MPs condemn accident compensation `clawback'

ROSIE WATERHOUSE

Social Services Correspondent

The Government is being urged to change a controversial system under which the Department of Social Security claws back compensation paid to the victims of accidents or industrial injuries.

In a critical report, the House of Commons Social Security Committee concludes the system operated by the compensation recovery unit is "manifestly unfair" and discourages people from claiming damages.

The committee's inquiry followed a stream of complaints that the unit was recovering most and sometimes all of the damages awarded to recoup social security benefits paid out since the accident or injury. It found: "Some of the cases we have encountered, we believe, are revolting to the ordinary man's sense of justice."

The unit was created by the 1989 Social Security Act to ensure that all state benefits paid by the taxpayer should be recovered. The unit was allowed to claw back benefits paid for up to five years.

Even compensation paid for pain and suffering could be clawed back by the unit. Since it was set up, it has recovered increasing amounts, rising from pounds 3.7m in 1990-91 to pounds 110m in 1994-95.

The report concluded that it was unfair that, in order to recover the benefit paid by the taxpayer, "it is the victim who receives damages to compensate for his loss who has to carry the burden of recovery. To recover benefit in this way leaves the victim undercompensated".

The committee recommends that the benefits to be paid back should be added to the compensation package and effectively paid for by the employer or person responsible for the accident or injury.

The report warns that if the Government accepts the central recommendation, insurance premiums, in particular employers' liability insurance, will have to rise to cover the new element of compensation.

The Association of British Insurers opposes the proposal and argues that employers' liability insurance is already unprofitable.