With this it will be convenient to discuss the following:
‘(3A) Money received by the claimant from emergency or recovery funds, whether funded publicly or privately, in the aftermath of a riot must not be taken into account by the decision maker when deciding the amount of compensation to be paid.’.
The amendment relates to the £1 million cap that the Government have landed on. I am probing what is behind the £1 million limit.
Someone who sets up a small business on Tottenham high street might buy the shopfront and have a home of sorts above the shop. In London the average price of a house is estimated to be £470,000, and the average price of a shopfront is a little more than that. A number of individuals on the high street found that they were underinsured, or not insured at all. The issue of insurance premiums in the kinds of areas affected by the riots is very real.
In response to my hon. Friend the Member for Croydon North, we do not want to see parts of our country looking like areas of America, such as the city of Detroit. That city has experienced successive riots, has a falling population and was effectively declared bankrupt a few years ago. Showing great sensitivity to those areas that experienced riots, we do not want them to become failed communities. We want them to be communities where people can set up businesses and thrive. Successive Governments in our country have been in the business of regeneration and improvement. We do not currently have areas in our country that are like Detroit.
The question of where to set the cap is in the context of the ability to find insurance, its cost and whether some of the big players on the high street decide not to come to the area. We lost easyGym, the post office and Carpetright from our high street; all were really important for us. The big issue is whether they are going to come back. If they do not come back there is no footfall for the small independent retailers and shopkeepers. How did we arrive at the £1 million cap?
We also have to look at the regional context. The cost of running a small business in Croydon is different from the cost of running one in Salford. There is currently no regional variation before us to indicate an understanding of that.
My hon. Friend is making an important point. In a riot, police resources are necessarily overstretched and they have to prioritise, and they tend to prioritise the wealthier areas. Once again it is the poorer businesses that can least afford the loss that suffer. It is those areas that would be affected by the inability to claim above the cap. What is my right hon. Friend’s view on that?
My hon. Friend makes a good point. He and I are regular soldiers in the fight for very poor areas. With regard to the £1 million cap, I would say that the 2011 riots were unusual. As a Londoner born and bred, I would never have imagined that on the second day I would see the constituency of Ealing Central and Acton caught up in the riots.
My hon. Friend makes a serious point. There was a similar context in Salford. That goes to the point about the £1 million cap meaning different things on the high streets of Tottenham, Ealing, Salford and Croydon. It goes to the cost of running a business, to the detail of loss of stock as a result of flooding or following fire damage because a business has been burnt to the ground, and it goes to insurance. We want businesses to be insured and not to have to rely fully on the legislation. Given that we do not want to have areas in our country that cannot recover because of under-insurance or no insurance, the point about the £1 million cap is very important.
I go right back to the very good Kinghan report, which of course suggested the cap in the first place. Options were explored in Kinghan’s review. His first option was that we set a percentage—say, 25% or 50%—as the limit of compensation that the police or Government would pay in respect of claims paid by insurers to their customers. His second option was that we put an absolute limit on any single claim that the police or Government pay to an insurer—say, £500,000 or £1 million. The third option was that the limit be set by reference to the size of the insured business, so that the insurer receives compensation only for claims made by businesses with a turnover below the limit. I liked the third option a lot and thought it was fair, because it allowed for an understanding of the differences between small businesses.
In drafting the Bill and landing on the figure of £1 million, were the Minister’s officials in touch with the Federation of Small Businesses or with high street businesses, for example small retailers and newsagents? Where did they get their estimates for the cost of running a business? Will the Minister say more about the claims we saw as a result of the rioting across the country?
If one looks back at the experience of the 2011 riots, one sees that the overwhelming majority of claims subsequently lodged were for under £1 million. Having said that, there were claims—albeit a small minority—for more than £1 million. We can understand the argument for capping the costs that fall on the police, but there is a strong argument, which my right hon. Friend the Member for Tottenham put powerfully, that we should not have an arbitrary cap of £1 million and that if losses exceed £1 million, compensation should be paid. The question in those circumstances is: who pays?
On Second Reading my right hon. Friend the Member for Tottenham made a very powerful case indeed. It is not difficult to see that for a small or medium-sized family business with, for example, substantial stock, depending upon the nature of the business, the losses sustained might exceed £1 million. I was impressed by my right hon. Friend’s argument that the kind of successful high streets we want to see in our communities is a combination of the big and the small.
I remember debating at length in this very room the Localism Bill in 2010-11, which led to the initiative by Mary Portas on regeneration of our high streets, and what constitutes a successful high street. What we want is for businesses of all kinds, big and small, to come to and make a success of high streets—high streets where people want to go. Crucially, we then need confidence on the part of those businesses that in the unlikely event of a riot, they will not suffer as a consequence and that insurance cover will be provided. One therefore comes back to the cap.
We think that there is an argument for payment of compensation beyond £1 million. There is an argument that compensation of up to £1 million should, in line with historical practice, continue to fall on the police. Beyond £1 million, in circumstances where the police are under immense financial pressures, there is clearly an argument that compensation should not be paid by the police. We would ask the Minister to consider the Home Office accepting responsibility for the payment of compensation over and above £1 million as the Bill progresses.
I am grateful. I want to raise the question of the high street funds that were set up after the riots. I pay tribute to Sir Bill Castell, chairman of the Wellcome Trust and one of our great industrialists, for all the work he did to encourage big business to fund small business. I put it to the Minister that it cannot be right that any payment from charitable interests—a high street fund helping small business on the high street—is somehow offset against the riot damage. I want reassurance. Sir Bill raised this a lot at the time and I spoke to him today. We hope that that is not to be the case.
I can immediately alleviate the right hon. Gentleman’s concerns. No matter where the charitable donation comes from it will be outside the £1 million, and I will set that in regulations.
Croydon, of course, is the king of the suburbs. The mayor of Croydon set up a fund immediately after the riots. Many of the generous citizens of Croydon donated to that and were aghast to see that the money that was handed out to businesses and individuals that had suffered was deducted from the compensation payments made. I hope the proposal that the Minister now makes will also address such circumstances.
It will. I completely agree morally that charitable donations should stay outside, whether from a lady putting 50p in a tin on the high street, as I know took place, or from some of our great businessmen coming together to offer help. I will set that in regulations. I hope that alleviates concerns on amendment 4.
On the £1 million cap, we have to be honest about what the Bill is for. It is a safety net for those who are not insured should a riot affect them and their businesses. Of course, if it is taxpayers’ money a limit has to be set somewhere, and 99% of all claims following the terrible riots that took place across the country in 2011 were below that limit. I am happy to share that information with colleagues before Report.
In looking at where to set the cap, we should not encourage people not to be insured or insurers to take the view that the state will pick up the cost for which they and businesses have responsibility. That is why we set the cap at £1 million. I will make the commitment today that that will be continually reviewed within regulations without the need for primary legislation. At the moment we have very low inflation nationally, although building and residential inflation is quite high, particularly in London. We will keep a close eye on that but there has to be a limit. There cannot be a blank cheque from the taxpayer; I think we all accept that.
In response to the shadow Minister’s point, if the money comes out of the police or Home Office budget, it is still taxpayers’ money and there is a limited amount available. I think £1 million is fair and we will keep it under review. We will also ensure that charitable donations, no matter where they come from, are exempt, and I will place that in the regulations for the Bill. I hope that the amendment will be withdrawn.
I am grateful for what the Minister said about the charitable donations set up after the riots and the points I made about the high street fund. I am still a little concerned about the £1 million figure because regionality has not really been addressed by the Minister. There are big differences across the country.
Perhaps I could offer an olive branch. I will write to members of the Committee explaining the logic and thought processes behind the decision, rather than putting the question to a vote now, which would prevent it being brought back on Report. If the right hon. Gentleman is still concerned on Report, options will be open to him then.