Queen’s Speech

Lord Hodgson of Astley Abbotts Excerpts

Monday 21st October 2019 Lords Chamber

[Lord Hodgson of Astley Abbotts (Con)]

My Lords, as other noble Lords have remarked, today’s debate takes place under the shadow of major developments as regards Brexit. However, Brexit will eventually, thankfully, finally come to a conclusion and it is important that in the interim we reassure our fellow citizens that we are not unaware of the many other problems and issues that affect their lives. In that sense, and the sense that we need to move on, I support the general approach of the Government’s programme. The Financial Times may have rather disobligingly dismissed the contents as “sunny optimism”—as if sunny optimism was somehow a crime—but, for me at least, some optimism is far from unwelcome.

The Queen’s speech gives an opportunity to step back from the day-to-day preoccupations and look at the wider picture. I wish to focus on two issues of which the Government need to be aware and take into account in their future thinking.

The first major challenge is the impact of the fourth industrial revolution—that of artificial intelligence and robotics. In the 1960s, Gordon Moore, the founder of Intel, devised what became known as Moore’s Law, which is that computing power will double every two years into the future. The sceptics laughed at Mr Moore but, so far, he has been proved right. We no longer have to confine ourselves to computing power; we now have the rapidly increasing programming power. It is this combination of computing power and programming power that will change the way we live and work.

It is estimated that between 7 million and 8 million jobs in the UK will either disappear or be radically reshaped over the next 20 years. The charges for Governments over that period will be to consider what geographic areas and spheres of economic activity will be particularly affected and then to take remedial action if we are to avoid what may prove to be intolerable strains on our social cohesion.

That circumstance takes me to my second point: the rapidly increasing population of the United Kingdom, as referred to by my noble friend Lord Horam. I have raised this matter in your Lordships’ House before, and again today I make it clear that this is not an attack on immigration or immigrants. I recognise that a level of immigration refreshes our society and economy. My concern is about the wider impact that each one of us—young or old, whatever our race, colour or creed, whether we arrived here five minutes ago or 500 years ago—has on our country. The numbers are stark. As my noble friend Lord Horam has pointed out, the population of the country is increasing by over 1,000 a day: roughly 400 from natural increase—the excess of births over deaths—and something over 600 from net immigration. The longer-term picture is no easier to understand and discern. The ONS suggests that by 2040 we will have more than another 7 million people in this country. My noble friend Lady Williams knows Manchester well and that its population is about 2.5 million. So, we are going to have to build three Manchesters over the next 25 years.

The Migration Advisory Committee, to which my noble friend referred, provides expert advice to the Government on these matters. Its work is valuable and no doubt its advice will be sought in establishing the promised points-based immigration system, but, as my noble friend also pointed out, it has one fundamental strategic weakness: that, following its terms of reference, it sees everything through an economic prism and in economic terms. However, demographic change is about much more than economic impact: it has huge quality of life impacts.

This is a big subject but let me give two quick examples. First, water. The Environment Agency says that by 2040-45 this country, especially in the south-east, will be running short of water. Some of this, of course, will be the result of global warming, but much more will come from the growth in population. Each of us on average consumes 140 litres of water a day.

Secondly, there is the impact on our environment and ecology. In 1970 the United Kingdom had 20 million pairs of farmland wild birds. By 1990 we had lost half of them, and by 2010 the number had halved again. Behind this came collapses in the less glamorous forms of life: insects, plants, fungi, lichens and bacteria. Is this all down to demographic change? Of course it is not, but growth in population is clearly playing a significant role. Does it matter? To many of us in this House, it does not matter that much because we will not be here in 2045 when these developments finally play out and we see the impact. However, there is surely a need for a calm, rational debate, discussing how to weigh up these many difficult, sensitive and often conflicting objectives, if only, and not least, to take into account the views of the generations who will come after us. So, when the Government produce an Environment Bill—pages 98 to 100 of the briefing on the Queen’s Speech—which does not even mention demographic change, I am inclined to despair.

Further Developments in Discussions with the European Union under Article 50 of the Treaty on European Union

Lord Hodgson of Astley Abbotts Excerpts

Monday 11th March 2019 Lords Chamber

[Lord Hodgson of Astley Abbotts (Con)]

My Lords, like the noble Lord, Lord Rooker, I am a member of his noble friend Lord Cunningham’s Secondary Legislation Scrutiny Committee Sub-Committee B. My noble friend Lord Callanan was kind enough to say some nice words about the committee members in his opening remarks. I hope that that includes the staff, because our ability to perform well and effectively is very much dependent on the backup we get from the staff, who have done a terrific job. When my noble and learned friend comes to reply, I hope he will make it clear that the nice remarks, which I am sure the noble Lord, Lord Rooker, and I are happy to accept, include the staff, who have worked so hard to sort out and make sense of these extremely difficult and complex issues.

So many noble Lords speak this afternoon with great authority and certainty. I fear that I do not have certainty. I am a mild Brexiteer. I do not believe that the day after we leave the European Union the sun will come up shinier and brighter than ever before, nor do I believe that it will not come up at all, or hardly at all. Indeed, in many ways, following the remarks of my noble friend Lord Howard, I think that in almost any combination of outcomes we will find that commercial and other imperatives will drive this country and the European Union to find a way to work together and that for many people, therefore, despite some major changes, life will go on much as before. If that sounds eccentric, even complacent, perhaps I may underline my reputation for eccentricity by going a stage further. Despite all the sound and fury that is being devoted to this topic now, when we come to 2030 or 2035 and look back 10 or 15 years, I think that this will be seen to be a second-order event, because we stand the edge of two huge shifts of the tectonic plates which are going to transform the way this country lives and the way it relates to the rest of the world.

The first of these is the irreversible shift of wealth from the West to the East. In the 1990s the G7, of which this country was a member—the seven most prosperous countries in the world—accounted for about 56% of world output. By 2040, it is estimated that it will account for 22%. We are going to be, whether we are inside or outside the EU, in a very slow part of the stream. That will pose great strains on this country at every level, including our social cohesion. Social scientists will tell you that it is not absolute wealth that is the determinant of happiness; in many cases, it is relative wealth: how I am doing vis-à-vis my neighbour. As people in this country see other countries in the Far East begin to move up alongside us, they will begin to question what this country stands for, the way the system works, our approach and indeed our structures.

The second factor is the impact of the fourth industrial revolution. It is hard for us to estimate just what that is going to do for this country, the way we live and the way we work, over the next 10 or 15 years. The central estimate at the moment is that about 7.5 million jobs in this country will either disappear or be radically changed. My noble friend Lord Ridley, who is not in his place, will say not to worry about that too much, because we will be able to create more jobs: they will be destroyed, as has always been the case in the past. He may be right—indeed I hope he is—but it is a pretty heroic scale of job creation over a very much shorter period than in other industrial revolutions, which have lasted 50, 75 or 100 years. Whether he is right or not, it is going to be a time of great change which will also impose huge strains on our society. So the background to my Brexit position is the key question: does membership of the European Union help or hinder our ability to face up to and resolve these challenges? In short, will economic power, large power blocs, be the key determinant, or will it be the ability to be flexible and speedy in our response? I have concluded that, in fact, flexibility will be by far the most important factor. I fear that the structures and member states of the EU will not be able to react fast enough—a fast reaction will be critical—nor will they be able to forge a common purpose among them.

Against that background, I turn to the proposed transaction—the Prime Minister’s deal. During a lifetime in the City in which I watched and participated in negotiations on the outcome of which hung fame, fortune and reputation, two features predominated. The first was that, as these fierce negotiations drew to a close, both parties would feel dissatisfied and disappointed and that if somehow they had played the cards better, a better outcome could have been achieved. For me, the question is not whether this is a good deal; it was never going to be a good deal. The question is whether it is a good enough deal for us to want to back it. The second feature was that the toughest issues always had to be sorted out at the eleventh hour. The idea that hard issues could be sorted out early in a negotiation is fanciful.

The noble Lord, Lord Thomas of Gresford, referred to the old phrase, “the man on the Clapham omnibus”. Perhaps I may introduce a much more vulgar and politically incorrect phrase—“It ain’t over till the fat lady sings”. As we enter March, the fat lady is starting to warm up. That means that, as the noble and learned Lord, Lord Hope of Craighead, said—and as the noble Lord, Lord Hannay, did not say—any extension of the Article 50 period would be a great mistake. It is only the pressure of an end date that will force the concessions and agreements that have to be reached to make this deal happen. Otherwise, everybody relaxes and the fat lady goes back to her dressing room and waits for a chance to warm up in a month or two.

In my view the Prime Minister’s proposed deal is good enough, although we must remember, as the noble Lord, Lord Rooker, has just reminded us, that it is only half a deal. There is another whole chunk still to go in negotiating our future relationship. Of course it would be helpful to get some movement on the backstop, but I feel that the EU is unlikely to want to hold us within its structure if we are paying no subscription. Many of us have felt, and evidence is now emerging, that, given the relatively low volume of trade across the land border, technology will provide an answer.

It may be unfashionable to say this, but I believe that the Prime Minister has played an impossible hand pretty well. Assailed by equal and opposite forces within both the Conservative and Labour parties, she has plodded into the storm enduring unceasing ridicule and criticism. I hope she will get the necessary backing for her transaction so that this country can reorientate itself to the new situation and begin to address not only the big strategic issues I mentioned earlier in my remarks but the many short-term problems that we face.

--- Later in debate ---

[Baroness Hayter of Kentish Town (Lab)]

My Lords, the noble Lord, Lord Hodgson of Astley Abbotts, says, “It ain’t over till the fat lady sings”. I am not sure whether he is expecting me to break into song to signal that we are near the end of this debate, or whether he was referring to the Prime Minister, who is touching down about now in Strasbourg.

[Lord Hodgson of Astley Abbotts]

May I say to the noble Baroness that I was not referring to her in any way? The man on the Clapham omnibus is a theoretical person and so is the fat lady in the example I gave.

[Baroness Hayter of Kentish Town]

Listening to Ministers—not tonight, but on other occasions—one might think that the lack of an agreement is all the EU’s fault. However, of course, it is we who chose to leave the EU: that is, we as a country, not necessarily as individuals. Mrs May chose her red lines before she understood the task or consulted those who did. Mrs May chose to trigger Article 50 and thus our exit day. It was the Prime Minister who chose our negotiating lead: he resigned. Mrs May chose our second negotiating lead: he resigned. Mrs May chose our third negotiating lead: he could not hack it, so she then sent the Attorney-General over, and now we find that he cannot hack it.

The truth is, of course, that all those faults lie with the Prime Minister. She failed to reach out to the 48% —who, my noble friend Lord Rooker reminded us, are 15.8 million people—who might accept that they lost the referendum but surely still have the right to a Brexit that would be the best possible one for the country. She failed to reach out to the Opposition, even after she lost her majority, to see whether a deal could be honed which could be supported across the Commons. She failed to heed anyone other than the ERG, whose concerns for the countries, regions and interests of the UK have yet to be demonstrated. She negotiated a deal that she cannot even sell to her own Parliament: it was defeated by 230 in the House of Commons and looks set for a similar defeat tomorrow. Is it any wonder that one Cabinet source told the Telegraph:

“I would say there are only two ministers in the Cabinet who still support her”?


We heard earlier that one of these is “Failing Grayling”.

How much better it would have been for the country and, indeed, for her premiership, had the Prime Minister heeded this House, but also the Opposition, and crafted a deal which would see us in a customs union with the EU, solving much of the Northern Ireland border checks issue and, importantly, preserving our supply chains and our manufacturers’ major trading routes. Blinded by those ludicrous red lines, the Prime Minister ignored the one path out of her dilemma. In doing so, she ignored the majority of those who voted in the House of Commons against her deal, seeking to bend only to a minority of those who voted against her: the hard Brexiteers. Of course, they fixated on the backstop because, truth be told, they had never considered the Northern Ireland dimension of Brexit before 23 June 2016. As the noble Lord, Lord Kerr, reminded us earlier, it was the UK which proposed a backstop. The EU agreed to it and now the UK is saying, “Oh, we do not now agree with our own proposal, so please will the 27 change it?”

Throughout this sorry saga, the Prime Minister and her team have shown little respect for the EU, its Parliament, which has to agree the deal, or its key players, who find themselves addressed via a lecture in Grimsby, rather than across the table.

The Government have failed to respect both the EU negotiators and staff who have devoted untold hours to implementing a decision taken by the UK and the 27 rather busy Prime Ministers who keep having to add this to their already demanding agenda. Indeed, it hardly seems conducive to a better outcome for our Foreign Secretary to threaten that relations with the EU will be “poisoned for many years” if Brussels fails to budge in the talks and that,

“future generations, if this ends in acrimony ... will say the EU got this wrong”.

There is no blame to our government; everything is the fault of the EU. Perhaps that is what leads the noble Lord, Lord Armstrong of Ilminster, to say that he has never felt a greater sense of shame.

As the noble Lord, Lord Finkelstein, has made clear, the one way not to leave the EU is without a deal, because of the sudden imposition of WTO tariffs and the ending of existing commercial relationships all built on zero tariffs and shared rules—all without even a transition period for business, importers, exporters and our ports to prepare. As for holidaymakers, perhaps 1.5 million of their passports may not work across the 27 member states because there is not enough time left on them. Their health cover will be lost; there will be queues at Eurostar and ports. This is to say nothing of their not being able to take their pets with them. They will not like that hard crash out as reality bites. Crucially, it would leave our UK citizens living across the 27 countries in a legal limbo, their healthcare, residency, jobs, and even driving licences uncertain. That is all without the opportunity costs mentioned by the noble Lord, Lord Horam, and the health, crime, housing and education issues that we are not dealing with because of the attention and money being spent considering no deal.

The noble Lord, Lord Howard of Lympne, warned of a loss of trust if we fail to leave on the 29th of this month. But there will be a much greater loss of trust if we leave in such a way as to damage the very people who voted for Brexit. So where do the Government go from here? It is possible they are going to need a Bill I have just been sent. It is the Bill on how to revoke Article 50—the draftsman was worried that the Government did not have it, so just in case they need it I offer it to the Minister.

If the Prime Minister fails to engage with the Opposition, with those willing to take the country forward on a consensual, constructive route, she risks being written up in history, either as my noble and learned friend Lord Goldsmith described—as Vladimir waiting for Godot, perhaps with the noble and learned Lord, Lord Keen, as the boy, waiting for an impossible majority to arrive—or perhaps, more seriously, as a chapter in the next Christopher Clark version of The Sleepwalkers. This is the book on how the 1914 leaders took Europe to war by simply sleepwalking into it. She may do the same by dozing on the job, so that the UK falls, heedlessly and unnecessarily, into the economic insecurity and diplomatic catastrophe of an unplanned, unwarranted and unnecessary no-deal exit from the near half-century of co-operation, growth and development we have had with our near neighbours in the EU.

It is not for this House to pass judgment on whether the Prime Minister has the confidence of the Commons. But I can say with absolute confidence that the Opposition have little faith in her approach to Brexit, in her deal and in her ability to negotiate an acceptable way forward in the interests of the whole of the UK. Our future is in her hands. I hope that makes others sleep easy, because it does not me.

Non-Contentious Probate (Fees) Order 2018

Lord Hodgson of Astley Abbotts Excerpts

Tuesday 18th December 2018 Lords Chamber

[Lord Pannick]

I am grateful to the noble Baroness for her observation. My answer to the noble Baroness is that, yes, the Lord Chancellor is obliged to have regard to,

“the competitiveness of the legal services market”,


but I understand that to apply only in a context where there is a competitive market. Of course, in many contexts there is. But, like the noble Baroness, I do not understand there to be a competitive market for probate, and in my judgment that provision does not require the Lord Chancellor to have regard to a factor which is simply not relevant to the topic we are discussing.

[Lord Hodgson of Astley Abbotts (Con)]

My Lords, I am not a lawyer. I have never applied for probate, I know nothing about the operation of the probate service and I come at this as a babe in the legal wood. But having read the paperwork that was put down and heard this afternoon’s discussion, I see four things. I see us helping the poorest in our society by eliminating any charge for estates between £5,000 and £50,000. I see us ensuring that the maximum charge is never more than 0.5%, and sometimes less than that. I see a maximum of £6,000 on even the largest estate, and I see this providing a degree of cross-subsidy to ensure that we have an efficient courts and tribunals system—a point that the noble Lord, Lord Pannick, has just made. So I say to my noble friend Lady Browning, with the very greatest respect, that those seem to be perfectly good Conservative principles, and I therefore support what the Government are trying to achieve here.

If we chase down the vires point which the noble Lord, Lord Marks of Henley-on-Thames, focused on, surely any amount of return above cost is not allowable in his argument. We are about to have a reduction in the cost, as I read the papers, of £9.30—the estimated reduction in the average unit cost of applying for probate—as a result of the new system. I am not clear—perhaps the noble Lord can enlighten me when he concludes—about whether his proposal is now to reduce the fees, because of course they will be above the cost of providing the service.

I have been involved in the charity and voluntary sectors. I have worked on their behalf, written reports to the Government, supported them and fought their corner in third-party campaigning and other areas. The reports have been well received by the sector, and sufficiently well received that the Government immediately banned any idea of bringing them in—but never mind about that. The point is that they have made a great case about the impact on charities and charitable donations of the imposition of these particular charges. I must say that, however I work the maths and however I try to work through the ideas, I do not see the logic of the more extreme and indeed scaremongering issues that have been raised by many parts of the sector.

It must surely be perverse that under the present system we are charging the same fee to someone who has a £5,001 estate as to someone who has a £20 million estate. That must be perverse and the present system must not be right. This must be a way of improving it.

[Lord Sharkey (LD)]

My Lords, I will not join in the discussion about what is or is not a Conservative principle, but it is clear that this measure is in fact highly contentious, drafted as it is by the irony division of the Ministry of Justice.

Its 2016 predecessor was also highly contentious, as it attempted to impose probate fees of up to £20,000. The consultation response, which has not so far been mentioned, to the 2016 proposal was overwhelmingly negative. It was opposed by both the Law Society and the Bar Council, among others, and both Houses were, to say the least, worried and unenthusiastic about the proposal.

The grounds for opposition were clear. The proposal was a tax poorly disguised as a fee. It may well have been ultra vires. The use of Section 180(3) of the Anti-Social Behaviour, Crime and Policing Act 2014 as a legal base for the absolutely enormous increase in costs may well not have been within what Parliament envisaged. As the noble Baroness, Lady Meacher, noted, there was no indication at all as that Bill proceeded through Parliament that the power in Section 180(3) would be used to prescribe probate fees to fund the courts and tribunal service generally.

The 2018 version of the SI that we debate today is different from its 2016 predecessor in only one main respect: its charges are lower. In the abandoned 2016 version, the probate fee for estates of £2 million was set at £20,000. In this version, the fee is £6,000. That is a reduction in the quantum only. It does not address the objections raised to the principle of such a charge, so very far above the cost of providing the probate service.

As noble Lords have said, the current probate fee is flat across all sizes of estate. It stands at £155 for an application made by a solicitor and £215 for an individual application. Those fees are based on cost recovery. The principle of cost recovery as the basis for charging for the service is abandoned by this new SI. An estate worth £2 million will pay nearly 40 times the actual cost of the service.

Civil Liability Bill [HL]

Lord Hodgson of Astley Abbotts Excerpts

Ping Pong (Hansard): House of Lords
Tuesday 20th November 2018 Lords Chamber

Customers need to know whether their insurers have acted fairly and kept their promises; insurers need to know that they will be punished if they do not. I look forward to the Minister’s reply.

[Lord Hodgson of Astley Abbotts (Con)]

I raise a narrower point than that of the noble Lord, Lord Sharkey. I refer to the Government’s Amendment 1 where, notwithstanding the heavyweight legal artillery from the noble and learned Lords, Lord Judge and Lord Hope of Craighead, I would like to probe the thinking a little further. What is proposed seems undesirable in a number of aspects, not least of which is that it may put the Lord Chief Justice into a conflicted and undesirable position.

Clause 3, to which the amendment applies, is entitled “Damages for whiplash injuries”. The House will be aware that because of the difficulty of diagnosis—as we have heard from my noble and learned friend—whiplash has provided easy pickings for the fraudulent over several years; in the vernacular of our early debates, the phrase was “cash for trash”. Millions of motorists’ insurance premiums have been unnecessarily increased. The Government—sensibly, in my view—introduced the blanket figure to cover all injuries with a duration of less than two years. That was discussed extensively and amended during the passage of the Bill here and in the other place. It was not, and is not, an uncontroversial policy decision. It remains an issue about which different parts of the House and different political parties have strong views.

Clause 3 is about money and the compensation payable under the whiplash tariff in different circumstances. I invite my noble and learned friend and the House to look at subsections (1) to (5). In each of those, the key word is “amount”—the amount of damages due and payable in different circumstances. The clause provides that these amounts are determined and laid out in regulations by the Lord Chancellor. Under this amendment, as my noble and learned friend pointed out, there would be another hoop to go through, in that the Lord Chancellor would have to consult the Lord Chief Justice before making regulations under the clause. The discussion in the House of Commons was pretty threadbare. I am concerned that the Lord Chief Justice may find himself dragged into policy areas which are not to his advantage. The clause is about money, not process. I ask my noble and learned friend to consider the options available to the Lord Chief Justice when the Lord Chancellor turns up at his office and presents the new tariff. As far as I can see, he has only two. Either he can accept without demur, or he can say that he thinks the proposed new tariff is too high or too low. If he does the latter, on what grounds would he make that judgment? What expertise does a judicial figure, the Lord Chief Justice, bring to the determination of these monetary figures? What expertise is available to him that was not available to the Lord Chancellor in making his original determination?

I make it clear that this is not an attack on the Lord Chief Justice. Indeed, it is intended to draw attention to the difficult position that future Lord Chief Justices may find themselves in as a result of this amendment. They would either have to act as a cipher and simply tick a box, or require amendments to figures that will remain politically highly charged. That runs the risk of the role becoming politically tainted, and further involving the Lord Chief Justice in the determination of matters on which the courts and justice system would later, no doubt, have to adjudicate.

It is not desirable for the Lord Chief Justice of the United Kingdom to be seen either as a cipher or as a participant in political processes. I look forward to hearing from my noble and learned friend why I have so gravely misjudged the situation.

[Lord Monks (Lab)]

My Lords, I declare an interest as a non-executive director of Thompsons, a leading personal injury firm. I have two or three questions for the Minister, particularly on Amendment 1. I thank him for the reply we received to the letter he referred to.

The House of Lords Regulatory Reform Committee advised that the key measures in this Bill, including the levels of compensation for claimants under the tariff scheme, should feature in primary legislation, not secondary. The Constitution Committee said that Ministers should follow this advice unless there were clear and compelling reasons not to. There seems to be a trend for the Government to seek wide delegated powers that permit the determination and implementation of policy. The Constitution Committee warned that the restraint shown by noble Lords towards secondary legislation might not be sustained—a serious warning to the Government that, if this trend continues, secondary legislation might be much more difficult to accomplish. I will be interested to hear the Minister’s comments on that.

Secondly, given that the employer liability clauses will not be dealt with through the new online portal, which is being reserved for whiplash claims, can the Minister confirm that the courts will be able to cope with what will undoubtedly be an increased number of claims without the presence of expert legal representation? It is estimated that they could increase from 5% to 30% of the total number of cases. Can the courts manage that extra responsibility?

Finally, what is meant by “in the long term”? This relates to paragraph 5.66 of the whiplash impact assessment accompanying the Bill, where the Government state that, taking into account adjustments to pre-action protocols, they consider that

“in the long term the courts would operate at cost recovery”.

I would be grateful for an explanation of what cost recovery means in this context.

Civil Liability Bill [HL]

Lord Hodgson of Astley Abbotts Excerpts

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

[Lord Keen of Elie]

My Lords, in moving this Motion I thank noble Lords across the House for their careful scrutiny of the Bill throughout its passage. Noble Lords have made not only detailed but informed contributions to the debate, and that has resulted in improvements to the Bill before it passes to the other place tomorrow for further consideration.

There have been extensive amendments to the whiplash provisions and appropriate amendments to Part 2 with regard to the discount rate. We consider that the Bill is in a better place as a consequence of your Lordships’ contributions.

I have been asked by my noble and learned friend Lord Mackay of Clashfern to put on record a clarification that I provided in my letter to Peers following Report. This relates to a request by the noble Baroness, Lady Bowles, for confirmation that the words “different financial aims” in what was then paragraph 3(3) of the new Schedule A1 to the Damages Act 1996,

“do not provide an override of the conditions laid down in the earlier new paragraph 3(2)”.—[Official Report, 12/6/18; col. 1649.]

As I indicated in my letter, I can confirm that the words in question form part of the definition of the approach to investment that the recipient of relevant damages is to be assumed to take for the purpose of securing the objectives set out in paragraph 3(2) and that the words “different financial aims” cannot therefore override those objectives. It is perhaps appropriate that I put that on record.

Finally, the Government share with the House the view that insurers should be accountable for meeting their commitments to pass on savings from the reforms. Therefore, we have also committed to developing an effective means for reporting on the savings made by the insurance sector being passed on to consumers, making sure that insurers are held to account. We will bring forward an amendment to this effect as soon as possible in the House of Commons. It is quite a complex issue, having regard to, among other things, commercial sensitivity and competition issues.

The noble Lord, Lord Monks, referred to the proposed changes to the small claims limits. We consider that these are appropriate in the circumstances. Of course we are open to debate on these matters, and if the noble Lord wishes to engage with me further on them, I am content to meet with him for that purpose. He is fully aware of the Government’s position on these issues. They form part and parcel of the overall package that we consider has to be delivered to address the issues referred to in the Bill.

Again, I thank all noble Lords for their contributions to the Bill.

[Lord Hodgson of Astley Abbotts]

Before my noble and learned friend sits down, could he possibly say a word about periodical payment orders, an issue which has occupied a number of us quite a lot? He said at the previous stage that he would confirm that the Government placed emphasis on the importance of PPOs as part of the array that is available to the courts when damages are decided.

[Lord Keen of Elie]

My Lords, I am obliged to my noble friend for that reminder. Clearly, it is our intention that this matter should be taken forward. As I indicated before, we are engaging with the judiciary on this matter, and we have engaged already with the Master of the Rolls to see what further developments can be put in place on the provision of PPOs. We share the view that the noble Lord has expressed that the appropriate use of PPOs should be encouraged, and we are grateful to the Master of the Rolls for his agreement in principle to the Civil Justice Council reviewing the law and practice regarding PPOs to see whether they can be improved. The timetable for that has not yet been agreed, but we hope it can begin towards the end of this year or early next year, with a view to completion in the summer of 2019. I hope that that reassures my noble friend.

I thank noble Lords again for their contributions to the Bill. I am content to carry on further discussions relating to the Bill during its time in the House of Commons if noble Lords so wish. Thank you.

Courts and Tribunals (Judiciary and Functions of Staff) Bill [HL]

Lord Hodgson of Astley Abbotts Excerpts

2nd reading (Hansard): House of Lords
Wednesday 20th June 2018 Lords Chamber

[Lord Hodgson of Astley Abbotts (Con)]

My Lords, I am most grateful to my noble and learned friend on the Front Bench for his introduction of the Bill, which I support, and in particular for his explanatory letter of 23 May, which laid out the background to it. As he knows only too well, I am not a lawyer, and speaking immediately behind a past Lord Chancellor and a past Lord Chief Justice on a technical Bill means that one needs to proceed with a certain degree of care.

More years ago than I care to remember, I attended a business school in the United States. The university used to arrange for distinguished visitors to come to lecture us. One such lecturer was a man called Peter Bauer who delivered a spellbinding piece of oratory. Peter Bauer’s name may not be familiar to all noble Lords. He was Jewish and was born in Hungary in 1915. He came to this country in the 1930s and taught for the rest of his life at Cambridge and the London School of Economics, and later became a Member of your Lordships’ House as Baron Bauer, of Market Ward in the City of Cambridge. His primary achievement was to revolutionise the way that foreign aid was distributed. He demonstrated how government-to-government aid, if it was not largely absorbed in corruption, often went on prestige projects such as national airlines or building dams, which did little for the average person in the country. He argued that it was more effective to give aid at a lower level, and the modern NGO structure is essentially a product of his thinking. In that spellbinding lecture, he pointed out that for such developments to take place successfully a degree of stability was needed, stability provided particularly by the rule of law and specifically by a respect for property rights. That is the relevance to our discussion today. His vision further required not just an effective legal system but, equally importantly, one that was understandable and accessible for the man in the street. He said that, without this, the critical ingredient of public trust and confidence would be missing. As he put it that afternoon all those years ago, “The law is too important to be left to lawyers alone”.

In my time in public life, one of my interests has therefore been to try to ensure that the law is kept up to date and is seen to be relevant by our fellow citizens. That lies behind my interest in the Bill today. As I say, it seems unobjectionable; nevertheless, I would like to raise a few points with my noble and learned friend. First, in his letter of 23 May, he wrote that one of the purposes of the Bill was to,

“make it easier for people to resolve disputes and secure justice”.

Amen to that, we all say, but—to touch on the point made by the noble Baroness, Lady Chakrabarti, in her opening remarks—to achieve that objective we need judges. To me as a lay man reading the newspapers, there appears to be a critical shortage of applicants for judicial posts. The reasons as I read them are pretty wide: they range from the financial, particularly the provision of pensions, to the physical state of our courts and indeed to the growing pressure being exerted on judges by social media. It will take time to resolve these challenges and some may not be resolvable at all. What could be done in the short term? One way would be to raise the retirement age. The compulsory retirement age of 70 makes appointments post 65 unlikely to be attractive either to the applicant or to the judicial system from the point of view of use of resources. With people living longer and healthier lives, many argue that ageism is a prejudice that we have yet to tackle successfully and properly. Why not kill two birds with one stone and increase the compulsory retirement age for judges to 75?

My second point concerns the point raised by the noble Lord, Lord Beith, about Law Commission Bills. In my view the Law Commission does incredibly valuable work updating the law in an entirely apolitical way, but too much of that work is shunted into a siding and left to rust. Surely we should be able to find sufficient parliamentary time for a couple of Law Commission Bills, given their uncontroversial nature, as he pointed out. Two in particular that stand shovel-ready, to use the modern parlance, are of special importance. One is on election law. What could be of greater importance than maintaining public trust and confidence in our electoral system? It is worth underlining that point with a short quote from the briefing by the Law Commission at the time of the launch of its recommendations:

“It is widely acknowledged by those involved in administering the electoral process that this body of laws has grown so large, fragmented, complex and outdated that it is no longer fit for purpose”.


Those are serious allegations that the Government should address by bringing forward this Bill. The other Bill concerns technical issues in charity law, in which I declare an interest because some of the recommendations arose from a report that I wrote for the Government as long ago as 2012 but which nevertheless the sector badly needs and would welcome. There have been endless—and I mean endless—promises about the intention to bring forward one or more Law Commission Bills. Perhaps my noble and learned friend can give me another endless promise when he winds up today.

The penultimate point is developments in the working practices of the tribunal system and some of the challenges that it now faces. For example, the Charity Tribunal, which arose from the Charities Act 2006, was designed to provide a quick, effective, user-friendly and economically attractive way for charities, many of which are quite small, as well as their regulator, the Charity Commission, to resolve differences.

I am not sure that our hopes during the passage of the Bill—cross-party hopes, I hasten to add—have been entirely fulfilled. Too many cases seem to have devolved to the familiar and expensive heavy artillery exchanges which take place in the courts. I do not suggest that individuals should be inhibited from employing legal representation, but the original vision was that the tribunal would provide surroundings—an atmosphere, if you like—in which interested parties could speak for themselves. This appears to be a diminishing hope. I fear that such developments are paralleled in other parts of the tribunal system. If you accept Peter Bauer’s contention that the law should be accessible and comprehensible, such developments are surely unwelcome.

Finally, I have a specific, technical point. The Charity Commission is the statutory regulator for the charity sector. It has a huge and important task, given that there are 160,000 regulated charities and probably as many again unregulated ones. Yet if the commission wishes to seek clarity on a point of law by taking a case to the Charity Tribunal—it might wish to do so to get general clarity for a number of charities which might otherwise have to pursue their own case—it has no power to do so, but can do so only with the permission of and through the Attorney-General. For the regulator of a sector, that cannot be a sensible state of affairs.

Worse than that, the Attorney-General can be exceptionally slow in responding to such requests. For example, in September 2016, the commission requested the Attorney-General to refer the issue of the Royal Albert Hall Corporation—a long-running charity saga—to the Charity Tribunal. On 4 January 2018—four months later—my noble and learned friend replied to a Parliamentary Question of mine, stating:

“The Attorney-General requested further information … He has now received that further information and expects to make a decision early in the year”.


Frankly, that is not good enough. This cumbersome and protracted procedure places the regulator of this important sector of our national life in an impossible position. We should surely move to a position where the Charity Commission is free to refer cases to the tribunal off its own back but must inform the Attorney-General that it is doing so.

The Bill has my support but, as other noble Lords have pointed out, we need to ensure that it represents more than just moving the furniture around if we are to keep pace with Peter Bauer’s belief in the importance of transparency and relevance in our judicial system.

Civil Liability Bill [HL]

Lord Hodgson of Astley Abbotts Excerpts

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

Moved by

[Lord Hodgson of Astley Abbotts]

49: Clause 8, page 7, line 31, at end insert—
“( ) Rules of court under subsection (1) must draw attention to those aspects of orders for periodical payments which may make them more suitable in cases where individuals receive large sums of damages, have long-term injuries or are risk-averse.”

[Lord Hodgson of Astley Abbotts (Con)]

My Lords, we come to a matter that we discussed at some length in Committee, so I will cut to the chase. An award of damages that will be paid out over a long period—for example, to provide care to someone previously injured in their 20s—is based on two very important assumptions: how long the person will live and what rate of return can be expected from the sum awarded. If the damages are awarded in the form of a lump sum, these two factors assume a particular and increased importance. The first of these factors, the length of time that a person is expected to live, is inevitably based on averages, so if the injured person lives beyond the expected average then there is a risk that the individual will spend the last few years of their life in financially straitened circumstances. As regards the second factor, if the investment performance falls below that which is anticipated then a similar outcome will result.

As we have already discussed, there is a way for the individual to avoid both the longevity risk and the investment risk. He or she can do so by taking the award in the form not of a lump sum but of a periodical payment order, a PPO. Under a PPO, part or all of the award can be paid weekly, monthly, quarterly or whatever to suit the injured party, and paid normally on an inflation-proof basis for the rest of a person’s life. Sadly, though, we have discovered that PPOs appear to be the poor relation as regards the methods of awarding damages. We discussed in Committee the various structural reasons why this was so—the preference of insurance companies for a swift solution and the capital required to back a PPO, the potentially seductive nature of a very large lump sum compared with the more modest amount of a periodic payment and so on.

My amendment is designed to tip the balance more in favour of PPOs, so that in cases where lump-sum damages exceed, say, £1 million and/or the award will be paid out over more than 10 years and/or the individual is of a risk-averse nature, the court should press for the award to be made in the form of a PPO. To be clear, the court should not compel; that would be completely inappropriate. If a person is determined to have a lump sum, a lump sum they must have. However, the court should certainly encourage PPOs. None of this appears to run counter to the wishes of the House of Commons as expressed by the Justice Committee in its report on the discount rate, nor indeed the thinking of the Government as expressed in their response to that report.

So how to achieve this desired result? Giving the Minister the power to make regulations in this area might interfere with judicial independence, so it appears that the only avenue remaining is the use of the Civil Procedure Rules of court, and that may perhaps be a clumsy way to proceed. If my noble friend cannot accept my amendment, and I fear he may be unwilling to do so, I hope he will be able to make a clear and unequivocal statement that the Government favour the increased use of PPOs in the sorts of cases that I have described so that, with the views expressed in your Lordships’ House today and previously in Committee and, no doubt, in due course in the other place, courts can be in no doubt about the will of Parliament in this important matter.

It may be worth while undertaking a review at some future date of whether the use of PPOs is increasing. That might be along the lines of Amendment 89 in the name of the noble Lord, Lord Beecham, to which I have no doubt he will speak fruitfully in a minute or two. In the meantime, though, I beg to move.

[Lord Hope of Craighead (CB)]

My Lords, I should like to say a word in support of Amendment 50, which is in my name and builds on an amendment tabled in Committee by the noble Lord, Lord Faulks, to which I put my name but to which I was unable to speak because at the very moment he rose to speak I was taken out of the Chamber for a business meeting, so I never got to say what I should like to say now.

I have proposed for the noble and learned Lord’s consideration an expanded version of his amendment, and I should like to explain the background to it a little more so that the point is firmly before the House. On page 7, line 32, subsection (2) of proposed new Section A1 provides that proposed new subsection (1), which talks about the duty of the court to take into account the rate of return prescribed by order by the Lord Chancellor,

“does not however prevent the court taking a different rate of return into account if any party to the proceedings shows that it is more appropriate in the case in question”.

At first sight, that is quite a reasonable provision which the courts might feel able to use from time to time, but, as case law has developed, the door has effectively been shut on any use of the provision in these terms in cases where it is most likely to be wanted, which is those of injury of maximum severity.

In Warriner v Warriner 2002, the Court of Appeal, drawing on points made in Wells v Wells, stressed that on policy grounds there was a need for negotiations to be conducted with reasonable certainty as to the result and to eliminate unnecessary costs and the leading of extensive evidence. Building on the principle stated in Wells, which I of course support, it refused to interfere with the rate of return prescribed. That point was repeated in subsequent cases and more recently in the Court of Session in Edinburgh, where the same principles apply. The Lord President, Lord Carloway, made it clear in the case of Tortolano v Ogilvie Construction Ltd in 2013—Court of Session Inner House Cases, page 10—that there must be something special or exceptional about the case and that the fact that the injuries were catastrophic, which puts the level very high indeed, was not a special or exceptional case factor that would justify departing from the specified rate.

My point is that the Bill repeats almost exactly the wording of the Damages Act 1996, on which the case law has been built. There is one tiny difference. The formula in the 1996 Act was “does not, however, prevent”. In the Bill, we find the slightly different words “shall not, however, prevent”. But the crucial wording, in particular the word “appropriate”, is still there. If the wording of the Bill remains as it is, my concern is that it is effectively a dead letter because the courts, following established case law in the Courts of Appeal both north and south of the border, will feel that there is no case for interfering at all, even in the most extreme cases, where, as I have suggested, the need for even more precision and care in the rate of return is most compelling.

There is reason to be a little more generous at this stage. As the noble and learned Lord is well aware, the basis on which the rate of return is to be struck is to be taken at a slightly different level from that on which Wells v Wells was based. In Wells, the House of Lords used a rate of return that was inflation-proof—adopting a relevant government bond which had that rate of return—to avoid any risk of losing touch with inflation. Now, instead of a very, very low level of risk, there is to be an assumption that more risk will be acceptable than a very low level of risk, although it is less risk than would ordinarily be accepted by a prudent and properly advised individual investor. So there is a change towards a slightly greater element of risk, although not that high. The point is that any change in the level of risk being contemplated raises the possibility that in these extreme cases, the level may fail to achieve what is needed to provide the injured party with what is necessary to compensate them fully for the loss and injury sustained.

Simply to repeat the same formula is unsatisfactory. I was grateful to the noble and learned Lord for agreeing to a meeting the other day at which I was able to explain the point. I think the meeting was left on the basis that an attempt would be made to find a form of words that would not undermine what the Government seek to do but would, at the same time, allow the courts to look afresh at the idea of departing from the rate—although one would of course not want them to do so as a matter of course or have any unnecessary delay or expense in going through these complicated cases just to achieve a different rate. It would have to be a case that really justified such attention.

Some points can be drawn from Wells that may be relevant to my point. First, I was looking at the award in the form of a capital sum—we are talking about that rather than what the noble Lord, Lord Hodgson, was talking about a moment ago—in which the income will not be reinvested. The ordinary investor would reinvest the income to keep the capital sum as inflation-proof as possible, but in our case the income would be used to meet the needs of the injured party. At the same time, the injured party would be drawing on the capital sum, because it is a diminishing fund, the idea being that at the end of the claimant’s lifetime, or when the injuries have finally resolved themselves, there will be nothing left. So we have the extraordinary situation of a sum of money where the income cannot be used to protect against inflation and, at the same time, the sum is reducing. As Lord Lloyd of Berwick pointed out in Wells, if you are having to draw on the capital to meet these costs because the income is not good enough, in a diminishing market, that runs the real risk that the market may not recover sufficiently to bring the award up to the level needed to sustain the injured party for the rest of the period during which that party needs to be sustained. There is a difficult area here: in some cases, particularly if you alter the level of risk, you run into the possibility of the injured party not being fully compensated.

I seek by the amendment to suggest for the noble and learned Lord’s consideration a slightly different formula of words in that critical proposed new subsection that would enable the court to escape from the straitjacket of existing case law in cases that justify a fresh approach. On that basis, I have expanded a little on the formula of the noble Lord, Lord Faulks, to draw attention to the need for this sum to be sufficiently large to meet the needs of the claimant for the rest of the period. It is in that context that I ask the noble and learned Lord to consider my amendment in deciding what best to do to avoid simply repeating a dead letter.

--- Later in debate ---

In light of these observations, I invite the noble Lord to consider withdrawing his amendment at this stage.

[Lord Hodgson of Astley Abbotts]

My Lords, I said that my amendment was designed to tilt the balance in favour of PPOs, and I am grateful to the Minister for his comments. It is good to know that guidance will be rewritten to draw attention to the PPO advantages, and to hear the news that the Lord Chancellor has written to the Master of the Rolls on using the Civil Justice Council to make improvements in that regard. Before I withdraw my amendment, can my noble and learned friend say how long he thinks it will be before the Civil Justice Council produces some results from that discussion and consultation?

[Lord Keen of Elie]

I cannot at this stage answer that question. However, I will consider the point and write to my noble friend, and place a copy of the letter in the Library.

[Lord Hodgson of Astley Abbotts]

I am grateful to my noble and learned friend and, on that note, I beg leave to withdraw the amendment.

Amendment 49 withdrawn.

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.

Special Immigration Appeals Commission (Procedure) (Amendment) Rules 2018

Lord Hodgson of Astley Abbotts Excerpts

Wednesday 23rd May 2018 Lords Chamber

[Lord Marks of Henley-on-Thames (LD)]

My Lords, I will be very brief. We note that these changes are supported by the judge who chairs SIAC, Mrs Justice Laing, and whatever we may think about the closed material procedure, the changes themselves are clearly sensible.

I use this opportunity to suggest that it is very important that closed material procedure be used only as a last resort and in cases of necessity. I note that only 14 cases have been before SIAC in the year under consideration, and that itself is a helpful indication.

On the implementation of the changes to immigration bail under Schedule 10 to the Immigration Act 2016, it is plainly sensible that there should be arrangements for the commission to grant bail. “Financial condition” is sensible terminology that is much better than “recognizances”, if I may say so. We also think it sensible that there should be arrangements for the amendment or variation of bail conditions in appropriate cases.

The Minister is plainly right that leap-frogging is a useful procedure that is used in other courts and jurisdictions. Where there is a point of law of public importance or binding authority that would prevent a decision at a lower level than a Supreme Court, it is plainly sensible that the Supreme Court should be the first port of call in cases that are so certified by the commission, and where the importance of the case warrants it.

We also applaud the longer time limits. The time limit was five days for appellants who were in detention and 10 days otherwise. Fourteen days is a very short time limit, but it is at least a little longer, and it is of course important that appellants have a chance to consider their appeals and their applications for a certificate under the legislation before they have to make the application. However, broadly, we support this statutory instrument.

[Lord Hodgson of Astley Abbotts (Con)]

I have one brief question, about the role of the special advocates. When we discussed the Justice and Security Act, one of the drawbacks of the special advocate procedure, very good though it was, was the inability to re-interview the client after an initial briefing. Does that proviso still work in these cases? In the case of an immigration appeal, are special advocates still unable to re-interview their client to find out their views on the information that has been put before them?

[Lord Beecham (Lab)]

My Lords, I am grateful to the Minister for a very clear explanation of the provisions of this statutory instrument. I note that in the House of Commons Delegated Legislation Committee, all of 11 minutes were spent on this matter. The Minister has provided us with somewhat more information than was provided on that occasion. Is he in a position to indicate the number of cases expected? The noble Lord, Lord Marks, referred to a very limited number, but is it anticipated that it will remain at a low level, or is there likely to be any growth?

Can the Minister also make some reference to the condition of the asylum centres where, presumably, some of these applicants will be held pending the outcome of their cases? Of course, great concern has been voiced about the management of some of these establishments. I confess that this issue is not directly related to the statutory instrument, but it is a matter of concern and I would be pleased if the Minister could say that the Government are looking seriously at the management of these places, whatever the outcome of the applications by the individuals involved.

Civil Liability Bill [HL]

Lord Hodgson of Astley Abbotts Excerpts

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

Moved by

[Lord Hodgson of Astley Abbotts]

55: Clause 8, page 7, line 31, at end insert—
“( ) Rules of court under subsection (1) must draw attention to aspects of orders for periodical payments which may make them more suitable in cases where individuals have long-term injuries or are risk averse.”

[Lord Hodgson of Astley Abbotts (Con)]

My Lords, as we begin to discuss Part 2, I return to an issue I raised at Second Reading: the use—or perhaps the insufficient use—of periodical payment orders, particularly in cases where compensation is payable for long-term injuries.

To summarise the position, periodical payment orders are a form of annuity that ensures that a guaranteed sum, usually index linked, is paid to the injured party as frequently as he or she requires—weekly, monthly, quarterly or annually. PPOs have two particularly significant aspects. First, they transfer all longevity risk to the insurance company. The insured does not have to be concerned that he or she may live longer than is actuarially assumed, with the possibility of having to live in reduced circumstances for the last years of their life. Secondly, PPOs transfer all investment risk to the insurance company. The insured does not have to worry that bad investment decisions made on his or her behalf might result in a reduction in his or her income. Those are two significant factors.

I hope that it is common ground that one of the major purposes of the Bill is to ensure fairness—to ensure that individuals suffering life-changing injuries are properly compensated for the rest of their lives, however long or short these may be, and that these payments are made within a framework that is fair to the other insured individuals, who will have to pay their share of the expenses. I remind the Committee once again that I am not a lawyer—but a court must find it incredibly difficult from a purely practical point of view when faced with, say, the tragic case of a young man aged 25 who is badly injured in a road traffic accident, and the impossible task of ensuring fairness between the parties and deciding in such a case what the right single lump-sum award of damages should be. What is the life expectancy of such a person?

I have heard it argued that one does not need to be concerned about individual cases because average life expectancy over a number of cases can actuarially be determined fairly. However, that considers the case only from the point of view of the insured and, indeed, the co-insured. It is not much help to the individual injured party—injured, say, at the age of 25—to hear, “We thought you’d only live for 35 years, but here you are. I’m so sorry that you’re still living now and that the money is running out”. Nor is it fair to the insured and the co-insured, that when such a person, very sadly, dies early of complications aged, say, 40, a potentially significant lump sum is passed to his or her descendants, who have virtually no locus in the case.

In those situations, periodical payments would ensure fairness—so why are they not the default option in cases of long-term injuries and for people with low risk tolerance? There appear to be a number of structural reasons why that is so. First, from the point of view of the insurance company, a lump-sum payment is neater and more administratively convenient. In essence, one could put a pink ribbon round the file—or, in modern parlance, send the case to the cloud—and forget all about it. Further, PPOs are unattractive to insurers because of the method by which they are rated for capital adequacy purposes. I will not detain the Committee this afternoon with a detailed explanation except to say that, under the technical provisions of reserving, the combination of a best estimate of liabilities, the risk margin and the solvency capital requirements makes PPOs unattractive.

Secondly, from the point of view of the insured, particularly someone who is less financially sophisticated, an offer of, say, £6 million as a lump sum may on the surface appear to be more attractive than, say, a quarterly payment of around £50,000. I have also heard that it is not impossible that families might prefer the lump-sum route in the hope of some windfall, and there may be financial advisers who see a long-term stream of fees for providing investment management advice and might prefer a lump sum to a PPO.

Thirdly and finally, the individual judge considering the award might find it outwith the court’s role to opine too definitely on the method by which the award should be paid. All these influences, although individually not particularly significant or decisive, collectively tilt the balance away from PPOs.

The Government recognise the challenge in increasing the take-up of PPOs in paragraphs 48, 49 and 50 of their response to the report of the Justice Select Committee. Paragraph 48 states:

“The Government therefore sees many benefits in the use of PPOs to provide compensation in respect of future losses … particularly those who are most dependent upon the provision of long-term future care. The Government agrees with the Committee that it is not obvious why PPOs are used in relatively small numbers of cases”.


The following paragraph states:

“Perhaps even more tellingly, there was little enthusiasm for any changes to the law regarding PPOs in response to the consultation … It is therefore not clear what might be done to increase the take up of PPOs”.


For those of us who received today’s briefing from the Association of British Insurers ahead of this Second Reading debate, we can see the push-back already beginning. Under the section on PPOs, it says that they are,

“available in 99% of all cases … Insurers continue to make PPOs available for claimants when requested”.

I think that the use of those words indicates that it is not top of insurers’ lists to make sure that it is even Steven between the ways in which these awards are paid.

I have been seeking ways to redress this imbalance and move towards a position where PPOs might become the default option in cases where compensation for injuries will be paid out over the long term or where the injured party has a low tolerance of risk or is risk averse. Amendment 55 is intended to achieve this by requiring changes to the rules of court which would encourage or require judges to consider wider factors, in particular longevity risk and investment risk.

As I said a few moments ago, I am no lawyer, and I have no idea whether Parliament can require the inclusion of specific provisions in the rules of court without infringing judicial independence. It may be that, in the course of this debate, there are other, neater ways of achieving this shift of emphasis. So Amendment 55 is a probing amendment at this stage. However, I am convinced that the present position is not satisfactory, and the Government essentially agree that that is so. I look forward to hearing my noble friend’s reply. In the meantime, I beg to move.

[Lord Sharkey (LD)]

My Lords, Amendment 92 in this group would require the Lord Chancellor to carry out a review of the impact of any new rate on the extent of the use of PPOs and to lay this report before Parliament. Our amendment has the same general purpose as Amendment 55 and as other amendments in this group.

The noble Lord, Lord Hodgson, has already spoken eloquently to Amendment 55 so I can be very brief. It seems to me that all the amendments in this group are intended to provide a gentle nudge in the direction of PPOs. Their purpose is to create conditions in which the incidence of voluntary uptake of PPOs may increase. Given the scope of the Bill, not to mention the ethical questions that would be created by any reduction in the freedom to choose or not choose PPOs, this is probably as far as we can go.

I hope the Minister will be sympathetic to the thinking behind all of these amendments, coming as they do from various parts of the House. If he is sympathetic, perhaps he would be willing to meet interested noble Lords before Report with a view to drafting an amendment or amendments that he might consider bringing forward or supporting.

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[Lord Hodgson of Astley Abbotts]

My Lords, I thank my noble and learned friend for that extensive reply and other noble Lords for their contributions to this debate.

I take issue with my noble and learned friend on two matters. First, it is perfectly possible for us to deal with the question of PPOs for mutuals by setting up a proper reinsurance programme. That could be done quite easily. Therefore, to say that we would like to do this but we cannot because mutuals cannot provide it is inaccurate. We can sort that out with a certain amount of technical help.

Secondly, the noble Lord, Lord Sharkey, said that we were engaged in a nudge. Personally, I am engaged in a bit of a shove, and I hope that the noble Lord, Lord Monks, will join us in in that shove. I am not sure that my noble and learned friend has given a shove; I think it is a very delicate pressure on the arm of the industry, which I am not sure will be effective.

We heard from the noble Earl, Lord Kinnoull, about how PPOs are declining in use and from the noble and learned Lord, Lord Woolf, about the culture and question of fairness, which must be at the heart of all our discussions. I was encouraged to think that such an eminent jurist as him should think that the rules of court could provide the flexibility to enable the issues covered by my amendment to be incorporated. We are in an era where things are moving fast, and we do not want to find ourselves stuck in inflexibility.

My noble and learned friend Lord Mackay of Clashfern referred to the question of interference by the Executive with the judiciary. I made clear that I was concerned about that in my opening remarks. The amendment is designed so that Parliament, the legislature, makes its view clear. It is nothing to do with the Executive. It is giving judges a steer, but after that, it is over to them how they proceed. My worry about my noble and learned friend’s comments is that the best remains the enemy of the good. We have a system that is not working very well, but we are saying, “This is frightfully difficult, so we should not change it; we are likely to cause more trouble by changing it than we solve, let sleeping dogs lie”.

The system is not working very well. The transfer of investment and longevity risk away from the individual has to be a key part of making matters fair. It deals with important and difficult cases of the sort raised by the noble and learned Lord, Lord Judge. I hope that the Minister will agree to meet some of us between now and the Bill’s next stage, because I do not think we have got to the bottom of this. We are missing an opportunity to do something seriously helpful for people who suffer long-term, life-changing injuries. In the meantime, I beg leave to withdraw the amendment.

[Lord Keen of Elie]

In response to my noble friend Lord Hodgson, and a point raised by the noble Lord, Lord Sharkey, I would be perfectly content to meet them before the Bill’s next stage to discuss this. If they contact my private office, that can be arranged.

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Moved by

[Lord Hodgson of Astley Abbotts]

61: 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 to justify such a review.(3B) Where a review under this paragraph has not taken place for a period of 12 months, the expert panel must report to the Lord Chancellor as to why it considers that no review is necessary.”

[Lord Hodgson of Astley Abbotts]

My Lords, I rise to move Amendment 61 and speak to Amendments 65, 69, 86, 90 and 91, which are consequential.

These are probing amendments, designed to tease out the Government’s thinking on the methodology for carrying out reviews of the discount rate. As I understand it, the Government intend that each review of the rate must commence within three years of the last review, irrespective of whether there have been changes in the underlying investment climate that would affect the varying rates of return on the sums awarded. I would suggest that time is not the right metric by which to settle a requirement for carrying out reviews. I agree with my noble friend Lord Faulks, who has an amendment in this group, that three years is too short in any case. I would respectfully suggest that a five-year period suffers the same strategic defects. Fixed or maximum periods will inevitably lead to an increase in attempts to game the system. My noble and learned friend the Minister will, I am sure, point out that three years is a maximum and reviews can take place more frequently.

In the world of practical politics, things will not work out like that. Changing the discount rate is a significant and potentially controversial decision. We only have to look at the immediate history, with the discount rate remaining unchanged for over 15 years during one of the biggest financial booms and busts that the world has ever seen. I believe that Lord Chancellors will be reluctant to implement the changes until forced to do so, so there will be a bunching of claims as the fixed period nears its end—whether it is three or five years—as defendants and claimants reflect on whether the upcoming review is likely to be to their advantage.

Perversely, a fixed-term system requires a review where there is no obvious reason to undertake one. If the Bill is planned to achieve fairness, a key objective must surely be to ensure that rate changes are made to reflect changes in the underlying available rates of return on investments as quickly and efficiently as possible. This group of amendments suggests a different approach, making the expert panel established under paragraph 5 of proposed Schedule A1 a permanent feature. At present, it is not: it is dissolved after each review under paragraph 5(3), which is deleted by my Amendment 90.

Amendment 61 imposes a new advisory duty on the panel to,

“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 to justify such a review”.

The decision to initiate the review remains with the Lord Chancellor, but he or she is given the comfort of a third party advising that a review is advisable. To ensure that paralysis does not overtake the panel, the second part of Amendment 61 requires that,

“where a review under this paragraph has not taken place for a period of 12 months, the expert panel must report to the Lord Chancellor as to why it considers that no review is necessary”.

How the expert panel would make that judgment is up to it. Bearing in mind that in the new world, investment should be assumed to be in lower-risk categories, there are multiple indices: gilts—not index-linked gilts, I hasten to add—or prime corporate bonds, which together can provide indication of changes in the likely available rates of return. All the other amendments in my name in the group are consequential.

To conclude, these probing amendments seek to move the undertaking of reviews of the discount rate from an arbitrary, time-based system to one that reflects events in the relevant real world—namely, changes in the available rate of return on investments. I beg to move.

[The Deputy Chairman of Committees]

I must advise your Lordships that if the amendment is agreed to, I cannot call Amendment 62 for reasons of pre-emption.

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In the light of these explanations and while understanding that these are generally probing amendments—Amendment 74 is just that, as the noble Lord, Lord Sharkey, observed—I invite noble Lords not to press these amendments.

[Lord Hodgson of Astley Abbotts]

My Lords, I am grateful to all noble Lords who have taken part in this wide-ranging debate. Perhaps I might return to Amendment 61, where we began 54 minutes ago, and say to my noble and learned friend on the Front Bench that the purpose of this amendment was to assist the Lord Chancellor, not to undermine him. It was designed to give him some air cover by somebody saying, “Oi! You need to be doing something about the rates of return”. There was no fixed term to this; they could turn up at any time and say that. The idea was that they would somehow do it every year, but it would not be. It could be more frequently if interest rates changed sufficiently to justify the rate going up and down.

A permanent panel would have a role. The noble Lord, Lord Sharkey, talked about the MPC, which is not the same sort of thing but it has a collective institutional memory. If you dissolve the panel after each time it sits, and start again de novo with the next review, that seems a waste of the experience, knowledge and know-how of making these things work that would be built up in the operation of a panel. My noble friend Lord Faulks said that it is a political decision and I agree. It is, which is why Amendment 61 says:

“The expert panel under paragraph 5 must advise the Lord Chancellor to undertake a review”.


It does not say that he must; it says that it must advise him and at that point the Lord Chancellor may say, “No thank you” and make his own decision.

Let us consider this situation. The Lord Chancellor has a wide range of duties so somebody will have to tip up one morning and say, “Lord Chancellor, it’s time you had a review of the rate”. Somebody in the MoJ will have to survey the rates of return available and the unlucky official who has to do that will know that it will be an unpopular thing to say because the Lord Chancellor will not want to get into the controversy of having to establish and justify a new rate. That will not be a popular moment, so the much more likely time for it to happen is when the unlucky official comes along and says, “Lord Chancellor, the three-year period”—or five-year period—“is coming to an end and you’ve got to do something”. We will have this series of events at the end of the period prescribed, depending on whether the Government accept my noble friend Lord Faulks’s amendment to have five years as opposed to three. I suggest that, from the point of view of efficiency, applicability and fairness, an expert panel being able to say to the Lord Chancellor, “It’s time we had a review” is a much better way to proceed and much more in keeping with the arrangements and purposes behind the Bill.

We shall obviously go no further on this tonight, but perhaps I can put it on the shopping list for when my noble and learned friend is kind enough to say that we can come and talk to him. In the meantime, I beg leave to withdraw the amendment.

Amendment 61 withdrawn.

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As I said, I am probing; the most basic point is the discrepancy between “different financial aims” in the Bill and “similar investment objectives” in the Explanatory Notes—it seems to me that the Explanatory Notes have got it right. Then there is the additional confusion over what happens because you also have the implications of the purposes in paragraph 3(3) of new Schedule A1 and the factors in paragraph 3(5). It would be useful to have an elaboration, or even some sorting out, of how that is all supposed to work.

[Lord Hodgson of Astley Abbotts]

My Lords, I will briefly support the noble Baroness, Lady Bowles of Berkhamsted, in what she just said. It is easy for us to overlook what quantitative easing has done to the returns on savings and fixed interest. It has been a much longer-running saga than was anticipated, and it is still carrying on. If we are to set up a system that precludes people investing in equities, which gives some protection against that, we will be doing no service to the people who need this money as part of the way to recover from terrible injuries they received. The last line on page 9,

“who has different financial aims”,

does not add anything at all to the situation and will merely provide fuel and funds for lawyers to discuss exactly what that means in cases in future years.

[Lord Keen of Elie]

I am obliged to all noble Lords for their contributions. The noble Lord, Lord McKenzie of Luton, began by referring to the briefing from APIL—the Association of Personal Injury Lawyers. I am familiar with it, and indeed, the association invited me to speak at its annual conference, where I confirmed that we would take the Bill through Parliament. I have not cleared my diary for next year. Much of what they had to say, which was repeated by the noble Lord, was, as the noble Earl, Lord Kinnoull, pointed out, met by the need to encourage the uptake of periodical payment orders. We are committed to that and we will take it forward in various ways. They need to be embraced more thoroughly, not only by claimants but by defendants —insurers—as well. Nevertheless, I make that point.

The noble Lord referred to the case of Wells v Wells, which has been mentioned before. There we saw the reference to what was essentially construed as “very low risk investment in UK gilts”, and we are moving away from that. However, there is an additional element in that, which is volatility: you have an investment portfolio which may be subject to volatility, and you may find that it is at a low point at a stage when you need to withdraw capital funds. That has to be factored in as well, and we appreciate all that.

On the suggestion that we are somehow inviting people to invest their savings, or a majority of them, in hedge funds, that will not do at all. The portfolio A that was examined included 13% UK equities, 15% overseas equities, and 18% of alternative investments which could be modelled as hedge funds. We have to see all this in context. We took clear evidence on the nature of a low-risk portfolio, and there was reference, for example, to widows and orphans, but we are in a different climate in this context. We are not seeking to move away from the idea of 100% compensation. I will come on to the probing amendment of the noble Baroness, Lady Bowles, on setting the rate by reference to not only a floor but, I suggest, a ceiling—there are reasons for that—and the question of investment objectives, as distinct from different financial aims.

Amendment 78 seeks to amend paragraph 3(2) of new Schedule A1 by removing the words,

“in the opinion of the Lord Chancellor”,

from the requirement that the Lord Chancellor must decide the rate on the basis that,

“the rate of return should be the rate that, in the opinion of the Lord Chancellor, a recipient of relevant damages could reasonably be expected to achieve”,

if he invested the relevant damages for the purpose of the assumed objectives. The effect of the amendment would be to prevent the Lord Chancellor seeking to justify a rate on the basis that it seems perfectly reasonable in his subjective opinion when, by any objective assessment, the rate proposed is not supportable.

The noble Lord referred to an “unfettered discretion” and conflict with a political interest, but we are talking about the Lord Chancellor making the decision in his capacity as Lord Chancellor. He does not have an unfettered discretion. He is subject to public law duties in the exercise of his functions. Any decision of the Lord Chancellor as to what the rate should be must be rational, and any failure in rationality can be challenged by way of judicial review. I have already touched upon that and the question of disclosure, and I shall not repeat it.

It is necessary to have reference to the opinion of the Lord Chancellor in relation to setting the rate because the setting of the discount rate is not now, and will not under the proposed legislation, be a precise science—it cannot be. The decision to be made on the rate will require the weighing of different potential outcomes for individuals in relation to a range of possible rates. An inevitable degree of subjective assessment is involved in this process. That is why it is appropriate that, although there is an expert panel, that subjective assessment is made by the Lord Chancellor, albeit with the reasons being given and explained, with a rational analysis of the information submitted to him.

Amendment 78A would require the Lord Chancellor to assume, when considering the damages to which the discount rate would apply, that the relevant damages would be payable as a lump sum or partly as a lump sum. The current wording of the Bill requires the Lord Chancellor to assume that the relevant damages will be payable wholly as a lump sum. We do not consider that this amendment is necessary. The discount rate will only ever be applicable to damages payable as a lump sum, and in setting the rate the Lord Chancellor will have regard to that.

Amendment 79 would include the requirement to assume, among the assumptions which the Lord Chancellor must make under paragraph 3(3) of new Schedule A1 in determining the discount rate, that the cost to the claimant of investment advice shall not be recoverable by way of damages. I appreciate the point made by my noble friend Lord Faulks about the need to be clear about how investment management costs are to be treated in setting the rate, but we do not consider that this amendment is necessary.

Paragraph 3(5) of the schedule provides for the Lord Chancellor to make such allowance for “investment management costs” as he thinks appropriate. This provision has been included on the basis that under the current law the cost of investment advice is not, for the reasons explained by my noble friend Lord Faulks, recoverable as a head of damages and therefore needs to be taken into account as a factor in setting the discount rate. Should the law change, an allowance in the setting of the discount rate would then become unnecessary, as the claimant would already have the benefit of the compensation for the costs. However, we understand that paragraph 3(5) reflects the current law and can adapt to changes in the law. Therefore, we do not consider that it casts doubt on the present law regarding the unrecoverability of investment costs as a head of damage. That is a feature of fixing the discount rate.

Amendment 80, tabled by the noble Earl, Lord Kinnoull, seeks to change one of the assumptions that the Lord Chancellor is required to make under paragraph 3(3) of the new schedule. Under the amendment, the recipient of the relevant damages would be assumed to invest in a diversified portfolio of investment grade listed debt securities rather than a diversified portfolio of investments. The range of investments to be assumed to be made and included in the diversified portfolio under the amendment is clearly narrower than that under the proposed assumption in paragraph 3(3)(c) at present.

The Bill does not restrict the investments that are to be assumed, save that the overall investment approach must be assumed to fall within the range of risk described in paragraph 3(3)(d). We consider that this approach avoids the rigidity of tying the assumptions to a single type of investment. The Lord Chancellor and the panel can therefore assess what the appropriate investments should be in the circumstance of the review. In making their assessment, the Lord Chancellor and the panel will have to have regard to evidence of how claimants actually invest and the returns actually available to investors. We consider that to be a more sustainable system for the future.

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Moved by

[Lord Hodgson of Astley Abbotts]

89: Clause 8, page 10, line 36, at end insert—
“( ) For the purposes of this paragraph, the Lord Chancellor may adopt the membership and work of an expert panel already established by the Lord Chancellor prior to this Schedule coming into force.”

[Lord Hodgson of Astley Abbotts]

My Lords, this is another “hurry up and get this thing done” amendment, as we discussed extensively earlier today, particularly on the group beginning with Amendment 58. During the course of the responses that my noble friends on the Front Bench gave in that debate and others, my horse was shot—not once but twice. Or at least it was wounded, so I will be very brief.

I suggest merely that as a Committee we agree that we wish to see the new system brought into effect quickly as possible. This amendment is designed as empower the Lord Chancellor to begin preparatory work on setting up the expert panel and putting it to work before Schedule A1 comes into effect. My noble friend Lord Hunt of Wirral, who unfortunately was unable to stay for the rest of the debate, has written to my noble and learned friend on the Front Bench about this, citing precedents of where it has proved effective in the past to get things moving quickly, and the Minister has acknowledged those particular suggestions.

I hope that the Government will work in parallel and not end-to-end, because that will enable us to shorten the period by bringing this new system into effect. The whole discussion around Amendment 58 was about the length of time that it could take. The quicker we can find ways to shorten the proceedings the better, and this amendment might take a couple of months off that procedure if we can get the expert panel in place now. I beg to move.

[Lord McKenzie of Luton]

My Lords, we support the thrust of this amendment. Matters would have been helped had there been a stand-in panel in the first place.

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[Lord Hodgson of Astley Abbotts]

I am grateful to my noble friend, but I am less reassured—my horse has got up and started moving around again. I thought it had been shot but in fact it has not. “As soon as possible”, “as quickly as possible”, “we shall be working on it”, “we’ll do everything we possibly can”, “there’s no question of delay”, and, “we have procedures to go through and we’ll have to take evidence”—all this sounds like things are being slowed down again and the very thing that we were driving at in the amendment has been run into the rails, to continue with my horseracing metaphor. However, the hour is late and I beg leave to withdraw the amendment.

Amendment 89 withdrawn.