by Chancellor Rachel Reeves’ efforts to regain control of Britain’s finances are being hampered by a huge £47bn bill in unpaid compensation claims which could be even longer, The Independent can be revealed.
Analysis of a report by the National Audit Office (NAO) revealed that previous governments have committed £84bn to 12 compensation schemes for wrongdoing, cover-up and negligence.
Although much of that sum has been paid out by the British state, almost £47bn is still owed in high-profile cases such as the contaminated blood and the Post Office Horizon scandals.
The outstanding total is more than double the £22bn black hole in the nation’s finances which the Chancellor revealed to MPs in July which saw winter fuel payments slashed, social care reforms canceled and spending plans slashed including upgrading the rail network.
Ms Reeves has also confirmed that she intends to backtrack on her election promise not to raise taxes.
But, alarmingly for the government, the bill could grow even higher. Victims of the contaminated blood scandal are expecting more than the £2.2bn currently in the budget to compensate them, with other claims for compensation yet to be settled.
The figures do not include compensation for around 3 million Wasspi (Women Against State Pension Inequality) women whose retirement plans were hit by changes to the pension age, worth between £1,000 and £2,950 each. There is also pressure for a proper compensation scheme for Britain’s nuclear testing masterpiece, of which 1,500 are believed to be still alive.
Although some compensation schemes have now closed, many are still open and no end date has been identified. The pressure has increased in recent months to make these payments.
Former Post Office minister Paul Scully, who oversaw compensation for postmasters, said The Independent that the huge bill for the taxpayer is often “the result of groupthink and a cover-up to protect the brand”.
He said: “If the cover-up had not happened and the mistakes had been dealt with earlier, the cost to the public purse would have been much lower.”
He added: “I came across a lot of horrible situations [in the Post Office scandal]. Nothing can properly compensate for the way lives have been destroyed and businesses bankrupted by this scandal but we have a duty to compensate the victims as best we can.”
He said the budgeted amounts were based on value for money tests carried out by the Treasury to protect the taxpayer in the future.
The new government plans to introduce a duty of candor for public employees to try to prevent cover-ups.
It follows outrage over the behavior of the Post Office under former boss Paula Vennells, which led to sub-masters being wrongly convicted and jailed for theft, fraud and false accounting.
The NAO report found that £222m has been paid to date out of a potential £1bn budget for the Post Office, according to analysis by the Taxpayers’ Alliance.
The compensation bill included the infected blood scandal where more than 30,000 people in the UK were infected with HIV and hepatitis C after being given contaminated blood products in the 1970s and 1980s. Successive governments ignored warnings about the blood supplies, allowing victims to become infected. Among those heavily criticized at a public inquiry was former health secretary Kenneth Clarke.
So far, £346m has been paid out of the £2.2bn budgeted for interim payments – but campaigners say the cost should be more.
Former SNP MP Chris Stephens, who worked closely with the victims and their families, said the actual cost of compensation was always understood to be at least £10bn.
He said: “The infected blood community deserves clarity on these figures. The £10bn figure is accurate and the previous government did not account for the funds or the £10bn was used as political leverage to scare people about the cost.
“The government must ensure that the promises made by Parliament to the infected blood community are fulfilled. in its entirety.”
However, the NAO has warned that there is a lack of co-ordination in how the government decides and handles compensation schemes, leading to mistakes.
The report noted: “Citizens eligible for relief will suffer hardship and distress. These citizens have a reasonable expectation that their claim will be dealt with fairly and quickly. There is no central coordinated approach when the government sets up new compensation schemes which leads to a relatively slow, ad hoc approach.
“Setting up and administering a compensation scheme is a complex task, and challenging for officers who have never done it before. This has resulted in mistakes and inefficiencies in the design of schemes, and delays in getting money to claimants.
“The confidence of the claimant and the interested parties can be undermined when the design and operation of the scheme is not seen to be independent of those who have harmed them. Those experienced with schemes agree that: gratification should be quick; decisions that are fair, proportionate and transparent; and that the people who are harmed should be at the heart of the decision-making.”
Clinical negligence schemes managed by NHS Resolution have the largest share of taxpayer funding, with £26.5bn paid out and a further £69.3bn in the budget.
Other schemes have an unknown ceiling for payouts, including the vaccine damage scheme from the late 1970s, with £20m paid out so far.
So far the payments for the Windrush scandal – which saw people who are entitled to live in the UK wrongfully – have reached £85.9m from a budgeted amount of £215m.
Another open scheme is the armed forces compensation scheme (AFCS) which pays for injury, illness or death in service on or after 6 April 2005. To date, £1.3bn has been paid out of a total of £2.3bn in the budget.
Schemes that have been fully paid include compensation for coal miners (£4.3bn), claw and mouth (£1.3bn), and Icelandic water trawlers from the cod wars of the 1970s (£43m).
A Treasury source said details of the potential costs of the compensation schemes would be set out in the Autumn Budget “as required in the usual way”.
The government has said it is determined to pay comprehensive compensation to infected victims affected by the contaminated blood scandal. But he admits he still doesn’t know how much needs to be set aside.
The Treasury has noted that the total cost of the compensation scheme will ultimately depend on the number of infected or affected people who come forward, but “everyone eligible will receive the compensation they are due”.
John O’Connell, chief executive of the Taxpayers’ Alliance, which coordinated the figures, said: “Taxpayers will be very happy with the huge bill they’ve been left with as a result of this catalog of bigotry by previous governments.
“When things go badly wrong, it is to be expected and indeed to demand compensation, but what is unacceptable is that these mistakes are only once in a blue moon.
“The new government can demonstrate that they represent change by quickly and effectively resolving existing schemes while ensuring that errors of this nature are a thing of the past.”
