The timing is right to cut red tape, curb the compensation culture and tackle claims farmers
Once the vaudeville of the party conference season is over for another year, parliament will resume its work, and members of the coalition government will start to reveal more of their plans to change the face of the country. The outcome of the government’s Comprehensive Spending Review will be announced on 20 October and the scale of that change will begin to sink in. The state is currently spending £4 for every £3 it is raising through taxation. That leaves us at the mercy of the money markets and it cannot be sustained. Some difficult choices will have to be made. Some very, very difficult choices.
The CSR will not be the only important announcement of the autumn. Any day now, my colleague and good friend Lord Young should be publishing his review of health and safety and the compensation culture. David was an outstanding trade and industry secretary under Margaret Thatcher and he has one of the best brains in politics. Indeed, his strength is that he isn’t really in politics at all. He is rooted in the private sector and he truly understands, and believes in, free enterprise. Now he has an historic opportunity to ensure regulation is made proportionate again, with unnecessary red tape hacked away and banished forever.
Through a combination of fortune and design, David’s timing could not be better. We have a radical, young, new government that wants to roll back the boundaries of the state and set the people free; and we also have, in the shape of Lord Justice Jackson’s exemplary report on costs, a ready-made blueprint for reintroducing some sanity into the claims arena.
David Young has already endorsed the Jackson reforms and I hope ministers move swiftly from their current consultation to implementation of the reforms in toto, even when that requires legislation, as some of it undoubtedly will.
I have another hope too. The Compensation Act 2006 introduced regulation of Claims Management Companies (claims farmers) and the regulator has done some good work. This is an ever-changing and fast-moving target, however, and I believe it is now essential that the legal and regulatory framework should be toughened up.
It is now over six years since Sir David Arculus and his Better Regulation Task Force produced their report, Better Routes to Redress, which called for positive action on the content of advertising by claims management companies; but irresponsible advertising is still prevalent and no one yet seems to take responsibility for the social and economic consequences of these activities.
I have not seen David Young’s report, but he is a man of good sense and I sincerely hope he will seize this opportunity to play his part in restoring sanity to the claims arena in particular and society more generally. Confronted with the dire fiscal and economic legacy left behind by its predecessor, this government cannot afford to be timid.
The next 12 months will establish whether we are going to carry on in the same old way – over-burdened with taxes and bureaucracy and all but bankrupt – or whether we have the courage to make fundamental change and radically redefine the relationship between the state and the citizens it exists to serve. David Cameron and David Young both have work to do. IT
Lord Hunt is a partner and chairman of the financial services division at national commercial law firm Beachcroft LLP.