Coal Health Compensation Schemes

Transcription

1 Coal Health Compesatio Schemes REPORT BY THE COMPTROLLER AND AUDITOR GENERAL HC 608 Sessio July 2007

2 The Natioal Audit Office scrutiises public spedig o behalf of Parliamet. The Comptroller ad Auditor Geeral, Sir Joh Bour, is a Officer of the House of Commos. He is the head of the Natioal Audit Office, which employs some 850 staff. He, ad the Natioal Audit Office, are totally idepedet of Govermet. He certifies the accouts of all Govermet departmets ad a wide rage of other public sector bodies; ad he has statutory authority to report to Parliamet o the ecoomy, efficiecy ad effectiveess with which departmets ad other bodies have used their resources. Our work saves the taxpayer millios of pouds every year. At least 8 for every 1 spet ruig the Office.

3 Coal Health Compesatio Schemes LONDON: The Statioery Office Ordered by the House of Commos to be prited o 16 July 2007 REPORT BY THE COMPTROLLER AND AUDITOR GENERAL HC 608 Sessio July 2007

4 This report has bee prepared uder Sectio 6 of the Natioal Audit Act 1983 for presetatio to the House of Commos i accordace with Sectio 9 of the Act. Joh Bour Comptroller ad Auditor Geeral Natioal Audit Office 12 July 2007 The Natioal Audit Office study team cosisted of: Daisy Hodgso, Adrew Packer ad Simo Reaso, uder the directio of Peter Gray. Additioal assistace was provided by Jo Cable, Ady Diig, Wifgi Gebrial, Satosh Gora, Clare Rapkis ad Marti Welsh. This report ca be foud o the Natioal Audit Office web site at For further iformatio about the Natioal Audit Office please cotact: Natioal Audit Office Press Office Buckigham Palace Road Victoria Lodo SW1W 9SP Tel: equiries@ao.gsi.gov.uk Natioal Audit Office 2007

5 CONTENTS SUMMARY 4 PART ONE Backgroud to the schemes 8 Establishmet of the schemes 8 The applicatio process 9 The outcome 9 Exteral reviews 10 Scope of report 10 PART TWO The plaig of the schemes 11 Estimatig the potetial umber of claimats 11 ad liabilities Desigig the schemes 12 PART THREE Implemetatio 15 PART FOUR Completio 26 Targets for completio 26 The Departmet s outstadig liability 28 APPENDICES 1 Study methods 29 2 The diseases ad related 31 compesatio arragemets 3 Timelies 35 4 Process maps 38 5 Best practice 42 6 Cotractors 44 7 Fees paid to claimats represetatives 45 8 The Boys Smith report 46 The settlemet of claims 15 The cost of admiisterig the schemes 21 Photographs courtesy of Mary Evas/Hery Grat

6 SummARy 1 I Jauary 1998 the Departmet of Trade ad Idustry, restructured ad reamed i Jue 2007 the Departmet for Busiess, Eterprise ad Regulatory Reform (the Departmet), took over resposibility for the accumulated persoal ijury liabilities of the British Coal Corporatio (the Corporatio). The High Court foud the Corporatio egliget i Jauary 1998 i respect of lug disease caused by coal dust, kow as Chroic Obstructive Pulmoary Disease (COPD). Ad i July 1998 the Court of Appeal cofirmed a earlier High Court decisio of egligece i respect of had ijuries caused as a result of usig vibratig equipmet, kow as Vibratio White Figer (VWF). 2 The Departmet, i egotiatio with the Claimats Solicitors Groups 1 ad subject to the approval of the High Court, itroduced two schemes, oe for COPD ad oe for VWF, to compesate former miers. Potetial claimats could make applicatios for compesatio via their legal represetative. The Departmet cotracted iitially with IRISC, ad sice 2004 Capita Isurace Services, to admiister ad assess claims. It also cotracted with idepedet medical assessors to carry out medical examiatios. The Departmet met the cost of the claimat s legal represetatio, where these claims were successful. 1 The Claimats Solicitors Groups are steerig groups each led by the same three firms of solicitors, whose role is to represet the iterests of claimats. 4 COAL HEALTH COmPENSATION SCHEmES

7 summary 3 The two schemes remai uder the jurisdictio of the High Court i Eglad ad Wales, which cotiues to require regular updates of progress, usually aroud three times a year. The Court also cotiues to rule o matters where the claimat ad the Departmet caot agree. 4 By March 2007 the Departmet had received over 591,000 COPD claims ad 169,000 VWF claims. These greatly exceeded its iitial forecasts of 173,500 ad 45,000 respectively ad it had to icrease sigificatly the resources applied to process applicatios as the schemes evolved. Difficulties i dealig with the umber of claims ad the complexities posed by some of them also led to log delays i payig compesatio for some claimats. By the ed of March 2007, just over 168,000 COPD claims ad 27,000 VWF claims remaied outstadig; the media settlemet uder the COPD scheme was aroud 1,500, takig some 29 moths to process claims; ad for the VWF scheme 8,300, ad some 20 moths. 2 The media settlemet for COPD claims reflects the fact that settlemets are discouted to take accout of the effects of smokig ad impairmet caused by ormal levels of dust i the air, for which the Corporatio was ot resposible. 5 I 2005, the Departmet set a target to achieve effective closure to processig VWF claims by 31 October 2007 ad COPD claims by 16 February Whe all the claims are settled the Departmet expects to have paid some 4.1 billio i compesatio. It is also likely to have spet some 2.3 billio i admiistratio costs, i the form of paymets to miers legal represetatives, the cost of its cotractors 3 ad its ow legal costs. Overall coclusio ad mai fidigs 6 The Departmet always faced a formidable challege i establishig two schemes o this scale to compesate people who were ofte elderly, ill, ad axious to receive the compesatio rightfully due to them. The schemes were large ad raised challegig issues reflectig the complexity of the coal idustry, the ature of the illesses ivolved, ad the log time period over which the Corporatio had bee foud egliget. The task was sigificatly complicated by the commo law ature of the schemes where each rule ad procedure must be egotiated with the claimats solicitors ad where ay differeces of opiio are resolved through the courts. From the start, the Departmet was uder pressure from all parties to get the schemes up ad ruig. 7 Whe the fial claims have bee discharged the Departmet will have settled more tha three quarters of a millio cases. This would be i itself a major achievemet, but the Departmet might have bee able to deliver the schemes more quickly ad more costeffectively had it bee better prepared at the time of the Court ruligs ad more particularly i the period of trasitio of resposibility from the Corporatio. The Departmet produced limited strategic oversight or forward plaig o how it would hadle ay resultig liability ad isufficiet resource was allocated to the task. This lack of preparatio was to make the Departmet s task sigificatly more difficult to admiister, require substatial effort to put right, ad cause frustratio ad upset to some claimats. These schemes illustrate vital lessos that should be leared should Govermet departmets be required to establish other compesatio schemes i the future. 8 Whe developig the schemes, the Departmet relied primarily o Corporatio estimates util These estimates sigificatly uderestimated the umber of potetial claimats. They also failed to recogise that the liability would iclude claims o behalf of the estates of deceased miers, ot just widows. A actuarial assessmet at the time the schemes were beig developed would have helped idetify where the ucertaities lay ad would have allowed these to be take ito accout whe desigig ad egotiatig the details of the schemes. However, as the Departmet s 2001 review of the assumptios uderlyig the estimates o COPD demostrated, the spectrum of results is likely to have bee very broad, still givig rise to cosiderable ucertaity. 9 The Departmet set out to pay compesatio without a systematic i-depth optio appraisal beig cosidered at more seior levels withi the Departmet. There is evidece that some optios were cosidered at workig level, for example the possibility of puttig the schemes o a statutory footig, but by the time of the court judgemets the rage of optios ope to it had already arrowed sigificatly. Also, i order to esure equity betwee claimats, combied with the eed to egotiate with parties represetig claimats, the Departmet made the process complex without testig the practical implicatios of the rules beig draw up, particularly where the amouts of compesatio might be small. 2 The moetary figure for VWF icludes geeral damages ad services compesatio; it does ot iclude wage loss compesatio. The duratio figure applies oly to geeral damages claims. See Appedix 2 for a explaatio of the types of compesatio available. 3 Icludig claims hadlers, medical specialists ad records maagemet. Coal Health Compesatio Schemes 5

8 summary 10 Oce the scale of the problems bega to become clear, the Departmet took actio to address the challeges posed. I 2001 it brought i a seior secodee with experiece of programme maagemet. It improved strategic oversight ad programme maagemet; recruited a broader rage of skills oto its team; ad further work with cotractors, such as the computerisatio of some records, helped to speed up processig ad deliver efficiecy gais. I 2004, as part of a wider study of risk maagemet i govermet, the Natioal Audit Office 4 foud that the Coal Liabilities Uit had demostrated effective risk maagemet, makig it a itegral part of day-to-day project maagemet ad commuicatio with all parties. 11 It has take years of itesive effort for the Departmet ad its cotractors to get to a positio where it is addressig more effectively the factors ihibitig the processig of remaiig claims ad reducig the claims outstadig. Some of this has reflected the sheer size of these schemes, for example the eed for the Departmet s medical cotractors to employ large umbers of specialist staff which were ot available i the umbers required. The Departmet has sought to simplify some procedures. Most otably, workig with solicitors ad the Court, it took actio to reduce the volume of outstadig COPD claims, which had reached 400,000 i 2004, by itroducig a fast-track optio i 2005, kow as the Optioal Risk Offer Scheme. Some 170,000 claimats have ow chose this optio. 12 The COPD scheme has bee particularly costly to admiister. We estimate that, at 31 March 2007, aroud 69 per cet of all claimats paid compesatio have received less tha the average cost of admiisterig the claims ( 3,200 per claim up to March 2007). For the VWF scheme the equivalet figure is aroud seve per cet. The fast-track optio for COPD, which the Departmet developed from its experieces admiisterig the scheme, has helped to reduce both admiistrative costs ad the timescale for claim settlemets. 13 The Departmet s approach to egotiatig the origial fees tariffs with solicitors i 1999 was weak. Whilst this was ot a stadard procuremet matter where the Departmet could select its suppliers, its preparatio lacked the depth of aalysis that might ordiarily have bee expected to support its egotiatios i a commercial settig. The egotiatios took place i the midst of pressure to reach agreemet, ucertaity over the likely umber of claims ad the practicalities of operatig the schemes, yet the Departmet tied itself ito a agreemet which made o provisio for the tariff to be reviewed i the light of experiece. At the time, the Departmet believed that the closure of the schemes to ew claims would happe withi aroud two years. The Departmet was therefore i a weak positio oce the assumptios uderpiig its iitial aalysis proved to be erroeous. 14 A aalysis prepared by a Cost Judge i coectio with a recet challege by the Departmet of costs payable uder the fast-track COPD scheme has suggested that the costs payable uder the origial tariff were i excess of the levels that would be awarded followig a covetioal detailed assessmet based o data curretly available. We have calculated that, had costs payable to solicitors bee i lie with the fidigs of the Cost Judge several years later, the total amout payable by the Departmet to solicitors would have bee 295 millio less. We are ot suggestig that the Departmet was able to egotiate a agreemet from the outset at the levels idetified by the Cost Judge as oly limited iformatio was available. This reiforces the desirability of itroducig a review clause i such istaces, although such a clause ca work to the advatage of either party. There are o comparable figures available for VWF geeral damages 5 claims. Drawig o lessos leart throughout the schemes, the Departmet is curretly egotiatig the tariff to be paid for VWF services claims. 15 Although still tied to the origial agreemets, the Departmet has sought to egotiate dow the costs associated with subsequet chages to the schemes. It cotested, for example, the fees payable o the fast-track COPD procedure because of the lower level of solicitor iput. The Court ruled i April 2007 that the fees for the fast-track procedure should be set at levels lower tha those where a claim ivolves a full medical assessmet. The reductio i fees arisig from this rulig is likely to reduce the cost to the taxpayer by up to 100 millio. 16 The Departmet has set aspiratioal dates for the effective completio of both schemes. A sigificat proportio of the remaiig claims, however, raise complicated issues. The Departmet has mapped out the risks it ow faces, icludig the eed to work effectively with its cotractors ad solicitors, ad has sought to put i place arragemets to maage these issues. Closure of the schemes will ot, by itself, fially discharge all liabilities ad will ot prevet future coal health related claims beig brought agaist the Departmet. The Departmet is aware of these risks ad applyig its experiece from the COPD ad VWF schemes i maagig them. 4 Maagig Risks to Improve Public Services, Natioal Audit Office, (HC 1078). 5 See Appedix 2 for defiitios of the damages available uder each scheme. 6 Coal Health Compesatio Schemes

9 summary Lessos for the future These schemes illustrate the sigificat admiistrative challeges that ca be posed whe operatig o this scale. The followig poits highlight some of the key issues to be take ito accout should departmets be asked to take forward similar compesatio schemes i the future. It should be read i cojuctio with forthcomig guidace due to be published by HM Treasury. Pre Start-up/start-up Whe a potetial ew liability is idetified it must be moitored regularly ad, takig accout of how likely it is to come to fruitio, sufficiet actio should be take to maage the risks. As soo as a liability looks likely to crystallise departmets should: establish a project board, with idepedet iput, preferably by the Chair, with suitable seiority ad skills to take a strategic view of how the liability should be maaged. coduct a full optios appraisal based o how the liability might be discharged. This should be based o all available data icludig, where the liability could be large, a actuarial aalysis. The optios appraisal should explicitly assess the costs of alterative delivery mechaisms. put sufficiet resources i place sufficietly early to eable the ecessary aalyses to be completed to support the decisios to be take durig the plaig stage. From the start, have a strategy i place for maagig the expectatios of likely claimats ad other stakeholders. As soo as the liability is decided, the departmet will be uder itese pressure to begi paymets quickly. Departmets should take actuarial advice at a early stage ad draw upo actuarial advice throughout the scheme before key decisios are take, for example settig the dates for scheme completio. The actuarial aalysis should seek to idetify, amogst other aalyses, the likely umber, value ad type of claims, ad cosider the likely profile of payouts to help iform the scheme desig ad fiacial maagemet. I tadem with drawig up the scheme rules, departmets should test the practicality ad cost of what is beig proposed by reviewig the quality of evidece likely to be available to support eligibility ad the likely impact of the arragemets o claimats, particularly where they may be elderly or ill. Implemetatio The implemetatio pla should iclude: idicative service stadards, icludig target processig times for differet types of claim. a procuremet strategy, settig out the optios for admiistratio of the scheme icludig, where appropriate, out-sourcig ad the reasos for the preferred approach. a resource pla, coverig the umbers of staff likely to be eeded to deliver the scheme, icludig specialist skills. a pla of the data recordig, hadlig ad reportig requiremets icludig that eeded for maagemet reportig ad fiacial cotrol. a project timetable for procuremet, publicity ad lauch activities, scheduled reviews ad audit activity ad target dates for key milestoes i hadlig claims. a commuicatios pla coverig the publicity to be geerated i coectio with the lauch of the scheme, the equiry hadlig capacity to be put i place at lauch ad subsequetly. cosideratio of the scope for allowig idividual claimats, or their represetatives, access to progress iformatio o their case via the iteret, subject to assessmet of the likely costs ad beefits. a outlie closure pla settig out the expected time lie for the scheme ad how closure might be hadled. a procedures ad operatios maual for case officers, supervisory ad maagemet staff. explicit plas for dealig with appeals, icludig idepedet adjudicatio where appropriate. appropriate arragemets to deal with ay policy questios that might arise affectig the scope of the scheme. a outlie of the potetial closure strategy icludig the criteria dictatig whe closure might be aouced, ad the factors that might eed to be cosidered. I workig with their delivery parters, departmets should draw upo best practice to develop a effective partership that draws o the skill ad experiece of cotractors i developig schemes ad problem solvig. Examples of good practice ca be foud i the NAO publicatio Drivig the Successful Delivery of Major Defece Projects: Effective Project Cotrol is a Key Factor i Successful Projects, HC 30, May 2005 available at I commuicatig with claimats, departmets should explai decisios clearly, ad keep claimats iformed if processig times are log. If claims caot be settled quickly, departmets should cosider makig iterim paymets, especially if the basic eligibility is ot i dispute. Departmets should have effective ad timely performace maagemet arragemets i place to esure that emergig performace issues are cosidered at the appropriate level. I additio where there is a level of ucertaity cotracts should iclude a provisio to review certai performace idicators icludig remueratio. Departmets should evaluate progress shortly after the scheme begis to assess performace ad idetify areas for improvemet, with a further evaluatio after it has closed. Coal Health Compesatio Schemes 7

10 Part Oe Backgroud to the schemes 1.1 Whe the workig pits of the British Coal Corporatio (the Corporatio) were privatised i 1994, the Govermet at that time decided to retai resposibility for meetig ay potetial persoal ijury liabilities arisig as a result of publicly-owed miig activities. This icluded diseases for which the Corporatio had already accepted liability or was i the process of settlig, for example for oise iduced hearig loss, ad other claims where the Corporatio was cotestig liability. This liability trasferred to the Departmet i Jauary I the same moth, the High Court i Eglad ad Wales foud the Corporatio egliget i respect of lug disease caused as a result of coal dust, kow as Chroic Obstructive Pulmoary Disease (COPD), see Appedix 2. The disease has varyig severity, ragig from chroic brochitis to emphysema, which seriously affects quality ad logevity of life (see box). Uder the judgemet, the Corporatio, ad hece the Departmet, was liable for disablemet caused by coal dust as a result of workig for the Corporatio after 1954 (1949 i Scotlad) but ot for the effects of smokig or impairmet caused by ormal levels of dust i the air. Chroic Obstructive Pulmoary Disease (COPD) COPD is a medical coditio that affects the lugs. The mai symptom is breathlessess, which results from the lugs beig uable to get sufficiet oxyge ito the blood, ad hece to the muscles, to allow ormal exertio. Severity depeds o the extet of lug damage. A mild form of COPD is chroic brochitis, which is o-disablig ad reversible. Emphysema is a severe form that is life-shorteig due to a permaet arrowig of the airways. Smokig is the primary cause of chroic brochitis ad emphysema i the geeral populatio. I 1993, chroic brochitis ad emphysema were added to the list of idustrial diseases that qualify for the paymet of State disablemet beefit. 1.3 I July 1998, i a separate group actio, the Court of Appeal cofirmed the High Court fidig that the Corporatio was egliget i respect of had ijuries caused as result of usig vibratig equipmet, kow as Vibratio White Figer (VWF), see Appedix 2. The coditio is irreversible ad utreatable (see box). As a result of the litigatio, the Departmet was liable for disablemet caused by service after 1 Jauary Vibratio White Figer (VWF) VWF ivolves damage to blood vessels, which causes parts of the figers to go white due to the reduced flow of blood, ad damage to erve edigs, resultig i umbess ad tiglig. The severity of the coditio varies. I its mild form there is temporary umbess. As it becomes more serious there is a progressive loss of dexterity. It ca require amputatio i extreme cases. The disease is irreversible ad utreatable. Discomfort becomes worse upo exposure to cold. Practical problems iclude difficulty i doig up buttos or holdig small objects. Establishmet of the schemes 1.4 For both COPD ad VWF liabilities the High Court ordered the Departmet to agree, with the claimats solicitors, schemes for assessig idividual levels of compesatio. These arragemets applied to claims already registered ad to idividuals who wished to itroduce a claim. The High Court cotiues to moitor progress ad be available to resolve disagreemets betwee the claimats solicitors ad the Departmet. 1.5 The Departmet, i egotiatio with the claimats solicitors, drew up plas for separate schemes for COPD ad VWF. The purpose of these schemes is to replicate for each claimat, as closely as possible, the outcome if they had goe through a full court process. For each scheme the solicitors were represeted by a Claimats Solicitors Group, 8 Coal Health Compesatio Schemes

11 part oe draw from the group of over 300 solicitors represetig all claimats. The rules for assessig claims were set out i Claims Hadlig Agreemets 6 (the Agreemets), see box below. The agreemets for each scheme were subject to approval by the High Court. The VWF scheme Agreemet was fialised i Jauary 1999, ad the COPD scheme i September of the same year. Each Agreemet icludes a tariff of fees for remueratig claimats legal represetatives. There are separate Agreemets for Scotlad. 1.6 Sice sigig the Agreemets, a umber of additioal elemets have bee agreed betwee the parties. These iclude, for example: a settlemet for Services claims uder the VWF scheme to compesate for assistace with tasks such as gardeig which the disease sometimes prevets claimats udertakig (see Appedix 2); ad for COPD the itroductio of a fast-track scheme kow as the Optioal Risk Offer Scheme (see Chapter 3, paragraph 3.18). Claim Hadlig Agreemets After the coclusio of each set of litigatio the Departmet prepared a Claims Hadlig Agreemet (for VWF this was titled a Arragemet) i egotiatio with the Claimats Solicitors Group 7, settig out: the tariff of damages; the procedures to be followed i processig claims, icludig measurig idividual disability; how etitlemet to damages would the be calculated, icludig for COPD the weightig of smokig, dust ad years of employmet; istructios ad guidace to medical staff; the various forms that claimats ad medical staff would be required to complete depedig o the circumstaces of the claimat, otably whether the mier was still alive or deceased; the arragemets for dealig with claimats who died while their claims were processed; some of the stadard letters to be used by the Departmet s claims hadlig cotractor; ad the fees payable to solicitors. Both Agreemets had to be agreed i detail with the solicitors. I Eglad ad Wales, for COPD, these egotiatios bega i February 1998 ad were cocluded i September The correspodig dates for VWF were July 1998 ad Jauary A Agreemet specifically coverig COPD claimats i Australia ad New Zealad was siged i Jauary There are separate Agreemets for Scotlad which were egotiated o behalf of all Scottish claimats by the Scottish area of the Natioal Uio of Mieworkers (NUM) ad their solicitors. They were siged i Jauary 1999 (VWF) ad Jue 2000 (COPD) ad are idetical to those coverig Eglad ad Wales save where there are variatios i the law betwee the legal systems. This pricipally arises i relatio to posthumous claims. The Agreemets are ope to all Scottish claimats irrespective of NUM membership. The Departmet egotiated separate Hadlig Agreemets with the Uio of Democratic Mieworkers (UDM), siged o 28 Jauary 1999 (VWF) ad 17 November 1999 (COPD). Except for fees these Agreemets are idetical. The applicatio process 1.7 The Departmet has employed a umber of cotractors to admiister the Agreemets. Iitially, it took over the Corporatio s existig cotracts: IRISC for processig health claims; Nabarro Nathaso (ow called Nabarro) for legal support; ad Hays Commercial Services ad Busiess Healthcare for records maagemet. The Departmet let further cotracts maily for medical services. IRISC was purchased by Ao 8 i 1997, which i tur was purchased by Capita Isurace Services i 2004 ad which wo a subsequet retederig of the cotract i The cotractors are listed at Appedix Applicats were required to register their claim with the Departmet s processig cotractor through a advisor, usually a solicitor. Potetial applicats icluded the estates of deceased miers. Claimats who were still alive would be asked to atted a medical examiatio or have a medical examier visit them. A outlie of the broad process for each scheme is show i Appedix The COPD scheme was closed to ew applicatios i March 2004; VWF closed to ew applicatios i October 2002 for live claims ad Jauary 2003 for posthumous claims. A summary of the umber of claims made i Eglad, Scotlad ad Wales is give i Figure 1 overleaf. I 2005, the Departmet set a target to achieve substative completio 9 of processig VWF claims by 31 October 2007, ad COPD claims by 16 February The outcome 1.10 By the ed of March 2007 some 430,000 COPD ad 145,000 VWF claims had bee settled. This icluded the deial of 6,500 COPD ad 1,600 VWF claims. Ad the withdrawal by the claimat of a further 44, COPD ad 33,000 VWF claims. The remaider remai to be settled. 6 The Agreemet coverig VWF was titled a Arragemet. 7 Some solicitors represetig claimats are ot members of the Claimats Solicitors Groups ad were ot ivolved i these egotiatios. 8 Ao cotiued to use IRISC as its tradig ame. 9 I the case of the COPD scheme, substative completio is defied as less tha 500 cases outstadig ad, i the case of VWF, less tha 300 cases outstadig. 10 If a claimat s represetative accepts otificatio of deial the claim is reclassified as withdraw. Coal Health Compesatio Schemes 9

12 part oe Exteral reviews 1.11 Two reviews have bee coducted o the Coal Health Compesatio Schemes to date: I March 2005 the Trade ad Idustry Committee of the House of Commos reported o the Coal Health Compesatio Schemes. It focused o the positio of the schemes at the time immediately precedig the report ad the future risks to scheme completio. I July 2005 the Miister for Eergy aouced a further review of the schemes with a differet locus. It had two objectives: first, to review the itegrity of the admiistratio of the schemes; ad secod, to cosider whether the arragemets for dealig with fraud were adequate. It was udertake by Stephe Boys Smith, a former seior official i the Home Office, with the support of secodees from the Departmet. The fidigs, published i November 2005, are summarised at Appedix 8. Scope of report 1.12 This report examies: i) the Departmet s plaig for the schemes, icludig the iitial forecasts (Part 2); ii) iii) the implemetatio of the schemes, icludig the cost of admiistratio (Part 3); ad the Departmet s strategy for closig the schemes (Part 4) This review was prompted by requests from Members of Parliamet to augmet the reviews already coducted, i particular to draw out potetial lessos that might aid the admiistratio of future schemes. The objective of this review is to examie the extet to which the Departmet has maaged the schemes effectively ad efficietly. The study methods are summarised at Appedix 1. 1 Breakdow of COPD ad VWF claim umbers by coutry (at 31 March 2007) Total COPD claims received Eglad Scotlad Wales Total Overall 443,681 50,826 97, ,706 Miers 189,570 43% 18,185 36% 34,804 36% 242,559 41% Widow ad Estate claims 254,111 57% 32,641 64% 62,395 64% 349,147 59% Total VWF claims received Overall 137,166 11,521 20, ,617 Miers 118,845 87% 9,280 81% 17,686 85% 145,811 86% Widow ad Estate claims 18,321 13% 2,241 19% 3,244 15% 23,806 14% Source: The Departmet s claims moitorig statistics 10 Coal Health Compesatio Schemes

13 Part two The plaig of the schemes 2.1 This Part examies the Departmet s preparatios for lauchig the ew schemes, icludig its arragemets for forecastig the potetial umber of claimats ad its appraisal of the optios for meetig its liabilities. Estimatig the potetial umber of claimats ad liabilities 2.2 The Departmet eeded properly researched estimates of the likely liabilities ad the umber of claims to iform the desig of the schemes, esure adequate resources were i place to process applicatios quickly ad iform public expediture plaig. Eve if the ucertaities associated with the figures were great, the Departmet eeded to kow the limits withi which it should pla. Our work suggested that there were serious shortcomigs i the Departmet s approach at this early stage. 2.3 I March 1998, just after takig over resposibility for the liabilities, the Departmet forecast that the umber of claims durig the life of the schemes would be of the order of 220,000, comprisig 173,500 for Chroic Obstructive Pulmoary Disease (COPD) ad 45,000 for Vibratio White Figer (VWF). It oly forecast forward the fiacial liability util 2003, whe it the believed a sigificat majority of claims would be settled; the combied liability of the two schemes was expected to be some 614 millio. There was o sesitivity aalysis coducted o these estimates. These estimates were to fall sigificatly short of the evetual umber of claims of 591,706 for COPD ad 169,617 for VWF, ad the evetual liability, ow expected to total up to 4.1 billio (Figure 2). 2.4 The Corporatio had previously wared the Departmet that the compesatio liability could be sigificat. The Corporatio s fial estimate (Jue 1997) had assessed the COPD liability at betwee 500 millio ad 2 billio, with VWF at 50 millio to 250 millio but possibly more. The supportig estimates suggested that the most likely umber of claims for VWF would be i the rage of 25,000 to 50,000; ad for COPD betwee 75,000 ad 300,000. These estimates were highly sesitive to the uderlyig assumptios. 2 Summary of claims estimatio coducted by British Coal Corporatio i 1996 compared to the Departmet s forecast at March 1998 ad outtur estimate at March 2007 VWF COPD Total Claims Liability Total Claims Liability British Coal Estimate (1997) 25,000 to 50,000 50m to 250m(+) 75,000 to 300, m to 2,000m DTI estimate (March 1998) 45, m 1 173, m 1 DTI estimate (March 2007) 169,617 1,632m 591,706 2,416m Source: Natioal Audit Office aalysis of the Departmet s papers NOTE 1 The Departmet s March 1998 fiacial estimates were projectios to scheme completio (2003 for COPD ad 2001 for VWF). Coal Health Compesatio Schemes 11

14 part two 2.5 The Departmet was able to draw upo the Corporatio s estimates but its March 1998 figures were ot a actuarial estimate, simply a very broad best guess of the populatio of mieworkers potetially exposed; 11 the proportio of applicats likely to claim, based o previous health claims experiece; ad medical advice o the possible ature of ijuries. The Corporatio s estimates had idicated a sigificat level of ucertaity attached to the likely umber of claims, but there is o idicatio that the Departmet took this ito accout i its plaig. At o poit durig the plaig for these schemes did the Departmet seek actuarial advice o the potetial populatio, the likely umber of claims icludig the likely rage of ucertaity, their likely compositio or the cost. 2.6 The Departmet did ot appreciate at this poit (i early 1998) that uder geeral legislatio a etitlemet to compesatio could be passed to the estate of the mier upo death ad to subsequet estates if etitlemet had still ot bee claimed. It had previously cosidered that the liability would exted oly to direct depedats, particularly widows, ad it became aware of this wider scope to the liability oly i late The Corporatio had ot factored this wider etitlemet ito its earlier estimates. The Departmet did ot, however, commissio a further ivestigatio of its likely impact o the umber of claims or the level of compesatio. 2.7 This omissio, ad the failure to follow-up, was to prove sigificat. I 2001 the Departmet commissioed PricewaterhouseCoopers LLP (PwC) to review its assumptios to determie the provisio for COPD claims. PwC cocluded that the umber of miers workig udergroud betwee 1954 ad 2000 was of the order of 1.3 millio. It highlighted there was much ucertaity aroud the chaces of a udergroud worker cotractig COPD ad his subsequet propesity to claim; its best estimate was 200,000 to 300,000 claims, but it highlighted the risk that this figure might be a severe uderestimate. I terms of the future claimat profile it highlighted that there might be a surge i claims o behalf of deceased miers towards the latter part of the scheme s life cycle. Compared to the Departmet s iitial estimates, much of the subsequet rise i the umber of claims ca be ascribed to the impact of estate claims o the overall total. Estate claims were to accout for 44 per cet of COPD claims ad eight per cet of VWF claims. Desigig the schemes 2.8 The Departmet s plaig prior to the High Court judgemets o COPD ad VWF i Jauary ad Jue 1998 was limited. The legal defece of the COPD ad VWF litigatio was led by the Corporatio. The Departmet took the view that the Corporatio was better placed tha itself to hadle the legal defece the Corporatio s seior maagemet, officers, lawyers, claims hadlers ad records staff were judged to have kowledge ad experiece uavailable withi the Departmet. Resposibility for the liabilities was therefore ot trasferred to the Departmet util Jauary I February 1998 the Departmet started the arragemets to deal with the COPD ad VWF liabilities. It formed a Eergy Liabilities Committee, appoitig officials to oversee the liabilities. 12 I November 1998 it established a dedicated Coal Health Claims Uit, comprisig three officials, icludig for the first time a dedicated seior member of staff. Much of the time of the ew Coal Health Claims Uit, ad the deliberatios of the Eergy Liabilities Committee, was immediately occupied i completig the egotiatio of the Agreemets The Govermet had aouced i July 1995 its decisio to trasfer the COPD ad VWF liabilities to the Departmet by the ed of There is evidece that durig this period, ad precedig the Court judgemets, the Departmet stood back to assess its optios for dischargig the liabilities. At workig level it did cosider some of the possible optios icludig offerig the liability to reisurace ad the possibility of puttig the schemes o a statutory footig where Parliamet rather tha the Court would determie the scheme rules. We could fid o evidece, however, of a more systematic i-depth optio appraisal beig cosidered at more seior levels. Oce the courts had reached their decisio, most of the optios previously ope to the Departmet would have become much more problematic to implemet without beig draw ito a commo law process. It is ot possible for the Natioal Audit Office to say whether the other optios would have bee viable. 11 This also icludes the type of exposure, for example for COPD, the quatum of damage by dust varies amog collieries; it was ot util a dust model was fialised i 2001 that this could be quatified. 12 This was reamed the Coal Liabilities Committee i Jauary 1999 ad is ow called the Coal Liabilities Strategy Board. 12 Coal Health Compesatio Schemes

15 part two 2.11 At the time of the Court judgemets the Departmet did ot have the iformatio that would be eeded to iform the desig of a ew scheme. I particular, it did ot kow the likely level of compesatio to be paid across the populatio of claimats ad, for COPD, it had o iformatio to quatify the profile of severity of COPD ad the extet to which smokig would reduce compesatio etitlemet. I may respects, much of this iformatio would oly have become available oce cases bega to be assessed. Recogisig that such iformatio might be eeded, ad usig actuarial expertise to idetify sigificat ucertaities, could have helped the Departmet take a broader view of the optios available. This could have icluded groupig differet types of claimats so that admiistratio costs reflected more closely the level of compesatio payable, for example by usig less itesive procedures to process claims where the mier smoked ad had a short period of qualifyig service (see Case Example 1). Obtaiig such iformatio, for example from samples of cases, however would have take time at a poit whe the Departmet was uder pressure to get the schemes up ad ruig Previous persoal ijury claims i the coal idustry, such as those for peumocoiosis ad oise iduced hearig loss, though o a smaller scale, might have offered some useful lessos to be leared or highlight potetial risks (see box). The cost of commo law claims, for example, uder the Noise Iduced Hearig Loss Scheme had suggested that admiistrative costs could be comparable to the amouts of compesatio paid out. case example 1 A example of the effect of smokig ad short qualifyig service take from the COPD claims hadlig database Ms A submitted a COPD claim i Jue 2001o behalf of her father, who died i the 1980s. He had worked as a coal face worker i three differet mies for some 50 years util mid 1960s. Ms A recorded that her father experieced breathlessess whe walkig short distaces ad eeded help with tasks which might cause exertio, such as gardeig. His cause of death was show o the death certificate as brochopeumoia ad peumocoiosis: he was a light smoker for 60 years ad was judged to be 30 per cet disabled at the time of his death. Due to the mier s smokig history, ad oly 11 years of qualifyig employmet, the Departmet was liable oly for seve per cet of his disability: Ms A received approximately 800 i damages i The Coal Workers Peumocoiosis Scheme 1974 The Coal Workers Peumocoiosis Scheme is a o-fault scheme set up i 1974 as a private agreemet betwee the British Coal Corporatio ad: the Natioal Uio of Mieworkers; the Natioal Associatio of Colliery Overme, Deputies ad Shotfirers; ad the British Associatio of Colliery Maagemet. The scheme provides compesatio to mieworkers (or their families) who have certai respiratory diseases, but pricipally peumocoiosis, by 1) lump sum paymets partly for disability but also for the claimat waivig his right to a commo law claim through the Court, 2) weekly or mothly beefits to compesate for loss of earigs. The Departmet assumed the liability o 1 Jauary 1998; the scheme is admiistered by Capita Isurace Services. Eligibility is depedet o (a) 10 years employmet i a Corporatio mie, (b) paymet of Idustrial Ijuries Disablemet Beefit for peumocoiosis (for lump sum paymets) ad (c) paymet of Icapacity Beefits (for weekly/mothly loss of earigs paymets). Sice 1974 there have bee some 90,000 claims ad approximately 150 millio i lump sum paymets ad some 45 millio of loss of earigs paymets. Sice 2000, claims have averaged 100 per moth. The average lump sum paymet is 2,700. There are curretly some 95 Loss of Earig claims receivig, o average, 1,000 per moth. It takes, o average, some 23 moths to settle a peumocoiosis claim. A major factor affectig this average is the practice of claimats delayig their acceptace of the Departmet s offers util their applicatios for the relevat State beefits, listed above, have bee completed. Noise Iduced Hearig Loss Idustrial hearig loss is also kow as oise iduced hearig loss (NIHL). It ca be defied as irreversible damage to the ears caused by exposure to high levels of oise. Miers claims are brought agaist the Corporatio; the Departmet assumed this liability o 1 Jauary The Corporatio egotiated the settlemet of claims o a idividual basis. It did so iitially by egotiatig a tariff with the pricipal miig uios, eterig ito agreemets with the uios directly, ad their appoited legal represetatives. As miers left the idustry, may of them left the uio ad whe they later became aware of their hearig loss they brought claims through high-street firms of solicitors. The chage i the profile of cases led the Corporatio to eter ito arragemets for the settlemet of oise claims ot oly with trade uios, but with those firms that had large volumes of claims. I geeral, the Departmet has cotiued with those agreemets. Noise iduced hearig loss claims are ot hadled uder a specific scheme. There are two types of claim, oe settled uder the Iro Trade Tariff ad the other through commo law. The average settlemet uder the Iro Trade Tariff is approximately 1,500 with costs ad disbursemets ragig from 485 to 800. Claims uder commo law have a average settlemet of betwee 3,000 ad 3,500. Negotiated costs rage from 2,000 to 4, Sice 1997 there has bee some 40,000 hearig loss claims totallig 70 millio i compesatio. Aroud 1,400 remai to be settled. The rate at which claims are received is slowig ad stads at 100 per moth. The average settlemet is i the order of 1,750 ad takes some 18 moths. Source: The Departmet (March 2007) 13 Aswer to a Parliametary questio 11 July Coal Health Compesatio Schemes 13

16 part two 2.13 Our work has suggested that the weakesses i the Departmet s iitial maagemet of these liabilities, especially its forecastig, were exacerbated by: Lack of resources. It devoted isufficiet staff to maagig the COPD ad VWF liabilities. After privatisatio of most of the collieries i 1994 the Departmet s overridig objective was to miimise its ivolvemet with these liabilities, iitially assigig half of oe perso s time. By 1 Jauary 1998, whe these liabilities were legally trasferred from the Corporatio to the Departmet, two staff were assiged, risig to three i November of that year. Departmetal papers as early as 1996 suggest that a lack of resources withi the Departmet impeded udertakig the aalyses required. The timelie at Appedix 3 provides details of the build up of staff over time. Failure to follow some of the routie steps that the isurace sector would take whe plaig for a potetial liability of this ature. While the Departmet had access to the skills ad experiece i hadlig claims eeded to egotiate the Agreemets, 14 it lacked at these crucial early stages the skills ad kowledge to maage liabilities of this scale, icludig actuarial expertise. Appedix 5 of this report highlights some of the steps ofte take ow withi the isurace idustry whe faced with such liabilities. 14 Whe the liabilities were legally trasferred to the Departmet i 1998 it took over the Corporatio s cotract with Nabarro for legal services ad the cotract with IRISC for hadlig health claims. The legal support provided to the Departmet by Nabarro was supplemeted by the Departmet s i-house legal team. Later the Departmet also deployed cosultats from PwC ad Deloitte with experiece i isurace ad claims hadlig, together with risk maagemet. 14 Coal Health Compesatio Schemes

17 Part three Implemetatio 3.1 This Part looks at the Departmet s implemetatio of the Coal Health Compesatio Schemes. It cosiders: the speed at which claims were settled; the Departmet s respose to the emergig challeges; ad, the costs of admiisterig the schemes. The settlemet of claims 3.2 The media time take by the Departmet, its cotractors ad claimats represetatives to process claims uder the Vibratio White Figer (VWF) scheme has bee 20 moths ad for those goig through the full assessmet process uder the Chroic Obstructive Pulmoary Disease (COPD) scheme 29 moths (Figure 3). Some claims have take sigificatly loger, ad some remai to be cleared. Others were hadled more quickly. I part this is due to the Departmet s early agreemet with the Claimats Solicitors Group to prioritise claimats by cohort, with claims from livig miers ad widows hadled first followed by estates. 15 Where possible, this resulted i claims from livig miers with the most pressig health eeds beig cosidered first. Iterim paymets were also made. Usig the fast-track route for COPD claims, itroduced i its curret form i 2005, the Departmet ad its cotractors have reduced average processig times to 19 moths for claims processed via this route (Figure 4 overleaf). The causes of log processig times 3.3 The complexity of the scheme rules, which were a egotiated outcome, cotributed to the difficulty of clearig claims, placig sigificat demads o all parties to brig together the iformatio eeded to process applicatios. To protect the iterest of taxpayers, the Departmet eeded sufficiet iformatio to verify claims but, i some istaces, the iformatio was either ot easily available or icomplete. The schemes, for example, required the applicat to complete a questioaire ad, for COPD, siged madates allowig access to: Geeral Practitioer 3 Processig times1 for COPD ad VWF claims to post-medical offer at 31 March 2007 VWF processig time for Geeral Damages offers made after a medical assessmet Cohort Average 2 Maximum 3 50 per cet (moths) (moths) of claims dealt with i less tha: 4 Source: Natioal Audit Office aalysis of data from Capita Isurace Services (moths) Miers Widows claims Estate claims All claims COPD processig time for offers made after a medical assessmet Cohort Average 2 Maximum 3 50 per cet (moths) (moths) of claims 4 dealt with i less tha: (moths) Miers Widows claims Estate claims All claims NOTES 1 All duratio figures are rouded dow to the earest moth. 2 This is the mea duratio. The calculatio is based o the duratio of claims i the schemes betwee the date of registratio ad the date of last kow offer; it does ot iclude cases litigated outside of the schemes or those which were withdraw or deied. 3 This excludes cases litigated outside of the schemes, those which were withdraw or deied ad those still to receive offers after 31 March This is the media duratio. 5 This table does ot iclude VWF services claims which were made by aroud oe quarter of all claimats. The media settlemet time for the services compoet of these claims is a additioal 36 moths. 15 For example, while the COPD Claims Hadlig Agreemet was beig egotiated, the Departmet bega its programme of spirometry medical tests (see Appedix 2) to help rak claimats by disability. It also used this test to make iterim paymets. Coal Health Compesatio Schemes 15

18 part three records, hospital records, Beefits Agecy records, Social Security (Local Office) records, pesio scheme records, British Coal medical records, colliery workers peumocoiosis records, redudacy records ad, i the case of estate claims, the post mortem record. For estate claims, copies of the deceased s death certificate, marriage certificate (if appropriate), Grat of Probate or Letters of Admiistratio ad, if available, evidece of fueral expeses also had to be furished. 3.4 For applicats with valid claims the process could be frustratig ad time cosumig. Miers represetatives iterviewed by us believed that the iformatio required was ot always proportioal to the amouts of compesatio at stake. Appedix 4 illustrates, i simplified form, the iformatio flows ecessary to successfully process a claim. 3.5 The operatioal implicatios, especially the ifrastructure requiremets, of the Agreemets were ot fully cosidered by the Departmet durig the iitial egotiatios with the Claimats Solicitors Group. The Agreemets set out exactly how claims would be assessed with the aim of achievig a similar outcome for the claimat had he progressed his case through the courts; cosequetly, the Agreemets are very detailed. The COPD Agreemet rus to 625 pages ad has sice bee supplemeted by 13 protocols dealig with specific aspects of claim hadlig, for example smokig history. Similarly, the VWF Agreemet rus to 747 pages ad is supplemeted by two protocols. 4 COPD processig time i moths1 for fast-track offers to livig claimats Cohort Average 2 Maximum 50 per cet (moths) (moths) of claims 6 dealt with i less tha: (moths) Fast-track Fast-track aloe Expedited Source: Natioal Audit Office aalysis of data from Capita Isurace Services NOTES 1 All duratio figures are rouded dow to the earest moth. 2 This is the mea duratio. 3 Live Optioal Risk Offer Scheme for mier claimats oly, available from 28 February These figures represet the total time the claimat was i the COPD compesatio scheme. 4 These figures represet the total time the claimat was i the fast track procedure. 5 The Expedited Scheme was available from September This is the media duratio. As far as we could determie, the Departmet did ot, whe i the midst of egotiatios, assess the practicality ad cost-effectiveess of the proposed processes. Neither did the Departmet, followig the egotiatios, pilot the processes from ed-to-ed to test the overall robustess of each scheme ad to address uforesee problems before committig resources. The Departmet was uder sigificat pressure from all parties to get the schemes up ad ruig. 3.6 As the Agreemets were applied, cosiderable bottleecks bega to occur ad these delayed settlemet of the claims ad caused frustratio for applicats (see Case Examples 2, 3 ad 4). Regioal moitorig groups were set up by Miisters i 1999 comprisig Members of Parliamet, solicitors, trade uios ad the Coal Idustry Social Welfare Orgaisatio to moitor progress o the settlemet of COPD claims ad to cosider how the processig of these claims might be speeded up. CASE EXAMPLE 2 Shortage of iformatio delayed the process Mr B is a 55 year old who worked as a labourer for the Corporatio, ad other employers, over some eight years. He made a VWF claim i July 1998 ad filed a completed questioaire i May Because of Mr B s work with differet employers the claims hadler, Capita, had difficultly obtaiig a complete picture of his employmet history; it was ot util July 2002 that his employmet records were cofirmed. Followig a request for further iformatio, i December 2004 Mr B s solicitor submitted a witess statemet to cofirm the type of tools he used i his job. I March 2006 Capita requested Mr B s GP records, ad these uderwet medical review i October 2006, over eight years after the claim was first filed. Our examiatio foud little evidece o file to explai some of the sigificat delays. As at 31 March 2007 this claim is ot settled. CASE EXAMPLE 3 There were delays i providig medical assessmets Mr C is a 76 year old who worked udergroud for 42 years from the age of 17 for both the Corporatio ad other, smaller, mie operators. He filed his COPD claim i March Some 20 moths of Mr C s total claim duratio was due to delays i medical assessmets. Departmetal files do ot explai the causes of these delays. His iitial medical was requested by the claims hadler, IRISC, i March 1999 ad it was ot udertake util Jauary With the help of his solicitor, Mr C completed his claim questioaire i July Receipt of this questioaire at IRISC triggered a request for a full medical assessmet. Agai, a delay meat this was ot completed util May A further delay i locatig the claimat s employmet history at a mie ot operated by the Corporatio meat a iterim paymet was ot made util Jue 2004, over six years after the claim was first submitted. As at 31 March 2007 this claim is ot settled. 16 Coal Health Compesatio Schemes

19 part three 3.7 The Departmet, ad its cotractors, faced a umber of challeges: Key elemets of the processig procedures did ot work as iteded. The mai medical assessmet process for each scheme required the Departmet to develop bespoke processes which required specialist medical staff. Iitially, these staff were ot available i the umbers required. The scale of the COPD scheme, for example, was such that it was difficult to fid the umber of respiratory specialists required i the UK. This shortfall took time to resolve, icludig usig retired doctors ad recruitmet overseas. Medical ad employmet records took loger to obtai, ad were ofte icomplete, did ot exist, or were volumious. Some solicitors ad other claimat represetatives were slow i dealig with their tasks ad returig fully completed claims questioaire forms. The Agreemets placed few deadlies o solicitors. To CASE EXAMPLE 4 The evidetial requiremets took time to fulfil Mr D is a 49 year old who worked as a fitter for the Corporatio for some five years i differet roles. Whe he filed his VWF claim i August 2000 his solicitor provided what it felt was sufficiet evidece of Mr D s work history. The claims hadler, IRISC, eeded additioal evidece of the type of fittig work performed by Mr D to assess whether he used vibratig tools. By April 2001 IRISC had ot bee able to validate Mr D s work history with iformatio from the solicitor or the Departmet s cotractors so it asked the claimat to provide witess statemets; these were ot forthcomig ad were requested agai i September The claimat s solicitor wrote to IRISC to complai about the delay i processig the claim. Evetually, i July 2003, Mr D s claim was passed to the IRISC s dedicated ivestigatio team which cofirmed the employmet group but tured dow the claim due to isufficiet time exposed to vibratig tools. After a appeal ad further ivestigatio i April 2005 the claim (ow hadled by Capita) was reistated ad a medical assessmet requested. A offer was made i December 2005 for geeral damages but was rejected pedig the outcome of a services claim applicats ca make a separate claim i respect of impairmet to their ability to perform everyday tasks, kow as a service claim. Iformatio to support this services claim was provided by the solicitor i December I April 2006 Capita cotacted Mr D s helper to assess his services eeds. The geeral damages ad services claims were settled i July help esure that all those still wishig to register a claim could do so i the ru-up to scheme closure, the Departmet relaxed the iitial claimat iformatio required of solicitors. This caused some later bottleecks whe delays occurred i supplyig the required remaiig iformatio. The processes for capturig the primary data (otably the applicatio forms) were largely paper based, resultig i sigificat amouts of paperwork for trasfer to the computerised database. With the itroductio of the password protected CoalClaims website i 2002, solicitors could submit ew details electroically about their cliets although most preferred ot to at that stage. 16 I additio, some medical reports were submitted electroically by cotractors, icludig 110,000 VWF geeral damages medicals. Certai claims bega to raise issues ot covered i the iitial Agreemets, despite their legth. Referred to as policy issues, these ecessitated further egotiatios with Claimats Solicitors Group so that chages ad additioal elemets could be agreed. Some issues remai to be resolved ad are covered i Part 4. The Departmet s respose to the delays 3.8 By March 2001 there were some 97,000 VWF ad 133,000 COPD claims outstadig, ad these figures were risig. The Moitorig Group i Eglad idetified that a blame culture betwee the cotractors, together with a adversarial relatioship betwee the Departmet ad the Claimats Solicitors Group that could be traced back to the origial litigatio with the Corporatio, was hamperig progress. 3.9 I September 2001 the Departmet brought i a seior secodee from Shell UK Limited with programme maagemet experiece to stregthe its review of iteral procedures to improve performace. His report made a umber of recommedatios, summarised i the box overleaf. As a result of this ad chages already beig itroduced by the Coal Claims Uit team, a ew project board was established for both COPD ad VWF to exert greater project maagemet cotrol. I additio, the umber of Departmetal staff was icreased from some 20 to about 40 ad further secodees 17 with experiece i project maagemet ad the settlemet of isurace claims were egaged to provide professioal iput. 16 Solicitors ca also view the progress of their cliets claims ad 94 per cet of solicitors have used this facility. 17 From PricewaterhouseCoopers ad latterly Deloitte & Touche. Coal Health Compesatio Schemes 17

20 part three 3.10 The Departmet also took steps to improve, over time, the scope ad format of the iformatio it receives from its claims hadlig cotractor to eable it to track progress. Iformatio was eeded to try to meet the eeds of various stakeholders, icludig the Courts, Members of Parliamet, ad claimats The Departmet also oversaw a series of iitiatives aimed at improvig quality ad productivity. Solicitor Liaiso Maagers were appoited at Capita to tackle operatioal difficulties more effectively. I additio to the Coal Claims website ad the submissio of medical records electroically (paragraph 3.7), greater use of computerised procedures icluded the scaig i of employmet records at the various archive facilities ad, at Capita, the scaig of over 30 millio sheets of primary documetatio, leadig to the more efficiet processig of claims. The Departmet reported that the work at Capita had resulted i a savig of 5.2 millio for the taxpayer. Review of COPD ad VWF schemes (Jauary 2002) Summary of recommedatios Strategy Clarify the objectives ad timeframe, stregthe the delivery orgaisatios, revisit the cotract strategy, refocus the workig arragemets betwee the Departmet ad the plaitiffs solicitors, stregthe feedback procedures. Plaig Build a ed-to-ed capacity pla for each scheme for the ext three years. Support this with resource plas for each cotractor, a commuicatios pla, a IT pla, ad small project plas. Put i place a sigle project maagemet methodology. Maage all projects more rigorously. Operatios Stregthe the cotractors capability to maage ad to operate processes ed-to-ed. Defie more clearly the accoutability of each party, stregthe the decisio makig capability. Cotrol Stregthe both operatioal cotrol ad the periodic review processes so that progress agaist pla ad upcomig issues are regularly moitored. Stregthe the feedback to ad from those o the groud. Report by the Secodee from Shell UK Limited 3.12 I 2004, as part of a wider study of risk maagemet i govermet, the Natioal Audit Office used the Coal Liabilities Uit as a case study ad highlighted specific areas of good practice i the use of risk maagemet: to set up ad maage large ad ovel projects with multiple parters by thikig about risk so that it became a itegral part of day-to-day project maagemet ad commuicatio with all parties; to establish positive ad ope relatioships with key stakeholders; to allow time ad sufficiet resources for risk maagemet; ad to be prepared to take calculated risks. Addressig the claims outstadig o the VWF scheme 3.13 To address the claims outstadig o the VWF scheme, the Departmet asked its cotractors to expad the capacity to coduct medicals from 2,300 to 3,600 a moth durig 2000 ad to 4,600 a moth by August IRISC, the Departmet s claims hadler at that time, also improved its capacity by icreasig VWF scheme staff from 271 i December 2001 to 354 i July These efforts bega to icrease the umbers of claims which had received a Geeral Damages offer steadily from 2003 owards (Figure 5). Addressig the claims outstadig o the COPD scheme 3.14 Problems persisted with the COPD scheme. From 2002 to 2004 there was a sigificat uder-utilisatio of the capacity available to complete the mai COPD medical. This was due, iitially, to isufficiet completed applicatios from claimats via their represetatives; without a completed claims questioaire the claim could ot eter the medical assessmet process. Oce these questioaires were logged delays bega to occur i performig the iitial spirometry testig (see Appedix 2) ad i claimats attedig full medical assessmet appoitmets The claims outstadig experieced o the COPD scheme were, however, to be sigificatly exacerbated by the surge of applicatios received by the Departmet followig its aoucemet i March 2003 that the Scheme would close to ew applicatios i March I 12 moths, the claims at the pre-offer stage rose from some 150,000 to over 400,000 (Figure 6). This had bee i cotrast to the Departmet s experiece o VWF where the forewarig of closure for September 2002 had caused a much smaller ad maageable receipt of applicatios ad hece had less impact o the claims outstadig (Figure 5). 18 Coal Health Compesatio Schemes