The taxpayer could be hit with a bill of £100 million or more for compensating businesses and residents whose property was destroyed in the 2011 riots, according to a new report.
A review of the Riot (Damages) Act - which has not been substantially changed since it was written in 1886 - gave the first official estimate of the potential costs of the disorder in London and other English towns.
It also said the insurance industry has paid out £170 million so far - 2,254 claims in total including more than £1.5 million to domestic policyholders.
Some of the £170 million total is included in the cost to the public purse because the Act allows insurers to be compensated for riot claims.
Neil Kinghan, a former civil servant who was commissioned by the Home Office to conduct the detailed review, said in his report: “Public expenditure cost has been £35.2 million on claims under the Act, but it could still grow to £100 million, or more.”
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20 Aug 2011It compares with claims totalling £17.2 million which were made after the 1981 riots in Brixton, south London; Toxteth in Liverpool and other parts of the country.
Mr Kinghan said the law should continue to allow insurers to be reimbursed.
But he added that a cap should be introduced so that insurers can only claw back money paid out to businesses with a turnover of less than £2 million. Domestic claims would be unaffected.
He said a cap would “ensure the delivery of best value for money for the Exchequer”.
Insurers had warned Mr Kinghan that it might have been necessary to increase premiums for property insurance if the law was changed to prevented them claiming money back from the Treasury.
Mr Kinghan also recommended that uninsured people should continue to be able to claim under the Act.
In addition, the law should be extended to cover damage to cars, which were not invented when the Act was drawn up, and claimants should be reimbursed “new for old” rather than “old for old”.
Otto Thoresen, director general of the Association of British Insurers, said: “We are concerned that the review recommends that insurer recoveries from the state should be restricted to businesses that turn over less than £2 million a year.
“This could be a disincentive for some larger firms to locate in some areas.
“The Government should carry out an impact assessment on the impact of both of these proposals.”
Damian Green, the policing minister, said: “We aim to launch a public consultation by the end of the year.”
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