My Lords, we support the thrust of the amendments tabled by the noble Lord, Lord Hodgson, and his introduction of Amendment 53. My noble friend Lord Sharkey and I, together with the noble Earl, Lord Kinnoull, and the noble Lord, Lord Faulks, have tabled a number of amendments to the proposals for later reviews of the discount rate; that is, all reviews after the first, which we discussed in the previous group. These amendments on the later reviews are considered in this and the following group—the last group—and I shall speak to both groups of amendments now.
Broadly, we support the following propositions. First, we do not regard it as sensible to have a fixed three-year period, or even a fixed five-year period, between reviews of the discount rate. Interest rates and rates of return change unpredictably and at very different speeds over time. Years may go by, as they have recently, with very little change then a period of rapid change may follow. Fixed periods between reviews do not respond to that pattern of change and slavish adherence to fixed periods would lead both to reviews required by statute taking place unnecessarily during periods of stability and, more seriously, to there being periods—possibly long periods—following rapid changes in rates when the discount rate failed to represent an accurate assessment of predicted long-term returns.
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As a response to this difficulty, while I can see the argument for a five-year longstop provision whereby, at the end of five years following the previous review, there should be provision for a fresh review by the Lord Chancellor, in years one to four of the cycle that review should be available if necessary. However, it should be for the expert panel to decide on the need for a review at these interim stages, on the basis of its expertise and financial experience. So I argue that the panel should be able, indeed bound, to advise the Lord Chancellor on whether such a fresh review was yet necessary during every interim year. Amendment 57 and other amendments substituting five years for three are intended to achieve that end.
That leads to our second proposition: that the expert panel should be an established panel, as the noble Lord, Lord Hodgson, proposes, not a fresh panel established on an ad hoc basis, review by review, which would cease to exist after every review. This is not only for the reason that the noble Lord gave, which was that the formation of an expert panel would be a giveaway, but because it would be better for the expert panel to be always available to give advice on whether a fresh review was necessary. This is one of the purposes of our amendments between Amendment 75 and Amendment 86.
On the Government’s proposals, there would be no panel between one review and the next and no formal mechanism for involving the expert panel in deciding when a review should take place at any stage before the end of the proposed three-year maximum interval. That decision would, on their proposals, be for the Lord Chancellor alone with no expert assistance. In deciding on the advice to be given on any review, it would also be better, I suggest from the point of view of consistency of approach, for the expert panel to build up a body of experience over successive reviews.
Thirdly, I suggest that in proposing that the Lord Chancellor should do no more than consult the expert panel, the Bill as it stands has failed to achieve an appropriate balance between that panel, with the considerable experience it will have of investment matters, and the Lord Chancellor, whose experience is now generally political rather than expert or even legal. While I accept that political input and accountability are required, I see no reason why the Lord Chancellor should not be bound to have regard to the advice of the expert panel rather than merely consulting it. That should apply equally to decisions on when to have a review as to decisions made on whether to change the rate on such a review and, if it is to be changed, what the new rate should be. Amendment 63 and proposed new sub-paragraph (8) of the substitute arrangements for later reviews in Amendment 67 are designed to achieve this.
Fourthly, it should be specifically provided that confidence in the ability and independence of appointed members to adopt a balanced approach should be a criterion for their selection. While we agree with the Government that the proposed composition of the expert panel is sensible—although, as we proposed in Committee, we would have preferred to see a medically qualified member of the panel—we nevertheless suggest
that a commitment to fairness to the interests of both claimants and defendants, as set out in Amendment 80, would be desirable.
So in substance we support the recruitment of an expert panel to assist the Lord Chancellor in ensuring an appropriate discount rate, a process for which, without such assistance, the Lord Chancellor will generally be uniquely unqualified, but the Bill as it stands fails to accord to the panel either the importance or even the role that its expertise and position under the legislation would logically demand for it. While we do not intend to press these amendments to a vote, I would hope that the Minister and his department might consider what is said on the subject of these reviews and, indeed, the consensus that has built up among Members of the House interested in these amendments during discussions on these topics hosted by the noble and learned Lord and the noble Baroness, for which we are very grateful, and then come back with some government amendments at Third Reading that reflect the concerns and the consensus that have been expressed.