Leading counsel has suggested that Lord Chancellor Liz Truss erred legally in both the process and substance of her decision to change the discount rate, a leading medical defence union revealed last week as it hinted it may yet challenge her over the move.
The news came ahead of today’s implementation of the new discount rate of -0.75%, which the insurance industry has been lobbying hard to reverse.
The Medical and Dental Defence Union of Scotland (MDDUS) – which operates across the UK and is calling for reform of GPs’ indemnity insurance costs – described the “astonishing” decision to change the discount rate as “a classic failure of joined-up government that looks set to make the problem worse, rather than better”.
The recent spring Budget said the new rate would cost the NHS an extra £6bn between now and 2022.
MDDUS chief executive Chris Kenny – the former chief executive of the Legal Services Board – said: “That will drive up the size and number of claims and associated legal bills, and mean more of them will be painfully fought over in court rather than resolved amicably.
“The promise of ‘appropriate funding’ to reduce the impact, although welcome, is as yet undefined. And how can it be remotely sensible to proceed with such a change when a review, with a promise of early legislation to alter the basis on which the rate has been set, is about to be launched?”
Mr Kenny challenged Ms Truss to show her reasoning in greater detail, “as advice from leading counsel suggests she has erred legally in both the process and substance of her decision-making. We do not discount further action once we have studied her response”.
Looking at the issue of GPs’ indemnity insurance more broadly, he said: ““Everybody agrees that we need to maximise the proportion of damages going to genuinely injured claimants, rather than to lawyers…
“The solutions are clear – tort reform, cost capping and clearer, more transparent and broadly based tests for setting the discount rate.”
Last week, during a Westminster Hall debate on GP indemnity costs called by Alex Chalk MP, junior health minister David Mowat said: “We… have an environment in which, for whatever reason, there has been an explosion in small claims against the NHS, which particularly affects GPs, and there is a legal environment in which even unsuccessful claims or claims without merit can sometimes be rewarded.
“All of that is made worse, as we have heard, by the change to the discount rate made by the Lord Chancellor…
“That will have a significant impact on all insurers in the private and public sectors. It particularly affects the health sector. The £59 billion reserve that the NHS has for central litigation costs will increase because of the change that has been made by something in excess of £5 billion or £6 billion. Those are significant and serious sums of money in the public purse.
“The government’s position is that doctors will not have to pay as a consequence of the technical change in discount rate. We are working through how that will work.”
Responding to the new rate coming into force, the Association of British Insurers said premiums would go up in waves over the next year in line with renewal trends.
It said: “Many insurers choose to reinsure against large risks, such as catastrophic personal injury claims, which means some of the impact of the recent change will so far have been absorbed by existing reinsurance contracts.
“But given the size of the discount rate cost impact, these companies will inevitably increase their premiums when that reinsurance is renewed, adding to insurer costs which will inevitably feed through to the premiums insurers have to charge customers.
“Most reinsurance renewals will take place in January 2018, meaning the third wave of increases could well be the largest if a new rate has not been set by then.”
Mr Kenny noted also that longstanding industry proposals to reform the Law Reform (Personal Injuries) Act 1948 were still awaiting a government response.
“In the meantime, awards continue to be calculated on the basis of the costs of private sector care, when all the evidence shows that those who receive damages, quite rightly, use excellent and readily accessible NHS services where they can do so. Legislation is needed… urgently.”