Civil Liability Bill [HL] — House of Lords, 2018-05-15
Topic: Macroeconomics
Richard Keen (Conservative, Centre-right): My Lords, I begin by acknowledging the point made by my noble and learned friend Lord Mackay of Clashfern. The Bill makes perfectly clear that this is a decision of the Lord Chancellor as Lord Chancellor, and it is in that context that it has to be seen and understood Amendment 61 would replace the proposed three-year maximum review cycle for the second and subsequent reviews of the rate with a system under which the need for the rate to be reviewed would be determined by the expert panel by reference to changes in returns on investment. Of course, there are then consequential and supplementary amendments. The effect would be to add a new and distinct responsibility to the role of the panel. It would in effect, as I believe my noble friend Lord Hodgson acknowledged, require a standing panel to be created. If more than a year had passed since the rate was reviewed, the expert panel would be required to assess the need for a review and then to advise the Lord Chancellor to review the rate if it considered that the nature of return on investment had changed enough to justify a review. If the panel decided that this condition had not been satisfied, it would have to report its reasons for this view to the Lord Chancellor The concept of a review based on changes in investment returns was canvassed as an alternative to a fixed review period in the Government’s 2017 consultation on how the rate should be set, and it was supported, let me be clear. However, basing the review requirement on changes in investment returns would, we believe, create more uncertainty and be less predictable than a regular fixed-date review. The introduction of a requirement for the panel to consider the need for a full review annually could further fuel such uncertainty I appreciate the concerns raised by the noble Lord and others at Second Reading about the potential for a fixed review period to prompt undesirable litigation behaviour and the possibility of what is sometimes termed the gaming of the system in anticipation of a change to the rate. However, this problem would not be avoided by the system which the amendment proposes. Litigants would still know when the panel would be required to consider whether the rate required reviewing. Indeed, such occasions would be more frequent under the amendment than under the three-year cycle proposed in the Bill. One can imagine a stop-start mentality emerging leading up to the time when the panel was expected to report A further consequence of the amendment would be that the expert panel would have, in practice, to exist independently of the review of the rate, rather than being convened by the Lord Chancellor for each review, as the Bill currently provides. In effect, a standing panel would be required, which would have to exercise judgment as to the timing of reviews, rather than confining itself to the technical matter of advising the Lord Chancellor on the factors that may considered in the setting of the rate, which is the purpose of the expert panel. The amendment would therefore make a very significant change to the proposals in the Bill regarding when the rate should be changed. The Government’s proposals for a fixed-period maximum cycle for the review of the rate have, as I say, been developed through consultation and been the subject of pre-legislative scrutiny, and we consider that they provide a simple and certain method by which reviews can largely be predicted. Amendment 74 would require the Lord Chancellor to adopt any recommendation from the expert panel as to whether the rate should be changed and, if so, what the rate should be. Clearly, such a change would diminish significantly the responsibility and accountability of the Lord Chancellor for any review outcome—indeed, it would essentially remove it. Amendment 74 would also remove the requirements on the Lord Chancellor, the panel and the Treasury set out in paragraph 2(6) and (7) of new Schedule A1 to comply with or to take into account the duties of the Lord Chancellor in relation to the setting of the rate that are set out in paragraph 3 of new Schedule A1. What we would have is the elevation of the panel from an advisory role to essentially an executive role. That would be a major change and clearly greatly alter and increase the role of the panel The creation of the expert panel to advise the Lord Chancellor is, of course, one of the most important changes introduced by Clause 8. The panel is central to the Government’s proposals for the way in which the rate is set, introducing new expertise and transparency. The panel will play a very important role in providing assistance to the Lord Chancellor in setting the rate, but it would not in our view be appropriate for the panel’s recommendations to bind the Lord Chancellor in deciding whether the rate should change and what it should be. The setting of the discount rate requires the weighing of different potential outcomes for individuals in relation to a range of possible rates. An element of value judgment will ultimately be required. It is important, therefore, that the decision-maker should be politically and publicly accountable for decisions on the rate. That is why the Lord Chancellor is, in our view, the appropriate person to make that choice. Indeed, this was recognised by the Justice Select Committee, which stated in its report that: "Setting the discount rate has repercussions on the taxpayer through Government expenditure and also consumers through its impact on insurance premiums and inflation; therefore we think it is right that the decision to set the discount rate lies with the Lord Chancellor" We agree with that assessment In addition to being influenced by the pre-legislative scrutiny carried out by the Justice Committee, the proposals we have put forward have been developed through the public consultation process. In response to the question of by whom the rate should be set, the largest single group of support was for the rate to be set by the Lord Chancellor following advice from an expert panel. I note the support for that which has been given, in particular, by my noble and learned friend Lord Mackay of Clashfern, expressing his experience as Lord Chancellor and underlining the distinct role of the Lord Chancellor in this context.