Civil Liability Bill [HL]

Viscount Ullswater Excerpts

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

[Lord Hodgson of Astley Abbotts (Con)]

My Lords, with this group of amendments we come to the procedure for timing the future reviews of the rate. They are in large measure parallel to some amendments I tabled in Committee but during that debate a number of important points were made by noble Lords, which I have reflected in changes in the drafting.

Our policy objective should be to establish a system that has three guiding principles. First, there should be a change in the rate only when the underlying investment climate—that is, the generally prevailing rate of return—has changed sufficiently significantly. We do not want frequent jerks on the tiller. Secondly, the timing of the change should be as unpredictable and quick as possible to minimise the chance of any people gaming the system. Thirdly and finally, we need to avoid the consequences of political inertia. The decisions to change the rate will always be controversial. As we heard from the noble Earl, Lord Kinnoull, the costs of these changes, one way or the other, can be very great indeed. Therefore, there will always be pressure on the Lord Chancellor to postpone any changes until the very end of any fixed-term period.

The way the Bill is currently drafted in large measure fails this test. First, having time-based reviews—for the reasons I have just explained, these are essentially time-based—fails to link to the fundamental reason for undertaking such a review; that is, the changing of the underlying rate of return on investments. Secondly, a system that requires the establishment of a new expert panel on each occasion—a decision that will undoubtedly leak—inevitably increases the chances of the system being gamed. Thirdly and finally, a system which places on the MoJ and the Lord Chancellor the whole responsibility of deciding both whether a review should take place and then whether the result of any review should be implemented is likely to lead to a preponderance of reviews taking place at the end of any fixed-term period.

The amendments I have tabled are designed to address the system and remedy these weaknesses. First, the decision on whether or not to implement a change remains with the Lord Chancellor because, as noble Lords have pointed out, this is at root a political decision. Secondly, the Lord Chancellor is relieved of the duty of monitoring changes in the available rates of return. This is undertaken by the expert panel, which will now become a permanent body. The expert panel, the proceedings of which will be confidential, will decide when to recommend to the Lord Chancellor that the rate should be changed and, if so, by how much. In this connection, to avoid frequent small changes, I have inserted “significantly” after “sufficiently” in the penultimate line of Amendment 53. All the above can be undertaken confidentially, away from the public glare, inevitably leading to a reduction in the amount of gaming. Indeed, if the Lord Chancellor chose not to accept the expert panel’s advice—which he or she would be perfectly entitled to do—no one need ever know it had taken place.

Finally, the other change from my Committee amendment is to remove the expert panel’s requirement to report to the Lord Chancellor at the end of every 12 months in which a review has not taken place, explaining why no review has taken place. My original intention was to improve transparency and clarity but it is clear from the remarks of noble Lords in Committee that it was a procedure that confused rather than enlightened and therefore I have struck it out. In the meantime, I beg to move.

[The Deputy Speaker (Viscount Ullswater) (Con)]

I must advise your Lordships that if this amendment is agreed to, I cannot call Amendment 54 because of pre-emption.

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

My Lords, we support the thrust of the amendments tabled by the noble Lord, Lord Hodgson, and his introduction of Amendment 53. My noble friend Lord Sharkey and I, together with the noble Earl, Lord Kinnoull, and the noble Lord, Lord Faulks, have tabled a number of amendments to the proposals for later reviews of the discount rate; that is, all reviews after the first, which we discussed in the previous group. These amendments on the later reviews are considered in this and the following group—the last group—and I shall speak to both groups of amendments now.

Broadly, we support the following propositions. First, we do not regard it as sensible to have a fixed three-year period, or even a fixed five-year period, between reviews of the discount rate. Interest rates and rates of return change unpredictably and at very different speeds over time. Years may go by, as they have recently, with very little change then a period of rapid change may follow. Fixed periods between reviews do not respond to that pattern of change and slavish adherence to fixed periods would lead both to reviews required by statute taking place unnecessarily during periods of stability and, more seriously, to there being periods—possibly long periods—following rapid changes in rates when the discount rate failed to represent an accurate assessment of predicted long-term returns.