MOJ provides further guidance on the likely timing of a change in the discount rate

Articles | Wed 25th Apr, 2018

On 24^th April 2018 the Civil Liability Bill had its second reading in the House of Lords. A transcript of the debate can be found here.

Of greatest interest to practitioners will be the comments by Lord Keen (Lords Spokesperson for MOJ) at the very end of the debate, which intimate that the aim is to achieve Royal Assent for the Bill by April 2019 following which the first review of the discount rate will be commenced immediately. Lord Keen also stressed the ambition for work to be done in advance of implementation of the Civil Liability Bill so that the review can effectively be fast-tracked:

“I appreciate the concern about the delay in respect of the discount rate. We are proposing to carry out the first review as swiftly as possible. I understand that we are aiming for April 2019, not 2020 as has been suggested. There is a 90-day period and then a 120-day period. There is a need to have an expert panel in place, but considerable steps may be taken in anticipation of the Bill passing to ensure that we have the machinery in place for the swift appointment of an expert panel, so that the review can be carried out as soon as possible. I will take further advice from officials on the question of how far we can go with that sort of preparation prior to Royal Assent of the Bill, in order to move swiftly on that matter“.

Clearly, there can be no guarantees as to the timing of Royal Assent and question marks still exist over the speed at which the expert panel will conduct the review. However, it is safe to say that the MOJ hopes to increase the discount rate as early as April-May 2019 if possible. Once again, the cost to the NHS has been put at the forefront of the reasoning behind the need for change, with Lord Keen commenting:

“This Bill will reform the personal injury discount rate, which adjusts a compensation lump sum to allow for the return a claimant is expected to receive by investing it over the period of the award. Currently at minus 0.75%, we have one of lowest rates in the world. In Germany, it is 4%; in France it is 1.2%, and in Ireland it is 1%. The current rate consistently compensates for injury at more than the 100% required by law. Awards currently average 120% to 125% even after management costs and tax. This is putting huge pressure on the National Health Service in claims for clinical negligence. Last year, the NHS spent £1.7 billion on such cases, a cost that has almost doubled since 2010-11, with an unsustainable average increase of 11.5% every year“.

Article by: Stuart McKechnie QC