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Let me start with amendments 5 and 6, tabled by
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.