Civil Liability Bill [HL]

Lord Monks Excerpts

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

We think that the prospect of the greater use of periodical payment orders will be in the interests of the system and of many of those who have suffered extremely serious injuries. We would like to see that process set in being, but then properly reviewed. There are concerns—we have heard some of them already—about how it would operate. We will need a commitment to the review after a reasonable time to ensure justice is being done for those who have suffered and that society as a whole accepts its responsibility for ensuring they have adequate compensation adapted to their particular needs as far as possible.

[Lord Monks (Lab)]

My Lords, I too welcome the engagement and interest of the noble and learned Lord, Lord Woolf, in Part 1 of the Bill, which we will return to at certain points on Report. On Part 2, I am one of the nudgers mentioned by the noble Lord, Lord Sharkey, in seeking to promote the greater use of PPOs in assessing people’s compensation.

A large part of the compensation in serious PI cases are the costs of care. These tend to rise faster than the price index, which is all that the index-linked gilts yield approach protects against. In the PPO regime, this is allowed for explicitly by indexing care costs to an index of carers’ earnings, but this has not been carried forward into the lump sum compensation regime, although the Damages Act allows for different discount rates to be applied for different purposes. As a result, most large cases result in significant undercompensation for the claimant if they live an average lifespan.

The PPO is a much better method of compensation, since it goes on as long as the claimant lives. I understand that it is used by the NHS and government departments. Insurance companies, on the other hand, are highly resistant to settling by PPOs unless courts impose them. Only a small number of cases go to court; the vast majority are settled outside. Understandably, insurance companies do not want an outstanding liability which might last for many years. Regulators require them to reserve on a basis stronger than index-linked gilts for lump-sum entitlements.

As the amendments suggest, there is a need for regular reviews of the discount rate, as yields have fallen steadily. I hope that the Minister can respond positively to the nudging from different parts of the Committee on this important question.