17 May 2017Print This Post

MDU calls on GPs to lobby election candidates over discount rate

Tomkins: the law must change

The Medical Defence Union (MDU) has launched a campaign called ‘Save General Practice’ to push for changes to the personal injury discount rate.

The MDU said doctors, “facing the potentially devastating impact of a massive increase in the size of clinical negligence claims”, should raise the issue with election candidates.

Responding to the Ministry of Justice’s six-week consultation on how the discount rate should be set in future, Dr Christine Tomkins, chief executive of the MDU, said Lord Chancellor Liz Truss had “added billions of pounds” to the cost of medical negligence claims by her decision to cut the rate to -0.75%.

“The law must change to require whoever makes the decision to take into account the effect on public services like the NHS and on every citizen.

“The Treasury will need to find an additional £5.9bn for the first three years of additional NHS costs alone.”

Dr Tomkins said GPs needed “immediate assistance” to help them with increased professional indemnity costs as a result of the cut in the rate.

The MDU, along with other groups responding to the consultation, called for a panel of experts to advise the Lord Chancellor on her decision.

The Association of Personal Injury Lawyers (APIL) said the panel should be independent, overseen by a judge and include claimant and defendant lawyers as well as financial experts.

“Changing the legal parameters governing the way in which the discount rate is set would be done for all the wrong reasons,” APIL said.

“The Ministry of Justice should not be influenced by the insurer lobby assertion that ‘a reduction in the [discount] rate could cost the insurance industry billions of pounds.’”

APIL said lowering the rate had “acted as a corrective” and a driver towards encouraging more insurers to offer periodical payments.

The Association of British Insurers (ABI) said the current link between the discount rate and index-linked government securities (ILGS) was “flawed” and failed to recognise the investment options open to claimants.

The ABI said it should take into account “the reality that claimants invest in a low-risk, mixed portfolio of assets which yield higher average returns than investing all a claimant’s compensation in ILGS”.

The association also suggested replacing the current single rate with two rates for a single case to reflect different investment periods, reflecting the lower returns likely for claimants with short-term needs.

The ABI said this was the approach taken in Ontario, Canada, where for the first 15 years a variable rate applied, updated annually to reflect returns on investments, followed by a fixed rate.

Defendant lawyers Kennedys agreed with the ABI that the rate should be set by reference to mixed investments and the need for a panel, but preferred the “consistency and simplicity” of a single discount rate.

Kennedys said the availability of periodical payment orders should not affect the discount rate, arguing that claimants should be able to choose the form of their damages award.

Partner Mark Burton said the “enormous increase in claims costs” caused by the rate cut risked a number of adverse outcomes.

“At a claims-handling level, we predict that settlements may now be delayed while awaiting the consultation outcome, and that some cases will become more entrenched as compensators are forced to argue smaller points because the financial stakes have been raised so high.”

The Personal Injury Bar Association (PIBA), which represents barristers working for claimants and defendants, emphasised that any decision to change the “investment risk profile” used to calculate the discount rate was a “political one”.

PIBA said that given that its members spoke “with different voices” on the issue, it would remain silent.

The association said the investment choices made by claimants were not “a good indicator” for government of the best method for setting the rate, since under the original discount rate claimants did not have enough money to invest only in government securities.

PIBA added that if Parliament changed the law so claimants were expected to invest in a mixed portfolio, then either “the discount rate should reflect the expected cost of obtaining investment advice” or the claimant should be entitled to recover costs associated with obtaining advice.

“The law at present prevents such a claim being made,” it noted.

By Nick Hilborne

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One Response to “MDU calls on GPs to lobby election candidates over discount rate”

  1. Isn’t the simple answer to review the rate on a two/three year basis to ensure that economic changes are taken into account and the period of review mutually agreed by all parties?
    The reason that the change to the rate was so dramatic is that it hadn’t been changed for years.

  2. David Vine on May 17th, 2017 at 2:33 pm

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