Civil Liability Bill [Lords]

Rory Stewart Excerpts

2nd reading: House of Commons & Money resolution: House of Commons & Programme motion: House of Commons
Tuesday 4th September 2018 Commons Chamber

[Ruth George (High Peak) (Lab)]

I will address my speech to you, Madam Deputy Speaker.

I agree with Government Members that the insurance industry plays a valuable role. It has two main purposes: to ensure that innocent victims are compensated for their suffering and its impact on their lives and that perpetrators are appropriately penalised with higher premiums. Unfortunately, the measures in the Bill will do nothing to effect either of those main aims of the insurance industry, but they will impact heavily on innocent victims and ensure that perpetrators do not pay the costs of their actions.

I agree that we need to combat the problem of claims management companies, as we have heard from Members on both sides of the House. However, as the hon. Member for Croydon South (Chris Philp) set out lucidly, claims management companies are fed information by insurance companies, to enable them to target the victims of accidents. Since that was banned directly, they have been doing it indirectly. Insurance companies are not only feeding claims management companies information to enable them to do that but are profiting from it, and they are now briefing Members that it is a problem with claims management companies.

[The Minister of State, Ministry of Justice (Rory Stewart)]

This may be a naive question, but it seems as though two different arguments are being made by Opposition Members. There was a suggestion from the hon. Member for Jarrow (Mr Hepburn) that the direction of the insurance companies is to try to stop anybody claiming. The hon. Lady seems to be arguing that the insurance companies are also fuelling these claims. Can she explain that paradox? How can they can be involved in both at the same time, and how does that work for them financially?

[Ruth George]

I cannot answer for other Opposition Back Benchers. I am speaking as an individual Back-Bench MP with experience of the insurance industry, and the hon. Member for Croydon South set out clearly similar experiences.

Along with Government Members, I have met the Association of British Insurers, but I suspect that it was a slightly less happy conversation, and I will certainly read less of its briefings in my speech. I challenged the ABI on the information coming to claims management companies from insurance companies. It agreed that that was happening and said that the Government could look to stop it. When insurance companies are putting information out to solicitors’ firms, they could ban those firms contacting claims management companies to farm out the information.

[Rory Stewart]

This is a sincere question. The suggestion made by the hon. Member for Jarrow and a number of others is that the entire profit model of the insurance companies is based on charging big premiums and trying to minimise the number of claims, and that that is how they make money. The suggestion is that the entire Bill is driven by the insurance industry trying to stop anybody making claims. At the same time, perfectly reasonably, you are making the argument that the insurance companies are trying to support claims. How do they—

[Madam Deputy Speaker (Dame Rosie Winterton)]

Order. Having brought to the attention of the hon. Member for High Peak (Ruth George) that she must not use the word “you”, I hope the Minister will follow suit.

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[The Minister of State, Ministry of Justice (Rory Stewart)]

It has been a great privilege to be able to sit through this debate with an extraordinary number of Members, many of whom have very direct experience as lawyers in the claimant industry or connections to the insurance industry. It has therefore been a very well-informed debate.

Our proposals in this Bill are serious, but to some extent matters of housekeeping. They follow a lengthy and extensive consultation over a number of years, and they attempt essentially to do three things: first, to try to improve the administration of justice in certain key, but relatively limited, ways; secondly, to address some issues around public morality and honesty; and, thirdly, to make sure we guard resources whether in the interests of people paying motor premiums or those who are supporting the NHS.

A number of objections have been made by Members across the Chamber and seven of them have stood out. Four of those I would respectfully and politely disagree with, but three have some real heft and we will take them into account in proceeding with this Bill.

The first of those objections, from the hon. Members for Ashfield (Gloria De Piero) and for Jarrow (Mr Hepburn), largely focused on the questions of damage in the workplace and to people with non-whiplash-related injuries. This is not strictly relevant to this Bill, which deals with whiplash-related injuries. The change in terms of non-whiplash-related injuries is proposed to be from £1,000 to £2,000, roughly in line with RPI since it was set in 1991, and dealing with roughly the same category of cases that were intended when the legislation was first introduced in 1991.

The second issue that has been raised by some hon. Members is that there is no evidence. This will be somewhat depressing for the people who have conducted an extremely extensive consultation, which has taken evidence not only from the insurance industry, as has been suggested, but from the Department for Work and Pensions, from claimant lawyers, from the Medical Reporting Organisation and from a large public consultation.

Thirdly, the hon. Member for Jarrow and, to a certain extent, the hon. Members for Enfield, Southgate (Bambos Charalambous) and for Cardiff Central (Jo Stevens) suggested that very few fraudulent whiplash claims were being made. This is a difficult issue to pursue, as my hon. Friend the Member for Croydon South (Chris Philp) eloquently pointed out, because of the asymmetry of the information. In other words, it is extremely difficult to prove that someone has a whiplash claim because it is, by its very nature, a concealed injury. Nevertheless, the statistics—in particular, those raised by my hon. Friend the Member for Spelthorne (Kwasi Kwarteng)—show that the number of traffic accidents has decreased by a third while the number of claims has gone up by 40%. At the same time, as my hon. Friend the Member for Walsall North (Eddie Hughes) pointed out, cars have become considerably safer. All this suggests that something is going on in relation to these claims.

The fourth objection, raised by the hon. Member for Lewisham West and Penge (Ellie Reeves), related to access to justice. The suggestion was that it was inappropriate to say that people should proceed to a small claims court for claims of under £5,000. The vast majority of existing claims do not proceed to court at all. The district judges who are ruling on these claims are used to dealing with claims of up to £10,000.

The three more serious objections are those that we are addressing. One of them is the idea that the insurance industry will not pass on the savings to motorists in the form of premium savings. As the Secretary of State has indicated, we will therefore be introducing an amendment, which will be with the House shortly and will be available in Committee and on Report, to address this exact concern, which was expressed by the hon. Members for Harrow West (Gareth Thomas), for Leeds East (Richard Burgon) and for Jarrow, and by my hon. Friend the Member for South Leicestershire (Alberto Costa), as well as by the hon. Members for High Peak (Ruth George) and for Hammersmith (Andy Slaughter) .

The second serious concern was about vulnerable road users, and it was raised by my hon. Friend the Member for Chelmsford (Vicky Ford) and by the hon. Members for Cambridge (Daniel Zeichner) and for Brentford and Isleworth (Ruth Cadbury). There, too, we will be introducing changes to ensure that vulnerable road users are excluded from the scope of the Bill and from the raise in the limit. Thirdly, my hon. Friend the Member for Croydon South and others raised concerns around periodic payment orders. The Secretary of State has written to the Master of the Rolls to ensure that PPOs are introduced more frequently, in order to ensure that vulnerable people suffering problems around lifetime care costs are genuinely able to get regular, sustainable and reliable payments out of the insurance industry to sustain them.

[Chris Philp]

Will the Minister give way?

[Rory Stewart]

Very briefly, because I have been told to stop in three minutes.

[Chris Philp]

What does the Minister think of the idea that we might tweak the system so that periodic payment orders became the default setting unless a judge agreed that there was a good reason to do otherwise and make a lump sum payment?

[Rory Stewart]

I am very happy to take that issue offline with my hon. Friend. There is a lot to be said for PPOs.

In essence, there are three fundamental arguments that we would make in favour of the Bill. The first is that we need to ensure that the administration of justice is proportionate and sustainable. As my hon. Friend the Member for Chelmsford has pointed out, the fact that nearly 40% of the costs are currently being absorbed by legal fees is a serious issue. Secondly, we need to ensure that the system is straightforward. As my hon. Friend the Member for North Warwickshire (Craig Tracey) pointed out, the introduction of the portal will ensure that the administration becomes more straightforward. Thirdly, my hon. Friend the Member for Croydon South has pointed out that the introduction of fixed tariffs, on the French model, will make the administration of justice more predictable.

The question of fraud and morality is also at the centre of these changes. As my hon. Friend the Member for Bromley and Chislehurst (Robert Neill) said, fraud does happen, and my hon. Friend the Member for South Norfolk (Mr Bacon) has pointed out that it can often be extremely flagrant. My hon. Friends the Members for Spelthorne and for Walsall North (Eddie Hughes) said that even if we cannot prove every case of fraud, it is at least true that claims are becoming more exaggerated. Indeed, as my hon. Friend the Member for Walsall North also pointed out, that can have medical consequences. To quote the polite words of the New England Journal of Medicine:

“The elimination of compensation for pain and suffering is associated with a decreased incidence and improved prognosis of whiplash injury.”

That was the point made by my hon. Friend about the situation in Greece.

The fundamental point is that the Government have a responsibility to balance the administration of justice and honesty with the broader social costs. As my right hon. Friend the Member for Chipping Barnet (Theresa Villiers) pointed out, insurance premiums have been rising, and we need to take them into account. As my hon. Friends the Members for South Norfolk and for Bexhill and Battle (Huw Merriman), premiums are rising in rural areas in particular. Again, as my hon. Friend the Member for North Warwickshire pointed out, the cost of over £1 billion to the NHS that will be addressed through this legislation is one that is borne by every taxpayer and is causing increasing concern among medical professionals.

This is a serious piece of legislation that addresses various focused points. It comes at the end of an extensive consultation, during which we have made several concessions to address the concerns expressed across the House. During the House of Lords’ consideration of the Bill, we introduced new definitions for whiplash, we involved the Lord Chief Justices in the process, and we adjusted some of the timings for the discount rate. Through this legislation we believe that we can contribute towards a more honest and proportional system that takes into account the significant social costs of exaggerated claims. Through a more simple, predictable, effective and rapid administration of justice, we can protect a range of social and economic interests while balancing the rights of road users, claimants, defendants and, ultimately, citizens as taxpayers.

Question put and agreed to.

Bill accordingly read a Second time.

CIVIL LIABILITY BILL [LORDS] (PROGRAMME)

Motion made, and Question put forthwith (Standing Order No. 83A (7)),

That the following provisions shall apply to the Civil Liability Bill [Lords]:

Committal

(1) The Bill shall be committed to a Public Bill Committee.

Proceedings in Public Bill Committee

(2) Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Tuesday 9 October.

(3) The Public Bill Committee shall have leave to sit twice on the first day on which it meets.

Proceedings on Consideration and up to and including Third Reading

(4) Proceedings on Consideration and any proceedings in legislative grand committee shall (so far as not previously concluded) be brought to a conclusion one hour before the moment of interruption on the day on which proceedings on Consideration are commenced.

(5) Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption on that day.

(6) Standing Order No. 83B (Programming committees) shall not apply to proceedings on Consideration and up to and including Third Reading.

Other proceedings

(7) Any other proceedings on the Bill may be programmed.—(Jeremy Quin.)

Question agreed to.

CIVIL LIABILITY BILL [LORDS] (MONEY)

Queen’s recommendation signified.

Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),

That, for the purposes of any Act resulting from the Civil Liability Bill [Lords], it is expedient to authorise the payment out of money provided by Parliament of any expenditure incurred under or by virtue of the Act by the Lord Chancellor.—(Jeremy Quin.)

Question agreed to.

[Mr Speaker]

In the thitherto unimaginable scenario that Members do not wish to listen to the hon. Member for Oxford West and Abingdon (Layla Moran), they can leave the Chamber quickly and quietly, so that the rest of us can enjoy her mellifluous tones.

Civil Liability Bill [ Lords ] (First sitting)

Rory Stewart Excerpts

Committee Debate: 1st sitting: House of Commons
Tuesday 11th September 2018 Public Bill Committees

[The Minister of State, Ministry of Justice (Rory Stewart)]

Vulnerable road users will be excluded from the Bill and from secondary measures on the small claims court limit. A vulnerable road user is anybody who is neither driving a motor vehicle nor a passenger in one; in other words, the definition includes pedestrians, horse riders, motorcyclists or anyone else on the road who is not in a motor vehicle.

[Gloria De Piero]

I thank the Minister for putting that on the record.

We absolutely agree that there is a need to act against insurance cheats; no one supports fraudsters. The amendment would not affect the pursuit of those who are claiming fraudulently. By accepting this amendment, the Government can still hit their target. Through this amendment, we simply want to protect those who are injured in the course of their work through no fault of their own. Before it is suggested that this somehow drives a coach and horses through the Government’s intentions, we are not talking about huge numbers of cases.

Thompsons Solicitors deals with workers’ injuries day in and day out. The majority of its work is for the trade unions. Just 16% of its case load consists of injuries from road traffic accidents, and of that number whiplash cases comprise less than 20% of the total. Once we eliminate the large number of these claims that are not work-related, we are left with a tiny percentage of claims related to whiplash that people have suffered in the course of their work.

I have seen no complaint of fraud levelled by the Government against workers nor any suggestion that they are anything to do with the compensation culture of which there has been so much talk, although notably Lord Young said in his report, “Common Sense, Common Safety”, that in any case that view was a perception and not a reality. The Association of British Insurers, which has been very active around this Bill, has produced no examples of fraudulent claims by workers.

This amendment is an opportunity for the Government to exempt employers’ liability claims from the Bill and at the same time exclude them from the small claims limit. If the Government refuse to exempt workers, are they saying that any whiplash claim is evidence of fraud, whoever it is made by? If so, why have they not banned all whiplash claims? If they refuse to exempt workers, are they saying that the police officer, the paramedic, the school bus driver or the firefighter who suffers whiplash while working hard for our communities is scamming it?

Given that the Government have exempted vulnerable road users—horse riders, pedestrians and cyclists—from both the Bill and the associated small claims changes, what is their justification for not exempting workers? Are they saying that vulnerable road users are worthy of more protection than workers? Perhaps the justification is that the cyclist, the pedestrian and the horse rider do not take out motor insurance for their road use, but neither does the professional driver. If the justification for the exemption of vulnerable road users is that they are uniquely exposed, surely the professional driver is, too? For instance, there is the police officer in a high-speed chase or the HGV driver who is on the road for eight hours a day. The reality is that the Government have exempted vulnerable road users because including them would be politically untenable.

--- Later in debate ---

[Gloria De Piero]

It would be grotesque nonsense for a cyclist or a pedestrian injured through no fault of their own to find themselves subject to a tariff and a £2,000, let alone a £1,000, small claims limit when the target is whiplash and, in turn, apparently fraud. The same applies to workers. What on earth have they to do with whiplash for the purposes of fraud? If the Government will not move on this point, the only conclusion one can draw is that there is one rule for the small number of those wealthy enough to own a horse and another for the tens of thousands who drive for a living, many of them not in well-paid jobs—say, the paramedic or the refuse collector—who run the risk of whiplash when going about their jobs.

It is deeply disappointing that the Government are sneaking through crucial parts of their changes via a statutory instrument in order to avoid this sort of scrutiny. I wish to make perfectly clear today where the Opposition stands on workers for the entire package of measures. Workers, like vulnerable road users, should be excluded from both the Bill and the small claims increases.

[Rory Stewart]

It is a great privilege to serve under your chairmanship, Mr Stringer. Thank you again for the serious involvement that has gone into the debate. It has been a real privilege, as somebody who is not a legal specialist, to see how many well informed and distinguished colleagues we have on both sides of the House contributing to these interesting questions of definition.

Many of the amendments we are dealing with today reflect the work of the House of Lords and, in fact, of Opposition Members of the House of Lords—Labour Members, Liberal Democrat Members and Cross Benchers—who introduced many of the clauses into this Bill, which were not originally there and which we are now discussing. With your permission, Mr Chair, I will move quickly through amendments 8 and 9 and new clause 9 and then discuss why we feel clause 1 should stand part of the Bill.

The definition of whiplash, which is dealt with in amendment 8, was placed in the Bill after extensive debate pushed by the Delegated Powers and Regulatory Reform Committee of the House of Lords. In the initial version of this Bill, we had not sought to define whiplash. The DPRRC argued carefully and at great length that it felt strongly that it was inappropriate to have legislation of this sort if a definition was not in the Bill. The Committee felt it was not appropriate for any individual, whether a Minister or a chief medical officer, to make this definition on their own. It should be made by Parliament as a whole and it should be made fully explicit.

After a great deal of debate in the House of Lords, we conceded this point. The clause was inserted and everybody—Cross Benchers, Opposition Members of the House of Lords—nodded the amendment through. It was then inserted. The reasons for this are both those brought forward by the DPRRC and, I would add, to assuage some of the concerns put forward by the Opposition. Clause 2 also allows for a review of the definition by the chief medical officer, along with others, every three years to make sure it remains in touch with medical science and medical expertise. The definition is in the Bill and not purely provided by medical experts because, as the House of Lords argued, this is a medico-legal definition. In other words, it is not simply a question for medical specialists; it relates to the operation of law and the way in which the law of tort would operate.

The final reason for which I ask that amendment 8 be withdrawn is that I am afraid it refers only to the chief medical officer for England, whereas, of course, the legislation applies to England and Wales. That is why we feel strongly that clause 2, which refers to the chief medical officer for England and the chief medical officer for Wales and, indeed, the Lord Chief Justice and the Law Society in consulting on the definition of whiplash every three years, is the appropriate way to proceed. On that basis, I respectfully ask that amendment 8 be withdrawn.

It is easy to understand why amendment 9 was tabled and that the Opposition would be concerned. Again, we would respectfully argue that the key point is that the injury has occurred and not why the individual is in the car. The question of why they are in the car would be a distinction without a difference. There are many pressing reasons why somebody might be in a car. I, like many Members here, represent a rural area. Somebody might be in a motor car, for example, because they were having to drive their child urgently to a hospital. They might be in a motor car for any number of reasons that left them with little choice but to be in the car. It would seem invidious to distinguish between them and somebody else who is in the car for the purpose of employment, purely on the basis of the injury. The key is the injury and the fact that the third party who is liable for that injury is held liable.

[Jo Stevens]

The Minister mentioned choice. The fact is that if somebody is driving in the course of their employment, they do not have a choice because they are doing so on the instruction of their employer. Does the Minister accept that his argument on choice is not relevant when talking about an employer liability claim?

[Rory Stewart]

The argument I am trying to make is that, in many ways, travelling in a motor car in a rural area is, in effect, not a choice. If you were heavily pregnant and had to get to a hospital, you would have to get into that motor car. You would have no more choice than an individual who was in a car for employment purposes. In my constituency, very sadly, there are simply not the public transport links. People are obliged to be in a motor car, whether or not they are travelling in the course of their employment. Were they to suffer a whiplash injury, travelling in a rural area through no choice of their own, because they were suffering some kind of emergency or they were having to respond, it would seem invidious that they would receive different treatment from an individual who is, for example, driving a postal van.

--- Later in debate ---

[The Chair]

Order. Before I call the Minister, I remind hon. and right hon. Members that interventions should be short and to the point. We can be relatively relaxed, but not too relaxed.

[Rory Stewart]

Thank you very much, Mr Stringer. Those two arguments were based on the question of frequency of travel and probability of an accident. Again, the key point in any form of injury claim is the nature of the injury and the liability of the third party that caused it, not the reason someone is in a car. It would be difficult to argue that somebody who travels in the course of their employment is necessarily travelling more frequently than somebody who is not. Somebody in a rural area might, for example, be commuting 5 miles to work in the morning and 5 miles back in the evening. A farmer in my constituency could be travelling between one field and another. There is no necessary reason to feel that they would be travelling more frequently than, for example, a parent taking their child to school in exactly the same area.

Arguments based on frequency or probability of impact should not be relevant. A more fundamental reason is that, in the end, the law is about the injury and the obligation that the third party who caused the injury owes to the injured person, regardless of how frequently that individual is in a car or why they are in a car in the first place. To be blunt, they could simply have gone to the car to get something from it, and could not be driving anywhere, and be struck and suffer whiplash. They would be entitled to exactly the same compensation as an individual driving that car.

[Jack Brereton (Stoke-on-Trent South) (Con)]

Does the Minister agree that the numbers applicable to amendment 9 would be negligible because most of the claims would be against a third party, not the employer?

[Rory Stewart]

Yes, I agree, but the key point is the injury, not why someone is in the car. This is a distinction without a difference.

[Bambos Charalambous (Enfield, Southgate) (Lab)]

The Minister mentioned children. I am conscious that children are not regarded as vulnerable road users. They would still need to go to court and have infant settlements made in their name. What consideration has been given to children who are injured in an accident through no fault of their own, obviously, and who have to go to court for a settlement?

[Rory Stewart]

In this regard, it is correct that the age of the individual within the motor car is not relevant within the law in assessing the injury, except in so far as the injury is specific to the age of the individual.

[Scott Mann (North Cornwall) (Con)]

The Minister makes an excellent point about rural areas. Many of my constituents have to travel for at least two hours to visit a GP or a hospital. The point I make is about the frequency of travel. I used to work for Royal Mail, driving for eight hours a day. My driving skill was much higher then than currently. Surely, such a person is less likely to have an accident because they are on the road more?

[Rory Stewart]

The key point, which goes against both Government and Opposition Members, is not the likelihood of having an accident. That should not affect the level of compensation that someone receives. That should be relative to one thing only: the nature of the injury and the prognosis. It should not be relative to why someone is in the car, how well or how frequently they drive or why they are driving. On that basis, I politely ask that amendment 9 be withdrawn.

New clause 9 reiterates some of the arguments in amendment 9; in other words, it focuses on the question of people injured during the course of their employment. However, it also references vulnerable road users. I have attempted to argue the relevance of someone driving a vehicle in the course of their employment in our discussion on amendment 9. On vulnerable road users, we respectfully request that new clause 9 be withdrawn for the reason I gave in my intervention on the hon. Member for Ashfield—vulnerable road users are already exempted by the Bill, so new clause 9 will be otiose.

On that basis, I respectfully ask that clause 1 stand part. This was a good and serious reform introduced with strong cross-party support by the House of Lords, driven by the DPRRC, which provides a much more accountable, transparent and predictable definition of whiplash to guide the legislation. We owe the Lords a huge debt of gratitude for that. We ask, on the basis that Members of the House of Lords from the Labour party, the Lib Dems, the Cross Benches and the Conservative party all agreed to it, that clause 1 stand part of the Bill.

[Gloria De Piero]

I have listened to the Government’s arguments, but do not accept them. The Bill’s objective is to reduce fraud. I have not heard anybody suggest that workers injured in the course of their employment are scammers. However, I have heard from Labour Back Benchers that workers drive all day and do not have a choice about whether to drive. I will divide the Committee on the amendments.

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[The Chair]

Order. Minister, as you will have noticed, we have strayed into a stand part debate, so I do not intend to have a separate one. If the Minister wishes to say anything in response, now is the time.

[Rory Stewart]

I shall focus narrowly on amendments 10 and 11, which focus on the question of reducing the period from two years to 12 months. Perhaps when we move on to amendments 12 to 15, we can talk a little more about the Judicial College guidelines and the question of tariffs.

The hon. Member for Lewisham West and Penge questioned where the word “minor” came from, which is important. It comes from the Judicial College guidelines. The idea that injuries under two years rather than under one year should be separated reflects the process within the Judicial College guidelines and its definition of what constitutes a minor injury. Clearly, that is a legal definition; in no way does the Judicial College intend to suggest that somebody suffering two years of injury is not suffering considerable pain, distress and loss of amenity. It is simply used to make a distinction between an injury that passes over time and an injury that is catastrophic and lasts throughout one’s life. In no way is it intended to denigrate the experience during the two years.

We feel strongly that it is important for the Bill to remain consistent with the definitions within the Judicial College guidelines. In the absence of that, there would be the first problem of imposing a very unfair pressure, which could inflate, on GPs to push through the one-year barrier, but there is a more fundamental problem. Were we to accept the amendments, they would not only take about 11% of cases out, but mean that the provisions on the requirement for a pre-medical offer would then be removed for the one to two-year period. We would suddenly end up with people able to proceed without medical reports for the one to two-year period, which would undermine a lot of the purpose of the Bill.

[Ruth George]

Surely it is up to insurance companies whether they choose to make pre-medical offers. It is entirely in their hands whether to do so. Whether or not it can be done is for the applicant but the decision is in the hands of the insurance companies; it should not be in the hands of legislation.

[Rory Stewart]

The hon. Lady puts her finger exactly on the current situation. Currently, the decision is in the hands of the insurance companies. The argument in the legislation is to take that decision away from the insurance companies; it will prohibit them from making an offer without a medical report. That was supported by the Opposition as well as the Government, and that is exactly the intention of the legislation. That is another reason why we will resist amendments 10 and 11.

[Gloria De Piero]

Does the Minister accept that, although the small claims limit has remained at £1,000, the way that was calculated changed in 1999?

[The Chair]

Order. Can I just say to the hon. Lady that the Minister had sat down? It is appropriate to intervene when the Minister is on his feet. If the Minister wishes to make a statement in response, I will take it.

[Rory Stewart]

This is a good challenge. It is not, respectfully, relevant to amendments 10 and 11, but relates to the question of something that will be done by the Procedure Committee, if it were to proceed through secondary legislation—a proposal to raise the limit from £1,000 to £2,000. The hon. Lady is correct that in 1999, changes were made to how the £1,000 limit was calculated, which adds an extra level of complication.

There is also a debate between us on whether CPI or RPI should be used to move that initial 1991 definition and, if so, to what amount. Should the hon. Lady wish to proceed, that is appropriate—not for this amendment or the Bill, but for subsequent measures.

[Gloria De Piero]

We do not intend to divide on this but we will raise these issues again on Report and Third Reading.

--- Later in debate ---

[Ruth George]

As someone who has suffered whiplash, I can speak about the amount of pain and suffering it causes and its impact on a victim’s life. As my hon. Friend said, those things can vary from person to person and from accident to accident, but an injury to the ligaments at the bottom of one’s neck, which carry the head all day long, can have a profound effect on someone’s being able to lift anything at all.

At the time of my injury, I found it very difficult to lift my young baby. When I did so, I was in considerable pain for a long time thereafter, and the problem has continued. I am no longer able to lift very much because it gives me a severe migraine. That is the issue we are considering for people with whiplash.

[Rory Stewart]

If an injury continued, with migraines more than two years after the incident had occurred, it would not be classified as a minor one under the Bill and would not be subject to the tariffs. It would go through the normal court procedures, via a fast track, and the award would be made by judges.

[Ruth George]

Absolutely, but what I was going to say was that my injury was then exacerbated by physio. It might have cleared up within two years—I had hoped that it would and for most people it does—but it takes a long time and a lot of suffering to get to that point.

For the vast majority of people who suffer whiplash, and particularly when it is of longer duration where there is significant medical evidence—MRI scans and extended x-rays—the Bill, as the Minister said, will prevent pre-medical offers from being made. There will have to be medical reports showing what has been happening to someone’s neck and the impact on them.

It does not make sense that we are considering introducing a one-size-fits-all tariff at a very low rate that takes no account whatever of the amount of pain and suffering, only its duration. It takes no account of the impact on the victim’s life, including on their work and home life. If someone is a carer, works in a nursery or has another manual job, the impact on them will be far greater than on someone with a similar injury who does not have to perform such tasks.

[Rory Stewart]

This is an important and serious issue, so I wish to clarify something that I am sure all hon. Members on both sides of the House already understand. The legislation purely relates to general damages, which cover pain and loss of amenity. All the examples that were given, such as loss of earnings or being unable to perform a particular job because of whiplash, would be covered by special damages and are not affected by the legislation.

If an individual had an injury that prevented them from going to work, that loss of earnings would be covered under a separate special damages claim. The legislation relates purely to the subjective judgment on the pain experienced—not the physio costs or the loss of earnings. That is all unaffected by the legislation.

[Ruth George]

Those of us who have worked in the trade union movement will know that compensation for loss of earnings does not always equate to the amount that somebody loses and the impact on their job. Many employers have schemes whereby anyone who is off sick for more than a certain number of days is unable to return, or suffers some other detriment. With many schemes, people have to survive on sick pay. Even if the difference comes to a significant amount, it takes a long time for that to come through. That feeds into the impact not just on somebody’s work, but on their life. The judiciary can take account of that when they set an award, but this tariff takes no account of the amount of pain and suffering—only the duration—or of the impact on a person’s life at the time of the injury.

[Ruth George]

My hon. Friend makes an excellent point. I was dismayed by the huge cuts in 2012 to the criminal injuries compensation scheme, but the amount for whiplash remained at £1,000. Even this Government, who were looking to remove a vast proportion of the costs of the criminal injuries compensation scheme, did not seek to change the tariff for whiplash, because they accepted that £1,000 for a 13-week injury was a fair amount of compensation, even under the criminal injuries scheme paid for by the Government.

However, the Government are now proposing that insurance companies that receive far more than the amount of tariffs per year from many motorists should have to pay out less, and that for a six-month injury someone would receive perhaps £450. For many motorists an insurance premium for six months is more than £450, begging the question: what will they pay insurance for? Where is the value for money, and where is the fairness to victims of accidents in today’s proposals?

[Rory Stewart]

I thank the hon. Members for Ashfield and for High Peak for their powerful speeches. Before I move on to amendments 12 to 15 and Government new clause 4, I will clarify some points raised by the hon. Member for High Peak.

Many things are covered by insurance besides the ability to get compensation for whiplash. It would be absurd if the entire purpose of an insurance scheme was simply to give someone an annual pay-out for whiplash, and they paid £450 for that insurance when such claims were capped at £450. The hon. Member for High Peak is right that that would be an absurd system, but insurance covers many things besides whiplash claims. In fact, we are trying to move to a world in which the majority of someone’s insurance would cover things other than their whiplash claim.

This goes to the heart of the discussion so far, and to a point made by the hon. Member for Lewisham West and Penge. Fundamentally, the number of road traffic accidents has decreased by 30% since 2005. At the same time, cars have become considerably safer: headrests and other forms of restraints have made it much safer to be in a motor car than it was in 2005. During that same period, whiplash claims have increased by 40%. Whether we define these as fraudulent or simply exaggerated, there is no doubt of the trend. There are fewer road traffic accidents and cars are safer, yet whiplash claims are going up.

[David Hanson]

We heard a number times in the Justice Committee, when taking evidence from the Minister’s colleague, Lord Keen, the question of the word “fraudulent”. Can the Minister quantify for this Committee how many fraudulent claims he expects there to be on an annual basis?

[Rory Stewart]

The answer is that judging fraud in whiplash is almost impossible except statistically through the measures that I have used, because for minor whiplash claims of the sort that are covered in the tariff—not the type of whiplash injury that the hon. Member for High Peak experienced—there is no way of proving whether an injury has occurred. That is why The New England Journal of Medicine has done research on this.

There has been interesting research on what happens if someone sits in a motor vehicle with a simulated accident and a curtain behind them, so that they are unable to tell whether the accident has occurred or not. It shows that 20% of people experienced whiplash without the collision actually occurring. This is clearly a complex medico-social phenomenon. The polite way of putting it is that there is an asymmetry of information. It is close to impossible for an insurance company to prove that an individual did not experience whiplash, particularly at the three-month rate.

[David Hanson]

Could the record show, Mr Stringer, that the Minister, like his colleague in the House of Lords, could not indicate how many claims per annum are fraudulent?

--- Later in debate ---

[Rory Stewart]

I am very happy for the record to say exactly that, provided we explain why that is the case. The nature of this injury is such that it is impossible to know, in most cases, whether the individual is making a fraudulent claim. In the case of the kind of injury experienced by the hon. Member for High Peak—a much more serious injury—it is possible to detect things through MRI scans, but for the majority of injuries that we will be talking about in the three-month to six-month period, no physical evidence can be adduced one way or the other.

In the end, the qualified GP has to sit down and reach some kind of judgment, through discussion with the individual and gathering the evidence of injury, that the balance of probabilities holds that the individual is experiencing subjective pain, but it is impossible to prove that through the kinds of medical evidence that one would adduce in a normal medical case.

[Ruth George]

An MRI scan will identify where there is soft-tissue injury. At any stage, the point is whether it is worth going for an MRI scan. By reducing the tariff to such a small amount, GPs in many instances, particularly up to 12 months, may well deduce that it is not worth referring a patient for an MRI scan to produce that medical evidence. The tariffs proposed will reduce the amount of medical evidence produced and may well increase the number of fraudulent claims, because there will be less requirement for medical evidence such as an MRI scan.

[Rory Stewart]

Many whiplash injuries are not detectable on an MRI scan. Many people are currently receiving compensation for whiplash and have experienced whiplash injury, which cannot be caught on an MRI scan. The GPs who will be asked to decide whether someone has had a whiplash injury will not be holding them to the standards of an MRI scan. Were they to do so, we believe that the number of whiplash injuries would decrease very dramatically. Nothing like 550,000 injuries a year would be recorded on an MRI scan, particularly in the three-month to six-month period.

[Jo Stevens]

I practiced in this area for nearly 30 years. Every day, I saw the impact of motor accidents and soft-tissue injuries on young and old people from all sorts of backgrounds. What the Minister is saying is absolute nonsense. GPs are able to determine whether someone has suffered an injury—they have been doing so for many years and will continue to do so for many years. This is simply an excuse to increase insurance companies’ profits.

[Rory Stewart]

There is a fundamental issue—we may get on to it later in the debate—about the different understanding of insurance companies on opposite sides of the House. Two arguments are put forward. The hon. Member for Jarrow (Mr Hepburn), for example, suggested in his speech in the House that the insurance industry worked on a binary basis—that the objective of the insurance industry was simply to increase the premiums as much as possible to sky-high levels, and reduce payouts.

We would argue, as does the Competition and Markets Authority, that there is a third crucial factor—competition—in understanding the impact of the legislation. What prevents premiums endlessly going up and an insurance companies never paying out is that people simply would not go to that insurance company and would go elsewhere. The insurance markets were very carefully studied by the Financial Services Authority and the Competition and Markets Authority. They are confident that 80% of the associated savings in costs will be passed on to consumers through the mechanism of competition and agencies advertising to get customers.

One way in which we seek to demonstrate that point publicly is through inserting an amendment to get the insurance companies to come forward with clear information on the amount of money they have received and the amount they have paid out. We can then have an open debate in Parliament to discover which of us is right—whether the Competition and Markets Authority is right or whether, as the hon. Member for High Peak and the hon. Member for Jarrow argue, it is a purely binary process.

[Bambos Charalambous]

Is the Minister aware that the insurance companies settle the vast majority of whiplash claims without going to court and pay up without even trying to fight the claims? If the Minister is correct that the claims are hard to detect, why are the insurance companies not fighting more of them and taking people to court?

[Rory Stewart]

The answer is exactly for that reason. Because they are so hard to detect, they are almost impossible to fight, and therefore insurance companies have historically made that decision. They often do not even get a medical report because it hardly seems worth while to do so. When somebody comes forward with a whiplash claim, the procedure has often been to settle without going to court in order to reduce the legal fees and the associated costs, exactly because it is incredibly difficult.

Whiplash claims are extremely controversial medically. A lot of articles are written about this—I quoted the New England Journal of Medicine in the House, which is particularly stark. Cassidy’s article argues very strongly that the absence of compensation for pain and loss of amenity is associated with a much improved prognosis and reduced duration in the whiplash injury itself. In other words, the New England Journal of Medicine points to the fact that this is not purely a medical phenomenon. It has social and legal dimensions, of which compensation is a part.

[Gloria De Piero]

Is the Minister familiar with the quote from the head of the City of London police insurance fraud enforcement department? He said in the Insurance Post:

“It would be wrong to say that I believe there is a compensation culture or an insurance fraud culture in general.”

Another expert denied?

[Rory Stewart]

Such arguments would be more powerful if Opposition Members could explain why the number of whiplash claims has gone up by 40% since 2005, when the number of motor vehicle accidents has declined by 30% and cars have got much safer? A lot of things have been introduced in cars since 2005. Nearly 85% now have the safety features specifically designed to reduce whiplash that only 15% had in 2005. There are fewer accidents and much better protection around the individual.

[Ruth George]

Will the Minister give way? Does he want an answer?

[Rory Stewart]

Absolutely. Let me just articulate the question and the hon. Lady can perhaps answer it exactly. Why has the number of road traffic accidents reduced dramatically—cars have got safer so people are much less likely to experience injury, and there are fewer accidents—yet the number of claims has gone up by 40%? Why is she confident that the operation of claims management companies is not associated with the extraordinary increase in whiplash claims? Presumably, we have all received calls from claims management companies. An average of 600,000 claims are made a year—almost one in 100 citizens in the United Kingdom make a whiplash claim. How can that be possible when the number of road traffic accidents is reducing?

[Ruth George]

The Minister makes an excellent argument for regulating claims management companies properly. He has made no argument for blaming and making innocent victims of road traffic accidents. On Second Reading, we heard that many people are phoned by claims management companies. In many instances, their details are given out by the insurance companies to whom they make an honest claim. The insurance companies, which are linked to those claims management companies, give those details. If the Minister wants to act on the problem of whiplash, he should look at those claims management companies and their tactics of cold calling, as the Bill does in banning pre-medical offers, and end the links between insurance companies and claims management companies, rather than making innocent victims suffer.

[Rory Stewart]

With permission, I will proceed. There is still no answer to why the number of claims has risen, particularly when the number of road traffic accidents has dropped. The hon. Lady suggested that she would answer the question but did not. I look forward to someone answering that question, but I would like to make progress.

[David Hanson]

In Committee, it is normal to take interventions. As a Minister I never refused an intervention in Committee. I hope the Minister will accept this intervention. He mentioned the increase in claims being made. How many of those claims does he expect are fraudulent? That is the key. If they are not fraudulent, they are genuine claims, whether they are through a claims management company or from an individual.

[Rory Stewart]

The statistics suggest very strongly that what happened to an individual in a motor car in 2005 would, on average, have been much more severe than what happens to an individual in a motor car in 2018. A 30% reduction in the number of road traffic accidents, combined with the improvement in safety procedures, would suggest that an individual having a motor vehicle accident today would be considerably less likely to suffer whiplash than would have been the case in 2005. Therefore, the fact that the number of claims has increased by 40% is a very peculiar anomaly that requires explanation, which nobody has produced so far. Will somebody please explain why the number of claims has increased by 40% when there has been no physiological change in the human body since 2005 and motor cars have, if anything, got safer?

[David Hanson]

The Minister still has not answered the question. How many of those additional claims does he suggest are fraudulent? If a claims management company takes forward a claim, there might be issues about the claims management company but, ultimately, if the claim is not correct it will not be approved. Therefore, how many of those extra claims are fraudulent? He needs to tell the Committee.

[Rory Stewart]

In 2016, there were 7,572 confirmed fraudulent motor claims and 58,576 suspected claims, resulting in 66,147 detected motor fraud claims. However, my point goes much wider. Because of the asymmetry of information and because it is impossible to prove whether the injury has occurred—particularly at the three to six-month period—it is impossible to put a precise number on it. We can be confident, through the soaring inflation in the number of these claims, that many are exaggerated, to put it mildly, even though we cannot prove the exact number beyond the 66,147 that are actually fraudulent.

[Craig Tracey]

I spent 20-odd years on the frontline dealing with these types of claims and acting on behalf of the client rather than the insurance company. For genuinely injured people, we found that financial compensation was a minor consideration in the overall claim. They wanted to feel better and get put right. Is it not right that insurance companies should focus on rehabilitation, treatment and proper diagnosis rather than worrying so much about value?

[Rory Stewart]

I absolutely agree. It is very important to keep reminding the House that we are focusing on general damages, not special damages. In other words, we are focusing on what ultimately must be a difficult, subjective judgment about the level of pain that an individual experiences, and not loss of earnings or other forms of treatment.

[Robert Courts]

I repeat my declaration that I practised in this area until I was elected two years ago, and I remain a door tenant at my chambers. Having practised in this area for more than 10 years, I too have experience. Does the Minister accept that there is a danger that the Committee is confusing two issues? According to the guidance notes, the manifesto gave a commitment to

“reduce insurance costs for ordinary motorists by tackling the continuing high number and cost of whiplash claims.”

This is not solely about fraud. It is also about perfectly genuine claims where the costs have become very expensive. Are the Government seeking to provide redress for those who have been injured, but to do so in a cost-proportionate manner?

[Rory Stewart]

Fundamental to decisions that the Ministry of Justice has to make under any Government is the need to think seriously about balancing different types of interest—in this case the interests of the claimant, the third party and the taxpayer, as well as those of road users and people who take out motor insurance. It is therefore appropriate for us to question the overall cost of the system, and—particularly for motorists in rural areas—the fact that the premium could be as much as £35 a year extra, and considerably more for a young driver, because of the hundreds of thousands of people each year who make whiplash claims.

[Gloria De Piero]

Insurers have never mentioned fraud as a material risk in their financial report. If it were such a serious concern, would they not be required to report it to the Financial Reporting Council?

[Rory Stewart]

The question of what constitutes a material risk in a financial report is driven primarily by the financial stability of the company, so the question of whether fraud is defined in that way relates purely to the cost of the fraud. The question is a financial one, not one of honesty.

Amendments 12, 13, 14 and 15 relate to the Judicial College guidelines. This debate has had quite a long consultation period—it has been going on for more than three years. We are grateful to the Association of Personal Injury Lawyers and many others, including the Law Society, who have fed in to this consultation, and we have arrived at a compromise. The Opposition were extremely uncomfortable with the initial proposals, and we have made a lot of concessions—that is why I will be asking hon. Members to withdraw their amendments.

The initial proposals by the Chancellor of Exchequer in his Budget speech were to remove general damages entirely, and for no compensation to be offered for pain, suffering and loss of amenity. There was also a proposal to have no judicial involvement whatsoever in setting levels of compensation, and the third element of controversy was about whether it was appropriate to have tariffs at all.

We have made significant concessions on the first two points—in the House of Lords for the second proposal, and before that stage for the first proposal. Under pressure from many people, including Opposition Members, we have accepted that there should be general damages, and that principle has been reinserted. Secondly—this is why I will ask for support for clause 4—we will push ahead with the proposal that the Lord Chief Justice should be consulted on the level of the tariffs. That brings in the judiciary so that it will not be done purely by the Lord Chancellor, which brings us to the question of whether there should be tariffs at all.

A tariff system is relatively unusual in English common law although, as the hon. Member for Enfield, Southgate pointed out, an equivalent exists for criminal injury compensation cases, which creates some paradoxes and contradictions. At the moment, someone who suffers a criminal injury could receive a different level of compensation than if they suffer exactly the same injury without a criminal act. The same is true if someone in a motor vehicle suffers from a terrorist attack. The Government could give someone considerably more compensation if they are the victim of a terrorist attack than if they suffer the injury in a different way.

However, tariffs are not unusual: they have been introduced very successfully in Italy, France and many other European jurisdictions. Under the proposals in the Bill, there will be judicial discretion on the tariffs. That is judicial discretion that we have consulted on closely and will return to under later amendments. It is in line with what the European Court of Justice believes should be the appropriate degree of judicial flexibility when applied to a tariff system.

[Bambos Charalambous]

Let us assume for a moment that we accept that the tariff system is the right one. Does the Minister not agree that the inconsistencies are just unacceptable and that there needs to be a review of the levels that have been set out, because there seems to be no rhyme or reason to them? Can he explain to me how the levels have been arrived at? I cannot see where they have come from.

[Rory Stewart]

This goes to the heart of the concerns that the judiciary raised when the first criminal injury compensation schemes were introduced and, indeed, when compensation for a terrorist act was introduced. As the hon. Gentleman suggests, it is perfectly legitimate to question whether, within the tradition of tort in the English common law, it is appropriate to distinguish between an injury suffered at the hands of a criminal or a terrorist and an injury simply suffered at the hands of another third party who is liable, but that is a much deeper philosophical jurisprudential debate than I think we can proceed with here. With that, I respectfully request that the amendments be withdrawn or not pressed and I ask the Committee to support Government amendment 4.

[Gloria De Piero]

I am afraid that I am going to disappoint the Minister. We feel so strongly, because we are led by the independent experts, by the Select Committee on Justice and by some people in the Minister’s own party, whom I quoted earlier, that we believe that the Committee needs to divide on amendments 12 to 16.

Question put, That the amendment be made.

--- Later in debate ---

[Gloria De Piero]

This amendment would allow judges to increase the amount of damages payable where they determine the tariff amount to be insufficient compensation, rather than capping judges’ ability to increase compensation awards to a percentage specified by the Lord Chancellor, as the Bill currently does. Once again, I want to point out the long-standing tradition of trusting judges, rather than having politicians interfere with the discretion of the courts—a tradition that the Government are inexplicably undermining with this Bill.

Clause 5(3) states that if the court thinks there should be an uplift from the tariff because of the severity of the injury, the amount by which the court can increase the payment is limited according to a cap set by the Lord Chancellor. Not only are the courts being fettered by a tariff, but when they consider the tariff to be inappropriate, they will get their judicial wings clipped again. This reduces judges to little more than errand boys for the Lord Chancellor.

Many Lord Chancellors these days are not lawyers. They will rely on the advice of their officials, who need not have legal training either. If the Tories do not trust the judges, who do they trust? What are they scared of? What evidence do they have that judges will behave badly and award huge sums? What court cases can they point to in which that has happened? I can find none at all, and nor can the experts whom my team and I have consulted.

I suspect the insurers fear that without a cap, every tariff award will be taken to court, where judges will apply an uplift and blow up their tariff. If that is what they fear, it suggests that they secretly accept that the proposed tariffs are too low. Perhaps the reason for all these restrictions—all these fetters on what a judge can decide for themselves—is that the Government and the insurance industry are running scared that judges will, indeed, rebel against them. Not because judges are intrinsically rebellious—far from it, some would say; they are conservative with a big and a small c—but because they have a duty to be impartial and deliver justice, and the Government’s proposed tariff does not even remotely do that. Amendment 18 would restore judges’ lost autonomy.

[Rory Stewart]

I thank the hon. Lady for her speech. This amendment relates to the fundamental question of the tariff system and the relationship between the judiciary and the tariff system. Clause 5 provides a pragmatic compromise between a strict tariff system and judicial discretion by allowing the judges to lift that tariff in exceptional circumstances. However, as the European Court of Justice accepted in the arguments made in the Italian case, there needs to be a limit. If there were no limit to judges’ discretion, the tariff system would become unworkable.

In so far as we disagree about whether there should be a tariff system in the first place, I completely understand where Opposition Committee members are coming from. However, given that the fundamental cornerstone of the Bill is that there should be a tariff, we need to strike a pragmatic compromise between the tariff and giving some discretion to judges. Therefore, we propose that the Lord Chancellor will set a percentage of discretion for judges to uplift the tariff. We also propose that he will consult the Lord Chief Justice on the appropriate level of discretion. We will look carefully at the rulings of the European Court of Justice and the decisions that it has made in other countries where tariffs exist to arrive at that figure.

[Bambos Charalambous]

The tariffs range from £235 to £3,910, which are incredibly small amounts in the great scheme of things. To try to fetter the judges’ discretion on such small amounts, for exceptional circumstances that have yet to be defined, is to use a sledgehammer to crack a nut. We just accepted an amendment to the effect that the Lord Chancellor must consult the Lord Chief Justice. Does the Minister not think that it would be better to use that mechanism, rather than “exceptional circumstances”, to set the tariffs?

[Rory Stewart]

We certainly will move to introduce an amendment exactly in relation the hon. Gentleman’s question—he has campaigned well on this, as have other hon. Members—setting out that we should consult the Lord Chief Justice on the level of tariffs as well as on the percentage uplift for judicial discretion. Those are two important concessions that I hope will reassure the Opposition.

[David Hanson]

Before the Minister sits down, can he give some further detail about how he intends to consult the Lord Chief Justice on making the regulations? How much notice will he give the Lord Chief Justice? Will the Lord Chief Justice’s comments be public? Will they be published so that other hon. Members can see them prior to any decision being taken? What happens if the Lord Chief Justice disagrees with the Government’s suggestions? Could the Minister give some outline of those circumstances?

[Rory Stewart]

As the right hon. Gentleman is aware, clause 5(5) merely states:

“The Lord Chancellor must consult the Lord Chief Justice before making regulations under this section.”

We intend that to be done in an accountable, responsible, transparent and predictable fashion that would give the Lord Chief Justice a serious amount of time to consider and respond, but, ultimately, it is a consultation and the power of decision rests with the Lord Chancellor, as is implied in the legislation.

[David Hanson]

Will the Lord Chief Justice’s comments on the consultation be public? Will other people apart from those two parties be able to see both their comments?

[Rory Stewart]

That remains to be determined by regulations introduced by the Lord Chancellor and is not included in the Bill.

[Jo Stevens]

Why not take the pragmatic approach and just leave it to the judges to decide? They are the experts. Why should a politician influence what is happening?

[Rory Stewart]

The answer goes to the core of the entire legislation. The proposed tariff recognises that what we are dealing with—or at least, what we believe we are dealing with—in relation to whiplash, with the peculiar anomalies since 2005 and the increase in whiplash claims, is not exclusively medical or legal, but has strong social and political dimensions in terms of insurance premiums and the cost to the public purse, which is why quite a lot of part 2 of the Bill deals with the NHS. The introduction of the tariffs is designed precisely to reduce the amount paid out in the specific case of general damages for minor whiplash injuries. Simply to stick with the judicial college guidelines would obviate the entire purpose of the Bill and undermine the medical, legal, social and political arguments that underlie the legislation.

[Ellie Reeves]

Under the proposals, an uplift would be allowed only if the whiplash injury was exceptionally severe or the circumstances were exceptional. Does that not hugely undermine the principle of judicial discretion and take away judges’ ability to assess cases and make appropriate awards for damages? The threshold in these proposals has to be far too high.

[Rory Stewart]

Clearly, a system of the sort we propose, which is modelled on the existing tariff systems in places such as France and Italy, is designed to set in law, through the actions of an accountable Minister, the level of the tariff. The argument is absolutely right. As the hon. Lady suggests, that will remove discretion from judges except in exceptional circumstances. The reasons for that are to do with our policy objective of dealing with the whiplash claim culture. Our intention is to reduce the damages paid for minor whiplash injuries, which are defined in the Judicial College guidelines as those that last less than two years. That will result in general damage payments lower than those currently awarded by judges. However, in exceptional circumstances, judges will be able to increase the award.

[Gloria De Piero]

What is the fear here? Is it that judges will make awards above the tariff set?

[Rory Stewart]

The Judicial College guidelines are simply a historical record of awards by the courts. It is a fact that those awards to date have been higher than the awards we propose in the tariff. The policy intention is to reduce the general damages paid, particularly for people at the three-to-six-month level. As we get closer to the two-year level, awards under the tariff come closer to the Judicial College guidelines, but at the lower end, as was suggested, there is a disagreement between the Government and the current practice of judges about the appropriate award for pain, suffering and loss of amenity.

There has been a lot of discussion about experts, but right hon. and hon. Members must remember that we are discussing general damages, not money for loss of earnings or to pay for physiotherapy. We are discussing a judgment of exactly how many pounds and pence someone should receive for a whiplash injury—for the subjective experience of pain in their neck or shoulder. It is difficult to argue that there is particular expertise on the question of the subjective experience of pain. Indeed, as the hon. Member for Enfield, Southgate suggested, it is impossible for anyone—whether they are a Minister, a judge or a doctor—to suggest that the money that is paid can remove the pain. The pain remains. Money paid in general damages is intended simply as an acknowledgement of the existence of pain, suffering or loss of amenity. It cannot, as would be the case with special damages, remove the pain itself. On that basis, I politely request that the amendments be withdrawn and the clause be accepted.

[Gloria De Piero]

We do not accept the Minister’s arguments, so will divide the Committee.

Question put, That the amendment be made.

--- Later in debate ---

We therefore propose—this effectively happens now in a fast track case, where the defendant fights on liability and the case falls out of the fast track—that the claimant should get help to fight on. The costs will be fixed, as they are now in the fast track, but at least the claimant will have someone to hold their hand who is on their side. Perhaps the Government think that injured people, possibly claiming sums that exceed their monthly pay cheque, should be left on their own, assess quantum on their own and fight well-funded insurers on their own.

[Rory Stewart]

I very strongly support the basic principles and philosophy of amendments 19 to 21. I have huge respect for MedCo—right hon. and hon. Members will be aware that it is a non-profit portal designed to select at random an expert witness in order to testify in whiplash injury claims. I can reassure them that the intention is for MedCo to be the appropriate channel through which advice is sought.

The only reason we have not put MedCo on the face of the Bill is to provide for the eventuality that, in 20 or 30 years’ time, an entity other than Medico might exist— as hon. Members will see in clause 6(4), we are specifying the form of evidence, the person, the accreditation and the regulations. That was on the advice of counsel, which has had strong experience over the last century, that defining a non-profit on the face of the Bill could cause massive challenges if something unforeseen happens to it. We absolutely agree that MedCo is the appropriate body to use at the moment. All the arguments made by the Opposition are accepted, but on counsel advice, we respectfully advise that it would be better to allow flexibility rather than defining MedCo on the face of the Bill, and therefore ask them to withdraw those amendments.

New clause 3 argues for an individual to be able to reclaim their legal costs while pursuing their whiplash claim. This is a fundamental point of debate and disagreement, and goes against the fundamental principle of the small claims court, the idea of which is that an individual should be a litigant in person and not in a position to recover their legal costs. The argument made is that, under the level proposed—which in the case of certain kinds of damages is £10,000, in relation to whiplash would be £5,000 and in relation to personal injury could be as much as £2,000—we believe that the nature of the claims, particularly with a medical report in place, should be relatively straightforward. We have made some concessions about the online portal and the roll-out, all of which, we think, makes it inappropriate to ask for the reclaim of legal costs.

[Ellie Reeves]

Are we not going to be in exactly the same situation we were with employment tribunal fees? For people pursuing claims, fees, whether they are court fees, legal fees or medical costs, will put people off pursuing claims and therefore undermine their access to justice. The Government were called out on this by the Supreme Court regarding employment tribunal fees and we seem to be going back down the same route.

[Rory Stewart]

This will be entirely different. The disagreement is only about whether one can employ a lawyer and recover the cost of the lawyer. The individual will be able to recover from the insurer the medical costs on the report they got—for example if they spent £140 going through the MedCo portal. The small claims court cost of registering the claim would also be recoverable. However, in the vast majority of cases at the moment—we consider that this will be true in the future—cases do not go to court at all. In the vast majority of cases, a claimant will get a medical certificate, follow the path of the online portal and the settlement will come without them having to proceed to court.

[Jo Stevens]

The Minister’s impact assessment, which I referred to on Second Reading, explicitly states that the measure will affect the number of people who will bring cases, and that the number of cases will go down. Will he comment on that please?

[Rory Stewart]

Absolutely. The Government’s contention is that some of the cases currently being brought forward are fraudulent or exaggerated claims motivated by a desire to get a payout when either an injury has not been experienced or the injury experienced was considerably less than claimed in court. We believe that, by reducing the level of tariffs that paid out and by removing the industry of lawyers whose costs can currently be reclaimed through the process, it will be less likely that an individual who has not suffered an injury will go through the inconvenience of seeking a medical report, and less likely that they will proceed to the small claims court or go through the online portal to receive payment for an injury that did not occur. They would not be supported and encouraged by the legal profession or, more likely, claims management companies in proceeding down that path.

[Jo Stevens]

Will the Minister clarify? Is he saying that, although his impact assessment states that the number of cases will go down, the measure will apply only to fraudulent cases? Is he saying that no genuine victim of injury will not pursue a claim because they are not able to recover their costs?

[Rory Stewart]

The impact assessment, which is based on an enormous amount of expert evidence and discussion, boils down to a pretty straightforward assumption about human behaviour. Under the proposed new system, if someone has a car crash and injures themselves, they will proceed to their insurance company, register the fact that they have genuinely injured themselves, be directed towards MedCo, which would provide a report, go to the online portal and, in an effective, efficient and transparent fashion, proceed towards a predictable tariff based on their medical reports. If the medical reports say that the prognosis is six months, a fixed tariff would be paid out.

The experts’ contention is that, if someone has a car crash and genuinely nothing happens to them, it would be unlikely, in the absence of a claims management company encouraging them to do so, that they will tell the insurance company that they have a whiplash injury, or be coached to mislead a doctor in the MedCo process to get some kind of report suggesting they have a whiplash injury. Therefore, somebody who either did not experience an injury or experienced an injury so minor that they were not interested in pursuing compensation would not proceed. We believe that, under the current system, the practice of some claims management companies is to encourage people who either have not experienced an injury or have experienced a considerably more minor injury to make a fraudulent or exaggerated claim. We believe that those claims will be not entirely excluded but reduced.

[Bambos Charalambous]

Does the Minister accept that there has to be a hearing to settle children’s claims, and that infant settlements require representation? Children often sue their parents if there has been a road traffic accident that is no fault of their own. Will he consider exempting them from the scope of the Bill? They require solicitors, because there has to be a hearing for there to be a settlement.

[Rory Stewart]

Perhaps we can return to that very interesting point on Report. It has not been raised in any of the amendments tabled so far, but I would be very interested to see an amendment tabled and to discuss the matter outside this Committee.

On the basis of the arguments I have made about MedCo, I respectfully request that the Opposition withdraw amendments 19, 20 and 21.

[Gloria De Piero]

Will the Minister say a bit more about the advice he has received from counsel and about why he will not accept the amendments?

[Rory Stewart]

It is pretty straightforward. MedCo is a non-profit organisation set up relatively recently as a portal funded by the insurance industry. We intend the Bill, like any law we pass, to have sustainability and resilience. Potentially, it will last 50 or 100 years. It is very difficult, looking forward over that period, to be confident that the exact portal or organisation by which doctors qualify to provide an assessment of whiplash will be called MedCo—it may be called something else. The measure provides the flexibility, through regulations from the Lord Chancellor, to define the form of evidence, the person, the accreditation and the regulation necessary to proceed. We think it would give a hostage to fortune to put the brand name of a specific non-profit on the face of the Bill. On that basis, I request that amendments 19, 20 and 21, and new clause 3, be withdrawn.

Civil Liability Bill [ Lords ] (Second sitting)

Rory Stewart Excerpts

Committee Debate: 2nd sitting: House of Commons
Tuesday 11th September 2018 Public Bill Committees

[David Hanson]

My hon. Friend makes a valid point; it is one I had not thought of and I am grateful to him for bringing that to the Committee’s attention. If this saving is going to be made, it would be sensible to say whether it is made early on, because downstream, as my hon. Friend indicated, there will no doubt be a tapering.

To be honest with the Committee, the Minister is only proposing new clause 2 because he got done over in the other place by Members of the House of Lords and could not get the Bill through the House of Lords without this new clause. He got done over in the other place because the Justice Committee unanimously called for

“the Financial Conduct Authority to monitor the extent to which any premium reductions can be attributed to these measures and report back to us after 12 months.”

I go back to the all-party Justice Committee, chaired by a Conservative MP, with a Conservative majority, which said in its report on this Bill that there should be a report within 12 months. We have been helpfully reminded by my hon. Friend the Member for Brighton, Kemptown why we suggested that at the time: because we wanted to see the impact within 12 months.

On the amendment tabled by Lord Sharkey in the House of Lords, Lord Keen, the Minister dealing with this in the other place, said on Report:

“the Government are not unsympathetic to the underlying intention of Amendment 46, as tabled by the noble Lord, Lord Sharkey. The point is that having made a firm commitment, insurers should be accountable for meeting it.”—[Official Report, House of Lords, 12 June 2018; Vol. 791, c. 1632.]

That is what this Minister’s colleague said in the House of Lords, and I do not disagree with it. I only say to the Minister that April 2024 seems a tad far in the future to secure the proposals that he is putting to the Committee today.

The Minister needs to say firmly to the Committee what he anticipates the savings to be now, how he will monitor what the insurance companies are making—not just now, but in the next five years—and how he will hold the insurance companies to account. How will he ensure that, whatever date we end up with—be it 1 April 2024 or, if the amendment of my hon. Friend the Member for Ashfield is accepted, as I hope it will be, an earlier date—they meet their obligations and give the money back to the people who are funding it in the first place?

[The Minister of State, Ministry of Justice (Rory Stewart)]

It is a great honour to serve under your chairmanship, Sir Henry. I am grateful to right hon. and hon. Members for bringing proposing the amendments and new clauses.

Effectively, as the right hon. Member for Delyn has pointed out, new clause 2 was introduced with a lot of influence from the House of Lords—it was driven by Opposition Members of the House of Lords to meet exactly the concerns raised by right hon. and hon. Members. Therefore, I am tempted to argue in my brief argument that amendment 17 and new clause 6 are, in fact, unnecessary. The noble Lords did a good job in new clause 2 of addressing many of the concerns raised in the debate, which is why the Government are keen to ask for the Committee’s support.

At the heart of this, the Committee will discover, is a fundamental disagreement about the nature of markets, which will be difficult to resolve simply through legislation. There are profoundly different views on both sides of the House about what exactly is going on in a market. Again and again, all the arguments—from the hon. Member for Jarrow (Mr Hepburn) right the way through to the eloquent speech by the right hon. Member for Delyn—rest on the fundamental assumption that every company, insurance or otherwise, in the country is simply involved in trying to charge their consumers as much as possible and provide as few services as possible, and that there is nothing to prevent their doing that.

Of course, what prevents companies from doing that ought to be competition. It does not matter whether that is the insurance industry or, to take a more straightforward question, why Tesco’s does not charge £50 for a loaf of bread and try to produce one slice. In the end, the decision on what premiums are charged will be driven by competition between different insurance companies. All the arguments, whether in relation to these or other amendments, are based on that fundamental misunderstanding. The Labour party is again effectively pushing for a prices and incomes policy. They are trying to get the Government to fix the prices of premiums and control the prices that insurance companies charge because they simply do not trust the Competition and Markets Authority, the FCA, the insurance industry or any other business to pass on savings to consumers.

[David Hanson]

With respect to the Minister, in this case the Labour party is just asking for confirmation of what the Government want to do. They said that they want to save £1.3 billion, and in November 2015 said that they would give back £50 as premiums. That figure has changed. All I am asking is this: what is their estimate of the figure today? The Minister should be able to give an estimate because he has done so on two previous occasions—in an assessment of the Bill’s financial implications in the Conservative party manifesto, and in the Chancellor’s statement to the House of Commons.

[Rory Stewart]

Unfortunately, something is being missed in the way the right hon. Gentleman is framing his arguments. He is suggesting that there is a fixed, stable situation—the Chancellor of the Exchequer offered £50, nothing changed, and now it is £35. If that were true, it would indeed be a disgrace, but the reality is that, following the negotiations that took place in the consultation and in the House of Lords, the savings that the insurance companies will realise and will be in a position to pass on to the man or woman paying the premium have been considerably reduced.

When the Chancellor of the Exchequer—[Interruption.] The right hon. Gentleman might be interested in listening to the answer rather than talking to somebody else. When the Chancellor of the Exchequer spoke, he of course suggested that all general damages would be entirely removed. His proposal was that there would be no general damages at all. It is therefore perfectly reasonable. If no general damages at all were paid, the insurance company’s savings would be considerably larger, and the savings passed on to the consumer might indeed have been £50.

Due to the very good work that the Opposition and the noble Lords put in, there have been a number of compromises to the Bill, which mean that the savings passed on to the insurers, and from the insurers in the form of premiums, will be considerably reduced. One of those compromises is that, whereas in the past there were going to be no general damages paid to anybody getting a whiplash injury of under two years, there is now a tariff for money to be paid out. As it gets closer to two years, the tariffs paid out will be much closer to the existing Judicial College guidelines, so the savings will be considerably less.

[Bambos Charalambous (Enfield, Southgate) (Lab)]

We have been here before with the Domestic Gas and Electricity (Tariff Cap) Act 2018, in which the Government fixed the energy price cap and said that the big energy companies would give money back to the consumers, even though the money is not as high as we expected. Then it was £100, and now it is about £70. Why does the Minister not want to do that with insurance companies?

[Rory Stewart]

That is a very good question. The hon. Gentleman and the right hon. Member for Delyn are essentially asking the same question. Indeed, that is what this whole debate is about. The question is about the extent to which the Government wish to interfere in the market to fix prices. As the hon. Member for Enfield, Southgate suggested, a very, very unusual and unprecedented decision was made about the energy companies following a suggestion originally made by the Labour party that we should get involved in fixing prices. That is something about which, from a policy point of view, we generally disagree with Labour because—this deep ideological division between our two parties goes back nearly 100 years—we are a party that fundamentally trusts the market.

The Financial Conduct Authority and the Competition and Markets Authority argue that the insurance companies are operating in a highly competitive market. The reason why we did not initially suggest that we need to introduce anything equivalent to new clause 2 is precisely that we believe that the market is operating well, and that the savings passed on to the insurance companies will be passed on to the consumers, as happens in every other aspect of the market. I have not yet heard a strong argument from the Opposition about why they believe that not to be the case. Logically, Opposition Members can be making only one argument: they must somehow be implying that the insurance companies are operating in an illegal cartel.

[Jo Stevens (Cardiff Central) (Lab)]

rose—

[Rory Stewart]

I give way to hear why the Opposition believe that is not the case.

[Jo Stevens]

The Minister has said that the Opposition want to fix the market and prices. He also mentioned trust, which is exactly what this is about, because we have been in this situation before. Previously, insurers promised to return savings to consumers and did not. Why is it different this time? Why does the Minister think we can take insurers at their word this time when they have not returned savings previously?

[Rory Stewart]

Recent evidence on the cost of motor premiums shows that, after the implementation of the last set of reforms, there was a flattening off in the increase in the insurance premiums that was lower than inflation. The reason we believe this mechanism works—this was all part of the evidence put forward by the Competition and Markets Authority—is that it is a very mobile market. Currently, 72% of policyholders have switched their motor insurance provider—it is not a static market where people do not move between providers, which gives a very strong incentive to compete on the premiums. Fifty per cent. of insurance customers are going to comparison websites to compare the premium prices.

--- Later in debate ---

[Gloria De Piero]

Does the Minister accept that, since the changes made in 2012, insurance companies have saved £11 billion?

[Rory Stewart]

I am not in a position to accept or reject that figure—I am not familiar with that figure and I am not clear how it has been arrived at. I am happy to look at that in more detail before Report stage of the Bill.

[Craig Tracey (North Warwickshire) (Con)]

The Minister mentioned the reforms of the Legal Aid, Sentencing and Punishment of Offenders Act 2012, but is it not right that, in the two years following those reforms, insurers passed on £1.1 billion of savings, and that average premiums dropped by £50?

[Rory Stewart]

Again, the Competition and Markets Authority is our best guide. Its job is to look very closely at the operations of its industry. It believes that this is a very competitive industry, which is why it is confident that the reforms introduced led to savings that were passed on to customers and why it believes that the current reforms will lead to the same. If that does not happen, it would be interesting to hear Labour Members’ theories about why competition is not operating in this market and why they believe there is a cartel. If that is the argument they wish to make, they will be assisted and not impeded by the Government new clause, which will enable them to gather the information with the Treasury and the Financial Conduct Authority in order to make precisely that case.

[Jo Stevens]

Perhaps I can help the Minister on the figure that my hon. Friend the Member for Ashfield mentioned—the £11 billion of savings after the 2012 changes. That is an Association of British Insurers figure. That figure was saved in claims costs over six years, according to its evidence, but premiums are now higher than ever.

[Rory Stewart]

I will return to the fundamental disagreement between right hon. and hon. Members. We can all agree that there were significant savings to the insurance industry. We can all agree that some of those savings were passed on to customers and that premiums ceased to rise at the rate at which they had been. There is some disagreement between the two sides of the House about whether enough of those savings were passed on—we argue that the industry passed on sufficient savings—and whether premiums went up more than they should. However, without Government new clause 2, the evidence or information will not be available to people in order to make such arguments.

It is not enough to produce a general figure, saying, “Here is £11 billion, and this is how much was passed on in premiums.” That is why the new clause has no less than 11 subsections that detail the kind of data that would need to be extracted from the insurance industry by the date recommended in order to prove that case. I was asked why reporting would not be done annually. The answer, of course, is that a claim can be brought any time within three years of an accident. The date takes into account that the law is due to come into effect in 2020. We add three years to that for the claim, and then time for the data and evidence gathering in order to report in 2024.

[David Hanson]

If the Bill comes into effect in 2020 and we add three years, that is 2023. However, new clause 2(7) says:

“Before the end of a period of one year beginning with 1 April 2024”.

That means that the report may not be done until the end of March or April 2025. It may be published by the Government after that, and then there will be discussion. Therefore, even on the Minister’s timetable, we are talking about three years past the 2023 deadline that he indicated to the Committee a moment ago. He should reflect on that and table an amendment to his new clause on Report that brings forward the proposed date considerably.

[Rory Stewart]

The reason why I respectfully request that the Government amendments are supported and the Opposition amendments are withdrawn is that pushing for one-year rather than three-year reviews and attempting to price fix the result would leave the opposition amendments open to judicial review and create an enormous, unnecessary burden on the market. Our contention is that the market already operates—we have the Competition and Markets Authority to argue that that is the case—and, by introducing our new clause, we will be able to demonstrate that over time. It is a very serious thing.

I remain confident that, if insurance companies are compelled to produce such a degree of detail and information to the Financial Conduct Authority and the Treasury, they will pass on those savings to consumers because, were they not to, they would be taking a considerable legal risk. The industry initially resisted this move, and understands that it is a serious obligation.

[Ruth George (High Peak) (Lab)]

As the Minister said, the insurance companies have said that they will pass savings on to consumers, and the Government have been actively engaged in trying to ensure that all insurance companies sign up to a pledge to reduce premiums, which in itself is a way of fixing the market. However, if it will take insurance companies seven years from now to produce the information, from what date will premiums be reduced? When will consumers see payback from the policy?

[Rory Stewart]

We would expect, because of the nature of competition, for premiums to begin to reduce soon—almost immediately—as insurance companies anticipate the nature of the changes and move to drop premiums to compete with each other and attract new customers. In fact, following legislation in 2012, premiums dropped from £442 in 2012 to £388 in 2015.

[Ruth George]

If the Minister expects premiums to drop so soon, why can the Government not report to the House on those premiums dropping?

[Rory Stewart]

The premiums dropping will be assessed and published in the normal fashion. The requirement in new clause 2 is much more complex. The new clause requires a prodigious amount of information about all forms of income streams, the number of claims and the number of premium holders so the Treasury and the Financial Conduct Authority can develop a sophisticated and detailed picture in order accurately to address the concerns of Opposition Members that, over the period—particularly the three-year period that will be affected by the introduction of the Bill—insurance companies will not pass on savings to consumers. We believe they will, which is why we are comfortable pushing for this unprecedented step of gathering that information to demonstrate that the market works.

On that basis, I politely request that the Opposition withdraw their amendments and support Government new clause 2, which after all was brought together by Opposition Members of the House of Lords and others, and which achieves exactly the objectives that the Opposition have set out.

[Gloria De Piero]

The Minister talked a lot about where the Committee disagrees, but there are things we can all accept as fact—the facts that insurance profits are up massively and that these changes will save insurance companies £1.3 billion, for instance—and we all want premiums to come down. We believe only amendment 17 and new clause 6 will deliver that, so we seek to divide the Committee.

Question put, That the amendment be made.

--- Later in debate ---

[Bambos Charalambous]

Let us be clear what we are talking about with the discount rate: damages for people who have suffered catastrophic, life-changing injuries. The lump sum they receive is to last them their entire life and is to pay for urgent treatments, care, support, adaptations—a whole host of things. We need to be very careful how we deal with this, as very small variations in the discount rate can have serious impacts.

As an example, I have been advised by a leading law firm that it settled a claim in 2015 for a client in her 30s who suffered cardiac arrest and irreparable brain damage due to negligence. She was awarded £9.95 million when the discount rate was 2.5%. That award was to pay for extensive medical treatments, childcare and live-in carers for the rest of her life. Had the claim been settled in 2017, when the discount rate was changed to -0.75%, it would have resulted in a settlement of £20 million.

Such cases are relatively few in number, but when they do occur, we must make sure that they are dealt with as precisely as possible, without leaving such large fluctuations to chance. We would all agree that the time between the setting of the two discount rates was far too long. I very much support a shorter period of time for that to take place. Someone who receives such a lump sum would surely choose to invest it in as low risk a manner as possible—they would not want any risk if possible—because it has to last them their entire life. The discount rate should be set on the basis that the investment will be very low risk.

In setting the discount rate, the Lord Chancellor is given wide-ranging discretion. That opens up potential for other factors to influence the Lord Chancellor, which could adversely impact the compensation received by someone who has suffered catastrophic injuries. We need to be clear about the reasons why the Lord Chancellor will be setting the rate. As my hon. Friend the Member for Lewisham West and Penge mentioned, the Justice Committee recommended setting up an independent panel of experts to advise the Lord Chancellor on setting the rate. It also recommended that the panel’s advice be published in full. The Bill has removed that transparency. I have grave concerns about the reasons for that and how the rate will be set. We need to know how the rate has been set. When the Bank of England sets interest rates, it has a panel of experts and it gives reasons why. A similar system should apply here.

I support the amendments and new clause. It would be right and proper for the power to be taken away from the Lord Chancellor and for the rate to be set by an independent panel of experts, at regular periods.

[Rory Stewart]

I have enormous sympathy for the amendments, in particular the arguments on amendments 24, 22 and 23. As the hon. Member for Lewisham West and Penge and the hon. Member for Enfield, Southgate have clarified, we are dealing here with people who have suffered catastrophic, life-changing injuries and we have a very particular responsibility, particularly since some of those people can be immensely vulnerable. They can include children who have catastrophic, life-changing injuries. We all have an obligation to ensure that the principle of 100% compensation is met.

The discount rate can seem a slightly technical mathematical formula. It is there to try to hedge effectively against inflation and the expected rate of investment returns in setting an award. As the hon. Member for Enfield, Southgate pointed out, a shift in the discount rate could mean a difference between an award of £10 million and an award of £20 million—a very significant difference.

In setting the discount rate, our first obligation has to be to the very vulnerable individuals who have suffered a catastrophic or life-changing injury. We need to ensure that they are able to make an investment that does not carry substantial risk. We cannot guarantee everything because inflation and markets can move. Insofar as we can do so in advance, we should attempt to arrive at a rate that fairly reflects the likelihood of their getting the compensation that it was anticipated they would receive from the judge. That means that we should not aim to chase a median rate. We should aim to chase a rate on the basis of advice from the Government Actuary and later from the expert panel, to determine the fair rate of return.

In that case, why are the Government challenging amendments 24, 22 and 23? The answer is that amendments 22 and 23 reflect the original position of the Government on the Bill, so we are slightly going round in circles. We had originally suggested in the version of the Bill that we presented to the House of Lords that the Lord Chancellor should consult the expert panel before setting the rate. Under pressure from Opposition Members in the House of Lords, in particular Lord Sharkey, the Lords pushed us into a position where we agreed that, instead of an expert panel, it should be the Government Actuary, working with the Lord Chancellor, who set the first rate.

The argument made by the Lib Dem peer and backed by others, including Lord Beecham, was that the problems for the NHS caused by the discount rate are so extreme and the costs on the public purse so extreme, that the first change in the discount rate should happen relatively rapidly, on the advice of the Government Actuary. Were we now to reject that amendment, which we accepted after long negotiation in the House of Lords, we would have to go back to the drawing board and set up the expert panel again, leading to a very significant delay, which would impose costs on the NHS.

We are in the ironic position that the Opposition are now proposing as amendments the original Government position, which the Opposition struck down in the House of Lords. We are slightly in danger of going round in circles. We are where we are and, given the problems of time, I suggest that the pragmatic compromise is that the Government Actuary, who is an independent individual with enormous expertise, works with the Lord Chancellor on the first setting or the rate, and that for subsequent settings of the rate, the expert panel comes in, as the House of Lords recommended.

That brings us to the lengthy amendment 24, which the hon. Member for Lewisham West and Penge introduced with great eloquence. That essentially argues that the rate should be set by the expert panel alone and not by the Lord Chancellor. We disagree fundamentally with that because the expert panel and the Government Actuary would argue that it is not their position to set the rate. It is their position to provide actuarial advice on different investment decisions that could be made, the likely rates of inflation and the likely rates of return.

Ultimately, a Minister accountable to Parliament should set that rate, because they have to balance some very different issues: our obligation towards vulnerable people who have suffered catastrophic life-changing injuries and our obligation on the costs to the national health service, which run into billions of pounds, and balancing these different public goods.

It simply would not be fair to expect an actuary to make those kinds of political and social decisions. It is entirely appropriate to expect actuarial experts to provide the expert advice on what the range of options would be, and to reassure individuals that the Lord Chancellor is not likely to make a decision that would have a significant negative impact. It is only necessary to look at what the Lord Chancellor did two years ago in setting the rate of -0.75%. If it had been the case that the Lord Chancellor was fundamentally driven by Treasury calculations and was not interested in defending the vulnerable individual, they would not have moved the rate from 2.5% to -0.75%, effectively doubling the compensation paid. The Lord Chancellor, in setting this rate, on the advice of the expert panel, will be acting as the Lord Chancellor, not as the Secretary of State for Justice.

[Bambos Charalambous]

The Minister said there was a big change when a previous Lord Chancellor set the rate at -0.75%. I wonder what advice and from whom she received in setting that rate. Clearly, she would have had some advice, rather than plucking that figure out of the air. I wonder what the situation is now.

[Rory Stewart]

At the moment, the advice received would be from actuaries. Ultimately, we commission the Government Actuary’s Department voluntarily to provide the best advice on what the rate should be. It then arrives at a gilt rate, which drove us towards -0.75%. The Bill puts the role of the Government Actuary into law, so it is no longer voluntary but compulsory. It will be obligatory for the Lord Chancellor to consult, and in future there will be a broader expert panel around the Government Actuary.

--- Later in debate ---

[Gloria De Piero]

I beg to move, That the clause be read a Second time.

New clause 1 deals with one of the most important effects of this package of measures. It says that the whiplash small claims limit can increase only in line with inflation based on the consumer prices index. It specifies that the limit can increase only when inflation has increased the existing rate by £500 since it was last set.

The Government have been disingenuous in trying to sneak through these changes to the small claims track limit by using delegated legislation, which restricts the proper scrutiny that such significant changes deserve. With the new clause, we ask the Government to do the right thing and to put it on the face of the Bill, enshrining the terms that a plethora of experts agree on: the use of CPI over the retail prices index when it, and using 1999 as a start date for any recalculation of the limit for a small claims track.

The White Book that I showed the Minister shows that there was a 20% increase in the small claims limit in 1999 when special damages were removed from the calculation of the limit. Lord Justice Jackson, in his “Review of Civil Litigation Costs: Final Report” said that the only reason to increase the personal injury small claims limit would be to

“reflect inflation since 1999. As series of small rises in the limit would be confusing for practitioners and judges alike.”

He made it crystal clear that the limit should remain at £1,000 until inflation warrants an increase to £1,500.

The Government admitted to me this morning that there is a difference of opinion in their own ranks about which of these years should be the benchmark. We say again that they must listen to the Lord Justice Jackson and the Justice Committee chaired by one of their own, the hon. Member for Bromley and Chislehurst (Robert Neill), who agrees with him. We should state on the face of the Bill that 1999 must be the start date for any recalculation of the small claims limit, not 1991. The Government accepted all the key recommendations in the Jackson report save the recommendation that there should be an increase in the small claims limit to £1,500 only when inflation justifies it.

To turn to another aspect—the Government have admitted that it has caused a dispute among Ministers—I want to make the case, as I have done before, that CPI and not the RPI is the correct measure to apply for inflation. It seems that the Government use RPI when it suits and use CPI when it suits. CPI is what we use for the pensions and benefits paid to injured workers while they are pursuing justice for that injury through the claim. Even the Chief Secretary to the Treasury agrees with me. When asked at the House of Lords Economic Affairs Committee whether she agreed that RPI was an inadequate measure, she said:

“We certainly agree that it is not the preferred measure of inflation. CPI is a much better measure of inflation… we agree that it is not the preferred method, and we are seeking to move away from RPI”.

Why are we moving towards it here? The Government say they wish to apply RPI to the small claims limit because RPI is applied to updating damages—the same damages that they are taking an axe to with the new tariff.

Perhaps some in the Conservative party are persuaded, like me, that CPI is the best option, because of yet another expert who has lined up to say so. On 30 January 2018, the Governor of the Bank of England, Mark Carney, said:

“At the moment, we have RPI, which most would acknowledge has known errors. We have CPI, which is what virtually everyone recognises and is in our remit.”

It is perfectly clear that we need to enshrine CPI as the key measure on the face of the Bill. The amount of £1,000 from 1999 would now be worth either £1,440 if CPI is applied, or £1,620 if RPI is applied. Lord Jackson said that it should not go up to £2,000, as the Government suggests, until inflation warrants it.

I trust the Minister will not be as dismissive as Lord Keen was when he said in his evidence to the Justice Committee:

“We do not feel that there is a material difference between setting it at £1,700 today and seeing it drop behind inflation next year, and setting it at £2,000 without the need to review it again for a number of years.”

Try telling the nurse, the caretaker or the bus driver that there is no material difference between £1,700 and £2,000. For those on real wages, that has a real impact.

[Rory Stewart]

Relatively rapidly, I would say that we have five types of disagreement with the amendments. Broadly speaking, those are political, philosophical, economic, financial and constitutional. The political disagreement is that the amendment would go to the heart of the Bill. The entire concept of the Bill is to try to effect a change in the current practice and process around whiplash claims by moving the claim limit to £5,000. That is part of the entire package—the tariffs and small claims limits are related to that.

Philosophically and fundamentally, we are not arguing that the shift to £5,000 is fundamentally a question of inflation. There are many other reasons why the small claims limit has been moved in the past. Indeed, in relation to some types of claim, as you will be aware Sir Henry, as one of our learned friends, some of the claims have been moved to £10,000, which goes a long way beyond inflation.

Largely, the driver of whether or not something is on a small claims track is to do with the nature of the claim, not the nature of inflation. However, if we worked on the narrow question of inflation, the Judicial College guidelines are currently on RPI as opposed to CPI. I respect the arguments that the hon. Member for Ashfield made but that is not the fundamental argument the Government are making.

The amendment would have curious financial implications. It would create a strange syncopated rhythm, whereby movements in CPI are not necessarily reflected in the triennial review except in £500 increments which, over time, mathematically will lead to peculiar results.

The fundamental reason we oppose the amendment is the final argument I mentioned, which is constitutional. This is business for the Civil Procedure Rule Committee, as it always has been, and it is not suitable to put in the Bill. On the basis of those political, philosophical, economic, financial and constitutional arguments, I respectfully request that the amendments be withdrawn.

[Robert Courts (Witney) (Con)]

I want to make a few brief comments. I entirely understand the force of the comments made. As someone who started his practice in the small claims court before progressing to other courts, I have seen how they work. I have a couple of pertinent points—the Minister alluded to the first. For some very complicated cases, particularly commercial ones, there are already limits of £10,000. As other Members who have practised will realise, the fact that someone is in a small claims court and not represented does not mean that they are completely unassisted. The district judges who hear those claims are solicitors or barristers and are extremely competent and experienced in their own right. Therefore, there is every reason to believe that they will be able to hear those claims, which will have justice as their case is heard.

--- Later in debate ---

[Ellie Reeves]

I beg to move, That the clause be read a Second time.

To understand the importance of new clause 4, we must understand the significance of the use of periodical payments to compensate those who have been injured through negligence, often catastrophically, with little or no capacity for work and with considerable care costs.

More often than not, successful claimants are paid a lump sum, which is intended to compensate them for the rest of their life. However, the benefits of periodical payments, rather than a lump sum, are threefold. First, periodical payments are index-linked so they go up in accordance with rising costs of living or care. Secondly, in such cases, there are often arguments about life expectancy. If the court accepts that a victim of a catastrophic injury is likely to live until 42 but medical advances mean that they actually live until 80, a lump sum will run out many years earlier. With periodical payments, the injured person is compensated every year for the rest of their life. Thirdly, receiving an annual periodical payment rather than a lump sum means that injured people do not have to make difficult investment decisions and, equally, it removes the risk that they will spend the money all at once.

The setting of the discount rate is highly relevant to periodical payments. When the rate stood at 2.5%, it was far more attractive for defendants to pay a lump sum that was discounted by 2.5% than to pay index-linked annual payments. That meant that in all but the most serious cases, periodical payments often met huge resistance from defendants. A rate that assumes a much lower level of investment risk by injured people may well result in an increase in the use of periodical payments, particularly in cases not at the most catastrophic level where resistance from defendants has been greatest. The benefits to the injured person are clear, and the benefits to the state of not having to pick up the bill for care or housing, if and when the money runs out, are obvious.

On Second Reading, the Minister said that he welcomed the use of periodical payments. Can he tell us the percentage of personal injury claims in which they are used? It is my understanding that the figures are astoundingly low, often due to resistance from defendant insurers. New clause 4 makes it incumbent on the Civil Justice Council, with its expert knowledge, to review the impact of part 2 and the discount rate on the prevalence of periodical payments being awarded. If we agree that periodical payments are a good thing, surely we can agree that their use must be monitored so that appropriate and evidence-based action can be taken where necessary. This would benefit injured people and the Treasury alike.

[Rory Stewart]

Once again, I want to take this opportunity to praise the hon. Member for Lewisham West and Penge. The arguments for PPO are very strong. It is absolutely correct that the ideal thing is to give someone a PPO. The problem at the moment with receiving a large sum with a discount rate is that one could end up overcompensated or undercompensated. Overcompensation means a huge cost to the NHS and the taxpayer. Undercompensation can be catastrophic for one’s lifetime care costs. Rather than taking a lump sum, the PPO ensures that one gets the amount of money required to look after one’s costs. Therefore, we agree with the nature of this argument.

The disagreements with this amendment are technical. The 18-month period from Royal Assent is too short to take real effect. Regarding the basic question the hon. Lady has raised—whether the Civil Justice Council should look at the use of PPOs and the impact of discount rates on PPOs—we have written directly to the Master of the Rolls to request that the Civil Justice Council look at the use of PPOs. We remain open to doing that again, once the new review of discount rate is introduced.

It is absolutely right that we should encourage more uptake and challenge the insurance companies, which have said publicly that they want more use of PPOs, to ensure that more PPOs are given out. That is the best way to protect an injured person. There are some narrow cases where it is not appropriate—somebody may not have sufficient insurance or the financial weight to deliver a PPO—but when it is paid out, it ought to be paid and that is why we are grateful that, for example, the NHS continues to use the PPOs in the case of catastrophically injured children. I request that the hon. Lady withdraw the amendment.

[Ellie Reeves]

I thank the Minister for that response and, to some extent, his assurances. However, given that the Bill seeks to make big changes, if we are committed to periodical payments and their use, there should be a mechanism for review built into the legislation. I shall press the new clause to a Division.

Question put, That the clause be read a Second time.

--- Later in debate ---

[Gloria De Piero]

The Government have refused to allow the small claims changes, which will have a fundamental impact on access to justice for hundreds and thousands of injured people every year, into the Bill. New clause 7 is designed to ensure that vulnerable road users are exempted as the Minister has promised. New clause 8 would do little more than reflect the recommendations of Lord Justice Jackson in his civil justice review. The Minister agreed this morning that there had been a change to the small claims limit in 1999. New clause 8 says that 1999 is the date from which any change to the small claims limit should be calculated and that the increase should be by no more than £500 at any one time. As I have said, that reflects the recommendations of Lord Justice Jackson.

There is a difference between us on the appropriate level of inflation. We say CPI—the consumer prices index. There is absolute logic in that because that is the inflation rate applied by the Government to benefits paid to injured people. It is also, of course, the rate that the Governor of the Bank of England recommends.

[Rory Stewart]

Given that we are coming towards the end of the proceedings, I again pay tribute to right hon. and hon. Members on both sides of the Committee for the quality of debate. It has been quite testing personally: a lot of very learned friends have asked a lot of fundamental questions, ranging from inflation rates to the good challenges from my friend the right hon. Member for Delyn (David Hanson), who keeps me on my toes. I thank them very much for their various contributions.

With the final group of amendments, we come to questions that relate to some of the debates that we have had already, in different forms. This in effect is a subset of the arguments made on new clause 1. As right hon. and hon. Members will remember, new clause 1 involved an argument that the reductions should be made in relation to all personal injury claims. These proposals take the same arguments and apply them to two subsets of people who are injured: vulnerable road users and people injured in the course of employment. On both those things, there are some differences between us, again, on the correct level at which to set the rate, but there are also some important concessions that are worth bearing in mind. They were made in the House of Lords and in the subsequent process.

In relation, first, to people injured in the course of employment, personal injury claims that are not as a result of whiplash, we have listened very carefully to right hon. and hon. Members. They will remember that in the initial consultations there were suggestions about raising the limit to £10,000 or £5,000. The agreement has been that for non-whiplash-related injuries, it is kept at £2,000.

There is some discussion about whether it is correct to see that in terms of CPI or RPI—the retail prices index—but broadly speaking, it is not very significantly different from the rates that were set in the 1990s when inflation was applied, although there is some disagreement between the two sides of the House, to the extent of a few hundred pounds, on the extent of headroom put on top of inflation. There could be a broader argument, which was raised earlier, about the fundamental principle that compensation should be paid for the injury rather than on the basis of why somebody was present on the scene, whether in the course of employment or another activity. However, that goes beyond the scope of the amendment.

The real concession has been made in relation to vulnerable road users, which I hope hon. Members on both sides of the House will welcome. We listened carefully to representations made primarily not by people who own horses—although I remind hon. Members that there are more than a million horses in the United Kingdom, so it is not quite as much of a minority pursuit as some might like—but by cyclists, who led a strong campaign arguing that they are particularly vulnerable on the roads. They are: they are not encased in a sheet of metal. We accept that the same argument also applies in spades to pedestrians—as a proud pedestrian, I feel that very strongly—and to people on motorcycles, who are not encased in metal either.

We are delighted to confirm that vulnerable road users will be excluded in respect of the small claims limit and the Bill. On that basis, with many thanks to everybody for their prodigious and learned contributions, I politely ask that the amendment be withdrawn.

[Gloria De Piero]

I will disquiet the Minister one more time and press the new clause to a Division.

Question put, That the clause be read a Second time.

--- Later in debate ---

Short title

[Rory Stewart]

I beg to move amendment 7, in clause 14, page 16, line 6, leave out subsection (2).

This amendment removes the privilege amendment inserted by the Lords.

The amendment is procedural. It is a privilege amendment that changes subsection (2) of the short title. The House of Lords has said that nothing in the Act shall impose any charge on the people or on the public funds. Bringing it to the House of Commons means the Ministry of Justice should be liable for any charges to the funds. The House of Commons is able to take on the terms of the fund. This is a normal procedural amendment for when something comes from the House of Lords to the House of Commons, so we ask that Government amendment 7 is accepted.

Amendment 7 agreed to.

Clause 14, as amended, ordered to stand part of the Bill.

Bill, as amended, to be reported.

Civil Liability Bill [Lords]

Rory Stewart Excerpts

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

[Ruth George]

I absolutely concur with my hon. Friend’s point, which I raised with the Health and Safety Executive, whose laboratory is in my constituency. It concurred that one of its major concerns is that without claims being made against employers they will cease to militate against risk in the workplace. That is just one of the many problems the Bill will cause, both for victims of accidents and for all other employees in the workplace.

The Minister has heard many examples this afternoon of how the Government could crack down on fraud and on the costs of insurance without cracking down on innocent victims of accidents. The requirement in the Bill for medical reports prior to offers being made is an important one, which all sides are supporting. We hope that the Government would seek to assess the impact of that change before impacting on victims. We have also heard many calls from Members on both sides of the House for claims management companies to be acted against because they are obviously playing the system and we need to make sure that that cannot continue.

This Bill is seeking to make the innocent victims of accidents pay for the fact that insurance companies are not prepared to crack down on fraud and so have come to this Government seeking their help. We have no guarantee that insurance costs will fall, but we do know that insurance companies will make £1.3 billion more a year out of this legislation and that innocent victims of accidents will suffer. I very much hope that the Minister has listened to the arguments being made on both sides of the House today and will accept the new clause.

[The Minister of State, Ministry of Justice (Rory Stewart)]

Let me begin by paying tribute to the high quality of debate today from hon. and right hon. Members on all sides of the House. This has been a serious business. The consultation on the issue began in 2012 and the detailed measures we are debating today were announced in the Budget in autumn 2015. There are disagreements on every side of the House, which are expressed in new clauses 1 and 2, but, more generally, I hope that everybody in the House will recognise that the Bill has been adapted as we have listened a great deal to suggestions made by the Opposition and others. I pay tribute to the hon. and right hon. Members on all sides who pushed for the changes we have introduced on vulnerable road users, on the new role of the consultation with the Lord Chief Justice and on definitions, particularly in respect of whiplash. I also pay tribute to what happened in the other House, where this legislation was considerably revised and improved by efforts from Cross-Bench peers, as well as Labour, Lib Dem and Conservative peers.

--- Later in debate ---

[Alex Chalk (Cheltenham) (Con)]

Does my hon. Friend agree that it is important that claims against employers above £2,000 are taken outside the scope of this? It is right in those circumstances, where it can be difficult to make the claim stick, that people should be entitled to recover their costs in the event of a successful claim. Does he agree that making that change was a critical improvement to this Bill?

[Rory Stewart]

My hon. Friend makes a powerful point, which should, to some extent, reassure the hon. Member for High Peak, some of whose arguments rested on damages in the workplace. The rise to £5,000 does not relate to damages in the workplace. As has been pointed out, it relates only to whiplash injuries suffered in a vehicle.

[Robert Neill]

I am grateful to the Minister for giving way. I take on board his point that the appropriate test for a small claims regime is complexity or otherwise, but will he recognise that there is a risk that perceived complexity might make claimants vulnerable to the operations of claims management companies, which do not have the high standards and good regulation of personal injury lawyers, as he rightly recognises? What safeguards do the Government intend to put in place beyond this Bill and more generally to make sure that we do not have a displacement effect from well-regulated personal injuries lawyers to unregulated, unscrupulous claims managers of the kind to which my hon. Friend the Member for Croydon South (Chris Philp) and others referred? What more can we do to safeguard against that unintended consequence?

[Rory Stewart]

This is an issue on which my hon. Friend has been very thoughtful in his role as Chair of the Justice Committee. There are obviously three things that we are endeavouring to do and we are open to more ideas. One of them, of course, is that, through this package of measures, we disincentivise claims management companies from having a significant financial interest in pursuing this type of case. The second, as my hon. Friend pointed out, is the setting up of an online portal to reassure individuals that they will have a more predictable, more transparent and more straightforward system for pursuing their claims in person. Finally, through consultation with the judiciary, we are looking at the issue of paid McKenzie friends. We are waiting for the judiciary to report back so that we can take action on that issue.

[Ruth George]

The Minister claimed that raising the limit for workplace accidents to £2,000 would allay my fears, but given that USDAW and other unions have said that this will actually increase the numbers needing to go to the small claims court by five times, it certainly does not. There are still wide concerns around taking cases against employers, as he will know. Will he make any assurance that the portal will be tested, and that it will be ensured that an ordinary layperson can use it before any claims are implemented?

[Rory Stewart]

Clearly two different cases are being made here. On the question of the online portal, a very serious group of people, which includes insurers and lawyers, is testing it. One of the concessions that was made in the House of Lords—I think it is a good one—is to extend the time before this is rolled out by 12 months so that we have more time to make sure that the testing is done and that the portal operates properly. That is a good challenge.

The point about injuries in the workplace is that that, I am afraid, is outside the scope of the Bill, which is very narrowly defined to deal with whiplash injuries. Indeed, new clause 1 is also very narrowly defined as it deals with only the question of a “relevant injury”, which, in this case, is a whiplash injury. Therefore, while arguments about other forms of injury and employment are very interesting, they are not relevant to the debate on new clauses 1 or 2.

Moving on to the next question about simplicity and inflation, I just wish to point out that the previous Labour Government accepted the principle that inflation was not the only determinant of the levels that the small claims court should meet, because, of course, the small claims limit was raised from £1,000 in 1991 to £3,000 in 1996, and then to £5,000 in 1999 under the Labour Government before it was raised to £10,000 in 2013. Quite clearly those rises were well in advance of inflation and were driven, as indeed was the case for European small claims, by the notion of the simplicity of claims, not a change in either the CPI or the RPI.

Even if one were to accept that there should be a relationship to inflation, the mechanism proposed in new clause 1 seems to be a recipe for falling behind inflation. In effect, the proposal is that an increase should only take place if there had been a rise of at least £500, and should then be limited to £500. It would not take many years of slightly higher inflation than we have now to end up in a situation where, over a five and 10-year period, the increase would be considerably in excess of £1,000, which would then allow for a rise, but we would then find a syncopated system that, very rapidly, would be falling behind inflation.

The more fundamental point is a constitutional one. This is not an issue that is traditionally dealt with through primary legislation, and it is not an issue that is dealt with in the Bill. That is because increases to the small claims limit are properly an issue for the Civil Procedure Rules Committee, on which the Master of the Rolls, district judges, senior judges, personal injury lawyers—barristers and solicitors, including the president of the Association of Personal Injury Lawyers—and representatives for consumer bodies such as Which? sit. That is a better way of looking at the proper limits than trying take forward primary legislation on the Floor of the House. Technically, there is also another issue with the new clause, which is that subsection (4) should include paragraphs (a), (b) and (c).

That brings me to new clause 2. The hon. Member for Enfield, Southgate (Bambos Charalambous) quite rightly drew our attention to potentially vulnerable litigants, such as infants, children and other protected parties. He argues—on this we absolutely agree—that they suffer the same forms of injuries as any other human, and are entitled to fair compensation and the same degree of representation that would be afforded to any adult. At the moment, that is, of course, provided by the allocation of a litigation partner by the judge concerned.

The hon. Gentleman and the hon. Member for Ashfield asked what happens if that does not work and whether an increase in the number of cases would undermine that system. We have looked at this carefully, because the hon. Gentleman raised the matter in Committee. Our conclusion, having consulted a wide range of individuals, is that we do not believe that that would occur, but a number of safeguards are in place in the worst-case scenario. In most cases, an individual who is in that situation, such as an infant, would be represented by their parents. In a situation in which they were suing their parents, because the parents were, for example, driving the car, a litigation friend would be appointed by the court. In the case that they would be unable to find a competent adult who met all the criteria stated by the hon. Gentleman, including there not being a conflict of interest from that individual, it would be possible to appoint the official solicitor. In a case in which that, too, failed, judicial discretion remains to move the case of the infant out of the small claims track into the fast track, where the legal costs would be recoverable. Of course, judges would still have a very serious role to play in approving any settlement made to an infant or any protected party. That was why Lord Justice Patten made this ruling in the case of Dockerill v. Tullet:

“I can see no reason in principle why a small damages claim made by an infant should be taken out of the small claims track merely because of the age of the claimant. It is also clear that the premise on which CPR 45.7 operates is that the normal track for damages by infants will be the small claims track.”

That brings me to my conclusion. This very impressive piece of legislation has involved the upper House, the Opposition and civil society members throughout its Committee stages. The Government have made a number of very serious concessions to make the process more workable. I pay particular tribute to the Justice Committee for the pressure that it has put on us in relation to a very large number of issues, ranging from the online portal to paid McKenzie friends and vulnerable road users. We have now ended up with a Bill that does not do everything that was set out when the Lord Chancellor initially announced it in autumn 2015. Instead, with a series of realistic, focused and pragmatic compromises, we have struck the right balance between the protection of genuine claimants who have suffered genuine injuries, and the protection of different forms of public interest—in particular, the public interest of people, especially in rural areas, who need to be able to afford their motor insurance in order to move around. This Bill will remove unnecessary complexity, unnecessary costs and, in particular, the moral damage and hazard that currently exist in the form of claims management companies and a few unscrupulous individuals.

As Lord Brown of Eaton-under-Heywood—the previous president of the Supreme Court—pointed out in the upper House, this country is now known throughout the world as a haven for unnecessary whiplash claims. Despite a significant reduction in the number of car accidents and an increase in vehicle safety measures over the past 15 years, if not over the last three, we have seen a significant increase in the number of whiplash claims, which can be accounted for only on the basis of fraudulent and exaggerated claims.

Question put, That the clause be read a Second time.

--- Later in debate ---

[Kwasi Kwarteng]

If the hon. Gentleman were an insurer, managing a business on a daily basis, he would have to make a call every single day on which claims to fight and which not to fight. Often, for reasons of cost, the insurer will simply pay the money, without regard to the veracity or otherwise of the claim.

[Rory Stewart]

Does my hon. Friend accept that there is also the serious issue of asymmetry of information? In the case of injuries lasting less than six months, it is very difficult to prove through any medical means whether or not the injuries occurred, and therefore very difficult to defend against the claim.

--- Later in debate ---

[Mike Wood]

I understand the hon. Gentleman’s point, but there is clearly a distinction between being the victim of crime and being involved in an accident, even a road traffic accident.

[Rory Stewart]

rose—

[Mike Wood]

Of course I give way to the Minister.

[Rory Stewart]

Does my hon. Friend agree that these discrepancies already exist, because the criminal injuries compensation scheme is, in fact, already an example of a tariff-based system? As those discrepancies have existed since 1962, nothing in the Bill changes their basic nature.

[Mike Wood]

The Minister, as ever, speaks straight to the point that bringing this system in line with the criminal injuries compensation scheme is actually making parallel systems more consistent, and it is entirely logical that they should operate on similar tariff-based systems. One of the flaws in the current system is that, as the Judicial College is setting its guidelines, the awards it uses for deciding the amounts in the guidelines are not the overall amounts that are payable in the event of a road traffic accident leading to personal injury, but are based on the awards made by the court in the relatively small proportion of claims that proceed to trial and are then adjudicated by a judge. The system does not consider the very large number of claims that are settled at an earlier date when the figure would tend to be lower.

Clearly, cases that proceed to full trial are more likely to be the more complex ones. This has the effect of institutionalising an inflationary element within the guidelines as they are reviewed, because the review is only ever based on those types of claim that actually end up being the higher awards anyway. It can only ever lead to an increasing amount. The impact of that falls clearly on our constituents. We rightly insist on mandatory motor insurance. As hon. Members have said, motor insurance premiums increase rapidly. One reason why they increase rapidly is that there has recently been a large increase in the average amounts paid out for personal injury claims. If we fail to take this sensible action, those amounts can only increase, and we can expect premiums to continue to increase at around 10% annually, quickly putting them out of reach.

--- Later in debate ---

[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.

--- Later in debate ---

[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.

[Robert Neill]

I cannot let the Minister move on from the important and significant points of my hon. Friend the Member for Cheltenham (Alex Chalk) without observing that he emphasised the role of the Lord Chancellor in consulting with the Lord Chief Justice in the setting of the tariffs. That is an important safeguard. Can the Minister tell us a little more about how it is envisaged that that will work?

[Rory Stewart]

Absolutely. This is a concession that we have inserted into the Bill partly due to pressure from my hon. Friend, the Chairman of the Justice Committee, and from other Members, including my hon. Friend the Member for Cheadle (Mary Robinson). It means that the Lord Chancellor, when reflecting on the nature of the tariff in a judicial capacity, will consult the Lord Chief Justice. That concession in the Bill, combined with the strong emphasis on judicial discretion allowing the tariffs to be uplifted, will be central to our attempt to reconcile a tariff-based system with the tradition of English common law. Through it, we hope to address some of the concerns raised by Lord Woolf.

We have discussed the purpose of the Bill, and the way in which getting rid of the tariffs as suggested in amendment 2 would undermine the central purpose of getting a more affordable system into place. We have made a number of concessions in order to meet concerns raised by many distinguished colleagues around the House, including individuals with experience of personal injury law and those with experience as constituency MPs of the honourable and serious work done by personal injury lawyers. I shall show respect to the House and touch on some of those concessions.

In the initial proposals put forward by the Chancellor of the Exchequer in the autumn of 2015, the suggestion was that there would be no general damages payable at all. That was roughly the argument made by the former Labour Lord Chancellor, Jack Straw. We have moved away from that position and accepted that general damages should be paid, but we have suggested that there should be a tariff for those damages. As my hon. Friend the Member for Bromley and Chislehurst (Robert Neill) has said, we will consult the Lord Chief Justice on that tariff and there will be judicial discretion. There is a precedent on tariffs—they exist in Italy and Spain—and there is even a precedent in English common law in the criminal injuries compensation scheme.

The benefits that we believe a tariff system will deliver include a reduction in the cost of this form of transaction and, hopefully, through that, a reduction in the number of potentially exaggerated or fraudulent claims. That would have an advantage for general public policy in that people would not be encouraged to make fraudulent claims. We believe that the system will also provide certainty and predictability to claimants, especially when they are connected to an online portal that will ensure that they follow a particular sequence. They will proceed to the online portal, then, for the first time, they will be required to go to a medical practitioner specialising in whiplash claims who would give them a prognosis of, for example, six months, 12 months or 24 months. On the basis of that prognosis, through the portal, a fixed tariff would then tell them exactly how much they would be given. This should mean that in the overwhelming majority of cases there would be absolutely no requirement to proceed to court. In any cases where we did proceed to court, we would rely on the small claims process in order to settle the claim, using the tariffs to reinforce the process.

The speeches so far have not touched on Government amendment 1, which I hope all Members, including Opposition Members, will be happy to accept. Clause 5(7)(a) states that the term “tariff amount” means

“in relation to one or more whiplash injuries, the amount specified in respect of the injury by regulations under section 3(2)”.

Clause 3(2) refers to the

“amount of damages for pain, suffering and loss of amenity payable in respect of the whiplash injury or injuries”.

In other words, clause 3 refers to “injury or injuries”, whereas clause 5 refers simply to “the injury”. The proposal in Government amendment 1, recommended by parliamentary counsel, is that we deal with the discrepancy by inserting “or injuries” after “the injury” in clause 5(7)(a). I hope that the Opposition will be happy to accept that suggestion.

That brings us back to the central issue of the way in which tariffs are set. The hon. Member for Hammersmith (Andy Slaughter) focused a great deal on the notion that the tariffs were somehow inequitable in terms of the damage that individuals have suffered. The hon. Member for High Peak (Ruth George) said several times that we should not refer to these types of injuries as minor. I want to emphasise that the phrase “minor injuries” is derived from Judicial College guidelines, not from the Government or any political party. It is simply a long-standing convention to refer to injuries of under two years’ duration as minor injuries, and that relates to Sentencing Council guidelines for injuries of under two years’ duration.[Official Report, 3 December 2018, Vol. 650, c. 6MC.]

As hon. Members have pointed out, people who suffer, particularly from whiplash injuries of longer duration, might also lose earnings, have considerable medical costs, have to go to a physiotherapist and so on. Although those arguments were well made, for example by the hon. Member for Bridgend (Mrs Moon) on Second Reading, they overlook the central fact that the tariffs will apply only to general damages. An individual who has suffered loss of earnings or who needs extra care costs can apply for special damages in the normal way. The Government propose no change to special damages.

On the arguments of the hon. Member for Hammersmith about the levels of the tariffs, we have attempted to achieve a reduction in the tariff at the lower end. For example, an individual who suffers an injury of under three months’ duration could receive damages considerably less than those in the current guidelines, but I hope that the hon. Gentleman accepts that, as we approach a duration of two years, the compensation offered begins to merge much more closely with the existing guidelines at a level of £3,600.[Official Report, 3 December 2018, Vol. 650, c. 6MC.]

In addition, as the Chairman of the Justice Committee pointed out, the levels of the tariffs are currently proposals about which the Lord Chancellor will consult the Lord Chief Justice. He will do that not just once but regularly, on a three-yearly basis, to ensure that our calculations on pain, suffering and loss of amenity reflect judges’ views.

It must be remembered that, ultimately, judgments on pain, suffering and loss of amenity are difficult. As my hon. Friend the Member for Cheltenham (Alex Chalk) pointed out, the question of how much compensation somebody receives for a loss of earnings is relatively easy to calculate, because the figure can be derived from the earnings. The amount of money to which someone is entitled for medical costs is, of course, directly derived from the cost of medical care provided. However, in the case of general damages, a judge must attempt to decide the subjective impact of pain on the individual and assign a financial cost to it. That cannot be anything other than a subjective judgment. There is no objective scientific formula for comparing pain with cash, because the cash is designed not to eliminate that pain, but in some way to acknowledge it. Whether we are talking about the criminal injuries compensation scheme, under which our constituents frequently come forward with examples of what they rightly and subjectively experience as a huge discrepancy between the depth of horror they have suffered at the hands of criminals and the amount of compensation offered, or the tariffs for pain, suffering and loss of amenity under the Bill, in the end the compensation provided cannot constitute anything other than a symbolic judgment, with the court or the Government acknowledging that no amount of money can remove the pain, but with the amount designed to be a public recognition that that pain exists.

The former Justice of the Supreme Court, Lord Brown, is an important guide, and his statements in the House of Lords give us all a sense of reassurance on a tricky bit of law. He feels that two important principles are at stake. The first is that there is a moral hazard and societal issue taking place, in that both the incidence of car crashes and, on a national comparison with Germany and France, the disproportionate number of whiplash claims compared with what would be expected both in terms of automobile design and the biology of the human body, need to be addressed—in other words, fraud needs to be addressed. The second is that there has been an anomaly in law whereby some of the graver injustices, and graver injuries and suffering, have been proportionally undercompensated compared with cases of suffering minor whiplash injuries—the majority of cases before the courts—which involve a duration of only three or six months.

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[Mr Deputy Speaker (Sir Lindsay Hoyle)]

I can now inform the House that I have completed certification of the Bill, as required by the Standing Order. I have confirmed the view expressed in the Speaker’s provisional certificate issued yesterday. Copies of the final certificate will be made available in the Vote Office and on the parliamentary website. Under Standing Order No. 83M, a consent motion is therefore required for the Bill to proceed. Copies of the motion are available in the Vote Office and on the parliamentary website, and have been made available to Members in the Chamber. Does the Minister intend to move the consent motion?

[Rory Stewart]

indicated assent.

The House forthwith resolved itself into the Legislative Grand Committee (England and Wales) (Standing Order No. 83M).

[Sir Lindsay Hoyle in the Chair]

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[Simon Hoare (North Dorset) (Con)]

rose—

[Rory Stewart]

rose—

[Pete Wishart]

I give way to the Minister first, because I am particularly interested in his views about this.

[Rory Stewart]

I would be grateful to know how Union issues of foreign affairs and defence, which the people of Scotland voted in a referendum should continue to be dealt with by the United Kingdom, would be covered by the hon. Gentleman’s proposal.

[The Chairman]

Order. We are discussing the legislative consent motion.

--- Later in debate ---

[Rory Stewart]

I beg to move, That the Bill be now read the Third time.

It is with great pleasure that I rise to speak on Third Reading. This Bill has been a long time coming. The first suggestions of the Bill’s introduction date back to 2012, six years ago, and the precise measures in the Bill were proposed by the Chancellor in an autumn statement in 2015, more than three years ago. Since then, there has been a series of detailed consultations. I would like to pay tribute to the Justice Committee for its prelegislative scrutiny, particularly on the issue of discount rates. Perhaps the biggest tribute must be paid to all Members of the other House, who undertook a very serious series of debates, which led to a number of significant changes to the Bill that I hope all Members of the House agree are significant improvements.

Perhaps the most dramatic improvement is the Government amendment that ensures insurers pass on savings to their customers. A number of learned, hon. and right hon. Friends have expressed concerns that were we to achieve a situation in which the insurance companies paid out less to claimants, that would simply go into the insurance companies’ bottom line. We have therefore introduced through an amendment perhaps the most detailed and unprecedented reporting requirements incumbent on the insurance companies to the Treasury and the Financial Conduct Authority.

[Julian Knight (Solihull) (Con)]

Will the Minister give way?

[Simon Hoare (North Dorset) (Con)]

rose—

[Rory Stewart]

I will give way in one moment. To clarify, the intention is that the companies not just may but will pass this information to the Treasury and the Financial Conduct Authority, and the Treasury and the Financial Conduct Authority not just may but will request that information, so that we can accurately explain to Parliament and the people how much money the insurance companies are making from their premiums, how much they are paying out to claimants, how much savings they are making and how much of those savings they are passing on to their customers.

[Julian Knight]

Will the Minister confirm that this is an unprecedented level of oversight, in terms of what the Government are challenging the insurance industry to perform for its customers?

[Rory Stewart]

Absolutely. It is an unprecedented move. The fundamental idea is that the insurance companies are operating in a competitive market, so this is not simply a question of how much money they take in premiums or how much money they pay out; it is also about attracting customers, and in order to attract customers, they need to compete with one another on price. If they were not to do so, they would in effect be running a cartel, and the information they give to the Treasury and the Financial Conduct Authority would provide exactly the evidence to display that kind of unfair practice. We are therefore guaranteeing that the commitment made by 85% of the insurance industry to pass on these savings to customers will be upheld. I give way to the hon. Member for Belfast South (Emma Little Pengelly). [Interruption.] Oh, no, she was not intervening on me. I apologise.

[Simon Hoare]

It was me.

[Rory Stewart]

I give way to my hon. Friend.

[Simon Hoare]

I must say that I have been confused with many things, but to be confused with an hon. Lady from the DUP is a first.

My hon. Friend the Minister, perfectly properly and quite rightly, is placing very important obligations on the insurance industry. The FCA has a raft of things of which it has oversight. How is he proposing, alongside the Treasury, to communicate to the FCA that this House has the legitimate expectation that the FCA should be robust in seeking that information from the insurers?

[Rory Stewart]

This is a very good challenge, and we will reinforce that duty on the FCA through both the legislation and the statements within the amendment proposed by the Government. We will also reinforce it through this statement from the Dispatch Box: we will require the insurers to pass this information on and we will require the Treasury and the FCA to request it. The purpose of requesting that information is rigorously to hold the insurance industry to account and ensure that the savings are passed on to customers.

I want to take this opportunity to pay tribute to the personal injury lawyers. One of the problems in this debate has been the suggestion that it is a black-and-white, sometimes Manichean dispute, with the press and civil society sometimes unfairly implying that the personal injury lawyers are somehow to blame. We must put on the record very clearly our respect for the personal injury lawyers and the work they do.

In addition, we must send a very strong message of respect towards people who are genuine victims of whiplash injuries, or indeed of any other form of personal injury. They are entitled to a fair level of compensation and to an adequate level of representation. We believe very strongly that the measures in the Bill strike a proportionate and reasonable balance between fair compensation, reasonable representation and the costs imposed on the rest of society.

[Kevin Hollinrake]

My hon. Friend makes a very good point about the personal injury lawyers. One of the provisions in the Bill—I think it is clause 8—states that claims management companies will be regulated by the FCA. We already regulate the insurance industry, so how do we make sure there is no conflict of interest in the regulation of both those parties, which often have competing interests?

[Rory Stewart]

This is a very interesting point, and I am very happy to follow up on it in more detail. The nature of the regulation in each case is quite distinct. In relation to the insurance industry, the regulation proposed is to ensure that we have the financial information to prove that the savings the insurance industry has derived from these reforms are passed on to customers. In the case of the claims management companies, the regulation is to ensure that they comply with the law, particularly the legal changes introduced by previous legislation. In accordance with the suggestions from the Justice Committee, we are also looking at the advice forthcoming from the judiciary to ensure that we can deal with other issues involving claims management companies.

If I may, I will come back to the core of the Bill. We are dealing with a perfect storm of three things. First, at the minor end of whiplash injuries—the three-to-six-month end—this is a condition that, in effect, is unverifiable and difficult to disprove. The polite way of expressing this is to say that there is an asymmetry of information. Somebody suffering a whiplash injury will experience genuine and sincere pain, but that pain cannot be detected at the minor end through any medical instruments. That is the first challenge involved in this type of injury.

The second challenge is of course the level of payments offered to individuals suffering these injuries. The third is the level of recoverable costs which meant, in effect, that a no win, no fee process was operating in which people could apply to a lawyer to represent them and be confident that the legal costs would be recoverable from the defendant. When that is connected to the fact that for all the reasons I have given—particularly the first, asymmetry of information—the insurance companies are not contesting claims, we end up with a discrepancy rapidly emerging between the number of motor vehicle accidents and the number of claims, and between the number of claims made in the United Kingdom and the number made in other jurisdictions.

Lord Brown of Eaton-under-Heywood, a former justice of the Supreme Court, stated that he was

“reluctantly persuaded that this provision is justified: it is surely intolerable that we are known as the whiplash capital of the world, so I have concluded that it is open to government, as a matter of policy, to seek to deter dishonest claims in this way.”—[Official Report, House of Lords, 12 June 2018; Vol. 791, c. 1603.]

[Kwasi Kwarteng]

Does my hon. Friend have any idea why the situation has developed in which we are the whiplash capital of the world, as the noble Lord put it?

[Rory Stewart]

It is a sensitive issue, because of course many individuals who have even quite a minor road accident experience a whiplash injury and have significant pain, particularly in the soft tissue of the neck and shoulders, which can last three to six months in the majority of cases or longer in a minority of cases. However, the New England Journal of Medicine, which conducted a significant study across various countries, concluded that the prognosis for a whiplash injury was significantly worse in countries in which compensation existed. In other words, there appears to be some form of medical relationship between the compensation offered and the prognosis for the whiplash injury.

How that relationship operates is a matter of speculation, but the following things may explain it. First, compensation payments and the encouragement provided by claims management companies, particularly on the telephone—we have heard a great deal of anecdotal evidence about that today—could encourage individuals to make claims that they may not themselves feel are as justified as the claims management companies imply. That leads to serious problems, the first of which is moral. It is a problem of dishonesty. In effect, it appears that some people—we do not know how many, but certainly a significant minority—are being encouraged to make dishonest insurance claims. As hon. Members have pointed out, that is potentially morally corrosive to our society. We do not want to encourage a system in which people feel that they can make such claims.

The second problem is that the situation has had a disproportionate impact on court time. Lord Faulks has said:

“If there was to be a reduction for really serious injuries, I can imagine why noble Lords would baulk at the imposition of a tariff. However, we are for the most part talking about pain and discomfort of a relatively transient nature…So these reforms—quite modest though they are—are a proper response to what I would describe as a racket.”—[Official Report, House of Lords, 12 June 2018; Vol. 791, c. 1607.]

The cost to society imposed by this compensation is disproportionate to the severity of injury.

[Eddie Hughes]

This might sound like an unrelated point, but surely the best way to deal with whiplash is to prevent it from happening in the first place. I believe that in 2015, the Government committed to spending £1.5 billion on 10 smart motorway schemes, the idea of which is to keep traffic flowing at a constant speed. If people are stopping and starting all the time, they lose concentration and are more likely to drive into the car in front of them, resulting in a possible claim for whiplash. The Government are dealing not just with the problem itself but with the root cause.

[Rory Stewart]

That is a very good point. Fundamentally, our prime obligation must be to improve road safety. Both the Labour Government and our own Government have made progress in that regard. In fact, over the past 15 years we have seen a 35% reduction in road traffic accidents, and, as we have heard, the safety equipment in vehicles has improved dramatically. Whereas 15 years ago only 15% of vehicles were fitted with equipment that can protect someone from whiplash, 85% now are, so people are safer in their car and less likely to have an accident. However, my hon. Friend’s central point is absolutely right. Very tragically—I have experience of this through my constituents, as will other hon. and right hon. Members—if someone who was killed in a motor car did not have a dependant, their family would be entitled to almost no compensation at all. Our obligation must be to prevent the accident from happening in the first place.

[John Howell]

Earlier this afternoon, the Minister will have heard my hon. Friend the Member for Croydon South (Chris Philp) give an example of how he was approached—hassled, in fact—by a claims management company. I, too, have been in that situation for a fictitious accident and I still get calls about that. Is dealing with this not one of the real ways that we will be able to prevent our being the whiplash capital?

[Rory Stewart]

My hon. Friend makes a very good point, which has been made by the shadow Front-Bench team and others: dealing with claims management companies is going to be a central part of this. Consultation has taken place on this, and measures have been taken against claims management companies. A significant issue remains, which we are consulting on and trying to resolve—to be honest with the House, it is the fact that many of these calls come from foreign jurisdictions, so the challenge is trying to work out the best way to deal with that.[Official Report, 3 December 2018, Vol. 650, c. 7MC.] On my way into the Second Reading debate, I received exactly that kind of call, encouraging me to make a whiplash claim for a car accident that I had suffered. For a moment, I wondered whether somebody had not put somebody else up to calling me in this fashion and whether this was not some kind of fuss. Sure enough, however, this is continuing to happen.

[Julian Knight]

Perhaps the company in question knew that the Minister was in for a bruising time in that debate. The absolute key to this whole debate is that this is about confidence in our legal system and in justice in compensation. The reality is that these phone calls and companies, which try to encourage people to make claims for any particular reason, are destroying confidence in that system. That is why the Bill is so necessary.

[Rory Stewart]

This is a really important point. At the core of our legal system there needs to be public trust and confidence in that system, and having an honest, proportionate, credible and calibrated system is absolutely central to the public continuing to have confidence.

With your permission, Mr Deputy Speaker, I want to make one slightly technical point relating to the Bill, and in particular to the injuries mentioned in clause 1(2) and (3). Subsection (2) states:

“An injury falls within this subsection if it is—

(a) a sprain, strain, tear, rupture or lesser damage of a muscle, tendon or ligament in the neck, back or shoulder, or

(b) an injury of soft tissue associated with a muscle, tendon or ligament in the neck, back or shoulder.”

Subsection (3) states:

“An injury is excepted by this subsection if—

(a) it is an injury of soft tissue which is a part of or connected to another injury”.

I wish to pause on that point for a second, because we wish to make it clear, as the Government, that when we refer to the question of something being “connected”, we are not referring to it being connected simply by virtue of it taking place within the same accident.

I have the following on a formal piece of paper here, so that I can make my Pepper v. Hart statement to make sure that this is clear for the judiciary. In subsection (3), therefore, we have excluded those soft tissue injuries in the neck, back or shoulder which are part of or connected to another injury, so long as the other injury is not covered by subsection (2). The effect of subsection (3) would be to exclude, for example, damage to soft tissue which results only from the fracture of an adjoining bone or the tearing of muscles arising from a penetrating injury, which would otherwise fall within subsection (2). It has been suggested that the words “connected to another injury” in subsection (3)(a) could mean an injury resulting from the same accident. There is therefore a concern that a number of soft tissue injuries that would otherwise fall under the definition of whiplash injury will be excluded, and so not subject to the tariff of damages, simply by reason of being suffered on the same occasion as a whiplash injury.[Official Report, 3 December 2018, Vol. 650, c. 8MC.]

This is absolutely not the intention behind subsection (3). Nor is it an interpretation that stands scrutiny. The effect of that interpretation would be to significantly limit the scope of clause 1, in a quite arbitrary way, based on whether a person happened to have incurred any other injury in the same road traffic accident. That is not the intended effect, and nor do we believe that the clause will be interpreted by the courts in this way, as it would not be the normal meaning of the word “connected” in this context. To clarify then: the words “connected to” do not, and are not intended to, extend to situations where two or more injuries are connected solely by their cause—for example, a road traffic accident.

[Stephen Kerr]

Since the Minister was taking interventions, I thought I would chance my arm and intervene to ask, as a Scottish Member, what discussions he has had with his Scottish counterpart. The Scottish Government committed to introducing draft legislation mirroring this Bill, which is for England and Wales only. Where is that Bill? I understand that it has not even begun to make progress in the Scottish Parliament. What has the conversation been like with the Scottish Minister?

[Mr Deputy Speaker (Sir Lindsay Hoyle)]

Order. That is not the issue before us.

[Rory Stewart]

Unfortunately, tempted though I am to respond, as you point out, Mr Deputy Speaker, I am not entitled, particularly following some of the comic interventions from the hon. Member for Perth and North Perthshire (Pete Wishart), to speculate on what the Scottish Government think they are doing. My hon. Friend is absolutely correct, however, that they chose to withdraw from this Bill.

We have talked a great deal about whiplash injuries and how we have attempted to address them, and I am happy for others to return to that question in interventions if they wish to do so, but we have perhaps had less time to address another central issue, which is the second part of the Bill, on the discount rate.

[Robert Neill]

I am pleased the Minister is mentioning that, because although we have concentrated on some controversial areas, putting the discount rate on a more modern footing is important and largely welcome, as is of course the prohibition on settlement without medical reports, which again has not been touched on but is very significant and an advance.

I want to use this opportunity to thank the Minister for what he said about the Justice Committee and the way he engaged with us and me personally. We have raised caveats with some of the objectives, and he has met us on a number of issues, if not all of them, which has enabled those of us who want to keep an eye on this and hold the Government and the industry’s feet to the fire to adopt Lord Brown of, um, Eaton, um—

[Robert Neill]

That one. I ought to know him, as a fellow bencher of Middle Temple, and to get his title right. The noble Lord Brown has said that with some reluctance—because it is a balancing act—he can accept the Government’s intentions in this regard. The way the Minister has handled this difficult balancing act in the Bill has made it much easier for a number of hon. Members to do the same.

[Rory Stewart]

I am tempted to reflect on the question from my hon. Friend the Chair of the Justice Committee. There is a central issue and challenge at the heart of the Bill. Dealing with this perfect storm of problems—unprovable conditions, high payments, recoverable costs and the actions of the insurance industry—is not easily done through primary legislation, so I pay tribute to right hon. and hon. Members on both sides for their focus on not just the primary legislation but elements of secondary legislation and some of the requirements around it.

The only way this reform will work—the only way to prevent excessive whiplash claims—is by being very nimble in anticipating exactly how claims management companies will operate and predicting how this phenomenon could change in the future. As my hon. Friend has pointed out, that means putting in place an absolute insistence that someone must have a medical examination. At the moment, many of these claims are settled without anybody having any medical examination at all. There must be a medical examination, and it must be conducted by a qualified GP, who is currently allocated through the portal in a random fashion so that people are not in a position to be able to conspire in any way as a result of the kind of doctor whom they are given. An approved GP with the right kind of training, or a medical specialist of another sort, will then give a prognosis that will allow them to proceed in a much more straightforward way.

That brings us to the second aspect, which, again, is not primarily a question of primary legislation. I refer to the design of the online portal. It is important to ensure that, as cases move to the small claims court, people have a straightforward, intuitive way of logging claims. One of the things that we will be doing over the next year is testing and retesting the portal in as many ways as we can to ensure that it actually works.

[John Howell]

I thank my hon. Friend for giving way again. He is being most generous.

I have been a great champion of the online work that is being done in the judiciary. I have spoken to Lord Briggs, and in my time in the courts, sitting with judges, I have championed it there. Does my hon. Friend agree that a very important element of the online system is the dramatic improvement in access to justice for people who are making claims? I know that a great deal of testing is involved, but does he also agree that the delay in its introduction is regrettable because it deprives people of that access to justice?

--- Later in debate ---

[Rory Stewart]

My hon. Friend has made a good point, but there is, of course, a delicate balance to be achieved. It is absolutely true that really good online systems can transform people’s lives and make access to justice much easier for them, but, equally, the Government do not always have an unblemished record when it comes to the delivery of IT systems. It is important to ensure that the system really works and that we have tested it again and again before rolling it out, because otherwise a system designed to increase access to justice may inadvertently decrease that access through the malfunctioning of the online portal.

[Robert Neill]

Will my hon. Friend give way one last time?

[Rory Stewart]

Yes.

[Robert Neill]

I am very grateful for my hon. Friend’s generosity.

Some of the powerful evidence given to the Justice Committee came from two members of the judiciary who spoke about the potential unintended consequences and adverse impacts on the courts of the inability of an increasing number of litigants in person to work their way through the portal. Will my hon. Friend undertake to ensure that throughout the ongoing work on its design, the issues raised by members of the judiciary will remain central to the discussions, and that they will have a full role in the testing and roll-out?

[Rory Stewart]

The answer to both those questions is yes. An important concession was made in the House of Lords to extend the amount of time for testing, so that there is more time in which to make sure that the portal has been properly tested by, among others, the judiciary.

Part 2 of the Bill relates to the discount rate, and results from a very sudden change in the way in which compensation was paid to catastrophically injured victims. After 16 years in which the discount rate was set at a positive 2.5%, the last Lord Chancellor but one decided to reduce it to minus 0.75%, which radically changed what happens when someone is allocated a lump sum.

Let me remind the House of the formula that is applied. If, Mr Deputy Speaker, you were attempting to receive compensation for a projected 10 years of life, you were seeking £100,000 of care costs for each of those years, and inflation was, for the sake of argument, zero, you would receive only £1 million to cover you for your 10 years of projected life. Obviously, if inflation was higher, the real-terms increase in your care costs would mean that you would have to be afforded more, and the calculation that would need to be made in the awarding of the money would be how much of a return you could reasonably expect to receive for your money. If you could reasonably expect to receive a higher return for your £1 million, it might be possible to cover you for more years, and vice versa: fewer years would mean a lower return. The discount rate has been applied since the 1970s by the judiciary, and since 2001 by the Lord Chancellor, to enable the courts to calculate the fair rate to apply to a lump sum in the case of catastrophic injury. That sudden change from 2.5% to minus 0.75% meant that in the single year 2017-18 the NHS faced £404 million of costs. Projected forward at that rate, there are potentially not just hundreds of millions, but billions, of pounds of costs attached to the public Exchequer and through insurance premiums on the public themselves. Therefore, through the pre-legislative scrutiny conducted by the Justice Committee and the Government Actuary’s Department we have attempted to strike a proportional balance between the interests of often very vulnerable, catastrophically injured victims and those of society as a whole.

[Julian Knight]

Is it not the case that the mechanics of the discount rate as it was constituted by the Lord Chancellor before the previous one effectively mean that claimants are estimated to be receiving substantially more than 100% entitlement, and that is not what the system is about? We need a system that reflects current investment strategies and current investment returns.

[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.