132.In this chapter, we draw on our recommendations to suggest how the Government might amend and proceed with legislation.
133.It is legitimate to consider changing the assumptions made when setting the discount rate better to reflect “real world” behaviour, but the evidence currently presented by the Government concerning claimant investment behaviour is thin. Further evidence is required on this point. But there is ample evidence that the rate ought to be reviewed and set regularly, and we are convinced of the merit of an expert panel to assist the Government, with some fine adjustment of the process.
134.If the Government remains convinced that it must change the assumptions it makes about how damages will be invested, to adjust the balance between the interests of different groups of society, it should say so. In that case, we would recommend that the Government:
a)undertake careful and representative research into the way claimants invest their damages, the reasons for their choices and the extent to which they obtain fair compensation, and with the benefit of that research review the legislation at an early stage to consider:
i)how its impact on claimants is reflected in the balance the legislation strikes; and
ii)whether to exercise the power to amend the assumptions by regulations which we recommend below; and
b)amend paragraph 4 of the Schedule inserted by the draft Clause so that:
i)the investment approach is assumed to involve the lowest reasonable level of risk between the two levels set out in the existing draft; and
ii)the Lord Chancellor has power to amend the prescribed assumptions, in regulations to be made by statutory instrument subject to the approval of both Houses of Parliament (the “affirmative procedure”);
135.In relation to process, we recommend the schedule inserted by the clause be amended as follows:
a)remove paragraph 2 (with consequential amendment) so an expert panel is involved in the first review; and
b)amend paragraph 3 to require:
i)the panel and the Lord Chancellor expressly to consider whether to set different discount rates for different periods of loss and/or different heads of damage; and
ii)the Lord Chancellor to publish his or her reasons for any decision to change the discount rate or to leave it unchanged, the advice provided on the matter by the expert panel, and reasons for not accepting the advice of the expert panel whenever that occurs; and
c)amend paragraph 6 such that the panel is quorate only when 4 out of its 5 members are present.
29 November 2017