Yesterday’s budget marks just over two years since former Chancellor George Osborne announced, in his 2015 Autumn Statement, significant reforms to damages for whiplash claims and five-fold increase in the small claims limit for road traffic injury cases. Material released by the Treasury yesterday appears to indicate that Government expects to implement these reforms before April 2019.
Legislation aimed at achieving Osborne’s reforms had made some progress in Parliament this spring – in Part 5 of the Prison and Courts Bill – but it was lost in the run up to the general election. The programme was re-announced in the Queen’s Speech in mid-June and was to be taken forward via the Civil Liability Bill. Since then, however, we have neither seen any detailed provisions nor had any firm indication as to timing. On the latter, our best estimate had been some time around Q3 2018 and for new claims only.
Things may have changed with the 2017 budget yesterday, but you really do have to look hard to find the clues. Buried deep in the material that accompanied Philip Hammond’s speech is this table which maps projected revenue changes due to measures from the 2015 Autumn Statement. The relevant part is set out below (just for completeness, it’s item w at row 32 of the table). What we have done, in red, is to gross up the Treasury’s projected changes in Insurance Premium Tax in order to derive notional full premium figures for the effect of the reforms across the motor insurance market.
|Measures announced at Spending Review and Autumn Statement 2015||Head||2017-18||2018-19||2019-20||2020-21||2021-22||2022-23|
|Insurance Premium Tax: reform to motor insurance claims rules||Tax||0||-10||-35||-45||-55||-55|
|Tax amounts grossed up assuming IPT remains at 12% (NB: whiplash reform will apply to England & Wales only)||Premium||0||-83||-292||-375||-458||-458|
The table and our additional projections would seem to suggest the following conclusions:
- Whiplash reform is not going to happen before April 2018, given that there is no projected IPT change in the 2017/18 financial year.
- However, the implementation date should lie between April 2018 and April 2019 and the IPT and premium savings build up over time. This points very strongly to implementation being for ‘accidents on or after’ the relevant date.
- It is not easy to predict more accurately when in the April 2018 – April 2019 window the implementation date might lie. Our earlier best estimate of Q3 2018 is therefore still plausible. [All that can really be said is that the predicted £10 million IPT reduction in this first year indicates that Government believes around a fifth of claims started under the new rules will have concluded in the same financial year.]
- When implemented in full, the Government expects (all other things being equal) the reforms to contribute to an aggregate reduction in motor insurance premium of just over £450 million annually.
If, as appears likely to be the Government’s intention, the necessary legislation is to take effect from around this time next year, then we would expected it to be introduced in the coming weeks. We are keeping a very close watch on developments and will update the blog with news as and when.
About the Author
Alistair Kinley is BLM’s Director of Policy & Government Affairs.
Alistair is responsible for BLM’s engagement with government departments and regulators on policy and public affairs issues and consultations affecting the firm and its customers. He coordinated BLM’s market-facing activities in connection with the Insurance Act 2015 and the consultations which preceded its publication and introduction in Parliament.
He is a member of the Civil Justice Council (CJC), a regular speaker and experienced commentator on legal and procedural reforms and was a contributing editor to the Law Society’s Litigation Funding Handbook (September 2014).