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With this it will be convenient to discuss the following:
Amendment 6, page 5, line 19, leave out from “maximum” to “per”.
Amendments 6 and 7 together represent an alternative to amendment 4 and to amendment 5. They would make determining the compensation cap subject to parliamentary approval and also provide for its review and revision on the same basis without recourse to further primary legislation.
Amendment 5, page 5, line 19, leave out “1” and insert “10”.
This amendment is an alternative to amendment 4 and would increase the £1 million compensation cap to £10 million.
Amendment 7, page 5, line 20, at end insert—
‘(1A) The compensation cap (the “cap”) under subsection (1) must be determined, and revised every three years, by regulations made by the Secretary of State, with the following elements:
(a) the cap may apply differently, or be set at a different level, in different areas; and
(b) the Secretary of State must publish:
(i) the methodology used; and
(ii) the first draft determination of the cap for public consultation within a month of the day after the day on which this Act is passed.
(1B) The Secretary of State must lay before the House of Commons a draft of the regulations making the final determination or revision in a statutory instrument alongside a statement of whether and how the responses to the public consultation were taken into account.
(1C) A statutory instrument under subsection (1B) must be laid in draft before the House of Commons and may not be made until approved by resolution of that House.
(1D) Notwithstanding section 12, section 8 shall come into force on the day after the day on which this Act is passed for the purposes of subsection (1A).
(1E) Until a determination has been approved by the House of Commons, no cap shall apply.
Amendments 6 and 7 together represent an alternative to amendment 4 and to amendment 5. They would make determining the compensation cap subject to parliamentary approval and also provide for its review and revision on the same basis without recourse to further primary legislation.
Amendment 9, page 6, leave out lines 16 and 17.
This amendment is consequential on amendment 4 and on amendment 7.
The amendments address the issue of the £1 million compensation cap. It is important for the House and for individuals beyond it who, unfortunately, may find themselves caught up in a riot that we interrogate how the Government reached that figure. In Committee, I raised the issue of the cost of running a business and the fact that it varies across the country. The price of running a newsagent, off-licence or small gift shop in Yeovil is different from the cost in Northumbria and different again from the cost in Tottenham, yet this £1 million figure exists for all those businesses.
I was grateful that the Minister for Policing, Crime and Criminal Justice, who led for the Government in Committee, wrote to my right hon. Friend Mr Howarth, who also served on the Committee, in response to some of the points I had made and that he shared that with members of the Committee. The letter stated:
“In finding a solution it was important for the Government to come up with a balanced approach that protected the public purse from unlimited liability whilst also ensuring that significant numbers of businesses would not be inhibited from making claims. A further key issue was to minimise the bureaucracy around the administration process.
A number of respondents to the consultation suggested an alternative, and more simple administrative approach, of a cap on the amount of money…We examined data provided by forces and found that 99% of claims from businesses and insurance companies made after the 2011 riots were under £1m.”
It is important to stress that we do not know when there will be another riot. We hope there will not be one, but we are here this morning because we suspect there will be, given the history of our country and the fact that from time to time these things happen. It is important to emphasise that the fantastic nature of our policing model, with policing by consent and our police not routinely carrying guns, means that the public stand alongside them. When that consent is withdrawn and a riot happens, it is not the fault of the business or the homeowner, who have paid their taxes and expect to be protected. Therefore, setting a £1 million cap is an important moment, particularly given the nature of our economy at the moment and the cost of a property in a city such as London. The average price here is now running at half a million, so the average shop front on a high street in Tottenham is about the same and the £1 million cap is an important figure to understand fully.
Clearly the right hon. Gentleman makes an important point about ensuring that people are properly compensated, but does his amendment not give him a concern that it would provide people with a disincentive to be responsible and take out insurance? How does he suggest we get a better balance between the obligation of the taxpayer and that of the individual?
The hon. Lady makes an important point and there is a balance to be struck, but I hope she will understand that it is important to interrogate why we have arrived at the £1 million figure. It is also important that we recognise something about parts of the country that experience these upheavals from time to time; it remains the case in a constituency such as mine, which has had two riots in a generation, that when someone walks down Tottenham High Road they do not see the sort of scene they would see in Detroit, with boarded-up shops, houses in which people do not live and no-go areas—areas that have failed. Fortunately, in these fantastic islands of ours there are no communities that have failed—we do not allow them to fail. We do not want to see that kind of failure. We need to get the balance right between having people, rightly, insuring themselves, and recognising that in the poorest parts of our country people are often under-insured or not insured, so when there is a riot we must still try to put them back into a situation where they can get on with their lives and with their business, and get on with the economy.
The 2011 riots were unusual, in that, surprisingly, there were riots in Clapham Junction and in Ealing. There were riots in parts of the country where one might not have expected riots. However, riots occur most often in the most deprived communities and we do not want the economies of those communities to disappear completely. Insurance premiums can also be so high in communities such as the one I represent, and such as those represented by my hon. Friends the Members for Croydon North (Mr Reed) and for West Ham (Lyn Brown), that they are a disincentive to insuring or they encourage under-insuring in the first place.
Amendment 4 seeks to get further explanation about the £1 million cap. Amendment 5 would take the figure up to £10 million, and it is a probing amendment to understand how the £1 million figure has been reached. Amendment 7 is the most important amendment I have tabled and it asks for greater transparency. I have asked for the methodology being used to be put before this House, for Parliament to be able to understand that methodology every three years or so and for this House to be a bigger determinant in reaching the figure for the compensation level.
I say that because there is some tension in the fact that it is the Home Office and the Met that pay out compensation, and it often arises at the point of declaration. On previous occasions there has certainly been controversy when the Home Office and the Met have not wanted to declare a riot. That tension comes up again in relation to how much compensation is paid. Of course they are reluctant to pay more than is necessary, and I understand that, because it comes out of the public purse. That is why amendment 7 would provide for greater scrutiny of the figure; how it is arrived at, what methodology and evidence are used, and whether it might not be more appropriate to lay the draft before this House so that scrutiny can take place here, as is appropriate from time to time.
I am a bit confused—I am always confused, but I am particularly so this morning—by these amendments. Could the right hon. Gentleman briefly explain which of his three different proposals he would personally like to see enacted? It seems to me that he is proposing no cap, a cap of £10 million and a cap to be decided by a formula that is yet to be determined.
Forgive me. The hon. Gentleman was not on the Committee, but if he reads the Hansard report of its proceedings he will see that there was quite a lot of debate about this figure. The Government were unable to give much detail of how they arrived at the figure. The Minister has since written to my right hon. Friend Mr Howarth, who chaired the Committee—its members were copied in—and given greater clarity on what the Government were told by the insurance industry and on the amount of figures that came under £1 million. I received that letter after tabling these amendments. However, the amendments are probing, because it would be quite wrong for a Bill of this kind to pass quietly through the House without discussion and scrutiny. I see Gavin Barwell nodding in agreement, because his constituency was caught up in the riots. My amendments have been tabled in that spirit.
Mr Nuttall is right: there is of course a difference between removing the £1 million cap and raising it to £10 million. I suspect that not all of my amendments will be pressed to a vote. However, I emphasise amendment 7, in particular, because it facilitates scrutiny and the need to return to this figure in future, which must be right. I do not want the House to settle on £1 million and then find in 10 or 15 years that it would leave a lot of people, particularly in London and the south-east, really short if their property were damaged in a riot.
The right hon. Gentleman talks about the challenge of striking a balance between the Home Office and other potential sources for the unpaid sum, but I do not think he has offered sufficient clarity on the role of insurance. He has talked about the challenge of insurance being extraordinarily expensive. In my constituency we have a similar issue with flooding. Flood Re and the negotiations that the Government have had in that regard have clearly been very helpful. What conversations has he had with the insurance industry, and indeed with the Government, on what can done to make insurance more affordable?
There are parts of this country that routinely experience flooding, as I said in Committee, and there is considerable experience in the system in relation to how we deal with those communities and how the insurance industry reacts in those circumstances. Floods happen more frequently in our country than riots, but a similar catastrophe befalls those who find themselves caught up. I hope that the bureau that will be set up as a result of this Bill can draw on the experience in those areas.
I have heard hon. Members in those areas raise concerns about loss adjustors and the manner in which they treat our constituents. In circumstances in which everything has been lost in the flood or burnt to the ground in a fire, the individual concerned is expected to go and find a receipt for a stove or oven that they now have to claim for. How are they going to find that receipt? Where is it? It is a miserable situation, and I am afraid that during the riots we found the performance of loss adjustors very patchy, and some of them behaved quite inappropriately to my constituents.
However, as I have indicated before, we have a situation of insurance, underinsurance and no insurance at all. That is why we have the Riot (Damages) Act 1886 and why we should inquire as to what the appropriate levels of this newly introduced cap should be. For all those reason, this clutch of amendments address that point. As I have indicated, they are largely probing amendments. I look forward to hearing what Mike Wood has to say about both regulations and the need for greater clarity. Perhaps this House might have a greater role in determining that figure, scrutinising it and returning to it over time, because I fear that £1 million may well look very different to people in the wider country in 10 or 15 years’ time, long after the Bill has passed through both Houses.
Let me start with amendments 5 and 6, tabled by Mr Lammy, which would either remove or raise the compensation cap. Although I fully understand his reasons for asking that the level of the cap be considered, I am unable to support either amendment. As I have stated at earlier stages in the legislative process, we simply cannot continue to have a situation in which the public purse is subject to unlimited liability.
Neil Kinghan’s excellent independent review into the reforms necessary after the 2011 riots set out convincingly and comprehensively the reasons for retaining the principle of strict liability for police forces when the basic contract to uphold law and order, to which the right hon. Gentleman has referred, breaks down, and that police should be liable for the costs of that. However, Neil Kinghan went on to say that it is not reasonable to expect those liabilities to be unlimited. That is why he put forward a number of alternative ways of controlling liabilities—capping them—in order to deliver a fairer deal for police forces and the taxpayer.
The effect of either amendment would be to impose a still higher liability on police forces and therefore on the taxpayer. The right hon. Gentleman asks how the £1 million figure was reached. The Home Office put the figure forward in response to an earlier consultation, and it received widespread support. At present, the cap is generous. It has been set to make sure that it would have protected as many of the claims made in 2011 as reasonably possible.
Analysis by the Home Office and Association of British Insurers estimates that, had a £1 million cap been in place in August 2011, 99% of claims paid then would still have been paid in full; that compares with about 33% had we continued with the alternative option of a cap on turnover of business, which Neil Kinghan ended up recommending. The £1 million cap is far more generous to the victims of riots and recognises exactly the points made by the right hon. Member for Tottenham: of course such victims are in no way to blame and could have done nothing to prevent their loss. We want to make sure that they continue to be compensated, within a reasonable limit.
I also take note of the right hon. Gentleman’s point about big businesses and the important role they play in our high streets. However, like most businesses, big or small, they have a responsibility to insure themselves adequately—not only against riots, but against a broad range of risks. The £1 million compensation cap applies directly to riots, as defined in the legislation. We would similarly expect such businesses to insure themselves against fire and looting caused by arsonists and against gangs of people rampaging riotously, although perhaps made up of fewer than 12 people and so falling outside the scope of normal riot legislation.
Damage caused by looters or gangs on the rampage is every bit as serious, but police forces would not have liability unless negligence could be demonstrated. There is a need for adequate levels of insurance and it is not unreasonable for businesses with assets running into millions to take out such insurance. Setting a cap at £10 million would largely benefit insurers far more than big or medium-sized businesses on the high street, as they could subrogate those claims under the Bill and the existing scheme. Furthermore, of course, they tend to provide the insurance for big business.
The most pertinent example from the 2011 riots was the claims, which have not yet been settled, arising from the destruction of the Sony warehouse in Enfield. Those run into tens of millions of pounds. That money would go entirely to insurers if the claims ended up being accepted. From the Home Office research, it seems that increasing the £1 million cap to £10 million would have affected six uninsured businesses in 2011—six businesses among all those affected, at a massive cost to the taxpayer without any real benefit to our communities. That is why the £1 million cap has been widely welcomed by Members as well as by the insurance industry. The Government have published their intentions in response to the consultations following the 2011 riots on reforming the compensation arrangements. The £1 million cap was very widely welcomed in that response by stakeholders who took part in the consultation.
Raising or removing the compensation cap would essentially represent a large-scale transfer of resources from the public purse—our police authorities or the Home Office, funded by taxpayers—to insurers. That enormous cost would threaten the affordability of the other parts of the proposed scheme, such as switching from replacement value to new-for-old—that is common practice among almost all insurers now—and the extension of the riot compensation scheme to cover motor cars with third-party insurance. Those other parts of the scheme have a cost, and if we do not limit the expense of claims while making sure that we cover 99% of the 2011 claims, I do not believe that we could afford those other parts. I urge the right hon. Gentleman to reconsider this, as his amendment would put the substance of the Bill at risk.
The right hon. Gentleman’s amendment 7 has a number of provisions that would have the effect of abolishing the current provision but introducing it later after public consultation. I certainly recognise the need to consult widely as regulations are drawn up, but I would not support the amendment. I do not believe that the proposal is necessary as the public consultation has essentially already taken place. There was a White Paper and the Home Office did consult. It has responded to the consultation. As I said, the principle of the £1 million cap was strongly endorsed.
I agree, however, that it is sensible to review the cap every so often. The £1 million figure is extremely generous, but, as the right hon. Gentleman said, in 10 or 20 years’ time, inflation would make it rather less so. However, it is unlikely from an economic perspective that there would be significant financial changes within the three years from Royal Assent, after which the Government are committed to reviewing new regulation anyway. For those three years, we should support the £1 million cap, making sure that we can put it into effect as quickly as possible in case the very worst should happen. We want to be in a position to support victims. There is, of course, already a power in the Bill to amend the cap through regulations.
On the proposal to introduce regional variations, I can see the initial attraction, but the reality is that the £1 million cap is primarily determined at the London level. Regional variations would not mean that the cap was higher than the £1 million in London, but that there was a lower cap elsewhere in the country. The proposal is not necessary, and it would add additional complexity to the scheme, so I would want to avoid it.
Having read Neil Kinghan’s independent review, I think that, even for London, the £1 million cap is appropriate. Obviously, the report is from 2013, but Neil Kinghan found that the average claim for uninsured losses in London—where we would expect claims to be highest—was running at about £10,000, while it was about £35,000 for uninsured losses. The average is therefore many, many times lower than the proposed cap.
I hope my colleague the Minister will agree that we cannot support a proposal that would mean the Bill was introduced without a cap, given the potential burden that that could place on police and crime commissioners and the public purse. Without having the certainty provided by the cap on liabilities, I certainly would not want to move on with legislation that put additional responsibilities and burdens on the police through new-for-old provisions or the addition of some motor vehicles.
The £1 million cap is set at the right level. As I said, it has been broadly welcomed by stakeholders, including the Association of British Insurers, which I have met. It also addresses the concerns of other respondees to the earlier Home Office consultation, such as the British Retail Consortium and the Association of Convenience Stores, which had expressed concerns at the business turnover cap that the Kinghan review had originally proposed.
The Bill strikes a sensible balance between ensuring that the vast majority of individuals and businesses are fully compensated and that the public purse does not have to pay out on high-value claims exceeding £1 million.
Amendments 4, 5 and 7, and their consequential amendments, have been tabled by my magnificent and right hon. Friend Mr Lammy. All the amendments pertain to the compensation cap. As has been said, the Bill caps the total amount that can be paid out in a single compensation claim to £1 million. Amendment 4 would remove the compensation cap, amendment 5 would increase it and amendment 7 would ensure that it is assessed every three years by Parliament.
The Opposition Front-Bench team have a number of concerns about amendments 4 and 5. We therefore suggested in Committee that, if the cap is raised, the Home Office should be liable for costs greater than £1 million. That would spread risk and ensure that police forces are not made financially vulnerable by circumstances that, by definition, are beyond their immediate control. If the House accepts amendments 4, 5 and 7, the Government might wish seriously to consider that proposal.
Amendment 7 would require Parliament to set the compensation cap, and to assess the level of the cap, every three years. We support the amendment because too low a cap—especially in London—may lead to increased insurance premiums in areas afflicted by rioting. We would not want communities and high streets to be damaged by this legislation, and a regular review would allow us to act on the basis of evidence.
It is important to continue to assess the compensation cap. The Bill needs to balance the interests of the community, the police, the insurance industry and the taxpayer. We must ensure that communities are protected and victims are compensated, while not asking the police to write a blank cheque. The compensation cap goes right to the heart of that task. It is right that the cap is continually assessed and that the House plays a central part in that.
I therefore urge the Minister, who has already done remarkably well this morning, to give us some assurances and some comfort, particularly on amendment 7. You know, Mr Deputy Speaker, he is fast becoming a favourite.
I do not know whether I am going to blot my copybook now or not, but I thank the hon. Lady for approaching this group of amendments in a constructive way, as she and Mr Lammy did in Committee. That is the approach we have taken across the House, recognising that there is an issue in the Bill, and seeking to sensibly examine what is appropriate in terms of the manner in which it has been framed.
In introducing the amendments, the right hon. Gentleman highlighted his desire to probe these provisions and to ensure that the House has the opportunity to scrutinise them properly so that right hon. and hon. Members have the chance to underline important issues. He mentioned my hon. Friend the Comptroller of Her Majesty’s Household, who has also fought tirelessly on behalf of his constituents. Obviously, his role on the Front Bench means that he is not able to take part in these debates in the same manner that we are. However, it is for him, the public and all of us to consider what the right mechanism is and to ensure that the Bill is appropriately examined so that we get it right. That is the overarching theme reflected in our debates on Second Reading, in Committee and on Report this morning.
I want to draw attention to the operation of clause 8(8), which gives the Secretary of State the ability, through regulation, to make changes to the overall cap of £1 million set out in clause 8(1). It is important to look at the Bill’s subsequent provisions, which, again, underline the protections that are there. If regulations come forward to increase the level of the cap, that would be by the negative procedure. To have an additional safeguard if, say, the level was to be reduced—that would certainly not be our intention—that would be by the more positive affirmative regulation mechanism. That, again, reflects the spirit in which the Bill has been approached and the manner in which it has been examined.
The right hon. Gentleman highlighted a number of measures in the letter my right hon. Friend Mike Penning, the Minister responsible for policing, fire, criminal justice and victims, wrote to the Chair of the Public Bill Committee. Obviously, in previous consultations, we examined different ways in which compensation should be capped. My hon. Friend Mike Wood, in what was a very clear contribution to the debate, set out why that is needed and some of the thought processes involved. On further analysis, it was felt that the £2 million turnover cap initially suggested by Neil Kinghan would have meant more claimants not being able to get through the mechanism, with additional bureaucracy attached to the process. It was felt that that was not the appropriate way forward.
Through the different amendments, the right hon. Gentleman has made a number of different suggestions. I know he was not seeking to favour one over the other, but rather to ask, “Have we properly examined this? Have we properly thought this through?” In terms of replacing the £1 million compensation cap by a £10 million cap, the experience of the riots of August 2011 demonstrates that it is not right for the taxpayer to shoulder the burden of unlimited liability. As my hon. Friend highlighted, liability for the Sony claim alone has already run into tens of millions of pounds, so it is clear that a cap is needed. As a point of principle, it is not unreasonable to expect a business with more than £1 million in assets to take out insurance to protect itself from a wide range of risks. The £1 million compensation cap was generally welcomed by stakeholders. It will provide full protection to the vast majority of individuals and businesses, while ensuring that liability to the public purse is not unlimited.
On a point of order, Mr Deputy Speaker. I am very surprised that there is not a statement in the House today. You may have seen the reports in yesterday’s newspapers that European judges have ruled that a foreign—Moroccan—criminal cannot be deported from the country despite the Home Office saying that she committed serious offences which threatened “the values of society”. My understanding is that the person concerned is the daughter of Abu Hamza, so this is a very serious matter for the security of this country. Surely it should be raised in this House and a Home Office Minister should be making a statement today. Have you had any indication that the Home Office intends to make any kind of statement about this issue?
I do not think I am going to shock you by saying that I have had absolutely no indication of anybody coming forward with a statement. However, the hon. Gentleman has quite rightly, as ever, raised the matter, it is on the record, and I am sure that people in different Departments will be listening as we continue this debate.
A £1 million cap strikes the appropriate balance between protecting the public purse and helping those who need it most. Increasing it to £10 million would increase police and public purse liability tenfold, which is neither necessary nor appropriate. If the cap were raised to £10 million, the most likely beneficiaries would be insurance companies seeking to reclaim the costs of any very large claim from the relevant police and crime commissioner. I do not think that that was the intent behind the right hon. Gentleman’s approach in his amendment, but I respect the manner in which he has sought to draw the House’s attention to how we have reached this point and why we judge that £1 million is the appropriate level.
The right hon. Gentleman has proposed, as an alternative, that there should be regulations following a public consultation, with reviews taking place every three years. As I said, we believe that there is a compelling reason for having a cap in place. There are benefits that attach to having certainty on the level of the cap, with it being clearly defined, rather than perhaps having further uncertainty in the future as to what it might be. Leaving it to be set by regulations after a public consultation would serve only to remove certainty and increase bureaucratic burdens. A public consultation would achieve very little given that 99% of claimants would have been paid in full from August 2011.
As this Bill and its consequences are a matter of public record, will the Minister undertake to write to hon. Members who have one of the six businesses beyond the Sony claim in their constituencies? I would certainly like to know whether there were any businesses in Tottenham that experienced a claim of more than £1 million, and the nature of those businesses. That would be helpful for the record as we move forward.
I do not know whether I am able to give the right hon. Gentleman the assurance he seeks, on the basis of legal constraints or data protection issues, but I note his point. I will reflect on it, and if there is anything more that I may be able to add, then I will obviously be happy to write to him. However, I draw the House’s attention to the fact that this might not be quite as straightforward as he suggests and there may be inhibitions that would prevent that sort of broader disclosure.
The Bill already provides for the power to amend the compensation cap through regulation should it be necessary to adjust it to reflect inflation. It would be a relatively simple task to examine cost of living and property price changes in the period since the cap was last set and apply any change to its level before making compensation payments.
In Committee and again today, the right hon. Gentleman raised the issue of regional variations that might affect the cap. The £1 million cap was determined using claims information from the London riots in 2011. One could say, therefore, that the analysis was conducted on claims from one of the most destructive riots in a generation in one of the most costly regions in which to live. It was a very serious example and the right benchmark. On that basis, the cap would not only adequately cover Londoners in the event of a future riot, but more than adequately cover those in other regions. That is the approach we have taken. I reiterate that according to our analysis and that of the Association of British Insurers, had the £1 million cap been in place for the August 2011 riots, then 99% of claims would still have been paid in full.
I hope that in the light of those comments the right hon. Gentleman will be minded to withdraw his amendment.