The personal injury discount rate is a pivotal part of the compensation process. It must be carefully reviewed, calculated and set. The rate is critical as it helps to determine what an injured person receives following what can often be life-changing injuries. Damages are paid to individuals, usually as a lump sum, to account for the losses caused by an injury. The level at which the personal injury discount rate is set is based on assumptions about the risk of the recipient’s investment of the damages they are awarded, which helps to ensure that any future market fluctuations are accounted for. The rate ensures that recipients ultimately receive the level of compensation that was intended and do not enter a state of extreme over or under-compensation.

The need for the rate to be set correctly is clear. An individual involved in a major car crash who breaks their back and may as a result never work again might need to adapt their home and pay for care, and might have loss of earnings. When they receive their compensation as a lump sum, they would need to invest it. At present, injured individuals are treated as very risk-averse investors, rightly so given the impact that a major injury would likely have on one’s perception of risk. Also, they are not investors looking at the stock market. Their future quality of life depends on ensuring that they have enough money to live on and to provide important care. It is therefore imperative that the rate is set at the correct level to ensure that compensation awards are delivered as intended—based on the risk of the investments that the sums are put in.

The amendment would replace schedule A1 as drafted with a far more appropriate means of setting the discount rate—allowing it to be set by an expert panel, rather than it being politicised as a decision by the Lord Chancellor. Amendments 22 and 23 would ensure that the expert panel set the rate right from the beginning and not just in subsequent reviews. Throughout the Bill there are too many instances of handing power from experts to Ministers without sufficient checks and balances. That is not right, and the concessions offered by the Government—for Ministers to liaise with some experts—do not go far enough. Our amendment would shift the emphasis from the Lord Chancellor to the independent expert panel.

Furthermore, the Justice Committee recommended in its pre-legislative report on the draft personal injury discount rate that the panel should advise on the first review and, if the Lord Chancellor chose not to follow the panel’s advice in setting the rate, that information should be made public, along with his or her reasons for so doing. The requirement to consult a panel appeared in the original Bill, but unfortunately it was removed from the Bill in the House of Lords. Opposition amendments seek to address that, and they would add much-needed clarity and transparency on how the rate is set initially and in future, avoiding politically or ideologically driven decisions by shifting the balance in favour of experts.

Paragraph 5 of proposed new schedule A1 in the amendment clearly outlines the necessary credentials of members of the expert panel, whether as experienced actuaries, investment managers or economists. Transparency and independence, and external expertise are vital in setting the rate, and they should be welcomed. To hand decision making over to the Lord Chancellor, as the Bill does in many places, will remove independence from a process that helps to deliver access to justice. Confidence in politicians is at a low, and we cannot allow confidence in the justice system—or our constituents’ faith in their ability to access justice—fall to equally low levels.

New clause 5 would see the expert panel conduct a review of the assumptions on which the rate is set within three years of the legislation coming into force. That is set to be within three years of the date of the schedule coming into force so, although both the existing schedule A1 and the alternative proposed in amendment 24 maintain the period of review for the rate as being within five years, as amended in the House of the Lords, I hope that the Minister will give us assurances that should it be found during the review of the assumptions that the most prevalent investments by injured claimants are determined to be very low risk—as such, people would not be receiving appropriate compensation payments—the rate would be changed sooner rather than later during that period.

It is imperative that the vast changes to be introduced by the Bill have sufficient checks and balances in place to ensure that they work as intended, so that injured claimants are not left suffering further in the pursuit of justice. As I outlined in my speech on Second Reading, the changes to be introduced by the Bill have the potential to be a textbook example of a change in the law with ramifications that we will not truly know until much further down the line, at which point it will be too late, with the damage done and access to justice eviscerated for many.

For that reason, it is important that we should ensure that the correct checks and balances, regular reviews and expert-led setting of the rate form part of the Bill. I hope that by implementing those measures we will not see a repeat of the access-to-justice crisis caused by LASPO, employment tribunal fees and—an anticipated impact—changes to the small claims limit. The Government should take the time to implement the amendments to part 2 of the Bill.