Personal Injury Claims: Motor Vehicle Incidents

Debate between Lord Keen of Elie and Baroness Kramer

Wednesday 1st March 2017 Lords Chamber

[Lord Keen of Elie]

My Lords, I agree with the observation that the level of the discount rate reflects a very conservative assumption about how a person would deal with a large lump-sum payment of damages in order to protect their future position. That has to be the subject of review, because it is clearly outdated.

[Baroness Kramer (LD)]

My Lords, surely the review and the consultation should have come before the change in the discount rate, which is, as the Minister has heard from around the House, absolutely preposterous. As he knows, it is a fixed number based on three-year index-linked government securities, a commodity in which nobody who is investing funds for an injured claimant will put their money—it is less than you would earn by putting it into a local bank account. The fact that the number is preposterous means a big increase in premiums for motorists and a billion pound additional burden for the NHS, as well as an unnamed additional burden for the Ministry of Defence.

[Lord Keen of Elie]

My Lords, I am glad that the noble Baroness acknowledges that the basis of the calculation of the discount rate clearly requires review. However, the Lord Chancellor was under a legal obligation to deal with the discount rate and we are now concerned to ensure that we consult fully and address the question of how it should be calculated in future.