9 February 2018Print This Post

The misleading claims behind the campaign to lower the discount rate

Best: Discount rate accounts for tiny proportion of NHS’s budget

Posted by Matthew Best, underwriting manager at Litigation Futures Associate Temple Legal Protection

A coalition of organisations which represent the NHS and health professionals has made strong claims in a letter to justice secretary David Gauke that the legal costs of clinical negligence claims are crippling the NHS. Similar comments were made by the National Audit Office (NAO) in September last year and yet the case doesn’t hold water.

The letter was signed by the NHS Confederation, Academy of Medical Royal Colleges, British Medical Association, Family Doctors Association, Medical Protection Society, Medical Defence Union and the Medical and Dental Defence Union of Scotland.

It said: “The rising cost of clinical negligence is unsustainable – diverting vast amounts from frontline care… This is money that could be [better] spent.”

These comments have been circulated regularly and they appear reasonable. However, what costs are they talking about? They vaguely refer to “the calculation used to work out how much a victim of negligence should receive [which] was changed last year”.

That, obviously, is the discount rate. It has historically orbited around 0-3%, but last year the government finally recognised that, following the financial crisis, the yield from low-risk investments fell below the rate of inflation and this led them to protect the victim by setting a discount rate of -0.75%.

The global economy is recovering though, with the resultant improved outlook for investment potential, and therefore the discount rate should change to reflect this. It is going to anyway due to the pressure exerted by paying parties.

The new rate is expected to be set between 0-1%, meaning a victim’s compensation will be significantly less than now.

Yet the current cost of clinical negligence to the NHS is £1.7bn. This figure accounts for around 1% of the total NHS budget. In the great scheme of the NHS, a higher discount rate will save a tiny fraction of its budget. Is the NHS genuinely suggesting that it is this that is ‘crippling’ the service?

The letter does not suggest that the cost of negligence is the result of fraudulent claims, however. They acknowledge that these are recognised victims of negligence who now face a very uncertain future having suffered life changing health problems.

The various bodies that signed the letter appear to be intentionally disingenuous. They argue that the discount rate significantly affects the cost of legitimate negligence when it is in reality an incredibly small fraction of the budget.

Then, in the next breath, they suggest that legal costs by claimant solicitors are the issue. In reality, a victim of negligence initially writes a letter of complaint without issuing formal legal proceedings and it is the initial denial by the NHS followed by their typical refusal to readily admit liability, coupled with an internal defensive response and unwillingness to share and learn from mistakes that leads to protracted and costly legal disputes.

So which is it: the discount rate or lengthy litigation crippling the NHS? The answer is neither. It starts with a genuine incidence of negligence due to an institutional culture of denial and ends with a refusal to accept liability and the resulting lengthy legal dispute.


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