Civil Liability Bill [HL]

Lord Hodgson of Astley Abbotts Excerpts

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

Moved by

[Lord Hodgson of Astley Abbotts]

53: Clause 8, page 8, line 14, leave out “within the 3 year period following the last review” and insert “if the procedure set out in sub-paragraph (3A) applies.
(3A) The expert panel under paragraph 5 must advise the Lord Chancellor to undertake a review of the rate of return when it considers that the nature of return on investment has changed sufficiently significantly to justify such a review.”

[Lord Hodgson of Astley Abbotts (Con)]

My Lords, with this group of amendments we come to the procedure for timing the future reviews of the rate. They are in large measure parallel to some amendments I tabled in Committee but during that debate a number of important points were made by noble Lords, which I have reflected in changes in the drafting.

Our policy objective should be to establish a system that has three guiding principles. First, there should be a change in the rate only when the underlying investment climate—that is, the generally prevailing rate of return—has changed sufficiently significantly. We do not want frequent jerks on the tiller. Secondly, the timing of the change should be as unpredictable and quick as possible to minimise the chance of any people gaming the system. Thirdly and finally, we need to avoid the consequences of political inertia. The decisions to change the rate will always be controversial. As we heard from the noble Earl, Lord Kinnoull, the costs of these changes, one way or the other, can be very great indeed. Therefore, there will always be pressure on the Lord Chancellor to postpone any changes until the very end of any fixed-term period.

The way the Bill is currently drafted in large measure fails this test. First, having time-based reviews—for the reasons I have just explained, these are essentially time-based—fails to link to the fundamental reason for undertaking such a review; that is, the changing of the underlying rate of return on investments. Secondly, a system that requires the establishment of a new expert panel on each occasion—a decision that will undoubtedly leak—inevitably increases the chances of the system being gamed. Thirdly and finally, a system which places on the MoJ and the Lord Chancellor the whole responsibility of deciding both whether a review should take place and then whether the result of any review should be implemented is likely to lead to a preponderance of reviews taking place at the end of any fixed-term period.

The amendments I have tabled are designed to address the system and remedy these weaknesses. First, the decision on whether or not to implement a change remains with the Lord Chancellor because, as noble Lords have pointed out, this is at root a political decision. Secondly, the Lord Chancellor is relieved of the duty of monitoring changes in the available rates of return. This is undertaken by the expert panel, which will now become a permanent body. The expert panel, the proceedings of which will be confidential, will decide when to recommend to the Lord Chancellor that the rate should be changed and, if so, by how much. In this connection, to avoid frequent small changes, I have inserted “significantly” after “sufficiently” in the penultimate line of Amendment 53. All the above can be undertaken confidentially, away from the public glare, inevitably leading to a reduction in the amount of gaming. Indeed, if the Lord Chancellor chose not to accept the expert panel’s advice—which he or she would be perfectly entitled to do—no one need ever know it had taken place.

Finally, the other change from my Committee amendment is to remove the expert panel’s requirement to report to the Lord Chancellor at the end of every 12 months in which a review has not taken place, explaining why no review has taken place. My original intention was to improve transparency and clarity but it is clear from the remarks of noble Lords in Committee that it was a procedure that confused rather than enlightened and therefore I have struck it out. In the meantime, I beg to move.

[The Deputy Speaker (Viscount Ullswater) (Con)]

I must advise your Lordships that if this amendment is agreed to, I cannot call Amendment 54 because of pre-emption.

--- Later in debate ---

[Lord Hodgson of Astley Abbotts]

My Lords, I am very grateful to my noble and learned friend for his very full response. I am sure he will not be surprised when I say I am slightly disappointed at the way in which he has rejected quite a lot of the arguments that have been put forward from all quarters of the House. He rightly points out that the three-year period is a maximum, but I will have a sporting wager with him that when we come back here 20 years from now the reviews will be bunched around the end of the fixed period, whenever it is, because that is the way the political process will work.

As the noble Lord, Lord Marks, pointed out, the idea of the expert panel is that you build a body of knowledge and institutional memory about how these things will work more effectively, which will get lost if you have to constitute a panel every time.

As for advice, as the noble Earl said, Her Majesty’s Treasury has an interest in this case, as when you say, “We are going to change the discount rate”, it has to go back and redo its sums. This will be an interesting question that it has to face on each occasion. There remains confusion in the Government’s mind between instituting a review and instituting a change, and the two tend to get conflated.

There was a slightly strange suggestion that somehow there will be gaming around the meetings of the panel. That seems to me unlikely. I could not conceive why the panel would be announcing its meeting or why that would cause gaming in any way. No system is free of gaming, but this seems unlikely to lead to a greater degree of playing the system.

My noble and learned friend used a final rather strange phrase. He said that there was a social impact to the decision. I was not clear what social impact meant. This seems to me a clinical decision about the rates of return, which the Lord Chancellor must make. The social impact does not seem to me part of this discussion. Perhaps I have misunderstood what he said, so I will read Hansard carefully. In the meantime, I beg leave to withdraw my amendment.

Amendment 53 withdrawn.