Riot Compensation Bill — House of Commons, 2015-12-04
Topic: Law and Crime
Lyn Carol Brown (Labour, Centre-left): No, we are doing quite well. The 1886 Act pays no consideration to what are now important questions for any legislation dealing with insurance and compensation. For understandable reasons, there is no mention of motor vehicles. There is no consideration of interim compensations for victims while claims are being processed or of the new-for-old replacement of damaged goods, and there are no powers for the police to delegate administering the compensation process to experts in legal claims. As a result, in 2014, three years after the 2011 riots, victims were still waiting for over £40 million of compensation to be paid out. This is an inordinately long wait for compensation. The existing legislation has therefore been shown to be not fit for purpose, and so the hon. Member for Dudley South is doing the House a favour today I pay tribute to my hon. Friend the Member for Croydon North (Mr Reed) for his work on this issue. His constituency was hit as hard by the 2011 riots as many others, and he has worked tirelessly highlighting the difficulty that locals have had in receiving the compensation that they should be entitled to. He used the Freedom of Information Act to show that three years after the riots, 133 victims in London had yet to receive a penny in compensation from the police. Just 16% of the requested compensation had been paid out at that point. These victims of rioting must feel badly let down considering that the Prime Minister had promised they would not be left out of pocket. Without his tireless work and that of my right hon. Friend the Member for Tottenham (Mr Lammy), I gently say that I doubt this Bill would have been before the House today To be fair to the Government, being even-handed on a Friday, they have recognised the problems that people have had in receiving compensation. They commissioned an independent review of existing legislation chaired by Neil Kinghan. The Kinghan review was published in September 2013, and it made a series of recommendations. It recommended that the principle that the police are strictly liable for damages incurred during riots ought to be maintained; that legislation ought to protect insurers so as not to deter people from taking out insurance policies, or to inflate the cost of insurance; and that payments to insurance firms should be limited to businesses insured with an annual turnover of less than £2 million. It suggested that legislation should allow the police to delegate the administering of claims to a body made up of insurance professionals rather than the police having to take on that complex administrative task themselves. A further important recommendation was that allowance be made for compensating at the cost of replacement goods—old for new—as is the case in most modern insurance practice. The review judged that new legislation replacing the 1886 Act would be necessary The Government ran a consultation exercise after the publication of the Kinghan review, and the Bill before us, as we have heard, has the support of the Government and takes up many of the review’s recommendations. This includes a number of provisions that are uncontentious but nevertheless important, such as including cars within the scope of compensation and providing for interim payments. Given the clear need to update the legislation that governs riot compensation, we welcome this Bill and believe that it ought to move forward to Committee, where it can receive further scrutiny. While we support the principle that the police ought to be strictly liable for damages incurred during the course of a riot, it is important that our police forces are not asked to promise a blank cheque. It is impossible for police forces to plan and budget for the possibility of having to compensate victims of riots without some understanding of the likely costs to be involved. This is particularly true when our police forces are still absorbing the 17,000 police officer cuts from the previous Parliament. It might be Friday but this is not politics-free To deal with this problem, the Kinghan review originally proposed that insurers would be able to claim only for businesses with an annual turnover lower than £2 million. The Bill instead places a £1 million cap on the total claim that can be made, and removes any reference to company turnover. The Association of British Insurers estimates that 99% of commercial property claims for material damage from the August 2011 riots would have been fully covered by this new £1 million limit. The Home Office makes similar estimates, and the impact assessment that accompanies the Bill suggests that just 19 of 1,988 impacted businesses would wish to claim over £1 million in the case of large-scale rioting. This appears to be a significant improvement on the turnover-based model suggested by Kinghan. According to the ABI, only 33% of commercial property claims for material damage during the August 2011 riots came from businesses with a turnover of less than £2 million. There were serious fears that the £2 million turnover limit would have therefore created a disincentive for large businesses to set up in areas that they would possibly consider to be susceptible to rioting, and that some businesses would be left unfairly out of pocket. These details need to be looked at very closely as the Bill moves through Committee, particularly as the £1 million limit represents a departure from the recommendations by the Kinghan review and may have an impact on insurance premiums. I want to ensure that the Government are taking seriously the competing interests of the insurance industry, businesses, the police, and the public finances Another area of concern that we will pursue in Committee is what constitutes a riot and who decides when a riot has taken place. At present, the Bill empowers police and crime commissioners to determine whether there has or has not been a riot, which they must do in accordance with the definition of a riot provided by the Public Order Act 1986. It is the budgets of police and crime commissioners that will ultimately be hurt if they do judge that there has been a riot, so we might, in effect, be allowing the police to mark their own homework. This was raised by Mark Shepherd of the ABI, who has called for "a more independent determination of when a disturbance is a riot" That might be appropriate given the quasi-judicial nature of the decision My final area of concern is that the Bill does not cover loss of trade for businesses, loss of rent for landlords, or the cost of alternative accommodation needed in the wake of a riot. These are all instances of what insurers call consequential loss. Many of those most severely impacted by the 2011 riots would therefore not have been be fully compensated through the provisions in this Bill. That is particularly true of businesses with small capital holdings who rely on trade that has been disrupted by rioting. This needs to be carefully looked at during the next stages of the legislative process so that we can provide the most equitable deal possible between the police and the community in the unwelcome event of future riots The current arrangements for dealing with compensation after riots is clearly inadequate, and a new framework is required. I look forward to going through the details of the Bill to make sure that we can have a system that commands the support of the public, business, and the police alike. That will mean looking carefully at the caps on compensation, the process of determining when a riot has taken place, and the clauses setting out which losses are, and which are not, eligible for compensation. We must make sure that we try to minimise the numbers of people who fall victims of future riots, as, unfortunately, so many did in 2011.