NORTHERN IRELAND ASSEMBLY
ASEMBLY AND EXECUTIVE
REVIEW COMMITTEE
Compensation Agency for Northern Ireland
10 March 2008
Members present for all or part of the proceedings:
Mr Raymond McCartney (Deputy Chairperson)
Mr Alex Attwood
Mr Simon Hamilton
Mrs Carmel Hanna
Mr Nelson McCausland
Mr Alan McFarland
Witnesses:
Mr Robert Crawford )
Mr Ray Jones ) Compensation Agency for Northern Ireland
Mr David Whitcroft )
Also in attendance:
Mr Victor Hewitt ) Specialist adviser
The Deputy Chairperson (Mr McCartney):
I welcome Mr Robert Crawford, Mr Ray Jones and Mr David Whitcroft from the Compensation Agency to the Committee. Thank you for coming. We are behind schedule, so I thank you for your patience.
Before Mr Crawford makes his presentation and I open up the meeting for questions, I ask Committee members to declare any relevant interests .
Mr McCausland:
I am a member of the Belfast District Policing Partnership.
Mr Robert Crawford (Compensation Agency for Northern Ireland):
With me are Mr Ray Jones, who is the director of operations at the agency, and Mr David Whitcroft, who is the agency’s accountant. They will assist me on any technical matters that may arise. I will say a few words about the work of the Compensation Agency for Northern Ireland to set the context for our discussion. The agency is demand-led. We receive claims from people who have suffered injury or damage as a result of violent crime. Our work, therefore, depends on the level of violent crime.
We do not accept all claims. At present, we deny liability in around 60% to 65% of claims. That percentage can go up or down, and that will affect the amount of money that we pay out. It may be some time before a claim is paid. Our current average is 12 to 14 months between application and payment. However, some cases can take much longer. For example, we have cases on the books that are more than 10 years old. Again, that creates some difficulty for us in predicting when money will be spent. Either way, we need to make provision for those cases in which we accept liability and anticipate accepting liability.
There are two classes of claim. We take resource cover for all the claims that we receive, and we either put a price on each of those, or estimate how many of those claims we are likely to pay, and apply an average price. Currently, we hold around £62 million for all the claims that the agency has received. We have attempted to estimate how much funding we will need in the remainder of the 2007 comprehensive spending review (CSR) period, and that figure is based on the number of claims that we anticipate receiving — not an exact science — the number that we anticipate paying, and the amount that we anticipate paying out for each claim. There is around £23 million remaining for that purpose in the two remaining years of the CSR period.
I emphasise that the figures that I am giving are non-cash-resource figures — they are not cash. Essentially, the agency’s work is about getting funding to cover liabilities — that is the challenge that we face. Usually, cash is much easier, in the sense that once one has resource cover, it is a matter of profiling the cash and controlling that year on year.
Unlike our counterparts in England, Wales and Scotland, we are managed by departmental expenditure limit ( DEL) rather than by annually managed expenditure (AME). That means that we operate on a three-year cycle, unlike AME, which operates on a one-year cycle. I do not know why it is the case, but AME is much more flexible and easier to manage. We have not been able to find any reason as to why we differ from our colleagues. As a result of our being so, however, we must do more forecasting and planning, and we are involved in more controls.
As a final comment, I will build on that and say that it is difficult to predict the future level of payments. We have attempted to improve our predictions. In the past year to 18 months in particular, we have done a great deal of work on forecasting, and we think that we are in a much better position now. For example, since April last year, we have been able to move to a three-year business plan for the first time, and that has been a big help to our planning.
The point that I want to leave the Committee with is that we have no crystal ball that will help us to determine the number of claims that will come through the door next year or the year after. With that caveat in mind, we will seek to help the Committee as much as we can with our future funding.
The Deputy Chairperson:
Thank you. On your final point, are there any developments in the criminal-justice system that might place a financial burden on, or create financial pressures for, your agency?
Mr Crawford:
Several things are happening, but I would not say that they will all necessarily create pressures. For example, with effect from this April, we are introducing a new criminal-injuries scheme, which will change a number of the headings under which compensation is paid. There are about 400 descriptors that are applied to injury types, and we have made a calculation that is based on the experience of colleagues in Great Britain and on the way in which compensation rates are changing. That will affect our payments, and we have already factored that into our current budget.
The calculations that we have made may be wrong — there may be more claims, or fewer claims of a high value. We cannot predict that accurately. We used a conservative figure in making that calculation, but if that figure were to be less than we estimated, we might make savings of £1·5 million or £3 million over the next couple of years. However, I must point out that at the end of the current financial year, we have seen an increase in the number of claims that we have received for criminal damage and criminal injury — those types of claims were up by about 10% for criminal damage and 2% for criminal injury. If that trend were to continue, meaning that we receive that number of claims every year from now on, that would involve an increased cost of several million pounds.
We are looking at how we can manage our money better. We have entered into one agreement so far and are looking for other agreements with health trusts on long-term residential care. We anticipate saving several million pounds over the next couple of years if we can get those agreements in place. That is related to the fact that, particularly for some of our older claims, we must pay all the money out to an applicant for, perhaps, the next 25 years of care. However, if we can get agreements with health authorities on the provision of that care, we can pay the money in instalments. That arrangement is outside the existing constraints of the scheme, so we are not yet certain whether it will be possible to get the kind of agreements that we seek. However, we have one in place already that has saved us a considerable sum of money. That is an example of the sort of things that are happening.
Most fundamental to this is the fact that we have seen an upturn in the number of claims, particularly in this financial year. Claims have been falling for the past five years. Therefore, it is not clear to us whether the increase represents a change in that trend or a blip. We have alerted the Northern Ireland Office to the fact that we might need to consider obtaining further resources. However, if we were to do that, we would be looking at the resources for year three, because, as I said at the start, we already have £23 million provided in the current CSR period for future claims, and that will certainly cover us for next year.
The Deputy Chairperson:
If there were a drop in case numbers, would that have staffing implications?
Mr Crawford:
Our framework document already commits us to reducing staff numbers by five, so we will go from having 80 staff to 75 staff. If there were a reduction in caseload, and the number of claims that we receive decreases, we would certainly look at whether we could make further reductions.
We are in the middle of a staffing review, because we need to create our business plan for next year, and we want to build our staffing requirements into that. A number of other factors needs to be taken into account; for example, the grade-C issue has not yet been resolved. We have quite a number of staff at that level, so that will have an effect on agency staff.
To give the Committee some examples of figures, for approximately the past five years, we have been operating with five fewer staff than our full complement allows, meaning that we have given approximately £150,000 back to the Northern Ireland Office this year. We did so because it has been possible for us to manage with fewer staff than we have money for. The budget figures that are provided do not take account of the planned reduction in the number of staff by five. Therefore, by the end of the CSR period, we expect to be running at around £122,000 under the budget figure.
I should mention the fact that we have got very good staff and many very experienced staff, as well a very low sick-leave record, which stands at about 2·9%. That means that we do not have to plan on the basis of having many staff out sick, and we do not. We have the staffing complement, and the budget to bring in staff if we need to. However, in practice, we have been able to operate well under our complement.
The Deputy Chairperson:
I will ask one final question before I invite questions from Committee members. Is there any duplication in other parts of the system that you feel you could cover, or vice versa?
Mr Crawford:
During the year, we helped out on a short-term basis with AccessNI work. We were able to accommodate that within our existing budget without seeking staff or funding for us to do so. Agency staff are excellent caseworkers, so we have the skills to do casework. I am not sure whether, in the long term, it would be sensible to mix our work with other work. However, as I said, we provided short-term assistance for AccessNI projects, so we know that we can provide it. One difficulty is that we also set targets for ourselves, and anything that we bring into the mix prejudices our staff’s ability to meet those targets. The way in which the agency is driven is through managing cases. Our framework document requires us to seek to reduce the average time that it takes to process claims, and that is our fundamental objective. We make modest improvements on that year on year. That objective could be at risk if more is added to the agency’s workload.
Mr McFarland:
Thank you. I have several queries, but I will give you them all together. Will you differentiate for me between the Criminal Injuries (Compensation) ( Northern Ireland) Order 1988 and the Criminal Injuries Compensation ( Northern Ireland) Order 2002? Each has a figure of £13 million or £14 million attached to it. Presumably, there is a difference of some sort between them. How many cases have you in total for your 75 staff? Will you take us through the amazing fluctuations in capital that are outlined in your submission, which vary from £30,000 and £830,000? I am not sure what you are at there. The table at paragraph 4 of your submission shows budgeted expenditure of £430,000 for 2008-09, which rises to £830,000 for 2009-2010, and then falls to £70,000 for 2010-11, yet it was at £30,000 in 2006-07.
Mr Crawford:
I will ask Ray Jones to let you know the number of cases. He will look that up while I answer your other questions.
There are two different criminal-injury schemes. The 1988 scheme is court-based and is the old way of handling criminal-injuries claims. By court-based, I mean that it is adversarial. The applicant submits an application and hires a lawyer, and the agency tests his or her position. The eventual settlement is approved by the court, and, if necessary, it goes to appeal. It is all court-based, and there are many legal fees to be paid. A good publication is available on that. Sir Kenneth Bloomfield headed a review of the first criminal-injuries scheme, as set out in the 1988 Order. He reported in 1999 and made a number of recommendations.
One of its recommendations was to introduce the tariff scheme, which came in under the 2002 Order. It is so called because it is based on specified amounts for each criminal injury. In other words, if an individual breaks an arm, a certain amount is paid out, or if an individual sustains hearing loss in both ears, £8,500 is paid out. That is how it works — it is not court-based. Legal fees are not paid, and, on appeal, cases are heard by an independent appeals panel.
We differentiate between them because the schemes are fundamentally different. We can manage the money between them because all the money that the agency receives is programme money. It is not like votes for different types of expenditure — we can mix and match. However, we must manage them, in a management-information sense, as two separate schemes.
The 1988 scheme is now closed. Some 560 cases under it remain outstanding. We receive a small number of claims under the 1988 Order each year, mainly for sex-abuse cases, for which there is a longer time limit in which to make a claim. Any minor who has been injured can claim up until the age of majority plus three years, which is essentially 21 years of age. We are managing out those cases. We have had about 12 new claims under the scheme this year, and the number of claims falls each year, as one would expect. We cleared about 275 of those cases this year, and, over the next three years, we will clear the remainder — except for possibly a rump of cases.
Mr Ray Jones (Compensation Agency for Northern Ireland):
The total number of cases that we have in hand is approximately 7,500. The average intake for tariff is about 5,000. The current intake for damage is around 700 or 750 cases. Technically, we still have the capacity to take very old cases under the Criminal Injuries (Compensation) ( Northern Ireland) Order 1988. Only 12 cases were submitted under that legislation this year, on a very limited and restricted basis.
Mr Crawford:
In precise figures, the 10% increase in damages that I mentioned involves a rise from 663 to 720 cases in the current year, and we predict a future figure of about 700. In the tariff cases to which Ray referred, we predict that we will come in at a little more than 5,000 — at 5,006 — and we predict a figure of around 5,000 for the future. We also have those old cases to manage out.
Mr McFarland:
What about the capital element?
Mr Crawford:
The capital figures that we have provided do look as if they are all over the place. However, that is simply because our main capital expenditure is on computer systems, which we are refreshing. The profiled expenditure relates to when we anticipate spending that capital.
In fact, the figures have changed a little since they were provided, because we have pushed some work back into next year in order to get the computer system for the new tariff scheme definitely up and running by the start of April. Work on our website, for example, will not be completed by then; therefore, some of that expenditure will fall into the following year.
Mr Attwood:
What is the explanation for criminal-damage compensation in 2007-08 rising to more than £25 million from £920,000 in 2006-07?
Mr Crawford:
It is helpful to have the opportunity to explain that, because it also explains some of the forecasting difficulties. Much of that rise relates to a series of criminal-damage claims for firebomb attacks in the dissident republican campaign, specifically on large commercial premises. There is a time lag with large claims before money is paid out, and the agency makes provision for those claims.
First, a loss adjuster is sent out within 24 hours. An ongoing debate then takes place between the applicant and the Compensation Agency. Many professionals are involved in judging the size of the loss, including financial loss of profit, and so on, and that explains the time lag.
Mr Attwood:
I appreciate that, but there is a consistency and a pattern in all the other claim lines. If one examines them, they do not vary much year on year. However, there is a huge variation in criminal-damage compensation year on year. Is the fact that claims were in the system that took a long time to process and that converged in that year the only reason for that?
Mr Crawford:
Yes, because the incidents happened within a certain period, and the time lag to clear the claims was about the same in most of those cases.
Much of that work involves related claims. In other words, one incident may generate eight or 10 claims, in which case the agency runs them together as far as possible, because the issues are the same, and because doing so cuts down on administrative and legal costs. It is quite common for a number of large claims to be paid at the same time.
Mr Attwood:
I can imagine what the answer to my second question will be, and I do not want you to cause yourself unnecessary grief. However, I get the impression that the Compensation Agency is pretty tightly run and knows what it is doing. It has said in its framework document that it can reduce staff by five. Is it not the case that you could reduce staff by another five?
Mr Crawford:
The agency has already reduced staff by five. It currently employs 69·8 full-time equivalent permanent staff. The framework document requires the staffing level to get to 75 in two years. We have one vacancy to fill, which was occupied by a supernumerary member of staff. Therefore, the agency does not have five vacancies that it is seeking to fill; it is running at five under its complement.
However, we have cover if the workload pressure on staff were to increase. That is why we gave £150,000 back this year — we did not use it, and I do not anticipate our using it over the next two years.
At present, we are carrying out a staffing review, and, as I mentioned earlier, there are a number of issues to be bedded into that. The next framework document review is due in 2010, and I would not be surprised if, in that, the figure goes down further. What I am saying is that we do not use all the resource unless we must. Providing that we keep reducing the time taken to process claims, which is the big driver, it is much more prudent and proper that we give the money back so that it can be used elsewhere. Certainly, we could employ the extra five staff and make a bigger dent in our budget; however, at present, we are achieving our aims with the existing structure. That is the long way of answering yes.
Mr Attwood:
Out of the four or five agencies from which we have heard evidence up until now, yours is the only organisation that has given us evidence to that effect.
Mr Crawford:
A caveat is that if there were to be a change in circumstances and a large number of claims made, we would want that cover.
Mrs Hanna:
Good afternoon; you are very welcome. Have you any ideas as to why there has been an upturn in the number of cases this year?
Mr Crawford:
We have tried very hard to figure that out. We have looked at the crime figures, and, for most classes, they are going down. There are a couple of areas, such as violent crime, in which there have been increases.
Mrs Hanna:
You do not see a common trend in the cases?
Mr Crawford:
Not really. I would like to carry out more work into that, perhaps with NIO statisticians and others who may be able to help. The 2% increase in claims for criminal injury might correlate with some areas of violent crime; however, claims for offences against the person have gone down. What we find more odd is the number of criminal damage claims, because there has not been an upsurge in damage, nor have there been big incidents during the year that resulted in damage to many properties.
We do have many vehicle claims. It strikes me that people who previously would have claimed from insurance, and therefore not bothered submitting a claim to us, may now be claiming from the agency, or there may be a better information system in place. However, we have never before noticed information provision to be bad in Northern Ireland, because we get about three times per capita the number of claims as are submitted in GB — people do know about the schemes.
However, that is only speculation. People may now be thinking of claiming from us, where previously they would have claimed off their insurance. The amounts for criminal damage would facilitate that, because we pay everything but the first £200. Many insurance rates are better if one has an excess that is higher than that. Therefore, it becomes sensible to claim from the agency rather than off one’s insurance. We cannot, however, substantiate that with fact.
What we have done is to ensure that our staff are fully aware that we do not pay claims on uninsured vehicles. There is a clause in the legislation that allows us not to pay for damage if the vehicle has been on the road unlawfully or without tax. We have tightened up to ensure that staff know that. However, we have not noticed any change in the claims that we are denying for that reason. The explanation probably is that people consider claiming from us as being a better option than going through their insurance.
Mrs Hanna:
You stated that your emphasis is on strengthening the process and in getting the claims processed within a certain time limit. Did you say that the average processing time was 12 to 14 months?
Mr Crawford:
Yes, 12 to 14 months.
Mrs Hanna:
Did you say that some cases have taken 10 years to process?
Mr Crawford:
Yes, we have such cases on our books, and perhaps I should say a little bit about that, because it does sound really rather bad. In some very serious injury claims, it can take years to establish the extent of the injury; for example, brain damage can take years to assess. Very often, the decision to let the claim continue to run is made between the applicant, or the applicant’s representative, and the agency. What we can and what we do do, at the request of applicants, is to make interim payments.
Mrs Hanna:
My next question was about interim payments, particularly for such cases.
Mr Crawford:
We do that. You will probably be familiar with the Green Book method of assessing compensation. We use that largely in the old cases. Post-2002, of course, the method used is different. However, in the old cases, the Green Book is very much the starting point. There is a point at which we decide that, as we will be paying more than X, we make X as an interim payment so that applicants are not disadvantaged. Some applicants do not want interim payments, but, for the most part, we find that they are helpful.
In other cases, such as criminal-damage cases, we have real difficulty in establishing the scale of the loss. For example, if a property were damaged and records were not kept, and an issue were to arise about the amount of profit or income that a business earned, we would have real difficulty with establishing the scale of the loss. Indeed, a few cases have lingered because of that issue.
Mrs Hanna:
Do you try to recreate that record rather than its being the applicant’s responsibility to do so?
Mr Crawford:
It is the applicant’s responsibility to keep that record. At some point, we seek to close a case by making an offer, on the basis of our assessment of the earnings of a particular business, and we have a forensic accountant who does that for us. However, if the applicant were to choose not to accept that offer, there would be some arguing back and forth, and, sadly, sometimes that can create an impasse.
Therefore, that is how things operate. However, ultimately, there is always a point at which we will make an offer, and we will not hang on, waiting for more evidence. Therefore, to conclude, unless we are unable to trace an individual, we will make an offer. There may be 30 such cases in which we have made offers, and we are in negotiations with those people.
Mr McCausland:
I am going over ground that has already been covered, but I want to get clarity. Under the 1988 Order, your table shows that expenditure increased from around £10·3 million, to £11·4 million, to £14·2, to £17·8 million between 2005-06 and 2008-09. Considering that it is nearly the end of the financial year, is it your understanding that the figure will be £17·8 million for this financial year?
Mr Crawford:
That is the budget that we have allocated for this year. The actual expenditure will be around that figure, but we have not finalised it as yet, so we cannot give you a final total.
Mr McCausland:
What is your budgeted figure for next year?
Mr Crawford:
Again, we have not broken that down yet. We have included the “resource non-cash” totals in the table. Those are the available amounts that we have to set against the various areas. We may need to draw forward some money from year three to cover that, but we have not broken it down yet. When we draw up our business plan, which we are in the process of doing, the amount will probably look similar to that figure, because the expected number of claims on our projection will be similar to this year.
Mr McCausland:
There is a changing trend, which ranges from £10·3 million up to almost £18 million.
Mr Crawford:
I have just been reminded that there is a point that I need to make. You referred to the 1988 Order figure. However, what I have just said applies to the 2002 Order figure. We have now provided for the remaining 560 claims that apply to the 1988 Order. There are only 12 new claims, and we have not made provision for them, because we assess them individually as we receive them. Indeed, all the claims have been assessed individually. That is the amount that we expect to spend, so that is the provision that we have now taken for them.
Members will notice that the “total resource non-cash” figure for 2008-09 is almost £51 million, whereas it appears that we have projected relatively small figures for the next two years. The reason for that is precisely what I have just said. In the past year, we estimated the value of all old criminal-injury claims and all existing criminal-damage claims in the system, and we made provision for those. Therefore, almost £31 million of that £50 million is essentially an adjustment, because we improved our forecasting and planning. Therefore, the figure is £17·8 million, and, strictly, there could be around a dozen new claims. Our expected figure for that is £100,000 for the next two years. However, the 2002 Order figure for 2008-09 will be almost £14 million for the next two years. In fact, it will be less than that, because the 2009 scheme will come in in April, so we will have to factor that into the figure.
Mr McCausland:
Between 2005-06 and 2007-08, the criminal-damage figures jumped from £15 million to £25 million because of arson attacks. Therefore, for future years, it would take only one such arson attack to add a further £10 million to that figure.
Mr Crawford:
That is a very good point, and one that I wish to clarify. We do not carry provision against one-off attacks, which would prove to be very expensive. We have an estimate based on the level of criminal-damage claims this year, and that estimate did not include that large jump. We value all criminal-damage claims as they are received. We are looking at a 12-month rolling average, and, therefore, our current prediction is based on the past 12 months.
The sort of calculation to which you refer is not built into our budgeted expenditure. However, we have an agreement with the Northern Ireland Office and, indeed, through the NIO, with the Treasury that we will seek extra money in that event, because it simply cannot be predicted. That would be an advantage if we were in an AME environment rather than in one that concerns departmental expenditure limits, because, in AME-type accounting, it is expected that one may need to seek additional funds year on year.
Mr McCausland:
Currently, you can go back to the Treasury and say that you need £10 million. Would that arrangement remain if policing and justice powers were devolved?
Mr Crawford:
That would need to be negotiated between the Department of Finance and Personnel and the Treasury. However, it is explicitly annotated in the NIO’s relationship with the Treasury as one of the risks in which the Treasury would allow the NIO to seek extra funding. I imagine that that should carry on, because it is already built in.
The Deputy Chairperson:
I thank Robert, Ray and David for their presentation and patience.
Mr Crawford:
Thank you.