Lawyers: "MoJ Must Reinforce Current Discount Rate During Consultation Period"

The Ministry of Justice (MoJ) has today published a consultation on how the personal injury discount rate should be set when calculating the damages awarded to seriously injured people.

The consultation paper examines how the rate should be set, how often and who should set the rate. The MoJ also wants to consider whether sufficient use is being made of periodical payment orders.

The rate, which has to be taken into account by the court in assessing the size of a lump sum award of damages for future financial loss in a personal injury case, was recently reduced by the Lord Chancellor, acting in accordance with the present law, from 2.5% to minus 0.75%. This change was announced on 27 February and came into force on 20 March.

Previous reviews of the method of setting the discount rate in 2012 and 2013 concluded that the current system was appropriate. Before February this year, the previous rate of 2.5% had remained unchanged since 2001.

Expert Opinion

“Whilst we regret the period of uncertainty that this further consultation will bring we do recognise the desire to create a methodology that provides for regular review ensuring that market changes are properly reflected.

“We will consider the consultation document carefully and respond in due course, whilst reflecting on the fact that Government has already consulted on the underlying principles behind the setting of the discount rate in 2012 and 2013 and took no steps to change the present approach as a result. It is worth reminding ourselves that the reason that the change in rate was so significant was because the revision was long overdue.

“In the meantime, the law is that the discount rate is -0.75% and the MOJ should reinforce that and create a period of absolute certainty until a final outcome is achieved to the current review process. They should also publicly challenge those insurers who are using every possible tactic to delay the resolution of cases in the hope of a better outcome on the discount rate following the consultation. The Judiciary need to be aware of what is happening and be prepared to intervene to push cases forward and apply the current law. Present delays and tactical moves by some insurers are damaging to seriously injured individuals, disruptive to the administration of justice and highly likely to add to costs in the legal process.

“During the consultation period the MOJ and the Treasury should fully take into account the interests of seriously injured people often with lifelong needs and in our view endorse the approach of the House of Lords and of previous reviews in maintaining a risk free rate. A discount rate should be set to ensure compensation is adequate and not to satisfy shareholders or displace costs from the private to the public sector.” Stuart Henderson - Partner