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Sir John Bourn, Head of the National Audit Office, told Parliament today that the costs of compensation claims paid by the Ministry of Defence are on the increase and that more can be done to keep down the cost of handling claims and to improve the service to claimants. 

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Compensation and legal costs have risen from £25 million in 1992-93 to nearly £100 million in 2001-02, mainly due to factors outside the MoD’s control. The MoD estimates that the hidden extra costs of a claim are about six times the compensation paid. There are a number of new areas of claims, such as Gulf Veterans’ Illness, potentially in the pipeline.

The MoD has taken a number of steps to improve its handling of claims, and there have been improvements in, for example, the time taken. Despite this, the MoD should do more to reduce the time and cost. There were some instances where it had encountered extra costs or delays by not applying good practice. For example, it had sometimes had problems locating and providing documentation, and, prior to September 2000, had made unrealistic initial offers to claimants, thereby causing delay.

The MOD should also improve the way it addresses claimants’ non-financial concerns. Only 14 per cent of claimants said that they had received an apology, and 33 per cent an admission of liability, from the MoD. The introduction of new Civil Procedure Rules in 1999 will increase the number of claimants receiving an admission of liability, when appropriate, on newer claims.

Although some of the MoD’s activities, such as combat, and assault course and riot training, involve a greater than normal risk of injury, many incidents are avoidable. Most incidents took place away from the battlefield or combat training. The MoD has recently taken steps to improve its management of health and safety, in order to try to prevent incidents which give rise to claims. Its performance has improved, with falls in the number of reported incidents (by 24% between 98-99 and 01-02), and compares well to that of other organisations. There are problems, however, with the completeness and quality of the MoD’s data on incidents. Only about 40 per cent of incidents were recorded, although this was in line with national figures. Despite good guidance, the quality of the risk assessments undertaken to prevent incidents and the investigation of incidents when they occurred was mixed.

More should be done to strengthen the links between those parts of the MoD which deal with risks, incidents and claims. Unlike in some other organisations, the cost of any compensation paid does not fall on the budgets of those in the MoD responsible for preventing the occurrence of incidents in the first place. The hidden costs associated with such claims, such as lost working hours and equipment repair costs, do fall on the individual budgets, but are not linked to the incident. Thus the budget holder is not directly aware of the full cost of the incident and has little financial incentive to invest in measures to reduce the risk of incidents, as they see none of the resulting savings in compensation paid.

"While the MoD has taken steps to improve the way it prevents incidents and handles claims for compensation, there is no room for complacency. Many incidents could be avoided and there are a number of steps the MoD should take to improve prevention. When things do go wrong, the result is often a personal tragedy for claimants and their families. It is therefore only right that MoD provide recompense in a timely and efficient way, and pay closer attention to the non-financial needs of claimants, including apologising where it is genuinely at fault."

Sir John Bourn


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