The government will look to remove “avoidable obstacles” stopping the greater use of periodical payment orders (PPOs), Ministry of Justice spokesman Lord Keen said yesterday.
He also reassured claimant lawyers that the government “is fully committed to the 100% compensation principle”.
In a speech on reform to the Association of Personal Injury Lawyers annual conference in Birmingham, Lord Keen talked about the discount rate, saying the evidence the MoJ has gathered “demonstrates that the current approach to setting the rate does not reflect the actual investment behaviour of claimants, and this is resulting in systemic over-compensation”.
He continued: “Research by the Government Actuary indicates that on average (after deductions for investment management and taxation) awards will currently produce about 120 to 125% of the required compensation.
“Such over-compensation means that the NHS in particular is overpaying on claims for clinical negligence, putting increasing pressure on the public purse. Every pound that is being spent on over-compensation could be spent on frontline NHS services.”
This was why the Civil Liability Bill – which has its second reading in the House of Lords next Tuesday – would look to set the rate by reference to expected rates of return on a low-risk portfolio of investments, rather than very low risk as now.
Lord Keen continued that the government considered that PPOs were “in principle a better form of taking compensation for future loss than a lump sum payment, and supports their use”.
He said: “That said, it is also right that claimants should be able to choose a lump sum if they wish.
“To assist claimants in reaching decisions on how to receive their compensation we intend to provide or endorse guidance on standard practice to ensure that claimants are properly informed as to the implications of choosing between a lump sum and a PPO.
“We will also investigate whether there are any ways in which the present law and practice regarding PPOs could be improved to ensure that any avoidable obstacles to their use are removed.”