MDU says discount rate law must change

The law governing the discount rate is not fit for purpose and the new Government must change it, the MDU has said in a recent consultation response.

What is the discount rate?

The discount rate is the interest rate used by courts to calculate lump sum compensation payments to victims of clinical negligence incidents and other personal injury claims, such as motor accidents and employers' liability cases. The rate is applied to claims involving long-term care and loss of income.

The recent discount rate drop of 3.25% has substantially increased the cost of clinical negligence claims overnight and had a massive impact on the cost of public services like the NHS.

Our response

'The Lord Chancellor's decision to lower the discount rate has added billions of pounds to the cost of clinical negligence and other personal injury claims overnight,' said Dr Christine Tomkins, MDU chief executive.

'For example, a claim that we would have paid on behalf of a GP for £8.4 million is now likely to settle for £17.5 million.

'The law must change to require whoever makes the decision to take into account the effect on public services like the NHS and on every citizen. There should also be an independent panel of experts to advise the decision maker, who should not set the rate in isolation. The financial and economic repercussions are profound and need to be fully understood as they should inform any decision about the discount rate.

'The benefit to the number of people who receive compensation awards must be balanced against the wider public interest, such as the impact on the NHS. The Treasury will need to find an additional £5.9 billion for the first three years of additional NHS costs alone.

'We have responded to the consultation on behalf of our members, pointing out what we think are the flaws in the current decision. In the meantime, GPs need immediate assistance to help them with the increased cost of indemnity as a result of the rate drop. It was already a serious concern and the Government committed to support GPs with the massively increased costs this decision has caused.

You can read the MDU's full response to the Ministry of Justice's consultation, 'Personal injury discount rate: how it should be set in the future', here.  

This guidance was correct at publication 31/05/2017. It is intended as general guidance for members only. If you are a member and need specific advice relating to your own circumstances, please contact one of our advisers.

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