I am grateful for that further assurance. On 10 December, the Minister said that 3% “is not going anywhere”. On 12 December, he said:
“Three per cent. is 3% and we have no intention of moving away from it.”––[Official Report, Mesothelioma (Lords) Public Bill Committee, 12 December 2013; c. 117.]
He has given us a further assurance this afternoon. He was a wee bit more equivocal, if he will forgive me for saying so, in his letter to Committee members on 17 December, where he said:
“We will look to ensure that the rate of the levy continues to be 3% of GWP...or equivalent to 100% of average civil damages.”
I am particularly concerned about this, because the Government’s impact assessment says that the levy will raise £371 million over 10 years, but I have subsequently learned from the economist at the Department for Work and Pensions that their modelling to arrive at that figure is based not on 3% “not going anywhere” but on how much it costs to meet payouts at 75% of average civil damages and the associated costs. In fact, the figure of £367 million in the impact assessment, which is what the Government have been relying on as the cost of the scheme that they say is affordable to the industry, means that the industry will face a levy of just 2.46% over 10 years. I know that the Minister has assured us that there will be a review after four years of the operation of the scheme, the amount the levy has raised and what can be done to increase the rate of payments beyond 75%. Indeed, the Minister has said to me that there might be other things that can be done, too.
If the industry can afford 3% today, it can afford 3% over the lifetime of the scheme. If the rate were maintained at 3% over the first 10 years of the scheme, it would raise £452 million rather than £371 million. That would be a further £81 million for sufferers that the industry is telling us it can afford. Indeed, the industry thinks that the scheme will run for 30 or 40 years and talks about there being a cost of £30 million to £35 million a year, or £1.2 billion to £1.4 billion over the whole period of the scheme. The cost of 100% payouts going back to 1968 will be £1.1 billion, so 3% would allow us a much earlier start date and to increase the rate while leaving some money over for research or to cover other diseases.
It seems to me that there is plenty of scope to enshrine the level of 3% in legislation. The industry can afford to pay it and we have no reason to believe that it cannot or will not be able to afford it in the future. The industry says that that is an acceptable levy that would put more money into the scheme, if not immediately then in subsequent years. The industry will face the levy during the first four years of the scheme, so we are not asking for any extra money during those years. I cannot understand why that levy cannot be enshrined in the Bill today.
I strongly support amendment 5 on the start date, proposed by my right hon. Friend the Member for Newcastle upon Tyne East (Mr Brown), for exactly the reason given, for example, by my hon. Friend the Member
for Wansbeck (Ian Lavery)—the guilty knowledge which backdates, even on the most modest reading, to at least February 2010 when the Labour Government launched the most recent consultation. I would argue that since that date the industry has been on notice that there will be a scheme, and one for which it will have to pay.
The Minister says that one option in the consultation was to do nothing, and that might be true. Consultation documents always contain a do nothing option, but that rarely suggests that nothing will transpire. I do not think that the Government of the day, this Government or insurers have thought that doing nothing was the option on the table. Labour’s consultation document specifically said that Ministers were
“persuaded that an Employers’ Liability Insurance Bureau…should form part of the package”
creating a compensator of last resort. The industry has been planning for a scheme based on market share of employers’ liability insurance, either historic or current. In its response to the Labour consultation, the industry concentrated on only two costed models and made it quite clear that that was the basis on which it expected the scheme to proceed.
It has been noted, although I think some of my colleagues were rather sceptical about the figure, that backdating to 2010 could increase costs by £80 million over 10 years. I think that figure is acceptable and understand why the Government have suggested it. We will see an early spike in claims during the first few years of the scheme and in later years, of course, we will expect the number of claims to reduce. I accept that backdating the scheme to February 2010 would breach the 3% levy by taking it to 3.56% over the first four years of the scheme, although it would be comfortably within 3% over the first 10 years. Ho0wever, I strongly contend that for a multi-billion-pound industry that is receiving, as colleagues have pointed out, a £17 million gift and a £30 million loan from the Government, it could easily swallow that cash-flow issue, especially given that, as has been pointed out repeatedly this afternoon, it has been taking income in premiums for such policies over years—in fact, over decades. The money is already in its hands.
Let me remind right hon. and hon. Members that it is not possible to access the scheme unless the technical committee that will manage it takes a view that an employers’ liability insurance policy was in place. It is not possible to access the scheme on the basis that there was no policy; there must be prima facie evidence that there was a policy and that premiums were therefore collected.
I understand and strongly sympathise with the points made by colleagues about the moral case for 100% of average civil damages to be the basis on which the scheme should operate. In fact, I believe that that is the Minister’s, and everybody’s, moral preferred position in relation to the victims of this horrific disease. I was very pleased to hear him put on the record—I think it is the first time he has had the chance to do so—that it was not his view that a figure below 100% was necessary to create some sort of incentive to sufferers to find an insurer rather than simply come to the scheme. I think we have all found quite offensive the suggestion that sufferers are in some way shopping around for the best deal. I am grateful to him for putting on the record that the Government do not believe that that would be the case.
I was struck by the point made by my hon. Friend the Member for Middlesbrough (Andy McDonald)—sadly, he is not in the Chamber at the moment—that because of well-established principles of contributory negligence, in paying out less than 100% to victims we albeit inadvertently send a message to them that it may be perceived that to some degree the suffering that they are facing is their own fault. That is an extremely unfortunate and unjustified message to send to victims who have contracted a disease simply from going out to work to earn a living and support their families. I hope we can all accept that whatever the constraints imposed by the deal that the Minister has been able to negotiate, the moral case for mesothelioma sufferers coming to this scheme is that they should be compensated in full.
The proposal by the hon. Member for Chatham and Aylesford (Tracey Crouch) is supported right across the House. We recognise that an 80% payout is a very reasonable compromise even within the terms of the scheme that the Minister has negotiated. There would be more money in the scheme if the Government and the industry stopped messing around with the likely legal fees that claimants would be facing. The fees were £7,000 and then went down to £2,000, which somehow magically allowed us to get the payouts up to 75%, and now they have gone back up to £7,000 again. The hon. and learned Member for Sleaford and North Hykeham (Stephen Phillips) is not able to join us in today’s debate, but in Committee he made some very telling points about lawyers’ fees. He is a well-paid lawyer, so I am sure he will forgive me for saying that he ought to know —[Interruption.] The fees were considerably more modest than his fees, as I think we all heard. He pointed out that any assumption in the basis on which legal fees were calculated within the scheme would create the danger of that becoming the tariff for its legal fees. The Minister undertook to have further discussions to see whether it would be possible to bear down on the level of legal fees.
I have since been advised by an asbestos victims support group that it has been asked to help to get mesothelioma victims to put pressure on their lawyers to keep the fees low. That is unacceptable. At a time when they are coping with an appalling illness and worrying about the future for their families, as they know they may not even survive to receive the compensation that they are due, the last thing they need is to get into an argument with their lawyers about fees. I really hope that the Minister is able to do much more than simply pass the problem back to victims. Perhaps he will respond to that point in his comments.
Another issue that we discussed in Committee and have not yet got to the bottom of is that a whole range of other fees are covered by the levy, as we have debated during the passage of the Bill: the insurance industry’s legal fees of £24.2 million, as distinct from the victims’ legal fees; the scheme administration costs of £4.4 million; and the set-up costs of £1.4 million. In Committee, the Minister assured me that the industry’s legal fees would be spent to the benefit of claimants and said he would get back to me if he was wrong about that. As he has not done so, I assume that those fees will be spent for the benefit of claimants. However, since he told me that on 12 December, I have been racking my brains as to how they would be spent for the benefit of claimants, and I have not been able to think of anything. I therefore hope that he will now be able to give me chapter and verse on exactly how those fees are to be deployed.
I also hope the Minister will be able to confirm that the sum set aside for setting up and administering the scheme will contain no profit element. This is of particular concern, because we know that the insurance industry itself is likely to bid to run the scheme. The Minister assured us in Committee that the process of appointing the body to run the scheme would be a competitive one. He said it would be based on value for money and commercial criteria, which is welcome, but those criteria would not necessarily preclude the administrator from making a profit: they might simply have to come up with the best price.
I am still in some about doubt about the position on arbitration costs and whether they are also being taken out of the levy. The Minister has not yet responded on that.
All those factors could serve to deplete funds that could otherwise be deployed to more generous payouts or to an earlier start date. It really is not good enough that we are still in the dark at this very late stage as to how much of the levy is earmarked for expenditure other than direct payments to victims.
5 pm
I welcome the debate we have had this afternoon and the attempts made by Members throughout the House to extend the generosity of the scheme to victims. I very much hope that the Minister will be able to give us some positive reassurances as to how that can be achieved, because I know he shares with all colleagues the wish for the scheme to be as generous as possible. It is strongly our view that there is every reason to believe—we have heard the evidence this afternoon—that the scheme can afford to be more generous than it is at present.