Damages (Personal Injury) Order 2017 — House of Lords, 2017-07-18
Topic: Domestic Commerce
Susan Kramer (Liberal Democrats, Centre to centre-left): My Lords, I congratulate the noble Lord, Lord Hodgson, and thank him for bringing forward his regret Motion on this order. So much of the detail has been described to the House that I am not going to repeat it, but there can be almost no one who looks at a discount rate of minus 0.75%, even for a risk-free investment, who does not come to the conclusion that the number is simply preposterous. For the Government to implement a result that is preposterous seems to me entirely inappropriate, not just for this Government but for any For many years I was a banker. There were times when it was necessary to price instruments, and I would turn to one of the junior bankers who worked with me and ask them to go away, go through the analysis and come forward with a conclusion. You would find one or two who were wedded to a particular formula that had been brought to their attention at some point during their training, and were absolutely certain that by applying the formula they would come to an appropriate result, even though when one looked at the result it was completely inappropriate for the situation and the purpose. That is what we have here: an allegiance to a formula—which was probably the wrong formula from the day that it was brought in but is certainly an inappropriate formula today—that the Government are insisting on applying simply because it is the existing formula. Frankly, I can think of no worse way in which to manage any aspect of finance in this economy The Government may take the view that the impact of making a preposterous and inappropriate decision does not matter very much. I think that it does, as I think does most of this House. Of course it is crucial that anyone who has been severely injured and is awarded damages over a long period should not be undercompensated, but there is no rationale either for overcompensation. If I understand correctly, this does not change the award; it is with the translation of the award into a lump sum that the discount rate comes into play. The impact on insurance premiums matters. I admit that I am less concerned about the profits of insurance companies than about the impact of rising insurance premiums on many of the people who have to take out insurance. The noble Lord, Lord Hodgson, referred to young people who are now having to pay significantly more for motor insurance. It has been proposed that the price could be as much as an additional £1,000 a year, a very significant sum. We have already seen a significant rise in insurance premiums, partly due to changes in the Government’s tax regime. I point out to the noble Lord that if you are a young person living in a rural community you may have no choice but to drive if you want to have a job and go to school, as we have cut back on rural bus services, so there is an ongoing impact that is quite significant There is also very little discussion of the impact on various different departments. I think that the MoD suffers badly from this change in the discount rate, although I have no idea what the figure is. Presumably the National Health Service is impacted significantly as well. All that rolls back on the taxpayer, so there are real implications of getting the discount rate wrong I do not understand why the Government persist in applying a formula that they know is entirely inappropriate and comes up with a preposterous result, particularly when they have almost completed a consultation, with a review to follow which, we hope, will mean that they go back to the drawing board in a matter of weeks to try to right this set of wrongs I would become very angry with a junior banker who blindly applied a completely inappropriate formula. When it is a Government blindly applying a completely inappropriate formula, it begins to be unforgivable.