My Lords, I declare my interests as detailed in the register, in particular as a partner in the international, commercial law firm DAC Beachcroft and as chairman of the British Insurance Brokers’ Association. It is also my great privilege to follow the noble and learned Lord, Lord Hope of Craighead. Fascinated as I was to hear his explanation of what lay behind that decision in Wells v Wells—of course I shall respond in much greater detail in due course in Committee—certainly the world has moved on a long way since that original decision.
I hope that the reforms in the Bill are in no sense controversial. They skilfully and fairly balance competing interests. That is never an easy task for government but it is an essential one, and I commend the Minister on his courage and resolution.
Reference has already been made to the many representations we are receiving, and we shall inevitably hear a great deal of noise from all those vested interests on both sides. But we are not here in this House to serve vested interests. It is the public interest we must serve, and it feels as if Ministers have got the balance broadly right. This has not happened by accident, especially on the law relating to the discount rate.
The reform proposals in Part 2 address an increasingly urgent need. As noble Lords have already understood from previous speeches, the lower the discount rate, the higher the cost. England and Wales are now the sole territories in the developed world with a negative discount rate for all future loss claims. For many
younger and elderly drivers alike, the consequences have already proved to be extremely costly. That has thrown out any balance of fairness. We must also, as several speakers have mentioned, be aware of the heavy burden the negative discount rate has been imposing on the National Health Service.
Competition law prevents insurers offering any collective undertaking that premiums will fall if and when the discount rate is restored to a sensible level. However, there has still been an unprecedented commitment from individual chief executives across the market that savings would indeed be passed on. I cannot think of another occasion on which industry leaders have come together to make such a public pledge. They are of course responding to a strong lead from the Government, as the Minister made clear.
The Government published Command Paper 9500, The Personal Injury Discount Rate: How It Should Be Set in Future, on 7 September of last year. The Secretary of State then wisely asked the Justice Select Committee in another place to undertake pre-legislative scrutiny of the draft clause included in the report, which would change the basis on which the discount rate is calculated. That committee, on which no party has a majority, came to a consensus, in favour of reform, with certain caveats. In particular, the committee supported the establishment of an independent expert panel—not a representative panel—to advise the Lord Chancellor on the discount rate, and any discussion on the discount rate necessarily involves making reasonable assumptions about the likely appetite for risk on the part of anyone looking to invest a sum—particularly a substantial sum—of money.
As the committee and the Government have both acknowledged, setting the discount rate can never be a precise science, but I strongly support the notion that it should have a real-world basis, which is currently rather lacking. The Government are rightly committed to retaining the principle of full compensation, which, as we have just heard from the noble and learned Lord, Lord Hope of Craighead, is so important, particularly in very serious cases.
We must not forget that this means compensation must be neither too little nor too much. In Paragraph 77 of their response to the Select Committee, I was heartened to see the Government state that they,
“will work to ensure that the panel is ready to start work at the earliest opportunity”.
That is a clear undertaking. Given the very considerable measure of consensus around this legislation, I ask my noble and learned friend the Minister to confirm that arrangements for the establishment of this expert panel can and will begin well before the legislation eventually receives Royal Assent.
I would like to mention Part 1 of the Bill. The discount rate provisions are of vital importance, but the plans for whiplash reform too should be commended as being sensible and uncontroversial. For far too long, we have as a country sustained a system in which there is an unseemly squabble over the value of soft tissue injury claims. That has been far more to the benefit of those paid to do the squabbling than it has been for their clients, the victims. What matters most to their clients is prompt and fair redress, not a
mathematically precise assessment of their loss. The idea of creating a fixed tariff for such claims, while novel in common law terms, is the right way forward. It takes the mystery out of how such claims are valued and avoids the use of precious court time in arguing over valuations. It can and must create a smoother process for the claimant, who will rightly be placed at the centre of such a process.
I have been a practising lawyer for exactly 50 years next month—I started life as a claimant lawyer, acting in cases for thalidomide victims. I have to say that claimant lawyers and others with a stake in maintaining the status quo are heavily pressurising me to argue that this is unfair and ill thought through. I believe that the Government have taken account of any legitimate concerns. They have wisely dropped the notion that some claims should receive nothing at all. The sums proposed for the tariff, while low, are more in line with what society can realistically afford to pay for these claims. Let us not forget, it is the wider public who have to fund these claims through higher insurance premiums and the inflated cost of goods delivery.
There are consumers and citizens at both ends of this equation. It is the task of Government to balance the interests of everyone involved. In another place, as we have heard, debate continues today on the Financial Guidance and Claims Bill, particularly on how we will contain the excesses of the claims management industry. How many times have we said that in this place? But at last it seems that something is being done. There is a simple answer to the question: it is to contain the amount of money from which they and their hangers-on can take a cut. By their very nature, civil claims set group against group, citizen against citizen.
A decade or more ago, I had the privilege of talking to a very senior senator in Washington, who told me that a complicated and unpredictable system of redress ultimately undermines civility in society. I believe that it does, and I hope that these reforms will go some considerable way towards simplifying redress and restoring the balance of fairness in society. However, I also hope that, in what I think is increasingly an uncivil age, they will serve to restore civility and a healthy respectful relationship between the people in England and Wales.
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