(The Lord Chancellor and
Secretary of State for Justice): Earlier today, I
notified the market via the London Stock Exchange group that I
would today lay a Statutory Instrument to change the discount
rate applicable to personal injury lump sum compensation payments
in England and Wales, to minus 0.25%. The new rate will come into
force on 5 August 2019, in line with the statutory timetable set
out by the Civil Liability Act 2018 (“the Act”).
Under the Damages Act 1996, I, as Lord Chancellor, have the power
to set a discount rate which courts must consider when awarding
compensation for future financial losses in the form of a lump
sum in personal injury cases. The legal framework was changed by
the Civil Liability Act 2018.
The new framework makes clear that claimants must be treated as
‘low risk’ investors. Under the Act I, as Lord Chancellor, must
conduct a review and determine whether the rate should be changed
or kept unchanged within 140 days of beginning the review and
including the day on which the review starts. I started the
review on 19 March 2019, and in conducting this review, I
consulted the Government Actuary and HM Treasury.
The Government Actuary provided an analysis of dual rates – this
would involve a lower short term rate and then a higher long term
rate after a ‘switchover’ period. Although I consider their
analysis interesting with some promising indications, I do not
consider it appropriate, noting the lack of quantity and depth of
evidence required, to adopt a dual rate for this review. The
potential of the dual rate to be appropriate for future reviews
is one that I will consider in more detail.
