Baroness Warwick of Undercliffe (Lab)

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My Lords, I thank the noble and learned Lord, Lord Brown of Eaton-under-Heywood, for giving us this opportunity to consider the potential complexities of this issue. I have no legal expertise, but as a member of the Procedure Committee, I had an opportunity to consider this issue.

I want to speak about parliamentary privilege—to reflect on what it was introduced for and its continuing relevance today. I should say up front that what has been characterised for the purposes of this debate as a potential conflict I see rather as a question of balance—between respect for legal judgments on the one hand and exercising Parliament’s profoundly important right to free speech on the other. I believe that the House already has sufficient mechanisms with which to maintain that balance. The noble and learned Lord, Lord Mackay of Clashfern, set them out very clearly. Seeking to change these mechanisms by introducing new restrictions or disciplines could have a profound effect on the ability of parliamentarians to carry out our public duties without fear or favour.

A consequence of Parliament’s exclusive jurisdiction over proceedings in Parliament is that participants are not legally liable for things said or done in the course of those proceedings; nor are those adversely affected by things said or done in Parliament able to seek redress through the courts. Therefore, in certain circumstances, it overrides other generally accepted legal rights.

Parliamentary privilege is, by its very name and definition, an exception to the general principle of the rule of law. The tension between parliamentary privilege and the rule of law can be uncomfortable, but the rule of law as reflected in judicial decisions must be balanced against the competing claims of Parliament to be free to speak on matters of importance without fear of prosecution. To seek a general assumption that judicial decisions must trump the freedoms of speech afforded through parliamentary privilege is to introduce the risk that the judiciary or the Executive interfere with the proper operation of Parliament. Parliamentary privilege is a fundamental constitutional principle, itself part of the law. It would be a big step to tamper with that principle by deploying the argument that parliamentary privilege, as currently operating, is no longer proportionate.

The last major review of parliamentary privilege was in 1999, the year I entered this House, and it still usefully reminds us that parliamentary privilege exists to protect the independence of Parliament. Parliament and its Members and officers have certain rights and immunities under the banner of parliamentary privilege, which are rooted in this country’s constitutional history. They allow each House to work effectively, giving them the exclusive right to oversee their own affairs and, above all, to enable Members to speak freely. While the courts have a legal and constitutional duty to protect freedom of speech and Parliament’s recognised rights and immunities, they do not have the power to regulate or control how Parliament conducts its business. Parliament in turn is careful not to interfere in how judges discharge their judicial responsibilities. In taking responsibility for our own affairs, we must still respect the rule of law.

The way that we ensure privilege is not abused, and the rule of law is not undermined, is for each House to enforce its rules on conduct and to ensure that our Standing Orders set out the importance of respecting judicial process, the separation of powers and the rule of law. The sub judice rule, set out in the Standing Orders of the House, makes it clear that the privilege of freedom of speech in Parliament places a corresponding duty on members to use the freedom responsibly. Respect for this rule is important in securing a balance between Parliament and the courts. Perhaps, as the noble and learned Lord, Lord Brown, suggested, stronger wording in the Companion could highlight the need to respect the sub judice rule and use parliamentary privilege responsibly. But I would also want to ensure that any enhanced wording in the Companion would still provide for the possibility of a Member breaching a court order if he or she believed there was a strong public interest argument in favour of doing so.

For me, free speech in Parliament remains the touchstone in any debate of this issue because of its constitutional importance to our functioning democracy. In my 20 years in this House, I have heard parliamentary privilege called on only a handful of times. It is clearly not used lightly, nor do I believe that its recent use by the noble Lord, Lord Hain, in October last year represents an escalation that now needs to be addressed. I would counsel against introducing new or draconian measures that would regulate what Members can or cannot say during parliamentary proceedings. That would mean curtailing the freedom of speech essential to parliamentary privilege, guaranteed by Article IX of the 1698 Bill of Rights, and reaffirmed regularly thereafter.

Lord Lisvane (CB)

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My Lords, I start from the premise that there should be a comity between the courts and Parliament and that both should be, in the words of Lord Browne-Wilkinson in Prebble v Television New Zealand,

“astute to recognise their respective constitutional roles”.

There are two means of, as it were, keeping the tanks off each other’s lawns. One is article IX of the Bill of Rights, which says that parliamentary proceedings,

“ought not to be impeached or questioned in any Court or Place”,

outside Parliament. Over the years, the judiciary has generally been very careful to ensure that this is observed. The mirror image is the sub judice rule, enshrined in resolutions of the two Houses, which prohibits reference to active proceedings in the courts, subject to the right of Parliament to legislate on any matter and with the possibility of a waiver if, in the judgment of either presiding officer, this is justified.

I should note in passing, as this was something that much occupied me in my former life, that the sub judice resolutions in their present form date from 2001 and are sorely in need of updating. For example, following the Armed Forces Act 2006, there is now no mandatory post-trial review in court-martial proceedings. Moreover setting down a case for trial, one of the trigger points for the rule’s operation, is phraseology no longer used in the Civil Procedure Rules. The application of the rule to tribunals needs to be clarified, and I have long thought that its application to inquests—in effect, treating them as quasi- criminal proceedings—is simply not sustainable.

However, in the issue we are considering today, the sub judice rule is a bit of a red herring. It may apply to injuncted material but only if proceedings are still active; it will not apply to a final injunction unless an appeal is outstanding. The question before us is, I suggest, whether there should be a parallel rule to protect the rights conferred on an individual by the judicial process, and incidentally of respect for that individual’s private life under Article 8 of the European Convention on Human Rights.

Two particular cases were considered by Commons committees. In 1978, the Committee of Privileges considered the Colonel B case, which has already been referred to, and, in 1996, the Procedure Committee considered the Baby Z case. A more wide-ranging inquiry was undertaken by the Joint Committee on Privacy and Injunctions, which reported in March 2012. Part of the Joint Committee’s consideration was of parliamentary breaches of court injunctions. To what extent they were justified is neither here nor there. They related to people engaged in the popular sports of football and banking, and particularly to sportsmen who, in their private lives, had been a little too sporting.

My noble and learned friend Lord Brown of Eaton-under-Heywood referred to the suggestion made by my noble friend Lord Pannick in the Times a while ago. I hope I may be acquitted of vaingloriousness when I say that I was a few years ahead of my noble friend. In my memorandum, as Clerk of the House of Commons, to the 2012 Joint Committee, at pages 191 to 211 of the committee’s written evidence, I set out how the two Houses could deal with the problem. They could pass in effect a self-denying ordinance, on the pattern of the sub judice resolutions, stating the determination of each House to preserve Parliament’s freedom of speech, uphold the rule of law and respect the rulings of the courts, save either for the purpose of changing the law or if the chair had given prior—note, prior—authority for the rule to be set aside if the circumstances warranted it. This would be a high bar to clear. Such a resolution would also have an important declaratory function, which we should not underestimate. The Joint Committee was clearly attracted by this option but, in the end, concluded that there were not enough cases to constitute a real problem that needed to be dealt with in this way.

That was also the conclusion of the Commons Committee of Privileges in 1978, the Procedure Committee in 1996 and the Joint Committee on Parliamentary Privilege in 1999, which was endorsed by the Joint Committee on Parliamentary Privilege in 2013. It also wisely recommended against the codification of privilege in statute.

There we have it: it is a matter of proportionality. If, in your Lordships’ judgment, and that of the other House—and it would be sensible for the two to keep in step—these are events whose frequency and nature give rise to sufficient continuing concern, the means of addressing the issue are to hand.

Baroness Young of Old Scone (Lab)

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My Lords, I want to make three points. First, the reality is that the Prime Minister’s deal is dead. The majority of MPs and probably the majority of your Lordships’ House, from all sides, simply do not support it. In the country, both leavers and remainers are quixotically united in rejecting it. The PM’s deal is definitely dead.

Secondly, there is no real mandate for leaving the European Union: 17 million people voted to leave, 16 million people voted to remain and 13 million people did not vote at all. So the “expressed will of the people”, as the Brexiteers like to call the outcome of the referendum, was the expressed will of only 37% of the electorate, and the polls tell us that these figures are shifting further in the direction of remain, particularly among young people eligible to vote for the first time—the very people who will inherit this mess.

It is not just a numbers game. All the political parties, with the exception of the Liberal Democrats, are radically split on the issue. Today in the House, even the Bishops have confessed—if that is what Bishops are allowed to do—that they are split. The normal machinery of politics simply does not work where Brexit is concerned. In any other walk of life, no sensible leader would attempt something as complex, heroic and contentious as unravelling 50 years of close partnership with no real mandate, no overwhelming support in the country and with their party split and unable to offer support. It simply would not happen.

Thirdly, if the PM’s deal has no support, no deal is even more catastrophic and must be absolutely ruled out. It would be equivalent to the closing moments of the road movie “Thelma & Louise”—one of my favourite films—when the two main characters, cornered by events and the law, drive spectacularly and with huge élan off a cliff. Driving off a cliff never has a good outcome, and let me give your Lordships just one example of the risks of a no-deal Brexit which has not been highlighted completely so far.

Brexit is a pivotal challenge for the environment. Some 80% of our current environment law stems from the EU and a no-deal Brexit would sweep away the current effective systems of enforcement of environmental law, and the existing rights of the public to environmental information, to public participation and to access to justice. With a no-deal Brexit there is a real risk that, as part of a desperate scramble to sign trade deals, the UK would be pressurised into a post-Brexit bonfire of environmental standards. As my noble friend Lord Whitty outlined, the Government have promised a whole framework of primary and secondary legislation for the environment, but none of it can come into place quickly, if at all, under a no-deal Brexit. This is simply one area that I have knowledge of where black holes will open up under no deal. We must avoid a no-deal Brexit at all costs.

I believe that your Lordships’ House must be the voice of sanity. We should vote vigorously against the Prime Minister’s deal and stop a no-deal Brexit. We must not be like Thelma and Louise, heading off a cliff, intoning, “It’s the will of the people”. I would go further than our Front Bench and ask the other place to revoke the Article 50 notification. Some say that resiling from a Brexit that looks highly unpalatable under closer examination, and which has in reality proven politically unachievable, would destroy faith in the political system. But there is no faith in the political system. Many of those who voted to leave did so because they felt politics had not delivered social and economic results for them, and because they had already lost faith in the political system. The time has come for men and women of good will across the parties to abandon this Brexit, which will impact particularly on those who are poorer and less able to cope, and focus on forging a national engagement and agreement to address the real issues of the day: future prosperity, economic and social inequalities, and the safeguarding of peace.

Lord Lilley (Con)

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My Lords, it is a great pleasure to follow a thoughtful speech from the noble Earl.

The Prime Minister claims there is no alternative to her deal—but there is. It is not mine, not Jeremy Corbyn’s—whatever that is—but Donald Tusk’s Canada-style free trade deal he offered in March and repeated in October. As he said, that is the only deal compatible with leaving the customs union and single market, as promised in the referendum and in the Conservative manifesto. It must cover the whole UK, which means replacing the backstop by a commitment by Ireland, the EU and the UK that we will all retain an invisible Irish border, as we have all pledged to do if there is no withdrawal agreement. Under Article 24 of the WTO, if we agree such a deal in principle we can continue to trade with zero tariffs after 29 March while fleshing out the details.

To get such an agreement we must be ready, and be seen to be ready by the EU, to leave on WTO terms. As Trade and Industry Secretary, I helped negotiate the WTO to provide a safe haven for trade and I also implemented the single market programme. I predicted that both would boost trade—wrongly in the case of the single market, to which our exports have grown by a miserable 18% over 25 years, but rightly for the WTO as our exports to the rest of the world have grown by 72%.

If we leave on WTO terms there would be four obvious pluses. First, far from crashing out, we will be cashing in, as my noble friend Lord Hamilton, predicted I would say, and we will keep £39 billion. Your Lordships’ own committee concluded that:

“Article 50 allows the UK to leave the EU without being liable for outstanding financial obligations”.

To show good faith, we should confidently submit the issue to international arbitration. Secondly, it would end corrosive uncertainty—economic and political—which would continue for over two more years under the PM’s deal. Thirdly, both sides will have to solve the Irish border issue by administrative measures without border posts, as they have promised if there is no deal. Mr Varadkar has said:

“In … a no deal scenario … we won’t be installing a border between Northern Ireland and Ireland, and everyone knows that”.

Mr Junker reassured the Irish Parliament that:

“If negotiations fail … the European Union will not impose a border, customs posts or any other kind of infrastructure on the frontier”.

And Britain has said it will not,

“require any infrastructure at the border … under any circumstances”.

We already tackle smuggling of tobacco, alcohol, red diesel and drugs without border checks, so the UK can certainly stop illicit trade in Dyson vacuum cleaners if our regulations deviate from those of the EU. Finally, once we all resolve the Irish border issue administratively, we can take up Tusk’s offer of a free trade deal for the whole UK.

Not one of the noble Lords who has railed against no deal in these debates has addressed these benefits of a WTO Brexit, even to refute them. More remarkable, only two or three noble Lords have spelled out specific concerns about a WTO Brexit. The others simply demonised it with a lexicon of lurid adjectives which were last deployed to warn against leaving the ERM, not joining the euro or the millennium bug.

Let me address the specific concerns that a couple of noble Lords have raised. The first was given by the noble Baroness, Lady Smith of Basildon, opening the debate in December, who said, “Planes will be grounded”. She was apparently unaware that on 13 November the European Union Commission had already promised legislation allowing air carriers from the UK to fly over, to and from the EU provided the EU reciprocated. The Commission also announced that hauliers will continue to get licences, that Airbus can export its wings, that the UK will be swiftly listed as a safe country to allow entry of live animals and animal products from the UK, and more.

The other concrete concern came from the most reverend Primate the Archbishop of Canterbury, While temporal Lords have been demonising a WTO Brexit with odium theologicum, it took a Lord spiritual to bring us down to earth with the request for proof that it would not have a significant negative effect on people in his diocese, such as when Operation Stack has been in force. Of course it is impossible to prove a negative or that Operation Stack will never be necessary regardless of Brexit, as it has been invoked on 211 days over the past 18 years, although without any archiepiscopal moral censure of those responsible.

I can explain why Brexit should not add significantly to such delays. First, HMRC expects roughly the same number of physical checks of vehicles at Dover as at present because its checks are based on risk, notably of smuggling tobacco, drugs and illegal immigrants, none of which will increase because of Brexit. Moreover, HMRC promises to prioritise flow over compliance. That means waving lorries through even if their declarations are incomplete.

The concern in the past has been not about Dover but about Calais. However, the good news, brought to the most reverend Primate’s attention by my noble friend Lord Forsyth, is that the chairman of Calais ports says that they too will have no more checks than at present. They are determined and confident that traffic will flow freely—not to be nice to Britain but to avoid losing trade to Zeebrugge, Rotterdam and Antwerp. They are installing three extra lorry lanes, an inspection post for animals away from the port and a scanner for trains moving at 30 kilometres an hour. Monsieur Puissesseau was indignant that the British Government were—quite unnecessarily in his view—hiring ferries to take trade away from his port to other ports.

Problems one prepares for rarely happen, as we discovered with the millennium bug. The Government are now being rather coy about how advanced their preparations are for leaving on WTO terms because they want to frighten MPs into voting for their deal, but I am confident that if we leave on WTO terms on 29 March events will be far closer to a damp squib than the apocalypse. That may disappoint some fanatical remainers in this House, but they will get over it.

Lord Monks (Lab)

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My Lords, I declare an interest as a non-executive director of Thompsons, a leading personal injury firm. I have two or three questions for the Minister, particularly on Amendment 1. I thank him for the reply we received to the letter he referred to.

The House of Lords Regulatory Reform Committee advised that the key measures in this Bill, including the levels of compensation for claimants under the tariff scheme, should feature in primary legislation, not secondary. The Constitution Committee said that Ministers should follow this advice unless there were clear and compelling reasons not to. There seems to be a trend for the Government to seek wide delegated powers that permit the determination and implementation of policy. The Constitution Committee warned that the restraint shown by noble Lords towards secondary legislation might not be sustained—a serious warning to the Government that, if this trend continues, secondary legislation might be much more difficult to accomplish. I will be interested to hear the Minister’s comments on that.

Secondly, given that the employer liability clauses will not be dealt with through the new online portal, which is being reserved for whiplash claims, can the Minister confirm that the courts will be able to cope with what will undoubtedly be an increased number of claims without the presence of expert legal representation? It is estimated that they could increase from 5% to 30% of the total number of cases. Can the courts manage that extra responsibility?

Finally, what is meant by “in the long term”? This relates to paragraph 5.66 of the whiplash impact assessment accompanying the Bill, where the Government state that, taking into account adjustments to pre-action protocols, they consider that

“in the long term the courts would operate at cost recovery”.

I would be grateful for an explanation of what cost recovery means in this context.

Lord Hunt of Wirral (Con)

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My Lords, I declare my interests, having now been chair of the British Insurance Brokers’ Association for the past five years and for the last 50 years having been a partner in the global legal firm DAC Beachcroft.

We need to remind ourselves that it is almost three years to the day that the then Chancellor of the Exchequer announced the coalition Government’s plans to reform whiplash claims. What a long journey it has been. In welcoming the amendments made in the other place, I join the noble Earl in impressing on all noble Lords the need to avoid any additional delay. The figures on the costs to the National Health Service just given by the noble Earl are stark and revealing, and we need to speed up.

I congratulate the noble Lord, Lord Sharkey, on the way in which he proposed that we should speed up the review process of looking at the discount rate, which is a vitally important part of the Bill. We also removed the prospect of any delay between Royal Assent and the start of the review timetable. I trust that my noble friend the Minister will understand when I stress again how imperative it is that we proceed to Royal Assent without any further delay. There is now no need to return this Bill to the Commons and no need to let any more time pass before Royal Assent. Further, there is no need to further delay the start of the review and the return to a more realistic, viable and normal discount rate.

I welcome the new clause on reporting, although I can understand how, as a non-lawyer, the noble Lord might think it complicated. But it covers the full picture exceedingly well. I congratulate all those both in Government and in the insurance industry who worked so hard on the wording over the summer. I know that it is not perfect, but it strikes an appropriate and judicious balance. It introduces the necessary rigour into reporting, but at the same time it is workable for those who have to provide the data.

One vital element to the industry—passing on cost savings to consumers—has been slightly forgotten in the heat of the debate at earlier stages. For insurers to be able to pass on the savings, there must first be savings. That is the primary purpose of this Bill. Only if the Bill is implemented, as it is now with a tariff of low damages for whiplash claims up to two years in duration and the other measures planned alongside this, including raising the small claims limit to £5,000, will there be any prospect at all of savings being realised and passed on to consumers. That will be in the best interests of all consumers and all citizens.

I add my praise to the Minister and the noble Baroness for their diligence and patience and for making themselves so readily available and accessible to all and any Members of this House to discuss various matters of concern. The Minister has made this a better Bill. Now let us speed it on its way.

Lord Marks of Henley-on-Thames

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My Lords, on behalf of these Benches, I add my thanks to the noble and learned Lord the Minister and to the noble Baroness, Lady Vere, for their help, courtesy and consideration throughout the passage of this Bill. We have all approached the Bill with common purposes; on some of the issues, we have suggested different ways of achieving those purposes. With co-operation from Members across the House, in the Conservative Party and on the Labour and Cross Benches, we have produced a set of amendments that have now improved the Bill significantly as it goes to the Commons. If I may say so, it has been a model of co-operation. We are very grateful to the noble and learned Lord for the many meetings that he has held at which he has explained the Government’s thinking and listened to us, and for the letters that he sent us explaining their thinking and, sometimes, changes in thinking. Thank you.

Lord Beecham

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My Lords, I am not sure I have enjoyed much fun as we have gone through this Bill but, as it leaves the House, I thank the Minister and his colleague on the Front Bench, and the Bill team for their readiness to discuss its provisions and respond to some, at least, of the concerns and suggestions that have been made from all sides of the Chamber. I also express my admiration for those who have brought their professional expertise and knowledge to our debates and discussions. It has been quite an awesome experience to listen to some of those who have spent a lifetime dealing with these matters.

Nevertheless, from these packed Benches, we believe that the Bill is fundamentally flawed and hope that, when it returns to us, it will have been improved. In particular, we would like to see the definition of “whiplash” made by medical experts and the damages determined by the judiciary based on Judicial College guidelines, rather than by a tariff specified for whiplash injuries. If there is to be a tariff, the college should be involved in determining the levels.

The Law Society suggests that the Government should clarify what would constitute a failure to take reasonable steps to mitigate the effect of an injury, which is part of the Bill’s proposition. It is also concerned about the provision in Clause 3 that means the capacity of the Lord Chancellor to allow discretion to increase the award in exceptional circumstances is by way of regulation, again, rather than being left to the judiciary to determine what constitute such circumstances.

Underlying the Bill and the proposals to raise the small claims limit for whiplash injuries to £5,000, and for other personal injuries to £2,000, is the effect of creating obstacles to justice likely to deter legitimate claimants from pursuing and receiving compensation. Where they do, they are likely to add to the growing difficulties experienced by the courts in dealing with unrepresented litigants. To most Members of this House, the sums involved are very modest; to many potential claimants, they are not. For our part, we will in future seek to oppose the intended increase of the small claims limit to all RTA cases to under £5,000 and for all other personal injury claims to £2,000, when the relevant regulations are laid.

We look forward to a review of the impact of this legislation on the much-vaunted claims of the insurance industry significantly to reduce insurance premiums—the noble and learned Lord has referred to that aspiration, as I would describe it—and, more positively, to a significant growth in the number of periodical payments orders in the most serious cases of injury, which are the subject of Part 2 of the Bill, which deals with the discount rate. That is the most positive part of the Bill, and it certainly has our support.

It has been an interesting experience to participate in these debates, and I hope that the Bill will return to us in due course, in an improved form. I await that moment with barely contained impatience.

Lord Judge (CB)

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My Lords, it is a great comfort to hear the noble Viscount, Lord Hailsham, say that he agrees with what I am going to say before he has heard it. Now, perhaps he will not mind hearing it.

We have to face the reality that there are a huge number of fraudulent claims for damages arising from alleged whiplash injuries sustained in road traffic accidents—far too many of them. We also have to remember that a large number of perfectly honest claims are made as a result of injuries suffered in road traffic accidents. We have to find a pragmatic solution to the problem of fraudulent claims, given that the cost of contesting them in court tends hugely to outweigh the amount of money that is at stake if the claim is not substantial. Whiplash injury cases, in the way that will now be defined in the Bill, are not cases that attract vast sums of money in damages. I particularly welcome the requirement of medical evidence, which provides some level of protection against the fraudulent. I welcome also the prohibition on cold calling, and I think there is something in the provision for uplift.

Can we be clear, though, that some claims absolutely reek of fraud? I suspect many of us know, for example, of a case where, at traffic lights with two cars in a line and none behind, the front car moves forward across the junction, not too fast, and is followed by the second car. Then, suddenly, the front car slams on its breaks for absolutely no reason, resulting in an impact. I am certainly aware of at least one case—perhaps we all are. It was not a case in court but was narrated to me by a friend, who was rather mortified to find that, after a small accident, the recipient of the injuries in the other car came out of the car saying, “Whiplash, whiplash!”, and had no other word of English to speak. He then found that his insurance company had received claims for no less than four people, when there was only one person in the car. As I say, these cases reek of dishonesty.

I hope that, if this part of the Bill is enacted, insurance companies will continue to remember that before a claim can be made for whiplash injuries, there has to be a claim and the claim should be contested as and when there is evidence of fraud. They cannot just sit back, otherwise they will find themselves paying out more and more. Some cases reek of fraud and they should be contested, and the easy way of doing nothing much more than that should be avoided. The police should be informed and the evidence should be handed to them so that at least they can investigate. I know that they have many other things to do, but a few knocks on doors and the word would go around the fraudulent area of this particular universe saying, “Hang on, there’s something going on here”. That too might discourage the odd dishonest claim.

What I cannot accept is a solution which means that a dishonest claim is handled in exactly the same way as an honest one. We cannot have dishonesty informing the way in which those who have suffered genuine injuries are dealt with. That is simply not justice. There should not be any idea that an honest claim for a whiplash injury made by the victim of a car accident should be less well compensated than an identical injury suffered by someone at work. There are all sorts of ways in which injuries can be caused; indeed, a slip in the street or a fall down the stairs can result in a whiplash injury, so there are many perfectly ordinary ways in which these injuries can be sustained. We need a process that produces the same result for the same victim who has honestly suffered the same consequences.

The remedial system proposed in this draft is founded on regulation-making powers vested in the Lord Chancellor. I see the noble and learned Lord, Lord Irvine, is in his place. As far as one can see, today and for ever, not only will the Lord Chancellor have no judicial function, but he or she is most unlikely to have any relevant experience of this particular area of work. In exercising his responsibilities, he will be dependent on his officials. You can almost sense the way the tariff is currently being proposed—it is still only a proposal—in that there is an understandable anxiety to limit fraudulent claims, and the error will be to reduce the tariff level to cover all claims, including the genuine ones. I respectfully suggest to the House that some form of judicial involvement in the fixing of the tariff for whiplash injuries is essential.

The Bill already acknowledges the value—I would say the need—of direct judicial input into the process, as set out in Clause 3(5). The proposed new section 2 specifically involves the Lord Chief Justice as a consultee in any processes for increasing the tariff. Perhaps I may say that it is absolutely obvious that the very least that should be provided is that the Lord Chief Justice of the day should be consulted about the level of the tariff. Of course he will take advice and make whatever recommendations he thinks right, and the ultimate decision will be for the Lord Chancellor, but it is fair to say that it would hardly be wise for a Lord Chancellor simply to take the judicial expertise on board, say that he has considered it, and then ignore it. If he were to do so, I suspect that either the other place or this House might actually awaken from our slumberous non-scrutiny of regulation making.

Lord Pannick (CB)

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My noble friend Lord Kinnoull referred to “jurisprudential purity”. I would prefer to describe it as the essential role of the judiciary in deciding what compensation is appropriate. I would be very grateful if the Minister would tell the House whether there is any precedent for a Minister, rather than judges, deciding on the appropriate level of compensation for a civil claimant when that compensation is being paid not by the state—I recognise that that may be a different matter—but by a private wrongdoer or, more accurately, their insurance company. I suggest that either there is no precedent or this is rare, for a very good reason: put simply, judges, not Ministers—or their civil servants, more accurately—have expertise and independence in this area. For those reasons, I strongly support the speech made by my noble and learned friend Lord Woolf.

Lord Sharkey (LD)

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My Lords, all the amendments in this group are aimed at significantly bringing forward the date of the first review of the discount rate. They are all in my name and those of my noble friend Lord Marks and the noble Earl, Lord Kinnoull, and I am very grateful for their support. I am also extremely grateful to the noble and learned Lord, Lord Keen of Elie, and to his officials for the considerable time they gave to the discussion of this matter between Committee and Report, and for their help in suggesting drafting for some of the amendments in this group.

As the Bill stands, the timetable for the first review would be as follows. The Lord Chancellor can decide when the provisions in Part 2 commence and there is no minimum or maximum period laid down. At his sole discretion, he can take as long as he likes to commence the provisions that enable a review of the discount rate. Once he has decided to commence the provisions, he then has up to 90 days to trigger the start of the first review. The review must conclude within 180 days, during which the expert panel has up to 90 days to respond to the Lord Chancellor.

All this means that the entire process will take up to 270 days plus the time elapsed before the Lord Chancellor commences the provisions in the Bill itself. As the noble and learned Lord, Lord Keen, said in his letter of 30 April, assuming the Bill receives Royal Assent this year and that the provisions are brought into force within two months, the statutory timetable means that the first review would be completed before the end of 2019. This will take far too long, as I think all those who contributed to the debate in Committee recognised.

The amendments in this group replace the existing process for conducting rate reviews with a separate and much faster process for conducting the first review. They leave untouched the process for subsequent reviews. Amendments 51, 55, 58 and 59 shorten the length of time after commencement that the Lord Chancellor has to trigger the first review from 90 days to 25 days. Since other amendments in this group will later remove the expert panel from the first review, there is clearly no need for the three-month maximum delay.

Amendments 64 to 66, 72, 74, 78 and 87 set up the new process for the first review. The essence of this new process is contained in Amendment 65. The other amendments are enabling or consequential, with the exception of Amendment 90, tabled by the noble Earl, Lord Kinnoull, to which I have added my name and which I will discuss later. Amendment 65 requires that the review is held and the rate determined within 140 days from the Lord Chancellor’s triggering of the first review. It also requires that the Lord Chancellor must, within 20 days of the start of the 140-day period, consult the Government Actuary and the Treasury. The requirement to consult an expert panel is removed entirely from the first review. The only consultees are the Government Actuary and the Treasury. The amendment specifies that the Government Actuary must respond to the consultation within 80 days of the Lord Chancellor requesting the consultation, while Amendment 65 sets out that:

“The exercise of the power … to determine … the rate … is subject to paragraph 3”,

exactly as at present and exactly as for subsequent determinations.

In summary, the changes brought about by the amendments to the process of the first review are as follows. They will reduce the time between commencement and triggering from 90 days to 25 days; they make it plain that the Lord Chancellor must request consultation no later than 20 days after triggering a review, a period unspecified in the Bill as it stands; they will remove the expert panel from the first review and the only consultees will be the Government Actuary and HMT; they will require the Government Actuary to respond to a request for consultation within 80 days after the request has been made; and the entire review must be concluded within 140 days of the Lord Chancellor’s triggering the review.

In all, these measures will reduce the time to arrive at the first determination from commencement by 105 days. This will represent a very significant saving, especially to the NHS, where it may be as much as £300 million a month. Amendment 65 and the other amendments in my name do not address the absolute discretion the Bill gives the Lord Chancellor to decide when the provisions governing rate reviews should commence, but this is addressed in Amendment 90 in the name of the noble Earl, Lord Kinnoull. There is no good reason to allow the Lord Chancellor unfettered discretion and I support Amendment 90, which removes it.

In my view, the time between Royal Assent and commencement should be either zero or some small number. When we discussed these matters in Committee, the Minister opened his response to our proposals to bring forward the first review by saying:

“I believe we are as one in our desire to see the provisions brought into force as rapidly and sensibly as possible”.—[Official Report, 15/5/18; col. 633.]

He went on to commit to reflect further on the matter. It is quite clear that he and his officials have done exactly that. Many of the amendments in this group, particularly Amendment 65, are largely the fruit of that reflection and of our discussions. I am grateful for that and I commend these amendments to the House. I beg to move.

Lord Hunt of Wirral (Con)

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My Lords, I declare my interests as set out in the register and congratulate the noble Lord, Lord Sharkey, and the noble Earl, Lord Kinnoull, on Amendment 65, in particular, and the consequential amendments. More than anything else, the simplification of the process for the first review of the discount rate will allow the Lord Chancellor to proceed with the speed that everyone in this House has urged. I very much hope that my noble friend the Minister will confirm that the Government are prepared to accept Amendment 65 and the consequential amendments. I look forward to her acceptance.

Lord Faulks

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I entirely accept that it does, but ultimately the question of what the rate is is determined by experts, taking into account the factors which are, I agree, set out in the Bill. I shall listen with interest to what the Minister says, but it still seems to me that that is perhaps dangerously close to the judges getting involved in an area which might render them subject to criticism.

Lord Beecham (Lab)

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My Lords, at this late hour I propose only to express agreement with much of what has been said from all round the Chamber in these debates. I am not as concerned as the noble Lord is about the role of the Lord Chief Justice. It does not seem at all inappropriate for the Lord Chief Justice to be consulted, which is all that the amendment suggests, in the course of making these very difficult decisions. The noble Lord need not worry very much about the consequences of that.

I am happy to support all the amendments that have been discussed and I congratulate noble and learned Lords on the progress that has been made. I assume that the Minister will be inclined to accept, and I certainly hope that that will be the case.

Lord Faulks

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My Lords, this amendment is in identical terms to that which I advanced in Committee. This time I have the support of the noble Earl, Lord Kinnoull. In view of the fact that there are no changes in the nature of the amendment, I think I can be brief in outlining its purpose.

The purpose is to ensure that the reviews are regular—indeed, that is the purpose of the Bill—which is particularly important in the light of the fact that Lord Chancellors so rarely exercised the power in the previous 20 years or so. The question is: how regular? I respectfully submit that the three-year period is too short, and a five-year period would be much better.

I say this based not least on personal experience at the moment and having had conversations with people on, as it were, both sides of the fence. When you are expecting a change one way or another, as is the position now—because the market suggests, as the noble Earl pointed out, that there probably will be a change, let us say from minus 0.7% to plus 1%—one side or another will see it to their advantage either to bring forward a claim or delay it to take advantage of the putative date of the decision.

This process is perfectly legitimate and part of the hurly-burly of litigation—there are lots of uncertainties in litigation—but this one is of particular significance where large sums of money are concerned. I am not disparaging anyone involved in the litigation process. But if the change happens every five years, there will be less of this gaming than if it happens every three years, just as everyone says about the last year of a four-year term of a President—nothing much happens. A lot of positioning will be taking place before the change.

This is a view expressed widely in the profession. I therefore ask my noble and learned friend carefully to consider accepting the amendment, or at least coming back at Third Reading with something that reflects those considerations. I beg to move.

Lord Beecham

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My Lords, I am inclined to agree with the noble Earl about Amendments 68 and 71, but I am afraid I remain unconvinced about the five-year period as opposed to the three-year period, and find myself in the rather strange position of agreeing with the Minister. It is not as though all claimants will be five years off a review. Some will be and others will not, necessarily. There will be different timescales for individual claims, and I do not think five years is necessary to protect the integrity of the system. Some people will try to game, whatever the period. Five years is not necessarily more likely to protect against that than otherwise. Rather unusually—I am sure the noble and learned Lord will stick to the three-year period in the Bill—I will have to agree with him.

I should like to say at the end of this very long day that the House has done its usual very good job of scrutinising difficult legislation. It is a little late to try to recall everything that we have discussed and agreed, but a good job has been done today and I hope the Bill will be improved. The Minister has offered to consider a number of matters before Third Reading—and, in any case, the Bill will go somewhere else in another week’s time and come back to us eventually for further consideration. There may be changes that we have to consider at that stage.

On behalf of these Benches—or what is left of us—I thank the Minister for his running of the Bill. He has been more than willing to talk to colleagues, even when some of them, like me, are rather slow on the uptake in this rather technical area. It is not one where, in practice, I had very much to do with cases at this level, as a personal injury lawyer—thank heavens. Around the House, we have heard some very important contributions from Members from all sides, and there is every prospect of further changes being made at Third Reading or in another place on the basis of the level of debate, discussion and argument that we have had. That is a signal tribute to the work of the House.

Lord Sharkey (LD)

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My Lords, Amendment 92 in this group would require the Lord Chancellor to carry out a review of the impact of any new rate on the extent of the use of PPOs and to lay this report before Parliament. Our amendment has the same general purpose as Amendment 55 and as other amendments in this group.

The noble Lord, Lord Hodgson, has already spoken eloquently to Amendment 55 so I can be very brief. It seems to me that all the amendments in this group are intended to provide a gentle nudge in the direction of PPOs. Their purpose is to create conditions in which the incidence of voluntary uptake of PPOs may increase. Given the scope of the Bill, not to mention the ethical questions that would be created by any reduction in the freedom to choose or not choose PPOs, this is probably as far as we can go.

I hope the Minister will be sympathetic to the thinking behind all of these amendments, coming as they do from various parts of the House. If he is sympathetic, perhaps he would be willing to meet interested noble Lords before Report with a view to drafting an amendment or amendments that he might consider bringing forward or supporting.

Lord Faulks

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My Lords, I begin with my declaration of interest, one I gave in Committee and at Second Reading. It is perhaps of some relevance to the debate that we are currently engaged in that I have for some years been involved in claims of the utmost severity and I am to this day instructed for defendants, particularly the National Health Service, the Medical Defence Union and insurers, but also claimants.

I move Amendment 56 in my name and that of the noble and learned Lord, Lord Hope of Craighead, who is not in his place because he had an unavoidable engagement. He knows essentially what I shall say. I cannot claim a total endorsement of any comment I may make in advance, but I can say that he supports the general tone of what I shall say in support of the amendment.

The desirability of periodical payments is clear, and has been well articulated around the House today—but not, I agree with the Minister, in all cases. The Government have very much acknowledged the need to encourage them but have so far not included in the Bill any specific provisions which would have that effect. The noble and learned Lord, Lord Judge, explained the difficulties of estimating life expectation, and he is of course right—although it may have passed his experience and practice that there is an enormous amount of literature now, particularly from the United States of America, in which very refined estimations of life expectation are provided to the court, particularly in the case of the most seriously disabled, so that you are able to enter an algorithm to see the likelihood of reaching a certain age. Having said that, it may well be the case that there is a spurious accuracy about that documentation, in view of the fact that the expectation of life of a seriously brain-damaged child, for example, has radically increased over the time when I have been in practice. An estimation made 20 years ago would simply not be right now for a child with exactly the same injuries.

Section 2(1) of the Damages Act 1996 gave the courts a power for the first time to order periodical payments, but could not do so unless the parties consented. That was preceded by a structured settlement agreement that had been reached in a particular case; it had attracted much attention and, therefore, Parliament intervened to give judges in appropriate circumstances a power of that sort. Then by Section 100 of the Courts Act 2003 the courts were enabled to order periodical payments, if they thought it appropriate. However, my experience is that they do not generally do so. In fact, I have never heard of the courts ordering periodical payments where a defendant is a secure provider but one side or another objects to such an order.

One consequence of the drastic lowering of the discount rate is that periodical payments have become much less attractive. With such a generous discount rate and the consequent rise in lump sums, there is very little incentive on a claimant to seek periodical payments when he or she can do better even by cautious investment in the market. We do not know what adjustment to the discount rate may be or, indeed, when any such adjustment may be made. Even if there is an increase to +1% as opposed to -0.75%, it may not be enough to discourage lump sums as opposed to periodical payments. It should be remembered that before the case of Wells v Wells in 1998, and for many years, the discount rate was +4.5%. It was lowered to 2.5% in 2001 to reflect the decision in Wells.

Amendment 56 is intended to provide some legislative encouragement to a party to seek periodical payments. The assumption by the courts currently is of a claimant as an incredibly cautious investor; in future, he will be regarded as a slightly less cautious investor by virtue of this Bill. Surely, if an investor is really anxious to avoid the uncertainties of the future, the best way in which he or she can do that is by an order for periodical payments with appropriate indexation. It used to be said, and indeed it has been said this afternoon, that the one thing that one knows about a lump sum is that it is either too much or too little. Inevitable uncertainties about life expectation mean that the degree of inaccuracy may be profound. Surely, then, if a sensible offer of periodical payments is made by a defendant and turned down by a claimant in favour of a lump sum, it indicates that the claimant is not nearly so risk averse as the legislation and the discount rate presumes that he is.

It is, of course, entirely a matter for the claimant what he or she wants to do with his money, subject only to the unlikely intervention of the courts to order periodical payments. It seems to me, therefore, that it should be open to the court to vary the discount rate to reflect the fact that, by turning down a reasonable offer of periodical payments, a claimant has evinced an intention to be rather more adventurous than the legislation presumes that he will be. This could either have the result of reducing the overall sum, thus making periodical payments more attractive in the light of a different discount rate, or of promoting settlements, factoring in the possibility of a court varying the discount rate in the light of sensible offers of periodical payments. One way or another, it may go some way to redressing the tendency away from periodical payments in favour of lump sums. I do not think it falls foul of what the noble and learned Lord, Lord Woolf, indicated: that Parliament should not tell judges of great experience precisely how to reflect these principles in an individual case.

The other part of the amendment concerns the particular nature of the loss in respect of which damages are sought. In substantial claims, there are a number of different heads of damage, and it may be that with some heads a different discount rate is appropriate. At the moment, the Bill talks of “classes” of case, not of different types of loss within the same case. In large claims there will be many heads of loss. They will include the cost of future care—usually the largest amount—the cost of specialised equipment; adaptations to accommodation; therapeutic and other medical treatment and loss of earnings, to name some of the main established heads of damage. Different considerations as to the appropriate discount rate may apply to different heads of loss.

In 2010, sitting in Guernsey, Jonathan Sumption QC, before his elevation to the Supreme Court, applied different discount rates to loss of earnings claims from those which he applied to other heads. That decision is not, of course, binding on our courts but it does illustrate that it may be appropriate to vary discount rates depending on the type of loss. This is done in a number of other jurisdictions.

My amendment originally contained a further factor to be taken into account in varying the discount rate, namely if a court concluded that a claimant would not in fact seek to recover a particular cost privately but would rely on the state. Very often, an award is made on the assumption that a claimant will, for example, seek to have his medical treatment and care provided privately, when that may not in fact be the case. In certain extreme cases, one is much better off receiving care for complex conditions through the state rather than, as it were, setting up a private hospital. This part of the amendment was initially accepted by the Table Office, but I was then told that it was outside the scope of the Bill. I am bound to accept that ruling but, as other noble Lords have said—and may say again—it is important that an outmoded provision, namely Section 2(4) of the Law Reform (Personal Injuries) Act 1948, is reviewed, and probably repealed, as soon as possible. I beg to move.

The Deputy Chairman of Committees (Viscount Ullswater) (Con)

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I must advise noble Lords that if Amendment 58 is agreed to, I cannot call Amendments 59 and 60 because of pre-emption.

Lord Hunt of Wirral

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My Lords, I rise to support Amendment 91, tabled by the noble Lord, Lord Hodgson, which is in this group. The offending part of paragraph 8 is the legislative equivalent of putting the genie back in the bottle or un-casting the die.

Let us be clear: the option of the Lord Chancellor setting no rate does not mean leaving the current rate alone, or even setting a rate of 0%. I want to outline the sequence of events that will occur: having set the rate at least twice, the Lord Chancellor will decide that it is no longer appropriate for the Lord Chancellor to set the rate at all, that he should repeal all previous rates and that the whole matter should be thrown back to the courts. The effect would be to create a maelstrom in which no one can settle a case, because no one knows what the rate would be.

These sub-paragraphs, which Amendment 91 would remove, would in effect allow the Lord Chancellor to repeal the entire discount rate review mechanism, via secondary legislation, simply by deciding that he or she has had enough. I am surprised that the Delegated Powers Committee did not raise an objection, but the meaning of the sub-paragraphs is pretty opaque. It simply cannot stand up.

Lord Sharkey

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I have in this group Amendments 74, 87 and 88. Amendment 74 is a probing amendment. It provides the Committee with an opportunity to debate the value of the Lord Chancellor having a decisive role in determining the PIDR. As things stand, that is what he or she has—a decisive role. It is true that the Bill will create an expert panel to advise him and that it sets out the assumptions on which he must make that determination, but it is the Lord Chancellor who makes the decision. This poses the obvious question—why? What are the merits of having a politician making this judgment? What merit is there and what dangers might there be in having this decision in the political arena?

It is true, of course, that the rate decision has many serious consequences—for claimants but also for insurers and for the NHS, as we have discussed. These consequences are far reaching—but so are the consequences of changes to the Bank of England base rate. Changes in the base rate affect everyone who has a mortgage, every borrower and every saver. Some recent changes to the base rate have had dramatic effects on millions of people and continue to do so. For example, millions of people with savings have been dramatically disadvantaged by rate changes since 2007. Equally, millions of mortgage holders have benefited enormously from these changes. But these decisions on the base rate were taken not by politicians but by the MPC—an expert panel. If decisions on such wide-reaching and consequential matters can be taken by an expert panel without political involvement, why have political involvement in the PIDR? Why have the Lord Chancellor involved?

I raised this question when I met Ministers to discuss the Bill. The noble and learned Lord, Lord Keen, commented that the Lord Chancellor’s role was a matter of government policy. I understood that. However, we did not have time to go into the question of why it was government policy or whether there were better alternatives. We did not discuss what grounds the Government might have for maintaining the policy or whether any assessment had been made of alternative arrangements. We now have a little more time to discuss the issue and the merits of removing this role from the reach of politicians for reasons analogous to removing control of the base rate from them. I look forward to the Minister’s reply.

Amendments 87 and 88 are straightforward. They deal with the expert panel itself, as set up in paragraph 5 of the new Schedule A1 to the 1996 Damages Act, inserted by Clause 8(2). This panel is to be consulted by the Lord Chancellor in determining the rate. The Bill specifies the members of the panel as the Government Actuary, or his deputy if the office is vacant, who is to be chair, and four other members appointed by the Lord Chancellor, one of whom must have experience as an actuary, one experience of managing investments, one experience as an economist, and one experience in consumer matters relating to investments. All these roles seem pretty well defined, except possibly the last one. Could the Minister flesh that out a little? Can he give examples of the kind of persons who might qualify as having,

“experience in consumer matters … relating to investments”?

It seemed to us that the panel might benefit from an additional member with different expertise. Amendment 87 would add a member who is medically qualified and has experience of changes in medical science and their effects on life expectancy. The PIDR has a very significant effect on the damages awarded against the NHS for clinical negligence, as we have mentioned. Payouts last year amounted to £1.7 billion and the amount has been rising steeply in recent years.

Awards for clinical negligence frequently have to take into account estimates of life expectancy. The Committee will know that the PIDR has a very significant effect on damages awarded against the NHS for clinical negligence. As I said, payouts amounted to £1.7 billion last year, and much of this was determined by reference to life expectancy. Of course, actuarial methods can and do give an estimate of life expectancy, but for the most part this will be based on extrapolations of current trends. What might not be taken into account is the likelihood of discontinuous change brought about by the speed of advances in medical science. We live in a golden age of medical research. It is not a total exaggeration to say that one hears nowadays almost daily of some remarkable medical breakthrough that will in due course benefit patients by curing disease, improving quality of life and prolonging life itself.

It seems to us that the expert panel would benefit from having first-hand, direct experience of these new treatments and their likely effects. A member with such experience would make a valuable contribution to any assessment of the role played by life expectancy in determining awards. I look forward to the Minister’s thoughts on the matter.

Amendment 88 would impose a duty on the Lord Chancellor to secure that,

“each of the appointed members approaches the work of the expert panel as an expert with the object of recommending a rate of return that is fair to … both claimants and defendants”.

It could be argued, for example, that the last change to the PIDR was not fair to both claimants and defendants in that it produced a huge rise in the amounts awarded to claimants. And it works the other way: there might be rates that a panel thought unfair to claimants. If so, it would be important that that view helped form the recommendations. We see our amendments as allowing a dispassionate view of the effects of a change to the PIDR for both claimants and defendants, and this should have an explicit role in informing the panel’s recommendation. I hope that this is not controversial. In fact, I rather hope that the Minister will be able to demonstrate that the amendment is unnecessary and that the requirement for fairness is somehow already built into the procedure.

Lord Faulks

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My Lords, we have had a debate effectively asking the Government to get on with the process of fixing the discount rate. We have now had a debate about who should be on the panel and how they should go about exercising the function of deciding the discount rate. This group of amendments is to do with a shorter, but very important, issue—namely, the regularity of reviews.

It is plain, I suggest, that there must be regular reviews, and much more regular than in the past. One of the problems that existed, and still exists until the law is changed, is that there was no particular period in which the Lord Chancellor had to exercise his or her power to alter the discount rate. It was very rarely done, not least because of the potentially significant political consequences of the decision. When, finally, the then Lord Chancellor, Ms Truss, altered the discount rate in 2017, it had the most dramatic effect. While more regular reviews are desirable, the question is: how regular should they be?

The problem about having a review every three years is that parties to litigation will have a quite understandable tendency to try to guess the outcome of the determination of the new discount rate and to game the system. I do not wish to imply anything inappropriate about such gaming; it may well be done by either side in a dispute, and is simply a factor in the uncertainty involved in negotiations, where a party thinks it would be to their advantage either to wait until after determination of the discount rate or to ensure that a trial or settlement is concluded before the discount rate is altered.

Large claims take some time to get to court. A brain-damaged baby does not have to begin a claim—or, at least, a claim does not have to be begun on their behalf—until after he or she attains their majority at the age of 18. The normal limitation period for personal injuries is three years, but there are exceptions in terms of date of knowledge and, under Section 33 of the Limitation Act 1980, there is the power to disapply the limitation period in certain circumstances.

In a complicated criminal negligence case, it may be a number of years before there is clarity in terms of causation and, indeed, prognosis, once all the various experts’ reports have been assembled and exchanged, and there have been meetings of appropriate experts. There is then the problem of finding a court date for trial.

There is thus plenty of time and room for manoeuvring. In my view, a three-year period is definitely too short. I would have favoured, if I had been asked, a seven-year period, but I suggest in this amendment five years as a compromise. If any evidence is needed of the gaming of the system, it is apparent now. That evidence may be anecdotal, but there is such an accumulation of this anecdotal evidence that it simply cannot be ignored. Parties are either anxious to conclude their cases before the putative date of the variation of the discount rate or to delay matters. There is much speculation as to when this Bill will become an Act. I fear that such manoeuvring will take place almost continuously if the three-year period is maintained.

I therefore ask my noble and learned friend the Minister seriously to consider altering the period to five years, which will mitigate to some degree the uncertainty that prevails on discount changes. Uncertainty, I accept, is inevitable in litigation, but where there is such a degree of uncertainty, with potentially large consequences in the size of a claim, it militates against settlement. Settlement of claims avoiding court hearings is surely desirable and unless the Government change the frequency of the review, I fear that there will be a very real increase in the number of claims that do not resolve themselves. Alternatively, there will be a number of applications to court to try to adjourn matters or accelerate them to reflect some perceived advantage to one side or another. I beg to move.

Lord Faulks

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Does the noble Earl not accept that there is a risk that if there is such a frequent review, those who are parties to litigation will simply feel that they are in a permanent state of uncertainty about what the discount rate may be? They have to rely, for at least a reasonable period, on a certain discount rate.

Lord Beecham

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I am not really persuaded by the logic of the amendment of the noble Lord, Lord Faulks. It is not as if all claims will be faced with a five-year period. If a case is brought two years before a review, the courts will be dealing with a more recent determination than if it had been five years. I do not see the advantage of the noble Lord’s proposition. There will be some cases that will obviously be closer to that date than others.

Lord Hope of Craighead

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I have one point to add to the remarks of the noble Lord, Lord McKenzie, on the effect of the different approach to the level of risk. One factor which was mentioned by Lord Lloyd of Berwick in Wells v Wells was the need to have a relatively stable, constant fund from which funds could be drawn as the need arose over a long period of time. The risk he was contemplating in that part of his judgment was not that of the funds running out, just that the value of the fund would diminish as the stock market went down. In its turn, this would prejudice the viability of the fund to maintain itself at the appropriate level as time went on. The risk we were contemplating then, in looking at the appropriate rate of return, was differentials in performance which would affect the ability of the fund to meet ongoing costs which would not fluctuate. They were the constant costs of equipment maintenance or nursing services which the injured person had to meet from time to time: a level rate of costs, against a fluctuating value in the fund available to pay for them.

There is much to be said for reducing the level of risk to the minimum possible compatible with the aims of the Government, to avoid the problems of fluctuation which affect the viability of the fund. I mention this because it is another factor which lies behind the point made by the noble Lord, Lord McKenzie. As the noble Lord, Lord Faulks, has pointed out, the advantage of the Wells approach is that investment advice was not needed. I am not quite sure how these things are structured, but if the fund were to be put in the hands of an adviser, there is usually a performance factor taken out of the management of the fund. It is not so much investment advice as the cost of managing the fund. The larger the fund, the more likely it is that the best way of handling it is to put the whole fund into the hands of an investment adviser who would simply manage it accordingly.

It is rather difficult to extract from that a recoverable figure of the kind that the amendment in the name of the noble Lord, Lord Faulks, is directed at. There is a lot to be said for just taking that factor out of the award altogether and leaving it up to the individual to decide how best to have the money managed. If it is a management figure, then that is all right: it is just part of the choice that the injured person makes. It should not be added in as an additional element of damages.

Baroness Bowles of Berkhamsted

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My Lords, we are dealing with sensitive issues here. Nobody wants claimants to get a raw deal, but we need to examine presumptions that we appear to be writing in, especially in the light— as has just been mentioned again—of the possibility of periodic payments. In his reply to the first group of amendments, the Minister seemed to say that the possibility of periodic payments was a lot more open than it appears to be, due to the statistics.

Amendment 80B is another probing amendment. I tabled it because the language of paragraph 3(3)(d)(ii) of new Schedule A1—it is much easier to say “the last three lines at the bottom of page 9”—does not seem quite right. The wording concerns how it is to be assumed the relevant damages are invested and says to assume,

“less risk than would ordinarily be accepted by a prudent and properly advised individual investor who has different financial aims”.

My amendment deletes the whole sub-paragraph, but it is a vehicle for probing and there are less extreme ways to fix it.

I understand the intention of the words: the claimant should be reckoned to invest in a cautious and advised way, perhaps more cautiously than an individual who does not have the same vulnerability. Paragraph 41 of the Explanatory Notes explains it as,

“less risk than would ordinarily be taken by a prudent and properly advised individual investor (who is not a claimant) with similar investment objectives”.

Those investment objectives clearly need to be the purposes set out in paragraph 3(2) of new Schedule A1, at lines 25 to 31 of page 9, which includes, for example, that the damages,

“would be exhausted at the end of the period for which they are awarded”.

However, the actual wording in the three lines at the end of page 9 does not seem to say the same thing. The first two lines—

“less risk than would … be accepted by a … properly advised individual investor”—

are broadly okay, but it then says,

“who has different financial aims”,

which is very different from the “similar investment objectives” of the Explanatory Notes. I am therefore slightly puzzled. Was the intention to state that they are different because they are not a claimant, is it a mistake, or have I missed some other point?

The Lord Speaker (Lord Fowler)

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My Lords, I should inform the Committee that if Amendment 1 is agreed to, I will be unable to call Amendments 3 to 5 by reason of pre-emption.

The Advocate-General for Scotland (Lord Keen of Elie) (Con)

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My Lords, I am obliged for all the contributions that have been made so far this morning. I observe that it appears to be generally recognised that the Bill is addressing a very real issue about which policy decisions have to be made and implemented. I quite understand the question raised about where the definition of whiplash injury should appear. The definition in the Bill seeks to limit injuries to those soft tissue injuries that affect the neck, back or shoulder and arise from road traffic accidents. The vires in the Bill are tightly drawn to enable regulations to be made by the Lord Chancellor that would apply only to a discrete number and type of injury.

It is interesting to see the diversity of amendments that have come forward this morning. That may underline the particular challenge we face in arriving at a suitable definition, be it in the Bill or in regulation. We have sought to address an issue that involves reconciling a legal understanding of this matter with a medical definition—one which covers both injury and the symptoms of injury. That involves us engaging with not only medical expertise but a degree of legal expertise. In addition, while I am not going to go through the detail of every amendment, because I understand what lies behind them, I will note this much. The noble Earl, Lord Kinnoull, set out three points for consideration, and in doing so underlined the very real problem that we need to address here. It was emphasised by the suggestion that if you go to a particular claims management site you are encouraged to believe that even if you have no symptoms you may still have a claim.

I was reminded of an incident some years ago where I was acting for an American pharmaceutical company. The US attorneys showed me a photograph of a genuine roadside sign that had been erected in the state of Mississippi. It said, “If you’ve taken drug X and suffered a fatal heart attack, telephone this number”. The lengths to which we lawyers will go know no bounds, and our belief in the Almighty is always there. There is a very real industry out there. I do not use the term “racket”, but others have—and with some justification.

Looking to the current position, the noble Lord, Lord Sharkey, correctly observed that the regulations that we have produced in draft to elaborate the definition of whiplash injury have only just appeared. I quite understand the need for noble Lords to consider those regulations in more detail. In turn, I will consider in more detail whether we should incorporate a more precise definition in the Bill. But I stress that, even if we were to take that step, it would be necessary for us to bear in mind the ability of government to proceed by way of regulations to support any definition in the Bill. We are well aware that flexibility will be required with regard to any final definition so that we can meet the way in which claims development occurs—the way in which this sort of market develops—in order to put limitations on claims.

At the end of the day, the detailed definition of whiplash injury will need to reconcile the current legal understanding with an accurate medical definition covering both injury and symptoms. Our aim is to achieve that objective, but to what extent we achieve it by incorporating the definition in the Bill is not a matter on which I would take a final position. I quite understand the suggestion that we should consider further the extent to which the definition can appear on the face of the Bill, and also allow noble Lords the opportunity to consider the scope of the draft regulation that has only recently been made available. In the light of that, and understanding that these are essentially probing amendments, I invite noble Lords not to press them at this time.

Lord Beecham

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My Lords, I shall speak to the amendments in my name. I have already effectively, I hope, spoken to Amendment 5. Amendment 4 is a probing amendment that seeks to alter the definition of a whiplash injury to confine it to neck injuries. I accept the point that the noble and learned Lord, Lord Mackay, made about the precise definition, and also the fact that I am effectively in the position that I was questioning before, of not having the medical authority to give a prescription. That underlines the need for independent medical advice as to what constitutes the kind of injury that needs to be covered.

Amendment 5, to which I referred before, would require the definition to be provided by the Chief Medical Officer. There may be other professional sources that would be as effective, but the independence and status of the Chief Medical Officer strikes me as highly relevant.

The other amendments in this group to which I will refer are, particularly, Amendments 8 and 10, which suggest a new tariff for 12 months rather than the two years in the Bill. I understand that the vast majority of cases are within that one-year period, so to extend it to two years seems somewhat invidious, given that there has to be proof of the effect of the accident. Two years is a long time to be subjected to, for what would be a pretty minimal level of compensation provided for in the tariff. I hope that that would improve the Bill somewhat.

In relation to Amendment 9, sub-paragraph (ii) seems superfluous because it requires the claimant to have mitigated the damage suffered, but in common law the plaintiff has to demonstrate that he has done precisely that. Sub-paragraph (ii) does not seem to add anything to the current legal position and, for that reason, it should be removed.

Amendments 15 to 20 are in this group. They would remove references to psychological injury from Clauses 2 and 3. That is a matter which we feel should be dealt with in the ordinary way. I beg to move.

Baroness Primarolo (Lab)

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My Lords, I rise to speak briefly to Amendment 21, which is tabled in my name. I draw attention to my interests as set out in the register.

I shall follow the theme in the point made by the noble Earl, Lord Kinnoull, with regard to physiotherapy and psychological treatments in claims under this clause. The debate at the moment is with regard to probing amendments, and I hope very much that the Minister, in his reply, will be able to give us a little more explanation on how he sees this particular section of the Bill operating.

I should also say as a caveat that, while I accept the very strong point continually made in the Chamber, and rightly so, about the creativity of some claims management companies—the ones making the telephone calls—to find ways into this area and to cause considerable difficulties, I hope that we will not lose sight of the genuine claims of individuals and the hardships they suffer when they seek to make a claim but cannot represent themselves and whose access to finance for such a claim does not exist. In our rush to deal, quite rightly, with unwanted claims, I hope that we will not undermine and damage the very valuable claims that are necessary for individuals—not just adults but children as well.

With regard to my proposed amendment, Clause 2(6) states:

“Regulations… may provide”,

that a person has taken,

“reasonable steps to mitigate the effect of … whiplash injury or minor psychological injury”.

As I have said, I want to talk about physiotherapy as well.

The reason I ask the Minister to give us more information is in the background of the very public debate about, for example, the provision of mental health services and, in particular, where such services are provided and how the claimant would get access to them and therefore have taken reasonable steps not to undermine a subsequent claim. The King’s Fund, in its analysis of NHS trusts, clearly identifies, through their financial accounts, that approximately 40% of mental health trusts have received a reduction in their funding and therefore in their services.

The type of claims made that require psychological support may involve children who, having been with their parents in a car accident, have problems with nightmares, so they need access to proper support and therapy. Such a claim may involve, and has involved, parents travelling in a car where the mother is pregnant and therefore suffers stress as well as physical injuries. Again, where is the access to psychological injury and, reasonable steps having been taken to mitigate that, given the connection between pain and one’s mental health well-being?

I am not a lawyer, and if my comments are considered ill-informed I will not be embarrassed by being corrected by the very many experienced noble and learned Lords in this Chamber. At the heart of this, and the objective that the Government seek to achieve, is how to stop those who are using the system in a way that, frankly, undermines the rights of good, honest people who are not making fraudulent claims. How to correct that system without preventing worthy, correct and needy claims is a huge challenge. At the moment, while I understand why the ABI talks in its briefing about the need for it to have flexibility to adjust and evolve as the industry does, I see nothing in the Bill that puts that same flexibility into protecting the rights of legitimate claimants in this area of physical damage.

I very much look forward to hearing what the Minister has to say on this whole area, because I fear that otherwise we may need to return to this. There is not enough protection at the moment for the individual legitimate claimant.

Lord Faulks (Con)

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The amendment tabled by the noble Lords, Lord Sharkey and Lord Marks, seems at least to question the underlying premise behind these reforms. I respectfully suggest that the Government have established the premise. The Minister set out the Government’s case, as it were, at Second Reading, and the statistics seem to lead ineluctably to the conclusion that there is widespread abuse of the whole whiplash claims system. The solution, though it is inevitably somewhat rough and ready, is that there should in effect be a reduction in what claimants might have been able to claim under the system that currently obtains, although that is in relation only to damages for pain, suffering and loss of amenity and excludes loss of earnings or any other consequential losses. It is a reduction but a fairly modest one and we are speaking of injuries at the lower end of the scale, although I do not downplay the discomfort that can follow from whiplash injuries. However, the purpose behind the reforms is surely, first, to provide certainty and, secondly, to make the awards reasonably modest so as to provide less of an incentive for those who would seek to make fraudulent claims. That, combined with the ban on medical officers, should fulfil what is, as the noble and learned Lord rightly says, essentially a policy decision.

In effect, the losers about whom we should be concerned are those genuine claimants, as opposed to the many who are not genuine, who I accept will get a lesser sum than they would otherwise have obtained. In the round, though, I suggest that this is a sensible policy decision. The House may have in mind that when these reforms were initially trailed by the then Chancellor of the Exchequer George Osborne—and it came from the Treasury rather than the Ministry of Justice—the suggestion was that there would be no damages at all for whiplash injuries. This is a modification of that change, and of course there is the right of the judges to have an uplift in circumstances that we may be exploring later. Still, I suggest that it would be a mistake to pass these matters back to the judges. The Judicial College guidelines are in fact an extrapolation from individual cases decided by judges. They then, as it were, create a form of certainty, although they are variable according to individual cases.

I think the Government have made a case. They have to grasp the nettle, and they have done so in this case.

Lord Marks of Henley-on-Thames (LD)

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My Lords, the amendments are, as has been said, in my name and that of my noble friend Lord Sharkey. I shall first add to the point made about the Delegated Powers and Regulatory Reform Committee by quoting what it said about placing the tariff in the Bill. It said that the second central question—the first being the question that I quoted earlier about what is meant by whiplash injury—is:

“By how much are awards of damages to be reduced?”

The committee said that the Government’s answer was that:

“The reduction in damages will be whatever the Lord Chancellor says it will be, in regulations to be made by him or her at some future date”.

The committee came to the conclusion, as the noble Earl pointed out, that that is an inappropriate delegation of power. I again make the point that it is appropriate for the Government to accept that recommendation. That has always been the way that that committee’s recommendations have been dealt with. Of course, amendment in the future can be made by statutory instrument.

I turn to the important point that was made in different ways by the noble and learned Lord, Lord Brown of Eaton-under-Heywood, the noble Lord, Lord Faulks, and the noble Earl, Lord Kinnoull, which is that the cost paid by society for these reforms in this particular case—that is, the reduction in damages—is a reduction in awards for genuine claimants. It is genuine claimants who are made to suffer. I cannot see the justification for that in any of the evidence that the Government have produced. We accept entirely that there is a problem with fraud. We are fully behind attempts to tackle fraud by eliminating, or at least reducing, fraudulent claims. But to remove the right to fair damages for claimants in these particular types of cases does not seem to be an appropriate response to this problem in a civilised society.

We address this central problem by saying that the Judicial College Guidelines are an appropriate way of coming to a conclusion on appropriate damages. They are a fair and workable way in which to achieve comparability. They avoid the problem that fraud may be positively encouraged by a cliff-edge system that encourages exaggeration. Damages under this proposal double if the claimant can persuade the medic who is preparing his report that an injury will have a duration of three months-plus, rather than just short of three months—doubled from £225 to £450. In that context, I make two points. The first is that it is a little odd that the response—

Lord McKenzie of Luton

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My Lords, I shall also speak to our other amendments in this group. Amendment 43 requires that regulation made by the Treasury must require the FCA, when it is the regulator, to prohibit regulated persons from providing claims management services in advising, doing or arranging any of the acts prohibited by Clause 4 as regards settlement of a claim before a medical report is available. Many have spoken on this Bill and elsewhere about the conduct of claims management companies and how fleet of foot they can be in exploiting opportunities. These activities have been constrained by recent legislation. The FCA is to become a tougher regulator, transitional arrangements have been put in place and a charge cap has been enabled. However, we use this opportunity to get a comprehensive update on where regulation is or what is yet to be put in place for CMCs.

Amendment 44 refers to cold calling. We know that cold calling is often a prelude to some scam or nefarious activity, and there has been a range of activity to restrict such operations. The Financial Guidance and Claims Bill provides for a ban on cold calling for pensions, enables the introduction of a ban on other financial products and makes provision in respect of certain CMC activity but, for the avoidance of doubt, can the Minister tell us where these things stand across the board?

In our debates on the financial guidance body, exchanges took place about no cold calling in respect of personal injury claims by virtue of the involvement of solicitors in that activity. However, it was further suggested that people were finding a way around that. This is by way of a probe. Is all cold calling in respect of personal injury claims—be it by CMCs or otherwise—now prohibited?

Amendment 44 is one of several in this group which require a review of the activities of Part 1: in particular to ensure that savings arising to insurers are passed on to consumers—motorists. We know that this is particularly difficult. The accounts and activities of general insurers can be complicated and it is very difficult to identify a fixed starting point from which to do the analysis. A whole host of questions arise about how the distribution of any savings made should accrue across the range of consumers that face insurers.

There are questions about who might be the person in a particular organisation to have to certify annually that savings have been secured. Experience shows that if you simply have a process whereby someone has to sign off for the company that savings have been passed on and the policy complied with, it could well be delegated to someone who does not necessarily know exactly what has gone on. In all the variations trying to substantiate that savings are made and that what is promised under the legislation is being delivered, we may seriously think about regulation which requires the chief executive of each of the insurers to be the person held to account for the statement about the extent to which compliance with the requirement has been made.

I may return in a moment to speak to some of the other amendments in the group, but for the time being, I beg to move.

Baroness Berridge

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I rise briefly to speak to the amendments I have in this group, which refer to a report by the FCA as well as a report being laid before Parliament.

It is important in this context to look back at Second Reading and the Government’s confession that the insurance industry had not done all it could to get on top of the issue of fraud. In some respects, on Second Reading one could have been forgiven for thinking that the problem of fraud was so great for the insurance companies that they were teetering on the brink of bankruptcy as it was such an urgent issue. Nothing could be further from the truth. A report from Direct Line Group, which is the largest insurance group that we have, shows profits for financial year 2017 of £610.9 million—a leap of 51.4% on 2016. Dividends were up 40.2%. In its interim report in 2017, one of the reasons it gave for that was fewer than expected bodily injury claims. We might argue for a long time about CRU figures, but Direct Line attributes its increase in profits to a decline in personal injury claims.

It is disappointing to those of us who are saddened and troubled by the effect on genuine claimants that there is no proper mechanism in the Bill to ensure that the £1 billion of savings from claimant payments will actually go to the motorists. The Government are saying that that is the Bill’s overall intention. In light of the scale of the fraud that the insurance industry would like us to believe, it is disappointing that it has not invested more of its resources into controlling this fraud because it is a societal issue that affects culture, as opposed to the profits that I have just outlined.

There is a particular legal problem, though, on which I hope the Minister can help us. Many insurance companies are no longer mutuals; they are listed on the stock exchange, with all its reporting requirements and requirements for directors to take into account their shareholders in the payment of dividends. How is that circle going to be squared? You have directors with an obligation to shareholders. They make cost-benefit savings, but they are under pressure either to pay down debt, as some have with some of their profits, or to pay out dividends rather than decrease the premiums they are charging to motorists.

There is a further issue with insurance companies, which is that they have enjoyed bumper savings from the implementation of the Jackson fixed-cost reductions and the LASPO changes that were introduced in April 2013. I am grateful to a fee earner from the Vale of Catmose—and to Thompsons Solicitors—who pointed out to me that insurers have saved at least £8 billion in claims costs between 2010 and 2016; the figure to date is around £11 billion. In spite of this, premiums have continued to increase relentlessly. She said the average premium has gone up from around £385 in the second quarter of 2013 to £493 in the last quarter of last year, according to the ABI’s own premium tracker—an increase of 28% since the LASPO changes.

There have been inordinate savings before that insurers have not passed on as reduced premiums. It may be as a result of being legal entities, as I have described, that they are under pressure from their shareholders to pay out bumper dividends instead of reducing premiums. There needs to be something more effective in the Bill to ensure that, after the Government introduce these changes, insurance companies will be held strictly to account and will pass on the savings they will undoubtedly make.

There is a laissez-faire attitude that, as half the market uses price-comparison websites, these savings will be passed on, but it does not always come to pass. It is ironic that, after the Second Reading of this Bill, we received the message that the Commons had passed the Domestic Gas and Electricity (Tariff Cap) Bill for meters. That clearly shows that, in some circumstances, the market does not provide the savings to consumers that we envisage. The Government need to ensure that savings are passed on and there is a strict mechanism in the Bill to that effect.

Lord Hodgson of Astley Abbotts (Con)

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My Lords, like the noble Lord, Lord McNally, perhaps I may begin at the beginning. Notwithstanding some rather disobliging remarks from the Delegated Powers and Regulatory Reform Committee referred to at some length by the noble Lords, Lord Beecham and Lord Sharkey, which no doubt we shall discuss in Committee, I welcome the Bill because it has at its heart the objective of achieving the greatest possible fairness. There will be fairness on the one hand to ensure that those who suffer life-changing injuries, often through no fault of their own, are properly compensated in so far as money can ever compensate for life-changing events of that sort. There will also be fairness to the other participants in the insured class who will inevitably have to face commensurately increased insurance costs. They are entitled to reassurance that overcompensation will not take place.

Sadly, as other noble Lords have referred to, there is a darker side to all this as part of a litigious society in the form of making claims on the basis of no or fabricated evidence. The proposals in Part 1 to bring whiplash claims under control therefore seem very worthy of support. In his opening remarks, my noble and learned friend referred to some of these fabricated cases, and perhaps I may pass on to him and to the House the following example. Last Friday, I was in the north of England to attend a board meeting of a company of which I am the chairman. I took a taxi and, as is my wont, I inquired of the temperature of the taxi driver, political and otherwise. We got on to the issue of whiplash injuries. He told me that it was prevalent in this and other towns in the north of England for young men to buy a clapped-out banger of a car or van for around £200 and engineer a crash with a taxi. I asked why they would choose a taxi. The driver said that there were two reasons. First, they know that a taxi will be well insured. If it was not, it would not be licensed by the local authority. Secondly, taxi drivers depend on the good will of the local authority for the renewal of their licences and so are less likely to put up a fight, argue the case and press for compensation. That is my contribution of anecdotal evidence gathered last week in the north of England, and it is why I think the Bill is an important first step towards reining in the compensation culture.

I say that it is a first step because there are other areas which need attention. No doubt noble Lords will have received briefings from the Association of British Travel Agents about burgeoning claims for compensation for illness occurring on holiday. Moreover, one of the most depressing aspects of the reviews I have carried out of the charity sector is the way in which individuals attending a charitable event, such as a proposal to raise funds for some much-needed community project, seem quite ruthless in bringing claims against a charity. Falling over a guy rope for a tent is a very common claim, as if tents do not have guy ropes and you have no responsibility for looking where you are walking. Charities are often run by volunteers who have only limited access to legal advice. Faced with what they consider an unreasonable claim, they can only use the small claims court for personal injury claims up to £1,000. I understand that this is to be raised to £2,000. However, the £1,000 for road traffic accidents is to be raised to £5,000. I hope that my noble and learned friend the Minister will explain at some point why we are moving from £1,000 to £2,000 and £1,000 to £5,000. That would be extremely helpful, particularly for smaller charities that have to deal with these unfortunate incidents.

Turning to Part 2 of the Bill, I have taken an interest for some time in what is familiarly called the Ogden rate, including initiating a debate on the matter last July, to which my noble and learned friend on the Front Bench replied. I support the overall shape of the proposal. I note the experienced comments of the noble and learned Lord, Lord Hope of Craighead, about risk. We may be able to have some existential discussions about the nature of this in Committee.

I want to raise two issues that I hope we can explore. First, reverting to the underlying strategic aim of achieving fairness, it seems that with long-tail insurance cases, the use of lump sum damages can result in only one near certainty: that the award will be unfair to one party or another. Surely we need to do more in such cases to make better use of periodical payment orders. One of the answers to the question raised by the noble and learned Lord, Lord Hope of Craighead, on making sure that people were fairly compensated would be to make greater use of PPOs.

I am concerned that injured parties—who may or may not be financially sophisticated—may be seduced by an apparent amazingly large lump sum against which the PPO may seem fairly modest and, in reaching that conclusion, may think that they should accept a lump sum. There is a risk that the injured party may be egged on by investment managers who see a long stream of advisory fees stretching into the future, and by insurance companies who see a chance to put a pink ribbon round the file and close the claim for ever.

My second concern is the proposal for the timing of reviews, a process that—as pointed out by the noble Lord, Lord Sharkey, in his opening remarks—needs to be designed to minimise the possibility of the system being gamed. I share the view that three years is too short a period. Indeed, any fixed-term review period is a very blunt instrument. I would argue that the trigger for a review should not be time-based but result from changes in the available rate of return on our investment. Establishing such a benchmark could be problematic, though changes in the base rate would be a pretty good indicator given that these investments will be low-risk, even under the new regime. Perhaps thought might be given to extending the duties of the expert panel proposed in the Bill to include a power for it to recommend to the Lord Chancellor that the rate ought to be reviewed. I look forward to discussing this matter and others in Committee.

Finally, there is an often expressed concern—indeed, it has been expressed this afternoon—that these proposals to control the costs of claims will result not in reduced premiums for the insured but merely in increased profits for insurance companies. Those of us who have spoken up for a fairer system expect the industry to demonstrate that savings as a result of these measures are being appropriately passed on. To be candid, it will not be good enough for the industry to say something along the lines of, “It’s a very competitive industry so savings are bound to be passed on”. The public are in a cynical mood, as reflected in an article in last Saturday’s Times entitled “Insurers fail to drive down premiums”. The article quotes Mr Matt Oliver from GoCompare as saying:

“Where insurance is concerned, loyalty doesn’t pay. Companies typically use their best deals to attract new customers, so often the only option for existing customers is to go elsewhere”.

If that situation persists, it would be a sad outcome to the Bill, the purpose of which I strongly support.

Lord Mackay of Clashfern (Con)

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My Lords, this is an extremely interesting Bill for me, for reasons that I will explain in a moment.

I will not say much about the first part of the Bill and the types of injury it deals with. That is because long ago, when I was in practice in Scotland, the system was still that juries awarded damages in personal injuries cases. I acted for the defendant in a case of whiplash injury. The lady came to the jury to explain how bad her injuries were. We had put in an advance offer—as was usual—for what we understood, from the medical evidence, was a reasonable estimate of the worth of the injuries. At the jury trial the lady was very good at explaining how bad the whole thing was, and she got an award considerably above our offer. My reputation as an estimator was, therefore, adversely affected by that experience.

I had the great advantage, however, that the late Lord Fraser of Tullybelton—as he became—was the presiding judge. In those days the judge was not supposed to give much indication: it was a matter for the jury and he was not supposed to intervene to say it should be this or that. Lord Fraser—as those who knew him will remember—was an excellent judge who observed that requirement meticulously. He came to me afterwards and said that he thought I had been very badly treated by the jury, which shows how difficult it is to estimate genuinely on this type of injury. I have no doubt that there may be some question about precisely what the rate should be when the whole thing is lumped together as if it were a reasonably common experience, with reasonably common results.

However, I want to speak primarily about Part 2 of the Bill, because I am in the remarkable position of seeing that this part would amend a Bill that I introduced, and which became an Act, in 1996. My recollection of that—it is over 20 years ago, as your Lordships will quickly be able to observe—was that the judges were having a lot of difficulty in assessing damages, particularly for the whole of life, as some cases required. They were of course experiencing the benefit of actuaries and other people who ran investments, and so on. This involved a very large amount of work in the individual cases and the judiciary were anxious—I am subject to correction by members of the judiciary who may remember this situation—to avoid the necessity for this repeated excursion into financial administration. The other thing is that at that time, in 1996, the markets were probably a bit less volatile than they are now.

Eventually we passed that Bill, which required the Lord Chancellor to fix the discount rate. Fortunately, I had managed to retire before I had to do it so it fell to the noble and learned Lord, Lord Irvine of Lairg, to fix it, which I am sure he did to the best of his ability. He had to take the advice of the Government Actuary but he was not confined to that. He fixed the rate and that rate has lasted until 2017. The great thing about that matter is that if it changes after such a lapse of time, it is going to be quite a change and the effect on the estimates within various bodies, particularly public bodies such as the National Health Service, is terrific. I entirely agree that something more regular is required and that it is a difficult task, because the effects of the kind of injuries that may come before the court can vary tremendously, from those which will last for a lifetime to those which are much shorter.

I want to look at the assumptions that the Lord Chancellor is required to make under the Bill and I venture to suggest that they form a bit of a challenge. The Bill says in Part 2:

“The Lord Chancellor must make the rate determination on the basis that the rate of return should be the rate that, in the opinion of the Lord Chancellor, a recipient of relevant damages could reasonably be expected to achieve if the recipient invested the relevant damages for the purpose of securing that—

(a) the relevant damages would meet the losses and costs for which they are awarded”.

That is fairly easy to say on a day-to-day basis. But Part 2 then says that,

“the relevant damages would meet those losses and costs at the time or times when they fall to be met by the relevant damages”.

These will be years ahead in some cases, so it is quite an assumption that the Lord Chancellor has to make. The last provision is really crucial. It says that,

“the relevant damages would be exhausted at the end of the period for which they are awarded”.

When I chaired the Select Committee that looked into the Assisted Dying Bill, one thing we learned was that doctors had great difficulty in assessing the length of life. One of the great difficulties is to assess when the damages should be finished, because in the life cases, which are now a very substantial part of the damages that have to be paid by the National Health Service, life expectancy is very difficult to estimate. Even as you get near the end of life, life expectancy seems to be very difficult to estimate. When a baby is born and the results affect that baby for the rest of its life, you can imagine the difficulty of trying to determine that.

The Lord Chancellor has to go on, having made these assumptions, to assume,

“that the relevant damages are payable in a lump sum”.

He is not allowed to take account of the fact that you can now pay in instalments. The second assumption is,

“that the recipient of the relevant damages is properly advised on the investment of the relevant damages”.

That seems a fairly easy assumption to make. It is not so easy to know what the right advice would be. The third assumption is,

“that the recipient of the relevant damages invests the relevant damages in a diversified portfolio of investments”.

You would think that might be covered in proposed new subsection 3(b), but for clarity it has been separated out. Proposed new subsection 3(d) is the one I want particularly to draw attention to because we may want to look at it in some detail in Committee. It says:

“The assumption that the relevant damages are invested using an approach that involves … more risk than a very low level of risk, but … less risk than would ordinarily be accepted by a prudent and properly advised individual investor who has different financial aims”.

I assume these are different aims from the people who are investing the damages award for the injured party.

The assumptions that have to be made by the Lord Chancellor on this basis all seem very reasonable, but I think it would require the Lord Chancellor to have a certain element of the prophet about him or her to enable these assumptions to be taken with any degree of accuracy—we really need to look at this. I imagine that the promoters of this Bill have looked at this very carefully and if it is going to be accurate from the point of view of awarding damages, these conditions have to be fulfilled. The difficulty about it is how you satisfy yourself that that will be true. That is what I would like to hear a little about.

The expert panel included an actuary, but my understanding of actuarial science—it is a limited understanding—is that it is very much based on the statistical evidence on length of life. The trouble is that each case is separate; it is not the average, it is an individual case. How do actuaries go about doing this? I am interested to know. The Government Actuary has to do all that kind of thing and does it extremely well, but it is not by any means easy. Getting an expert panel to agree—it includes an actuary and investment people—will be very difficult.

The Bill deals with making fair the system of awards in civil liability. Two distinct aspects are covered in the Bill—the particular kind of injuries are dealt with in the first part and the discount rate in the second part, but the system is bigger than that. One of the important elements in the present system is an Act of 1948 in which Section 4(2)—I am sorry, Section 2(4); I had better get them in the right order—indicates that the damages are to be calculated on the basis that the medical attention is given on a private basis. I can see that in 1948, when the health service was very young, that might be appropriate, but I think modern times have crept up on that and it is rather doubtful whether that is a good basis.

There is another point in relation to that. One of the biggest areas of claim for the National Health Service is in obstetrics. The trouble with an obstetric injury is that it is likely to have effect for the rest of the person’s life and, as I say, you have to forecast what that is. My understanding is that the amount of private practice in obstetrics has almost disappeared for the reason that the premium for an operator in obstetrics is so large as not to be worth while; he is better to be in the National Health Service. I am not sure about that but it is what I understand to be the case. If so, it strengthens very much the need for a revision of a rule that requires you to assume what is not there as a basis for damages. Assessing damages is difficult enough without trying to assume what now is no longer practised.

Lord Purvis of Tweed (LD)

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My Lords, I know the Committee wants to move on but I will make just a couple of brief points—in support of the Government moving on this issue; on the contributions made by the noble and learned Lord, Lord Mackay of Clashfern, and my noble and learned friend Lord Wallace of Tankerness; and on the anxiety that perhaps yet again we will be making constitutional measures on a temporary basis late in the day as a result of decisions by two Executives. While we have to take the Government at their word that these will be temporary measures, many procedures in this House and many elements of our constitution started off as temporary measures but have become almost permanent features of our constitution. In the absence of some changes which will provide a sunset element, we may well be in a similar situation.

Two years ago I brought a Bill to this House for a British constitutional convention, as a result of the Scottish referendum, to try to proactively discuss some of these issues. But, as the noble Lord, Lord Lang of Monkton, said, we are where we are now with this Bill so we have to address what may be constructive ways forward. I think the contributions made so far are good suggestions for what is a very complex situation because we are extracting ourselves from a single market at the same time as seeking to create one with the powers that will be coming back from the European Union. By definition, many of those powers are designed to be cross-border.

Many elements of European legislation are as a result of international agreements that the EU itself has made to implement global agreements, such as on climate change or safety in aviation. These are complex. Interestingly, as the Government’s own framework paper shows, most of that legislation has come into place since devolution. The evolution of the markets within the European Union does not entirely predate 1999. Whether on animal welfare, safety or aviation, many have developed not only since we established devolution in the UK but since the single market has developed. These are going to be very important for our future trading relationships, not only between us and the EU but in our arrangements with third countries.

Most of those areas concern non-tariff barriers, regulations and legislation in domestic law. These are going to be relevant for every single trade agreement that the UK will negotiate and will be at the heart of our relationship with the European Union. Although I have a degree of sympathy with the Government on a temporary basis, we will have to come back not only to the legislation for the implementation period but to that for the new relationship with the European Union. That adds even more weight to the fact that the discussions taking place now will have to be time-limited.

We are also discussing blind how we would expect a framework or a common market to operate within the UK. In many respects, you would argue that we do not have that at the moment. If you drive from where I live in the Borders to London and if you are selling cigarettes or bringing animals, you will be operating under three different road traffic systems. If it was cigarettes, you might have a different packaging system in Scotland. Certainly in Scotland, not only the language of road signs but road traffic speeds are legislated for differently. We operate within many barriers. The question is how damaging those barriers would be to the functioning of the United Kingdom.

That leads on to my second point. This is not simply going to be a relationship based in law; it is also about how the different component parts of the United Kingdom will operate. Since 1999, as noble Lords have said, there have been major changes to that legislation—changes that previous UK Governments said should not be made because they would be counter to the effective operation of the United Kingdom—and Governments have changed their position, usually as a result of consensus and cross-party negotiations.

Where I did slightly disagree with the comments of the noble Lord, Lord Lang, is that there have been now more than 150 LCMs in the Scottish context, and in many respects devolution has been working extremely well when you take away the rhetoric of the wider nationalistic argument. But it does show that there needs to be a degree of flexibility within this set of arrangements. That flexibility will have to come not just with a government-to-government relationship but also with the other elements that are necessary to determine how effectively a common market operates. Who provides the statistics? What is the dispute resolution mechanism? Who provides the data? We saw this in all the discussions that the noble Lord, Lord Dunlop, had during negotiations on the fiscal framework between the UK Government and the Scottish Government. In the end, many of the discussions were not about the legislative element but about the non-legislative element, such as who provided the information, whether there was an independent source of data on fiscal revenue and who did the forecasting going into the future. These are all going to be very important.

Noble Lords perhaps thought I was making a glib comment in the previous discussion when I intervened on the Minister and spoke about managed divergence, but that is part of the parlance in our discussions with the European Union. We have that within the UK, and the question is how divergent we can be in the UK for that common market to operate effectively. Part of this discussion will have to be about the existing offices that consider the markets within the UK—our office for energy, our office for communications, the Competition and Markets Authority—which are now going to have to be covered.

That leads me to my final point, which in a way is to address the point made by the noble Lord, Lord Forsyth. The choices that we have made about our relationships within the UK—whether nations were consulted and whether or not consent was provided—have been addressed by our European colleagues in different ways. The noble Lord referred to consent in the German federal structure, under which the Bundesrat provides, under the constitution, a decisive opinion when the federal Government bring forward measures that would impact the interests of the Land parliaments. This House is not a federal House; the House of Commons is not a federal Chamber. We will have to have some forms of institutions which bring this together.

In the first instance, however, I strongly support this legislation and the temporary measures being time limited. We will need a schedule of the specific areas which are, in effect, reservations, because we will have to make sure that those areas are resolved before we go over to the next stage. We will be in a kingdom of divergence and will need new institutions. It is not just about frameworks, but a new relationship across them. As many noble Lords have said, including the noble and learned Lord, Lord Hope, in his Second Reading speech, all of this will have to be underpinned by trust. It is the non-legislative relationships which in many respects will be more important than the legislative relationships in this Bill, in the next Bill, in the final agreement Bill and in all the different measures that come subsequent to it.

Lord Foulkes of Cumnock

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The noble Earl may know that the Scottish Parliament rejected my suggestion that it should have a house of lairds.

Lord Campbell of Pittenweem

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Before the noble Earl sits down, I would like to pick up the point that was made to him at lunch. He will be aware that when the Scottish Parliament was established, a great deal of store was set by the form of the committee system, which it was hoped would be independent and would provide the kind of scrutiny that a second Chamber would afford. I do not think it is challengeable that the committee system has unfortunately become very political, to the extent that it is very difficult for Members on the committee to strike the kind of independence that we sometimes see in Select Committees in the other place and here. A consequence is that an effort to introduce a principle of “holding to account” has not been maintained in the way that it was in the beginning. If that continues, it makes the case for a second revising opportunity—I do not describe it as a Chamber—overwhelming.

Lord Stevenson of Balmacara

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I join many noble Lords in congratulating the Government on the way they have handled this issue and reinforce what was said by the noble Lord, Lord Forsyth: I have not seen any such movement from any Government in my time here in terms of trying to reach out to the points being made and accommodate them. That is terrific; long may it last. The test will be whether the noble and learned Lord in fact withdraws his amendment before the end of tonight—but I trust him in this case.

I also think that the idea of a probing government amendment is pretty good. It is nice to know that there is an open mind on the other side, and no better way of showing it than saying: “We haven’t got the faintest idea here, but here’s something you might want to consider and discuss and we will listen hard and take away the best bits”. It is good in the sense that it builds trust and engages debate. We have had a terrific debate—possibly a little overlong, but it has been very interesting—and I am sure that many points will take us forward. I recognise that the idea of probing your own ideas may not work unless we can actually come up with some ideas, so it behoves us all to think very hard about the advice that we want to give to the noble and learned Lord and his colleagues.

What do we want? There are five things that I would like to see in revised amendments. We should be looking for an agreed amendment among the various interests around the House as much as possible. There has been enough evidence about where the central points are—we may differ on the nuances, but there is enough there. It would be really good if we could have some informal discussions and meetings before Report—and Third Reading, if it goes that far. By that stage, I hope that we will have a firmer view of what we are going to do in Northern Ireland. I agree that the situation is beyond the power of this House to do anything about, but it is a real gap when we are trying to address our longer-term constitutional position. If we have nothing to say, that says more about us than about the situation in Northern Ireland. I hope that that will be taken into account.

My first point is a negative. The Bill has raised debates, ideas and thoughts that are really important, but they are far too time-rich and need more discussion before they go into the Bill. The Bill is at heart limited to ensuring that we have a legal framework if and when we leave the EU—as the noble and learned Lord said, a fully functioning statute book. We are wrong to try to overload it with too much. I hope that, in offering our advice either privately or in meetings, we will focus on the minimum necessary to get the Bill on the statute book in a way that will be effective and efficient, and will achieve what we are trying to do.

On the other hand, the debate should not be curtailed by the question of what is and what is not in the Bill. We must accept—some noble Lords were ahead of me on this point—that transfers of this amount of responsibility to admittedly mature Parliaments and Assemblies will start a new chapter in the devolution story, and it would be remiss of this House if we did not think through some of the implications of that.

I have no particular remedies here, but it is inconceivable that the current arrangements, under which we determine through a Board of Trade how we conduct trade policy, can accommodate the new arrangements. They will have to be expanded and thought through again. We will have to think about how we deal with treaties and how our ongoing relationship with the EU and its regulatory and other official operations will continue in a devolved situation where trade responsibility and policy is at a level other than national. There may well be a set of rules that will accommodate that. They will not fit into this Bill, but they need to be considered as we go forward.

We have to think also much wider—certainly much wider than this idea that somehow this paves the way to independence for any or all of the parts of the United Kingdom. We have to think about the opportunities that will exist as these things are devolved in terms of such matters as what happens to state aid rules when they are changed. This will raise a lot of concern and interest much more widely than in this House. We will do ourselves a disservice if we do not take that into account as we think this through. For the moment, though, let us think very narrowly about this Bill.

At the heart of it, we want an agreement that, on the face of the Bill, the underlying principle in play is that everything is devolved unless it is reserved. We also want a clear understanding of why certain things are reserved. The noble and learned Lord, Lord Mackay of Clashfern, gave a very good example of one way into this argument by saying that it was a question of when powers were in consideration which applied in more than one geographical area; however, I put it to him and to the Ministers who are working on this that this is not quite the full story. If you look at the note on the common frameworks that accompanied the full list of them, it goes much deeper than that. These are principles, as I understand it and as I think the noble and learned Lord confirmed, that were agreed by the UK, Scottish and Welsh Governments at a meeting of the Joint Ministerial Committee in October 2017, so they are not in dispute. The principles make clear that,

“common frameworks will be established where they are necessary in order to: … enable the functioning of the UK internal market, while acknowledging policy divergence;”

—the coda about “acknowledging policy divergence” is really important, and we need to know more about that—

“ensure compliance with international obligations;”

—I think that is fairly clear—

“ensure the UK can negotiate, enter into and implement new trade agreements and international treaties;”

—I have already said I do not know whether that will necessarily be the only way into that debate—

“enable the management of common resources;”

and then two rather important issues that we have not touched on but that surely have to lie at the heart of this:

“administer and provide access to justice in cases with a cross-border element;”

and,

“safeguard the security of the UK”.

It has always been the case that national security is the primary concern of all governments, but surely that plus the geographical “bite”, as indicated by the noble and learned Lord, give us—together with the other points I have raised—a much richer context within which the decision to reserve an item can be placed. It is important that this is on the face of the Bill. That is the key issue. There must not be a sense that something has been hidden or held back. We have to be open and trust those who are concerned about this that this will be the way forward. I hope that when the Minister comes to respond, he will be able to confirm that this is an issue that he might look at with some sympathy, because I think it will be the key to it.

I also think, as suggested by the noble and learned Lord, Lord Wallace of Tankerness, and others, that we should see the 24 policy areas included as a Schedule to the Bill. The point made by my noble friend Lord McConnell of Glenscorrodale is very important: we are talking about those things that will have to be reserved for a reason. We should list them, and we should also understand the reasons why they are reserved.

There are two smaller points—in the sense that they are less full of implications; they are still very important—that I will tag on to the end of this. The noble and learned Lord, Lord Hope, raised a number of points that will need to be picked up and that we must not forget, because the change to the existing Clause 11 will affect other aspects of the area. He made that point well. There have also been calls from all around the House for a sunset clause, which I absolutely support. That is the right thing to do. If that all comes together, however—and I think we are confident that it is possible—what we are signing up to is an agreement to agree on process, but that agreement will be able to get the consent of the devolved Administrations. That combination is vital to the way forward, and I recommend it very strongly to the Ministers.

Finally, if we are going to avoid the veto problem, which I think is a real issue that we have not really bottomed out, we are going to need a dispute resolution mechanism. There is no doubt about that. You cannot just go into this hoping that it will somehow be all right on the night. We need to know what happens when one area, for whatever reason—whether it is a political reason or truly an issue of conscience—wants to put down a veto and hold out. I do not think there has been any dispute, but we have not said it enough: at the end of the day the UK Parliament has to have a backstop power to legislate in cases that meet the criteria for why things are reserved. I think we should keep saying that until it has become part of the fabric of our lives. It is not said enough, as the noble Lord, Lord Lang of Monkton, mentioned.

But we also need to achieve the consent that is necessary to establish the agreements that will underpin trust and support for this in the long run. I absolutely think that the amendment proposed by the noble and learned Lord, Lord Mackay, has something in that regard. I am grateful that the Minister has said that he will take this away; we need to workshop it—what we should have is a hackathon—in order to work out together where we might go with it.

Lord Judd (Lab)

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My Lords, it is a great pleasure to follow the noble Lord, Lord Cromwell. I found myself in agreement with much of what he said, particularly the emphasis at the end of his speech upon the absence of any firm indication whatever about mechanisms—the working arrangements that will ensure the right outcome. This is becoming deeply disturbing because there are countless thousands of people out there who are uncertain and worried stiff, not only on this count but about so many aspects of Brexit and what is going to happen. Effective reassurance on this is terribly important.

It is significant that the report has had the endorsement of the noble and learned Lord, Lord Hope, and what he said was important. He emphasised the importance not only of reciprocity but of certainty, and he is absolutely right. For him to bring all his legal experience to bear in emphasising those points is indeed significant.

Other noble Lords have spoken about the need for clarity, relating again to the point made by the noble Lord, Lord Cromwell, that we need to be clear about the structures and arrangements for enforcement. Clarity cannot be overemphasised.

It has been a great joy to serve on the committee, not least because of the very special nature of our chair. She is one of the most effective chairs I have ever served under. She brings a firmness which we all recognise, together with her, if I may use these words, kindly and in the best sense wicked, devastating charm—look out when it is in operation; she is ruthless at times—and her incisiveness. We had a very good indication of that in the way that she introduced the debate.

It has also been a joy to serve on the committee because of the commitment, seriousness and quality of fellow members of the committee. I have never gone away from a committee meeting without feeling challenged and impressed by what is gathered around that table. The House would do well to take its findings seriously.

Sometimes, we fail to thank our witnesses. We owe them a great deal for the candour with which they spoke. I am one of those who learns from personal experiences; I learn from them all the time. I therefore always take away from something in which I am really involved anecdotes which help to inform my attitudes to life. I shall never forget the occasion on which two very distinguished and highly qualified lawyers were giving evidence to the committee, but broke off to say—I am not quoting them literally, I am reporting what I heard—“We are lawyers. What we want to say now is not necessarily professionally in our personal interest, nor in our interest at all, because if things do not work out satisfactorily, there will be lots of work for lawyers in times ahead. But we are dealing with family matters. Surely everyone around this table cares about children. What is so awful in the handling of family matters in the legal system is how children can so easily be trampled on. We want outcomes that are in the best interest of children. What is significant is that it is beginning to work”.

I was taken to task by our chair the other day in a private conversation to say that they did not say “it is beginning”, they said that it is so effectively working on a cross-border basis. Of course, that is related to the role of the European court, enforceability and the system by which every member country is in the end legally accountable to one authority. We must have something very good indeed if it is to replace what the European court has brought.

The other thing that has come across to me in the work of this committee, which has come across day after day—and it has come across to me in other committees in which I have served—is the gap in which we are operating between reality and myth. I cannot find, in all the experience that I have been through on European matters, anything to substantiate the myth about the wicked nature of the European Court and the reasons why we have to extricate ourselves from its operation. Of course, there was a building and learning experience—but those who work in the system find it so effective and important. On the whole European issue, I hope that in this House, if nowhere else, we will want to feel that we have made a contribution not just to the well-being of British people but to the evolution of law within the European Union in the interests of people throughout the European Union. We do not hear enough about that argument. What is going to happen to that? Our lawyers and legal profession has played a key part in the evolution of European law, which is just not recognised or understood by the British people.

The myth has reigned too long. We must have reality—and that reality rests on making sure that, whatever happens, we have something that is as good as the European court.

Baroness Ludford (LD)

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My Lords, it is a pleasure to take part in this very important debate. I too pay tribute to the vigorous chairmanship of the noble Baroness, Lady Kennedy of The Shaws. Indeed, it is a pleasure to serve on the committee; we are a happy band. Unfortunately, I could not attend yesterday’s session and believe that I missed some seasonal goodies. That was very unfortunate.

The current regime of mutual recognition and enforcement of judicial decisions and judgments provides simpler, less expensive and speedier justice. It is for those reasons that it is valued by the Government. In their August future partnership paper on civil judicial co-operation, the Government said that the EU system,

“plays an important role in enabling businesses to trade with confidence across borders, providing legal certainty in cross-border transactions and avoiding delays and excessive costs where individual and family rights need to be protected in cross-border situations”.

The benefits of predictability and certainty have been highlighted by the noble Lord, Lord Cashman, and the noble and learned Lord, Lord Hope. That explains why successive UK Governments have chosen to take part in a whole series of civil law EU measures—to opt in, in the jargon. One can weigh the importance of those opt-in decisions compared with, for instance, criminal procedure law, where the UK has declined to opt into most of the instruments. The same applies in the area of international migration, where the UK has stayed apart.

The UK influence in the EU civil justice regime is considerable. Our lawyers, judges and legal system make a very strong contribution to it. The idea that it is alien to our legal traditions is very wide of the mark. I wish that the British Government had been more proactive, in line with our legal strengths, in improving the rule of law across the EU. Today, the European Commission has taken the decision to trigger Article 7 of the treaty, saying that Poland risks causing a serious breach of EU rules and values by politicising the judiciary. Frans Timmermans, the Vice-President of the Commission, rightly said that the erosion of the rule of law in one member state is a problem not just for that member state but threatens a breakdown of the,

“functioning of the Union as a whole”.

I saw it reported in the press that the UK Government did not approve of this move by the Commission, and I think that is a mistake.

I also happen to have a positive view of the EU scoreboard, which, unfortunately, is not comprehensively shared across the committee. That scoreboard is a comparative overview of the efficiency, quality and independence of justice systems in member states. The point of that exercise, which may well be imperfect, is to help build the trust essential to the operation of mutual recognition, which underpins the single market and legal enforcement.

Our report said that uncertainty about the future is,

“having an impact on the UK’s market for legal services and commercial litigation, and on the choices businesses are making as to whether … to select English contract law”,

to govern their commercial relationships. This is borne out in a remark by the Bar Council’s Brexit working group, to which the noble Earl, Lord Kinnoull, referred. It said:

“It is likely that, if parties consider that the answer to the questions of ‘Will my jurisdiction clause be respected?’ and ‘Will my judgment be enforced?’ will involve adding time and expense as well as uncertainty to any transaction, then this may encourage them to amend their contractual clause in favour of resolving disputes before other Member State courts”,

so taking business away from London and other legal centres. We know that courts working in English are being set up in other member states, notably the Netherlands. Even more importantly, there will be an adverse consequence for companies, especially small and medium-sized ones, from losing the EU regime.

But the harm to those who rely on the EU regime in regard to divorce, child custody and maintenance goes far beyond inconvenience and could amount to serious distress. Some witnesses suggested that a complicated combination of the Lugano and Hague conventions, and retention of the Rome I and II regulations through the withdrawal Bill could offer some kind of workable alternative solution. However, it was not clear to the committee how we would accede to the Lugano convention, which is between the EU and three EFTA countries. Perhaps the Minister can enlighten us on that.

Our conclusion in any case was that this approach will come at a cost and would anyway apply only to civil and commercial proceedings, since, as our report said,

“there is no satisfactory fall-back position in respect of family law”,

and a return to common law rules would be detrimental to litigation in family law. Apart from the increased burden on domestic family courts—extra pressure our evidence suggested they cannot take—there would be that distress for families; hence the need to maintain the EU framework is acute in this field.

However, not only can we not do this unilaterally, but we keep coming up against the Government’s dogmatic red line on the Court of Justice of the European Union. Our conclusion, in paragraph 29, was:

“We remain concerned … that if the Government adheres rigidly to this policy it will severely constrain its choice of adequate alternative arrangements”.

We would be giving up the utility of the regime we have now because of an ideological obsession with the Luxembourg court.

The Government’s partnership paper we found devoid of detail and consisting of aspirations and platitudes. The paper said that,

“it is vital … that there are coherent common rules to govern interactions between legal systems”,

and the Government claimed in their response to us that this paper sets out a “clear position”. We did not find such clarity. To continually repeat the mantra of “deep and special” does not magically solve all the problems. The Government’s lack of a real plan is inadequate and disappointing. Perhaps the Minister can provide such a plan this afternoon.

As the noble Baroness, Lady Kennedy, remarked, the Government seem to be preparing for failure and disengagement as regards,

“how ongoing cooperation in this area could be wound down”.

That was a dismaying apparent admission of failure before we have even started. I hope that the Minister will be able to give us more encouragement in his response.