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CONFIDENTIAL

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D O C U M E N T

IS T H E P R O P E R T Y

O F H E R B R I T A N N I C

M A J E S T Y ' S

G O V E R N M E N T

C(82) 3 C O P Y

H

N O

F e b r u a r y 1982 C A B I N E T

R E C O V E R Y O F HOSPITAL COSTS F R O M

ROAD T R A F F I C ACCIDENTS

M e m o r a n d u m b y the S e c r e t a r y of State f o r S o c i a l S e r v i c e s

1. C a b i n e t a p p r o v e d i n p r i n c i p l e a t i t s m e e t i n g on 26 N o v e m b e r ( C C ( 8 1 ) 38th C o n c l u s i o n s , Minute 5) the p r o p o s a l f o r r e c o v e r i n g f r o m motor v e h i c l e i n s u r e r s the c o s t to the N a t i o n a l H e a l t h S e r v i c e ( N H S ) of t r e a t i n g c a s u a l t i e s i n r o a d a c c i d e n t s and i n v i t e d m e to put f o r w a r d d e t a i l e d p r o p o s a l s for c o n s i d e r a t i o n . T h e s e p r o p o s a l s , w h i c h a r e s e t out i n the following p a r a g r a p h s , w e r e c o n s i d e r e d by the H o m e and S o c i a l A f f a i r B C o m m i t t e e a t i t s m e e t i n g on 2 F e b r u a r y . Colleagues expressed a number of r e s e r v a t i o n s both about the p r i n c i p l e of the s c h e m e and the p r o p o s e d method of i m p l e m e n t a t i o n t h r o u g h the F i n a n c e B i l l . In v i e w of t h e s e i t w a s c o n s i d e r e d that the p r o p o s a l s h o u l d be r e v i e w e d and a f i n a l d e c i s i o n taken by Calw.net. BASIS O F P R O P O S E D

ARRANGEMENTS

I t w a s a g r e e d i n the d i s c u s s i o n on 26 N o v e m b e r t h a t to be a c c e p t a b l e 2. the s c h e m e should be d e s i g n e d to a v o i d the p r o b l e m of 'no fault l i a b i l i t y ­ this w a s the m a j o r o b j e c t i o n r a i s e d a g a i n s t m y p r e d e c e s s o r ' s p r o p o s a l s i n 1980. A c c o r d i n g l y the b a s i c p r i n c i p l e of the s c h e m e now p r o p o s e d i s the r e c o v e r y of r o a d a c c i d e n t t r e a t m e n t c o s t s f r o m m o t o r i n s u r e r s on a b l o c k basis. I would p r o p o s e a l s o that the s u m to be r e c o v e r e d should be the e s t i m a t e d c o s t to h e a l t h a u t h o r i t i e s of t r e a t i n g r o a d a c c i d e n t v i c t i m s i n the Previous year. T h u s i n s u r e r s w o u l d know i n a d v a n c e of setting p r e m i u m s the a d d i t i o n a l c o s t s they w e r e e x p e c t e d to b e a r but i n d i v i d u a l d r i v e r s would not be i d e n t i f i e d i n the a c c o u n t s p r e s e n t e d . 7

3

« T h e total s u m to be r e c o v e r e d i n a f u l l y e a r i s e s t i m a t e d to be £88 m i l l i o n i n 1 9 8 3 - 8 4 (for E n g l a n d o n l y ) a d d i t i o n a l to the s u m r e c o v e r e d t p r e s e n t u n d e r the R o a d T r a f f i c A c t 1972 (about £ 4 m i l l i o n a y e a r ) . This ^ o u l d be the c o s t of t r e a t i n g a l l m o t o r a c c i d e n t v i c t i m s i n 1 9 8 2 - 8 3 i n c l u d i n g o n - m o t o r i s t s e. g. p e d e s t r i a n s and c y c l i s t s . T h e a g g r e g a t e b i l l would be apportioned b e t w e e n i n s u r a n c e c o m p a n i e s who w o u l d h a v e to a g r e e the b a s i s on w h i c h t h i s w o u l d be done. T h e a v e r a g e a n n u a l p a y m e n t i s l i k e l y to be of the o r d e r of £ 6 to £8 p e r e a c h i n s u r e d v e h i c l e . M o r e d e t a i l of the s c h e m e i s given i n the a n n e x to t h i s p a p e r i n the context of the p r e s e n t l e g a l p o s i t i o n and of p r o p o s a l s m a d e i n the p a s t b y t h i s G o v e r n m e n t and o u r p r e d e c e s s o r s . a

n

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TIMING AND P R E S E N T A T I O N 4. I n o r d e r to h a v e a s c h e m e on t h i s b a s i s i n o p e r a t i o n by 1 9 8 3 - 8 4 the i e g i s l a t i v e p r o v i s i o n s w o u l d h a v e to be i n c l u d e d i n the F i n a n c e B i l l . P a r l i a m e n t a r y C o u n s e l h a s p r o d u c e d a p r e l i m i n a r y d r a f t of c l a u s e s w h i c h would give effect to the p r o p o s a l s (though for l e g i s l a t i v e p u r p o s e s t h e s e would need to be t r e a t e d a s a t a x a t i o n m e a s u r e ) . I t m a y not be p o s s i b l e to use the F i n a n c e B i l l to r e p e a l the e x i s t i n g p r o v i s i o n s i n the R o a d T r a f f i c A c t 1972; i f not, the p r e s e n t c h a r g e s w o u l d n e e d to be deducted f r o m the i n c o m e r a i s e d u n d e r the new s c h e m e u n t i l a s u i t a b l e B i l l could be found. The F i n a n c e B i l l t i m e t a b l e m e a n s that c o n s u l t a t i o n w i t h the i n s u r a n c e and m o t o r i n t e r e s t s would h a v e to b e g i n v e r y q u i c k l y . T h i s would n e e d to be p r e c e d e d Y a s t a t e m e n t of o u r i n t e n t i o n s .

b

5

« The m a j o r judgment i s p o l i t i c a l . O b j e c t i o n s of p r i n c i p l e , a s w e l l a s a d m i n i s t r a t i v e d i f f i c u l t i e s , h a v e r e s u l t e d i n the a b a n d o n m e n t of p r e v i o u s s c h e m e s d e v e l o p e d both by t h i s G o v e r n m e n t and o u r p r e d e c e s s o r s . These a r e d e s c r i b e d i n p a r a g r a p h s 2 a n d 3 of the a n n e x . W h i l e the p r e s e n t P r o p o s a l s a r e d e s i g n e d to a v o i d a s m a n y of t h e s e d i f f i c u l t i e s a s p o s s i b l e there i s no doubt that they w i l l be c o n t r o v e r s i a l . T h e m a i n a r g u m e n t s for and a g a i n s t m a y be s u m m a r i s e d a s f o l l o w s : F or : ­ a. T h e i m p o r t a n c e of w i d e n i n g the i n c o m e b a s e of the N H S , i t w a s c l e a r f r o m the d i s c u s s i o n s on p u b l i c e x p e n d i t u r e that t h e r e w e r e no o t h e r a c c e p t a b l e p r o p o s a l s to i n c r e a s e r e v e n u e f r o m charges, b. Some p r o v i s i o n for r e c o v e r i n g t h e s e c o s t s e x i s t s a l r e a d y i n the Road T r a f f i c A c t 1972. c. T h e h e a v y l o a d w h i c h d r i v i n g a c c i d e n t s p l a c e on the h o s p i t a l s and t h e i r staff, and on the e c o n o m y and s o c i e t y i n t e r m s of disablement. d. T h e w a y i n w h i c h o u r s c h e m e would enable the c o s t to be s p r e a d a m o n g i n s u r e d d r i v e r s a c c o r d i n g to t h e i r d e g r e e of r i s k i e b y the c o m p a n i e s ' a p p r o p r i a t e a d j u s t m e n t s to e a c h p r e m i u m . e. A t £ 6 to £8 on a v e r a g e e a c h y e a r t h i s i s only e q u a l to the c o s t of a few g a l l o n s of p e t r o l . A

-gain t 8

:

f. T h e d r i v i n g p u b l i c should not be s i n g l e d out for this c h a r g e ; they p a y f o r the N H S t h r o u g h t h e i r t a x e s and N H S i n s u r a n c e c o n t r i b u t i o n s ; and t h e r e a r e o t h e r s who r u n r i s k s s u c h a s h a n g ­ gliders. ( H o m e A f f a i r s C o m m i t t e e e x a m i n e d i n J u l y 1980 w h e t h e r the l a t t e r type of a c t i v i t y could be brought i n , but c o n c l u d e d i t w a s too d i f f i c u l t to d o ) .

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g. T h e m o t o r i s t w h o s e a c c i d e n t i s nobody's f a u l t - o r the p e d e s t r i a n ' s - should not be p e n a l i s e d , e v e n through a s p r e a d i n g of the c o s t s through i n s u r a n c e p r e m i a . h. I n s u r e r s would r e s i s t b e c o m i n g , a s they w i l l a r g u e , t a x c o l l e c t o r s , e s p e c i a l l y a s a l t e r n a t i v e s of e x t r a v e h i c l e e x c i s e duty o r p e t r o l t a x a r e , a s they w i l l see i t , a v a i l a b l e . j. P o l i t i c a l l y the i m p a c t of t h i s s c h e m e w i l l be f e l t t w i c e , f i r s t w h e n the l e g i s l a t i o n i s t a k e n through the H o u s e t h i s S p r i n g and s e c o n d w h e n i t c o m e s into effect i n 1983. We w i l l h a v e to judge t h e r e f o r e w h e t h e r we c a n get s u c h a s c h e m e through the House. T h e s e p r o p o s a l s i n m y v i e w offer the b e s t c h a n c e of s u c c e s s . CONCLUSIONS D

«

T h e next steps, a.

i f the p r o p o s a l s a r e a p p r o v e d by C a b i n e t , would b e : ­

a n e a r l y a n n o u n c e m e n t of the d e c i s i o n to i n c l u d e p r o v i s i o n i n

the F i n a n c e B i l l to r e c o v e r r o a d a c c i d e n t c o s t s on the b a s i s

<•

proposed; b.

c o n s u l t a t i o n w i t h i n s u r a n c e and m o t o r i n t e r e s t s about the

i m p l e m e n t a t i o n of the p r o p o s a l s ; c.

P a r l i a m e n t a r y C o u n s e l to be i n s t r u c t e d to d r a f t the n e c e s s a r y

c l a u s e s , f o r i n c l u s i o n i n the F i n a n c e B i l l ,

to i m p l e m e n t the p r o p o s a l s

i n this p a p e r .

N F

D e p a r t m e n t of H e a l t h and S o c i a l S e c u r i t y H

F e b r u a r y 1982

3

CONFIDENTIAL

ASBKX

C O N F I D E N T I A L

Siting

T^.l.^nn « .

l

i

a

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l

e

u n d e r s e c t i o n 154 o f t h o Road T r a f f r c A c t 1972 f o r

> « P t t a l t r e a t m e n t o o s t s where t h e y have made a payment on a p o l i c y 1 aspect o f the death o r b o d i l y i n j u r y o f the person t r e a t e d ^ct

MM

xs

to a U M t o f S1250 f o r i n - p a t i e n t t r e a t m e n t and £125 f o r o u t - p

Wment.

c

h

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u n d e r s e c t i o n 154 a r e e s t i m a t e d t o he due a

x n

t

pre«nt

i " about 20 p e r c e n t o f r o a d a c c i d e n t cases; i n p r a c t i c e t h e y o f t e n

ar

» * - c o v e r e d , m a i n i y hecause o f a d a d n i s t r a t i v e d i f f i c u l t i e s connected w r t h «rd

party settiements.

Under s e c t i o n 155 o f t h e A c t an ..emergency t r e a t ­

- t

fee" o f £10.10 i s p a y a b l e by t h e d r i v e r , i r r e s p e c t i v e o f f a u l t ,

*•

doctor ( n e t n e c e s s a r i l y i n a h o s p i t a l ) who f i r s t t r e a t s a p e r s o n

l n

injured

an a c c i d e n t .

h ee ^aDour h -he ^ scheme f ^ hv Labour vxu Government i n 1976 w o u l d have r e cTanuarv overed proposed„ b y tt h insurance companies, i n advance, t h e t r e a t m e n t c o s t s es rmate r n January

^

r

«

each succeeding f i n a n c i a l y e a r .

T h i s was o r i g i n a l l y t o have been by a

W

- l a t e d t o t h e premium income o f companies.

* *

i n s u r e r s ( w h i c h dragged on o v e r a p e r i o d o f f i v e months

*

However i n ™ ^ ° < ^ thrs



^

* f i r e d i e v y t o be c o l l e c t e d by t h e i n s u r e r s f r o , each i n d r v r d u a l v e h r c l e

Use

A-I

• Abandonment of the scheme was announced by Mr liiinals i n a W r i t t e n Answer February 1977, the reasons given being the inherent p r a c t i c a l d i f f i c u l t i February 1977, the rea;

l n

l V e n

i

n

a d m i n i s t r a t i v e expense.

^*

ln

Th

- Proposals nut forward by my immediate predecessor would have made Ual d r i v e r s l i a b l e f o r the f u l l c o s t to the NHS of t r e a t i n g t»eople .1ured i road a c c i d e n t s ; i t would then have been up to the d r i v e r to claim i s i „

n

n

h

n

uu

(,,,

c

cla c

hi

-rance policy.

When t h i s was considered by H Committee i n May 1900

°Heagues objected to the p r i n c i p l e of s i n g l i n g out motorists as a

311(1

l

i a b

t

' , *° • - i i i ' y without f a u l t a t t a c h i n g to i n d i v i d u a l d r i v e r s . The Secretary, T r e a s u r y , was however i n v i t e d , i n conjunction with the M i n i s t e r Health

,

and other M i n i s t e r s concerned, to examine the p o s s i b i l i t y of a Chi <-neme under which the c o s t s of other types of accident ( f o r example t i v i t i e s and the home) by would l s o be recovered.

' f S e P°rting c r e t a r y ' sa cproposals werei nconsidered the aCommittee i n J u l y 1980 0)l7th) --/ but were not approved. The a d d i t i o n a l arguments put forward were 5

c o n t r o v e r s i a l nature; the burden they would p l a c e on small employers;


( H ( 8

0

icu.Hy of d e f i n i n g the r-.norting a c t i v i t i e s to be covered; and the

e

^igh a d m i n i s t r a t i v e cont to the ' i n s u r a n c e ' i n d u s t r y . 1

C O N F I D E N T I A L

ANT.'MX C O N F I D E N T I A L

D e t a i l e d i m p l i c a t i o n s o f t h e scheme

a.

A p p o r t i o n m e n t o f c o s t s between

4.

The s i m p l e s t

in

the proportion

insurers

a p p r o a c h on t h e f a c e o f t h i n g s would be t o a p p o r t i o n

e i t h e r t o companion'

premium income

from mo Lor i n n m < i

nC



o o r t o t h e number o f v e h i c l e s i n s u r e d w i t h consider

b.

them.

But i t w i l l

be ncccsf­

any a l t e r n a t i v e s u b v e n t i o n s t h e companies may h a v e .

Apportionment between p o l i c y holders In negotiations

m t ' ss on t h e L a b o u r Government'

general o u t l i n e resemble

.

o ­ o rr i gg iinn a ll propor.al n -

the present ones - the i n s u r e r s took

w

- i.ch

i ;i

r!

^,^

strong

to being asked to a c t ( a s they saw i t ) as unpaid tax c o l l e c t o r s .

r

h e j r

I"

• ^

that the amounts to be c o l l e c t e d i n r e s p e c t of road a c c i d e n t c o s t s shoul s e p a r a t e l y i d e n t i f i e d as a f i x e d amount to be p a i d by the policyholde seems h i g h l y l i k e l y that they w i l l adopt the same approach a g a i n . 0

tfitut ^ 6.

There i s a strong case i n my view f o r r e s i s t i n g p r e s s u r e f o r BT>­

apportionment between p o l i c y h o l d e r s .

I understand that t h i s was the

enormous t e c h n i c a l conrolexity i n p r e p a r i n g the d r a f t B i l l on the Labour rived

Government's scheme.

coS

I n s u r e r s a l r e a d y have to r e c o v e r t h e i r own u-* , , ... troen

t s

t;

+rea

from insurance premiums and should s i m i l a r l y be able to deal witn wc o s t s given t h a t these w i l l have been f i x e d i n advance.

^ gJi oU

I acknowledge a Of

t h C

t h a t we s h a l l need to concern o u r s e l v e s g e n e r a l l y with the f a i r n e s s arrangements adopted by i n s u r e r s and t h a t there i s considerable scope 4-1 T A f u l l assessment w i l l not be p o s s i b l e • i reacti° ' proposals have been put to the i n s u r e r s and we have t h e i r i n i t i a l r c. Uninsured v e h i c l e s 7. S p e c i a l arrangements would be needed to deal w i t h those v e h i c i •+h the SuP , fu^ who, as an a l t e r n a t i v e to t h i r d p a r t y insurance deposit a sum w i w Court as urovided i n s e c t i o n 144(1) of the 1972 A c t . T h i s i s subject . . xrroup advice from P a r l i a m e n t a r y C o u n s e l . The argument f o r i n c l u d i n g t h i s mainly one of equity; a t present there are only eight of these "sp *u >re

o b s t r u c t i o n on t h e i r n a r t .

n

e

1

ffC:

a

0

d

vf

depositors"

( a l b e i t with substantial f l e e t s )

and the sums to be rec

them would not be a s i g n i f i c a n t proportion of the t o t a l . Act

S e c t i o n 14

exempts v a r i o u s p u b l i c bodies and a u t h o r i t i e s from the t h i r d - p a * ^

requirement; I do not propose to i n c l u d e these i n the scheme as to do not c o n t r i b u t e towards a decrease i n p u b l i c expenditure.

2 C O N F I D E N T I A L

M .^gof^ ^

ANNEX

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N F I D E N T I A L

^—^S£orcement ^

On the b a s i s that i n s u r e r s r a t h e r than i n d i v i d u a l m o t o r i s t s are made e

for the c o s t ,

I see no need to provide s p e c i a l l y f o r enforcement or

for +Vi

e

c r e a t i o n of c r i m i n a l offences; °

0 U r t s

s h

ould

the o r d i n a r y machinery of the

civil

suffice.

^-^iming 9.

iTr* •••s d i f f i c u l t at t h i s stage to f o r e c a s t the l e a d - i n time which the e

^

r

s

w

i l l need before the payments due from them can s t a r t .

^Portant to ensure that they are not r e q u i r e d to pay out "lore m in

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e

a

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th

P a

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l n s u r

^ ^ ^ P ^

e

l n e n t

w

n

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0 ; f

c

c

o

u

n

^

iums.

I t will

significantly

treatment c o s t s than they have a l r e a d y r e c e i v e d I understand that there i s often a t i m e - l a g between

premiums ( f o r example to a broker or agent) and t h e i r r e a c h i n g

a n c e companies.

T h i s w i l l need to be f u l l y explored i n the

discussions

e can be c e r t a i n when the f u l l savings w i l l s t a r t to be r e a l i s e d .

3

C O N F I D E N T I A L