Government tackles employers' liability crisis

The Government yesterday threw a lifeline to businesses facing spiralling insurance costs by postponing their liability to pay the NHS costs of treating injured employees.

The Department of Work and Pensions also unveiled plans to protect the smallest companies and announced a fresh drive to speed up the rehabilitation of workers back into the labour market.

The initiatives, which were given a lukewam welcome by business, were the Government's latest attempt to dampen protests that employers' compulsory insurance costs had risen as much as ninefold in the past year.

Des Browne, the minister for work, said: "The Government recognises that too many businesses have faced steep price increases, late renewals and premiums that fail to reflect their health and safety record."

He said there was evidence that affordable cover was not available in Northern Ireland, Wales or Scotland. "The market hasn't failed but it hasn't been working well enough," he said.

Business groups said employers last year faced an average increase of 50 per cent in their premiums, with isolated reports of increases as high as 800 per cent, although the average increase this year had fallen to 20 per cent.

The massive jump led to claims that businesses were being pushed to the wall while as many as 200,000 companies were operating illegally without insurance.

The Government responded by launching an inquiry that included a probe into how a "compensation culture" could be curbed.

New measures unveiled by Mr Browne include: a new framework for vocational rehabilitation; postponing the recovery of NHS charges for personal injury claims by a year to November 2004; and reviewing the need to insure for the 300,000 companies where the owner is the only employee.

Business leaders welcomed the changes but some said they did not go far enough. David Frost, director general of the British Chambers of Commerce, said plans to recover NHS costs were a "terrible burden in such a fragile economic climate". "The plan should be abandoned completely, not simply shelved for a year," he said.

The CBI praised the initiative on workers' rehabilitation but called for more details.

"They must make clear who will fund improvements to the rehabilitation framework and how these changes will relate to smaller firms that face greater difficulties getting staff back to work," said John Cridland, the CBI's deputy director general.

The insurance industry, which claims to make a loss of £1.32 for every £1m of premium it receives, said it had responded to concerns from business and government.

Henry Bellingham, the Conservative industry spokesman, described the proposals as a "wasted opportunity", saying none of the increased tax take from insurance premiums had gone into relief for businesses.