Committee of Public Accounts: Press Notice

COAL HEALTH COMPENSATION SCHEMES

Publication of the Committee's 12th Report, Session 2007-08

Edward Leigh MP, Chairman of the Committee of Public Accounts, today said:

"I welcome the fact that many former coal miners suffering from work-related lung disease and hand injuries have received payments under the two compensation schemes.

"The Department seriously mismanaged, however, the early stages of the implementation of the two schemes. Its attempt to implement the schemes swiftly, combined with its underestimation of how many claims would be made and how complex some would be, resulted in many claimants having to wait a very long time for the compensation they were owed.

"Some of these were elderly and ill and in no position to wait for years for compensation - in some cases ten years or more. Some claimants even died while waiting. The taxpayer has also taken a big hit, with the cost of just administering the schemes expected to total nearly £2.3 billion.

"There are lessons aplenty here for other parts of government planning and implementing new compensation schemes. These include getting actuarial advice in advance on the likely volume of claims and being a lot tougher with solicitors on the conditions attached to their fee tariffs. Far too much money went into the solicitors' pockets and our Committee expects the Department to be vigorous in pursuing them for the money they have been ordered to repay."

Mr Leigh was speaking as the Committee published its 12th Report of this Session which, on the basis of evidence from the Department for Business, Enterprise and Regulatory Reform, examined its management of the two compensation schemes.

In January 1998, the Department of Trade and Industry (now the Department for Business, Enterprise and Regulatory Reform) took responsibility for the accumulated personal injury liabilities of the British Coal Corporation. In the same year, the courts found the Corporation negligent in respect to lung disease caused by coal dust (Chronic Obstructive Pulmonary Disease or COPD) and hand injuries caused by using vibrating equipment (Vibration White Finger or VWF). Under the courts and in negotiation with claimant's solicitors the Department established two schemes to pay compensation. Both schemes are now closed to new claimants.

The Department received over three quarters of a million claims from former miners, their widows, or their estates for COPD (592,000) and VWF (170,000). By the time all the claims have been settled, the Department estimates that it will have paid some £4.1 billion in compensation.

The schemes posed a formidable challenge. Many claimants were elderly, ill and anxious to receive their compensation. The number of claims greatly exceeded the Department's initial forecasts of 173,000 COPD and 45,000 VWF claims. It was ill prepared for the number, and in some cases complexity, of claims made. Consequently some claimants have had to wait as long as ten years or more. In 2005, to address significant backlogs the Department, in negotiation with solicitors, introduced a fast track arrangement to process COPD claims. By September 2007, there were around 116,000 COPD claims and 12,000 VWF claims remaining to be settled. The Department is seeking to process most of the remaining VWF claims by March 2008 and COPD claims by February 2009.

The schemes were costly to administer. By completion, administration costs, including contractor and medical costs, are expected to total almost £2.3 billion. Claimants' solicitors and other representatives' fees account for just under £1.3 billion of this total. The Department's negotiation of the fees with solicitors was weak, with the result that it paid fees significantly in excess of costs. Some solicitors have also levied additional fees on successful claimants.