HC Deb 15 March 1995 vol 256 cc1001-8

Motion made, and Question proposed, That this. House do now adjourn.—[Mr. Kirkhope.]

10.2 pm

Mr. Tony Worthington (Clydebank and Milngavie)

I am grateful for the opportunity to have this debate on the subject of the compensation recovery unit of the Department of Social Security. This little-publicised body is causing misery and anger up and down the land, and it is high time the Government were forced to justify the activities being carried out in its name. This year, the CRU will claw back around £100 million from victims of accident, illness or disease, who may have taken several years to obtain an award from insurers or from the courts.

In this financial year, about 40,000 people will have had to pay benefit back to the CRU, and about 700 people will have had to pay back more than £25,000 each. The biggest single clawback that I have been able to find this year is from a person with a spinal injury, who has had to pay more than £84,000 to the DSS. For someone to have received that amount of benefit during the past few years, he or she must be a paraplegic or almost totally dependent on others. The 10 biggest clawbacks of this year are all for over £65,000 of benefit being paid back to the CRU.

My association with this issue arises from contact with Clydeside Action on Asbestos. Jointly, we lobbied Parliament in November last year, as a result of which a splendid article in the Daily Mirror led to large numbers of victims of the DSS contacting me. With subsequent publicity, I have now received more than 140 letters on that subject.

I shall list at random some of those cases. A man from Middlesbrough fell off scaffolding and received a spinal injury. He can never do manual work again, and has been off work for three and a half years. He was offered £25,000, and has had to pay back £21,000 to the CRU, leaving the rest for legal and medical bills.

A 50-year-old woman from Manchester had an accident in 1990 which left her with a permanent disability and in constant pain. He employers have now offered her £2,500, which is all she will be allowed to keep under the rules of the CRU. She says: What on earth have I made all those contributions for? This law is obscene. The honest hardworking folk are being kicked in the teeth. A man from Durham who spent 33 years down the pits had an accident in 1989 which left him permanently disabled. After three years, British Coal offered him £2,500—again, all that he will be allowed to keep. A man from Lancashire had an accident in 1991 and lost his job. The case is still pending, although the insurers admitted liability on the first day. He owes the CRU £25,000.

A Staffordshire man is already losing £30,000 to the CRU. He notes, as I do, the insult of the amounts being offered for industrial injuries. He contrasts his case with that of a major in the Army who was sacked from her job for being pregnant, and was awarded £400,000 in compensation. Another example is a Belfast bus driver who, after 26 years of work, lost his leg in a terrorist bomb explosion. He was offered £10,000 in compensation, which he fears he may lose to the CRU.

What emerges from those 140 cases is a burning sense of anger from people whose lives have been turned upside down. Many of them have lost their jobs and incomes, and have endured pain and inconvenience with which they must live.

The Minister smirks. I do not find those cases at all funny.

The Parliamentary Under-Secretary of State for Social Security (Mr. Roger Evans)

If the hon. Gentleman is saying that some of those people are paraplegics, is he not aware that, under the old system, future payments of attendance and mobility allowance continuing for years in the future would have to be taken into account? If he wants to make a comparison, he should make an accurate one.

Mr. Worthington

I shall come to that matter in a moment.

Who do those people now regard as public enemy number one? It is the Government, who should have been their safeguard. They no longer regard those who caused the illness or accident as their enemy. In all cases, they feel betrayed by the Government.

They thought that they were part of a national insurance scheme into which they had contributed year after year to cover themselves against an eventual calamity. They never thought that the scheme was a fraud, in that the money would have to be repaid. What was the point of their national insurance contributions? Those who were not receiving contributory benefits did not have to pay them back.

I am grateful to the Social Security Select Committee for agreeing to my suggestion that it should investigate the work of the DSS. The Minister appeared before the Committee today, and I was pleased to see that he found it impossible to justify the CRU's work. It was disturbing to see that he had no knowledge of the consequences of its work.

I am also grateful to my hon. Friend the Member for Thurrock (Mr. Mackinlay), who is in his place, for initiating his Workplace Injury Victims Bill, which draws attention to this issue.

Perhaps the Minister will be able to explain this evening how there is justice when all the money that is received in benefit is clawed back, although for years the victims have been contributing 9 or 10 per cent. of their incomes to national insurance. All the money is clawed back. The pre-1989 scheme, under which half the benefit was clawed back, contained an element of justice, as the victim was at least allowed to keep his or her own contribution.

There is no justice in the present scheme. When a victim receives compensation for illness, disease or accident, that settlement comprises various elements of damages, such as compensation for previous earnings and loss of future earnings and often a large payment for pain and suffering. When the Government claw back benefits, they ignore those elements and take back everything that has been paid by way of benefit to the victims, even if that encroaches upon any sum awarded for pain and suffering.

That is nothing more than theft. The Government have absolutely no entitlement to money which has been awarded to cover pain and suffering. Perhaps the Minister will inform the House how he justifies that indefensible action. I said earlier that I became involved in this issue through my association with Clydeside Action on Asbestos and Clydebank Action on Asbestos. Asbestosis sufferers have had to pay back £1 million to the DSS this year. Can one imagine the horror of the situation when sufferers of that terminal and appalling disease fight for years to gain some compensation for the illness inflicted upon them by negligent employers, and then have to pay back their compensation to the DSS?

Clydeside Action on Asbestos has dealt with cases of people who have paid back up to £50,000. Even if they die before the settlement is made, the DSS is at the graveside to claw back the money from mourning dependants.

Asbestosis sufferers have to suffer a terrible ordeal. First, they must prove that they contracted the disease rather than lung cancer or some other illness. They must then prove where they contracted that disease, perhaps 10, 20, 30 or 40 years before, and they must find workmates who can testify that they worked there. They must then locate their employers, many of whom have gone out of business, or find their responsible successor bodies.

They then face years of litigation. If they win their cases, they may have to pay back to the DSS all the money awarded to them. That is a squalid practice, which reflects very badly on this country, and especially on the Government. I am particularly angry about the situation because my constituency of Clydebank has an asbestos disease rate about 500 times the national average, due to its background of shipbuilding and engineering and the presence of a major asbestos factory. An article in The Glasgow Herald in 1993 about Turner and Newall's asbestos factory is accompanied by a photograph of young factory workers from 1953. All those workers are now dead, and 12 of them died from breathing-related diseases.

The matter is about much more than asbestosis, although I believe that asbestosis sufferers suffer particularly badly because of the time involved in settling their claims. Often, people are desperately ill, and a large part of their settlement is awarded for pain and suffering.

Other injustices are also emerging. What will happen if the insurance companies or the courts make a particularly niggardly settlement? What is the point of appealing that decision when any extra settlement will simply be confiscated by the agents of the Government?

There is increasing evidence—which is known to me and to the trade unions, if not to the Minister—that the clawback is backfiring, as more and more insurance companies are now offering only £2,500, which is the maximum amount that cannot be clawed back. Britain's largest union, Unison, has seen the number of cases which settle at £2,500 increase from 40 in 1990 to 270 in 1993, although the total number of cases has not increased. That is a more than sixfold increase. The Transport and General Workers Union and the GMB report the same findings.

How interesting it is that the victims are so angry with the Government that they would rather those who cause their affliction got off lightly than that the Government recovered more money. It is the reverse of what the Government intended. They said that the principle was that the negligent and the culpable should not be subsidised by the taxpayer, but that is what is happening.

Mr. Andrew Mackinlay (Thurrock)

Will my hon. Friend comment on my suggestion that the ultimate solution should be for the compensator—either the employer or his insurance company—to have to repay to the state the social security benefits instead of the person who is ill or injured? That would load the dice slightly in favour of workers who are suffering from the exploitation of employers or insurance companies that deliberately stall and offer insulting sums in compensation.

Mr. Worthington

That is a worthwhile idea to explore. The present position is certainly intolerable, as the person who is suffering from the system is the one who has already suffered.

In evidence to the Social Security Select Committee, the Association of Personal Injury Lawyers described the effect of the CRU as iniquitous, and so it is.

This afternoon, I listened to the Minister's response to questions from the Social Security Select Committee. It was a depressing and disturbing experience. The Minister seemed to have no knowledge of or concern for the consequences of his policies upon people who had suffered a calamity in their lives. All that mattered to his Department and the Government was efficiently gathering in £100 million per year.

The fact that the system was treating quite brutally victims of industrial accidents, disease and other misfortunes seemed not to bother him at all, and he was quite unable to answer questions about the consequences of his policies upon those people. Bad employers are now benefiting from his policies, because of the increased practice of only £2,500 being offered. That seems to have passed him by, and the Department does not even bother to keep statistics.

He seemed to justify it all by saying that the taxpayer now benefited by £100 million a year. The victims are taxpayers. They paid their national insurance and all their other taxes for years, and they have the right to be considered. Are they being treated fairly? I am a taxpayer, and I do not want tax savings at the expense of those who are injured, maimed or ill.

This afternoon, the Minister seemed unaware that he is no longer supposed to be a smart lawyer. He is supposed to be a Minister of the Crown, and deal with the world of values. I would like him now to defend the values that are causing distress to thousands of people throughout the country through the CRU.

10.17 pm
The Parliamentary Under-Secretary of State for Social Security (Mr. Roger Evans)

I shall ignore the discourtesy in the last part of the hon. Gentleman's speech.

He was right to say that asbestosis cases are some of the hardest for anybody to litigate. The circumstances are usually tragic, the problems of proof many years afterwards and the difficulties of medical evidence all too apparent, but they are the most difficult and hard cases, analogous to the problems of pneumoconiosis and the dangers of radiation damage and other forms of cancer. There are fundamentally difficult problems of proof that give the plaintiff considerable disadvantages. [Interruption.] I shall finish the sentence. Until the Limitation Acts were relaxed a decade or so ago, they were classically the cases which would never get to court, as the injury did not manifest itself until well after the limitation period.

Mr. Worthington

I am grateful to the Minister. I assure him that it is not simply an issue of asbestosis. I can show him other cases which are equally tragic, but I know about asbestosis. He mentioned pneumoconiosis. Is he aware that there is a separate scheme for pneumoconiosis sufferers, so that they are not caught up in this scheme? Will he introduce a similar proposal to lift those with asbestosis out of this tragic situation?

Mr. Evans

That is widening the argument considerably. The point at stake is this: we are discussing the assessment of damages for common law actions. If the hon. Gentleman wants to argue that asbestosis cases should be treated in some different fashion, that is a separate issue. If he does so, he has to bear in mind that they are not necessarily the only hard and difficult cases.

I accept that the operation of the scheme has been seriously misunderstood, and it is painfully obvious that it has been seriously misunderstood by the hon. Gentleman. The fundamental principle—a very old one—is that there should not be double recovery by the plaintiff: in other words, the plaintiff cannot have his cake and eat it. [Interruption.] It is not just the Government who claw back what they pay out. In an ordinary indemnity policy, when the insurers have paid up, they take the advantage of the plaintiff's rights and extract what they can from the defendants.

There is nothing unusual about that principle; indeed, it was embodied in the Beveridge report. A compromise was made in the Law Reform (Personal Injuries) Act 1948, whereby 50 per cent. of certain benefits was deducted under a statutory exception for five years. That compromise, however, was plainly a confusion, The courts added to the difficulty: some benefits were subsequently held to be non-deductible in full, while some were held to be deductible in half.

The most startling conclusion in the line of cases occurred in Hodgson v. Trapp, decided just before the legislation that we are discussing. More than £30,000 in respect of attendance and mobility allowances, cast forward without limitation in terms of numbers of years, was deducted from the plaintiff. The injustice, however, was even worse than that. Under the old scheme, what was deducted went for the benefit of the tortfeasor—the negligent employer; the person who was partly to blame.

It is hardly surprising that the original arrangements under the 1948 Act underwent considerable criticism in a report by the National Audit Commission and another by the Public Accounts Committee—a Committee of the House. The Government were persuaded to act on the basis that the existing system was not working in a coherent fashion, and aspects of it were plainly unjust—particularly to the severely disabled.

Under the old scheme, in the hard cases to which the hon. Gentleman referred—cases in which someone might be rendered paraplegic, for instance—enormous sums of attendance and mobility allowance would be deducted in full from that person's damages. Something obviously had to be done, and that is why the Government legislated as they did.

Mr. Mackinlay

Out of the frying pan into the fire.

Mr. Evans

That is not the case.

Under the scheme for which we have now legislated, those who receive benefits and recoup moneys must repay the benefit. That is hardly an unjust proposition, and it is hardly startling in an international context. Many other countries in every part of the world have a variety of different mechanisms to protect state welfare payments, and to provide for certain arrangements for the recovery of those payments from those who are guilty—

Mr. Mackinlay

Let us set aside for a moment the question of how compensation should be comprised and assessed. Does the Minister not understand that employers and insurance companies are exploiting the position, because they know that it gives them maximum leverage to make a poor, sick individual settle early and settle for little?

Mr. Evans

No; that is a gross exaggeration. If the hon. Gentleman has evidence to that effect, he should give it to the Select Committee. We shall await its report and see what evidence there is. The Association of British Insurers did not accept that the £2,500 lower limit—which is a practical arrangement—was being abused in the fashion suggested by the hon. Members for Thurrock (Mr. Mackinlay) and for Clydebank and Milngavie.

The arrangements under the legislation are, in broad terms, acceptable and fair to all the parties involved.

Mr. Worthington

No.

Mr. Evans

I appreciate that the hon. Gentleman may not be persuaded by my argument yet, but let me at least complete this facet of it.

In so far as the plaintiff has received state benefits just as though he had paid out for a private insurance policy on an indemnity basis, if he recovers he has an obligation to repay. If he does not recover, he does not have to repay, but he still receives his state benefits immediately and in full, like anyone else.

The defendants have to pay out money. They have to recoup it under the administrative arrangements of this scheme, whereby insurers pay it direct to the CRU—so the insurer has to pay. The taxpayer is now being paid out a not insignificant sum of money, whereas that sum of money—this shows the injustice of the 1948 scheme—was being used previously to subsidise the negligent and those who were partly to blame for accidents. That cannot be a sensible or reasonable targeting of public expenditure on social security priorities.

Of course, members of the public who are suing prefer to win the maximum damages that a court will award or which the insurers to the defendants might pay up. But traditionally, damages for tort injuries are based on compensation—no more and no less. I think that someone said that the awards for compensation may not be high enough, but that is a rather different issue. The principle is: a person will be compensated for his injuries, no more and no less, under a scheme which is well established and long known. The problem with the arrangement under the old scheme was that it was unfair to the taxpayer and it dissipated public money in a way that was inconsistent. It was not fair as between different classes of plaintiffs, particularly the severely disabled who had on-going obligations to deduct in respect of attendance and mobility allowance.

Mr. Worthington

The Minister is doing the same as he did this afternoon—telling us what was wrong with the old scheme. I am asking him to justify the new scheme. It was clear this afternoon that the Department does not keep statistics or information. I have more information about the working of the scheme and its consequences for people than the Minister does. Why will he not turn his attention to the workings of the new scheme and its consequences for people?

Mr. Evans

If the hon. Gentleman will bear with me, I shall come to the workings of the new scheme. He undoubtedly has a certain amount of information about its operation. He has tabled large numbers of parliamentary questions about it. The Department of Social Security is well aware of how the scheme operates.

It is not helpful to the House or to anyone to cite, as the hon. Gentleman did, the bald facts of a number of cases, some of which would undoubtedly be thought tragic. But the arrangement must be that the plaintiff in an ordinary action at common law has a case which may be strong, indifferent or weak. That is reflected in the amount that he succeeds in recovering. Understandably, those who may wish to obtain more do not always do so.

The Government had a choice about the way in which the new scheme would operate. How were they to make provision for the repayment of the moneys? As the hon. Member for Thurrock has suggested, it was open to the Government to say that all recouped damages should be added as an extra head of damages. That sounds an extremely attractive proposal to plaintiffs—

Mr. Mackinlay

And fair.

Mr. Evans

I hear what the hon. Gentleman says, but there is then an element of double recovery.

It is hardly surprising that such a proposition would be entertained by the insurance industry as an appalling increase in its costs, and a burden by way of additional expenditure on insurance premiums for the rest of the public who are not injured—

Mr. Mackinlay

But it would help health and safety standards in factories.

Mr. Evans

The hon. Gentleman makes the perfectly fair point—even if it is perhaps not in order—that there is a strong public interest in improving safety standards at work, on the roads or anywhere else. The old system, which enabled the negligent employer to take advantage of the taxpayer, is hardly consistent with that argument.

The Government, in introducing the new scheme, had a number of options. We could have created the kind of statutory repayment right—a statutory right of subrogation—that exists in certain other parts of the world, whereby we would nationalise all plaintiffs' claims, take conduct of them and settle them on behalf of the plaintiff, on the basis that so much of the damages could be identified as loss of earnings against which benefit could be offset. The other option that I heard about this afternoon was to agree the proportion of contributory negligence.

The Government, rightly, chose not to do either, because it would have involved considerable administrative expense and meddling in the affairs of plaintiffs who have, and ought to have, free conduct of their litigation. The Government's choice is administratively extremely simple. By placing a requirement on insurers to pay the compensation recovery unit a certified amount to the Government, we have introduced a scheme that, for the first time, gives the taxpayers' interest proper representation.

It would be possible to introduce a case-for-case breakdown to deal with the issues of whether there should be separate heads of damages and contributory negligence. However, only a fraction of personal injury cases lead to litigation, and an even smaller fraction—less than 10 per cent.—are determined by a judge.

The trade unions or lawyers representing both sides in such arguments deploy an exact practitioner's art, and such claims are cheaply and economically settled, with the avoidance of litigation. If we were to introduce a system whereby the Government were to act as big brother and to interfere in that settlement process, we would inevitably create considerable expenditure and place the Department of Social Security in the position of judge, without the expertise and a full and fair trial.

It is simpler and fairer on all parties involved for the Government to recover the whole of their loss. That is not startling or unfair, but is the basis on which insurance companies operate in respect of, for example, ordinary indemnity insurance. You may pay your premiums, Mr. Deputy Speaker, but the insurance company always expects to recover its loss from you.

Question put and agreed to.

Adjourned accordingly at twenty-eight minutes to Eleven o'clock.