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9.15 pm
Why is that important? Usually, periodic payments are only of use in high-value cases involving serious injury, usually with substantial care costs. The current position, reproduced in clause 100, is inadequate. The greatest proportion of such awards relates to the cost of future care for the claimant and to the claimant's loss of earnings. The costs of both over a long period will increase by considerably more than the RPI, which means that the compensation that is intended to provide for those needs will be insufficient; in particular, the money paid periodically to cover the cost of care will quickly become inadequate to pay for a care regime that the court has said is necessary.
As the explanatory notes show, it is expected that periodical payments will be linked to the RPI in the great majority of cases, so it can be anticipated that the RPI will indeed be applied in that way by the courts, which will be disastrous for the claimants who are in most need of help. Surely, the whole point of periodical payments is to improve on the old lump-sum position. In the original consultation paper on the issue, "Damages for Future Loss: Giving the Courts the Power to Order Periodical Payments for Future Loss and Care Costs in Personal Injury Cases", the then Lord Chancellor's Department noted:
- "We consider that periodical payments can provide a fairer and more certain way of ensuring that claimants awarded damages for future losses and care costs, often for the remainder of their lives, receive the compensation to which they are entitled."
- "place the risks associated with life expectancy and investment on defendants rather than claimants. This ensures that claimants who live longer than expected enjoy the quality of life they are entitled to, and do not have to fall back on social security when the money runs out."
There is wide recognition in the higher courts that there may be a need to index awards by reference to indices other than the RPI. The Department of Health recognises that hospital and community health service inflation is likely to outstrip the RPI for the foreseeable future and concern has been expressed in the Judicial Committee of another place about the ability of awards to keep pace with expense. There is real concern that the cost of future care for the claimant and the claimant's loss of earnings will, over a long period, increase by considerably more than the RPI, which will mean that the compensation that was intended to provide for those needs will be insufficient. In particular, the money paid periodically to cover the cost of care will quickly become inadequate to pay for a care regime that the court has awarded.
The key argument is that while the RPI may be a sound basis for calculating damages for non-pecuniary loss, other more appropriate indices should be used to
calculate pecuniary losses accurately, to ensure that the claimant is neither undercompensated nor overcompensated. I understand that the Civil Justice Council's serious injury and clinical negligence committee has also expressed extreme concern about the proposed RPI link.In Standing Committee, my hon. Friend the Minister said of a not dissimilar amendment that it made no provision for indexation, in which case the claimant would be worse off. Moreover, the suggestion that there should be links to another index raises the worry that insurers would be unable to provide a product, as financial regulations limit the index-linked products that they can supply.
If there were no provision, claimants would be no worse off at common law than they are at present. My main concern is that the common law position needs to be improved and the Bill would not achieve that. My hon. Friend the Minister prays in aid the insurance difficulties, but the insurer stands in the place of the tortfeasor and the purpose of compensation, as was recognised by Baroness Scotland, is to put the victim in the position in which he or she would have been had the accident not occurred. The effect of the clause would be unjustly to enrich the guilty tortfeasor or his insurers at the expense of the innocent claimant victim, contrary to all principles of common law.
Surely, it is the responsibility of the insurance industry to develop new products if periodical payments are to achieve the objectives laid out in the original consultation. While the Bill requires only the majority of cases to be linked to RPI, the insurance industry has no incentive to bring in alternative products.
The Financial Services Authority says that periodical payments have to be linked to the RPI under the close-matching regulations, but back in the late 1980s, we had all sorts of problems with the Treasury, the taxation system, the various controls over the financial industry and how to structure settlements. In practice, all those problems were overcome by various amendments and concessions made by the Treasury. There is no reason why similar amendments could not be made now to provide just and fair compensation to victims. Victims should not lose out. In any event, the argument about insurance products does not apply to claims against the state for clinical negligence, as it is unlikely that the state would purchase annuity products anyway but would proceed on the basis of self-insurance.
What can be done at this late stage? I am realistic; I recognise that the prospect of my being able to put the amendment to the vote and carry it are somewhat slim, but I put it to my hon. Friend the Minister that, even at this late stage, he could issue a clear indication in responding to the debate that discretion should be used to ensure that victims do not lose out, especially on care costs, and to depart from the RPI where it can be shown that claimants would substantially lose out if the RPI applied in respect of care costs. If my hon. Friend were to do that, those who bring such cases could use the Pepper v. Hart principle to ensure that his remarks were brought before the court and claimants would then have a reasonable chance of getting fair and adequate compensation.
The second thing that my hon. Friend could do is to say that he would try to bring before the rules committee his view that the draft practice direction amendments
should themselves be amended to set out the circumstances in which discretion is appropriate, for example, in relation to substantial care costs or future earnings. If we were able to do that, it would at least bring to the attention of the courts the circumstances in which claimants would otherwise be undercompensated if the RPI were to seen simply as the norm.I urge my hon. Friend to say that he will at least consider those two very simple and straightforward things that would ensure that victims do not lose out, that they get fair compensation and that insurers do not get a windfall at the expense of the taxpayer, who will have to pick up the tab through the social security system when the money runs out.
Mr. Hawkins: The hon. Member for Hendon (Mr. Dismore), from his expertise as an active member of the Association of Personal Injury Lawyers, has obviously considered the detail of what we debated in Committee, when Liberal Democrat Members moved an amendment not dissimilar to that which the hon. Gentleman moved tonight. He is also aware that I have some familiarity with medical negligence cases, although perhaps not his depth of detailed experience. I dealt with such cases at the Bar and in my subsequent work as a corporate lawyer, working in insurance.
As I said in Committee, I am indebted to, among others, my noble Friend Lord Hunt of Wirral and Dr. Gerard Panting and Shelley McNicol from the Medial Protection Society for some of the detailed briefing that I have received in relation to the indexation and RPI issues that the hon. Gentleman has raised.
We in the House are always concerned when any change is proposed that could lead to what has become known in America as defensive medicine—any situation in which surgeons or other medical consultants or doctors would perhaps feel unable to take steps in surgery or other medical procedures that might be vital to the patient's needs but contain an element of risk. If medical specialists were unwilling to use their skills fully because they were looking over their shoulder, worrying about possible negligence claims and the possible insurance position, there would be great concern in the House, and not only among Conservative Members.
Although the Medical Protection Society, which has more than 114,000 members in the United Kingdom alone and more than 200,000 members throughout the world, generally welcomes a move away from lump-sum settlements to providing periodical payments in clinical negligence cases, it has serious concerns about the way in which indexation would operate.
The hon. Member for Hendon has already referred to the debate in another place on 19 May this year, at columns 536 to 538 of House of Lords Hansard. An exchange took place between the noble Lord Goodhart, of the Liberal Democrats and the Minister, Baroness Scotland. In response to clarification by Baroness Scotland of the reference to RPI in this context, my noble Friend Lord Hunt was able to withdraw his amendment, which had sought to limit the operation of an opt-out clause to exceptional circumstances. The hon. Member for Hendon is having another go at getting rid of all reference to the RPI. In Committee, the Liberal Democrats were working on the basis of advice from Mr. David Kemp, QC, who is probably acknowledged as the greatest expert in the field of damages for personal injury and medical negligence.
What we said about the Liberal Democrat amendment in Committee, which is similar to the proposal of the hon. Member for Hendon, is that any taking out of the RPI would virtually stop structured settlements in their tracks. It is difficult enough already to find any kind of insurance-based product that would enable provision to be made for periodical payments, even one that is increasing in accordance with the RPI. In the week before we debated the matter in Committee on 8 July, one insurance company had closed its doors to any new business of that kind, and another company was talking about limiting the range of products that it offers. Continuing attempts are being made in the courts to persuade judges to allow future care costs at a much higher level. To date, those attempts have not succeeded, but great concern was expressed not only by the chief medical officer, Sir Liam Donaldson, that courts may not take into account treatment being available under the NHS, but by the NHS Litigation Authority, which raised the matter with my noble Friend Lord Hunt of Wirral.
What the hon. Member for Hendon has provided is a re-run of the amendment tabled in Committee by the Liberal Democrats. The Government's position then—and now, I suspect—was that the RPI index was the right approach in the great majority of cases. That has been the view not only of the Government but of the insurance industry. What the Opposition do not want is any change to these proposals that would make it more difficult for a responsible body such as the Medical Protection Society to represent its members, that would lead to defensive medicine, and that would make it more difficult for the insurance industry to provide any sort of cover for medical professionals. I suspect that when the Minister comes to respond, he will make similar comments.
On the hon. Member for Hendon's other amendment, what the Opposition say is that the court has to consider the claimant's needs. We expect that rules of court will concentrate on such matters as are in the claimant's best interests. It seems to us that rules of court are the right place for these matters to be dealt with, and that experienced judges can be trusted to use their powers in accordance with rules of court to ensure that the claimant's needs are met. It would not be sensible to make further changes—even though I recognise that the Association of Personal Injury Lawyers holds strong views on the matter—which we believe would lead to the kind of problems of defensive medicine that have been so prevalent in recent years in the United States.
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