The
Committee consisted of the following
Members:
Chairman:
Mrs.
Janet
Dean
†
Baldry,
Tony
(Banbury)
(Con)
†
Bellingham,
Mr. Henry
(North-West Norfolk)
(Con)
Bone,
Mr. Peter
(Wellingborough)
(Con)
Browne,
Mr. Jeremy
(Taunton)
(LD)
Carswell,
Mr. Douglas
(Harwich)
(Con)
†
Ellwood,
Mr. Tobias
(Bournemouth, East)
(Con)
†
Flello,
Mr. Robert
(Stoke-on-Trent, South)
(Lab)
†
Foster,
Mr. Michael
(Worcester)
(Lab)
†
Hughes,
Simon
(North Southwark and Bermondsey)
(LD)
†
Jones,
Helen
(Warrington, North)
(Lab)
†
Jones,
Mr. Kevan
(North Durham)
(Lab)
†
Linton,
Martin
(Battersea)
(Lab)
†
Mallaber,
Judy
(Amber Valley)
(Lab)
†
Mann,
John
(Bassetlaw)
(Lab)
†
Prentice,
Bridget
(Parliamentary Under-Secretary of State for Constitutional
Affairs)
†
Skinner,
Mr. Dennis
(Bolsover)
(Lab)
†
Taylor,
Ms Dari
(Stockton, South)
(Lab)
Jenny
McCullough, Committee
Clerk
†
attended the
Committee
The
following also attended, pursuant to Standing Order No.
118(2):
Marris,
Rob
(Wolverhampton, South-West)
(Lab)
Rooney,
Mr. Terry
(Bradford, North)
(Lab)
First
Delegated Legislation
Committee
Monday 22
January
2007
[Mrs.
Janet Dean
in the
Chair]
Draft Compensation (Exemptions)Order 2006
4.30
pm
The
Parliamentary Under-Secretary of State for Constitutional Affairs
(Bridget Prentice):
I beg to
move,
That the
Committee has considered the draft Compensation (Exemptions) Order
2006.
It is a pleasure
to serve under your chairmanship, Mrs. Dean. This is the
first time that we have served together as Chairman and Minister in a
Committee. We have often been on the same Benches in the past, and I am
sure that you will conduct our proceedings as admirably as you always
do.
The
order was laid before the House on 28 November. It specifies the
classes of persons and organisations that are exempted from the
statutory requirement to be authorised to provide a regulated claims
management service under part 2 of the Compensation Act 2006. The
Committee will notice that a correction slip was issued on 13 December
to correct two errors in the draft. I am grateful to members of the
Joint Committee on Statutory Instruments who raised the issue with us.
We were happy to correct
matters.
I
should remind members of the Committee that other statutory instruments
setting out the scope of regulation and the detailed regulations that
underpin the framework needed to regulate the activities of claims
management services were debated on 5 December and came into force on
14 December. The conduct rules for authorised persons were also
published on 14 December and the authorisation process is under
way.
The Committee
will remember that the Better Regulation Task Force in its report
“Better Routes to Redress”, published in May 2004,
recommended that the claims management industry first be given a chance
to self-regulate and, if progress were not made by the end of December
2005, that my Department should regulate the sector. Sadly, the
industry failed to self-regulate, so the Government were obliged to
step in. The measures that were introduced and thespeed with
which work progressed were welcomed throughout the parliamentary
passage of the Act. Indeed, the hon. Member for North-East
Hertfordshire (Mr. Heald) said on 22 June 2006
that
“it is clear that
self-regulation has not
worked”.
He said that
there is
“the need to get
on with this, and to introduce some robust arrangements that will act
relatively quickly”. —[Official Report, Standing
Committee E, 22 June 2006; cc. 72,
101.]
I therefore expect and
hope that Members in all parts of the Committee will be of one mind on
the statutory instrument.
Part 2 of the 2006 Act
establishes a robust framework to regulate claims management services.
The regulation will put in place vital safeguards for consumers,
including a requirement that all authorised persons must comply with
strict rules of conduct. It will raise standards throughout the
industry and will give consumers the confidence in the services that
they are using.
We
have deliberately defined claims management services under the Act
widely to ensure that there are no loopholes. The Compensation
(Regulated Claims Management Services) Order 2006, which was debated in
December, defines those activities under sectors that are regulated
under the Act. The aim of the regulation is to target those who provide
claims management services on a commercial basis. Individuals working
in a voluntary capacity, for example, at a citizens advice bureau or a
legal advice centre or where claims management advice is given to a
friend, are excluded specifically from the scope of the Act by virtue
of section
4(1)(d).
The draft
Compensation (Exemptions) Order 2006, which was made under section 6(2)
of the Act, specifies the class of persons or bodies whose activities
fall within the scope of regulation. However, due to the nature of
their activities or because they are already regulated, they are to be
exempt.
The exemptions
were drawn up in accordancewith general public law principles,
taking intoaccount relevant criteria and with proper
procedural consideration given to each person or class of persons. The
Government consulted on the draft and discussed the proposals with
representative bodies and interested parties to ensure that definitions
accurately described the person or class of persons to be
exempted.
Tony
Baldry (Banbury) (Con): Among the organisations that the
Minister consulted, did she consult the Association of Personal Injury
Lawyers, which is genuinely concerned about article 5? APIL is
concerned that if a claims organisation is regulated by the Financial
Services Authority, it will be exempt from regulation by any other
regulator. The FSA is not particularly attuned to dealing with the
regulation of claims management companies. Why are claims management
companies being given exemption when they happen to be otherwise
regulated by the
FSA?
Bridget
Prentice:
We did consult APIL and others. I saw the
briefing note that APIL sent out last week and was rather disappointed
by it. The note does not, for example, commend the Government for
acting with speed to implement the regulatory framework. There is no
evidence to substantiate APIL’s claims that insurers’
claims management activities would be regulated to a lower standard
than if regulated by my Department. APIL confuses the concept of double
regulation. No body should be regulated twice in respect of the same
activity, which is exactly what the order achieves—that no body
is doubly regulated. That does not mean that insurers will be exempt;
it means that they will be regulated under the SFA—I am sorry,
the FSA: the SFA has more pressing things to deal with at the moment.
There is a misunderstanding in the briefings that APIL sent
out.
Mr.
Kevan Jones (North Durham) (Lab): Before the hon. Member
for Banbury raised his point, it was not one that I had honed in on. As
currently agreed, would the order exempt claims handling organisations
that sell after-the-event insurance, such as Freeclaim IDC, a
disreputable organisation which has in the past hidden behind the fact
that the insurance products that it sells are covered by the
FSA?
Bridget
Prentice:
My hon. Friend makes a good point. That is
exactly the issue that we wanted to clarify, so that claims management
is dealt with under the order. Of course, people dealing with insurance
properly, and those not dealing with it properly, will be dealt with by
the FSA. It is important that we make those two things clear, and my
hon. Friend makes a good point in raising the
issue.
John
Mann (Bassetlaw) (Lab): Just to be absolutely clear, is it
the case that a claims handling company such as Vendside, which deals
with mining and textile industrial disease claims, and also on the open
market with mortgage and endowment mis-selling, would not escape
regulation of its claims management business by claiming that the
company should be regulated by the
FSA?
Bridget
Prentice:
No, it certainly would not. If Vendside wishes
to be a claims manager, it mustbe regulated under the 2006
Act, and would not be exempted by the order. Vendside could perhaps be
separately regulated under the order by the Department for
Constitutional Affairs, as well as by the FSA for the other services
that it provides.
The
order exempts legal practitioners, provided that they are acting in the
normal course of business permitted by their profession rules. Those
exemptions will apply only in so far as those concerned are already
regulated under provisions for claims management services. Those
providing regulated claims management services regulated under the
Financial Services and Markets Act 2000 will be exempt. That covers the
handling of insurance claims by insurers, including where an insurer
deals directly with a third party who has a claim against one of its
policyholders. It is often referred to as third party capture, and two
hon. Members have raised concerns about it. The Financial Services
Authority has made it clear that it will take very seriously any
allegations of impropriety in the handling of third party capture
claims for insurers.
The activity of referring
uninsured losses for a fee to legal practitioners or to an authorised
person, however, is not covered by the 2000 Act, and any person
carrying out that activity, as my hon. Friend the Member for Bassetlaw
said, will need to be authorised under the Compensation Act 2006. I
hope that that situation is absolutely clear for all members of the
Committee.
The order
also exempts independent trade unions. The exemption for trade unions
was debated at length during the passage of the 2006 Act. We
consideredthe concerns seriously and have limited the
exemption to trade unions certified as independent by the certification
officer under the Trade Union and Labour Relations (Consolidation) Act
1992 in providing regulated services to members and members’
families.
That will help to prevent a claims management
business from attempting to secure independent status as a trade union
to avoid regulation. Again, I think that that covers the issues raised
by my hon. Friend.
The exemption for trade unions
does not extend to any subsidiary company, whether wholly or partially
owned by a trade union, and any such company will be required to seek
authorisation to provide a regulated claims management
service.
Simon
Hughes (North Southwark and Bermondsey) (LD): My question
is linked to the exemptions for trade unions and students unions in the
order—an area that the Government are approaching in the right
way. Would the exemption also apply to members of the Co-operative
Society—who have an in-house service or contractual relationship
with a solicitor for claims handling—a political party such as
mine or the hon. Lady’s, an organisation such as the Automobile
Association or the Royal Automobile Club or any other membership
organisation that is not a trade union in the conventional sense of the
word?
Bridget
Prentice:
My immediate answer is no. The exemption would
not apply to those organisations, so they would not be exempt—I
must be careful about double negatives—even though they might be
membership organisations. If they provide a claims management service
in the course of their business, they will have to be regulated. My
immediate reaction is that they would not be regulated, but I will take
further advice on that to be absolutely
certain.
Simon
Hughes:
I am very grateful to the Minister, and I am not
seeking to trap her into an answer. I am just trying to make sure that
we are clear. What about organisations such as provident societies or
mutual societies, in which members have a self-help set of activities?
Could she tell us about that family of organisations? I will quite
accept it if she says that they will have to get a specific exemption
and will not have a class exemption, but it would be helpful if people
knew.
Bridget
Prentice:
The hon. Gentleman makes a reasonable point, and
I will see that he gets that information. The Act does allow for people
to be brought in or taken out depending on their behaviour. If it
becomes clear that another organisation—such as a mutual
society—is behaving much like a trade union, there might be a
case for it to ask for exemption, and that would be considered. The
condition of the exemption for trade unions, for example, is that the
unions are required to act in accordance with the code of practice
issued on 28 November by the Lord Chancellor and Secretary of State for
Constitutional Affairs. That sets out some of the key standards that
exempted trade unions will need to apply to the provision of regulated
claims management services to their members. Very serious breaches of
that code could lead to the exemption being withdrawn from a trade
union, which would then have to apply for authorisation under the Act
or else cease to provide the claims management service. We continue to
work with the Trades Union Congress and the certification officer to
monitor the operation of the code of practice. The order will also
exempt charities and not-for-profit advice
agencies.
Mr.
Jones:
On the role of trade unions, what will be the
situation if a trade union is added that is defined under the Act and
registered with the certification officer, and is therefore a bona fide
trade union—I can think of at least two examples with which my
hon. Friend the Member for Bassetlaw and I have been
involved—but is quite clearly acting purely as a claims handler
rather than a trade union? In such a case, who would say that the union
had to fall under the regulations of the organisation? From my
experience with the TUC, a blind eye seems to be turned to at least one
member
organisation.
Bridget
Prentice:
I cannot comment on that particular issue except
to say that the Government have worked closely with the TUC and its
legal department in drawing up the code of practice. The TUC is as
determined as we are to ensure that the code works properly alongside
the certification officer who will monitor it. If it were discovered
that an organisation claiming to be a trade union—it would have
to be a trade union as defined under the Act—was acting purely
as a claims handler, it would be contravening the code of practice. It
therefore would not fall within the exemption that we are debating, but
would have to be regulated under the
Act.
John
Mann:
I think that it would be helpful to quote from the
TUC briefing that I received today. It is extremely clear, unambiguous
and helpful, and I seek the Minister’s comments on it. The
briefing says:
“Trade unions are
non-profit
making”—
which
gives a clear, well-understood and unambiguous definition of trade
unions. It also
states:
“Unions
do not charge members costs or deduct from damages in personal injury
or employment cases, regardless of whether the case is won or
lost.”
In that
statement, it seems to me, although I seek the Minister’s view,
that the TUC is being unambiguous about what it regards as fair and
reasonable. Willthe TUC be referring to the regulator those
unions, whether they be TUC or non-TUC, that breach the principle
spelled out in its
briefing?
Bridget
Prentice:
I am sure that the TUC will be listening
carefully to our debate. As my hon. Friend says, the briefing makes it
clear how the TUC visualises the behaviour of a properly organised,
representative trade union. I am sure that it will take his point to
heart, so that if anyone is acting in a way that is detrimental to
members, including taking moneys from them for costs when it is clear
that that is not part of a union’s remit, the TUC will take it
on
board.
Mr.
Dennis Skinner (Bolsover) (Lab): Will my hon. Friend bear
in mind that many such cases came about because of a breakaway
organisation from the National Association of Colliery Overmen,
Deputies and Shotfirers in south Wales? That is where it all began,
after the judgment in Manchester on chronic obstructive pulmonary
disease. The breakaway organisation was principally Bleddyn Hancock, a
Welsh nationalist who fought against Labour some time later. They tell
me that he has a big house, a swimming pool and everything to go with
it. I do not know where it has come from; I am not the sort to make
wild allegations.
The Minister must concentrate
her mind on this: cases are now being taken to the courts involving
what we call beat knee. We all know that it will be extremely difficult
to prove. It is not like COPD, for which medical evidence is pretty
sound. My hon. Friends’ questions, which I am sure we will bear
in mind, are important. Although COPD is coming to an end and the
lawyers have been and gone, the truth is that there could be another
upsurge, depending on what the judge
says.
Bridget
Prentice:
I am grateful to my hon. Friend for raising that
matter. He is right. We must be constantly vigilant about the behaviour
of some individuals and organisations within the area. It is also
beholden on the TUC as the umbrella organisation representing trade
unions globally to take as strict a view as I do of people mis-selling
or misbehaving in respect of individual trade union members. I hear
what my hon. Friend is saying. The issue has not been brought to my
attention before, but I will certainly ensure that we examine closely
the activities of those in such areas who think that they can get round
a law that is there to protect, in some cases, the most vulnerable in
our communities. I shall make sure that we pay close attention to any
judgment made as a result of such matters going to
court.
The order
exempts charities and other non-profit advice agencies. It exempts the
independent complaints reviewer, students unions as the hon. Member for
North Southwark and Bermondsey said, the Motor Insurers Bureau, the
Medical Protection Society, the Medical Defence Union and individuals
who refer or introduce a claim, but only if they meet the strict
criteria set out under the
order.
Judy
Mallaber (Amber Valley) (Lab): I am pleased that the order
contains the exemption. In my area, the organisations that did the most
to tell people that they might have COPD and vibration white finger
claims were the unemployed workers centre and healthand safety
committees connected with the trade union movement, which are very much
not-for-profit
organisations.
The
Minister spoke about the order being about protecting the vulnerable
members of our society. I was most angry with the claims handlers
because they were desperately trying to gather claims for members of
the family, who had no need to claim but who were entitled legally to a
legal claim as those who inherited their parents’ estate. That
is one of the main distinctions that should be drawn when looking at
which organisations have behaved honourably and should be subject to
exemptions and which organisations have behaved despicably and should
be
excluded.
Bridget
Prentice:
My hon. Friend made an important point extremely
well. In looking at such matters, we need people to be vigilant about
how some organisations behave. Clearly, those not-for-profit
organisations which are helping people should be supported and
encouraged in their work. Anyone who is behaving in a way that
undermines the spirit as well as the letter of the law and, indeed, is
allowing people in vulnerable situations, in effect, to lose out should
be brought to the attention of the Secretary of State. If
they were subject to an exemption, it could be removed from them. As my
hon. Friend said, those who are behaving honourably should be commended
and, if they are not already exempt, they might be able to apply for
exemption if that were
appropriate.
The
exemption could apply to garages and body shops that pass on referrals
for a fee, reward or gain, but only if they meet the tests that I have
outlined today. The order provides for an exemption from the need to be
specifically authorised and does not imply exemption from the rules of
conduct. The primary aim of claims management regulation is to protect
consumers by regulating the conduct of those who provide services for
commercial gain. We recognise that the regulation of the claims
management sector alone is not enough to ensure consumer protection. It
is vital that all aspects of claims handling are effectively regulated
to ensure that proper safeguards for consumers are in place and that
the Department is working closely with the Law Society, the Financial
Services Authority, the TUC and others to achieve that. On that basis,
I commend the order to the
Committee.
4.55
pm
Mr.
Henry Bellingham (North-West Norfolk) (Con): Welcome to
the Chair, Mrs. Dean. It is a pleasure to serve under you. I
thank the Minister for explaining clearly the details of the order and
going through the different classes of exemption. The Conservatives
support the order. We voted in favour of the primary legislation and
are grateful to her for coming to the House to explain some of the
details of the secondary
legislation.
The
Minister pointed out two corrections. To be fair, those corrections
have been made in response to the Joint Committee on Statutory
Instruments, chaired by my right hon. Friend the Member for Penrith and
The Border (David Maclean). I point out that although the mistakes were
technical, they were fairly significant. Why were the mistakes made?
What happened? Surely it is up to her Department to get such things
right and not to rely on the Joint Committee, although it could be
argued that the Joint Committee is doing its job, which it does well.
It is most assiduous in going through statutory instruments on the
House’s
behalf.
My question
relates to insurance brokers, who are regulated by the FSA in the vast
majority of their work and activities on behalf of insured
clients—probably95 per cent. of the general activities
of intermediaries and brokers are regulated by the FSA. For example, if
an insured individual or company is involved in a motor accident, any
damage to the person insured is dealt with by the broker and comes
under FSA regulation.
If a subsequent claim is made
for personal injury or other damages—for example, in a household
fire caused by a third party—the damage to the property is dealt
with under the policy, but any other loss, including injury to the
individuals involved, is a separate matter. Most of the time, however,
companies sell to the insured a legal expenses policy. If any personal
injury claim or other legal action is referred by the insurance
intermediary under that policy to a specialist solicitor or accident
management company,
that also is covered by the FSA. The FSA does a very good job in its
regulation, and I am pleased that the Minister has made it clear that
it will be tough on problems caused by third party capture. My hon.
Friend the Member for Banbury made that point before he had to go off
to another Committee, and the Minister gave him some satisfaction on
it.
To return to my
example, if the insured individual does not have a legal expenses
policy with the insurance company through the broker, the intermediary
or broker may well make a referral or recommendation. One could argue
that under the law of agency the intermediary has a duty of care to put
the customer’s interests ahead of his own, and that if he does
not make a referral he could be in breach of that duty of care, opening
himself up to the potential for an
action.
That area
represents well under 5 per cent. of brokers’ and
intermediaries’ activities, but it will not be regulated by the
FSA. It will be regulated by the new claims management regulator. The
Minister said that there would be no double regulation or duplication.
If, as she says, the FSA is doing an excellent job and her Department
has confidence in it—the FSA knows the companies concerned well,
as it deals with them day in, day out—is it fair for the small
percentage of activity that does not come under FSA regulation to be
dealt with by the claims management regulator? Would itnot be
better to bring it under FSA regulation? The industry is concerned by
that point. The Government have said a great deal about trying to
reduce burdens on business and about the work of the Better Regulation
Task Force. The BRTF examined the claims management industry and gave
it time to put its house in order, but the industry failed to rise to
the challenge of putting in place a satisfactory regulatory regime of
its own, as we have heard from the Minister on many
occasions.
We do not
want unnecessary extra regulation. We on the Opposition Benches
entirely support the thrust of the primary legislation, as do most
people in the insurance industry. They are in favour of greater
regulation of those companies that participate in ambulance chasing,
claims farming and other related activities. Given the
Government’s policy on regulation, particularly with regard to
financial services and the their avowed aim of making the City more
competitive in the global marketplace, will the Minister look again at
the role of the FSA? The position as it stands will cost companies a
significant amount of extra time and money. If she believes that the
FSA is doing such a good job, there is surely an argument for it taking
over the entire regulation of intermediaries and brokers, rather than
the claims management regulator dealing with 4 or 5 per cent. of the
activity, which could lead to a lot of extra work and
bureaucracy.
Perhaps
the Minister will respond to that simple question. Having studied the
order and the exemptions, we otherwise support what the Government are
doing.
5.2
pm
Mr.
Kevan Jones: We live in interesting political times and
the modern Tory party is a strange beast these days.
[
Interruption.
] It always was. In Committee and on
the Floor of the House, Conservative Front
Benchers were vehement that they did not want trade
unions to be exempted from the Compensation Act 2006, so it is
interesting that a change of heart has taken place. I welcome
that.
Mr.
Skinner:
I think that it is fairly easy. The current Tory
leader—
Helen
Jones (Warrington, North) (Lab): The right hon. Member for
Witney (Mr.
Cameron).
Mr.
Skinner:
For Witney, that’s him. He is engaged in a
different activity. We know that he is chasing every rainbow and all
the rest of it, but he also deserted the City and the CBI and is trying
to woo the trade unions. He is living in cloud cuckoo
land.
The
Chairman:
Order. Mr. Kevan
Jones.
Mr.
Jones:
I will not indulge my hon. Friend any longer,
because I know that he takes no encouraging. If the Tory party is
relying on trade union votes, it must be in desperate
straits.
I welcome
the order, particularly the exemption for trade unions. We made the
point in Committee and on the Floor of the House that trade unions
should be treated differently from other organisations, because they
are already regulated by the certification officer and double
regulation is not helpful. I also welcome the change of heart of the
TUC, which initially was painting me and my hon. Friend the Member for
Bassetlaw as the devil incarnate for suggesting that we should focus on
the fact that some trade unions would not abide by the tough standards
that the Minister wanted.
John
Mann:
My hon. Friend has got it slightly wrong,
technically. It was not the TUC, but solicitors residing in the TUC
building.
Mr.
Jones:
I thank my hon. Friend for that clarification. The
TUC’s change of heart is welcome. If it operates with a robust
code of conduct and is prepared to challenge the unions that are guilty
of bad practice or abuse of their members, that would be a good way
forward.
One issue
that I would like to raise with the Minister concerns not only how
trade unions operate now, but past practices. Along with my hon. Friend
the Member for Bassetlaw, I have raised the issue of the position of
the Durham Miners Association with the regulator. My point relates to
article 10, “Independent trade unions”, the idea of
retired members, and the idea of a member. As the Minister well
knows—I also raised this issue on the Floor of the
House—the Durham Miners Association now claims 15,500 members
with the certification officer, the bulk of
whom—
Rob
Marris (Wolverhampton, South-West) (Lab):
What?
Mr.
Jones:
My hon. Friend from a sedentary position says,
“What?”.
About 6,000 members of the
Durham Miners Association are women. The reason being put forward for
the figures is that some members are associate members, who have no
rights under trade union legislation. Associate members cannot complain
to a
certification officer, do not take part in any elections, and have no
democratic rights within the union. The £20 a year they pay is
an access fee for the union’s legal services, particular in
relation to COPD.
Rob
Marris:
It is a worrying situation because, as far as I
know, women were banned from working underground in British mines,
though not American mines. Would the situation he is describing not be
covered by article 10(3)(b) of the order, which defines what a member
is? The article specifically excludes someone who
“is a member only for the purpose
of pursuing a
claim”.
Mr.
Jones:
I am happy for that clarification, and I cannot say
that there were not female members of the NUM but, as my hon. Friend
the Member for Bolsover will be aware, there were very few. There may
have been some—those who worked in canteens and so on—but
there were not 6,000. In raising his point, my hon. Friend the Member
for Wolverhampton, South-West, did not clarify the position
vis-Ã -vis the certification officer, who accepts people as bona
fide members of a trade union. That is the problem. I have raised the
issue with the regulator and have made him aware of the
situation.
Will the
Minister tell us whether we could look at the past practices of trade
unions when considering whether they should be exempt? The Durham
Miners Association is continuing to accept the £20 a
yearfrom people, and is now basically a claims-handling
company, although it is a registered trade union. It has taken some
£5.5 million into its coffers in the past three years, and
because of the pressure that I and other hon. Members have applied, has
now started to pay money back to people who demand it. Hopefully, with
the helpful intervention of their solicitors, Thompson’s, we may
get a situation in which people who complain will get their money back.
Clearly, although it is registered as such, the Durham NUM is not a
trade union: it is a claims handling organisation that does nothing but
deal with claims. Therefore, I ask that in looking at whether that
organisation or others come under the remit of the order and are
exempted, their past practice and current practices are looked
into.
I am happy with
the order. However, I hope that when the order gets teeth and the
regulator gets into certain organisations, we see the banishing from
the high street of the cowboys who, frankly, have wreaked havoc, preyed
on victims, including in my constituency, and stolen thousands of
pounds from people by doing nothing more than filling in a form and
passing it on to a firm of solicitors.
5.9
pm
Simon
Hughes:
I am very happy to serve with you in the Chair,
Mrs. Dean.
I am grateful to the Minister
for the way in which she introduced the order. She will remember that
during the passage of the 2006 Act, we on the Opposition Benches were
keen for both Houses to debate the order, so that there was no risk
that the measures went through without the opportunity for discussion.
That was honoured, the Bill was amended, and we are here today to
debate the order.
Like the hon. Member for North
Durham, I too am given to reflect on the slightly changed tone of
Conservative Members. I do not know what Christmas and new year have
done to them, but there has clearly been some tactical consideration
and they have to be nice to trade unions now. We will see how that
manifests itself. Clearly, it is a change of tactic, and has come from
a slightly surprising quarter, but there we are—the hon. Member
for North-West Norfolk is to be commended. I thought that the hon.
Member for North-East Hertfordshire (Mr. Heald), who spoke
on this issue in debates on the 2006 Act, was generally regarded as a
relatively gentle and moderate member of the Tory party. If he is now
regarded as relatively hard line, goodness knows where we may end
up.
I have a couple
of points in addition to those that I raised in interventions on the
Minister. The first is that on the substantive issue—the trade
union debate—the draft code of practice is well written and
clear. It deals with most of the matters that we were worried about. It
seems that every trade union member will be told what the code of
practice says and know what the relationship is between a union and a
company. They will know the financial arrangement and they, or anybody
on their behalf, will be able to examine any paperwork. There will also
be a complaints service, which is exactly as it should
be.
I have one
question on the code of practice. The previous Committee took the view
that the best way to deal with exemptions was to have a blanket
exemption and monitor whether people are complying with it. What do
Ministers, and the person who is to take over the regulatory function
for the time being, envisage as being the frequency and method of
monitoring? The matter needs to be kept alive not just by regulation
coming into force but with a good monitoring system to ensure that
people do not have the chance to exploit the system as they did in the
past.
Linked to that
matter is a second point that the Minister did not specifically
address. One abuse that we all want to avoid is somebody being signed
up for a day to get the benefit of the service. People should sign up
to a trade union because it is good to join a trade union with all its
benefits. We want to prevent people from being signed up by either a
bona fide trade union or a slightly less conventional one simply to get
this benefit. The hon. Member for North Durham mentioned an abuse
whereby people who do not expect to be covered—the extended
family, as it were—suddenly find themselves brought into the
loop. The hon. Member for Amber Valley intervened on that point. Will
the Minister assure us that such a situation is not intended for the
new system and that it will be for bona fide trade unionists who, as
part of their membership, get the services, support and legal advice
that they would expect from the
relationship?
I remind
the Minister of my point about the self-help organisations, mutuals and
so on. It will be helpful if she responds to it. In my constituency
there is an organisation called the Hospital Saturday Fund, in which
people can place money for later help, if they need it, with health or
social security care. It is well established, having been going on for
years, and it makes grants. It is based just over the Southwark border
by the Oxo tower in SE1. Such organisations might decide that they want
to offer the extended
service provided for in the order as it is linked to services that they
currently provide. I do not say that with the fund’s authority
or at its instigation, but co-ops, credit unions and other mutuals
might be
interested.
Two final
points: the hon. Member for Amber Valley will remember having a debate
about people who have a small value of relevant business. The Minister
rightly said that the order contains a provision for such people.
Article 12 sets out that certain providers of referrals will be exempt,
stating:
“Section
4(1) of the Act does not prevent the provision of the regulated claims
management service of referring details of potential claims or
potential claimants to another person if...of the cases that the
introducer refers to such persons, he is paid, in money or
money’s worth, for no more than 25 cases per calendar
quarter”.
That seems
difficult to monitor and regulate. How will anybody know about it? We
will have either a bureaucratic procedure for a small amount of
business or a system that will not work. I am not against the idea that
people for whom it is not the primary business, but who do a small bit
of the business, are exempted, but it could be a little
difficult.
The link
that has not been dealt with specifically was made during the
proceedings of the Bill by my hon. Friend the Member for
Montgomeryshire (Lembit Öpik) about someone with a small cash
turnover per year. He cited a constituent whose business had a turnover
of under £5,000. Given that the matter is defined by the number
of cases per quarter, not cash, can a person whose business claims to
have a turnover of £500,000 per year or £250,000 per
year, but who literally has less than £5,000-worth of business a
year of that type, make sure that he is not caught either accidentally
or with a bureaucratic
implication?
As for
the point made by the hon. Member for North-West Norfolk on which the
hon. Memberfor Banbury intervened, I share the
Minister’s understanding in that the position of the FSA is not
that of double regulation and that the APIL is not correct in its
assertion that it is. It seems that there are two types of activity:
one that is regulated in one way, and another that is regulated in
another way. We do not want double regulation, but that will not be the
result of the provision. I welcome the order on behalf of my
colleagues, particularly the code of conduct. It seems to be a good
one.
Mr.
Bellingham:
I think that APIL was saying that the FSA does
not publish its findings as it does not consider itself to be an
effective regulatory body. It considered that all the exemption that
was given in such matters should be taken over by the claims regulator.
That was the point that my hon. Friend the Member for Banbury was
making.
Simon
Hughes:
If that is the case, it seems a reasonable point.
It prompts my last question to the Minister. We had a productive
exchange when we were discussing matters in Committee about the fact
that the arrangement seemed to be temporary with a civil servant acting
as the regulator until the Legal Services Bill finishes its proceedings
through Parliament, in which case it is envisaged that the person who
is the regulator under the Legal Service Act, as it will then
become, will take over the regulation of such matters. Will the Minister
confirm that that is still the plan? Can she explain as best she can
how soon she hopes that the order will not only be passed by both
Houses, but will be implemented? How soon does she expect the
regulatory function to transfer to its final resting place for the
foreseeable future, together with the other regulation of those
activities under the Legal Services
Bill?
5.18
pm
John
Mann:
I am delighted that the TUC has issued a statement
that identically matches what I have been arguing for over the past two
years. I hope that the solicitors who did a private TUC briefing that I
attended two years ago and who attacked what they quoted as the
ill-informed remarks of certain Members of the House of Commons will do
the decent thing and say that those remarks at the time were not
ill-informed, but were precisely to the point, and on the point. One
thing will emerge from this surprising all-party consensus that is
particularly important for working people in this country. The unions
will be able to recruit and advise their members that, if they go
through their union in respect of industrial injury or industrial
disease, they will receive a fair and accountable service. However,
those who for whatever reason do not do that, will now have the backing
of regulation to minimise the worst excesses of those who may choose to
rip them off.
I wish
to illustrate what I mean. The members of KFAT were persuaded by
adverts by a claims handler called Vendside, a wholly owned subsidiary
of the Union of Democratic Mineworkers, Nottingham section, to take
their claims through that organisation and were then charged large
amounts. In most villages in the north midlands, there was a pit and a
textile factory. There are two kinds of case. In the first, a union
member takes a case in her name for a deceased miner husband or father
as she is entitled to, but succumbs to the lure of Vendside adverts or
direct mailings, which seem to be highly precise in targeting which
doors to knock on, however they get the names and addresses. She then
finds herself paying undue amounts to that organisation, often even
though her late husband was an active NUM member and would never have
considered joining UDM. The case of Mrs. Moorhouse, one of
my constituents, comes to mind. Such people feel a particular
grievance. I am also thinking of cases such as that of Mrs.
Zubic, another of my constituents, who was in precisely the same
situation with her late father’s mining claim but also had a
textile claim for industrial deafness and went through
Vendside.
I am
pleased to tell the Minister and the House that the Law Society has
made a landmark ruling today on a miner’s hearing loss claim
made through Vendside and its solicitors. The miner has been awarded
£3,500 compensation because of how misleadingly the funding was
handled. It was not one of the standard cases that received all the
publicity; it dealt with hearing loss. Although each case is dealt with
entirely on its own merits, it suggests what others and I have been
arguing—that tens of thousands of textile workers,
particularly those in the north midlands, who went
through Vendside and were charged large amounts of their compensation
should put in a complaint to the Law Society immediately. I will be
putting in many such claims from textile
workers.
John
Mann:
If I can just finish my point, I will give way to my
hon. Friend.
The point
in the context of the order is that members of that union are members
for life. Its rule book says, rather unusually for a trade union, that
they have access to the union’s legal services for life.
Therefore, all those women could have taken their cases through their
own union and had its full protection. They would not have been ripped
off. It is therefore a fantastic opportunity for unions—in this
case Community, which is part of the merged KFAT—to advertise to
the outside world that members should stick with and proceed through
their unions.
That is
precisely why the arguments put formally and informally by Thompsons
and others that we were being misleading were wrong. We are promoting
the rights and the whole point of trade unions. I am delighted that we
have cross-party consensus on the matter, because the TUC can now
demonstrate that all Parliament is sending a message that joining a
union and sticking with it in any industrial issue, rather than going
to a claims handler, is the sensible way to
proceed.
Judy
Mallaber:
Does my hon. Friend remember one of my
constituents, whom I brought to a meeting in his constituency at the
start of the process? The meeting was attended by the Lord Chancellor,
and we heard from textiles workers. My constituent had been a member of
the UDM but was enticed to go via Vendside and was then charged
because, he was told, he was no longer a member of the UDM, as he was
retired and had not been given the KFAT members’ benefits of
membership for life. He was charged even though he had been a UDM
member and could have taken his claim through another solicitor without
being charged.
John
Mann:
My hon. Friend is absolutely right. What is
happening this year—not last year, the year before or five years
ago but this year—is that Vendside/UDM is going out to carpet
workers in the west midlands to try to take cases forward. The sooner
the regulation is enforced to ensure that such scurrilous attempts to
take people in the wrong direction by a claims handler for the lure of
short-term gain, the better. Of course, there are those who cannot use
the Law Society and require the protection of regulators and
regulation. Given their historic relationship with the trade union
movement, the decent and appropriate thing would be for
Thompson’s solicitors to indemnify the costs to allow us to take
a civil case against the UDM/Vendside to get back all the money that
they have taken from miners and textile workers. We could then isolate
that union, get justice by getting the money back and ensure that they
get the publicity that they deserve through the mouths of those who
wish to take them on. Very many miners and textile workers in my
constituency and beyond are queuing up for justiceon
that.
I have one more point. It is
important; I have seen correspondence between the certification officer
and Unison about a trade union formed by the British National party or
some offshoot of it. The Minister may not be able to give verbal
clarification now on what discussions she has had with the TUC and the
regulator about a political party such as the BNP setting up a trade
union, although she may recall that in previous debates or private
discussions that I have had with her, I have pointed out that the BNP,
as if it had been a claims handler, attempted specifically to recruit
former ceramic union workers to take forward industrial disease claims,
clearly to recruit into the party, make money and give that racist and
fascist organisation some
credibility.
Mr.
Robert Flello (Stoke-on-Trent, South) (Lab): On that
point, the BNP is currently putting out leaflets in Stoke-on-Trent
suggesting that former ceramic workers should get involved with it to
take forward that exact
matter.
John
Mann:
That confirms my worst fears on how political
parties of whatever kind—but in this case, one that none of us
in this room would have any truck with—can abuse people’s
genuine complaints about employer practices. I trust that the Minister
will take a look at the precise issue and discuss it with the TUC. It
appears from correspondence that I have seen that the certification
officer will recognise the trade union as bona fide. I have not had the
chance to get into any deliberation or correspondence with the
certification officer, but that inaccurate decision does not have all
the facts that my hon. Friend, others and I can provide.
Even though what I am
talking about is absolutely on the margins, the margins can, as we have
seen from the UDM/Vendside issue, mushroom when a large number of
people have a genuine grievance and are looking for a remedy. If such
people see a professionally written advert in a newspaper—from
an organisation called Vendside that no one had heard of
before—or receive a knock on the door from someone promising all
things for no risk or get a telephone call or letter, they will be
tempted to get the justice that they deserve through that
route.
I repeat my
call: here is an opportunity for the trade unions to demonstrate their
value to the community. I hope that we will see a major advertising
campaign, led by the TUC across all our communities, advertising the
traditional values in a modern setting involved in joining a trade
union.
5.30
pm
Judy
Mallaber (Amber Valley) (Lab): I, too, am delighted at the
regulations and the Compensation Act 2006. There has been a lot of talk
about bad practice. I should register my interest as co-convenor of the
Unison Members of Parliament.
One of the great benefits of a
trade union is precisely the personal injury claims and the protection
given against industrial injuries. For example, nurses and other
hospital workers who have made claims for back problems have suffered
for many years. Without the benefit of their union to assist them, they
would not be in a position to make those claims, so we should put on
record the excellent work that is done by many trade
unions in promoting those interests. That element of protection, be it
against an unscrupulous employer or against what might happen in the
workplace, is a major reason for joining a trade union. The difference
between a union and a claims handler is that a union’s main
concern is to try to make the workplace safe and healthy in the first
place to avoid injuries. The union is also a back-up and an aid if
something goes wrong. There is a world of difference between that and
the bad examples that we have heard.
I was pleased to be at a
meeting in the constituency of my hon. Friend the Member for Bassetlaw
at an early stage in the process of this legislation. My hon. Friend
the Member for Sherwood (Paddy Tipping) and I took along some of our
constituents to show some of the bad practices by those who had been
former UDM members and those whom Vendside was seeking to entice into
their network to make money. There have not been quite so many bad
cases in my area as there have been in the Nottinghamshire
coalfields.
The
organisations that have done most to get people involved in making
claims for former miners areamong those that I hope will be
exempted under the not-for-profit provisions, particularly those
associated with the Derbyshire unemployed workers centre, such as the
trades council and the health and safety committees. The Derbyshire
asbestos support team has given back-up to promote compensation claims
on behalf of constituents of mine who are suffering from mesothelioma,
which are also covered in the Compensation Act 2006.
It is important that those
organisations are exempted under the order. They have done wonderful
work in taking the initiative in setting up testing centres in
Derbyshire, so that people could establish whether they had a claim
that they might pursue further. They are in sharp contrast to the
poisonous organisations that have come along at the end of the process,
advertising on television that they would take up claims and sending
out leaflets. My neighbour came to see me and said, “What should
I do? I have had people on the phone, wanting to come round and see me,
putting leaflets through the door asking me whether I am related to
anybody who has ever worked down the pit.” They were not asking
people whether they had suffered as a miner who was struggling with
diseased lungs and hands that would not work, or as a widow who was
struggling without money because she had lost her husband to a painful,
horrible disease that had lasted for many years. Those organisations
have come along at the end of the process, when all the hard work has
been done, to sweep up the pickings that are left from people whom they
can get in their grasp.
The order and the code of
practice are well drafted to make the distinction between unscrupulous
claims handlers and those organisations, both trade unions and not-for
profit organisations, that have played a role in giving great
assistance to those of our constituents who have suffered from personal
injury and continue to do so. I commend the order and applaud the work
done by the Minister and others in bringing it before the
Committee.
Rob
Marris:
What a pleasure it is to appear before you,
Mrs. Dean. I declare a registered interest: my constituency
Labour party receives donations from
Thompson’s, the trade union solicitors, where I was a partner
before entering this place. I congratulate the Minister on the
legislation and the regulation of claims farmers, the kind of people we
have seen walking down the high street with clipboards and so on,
trying to grab claims and taking part in the sort of activities to
which my hon. Friends have referred.
When responding to remarks
about the FSA, the Minister said that no organisation would be
regulated twice. I am not sure that that is consistent, because legal
practitioners such as myself are qualified solicitors—I have not
practised since I entered this place because I do not believe in
moonlighting—and are regulated by the Law Society. They may also
be regulated indirectly under these provisions. Similarly, trade unions
are regulated as trade unions and through provisions of this
kind.
It is right
that there is great support in the union movement for the trade union
code of practice, as has been adverted to today. Indeed, paragraph 19
of the consultation document that was published last November
says:
“There
was unanimous support from respondents to the principles in the Code of
Practice.”
That is
absolutely right. The Government are to be congratulated on that
listening exercise. It is not the code of practice that is the problem,
but the other half of the equation, to which remarks have been
addressed in this Committee, regarding the FSA.
Part of the problem concerns
the issue of alternative funding mechanisms for those who might be
engaged in a claim. Paragraph 2.4 of the code of conduct that the trade
unions published on 28 November
says:
“In
advising a member in any case where fees are payable by the member in
respect of the claim, a Trade Union should ensure alternative methods
of funding a claim are
considered.”
Paragraph 13
of the Law Society rules says—this is a partial
quotation—that
“it
is important that all the options available to the client for financing
the proceedings should be explained and discussed, including the
availability of legal
aid.”
The issue is a
legal minefield, because of the litigation following the introduction
of conditional agreements, with which my hon. Friend the Minister will
be familiar, and the cases of Myatt and Garrett in the House of Lords,
which relate to the inquiries that solicitors must make about
pre-existing legal expenses insurance, and so on. Yet claims handlers
and insurance companies would not be regulated as tightly under the
regulations as the trade unions would,which seems unfortunate,
particularly for a Labour Government.
I shall not be exhaustive, but
I have an awful lot of examples with me. I have a letter from a Ms S.
M., who works as a senior personal injury file handler at a major
insurance company, and who unfortunately had an accident. She made
contact with the insurers of the third party causing the
accident—this relates to the third party capture that we have
discussed—which was Direct Line. Direct Line got a medical
report, sent it to Ms S. M. and offered £1,900. She then
realised from her professional background that she was perhaps
being offered an under-settlement. She got a
solicitor and finally settled for £5,456, more than three times
the initial sum.
I
have a printout of claims in which the individual was initially not
legally represented and dealt directly with the insurance company for
the tortfeasor. One of two examples—they are extreme examples,
but extreme examples can make a point—is that of a Ms C. B. The
amount first offered to settle her claim was £5,000. At that
point she realised that she might need legal advice, and ended up
receiving £150,000, which is a 30-fold increase. Ms L. M., whose
initial offer was £4,000, ended up receiving £165,000.
That is not just insurance companies getting it slightly wrong, because
the quantum that would be awarded by a court is more of an art than a
science. When they get it wrong by 30 or 40 times, that suggests that
something is very
wrong.
Similarly, I
have a letter—I do not know the name of the claimant to whom it
refers, because it has been blacked out in the document that the trade
unions passed to me—from Sainsbury’s bank.
Sainsbury’s bank, writing to an individual who had had an
accident to say that it was insurers from the tortfeasor,
stated:
“Whilst
we are aware that there are various agencies that would be prepared to
arrange the above for
you,”—
“the
above” referring to obtaining medical reports and so
on—
“there are
numerous benefits in allowing our trained staff to process your
claim.”
Mr.
Kevan Jones:
Does my hon. Friend agree that a murky area
also exists, whereby organisations suchas the AA and others
pass on claims to insurance companies, and a fee is paid by the
insurance companies to those organisations, sometimes adding up to
several thousand pounds and possibly leading to a restriction on the
right of the individual to choose his or her solicitor dealing with
that
claim?
Rob
Marris:
I agree with my hon. Friend . There is a problem
with referral fees. About 18 months ago the Law Society of England and
Wales, of which I remain a member, allowed referral fees. I think that
that is a big mistake, although the Law Society is reviewing the
decision, and I hope that it will get rid of them.
To continue my point about
Sainsbury’s bank, the letter
started:
“Our
customer has contacted
us”—
Sainsbury’s
bank—
“to advise
us that they were involved in an accident with
you”—
the
recipient of the letter. Sainsbury’s was saying to someone,
“We hear you’ve had an accident, because our insurer told
us, and here’s the deal we’ll do for you.” I say
to my hon. Friend the Minister that thatis morally
questionable. I am not suggesting that Sainsbury’s bank has done
anything illegal, but it is disturbing in the context of the points
that have been made on third-party capture. It disturbs me particularly
because the bottom of the letter
states:
“Insurance
is arranged and administered by esure Services Limited...Both
Sainsbury’s Bank and esure Services Limited are authorised and
regulated by the Financial Services
Authority.”
Sainsbury’s
bank, a large and reputable company, appears to be engaging in rather
questionable practices through some of its staff. Questions should be
asked by the FSA. The letter was written in June 2006 and the
regulation might not have been in place, but the
Financial Services and Markets Act 2000 was, and the tenor of the
Compensation Act 2006 should have shown Sainsbury’s bank and its
staff that times have
changed.
Simon
Hughes:
I am very sympathetic to the point that the hon.
Gentleman makes, but I do not know whether there is a duty to tell
somebody who is written to, although it is self-evident to us, that if
they say yes to the offer they will be represented by the same
organisation as the other side. That would hardly be a recipe for
independent negotiation and agreement. I am not sure whether other
organisations such as the AA, of which I am a member—I do not
wish to mispresent any organisation—specifically tell people who
join or rejoin what arrangement there is, if any, between itself and an
organisation whose staff it does not directly employ. Does he agree
that they
should?
Rob
Marris:
I do agree. To be fair to Sainsbury’s bank,
the letter is clearly worded in saying that the bank is acting for the
other side. Alternative funding arrangements should also be made clear,
and I suspect that they are not always. People are simply told,
“Someone else might be able to pay for it.” They might be
considering making a claim for the first time: that is often the case
whether they are in a trade union or have had a car accident.
There should be a checklist
asking a victim whether they are a member of a trade union—union
schemes often cover car accidents—whether their husband or wife
is, whether they have household insurance that might cover an accident
and whether their own solicitor who did the conveyancing will make a
conditional fee agreement. That would sketch the possibilities so that
a victim could say, “Yes, actually, my wife is a member of a
trade union. Perhaps I had better see whether it will cover the claim
rather than having an audit for a fee, however transparent that fee
might be.” It is about raising the matter of alternative funding
arrangements and pointing the victim—the client or prospective
client—in that
direction.
There is a
potential conflict of interest in third-party capture which, despite
the case of the Durham Miners’ Association, there is not for
most trade unions, particularly those who are outstanding members of
the TUC and follow its code of conduct. The conflict of interest is
this: the trade unions should not have any interest other than
representing their member—or relative of their member, if a
scheme covers them—and getting them a good settlement through
reputable solicitors. The third-party capture insurers, who might be
negotiating directly with the victim on behalf of the
tortfeaser—the wrongdoer—therefore have a conflict of
interest. It is in their interests to settle claims such as Ms C.
B.’s claim in the example that I gave for £5,000 instead
of
£150,000.
The
regulations contain a provision that the trade unions have signed up to
through the TUC. The code of practice is understandable: I have read
it, and it is good. However, under article 5, regulation will not be as
onerous on organisations with a pecuniary interest in under-settling.
Trade unions should not and, in my experience, do not have such a
pecuniary interest. Regulation of that part of the industry—if I
can call it that—will be subject to less onerous regulation, but
often it is big business and needs more regulation.
I think that the Minister should
have another think. There is an unfortunate conflict of interest. I do
not expect her to withdraw the order, but I ask that she keep a close
eye on what the FSA is doing to ensure that those that it regulates
under third-party capture are not getting away with
murder.
5.46
pm
Mr.
Skinner:
I am prompted to speak by a couple of things said
in the last three or four contributions.
I mentioned earlier that beat
knee cases are pending from miners who worked in very low places and
were often subject to serious knee injuries—in the old days, we
called that beat knee. The problem today is not that there are a lot of
claims here, there and everywhere, but that in 1998 a surfeit of claims
emerged from the Manchester court for COPD and subsequently white
finger. The net result was that the Government took on board the task
of paying all the claims because there was no Coal Board left and the
industry had been privatised by the
Tories.
Mr.
Bellingham:
The
Tories.
Mr.
Skinner:
By the Tories. That is right,
Henry.
I compare that
with the fact that, in 1975, the then Labour Government did not get
involved in claims handling. When the pneumoconiosis settlement had to
be made, the unions were intact because they had members.
Unfortunately, some of them have not got members now, but they are
still trade unions in my eye—certainly as far as Durham is
concerned. Yes, the members were taken away by Thatcher and the rest of
them.
We had a scheme
that was not based on the individual claim. The net result was that
within 12 months every miner suffering from pneumoconiosis over and
above a certain degree according to a sliding scale had got their
money. It was rough and ready, but there were no fly-by-night
solicitors. The union solicitors in the 15 regions reached an agreement
between themselves, together with NACODS, which had not yet been split
up. The result was that the issue was dealt with.
The problem began when the
claim handlers arose out of the COPD and white finger cases. They might
have emerged in another way, but I am pretty sure that that was part of
it. So I ask the Minister to lookback at the pneumoconiosis
scheme in 1975-76. Ifthe Government can make a decision
collectively in judgments, a lot of people will be happier, all these
fly-by-night people will not be making money on the side and people
will get paid more quickly. The pneumoconiosis settlement was the way
to do it and it is a pity that we could not convince Justice Turner
that it was the way to do the
others.
5.50
pm
Bridget
Prentice:
That was a significant contribution to a very
useful debate from my hon. Friend the Member for Bolsover. We need to
take on board his points and the Government must look to how we will
deal with such matters in the future by learning the lessons of the
past.
I shall try
quickly to answer some of the points raised by hon. Members. If I
should miss any, I shall write to all Committee members with my
responses. I can only apologise to the hon. Member for North-West
Norfolk for the errors in the original order. They were human errors
that the Joint Committee properly picked up on while, as the hon.
Gentleman said, doing its job correctly. They have been
corrected.
My hon.
Friend the Member for Bassetlaw referred to the BNP. I take very
seriously any allegations that the BNP, or indeed any other political
party, might be soliciting people for claims. I shall take up with the
TUC and with the certification officer what my hon. Friend said,
discuss the serious issues that he raises and determine whether action
needs to be taken using trade union rules or otherwise to deal with the
problem.
The hon.
Member for North-West Norfolk also referred to insurance brokers. They
take a significant amount of referrals for uninsured loss due to
personal injury, and they can earn a significant sum: £600 and
more for each case referred. They, just as much as claims-handling
companies, can traffic low-value personal injury litigation, and they
might refer exaggerated cases. The necessary way to regulate them is to
apply the standards in the Act. It is tailored to that
purpose.
Mr.
Bellingham:
I was not suggesting lighter-touch regulation;
I was suggesting that because the FSA regulates 96 to 97 per cent. of
insurance brokers’ activities, it could regulate the other 3 to
4 per cent. That was my point. Perhaps the Minister will write to me
rather than reply in detail now.
Bridget
Prentice:
I am grateful to the hon. Gentleman for that. I
shall write to him in detail, and I understand his point. We work very
closely with the FSA on all such issues. We are using its model in the
legislation before us and, through the legal services board, in the
Legal Services Bill, which is being debated in the other place as we
speak. There are parallels.
Several hon. Friends and the
hon. Member for North Southwark and Bermondsey raised the issue of
trade union membership. We do not want to restrict access to trade
unions services so that widows and long-term sick are excluded from the
benefit of representation. At the same time, however, we do not want to
create any loopholes, such as those mentioned by my hon. Friend the
Member for Amber Valley.
The exemption has been expanded
to clarify that it applies to members, former members and those
members’ families. We have also made it clear that the
definition of “member” is in accordance with individual
trade union rules. A person cannot become a member of a trade union
simply to make a personal injury claim. I think the hon. Member for
North Southwark and Bermondsey made that point.
The hon. Gentleman, and my hon.
Friends the Members for Amber Valley and for Bassetlaw made points
about people providing services without financial gain. Section 4(4) of
the Act specifically excludes from the need to seek authorisation
people providing a regulated management service if they do so
voluntarily and do not receive any fee or financial reward.
The hon. Member for North
Southwark and Bermondsey also mentioned the timing of the transfer to
the LSB. Again, the Legal Services Bill is being debated as we speak.
It contains the amendments necessary to transfer the Compensation Act
2006 to the Legal Services Act, as we hope it will become. That will
depend on parliamentary time, but we hope that the LSB will be
established by 2010 and that the office for legal complaints will be
established by 2011. Obviously, work will be done in the meantime to
deal with the issue.
The hon. Gentleman also asked
about monitoring and compliance. We have established an exemptions
monitoring board to consider the operation of all exemptions, and
particularly the trade union exemption, in compliance with the code of
practice. It is intended that the board will meet every two months to
review progress and take up any issues that people have raised with it,
although it can meet more often if it feels that that would be
appropriate.
My hon.
Friends the Members for North Durham and for Wolverhampton, South-West
mentioned referrals for a fee. A person authorised under the Act will
be required under the conduct rules to inform any clients if they are
paying a fee to another person for the referral of the claim.
My hon. Friend the Member for
Wolverhampton, South-West also mentioned the regulation of insurers. I
am aware of the allegations about some insurers under-settling many
personal injury claims, and the examples to which he referred are known
to us. Indeed, they were discussed only last week with the FSA, the Law
Society, APIL, the Motor Accident Solicitors Society and the TUC, so
the issue is very much on the front burner as far as we are concerned.
The FSA has confirmed that it will consider all the evidence that is
put before it and will decide whether any additional rules are needed
to deal with any problems that the Act identifies. I hope that that
gives my hon. Friend considerable reassurance.
It has been an interesting
debate, and I will want to reflect further on a number of important
issues and, where appropriate, expand on them to members of the
Committee. As my hon. Friend the Member for Amber Valley said, trade
unions play an important role in serving their members’
interests, particularly on legal issues, and it is important to put
that on record. The order will help to ensure that regulation under the
Compensation Act 2006 is proportionate and targets commercial claims
management without imposing unnecessary burdens on small businesses,
trade unions and other not-for-profit organisations. That is consistent
with the commitments that we gave during the passage of the Act. As the
hon. Member for North Southwark and Bermondsey said, we also gave a
commitment to have this very debate, and it has been very fruitful and
useful one. On that basis, I commend the order to the
Committee.
Question put and agreed
to
Resolved,
That the Committee has
considered the draft Compensation (Exemptions) Order
2006.
Committee rose at two
minutes to Six
o’clock.
