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Hearing Loss (Coal Industry)

Volume 450: debated on Tuesday 10 October 2006

I shall proceed studiously, carefully and cautiously to outline the issues that I wish to raise about the scheme—or the lack of a scheme—that the Government operate for coal industry hearing loss claims. It is not a new matter. Such claims have been submitted over many years; the vast majority were settled 10 or more years ago through the iron trades scheme, which itself wound up about six years ago. I want to consider what has happened since then, and to ask some questions.

For the benefit of the Minister, and to give his officials the maximum time to delve into the issue, I give notice that one of my questions will be about the levying of VAT on costs, particularly those of the Union of Democratic Mineworkers. I have asked various parliamentary questions during the past year on whether the UDM has had to pay VAT on its costs. I give the officials the maximum time to clarify matters, should the Minister care to respond on that point.

I shall start with how the system used to work. Until six years ago, the costs paid by the Department for Trade and Industry as the employer, as a result of its Coal Board legacy, were between £600 and £700 a case. That is what solicitors received across the board. A number of solicitors have verified that the figures were in that ball park, and the Department’s statistics, kindly supplied in written answers, demonstrate that that was pretty much the case even six years ago. The vast majority of cases were not legally disputed. Most legal disputes were over limitation, but the vast majority were not disputed and therefore never went near the courts.

Since then, we have moved away from that system to a hybrid of bilateral arrangements with certain solicitors and others, and the common law. The position has worsened with the impact of the Conditional Fee Agreements Regulations 2000, which came into force in November 2000. From then, a different approach seems to have been taken by solicitors, which has implications for our constituents and for the Government.

I offer the Minister the opportunity to demonstrate that his Department and the Government have higher standards than other employers—as the Government should, given their employer liabilities. First, on their expenditure, the Government have a duty to taxpayers; secondly, as good employers, the Government have a duty of care to current and ex-employees. The difference between good and bad employers is that, faced with compensation claims for an industrial disease, the bad employer does not care how much goes to the men or women making the claim; they care about the bottom line and how much it will cost them. For the Government, the breakdown between the two is equal; the Government want to minimise the amount of taxpayers’ money being spent in toto—rightly so—but they also want to maximise the amount that goes to those who suffer industrial diseases as a result of negligence either of the Government or, as in this case, of the Coal Board, the employer.

When considering solicitors’ costs, the past six years provide some interesting reading. Between 2000 and 2006, the increase in solicitors’ costs for hearing loss claims has risen by 78 per cent. That is a significant increase. Average damages have gone down only slightly, but it is fair to say that they have remained on an even keel at just over £2,000 per man. I turn to the costs; I shall give one example, but there are many more—and this is not one of the more expensive ones.

In 2001, Beresford, the firm of solicitors, was paid an average per claim of £687. In 2005, that had risen to £1,246. As I said, at 61 per cent., that increase is below the average; the rise for the other solicitors and claims handlers is 78 per cent. That demonstrates a sudden and prominent rise. I shall round the figures downwards; the averages from 1999 onwards are £700, £700, £700, £700, £800, £1,100, £1,100 and £1,200. It is an upward spiral of costs to the taxpayer, but it is not only the Government who are paying more. Strangely, the claimant who wins is paying more.

It will be interesting to consider what has happened to some of my constituents. I have with me the minutes of a meeting between Beresford and the UDM. It gives details of how moneys will be transferred between the various agencies. It states that Vendside is “entitled” to a share of the client’s compensation. That sums up what was going on. A range of middlemen and women are sticking their noses in. That is the kind of thing happening to my constituents. If someone takes a claim to the UDM, the union might pass it on to a solicitor—perhaps Beresford. But Beresford could pass it on to another company, perhaps Browns. Indeed, I know of a case in which that happened. As a result, a cut of £352.50 goes to Vendside and another cut of about £250 goes to Beresford—before any work has been done by Browns.

It gets worse. I have a copy of the standard UDM form that one of my constituents had to use. Stamped over it is “Walker and Co.” and in the corner of the form I see this:

“When instructing Melex, the referral source of this claim should be noted on the letter of instruction.”

It seems a rather odd thing to write on a claim. Going back through the minutes of the meeting between Beresford and the UDM, I see that for medical fees Melex is a middleman broker, as is Walker and Co. They, too, are getting a cut of the money. Frankly, although the question whether my constituent or the Government pay is important, someone is making money out of claims for hearing loss.

Will my hon. Friend join me in condemning Watson Burton solicitors, who last week were exposed in the Newcastle Journal for colluding with a company called P and R Associates, another middleman firm? It abducted some £350,000 from victims’ payouts. Does my hon. Friend think that the Government should write to everyone who has had a claim paid, pointing out that those deductions are not necessary and should be repaid?

It would be appropriate for the Government, as a good employer, to write to everyone.

The Watson Burton case highlights the problem. The firm has been disciplined by the Law Society, but that ruling was kept private and confidential. It came to light only when it was leaked into the public domain, despite the fact that it affected the Government’s determination whether Watson Burton should be entitled to do hearing loss claims, as I believe it does, or claims for chronic obstructive pulmonary disease or vibration white finger—or even consumer complaints for redress to the Law Society. I hope that the Minister will insist on making judgments public on all firms of solicitors in which his Department has a direct financial relationship.

Everyone taking a cut has a knock-on effect. The same model has been used for textile workers. However, it is worse for them, as cases are dropped, with less good employers being prepared to negotiate before they get to court. There is a strange correlation, in that hundreds of cases are dropped by solicitors the moment that employers are about to go through the costly legal process.

The document that I have here may explain some of that—I will give the Minister a copy afterwards. It is about an offshore insurance company and its relationship with one of the companies dealing with hearing loss, which does other work with the Government. The document goes through the distribution of the gross premium that would in theory apply to hearing loss cases in the mining industry—I do not know whether it actually does, because it is a generic document. A £1,400 premium is levied for a conditional fee arrangement. That is then split into £550 for the insurer, £500 into what appears to be an offshore trust account, £150 into another account and £200 into a fourth account. Those figures are documented in great detail in relation to an Isle of Man offshore insurer that deals with hearing loss claims, and I suspect may deal with claims in relation to the mining industry as well as the textile industry. I will leave the Minister to inform the House about that at a later stage if it impacts on his responsibilities.

Clearly, something is awry. The Minister claims in one of his answers that the issue of insurance indemnity is a matter for claimants. I suggest that it is a matter for the Government as well as claimants. People in the textile industry could have gone through unions, such as the Community union, at no cost or risk to themselves. Instead, they went down another route—that is a separate issue for a different Department about access to justice, but it impacts on the Minister’s Department.

In relation to mining, the insurance indemnity issue should be of concern to the Minister. A constituent who has had deductions, like many others, has been told that he should have £50,000 in insurance indemnity, in essence to meet the Government’s costs if he loses in court. I have looked at his insurance policy and he has only £25,000 of indemnity. There are countless identical cases. That is an issue for employers, but is also an issue for my constituent in terms of access to justice and for the Government as an employer.

The issue of VAT is simple. I have here a series of written answers from the Minister. We are told that all hearing loss claims from the Union of Democratic Mineworkers were submitted by the UDM, not by Vendside. However, it appears from another set of answers that VAT has been paid on all the claims. If that is the case, around £1 million of taxpayers’ money has been wrongly paid in VAT. Unions cannot levy VAT in such cases. Limited liability companies can, but the claims referred to in four written answers were put in by the UDM, so I trust that the Minister will confirm whether VAT has been paid and immediately take action with Customs and Excise to claw back what I estimate to be £800,000 to £1 million of taxpayers’ money wrongly paid out to the UDM.

My final point relates to minutes that I have obtained under the freedom of information legislation, having failed to obtain the information through parliamentary questions. It is a note of a meeting between the UDM and the Department. In the response to my request, the document is described as the only minutes before the claims handling agreements from 1999 were settled. I have copies here for hon. Members. Two paragraphs are particularly interesting. The first says:

“The UDM have been accepting “defecting” claimants who had initially been registered with solicitors such as—”.

The name has been deleted, and I am sure that hon. Members would like to know which solicitor that is. The second says:

“The UDM will administer both VWF and COAD claims for anyone, from anywhere, and do not charge the claimant anything for the service” .

We have it on the record—these are official minutes—but that has not been stated before. Indeed, there appears to have been some defence of charging by the UDM, yet in the one meeting between the DTI and the UDM before the claims handling agreement was signed with the UDM, it is specifically stated in the minutes that the union will not charge. I suspect that this may be useful in forthcoming legal action against the UDM.

There is then a paragraph that has been blanked out. As this relates sequentially to the question of how the UDM are operating, I suggest that it is in the public interest that the paragraph be made public, so that people can see precisely what the arrangements were between the UDM and the DTI at that time. The energy liabilities committee is identified in the document. It has delegated authority to make a decision. No one I have spoken to has heard of that committee, and I would like the Minister to clarify who sat on that committee, what delegated responsibilities it had and during what years or months it sat.

I want to ask the Minister about people who have not received money for hearing loss claims dealt with by his Department over some years when the Department has conceded the principle that there is a claim to be made. Is his Department choosing to keep people in contact with the progress of their claim? There appear to be cases in which my constituents have not been informed of progress for the past two years. Will he methodically keep claimants in touch with their claims in cases in which they will certainly receive compensation, although the amount may be in dispute?

Claims in 2000 or 1999—I have looked at loads of them—were settled in three months, from the claim being lodged until final payment. Settlements are now taking five years, which seems to be a long time. Will the Minister condemn the practice of industrial deafness and hearing loss claims being handled by telephone? I have found that all cases were dealt with by telephone. Does he agree that there needs to be an urgent policy statement by the Law Society on that practice, as it is clearly a nonsense and brings solicitors into disrepute.

Does the Minister agree that if the Government allow a claims handler such as the UDM to deal with claims, there have to be consumer rights equivalent to those for dealing with complaints about solicitors through the Law Society? Indeed, why are claims handlers putting in claims, and will he release the range of costs given to different solicitors in relation to the agreements over hearing loss, so that we can see the maximum and the minimum?

I have asked questions on VAT, Melex and Walker and Co. Finally, will the Minister give access to claimants’ files where there is a consumer complaint? If there is a complaint and a solicitor is involved, there is the possibility, using the Law Society’s regulatory powers, to access the file so that we can see what has happened and the claimant can proceed with their complaint for better or worse. That seems appropriate, and from my experience it is a good system that works. The Law Society could do with ratcheting up its action against solicitors who mess it around, but generally the system works.

The potential to use such a system is not there for any hearing loss claim put in by the UDM. When I have requested a file or answers from the UDM on behalf of a constituent, there has been no response hitherto other than a refusal. Will the Minister, as a good employer, give my constituents and others who have a consumer dispute the right to access the employer file so that they can take their complaint—against the UDM rather than the Government—to a further stage?

I am grateful to my hon. Friend the Member for Bassetlaw (John Mann) for raising this issue. He has had a long and partially successful campaign that has led to a major inquiry into coal health compensation, and parliamentary statements by Ministers on this important subject. I am fully aware of the concerns that he and others have expressed about the difficulties that some claimants have faced in securing their full compensation, and about the manner in which solicitors and others have acted in handling the claims.

Generally, I am of course keen to ensure that the Department continues to pay damages swiftly and fairly—that is what the scheme should be about. I recognise that solicitors should be properly rewarded, but I also have a duty to the public purse to keep costs to a minimum and relevant to the work undertaken.

The first noise-induced hearing loss claims from miners were made against British Coal in the late 1970s and early 1980s. British Coal settled a considerable number of noise claims from its former employees. Some 257,000 hearing loss claims were made against British Coal in the 18-year period up to 1997. As the matter had not been heard in full at court, there was no time pressure on solicitors to submit claims.

The Department assumed responsibility for British Coal’s liabilities in January 1998. British Coal had been taken to court in 1996 under two separate group litigations supported by the mining unions. British Coal was found negligent in relation to vibration white finger in 1997 and in relation to respiratory disease in 1998. As a result, the Department entered into claims handling agreements in relation to those claims.

With hearing loss claims, the Department inherited pre-existing agreements between British Coal and miners’ representatives relating to those claims. At the end of August 2006, almost 40,000 hearing loss claims had been submitted since January 1997. Of those, more than 37,000 have been settled, denied or withdrawn, with more than 2,000 outstanding. Claims still outstanding are mainly claims of minimal hearing loss or those that have progressed to litigation. In total, almost £70 million has been paid in compensation since 1997. We continue to receive about 100 claims a month, although the trend is downward. Typically, claims take a little over a year to settle.

British Coal negotiated the settlement of claims on an individual basis. It did so initially by negotiating with the principal mining unions, entering into agreements with the unions directly, and their appointed legal representatives. As miners left the industry, many of them left the union and when they later became aware of their hearing loss they brought claims through high-street firms of solicitors. The change in the profile of cases led British Coal to enter into arrangements for the disposal of noise claims not only with unions, but with those firms that had large volumes of claims. In large part, the Department has continued with those agreements.

In the early days, claims were presented with either union backing or legal aid. In 2000, conditional fee arrangements were introduced and legal aid for personal injury claims was withdrawn. The Conditional Fee Agreements Regulations 2000 introduced different ways of financing claims for both solicitors and unions. The cost of financing unsuccessful cases is met by an uplift on the successful ones. The changes have meant that the Department has faced an increased cost liability in those cases in which there is no costs agreement in place and the claim is supported by a conditional fee agreement. There has also been pressure in those cases in which costs agreements are in place to increase the costs payable under those arrangements. Costs are settled on the best basis economically for the Department. If we can negotiate them, it is usually on a global basis, so none of the components is specifically negotiated. However, if the costs remain in dispute, each aspect of the costs will be questioned.

The Conditional Fee Agreements Regulations 2000 were intended to protect claimants from entering into agreements that were unnecessary or that they did not understand. Since November 2005, when the regulations were revised, the Law Society has been responsible for consumer protection. The new regulations are also designed to prevent technical challenges to conditional fee agreements. New codes of conduct in relation to client care and information regarding funding are due for release later this year. The Law Society has also produced a model conditional fee agreement.

There are cases in which the Department believes that solicitors have failed to satisfy the requirements of the Conditional Fee Agreements Regulations. That has led to continued challenges to the right to costs. However, I am pleased to report that the number of such challenges is reducing. I should make it clear that in cases in which the Department disputes the level of costs claimed, compensation is still paid up front. The Department is also making interim payment of those elements of costs that are not disputed. I understand that, in some cases, the claimant’s representative is withholding part of the compensation due in order to cover interest payments that accrue while the costs element is in dispute. That is, to put it mildly, disappointing, but it is for the Law Society to consider whether solicitors are acting appropriately in those circumstances.

My hon. Friend raised valid concerns both about claimants not receiving their compensation in full and about the manner in which some parties have handled claims. I stress that those are matters for the Law Society, not the Department. I am also deeply concerned that moneys are being deducted from claimants’ compensation; indeed, I am disgusted to learn of that practice. I assure my hon. Friend that I will continue to raise my concerns with the Law Society’s investigation and enforcement directorate and will maintain a close interest in the consideration of the issue. Indeed, I plan to meet its representatives again in early November to discuss progress.

The Department shares many of my hon. Friend’s concerns. In particular, I am concerned that some of the contractual arrangements entered into by some claimant representatives may breach either the Conditional Fee Agreements Regulations or the professional code of conduct for solicitors. Were that to be the case, I would expect that liability for costs could be struck down. I am also concerned by the level of some insurance premiums claimed. Those do not always appear to be good value for the claimant. A cheaper and more effective policy could and should have been obtained.

The level of the success fee uplift is invariably 90 to 100 per cent., leading to a potential doubling of the Department’s costs liability. I believe such claims to be excessive, given the nature of the cases that have been brought.

The Department considers some of the medical arrangements in these cases and the use of medical agencies excessive if not unnecessary. Courts have previously ruled that medical agency fees are recoverable provided that they are reasonable. Consequently, the Department continues to challenge charges that appear unreasonably high.

I cannot answer all the detailed points today. Some are very specific and some involve significant allegations, but I promise to respond fully to my hon. Friend in writing. On the point raised by my hon. Friend the Member for North Durham (Mr. Jones), that the Department should write to all claimants, we have considered that in the past. However, for various reasons that I could explain, we felt that it might lead to unnecessary anxiety and confusion. Some of the people involved are now very old and we must be sensitive about this issue. However, the Law Society has stepped up its advertising campaign to raise awareness of the issue of deductions, and in the light of my hon. Friend’s point, I will raise the issue again with the Law Society when I meet its representatives in a few weeks’ time.

On the question about the responsibilities of the energy liabilities committee, I understand that my hon. Friend the Member for Bassetlaw has asked me a parliamentary question about that. Although obviously I know the answer now, I think that it might be best to put it in writing as soon as I can.

On the levying of VAT on costs by the UDM, again I will have to write to my hon. Friend, but in view of what he has said, I will consider whether I need to take further action in terms of a possible need to alert the relevant Department or to direct Customs and Excise if that seems sensible, given what I think my hon. Friend was driving at.

There is one point that the Minister could confirm today if he was so minded. I am referring to access to files where there is a consumer complaint against the UDM and there is no ability to use the Law Society to force that organisation even to release the file to see, for example, whether the case has been handled properly in terms of the amount of compensation obtained.

In principle, it is always important to let people have access to as many data as possible. I cannot give my hon. Friend a full answer now. Because he does occasionally ask questions about this subject—100 or so a week—I will respond to him on the matter in writing so that I can get my answer right.

I congratulate my hon. Friend and colleagues on raising a series of matters relating to coal health compensation. We should remember that this has, in general, been a very successful scheme that has given many millions of pounds of proper compensation to decent former miners or their relatives. None of the concerns should hide that fact, but there are concerns, which is why we set up the official inquiry. I reported in parliamentary statements the outcome of that. My hon. Friend has now raised other matters, which I will take most seriously.

Question put and agreed to.

Adjourned accordingly at two minutes to Two o’clock.