Personal Injury Claims: Motor Vehicle Incidents

Lord Campbell-Savours Excerpts

Wednesday 1st March 2017 Lords Chamber

[Lord Keen of Elie]

My Lords, the way in which the discount rate is calculated will be examined with some degree of urgency. However, I do not accept that the discount rate will result in the inflation of the value of damages claims. It was designed originally to ensure that those claims would be properly calculated so that those who suffer life-changing injuries are properly compensated for the future.

[Lord Campbell-Savours (Lab)]

Does that mean that if the interest rate goes up, the discount rate goes up? I am only following the noble and learned Lord’s logic.

[Lord Keen of Elie]

The discount rate is related to the rate of return on government bonds, because there is an underlying assumption that those who receive large damages awards for future care will invest them in a very conservative manner, in bonds. Therefore, as the interest rate drops, so the discount rate will also drop.