Compensation claims and settlements
2.7.125 Compensation payments to SYP officers were covered by SYP's employer's liability insurance policy. They totalled £1.5 million. The funds from which compensation payments to the injured and bereaved were made came from six sources: South Yorkshire Police Authority's public liability insurance cover (£8.5 million); South Yorkshire Police Authority's financial reserves (£4.5 million); special payments from the Home Office (£2.8 million); and as a result of the contribution hearings (£1.5 million from SWFC, £1.5 million from Eastwood and Partners and £1 million from SCC).
2.7.126 South Yorkshire Police Authority's Finance and General Purposes Committee met on 8 December 1989 to consider the implications of the decision to settle some compensation claims from the bereaved and injured. Press reports that estimated the final cost of claims as £50 million were noted, but regarded as speculation fuelled mainly by solicitors acting for the claimants. The Police Authority's public liability insurance cover with MMI was limited to £8.5 million.
2.7.127 Minutes of the meeting recorded that the Police Authority's solicitor considered 'the estimate of £50m' was 'a wild exaggeration'. Further, the possibility that the Police Authority would 'ultimately have to bear any part of the cost' depended on 'the final bill and the extent of the police's liability'. However, the Police Authority's solicitor was 'reasonably confident at this juncture that the insurance cover will prove to be sufficient'.
2.7.128 The announcement in the press that SYP proposed to pay compensation, possibly as high as £50 million, caused surprise and concern within the Home Office. Aware of the £8.5 million insurance limit, questions were raised about where that amount would be found. Other Home Office officials had greater awareness of the situation, having responded to a request from the Police Authority in October 1989 for guidance on the whether the Home Office might help to meet the cost of claims from central funds.
2.7.129 At the time, South Yorkshire Police Authority's Clerk and Financial Officer, RC Johnson, wrote:
Unfortunately although half a year and more has elapsed since the date of the disaster, the size of this liability remains a matter of conjecture ...
The Authority had instructed me to write to you to enquire under what circumstances and to what extent the Home Office will consider giving further special assistance to the Authority in meeting what could conceivably be a very substantial burden.
2.7.130 The Home Office response gave no firm commitment to the Police Authority but it did not rule out a special payment. It noted that since the level of grant paid direct from the Home Office had been raised to 51 per cent of total police expenditure the only special payment made to any Force was also to South Yorkshire (in relation to the Hillsborough investigation led by WMP). It set out the circumstances in which a further payment might be considered:
(a) whether the size of the expenditure is such that to meet it would involve the police authority in such huge costs that the viability of the police force would be put at risk and (b) whether the commitment could have been foreseen (and so budgeted for).
The problem with compensation liability following Hillsborough ... although the size and timing of the commitment are uncertain, the likelihood of the commitment arising is foreseeable.
2.7.131 It was clear from the Home Office response that the Police Authority should demonstrate full commitment to meeting its responsibilities before seeking further government funds: 'While ... I do not wish to close the door in advance on any future application from your authority, I have to say that our expectation would be that it would have taken steps to cover this contingency from its own resources (including the grant it receives from the Government)'.
2.7.132 There followed a different approach from the Police Authority. Having agreed to pay compensation to those claimants meeting certain criteria, there was concern that the statutory figure for bereavement under the Fatal Accidents Act 1976 was only £3,500.
2.7.133 The Police Authority considered making higher payments in some cases, as had been done following previous tragedies including the King's Cross fire. The Police Authority was keen to explore whether such additional payments would qualify for a police specific grant. The indications were positive. The Lord Chancellor was to review the statutory provision for compensation in the light of recent cases where payments had been made above the statutory amount.
2.7.134 While noting that it was for the parties involved to negotiate the level of settlement in each case, the Police Authority was advised as follows: 'As far as the grant position is concerned, if on legal advice, your Authority proposes to settle at a higher level than the statutory figure the Home Office would be prepared to pay grant on that element of compensation not covered by your Authority's insurance, provided the total compensation figure paid did not exceed £10,000 per person'.
2.7.135 It is clear from the published updates from the Hillsborough Steering Committee of solicitors representing bereaved families that discussion of this issue was not confined to the Police Authority and the Home Office.
2.7.136 Elizabeth Steel, on behalf of the Steering Committee, wrote that it was 'common ground that the current level of damages for bereavement £3,500 is far too low and although Parliament has never pretended it should be a compensatory figure it has remained static since 1982 and should be increased'. The Hillsborough Steering Committee negotiated with the Police Authority and their insurers.
2.7.137 Despite those negotiations, and the assurance given by the Home Office, it appears that a higher figure in respect of bereavement was never formally agreed or paid, with bereaved families on record as having received only the statutory figure of £3,500.
2.7.138 Claims for compensation were received over a long period and the Police Authority's Finance and General Purposes Committee was given regular updates on anticipated costs. On 6 January 1995, the Police Authority's Clerk and Financial Officer reported that the then current estimate was that the £8.5 million insurance limit would be exceeded by £1.35 million. At that time 1,566 claims were reported as having been settled, with a further 80 outstanding.
2.7.139 By 15 March 1996, the estimate of the uninsured costs had increased to a possible £2 million, £0.5 million more than the amount provided for in the Police Authority's allocation. This did not appear to create anxiety. The Police Authority was running a projected underspend of £1.442 million that year and its revenue reserves were understood to be £7.9 million.
2.7.140 Estimates of the likely final costs continued to increase and by September 1999 the situation was less manageable. The Police Authority's decision to fund the defence costs of its former officers (Chief Superintendent David Duckenfield and Supt Murray) in the private criminal prosecution threatened to impact directly on policing budgets already being 'squeezed' by Hillsborough.
2.7.141 Writing to the Home Secretary to seek a meeting to discuss a further application for financial support, the Chair of South Yorkshire Police Authority, Clarence Swindell, suggested that the rising compensation costs 'could add around 13 per cent to Council Tax'.
2.7.142 Mike Hedges, who had recently succeeded Richard Wells as SYP Chief Constable, also wrote to the Home Secretary in support of an application for additional central funds. He considered that the 'exceptional nature of the impact of the Hillsborough Stadium Disaster of 15 April 1989 continues to affect the Force's finances in ways that could not have been foreseen'. This imposed 'a financial burden which reduces my ability to provide the people of South Yorkshire with the policing service that I would like and that they deserve'.
2.7.143 A briefing paper prepared by the South Yorkshire Police Authority for the meeting with the Home Office set out in detail the costs of settling the compensation claims. It explained that the £8.5 million insurance limit together with the £4 million contributions made by other parties that accepted a share of liability had been exceeded in June 1997.
2.7.144 Since that time, payments made by the Police Authority from its funds in the settlement of claims totalled £2.227 million while reserves placed on outstanding claims stood at £5.078 million. The resulting overall total of £19.8 million represented a substantial increase on initial estimates. The uniqueness of Hillsborough was highlighted thus: 'Hillsborough has re-written the rules and will have caused all police authorities to review the limits of their public liability policies. South Yorkshire Police Authority now have an indemnity limit under their policy of £21m and this is currently under review'.
2.7.145 Ultimately, the Police Authority's case was persuasive and the Home Office agreed to provide £1 million in March 2000 in support of outstanding compensation payments (although it declined to provide financial assistance in support of former officers' defence costs). Following further discussion, an additional £1 million was provided in the next financial year, followed by £800,000 in 2002/03.
 'SOUTH YORKSHIRE POLICE AUTHORITY FINANCE AND GENERAL PURPOSES COMMITTEE', 8 December 1989, SPA000000760001.
 Internal Home Office memorandum, 1 December 1989, HOM000006080001.
 Letter from RC Johnson, South Yorkshire Police Authority, to M Addison, Home Office, 27 October 1989, HOM000013850001.
 Letter from M Addison, Home Office to RC Johnson, South Yorkshire Police Authority, 6 November 1989,SPA000000250001.
 Letter from P Ransford, Home Office, to S Walker, South Yorkshire Police Authority, 20 February 1990, HOM000036010001, p5.
 Letter from Elizabeth Steel, Hillsborough Steering Committee to a firm of Solicitors: Hillsborough Group Bulletin 12, 29 December 1989, FAM000000190001, p10.
 'SOUTH YORKSHIRE POLICE FINANCE AND GENERAL PURPOSES COMMITTEE', 6 January 1995, SPA000000830001.
 'SOUTH YORKSHIRE POLICE AUTHORITY, REPORT OF THE CLERK AND TREASURER', 15 March 1996, SPA000000850001.
 Letter from Clarence Swindell, Chair of South Yorkshire Police Authority, to Jack Straw MP, Home Secretary, 10 September 1999, HOM000010060001, pp4-5.
 Letter from Chief Constable Mike Hedges to Jack Straw MP, 29 September 1999, HOM000010130001, pp3-5.
 Letter and enclosure from South Yorkshire Police Authority to Chris Michael, office of Charles Clarke MP, 21 October 1999, HOM000010120001, p8.
 Confirmed to the Panel by the Home Office.