Periodical payment orders

Part of Civil Liability Bill [Lords] – in a Public Bill Committee am 3:15 pm ar 11 Medi 2018.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Photo of Ellie Reeves Ellie Reeves Llafur, Lewisham West and Penge 3:15, 11 Medi 2018

I beg to move, That the clause be read a Second time.

To understand the importance of new clause 4, we must understand the significance of the use of periodical payments to compensate those who have been injured through negligence, often catastrophically, with little or no capacity for work and with considerable care costs.

More often than not, successful claimants are paid a lump sum, which is intended to compensate them for the rest of their life. However, the benefits of periodical payments, rather than a lump sum, are threefold. First, periodical payments are index-linked so they go up in accordance with rising costs of living or care. Secondly, in such cases, there are often arguments about life expectancy. If the court accepts that a victim of a catastrophic injury is likely to live until 42 but medical advances mean that they actually live until 80, a lump sum will run out many years earlier. With periodical payments, the injured person is compensated every year for the rest of their life. Thirdly, receiving an annual periodical payment rather than a lump sum means that injured people do not have to make difficult investment decisions and, equally, it removes the risk that they will spend the money all at once.

The setting of the discount rate is highly relevant to periodical payments. When the rate stood at 2.5%, it was far more attractive for defendants to pay a lump sum that was discounted by 2.5% than to pay index-linked annual payments. That meant that in all but the most serious cases, periodical payments often met huge resistance from defendants. A rate that assumes a much lower level of investment risk by injured people may well result in an increase in the use of periodical payments, particularly in cases not at the most catastrophic level where resistance from defendants has been greatest. The benefits to the injured person are clear, and the benefits to the state of not having to pick up the bill for care or housing, if and when the money runs out, are obvious.

On Second Reading, the Minister said that he welcomed the use of periodical payments. Can he tell us the percentage of personal injury claims in which they are used? It is my understanding that the figures are astoundingly low, often due to resistance from defendant insurers. New clause 4 makes it incumbent on the Civil Justice Council, with its expert knowledge, to review the impact of part 2 and the discount rate on the prevalence of periodical payments being awarded. If we agree that periodical payments are a good thing, surely we can agree that their use must be monitored so that appropriate and evidence-based action can be taken where necessary. This would benefit injured people and the Treasury alike.