EMPLOYERS' LIABILITY (COMPULSORY INSURANCE)

HC Deb 20 October 1971 vol 823 cc802-32

7.10 p.m.

Mr. David Watkins (Consett)

I beg to move, That an humble Address be presented to Her Majesty praying that the Employers' Liability (Compulsory Insurance) General Regulations 1971 (S.I. 1971, No. 1117), dated 9th July, 1971, a copy of which was laid before this House on 20th July, be annulled. I wish to make it clear at the outset that my co-signatories and myself do not intend to oppose the Regulations to the extent of forcing a Division. Our primary object in securing this debate is to enable certain matters in the Regulations to be discussed and particularly to enable the Under-Secretary to give certain assurances.

The Regulations bring into operation the Employers' Liability (Compulsory Insurance) Act, 1969, as from 1st January next, with the exception of Regulations 6 and 7, which are concerned with the display and production of certificates of insurance, which do not come into operation until 1st January, 1973. I understand the reason for the lapse of one year in bringing those into operation compared with bringing the Act in general into operation, and I do not intend to enlarge on that aspect of the matter, though some of my hon. Friends may wish to do so.

I understand the reason for the delay because the Act began as my Private Member's Bill. I have a paternal affection for the Bill and the Regulations. There is, therefore, no question of my wishing to oppose the Regulations strongly because obviously I would have no interest in delaying the operation of the Act.

Regulation 2 is headed: Prohibition of certain conditions in policies of insurance". This is extremely important and in many ways goes to the heart of the central principle of the Act. It seeks to ensure that there are no loopholes in the operation of the principle of compulsory insurance against employers' liability. The problem is to ensure, first, that there are no loopholes which would enable unscrupulous employers to avoid insuring against their liability and, secondly, to ensure that unscrupulous employers and insurers are not able to escape having to pay to any injured employee that to which he would be legally and morally entitled by way of compensation for his injury.

The various parts of Regulation 2 go a long way towards meeting this problem and it seems from Regulation 2(1)(a) to (d) that all foreseeable eventualities have been covered. I appreciate the problems involved in stopping up all possible loopholes and the need for these provisions.

However, the regulations for exemption from the application of the Act—the Secretary of State is empowered in Section 3(1)(c) to make regulations defining the exemptions—have not yet been laid. I understand that they must be laid between now and the coming-into-operation of the Act.

The Under-Secretary of State for Employment (Mr. Dudley Smith)

I intervene only to help the hon. Gentleman by telling him that he is right; that they will be laid before the coming into operation of the Act.

Mr. Watkins

I am grateful to the hon. Gentleman for that assurance.

Will the Minister go further and assure us that all possible avenues of escape through loopholes and all possibilities of evasion have been looked into? The various loopholes that appeared earlier appear to have been filled, but may be assured that the safeguards will not be weakened when the regulations dealing with exemptions are laid? I hope that we shall receive an assurance that the spirit and intention of all the regulations will be to brook absolutely no defaulting whatever in the operation of the Act.

Regulation 3 sets a limit to the amount of compulsory insurance: The amount for which an employer is required by the Act to insure and maintain insurance shall be two million pounds in respect of claims relating to any one or more of his employees arising out of any one occurrence". I understand that, during the consultations which took place on the drawing up of the Regulations, pressure was brought to bear on the Department of Employment to have no limit but to leave this as an open-ended arrangement. I cannot speak with certainty, but I surmise that the insurers wanted a smaller limit. I speak from the experience of conversations I had with them during the passage of the Bill. At that time I was thinking in terms of a limit of £1 million.

Bearing in mind all that has happened in the two years since the Bill received the Royal Assent, though being aware of the problems of insurers, including their financial problems in connection with reinsurance and similar technical matters and the likely size of claims, it seems that £2 million is reasonable. We are legislating for a long time ahead and it is to be hoped that the limit of £2 million will not be too badly eroded by inflation.

I draw attention to a working paper which was published yesterday by the Law Commission and which questioned whether judges were awarding high enough damages in accident cases. It was a remarkably good niece of timing on the part of the Royal Commission in view of this debate. Insurers invariably bemoan what they consider to be the too high level of awards being made by judges, but the Law Commission pointed out that many people feel—this is indeed a widespread feeling among informed people—that judges are not making sufficiently high awards and are not taking inflation sufficiently into account. That is a sobering thought when we are considering the prescribed limit under Regulation 3.

It is a sobering reflection, also, that what we are discussing here—if it is possible to discuss it in these terms—is financial recompense for the loss of a finger, a hand, an arm, an eye, a leg, or even a life, as only too tragically happens sometimes. I put those thoughts to the Minister in reference to the limit prescribed.

I am glad to express my appreciation to the Under-Secretary of State for his ready willingness to keep me informed and to seek my views during the drafting of the Regulations, and I include in my thanks the officers of his Department.

As I say, I have certain paternal feelings towards the Act itself, since I had the honour of piloting it though the House as a Private Member's Bill, and I recall that it received the Royal Assent on, literally, the very last day of the Parliamentary Session in 1969. It received the Royal Assent after a series of cliff-hanging exercises, both here and in another place, which will certainly live in my memory if in no one else's. The success of the operation was made possible only by the warm co-operation of a small but determined group of hon. Members on both sides.

The coming into operation of the Act through these Regulations will be an important step forward in industrial safety and accident prevention. There may well he beneficial side-effects resulting from a general tightening up in respect of employers' liability insurance. There are employers—I do not for a moment suggest that they are representative of the good majority—who need to pay better attention to the prevention of industrial accidents. Financial necessity, if nothing else, may now induce such employers to face their responsibilities. If by passing the Act and the Regulations we do anything at all to reduce the toll of accidents, which is the object of the exercise, we can look back upon some work well done.

7.23 p.m.

Mr. Ronald Brown (Shoreditch and Finsbury)

I add my congratulations to the Government on bringing these Regulations forward, and I echo the appreciation expressed by my hon. Friend the Member for Consett (Mr. David Watkins) for the courtesy and friendship we have experienced since he and I have been concerned in pressing for them to be laid at the earliest opportunity. The Under-Secretary of State has always shown us great courtesy in discussing these matters, and I endorse all that my hon. Friend said.

The fundamental importance of these Regulations can be seen even more clearly today. I was looking at the figures published yesterday regarding accidents at work. It is said that they are costing about 1 million a day or, translated into annual terms, over £250 million a year, which is about half our balance of payments surplus.

The importance of avoiding accidents at work can readily be seen. I find it a little sad that the running mate, as it were, of these Regulations, the Employed Persons (Safety) Bill did not finish its course. Although we were able to take it through Committee, it could not find time to be brought to the Floor for Third Reading and be sent to another place. If only we could have had that along with these Regulations, a tremendous step would have been taken towards reducing enormous cost to the nation of over £250 million a year and, what is more, the cost in terms of life and disability for people at work in industry.

I am a little worried about one or two matters in the Regulations, and I hope that the hon. Gentleman will be able to help me. As my hon. Friend said, Regulation I provides that Regulations 6 and 7 shall not come into effect until 1st January, 1973. He ventured his view as to why that had been done. I shall venture mine. Perhaps the Under-Secretary of State will tell us the facts.

There is an argument to the effect that any employer should have a period of time in which he can have his insurances renewed and that, if the full Regulations came into force on 1st January next year, someone's insurance could be, so to speak, betwixt and between, if, for example, he took his insurance out on 31st December and it was not renewable till the following 30th December. If, therefore, his insurance ran out at the end of this year, before 1st January, 1972, he would have right until the end of 1972 before he had to renew it and, accordingly, he could not comply with the requirement to exhibit under Regulations 6 and 7, although, under the first Regulation, he should have his insurance in order.

Employers have had time since the passing of the Act in November, 1969 to put their house in order, and I find it a little hard to accept that we should now give them a further year to ensure that their insurances are such that certificates can be exhibited. One can only assume that a man would fail to exhibit his insurance certificate if it were not proper in accordance with the terms of the Act or if he did not have it at all. So I am not inclined to accept the explanation that he might be betwixt and between. However, I may have misunderstood the situation, and I look forward to hearing from the Government about it.

I turn to Regulation 2. I have tried, as we all do, to seek advice from people who know, and I am told that it could be said, even under the terms of these Regulations, that an insurer could allege that misconduct was a reason for refusing to honour an obligation. I do not know whether that is correct; I merely put it to the Minister. On my reading of the Regulation 2(1)(a), which I had thought eliminated questions of misconduct, that does appear possible— in the event of some specified thing being done or omitted to be done after the happening of the event"— and so on. Could the question of alleged misconduct be fitted in there? I do not know. I hope that the Minister will satisfy himself that no insurer could allege that an employee, because of some alleged misconduct, had put himself outside the ambit of the Regulations or the insurance which his employer had taken out.

I turn to Regulation 6. I want the certificate which is exhibited to be meaningful. The draft in the Schedule will not mean much to the ordinary person. I take it that the important part is, Signed on behalf of … (Authorised Insurer)". How is the person on the shop floor to know who is authorised? Does "authorised insurer" mean that the Minister will have a list of insurance companies for whom he is vouching? How does he suggest that an ordinary person would know whether an insurer was authorised?

Many people may well find that the premium they are now asked to pay is more than they would wish. They may want to be in business for only a relatively short time, and therefore they may put up a certificate which is misleading, to say the least. It is true that if an employee is hurt and compensation is not paid because he is not insured, the employer is liable to be prosecuted. But it does not help the injured person to know that his employer was fraudulent and did not put up a proper certificate. I hope that the Minister can tell me that people will be able to recognise that an insurer is authorised when they want to be sure that they are fully covered.

Regulation 8 allows the factory inspector to demand to see the insurance certificate, on giving reasonable notice. But does Regulation 7 mean, as I hope it does, that the copy must be lodged with the factory inspectorate or with the Ministry? The factory inspector rarely gets round to all the factories in his area, so if the copy were not seen until he made a normal visit it could be a considerable time before he found that an employer was not conforming to the Regulations. If the employer has to lodge the copy with the factory inspectorate, as I hope, the inspector will be able to see any changes and notice any special points that arise much sooner than if he simply relies on his spot checks.

I am a little worried about the figure of £2 million given in Regulation 3. I know how hard the Under-Secretary worked to put that figure in, so I am being a little greedy in wanting a bigger figure, but I am thinking of inflation. In view of changing circumstances and assessments for accidents, I hope that there is a provision by which that amount can be increased without the need for another Regulation.

I welcome the Regulations. I am delighted that we can now tell all employees that wherever they go for their employment they should satisfy themselves that insurance certificates are exhibited and that they are properly covered.

7.34 p.m.

Mr. Kenneth Clarke (Rushcliffe)

I, too, congratulate those responsible both for the original Act and for the Regulations on closing an important loophole in the provisions whereby employees are protected and compensated when they suffer accidents in the course of their work.

Almost all employers have always insured against personal injury to their employees in the course of their work, but there has always been a small fringe who did not take that elementary precaution. Unfortunately, that small fringe tended not only to be irresponsible but to consist of those firms which avoided insuring because they were very short of cash and very small, sometimes being rather fly-by-night organisations. Being the kind of firms which tended to want to save on things like insurance premiums to protect their employees, they also tended to want to save money on safety precautions inside their factories.

Therefore, on those occasions when those of us whose work outside the House is largely involved with personal injury claims arising from industrial accidents came across a case of an uninsured employer, only too often it was a case of a deplorable breach of Factories Act requirements and similar requirements, in which the employer had saved money on all the guards and protective devices for his machinery as well as on insurance premiums. The result for the individual employee was that his remedy in the courts was worthless, because he invariably found himself suing a small firm or one-man employer whose resources were inadequate to pay the damages; any action in the courts was simply against a man of straw, who could not satisfy the judgment. By failing to insure, the employer had taken away from his employee all those protections which Parliament, through the Factories Act and Regulations, had sought to give employees over the years, as had the common law and the law of negligence.

The Regulations effectively close the loopholes. In particular, Regulation 2 (1)(b) and (c) seem to cover the possibility of a bogus insurance policy ruling out liability for negligence and for breaches of the Factories Act and the Regulations covering particular trades. These are the two headings under which almost all claims against employers are brought. Therefore, the position is very much improved.

But there remains one small group of cases which will still not be adequately covered by the Act and the Regulations. From now on, employees will be effectively covered in almost all those cases so long as their employers comply with the law, but there will still be every now and again a small number of employers who, although the factory inspector has not yet discovered it, are breaking the law. It is possible, for instance, with some sub-contractors in the building trade who employ men on building sites for the factory inspectors to have extraordinary difficulty in tracing them and discovering whether they are complying with the law.

There is an analogy with the other class of personal injury claims which is before the courts a great deal. It is valuable to consider what happens in road accident cases. Parliament makes it compulsory for anyone with a motor car to insure for a wide category of persons, and that category has been widened to include passengers. However, there are cases in which uninsured motorists cause injury to people, and then the Motor Insurers Bureau agreement makes sure that they have a real prospect of receiving proper compensation from insurers. Would my hon. Friend consider the possibility at some stage of trying to obtain a similar agreement for employers' liability cases? I understand that such insurance is fairly profitable for the firms engaged in it, and as they are responsible companies it is probable that they would respond to approaches from his Department, so that those very few employees who might have bad injuries inflicted on them in employment by an employer who is still defying the law, and is not insuring, might be adequately compensated.

The figure of £2 million given in Regulation 3 appears to be very generous, but, quite apart from the reservations expressed about the effects of future inflation, I wonder why that global figure has been chosen. Why has it not been expressed as a certain figure per employee, which might be more appropriate? The sum of £2 million is clearly an enormous figure for a very wide range of small employers. There are a few giant organisations to which £2 million is a figure which is rapidly becoming rather inappropriate to the total amount of claims to which they might become liable if a major catastrophe occurred at a large plant. I wonder whether the possibility of having some figure per employee was considered as an alternative.

It would be inappropriate to go too far beyond that, following the remarks about the level of damages for industrial injuries and other flatters, although, like the hon. Member for Consett (Mr. David Watkins), I welcome the recent proposals attempting to get more uniformity in awards of damages in personal injury cases. I hope that this will not be taken too far because there are difficulties in automatic figures for loss of limbs. For example, the loss of a finger is quite different for the professional piano player from the loss of a finger for a Member of Parliament, and physical injuries are more important to those engaged in physical work than to those engaged in clerical work. Given this, and the impossibility of getting an automatic table which would cover every conceivable case, I share the interest in and appreciation shown by the hon. Gentleman of the recent proposals, which might get away from the present rather unfortunate situation where there is sometimes widespread disparity from court to court in awards of damages.

7.42 p.m.

Mr. Peter Archer (Rowley Regis and Tipton)

This matter has ceased to be a party issue—and I use that form of words advisedly. I endorse every word of the speech of the hon. Member for Rushcliffe (Mr. Kenneth Clarke). I endorse his diagnosis of the problem; I endorse his suggestion to safeguard against those who may not comply with the Act and the Regulations; I endorse his final remarks.

Now that there seems to be no longer an issue in this House on some of the matters which were perhaps the subject of an argument at earlier stages, it is only right for me to join in congratulating the Minister on what are obviously very carefully drawn Regulations. They are very well drawn, if I may say so, and are obviously intended to make the Act effective. We are grateful for what is a significant milestone in this legislation.

I also seize the opportunity to congratulate my hon. Friend the Member for Consett (Mr. David Watkins). At last, after all his labours, the cutting edge of the tool is nearing whatever the cutting edge of the tool actually has to touch. There are those in the country who will be benefiting from these regulations in a very short time although, perhaps happily, they may not know it at the moment. This is one example—there are many others—of the contribution he has made to industrial safety.

But, of course, this is not a method designed to prevent industrial accidents, as my hon. Friend recognises. It is designed to ensure that, where we have been unsuccessful in preventing accidents, the unhappy victim will be compensated. In a sense, it may almost have the reverse effect because what we are doing is to ensure that employers do not themselves carry the risk of having to pay civil compensation for the effects of their own negligence. But this price is worth paying in order to ensure that the victims of accidents are adequately compensated.

Certainly I would not be easily put off with the argument, if anyone sought to use it, that nevertheless there is some kind of deterrent entailed here because insurance companies may always increase the premiums for employers with a large number of accidents. In my experience, this does not happen. Usually, employers of any substance have insured so much of their business of different kinds with one insurance company—their vehicle fleet, their works cars, their works pension scheme, and so on—that no insurer is likely to twist their tails by putting up their premiums in this sector of insurance.

The fact that we have successfully steered this part of our legislation to its conclusion provides no reason for feeling satisfied about other aspects of industrial accident prevention or in any way for inhibiting the efforts we were making previously. More power to my hon. Friend's elbow! These provisions do not eliminate all possible hazards, even in this sphere. It is still possible for two men working side by side to have virtually identical accidents—each losing an eye or an arm—and for one of them to be compensated, becoming perhaps moderately settled for the remainder of his life, while the other does not receive a penny because his accident did not happen to be anyone's fault and was just one of those things, or did not happen to be seen by a witness looking in the right direction at the right time. Because of this, the man may have to go through life with, added to his other burdens, the fact that he is in penury. There is still a great deal to be done and while we are, quite properly, congratulating ourselves, I hope that we shall not run away with the idea that this aspect of the problem has been sealed off.

Like other hon. Members, I invite the House's attention to Regulation 3. I, too, would welcome some information as to how the figure of £2 million has been arrived at. Obviously, to some extent, arbitrary judgments are involved. We cannot be sure what accident liability will arise in future. We cannot know what kind of damages will be awarded. But it would be helpful to know how the figure was arrived at and whether the suggestion, put by the hon. Member for Rushcliffe, was considered—that the figure, instead of being a global, blanket figure should have been calculated on a per capita basis or on some basis which gave effect to the magnitude of the risks involved or of the undertaking. The figure is not self-evidently adequate.

One may have a large undertaking which suffers a major disaster in which a large number of people are injured. We have all known of the unhappy accidents—in collieries, for example, or where scaffolding on building sites has collapsed—in which a large number of claims have been involved. Or, there may be a period where, for some reason or other, there is a series of misfortunes. Presumably these considerations have been taken into account.

But it is not these considerations that I have primarily in mind. The pointer was indicated by my hon. Friends when they used the word "inflation". Has due account been taken of it? I am not sure that the question of inflation arises at the moment because the Court of Appeal in its wisdom has said, when one is calculating lump sum compensation for compensation for future loss of earnings, which is the usual way we have to do it at the moment, that one is not permitted to take account of the effect of inflation. This matter may well have to be put right so that inflation is taken into account.

On what assumption has this calculation been made? Is it upon the assumption that the law will remain unaltered? If the answer to that is "Yes", then the Department stands indicted, because there is a great deal of pressure at the moment to ensure that the law is altered. My hon. Friend referred to the new document published by the Law Commission which, due to my own fault, I have not yet had the opportunity of reading. But one has only to look at a number of recent cases to appreciate the difficulties, and how even some judges are obviously very unhappy at the situation. How far is the Department considering a possible change in the law? Such a change would obviously entail a substantial alteration in these Regulations.

I accept that what is in question here is not the scale of fines. We are not punishing employers for being negligent, we are seeking to compensate the victim of negligence. To that extent, the courts must seek to hold the balance—although perhaps it does not sound a very attractive balance, when we recall that it is being held between employers who, by definition, are either negligent or in breach of statutory duty and employees who are the victims of their torts. Nevertheless, a balance the courts must undoubtedly hold. Where that balance lies depends to some extent on the value we set, on the one hand on capital investment and, on the other, on human working conditions, limbs, and earning power, human enjoyment of the amenities of life and, in the end, life itself.

I have some sympathy with my hon. Friend the Member for Shoreditch and Finsbury (Mr. Ronald Brown), who expressed certain doubts which were in his mind, because some of my trade union colleagues may have cause to wonder whether the judges who assess these damages look at matters in the way in which they look at them. I recollect as recently as 1967, when some of us in this House were complaining about the appalling accident figures, rising yearly, that a very distinguished judge, Lord Justice Danckwerts, said: … the employer's life is a somewhat hazardous one. Indeed it would be a good deal safer to keep lions or other wild animals in a park than to engage in business involving the employment of labour. With that we can wholly, and unhappily, agree. But the hazards of the employee's life demand our attention a little more readily.

Mr. Ronald Brown

Would my hon. and learned Friend agree that Regulation 3 means that while this is compulsory insurance and that an employer is liable to have it for an accident involving expenditure up to £2 million, it does not absolve a large employer, likely to experience a catastrophic situation, from insuring beyond that?

Mr. Archer

Indeed. It would be a tragedy if anything went out from this House tonight which encouraged employers to think that they were somehow relieved of the responsibility of ensuring that their insurances are adequate.

Damages in this country are very much lower than those in others. As the hon. Member for Rushcliffe has said, we cannot complain about the damages placed on pain and suffering on any arithmetical grounds, because there is no way of measuring adequate compensation for the loss of an arm or a finger. I have heard no reply to the New Testament question, "What will a man take in exchange for his soul?" Equally, I have heard no answer to the question: what will a man have in exchange for his arm or his eye? Even such factors as these, which cannot be assessed arithmetically, are assessed much lower in this country than in the United States.

I have discussed this with American lawyers, and they are appalled at the level of damages awarded here. But there are other aspects of damages which lend themselves to scientific calculation. In calculating the loss of earnings of a man for the remaining period of his working life, it is possible to make use of actuarial tables, to look at the statistics.

I have hesitated over being carried away by statistics since I saw a document headed, "The Legal Profession, Broken Down by Age and Sex". But statistics can have their use in making this kind of calculation.

I never understood why it was that the courts were so reluctant to use it. Earlier today, I was looking at the report of the Court of Appeal proceedings in the case of Mitchell v. Mulholland (No. 2) which occurred in 1971. That involved an appalling accident in which a man suffered injuries, admittedly in a motor accident and not at work, but nothing turns on that. He had suffered a severe head injury with diffused brain damage, a comminuted fracture of the neck of the right femur, dislocation of both shoulder joints, permanent organic impairment and left-sided hemiparesis of the left arm and leg, spasticity of the right leg which is three inches shorter than the left, so that he could not walk unsupported. He had very poor control of his right arm diplopia in all directions and his speech was badly affected. The doctor said: "… he sits around a ward all day. taking no interest in anything; not reading or watching television…". He said: There can be no hope of any mental improvement, so that, even if his physical condition changed, he would not be employable. The Court of Appeal was faced with the appalling difficulty of assessing what compensation he should receive.

The Minister has to take into account when he is formulating Regulation 3 the kind of answer the Court of Appeal might give. What it said was that for the pain and suffering and loss of amenity, this man should receive £20,000. It sounds a substantial sum—it is a sum which none of us here would accept in exchange for the injuries which this man suffered. Then the court had to go on to consider the loss of earnings to the man for the remainder of his working life, taking account the kind of things which might happen to him. He might have been promoted, or his wages increased.

He might have been involved in other injuries, so that his working life came to a conclusion. He would have to pay income tax; it was very difficult. The court was offered the evidence of actuaries, of statistical tables and, on the whole, it rejected that evidence. I have hesitated, quite seriously, for some time before criticising what is obviously a very distinguished court. But faced with what has been said by another distinguished judge in an earlier case, this is how they concluded it: I do not think actuarial tables or actuarial evidence should be used as the primary basis of assessment. There are too many variables, there are too many conjectural decisions to be made before selecting the tables to be used. There would be a false appearance of accuracy and precision in a sphere where conjectural estimates have to play a large part. What that seems to amount to, with the greatest respect to a very distinguished Court of Appeal, is that because we have to make some guesses we ought to guess everything. One thing is certain; if the court had used actuarial tables, the damages would have been very much higher. If we make this kind of assessment of what a man has lost over the whole of his working life, stated baldly in a lump sum it looks enormous. It is enormous and, for that very reason, if we are compensating, why should we shrink from such a figure?

Mr. Edwin Wainwright (Dearne Valley)

Does my hon. and learned Friend appreciate that in the mining industry men whose working life was ended at 30 as the result of an accident were lucky to get £4,000 to last them for the rest of their lives? This must mean that the courts did not take into account the span of the working life.

Mr. Archer

I agree. There are a number of people, including the Law Commission, who see the force of that kind of example, and it is for that reason that I have trespassed upon the patience of the House and the limits of the rules of order by inviting the Minister to tell us whether these considerations have been taken into account and whether his Department has managed to pay some attention to the representations which have been made.

My hon. Friend the Member for Shoreditch and Finsbury has spoken about the importance not only of the adequancy of the premium paid or the sum insured but of the insurance company carrying the insurance. There have been a number of unhappy instances recently giving food for thought. I appreciate what is said in subsection (1)(3)(b) of the Act. But we would welcome an assurance that a close eye is being kept on this because otherwise a number of people, including employers, will be lulled into a false sense of security and feel that, by putting the Act onto the Statute Book and enacting these Regulations we have solved all the problems.

A great deal of work has been done by a number of people to bring these Regulations to fruition. I hope that those whom they most benefit will know of them. Because we have lived with these things, thought about them, almost tossed over in our sleep thinking about them, we think that everyone must know of them. It is not so. A very informative report issued today by the National Institute for Industrial Psychology has brought home to us how little the man on the shop floor knows about the provisions covering his protection and the part that he can play.

Every politician knows how difficult it is for people whom he thinks should be better informed to keep themselves informed. Because they have other interests and other demands on their time, people do not know all the facts. Politicians know how easy it is for such people to annoy them by, as they think, being surprisingly ignorant.

On a number of occasions within the last few months I have received letters addressed to my predecessor as the Member for my constituency. He retired in 1966. I do not think that I receive less coverage in the local Press than most Members. However, there are people who obviously have other things to think about. A short time ago I received a letter from an elderly lady who complained about the way in which I was running the local council housing department. We must not be shocked by these things. The moral is that if the man on the shop floor is not told in words which he can understand and has time to read, he will not know.

I do not complain about the drafting of the Regulations. I think that the drafting is admirable. But I hope that somebody will in due course paraphrase these Regulations in language which can be understood by ordinary people.

I offer my congratulations to the Government on their draftsmanship and to my hon. Friend the Member for Consett on the work that he has done and on his achievements.

I offer my congratulations, paradoxically, to the unhappy victims of future accidents who, although they do not yet recognise it, may find that what we have done tonight has been well worth while.

8.2 p.m.

The Under-Secretary of State for Employment (Mr. Dudley Smith)

I suppose all of us nurture the secret hope, if we fail to attain high office, that one day we may be responsible for a piece of legislation which we can call our own and which we pilot through the House of Commons and through Parliament generally.

Tonight it would be unjust of me not to pay tribute and to give credit to the hon. Member for Consett (Mr. David Watkins), who is a well-liked and respected Member of the House. He reminded us of the traumatic experience he underwent, as some of us know, in Committee and out in getting this valuable piece of legislation on to the Statute Book. The hon. Gentleman spoke about his paternal affection for the Act under which these Regulations are made. I congratulate the hon. Member on fostering the fledgling until it is now in a state where it can leave the nest.

We are grateful for what the hon. Gentleman said about the activities of the officials of the Department and their work in this connection.

It is always a joy to debate matters of health and safety with the trio of the hon. Member for Consett, the hon. and learned Member for Rowley Regis and Tipton (Mr. Peter Archer), and the hon. Member for Shoreditch and Finsbury (Mr. Ronald Brown). It has been my lot to do this on a number of occasions. Although obviously for political reasons we often differ, it helps enormously to know that one's opponents, so to speak, are enthusiasts about the subject and that they bring to bear on it a great deal of experience and understanding. I appreciate the comments they made tonight in their welcome speeches.

I welcome the debate on this subject because, although fortunately it does not affect many of our fellow citizens, it is of considerable importance to the few who have had the misfortune to suffer injury or to contract disease as a result of an employer's negligence and who have then been unable to obtain the damages that have been awarded to them. As the hon. and learned Gentleman so rightly reminded us, there are many tragic cases of which we all know. Sometimes the damages which have been awarded seem to be all too small in the context of a man's losing his whole livelihood and finishing up as a cabbage.

I am grateful to the hon. Member for Consett for his courtesy in co-operating with my Department over the various difficult stages in formulating these Regulations and for informing us in advance that he was tabling the Prayer. We appreciate that the Regulations are prayed against as an exploratory exercise rather than in any spirit of opposition.

When this legislation was passed by the House many of the points of detail were left to be settled during the preparation of the Regulations. After consultation with the interested parties we have arrived at these Regulations. Hon. Members will have noted that the Regulations make the Act operative from 1st January, 1972, by defining what will constitute an approved policy and the minimum amount of insurance cover which an employer must have.

The Regulations deal also with the issue, display and inspection of certificates. Regulation No. 4 brings into the scope of the Act certain employees who are not ordinarily resident in Great Britain.

Perhaps most important from the point of view of the coming into operation of the Act is the question of insurers issuing certificates of insurance. The House may remember that insurers were given an undertaking when this Measure was discussed in another place that there would be an interval of six months between the laying of the Regulations and the coming into force of the Act. This was to allow the insurers time in which to prepare their administrative machinery. It accounts for the date of commencement being 1st January, 1972.

However, the requirement laid on insurers by the Act is that they issue a certificate of insurance whenever a contract of insurance is entered into or renewed after the Regulations come into force. They are required to issue a certificate to an existing policy holder, therefore, only when the policy comes up for renewal; and this could be at any time between 1st January, 1972 and 1st January, 1973.

I emphasise that the big change is that from 1st January, 1972 every employer is liable for insurance; and he will be committing an offence if he does not have it. As from that date various policies will be falling due for renewal. The moment they are renewed, the Act becomes fully operative in respect of those individuals and the liability they incur under their policies.

This is important, because it means that any other action which depends upon the existence of the certificate of insurance cannot take place until after 1st January, 1973. The House will observe that for this reason two of the Regulations do not come into operation until that date.

The question of enforcement of the Act is affected by the time scale I have mentioned. The number of employers who do not insure at present cannot be estimated. All the indications are that they represent a very small proportion of the total number of employers. In those circumstances we have concluded, as the previous Administration concluded and as was recognised when the Bill was before the House, that it would not be justifiable in terms of expense to create a separate inspectorate to enforce compliance with the Act.

I emphasise that the Factory Inspectorate will not be enforcing the Act. It has not been found feasible to use any existing inspectorate for this purpose. At least four separate inspectorates would be involved, and not all of them are under direct Government control, it is possible that many of the smaller employers in whom we are particularly interested would fall outside the scope of all those inspectorates.

Therefore, enforcement will need to be largely dependent on employees inspecting the certificates of insurance which employers will be required to display. The T.U.C. has accepted that its members will have a large part to play in the enforcement of the Act. A Regulation has been made to require an employer to display a copy of his certificate of insurance at each of his places of business. This will be a burden on some large employers who have many branches, as, for example, multiple retailers, but I hope that the cost to them will be small when compared with the possible cost of a more formal enforcement procedure.

The hon. Member for Shoreditch and Finsbury, as indeed, also, the hon. and learned Member for Rowley Regis and Tipton, asked how a person on the shop floor would know whether an insurer was an authorised insurer. I would say that the Department of Trade and Industry publishes a report in which a list of authorised insurers is given, the Insurance Business Annual Report, and this gives a very good indication as to those who are well regarded and those who are not. I do not believe that we shall encounter too much difficulty, once the trade unions become operative in this field in their knowing exactly who are those who need attention.

Mr. J. T. Price (Westhoughton)

I am much obliged to the hon. Gentleman for giving way and I am sorry that I missed the earlier half of the debate. I have had considerable experience in a practical sense in this field. Can the hon. Gentleman say, for example, what is the situation where a large employer for his own domestic reasons has an indemnity fund to meet any legitimate claims made on him for negligence for employers' liability in the usual way? There is quite a number of very big firms which have such funds. Would the hon. Gentleman perhaps correct a misunderstanding which might arise from what he has just said? I can vouch for it that trade unions have very capable legal departments which deal with at least 98 per cent, of all cases which arise by negotiations outside the law courts.

Mr. Smith

I agree with the point that the hon. Gentleman makes. On the other point about indemnity funds, if he will bear with me I will come to that a little later in my speech. I am sure that this is in very capable hands, and that trade unions can institute efficient inspection of these particular provisions and, indeed, as I say, because of the cost to manpower resources it is important that this should be done.

Mr. David Watkins

Before the hon. Gentleman leaves this point I would like to say how extremely pleased I am to hear what he has just said. Throughout the proceedings on the Bill I consistently recognised that it would be largely dependent upon the activities of trade unionists and shop stewards to ensure that the provisions of the Act are enforced. At one stage there was a certain hostility to the whole idea of certificates being displayed and I feel that the Minister has completely vindicated what was one of the important points of the debate, one of the important points at issue during the passage of the Bill. It at least am very pleased to hear him say that.

Mr. Smith

As the hon. Gentleman knows, I was not a member of the Committee on the Bill and did not take part in those deliberations, but I can assure him that it will be largely dependent on the employees and I think it will be in good hands in that respect.

Mr. Ronald Brown

I disagree with my hon. Friend. I am rather worried because I read Regulations 7 and 8 specifically referring to inspectors appointed by the Minister. If what the hon. Gentleman now says is to be the case, is there not this fear? Suppose that a man in a workplace chooses to go looking for a certificate and it is not displayed and he then reports it. How long does the hon. Gentleman consider that that man will keep his job? Because immediately the onus of proof is being put on the man in the workplace to talk to the employer. Regulations 7 and 8 make it quite clear that it is the inspector's job to do that.

Mr. Smith

I think that as I go on the hon. Gentleman will, perhaps, gather how my own Department is involved in this matter. I do not believe that any individual who pointed this out, would be likely to be fired. I think I should be out of order if I started talking about the Industrial Relations Bill, but under that I think the man would have a very good case of claiming unfair dismissal. The point is that the attention of my Department will be called to this and it will take action itself.

I was about to say—

Mr. Harold Walker (Doncaster)

Will the hon. Gentleman allow me?

Mr. Smith

I ought to get on, but as it is the hon. Gentleman, I will give way.

Mr. Walker

There is a question raised about inspectors. I must say that I am rather concerned that he is telling the House that there will not be inspectors when he has just laid before the House Regulations providing for the function of inspectors. It seems rather contradictory that he has regulations which prescribe a role for inspectors and that then we are told there will not be inspectors. There is a contradiction which the hon. Gentleman must explain.

Mr. Smith

There will be those in my Department who will be responsible for this operation but it is not envisaged that the factory inspectorate—this is the point I was trying to get across to the House—will be responsible for this. A Regulation has been made, as I have just said, requiring an employer to display a copy of his certificate of insurance at each of his places of business, and it is very important that the employer does not have one token notice put up but has notices at all his places of business. Any failure to display can be reported to a local office of the Department of Employment for investigation, but I would hope that, on this matter, unions and individuals, before taking any such action, will discuss the matter with the employer, because in this way it should be necessary for my Department's officers to investigate only genuine cases of non-insurance. Those we are trying to get at here, as we all know, are those who are deliberately avoiding, not those who, through carelessness, may not have the right display.

I think that perhaps it will help the hon. Member for Doncaster (Mr. Harold Walker) when I say that we shall keep under review the question whether enforcement is adequate in the light of experience after the Act becomes fully operative in 1973, and provision has been made in the Regulations for my Department to require employers to send copies of their certificates by post to one of our offices.

The hon. and learned Member for Rowley Regis and Tipton made, I think, a very valuable point, that it is no use whatever Parliament making orders or regulations if the public does not know about them. This is crucial. We realise that it is essential that employers know of their obligations under the Act. For this purpose an explanatory leaflet has been produced by my Department for distribution on request. I hope—I know—that it will be in language much more readily understandable than the legal connotations of this document. An abridged version will be sent to every employer who exchanges his employees' National Insurance cards at any time during the next 12 months. A Press advertisement is being prepared, and full advantage of the opportunities presented by the other media will be taken to publicise employers' duties under the Act from 1st January, 1972. I hope that hon. Members will keep us on our toes, and that, if they think this is not sufficiently publicised, they will let us know, because it is our firm intention that these Regulations should be well known and understood and complied with by all employers as from 1st January next year. Employers not properly insured will become liable.

The hon. Member for Consett asked for reassurance that there would be no avoidance of responsibilities by either employers or insurers, and I should like to deal with that matter. It is clearly not possible for me to say that every employer will now take out insurance, and not even the most expensive enforcement procedure could guarantee that this would be so, but I should like to make it absolutely clear that we shall not hesitate to take action in any case where non-compliance comes to our notice.

Apart from these circumstances there are, in common with all insurance arrangements, situations in which the insurer can hold that the employer is not properly insured. All insurance policies invariably contain conditions—the so-called small print—which govern the rights of the parties to the contract. This is relevant to the question of what is our approved policy for the purposes of the Act. The Act empowers the Secretary of State to make a regulation approving only those policies which do not contain conditions which have been explicitly prohibited by the regulation.

In considering the extent of the prohibition which is contained in the Regulation now before us it is convenient to divide the conditions into three groups.

The first of these refers to the right of the insurer in common law to avoid a policy where there has been a fraudulent statement or a misrepresentation in proposal documents. I stress that nothing in this Act can be used to prevent such a condition being invoked by the insurer, because I am advised that any contract entered into in such a way would be held to be void in common law.

The second category of condition in an employer's liability policy concerns those which restrict the range of activities that an employer can undertake; for example, restricting a builder to working below a specified height. We have taken the view that it would not be right to expect insurers to pay out for risks which they have not undertaken to insure, and this is in line with practice under the Road Traffic Acts, to which reference has been made. I remind the House that an employer who works outside such a restriction will be uninsured and immediately liable to prosecution under the Act.

Mr. Peter Archer

Where there is an unusual condition of this kind which may seriously affect the employees, will there be notice of it in the certificate which is to be exhibited?

Mr. Smith

The hon. Gentleman is a lawyer and I am not. Rather than give an off-the-cuff answer, I should like to take advice on that point. Perhaps I may write and let him know the answer or perhaps he would arrange to put down a Question.

The conditions which are to be prohibited, therefore, relate to the more general matters which are covered by a policy and these conditions go a long way to satisfying the situation. The result is that it will, for example, no longer be possible for an insurer to avoid a policy because an employer has not guarded a machine or has failed to take adequate fire precautions. Nor will it be possible for an insurer to refuse to pay an injured employee because the employer failed to notify the accident to his employer. In short, I hope that this Measure will prevent the type of case which has given so much concern to hon. Members on both sides of the House, from occurring in the future, and we can all think of some notorious examples.

Mr. Ronald Brown

The hon. Gentleman says that where action is taken to declare the policy void the case will not be covered. This was the situation which caused my hon. Friends to start out on this road. In that case the insurer had accepted two premiums from the employer. If that insurer should continue to sign as authorised insurer, at what stage will that insurer be liable? He will remember the case of the General, Accident, Fire, Life Insurance Corporation—

Mr. Smith

It is not right and proper for me to discuss specific cases from the past, but, as this now stands under the policies as proposed, the liability will be fairly and squarely on the insurance company to pay out. We have included in the Regulations the right for an insurer to recover from the employer any payments which he may have been called upon to make in cases where, but for this prohibition, he would not have been entitled to avoid the policy. This has the effect that if the employer goes into liquidation the insurer becomes the creditor of the employer instead of the employee being put into that position.

The hon. Member for Consett also raised the position of exempt employers in the private sector. As he knows, the Act contains the power to make regulations exempting certain classes of employer from the requirements of the Act, but these regulations have not yet been laid before the House. It is, therefore, outside the scope of this debate to deal with regulations which have not yet been made, but if I may crave your indulgence, Mr. Deputy Speaker, I should like to refer briefly to this point.

It was generally agreed during the passage of the Bill that it would be desirable, in the words of the spokesman for the last Administration, to provide some exemption for organisations which have the necessary financial resources and which could be relied upon in all circumstances to pay any damages which may be awarded against them in court. This is the point which the hon. Member for Westhoughton (Mr. J. T. Price) brought out just now. We have examined several formulae which would define employers in the private sector to whom exemption could be granted, bearing in mind the primary requirement that any employer who is exempted must always be able to pay any damages awarded against him. However, we have been unable to find any formula which could distinguish between those employers who were solvent and those who were about to become insolvent. So we have decided that no employer should be exempt on the grounds of size alone, and I feel sure that hon. Members opposite will agree with this view. While I realise that this will cause some disappointment outside, I do not believe the consequences will be very severe.

We know of very few large employers who do not have any insurance of this kind, although a considerable number of them insure only in respect of sums greater than a specified amount. These employers rightly say that this enables them to give speedy and generous settlements and to build up good relations with their employees, and we do not wish to interfere with this on that account. I understand that there are available insurance policies which would enable the employer to continue to be responsible for the first amount of any claim but where the insurer would be ultimately responsible in the event of the employer not being able to meet his part of the claim.

Mr. J. T. Price

The hon. Gentleman is generously answering my point. May I take the example of two corporations, one in the private sector and one in the semi-private sector? The C.W.S. Limited is a great corporation dealing with many industries; it has always had its own internal trade insurance department and has always been able to meet any legitimate claims levied against its operations by the trade unions who negotiate on behalf of 38,000 or 40,000 workers.

The other example is the great group of Lever companies which has its own internal insurance company known as Blackfriar Insurance, quoting from memory, which has always adequately met all claims. One has to have special regard to people with a good record so that they are not embarrassed by this sort of Regulation.

Mr. Smith

I take the hon. Gentleman's point. I remind him that these Regulations are to catch the bad employer who is not fulfilling his social obligation. It is no part of our policy to interfere with those schemes where there are good relations and where it suits the employer to settle claims quickly, but there must be a safety net underneath for the big claim, for which the insurer must ultimately be responsible. I am advised that such policies as were referred to would meet the requirements of the Act without any question of the employer's exemption arising. I think that covers the hon. Gentleman's point. The particular companies to which he referred can settle down quite satisfactorily within the Regulations without any embarrassment to their arrangements.

In general, the exemption Regulations when laid before the House will deal with special cases involving employers who can offer satisfactory alternative forms of indemnity, for example where their funds are guaranteed by the Government, or those who insure through a Ship Owners' Protecting and Indemnity Club, which is a more specialised area.

A number of points have been raised about the limit of insurance which is an important point, and the hon. and learned Member for Rowley Regis and Tipton made particular reference to this matter. Provision was made in the Act for the required amount of insurance to be limited because of the reinsurance problems facing insurers. After considering this matter we have decided that the minimum amount of insurance cover which an employer must have should be £2 million for any one occurrence. I am confident this should help the insurers without prejudicing the interests of employees.

An interesting reference was made to the Law Commission report on the award of damages and the fact that these should be higher. This is important and in some ways is very material to the whole question of health and safety at work, but I do not think it is a subject with which I can deal tonight. The position is that this Act is concerned only with insurance against liability. The extent of that liability determined by the courts is not germane to the work of this Act. This is a legal matter for legal interpretation. We are concerned to make sure that people are properly covered by their insurance. The question of the judgment as to the amount of blame and the compensation must still remain with the courts, and I am sure the hon. and learned Member realises that.

Mr. Peter Archer

Surely the hon. Gentleman would concede that when discussing limits of liability for the purpose of these Regulations it is important to know the extent of that liability and what it is likely to be.

Mr. Smith

I do not think I had better get involved in a detailed argument with the hon. and learned Member on this point, much as I should like to do so. The overall cover there is £2 million for any one occurrence, and if we start talking about valuation of particular cases I shall be in serious trouble, particularly with the Law Officers.

I was asked why the limit was set at this amount. The limit has been chosen as being well above any known claim and is unlikely to affect anybody who is unfortunate enough to be injured as a result of an employer's negligence. Speaking from memory, the worst disaster where compensation was involved was the Melbourne bridge disaster in Australia when about £750,000 was paid out in compensation. God forbid we should have any disaster like that here, but it shows that even in a major disaster perhaps the sum of money may be below £1 million.

Mr. J. T. Price

With great respect to the hon. Gentleman, I do not believe the case he mentioned to be by any means the largest claim that has ever been made. There are numerous claims involving explosions or fires when a large number of people have been gravely injured or killed. It is always much dearer in terms of insurance to compensate the seriously injured person than to deal with dependants of somebody who has been killed. The injured person has to live out the rest of his life and may well be a liability to society. Therefore, I would not regard that as a correct statement by the Minis- ter because I believe research would show him to be wrong.

Mr. Smith

I accept the hon. Member's admonition and would point out that I was speaking off the cuff. The point occurred to me while the hon. Member was speaking. I believe it is important that the amount should be set at the figure of £2 million which, so far as one could see, should be sufficient to cover the type of case which may be involved.

Mr. David Watkins

When the legislation originally went through the House a considerable amount of research was carried out. This, of course, was before the Melbourne Bridge disaster. We were not at the time of the legislation able to find any case where the sum had exceeded £300,000.

Mr. Smith

I am grateful to the hon. Member for that information. There seems to be some divergence of opinion on this matter, but I feel that £2 million is a quite formidable figure. It was fairly asked whether this sum would be eroded by inflation and whether it would be enough for the future. The Secretary of State has the power to adjust the limit upwards from £2 million if, in future, this appears to be insufficient. This is an important point and answers some of the questions which were put, since my right hon. Friend can take this action at any time in the future. No doubt succeeding Secretaries of State will keep this matter under review. Therefore, it would appear that the point will be well taken care of.

The other point on the question of cover which is important was raised by my hon. Friend the Member for Rushcliffe (Mr. Kenneth Clarke) in a valuable intervention. He asked about the equivalent in industry of the uninsured driver and what could be done on this point. There have been suggestions that, with the coming into force of the Act, there should be set up some kind of indemnity fund along the lines of the Motor Insurers Bureau. Out of the fund would be paid employees who could not otherwise obtain damages awarded to them.

Although the T.U.C. has been in correspondence with my right hon. Friend about setting up such a body, the Act does not confer upon him any power to create one. While sympathising with the reasons which prompted the General Council of the T.U.C. to put forward this proposal, my right hon. Friend felt that it would be easier to see whether there was a need for an arrangement of this kind when the Act had come into force and after there had been time to see what effect it had had. While that is still our view, I accept that further consideration might need to be given to the question of a fund. One factor which would need to be taken into account is the examination which my right hon. Friend the Secretary of State for Trade and Industry is making of the adequacy of controls over insurance companies under existing legislation. I shall keep in close touch with this so that the interests of employees as well as others covered by compulsory insurance can be taken into account.

Up to the present, the practice has been for policies in this type of insurance to afford unlimited cover. I am aware, therefore, that the imposition of this minimum limit of £2 million for which an employer must insure could be construed as the maximum amount that insurers will offer for the present premium. The alternative open to us might force insurers into charging higher premiums to all employers because of the conditions in the reinsurance market and possibly into refusing cover to some employers in the higher risk businesses. It may be open to individual employers to negotiate any increased cover from their insurers if they wish. Again this is an important matter.

On the other hand, I know that some small employers have been amazed by the requirement that they should insure for £2 million, and they fear that their costs as a result will be exorbitant. I hope that they will realise that most existing policies already cover this figure, up to an infinitely large amount, and that the introduction of this limit should not involve them in additional expense.

I have spoken for a long time, and I apologise, but I wanted to be fair to hon. Members opposite who wished to interrupt. There are some important points here which needed bringing out, and I have tried to answer as many of them as possible. There is one that I have not yet mentioned. The hon. Member for Shore- ditch and Finsbury asked about Regulation 7. I confirm that the certificate must be produced or sent. He asked me whether that was the case.

As the House realised when the original Bill became an enabling Act, there were many points of detail to examine before the Regulations now before us could be prepared. Throughout this examination, my Department has been concerned to combine the need to protect the interests of employees with the need not to upset existing satisfactory insurance arrangements. As my hon. Friend the Member for Rushcliffe said, the position is much improved now. As a byproduct, it may lead to a tightening of safety arrangements. If it does, well and good, and we all join with the hon. and learned Member for Rowley Regis and Tipton in hoping that that is a by-product of the Regulations.

It has not been possible to meet both requirements in all cases, but what has emerged is equitable legislation which can be operated in practice. The Act and these Regulations are good. They are an improvement on a situation which needed attention. I commend them, and I thank the hon. Member for Consett for all that he has done in bringing forward this Act of Parliament.

Question put and negatived.

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