I am obliged to noble Lords. In speaking to Amendment 49, I shall also address Amendments 50, 73, 73A and 89. Clearly, we welcome the support on all sides of the House for the appropriate use of periodical payment orders as a means of ensuring that the anticipated future needs of an injured person are met. Of course, periodical payment orders avoid many of the uncertainties inherent in taking damages for future loss as a lump sum.
My noble friend’s Amendment 49 would require new rules of court to be made to highlight features of PPOs that may make them more appropriate than a lump-sum payment for a person with a long-term injury who is risk-averse, who would otherwise receive a large award for damages for future pecuniary loss. In responding to the very similar amendment tabled by my noble friend in Committee, the Government underlined their support for the use of PPOs. However, they also recognised that claimants and defendants must be able to make choices, and that the best choice for any individual is dependent on the circumstances of their particular case. My noble friend Lord Faulks pointed out that under Section 100 of the 2003 Act it is open to the court to insist on a PPO being utilised. As far as I am aware, the court has never actually exercised that power, but it does exist in statutory form.
It is vital that claimants who have suffered long-term serious injuries are well informed as to the implications of their choice between a lump-sum payment and a PPO, irrespective of whether their particular case reaches such a stage that the court has to consider whether to order a PPO. The Government remain fully committed to ensuring that appropriate advice is available to claimants in all cases. We are working to encourage the use and understanding of PPOs. In particular, we will over the coming months provide, or at least endorse, guidance that ensures claimants fully understand the choice between a lump sum and a PPO, and investigate whether current advice received by claimants on the respective benefits of lump sums and PPOs is effective.
Over and above that, we have listened carefully to the points raised in Committee and in further engagement with noble Lords. I am obliged to many of them for their engagement in the period running up to this stage of the Bill. The Lord Chancellor has now written to the Master of the Rolls on this matter, and I am pleased to say that he has recently agreed in principle to the Civil Justice Council, with its specialist expertise, exploring the issue with a view to suggesting the most practical, beneficial steps to increase the use of PPOs within the current system. The Government are grateful to the Master of the Rolls for this.
Taken together, we believe that these steps will ensure that focused and practical action will be taken to identify effective reforms that will encourage the use of PPOs whenever they are suitable. These measures can be tailored to address specific identified problems. Rules of court may be part of the solution, but they
will relate to the practice and procedure of the courts. That is the appropriate function of rules of court and their related practice directions, not providing guidance as to when one form of taking an award of damages might be better than another, which might be better in guidance itself. In light of that explanation, I hope that my noble friend would consider it appropriate to withdraw his amendment.
I turn now to Amendment 50 in the name of the noble and learned Lord, Lord Hope, which, as he says, would require the court to consider certain factors in deciding in an individual case whether it would be appropriate to take into account a different discount rate to that prescribed by the Lord Chancellor. As he pointed out, the wording in the present Bill reflects almost exactly the wording that appeared in the original provisions in the Damages Act 1996. The application of those earlier provisions is, of course, coloured by the decision of the Court of Appeal in Warriner, and the more recent decision in the Inner House in Tortolano. In light of that, I wish to give further consideration to the matter that the noble and learned Lord has raised to come to a view as to whether something might be done to tailor the wording to address the almost complete guillotine that is in effect in place in the two Appeal Court decisions.
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Ultimately, the prescribed discount rate is an instrument that simplifies proceedings, adds certainty and exists for the overall benefit of all affected litigants—so we have to proceed with some care to ensure that, in so far as we meet concerns or seek to meet concerns raised by Warriner and Tortolano, we do not arrive at a place where parties will almost inevitably engage in litigation simply to see whether they can get a different discount rate. So there is a balancing act to be achieved—and I shall look at that.
Amendment 73 in the name of the noble Baroness, Lady Bowles, also addresses the question of risk, but in the context of the setting of the assumptions to be used in the setting of the rate. The amendment would change one of the assumptions that the Lord Chancellor is required to make in setting the rate about the assumed approach to risk of the hypothetical claimant. Paragraph 3(3) of the new Schedule A1 provides a range of approaches to risk, from which the Lord Chancellor may make a choice as to the appropriate level. The range is relatively broad, I accept. The lower end of the range is more risk than a very low level of risk; that is broadly the familiar level used under the present law. The upper limit is less risk than would ordinarily be accepted by a prudent and properly advised individual investor with different financial aims from those specified in paragraph 3(2). This amendment would remove the assumption that a prudent and properly advised individual investor has different financial aims than the assumed recipient of relevant damages. The effect of the amendment would therefore be to alter the current ceiling as to the approach to risk.
The Government consider that claimants are not ordinary investors. They are assumed in the Bill to be more cautious, and the Bill therefore provides for them to be assumed to take less risk than an ordinary
prudent investor with different financial aims. Quite how much less risk will be a matter to be determined by the Lord Chancellor in his deliberations, assisted by the advice of the expert panel, based on the evidence that it gathers. I accept that an ordinary prudent investor could, in principle, have the same aims of a more cautious investor, albeit achieved by different approaches to risk. But it will be for the Lord Chancellor in setting the rate within the legal framework to weigh the evidence of investments and their returns and assess the expected consequences of choosing particular rates within the range against the legal framework. From those judgments, the Lord Chancellor will decide on the appropriate rate. We consider that we have taken the appropriate approach. We do not consider that these words are redundant, and I invite the noble Baroness to consider withdrawing her amendment.
Finally, I address Amendments 73A and 89 in the name of the noble Lord, Lord Beecham. Both look to the future and provide for reviews of how different aspects of the changes to the law relating to compensation for future loss in personal injury cases have worked in practice. As I understand it, Amendment 73A would require the Lord Chancellor to commission the expert panel to review the statutory assumptions on which the personal injury discount rate is to be based, and to review how investors of relevant damages are in fact investing such damages. The review would be commissioned within three years of Clause 8 coming into force and the panel would be required to make recommendations on whether the assumptions should be changed. Amendment 89, which is similar to Amendment 92B, tabled by the noble Lord and the noble Lord, Lord McKenzie, in Committee, would require a review of the impact of the reforms in Part 2 on the making of PPOs. Both amendments clearly have much in common, but I will deal with each in turn.
The Government’s aim is that the application of the assumptions in light of the evidence that has to be considered should produce a fair and evidence-based discount rate. However, we doubt whether the expert panel would be the best body to carry out a review of the appropriateness of the legal assumptions on which the rate is based. We also question whether a three-year deadline allows sufficient time for the effects of the new system to manifest themselves.
On the review of PPOs proposed by Amendment 89, of course we support the use— and the increased use—of PPOs, as I have set out. However, the CJC exists to provide advice to the Lord Chancellor, the judiciary and the Civil Procedure Rule Committee on the effectiveness of aspects of the civil justice system, and to make recommendations to test, review or conduct research into specific areas. It may well be an appropriate body to carry out an intended PPO review, if it is willing and able to do so. Another possibility might be the Law Commission. I also mention that the timing of the proposed review of PPOs—within 18 months of Royal Assent and a report made to Parliament within two years—may again be too soon to identify the real effect of the changes in the legislation, so there is a concern there.
However, I accept that these are matters of detail, and I do not wish to detract from the important concern underlying the amendments, which is that
the result of the legislation should be assessed. I make the point that there is already a system for the reviewing of the working of legislation, which involves the gathering of evidence of its effect. The well-established procedure of post-legislative scrutiny will, in our opinion, provide a suitable and effective way to assess the outcome of legislation and to decide whether any further changes are necessary.
This scrutiny is normally carried out three to five years after the legislation in question comes into force. These reviews are carried out by government, which, in the case of legislation affecting general personal injury law, would prepare a report for the Justice Select Committee. Such a review of Part 2 would consider the effect of the legislation in the round rather than just in relation to the assumptions for the setting of the rate or the making of PPOs. The noble Lord will be aware, for example, that a post-legislative review of Part 2 of LASPO is going on. We therefore anticipate that form of review being carried out, but in the timeframe of three to five years, which we consider would be more effective in determining what the impact of these changes has been.
In light of these observations, I invite the noble Lord to consider withdrawing his amendment at this stage.