trade unions, but we also want the power to protect union members in the rare cases where the service that they receive is not up to scratch. On that basis, I hope that he will not press his new clause.
On
amendment No. 5, the hon. Member for North-East Hertfordshire spoke of
his concerns about inappropriate and misleading advertising. I agree
with him that some of the advertising is outrageous and has to be
condemned absolutely. An essential part of the claims management
regulatory framework will be rules governing the conduct of authorised
persons. Compliance with those rules will
be a condition of authorisation and any authorised person who does not
comply will face disciplinary action by the regulator. That can include
attaching conditions to their authorisation—for example,
preventing them from providing a particular type of service or from
handling client money. It can also involve suspending their
authorisation or cancelling
it.
Advertising is a crucial area. The key issue is that it should not be misleading to consumers. That is covered by the codes of the Advertising Standards Authority and the authorised person’s responsibilities can be reinforced in the rules with explicit reference to the ASA codes. The rules will help to ensure that authorised persons adhere to high standards across all their marketing activities, which will be enforceable by the regulator. The rules that we have issued set out what we expect the standards applied to authorised persons to be. That includes not making misleading or exaggerated statements; not using expressions such as “no win, no fee” without qualification, unless there is no possibility of the client having to meet any costs that he may have incurred in connection with the claim; and not offering an immediate cash payment or similar payment as an inducement for making a claim. I hope that that reassures the hon. Gentleman.
On new clause 11, the Law Society has taken action to deal with complaints about solicitors who have taken costs in addition to those paid by the Government under the terms of the coal health compensation scheme. The Law Society has assured me that it takes complaints made to it about the scheme very seriously and many solicitors have already been referred to the solicitors disciplinary tribunal for disciplinary action. I empathise with Members who have first-hand experience of the disgraceful behaviour of some of those solicitors. I hope that they take some comfort from the knowledge that action is being taken against those who breach the rules. I understand that some £3.6 million that was made from additional charges has been repaid. But, of course, that is not enough. I know that colleagues in this House are working hard on behalf of their constituents to get additional fees returned, and I welcome the fact that they will continue to do so. I will continue to monitor the Law Society’s handling of these complaints.
I spoke in Committee about the requirement for claims management companies to provide the regulator with details about the information that they give to clients about fees. That is a key aspect of the authorisation criteria. The information that is given to clients should be clear and transparent. That is crucial and will be an important requirement of the rules.
It is our intention that the regulation should be effective and have teeth. The regulator will not tolerate attempts to mislead or misinform consumers because that would be a clear breach of the rules with which all authorised persons will be expected to comply if they wish to provide a regulated claims management service. An authorised person who is found to be in breach of the rules will be severely reprimanded, and the sanctions will include the authorisation being suspended or cancelled. Given those stringent safeguards, I hope that my hon. Friends will not press new clause 11 to a Division.
Points
were raised about the code of practice. We have an early draft of the
code at present, and it is still being discussed in detail with unions,
legal professionals
and others. We can thus think about including a consideration of clarity
about fees and funding in those discussions. I can tell my hon. Friend
the Member for Bassetlaw that Vendside would not be subject to the
exemption in the first place. As a separate company, it would have to
be authorised if it wanted to continue to carry out claims management
services. It is our intention that any subsidiary company, whether
owned wholly or in part by a trade union, will not fall within the
terms of the exemption. The only bodies covered by the exemption will
be independent trade unions listed by the certification
officer.
Let me turn to retrospection. Clause 8 will allow the Secretary of State to make transitional provision in regulations. For example, that will allow provision to be made for the regulator to use his discretion to investigate complaints relating to an authorised person in respect of conduct that began before the commencement of the Bill and continued after that commencement.
There will be a definition of a member in the exemption order. We have been absolutely clear that the exemption will be limited to members and their families. When trade unions act as claims farmers and pursue claims on behalf of non-members, they will have to be regulated. I have made it clear that we will ensure that there are no loopholes. Trade unions will not be able to sign up associate members only for the purpose of dealing with claims. However, retired members will be included in the exemption because they will clearly be part of a legitimate trade union activity.
The hon. Member for Montgomeryshire (Lembit Öpik) made an interesting point when he asked the hon. Member for North Southwark and Bermondsey (Simon Hughes) about minimum turnover requirements for smaller businesses. We are consulting on the fees payable by companies for their authorisation. However small a company’s turnover, it is the consumer who needs proper safeguards to ensure that there is adequate protection. We are examining the situation so that there is as much balance as possible.
Government amendments Nos. 11 and 12 will put beyond doubt the fact that the Secretary of State could bring claims management services that were provided in relation to industrial injuries disablement benefits within the regulatory net. As well as listening carefully to hon. Members’ concerns, we have continued to speak to many stakeholders about the introduction of the new regulatory regime. That has included discussions with Citizens Advice and Judge Michael Harris, the president of the social security and child support appeals tribunal, both of whom have raised concerns about claims management in relation to claims for industrial injuries disablement benefits and some other welfare benefits. Commercial intermediaries typically charge a flat fee for such a service, or take a percentage of the benefit payment if the claim is successful. Claims of that type would be made at a time when a person was already suffering from the trauma of the injury, which would make them more vulnerable. If consumers are being targeted, we want to be able to help by stepping in and providing appropriate protection.
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