I am pleased to be able to inform the House that we have decided to exempt payments made in respect of asbestos related diseases by subsidiaries of Federal Mogul from the Department’s Compensation Recovery Scheme.

The Compensation Recovery Scheme is aimed at ensuring that injured parties are not compensated twice—once through the compensation payment they receive from the employer or insurer and again through the benefits system. The scheme also helps ensure that compensators fulfil their own obligations and are not subsidised by the taxpayer. Benefit paid out for the same accident, injury or disease for which the compensation is being made is normally recovered from the compensator by the Department for Work and Pensions.

Federal Mogul has become insolvent under the United States of America’s insolvency legislation. As a result of this it is not in a position to meet, in full, its liabilities to its employees arising from asbestos related diseases. A trust fund has been set up to meet part of these liabilities. However, employees are only likely to receive around twenty pence of every one pound they are due. The unprecedented step to exempt this particular trust recognises the unique position in which former employees of Federal Mogul’s UK subsidiaries (Turner & Newall and associated companies) have found themselves.

Exempting the trust from the normal compensation recovery rules means that more money will be available to meet the needs of the victims and their families who have been affected by these diseases. All the funds in the trust will be available for compensation payments on top of benefits paid—we feel it is important to ensure that their already reduced compensation payments are not reduced further. The cost to the Government is estimated to be £10 million over the next three years.

These are unique circumstances which do not undermine the general principles of the Compensation Recovery Scheme.

We will bring forward the necessary regulations shortly.