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Lord Irvine of Lairg: If I may say so with respect, in his remarks the noble Viscount was anticipating Amendment No. 3, which I shall move, rather than this one.

I assure the noble and learned Lord the Lord Chancellor that I accept that this is a matter of fine judgment. I am not an enemy of flexibility for the courts. However, the criterion in the Bill in its present form--which is why I propose the amendment--is to my mind an invitation to any party to proceedings to try to persuade the court that a rate other than the prescribed rate is more appropriate in the circumstances of that party's case. That test can

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therefore lead to very fine arguments and expert evidence. A criterion of "exceptional circumstances" is, by contrast, a much stiffer test. It would require a highly unusual departure in a particular case from the generality of cases. Therefore, it would operate as a disincentive to unnecessary and costly legal argument backed by expert evidence.

Nevertheless, I appreciate that the arguments are finely balanced. The noble and learned Lord prefers the Bill in its present form and therefore he is ready to run the risk to which I have called attention. In those circumstances, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

6 p.m.

Lord Ackner moved Amendment No. 2:

Page 1, line 15, leave out ("and the Treasury").

The noble and learned Lord said: In the Explanatory and Financial Memorandum to the Bill, under the heading,

    "Financial and manpower effects of the Bill",
it is provided as follows:

    "The Bill's only likely effects on public expenditure are that any exercise of the power in clause 1 could affect the size of awards of personal injury damages against government departments, and that, under clause 6, ministers may accept secondary liability to support the primary obligations of public sector bodies".
In my respectful submission it is quite wrong that one should involve the Treasury as it is involved in Clause 1(3).

Clause 1 deals with the determination of,

    "the return to be expected from the investment of a sum awarded as general damages for future pecuniary loss in an action for personal injury".
Subsection (3) provides that,

    "Before making an order under subsection (1) above the Lord Chancellor shall consult the Government Actuary and the Treasury; and any order under that subsection shall be made by statutory instrument subject to annulment in pursuance of a resolution of either House".
Allowing a potential defendant to advise on a factor that affects the amount of damages he must pay is a startling and strange provision. If it stands, quite clearly justice will not be seen to be done. The Lord Chancellor is empowered to seek to fix the rate of return on investments to be used in the calculation after consultation with the Government Actuary; and the Government Actuary is well able to undertake without assistance from the Treasury his actuarial task, which is somewhat similar to that undertaken by actuaries in insurance companies which issue life and pension policies.

I suspect that the Treasury has been included in the clause because it is usual, as I understand it, to do so if expenditure of public money is involved. But damages payable by a government department is not public expenditure in the usually understood sense.

At Second Reading I asked my noble and learned friend the Lord Chancellor a question on this matter of which I gave him advance notice. I therefore had the

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benefit of his reasoned reply. Among other things he said that the Treasury had, among other expertise, expertise,

    "in relation to ... forecasting ... which is essentially what lies behind the power in Clause 1".--[Official Report, 29/4/96; col. 1410.]
But we are not involved in forecasting. We are not looking into the future. The actual rate of return at the moment of the calculation is what is required. That is what is done, day in, day out, when there is a purchase, for instance, of an annuity.

It looks wrong, and is wrong, for the Treasury to feature in the way that it does in Clause 1(3). I beg to move.

Lord Meston: I contribute only this observation. At Second Reading the noble and learned Lord the Lord Chancellor explained that the reference to the Treasury came from the draft Bill annexed to the Law Commission report. So it does. But having reread the Law Commission report, I could not find anywhere any justification for the inclusion of the reference to the Treasury in the draft Bill. It may be that the Law Commission thought it self-evident, but it was not evident to me.

Lord Irvine of Lairg: I, too, look forward to the noble and learned Lord's explanation as to why the Treasury is included. It occurs to me that it is possible that the Treasury could have market-sensitive information which it might be relevant for a Lord Chancellor to know: why, for example, a return on a particular security might not be a useful guide for a particular rate to be prescribed. I am not sure about that. However, I certainly welcome the opportunity by way of this amendment in the name of the noble and learned Lord, Lord Ackner, for the noble and learned Lord the Lord Chancellor to explain the thinking behind the inclusion of the Treasury.

Lord Simon of Glaisdale: The words "with the consent of the Treasury" or "after consultation with the Treasury" appear in measure after measure. They are practically always unnecessary. They are unnecessary here. The internal machinery of government takes care in every case that the Treasury is consulted about any matter that may involve expenditure.

The Treasury has a number of officials, some of whom are specifically earmarked to departments and are in close daily touch with departments. They are invariably consulted during the drafting of any measure, including regulation, and will rapidly intervene if there is any Treasury interest. In this case, it appears that the words are not only unnecessary but have given rise to considerable disquiet as expressed in this debate.

On many, many occasions all governments have been pressed to omit from statute these and other unnecessary words. Their only valid, and valuable, purpose is to provide employment for parliamentary draftsmen, their secretaries and typists and the printers of parliamentary proceedings and in due course the statute. No doubt in the end that is a substantial body of employment, but it is utterly wasted and unnecessary and is a waste of money. The Treasury should itself get rid of the

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provision. It clings to these words because it believes they are an extra safeguard against departments rushing wildly ahead and incurring expenditure without consent or consultation with the Treasury. The words are quite unnecessary. I am very glad that this matter has again been pinpointed by means of the amendment tabled by my noble and learned friend Lord Ackner.

The Lord Chancellor: If my noble and learned friend Lord Simon of Glaisdale is right, it will not matter whether this amendment is given effect to from the point of view of the ultimate result. It is that aspect of the matter that my noble and learned friend Lord Ackner--

Lord Simon of Glaisdale: Perhaps my noble and learned friend will allow me to intervene. He is quite right. It makes no difference in the actual result. But justice should not only be done but be seen to be done.

The Lord Chancellor: Precisely. If it is right that the Treasury should be consulted, it is right that that particular aspect of the matter should be public rather than swept under the table, as it were, because the provision is withdrawn from the Bill. If accepted, the argument of my noble and learned friend Lord Simon of Glaisdale would lead to the view that the Treasury would be consulted in any event, even though that did not appear in the statutory provision.

Lord Ackner: Perhaps my noble and learned friend would be kind enough to give way. I do not accept that it would be right for the Lord Chancellor to consult the Treasury when the Treasury is a defendant and likely to gain in accordance with the advice he gives. I should have thought that the Lord Chancellor would be the first person to recognise that one does not seek the advice of someone who is parti pris.

My point is much more fundamental than purely a drafting point. It is wrong that it is in the Bill, and it would be wrong if it is taken out of the Bill, to consult a potential defendant as to what he thinks is the interest he should pay on the damages that sooner or later he will be ordered to pay.

6.15 p.m.

The Lord Chancellor: That is precisely what I had in mind in suggesting that the point made by my noble and learned friend Lord Ackner would not at all be met by the point made by my noble and learned friend Lord Simon of Glaisdale because the view of my noble and learned friend Lord Ackner is that it would not be right for the Treasury to be consulted.

I do not accept that point. But I certainly suggest that the matter is not one that is dealt with on the usual argument that my noble and learned friend Lord Simon of Glaisdale has put in a number of Bills with which I have been concerned and, I am sure, a great number of Bills with which I have not been concerned; namely, that whether the words are in or out, it does not make any difference because that is what in fact happens.

It is true that the Treasury would be responsible for securing the implementation of an award against a government department. As my noble and learned friend

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pointed out, there is also the possibility of the Treasury being involved when Ministers accept secondary liability to support the primary obligations of public sector bodies in the sense that public expenditure might be involved in that connection.

In my submission, it would be perfectly right for the Lord Chancellor to consult with potential defendants. I should certainly expect to consult the insurance industry in any attempt to settle such matters and also to consult, as I do from time to time in connection with these matters, those who would be representing plaintiffs: trade unions representing plaintiffs and gatherings of professional bodies who represent plaintiffs from time to time. It would be for the Lord Chancellor to make the proper use of whatever advice or estimate he received. Obviously, in relation to this Bill a good deal of consultation has taken place. I have no doubt that my noble friend Lord Chelmsford will raise this issue later in a little more detail.

The Treasury has an expertise which is important to have in mind. As I said at Second Reading--I was obliged for the notice of the question and when I answered my noble and learned friend I did so on the basis of the notice that the question would be put to me--the reasons that I gave are perfectly good ones. The Government Actuary and his department is one repository of expertise but within the Government it is certainly not the sole repository of expertise on the subject of investment and money markets generally.

My noble and learned friend said that we were not concerned with the future but only with the present and determining a figure for the present. But we determine a figure which will rule so long as it is fixed under the Act until a new figure is put in. But the purpose of the figure is to help to determine the return to be expected from the investment of a sum awarded as general damages for future pecuniary loss. As I understand it, the theory of the law--my noble and learned friend will correct me if I am wrong--is that what the lump sum tries to do under the "pecuniary loss" head is to provide a sum which, coupled with the return which is obtained on it from investment, will compensate for the future loss which the plaintiff has. Therefore, there is a considerable element of judgment in relation to the future involved in this exercise.

It is true that one way of doing that is to accept the judgments of those who are in the market for index-linked government securities at any one moment of time. But the exercise is the exercise that I have indicated. That is what one is trying to do: obtain the best figure one can which will convert the pecuniary loss which has been determined as likely to accrue to the plaintiff into a capital sum, which with its interest and the capital itself will compensate the plaintiff over the years--it may be quite a long time--for that particular loss.

In my submission, the Treasury has an expertise in forecasting--there are differences of view about how great that expertise is, but undoubtedly it has the function of seeking to make such estimates--and it would be right for the Lord Chancellor to take account of it. I submit that the Lord Chancellor would be one

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who would take into proper account those observations and representations from the Treasury. I have no doubt, as I said, that in fixing the rates a very wide consultation would be expected.

The complexity involved in the selection of rates should not be underestimated. One has only to look in the relevant section of the Financial Times to see the range of possible figures. As is explained in the explanatory notes to the actuarial tables published by the Government Actuary's Department, the published rates make no allowance for the incidence of tax on the income from a compensation award. Assumptions must also be made about the rates of inflation. Also, although swings may not be vast, there are fluctuations which can add to the complexity. Thus, I should certainly believe it right to look to the Treasury, among others, to advise me, and would consider whether it would be helpful here to specify other expert consultees.

I believe that it is perfectly right in the circumstances of this case for the Treasury to be consulted. The Committee will notice that the formula here is not the one to which my noble and learned friend Lord Simon of Glaisdale referred in the first instance as the "agreement" of the Treasury. This is a consultation with the Treasury. It is true that it appears in the Law Commission Bill, probably on the view that it is self-evident. There is no detail at all supporting why the Treasury is mentioned but I feel that the reasons which I gave underlie that.

So I submit that it is perfectly right that the Treasury should be consulted, the rule-making authority having the duty of using the representations in the proper way and not simply on the basis that because one party to a potential action wants one thing, that is what should happen. In the light of that explanation, I invite my noble and learned friend to withdraw the amendment.

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