The
Committee consisted of the following
Members:
Chairman:
Mr.
David
Wilshire
Balls,
Ed
(Economic Secretary to the
Treasury)
Benyon,
Mr. Richard
(Newbury)
(Con)
Bone,
Mr. Peter
(Wellingborough)
(Con)
Breed,
Mr. Colin
(South-East Cornwall)
(LD)
Brennan,
Kevin
(Lord Commissioner of Her Majesty's
Treasury)
Bryant,
Chris
(Rhondda)
(Lab)
Burrowes,
Mr. David
(Enfield, Southgate)
(Con)
Cable,
Dr. Vincent
(Twickenham)
(LD)
Efford,
Clive
(Eltham)
(Lab)
Evennett,
Mr. David
(Bexleyheath and Crayford)
(Con)
Grogan,
Mr. John
(Selby)
(Lab)
Hoban,
Mr. Mark
(Fareham)
(Con)
Johnson,
Ms Diana R.
(Kingston upon Hull, North)
(Lab)
Kemp,
Mr. Fraser
(Houghton and Washington, East)
(Lab)
Kilfoyle,
Mr. Peter
(Liverpool, Walton)
(Lab)
Mullin,
Mr. Chris
(Sunderland, South)
(Lab)
Tami,
Mark
(Alyn and Deeside)
(Lab)
Susan
Griffiths, Committee
Clerk
attended the Committee
Second
Delegated Legislation
Committee
Monday 4
December
2006
[Mr.
David Wilshire in the
Chair]
Draft Compensation Act 2006
(Contribution
for Mesothelioma Claims) Regulations
2006
4.30
pm
The
Economic Secretary to the Treasury (Ed Balls): I beg to
move,
That the
Committee has considered the draft Compensation Act 2006 (Contribution
for Mesothelioma Claims) Regulations
2006.
It is a privilege
to serve under your chairmanship, Mr. Wilshire. Through the
regulations, we are making changes to the financial services
compensation scheme to allow the Financial Services Authority to make
rules facilitating the faster payment of compensation to mesothelioma
victims. This step was required as a direct result of the Compensation
Act 2006 and follows the short consultation conducted earlier this
autumn.
I know that
many hon. Members, including some on this Committee, have constituents
who have suffered from this disease, and have taken a keen interest in
measures to help victims to receive more timely access to compensation.
They include my hon. Friends the Members for Rhondda, for Alyn and
Deeside, for Houghton and Washington, East, for Barnsley, West and
Penistone (Mr. Clapham) and for Manchester, Central (Tony
Lloyd) and my right hon. Friend the Member for Leeds, West (John
Battle), who have campaigned on these matters for some
years.
As hon. Members
will know, mesothelioma is a cancer of the lining of the lungs or
abdomen that is almost always caused by exposure to asbestos. The
Government legislated in the 2006 Act to help claimants suffering from
this cancer to obtain as quickly as possible the compensation to which
they are entitled. That was achieved by reversing the effects of the
House of Lords judgment in Barker v. Corus UK. The Government
took the view that the practical effects of that decision would have
made it more difficult and time consuming for sufferers of the cancer
to obtain full compensation in circumstances in which they and their
families were already in considerable pain and
distress.
The 2006 Act
provides that, where a person has negligently or in breach of statutory
duty caused or permitted another person to be exposed to asbestos and
as a result that person has contracted mesothelioma, the negligent
person will be jointly and severally liable. That will enable the
claimant to recover full compensation from any responsible
person.
Let me put the
measure in its broader context.Hon. Members will know that, as
well as the liability changes made in the 2006 Act, the Government are
taking forward a wider programme of work, led
by the Department for Work and Pensions, toimprove the handling
of mesothelioma claims, to ensure that claimants receive as quickly as
possiblethe compensation to which they are entitled.
On20 July 2006, my right hon. Friend the Secretary of State
for Work and Pensions announced a number of interim measures to ensure
faster compensation for those with this cancer, as well as his
intention to put in place a long-term solution to ensure that, wherever
possible, sufferers can achieve compensation in
life.
The DWP launched
a consultation to discuss improving claims handling. That consultation
closed on 23 November. It is analysing the responses and will publish a
summary shortly. It is also organising a summit, on 13 March, at which
stakeholders will discuss options for action following the
consultation. We are debating a small part of that wider work to
improve claims handling. It is a process change as a direct result of
the decision to reverse the Barker judgment, but it is necessary to
speed up payment to victims where the FSCS is involved. Our
consultation on the changes sought views on the specific changes that
were being made to the FSCS to broaden the circumstances in which
responsible persons, defined as employers or insurers, can claim a
contribution directly against the scheme in these
cases.
Mr.
Peter Bone (Wellingborough) (Con): Will the Minister
explain whether the measure would help in a case in my constituency?
Unfortunately, the very well liked mayor of Rushden died of this
dreadful disease earlier in the year. He was a plumber all his life,
but he was affected by asbestos as a boy when he was an apprentice
plumber. Unfortunately, however, the company involved has long since
gone and so has the insurance company. Will this measure help the
family to recover some
compensation?
Ed
Balls: I am obviously very sad to hear ofthe
circumstances of that case. I cannot comment on the details, but I
think that the answer will depend on the precise dates at which the
exposure occurred. The compensation scheme exists precisely to ensure
that people can obtain compensation if they have had exposure and have
an employer or insurance company that is now insolvent. Our ability to
give compensation only goes back to the early 1970s, and if the
exposure occurred under a company that went into insolvency before
1974, the compensation scheme would not apply. If exposure was at any
point after 1974, there is the possibility of compensation under the
scheme. If the hon. Gentleman sends me the details of that particular
case, I would be happy to look into it and give him a more considered
response when we have the precise
facts.
The Committee is
considering the particular procedural changes that are needed to
implement the 2006 Act. We are not looking at the wider operation of
the FSCS as that would be more properly looked at in the context of the
DWP consultation. There are wider issues about the way in which
compensation and this scheme applies to individuals such as the hon.
Gentlemans constituent, who may or may not be entitled to
compensation, and they will be considered in the context of that wider
consultation. The regulations essentially bring us back to the position
before the Barker judgment and ensure, given the
clarification that has occurred in legal judgements in recent years,
that the FSCS can continue to play the same role with regards to
compensation as it did before the legal case. The measure involves a
set of rather narrow process changes to get things back on track and to
ensure that claims can be moved through speedily. As I said, broader
issues about compensation are a matter for the wider review that the
DWP is conducting.
To
give a bit of background, the FSCS is an industry-backed fund and is a
last resort in relation to financial services productsin this
case, insurance. It provides a consumer safety net in relation to
financial services and can pay out compensation if a firm is unable or
likely to be unable to pay out on valid claims. It is an independent
body established by the Financial Services and Markets Act 2000 and the
rationale behind the scheme is to give people the confidenceto
invest in financial services. The fund does not provide general
compensation as that would be a fundamentally different compensation
scheme; it exists to compensate people where an insurance company, or
in this case an insurance company offering employer liability insurance
to an employer, has become insolvent.
Following the
Governments decision to reverse the effects of the Barker
judgment, the Treasury has laid legislation before the House to allow
the Financial Services Authority to make changes to the compensation
scheme to help victims of this cancer receive more timely access to
compensation. Broadly speaking, under the proposed changes, a negligent
employer and insurer which has paid compensation to victims of the
disease will now be able to claim a contribution from the FSCS in
certain cases. That should help to avoid delay in compensation being
paid to claimants while the FSCS liability is established, and it is
also fairer to insurers and responsible employers, who, without the
changes, would not be able to paythe victim up front and
subsequently recover a contribution from the FSCS. The measure
introduces a process change that does not alter the overall liability
of the compensation scheme. As the regulations state, the proposals
have a retrospective effect and allow the payment of compensation to a
responsible person or their insurer notwithstanding the fact that they
have already made a payment to the victim wherethe application
for payment is made on or after25 July
2006.
Mr.
Peter Kilfoyle (Liverpool, Walton) (Lab): It may be beyond
the remit of this statutory instrument, but do the arrangements apply
to people who are in the armed forces? I know that it applies to people
who are in civilian occupations, but the armed forces used to be exempt
and often it was an easy ploy for employers to shift the onus of
responsibility for mesothelioma by linking it to someones time
in the armed forces while knowing full well that people could not make
a
claim.
Ed
Balls: The regulations apply to any insurance company or
employer that is designated a responsible person under the 2006 Act. I
would have to go back to the Act to find out the situation with regard
to this particular compensation scheme and those employers. I am not
sure whether my hon. Friends point is within the remit of the
regulations with regard to the way in
which compensation arrangements arrive after the definition of a
responsible person, but I am happy to write to him to give him a clear
answer.
Subsections
(7) to (11) of section 3 of the 2006 Act confer a power on the Treasury
to make regulations about the provision of compensation under the FSCS
to a responsible person or the insurer of a responsible person in
specified circumstances. Broadly speaking, the regulations include two
additional powers for the FSA to make various rules in relation to the
compensation scheme.
First, regulation 2 sets out a
power that deals with claims involving insurers subject to insolvency
and other defaults that took place before the commencement of the
Financial Services and Markets Act 2000 on 1 December 2001. The power
applies when a claimant could have claimed under the FSCS order where
section 3(1) of the 2006 Act applies. It is restricted to claims
relating to mesothelioma because section 3(1) applies only when a
responsible person has negligently or in breach of statutory duty
caused or permitted a victim to be exposed to asbestos; when the victim
has contracted mesothelioma as a result of exposure; when, because of
the nature of the disease and the state of medical science, it is not
possible to say whether that exposure caused the illness; and when the
responsible person is liable in tort for the exposure in connection
with the damage caused to the victim.
Secondly, the powers to make
rules will apply only where and to the extent that a responsible person
could claim a contribution from another person who is also responsible
for causing damage to a mesothelioma victim under the Civil Liability
(Contribution) Act 1978, but is unable or likely to be unable to get a
contribution because an insurer or the other responsible person is
unable or likely to be unable to satisfy the claim for a
contribution.
The
regulations also set out various specific situations that can be
expressly covered by the FSAs rules concerning the FSCS.
Regulation 3 is almost identical to regulation 2, except that it
applies to claims after 1 December and therefore under FSMA. The final
provision, regulation 4, relieves the FSA of the statutory obligation
to consult on its rules and any guidance it publishes on the subject.
It has been included to allow a quick change to be made to the
FSAs rules. However, a consultation has been carried out
jointly by the Treasury and the FSA in recent months and, as I said,
the proposal was widely supported. Once the regulations are passed the
FSA will be able to bring the detailed rule changes to its next
available board meeting, which is scheduled to take place later this
month.
In short, this
is a detailed process and an important step in helping victims of the
disease to receive timely access to compensation, and to ensure that
insurers and responsible persons are required to take their
responsibilities seriously and are not prejudiced with regard to the
operation of the compensation scheme.
The
Chairman: I felt it proper to let the Economic Secretary
put these detailed regulations into context, but I would be grateful if
the debate could be confined to what he describes as this
detailed process and not the general issues that
arise.
4.43
pm
Mr.
Mark Hoban (Fareham) (Con): May I add my welcome to that
of the Economic Secretary, Mr. Wilshire, and say what a
pleasure it is to serve under your chairmanship for the first
time?
I welcome the
update that the Economic Secretary gave on the broader consequences of
the Barker v. Corus case and how they are being carried forward
by the DWP. This afternoon is another of those consensual occasions on
which the Economic Secretary and I agree. I am afraid that this is the
second time in seven days that that has happened, and I suspect that it
is doing no good for either of our reputations.
The Conservative party supports
the measure, as we supported the enabling legislation in the 2006 Act.
It is clear from the responses to the consultation process which the
Economic Secretary outlined that the regulations have broad support
from the financial services sector and its advisers. There are a number
of mesothelioma sufferers in south Hampshire as a consequence of
exposure to asbestos in the dockyard and elsewhere, and I know that
they will welcome the consensus. On that note, I echo the question
asked by the hon. Member for Liverpool, Walton about the scope of the
regulations and which employees will benefit from them. I suspect that,
in my own constituency and elsewhere, a number of people who have
served in the armed forces will have an interest in the application of
the 2006 Act.
This
statutory instrument flows from the 2006 Act and reflects the
Governments decision to overturn the verdict on the case of
Barker v. Corus. If that had not been corrected, it would have
been far more difficult for sufferers of mesothelioma to receive proper
and timely compensation. It is worth mentioning that two of the three
cases heard under the umbrella of Barker v. Corus were funded by
the Government, and it is odd for them to try to reverse the
consequences of a judgment on a case for which they funded
litigation.
The
practical consequence of the case was to require the liability of all
parties to be established first and for payments to be made in
parallel. That would have been very time-consuming and involved a delay
in compensating people with a very aggressive condition and a very
short life expectancy. As the Minister said, this statutory instrument
will enable one insurer to take the lead on a claim in the knowledge
that it can collect contributions from other employers, insurers
orif the relevant insurer is insolventfrom the
financial services compensation
scheme.
On Report, my
hon. Friend the Member for Ryedale (Mr. Greenway) said that,
based on an average settlement of £150,000 and about 2,000
deathsper annum, the claims could cost in the region
of£30 billion over 10 to 15 years. As I understand it,
this statutory instrument will have the practical impact of speeding up
claims but will not alter the quantum of total claims.
What assessment has the Treasury
made of the impact of the timing of payments by insurers into the
financial services compensation scheme if the payment process is
accelerated? Has any modelling been done on the share of the total bill
that the FSCS will pick up? With that in mind, what impact does the
Minister believe there will be on any changes to the funding of
the scheme, to be outlined in a consultation document next year? As I
said, we support the regulations and wish to see them
passed.
4.47
pm
Mr.
Colin Breed (South-East Cornwall) (LD): I shall heed your
advice, Mr. Wilshire.
The proposals are very welcome,
as they reverse the Barker v. Corus decision. We are talking
about a terminal illness, and it is wholly right that we should speed
up the compensation claims. It is not easy to understand what anguish
the Barker decision caused to many mesothelioma sufferers, and I am
sure that the regulations will be a welcome relief to them, as the end
of the debacle seems to be in sight. The decision certainly had a
vastly detrimental effect on the victims, a section of our society that
most needs protection. The amendments to the 2006 Act will certainly be
welcome.
When the hon.
Member for Liverpool, Walton was at the Ministry of Defence, he may
well have received many letters, including some from me. It is right to
say that dockyard employees were affected by the disease, because
asbestos was on ships. They worked side by side with royal naval
personnel doing exactly the same job at exactly the same time, but now
find themselves in very different circumstances. Dockyard employees
will be compensated and benefit from the regulations, but those
ex-servicemen, who worked for the Royal Navy, have not received
compensation, and under current circumstances and the regulations they
will not get it. The Crown Proceedings (Armed Forces) Act 1987 prevents
that, which is a great shame.
We are beginning to recognise
the aggressive nature of this terrible disease, and the relatively
small number from our armed forces who were subjected to it as a result
of their workwe had no idea then about its effectare
denied compensation. I know that this subject is not part of the
regulations, but it is right to put it on the record, bearing in mind
that I and other MPs with dockyards in their constituency have, on a
regular basis, constituents dying of the disease. Those people do not
have the advantage of the compensation schemes that are available to
those who worked in the private
sector.
Nevertheless,
the order is a welcome move in the right direction. It demonstrates
that the Government are determined to get payments through, and for
thatI applaud them, but I hope that even at this stage they
might reconsider the situation of those who were affected while serving
with our armed
forces.
4.50
pm