Civil Liability Bill [HL]

Lord Sharkey Excerpts

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

Moved by

[Lord Sharkey]

11: Clause 2, page 2, line 35, leave out from “amount” to end of line 13 on page 3 and insert “determined in accordance with the 14th edition of the Judicial College Guidelines for the Assessment of General Damages in Personal Injury Cases or any subsequent revision to these guidelines.”

[Lord Sharkey (LD)]

My Lords, the long string of amendments in my name and that of my noble friend Lord Marks has a very simple purpose: to enable us to debate the proposed tariff and, in particular, two different types of tariff. The first, essentially contained in Amendment 11, is a tariff based on the Judicial College Guidelines. The second is a fixed, specified and structured tariff. This is essentially contained in Amendment 96, where the amounts are place-holders based on the average of awards actually made. Before I discuss either of these variations, I should again mention the Delegated Powers Committee recommendation that,

“it would be an inappropriate delegation of power for damages for whiplash injury to be set in a tariff made by Ministerial regulations rather than on the face of the Bill”,

and that the tariff,

“should be set out on the face of the Bill, albeit amendable by affirmative statutory instrument”.

At Second Reading, the Minister noted this recommendation and responded by saying:

“We consider that being able to regulate the tariff by the affirmative procedure is a more flexible way of being able to respond to changes”.—[Official Report, 24/4/18; col. 1531.]


That is precisely what the DPRRC proposed should happen after first setting out the tariff in the Bill. I hope that when the Minister responds, he will give a fuller answer as to why he believes that the tariff should not be in the Bill but should be fixed by an unamendable statutory instrument.

I turn to the question of the tariff itself. Should damages remain determined by application of the Judicial College Guidelines, or should they be fixed amounts? If fixed amounts, what should those be? These questions go to the heart of the matter. If we stay with the Judicial College Guidelines, the system would be relatively unchanged, although we could reduce awards for injuries of less than three months’ duration if, for example, we thought that that was where fraudulent claims were concentrated. If we move away from the Judicial College Guidelines to the example tariff contained in the impact assessment or to the tariff published yesterday by the Government, there will be very profound changes. The tariff published yesterday is even lower—by about 4.7%—than the example tariff on page 26 of the impact assessment. It would be interesting to know how these tariff levels were arrived at and what objectives were used in deriving them. For example, was there a target reduction in the cost of total damages awarded? If so, on what basis was this target chosen? Can the Minister explain the basis of the construction of the tariff amounts and tell us whether there was indeed a target for overall damage reduction?

Whatever method was used to devise the Government’s proposed tariff levels, in either the example tariff or yesterday’s tariff, both would have a very large effect. These new tariffs would transfer £1 billion away from claimants, via insurers, wholly or partially to motorists in the form of reduced premiums. That is a very large transfer. It is made up of £240 million in claims that would no longer proceed under the new tariff—assumed to be around 133,000—£550 million because of the reduced awards for every successful claimant, and £190 million from insurers no longer picking up legal fees and VAT. On the way, and as a consequence of this transfer, the general taxpayer would be hit for £140 million by reduced revenue from IPT and some loss of revenue to the NHS. If the Government’s tariff levels are applied, there will be, they calculate, a lot fewer claimants and, it is to be hoped, fewer fraudulent claimants, deterred as they might be by the banning of no-med settlements and very low tariff awards. This means that those successful claimants remaining will carry the burden of this transfer. Claimants will be £1 billion worse off; motorists will be £1 billion better off. What is the Government’s justification for such a massive transfer of funds? There are two questions to answer. First, what is the evidence base that justifies any transfer? Secondly, why this amount? Why such a very large reduction in amounts awarded to claimants? Why not a smaller reduction—or, for that matter, a larger one? What is the justification for this level of transfer?

In the impact assessment and in the Minister’s speeches at Second Reading, it was clear that some care had been taken to avoid using fraudulent claims as the main reason for the proposed changes. However, I note that today the Minister seems clear that this is in fact the main driver. As we noted at Second Reading, claims about the incidence of fraud are highly contested. Is there in fact a reasonable and properly evidenced consensus about the extent or cost of fraudulent or exaggerated claims? I worry that there is not.

There are certainly competing claims from all the many vested interests involved, including the insurance industry, but no independent assessment to help us reach an evidenced view. The Government more or less recognised this when they set out in the impact assessment the principal justifications for the proposed changes. They were all economic and based on a need they saw to correct three alleged market failures. The first failure—if you can really call it that—was asymmetric information. Only a victim could really know the extent and duration of the pain and suffering caused by whiplash, and the Government see this as an incentive to fraudulent or exaggerated claims. So it may be, but we do not seem to know how many or to what extent. But punishing all genuine whiplash claimants by hugely reducing their awards is surely not a reasonable remedy. Why punish these people and reward motorists for an unquantifiable, or at least unquantified, number of fraudulent or exaggerated claims?

The second market failure is alleged to be that of perverse incentives. This refers to legal fees. The Government claim that if legal fees were not recoverable or were less recoverable, this would bring down the number of claims. So it might, but would this be reasonable? In any case, this alleged saving is by no means the major element in the transfer of funds away from claimants.

The third alleged market failure is that of insurance companies settling claims without proof of injury. Here, there is obviously a genuine market failure, and I am very glad to see the Bill banning this practice. However, nowhere in the impact assessment’s justifications for action is there any reference to the huge transfer—over £500 million—that is brought about simply by the introduction of much lower awards for all claimants. Again, what is the evidence base for such a reduction?

The Government’s proposed tariff is significantly lower than the current actual awards in every duration band. For injuries lasting up to three months, current awards average £1,800; the Government propose £225. For injuries lasting between three and six months, current awards average £2,250; the Government propose £450. That carries on all the way up the duration scale. This all looks like an arbitrary and huge transfer of money from claimants to motorists via insurance companies. The Government have given no justification for the scale of this transfer and no explanation why claimants should be so punished and motorists so rewarded. I imagine that we will hear such claims as, “It is generally accepted that claim levels are too high”. This is not a sound basis for policy decisions, certainly not involving huge transfers of funding on this scale, which also create very serious anomalies.

As we pointed out at Second Reading, an injury of 24 months’ duration identical in its effects, if suffered at work, would attract up to £6,500. For whiplash, the Government would restrict you to £3,725. If the Government want a fixed tariff, as they clearly do, then they should put this tariff in the Bill, so that we have the opportunity to amend it. As importantly, they must justify this £1 billion transfer from claimants to motorists. They must explain why all claimants for whiplash should suffer and all motorists benefit.

[The Deputy Chairman of Committees (Baroness McIntosh of Hudnall) (Lab)]

My Lords, if this amendment is agreed to, Amendments 12 to 22 inclusive cannot be called by reason of pre-emption.

--- Later in debate ---

[Lord Keen of Elie]

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

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

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

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

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

[Lord Sharkey]

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

[Lord Keen of Elie]

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

[Lord Sharkey]

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

[Lord Keen of Elie]

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

[Lord Sharkey]

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

[Lord Keen of Elie]

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

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[Lord Sharkey]

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

[Lord Keen of Elie]

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

--- Later in debate ---

[Lord Keen of Elie]

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

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

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

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

[Lord Sharkey]

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

[Lord Keen of Elie]

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

[Lord Sharkey]

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

Amendment 11 withdrawn.

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[Lord Young of Norwood Green (Lab)]

My Lords, with the leave of the House I will move this amendment on behalf of my noble friend Lord Berkeley, who is unable to attend this afternoon due to personal circumstances. This amendment addresses a slightly different issue from those that I have heard today. If the Bill is enacted, the Government also propose to increase the small claims track limit for personal injury cases from £1,000 to £5,000 for all road traffic accident claims and to £2,000 for all other personal injury claims. The Ministry of Justice’s impact assessment makes it clear that the small claims limit increase is part of a broader reform package, although the small claims limit proposals do not appear in the Bill, as they can be implemented through secondary legislation via an amendment to the Civil Procedure Rules.

When the Ministry of Justice published its consultation on reforming the soft tissue whiplash claims process, Cycling UK—to which I must pay tribute for providing the briefing—realised that the stated proposal to increase the small claims limit to £5,000 extended far beyond whiplash claims by car occupants. In partnership with RoadPeace, the national charity for road crash victims, and Living Streets, the national charity for everyday walking, Cycling UK launched its Road Victims are Real Victims campaign, the catalyst for which was the shared concern that the consultation ignored the interests of road crash victims, particularly pedestrians, cyclists and motorcyclists—generically vulnerable road users.

Within the consultation, no reference was made to vulnerable road users. The focus was on whiplash, fraudulent claims and motorists, without consideration of the complexity of vulnerable road user personal injury claims, the different nature of the injuries typically sustained and claimed for or their vulnerable status. More than 6,000 people responded to the Road Victims are Real Victims campaign, writing to the Ministry of Justice in support of Cycling UK’s submissions and outlining their opposition to the proposed small claims limit increase, which disproportionately affects vulnerable road users. The MoJ’s consultation response failed to address any of the arguments raised on behalf of vulnerable road users, including the complexity of their claims or the nature of their injuries, save for one sentence in paragraph 86 acknowledging that certain points had been made but not responding to them.

The Government’s proposal to increase the small claims limit to £5,000 for all road traffic accident-related claims will affect 70% of cyclist personal injury claims and a similar percentage of motorcyclist personal injury claims, where the general damages for pain, suffering and loss of amenity are under £5,000. Cycling UK met with officials at the MoJ following publication of the consultation response, and explained why vulnerable road user personal injury claims should be excluded from the small claims limit increase to £5,000 and how that could be achieved simply through adopting the same definition of a road traffic accident claim for the purposes of the small claims limit, as the Government propose to adopt in Clause 1 of the Bill, which defines whiplash injury and refers to whiplash injury suffered due to driver negligence when someone is,

“using a motor vehicle other than a motor cycle”.

The Bill excludes vulnerable road users from the definition of whiplash and the whiplash reforms in the Bill. The changes to the small claims limit catch all road traffic accident personal injury claims, including those by vulnerable road users.

The consultation document made it abundantly clear that the Government’s main aim was to tackle what they perceived to be the “compensation culture” and both fraudulent and exaggerated whiplash claims. Whatever the extent of these problems, the purpose of the amendment is to ensure that vulnerable road users should not be penalised as a consequence of measures the Government implement to address them. I do not think that we are trying to say that this is a perfect amendment. I hope the Minister will understand that this is a probing amendment; we are seeking an assurance from him that he would be open to a consultation process. Before I end my contribution I suppose that I should declare an interest as a regular cyclist and a member of the All-Party Parliamentary Cycling Group. I beg to move.

[Lord Sharkey]

Talking about vulnerable road users, I was reading Tuesday’s edition of Insurance Times, and the opening sentence was:

“Justice minister Lord Keen makes the first concession on Civil Liability Bill ahead of it entering the committee stage in the House of Lords”.


It went on to say:

“Lord Keen sent a letter to peers this morning, and in it, he made his first real concession regarding the Bill”—


and it then went on to quote the Minister at some length.

I looked on the Bills in progress website and could not find any letter. I searched through my emails and could not find any letter; I searched through my junk mail and still could not find any letter from the Minister. I wonder whether he will simply tell me that I should not believe everything I read in Insurance Times, or whether there is some letter that he would like to draw our attention to.

[Lord Butler of Brockwell (CB)]

My Lords, I support this amendment. I, too, declare an interest as a regular cyclist and a member of the APPG on cycling. As has been made clear at all stages, the Government’s main aim in this Bill is to tackle what they perceive as the compensation culture, and in particular fraudulent and exaggerated whiplash claims. It should not be a by-product of that that vehicle road users, including cyclists, are penalised by measures designed for a completely different purpose.

Whiplash claims are brought by motor vehicle occupants, not by people riding bicycles or motorcycles or crossing the road. Nobody makes a fraudulent claim by throwing themselves off a bicycle or a motorbike or by jumping in front of a car. The point has been made to the MoJ that there is no evidence to suggest that fraudulent claims by vulnerable road users are an issue of concern—and, as far as I am aware, no evidence to the contrary has been provided by the Ministry of Justice.

Whiplash claims from cycle and motorcycle collisions are almost entirely unheard of. The mechanism of the typical injury sustained is, of course, different. People on bicycles tend to be injured by hitting hard surfaces—car bonnets or the road. They sustain fractures and injuries from those impacts. It is not at all likely that they would be making a fraudulent claim. Indeed, I think it is impossible to imagine that they would.

I support this amendment. I think that a Bill designed for whiplash claims should not accidentally spread its effect to vulnerable road users whose injuries are likely to be of a completely different nature.