A recently published report by a House of Commons committee acknowledged that, while improvements had been made to the Post Office and Horizon redress schemes over the past year, a series of recommendations should be considered by the UK Government to ensure faster redress for victims.

We have previously considered redress schemes linked to child sexual abuse in various jurisdictions; some have worked well and others have not. There clearly remains much to learn in implementing such schemes. In that context we consider the report published last year by the National Audit Office (NAO) entitled Lessons learned: Government compensation schemes.

The report was compiled at the request of the Public Accounts Committee (PAC) (of the last Parliament), which requested a thematic review of government compensation schemes for citizens who have suffered harm, hardship and distress from failure by public bodies.

The purpose of this report was to set out the insights that the that NAO has gained on foot of their reporting on such schemes in the past which, it was hoped, would set out good practice and the risks associated with such schemes, for those who are now and will in the future be engaged in designing and delivering such scheme on behalf of the government.

The NAO stated that for the purpose of this report the term ‘compensation scheme’ “…covers schemes where payment (or non-financial redress) is made as a result of a liability established in the courts, where there is no admission of fault by the government, and where there is no government legal liability.”

The report details the lessons drawn from the various schemes with supporting examples from across government to illustrate the challenges faced and how they have been addressed.

The report rightly and fairly observes that there is a balance to be struck between taking too long to design a scheme - and thereby losing the trust of the intended applicants - and rushing the design of a scheme due to political and media pressure, which often results in poor design decisions, which can give rise to unforeseen consequences.

It examines the various schemes under three headings and identifies 21 lessons:-

Overview of compensation schemes

It is at this stage that consideration should be given to how the scheme is to be structured, i.e. awards based on the specific circumstances of an individual, a tariff system or a once-off payment to all applicants, which can be fixed or variable.

The NAO also draws references the benefit of consulting the Parliamentary and Health Service Ombudsman Principles for Remedy in 2009, which guides public bodies on how to make good any injustice or hardship caused by maladministration or poor service. The NAO says that as it is usually the department or public body that is responsible for the relevant wrong who will be responsible for designing the scheme, every department or public body has gone about this in their own way with differing degrees of success. However, as far back as a report in 2008, the NAO highlighted the need for those designing such schemes to reach out to the existing expertise across government and the wider public service, to those who have already designed and administered schemes. The NAO give a very relevant example of this not being done saying that despite such schemes being in existence for over 20 years, in 2021 the Home Office told the NAO that it had no clear precedent when designing the Windrush Compensation Scheme.

Lessons Learned 

  • Officials should learn and apply lessons from good practice and previous schemes, including by consulting guidance from HM Treasury and the Parliamentary and Health Service Ombudsman.
  • Public bodies would benefit from a central hub within government that could provide guidance, expertise or a framework for those in government seeking to set up a compensation scheme.

Scheme design and planning

Under this heading the NAO observes that the integrity of the design of the scheme must win favour with the potential applicants, while also upholding the principles of good financial management. The scheme purpose, the people who can apply and the payments and supports that can be accessed as part of the scheme, must be clear from the outset. The NAO again references the Windrush Compensation Scheme, where following an independent review of that scheme in March 2022, people reported that they had been reluctant to apply to the scheme as they thought it applied to Caribbean communities only. The clarity of schemes can be enhanced by having stakeholder input into the design of the scheme.

Lessons Learned

  • It is important to make clear to stakeholders the purpose and scope of the scheme when the scheme is established, including what it is unable or not intended to do.
  • Scheme designers should consider the full range of potential awards in line with the intent of ministers and Parliament.
  • Involving stakeholders in the design of schemes can help to achieve buy-in and improve the quality of the scheme.

The NAO says that the issue of independence can be central to the success of such schemes, depending on the level of harm caused by the government or public body and this should be a primary plank in the design of any scheme. 

In November 2021, the House of Commons Home Affairs Committee recommended that the Windrush Compensation Scheme, which was ongoing at that time, be transferred to an independent organisation, to increase trust and encourage applications as there has been general public criticism, including by Human Rights Watch in 2023, for the scheme to be taken out of the Home Office's control and handed to an independent body. This lesson does appear to have learned by Government as the Infected Blood Compensation Scheme will be administered separately from the Department of Health and Social Care, by an independent body, the Infected Blood Compensation Authority.

Lessons Learned

  • It is important for the scheme’s credibility with claimants that both its design an operation can be seen to be independent from those judged to have caused the harm.

While government compensation schemes normally adopt an evidential burden based on the balance of probabilities, this evidential burden has to be offset against the need to protect the public purse, particularly from fraud. However, the burden of proof provided for in the scheme will inevitably impact the rate of processing, particularly if that burden is prohibitive. Yet again, the Windrush Compensation Scheme fell foul of this aspect of scheme design, having initially provided for some categories of scheme applications to be proven on the criminal standard, beyond a reasonable doubt.

In more recent government compensation schemes, there has been greater pressure to move towards settlements based on the unique and individual circumstances of the applicant and their individual losses, especially where the scheme’s stated objective is to restore the applicant to the position they would have been in had the wrong not occurred. While this is seen to be the fairest way to deal with applicants, those designing the scheme must be aware and clear that this will lead to a longer timescale to deliver compensation/redress and will be more costly.

Scheme designers also need to be clear as to whether a compensation/redress payment will be exempt from taxation and what impact, if any, it will have on benefits that the applicant is already in receipt of. For example, the NAO reports refers to the Post Office Horizon Shortfall Scheme, where the initial scheme design did not make the necessary allowances for the tax implications of payments out under the scheme and top-up payments had to be made at a later date to offset this oversight.

Lessons Learned

  • There is a balance to strike between paying claimants as quickly as possible and the requirement to protect the public purse – the optimum point will vary by type of scheme and the circumstances of claimants.
  • Scheme designers should be clear where ministers and Parliament stand on the extent to which speed of payment is balanced against other factors.
  • Interim payments can play an important role in supporting and reassuring scheme claimants.
  • Scheme designers should be clear in advance to what extent, if any, the government or Parliament would desire scheme payments to be exempt from usual tax or benefit obligations.

In part two of this series, we will look at the many practical lessons that are to be applied in the future operation of government compensations schemes, which are equally useful for private compensation/redress type schemes. We will also look at how this report might influence the establishment of a National Redress Scheme for England and Wales for victims of childhood sexual abuse.