We are nearing the first anniversary of the personal injury discount rate (PIDR) being set in England & Wales last July using a new legal framework which broke the link that lasted more than two decades between the PIDR and the investment returns on Index Linked Government Stock (ILGS). That notional link remains valid as regards the current PIDRs in Ireland and Northern Ireland. However, on 10 June the Irish government launched a consultation on a possible new legal approach to rate-setting and is seeking views by 5 August. In Northern Ireland it appears likely that a similar consultation could begin in the next few weeks.
The Irish consultation paper has its genesis in a specific recommendation made by the Cost of Insurance Working Group formed by the Irish Department of Finance and which made a series of recommendations in 2017 and 2018 aimed at addressing the drivers of high premiums for Irish motorists and businesses.
Perhaps the discount rate issue was informally ‘parked’ while England & Wales introduced legislation – The Civil Liability Act 2018 – to re-frame the rate-setting process and move away from the integral link with ILGS yields. In any event, the new consultation paper makes frequent references to this statutory approach in England & Wales and it really boils down to the two overarching questions posed in its introduction:
- In determining the discount rate, should it be left to the Judiciary to decide on the appropriate rate on a case by case basis, or should the existing section 24 of the Civil Liability and Courts Act 2004 be amended by introducing principles and policies to allow the Minister for Justice and Equality to determine the rate and review at intervals thereafter?
- As has happened in the UK, is there a need to update the investment strategy that a plaintiff is assumed to take in determining the discount rate?
The body of the 17 page consultation paper reads very much like a green paper (no pun intended) setting out principles and ideas rather than a white paper offering choices between sharply defined policy options, although that may well follow towards the end of the year, or early next, after responses have been analysed.
The PIDR in Northern Ireland is still subject to The Damages Act 1996 and therefore the link to ILGS remains. That said, the Minister of Justice has indicated she is minded to consult on a setting a new legal framework – the topic is a devolved matter – and may begin that process before the summer break, If so, we would expect that consultation to be more focused on a choice between the relatively new approaches to rate-setting in both in England & Wales and in Scotland.
We will be engaging fully in these exercises and be monitoring any legislative proposals that may emerge from either of them in the medium term and beyond. Please do get in touch if you would like further information on either of them.
Alison Cassidy, Partner, BLM
Alistair Kinley, Director of Policy & Government Affairs, BLM