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Government announces plan to reduce size of clinical negligence payouts

The Ministry of Justice has revealed a plan to stem a rise in payouts for personal injury claims related to the so-called discount rate.

Ministers will propose new legislation which would mean more predictability over how the rate – which affects the cost of GP indemnity fees – is reviewed in future.

This comes after the Government’s much-criticised decision to reduce the discount rate from 2.5% to minus 0.75% earlier this year, sparking warnings that indemnity costs for GPs would soar.

The discount rate is used to calculate the final financial compensation for victims of serious personal injury according to the amount they can expect to earn by investing it.

The law says this should put them in the same financial position as if they had not been injured in the first place.

As it stands, the rate is calculated based on ‘very low risk’ investments and set at the discretion of the Lord Chancellor.

But the new draft legislation proposes the rate should instead be set by reference to ‘low risk’ investments, ‘better reflecting evidence of the actual investment habits of claimants’ and therefore ‘significantly reduce overpayment’.

The MoJ said this calculation may have meant the current discount rate being ‘in the region of 0% to 1%’, although it was difficult to predict.

The proposals also suggest the rate should be reviewed at regular intervals of at least every three years, and include an independent expert panel in the Lord Chancellor’s decision-making process.

Lord Chancellor and justice secretary David Lidington said: ‘We want to introduce a new framework based on how claimants actually invest, as well as making sure the rate is reviewed fairly and regularly.

‘In developing our proposals, we have listened carefully to the views of others, and we will continue to engage as we move forward.’

An MoJ spokesperson told Pulse there was no immediate plan to review the discount rate that was set in March.

Medical Protection Society CEO Simon Kayll said the proposals were ‘a welcome step which could result in a more common sense approach with the reality of how claimants invest compensation payments at its core’.

He said it was ‘vital that Government gets this right if we are to avoid further sudden shocks to the cost of compensation’ but warned it was ‘dependent on implementation’.

‘The new framework will only apply if and when the proposed law is enacted and it will not apply retrospectively…

‘We look forward to seeing swift progress on this – and commitment to whole system legal reform to tackle the underlying issue of rising clinical negligence costs,’ he said.

The Scottish Government yesteday announced a similar Bill to be put before MSPs.