Yesterday the Government issued its latest consultation paper about the discount rate to be used for calculating future loss payments in personal injury cases. It has requested views by 11 May which can be fed in via the consultation home page.
The current law on the rate is that the Lord Chancellor sets it and has to follow the return on Index-linked Gilts (ILGS), which is presumed to indicate a risk-free approach to the investment of compensation. If this is going to change it will need legislation to change or repeal the Damages Act 1996 – a point which is confirmed in the Lord Chancellor’s written statement which accompanied the consultation.
On 28 March the Public Bills Committee heard evidence from Brett Dixon, of the Association of Personal Injury Lawyers, Rob Townend of Aviva and James Dalton of the Association of British Insurers. The context was legislative scrutiny of the whiplash measures to be found at part 5 of the Prison and Courts Bill currently proceeding in the Commons. Opening the evidence session, Sir Oliver Heald MP, Minister of State at the Ministry of Justice, asked this question: “In recent years, since 2005, we have seen a fall in the number of road accidents, we have seen safer vehicles and we have seen a more than 50% increase in whiplash-related claims. Can you put this in perspective and tell us what you think the problem is and whether you think our tariff system is going any way to solving it?”
A good deal of this recently-published Government Bill deals with prison reform and prisoner welfare and these issues took up much of the debate on Second Reading in the Commons yesterday, which ran from late afternoon until nearly 10pm. In addition, part 5 of the Bill seeks to implement the Government’s reforms to whiplash claims, which were also discussed at some length.
This short post covers none of those topics but instead suggests that perhaps the two most important interventions yesterday, in terms of financial impact on the claims sector, came relatively early in the debate and then right at its end. Both were quite brief and taken together they clearly signpost reform to the process by which the discount rate for future losses in personal injury claims is set.