Civil Liability Bill [HL]

Lord Cromwell Excerpts

3rd reading (Hansard): House of Lords
Wednesday 27th June 2018 Lords Chamber

[Lord Cromwell (CB)]

My Lords, I invite the Minister to join me in wishing the noble and learned Lord, Lord Hope of Craighead, a very happy birthday today. That pleasurable duty discharged, I have to say that I disagree with his amendment. I found very helpful his explanation of the constraints that surround it; none the less, the purpose of the clause, as the noble and learned Lord, Lord Mackay, alluded to, is surely as a safety valve for unforeseen circumstances. I accept, and said in an earlier debate, that courts have seldom, if ever, been able to exercise such a power, but we would be well advised at least to keep that option available, should any court be brave enough to do so at some point. For that reason, I feel that we should not support this amendment.

[Lord Faulks (Con)]

My Lords, either there is a realistic power to vary the rate—I can see that there are some arguments in favour of that, which found favour with Mr Sumption, as he then was, when sitting in Guernsey—or it does not have any real meaning, as is the case following the decisions of the Court of Appeal. Although flexibility is desirable, if it is meaningless and if we as a legislative body decide that we are not going to overrule any decisions of the Court of Appeal, the noble and learned Lord, Lord Hope, is absolutely right about being accurate in the way that we legislate.

Civil Liability Bill [HL]

Lord Cromwell Excerpts

Committee: 2nd sitting (Hansard): House of Lords
Tuesday 15th May 2018 Lords Chamber

[Lord Cromwell (CB)]

Was the noble Lord speaking to Amendment 77 or to Amendment 74?

[Lord Beecham]

I was speaking to Amendments 74, 77 and 84.

[Lord Cromwell]

In that case, I shall speak in support of Amendment 77 and cover Amendments 82A, 85A and 90A, which are tabled in my name as probing amendments.

I do not want to make a Second Reading speech, but will open with three points. The first is on the context of the amendments in my name, which is that we are talking about a one-off payment. It has to last the recipient the rest of their days, which is a pretty daunting prospect. Will it keep pace with inflation? Will the recipient die before or after the money runs out? Will the UK and global economies do any good in the next 10, 20 or more years? What returns will be achieved each year from now until the recipient’s death? No matter how clever the Lord Chancellor or expert the panel, these will remain unknowns or, at best, haphazard guesses.

The one thing we do know is that if the discount rates rise, which this Bill is intended to achieve, returns to recipients will fall. By raising the discount rate, we are saying that the investor must—they have no choice—take on more risk. We oblige them to do so. This calls into question the underlying principle of achieving 100% compensation.

Let us not take false comfort from the idea of an expert panel. This is a group of five people who will have to come up with a series of “best guesses” and then seek to arrive at a “best guess of those guesses” to suggest to the Lord Chancellor. The Lord Chancellor remains free to override them.

My concern is that, in its enthusiasm for reducing costs to the NHS and others, the panel will be encouraged in various ways to impose risk on recipients which they are not equipped to gamble with. If the panel does not do so, the Lord Chancellor may. I expressed my concerns about the make-up of the panel at Second Reading, so I will spare your Lordships a repeat of that. We should not forget that the Chancellor is acting for the Government in many of the highest-value cases. That seems a conflict of interest.

What should we do? If the panel is trying to determine a rate on which so much life-altering importance hangs and if we are allowing the Lord Chancellor potentially to vary that rate, we need to be assured that, as far as possible, the rate arrived at is the result of a transparent process and not some magic number produced from a black box and then applied.

My amendments seek to achieve three things: to oblige the Lord Chancellor to a greater extent than the Bill suggests to take account of the panel’s deliberations; to make the panel more transparent in its deliberations and conclusions; and to enable the panel to take into account the realities that the recipient will face in the real world—taxation, inflation and management charges. In the Bill, it is the Lord Chancellor who may take these things into account.

Anyone who has worked in investments knows that such costs are a key determinant of actual returns. With RDR and MiFID II, such charges—for example, management charges—are becoming far less opaque than they used to be. Surely the panel should present the Lord Chancellor with a fully baked rate, not a half-cooked one that has significant ingredients missing.

Turning to the specific amendments, Amendment 77, to which my name was added, obliges the Lord Chancellor to take proper account of the panel. It relates to Amendment 78 in a later group, but that requires matters not to be left simply to the Lord Chancellor’s opinion. I anticipate others speaking to Amendment 77, so I shall leave it there and speak to Amendments 82A, 85A and 90A which are in my name. On Amendments 82A and 90A, the expert panel are supposed to be the experts but they are denied the opportunity to consider the rate in the round, rather than give the Lord Chancellor the half-baked suggestion I referred to a moment ago. The Bill as drafted just provides the Lord Chancellor with opportunities to select his or her own rate. Amendments 82, 82A and 90A place the making of key assumptions where they belong: with the expert panel. Amendment 90A also requires a reasoned explanation by the panel of its decision. This is vital for transparency and understanding. It is also the basis, one hopes, for its voting and for discussion with the Lord Chancellor, including any override that he or she may choose to impose.

Finally, Amendment 85A in my name is again about transparency. Under the Bill as drafted, the Chancellor must give reasons for and publish,

“such information about the response of the expert panel … as the Lord Chancellor thinks appropriate”.

No, my Lords: the Lord Chancellor should publish what the expert panel advises and give a reasoned explanation if he or she departs from its advice. Echoing the point made by the noble Lord, Lord Sharkey, a few moments ago, just as the Bank of England publishes the voting pattern, so the voting pattern cast by this panel should be published. Only then will we have a clear basis for understanding how the rate has been suggested, whether the Lord Chancellor has altered it and, if so, why. The setting of the rate, we should remember, will have fundamental effects on the lives of people in very distressing circumstances. Surely, they and we have the right to an understanding of what has gone on. My amendment builds on what is already proposed in the Bill but will, I suggest, lead to clearer and more transparent outcomes that are therefore more meaningful, more useful and less open to the temptations of distortion.

[Lord Mackay of Clashfern]

My Lords, I want to say just one thing about the nature of the Lord Chancellor’s judgment in this case. The noble Lord, Lord Cromwell, said that the Lord Chancellor is acting on behalf of the Government, but that is not the nature of the decision: it is the Lord Chancellor’s decision as representing the Lord Chancellor himself. He has the responsibility of a personal decision in this matter, in the way this Bill is drafted. Certainly, when I had responsibility for these matters, it never occurred to me that I should consult the Cabinet about it.

Civil Liability Bill [HL]

Lord Cromwell Excerpts

2nd reading (Hansard): House of Lords
Tuesday 24th April 2018 Lords Chamber

[Lord Cromwell (CB)]

My Lords, it is a tradition in this House to say what a privilege it is to follow the previous speaker. As the 15th speaker in this debate, I have to say that I have enjoyed and learned from all 14 speeches so far. It has been a real privilege to listen to this debate because it reflects the House of Lords at its best: terrifyingly well qualified; taking a roughly hewn Bill and making it even better, and I am sure that the Minister is extremely grateful for all the questions and advice that he is receiving. Well, all good things must come to an end.

I intend to speak on the personal injury discount rate, and in particular the panel that is being established to advise on it, about which I have some questions for the Minister. I wish first to make a general point. It is essential that in a Bill that combines whiplash claims, an area that is infamous for mischief, and the discount rate for personal injuries as a whole, we are not tempted into viewing all claims, or even most claims, as excessive or fraudulent, a point made powerfully by the noble Baroness, Lady Berridge. There are, of course, opportunistic claims and, in some cases, a collusive sub-industry seeks to profit from them, but there are also many injury claims that reflect tragic and agonising circumstances for individuals and their families. It may be that it is too easy for false claims to be effective, but that is wholly separate from determining the value of compensation claims that are found to be genuine and on which the discount rate has a profound effect.

In swinging the pendulum away from apparently excessive claims, we must not allow it to travel so far that it treats genuine claims unfairly or distorts their real value. As the Justice Select Committee reported,

“it may be simply increasing levels of under-compensation for claimants who were already under-compensated”.

The noble and learned Lord, Lord Hope, also touched on the difficulty for a claimant who, in a depressed market, has to eat into capital and is thereby unable to recover their position later. We need to be mindful of such unintended consequences. As the Minister reminded us, there is a person behind every claim.

Turning to more specific matters in the Bill, relating to the changed approach to the discount, who are the winners and losers? The winners are those who save substantial sums through reduced payouts: the Government, the NHS and insurers. Some might say that this not a bad thing, particularly if the results in reduced premia are passed on—something that a number of speakers have touched on and expressed a certain amount of cynicism about. However, the losers are people whose lives may have been damaged or curtailed, who may be in lifelong pain and who have to make the payout last them to the end of their days. The winners win at the exact expense of the losers.

I invite the House to consider the question of the inequality of arms between the winners and the losers. The winners are large, well-organised, well-connected and articulate bodies with financial interests in the outcome; they are able to draw on a depth of expertise in the rather arcane world of predicting investment returns far into the future. Contrast that with the losers of the new arrangement. These are typically individuals who have suffered an injury. We cannot assume that they are well resourced, that they are acting collectively, that they are familiar with theories on investment returns or that they are erudite in subjects such as yield curves or risk profiles. I note that the Justice Select Committee report contained these words:

“We advise caution in considering evidence of claimants’ investment behaviour to set the discount rate. Investment by claimants in higher risk portfolios could indicate they are under-compensated and forced into higher-risk investments to generate sufficient return for their future living expenses”.


In the same report, the committee highlighted the inadequate evidence of real behaviour of people seeking to invest safely for their future—a future of uncertain duration, as pointed out by the noble and learned Lord, Lord Mackay of Clashfern, uncertain health and uncertain investment returns. The government response to that report accepted that the evidence is indeed limited.

In short, these people need protecting. I do not think that there is any disagreement about that. They are wholly dependent on the Lord Chancellor and the panel set up to determine the discount rate. I am concerned that both the panel and the Lord Chancellor have an incentive, perhaps even a temptation, to keep the discount rate just a shade higher than it should be—what the noble and learned Lord, Lord Hope, referred to as a “tension” in the arrangement. I note that in the Ministry of Justice impact assessment, 45% of the 92 respondents favoured retaining a very low-risk approach, so I do not think that we are looking at unanimous support for the new approach to a higher discount rate.

In its equalities statement, the Ministry of Justice concludes:

“The proposals will therefore be likely to reduce the amount of compensation that claimants receive unless they can demonstrate that a different rate should apply”.


Does the Minister really think that a claimant will be able to persuade a court or the Lord Chancellor that a rate should be changed? Currently, I believe, courts can vary the rate but never do so. I look forward to him correcting me or confirming that.

My second question is: can the Minister tell the House how the powers of the Lord Chancellor are to be contained such that he or she is prevented from perhaps guiding or even overriding the panel, especially as the panel is chaired by the Government’s own actuary, and that person will have two votes out of a total of six?

Turning to the panel itself, it has five members, quorate when only four: the Government Actuary, another actuary, an economist, an investment manager and a person familiar with,

“consumer matters as relating to investments”.

Those are four very clearly technical roles, although getting an economist and an investment manager to give an unambivalent view or one consistent across their professions is always something of a challenge. Each of these four panel members will be aware of the background to their appointment—that rates have been too low and need to be increased. Any dissent from raising rates may be considered too soft-hearted or too pessimistic about future economic growth, which itself is often a matter of political perspective. In short, there may be subtle pressure to pitch the rate a bit higher. Only a small adjustment in the rate will save the winners many millions but could spell a lifetime of struggle and hardship for the losers.

That leaves one role, which, by contrast, sounds to me pretty vague. I note that they are the last person listed as a panel member, and it feels slightly as if they have been bolted on as an afterthought, but perhaps I should not read too much into that. It would appear that this person is almost expected to sign off on behalf of consumers—in other words, on behalf of those receiving these payments. That is going to have to be a person who is not only extremely robust in negotiation but also multi-skilled in the technical areas represented by those who outnumber them, in vote terms, five to one. Otherwise, they are likely to find themselves outgunned or simply overwhelmed by the views of the other committee members, to say nothing of having only a single vote. My third question to the Minister is: can he tell the House whether, and on what basis, he feels that the last panel member is sufficient to counteract an inherent tendency for the panel to adopt a perhaps marginally overoptimistic view of the economic future? I say again that even the smallest tweak upwards in the discount rate will have a very significant negative consequence for the claim.

My final question to the Minister is: can he look again at the composition of the panel and the roles of the panel members so that he can assure the House that there is a fair balance of representation, both numerically and in terms of firepower? So often it is possible, in seeking to right one wrong, unintentionally to create another. This Bill in large measure seeks to prevent false claims of overpayment, but we must not in the process end up with a system that could deprive of adequate compensation those who need and deserve it.

Brexit: Justice for Families, Individuals and Businesses (EU Committee Report)

Lord Cromwell Excerpts

Wednesday 20th December 2017 Lords Chamber

[Lord Cromwell (CB)]

My Lords, if the noble and learned Lord, Lord Hope, professed himself humbled by the speakers who had gone before and the Minister who is going to respond, imagine how we non-lawyers feel following him. It was a great honour to be on the committee for the production of this report. In the noble Baroness, Lady Kennedy, we have someone who blends, in equal large measure, charm, wisdom and utter determination. I also express my thanks to the clerks and the supporting team, who have done such a terrific job in producing this very good report.

The report once again makes clear that there are a series of linked regulatory systems in a single space, rather than individual states with cumbersome and often expensive barriers between them. The central advantages of these systems, which come up time and again in the different areas our committee and other committees look at, are clarity, reciprocity and enforceability—words that we have already heard today and which I am sure we will hear again. Those are beneficial to all concerned, be it a parent with a child abducted to another country or a businessperson with a cross-border contract. The objective of our committee was not, as too often happens in this House, to refight the Brexit debate but to establish what Her Majesty’s Government’s plan is when we leave the EU so that the benefits of these well-established systems are not lost.

The Government’s written response and the paper which they continuously refer to throughout entitled Providing a Cross-Border Civil Judicial Cooperation Framework, are—I speak as I find—frustrating and a repetitive confection. The response is not the practical, reasoned reassurance that I was hoping for. It tends to repeat the very points in our own report, or responds in a fairly banal way. I take entirely the points made by the noble Lord, Lord Polak, about negotiation, but nevertheless I had hoped for more. It acknowledges the lack of certainty, reciprocity and enforceability, but we knew that from our own report and evidence. What it offers in response is,

“a new relationship based on mutually beneficial rules and processes”.

I think I can remember that as the sort of thing my mother used to say as she served out the apple pie. Another response is:

“We will need to build a bridge from our exit to our future”.


That almost sounds like the closing song from a Christmas panto. I do not really know what it means.

The Government say they are “seeking an agreement” and assert that that activity itself will provide confidence and certainty to businesses and individuals. We did not see any such evidence in front of the committee. The Government paper provides “general principles” for “ongoing cooperation” in the context of separation and “without prejudice” to the ongoing negotiations. Again, I am sure my mum would have approved of that. To replace the very effective existing Brussels I and II Regulations, the plan appears to be to fall back on the 2005 Hague convention and the 2007 Lugano convention, which are less clear and comprehensive than the existing set-up, which was created expressly to improve upon them, as the noble Baroness, Lady Kennedy, explained. Lastly, and I will try not to quote too extensively, we are told that the Government will consider the coverage of alternative international agreements when deciding how best to ensure ongoing reciprocity and mutual recognition. Again, I did not find a great deal of substance there.

So, what about the timescale? On the one hand, the Government favour a strictly time-limited implementation period, which they define as around two years. In the meantime, we carry on as now—or, rather, based on the existing structure of EU rules and regulations. The matter of the ECJ has already been touched on. We know the Government are keen to eschew the ECJ but they have not really offered anything clear to us as a mechanism to replace it. That makes for more uncertainty.

In conclusion, there is a common recognition that there are real and troubling problems here, and everyone agrees that reciprocity and cross-border enforcement need to be protected. However, a recurring theme across all the committees whose reports I have read or been a part of is the lack of actual practical mechanisms to deliver this. The only tangible quantifiable in the Government’s response is “in about two years”. We are not told the mechanisms. Such assurances are wearing thin.

Naturally, to return to the very wise point made by the noble Lord, Lord Polak, it is very difficult to be specific when negotiations are under way. Nevertheless, in all the evidence that we took, we really did not find evidence that actual mechanisms were being devised or discussed to safeguard the individuals, families and businesses that the noble Lord, Lord Cashman, spoke so movingly about a few minutes ago.

The Minister is known for his robust, factual and penetrating answers to questions and comments. I hope that when he responds he will go beyond the generalities and shine his very bright and piercing light on the mechanisms and how they are going to deliver outcomes at least as good as Brussels I and Brussels II.