Discount Rate announcement “entirely predictable” says Bill Braithwaite QC
September 11, 2017
The Lord Chancellor has set out long-awaited proposals for calculating the ‘discount rate’ applied to personal injury settlements. Under proposed legislation, the rate will be set by reference to rates of return on ‘low risk’ rather than ’very low risk’ investments as at present. The rate will also be reviewed at least every three years.
A statement said that ministers are keen to engage on the issue ahead of a bill being introduced into parliament. A consultation on the issue closed in May and draft legislation will be published to change the law.
The current rate of minus 0.75% was set by former lord chancellor Liz Truss in February. This latest statement says that, if the new system were to be applied today, the rate might be ’in the region of 0% to 1%’.
The proposals envisage that a review of the discount rate would be started within 90 days of the new law coming into force. The new rate will not apply retrospectively.
The Lord Chancellor’s announcement was largely expected by both solicitors and insurers.
Earlier this year, research published by Bill Braithwaite QC indicated that claimant personal injury solicitors were resigned to the discount rate moving back up as a result of the Government’s latest consultation – with just 10% expecting it to remain at minus 0.75%.
Since Liz Truss’ announcement in February there has also been heavy lobbying by the insurance industry.
Bill Braithwaite QC, who works exclusively for claimants and regularly concludes claims worth over £50 million every year, said:
“This announcement is entirely predictable.
“Under pressure from the powerful insurance lobby, the Government has backtracked on its decision earlier this year.
“Claimants should not be expected to run any investment risks with money which a Judge has declared is essential to their future health and well-being – yet this is now the reality of their situation.”
“On a more positive note, the Government has said it will review the rate at least every three years in future and create a role for an independent expert panel in the process. Prior to February’s announcement, the discount rate was last set in 2001 – meaning claimants have been under-compensated for over fifteen years.”