Civil Liability Bill [Lords]

Mary Robinson Excerpts

3rd reading: House of Commons & Report stage: House of Commons
Tuesday 23rd October 2018 Commons Chamber

[Mrs Badenoch]

I thank my hon. Friend for making that point. It is something I would have liked to say earlier, and I am glad he was able to make it for me.

In conclusion, the Bill fulfils a manifesto commitment by my party and should make it easier for genuine whiplash claimants. I will be supporting it tonight, but not, I am afraid, Opposition amendment 2.

[Mary Robinson (Cheadle) (Con)]

It is a pleasure to follow my hon. Friend the Member for Saffron Walden (Mrs Badenoch). As we have heard, the Bill makes important changes to our personal injury compensation system, and although I broadly support its aims and measures, I would like to put on the record a few of my concerns and those raised with me by lawyers and constituents.

The Bill is long overdue. The last increase to the small claims limit was made in 1991. As we have heard, data from the Department for Work and Pensions reveal that about 650,000 road traffic accident-related personal injury claims were made in 2017-18 and that about 85% of these were for whiplash-related injuries—a higher rate than in any other European country. Department for Transport figures, however, show that from 2007 to 2017 reported RTAs fell by 30%.

Clause 3 introduces a tariff for compensation in whiplash claims. Lawyers who have contacted me and met to discuss this have supported the arguments made by the Access to Justice Foundation, which has estimated that the proposed new tariff would deny 600,000 people injured on our roads each year the right to legal advice when seeking compensation.

The question I have asked is: how does this value equality and fairness in comparing types of injury under the compensation regime? For instance, under the proposed tariff, if I experienced an injury in a road traffic accident that lasted up to three months—as I have in the past—I would receive £235 in compensation. Compensation varies across many sectors. If my train journey from London to Stockport, a route on which I travel every week, were delayed by two hours, I could receive up to £338. Under these proposals, the same injury would attract less compensation simply because it was sustained in a road traffic accident rather than in another way.

[Rory Stewart]

I am interested by my hon. Friend’s speech. She said that she would be entitled to compensation amounting to £338 for a two-hour delay. Is that compensation for the ticket that was purchased? What is the nature of the compensation?

[Mary Robinson]

I am talking about the compensation that would normally be paid by train operators.

It is important that we tackle whiplash fraud, but it is hard to explain to those who are injured that the same injuries sustained in different circumstances—for example, a comparable injury at work—should be compensated differently. Under the reform proposals, someone who had been involved in a road accident would be entitled to £3,910 for a whiplash injury lasting up to two years, but would be unable to recover the cost of paying a lawyer to assert their rights. Someone who suffered an identical injury at work would be entitled to £6,500, and would be able to recover costs. For many people, it goes to the heart of ensuring fairness that comparable injuries should attract comparable awards—if awards are indeed to be given—whether those injuries were sustained in a road traffic accident or incurred at a place of work.

If, as is hoped and predicted, these changes result in savings to the insurance industry, it is important for members of the public to see that the savings are passed on via reduced premiums. Concerns were raised about that in Committee, and I am encouraged that the Government accepted amendments that will hold insurers to account. As amended, the Bill places a statutory requirement on insurers to provide the Financial Conduct Authority with certain information to enable Treasury Ministers to report to Parliament on whether the insurers have upheld their public commitments by passing on savings. The Government have estimated that these measures would lead to a reduction in motor insurance premiums of approximately £40 per customer per year. I expect the industry to demonstrate that savings are being appropriately passed on, so that consumers can see fairness in the insurance system.

[Craig Tracey]

Is my hon. Friend aware of the support for the Bill in its current form? A survey conducted by Consumer Intelligence showed that the most important factor in a low-value personal injury claim was a simple claims process, and the least important factor was the ability to claim back their legal costs.

[Mary Robinson]

It is absolutely right that people support reform of the system, and I support the Government’s action in doing so. I am keen to ensure that we can secure fairness for everyone through the Bill.

According to the recent AA British insurance premium index, these reforms have already triggered a fall in premiums owing to the expectation that claim costs will fall, and only yesterday it was reported that motor premiums had fallen for the first time in years: last month they were almost 10% lower than they had been in the same month in 2017. That means that the average driver is £45 better off as a result. Consumers will be pleased with lower premiums, but they must be convinced that that is worth any detriment that they may experience should they become victims of traffic accidents.

We might not be having this debate at all were it not for fraudulent claims. I can almost guarantee that, at some point in the past year, every Member—including, perhaps, the Minister—will have been contacted by a claims management company, usually wrongly asserting that they have been involved in a car accident recently, and can lodge a claim. That seriously concerns and aggravates many people. A 2017 YouGov report shows that more than two thirds of people are in favour of a ban on cold calling for personal injury claims. Cold calling is a particular issue for the vulnerable and the elderly, who may be talked into making fake or exaggerated claims. A Justice Committee report earlier this year stated that the recent restrictions on cold calling by claims companies

“do not go far enough and that an outright ban should be introduced.”

[Stephen Kerr (Stirling) (Con)]

My hon. Friend will know that I introduced a ten-minute rule Bill on nuisance calls. This Bill goes some way towards addressing the issue—there is no denying that—but does she believe that we could go further and hold the directors of companies who are responsible for cold calling directly responsible for any fines that arise from their activities?

[Mary Robinson]

I am grateful to my hon. Friend for making that point. That should be explored and people would welcome it because they would see that we were being positive in addressing this.

Throughout the Bill’s passage, I have met regularly in my weekly surgeries with solicitors and law firms that have been engaged in this process. They have impressed me, and impressed upon me their pursuit to help the vulnerable who are injured and to ensure that we have a justice system that works, is fair and protects people.

I thank the Minister for his continued engagement and openness with me and colleagues as the Bill has progressed through both Houses. He has been open to all my questions and I am grateful for the way he has dealt with them. I look forward to this Bill progressing. I know that there will be a spirit of openness and transparency as it does.

[Rory Stewart]

I again thank all Members who have participated.

Amendment 2 relates centrally to the core of this Bill, which is about the question of the setting of tariffs. We have discussed this with great verve and vigour from many different sides. The first debate that has taken place in the last hour and a half has been about the purpose of these tariffs: why we are introducing them in the first place. The reason why comes out of a perception of an anomaly. That anomaly can be seen either, as my hon. Friend the Member for Bexhill and Battle (Huw Merriman) pointed out, in terms of the fact that the number of car crashes is coming down and cars are getting safer, but at the same time the number of whiplash claims over the same period has increased dramatically; or, as my hon. Friend the Member for Spelthorne (Kwasi Kwarteng) pointed out, in terms of national differences. There are many more whiplash claims from Britain per head of population compared with Germany or France, leading to my hon. Friend speculating on biological differences.

The second debate has been about proportionality. That argument was made by, for example, my hon. Friend the Member for Middlesbrough South and East Cleveland (Mr Clarke). He was essentially arguing, along with the former president of the Supreme Court, Lord Brown, that there needs to be a closer relationship between the amount of compensation paid and the nature of the injury suffered. As Lord Brown said in the House of Lords:

“lesser injuries were altogether too generously compensated, certainly in comparison to the graver injuries”.—[Official Report, House of Lords, 10 May 2018; Vol. 791, c. 306.]

The idea of proportional compensation for a type of injury was central to the argument of my hon. Friend the Member for Middlesbrough South and East Cleveland.

My hon. Friend the Member for Dudley South (Mike Wood) reminded us that the former Labour Lord Chancellor, Jack Straw, had serious concerns about compensation for soft tissue injury and that this form of car insurance is mandatory, putting a particular obligation on the House of Commons when it considers it. But, characteristically, the most “sensible, proportionate and calibrated” speech came from my hon. Friend the Member for Cheltenham (Alex Chalk), who, by using those three adjectives to define the nature of the tariffs, brought us, in a huge move, from jurisprudential reflections on the nature of tariff systems to a disquisition on rural transport in Cheltenham. My hon. Friend the Member for Stoke-on-Trent South (Jack Brereton) brought it down to earth with a good focus on safety in vehicles.

--- Later in debate ---

[Rory Stewart]

This is a serious issue. The intention of the award made by the court is to provide 100% compensation. In other words, the intent of the court is to make sure that catastrophically injured victims receive the sum of money required to cover their lifetime care costs or loss of earnings. The best way of doing this is through a periodic payment order, which is why we have asked the Master of the Rolls and his committee to look at the use of PPOs. Under such orders, the real costs of people’s care year on year to the moment of their death will be covered; that is how the PPO operates. There is no need to give people a lump sum and speculate somehow on how long they are going to live.

In all cases we would encourage people to make much more use of PPOs. It is true that victims often do not want to accept PPOs. They would rather accept a lump sum either because they believe they can invest it and potentially generate more money or because they feel that were they to die prematurely they could pass on that lump sum to their relatives, but that is not the intention of the award. The award is designed to produce 100% compensation for their care costs.

[Mary Robinson]

We must get this right for people who have had those catastrophic injuries; their lives are changed forever. Getting this discount rate right is also important because it will affect how they will invest. What more can we do to ensure that they are not forced into, or tempted to, make riskier investments over the course of their lifetime, which will affect their care?

[Rory Stewart]

That is absolutely right. First, we must bear it in mind that when looking at compensation for somebody in terms of their lifetime care costs, there are a number of uncertainties. First, the court has to make a judgment as to how long they believe that catastrophically injured victim will live, which is very difficult. Secondly, they have to make some kind of judgment of the future performance of the financial markets in order to work out what a reasonable rate of return would be to cover those lifetime care costs. For that reason, the PPO is a much more reliable mechanism. However, in relation to the question of the risks taken by the individual, we have made it clear both in the Bill and subsequent statements what we intend in the decision of the Lord Chancellor. This will be a decision of the Lord Chancellor acting in a quasi-judicial role; this is not the Lord Chancellor acting on behalf of the Treasury, which is why the Lord Chancellor before the previous one ended up at a minus 0.75% rate, which would not have been the preferred Treasury rate. The Lord Chancellor is to make that decision on the basis that the individual concerned is a low-risk investor, and we would expect that individual to be taking less risk than would be taken by a traditional widows and orphans fund. In other words, because of the vulnerability of the investor and the importance of the return in covering things such as their lifetime care costs, we would be conservative in setting this rate.

We are confident that the rate that would be set would be better than the current rate, which imagines simply a gilt return, which does not reflect the actual nature of investing or of returns.

We are also clear that we are aiming for 100% compensation. We are not chasing a median compensation in which 50% would be under-compensated and 50% over-compensated. In fact, the Lord Chancellor would retain the discretion, on the advice of the expert committee and the Government Actuary’s Department, to be able to vary that rate. The judiciary would have the possibility of varying the rate in exceptional circumstances. Let us be in no doubt that we have an obligation to the public purse, to the NHS and to the public as a whole to control the costs. We have a moral responsibility to ensure that the compensation paid is 100% and not 125%, but we also have a moral obligation to ensure that vulnerable individuals who have suffered catastrophic injuries are properly compensated.

The Bill contains measures to reform whiplash claims and the discount rate, and it is the result of an admirable exercise in serious discussion in the upper House, in Committee, with the Justice Committee and through engagement with civil society since 2012. It contains a pragmatic, nuanced and calibrated set of measures that will deal with the excessive costs of whiplash and ensure that the discount rate is set in a way that balances the needs of our most vulnerable victims with the needs of the public purse. On the basis of that, and with great thanks to right hon. and hon. Members, I commend the Bill to the House.