By Robert Whiston FRSA Dec 14th 2010
My misgivings aired in the previous article (“Compensation – right or racket ?”) seem now to have been well founded.
The Daily Mail article two weeks later (Nov 13th 2010) touches on some very similar points but focuses on its impact on intended beneficiaries (which mine did not).
The full article “Victims of crime owed £600m compensation after body set up to hand money out runs out of funds” is given below but the salient features from it show that £600 million is owed to 50,000 people, and the CICA simply hasn’t got the money to pay the 50,000 people left in limbo.
The point I was trying to make (though perhaps poorly) in my previous article about the CICA (https://robertwhiston.wordpress.com/2010/11/20/22/) was not just that the CICA was perhaps squandering money (at £3 million each and every year on teeth and medical care), but more to the point, that it had liabilities that it seemed unable to quantify – although the £15m spent on teeth etc over the last 5 years would have gone some way to help people who really needed it, say, victims of knife crime.
Looking at the accounts both for this year (2009 – 10) and last year (2008 – 09), one would never suppose that tens of thousands of people were in danger of not being paid.
Yes, there are delays, as one would expect, but the overall impression given by the CEO is of compensation demands being dealt with quietly but efficiently, and the organisation itself becoming ever more cost-effective (“driven forward”).
If it is true that is the “CICA has been overspending by around £50million every year” (Daily Mail), why has £209 million been paid out from an annual budget thought to be £282m ? Isn’t that £73 million an under-spend / surplus (£282 – £209) ? This doesn’t tally with the assertion that the CICA has been overspending by £50 million every year. Indeed, no where in the accounts is the £600 million shortfall mentioned.
Carole Oatway, the £90,000 pa Chief Executive of CICA, gives nothing away in her opening remarks in the previous year’s accounts (Foreword, 2008-09).
The number of those ‘waiting over 12 months’ for a decisions to be made regarding their claim was 15,608 (Table 5, 2008 – 09). The overall total of all those waiting any period of time (inc. a few weeks or months) was put at 60,311 (Table 5, 2008-09).
Only “around a quarter of cases are still taking more than a year to resolve” it states. With the number falling (between 2009 and 2010), and cases dealt with more quickly, that does not tie in with the ‘50,000 victims’ cited by the Daily Mail. (cf ”As a result of the scheme change there has been a downward movement in respect of the total outstanding liability”- CICA).
In the following year’s accounts (2009 – 2010) the table listing the waiting times becomes Table 6 (see below). The number waiting more than 12 months had fallen to 14,012 with the total decisions delayed for any time at all being 63,357.
No where can be seen a £600,000 assessment or recognition of a liability in 2009 (or in the 2010 accounts).
Yet elsewhere it indirectly tells the reader it has contingent liabilities of over £1,200 million but the impact is softened by the additional wording that it is for estimated ‘future’ demands that may be made upon it.
At 31 March 2009, the Authority’s balance sheet records net liabilities of £921 million (31st March 2008, £1,288 million). This reflects the inclusion of liabilities falling due in future years which may only be met by future funding or funds from the Ministry of Justice and the Scottish Government. This is because, under the normal conventions applying to Parliamentary control over income and expenditure, the funding is not provided in advance of need.
So the issue is fudged. The claim demands may or may not be met. one thing is for sure the Ministry of Justice would prefer to duck this obligation to pour out more money.
There might be several reasons why the accounts are not as transparent and easily interpretable they should be and one reason could be reconciling the ‘funding convention’, which no doubt refers to Whitehall’s murky methods of accounting.
What is happening under “1.11 Recognition of compensation liability” (p 44) appears to be a soft shoe shuffle. A technical change of accounting liabilities allows the CICA to restate (understate ?) its financial obligations.
At a time when crime is said to be going down, the only statistical intrigue is why claims should be going up.
Is this the ‘dividend’ of encourageing people to come forward (as in rape cases) or a greater awareness, via televison advertising, that there is compensation available and there is someone out there who can be made to pay ?
Every business has to produce accounts and those accounts have to be audited. The CICA has of late resorted to confirming it is a ‘going concern’ and that the accounts are prepared on that basis. In the business and accountancy world this is a red warning flag. A going concern is a business functioning under the threat of liquidation in the foreseeable future (usually taken to be at least within 12 months). As a consequence Auditors require the directors to be very ‘hands on’ and take sole responsibly – and in effect indemnify the auditors.
Compensation can be slashed or the value of compensation options can be slashed – or the entire process can be privatised and/or terminated.
Is this time for another one of Ken Clark’s deft touches ? Will he be attracted to the New Zealand’s model or struggle through with what we have at present ?
Daily Mail, 13th Nov 2010
“Victims of crime owed £600m compensation after body set up to hand money out runs out of funds”
By James Slack and Jack Doyle
Almost 50,000 victims of violent crime have been kept waiting up to two years or more for compensation, it emerged last night.
They have been denied the £600million owed to them because the body set up to deal with the cases has run out of funds.
The 50,000 – who include the children of murder victims – need the money to cover medical bills and compensate them for their disabilities and lost wages. Some are owed up to £500,000 after being left crippled or unable to work by vicious thugs.
But the Daily Mail can reveal their claims have been deliberately delayed because the Criminal Injuries Compensation Authority does not have enough money.
Coalition sources say the system they inherited was a ‘total shambles’. They have now ordered an urgent review of the organisation, which was previously criticised for huge delays in paying the victims of the July 7 terror attacks.
Justice Secretary Ken Clarke said the compensation system ‘simply has not received adequate funding in each year’s budget to keep up with the level of claims’.
It is understood that the CICA has been overspending by around £50 million every year.
CICA pays compensation – ranging from £1,000 to £500,000 – to victims who have been left physically or psychologically damaged by a violent crime, or who lost a loved one. Payments to children and relatives of murder or manslaughter victims are a maximum of £11,000. Compensation rates are fixed by Parliament and depend on the type of injury suffered.
Figures released to MPs show there are 49,667 outstanding claims. Of these, 6,817 date back more than two years. The value of the claims is £598.6million. CICA is reliant on the Ministry of Justice for funding. The department is facing budget cuts of 23 per cent as a result of George Osborne’s spending review.
Labour MP Andy Slaughter, who uncovered the figures, raised suspicions the Government may be planning to slash the value of compensation awards to balance the books. Mr Slaughter said ministers needed to be ‘honest with the public’ if that was the intention.
Javed Khan, of Victim Support, said: ‘Many victims of crime rely on compensation to cover the financial cost of crime. ‘Delays can have a damaging impact, leaving victims out of pocket as well as stopping them from moving on with their lives.’
A Ministry of Justice spokesman said: ‘CICA receives a budget at the beginning of the year. As the scheme is demand-led the amounts due to victims in any one year can exceed the available budget for any year.’