| Previous Section | Back to Table of Contents | Lords Hansard Home Page |
Earl Howe: My Lords, in Committee, alongside the noble Lord, Lord Clement-Jones, I argued that the Bill's retrospective nature was undesirable in principle and
practice. It is undesirable because retrospection should not be incorporated into new law without good reasons, and in this case no such reasons exist other than a blatant desire on the part of the Chancellor to defray NHS running costs to the latest possible date.As the noble Lord rightly pointed out, there is no way that insurers who wrote motor policies between 2nd July 1996 and 2nd July 1997 could have budgeted for the additional costs to which the Bill will give rise. It is also wrong that the Government are legislating for a period even before they were elected to office. Replying to me in Committee, the Minister made no attempt to answer those fundamental points, which is not surprising as there are no satisfactory answers.
Insurers who are no longer writing motor business will be particularly severely affected. That category, faced with a claim, would be most unlikely to recoup any costs imposed arising from policies written during the period in question. The Minister was unable to answer that point and the response he made was extremely weak--that it takes up to two years for charges to feed through to the NHS, so setting a date of 2nd July 1997 for the provision to apply was not unreasonable. That wholly fails to address whether 2nd July 1997 is a fair starting point. To put the matter at its starkest, some motor policies priced on the old basis will have continued in force for more than one year after the Chancellor's announcement. That cannot be fair.
The amendment seeks to strike a fair compromise. The Minister indicated in Committee that the insurance industry is content with a starting point of 2nd July 1997, but my information is that that is not the case. The industry was only prepared to acquiesce with extreme reluctance. A starting date of 1st April 1998 would not entirely eliminate the Bill's retrospective impact but would allow a reasonable period after the Chancellor's announcement for insurers to factor in the new risk to motor policies written after that date. I ask the Government to think again.
Lord Hunt of Kings Heath: My Lords, I thank the noble Lord, Lord Clement-Jones, for his acknowledgement of the clarifying letter from my noble friend Lady Hayman.
There has been a great deal of discussion about retrospection. The noble Lord referred to Sicilian negotiations. I am not sure what he meant but I am certain that that is not an accurate description of the discussions between the Department of Health and the Association of British Insurers, which suggested that applying the higher rate of charges to NHS treatment from 2nd July 1997 would be reasonable. The insurers' representative body sought a meeting with the Secretary of State precisely because it wanted to discuss when the new charges for NHS treatment would be introduced. That meeting was held one year ago to the day--on 2nd March 1998, when insurers themselves advanced the date of 2nd July 1997 as being reasonable and fair for the new higher rate charges to take effect.
At that stage, the insurers had eight months' notice of the intended changes. They have had a further full year to adjust their practice. The average time taken to process a claim for compensation is two years. NHS charges are due when compensation is paid. In April 1999, when the new scheme should begin, some of the compensation payments coming through will relate to accidents in 1997 but many will relate to accidents after that time.
The argument has been made that insurers selling policies in 1997 would not have been aware that they could include exposure to the new higher rate NHS charges and that insurers must find additional money to meet that demand. Claims against motor vehicle insurance policies have risen over 10 years--using figures supplied by the Association of British Insurers--from £2.2 billion in 1986 to £5.1 billion in 1996. In 1996, the NHS recovered only £13 million in respect of treatment following road traffic accidents, which is one quarter of 1 per cent. of the money that insurers paid out on motor vehicle insurance policies.
Insurers selling motor vehicle policies in 1997 would have taken into account the possibility of a claim against that policy under the current provisions of the Road Traffic Act 1988 whereby an insurer could have faced a maximum charge for in-patient treatment of £2,949. That would have been part of the insurer's consideration. Under the new higher rate charges, the insurer can face a daily rate charge for the same accident of £435 per day, although admittedly there is a maximum charge of £10,000.
The average length of stay in an NHS hospital following admission after a road traffic accident is just over eight days. At the new higher rate charge, that average will produce a bill of about £3,500--a difference in cost in an average case of about £500. Given that the insurer could also be made to pay for treatment received in the private sector and must have allowed also for that possibility when setting premiums in 1997, the increase in NHS charges is only a small part of the insurer's cost.
I do not accept that our proposals are anything more than a small element in the insurance industry's calculations. It is interesting to view in parallel the implementation of social security benefits recovery legislation. That provides a system whereby the compensator is liable for the full amount of benefit paid up to the date of the compensation payment, subject to a five-year maximum. That certainly may reduce the compensation payable to the injured person, but only where benefits and compensation have been paid for like need.
Recovery of benefits legislation introduced by the previous administration applied from the beginning to compensation payments made after the legislation came into effect, irrespective of when the injury occurred. That relates both to the 1989 legislation, which affected victims, and the 1997 revision of the scheme, which affected compensators. The government of the day announced that they would move to introduce legislation 12 months before the 1989 Act was passed. In a subsequent case brought under the European
Convention on Human Rights, that period of notice was accepted as reasonable and the Commission rejected a claim that the Government's action was retrospective.We are considering now legislation where the intention to act was announced one-and-a-half years ago. The expectation that the new scheme would raise about £100 million each year was announced by the Treasury in October 1997--16 months ago. The actual range of income that the Department of Health considered feasible was made known to the Association of British Insurers in January 1998--more than 12 months ago.
We have been asked to consider the compromise position of 1st April 1998. For the reasons given, that is not more acceptable than the date agreed with the insurers of 2nd July 1997. For many years the NHS missed out on income that was its due. We were on record as saying that we wanted to rectify that position as soon as possible and move to charges that better reflect the costs of treatment. We have an agreed date with the insurers for so doing.
Any delay such as that proposed in the amendment in implementing the higher rate charges would be at further cost to NHS hospitals. The noble Lord, Lord Clement-Jones, asked me to quantify this. It is hard to give him an exact figure. However, putting the starting date for higher rate charges back from 2nd July 1997 to 1st April 1998 would be likely to reduce the direct income to hospitals providing care for accident victims by around £30 to £40 million. That may not seem to be a great deal when set beside the billions of pounds that insurers pay out every year in car-related claims, but clearly it is a very significant sum to NHS hospitals. The real boost to hospital incomes comes from the fact that we begin for the first time to pick up all the claims that are made and to raise NHS charges in all of these cases. The move to full costs is a long overdue step, but one that I think should not attract undue attention out of proportion to its real effect on insurers. On that basis, I invite the noble Lord to withdraw the amendment.
Lord Clement-Jones: My Lords, I thank the Minister for that most interesting response. Indeed, there was a great deal of meat in it, especially as regards the cost and the difference between the two. I believe that it deserves considerable reflection between now and Third Reading. I must thank the noble Lord for the care that he took in responding. It is a difficult matter because obviously there are issues of principle versus the question of cost to the NHS. One needs further reflection in order to resolve some of the issues that have emerged. Nevertheless, I thank the Minister for his reply and, in the meantime, beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 9 [Appeal to the court on point of law]:
Lord Clement-Jones moved Amendment No. 5:
The noble Lord said: My Lords, I should like formally to move this amendment because my own amendment is so closely cognate to it. The letter which I received
If the Bill simply provides that regulations "may be made" and, in the event, they are not made, what impact would that have in those circumstances? For example, would Order 55 override that to allow an appeal, or would regulations need to be made in order to allow an appeal? The letter is not entirely clear in that respect.
I accept the fact that Schedule 1 to the rules of court is, so to speak, a temporary schedule, whereas the rules themselves now seem to be fairly fixed. Therefore, there are some further issues involved. I still feel rather uncomfortable about an appeal not being enshrined in the Bill and simply being allowed under regulations. If the Minister could clarify the question as to whether an appeal is available even if regulations are not made, that would be most helpful. I beg to move.
Page 6, line 36, leave out ("Regulations may provide that").
Next Section
Back to Table of Contents
Lords Hansard Home Page