Katy Clark (North Ayrshire and Arran) (Lab): Yet again, the Government have clearly shown whose side they are on. Yesterday, a great deal of sympathy was

19 Mar 2013 : Column 896

expressed by Members from all parts of the House for Cypriots who may have more than 5%—perhaps up to 10%—taken off their bank savings. I have a huge amount of sympathy for those people, but today, Conservative and Liberal Democrat MPs do not seem to have any sympathy for some people on the lowest incomes in this country.

Those people are entitled to that money—the Court of Appeal has made that clear—but the Government have made it clear today that their political priority is to make sure that they get that money back from those individuals. All of us have constituents who will be affected, and over the coming months they will come to see us. I hope that those who support the legislation can look them in the eye. We know from the court cases that have been described today that many of those people are hard-working individuals who want to work. They genuinely want that opportunity, but they have not been offered the kind of work experience by the Government, whether we call it training or work experience—whatever we call it—that they need. They have not been given the opportunities that will give them what they need if they are to be offered real employment.

In constituencies such as mine, there has been an increase in the number of people suffering long-term unemployment, but there is also a generational problem, as we have not recovered from the industrial decline that took place over many decades. In surgery after surgery in areas such as mine, more and more people are coming to talk about the sanctions imposed on them by the Department for Work and Pensions. That is not just in relation to workfare but in relation to all aspects of benefits. The Department has clearly been given a political lead by Ministers to do everything that it can to make it hard as possible for people to get the benefits to which they are entitled.

In my constituency, and in the constituencies of many hon. Members up and down the country, there are thousands and thousands of people who genuinely want to work. They want opportunities for education, training and work experience that will enable them to improve their lot. What we should be discussing today is what kind of work experience and training will give our country the skills that enable us to compete internationally. It is an absolute disgrace that the Government have introduced this legislation, and are trying to do everything that they can to take money away from some of the poorest communities and individuals in the country.

6.42 pm

John McDonnell: I want the last words of the debate to be a thank you to two young people, because if they had not taken the Government to court, we would not have had this debate. I want to thank them for having the courage to say no when they were forced into unpaid work. I want to thank them for their courage in pursuing it through the courts, and I also want to thank them for allowing us at least to have some debate today to expose the regime that the Government have introduced.

I also want to thank the two organisations that have launched a week of action: Boycott Workfare and the Right to Work campaign. They are campaigning around the country to expose what companies are doing to exploit unpaid labour; the threats to benefits; and the

19 Mar 2013 : Column 897

harassment that people have endured. They are also coming out with a simple demand on behalf of young people across the country: they just want a job, but they want one with decent pay. I do not think that that is too much to ask in the seventh richest country in the world in 2013. I want to thank all those organisations for enabling us at least to have some form of debate on this issue today.

Question put, That the Bill be now read the Third time.

The House divided:

Ayes 263, Noes 52.

Division No. 195]


6.43 pm


Adams, Nigel

Afriyie, Adam

Aldous, Peter

Andrew, Stuart

Arbuthnot, rh Mr James

Bacon, Mr Richard

Baker, Norman

Baker, Steve

Baldry, Sir Tony

Baldwin, Harriett

Barclay, Stephen

Barker, rh Gregory

Baron, Mr John

Barwell, Gavin

Bebb, Guto

Beith, rh Sir Alan

Bellingham, Mr Henry

Beresford, Sir Paul

Berry, Jake

Bingham, Andrew

Birtwistle, Gordon

Blackman, Bob

Blackwood, Nicola

Boles, Nick

Bone, Mr Peter

Bottomley, Sir Peter

Bradley, Karen

Brady, Mr Graham

Brake, rh Tom

Bray, Angie

Brazier, Mr Julian

Brine, Steve

Brooke, Annette

Bruce, Fiona

Bruce, rh Sir Malcolm

Buckland, Mr Robert

Burley, Mr Aidan

Burns, Conor

Burns, rh Mr Simon

Burrowes, Mr David

Burstow, rh Paul

Burt, Lorely

Cairns, Alun

Carmichael, rh Mr Alistair

Carmichael, Neil

Chishti, Rehman

Clappison, Mr James

Clark, rh Greg

Clifton-Brown, Geoffrey

Coffey, Dr Thérèse

Collins, Damian

Colvile, Oliver

Cox, Mr Geoffrey

Crabb, Stephen

Crouch, Tracey

Davey, rh Mr Edward

Davies, Glyn

Davies, Philip

de Bois, Nick

Djanogly, Mr Jonathan

Doyle-Price, Jackie

Drax, Richard

Duddridge, James

Duncan, rh Mr Alan

Duncan Smith, rh Mr Iain

Dunne, Mr Philip

Ellis, Michael

Ellison, Jane

Ellwood, Mr Tobias

Elphicke, Charlie

Eustice, George

Evans, Graham

Fabricant, Michael

Fallon, rh Michael

Foster, rh Mr Don

Fox, rh Dr Liam

Freeman, George

Freer, Mike

Fuller, Richard

Garnier, Sir Edward

Garnier, Mark

Gauke, Mr David

George, Andrew

Gibb, Mr Nick

Gilbert, Stephen

Glen, John

Goodwill, Mr Robert

Graham, Richard

Grant, Mrs Helen

Gray, Mr James

Grayling, rh Chris

Green, rh Damian

Greening, rh Justine

Grieve, rh Mr Dominic

Griffiths, Andrew

Gummer, Ben

Gyimah, Mr Sam

Halfon, Robert

Hames, Duncan

Hancock, Matthew

Harper, Mr Mark

Harris, Rebecca

Hart, Simon

Harvey, Sir Nick

Hayes, Mr John

Heald, Oliver

Heath, Mr David

Heaton-Harris, Chris

Hemming, John

Henderson, Gordon

Hendry, Charles

Herbert, rh Nick

Hinds, Damian

Hoban, Mr Mark

Hollingbery, George

Hollobone, Mr Philip

Holloway, Mr Adam

Hopkins, Kris

Horwood, Martin

Howarth, Sir Gerald

Howell, John

Hughes, rh Simon

Hunt, rh Mr Jeremy

Hunter, Mark

Hurd, Mr Nick

Jackson, Mr Stewart

James, Margot

Javid, Sajid

Johnson, Gareth

Jones, Andrew

Kawczynski, Daniel

Kelly, Chris

Kirby, Simon

Knight, rh Mr Greg

Kwarteng, Kwasi

Lamb, Norman

Lancaster, Mark

Lansley, rh Mr Andrew

Latham, Pauline

Laws, rh Mr David

Lefroy, Jeremy

Lewis, Dr Julian

Lilley, rh Mr Peter

Lloyd, Stephen

Loughton, Tim

Luff, Peter

Lumley, Karen

Macleod, Mary

Main, Mrs Anne

Maude, rh Mr Francis

Maynard, Paul

McCartney, Jason

McCartney, Karl

McIntosh, Miss Anne

McLoughlin, rh Mr Patrick

McPartland, Stephen

McVey, Esther

Menzies, Mark

Metcalfe, Stephen

Mills, Nigel

Milton, Anne

Morgan, Nicky

Morris, Anne Marie

Morris, David

Morris, James

Mosley, Stephen

Mowat, David

Mulholland, Greg

Munt, Tessa

Murray, Sheryll

Newmark, Mr Brooks

Newton, Sarah

Nokes, Caroline

Norman, Jesse

Nuttall, Mr David

O'Brien, Mr Stephen

Offord, Dr Matthew

Ollerenshaw, Eric

Opperman, Guy

Ottaway, Richard

Parish, Neil

Patel, Priti

Pawsey, Mark

Penning, Mike

Penrose, John

Percy, Andrew

Phillips, Stephen

Pickles, rh Mr Eric

Pincher, Christopher

Poulter, Dr Daniel

Prisk, Mr Mark

Pugh, John

Raab, Mr Dominic

Randall, rh Mr John

Redwood, rh Mr John

Rees-Mogg, Jacob

Reevell, Simon

Reid, Mr Alan

Rifkind, rh Sir Malcolm

Robertson, rh Hugh

Robertson, Mr Laurence

Rogerson, Dan

Rudd, Amber

Ruffley, Mr David

Russell, Sir Bob

Rutley, David

Sandys, Laura

Scott, Mr Lee

Selous, Andrew

Shapps, rh Grant

Sharma, Alok

Shelbrooke, Alec

Shepherd, Sir Richard

Simpson, Mr Keith

Skidmore, Chris

Smith, Miss Chloe

Smith, Julian

Soubry, Anna

Spelman, rh Mrs Caroline

Spencer, Mr Mark

Stanley, rh Sir John

Stephenson, Andrew

Stewart, Bob

Stewart, Iain

Streeter, Mr Gary

Stunell, rh Andrew

Sturdy, Julian

Swales, Ian

Swayne, rh Mr Desmond

Swinson, Jo

Syms, Mr Robert

Tapsell, rh Sir Peter

Thornton, Mike

Thurso, John

Timpson, Mr Edward

Tomlinson, Justin

Tredinnick, David

Turner, Mr Andrew

Tyrie, Mr Andrew

Uppal, Paul

Vara, Mr Shailesh

Vickers, Martin

Walker, Mr Robin

Wallace, Mr Ben

Ward, Mr David

Watkinson, Dame Angela

Webb, Steve

Wharton, James

Wheeler, Heather

White, Chris

Whittaker, Craig

Whittingdale, Mr John

Wiggin, Bill

Willetts, rh Mr David

Williams, Mr Mark

Williams, Roger

Williams, Stephen

Williamson, Gavin

Wilson, Mr Rob

Wollaston, Dr Sarah

Wright, Jeremy

Young, rh Sir George

Zahawi, Nadhim

Tellers for the Ayes:

Greg Hands


Joseph Johnson


Anderson, Mr David

Brown, rh Mr Nicholas

Burden, Richard

Campbell, Mr Gregory

Clark, Katy

Connarty, Michael

Corbyn, Jeremy

Crausby, Mr David

Davidson, Mr Ian

Dobbin, Jim

Dodds, rh Mr Nigel

Donaldson, rh Mr Jeffrey M.

Durkan, Mark

Edwards, Jonathan

Esterson, Bill

Glindon, Mrs Mary

Hamilton, Fabian

Havard, Mr Dai

Hosie, Stewart

Lavery, Ian

Lazarowicz, Mark

Llwyd, rh Mr Elfyn

Long, Naomi

Lucas, Caroline

MacNeil, Mr Angus Brendan

Mactaggart, Fiona

McCrea, Dr William

McDonnell, John

McGovern, Jim

Meacher, rh Mr Michael

Mearns, Ian

Mitchell, Austin

Moon, Mrs Madeleine

Morris, Grahame M.


Osborne, Sandra

Pearce, Teresa

Ritchie, Ms Margaret

Robertson, Angus

Rotheram, Steve

Shannon, Jim

Sheerman, Mr Barry

Sheridan, Jim

Skinner, Mr Dennis

Stringer, Graham

Sutcliffe, Mr Gerry

Walley, Joan

Weir, Mr Mike

Whiteford, Dr Eilidh

Williams, Hywel

Winnick, Mr David

Wood, Mike

Tellers for the Noes:

Kelvin Hopkins


Pete Wishart

Question accordingly agreed to.

19 Mar 2013 : Column 898

19 Mar 2013 : Column 899

Bill accordingly read the Third time and passed.

19 Mar 2013 : Column 900

Parliamentary Standards Act

6.57 pm

The Leader of the House of Commons (Mr Andrew Lansley): I beg to move,


(1) Subject to paragraphs (2) and (3), the following offices of positions are specified for the purposes of section 4A(2) of the Parliamentary Standards Act 2009, with effect from 1 April 2013—

(a) the Chair of a select committee appointed under Standing Order No. 152 (Select Committees related to government departments), the Administration Committee, the Backbench Business Committee, the Environmental Audit Committee, the European Scrutiny Committee, the Finance and Services Committee, the Liaison Committee, the Political and Constitutional Reform Committee, the Select Committee on Procedure, the Committee of Public Accounts, the Select Committee on Public Administration, the Regulatory Reform Committee, the Committee of Selection, the Committee on Standards, the Joint Committee on Human Rights or the Joint Committee on Statutory Instruments; and

(b) a member of the Panel of Chairs appointed under Standing Order No. 4 (Panel of Chairs), other than a member who is the Chair of a committee specified in sub-paragraph (a) or a member who is entitled to an additional salary by virtue of any provision of the Ministerial and other Salaries Act 1975.

(2) If a Member already holds an office or position referred to in paragraph (1)(a), then any other office or position referred to in paragraph (1)(a) is not specified for the purposes of section 4A(2) of the Parliamentary Standards Act 2009 in respect of any period for which that other post or position is held by that Member.

(3) Any office or position referred to in paragraph (1)(a) for the purposes of section 4A(2) of the Parliamentary Standards Act 2009 is not specified for the purposes of that section in respect of any period in which it is held by a Member who is also entitled to an additional salary by virtue of any provision of the Ministerial and other Salaries Act 1975.

(4) Any reference to any committee in paragraph (1)(a) shall, if the name of the committee is changed, be taken to be a reference to the committee by its new name.

This is essentially a technical motion to meet the requirements of the Parliamentary Standards Act 2009. It enables specified Select Committee Chairs and members of the Panel of Chairs to continue to be paid an additional salary when the first determination by the Independent Parliamentary Standards Authority of MPs’ salaries comes into effect on 1 April 2013, and when there are any future determinations thereafter, as set out in the Act.

As Members may recall, under section 4 of the Parliamentary Standards Act 2009, as amended by the Constitutional Reform and Governance Act 2010, IPSA was given responsibility for paying the salaries of Members of the House of Commons. Sections 4 and 4A give IPSA responsibility for determining the amount of Members’ salaries and provide that it may determine higher salaries to be payable to Members holding offices or positions that are specified in a resolution of the House of Commons.

Under the new arrangements from 1 April, the House retains responsibility for determining those offices or positions eligible for the additional salary, but does not, of course, set the level of this additional salary. The motion specifies those positions, but importantly, the House

19 Mar 2013 : Column 901

should recognise that it makes no changes to the list of positions already eligible under existing resolutions of the House. Members can see for themselves on the Order Paper the list that the House has agreed to previously. It ensures that the—

7 pm

Proceedings interrupted (Standing Order No. 9(3)).

Motion made, and Question put forthwith (Standing Order No. 41A(3)),

That, at this day’s sitting, Standing Order No. 41A (Deferred divisions) shall not apply to the Motion in the name of Mr Andrew Lansley relating to the positions for which additional salaries are payable for the purposes of section 4A(2) of the Parliamentary Standards Act 2009.—(Karen Bradley.)

Question agreed to.

Proceedings resumed.

Mr Lansley: The motion ensures that the pay settlement that takes effect from 1 April 2013 will apply to the positions listed for the purposes of the payment of additional salaries. The first determination of salaries for Members by IPSA will take effect from 1 April 2013. That determination by IPSA provides for a 1% increase in the salary of Members in April 2013 and a further 1% increase in April 2014. IPSA further determined that the additional salary payable to specified holders will also receive a 1% increase. The motion will ensure that this increase is payable to the specified office holders to whom an additional salary is paid. It will also allow IPSA to make further determinations, without the need for any intervention of the House, although IPSA is required by statute to consult and then to publish its determination.

The motion also makes it clear that no Member may receive two additional salaries for any period of time, whether by virtue of holding two specified positions or because they are paid a ministerial or other salary by virtue of the Ministerial and other Salaries Act 1975.

I hope that explains the purpose of the motion, which I commend to the House.

7.1 pm

Ms Angela Eagle (Wallasey) (Lab): I thank the Leader of the House for explaining the motion before us. As he said, it allows the Independent Parliamentary Standards Authority to continue paying the Panel of Chairs and Chairs of Select Committees an additional amount, on top of their parliamentary salary, on 1 April 2013. Although IPSA has the power to set MPs’ pay, the House retains responsibility for determining which offices or positions are eligible for the higher salary. The motion sets out the positions that will qualify for the extra salary payment. As the Leader of the House noted, it makes no changes from the list of positions already eligible under existing resolutions of the House.

19 Mar 2013 : Column 902

IPSA was given the power to determine MPs’ pay in May 2011 and has recently concluded a consultation on pay rates for the next two years. It concluded, as the Leader of the House said, that MPs’ pay should rise by 1% in 2013 and by a further 1% in 2014. The motion allows that 1% increase to be added to the additional pay given to the members of the Panel of Chairs and the Chairs of Select Committees.

The Opposition agree with the Government that this is a necessary motion, which need not detain the House for long, and we therefore give it our support.

Question put and agreed to.


Human Rights in India

7.3 pm

Ms Gisela Stuart (Birmingham, Edgbaston) (Lab): I have a petition signed by many people in the west midlands and across the country, who ask the House of Commons to urge the Government to appeal to India to take immediate action to stop the human rights abuses facing minorities in India; that India should sign and ratify the Rome statute of the International Criminal Court and the UN charter against torture and other cruel, inhumane or degrading treatment or punishment, which encompasses the death penalty; and thus India should abolish the death penalty.

And the Petitioners remain, etc.

Following is the full text of the petition:

[The Petition of residents of the United Kingdom,

Declares that the Petitioners believe that the UK Government, together with the UN and EU, should encourage the Indian Union to take immediate action to stop human rights abuses facing minorities in India and that India should sign and ratify the Rome Statute of the International Criminal Court and the UN Charter against torture and other cruel, inhumane or degrading treatment or punishment which encompasses the death penalty and thus India should abolish the death penalty as it is a cruel, inhumane or degrading form of punishment; further declares that the UK Government should campaign to stop Balwant Singh Rajoana's death sentence and have him released from jail as he has served 17 years in custody and that the Indian Union should release all prisoners facing the same situation and those who have been imprisoned without trial.

The Petitioners therefore request that the House of Commons urges the Government to appeal to India for the above actions to be taken, and request that the Government bring these issues to light in the European Union and United Nations.

And the Petitioners remain, etc.]


19 Mar 2013 : Column 903

Claims Management Companies

Motion made, and Question proposed, That this House do now adjourn.—(Karen Bradley.)

7.4 pm

Nic Dakin (Scunthorpe) (Lab): The claims management industry has grown dramatically in recent years. In 2007, it was estimated that there were 400 claims management companies. There are now more than 3,000. The value of the industry in terms of annual turnover continues to grow and is now estimated to be £774 million, which is up 33% on last year.

Unfortunately, not all claims management companies behave responsibly. Consumer research conducted by the Association of British Insurers found that about four out of five adults in the UK had received unsolicited texts encouraging them to pursue claims for accidents or mis-sold financial products. In just 8% of cases, the individual who was contacted had had an accident or held a policy against which there might be a claim.

A Which? mystery shopping exercise found widespread rule breaches, misleading statements and unfair contract terms by a significant number of claims management companies. If you have received a text message or seen a TV advert telling you that you have thousands of pounds of unclaimed payment protection insurance, Mr Deputy Speaker, you are not alone. The research by Which? shows that 93% of people have.

In 2011-12, the claims management regulator received 10,000 complaints about claims management companies from consumers and firms. The cold calls, high-pressure tactics and misinformation that are used mean that the behaviour of some CMCs is extremely damaging to members of the public, particularly elderly and vulnerable people. Furthermore, the damage to businesses from the tenacity and dishonesty of some CMCs is very concerning. As the Motor Accident Solicitors Society points out, problems with the regulatory structure have allowed such bad practices to flourish. That is why that organisation and others have called consistently for better regulation.

The mis-selling of payment protection insurance by banks was one of the biggest mis-selling scandals ever. The courts have rightly said that those who were mis-sold PPI must be compensated. However, when claims management companies enter into the fray, further injustices occur, as a scandal of mis-selling begets a scandal of misclaiming. The claims management companies wilfully exploit the structures that are in place to protect consumers by submitting countless claims that have little or no merit, with no fear of a financial penalty. They have nothing to lose and everything to gain.

Jim Shannon (Strangford) (DUP): Every one of us as elected representatives has had complaints from our constituents on this matter. One of my concerns is that when people who are vulnerable financially receive information about such claims, they think that there is nothing to lose and that they will get the money. Does the hon. Gentleman think it is time that these companies were regulated so that they do not raise people’s expectations so that they think they will get the money, when at the end of the day they will not and, indeed, will be out of pocket?

19 Mar 2013 : Column 904

Nic Dakin: The hon. Gentleman makes a good point. A constituent of mine who works for a company told me recently that a member of the public, on the advice of a claims management company, had rung it up and given it the spiel. My constituent said to her, “I’m sorry, but we haven’t been selling PPI for the last 15 years.” The lady on the other end of the phone said, “Oh, I’m really disappointed. I thought I was going to get some money.” The hon. Gentleman is exactly right that such companies raise expectations and exploit vulnerable people at a difficult time. That really should be stopped.

Based on their cold-calling fishing expeditions, claims management companies write numerous letters to businesses simply because a client recalls that they may have had a financial transaction with a company, even though no evidence is provided. The CMC-generated letters always accuse the businesses of mis-selling, citing a stock list of reasons, despite the fact that in many instances no PPI was ever sold. CMCs also buy leads, many of which have been generated by companies that follow up accident whiplash claims and then try to instigate other claims where no client discontent exists.

Ironically, members of the public do not need to use any kind of intermediary to submit a PPI claim. The consumer will be charged about 30% of their compensation if they use a claims management company, but nothing if they submit the claim themselves. The consumer group Which? estimates the average PPI claim to be £2,750, costing the consumer around £835 in CMC fees.

Claims management companies are not just unnecessary, they can be damaging to both consumers and businesses, and an example from my constituency shows how serious that can be. Ian Broadbent’s company, Blue Sky Mortgages, has to respond to a continuous stream of vexatious claims from claims management companies on behalf of clients who have never been sold PPI by his business. In some cases, his business has had no dealings with the claimants whatsoever.

That is more than a mere annoyance. When a company disputes a PPI claim, the Financial Ombudsman Service steps in. However, there are clear problems with the way in which disputed claims are handled. Businesses are charged up to £850 per case, whatever its merits, and although no fees are charged for the first three claims against a company—soon to be extended to the first 25 claims—the rate at which CMCs generate claims, often with the most scant client information, means it is not long before a business has to pay out large sums of money for doing absolutely nothing wrong.

FOS investigations further damage businesses by dragging claims on, and it can take several years for a dispute to be resolved. That can be extremely damaging for businesses, with the uncertainty and unpredictability of FOS investigations adding further pressure to businesses struggling to survive in these austere times. Businesses have no right of appeal against FOS decisions—a right that consumers and claims management companies retain—and that is at odds with some fundamental principles. Claims management companies can file claims with absolute impunity. There are no charges for false claims, and if a claim succeeds, they know the decision is final.

Jackie Doyle-Price (Thurrock) (Con): I congratulate the hon. Gentleman on securing this important debate on an issue that has concerned our constituents for

19 Mar 2013 : Column 905

some time. Does he agree that it is perhaps time that this became a less risk-free business for claims management companies, particularly in the field of PPI where, frankly, reckless profiteering is being carried out by companies with absolutely no risk to them?

Nic Dakin: The hon. Lady makes an excellent point. We have a situation in which claims management companies can never lose, however vexatious the claims they pursue, while businesses targeted by those companies always lose. She is right: it is time to balance the risk in a different way.

Kate Green (Stretford and Urmston) (Lab): I am glad that my hon. Friend has initiated this debate. Does he agree that some of the Government’s policies that will mean people are no longer able to access lawyers—the fast-track small claims procedure, for example—will mean that claims management companies are able to expand their businesses? People will not be able to go it alone, but neither will they be able to access proper legal advice?

Nic Dakin: My hon. Friend draws attention to a very real danger in the current changes.

In his letter to me, Mr Broadbent drew attention to the following unsatisfactory way in which the FOS acted. After downloading the FOS standard PPI claim form, a client completed it. He answered the questions honestly in the form of tick boxes, and stated that he did not recall the sale process. The claim was declined, yet nine months later a CMC made the same complaint on behalf of the same client. In this case all the boxes were ticked, stating that the client had a clear recollection of the sales process and how the product was mis-sold. That was not considered a vexatious complaint and it is being considered by the FOS. It says that it must ignore the original complaint and review it on the basis of the claim submitted by the CMC. That will not strike anyone as a sensible, fair or efficient way to proceed.

The FOS does good work resolving disputes in many areas, but its ability to deal appropriately with PPI disputes is compromised by the sheer volume of complaints it receives. Last year, complaints about PPI made up 60% of all complaints dealt with by the FOS, yet CMCs made no contribution to the running costs of the FOS. Greater control over CMCs, and a system where they will be charged for making unsuccessful claims, would help free up the FOS to deal more effectively with other matters in its inbox.

The Ministry of Justice is to be applauded for making some headway in its control of CMCs, but there is more to do. The ban on referrals in personal injury cases, which is due to come into force in April, will hopefully reduce harassment of members of the public who have been involved in accidents. The flipside of that is that claims management companies may focus more on PPI claims and look to diversify into new areas of vexatious claiming. Indeed, there is already some evidence that they are turning their attention to mortgages.

The Financial Services Authority acknowledges that there has been no wholesale mis-selling of mortgages, yet some claims management companies are already sending template letters to businesses, claiming that

19 Mar 2013 : Column 906

mortgages were mis-sold. The letters are easily produced but take a lot of time to answer—sometimes as long as 10 or 12 hours—because of the complexity of the mortgages.

The claims management regulator set up by the Ministry of Justice regularly shuts down CMCs that deliberately submit vexatious claims, but the number of claims companies is too high for the regulator to keep up. The number of companies is rising—it has doubled in the past two years to more than 3,000. The competition between them results in more vexatious claims and ever more aggressive tactics. In the years 2011-12, the regulator undertook only 150 visits and audits of firms, which is fewer than 5% of authorised CMCs.

I would be grateful if the Minister responded to a number of questions in her reply. Does she support the call of Which? for improved regulation of CMCs? Will she take steps to ban cold calling and cold texting? Will she take action to ensure that, in any advertisement, CMCs make clear to the client the benefit of their taking their claim directly, without intermediary, to the FOS? Will she place a duty on CMCs to ensure that the claims they submit contain accurate information? Claims companies should be required to exercise due diligence and must reasonably believe that there is a possibility of a valid claim. They must not be allowed to continue to fish for claims with very little consequence.

CMCs play an influential role in the UK’s compensation and redress regimes. They are responsible for almost half the complaints sent to the FOS, but make no financial contribution to its operating costs of around £107 million. In the light of that, will the Minister explore how CMCs can make a financial contribution to FOS running costs? For example, CMCs could be required to pay the £500 FOS case fee when they have not undertaken adequate checks to ensure there is a policy in place. The FOS dismisses charging for CMCS in “Charging for our work: modernising our case fee arrangements”, saying that charges will be passed on to customers. A simple solution would be to ban the collection of up-front fees and cap the percentage of a claim that a CMC can take. That would prevent their passing on to customers the reasonable charges that I argue should be levied on the industry.

Will the Minister take steps to ensure that CMCs accept leads only from organisations that are also regulated by the claims management regulator, organisations that are exempt introducers, or organisations that are regulated by another body, such as solicitors? There is concern that the FOS is insufficiently independent of the regulator, which is currently the FSA. Can that be scrutinised? Can appropriate action be taken to ensure a clear separation of powers and responsibilities? It seems unreasonable that a business must adhere to the adjudicator’s findings without a right of appeal and with no knowledge of the adjudicator’s qualification for making a decision. Can that be looked at with a view to equalising the playing field?

Finally, can steps be taken to ensure that the Ministry of Justice and the CMR have sufficient powers and capacity properly to regulate the business in a way that is fair to consumers and businesses? After all, we should support businesses such as Mr Broadbent’s. His business lends to other businesses and helps them to expand, fuelling the growth of the economy.

19 Mar 2013 : Column 907

Claims companies are making huge amounts of money and filing huge numbers of claims against whatever businesses they can, regardless of whether they have mis-sold or even sold a PPI. At their worst, CMCs do not help the consumer, and damage businesses and clog up the regulators. Their proliferation must be stopped.

7.18 pm

The Parliamentary Under-Secretary of State for Justice (Mrs Helen Grant): I congratulate the hon. Member for Scunthorpe (Nic Dakin) on securing this debate on claims management companies, which remain topical. Clearly, there are serious conduct problems among a minority of CMCs, but it is worth remembering that some provide a useful service in identifying consumers who have suffered loss and supporting them in obtaining redress when they would otherwise receive nothing. While we have made good progress since the start of regulation, I acknowledge that there is more that can be done and should be done to improve the conduct of CMCs, and to strengthen consumer protection across the claims management industry. To that end, the Ministry of Justice claims management regulation unit remains committed to providing a stable and robust regulatory system that the public can trust. I am glad that the hon. Gentleman acknowledged the good work that the CMR unit is doing. It is stepping up its approach to improving CMC compliance and strengthening enforcement action through a range of measures.

The CMR unit has established a specialist compliance team to deal with poor practices used by some CMCs when handling claims for mis-sold payment protection insurance. In the past year, the compliance team has conducted more than 100 audits of CMCs assessed as high risk, issued warnings, and taken other forms of enforcement action where problems have been found. This work continues and includes targeting CMCs that are submitting poorly prepared or spurious claims, charging up-front fees and operating call centres, to ensure that sales calls are compliant.

On the problem of nuisance calls and text messages, we fully support the work of the Information Commissioner’s Office in enforcing the legislation that protects individuals from this form of direct marketing. We also recognise the benefits of a joint approach to tackling the problem. Before I go further, however, it is important to point out that spam texts that market claims services are generally not sent by CMCs, but by other organisations that generate leads for other businesses, including CMCs. The CMR unit is working with the ICO to investigate and take enforcement action against CMCs accepting leads or claims from this type of marketing.

Within the personal injury claims sector, most of the issues relate to businesses or organised groups attempting to defraud the insurance industry. The CMR unit contributes valuable intelligence and expertise, and has worked with a range of organisations and agencies to tackle fraud, including the Insurance Fraud Bureau, and police forces on a number of operations throughout the year. Those operations have resulted in arrests, charges and convictions. Much has therefore been achieved at a time when resources are limited. Since regulation began in 2007, the CMR unit has removed the licences of more than 900 CMCs across the sector. More recently, a major crackdown resulted in more than 400 CMCs

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being warned, suspended or having their licences cancelled. That has been done with no impact on the public purse, as regulation is self-financing.

So far, I have covered the good work that the CMR unit is doing to drive out malpractice. What I want to do now is to look further ahead to the programme of reforms we are introducing this year. Our reform plans give us all huge opportunities to do things better and to ensure that the regulatory framework continues to deliver effectively. This year’s reform agenda includes four main measures. Following a consultation exercise, we are proposing to tighten the conduct rules for CMCs. Most critically, we are proposing that contractual agreements between CMCs and consumers must be signed by clients before any fees can be taken. CMCs will only be permitted to refer to being regulated by the claims management regulator, rather than by the Ministry of Justice. CMCs will have to inform their contracted client of any variation or suspension of their authorisation. We intend to publish our response to the consultation shortly and, subject to the relevant Government clearance processes that can take some time, we expect implementation of the proposed changes to follow this summer.

Last year, we ran a public consultation on imposing a ban on CMCs offering financial rewards, or similar benefits, to potential claimants as an inducement to make a claim. The ban will come into effect from 1 April. Also from 1 April, we are implementing the primary recommendations contained in Lord Justice Jackson’s review of civil litigation costs, including in particular a ban on the payment and receipt of referral fees in personal injury cases and fundamental reform to the no win, no fee conditional fee agreements. That will include, in particular, a ban on the payment and receipt of referral fees in personal injury cases and fundamental reform to the no win, no fee conditional fee agreement.

Kate Green: I am aware of the changes being made to referral fees, but is the Minister aware of the concern that, because they will be brought within the ambit of the conditional free arrangements, CMCs will be able to use those CFAs as a means simply of replacing referral fees?

Mrs Grant: I think that our reforms have looked into these issues carefully and we have anticipated many of the issues to which the hon. Lady is alluding. I was going to touch on this in my speech anyway. We feel that our reforms have been carefully considered and are proportionate, appropriate and balanced, and that we now have to start to attack our compensation culture, which has been building up for many years. Obviously, the reforms will be reviewed within three to four years, and if further changes need to be made in order to create further balance and fairness, of course that can be considered.

Nic Dakin: The Minister is spelling out some of the good work being done through the Ministry of Justice and the CMR, but may I pick up on the point made by the hon. Member for Thurrock (Jackie Doyle-Price) about the balance of risk? The Financial Ombudsman Service places all the risk with businesses, which means that CMCs can act with impunity and without risk. Is the Minister talking to her colleagues across government to ensure that the excellent work being done by the MOJ is met in parallel by the other Departments and so can be reinforced?

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Mrs Grant: Again, I am grateful to the hon. Gentleman for acknowledging the good work of the CMR unit in the MOJ. Of course, we are working across government to try to get this right. I hear exactly what he says, but we need to take a balanced approach and to accept that not all CMCs are bad. We want targeted, appropriate and proportionate action against the bad companies, but we also want the good ones to continue.

Lastly, this year we intend to commence powers under the Legal Services Act 2007 to extend the Legal Ombudsman’s restriction in order to provide an independent complaints and redress scheme for clients dissatisfied with the service provided to them by the CMC they have contracted with. Consumers will benefit, because the Legal Ombudsman has wider powers of redress, including the ability to order compensation.

I want to pick up on some of the issues raised by hon. Members. I believe that I have already touched on my attitude to balance and our civil reforms to funding and the costs. I would like to reassure the hon. Member for Scunthorpe that I firmly believe that, notwithstanding the reforms, meritorious claims will still be permitted. It is avoidable and spurious claims that we want to stop.

On the issue of banning cold calling and texting, I should say that nuisance calls and text messaging are a serious problem that can cause considerable annoyance, as clearly it has done in the case of the company in the hon. Gentleman’s constituency. The Information Commissioner’s Office can take enforcement action and has lead responsibility in this area, but we of course work very closely with it, and will continue to do so. The commissioner can impose penalties of up to £500,000 for serious breaches of privacy. Indeed, I was informed a few days ago that for the first time it recently issued fines totally £440,000 to two illegal marketers responsible for distributing millions of spam e-mails.

In our opinion, a blanket ban on cold calling would be disproportionate. Other businesses operating in similar industries such as debt management are not subject to a blanket ban. Next year, CMCs will have to have a signed contract before they can take any up-front fees from an individual, and that will tackle the main detriment resulting from cold calling.

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On the issue of charging CMCs, we fear that that could penalise consumers who find the services of CMCs helpful in making complaints. We worry, too, that any fee would be likely to be passed on to the consumer. Also, we do not believe that charging a fee is the correct approach to protecting consumers. Protection will ultimately be achieved by effective regulation.

Jackie Doyle-Price: I hear what the Minister is saying, but I draw her attention to PPI claims, for which the banks have well-established processes that involve only the filling in of a form. The presence of an up-front fee might make consumers think twice about giving their business to a company, and about doing the work themselves instead.

Mrs Grant: I hear what my hon. Friend is saying, but I am afraid that I fundamentally disagree with her on this point.

The hon. Member for Scunthorpe asked who might be the best regulator for these purposes. I believe that the MOJ is in a good position to continue in that role. We can act now, and we are doing so. The CMR unit has a good track record of making a difference using relatively limited resources, and we have had a good response from stakeholders, who are supporting the regulation remaining with us. I also believe that it is not a good idea to transfer responsibility at a time of substantial change.

In conclusion, the CMR unit will step up its approach, and resources will be devoted to tackling the underlying problems that exist in the conduct of some CMCs. I do not believe that institutional reform is necessarily the answer, especially at a time when the industry is undergoing such fundamental change. The industry will of course have its role to play in driving up standards. CMCs must give consumers and defendants more confidence in the system by ensuring that they comply properly, fairly and adequately with the rules.

Question put and agreed to.

7.32 pm

House adjourned.