Director of Market & Public Affairs
Justice Committee’s report on the discount rate - what now?
As you are probably well aware, the Justice Committee published its pre-legislative scrutiny report on the draft discount rate clauses on 30 November. We all know what the recommendations are, but the million dollar question is…what now? Are the Ministry of Justice duty bound to follow any of the recommendations made? When might this happen?
Well, there is one certainty – we know that we will get an official Government response by the end of January. This was confirmed in the answer to a recent parliamentary question posed by the co-Chair of the Insurance and Financial Services All Party Parliamentary Group, Craig Tracey MP. This is encouraging given the Christmas period and given that the answers to these questions are generally non-committal and usually phrased in the vaguest possible terms. The context around the Government’s own interests (in terms of the NHS) must not be forgotten – we can expect some momentum on this given that the Treasury has a vested interest to move this forward quickly.
However, although the general principles as laid down by the Government have been agreed with, what is slightly disappointing about the report is the call for more - more evidence, more expert advice, and more reporting. This places the Government in a tricky position; it was, after all, the Ministry of Justice who asked the Justice Committee to compile this report in the first place. Disregarding its findings would seem churlish, but complying with its recommendations will add further layers of complexity, administration and, above all, delay to the entire process.
In addition, it is quite clear from the report and from the evidence sessions is that there is a lack of cross party support for reform. This is likely to make Tory whips nervous about introducing legislation which is at risk of being defeated. However, what isn’t certain is if this legislation would benefit from the more favourable voting numbers associated with EVEL, i.e. England Votes for English Laws. The discount rate issue is one that has traditionally been an England and Wales issue only, with Scotland generally following suit a short time thereafter, but how this might apply to any legislative reform isn’t yet clear. It is reasonable to expect that the Government may want to conduct cross-party talks to ensure any proposals that do come forward have the backing of the House.
And we mustn’t forget what is happening on the ground - our Complex Injury teams have seen an upturn in settlement activity as well as court approvals for lump sums subject to discount rates considerably above the current -0.75%. This really does suggest a degree of realism (or fatalism, perhaps) among the claimant fraternity. It also provides a strong indication of what a claimant will do with their invested damages after advice from lawyers and IFAs. This should go some way to satisfying the Justice Committee’s call for more evidence on claimant investment behaviour. It seems that the claimant community’s reluctance to date on this matter has been somewhat missed by the Justice Committee – after all, if no meaningful evidence has been provided by now, it’s doubtful that it ever will.
So, what’s the upshot? Of course, the dust hasn’t settled yet – the report was only published a few hours ago. However, it seems clear that, if anything, this report isn’t the rubber stamp that the insurance industry was hoping for. It’s largely positive in its findings, but the recommendations have certainly sown the seeds for at least some delay to implementing a change in the discount rate in 2018.