Civil Liability Bill [HL]

Debate between Lord Keen of Elie and Lord Sharkey

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

[Lord Keen of Elie]

My Lords, I begin by thanking the noble Lord, Lord Sharkey, not only for his contribution to this part of the Bill but for his engagement since Report in addressing these matters. I extend those thanks to other noble Lords, including the noble Earl, Lord Kinnoull, who has also engaged extensively on these matters.

Just to be clear, the Government are fully committed to beginning the first review as soon as possible after Royal Assent and to completing it as soon as is practicable. I hope that I can extend that comfort to the noble Lord, Lord Sharkey. That is why we have no objection in principle to the amendment. The only remaining question for the Government was the practical one of whether the 90-day period will be sufficient to ensure that all necessary preparatory work can be finished before the 140-day period for the completion of the first review. The Government have begun this work and are making good progress and, although there are public expenditure rules that may affect the timing of its completion, the Government now consider that the 90-day period is sufficient.

In view of this and having regard to the strength of opinion expressed across the House that the first review should proceed quickly, I am pleased to indicate that the Government intend to accept this amendment as well. Perhaps I can refer back to the observations of the noble Lord, Lord Monks, when I move that the Bill do now pass. For the present purposes, we accept the amendment.

[Lord Sharkey]

I simply express my gratitude to the Minister and his team for accepting the amendment and their co-operation throughout the passage of the Bill.

Civil Liability Bill [HL]

Debate between Lord Keen of Elie and Lord Sharkey

Report stage (Hansard): House of Lords
Tuesday 12th June 2018 Lords Chamber

[Lord Sharkey]

My Lords, Amendment 46 is in my name and those of my noble friend Lord Marks, the noble Earl, Lord Kinnoull, and the noble Lord, Lord Beecham. I am grateful to them all for their support. The amendment addresses the question of pass-through. How much of the savings generated for insurance companies by whiplash reforms would in fact be passed on to motorists, in the form of reduced premiums?

Most of the insurance companies wrote to the Lord Chancellor in March. The penultimate paragraph of their letter said that,

“the signatories to this letter today publicly commit to passing on to customers cost benefits arising from Government action to tackle the extent of exaggerated low value personal injury claims and reform to the personal injury Discount Rate”.

There would obviously need to be clarity about: the definition of a cost benefit; whether all customers would share the promised distribution or just those with motor insurance; and how the savings would be passed on. This might be in lowered premiums or just the promise of lower than expected premiums in the future, for example.

The House of Commons Justice Select Committee again noted the problem in its May 2015 report. Paragraph 3 of its conclusion and recommendations said:

“Potential savings to motor insurance customers are central to the policy justification for these reforms, but we conclude that the Government’s estimate of the pass-through rate may be over-optimistic, given the lack of robust evidence and the unenforceable nature of insurers’ promises to reduce premiums”.


The committee recommended that,

“if the reforms are implemented, the Government work with the ABI and either the Prudential Regulation Authority or the Financial Conduct Authority to monitor the extent to which any premium reductions can be attributed to these measures and report back to us after 12 months”.

Our amendment would require the Treasury to make regulations specifying that the FCA would require all motor insurers to publish a report on the savings made as a consequence of the whiplash reforms in the Bill, and how and to what extent these savings have been applied to reduce motor insurance premiums. It specifies the period to be covered by these reports as 12 months after commencement and how long the insurance companies would have to submit reports to the FCA, which would be three months. The FCA would then have a further three months to make and publish a reasoned assessment of whether the insurers have made the promised passed-on savings. The amendment also gives the FCA the power to request further reports from insurers annually as it sees fit. Finally, it would ensure that the FCA has the power to force the insurance companies to pass on savings if they have not done so, or done so sufficiently, within 30 months of commencement.

I think most if not all noble Lords would agree that the insurers should be held to their promise. To do that, we need to monitor and assess whether they have in fact held to their promise and, if they have not, to have the power to force them to do so. To do these things requires a tough and experienced regulator. Only the FCA has the resource, reputation, toughness and experience to be the regulator to do that, which is why this amendment gives it the job.

I know that the Minister feels strongly that insurers must be held to their promise and I realise that achieving this may be a rather complex matter. However, it is critical that we achieve it. It would be absolutely scandalous if savings made by insurers as a consequence of the Bill were retained by insurers. Amendment 46 sets out a method by which we can hold insurers to account for their promises. I beg to move.

[Lord Keen of Elie]

My Lords, we have on several occasions referred to the savings under these measures, which will be passed on to consumers by motor insurers. I understand that a number of Peers clearly have concerns about ensuring that this actually occurs.

I should say that the Government hold firm that the highly competitive nature of the motor insurance sector will mean that insurers have little or no choice but to pass on savings to consumers or risk being priced out of the market. An in-depth investigation by the Competition and Markets Authority in 2012 found that the motor insurance market is highly price-sensitive, driven by low levels of market concentration and high levels of penetration by price comparison websites. Resulting estimates indicate that 85% of insurance savings from whiplash measures will be passed on to the consumer. Finally, as the noble Lord, Lord Sharkey, observed, motor insurers providing cover to 84% of the UK market have already written to the Lord Chancellor to make the welcome commitment that they will pass on any savings.

That said, the Government are not unsympathetic to the underlying intention of Amendment 46, as tabled by the noble Lord, Lord Sharkey. The point is that having made a firm commitment, insurers should be accountable for meeting it. It is, however, important that any amendment in this regard is drafted with care so that it is effective but does not also impose requirements that push beyond the recognised remit of regulators such as the Financial Conduct Authority. I also observe that we must ensure that any legislative requirement in this area does not infringe on the very important area of competition law.

I therefore confirm that the Government will accept the views of Peers and develop an amendment, to be tabled in the House of Commons, that meets these requirements and provides an effective means for reporting on the public commitment made by the insurance sector, showing that it results in savings being passed on to consumers and thereby holds insurers to account. This is quite a complex and delicate process and it is ongoing at present.

I add only one further matter. Requiring a report to be made within 12 months of commencement is not likely to be the best way forward because claimants have a three-year period in which to make claims. After the Bill receives Royal Assent, there will therefore be an overhang for up to three years of claims that fall outwith the requirements for the tariff to be applied. We will have to look carefully as well at what point it would be appropriate for a report to be made and laid before Parliament. However, that is under active consideration and, in light of that indication, I hope the noble Lord will consider it appropriate to withdraw his amendment.

[Lord Sharkey]

My Lords, I am very grateful for the Minister’s answer and encouraged by it, too. I take the points about being careful on competition law and the period over which we assess the insurance companies’ return to the people they insure. I will follow with interest the progress of a government amendment as it goes through the House of Commons. Having said that, I beg leave to withdraw the amendment.

Civil Liability Bill [HL]

Debate between Lord Keen of Elie and Lord Sharkey

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

[Lord Keen of Elie]

My Lords, I begin by acknowledging the point made by my noble and learned friend Lord Mackay of Clashfern. The Bill makes perfectly clear that this is a decision of the Lord Chancellor as Lord Chancellor, and it is in that context that it has to be seen and understood.

Amendment 61 would replace the proposed three-year maximum review cycle for the second and subsequent reviews of the rate with a system under which the need for the rate to be reviewed would be determined by the expert panel by reference to changes in returns on investment. Of course, there are then consequential and supplementary amendments. The effect would be to add a new and distinct responsibility to the role of the panel. It would in effect, as I believe my noble friend Lord Hodgson acknowledged, require a standing panel to be created. If more than a year had passed since the rate was reviewed, the expert panel would be required to assess the need for a review and then to advise the Lord Chancellor to review the rate if it considered that the nature of return on investment had changed enough to justify a review. If the panel decided that this condition had not been satisfied, it would have to report its reasons for this view to the Lord Chancellor.

The concept of a review based on changes in investment returns was canvassed as an alternative to a fixed review period in the Government’s 2017 consultation on how the rate should be set, and it was supported, let me be clear. However, basing the review requirement on changes in investment returns would, we believe, create more uncertainty and be less predictable than a regular fixed-date review. The introduction of a requirement for the panel to consider the need for a full review annually could further fuel such uncertainty.

I appreciate the concerns raised by the noble Lord and others at Second Reading about the potential for a fixed review period to prompt undesirable litigation behaviour and the possibility of what is sometimes termed the gaming of the system in anticipation of a change to the rate. However, this problem would not be avoided by the system which the amendment proposes. Litigants would still know when the panel would be required to consider whether the rate required reviewing. Indeed, such occasions would be more frequent under the amendment than under the three-year cycle proposed in the Bill. One can imagine a stop-start mentality emerging leading up to the time when the panel was expected to report.

A further consequence of the amendment would be that the expert panel would have, in practice, to exist independently of the review of the rate, rather than being convened by the Lord Chancellor for each review, as the Bill currently provides. In effect, a standing panel would be required, which would have to exercise judgment as to the timing of reviews, rather than confining itself to the technical matter of advising the Lord Chancellor on the factors that might be considered in the setting of the rate, which is the purpose of the expert panel. The amendment would therefore make a very significant change to the proposals in the Bill regarding when the rate should be changed. The Government’s proposals for a fixed-period maximum cycle for the review of the rate have, as I say, been developed through consultation and been the subject of pre-legislative scrutiny, and we consider that they provide a simple and certain method by which reviews can largely be predicted.

Amendment 74 would require the Lord Chancellor to adopt any recommendation from the expert panel as to whether the rate should be changed and, if so, what the rate should be. Clearly, such a change would diminish significantly the responsibility and accountability of the Lord Chancellor for any review outcome—indeed, it would essentially remove it. Amendment 74 would also remove the requirements on the Lord Chancellor, the panel and the Treasury set out in paragraph 2(6) and (7) of new Schedule A1 to comply with or to take into account the duties of the Lord Chancellor in relation to the setting of the rate that are set out in paragraph 3 of new Schedule A1. What we would have is the elevation of the panel from an advisory role to essentially an executive role. That would be a major change and clearly greatly alter and increase the role of the panel.

The creation of the expert panel to advise the Lord Chancellor is, of course, one of the most important changes introduced by Clause 8. The panel is central to the Government’s proposals for the way in which the rate is set, introducing new expertise and transparency. The panel will play a very important role in providing assistance to the Lord Chancellor in setting the rate, but it would not in our view be appropriate for the panel’s recommendations to bind the Lord Chancellor in deciding whether the rate should change and what it should be. The setting of the discount rate requires the weighing of different potential outcomes for individuals in relation to a range of possible rates. An element of value judgment will ultimately be required. It is important, therefore, that the decision-maker should be politically and publicly accountable for decisions on the rate. That is why the Lord Chancellor is, in our view, the appropriate person to make that choice. Indeed, this was recognised by the Justice Select Committee, which stated in its report that:

“Setting the discount rate has repercussions on the taxpayer through Government expenditure and also consumers through its impact on insurance premiums and inflation; therefore we think it is right that the decision to set the discount rate lies with the Lord Chancellor”.


We agree with that assessment.

In addition to being influenced by the pre-legislative scrutiny carried out by the Justice Committee, the proposals we have put forward have been developed through the public consultation process. In response to the question of by whom the rate should be set, the largest single group of support was for the rate to be set by the Lord Chancellor following advice from an expert panel. I note the support for that which has been given, in particular, by my noble and learned friend Lord Mackay of Clashfern, expressing his experience as Lord Chancellor and underlining the distinct role of the Lord Chancellor in this context.

[Lord Sharkey]

The Minister talks about the consultation and the preferences expressed there. As I think I mentioned at Second Reading, there was no majority in favour of the Lord Chancellor being involved. There was a majority for other methods, not the Lord Chancellor.

[Lord Keen of Elie]

I acknowledge that. As I said, the greatest number of responses were in support of that particular proposal. I reiterate that.

I understand that Amendment 74 is a probing amendment but it would at a stroke remove many of the benefits that the proposed reforms in the Bill are seeking to achieve. This is because paragraph 3 of the new schedule governs how the Lord Chancellor is to decide what the rate should be, and Amendment 74 would remove paragraph 3 from the schedule. The essential change made by paragraph 3 to the present law is that in future the rate is to be assessed on returns reasonably expected to be achievable from a diversified low-risk portfolio of investments. This has regard to how claimants actually invest and the returns available to them. This evidence-based process of assessment will replace the hypothetical approach of the present law, which leads to the rate being set largely by reference only to returns from UK index-linked gilts.

Our evidence is clear that claimants simply do not invest all their awards in UK index-linked gilts; in other words, claimants do not pay Her Majesty’s Government to look after their money. Our research indicates that setting the rate on this basis leads to awards of compensation that are expected to produce on average around 135% of the funds anticipated to be necessary to meet the claimant’s losses, although this drops to 120% to 125% after taxation and the costs associated with the management of investments have been accounted for—a point that I will return to in a moment. The new system will put the setting of the rate on a far more realistic basis and bring the average closer to the target of 100%. This will be fairer for both claimants and defendants.

In support of this process, the paragraph sets out a number of key assumptions that the Lord Chancellor must adopt in deciding what the rate should be and a number of supporting factors he or she must take into account. It also enables the Lord Chancellor to identify and apply further assumptions and to take into account further factors in determining what the rate should be. Amendment 74 would remove the entire framework provided by the Bill for the basis of the setting of the rate. The effect would be that, unless the Supreme Court were to decide to adopt a different basis for the setting of the rate in a future case, the rate would continue to be set on the basis of the present case law, principally the 1998 decision of the House of Lords in Wells v Wells, which was referred to by the noble and learned Lord, Lord Hope, at Second Reading; it is a case on which I believe he sat. This would remove the central aim of the reforms to provide a fairer, more certain and more sustainable system for both claimants and defendants, and would remove any possibility of overcompensation and its impact on the National Health Service.

Clearly, we want seriously injured individuals to be fully compensated for all the losses caused by their injury. They should receive the full and fair compensation that is legally due to them. We do not seek to change the overriding objective of 100% compensation. The problem is that at present the rate has to be set largely by reference to UK index-linked gilts. But our evidence is that this is not how such claimants actually invest and therefore we have to move on.

I add that it might be a little odd to adopt the noble Lord’s Amendment 74 in light of his Amendment 71, which encourages us to have the Lord Chancellor fix the first rate without recourse to the panel at all. There seems to be a slight tension between the two amendments. I have expressed my view on Amendment 71, and we are going to look at that again, but I do not find it easily reconcilable with Amendment 74, albeit I acknowledge that it is a probing amendment.

[Lord Sharkey]

I simply observe that I do not think lawyers have an exclusive right to exercise and run conflicting arguments.

[Lord Keen of Elie]

Generally speaking, they are alternative arguments.

Amendment 77 would add an obligation on the Lord Chancellor to take into account the response of the expert panel in determining what the rate should be. Of course, that is exactly what the Lord Chancellor will do. Indeed, why would the legislation require the Lord Chancellor to consult the panel and require the panel to respond if the Lord Chancellor was not required to consider the panel’s response? Of course, there may sometimes be merit in stating every detail of a process in primary legislation but I suggest that it is not necessary in this case.

Amendments 82A, 85A, and 90A, spoken to by the noble Lord, Lord Cromwell, relate to the procedures and responsibilities governing the operation of the panel. Clearly, the expert panel has an important advisory role but it is not appropriate or desirable to load it with the additional responsibilities suggested in the amendments. Paragraph 2(7) of new Schedule A1 already requires the panel to take into account the duties of the Lord Chancellor under paragraph 3. Paragraph 4 requires the Lord Chancellor to give reasons for his or her decision and to publish information about the response of the panel. As the noble Lord, Lord Faulks, observed, ultimately the Lord Chancellor’s decision on the matter, as it is disclosed, will be amenable to judicial review. It is not a case of the Lord Chancellor receiving the expert panel’s views and simply ignoring them. Clearly, such a perverse course of action, which one would not anticipate, would leave his decision-making power amenable to review.

The obligations are expanded by the commitments that we gave to the Justice Select Committee to consult the panel about the allowances to be made for taxation, investment management charges and inflation in the setting of the rate and, over and above that, to publish the panel’s report to the Lord Chancellor at each review. It is not a case just of disclosing what the panel’s advice may have been but of undertaking to publish the panel’s report and then to give reasons for the decision that the Lord Chancellor has made.

As I touch upon that, I recollect that the noble Lord, Lord Sharkey, raised the question of the experts on the panel. I will come on to the question of a medical expert in a moment but I note that with regard to the position of someone concerned with consumer investments, one would be interested there in the context of someone who acted as a financial adviser to those who made investments as consumers at various levels. That, I understand, is what is contemplated at that point.

As I have sought to underline, the overall thrust of the amendments is that the panel should, in effect, carry out a pre-review of the rate. This is not the intended role of the panel. The panel’s role is advisory. It will be consulted by the Lord Chancellor and it will provide the Lord Chancellor with its views. The report of the panel and the Lord Chancellor’s decision and his reasons for the decision will be published. But the role of the expert panel is not to take away from the role of the Lord Chancellor. It is not the role of the panel to make a decision on what the rate should be. Its role is to provide expert support to the Lord Chancellor.

At the end of the day it is the Lord Chancellor who will make the necessary determination and will be publicly answerable for the determination he makes. Therefore, we consider that the decision must be for the Lord Chancellor, who will take that decision in his role as Lord Chancellor and be legally and politically accountable for it. The process of the setting of the rate is going to be transparent. The panel has been created for a very important purpose—namely, to bring new expertise to the process of setting the rate—but it is not its role to second-guess the outcome of the final review by the Lord Chancellor.

Amendment 84 would require the Lord Chancellor to base the allowances to be made for taxation, inflation and investment management costs on recommendations from the expert panel. The Lord Chancellor is already required by paragraph 3(5) of new Schedule A1 to make appropriate allowances for each of these three items. This will be an evidence-based exercise requiring judgment as to what the standard allowance should be against the range of possible individual circumstances that might be foreseen. The expert panel forms an integral part of the Government’s proposals. It will introduce additional expertise but, at the end of the day, the final decision must be for the Lord Chancellor. The amendments proposed by the noble Lord, Lord Cromwell, would in my submission take the role of the panel way beyond that of an expert consultative role.

I turn to Amendment 87, which was spoken to by the noble Lord, Lord Sharkey, and would extend the membership of the expert panel to include a medical representative. Here I concur with the view already expressed by my noble friend Lord Faulks. On one view, the effect of this amendment would be to broaden the general expertise within the panel, but I should explain that its role is intended to focus purely on matters relating to financial rates of return, in order to provide advice to the Lord Chancellor. The Bill therefore provides for the panel to be chaired by the Government Actuary and that the other members should have experience as an actuary, a manager of investments, an economist and, as I indicated earlier, in consumer matters relating to investment—for example, as a financial adviser.

The Government consider that this range of expertise is the most relevant for providing advice on what the relevant investments and rates of return are likely to be, and will be the most useful source in formulating advice for the Lord Chancellor. While medical expertise is relevant when determining a lump-sum amount of compensation to which the discount rate is to be applied, or in estimating the life expectancy of a claimant, these are separate issues to the setting of the discount rate and would be outside the remit of the panel, as an expert panel advising the Lord Chancellor. We do not see that a medical expert would contribute to the process of the expert panel.

I turn next to Amendment 88, which was also spoken to by the noble Lord, Lord Sharkey, and would require the Lord Chancellor to use the power to appoint the four appointed panel members to secure that each of those members approaches the work of the panel as an expert with the object of recommending a rate of return that is fair to the interests of both claimants and defendants. The appointed panel members are indeed intended to be experts in their fields. The expertise that they will bring to the process of setting the rate is one of the most significant reforms introduced by the Bill. The Government made it clear in their response to the Justice Select Committee that they intend to recruit experts who will act as independent experts in providing their advice, not as representatives of specific interest groups. This is not a representative panel; it is, I emphasise, an expert panel.

The appointed panel members will be required to disclose potential conflicts of interest and, under paragraph 3(2) of new Schedule A1, to take account of the duties imposed on the Lord Chancellor as to how the rate is to be set in deciding what response to give to the Lord Chancellor’s consultation. The mix of expertise stated in the Bill strikes, we suggest, a correct and fair balance between the various areas of knowledge that would be required. The proposed additional requirements on the Lord Chancellor in Amendment 88 are therefore unnecessary.

This amendment, however, also seeks to indicate what the objective of the work of each of the appointed panel members should be. The panel as a whole will play a very important role in providing advice, as I say, to assist the Lord Chancellor in setting the rate. It is very important that this advice is fair, which is why the Bill sets out the range of expertise referred to. However, the role and objective of the panel is to advise the Lord Chancellor on matters relevant to the setting of the rate by the Lord Chancellor. The role of the individual appointed members will be framed accordingly. We consider that the requirements on the Lord Chancellor under the terms of the legal framework for the setting of the rate, coupled with the advice from the panel of experts, who will bring a balanced range of expertise, and the requirements in the Bill which provide that the Lord Chancellor will give reasons for his or her decision, underline the way in which the decision-making process will be accountable and transparent. It will also have the objective of being impartial.

Amendment 91, which I believe was spoken to by my noble friends Lord Hodgson and Lord Hunt, who is still with us, would remove the provisions in paragraph 8 of new Schedule A1, which interpret provisions in relation to the setting of the discount rate to cover the possibility of the Lord Chancellor deciding on the occasion of a review to set no rate or no rate for particular classes of case, on the one hand, and changes from that situation, on the other. In fact, that new paragraph would reproduce the provisions in the Damages Act 1996 which indicate that the court must take into account such rate of return—if any—as may from time to time be prescribed by an order made by the Lord Chancellor. This wording implies that the Lord Chancellor might decide to set no rate under the present law. The provisions in paragraph 8(2) to (4) are intended to clarify how this power would operate.

Civil Liability Bill [HL]

Debate between Lord Keen of Elie and Lord Sharkey

Committee: 1st sitting (Hansard continued): House of Lords
Thursday 10th May 2018 Lords Chamber

[Lord Keen of Elie]

My Lords, I am grateful for the contributions that have been made. It respectfully appears to me that the points made by the noble Lords, Lord Sharkey and Lord Marks, materially bolstered the approach that the Government take in the Bill. Why do I say that? Because it is quite clear that we are addressing a matter of policy and have to do so as such. What ultimately has to be taken here is a political decision, not a judicial determination.

In fairness, I think it was a slip from the noble Lord, Lord Sharkey, but when he talked about the question of whether claims are genuine or not reasonable, he said that it was unquantifiable—and then corrected himself to unquantified. The former is more accurate than the latter.

Let us be clear. More than 80% of road traffic injuries are allegedly whiplash-induced injuries. The vast majority of all personal injury claims are whiplash claims. Over 10 years, the number of whiplash claims has rocketed—yes, it has stabilised a little in the past year or two, but it has still rocketed. At the same time, the number of road traffic accidents reported has dropped by 40%. At the same time, the number of vehicles classified by Thatcham as safe from the perspective of seating and headrests has increased from 18% to 80%.

As some people have said, an industry is going on. As others have suggested, there is a racket. We have a claims culture that has built up—I attribute no blame to any one party; all sides involved have contributed in one way or another to the ballooning of the claims culture. The time has come—indeed, the time may be almost past—when we need to address it as a political issue.

The noble Lord, Lord Sharkey, suggested that somehow we were making a transfer from claimants to motorists. With great respect, a very large proportion of claimants are motorists, so it is not as simple and straightforward as that. Secondly, he talked about the transfer requiring to be justified. The transfer is a consequence of the policy decision we are making to deal with the industry, the claims culture; it is not the purpose of it. It is, as I say, the consequence.

[Lord Sharkey]

In fact, I was asking the noble and learned Lord, with respect, to justify the quantum, but perhaps he is going to deal with that.

[Lord Keen of Elie]

With respect, as I say, the quantum is a consequence of the steps we are taking to address the claims culture. The way in which we are doing it is such that we are confident that the benefits will be passed to consumers in the form of motor insurance premiums.

[Lord Sharkey]

In that case, perhaps the noble and learned Lord could explain exactly how the tariff was constructed—on what basis?

[Lord Keen of Elie]

Yes, I shall come to that. We have had regard to the present level of damages awarded in these cases, we have had regard to expert input about how we can deal with the claims culture that has built up, and we have taken the view on the level of tariff required to implement the policy decision that we have made to deal with this emerging problem.

[Lord Sharkey]

Does the Minister accept that that is not really an explanation? It is simply a statement that the Government have done something. I was asking for the basis on which they arrived at these numbers. In fact, oddly, the numbers changed between the impact assessment and the SI published yesterday. There must be a reason for that; there must have been some discussion. There must be some basis on which these amounts were constructed, but it is not clear from his answer what they are.

[Lord Keen of Elie]

With respect, first, I understand that there was not intended to be a change between the impact assessment and the SI publication. That is why the rather odd difference of 4 point something per cent emerges. I acknowledge that that was not intended.

--- Later in debate ---

[Lord Sharkey]

I think this is a misunderstanding. I was not trying to imply that there was an element of certainty involved here. I simply wanted to know how the figures had been arrived at. Why not some other figure? Instead of 235, why not 200? Why not 400? How were these figures arrived at?

[Lord Keen of Elie]

With respect, a judgment had been made having regard to all the information available as to what level should be set for the tariff to address the very problem that we are attempting to deal with. It is not based on some mathematical formula or percentage.

--- Later in debate ---

[Lord Keen of Elie]

With respect, as the noble Lord outlined, they are self-perpetuating figures. Therefore, although we have regard to those guidelines when coming to a view as to where the tariff should be set, that was only one element in deciding the appropriate levels for the tariff itself.

I shall turn for a moment to the amendment proposed by the noble Lord, Lord Beecham, which would provide the court with complete discretion with regard to any percentage increase of exceptional circumstances. We do not consider that that is an appropriate way forward. It would simply lead to an increase in litigation and in the claims culture, so that is why we feel that there should be an appropriate limit on how any exceptional circumstances can be dealt with by the court.

In that context, I should point out that the tariff system is not entirely a novelty. Other European jurisdictions faced with the same claims culture and the same racket, as some people have called it, have introduced tariffs as well, or tables of predictive damages. That includes Italy, Spain and France. In due course both Houses will have the opportunity to debate the details of any regulations that are introduced to put forward the appropriate figures for the tariff, which at present we consider should be in the regulations, if only for the purposes of flexibility.

Again, I want to emphasise that this is essentially a matter of policy to deal with a very particular problem. It is a political decision; it is not one that we consider is for the judges; it is one that is ultimately for the Lord Chancellor to deal with in his capacity as a Minister. It is in these circumstances that I invite the noble Lord to withdraw the amendment.

[Lord Sharkey]

I thank the Minister for the long and comprehensive—and occasionally interrupted—answer. There is an issue here. I accept that it is a political decision, of course, and we are all operating on that basis, but I am still worried and puzzled about the way in which this table of tariffs has been devised. I have heard nothing from the Minister to suggest that it is not arbitrary. In particular, he did not answer my question so perhaps he can do it now. Were the figures devised on the basis of some target saving being set and then working backwards to say what the tariff would be to generate that saving? If that is the case, we ought to be told.

[Lord Keen of Elie]

Can I be clear to the noble Lord? I am not aware of there having been any target saving. As I sought to indicate earlier, this was rather an approach from the other direction: what policy is required? Effective policy is required to deal with the problem facing us.

[Lord Sharkey]

The Minister will forgive me if I say that that sounds a bit like the back of a political envelope. The question still remains. We are interested in what these figures are, and it would help our discussions if we had a clearer idea of how they were arrived at. I am sure that we will want to pursue that as the Bill makes progress. In the meantime, I beg leave to withdraw the amendment.