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Cabinet Committees

The Lord President of the Council (Baroness Amos): The Prime Minister has today placed a copy of the current list of Cabinet Committees, their full membership and terms of reference in the Libraries of both Houses. Details have also been updated on the Cabinet Office website.

Coal Health Compensation Schemes

The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Sainsbury of Turville): My honourable friend the Minister for Energy (Malcolm Wicks) has made the following Written Statement.

I announced in my Written Statement of 21 July that I was setting up an independent external review of the handling of the department's coal health compensation schemes. This followed a series of press articles raising concerns about various aspects of the schemes.

The terms of reference for the review were: to review the integrity of the administration of the scheme for dealing with coal health claims and to identify any specific measures needed to improve the administration of the scheme; to consider whether there are adequate safeguards in place to prevent, detect and pursue fraud while ensuring the fair and timely settlement of claims; and to make recommendations accordingly to Ministers and/or the accounting officer.

The review was undertaken by a team led by Stephen Boys Smith, a former senior official at the Home Office.
 
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I am publishing today the report of the review. I have placed the report in the Libraries of both Houses and it is available on the department's website (www.dti.gov.uk/coalhealth).

I am grateful to Stephen Boys Smith and the review team for producing a focused report on what are complicated issues.

The coal schemes were initially set up to discharge very substantial liabilities, inherited by my department from British Coal, for industrial injuries suffered by miners. In total we estimate they will result in payment to miners and their estates of up to £5 billion in compensation. We are about half way through the schemes and more than £2.8 billion has been paid out in compensation so far. As the report notes, and as Members in coal mining constituencies will be aware, significant sums have been paid out in the coal areas equivalent to around 3.5 per cent of local annual income. Current expenditure is nearly £2 million a day.

In short, I think that the Government are fully facing up to their obligations to discharge these liabilities. Given the scale of the task, it is important that there is confidence that the schemes are being well run. I am therefore pleased to take from the report the assurance that: the administration of the schemes is basically sound although there are lessons to be learnt about how the schemes were put into operation; that, aside from continuing efficiency improvements, no major changes are needed to improve the running of the schemes; and that the fraud procedures in place are appropriate.

The report also rejects the argument that the UDM was granted more favourable terms over other parties and confirms that arrangements with the UDM effectively provided identical compensation to that under the agreements with the claimants group.

The report also makes a number of specific recommendations. The department fully accepts those recommendations which are directed at it and will follow them through in the months ahead. I will report to the House as appropriate on this.

I wish to comment at this point, however, on the report's specific conclusions and recommendations in three areas: namely, the initial design of the scheme; the issue of the costs of administering the scheme, including legal costs; and the issue of transparency.

On the basic design of the schemes, the report concludes that the arrangements put in place in the late 1990s were not the best way to administer compensation for so many people; and it goes on to recommend that, were a similar case to arise in future, the Government "should very carefully examine alternative ways of proceeding".

I agree with this recommendation.

When the basic groundwork for the current schemes was put in place in the late 1990s, no one knew that we would have anything like as many as 700,000 claims under the schemes; and, in particular, that we would have so many relatively low value claims. The existing schemes are now well established and we have
 
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introduced radical changes to the lung disease scheme in the past 12 months to speed up the processing of significant numbers of claims.

Any further substantive changes to the existing schemes would run the risk of delaying the payment of claims which would be to no one's benefit. Moreover, given that we are in the last few years of the current schemes, now is not the time for further redesign. But were we to face such circumstances again, we would undoubtedly want to think long and hard about whether there are better alternatives.

The second key issue which the report raises is the question of costs and solicitors' costs in particular. In commenting on this, I should first make clear the considerable contribution to the running of the scheme that has been made by the various firms of solicitors involved. The schemes are complex; and it is entirely right and proper that miners and their families should have professional legal support through this process, funded by the Government under the legal obligations we inherited from British Coal.

But the report none the less points out that the legal cost structures were largely negotiated, along with the agreements themselves, at a time when the anticipated volumes of cases under the schemes were considerably lower than has proved to be the case. It would be wrong not to recognise that higher than anticipated volumes of cases undoubtedly bring opportunities for batch processing and reduced costs per case. The report also notes that not every claim will always require the assistance of qualified legal professionals and that the cost to public funds "does not now necessarily reflect the more routine nature of the work". The report recommends, therefore, that we consider whether there is more to be done in this area, with the aim of ensuring that legal costs more accurately reflect the nature of the work actually undertaken.

This is an issue the department is already actively pursuing. In particular, we believe that the new "fast-track" approach we have implemented this year for the lung disease scheme should require significantly less input by solicitors and should therefore incur considerably reduced costs.

We have argued that case with the solicitors' representatives and, indeed, before the High Court. We have now taken the issue to the Court of Appeal. I do not think it appropriate to comment in detail at this stage. But significant sums in legal costs—perhaps up to £200 million of taxpayers' money—are at stake.

There are also other areas where we have yet to reach agreement with the claimants' solicitors on costs and we will be pursuing these equally vigorously to ensure they reflect work done and a reasonable level of return.

More generally, I regret that legal costs have become the source of such contention. It is right that solicitors are properly rewarded for the work they have done. But claimants' representatives will recognise that it does no good whatever to the reputation of themselves
 
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or their profession if they are perceived in the press and elsewhere, rightly or wrongly, as being primarily motivated by fee earning opportunities.

In this context, the report also discusses the concern that in some cases solicitors have taken money from claimants' compensation to cover costs even though legal costs are met by the Government, and that, again in some cases, union fees have been deducted from compensation. Both issues are discussed in the report in some detail.

Clearly, it would be wholly unacceptable for deductions to be made from any compensation payment without the claimant's agreement, though the report notes that, as far as they were aware, there were no examples of that happening. But the report equally suggests that in some cases, claimants appear to have been invited to agree to make such contributions without it being crystal clear to them that such donations were a matter for their choice and that other solicitors would not seek to make them. That would strike me, to say the least, as questionable.

These are essentially matters about conduct within the legal profession and the department has no direct role. We have, however, raised the issues with the Law Society in the past and will continue to make clear to them the importance of taking these issues forward rigorously and proactively. There is again legal action in prospect, though not involving the department. The report does, however, make a specific recommendation that, subject to the outcome of any legal action in this area, the legal profession should take forward the issue of claimants who were not made fully aware that they were free to use solicitors who did not make any deductions. The report calls on the legal profession to take this forward. I urge it to do so and I will follow up this issue with the Law Society.

Thirdly, we have also taken steps immediately to address the recommendation about greater availablity of information about the schemes. We have already put on the website (http://www.dti.gov.uk/coalhealth/) the claims handling agreements, including the UDM agreements, and the latest reports to the courts on progress of the schemes, which cover a lot of detail. We will consider what further information might be added and would welcome input from interested parties about what additional information they would find helpful.

Although it is not dealt with within the report, I can also report separately to the House that the Serious Fraud Office has now confirmed to my department that, while its investigations are continuing, its investigation is not now focusing on any suspected fraud against the department.

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