Previous SectionIndexHome Page

8.53 pm

The Economic Secretary to the Treasury (Miss Melanie Johnson): I congratulate my hon. Friend the Member for Jarrow (Mr. Hepburn) on securing the debate and thank other hon. Members for their interest in the topic.

The Government fully understand the concerns that my hon. Friend has raised. We are sensitive to the anxieties of those most affected, not least because of the meetings and representations that we have received. I have had representations from hon. Members, including my hon. Friend, and the Government have also received significant correspondence on this issue. Furthermore, we very much understand the concerns of those suffering from

30 Apr 2001 : Column 725

asbestos-related diseases, especially where their condition is the result of employment in firms whose employers' liability insurance is provided by Chester Street.

I welcome the opportunity to respond to the issues raised, and to update my hon. Friend on progress on this matter. I should like first to explain the Government's approach to asbestos in the workplace, then to give an explanation of the different sorts of compensation available and to conclude by discussing the issues raised to do with Chester Street Holdings.

For many decades, asbestos was used by many employers, especially those involved in heavy industries and manufacturing, as my hon. Friend the Member for Jarrow has said. Those industries that had an extended reliance on the use of asbestos in the production process included shipbuilding, drop forging, steel production and insulation manufacturing. During that time, the substantial risk to the health of employees who handled asbestos was unknown.

Asbestos is made up of many particles that can cause considerable damage if they enter people's lungs. The most common conditions related to exposure to asbestos in the workplace include pleural plaques, asbestosis and mesothelioma. Those conditions can be extremely unpleasant and are often fatal; and for those reasons, the Government were committed to addressing the dangers of asbestos as soon as we came to office.

In 1999, we fulfilled that commitment by banning the importation, sale and use of all forms of asbestos. Unfortunately, we are only now seeing the damage that years of inaction by previous Governments has caused. We have addressed the problematic source by removing the threat of asbestosis for future generations, but we as a society need to care for those who are ill and their families.

I should like to stress that the Government have in place two well established no-fault schemes to provide some financial support for those who were exposed to asbestos by their employers and have now developed one of the conditions that I have mentioned. First, there is the industrial injuries disablement benefit, which is administered by the Department of Social Security. The scheme provides an allowance payable to people depending on the level of disability caused by the exposure to asbestos.

Over and above those arrangements, the Pneumo- coniosis etc. (Workers' Compensation) Act 1979 provides compensation for sufferers of certain dust-related diseases, or for the dependants of sufferers who have died, to the extent that they are not able to claim damages from their employers because the latter have gone out of business or there is no realistic chance of pursuing a court action. The scheme provides for a variable lump sum payment, again depending on the level of disability caused by exposure to asbestos in the workplace. Since 1980, that scheme has provided compensation to around 9,300 workers and their families, at a cost of approximately £83.4 million.

On employer liability: if the employer still exists, it is important to remember that the employer remains liable for the employee if the exposure to asbestos occurred as a result of that employment. The employee can therefore bring a civil case against his or her employer if the exposure to asbestos and the development of an asbestos- related condition were caused through employment with that employer.

30 Apr 2001 : Column 726

Mr. Michael Clapham (Barnsley, West and Penistone): My hon. Friend will be aware that only very small amounts are payable under the scheme when an employer cannot be traced. Will she consider how the scheme may be run? For example, would it be possible to consider including the insurance industry in the scheme to make the lump sums a little better? I accept that, generally, people who have asbestosis or mesothelioma cancer also have a disablement assessment; nevertheless, the lump sums paid under the scheme are very small, and that needs to be considered.

Miss Johnson: I cannot give my hon. Friend an undertaking on that this evening, but I will certainly consider the subject further as a result of his representations.

Of course, to be able safely to provide for their employees if one falls ill or is involved in an accident while working, employers regularly take out employers' liability insurance policies. Indeed, the Employers' Liability (Compulsory Insurance) Act 1969 made it mandatory for certain firms to take out such policies. In return for a premium to an insurance company, such an insurance policy decreases the financial risk to employers of claims that may be made against them by their employees.

The easiest way to envisage that arrangement is to imagine two relationships--the first between the employer and the employee; the second between the employer and the insurance company. If the second relationship is broken as a result of the insolvency of an insurance company, the first relationship--between the employer and the employee--remains intact. The liability of the employer to the employee thus still exists, irrespective of whether the insurance company is insolvent. Hence the employer remains liable for any claims made against them by employees or former employees; that is the case for all employers, whether in the private or public sector.

The commercial compensation schemes provide protection in the form of a compensation scheme for policyholders whose insurance company remains insolvent. I shall now turn to the arrangements under that scheme--

Mr. Hepburn: I mean no disrespect to my hon. Friend, but what we want tonight are answers. Are these people going to be compensated? Are we actually going to get together with the insurance industry and threaten it with regulation unless they receive their money? They need their money; they understand that the insurance companies are to blame and that those companies should pay. Furthermore, will there be a full public inquiry to find out how that board of directors could set up that scam and put people in that position?

Miss Johnson: As I explained at the beginning of my speech, I shall come to that point in due course; I hope that my hon. Friend will be patient. I reiterate the comments of my right hon. Friend the Secretary of State for Scotland on the topic--the Government are making it clear to the insurance industry that it cannot merely walk away from this matter. I shall return to that point in a moment.

The Policyholders Protection Act 1975 was established to protect the interests of policyholders of insolvent insurance companies. For a few specific types of

30 Apr 2001 : Column 727

insurance, including compulsory employers' liability insurance policies where the policyholder is the employer, the 1975 Act provides 100 per cent. protection for eligible claims, to the extent that the insolvent insurer is unable to meet the claim in full.

The costs of protection provided to such policyholders under the Act are met by a levy on the insurance industry, and are administered by the Policyholders Protection Board--set up under the 1975 Act. It is important to stress that if the employer no longer exists and the claim relates to a compulsory insurance policy, the individual who had a claim against the employer can take the claim to the insurer, or in this case, to the PPB direct.

It is in the context of the compensation available for those suffering from asbestos-related conditions that Chester Street has been raised by my hon. Friend. I shall not go into the history of Chester Street in too much detail--my hon. Friend has already touched on several aspects--but it was complicated, involving several subsidiaries.

By the 1980s, the company was subsidiary to the Iron Trades Employers Association. In the late 1980s, it was decided that it would be preferable to write all new policies in the subsidiary of the Iron Trades Employers Association. Those employers who had previously taken out policies with the association renewed their policies with the subsidiary. The association stopped writing new business but remained 100 per cent. owner of the subsidiary, with all profits accruing to the benefit of the policyholders of both the Iron Trades Employers Association and the Iron Trades Mutual Insurance Company. The subsidiary also took that opportunity to simplify its name to Iron Trades Insurance Company Ltd.

The change took effect from the start of 1990, and from that point onward I understand that the subsidiary made good progress, with two results. The first was that the subsidiary made profits and could pay dividends to the association. Secondly, as the business expanded, the value of the subsidiary as a fixed asset to the association also grew.

Mr. Clapham: My hon. Friend explains, in effect, that the scandal was created by Iron Trades dumping its asbestos liabilities in Chester Street Holdings, leaving insufficient assets to meet them. As my hon. Friend the Member for Jarrow (Mr. Hepburn) explained, those liabilities are in respect of the ordinary person who is the victim of asbestos from his workplace. Does my hon. Friend agree that we need to ensure that that cannot happen again? It is clearly a scandal and, if we do not act, it is likely recur because insurers want to get rid of asbestos claims. That is precisely what Iron Trades did--it dumped its asbestos liabilities.

Next Section

IndexHome Page