The Government’s 2008 scheme does not worry about who in particular was responsible for cover; it simply compensates people who have contracted mesothelioma. This new scheme should do the same, and in particular, should embrace mesothelioma victims who are self-employed or household members. The scheme is intended belatedly to make amends, and it should do so fully and generously. If the employers’ liability insurers would accept that, then that would be gracious on their part. I beg to move.

Lord Wigley: My Lords, I support these amendments and I will pick up the important points made by the noble Lord, Lord Howarth of Newport. I entirely support his emphasis on the need to ensure that those who suffered at second hand—whether it was the wives, daughters, or sometimes mothers of people in the industry who have been infected by the particles from washing clothes—should most certainly be covered if they have suffered a loss of health as a result.

The implication is that the insurance policies that were provided for the employees in case of negligence by the employer only relate to the employee in a very narrow sense. That needs to be explored in depth because there is a category of people who have undoubtedly suffered ill health and some who have died, and there may well be many more that come through from that avenue.

However, I return to the generality of these amendments. It has been noted in this debate that the scheme proposed by the Bill has its roots in the consultation announced by the previous Labour Government in February 2010, which is the date in these amendments. However, the scope of the assistance proposed in that consultation was, of course, significantly wider than what we have ended up with in the Bill.

6 pm

The Employers’ Liability Insurance Bureau—ELIB—which was proposed by that consultation, would have compensated all industrial disease victims in situations where their employers’ liability insurer cannot be traced. The consultation ended in May 2010, but no announcement on any scheme came forward until this other date—25 July 2012. There is no magic in that date, but it has now become a fixed date that will have a tremendous effect on those who are cut off by the way it will be implemented.

Under the proposed scheme, victims will be protected if they were diagnosed after 25 July 2012. Those who were diagnosed between 9 February 2010 and that date will be, for completely arbitrary reasons, excluded from this scheme. The person who is diagnosed on

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26 July 2012 will qualify, but if he is diagnosed on 24 July he will not. This is utterly unfair, which is why I urge noble Lords to support Amendments 4 and 8, which would bring this wronged group back into the scope of the scheme. That would be only logical. Not only is the insurance industry excused liability for all claims prior to July 2012, but is costs are also reduced, since in giving average compensation it will not need to enter into negotiations on a case-by-case basis. The insurance industry is, no doubt, the winner in this instance.

I contrast this package with that of industrial workers suffering from other forms of lung disease, who were compensated by the Pneumoconiosis etc. (Workers’ Compensation) Act 1979. Under that Act, workers who had suffered—if I remember correctly, going back to the 1950s—were taken on board. Why is there such a difference between the very generous treatment of sufferers in that instance, and this instance, where people are cut off in such an arbitrary manner?

We have all, no doubt, had messages from the families of those who have died from this horrendous disease. I will quote from two of them very briefly. Jean Kenyon says, simply, “My husband is a victim diagnosed in 2011. Why is he not included? It is a gross injustice”. John Gordon writes, “My late wife was diagnosed with mesothelioma in January 2012. Does this mean she suffered a horrendous death, which included a great deal of pain and mental anguish, which could only be recognised after 25th July 2012?”. In fact, it will not be recognised at all as things stand.

This is wrong, unfair, illogical and insensitive. I urge noble colleagues to support the amendments in the names of the noble Lord, Lord McKenzie, and the noble Baroness, Lady Sherlock.

Lord Browne of Ladyton: My Lords, I support this group of amendments. In the interest of the efficient use of our time I shall do so principally by adopting the arguments that have already been advanced by my noble friends in support of them, and will seek only to reinforce one point and augment another in relation to Amendments 5 and 6.

The quotations which my noble friend Lord Howarth deployed from the ABI’s brief come from the brief that the ABI provided to some of us—in a discriminating fashion, I recollect—in anticipation of the Committee stage on 5 June. On that occasion I deployed these very same quotations; I do not think that the noble Lord, Lord Howarth, had them at that stage. I made this point then, and I wish to repeat it: the ABI’s argument in relation to self-employed people seems to be, “This was a very small number of people”. I felt that that argument read that since we were leaving behind only a small number of people, we could be justified in doing so. I deployed the argument that that increased the injustice substantially and that extending the scheme to this very small number of people would have a very limited effect on the total cost of the scheme and on its administration. I also argued that it would be a deep and disproportionate injustice to leave those people behind because they were probably victims of the same negligence; they probably picked up the fibres that caused this dreadful disease in exactly the same workplaces as employed people did,

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but just happened to be working in them at the time. I repeat that point as there is some significant merit in it.

In relation to the group of people who are referred to in the Minister’s letter of 4 July as those who are infected by environmental or secondary exposure, there is a more compelling argument as to why these persons should be included in this scheme. It relates to the way in which public liability insurance and compulsory employers’ liability insurance—or employers’ liability compulsory insurance, which I think is its proper title—was sold historically. It may still be sold this way, but I know that it was sold in this fashion. I explored this argument in Committee—I am grateful to the Minister, who, in his characteristic fashion, addressed comprehensively in his letter those issues that he did not have a briefing to address in Committee—and I have now had it confirmed, from the information in the Minister’s letter, that it is right.

Almost invariably, employers’ liability compulsory insurance was sold in a package, with, among other things, public liability insurance. Consequently, it is invariably the case that the insurers, who carry the employers’ liability risk, also carry the public liability risk. It is the behaviour of exactly the same insurers, in either destroying their records or failing to be available to those who identified them as the insurers who carried these risks, that has caused this deep failure in the insurance market. Therefore, there is no difference in relation to the mechanism of insurance and its failure to provide compensation for people who have been exposed to environmental or secondary exposure, compared with those who were employed in the first instance.

It is almost incontrovertibly the case that were an employer to have been sued by the person who was exposed at the secondary level, that person would have been able to establish that they were owed a duty of care and that there was a direct causal connection between the exposure of their relative or loved one and their contracting the disease. Had they had somebody to sue, they would have been able to get compensation. If the employer does not exist and the insurer cannot now be found, they are in exactly the same position as the relative who was exposed to the fibres and carried them home. I made that argument, and from the way I read the very carefully worded letter from the Minister, that appears to be what his researchers have revealed: that this group of people would have been covered by public liability insurance and that almost invariably the same insurers would have carried that risk.

There is no argument, therefore, that has any merit, that those people who were in the category of secondary exposure should be excluded from this scheme. The opposite is the case. Given that exactly the same players would have been involved in the processes that caused their contracting this disease and dying from it, we should honour the experience they have had by including them in the scheme.

Lord Stoneham of Droxford: My Lords, I will comment on a number of issues to which these amendments give rise—and they are very sensitive issues. Any start date is arbitrary, and there will always be people who are caught by a start date, so whether it is 2010 or 2012,

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there will inevitably be feelings of unfairness. However, the earlier the start date, whatever the cost—perhaps the Minister will clarify the cost, but we were told it was £119 million, and if it is 70% of that it will come to £80 million—agreeing to that concession would cause a 25% increase in the cost of this scheme. Where is the money going to come from? Will it come from a new negotiation, or from reduced benefits and compensation for those who will receive money from the scheme? That question has to be answered by the movers of the amendment.

On the issue of coverage, there are obviously concerns about the self-employed and people from the same household, but are we saying that we are going to complicate this legislation and hold it up while we have an argument about public liability insurance versus employee insurance? That would be a recipe for severe delay. The great advantage of this legislation is that we have kept it simple and we have an agreement. It is a balancing act to get to that agreement and to get the legislation through so that it benefits the people who were in employment. Once this settles down, we could consider coming back to this—I hope the Minister will do so at some stage—and look again at how we might cover the self-employed and people from the same household, but if we start that discussion now we will be here until 2015 or 2016 before we have legislation to benefit the families for whom it is intended.

Lord Alton of Liverpool: My Lords, I will speak briefly to these amendments, in particular to support what the noble Lord, Lord McKenzie, argued in Committee and what these amendments call for today. We had a long debate on 5 June, in which I spoke at some length. The point I made then, which partly answers what the noble Lord, Lord Stoneham, has just said about the arbitrariness of dates, was that the original consultation period is surely the point from which this scheme should kick in, not the date of July 25 last year, the last day of the Session, when a welcome announcement was made that there would be a Bill along these lines and a scheme of this kind.

The consultation date of February 2010 is, for me, a seminal date. For those affected it represented a promise waiting to be fulfilled. The eligibility date should be at the commencement of the consultation. After all, the Association of British Insurers began the discussions at that time. It can hardly have woken up on 25 July last year, shocked at having failed to make contingency plans or reserves. Therefore, applying the date of February 2010 is the right and fair way to go about this. It is the date that people anticipated and expected. In law, as well, it is far more consistent. After all, there will be people who were diagnosed with mesothelioma during that period and it is important that they are accepted as part of this scheme.

I know that the Minister will not be in a position to share the legal advice that he has been given within the department, but we might well leave ourselves open to claims because of the consultation document that was issued and the clear indication that this scheme would probably begin from as long ago as February 2010, rather than 25 July last year. For those reasons alone, I am happy to support the noble Lord, Lord McKenzie.

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Lord Wills: My Lords, I, too, support these amendments and endorse everything that has been said. On Amendment 4, as my noble friend on the Front Bench has said, little credence should be attached to arguments that insurers could not reasonably have expected in February 2010 that a scheme such as this could not have been brought forward in the foreseeable future. Indeed, it is highly likely that the only reason for the selection of that date is that it reduces costs. That is not a negligible consideration, but, as we have heard, those costs are likely to be relatively small. We have heard that they represent a considerable percentage increase, but with all respect that is not the concern here. The issue is the absolute sums that are involved, which are relatively small. They ought to be easily affordable by insurers, particularly in light of the long period in which insurers have got away without paying sums that they should have been paying. In my view, those costs are unlikely to have to be passed on to employers.

Lord Howarth of Newport: My noble friend was making the point that for many years insurers got away with not paying compensation. I believe that the figure is that some 6,000 mesothelioma sufferers died uncompensated in the years since 1968. That would have saved the employer’s liability insurers £1 billion. They are very well able to do a little more for mesothelioma sufferers now.

6.15 pm

Lord Wills: My noble friend makes an extremely important point. In Committee, he made some very telling points about all the ways, not just the direct financial ways that he has just calculated, in which insurers have benefited during the very long period when legislation such as this was not in place.

We then have to ask whether these increased costs can be justified. We should be looking at the expectations not of insurers but of victims. Victims certainly expected that the start date of a scheme such as this would be in February 2010. I hope that the Government will now satisfy the expectations of victims, not insurers.

I will speak briefly to Amendment 6, to which my noble friend Lord Howarth spoke very powerfully. We have heard all sorts of moving stories in this House, in Committee and elsewhere, of tragedies that have happened in precisely the way that he has described. I heard them in my own constituency surgeries when I was the Member of Parliament for North Swindon. My noble friend said—I hope I am quoting him correctly—that this amendment is necessary because the exposure of these people is a direct result of negligence by employers. I agree with him. It is a matter of common decency that these people should be covered by the scheme, and I hope that the Government will agree with this amendment.

Lord Freud: My Lords, I thank noble Lords for these amendments, which all share the same broad aim: to widen the scope of the scheme to get more people into it. I will take the amendments in turn and address first those tabled by the noble Lord, Lord McKenzie, and the noble Baroness, Lady Sherlock, regarding the start date for eligibility. I will then address the amendments tabled by the noble Lord, Lord Howarth, on the self-employed and household members.

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We discussed the start date of the scheme at some length in Grand Committee. Clearly, it has received a lot of focus and continues to do so today. Under Amendments 4 and 8, once the scheme comes into force all living people who were diagnosed with diffuse mesothelioma on or after 10 February 2010 would be eligible for a payment from the scheme. They would also provide that any living dependant of a person with diffuse mesothelioma who had died on or after 10 February 2010 would be eligible for that payment.

Although it hurts to do this, I have to reject these amendments and ask that the noble Lord and the noble Baroness do not press them. I say that in the knowledge of the strength of feeling among all of us in this Chamber that the Bill should go as far as possible to help as many people as possible. The core issue is that this Bill was the subject of intensive negotiation. On top of that, it has been shaped by what I have felt to be innumerable obstacles that we have had to work around, and I need to restate why we cannot move the date as the amendments propose.

The start date of 25 July 2012 has been criticised for being arbitrary, but it is the date on which we announced that a scheme would be set up and it is the most legitimate date on which to commence eligibility. It is from that date that eligible people and insurers alike could expect that the scheme would be set up.

The proposed date of 10 February 2010 relates to the date when the previous Government published their consultation paper, Accessing Compensation: Supporting People Who Need to Trace Employers’ Liability Insurance. If noble Lords will allow me to correct myself, in Committee I said that that was published on 11 February, but other noble Lords were correct and it was in fact published on the 10th of that month. This was a consultation, not a decision in any particular direction, and did not create any expectation that people would be likely to get any sort of payment over and above what the Government provide for people with diffuse mesothelioma. I therefore cannot see that it is an appropriate start date for eligibility, and I fear that, were we to use it as such, it could be more reasonably criticised for being arbitrary than the existing start date.

We touched on the reasons why it took so long from the consultation being published to the scheme being announced to Parliament, so I will revisit them only briefly. I would have liked to have announced the scheme much sooner than 25 July 2012, but the issues involved were complex. We worked closely with stakeholders, including the insurance industry, claimant groups and solicitors, and all in all the process took longer to deal with than I had hoped. In addition to creating an expectation among people with mesothelioma, the announcement gave insurers notice that we intended to bring forward the scheme. From that date, those insurers will have had to factor the cost of the levy into their financial forecasts and plans.

There is one more point to mention that supports using the date of the announcement. Given that the insurers who are paying the levy to fund the scheme are not necessarily the same ones who took the premiums that paid for the historical insurance policies, we have to be able to demonstrate that the costs to them are

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fair and proportionate. Simply put, the earlier the start date, the higher the costs. If the scheme started on 10 February 2010, the extra costs, as I said earlier in response to the question from my noble friend Lord Avebury, would be £75 million.

Again, I need to take noble Lords from the figure of £119 million that I used in Committee. That figure was based on paying 100% of average civil damages to all claims, regardless of age. The £75 million figure that I am providing now is based on a tariff of 75% of average civil damages, which I have already talked about today, and takes the age of those making a claim into account. I think I owe noble Lords an apology to the extent that I have created any confusion.

I have spoken before about the risk that we take in raising the costs of the scheme. A litigious industry such as the insurance industry could easily delay the scheme with legal challenge if the costs were perceived as unfair. The other risk is that higher costs would be passed on to employers. I know that noble Lords would like us to do more, and indeed the Government would like to do more, but we cannot ignore these risks.

Lord Howarth of Newport: The Minister is worried that the employer’s liability insurers will default to the position of litigious opposition to the scheme if we attempt to improve it in these modest ways. Given that insurers have accepted the principle that they should fund a scheme, surely they would have no strong legal case to make in objection. Should he not simply say, “See you in court”?

Lord Freud: I have tried desperately hard not to end up in that position, because the “See you in court” line would just end up by tying us up for years with uncertain outcomes and would stop us getting payment to the people who need it from next July, which is when I want the payments to go out. I want this scheme up and running and working in April next year so that we can start making the first payments. I have tried in every way to ensure that we do not run into that kind of problem. The noble Lord may accuse me of not being robust enough, but I assure him that even to get to where we are it could be said that we have had to be as robust as possible.

The real problem is the technical difficulty with the four-year smoothing period that we have to use. We are going to have much higher costs in the first year as it in effect bundles up two years already and one year of running costs, so we are going to have substantially elevated costs in the first year that we have to find a way of smoothing, and we are doing that over a four-year period. If we extended that smoothing back even further to work in another two years’ worth of money—that £75 million—into the scheme, that would open up the whole agreement not just with the insurers but within the Government. On our assumptions, that would in effect push the levy rate up to approximately 4% in that period. That in itself would undermine what we are trying to achieve, which is to ensure as much as we can that these costs are not just passed on to British industry through higher current employer liability rates. That is the core reason. This is always about how much money you can get safely to people, and the adjustment in the amendment would undermine that.

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Of course, any start date that we choose will exclude some people. The best possible way forward is to pin eligibility to the date when people with diffuse mesothelioma had a reasonable expectation of a payment and insurers knew that they would need to start factoring in the cost of the levy as an additional business cost.

I need to remind noble Lords again that the existing provision for sufferers of mesothelioma will remain in place for those who are not eligible to come to the scheme. I thank the noble Lord and the noble Baroness again for these amendments. I understand the reason behind them, but I have given the reasons why I would like them not to press them.

I turn to the amendments tabled by the noble Lord, Lord Howarth. These seek to be helpful to a wider group of sufferers, but we cannot extend the legislation to people who are self-employed or who were secondary-exposure cases. The Bill addresses a specific failure of insurers and employers to retain adequate records of employer’s liability insurance, and would provide payments to those affected by this failure who cannot trace a liable employer or employer’s liability insurer against which to bring a civil claim.

Following our discussion in Grand Committee, we talked with the Association of Personal Injury Lawyers, which advised us that an employer would have had to have specifically added elements to their employer liability policy to cover families of their employees. The association was not able to identify any specific cases where this has happened, which leads me to suggest that this is not a common occurrence. Family members who contract mesothelioma through coming into contact with asbestos as a result of someone working with it may have recourse to civil damages through public liability insurance, but our scheme is funded by the companies currently selling employer’s liability insurance and not by insurers more widely.

6.30 pm

Picking up the noble Lord’s more technical point about the Bill, Clause 13(7) specifies the meaning of active insurer as,

“a person who, at any time during the reference period, was an authorised insurer within the meaning of the compulsory insurance legislation”.

That means in practice that employer’s liability insurers are specified. I sympathise with the noble Lord that that is not immediately apparent on first reading the Bill. I am grateful to my team of lawyers, who understand this rather better.

We cannot expect companies to fund cases when they have never received premiums. The proposed amendment imposes a disproportionate burden on the employer’s liability insurers, who will fund the scheme through the levy. In answer to the point raised by the noble Lord, Lord Browne, employers had to have asbestos cover in their employer’s liability policies, but we are aware of no requirement for a public liability policy to cover asbestos.

Lord Browne of Ladyton: My more fundamental point is that the insurers that sold employer’s liability compulsory insurance were the same insurers that sold public liability insurance to individual employers, because they were sold in a package. That was my experience

17 July 2013 : Column 805

when I was the Minister for employment between 2003 and 2004 when, the noble Lord will remember, there was a significant failure of the employer’s liability compulsory insurance market that had to be resolved. His letter of 5 July to me and others confirms that that is still the case, according to his research. These insurers are not separate insurers, they are the same insurers, and I suggest that the requirement to carry cover in relation to the specific risk of asbestos would have been irrelevant to public liability.

Lord Freud: I have just made the point that the public liability may have been bundled up with employee liability but it did not necessarily cover asbestos risk. That is the issue. If we start going into this, we are just blasting open and widening the position in a way that is very complicated and difficult to deal with under the timelines we are dealing with.

Moving to the second group about the self-employed, here the matter is not so clear-cut. Some people may appear to have been self-employed but if they are able to demonstrate when making their application that in fact they were employees, they may be eligible for a payment under the scheme. There is considerable case law amassed on this and we will ensure—Ican commit to the noble Lord, Lord Howarth—that the scheme will reflect this when assessing applications.

I know it is not fashionable but I should point out that there is a technical problem with the amendment, which is cumulative, but I will not go through it. As drafted, this amendment does not work because you have to be an employee and self-employed. In our spirit of co-operation, if we wanted to take it we would adjust it, but there are good reasons in both cases why we do not want to.

Baroness Masham of Ilton: My Lords, what happens to the wife who has been contaminated by her husband’s dungarees? Will she get anything?

Lord Freud: Yes, my Lords. That specifically is what the state provision is there for. In particular, the 2008 mesothelioma scheme was set up to make payments to people, such as wives, who worked with asbestos. It is a smaller payment but that is what it was designed to do. I ask the noble Lord to withdraw his amendment.

Lord McKenzie of Luton: I thank the Minister for his response, and all noble Lords who spoke in favour of Amendments 4 and 8. I also thank my noble friends Lord Howarth and Lord Browne for addressing the issues in Amendments 5 and 6.

To pick up the Minister’s reply, if the response to everything we have discussed tonight is basically that the scheme is locked down and there have been negotiations—this point was made by the noble Lord, Lord Stoneham; as well—we might as well go to the bar because I am not sure that we are going to shift anything tonight. We pay tribute to the Minister—

Lord Freud: I must come in on that. The group—huddle?—of noble Lords who have been working on this Bill have made enormous changes to what we are

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doing. Noble Lords’ concerns have fed straight in and we have made a series of changes. I do not want any Peer to feel that their views and the work they have done has not been taken, absorbed, acted on and gone right to the edge of what is possible. I assure the noble Lord that the bar is not the place for him.

Lord McKenzie of Luton: I am grateful to the noble Lord for that explanation although it is a pity about not being allowed to go to the bar. I want to make it clear that we have acknowledged, I hope fulsomely, the work the Minister has done on this. I acknowledge also the acceptance that what we have deliberated on in Committee and in meetings has influenced the Bill but if we are now saying that in a sense we have come to a full stop, I wonder what progress we can make. However, I will carry on with the argument.

As far as the start date is concerned, I simply do not accept the point that the insurers did not know until July 2012 that there was the expectation that a scheme would be set up. From what the Minister has told us, there have been two years of intense negotiations, generally with the ABI, which has had to discuss matters and negotiate with a range of insurers. There was an intense process under way, as we understand it, and therefore it must have been very clear to insurers that something was very likely to come from this and that was going to be the sort of scheme that has now emerged. I do not accept that the first insurers knew about it was the point when we said: “Here is the document. This is what we are going do”.

Lord Freud: I just want to clarify the point about the expectations or otherwise of the insurance industry. From our negotiations, which went on for a long time —more than a year; I cannot remember exactly—it would have been anticipating that the specific insurers with historic liability would have been pinned down in a completely different way from this levy. We spent an enormous amount of time working on that. As I have already told the House, my first instinct was to try to get the actual insurers that wrote the liability to find the money out of their balance sheets. I judged that the legal risks to that approach were high—not impossible, but high—and we therefore switched to this other approach. Actually, the expectations that the industry might have had would not have been set anything like as early as noble Lords might think.

Lord McKenzie of Luton: Again, I am grateful to the Minister for that explanation, but it seems to me that the expectations were not set only at the point of July 2012. On the cost that the Minister has outlined, I understand that it has reduced from the original figure of £119 million. I do not think that the figures that the Minister has given reflect any additional benefit recovery potential that would come from having two more years in the scheme, or know whether that was fed in to any analysis of how it might impact on the spreading that would arise from that. Maybe we will have to have that discussion on another occasion. I do not think that we are going to see eye to eye on this.

On Amendments 5 and 6, the noble Lord prayed in aid a technical deficiency of the drafting. I have done it myself; I think it was the noble Lord, Lord Deben,

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who advised generally against that. The thrust of the point made by the noble Lord, Lord Browne, was that, whether it is the employer liability route or the public liability route, you are basically coming back to the same insurers. Obviously, the Minister’s point about there being some hope for the self-employed —being able to argue that in certain circumstances they were de facto employees—is helpful.

We do not accept the proposition that the start date should be the 2012 date. February 2010 is a better date. That was when the expectation was effectively created. In fact, when you look at it, the insurers ended up with a lesser scheme than was proposed in February, so their expectation should have been of a higher obligation arising from that. A broader bureau was consulted on at that time. Having said all that, I wish to test the opinion of the House.

6.42 pm

Division on Amendment 4

Contents 152; Not-Contents 187.

Amendment 4 disagreed.

Division No.  2

CONTENTS

Adams of Craigielea, B.

Alli, L.

Alton of Liverpool, L.

Anderson of Swansea, L.

Andrews, B.

Armstrong of Hill Top, B.

Avebury, L.

Bach, L.

Bassam of Brighton, L. [Teller]

Beecham, L.

Bichard, L.

Billingham, B.

Bilston, L.

Boateng, L.

Boothroyd, B.

Brennan, L.

Brookman, L.

Browne of Belmont, L.

Browne of Ladyton, L.

Campbell-Savours, L.

Chandos, V.

Christopher, L.

Clancarty, E.

Clark of Windermere, L.

Clarke of Hampstead, L.

Clinton-Davis, L.

Collins of Highbury, L.

Corston, B.

Crawley, B.

Cunningham of Felling, L.

Davies of Abersoch, L.

Davies of Oldham, L.

Davies of Stamford, L.

Desai, L.

Donaghy, B.

Dubs, L.

Elder, L.

Elystan-Morgan, L.

Evans of Parkside, L.

Farrington of Ribbleton, B.

Faulkner of Worcester, L.

Finlay of Llandaff, B.

Foulkes of Cumnock, L.

Gale, B.

Gibson of Market Rasen, B.

Giddens, L.

Gould of Potternewton, B.

Grantchester, L.

Grenfell, L.

Grocott, L.

Hanworth, V.

Harris of Haringey, L.

Harrison, L.

Haskel, L.

Haworth, L.

Hayman, B.

Hayter of Kentish Town, B.

Healy of Primrose Hill, B.

Hilton of Eggardon, B.

Hollick, L.

Hollis of Heigham, B.

Howarth of Newport, L.

Howe of Idlicote, B.

Hoyle, L.

Hughes of Stretford, B.

Hughes of Woodside, L.

Hunt of Chesterton, L.

Jones of Whitchurch, B.

Jones, L.

Judd, L.

Kennedy of Southwark, L.

Kennedy of The Shaws, B.

Kerr of Kinlochard, L.

Kilclooney, L.

King of Bow, B.

Kinnock of Holyhead, B.

Kinnock, L.

Kirkhill, L.

Knight of Weymouth, L.

Lea of Crondall, L.

Liddell of Coatdyke, B.

Liddle, L.

Lipsey, L.

Lister of Burtersett, B.

Low of Dalston, L.

17 July 2013 : Column 808

Lytton, E.

McAvoy, L.

McConnell of Glenscorrodale, L.

McDonagh, B.

McFall of Alcluith, L.

McIntosh of Hudnall, B.

MacKenzie of Culkein, L.

McKenzie of Luton, L.

Maginnis of Drumglass, L.

Mandelson, L.

Mar, C.

Massey of Darwen, B.

Maxton, L.

Monks, L.

Moonie, L.

Morris of Yardley, B.

Morrow, L.

Nye, B.

Pendry, L.

Pitkeathley, B.

Ponsonby of Shulbrede, L.

Prescott, L.

Prosser, B.

Quin, B.

Ramsay of Cartvale, B.

Rendell of Babergh, B.

Richard, L.

Rooker, L.

Rosser, L.

Rowlands, L.

Royall of Blaisdon, B.

Sandwich, E.

Sawyer, L.

Sherlock, B.

Simon, V.

Smith of Basildon, B.

Smith of Finsbury, L.

Snape, L.

Soley, L.

Stevenson of Balmacara, L.

Stoddart of Swindon, L.

Stone of Blackheath, L.

Taylor of Blackburn, L.

Taylor of Bolton, B.

Temple-Morris, L.

Thornton, B.

Touhig, L.

Trees, L.

Tunnicliffe, L. [Teller]

Turnberg, L.

Turner of Camden, B.

Uddin, B.

Wall of New Barnet, B.

Walpole, L.

Warner, L.

Watson of Invergowrie, L.

Wheeler, B.

Whitaker, B.

Whitty, L.

Wigley, L.

Wilkins, B.

Wills, L.

Wood of Anfield, L.

Woolmer of Leeds, L.

Worthington, B.

Young of Norwood Green, L.

Young of Old Scone, B.

NOT CONTENTS

Aberdare, L.

Addington, L.

Ahmad of Wimbledon, L.

Anelay of St Johns, B. [Teller]

Ashdown of Norton-sub-Hamdon, L.

Ashton of Hyde, L.

Astor of Hever, L.

Attlee, E.

Barker, B.

Bates, L.

Berridge, B.

Best, L.

Bilimoria, L.

Black of Brentwood, L.

Blencathra, L.

Brabazon of Tara, L.

Bradshaw, L.

Bridgeman, V.

Brinton, B.

Brooke of Sutton Mandeville, L.

Brougham and Vaux, L.

Browning, B.

Burnett, L.

Byford, B.

Caithness, E.

Cameron of Dillington, L.

Cathcart, E.

Chadlington, L.

Chalker of Wallasey, B.

Chidgey, L.

Colville of Culross, V.

Colwyn, L.

Cope of Berkeley, L.

Cormack, L.

Courtown, E.

Craig of Radley, L.

Craigavon, V.

Crathorne, L.

Crickhowell, L.

De Mauley, L.

Deben, L.

Deighton, L.

Dholakia, L.

Dixon-Smith, L.

Dobbs, L.

Dundee, E.

Dykes, L.

Eaton, B.

Edmiston, L.

Elton, L.

Empey, L.

Faulks, L.

Fellowes of West Stafford, L.

Flight, L.

Fookes, B.

Forsyth of Drumlean, L.

Fowler, L.

Framlingham, L.

Freeman, L.

Freud, L.

Garden of Frognal, B.

Gardiner of Kimble, L.

Gardner of Parkes, B.

Garel-Jones, L.

Glasgow, E.

Glendonbrook, L.

Glentoran, L.

Goodhart, L.

Goodlad, L.

Goschen, V.

Grade of Yarmouth, L.

Greaves, L.

Greenway, L.

Grey-Thompson, B.

Griffiths of Fforestfach, L.

Hamilton of Epsom, L.

Hamwee, B.

Hanham, B.

Harris of Richmond, B.

Henley, L.

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Heyhoe Flint, B.

Higgins, L.

Hill of Oareford, L.

Hodgson of Astley Abbotts, L.

Hooper, B.

Howard of Rising, L.

Howarth of Breckland, B.

Howe of Aberavon, L.

Howe, E.

Howell of Guildford, L.

Hunt of Wirral, L.

Inglewood, L.

James of Blackheath, L.

Jenkin of Roding, L.

Jolly, B.

Jopling, L.

King of Bridgwater, L.

Kirkwood of Kirkhope, L.

Kramer, B.

Lamont of Lerwick, L.

Lawson of Blaby, L.

Lee of Trafford, L.

Lester of Herne Hill, L.

Lexden, L.

Lindsay, E.

Lingfield, L.

Linklater of Butterstone, B.

Loomba, L.

Lyell, L.

MacGregor of Pulham Market, L.

McNally, L.

Maddock, B.

Marks of Henley-on-Thames, L.

Marland, L.

Marlesford, L.

Masham of Ilton, B.

Mayhew of Twysden, L.

Miller of Chilthorne Domer, B.

Montrose, D.

Moore of Lower Marsh, L.

Morris of Bolton, B.

Naseby, L.

Nash, L.

Neville-Jones, B.

Newby, L. [Teller]

Newlove, B.

Northover, B.

Norton of Louth, L.

Oakeshott of Seagrove Bay, L.

O'Cathain, B.

Palmer of Childs Hill, L.

Palmer, L.

Pannick, L.

Parminter, B.

Perry of Southwark, B.

Popat, L.

Randerson, B.

Rawlings, B.

Rennard, L.

Ribeiro, L.

Ridley, V.

Risby, L.

Roberts of Llandudno, L.

Rodgers of Quarry Bank, L.

Roper, L.

Sassoon, L.

Seccombe, B.

Selborne, E.

Selkirk of Douglas, L.

Selsdon, L.

Shackleton of Belgravia, B.

Sharkey, L.

Sharp of Guildford, B.

Shaw of Northstead, L.

Shephard of Northwold, B.

Shipley, L.

Shutt of Greetland, L.

Skelmersdale, L.

Spicer, L.

Stedman-Scott, B.

Stephen, L.

Stewartby, L.

Stoneham of Droxford, L.

Stowell of Beeston, B.

Strasburger, L.

Strathclyde, L.

Taverne, L.

Taylor of Holbeach, L.

Thomas of Gresford, L.

Thomas of Winchester, B.

Tope, L.

Trimble, L.

True, L.

Tugendhat, L.

Tyler of Enfield, B.

Tyler, L.

Ullswater, V.

Verma, B.

Wakeham, L.

Wallace of Saltaire, L.

Wallace of Tankerness, L.

Walmsley, B.

Warsi, B.

Wheatcroft, B.

Wilcox, B.

Williamson of Horton, L.

Younger of Leckie, V.


6.54 pm

Amendments 5 and 6 not moved.

Amendment 7

Moved by Lord Freud

7: Clause 2, page 2, line 19, leave out “regulations made by the Secretary of State” and insert “the scheme”

Amendment 7 agreed.

Clause 3 : Eligible dependants

Amendment 8 not moved.

17 July 2013 : Column 810

Amendment 9

Moved by Lord Freud

9: Clause 3, page 2, line 47, leave out “regulations made by the Secretary of State” and insert “the scheme”

Amendment 9 agreed.

Clause 3 agreed.

Clause 4 : Payments

Amendment 10

Moved by Lord Freud

10: Clause 4, page 3, line 4, leave out “regulations made by the Secretary of State” and insert “the scheme”

Amendment 10 agreed.

Amendment 11

Moved by Lord McKenzie of Luton

11: Clause 4, page 3, line 4, at end insert “but shall be not less than 100% of the average damages recovered by claimants in mesothelioma cases”

Lord McKenzie of Luton: My Lords, I shall speak also to Amendment 13. Amendment 11 requires that those diagnosed with diffuse mesothelioma and eligible under the scheme should receive payment of an amount no less than 100% of the average actual damages recovered in mesothelioma cases. Because the scheme under consideration is a payment scheme rather than a strict compensation scheme, it has been agreed that a tariff based on average compensation levels taken over recent periods should be taken as a reasonable proxy for compensation amounts. The tariff, which we will discuss in subsequent amendments, is comprised of bands depending on age at date of diagnosis. It is understood that the starting tariff is accepted by the Government, the insurance industry and the Asbestos Victims Support Groups. What is not agreed is the percentage of the tariff that should be paid.

The amendment proposes that it should be 100%, a full compensation equivalent. Hitherto, the Minister has referred to payment levels of 70% of the tariff and today we heard the good news that he has been able to negotiate this a little higher with the ABI, with the proposition that it now be 75%. These amounts are of course separate from the payments towards legal costs and any research supplement, should that re-emerge. We should make clear again that we consider that the Minister has done a first-rate job in bringing the scheme thus far. We have no doubt that he has had to endure many painful engagements with the insurance sector, whose failure—or market failure in his terms—is at the root of the problem that this Bill seeks to address. I wish him to go further. I do not wish to seem ungrateful for these efforts but we have an obligation to speak to the victims to see it from their point of view.

17 July 2013 : Column 811

The payment scheme provided for in this Bill operates when somebody has been negligently exposed to asbestos and has consequently contracted diffuse mesothelioma. This is, as we have heard, a terrible disease, invariably fatal, which inflicts untold suffering on those who contract it and on their families. In Committee, a number of noble Lords spoke of their own harrowing experience of witnessing the awful pain that mesothelioma causes. The only thing that prevents individuals in these circumstances getting proper compensation—the government schemes fall far short—is the inability to trace the employer that caused negligent exposure to asbestos or the insurance company which provided employer liability insurance cover. No blame can be attached to mesothelioma sufferers for this. It is not their fault that, because of the passage of time, records have been lost or destroyed. Many can trace those responsible and the new tracing office will help more in the future. That is good news. That is as it should be. However, for those who cannot, why should they not be treated in an equivalent manner? They are the victims. If I may, I will quote from an e-mail received from Tony Whitston, who, as many will know, has been a tireless campaigner for asbestos victims. Tony said:

“For mesothelioma sufferers and their families, compensation isn’t about money per se. For mesothelioma sufferers, compensation provides solace that their loved ones will have some financial security when they die. For their families, compensation is about justice. No one will stand in the dock and answer for the terrible suffering and loss of life, past, present and to come. Compensation stands in for justice. To diminish compensation is to demean the pain and suffering families have witnessed and cheapens the justice they thought they had obtained”.

If we are encouraged to look at this through the eyes of the insurance industry, we will be told, as we have been, that a discounted payment is necessary to encourage individuals to trace an employer or insurer. We will be told that not all employers in the employer liability market will have been in the market or on risk over the years when people were exposed. That is notwithstanding that tracing or accessing the scheme has to follow the same routes. References to public liability policies not being traced are, by and large, a red herring. Collectively, over the years, the industry would have had premiums for liability that it has not had to meet, and it still has the benefit of premiums for other exposures that remain outside this scheme. If there has to be some rough justice at the edges of these arrangements, clearly the justice should go to the sufferers. The insurance industry should make amends for its failures of the past.

Our Amendment 13 seeks to take the insurance industry at its word. It has expressed concern that a levy rate of more than 3% could tip matters over to a situation where the levy costs would have to be passed on to industry. The noble Lord referred to that in his opening remarks. We are sceptical about whether pricing of employer liability policies would work collectively for all 150 or so market players in this way. However, accepting that 3% is a tipping point for the sector, Amendment 13 requires that the levy is a minimum of 3% or such lower sum as would provide for 100% of the tariff.

For the initial four years of the scheme, the industry would doubtless claim that at 75% of the tariff it is already at 3%, or perhaps above it, in which case the

17 July 2013 : Column 812

amendment should not cause it a problem. On the Government’s figures, the levy would be close to 3% for a 75% payout over the initial four years of the scheme but below 3% for the latter six years if the tariff is to be paid in full. Given that no one, we hope, is arguing that the percentage levy will reduce in future, except to the extent of avoiding paying more than 100% of the tariff, the amendment should be readily acceptable.

If the Minister is unable to accept the amendment as it stands, could he at least confirm that it is not the intention to reduce the levy rate in real terms after the smoothing period unless that produces more than 100% of the tariff? Amendment 13 sits perfectly well with that in the name of my noble friend Lord Browne and the noble Lord, Lord Wigley. I beg to move.


7 pm

Lord Howarth of Newport: My Lords, Amendment 16 is in my name. Again, the common theme is that the amendments in this group seek to maximise the amount that will be paid to mesothelioma victims and their dependants. I will come in a moment to my own amendment but I would like to say a few words in strong support of the amendments in the names of my noble friends Lord McKenzie of Luton and Lady Sherlock. It was certainly not the fault of the claimants that the documentation went missing and it is very hard to see why they should bear the burden. The Minister has spoken of the dangers of a disproportionate burden on the employer’s liability insurers, but is it not a disproportionate burden on the mesothelioma victims?

The ABI has put forward various arguments as to why payments under the scheme should not be at the same level as the average of court awards. The first is that an incentive must be provided for claimants to go to court. If they could just as easily get 100% by going to the scheme, why would they bother to go to court? With respect to the ABI, this argument is nonsense. This will not be a matter of choice for the claimants. The Minister’s letter to us of 4 July made it clear that the scheme is designed as a,

“last resort where all routes to civil action against the relevant employer or insurer are closed to the individual”.

The procedures under the scheme will make that a compelling reality. There will be the single portal and the identical search for documentation. Whether someone is on their way to having their case heard in court or considered by the administrators of the scheme, they will have recourse to the scheme only if they are unable to have recourse to the court, so the incentive argument is nonsense.

The ABI has also said that it is important to ensure that the overall cost to insurers is sustainable in the long term. I believe that the overall cost of a somewhat improved scheme—we have been debating today a variety of ways in which that scheme might be improved —would indeed be affordable. Apart from the fact that the insurers did very well for decades in being able to invest the premiums of mesothelioma sufferers whose documentation could not be found and who therefore could not bring a case, we have to remember in addition that between 1979 and 2008 the employer’s liability insurers were effectively subsidised by the taxpayer to the tune of hundreds of millions of pounds, as they

17 July 2013 : Column 813

were allowed to keep the amounts paid out under the Government’s pneumoconiosis scheme to offset against the cost of the liabilities of the insurers.

Even now, because the Minister declined in Committee to incorporate in the Bill the possibility of creating parallel and comparable schemes for other diseases such as asbestosis, asbestos-related lung cancer or pleural disease, only some 50% of sufferers from asbestos-related diseases stand a possibility of being compensated under this scheme. Those other 50% will in effect be subsidising the insurers. Those are a handful of reasons why I take with deep scepticism the proposition that the insurers could not afford to improve the scheme. We know, indeed, that their case load will fall, so even if it was a little pricey for them in the early years it would rapidly become more affordable. The Government are also going to smooth the way over the early years.

It is unlikely that the cost of these improvements would cause the cost of the scheme to creep above the 3% of gross written premiums. I prefer the DWP’s calculations on this to the ABI’s. However, if that were to happen it would not be a disaster and is not terribly relevant, because it is other factors that move premiums. The Minister’s fear that any improvements to the scheme would lead to the point at which additional burdens were placed, by way of higher premiums, on employers and industry is misplaced. The premiums that are charged in this market are the product of multiple factors and paying the beneficiaries-to-be somewhat more generously would not have an effect on the premiums. I do not believe that the percentage of gross written premiums has any bearing on what premiums are sought in the marketplace. The employer’s liability insurers pitch their premiums at the maximum that competitive market conditions allow. They will always do that, so the Minister’s fear is misplaced and he should call their bluff on that.

Finally, the third reason that the ABI gives is to stop people getting more than the courts would award. In its briefing, it said to us:

“As the payments will be made … on a straightforward tariff, some people will receive more compensation under the scheme than they would have received in civil compensation, and the aim is to set the tariff at a level that means this will only happen in a small number of cases”.

Elsewhere, it told us that the intention is for the tariff to be set “a little below” the average of awards made in civil cases. A little below? The proposition is that 30% should be docked from the average of court awards in the payments provided under the scheme. Seventy per cent was not enough and while we are very grateful to the Minister for easing the level of payments up to 75% of the average of court awards, that is still not enough. Nor would 80%, as in the amendment of my noble friend Lord Browne and the noble Lord, Lord Wigley, be sufficient in my view. Ninety per cent is the very minimum with which we could be satisfied. As the Association of Personal Injury Lawyers has pointed out, the Financial Services Compensation Scheme, which provides compensation where insurers have become insolvent, pays at the 90% level.

I turn for a moment to my own Amendment 16, which would prevent what I regard as excessive demands for repayment by the DWP through its agency, the

17 July 2013 : Column 814

Compensation Recovery Unit. The rationale for the figure of £110,000 is that if we expect the average of payments over the next 10 years to be £87,000—it may be fractionally more, now that the Minister has moved it up to 75%—and if, as the Minister has advised us, the average recovery required from claimants will be £20,480, add those two figures and you get to £107,500. Round that up a little and you get to £110,000. That is appropriate because payments under the scheme, unamended, will be meagre. At the same time, the DWP —and no doubt the Treasury, lurking behind it— aggressively intends to reclaim 100% in recovery of benefits and lump-sum payments from people who will have received only 70% of what they might have received in court.

Moreover, the department intends no abatement in its reclaiming to take account of pain and suffering, which they would do in the case of an award by the courts. So we risk the £87,000 typical award by the scheme being reduced by around a further £20,000 as a result of the DWP’s reclaims. According to the Association of Personal Injury Lawyers, the best estimate of what mesothelioma victims and their dependants will receive from the scheme will, therefore, be only 60% of what the courts might have awarded. It cannot be right that these people should receive only 60% of their legal entitlement when they have suffered a double negligence: negligence on the part of their employer and negligence on the part of their insurer.

The Minister has said that his intention, in this legislation, is to remedy a market failure. To be frank, that is a euphemism. We are talking about a gross and scandalous dereliction of their proper responsibility on the part of a number of insurers, affecting a significant number of people who should have had cover. This has been a great evil and we should make amends as fully and generously as we possibly can. Is that double negligence on the part of employers and insurers, from which they have already suffered, to be compounded by a double meanness on the part of the Government, insisting on taking 100% of 70% and taking no account of pain and suffering? The Government are being too greedy here.

Lord Wigley: My Lords, I shall speak primarily to the lead amendment, to which I have added my name, and return to Amendment 12, which stands in my name, at the close of my remarks.

The scheme proposed by the Bill will provide neither the full amount of compensation to which the sufferer would usually be entitled, nor full protection for those suffering from asbestos-related diseases. It is utterly unjust that those who have already suffered a wrong, due both to their injury and to the negligence of their employers in losing their insurance records, should now face losing a significant percentage of their damages.

The Government have offered the justification that mesothelioma claimants should be encouraged to seek out “all other avenues” before coming to this scheme. As I said during earlier stages of the Bill, this attitude shows a flagrant disregard for the harsh realities of this disease, not to mention the fact that the sufferers usually die very soon after diagnosis, so leaving their families with less compensation than they would otherwise have been entitled to. Of course, I welcome the move

17 July 2013 : Column 815

to increase the compensation payable from 70% to 75%, and I thank the Minister for securing that improvement. However, whether the Government propose that claimants should receive 30% or 25% less than the average worth of a claim, it is essentially unfair that any reduction is happening at all. By point of comparison, the Pneumoconiosis Act 1979 was designed to award full compensation to claimants and is reviewed annually.

The difference between 100% and 70% compensation for these claims is not to be balked at. On 25 June, the noble Lord, Lord Wills, asked the Government what assessment had been made of the likely impact on the insurance industry if it was made to pay the full 100% of compensation to sufferers under the proposed scheme. In his response, the noble Lord, Lord Freud, said that over the first 10 years of the scheme, if the tariff were 100%, the amount of compensation paid would total £451 million. Under the 70% tariff originally proposed, the insurance industry was, by comparison, forecast to pay £322 million. However, the money that the insurance industry saves by getting away with 70% or 75% is a cost suffered by the victims’ families.

The Minister also said that the Government,

“are getting an average of £87,000 a head to people who suffer from this terrible disease”.—[

Official Report

, 25/6/13; col. 654.]

It is presumably now nearer to £94,000 at the 75% level. According to the Association of Personal Injury Lawyers, if the tariff was set at 100% and based on the figure proposed by the noble Lord, Lord Freud, the amount of compensation awarded would be around £124,000. That is a £30,000 shortfall in what the victims and their families can expect and it is a big difference. It is a difference of millions of pounds for the insurance companies but, my goodness, that £30,000 difference for the victims will be even harder to bear.

Finally, I want to share with the House two of the many comments that I have been sent by families of asbestos victims. Sandra Emery wrote:

“It took Parliament … a hundred years to ban asbestos. As a result, I have lost my mother and brother to mesothelioma. Please do not compound the error by passing such inequitable legislation”.

As Kerry Jackson says:

“All victims and their families deserve 100% of what they are entitled to … this is a disease that has come through pure neglect”.

I ask the Government for an undertaking that they will continue to seek other ways to increase the compensation to around 100%. I plead with them to reconsider. I will not be pressing my amendment for the 80% level, which I would have done had the Minister not come forward with an increase. However, in order to register my support for the principle, if the 100% amendment is pressed to a vote I shall support it.

7.15 pm

Lord Browne of Ladyton: My Lords, I have added my name to the amendment in the name of my noble friend Lord Wigley. When he and I put our names to the amendment, we were unaware of what the Minister would be able to achieve without the benefit that our amendment being carried by your Lordships’ House might give in strengthening his negotiating hand. I have immense respect for my noble friend and his decision not to press his amendment and I will not seek

17 July 2013 : Column 816

to do otherwise. However, I want to add to what has already been said in relation to this group of amendments and the principle of justice.

In one of the early sentences of his introductory speech at Second Reading, the Minister enunciated a principle that, if a person is damaged by the negligent actions of another, that person should be entitled to compensation and, therefore, justice. I paraphrase him and I am sure that I do not do justice to the eloquence of his words at the time, but I remember pointing out that there was an inconsistency between that and other recent actions of his Government in relation to health and safety law.

We all agree with that principle and, with all due respect to the arguments that can be made, I suspect that the Minister does not equate the payments from the scheme with justice. He will be comfortable at the Dispatch Box and probably will, in his characteristic style, say that he is not presenting this as justice. Justice for these people would be for an employer who is insured to sue, and 100% compensation. So we are not going to do justice. I regret that we are not going to do justice to the victims of this dreadful behaviour and of the dreadful history that followed it, not necessarily on the part of employers—which went out of business for lots of reasons—but certainly on the part of the insurance industry.

However, we have a duty to strive for justice. The Minister eloquently expressed, as he has done on a number of occasions, that this is basically a negotiation. He has negotiated on behalf of the victims in a situation where hitherto they had only statutory schemes to look to, and he is to be congratulated on his achievement. I have experience of the responsibilities he holds and know just how difficult the job is. I have congratulated him on it in the past and he gets a significant amount of deserved credit in this House for what he has achieved.

He says that his ability to improve the scheme is a function of a number of practical and realistic things: what is negotiable in the circumstances of what the market will bear; and the point at which he judges, and the insurance industry tells him, that it will be compelled to transfer the marginal cost of the scheme to British industry and thus affect competitiveness. It is also a function of the fact that he is operating in a situation where he is seeking to have the scheme funded by what he calls active insurers, which are not necessarily the insurers that historically wrote the policies that carried the risk in the first place.

I accept all that. In the debate on the previous group of amendments, my noble friend Lord McKenzie made a point that prompts my own, which is different from any that have been made in the debate. We do not doubt the Minister’s bona fides, but whether we are at the limit of his negotiating ability, or whether we can help him go a bit further towards the sort of figure that is more like justice, it would be helpful if we knew how many of the insurers with which he is negotiating are those that carried this risk in the first place and behaved in the way they did.

Until now, the Minister has deployed very adroitly the point about active insurers as opposed to those who carried the risk. However, he has done it in a very

17 July 2013 : Column 817

generalised way. I was not moved to interrogate him in detail until he explained, probably for the second time —I did not pay enough attention the first time—to my noble friend Lord McKenzie that when he first approached the issue, his desire was to place the burden on those insurers that underwrote the policies and risk in the first place. That implies that he must have thought that there were enough of them to carry the burden. Therefore, this cannot be an insignificant number of insurers. The inference I drew from the argument that he put forward in his contribution—which he may now regret—was that a disproportionate burden was being placed on people who were not about when the problem was being created. However, my knowledge of the Minister and of his abilities, which is growing, suggests that the opposite is the case, and that more of these insurers than we think will have to pay up.

If I had thought about this before, I might have argued for a differential levy in order to get a significantly increased amount of money, so that we could all do what we wanted to do, which was get much beyond 70%. Is the Minister in a position to help us? It may not be of any great assistance to us, although there is still Third Reading, but at some stage—I am not asking him to name and shame, although I would quite like him to—it would be interesting to know the number of insurers involved. Perhaps we could go a bit further. Could he describe the scale of this market in monetary terms, and the proportion of the market that is controlled by those companies that let this insurance market fail? We would then all have a better sense of justice and of where we should apply the burden.

I will say two more things. Unfortunately I had to leave the Grand Committee before we came to debate this issue. When I read the Official Report, I was extremely impressed by the amendment of my noble friend Lady Donaghy, which proposed adopting the idea of the incentive that the ABI deployed—which my noble friend Lord Howarth demolished and which the Minister has now abandoned—and reversing it to fix the compensation at 130% of the average, in order to incentivise the insurance companies to get their colleagues to find the policies, and to get the people who wrote them to carry the risk and burden. That is where the incentive should be in this situation.

I see that the noble Lord, Lord Stoneham, is in his place. I am glad that, thus far in the debate, he has not deployed the argument of delay in relation to this legislation. I do not resent—but I do not like—the idea that those of us who have been trying to improve the legislation somehow have to step back because we may delay the point at which very deserving people can get some form of payment. I do not like it for a simple reason. The Bill was introduced in your Lordships’ House and went into Grand Committee. We are now on Report and this is the first and earliest point at which we can vote on anything in it. If the argument of delay in these circumstances is to have any merit, it means that we have to accept whatever is presented to us by the Government if it is broadly in a good area of public policy. If in future we ever have to face an argument for reform of the House of Lords, we had better not do that.

17 July 2013 : Column 818

Lord Wills: My Lords, I, too, support the amendments in this group and endorse everything that my noble friend on the Front Bench said in support of them. In doing so, I express my appreciation for the achievement of the Minister in nudging the percentage up to 75%. It is a significant advance and I appreciate all the effort that must have gone into achieving it. However, I am afraid that it is still not enough.

I will say a few additional words in support of Amendment 13, to which I added my name. It sets out a mechanism to try to ensure that the Bill can be a final settlement of the issue. It does so by setting out to ensure a continuing equitable balance between the various interests at play. We have heard at all stages of the Bill that there is strong support in your Lordships’ House for the percentage paid to be not less than 100% of the average damages recovered by claimants in mesothelioma cases, and for the start of the scheme to be 10 February 2010. However, at the same time, I think that your Lordships’ House recognises the strenuous efforts made by the Minister to achieve a settlement with insurers that could be delivered rapidly.

With respect to my noble friend Lord Browne, the issue is not so much the processes of Parliament as how obstructive the insurers are going to be. I appreciate that there is a risk of unpicking what the Minister has achieved and encouraging insurers to dig their heels in and be obstructive. We have seen too much evidence of the obstructive approach that they adopted in the past for that not to be a risk. Nevertheless, we can improve the Bill further, and this amendment seeks to do that.

As I understand it, the basis of the settlement, which can be achieved rapidly, is that costs should not exceed 3% of the levy. That is the point at which insurers estimate that they would have to pass on costs to employers. It is the actuarial assumptions made by insurers on this basis that have reduced the figure to less than 100% for payments under the scheme, and set the start date at 25 July 2012. Those actuarial assumptions are just assumptions. They could be questioned, and, as we have already heard, the Government’s assumptions are different. However, it may turn out that they are accurate. All assumptions at this stage can be only a best guess.

If it does turn out that these actuarial assumptions by the insurers have overestimated the cost of the scheme, the amendment will address that eventuality. If, over time, once the smoothing period is over, the cost of the scheme amounts to less than the 3% of the levy that insurers are currently willing to contribute, the end result will be that insurers will up paying less than they are currently prepared to pay—in effect, they will save money—while victims of mesothelioma will continue to receive less than many, and perhaps most, in your Lordships’ House and outside it believe that they should receive. Such an outcome would be manifestly unjust, and would lead to considerable pressure in Parliament for new legislation to put right such injustice.

The amendment seeks to avoid that situation, and all the further delays and uncertainty for victims of this disease that would result, by ensuring that such an injustice will not occur. It places no new burdens on insurers at all; it merely seeks to ensure that, whatever the outcome of the actuarial assumptions that underpin

17 July 2013 : Column 819

the current provisions of the Bill, insurers will pay what they are currently prepared to pay. It offers the victims of this dreadful disease the comfort that, if there is more money available as a result of those assumptions turning out to be inaccurate, it is those victims that will get it and not the insurers. This avoids the prospect of future wrangling and disputes, which I would have thought the insurers would certainly welcome. It would be in nobody’s interest to reopen the matter in this way, and this amendment offers a continuing equitable outcome. I hope that it will find favour with the Government.

7.30 pm

Lord James of Blackheath: My Lords, before the Minister replies, I should like to return to a point that came up in Committee and to try to set the industry context in which these misunderstandings, particularly those of the noble Lord, Lord Browne, are occurring. I should declare my interests. I was an elected member of the Council of Lloyd’s throughout the whole six years of its rescue; I was in the somewhat unhappy position of being chairman of its audit committee for those six years; and, finally, I was chairman of the committee that created Equitas. I have twice stood trial in America for the fraudulent signing of the audit certificate of Lloyd’s, of which I was fortunately acquitted each time, as it was a 25-year mandatory sentence. I therefore have some perspective on these affairs.

The noble Lord, Lord Browne, has a fundamental misunderstanding. There is no such thing as an insurance industry in the context in which all these liabilities were first conceived. Insurance companies do not exist. They have morphed into what is now, effectively, a vast international reinsurance market, where all these liabilities have been swept up and eventually reinsured with each other until they are all divided up against the entire global insurance market. Lloyd’s itself is now wholly owned by Berkshire Hathaway and the negotiations will, therefore, have to be entirely with Berkshire Hathaway and its chairman—good luck in getting charity from him.

The context, therefore, is not that there are a lot of companies waiting to have separate negotiations. You have to hold negotiations with something like Swiss Re, as it will represent the entire financial community which has come together to provide a collective bond to underwrite, first of all, Lloyd’s, and then everywhere else. The negotiation is very difficult for the Minister to undertake and it is in that context that I know he will now answer us.

Lord Freud: My Lords, I thank noble Lords for tabling these amendments. I will start with those relating to the rate of payment and then I will turn to the amendment of the noble Lord, Lord Howarth, on the recovery of payments over £110,000. The amendments tabled by the noble Lords, Lord McKenzie and Lord Wigley, and the noble Baroness, Lady Sherlock, seek to ensure a minimum level of scheme payment at either 100% or 80% of the value of an average mesothelioma civil damages claim. I completely understand and appreciate that noble Lords would like to see payment levels that are closer to, if not equal to or above, those of average civil damages. Equally, I take from our

17 July 2013 : Column 820

debates that I have noble Lords’ full support in wanting to guarantee that we get the maximum possible payment for people who, through no fault of their own, clearly cannot bring a case against an employer or their employer’s insurers. As we have often discussed, the funds to provide these payments are to be raised through a levy imposed on the active insurance market. The amount of levy to be imposed, and consequently the amount we can pay eligible people, has been determined following considerable work and negotiation.

Perhaps I may pick up the point about incentives made by the noble Lord, Lord Howarth. We have not made that argument. To the extent that it has appeared in some of the earlier texts on this Bill, I think it reflects a shape that was somewhat different when that argument might have applied. We have not made it. It is not relevant to this particular scheme. The noble Lord, Lord Browne, made the point in reverse. I actually give the credit for the 130% to the noble Baroness, Lady Donaghy, who proposed it originally. I have taken that point in a somewhat different way. That is what has driven the discussions with the FCA and led to its much tighter determination to have an effective incentive for insurance companies to do the tracing that they should do and to ramp up the tracing effect.

We have a duty here to do our best to ensure that costs are not passed on willy-nilly to British industry and that the levy works in that way. At that time, many of the insurers were not necessarily in the business on the same scale that they are today. I know that the noble Lord, Lord Browne, has asked for a full analysis. My noble friend Lord James gave him a picture of the kind of capital pools we are talking about. That is what insurance essentially is, with companies acting as agents. It is extraordinarily hard, but there is already a big split—I do not have reliable figures: I thought I had, but they are not reliable enough to quote in public—between a large number of run-off companies that are not active anymore, many of which are in run-off, which is the polite way of saying they have given up administration, because of some of the liabilities that they took. That needs to be monitored, which is difficult to do. There is also the matter of the market share of these companies. They may have been active for 50 years, but their market share may have changed dramatically. There is also the fact that some may have kept very good records while others have not, leading to a double whammy effect. Those that have paid up, because they have really good records, are probably those from which we are trying to take more money through this levy. I do not have a market analysis of the kind that the noble Lord, Lord Browne, wants, but I am confident in saying that nobody else has either.

Let us move on to where we have got to. Thanks to the combined and consistent pressure on the insurance industry from both the Government and noble Lords, we have secured what I could call a reluctant agreement from insurers that the scheme payments will now be set at 75% of average civil compensation. I emphasise again the important role played by noble Lords in getting that outcome. I am grateful for that. I have already talked about the different assumptions of the Government and the industry regarding the volume of

17 July 2013 : Column 821

applications. The insurers have based their calculations on their own figures, which they think will require a levy of close to 3% of their gross written premium.

This has been a tough negotiation and even those with whom the Government were negotiating have had a tough job persuading others in that industry that there is an affordable package here. We want more, but this is a significant move from the insurance industry. If we could pay people more, we would, but this is a balancing act. If we were to go up to 80% or 100%, we would be very concerned about the costs being passed straight on to British industry. Indeed, a key concern that I have had about the structure of the scheme is that that should not happen, or that the risks of it happening should be minimised, and that is what the smoothing mechanism for the first four years is about. I know that the noble Lord, Lord Browne, will not like me saying this but there could be delay and delay and a full renegotiation is quite a painful process, as I know he will understand better than virtually anyone else.

On the point about the 3% made by the noble Lord, Lord Wills, I have been fully on the record since the beginning of the afternoon about the two points relating to the CPI and, more importantly, about our intention to review the matter at the end of the smoothing period. I hope that he appreciates how far that goes towards meeting his concerns.

Your Lordships have been very generous in what they have said about this matter but I think that a real expression of gratitude here would be if the noble Lord did not call a vote on this. That is the kind of gratitude that I understand and appreciate.

Before I close, I shall turn quickly to the amendment tabled by the noble Lord, Lord Howarth, which would allow the scheme to recover a scheme payment already paid only if the amount of the payment was above £110,000. Clause 4 is intended to allow the scheme to recover any payment, or part payment, in specified circumstances. Those specified circumstances will form part of the regulations setting up the scheme and will be debated in due course. However, the intention is that a payment that has been made in error will be subject to repayment. This amendment would allow the scheme to recover a payment made in error only if that payment was above £110,000. Payments of £110,000 or less could never be recovered.

If someone receives a payment and it is subsequently established that the payment was made in error or obtained as a result of some fraud or misrepresentation—it does not happen very often but there are one or two examples—it is right that the person who received that sort of payment should be asked to repay it, regardless of the level of the payment. It would not be appropriate to allow someone to keep any payment if it had been established that they were not eligible for it. It would clearly be unfair to allow one person to keep a payment of £110,000 but to recover a payment of £110,000 and a penny paid to someone else.

It may be that the noble Lord’s amendment is intended to address the recovery of social security benefits and government lump sums from scheme payments, but the amendment as drafted does not achieve that.

17 July 2013 : Column 822

Provision for compensation recovery is dealt with in Clause 11 and Part 1 of Schedule 1, although I acknowledge that, like one or two other bits of the Bill, they are somewhat impenetrable.

The noble Lord’s intention may be to prevent the scheme administrator reducing scheme payments in order to offset the cost of repaying recoverable benefits and lump sums to the Secretary of State of £110,000 or less. Recovery of benefits legislation applies where a person makes any payment to or in respect of another person in consequence of an accident, injury or disease and specified social security benefits or lump-sum payments have been paid in respect of the same incident. This is the basic principle of not receiving money or being compensated twice—the use of the word “compensation” here is more casual than legal—and we believe that that principle should apply here.

The other effect is that a person could receive a scheme payment plus benefits and a lump sum. That would mean that some people could well end up in a more advantageous position than someone receiving the full amount of compensation directly from an employer or traced insurer, which clearly cannot be right. I appreciate the noble Lord’s intention to maximise the amount that people with mesothelioma can receive but this is simply not the way to achieve that end. Therefore, I urge him not to press the amendment.

7.45 pm

Lord McKenzie of Luton: My Lords, I thank all noble Lords who have spoken in favour of Amendments 11 and 13. Perhaps I may deal briefly with the Minister’s reply. We agree that we want to get the maximum possible out of this. We acknowledge the improvement in the incentive for tracing that the noble Lord announced earlier, and I think that all noble Lords accept the increase from 70% to 75% in the level of recovery. However, we always come back to analysing this from a justice point of view: what is fair to insurers and what is fair to people who have contracted diffuse mesothelioma because of employers’ negligence. We cannot get away from the fact that justice for them has to be 100% of the compensation that they would otherwise receive if there were formal compensation arrangements rather than the tariff. One hundred per cent of the tariff is justice; anything less is not.

I am not sure that we heard a compelling argument as to why the 3% minimum was not appropriate, particularly if it is where insurers are at the moment, certainly over the initial period. That would seem to be an easy one for the Minister to accept. However, given the hour and given the business that we have left to do, I should like to test the opinion of the House on Amendment 11.

7.46 pm

Division on Amendment 11

Contents 119; Not-Contents 153.

Amendment 11 disagreed.

17 July 2013 : Column 823

Division No.  3

CONTENTS

Adams of Craigielea, B.

Alton of Liverpool, L.

Anderson of Swansea, L.

Andrews, B.

Bach, L.

Bassam of Brighton, L. [Teller]

Beecham, L.

Bilston, L.

Boateng, L.

Brennan, L.

Brookman, L.

Browne of Belmont, L.

Browne of Ladyton, L.

Butler-Sloss, B.

Campbell-Savours, L.

Clancarty, E.

Collins of Highbury, L.

Corston, B.

Crawley, B.

Davies of Abersoch, L.

Davies of Coity, L.

Davies of Oldham, L.

Davies of Stamford, L.

Donaghy, B.

Dubs, L.

Elder, L.

Elystan-Morgan, L.

Evans of Parkside, L.

Farrington of Ribbleton, B.

Faulkner of Worcester, L.

Foulkes of Cumnock, L.

Gale, B.

Giddens, L.

Glasman, L.

Golding, B.

Gould of Potternewton, B.

Grantchester, L.

Grenfell, L.

Grey-Thompson, B.

Hanworth, V.

Harris of Haringey, L.

Haskel, L.

Haworth, L.

Hayman, B.

Hayter of Kentish Town, B.

Healy of Primrose Hill, B.

Hilton of Eggardon, B.

Hollick, L.

Howarth of Newport, L.

Howe of Idlicote, B.

Hoyle, L.

Hughes of Stretford, B.

Hughes of Woodside, L.

Jones of Whitchurch, B.

Judd, L.

Kennedy of Southwark, L.

Kerr of Kinlochard, L.

King of Bow, B.

Kinnock of Holyhead, B.

Kinnock, L.

Kirkhill, L.

Knight of Weymouth, L.

Lea of Crondall, L.

Lytton, E.

McAvoy, L.

McConnell of Glenscorrodale, L.

McDonagh, B.

McFall of Alcluith, L.

McIntosh of Hudnall, B.

MacKenzie of Culkein, L.

McKenzie of Luton, L.

Maginnis of Drumglass, L.

Massey of Darwen, B.

Mawson, L.

Maxton, L.

Meacher, B.

Monks, L.

Moonie, L.

Morris of Yardley, B.

Morrow, L.

Norwich, Bp.

Nye, B.

Pitkeathley, B.

Prescott, L.

Prosser, B.

Quin, B.

Radice, L.

Ramsay of Cartvale, B.

Reid of Cardowan, L.

Rendell of Babergh, B.

Richard, L.

Rooker, L.

Rosser, L.

Rowlands, L.

Royall of Blaisdon, B.

Sawyer, L.

Sherlock, B.

Simon, V.

Smith of Basildon, B.

Smith of Finsbury, L.

Snape, L.

Soley, L.

Stevenson of Balmacara, L.

Stoddart of Swindon, L.

Stone of Blackheath, L.

Taylor of Bolton, B.

Temple-Morris, L.

Thornton, B.

Touhig, L.

Tunnicliffe, L. [Teller]

Turnberg, L.

Uddin, B.

Wall of New Barnet, B.

Wheeler, B.

Whitaker, B.

Wigley, L.

Wilkins, B.

Wills, L.

Young of Old Scone, B.

NOT CONTENTS

Aberdare, L.

Addington, L.

Ahmad of Wimbledon, L.

Alderdice, L.

Anelay of St Johns, B. [Teller]

Ashdown of Norton-sub-Hamdon, L.

Ashton of Hyde, L.

Attlee, E.

Barker, B.

Bates, L.

Berridge, B.

Black of Brentwood, L.

Blencathra, L.

Brabazon of Tara, L.

Bridgeman, V.

Brinton, B.

Brooke of Sutton Mandeville, L.

Brougham and Vaux, L.

17 July 2013 : Column 824

Byford, B.

Caithness, E.

Cathcart, E.

Chadlington, L.

Chalker of Wallasey, B.

Chidgey, L.

Clement-Jones, L.

Colville of Culross, V.

Colwyn, L.

Cope of Berkeley, L.

Cormack, L.

Cotter, L.

Courtown, E.

Craigavon, V.

Crickhowell, L.

De Mauley, L.

Deben, L.

Deech, B.

Deighton, L.

Dholakia, L.

Dixon-Smith, L.

Dobbs, L.

Dundee, E.

Eaton, B.

Edmiston, L.

Empey, L.

Faulks, L.

Flight, L.

Fookes, B.

Forsyth of Drumlean, L.

Framlingham, L.

Freud, L.

Garden of Frognal, B.

Gardiner of Kimble, L.

Gardner of Parkes, B.

Garel-Jones, L.

Glendonbrook, L.

Goodlad, L.

Goschen, V.

Grade of Yarmouth, L.

Greaves, L.

Greenway, L.

Griffiths of Fforestfach, L.

Hamilton of Epsom, L.

Hamwee, B.

Hanham, B.

Heyhoe Flint, B.

Higgins, L.

Hill of Oareford, L.

Hodgson of Astley Abbotts, L.

Hooper, B.

Howe of Aberavon, L.

Howe, E.

Hunt of Wirral, L.

James of Blackheath, L.

Jay of Ewelme, L.

Jenkin of Roding, L.

Jolly, B.

Jones of Cheltenham, L.

Jopling, L.

Kirkwood of Kirkhope, L.

Lamont of Lerwick, L.

Lee of Trafford, L.

Lexden, L.

Lingfield, L.

Loomba, L.

Lyell, L.

MacGregor of Pulham Market, L.

McNally, L.

Maddock, B.

Mancroft, L.

Marlesford, L.

Mayhew of Twysden, L.

Miller of Chilthorne Domer, B.

Moore of Lower Marsh, L.

Morris of Bolton, B.

Naseby, L.

Nash, L.

Neville-Jones, B.

Newby, L. [Teller]

Newlove, B.

Northover, B.

Norton of Louth, L.

Oakeshott of Seagrove Bay, L.

O'Cathain, B.

Palmer of Childs Hill, L.

Pannick, L.

Parminter, B.

Popat, L.

Randerson, B.

Ribeiro, L.

Ridley, V.

Risby, L.

Roberts of Llandudno, L.

Rogan, L.

Roper, L.

Seccombe, B.

Selborne, E.

Selkirk of Douglas, L.

Selsdon, L.

Shackleton of Belgravia, B.

Shaw of Northstead, L.

Shephard of Northwold, B.

Shipley, L.

Shutt of Greetland, L.

Skelmersdale, L.

Spicer, L.

Stedman-Scott, B.

Stephen, L.

Stoneham of Droxford, L.

Stowell of Beeston, B.

Strasburger, L.

Strathclyde, L.

Taverne, L.

Taylor of Holbeach, L.

Thomas of Gresford, L.

Thomas of Winchester, B.

Tope, L.

Trees, L.

Trimble, L.

True, L.

Tyler of Enfield, B.

Tyler, L.

Ullswater, V.

Verma, B.

Wakeham, L.

Wallace of Saltaire, L.

Wallace of Tankerness, L.

Walmsley, B.

Warsi, B.

Wasserman, L.

Wheatcroft, B.

Wilcox, B.

Williamson of Horton, L.

Younger of Leckie, V.

Amendments 12 and 13 not moved.

17 July 2013 : Column 825

Amendment 14

Moved by Lord Freud

14: Clause 4, page 3, line 5, leave out “regulations” and insert “scheme”

Amendment 14 agreed.

Consideration on Report adjourned until not before 8.45 pm.

Civil Legal Aid (Financial Resources and Payment for Services) Regulations 2013

Motion of Regret

7.58 pm

Moved by Lord Bach

That this House regrets that the Civil Legal Aid (Financial Resources and Payment for Services) Regulations 2013, laid before the House on 7 March, will result in a substantial number of vulnerable people not being eligible for legal aid because of the capital in their house. (SI 2013/480)

Lord Bach: My Lords, one way of cutting legal aid is to take areas of law out of scope, which is something that this Government have done with a vengeance. As this House knows very well, social welfare law has been potentially destroyed by Part 1 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012. However, there is another way to do the same thing, and that is to cut the number of people who can obtain legal aid in those areas of civil law—and there are precious few of them—which are still in scope; for example, mortgage possession and eviction cases, community care cases, mental capacity cases and some domestic violence cases as well. By these regulations that we are debating tonight, which my regret Motion deals with, Her Majesty’s Government have excluded many who could claim legal aid previously. Is that a fair or just thing to do, particularly at a time of hardship and austerity for so many people? That is my point.

Before 1 April, any person in receipt of means-tested welfare benefits—for example, income support or guaranteed state pension credit—would qualify for legal aid on both income and capital. They were described as being passported. A quick decision could be made, which was easy to administer for the Legal Services Commission as was, the providers of that legal advice and the clients themselves.

Now the Government have put into place radical changes. The regulations require a capital test as well as an income means test: if a person has more than £8,000 capital, they are denied legal aid. Interestingly, under welfare benefit law, that sum is £16,000 and if they have anything less than £16,000, they would still qualify. My first question to the Minister is: why the difference? The welfare benefit system also ignores the value of a person’s main dwelling but in these regulations the value of their main dwelling is taken into account. Therefore, my second question is: why is it taken into account under these regulations but not under welfare benefit regulations?

17 July 2013 : Column 826

Of course, there is a disregard of £100,000 for any equity and £100,000 for any mortgage. Do the Government deny that many people who own homes with mortgages and some equity will not qualify for legal aid? The state has recognised in the benefits system that these people cannot easily, or at all, access their capital because it is tied up in the property that they have. Why will that not apply in these cases too? My case is that this will affect a large number of people’s access to some sort of justice. Her Majesty’s Government estimate 4,000 people will be affected. The belief of many outside is that that is an unbelievably small figure and that there will be many more in practice. This is simply unfair.

There is also a need for a general discretion to disregard income and/or capital where it was or is equitable in all the circumstances. In the 2000 regulations, there was a general discretion to disregard where it was equitable in all the circumstances. There has been no evidence of abuse of those regulations in that way. Why is it not in these regulations? We all know cases, perhaps involving mental capacity or disability, where justice demands legal help by way of legal aid. But because of the inflexibility of these regulations there is, to coin a phrase, no way out. There is certainly no way out with the exceptional funding scheme, which perhaps now should be called the very rarely exceptional funding scheme because it is not relevant to cases that are still in scope. Section 10 of LASPO is there for areas of law now out of scope. I fear the fact that there is no flexibility, and that the £8,000 capital is such a ridiculously low figure, shows that the purpose of these regulations is not to advance justice but to restrict it—not to help people sort out their legal problems but to make absolutely certain that they cannot.

In 2009, when austerity had already begun, the Labour Government did not reduce eligibility for legal aid in social welfare law; they increased it by 5%. We recognised that at a time of economic difficulties, it is crucial to ensure that people get quality and inexpensive legal advice to sort out their legal problems rather than go without any access, with the consequences that everyone knows; namely, that problems multiply and magnify until often in the end the state has to pick up the pieces arising out of problems with debt, welfare benefit mistakes and loss of employment. That decision by that Government was not a soft-hearted decision: it was based on a realisation that not only is access to justice right in principle; in this instance it saves the state money. It is not rocket science; it is just something that this Government do not get.

I look forward to the contributions of other noble Lords in this debate and to the Minister’s reply. I ask him on this occasion please to address the debate itself. When I was a Minister, like him, I had to undergo from time to time debates where the government policies that I was trying to defend were attacked from start to finish by practically everyone who spoke. It is not a comfortable position but I would argue that there is still a duty on Ministers to answer the debate being heard at that time. I do not think that the Minister did himself justice last Thursday in the debate that the noble Baroness, Lady Deech, began, but I know that he can. Anyone who heard him at Question Time today dealing with the noble Lord, Lord Tebbit,

17 July 2013 : Column 827

and others will know that he is an experienced and skilful performer in this House. Therefore, I ask him to deal with the issues that are raised in this debate and not just read out his speech.

There are already cases of people not getting legal aid when they should. That is a consequence of so much social welfare law being taken out of scope. There are also cases of people who have legal problems in areas that are still in scope but as a result of the regulations that we are debating tonight they are not able to access justice. That is a bit of a scandal. The Government should think again about these regulations and I hope that the House will agree with me that they are, at the very least, to be regretted. I beg to move.

Lord Pannick: My Lords, I thank the noble Lord, Lord Bach, for moving this Motion. Over the past three years he has played an essential role in identifying with forensic skill and great eloquence the defects in the series of measures that this Government have brought forward to limit legal aid in our society. The noble Lord has repeatedly pointed out, accurately and with some degree of force, that legal aid is a vital cement in our civil society. There is no point whatever in this place conferring rights unless people have the opportunity to vindicate them. It would be a great shame if there were further reductions in the ability of persons other than the wealthy to vindicate their rights by legal process.

The essential defect in these regulations is their treatment of the capital sums owned by persons who are otherwise eligible for legal aid. I cannot understand why the regulations apply different criteria to capital from the criteria that are applicable in welfare law. Regulation 8(2) provides that any person with more than £8,000 in capital will be denied legal aid, even though welfare benefits law provides that persons qualify for means-tested benefits even though they have up to £16,000 of capital.

There is a further discrepancy in that the welfare benefits system ignores the value of a person’s home. These legal aid regulations will disregard only £100,000 of equity in property, under Regulation 39; and £100,000 of any mortgage, under Regulation 37. The inevitable result is that many people who own their own homes will be excluded from legal aid, even though they cannot in practice access the capital.

All this is very unfortunate, given that the Legal Aid, Sentencing and Punishment of Offenders Act has already reduced the scope of legal aid so that it is now skeletal. I am very concerned that even within the much reduced scope of legal aid under that Act, people who have no income and who are therefore eligible for welfare benefits will be unable to obtain legal advice and assistance. As the noble Lord, Lord Bach, said, there is a vital need in the regulations for more flexibility.

The Minister will no doubt tell us, as he usually does, that funds are limited and that economies are needed, but to adopt criteria, as the regulations do, which are more onerous than the criteria applied to welfare benefits is simply irrational and fails to understand the vital function of legal aid itself as a welfare benefit for the needy in our society. My essential question for

17 July 2013 : Column 828

the Minister is this: why are the criteria for capital in these regulations different from, and more onerous than, the criteria for welfare benefit law?

Baroness Deech: My Lords, I shall speak in support of my noble friend Lord Pannick and the noble Lord, Lord Bach, who is also my friend but not technically my noble friend. I want to put the regulations in perspective and to inquire whether the Government realise the pressure that these calculations will place on other parts of our society. I will mention just two issues.

This Government and their predecessors have pushed very hard to widen house ownership in the past 20 or 30 years. It has been successful. Ownership, of modest homes, has spread to all corners of society. To include their value in the assessment of legal aid places an unfair burden on a modest number of the population who have striven to own their own home. Not only that, but having owned one’s own home one now finds that it has to be sold to pay for one’s care in old age. It may have to be sold to raise money if one has the misfortune to be involved in expensive litigation. Not only that but, heaven forbid, it might even come to a mansion tax. In other words, one is putting much too much pressure on that wide swathe of population that owns a home of relatively modest value. They might have bought it for a five-figure sum years ago, but they will now find their house in that more than £100,000, and then £8,000, asset rank, depriving them of legal aid. The assessment costs will bite into the limited funds that are available for legal aid, because given the way in which the legislation is drafted, assessing whether someone is eligible for legal aid will involve quite a complicated process.

8.15 pm

The regulations will also place pressure on the Bar, which, as I have mentioned many times in this House, I regulate but do not represent. Barristers are already doing an extraordinary amount of pro bono work—they represent people for free, which I discovered when I started regulating—but there is a limit to how much pro bono work can be expected of the Bar, especially the junior Bar, when legal aid is in effect being removed from many areas where the most altruistic of our young people and older barristers practise. There is no more good will by way of pro bono that can be drawn, or no more than there is at the moment.

We have also seen a growth in the number of litigants in person. People who are not getting legal aid are representing themselves. The calculations in these regulations will include a number of people who think that they can represent themselves, or indeed have to. This has caused, as we have already seen in judicial comments, a great deal of trouble for judges, who are trying to control what is going on in court and are finding that cases are taking longer and that there is no parity of arms between the self-representing litigant and the litigant on the other side who may be able to afford a barrister. Complaints are arising from this, because the litigants in person do not understand, and cannot be expected to understand, how procedure works and what can be expected of the judge and the barrister on the other side.

17 July 2013 : Column 829

The knock-on effects of these regulations, which almost get rid of legal aid, will bear their own costs. I join others in urging and pleading with the Government to withdraw and redraft them.

The Lord Bishop of Norwich: My Lords, a key reference in this Motion of Regret is to “vulnerable people”, which is why this non-lawyer dares to stand amid such legal luminaries and feels a bit vulnerable himself.

A civilised country is one where we are all free under the law and where vulnerable people are not left defenceless against unjust treatment by another person, organisation or even an agent of government. Vulnerability is relative, of course, but the calculations that inform the regulations under discussion concern people who may be a very long way, as we have heard, from financial comfort and security, and may have multiple other needs.

The level at which permitted disposable capital is set is likely to render some older people in particular less capable of securing legal aid when faced by serious problems requiring legal redress. The levels seem to be set deliberately low. An older person with a capital value in their house of, let us say, £150,000 and an income that is modest yet sufficient to take them over the limits here might have to sell up to pay for legal services in a case, for example, involving mental capacity or criminal negligence. If they do not sell, they will have no access to the law, or, as the noble Baroness, Lady Deech, has just illustrated, they would have to represent themselves.

Do we think that such a person should move away from the support structure of family and friends just when they might need them most, when suffering from an injustice, if they are to realise any capital? Perhaps I am painting too gloomy a picture, but these seem to me to be the likely consequence of the regulations. I should be grateful if the Minister would address such dilemmas and what someone in such a dilemma is expected to do.

Last week, the Justice Secretary’s statement that he was ideologically opposed to legal aid for prisoners in almost all situations, however disabled or disadvantaged they were, caused comment. I know that this is not the focus of this Motion of Regret, but the use of the word “ideological” was worrying. Ideology has too often trumped humanity in the history of the 20th century. Of course, the term emerged from the French Revolution, so its pedigree is argued over.

Although I am sure the Minister will robustly defend the regulations, I hope he will recognise that if they damage access to legal representation for vulnerable people, the Government will have to change course on humanitarian grounds and not defend themselves on the basis of a flawed ideology.

Lord Beecham: My Lords, I congratulate my noble friend Lord Bach on raising this issue by means of the Regret Motion. To prepare for this debate, I did of course read the regulations and the Explanatory Note. It occurred to me that it would be helpful to look at the impact assessment. However, that posed a certain

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challenge. It took about three-quarters of an hour for the Printed Paper Office and me to track down the appropriate documentation, because the reference in the Explanatory Note is not very helpful, and apparently nobody in the Ministry of Justice was able to respond to a telephone call from the Printed Paper Office.

However, I was eventually able to access the impact assessment, which was revised on Royal Assent. It certainly makes interesting reading. It discloses that a majority of respondents to the initial consultation,

“did not support the Government’s proposals for reform”,

although some did. It would be interesting to know what proportion of respondents supported the proposal out of the 5,000 who responded. “Some” could mean as few as two but conceivably a few more. It would be interesting to know what the balance was.

There has been no specific consultation on these regulations. However, the impact assessment made it clear that the changes have the potential to have a disproportionate effect on women, BME citizens and those between the ages of 25 and 64. Nevertheless, it stated that the Government’s conclusion was that clients should have a financial stake wherever possible. That financial stake could be as much as 30% of disposable income. Disposable income is not generously calculated. Roughly speaking, a contribution of that size would pay for an evening out for the Chancellor and whoever he chose to entertain—Lynton Crosby seems to be quite a popular accompaniment to any Minister.

There is also a serious point, which the noble Baroness, Lady Deech, referred to, about the question of the capital value of property to be taken into account. Given the current level of house prices, certainly in this part of the country, just over £100,000 of capital represents very little in the way of property. Values are substantially higher than would be reflected in other parts of the country. A pensioner on pension credit whose mortgage has been paid off and whose home is worth £110,000, who could be living in a very modest property in London to exceed that figure, will be ineligible for legal aid. A recently unemployed father on jobseeker’s allowance in negative equity with a home worth £240,000 and a mortgage of £250,000—so not in possession of any equity at all—will also be disqualified from receiving legal aid. A disabled man receiving employment and support allowance with a mortgage of £150,000 on a home worth £210,000—again, in London, that will not get you very far—will also be ineligible for legal aid. There is a real question of hardship here. It is certainly undesirable that people in that position should be compelled to have, to use that rather ugly phrase, “skin in the game” to access justice.

There is a particular question on which perhaps the Minister can help me. Regulation 40 states that,

“payment made out of the social fund under the Social Security Contributions and Benefits Act”,

must be disregarded. Does that apply to the Social Fund in its new incarnation, because it is of course no longer a national Social Fund; it has now been passed to local authorities? I do not necessarily ask for an answer tonight, but it is unclear to me whether that disregard will apply to payments made under the new regime.

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Another issue, mediation, has been raised by the Law Society, among others, and is something that the Government are very keen to push. I have my reservations about the degree to which it will actually help to resolve cases. Nevertheless, it is available, it has been used, and the Government want to encourage it. The same eligibility criteria will apply. Have the Government taken that into consideration? There is also the issue of the cost of administration of the system. Clearly administering the new regime will involve greater costs than the previous regime.

Then there is the question of how many people will be affected. As my noble friend said, the Government’s original estimate was 4,000. As he said, that is widely viewed as an underestimate. Admittedly the scheme has been going for only a few months, but have the Government made any attempt to ascertain the likely numbers, and can they project them? If they have not done that yet, will the Minister undertake to do so after, say, six months, nine months or a year, so that we can assess the impact on those affected?

It is unfortunate that we find ourselves in the position of considering significant changes to a scheme whose scope is in any case being substantially narrowed. Clearly, the likelihood of people being deterred from pursuing a remedy will be borne out in the event. It is difficult to argue with those who believe that deterring claims is part of the Government’s objective, at least as much as the potential savings that will accrue, at the expense, as the right reverend Prelate pointed out, of many vulnerable people.

I entirely endorse the terms of the Motion and look forward with interest to hearing from the Minister. I join my noble friend in congratulating the Minister on the line that he took this afternoon in questions about human rights. If I may say so, he distinguished himself from some of those around and behind him this afternoon in a very effective way. A little more of that from him would win him even more plaudits around the House. I congratulate him, and I hope that in that spirit he will respond a little more constructively to my noble friend’s Motion than might otherwise be the case.

8.30 pm

The Minister of State, Ministry of Justice (Lord McNally): I think there is a line in TS Eliot that says, “Woe unto me when all men praise me”.

This debate gives me the opportunity to clarify the position in the regulations laid before the House on 7 March concerning the issue of capital in relation to financial eligibility for civil legal aid. I will certainly respond to the debate, as I did last Thursday. In fact, I reread the debate and my reply. I think that I covered most of the points raised by the 14 lawyers and two others who contributed to that debate.

The Civil Legal Aid (Financial Resources and Payment for Services) Regulations 2013 set out the rules that the director must apply to determine whether an applicant’s financial resources are such that the applicant is financially eligible for civil legal services under Part 1 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012. These regulations broadly replicate the effects of Parts 1 and 2 of the Community

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Legal Service (Financial) Regulations, which were made under the Access to Justice Act 1999. Indeed, a number of the points that were raised tonight were in complaint of parts that replicated that Act.

However, as part of the Government’s consultation in 2010, entitled Reform of Legal Aid in England and Wales, the Government proposed several changes to the rules concerning financial eligibility and contributions for civil legal aid. One of these changes was the removal of capital passporting. Two others were to cap the subject matter of the dispute disregard at £100,000 for all forms of civil legal services, and to increase the levels of income-based contributions to a maximum of 30% of monthly disposable income. Before 1 April, someone receiving certain income-based benefits, such as income support, could have up to £16,000 disposable capital but be automatically passported through the means test and be deemed eligible for legal aid. However, a person not receiving a passporting benefit, and who had more than £8,000 in disposable capital, would be ineligible for legal aid.

It is inequitable that applicants with similar levels of capital may or may not be eligible for legal aid depending on the source of their income. To achieve greater internal alignment and fairness to all applicants for legal aid, the Government proposed that in future people in receipt of passporting benefits should have their capital assessed in the same way as it is assessed for others, although they would still be passported through the income side of the test.

The Government’s response to that consultation in June 2011 confirmed that they would take forward the proposal, and this is reflected in these new regulations. Therefore, under the new rules, all applicants for civil legal aid are subject to the same capital eligibility test. This means that any applicant with disposable capital above £8,000 will be ineligible for civil legal aid, regardless of whether they are in receipt of benefits. If the applicant’s disposable capital is more than £3,000 but does not exceed £8,000, they will be required to make a contribution from that capital towards the costs of the legally aided services.

Ensuring that the capital assets of all applicants are subject to the same eligibility test helps to focus limited public legal aid funds on the most financially vulnerable clients and means that those who can afford to pay, or can contribute towards the costs, do so. It is estimated that assessing all applicants’ disposable capital will result in approximately £10 million a year of savings in steady state. This is not insignificant against a backdrop of continuing pressure on public finances, where we need to continue to bear down on the cost of legal aid to ensure we are getting the best deal for the taxpayer. Disposable capital comprises all capital assets, including equity in land and buildings, money held in a bank, investments, stocks, shares and the monetary value of valuable items. However, there are certain disregards in calculating the amount of an individual’s disposable capital, including for mortgages and for equity in an individual’s home.

It may be helpful if I explain what these are. If an applicant is contesting property with their partner, their share of capital is assessed individually. Any outstanding mortgage, up to the value of £100,000, is

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subtracted from the value of the property. Where assets are in joint names, they will generally be treated as owned in equal shares. Thus the remaining equity is divided equally between the parties. The first £100,000 of the applicant’s equity is then disregarded under the subject matter of the dispute rule. The applicant then receives a further £100,000 equity disregard if the property is their main dwelling. If the remaining equity exceeds the £8,000 capital limit, the applicant will be financially ineligible for legal aid.

In practice, this means that only those applicants who are contesting large amounts of capital, or homes registered in joint names that are valued in excess of £500,000, and where there is a mortgage of at least £100,000, are excluded on capital grounds. We do not think it unfair or unreasonable that people who are disputing substantial assets fall outside eligibility for civil legal aid.

Where a property is not the subject matter of the dispute, is in an applicant’s sole name and worth more than £208,000, that applicant would not normally be eligible for legal aid. However, a further disregard of up to £100,000 would apply if the applicant was aged 60 or over and had monthly disposable income of less than £315. The financial eligibility criteria for civil legal aid are designed to focus our limited resources on those of moderate means and with moderate amounts of capital. This helps to ensure that we can continue to provide services for vulnerable persons, such as victims of domestic violence, children at risk and those with mental health problems.

For domestic violence and forced marriage cases where the applicant seeks an injunction or other order for protection from harm to the person, or seeks committal for breach of any such order, there is a power to disregard the eligibility limits. In this way, we extend eligibility to legal aid for victims of domestic violence irrespective of the value of any property that the individual may own. A contribution may be required from income or capital.

The eligibility waiver for victims of domestic violence seeking protection from harm is a significant concession. This measure improves access to legal aid for domestic violence victims by extending eligibility beyond the original limit. It means that immediate legal advice and representation is available for those who need it and who otherwise would not qualify under the normal eligibility regulations. For those applicants required to pay a contribution, as legally aided clients they will benefit from the reduced cost of representation under legal aid rates as opposed to private rates.

There is a concession for pensioners who are in receipt of an income of £315 a month or below. Disregards of between £10,000 and £100,000 can be applied to any capital assets that they hold, including both property and savings, depending on the level of their income. For example, a monthly income of £76 to £100 attracts a capital disregard of £70,000. This is in addition to the allowances that normally apply, such as the equity disregard. Pensioners who receive a passporting benefit are entitled to the maximum disregard of £100,000.

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The financial eligibility criteria for civil legal aid are designed to focus our limited resources on the poorest people. Bringing the capital rules for those receiving benefit into line with the rules for those who are not will help to do that, and will improve the fairness of the system. The substantial provision for disregards that I have outlined will ensure that an appropriate degree of sensitivity to individual circumstances is maintained, in particular as regards capital in the form of equity in the home. This is a sensible and reasonable measure.

The noble Lord, Lord Bach, made a number of points about the difference in the capital tests. Legal aid is not a welfare benefit and should not necessarily be treated in exactly the same way as universal credit, which is a working-age benefit. This is reflected in the different functions of income support and legal aid. The former is intended to lift people out of poverty over the long term while not penalising people for saving, while the latter is for people required to deal with a short-term legal issue and the associated expense.

The noble Lord, Lord Pannick, said that our LASPO reforms have reduced legal aid to skeletal proportions. I remind the House that we are talking about an exercise that has brought legal aid down from £2.1 billion to £1.5 billion. Neither the noble Lord, Lord Bach, nor the noble Lord, Lord Pannick, do their case any good by pretending that a system that will still spend something like £50 million on welfare legal aid and £1.5 billion in total can be described as “skeletal”. The noble Lord, Lord Bach, said how generous the Labour Government were in 2009. In 2010, we had to take some very tough decisions. Again, I question whether the noble Lord, Lord Bach, has any authority to encourage us to believe that in 2015 a Labour Government would try to restore any of these changes to legal aid.

I hear what was said by the right reverend Prelate and the noble Baroness, Lady Deech. However, they do not do the cause that they espouse—desiring to help the poorest and most vulnerable in our society—any good by arguing that these changes, which will affect people with quite substantial assets behind them, are not the right priority in the circumstances in which we find ourselves. The noble Baroness, Lady Deech, mentioned litigants in person. We are monitoring the impact of litigants in person. However, as I pointed out to the noble Lord, Lord Bach, in a more recent exchange we had, LASPO has been in practice for just over 100 days. He has been forecasting perfect storms and disaster for at least a year. We are keeping a close eye on these things and will monitor these various issues. However, the constant argument of disaster does not serve anybody. The very first Statement I made from this Dispatch Box was to the effect that if a part of your spending is directed at the vulnerable and the needy and you cut it, of course you will affect the vulnerable and needy. In those circumstances we have tried to make sure that we concentrate the money we have available where it is most needed. I will have a look at the Social Fund disregard and will write to the noble Lord—unless it was in that bit of paper that was passed to me. Even if it was, I will write to him.

This has been an interesting debate. The modest changes that we have made to the financial eligibility rules for civil legal aid are consistent with the fundamental

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objective of our reforms. We need to continue to think carefully about how taxpayer-funded money is spent and focus legal aid on the highest-priority cases and those most in need, while delivering the savings needed to address the national financial deficit. I hope that I have covered most of the questions raised in the debate, and I hope that the noble Lord, Lord Bach, will agree to withdraw his Motion.

Lord Bach: My Lords, I thank all noble Lords who have spoken in this debate, in particular the Minister for the trouble he has taken to respond to the debate. I am grateful to all noble Lords, particularly the noble Lord, Lord Pannick, for his extraordinarily flattering remarks, which were somewhat exaggerated. However, it was very good also to hear from the noble Baroness, Lady Deech, and from the right reverend Prelate the Bishop of Norwich; the Government should listen with some care to the remarks that he made. I am grateful, too, as always, to my noble friend Lord Beecham for summing up the Opposition’s view so clearly and crisply.

We should remember that we are discussing areas of law where the Government decided that legal aid should continue, not those areas of law where they thought that legal aid was completely meaningless or was not legal or appropriate. These are areas where people’s need for legal aid is acute: for instance, housing repossession, domestic violence or community care. With these regulations the Government have said on the one hand, “These are the areas where legal aid is appropriate”, but on the other, “Those of you who may be poor in income terms but have a small amount of capital cannot take advantage of where we are keeping legal aid in scope”.

That is not a satisfactory position for the Government to take. To say that what has been taken out of legal aid—particularly out of social welfare law—is skeletal seems to be an overstatement rather than an understatement when we look at what is left in scope compared with what has been taken out, which includes all welfare benefit social welfare law, all employment social welfare law, the vast majority of housing social welfare law and nearly all debt social welfare law. The word “skeletal” is not wrong at all.

Legal aid is part of our welfare system and should be so. It is part of our social security system and a protection for all our citizens, or so it ought to be. That was the idea when it was first formulated—an idea that has grown up with Governments of all persuasions over the past 60 years. It is a great shame to hear the Minister say that it can be completely divorced, as it were, from the rest of the social security system. It cannot be: it remains a protection for all of us.

These regulations make the position more complicated, more costly, more unfair and more inflexible. That is not satisfactory. Of course, I am tempted—as I always am—to divide the House on the issue. Noble Lords have spoken in pretty clear terms of what is felt around the House. However, the House has probably voted quite sufficiently in the early part of this evening. We have had the debate and will be able to read it in Hansard. I have no doubt—I know that the Minister will look forward to this—that we will come back to

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these issues in due course, but probably after the summer rather than before. I beg leave to withdraw my Motion.

Motion withdrawn.

Mesothelioma Bill [HL]

Mesothelioma Bill [HL]

Report (Continued)

8.47 pm

Amendment 15

Moved by Lord McKenzie of Luton

15: Clause 4, page 3, line 10, at end insert—

“(2A) The average damages recovered by claimants in mesothelioma cases shall be determined by reference to the gross tariff, as set out in Schedule (Tariff).

(2B) The gross tariff will be up-rated annually by the general level of prices as measured by the Consumer Price Index and reviewed at least every five years.”

Lord McKenzie of Luton: My Lords, in moving Amendment 15 I shall speak also to Amendment 19. These address aspects of the levy. That subject was covered in large measure by the noble Lord in his introductory statement, so I hope that I can be brief. However, given that we have not yet seen a draft of the levy regulations, nor will we by the time the Bill leaves your Lordships’ House, we need as much clarity as possible on what they will contain.

Amendment 15 sets out a gross tariff as a schedule to the Bill. It is based on the national institute analysis that sought to determine average civil compensation awards for mesothelioma cases based on recent experience. It is set out in yearly age bands and stretches from age 40—that is, at date of diagnosis—to age 94. The tariff is intended to be a proxy for levels of compensation that would have been awarded had individual compensation assessments been made. It is expressed in gross amounts, so if payments are made at less than 100%, the relevant percentage would apply. The tariff excludes the legal cost of reimbursement. I understand that the amounts included in that gross tariff, reflected in the proposed new schedule, are not contentious and are accepted by the Government, the ABI and the Asbestos Victims Support Group campaigners and its professional advisers. However, it would be good to have the Minister’s specific confirmation of that.

The Government may resist the tariff going in a schedule to the Bill, although we would contend that that is where it belongs. An alternative approach is acceptable to us, as long as there is certainty on the gross starting tariff. The amendment also calls for the tariff to be uprated annually by reference to inflation. We have adopted the CPI measure and the Minister has already said that that is the intent. However, again, it is important to have that on the record.

The amendment further calls for the tariff to be reviewed at least every five years. Not only is this reasonable in terms of generally ensuring that the tariff is aligned with reality, but it implicitly recognises the changes that might ensue following the uprating of civil compensation claims following LASPO deliberations. It would be helpful to have confirmation from the Minister that it would be the intent to align the tariff with the outcome of any such review. I beg to move.

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The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud): My Lords, I thank the noble Lord and the noble Baroness for their amendments. As I understand it, their purpose is to set out the exact tariff to be used by the scheme and to require that the growth tariff would be uprated annually in line with the consumer prices index. I support the intention of the amendments, although I do not think that they are necessary. I shall explain why.

I put on the record that it is our intention to uprate the scheme payments annually in line with the CPI. If we were to put that in the Bill, we would have no flexibility to uprate by any other amount in future. For instance, we have given an undertaking to review the scheme’s operation and the rates of payment at the end of the smoothing period. Obviously I cannot pre-empt the findings of the future review, but were any review to show that a gap had developed between average civil damages and scheme payments, we would want to address that. If we were required by the Bill to uprate only in line with the CPI, we would be unable to do so.

Regarding the proposed tariff to be included in the Bill, I confirm that we have published an ad hoc analytical publication that sets out the same figures that are included in the table attached to the amendment. These are the figures that we will be using as a baseline when we calculate the percentage level of damages. If we included the table as a schedule, as the amendment proposes, we would need either annual primary legislation or a regulation-making power to make any change to the schedule. As I say, I am happy to go on record to say that the figures contained in the report that we have published will be used when we calculate the amounts that individuals will receive. We will publish in regulations the amounts that people will receive from the scheme.

I hope that I have covered these issues in adequate detail and have put the position on the record without the need for these amendments, which I understand were intended to tease out these issues. I hope that the noble Lord will feel able to withdraw the amendment.

Lord McKenzie of Luton: I thank the Minister for his reply. It dealt satisfactorily with the purpose of the amendment, which I beg leave to withdraw.

Amendment 15 withdrawn.

Amendment 16 not moved.

Clause 7: Scheme administration

Amendment 17

Moved by Lord Howarth of Newport

17: Clause 7, page 4, line 12, at end insert—

“( ) must ensure as far as possible that the scheme administrator is unbiased as between the interests of the insurance industry and the interests of applicants to the scheme,”

Lord Howarth of Newport: My Lords, this amendment is intended to highlight the important issue of conflict of interest, which we have not sufficiently considered so far in our proceedings. The Government are proposing

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that a scheme intended for the benefit of mesothelioma sufferers should be run by the same insurance industry whose negligence deprived mesothelioma victims of legal redress and which for years held out against fair and decent treatment. As envisaged by the ABI, the industry would create an incorporated body, accountable to its funders in the industry through its board.

In its briefing to us, the ABI has made no mention of the possibility of competition that the Minister informed the House about earlier today. I applaud his intention to ensure that there is a competitive tender of the administration of the scheme; that is right in principle. However, it may be difficult for the noble Lord to find other tenderers that are competent to run the scheme. Let us see.

Meanwhile, the difficulty we need to keep clearly in sight is that it is in the insurers’ interest to pay 75% or even less of the average civil court settlements. It is in their interest to avoid costly procedures and negotiations of the kind the court route requires of them. Indeed, it is in their interest to determine that applicants for awards from the scheme are found to be ineligible. It is in their interest, after all, to reduce the levy.

The Bill, as drafted, and the scheme, as proposed, create an administrator and a technical committee that have pretty well plenipotentiary powers to assess eligibility, the validity of documentation and the significance of evidence. Under Clause 4(3)(b), the scheme may,

“in particular, give the scheme administrator power to decide when to impose conditions or what conditions to impose”.

That is a fairly blank cheque. In the scheme contents that we have been shown, which are to be brought in by regulation, the scheme administrator has powers to refuse altogether to make payment. We need to be well aware that there is a bias built into this system. It may be unavoidable but it is there.

The ABI has informed us that, of 4,051 ELTO searches in the year from May 2011 to April 2012, 2,354 were successful in tracing the documentation; it follows that 1,697 were unsuccessful. Yet the ABI is predicting that only 200 to 300 claimants will be found to be eligible each year. What is to happen to the other five-sixths of those whose documents could not be traced?

The powers of the administrator and technical committee are, as I have suggested, almost total. Admittedly, there is provision for reviews and appeals and, if this is to be a body created under legislation, there may be scope for judicial review, but that of course is not a desirable way to resolve these cases.

The insurance industry is going to be judge and jury in what is in its own interest. The case for using the insurance industry to administer the scheme is that it understands the business. However, I hope that the Minister will describe to the House how he intends to ensure fair play. The history of employer’s liability insurers does not inspire confidence and it is not satisfactory to design into the scheme a blatant conflict of interest. Therefore, the question is: will the oversight committee proposed in the amendment from my noble friends on the Front Bench be sufficient to ensure fair play?

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My Amendment 30 would require the Secretary of State to report on the performance of the scheme and the administrator to Parliament each year. This amendment is modelled on a provision that the Government have written into the Intellectual Property Bill. It is an admirable provision. If the Minister is willing to agree that there should be an oversight committee, should it report to the Secretary of State and the Secretary of State then report to Parliament on an annual basis? I hope that that will be the case. The matters on which we should look to the Secretary to State to report to Parliament include: the performance of the administrator; all the relevant data and statistics to enable us to know the performance of the scheme in detail; the number and variety of cases; the speed at which cases are processed; the pattern of tariff payments; the evolving relationship between payments under the scheme and awards made by the courts; and the scale and nature of compensation recovery unit recoveries from payments. We should also be told about what is happening in the field of research, which we debated at length this afternoon.

9 pm

The report ought also to cover those matters that are the responsibility of the Ministry of Justice in the Government’s two-pronged strategy to support people with mesothelioma. We need to know, therefore, what legal costs are being incurred. We need to have reports on reviews and appeals that have taken place—and, indeed, on the issue of legal aid and the cases that may be justiciable under the ECHR and which would be eligible for legal aid. We will need to know about the progress of the conditional fee agreements, about which we are waiting to learn from the Ministry of Justice what it intends.

All in all, we need to have an understanding of the state of co-operation between the DWP and the Ministry of Justice. It does not appear, at the moment at least, that it is as good as it should be. I took the precaution of inquiring at the Library yesterday, and made a final check today, to see whether the Ministry of Justice consultation had finally come out—a consultation that has been promised so many times, and upon which our expectations have been dashed so many times. Believe it or not, unless the Minister can correct both me and the Library, it has even now, after all these postponements, still not appeared. It does not seem that the Ministry of Justice shares the sense of urgency of the Minister at the DWP.

To its credit, the DWP is anxious to make haste to get its side of the bargain on the statute book. The Ministry of Justice appears to be entirely uninterested. It is so busy demolishing the foundations of justice with its attacks on the legal aid system that it has no time to spare any consideration for mesothelioma sufferers. It is simply awful. The Minister himself has said that he envisages a five-yearly review. Perhaps every five years, the annual report will be really super.

Finally, I suggest that the report should also cover the Government’s plans to establish other schemes—which is the subject of Amendment 29 in the name of my noble friends—and their thoughts about an Armed Forces scheme, which the noble Lord, Lord James of

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Blackheath, wants to see. I would go even further than the noble Lord. There is clearly an equal and extensive range of obligations on the Government to ensure that people who have contracted mesothelioma as a result of negligence on the part of the state or its agencies —on construction sites, shipyards and the enormous variety of industrial situations where the state itself may be the employer or has contracted to employ other employers—are no less well looked after and compensated than those who have been the victims of other employers and are unable to get redress from employer’s liability insurers. The Government self-insure, and have therefore taken that responsibility upon themselves. The annual report ought to cover the range of the Government’s responsibilities in this whole area.

Mesothelioma victims have few champions. They have the Asbestos Victims Support Group’s forum and the Association of Personal Injury Lawyers. They have the noble Lord, Lord Freud, whom I am sure they appreciate very much, and my noble friend Lord McKenzie of Luton, as doughty champions for them. Noble Lords in this House and Members of Parliament in another place are also committed to supporting them. However, their case was ignored by policymakers for decades. Again and again, the avarice of the insurance industry outweighed the generosity of the Government in 1979 and again in 2008.

Continuing parliamentary vigilance is essential. The Minister has so far promised an annual Written Ministerial Statement. That is not enough: we need a full annual report. I beg to move.


Lord McKenzie of Luton: My Lords, we have Amendments 25 and 29 in this group and we support Amendments 17 and 30 in the name of my noble friend Lord Howarth, although there is some overlap between the two sets of amendments. I will be brief as I believe we are pushing at an open door from what the Minister told us earlier today. Amendment 25 calls for the establishment of an oversight committee to monitor, review and report to the Secretary of State on the overall arrangements touched on by this legislation. It would undertake this task in relation not only to the scheme and the technical committee but to the tracing office and the electronic information gateway. They fit together, and we know that the insurance industry sees them as an integrated package.

The idea of an oversight committee was originally prompted by concerns over the extent to which the insurance industry may be engaged in all of this, possibly as a scheme administrator—although we welcome the news announced earlier today about the open competition—and certainly on the technical committee, running the tracing office and devising the portal. An oversight committee properly constituted would provide a level of reassurance for those whom the scheme should benefit and would be a counterweight to the level of engagement of a powerful industry with clear financial interests in how it all works, as my noble friend Lord Howarth so powerfully demonstrated. That is why we believe that the oversight committee should include representatives of asbestos victims support groups and the trade unions which have supported them, with an independent chair. Effective oversight would, we suggest, help the hard-pressed DWP resources,

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and an annual report from the committee could be incorporated with an annual report to Parliament by the Minister.

In Committee and in meetings thereafter, the Minister has expressed support for an oversight committee. We heard it again today and I know that he has considered various options. While disappointed not to see a specific amendment from the Government today, we hope for an assurance that they will introduce an amendment when the Bill passes to the House of Commons. I was not quite sure that it was clear enough in the noble Lord’s opening statement, so I hope he will clarify matters. It would be good if that assurance spelt out at least the bare bones of what is intended.

Amendment 29 is a return to the issue of support for sufferers of other asbestos and long-latency diseases. The payment scheme in this Bill relates to those diagnosed with diffuse mesothelioma. It therefore excludes other asbestos-related diseases such as asbestos-related lung cancer and asbestosis. It also includes other work-related, non-asbestos diseases such as pneumoconiosis. The DWP’s June 2013 analysis quotes the Health and Safety Executive data on industrial diseases, which has an annual estimate of sufferers of asbestos-related diseases of some 3,500—that excludes those suffering from mesothelioma—and of non-asbestos-related industrial diseases of some 4,200. Many of these will face the same problem in identifying a negligent employer or an employer liability insurer. The DWP’s June note acknowledges that many of the diseases covered do not share the same characteristics as mesothelioma, and that their severity and progression may vary, depending on the heaviness of exposure to asbestos.

It also highlights the fact that, for example, only a small proportion of asbestos-related lung cancers are compensated through government schemes, because of the range of different causes of lung cancer that mask an asbestos cause. Notwithstanding this, and perhaps somewhat strangely, in computing the effect of extending the scheme, it has been assumed in the data that the same proportion of those with diffuse mesothelioma who can access the scheme proposed by the Bill will be able to access an extended scheme, that the same level of scheme payment will be received, and that the same amount of benefit will be recovered. These are fairly broad-brush assumptions, to say the least. In resisting this amendment, the Minister will doubtless point to the costs of bringing forward an extension of the scheme. On the basis of their estimates over a 10-year period, they suggest that there will be 5,100 successful applicants for other asbestos-related diseases and 6,100 with non-asbestos work-related diseases. There will be additional levy on insurers of £478 million and £564 million respectively.

At face value, these figures are shocking. It is not so much the amounts as the suggestion that over the 10-year period some 11,200 people will miss out. By how much will depend on benefit recovery arrangements, but they could miss out to the tune of £1 billion. If the concentration were just on the other asbestos-related diseases, not expanding the scheme will deny 5,100 people, who will miss out just because an employer has gone out of business or cannot be located and a relevant insurer cannot be established.

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The amendment requires the Secretary of State to bring forward proposals within a year to establish other schemes to cover these other diseases. We have been clear that we do not want the pursuit of broader coverage to hold up the scheme for diffuse mesothelioma, and there is no reason why acceptance of the amendment should cause this to happen. It is accepted that it will be difficult to graft onto the mesothelioma scheme the tariff approach, given the varying degrees of suffering that some of the other diseases entail, and that there may be convoluted issues around causation. Therefore, while continuing to acknowledge the merits of the mesothelioma scheme, we should no longer look aside from those people—many thousands on the Government’s own figures—who face terrible suffering because of the negligence or breach of statutory duty of an employer. This is all the more important where access to the state lump sum and social security support is more difficult, as it is for some.

The Minister has come thus far and we have supported and congratulated him on doing so. Indeed, he has expressed sympathy for a broader scheme. Accepting the thrust of these amendments would add to that journey, which I beg him to undertake. If he cannot, he will of course be aware that the campaigns will go on.

Lord Freud: My Lords, it would be most convenient to deal with these amendments in their original order. If I may, I will start with the amendment moved by the noble Lord, Lord Howarth, on the scheme administrator, and then turn to the two amendments tabled by the noble Lord, Lord McKenzie, and the noble Baroness, Lady Sherlock, which relate to an oversight committee and future reports on further schemes. I will then turn to the amendment of the noble Lord, Lord Howarth, on annual performance.

Amendment 17 is intended to make certain that the body chosen to administer the scheme is able to operate in a wholly objective and unbiased manner. I know that there has been concern among noble Lords about the insurance industry’s involvement with this scheme, especially its administration. I agree that it is paramount that the administrators of a scheme that is intended to help its applicants must be able to do so in a fair way. I am confident that the necessary safeguards are in place to ensure this without the need for an amendment on the matter.

First, I remind noble Lords of the commercial procurement strategy that I spoke about earlier. The scheme administrator will be chosen through an open procurement competition that will be launched in time to meet our aim of taking the first applications in April 2014 and making payments next July. Members of the insurance industry will be allowed to tender, as will the shadow body created by the ABI. Legal specialists may also tender. The body will be chosen through this exercise according to our commercial criteria, which include being able to administer the scheme as set out by the scheme rules.

Secondly, I refer noble Lords to the scheme rules, which set out clearly every aspect of the scheme administration and specify how the administrator may or may not act. Compliance with the scheme rules will form an integral part of scheme arrangements.

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9.15 pm

I will pick up the point made by the noble Lord, Lord Howarth, on the power of the administrator to impose conditions when making payments. As we spent a lot of time in Committee discussing, this is designed to allow the scheme’s administrator to place a payment in trust where the payment was made to a minor or to a person who lacks capacity. I am content that the selection process for our scheme administrator, in conjunction with the scheme rules, provides sufficient assurance that the scheme administrator will not be able to influence or interpret the running of the scheme. I hope that the noble Lord is reassured by this explanation, and I urge him to withdraw the amendment.

Amendment 25 proposes an oversight committee that would monitor the performance of the scheme and other related matters and report to the Secretary of State. I agree with the idea behind this amendment. The suggestion was made in Committee, and since then we have been exploring available options for some form of oversight. I spent some time looking for an existing mechanism or body already within the auspices of the DWP that I could utilise, but I have not been able to find a suitable vehicle. We are therefore continuing to explore all the options.

We face one restriction which noble Lords will appreciate more than most—on the setting up of new non-departmental public bodies—and we have to deal with that issue as we develop our options. I am working with stakeholders to identify a suitable structure that will allow for effective scrutiny of the scheme without necessarily requiring underpinning legislation.

There are several areas in this amendment that I wish to reflect on. The first is the proposed use of the oversight committee to monitor the Employers’ Liability Tracing Office. ELTO is a private company funded by the insurance industry. The Association of British Insurers is currently looking to recruit representatives from stakeholder groups to sit on the board of ELTO to monitor its performance. Having stakeholder representatives on the board of ELTO will allow them to directly influence the work of ELTO, as well as ensure that it is performing to expected standards. In addition, we expect that the technical committee will sit within ELTO. If that expectation is realised, the ELTO board, which by then should include stakeholder representatives, will be able to monitor the performance of the technical committee and report on this through the annual ELTO report. It will also allow stakeholders to identify any concerns and raise them with the DWP so that remedial action can be taken as necessary.

Next, I must reflect on the proposal in the amendment to report on the proposed electronic information gateway. There may well be merits in looking at how any gateway interacts with the scheme in order to ensure that it is supporting, rather than hindering, applications. However, we cannot yet say whether or not an electronic information gateway will be introduced, so it is not possible to work out the details of how this monitoring may be carried out. I prefer a non-legislative solution to this issue that allows us to set up a proportionate and flexible oversight committee, made up from all stakeholder groups that have a stake in the operation of the scheme. It will provide valuable support to

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DWP officials as they monitor the scheme’s performance in the years ahead. We will continue to work with stakeholders on the proposals over the recess.

I now come to the amendment that would require a report to be published giving details of government plans to establish future schemes. I understand the desire for us to commit to going further and to helping as many people as we can. We have discussed before why the particular nature of mesothelioma lends itself to a discrete scheme aimed at that disease alone, and that separate schemes would be required to provide for sufferers of other diseases. While I understand and agree with the intention to keep up this momentum and for a commitment to do further work, I am afraid that I must reject this amendment. First, the complex and varied nature of other diseases would necessitate significantly more complex schemes that could take several variables into account. They are the ones that the noble Lord, Lord McKenzie, pointed to, and include the severity of the disease and the contributory factors when calculating eligibility and payment amount. The complex nature of the necessary schemes would also necessitate high costs.

Secondly, I draw noble Lords’ attention to the work of ELTO and the recent work of the FCA in conjunction with ELTO that I spoke about earlier. These two bodies have taken very positive steps towards correcting the market failure in the insurance industry. In the first year, the overall rate of successful traces increased from 46% to 71%, while the rate of successful mesothelioma traces increased from 34% to 58%. This work should not be underestimated. It may be that, in time, the work of these bodies brings further improvement until one day we get to a stage where the number of untraced records is so small that additional schemes are not needed. We need to give the measures that are in place sufficient time to show the progress that they are making.

The figures show that a much more significant improvement has been made in the overall tracing rate than in the rate of tracing mesothelioma-only cases. This shows that a scheme for mesothelioma cases is necessary, and reinforces my point that the steps we have taken already may in the fullness of time be sufficient for other diseases.

We also need to be mindful of the resource constraints within which we have to operate. The DWP will rightly focus on ensuring that the scheme operates as expected in its first years. There will undoubtedly be teething problems, as there are in any new scheme. Although we will do our utmost to minimise them, it would be naive to think that there will be none. It would therefore not be the best use of limited resources to divert them into producing a report into other schemes. As I have indicated, this would be complex to design and would be at the expense of the scheme that we have.

While I do not accept the amendment, which would commit us and future Governments to producing a formal report every year, I am alive to the need to review the situation as time goes by. Certainly, once we are able to see how much ELTO has improved things and how well the payment scheme has worked, the Government will be in a position to undertake such a review. I remind noble Lords that provision exists for

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sufferers of other asbestos-related industrial diseases under the scheme in the 1979 Act. Therefore, I urge the noble Lord and the noble Baroness not to press their amendment.

The final amendment in this group, tabled by the noble Lord, Lord Howarth, would require the Secretary of State to report to Parliament on the performance of the scheme within six months of the end of each financial year. It is not necessary to include this provision. Scrutiny and reviews are already planned for the scheme, without the need for including details in legislation. As I said, I am happy to commit to making a Statement to the House on the scheme’s performance.

Other amendments deal with the issue of scrutiny via some form of oversight committee. We are still working on the details, but we expect that performance information will be made available, probably online. This may be in another format. Perhaps it will be monthly rather than annual. We are looking at the matter and will consider it alongside the oversight committee. Indeed, the oversight committee may have views on the best way to make the information available. With that, I urge the noble Lord to withdraw his amendment.

Lord Howarth of Newport: My Lords, I am grateful to the Minister for his full response to each amendment in this group. He tells us that sufficient safeguards are in place to ensure the objectivity and unbiased behaviour of the scheme administrator, and asks us to accept that the open procurement competition will be a contributor to guaranteeing that impartiality. However, it may be difficult for him to find anybody competent to run the scheme who is not in the industry, so the problem of conflict is likely to persist. I do not wish continuously to impugn the motives of people in the insurance industry, and would like to think that those who are appointed to work as administrators of the scheme will set out with the best of honourable intentions.

We are always being warned, however, that we should avoid situations of conflict of interest and, from time to time, people are vulnerable to the temptations that conflicts of interest present to them. There is a whole institutional temptation here because the insurance industry stands to gain significantly from cases not going to court and from cases not being handled generously by administrators, who will have such absolute powers of determination. I therefore remain concerned about this, although the Minister offered a little reassurance about Clause 4(3)(b) when he said that it was harmless. Certainly, on the face of it, the wording of it seems to give enormously large powers to the administrator, but I accept what he said about the purpose of that particular piece of drafting.