Further clues about the discount rate?

Just after the election result in a blog dated 9 June I referred to “a much-changed form of political calculus” because of the hung Parliament. A subsequent piece suggested that the Queen’s Speech – passed in the Commons yesterday, 29 June – might offer a clue about legislation on the personal injuries discount rate. Some recent Government developments seem to connect both those comments and are explained in the body of this post.

The territorial extent – the footprint – of the Civil Liability Bill proposed in the Queen’s Speech is England and Wales only. That is clear from the background brief to the Speech and from Written Statements on Monday 26 June by the Leader of the House and by the Scottish and Northern Irish Secretaries of State. So the content of the Bill, which so far is limited to whiplash reform, will apply in England and Wales only.

The Bill, however, comes with a title that appears at first sight far wider than necessary to deliver content currently limited to whiplash reform. As my earlier piece noted, the Bill’s title could be broad enough to encompass legislation around the discount rate – in England and Wales, at least.

On 27 June – the day after the Ministerial Statements noted above – the new Economic Secretary to the Treasury, Stephen Barclay MP, delivered a speech in which he talked of the discount rate as follows:

… the government has been consulting on how the rate can be set in future in England and Wales. Scotland and Northern Ireland set their rate separately, which has an impact on the parliamentary arithmetic.

We are currently considering the responses to the consultation we’ve received and I would like to thank the industry for the constructive engagement on this issue.

We want to make sure that the way the rate is set is put on the firmest possible footing in future, so that we have a better and fairer system for claimants and defendants. In doing so, we will keep true to the 100% principle: that a claimant is paid no less than they should be, and no more.

In short, we have been consulting on moving away from a mechanism that has grown outdated and, with negative returns on interest-linked gilts, lost its connection with the way people invest in the real world. 

He referred expressly to England and Wales only, ie the same footprint as the Civil Liability Bill. And immediately after doing so he talked of “the parliamentary arithmetic”. What that could signal is that this Bill, possibly including discount rate reform at a later stage, might be taken forward under the English votes for English laws (EVEL) procedure.

EVEL might indeed produce a different arithmetic or calculus for this Government. The precise procedure is complex, but the unarguable numbers are that the Conservatives’ English and Welsh total of 305 MPs represents a majority of the 573 English and Welsh seats. Thus, the national minority might become an EVEL majority, which, to repeat the Minister’s phrase, would be quite an impact on “the parliamentary arithmetic”.

At this stage we can really only guess if the Government will in due course include discount rate provisions in the Civil Liability Bill. But in our view the current indicators – (i) that a consultation response is expected later in the year (ii) that a Bill with a suitably wide title is available for implementation of policy decisions taken as a consequence of that consultation and (ii) that the Minister has just addressed the issue directly when speaking to a senior insurance audience, talking not only of an “outdated” approach that has “lost its connection“ with practice but also hinting at how the Parliamentary handling of it might play out – are that this should be regarded as increasingly likely.

ak Written by Alistair Kinley, director of policy and government affairs at BLM

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