Civil Liability Bill [HL] — House of Lords, 2018-05-15
Topic: Domestic Commerce
Robin Granville Hodgson (Conservative, Centre-right): My Lords, I rise to move Amendment 61 and speak to Amendments 65, 69, 86, 90 and 91, which are consequential These are probing amendments, designed to tease out the Government’s thinking on the methodology for carrying out reviews of the discount rate. As I understand it, the Government intend that each review of the rate must commence within three years of the last review, irrespective of whether there have been changes in the underlying investment climate that would affect the varying rates of return on the sums awarded. I would suggest that time is not the right metric by which to settle a requirement for carrying out reviews. I agree with my noble friend Lord Faulks, who has an amendment in this group, that three years is too short in any case. I would respectfully suggest that a five-year period suffers the same strategic defects. Fixed or maximum periods will inevitably lead to an increase in attempts to game the system. My noble and learned friend the Minister will, I am sure, point out that three years is a maximum and reviews can take place more frequently In the world of practical politics, things will not work out like that. Changing the discount rate is a significant and potentially controversial decision. We only have to look at the immediate history, with the discount rate remaining unchanged for over 15 years during one of the biggest financial booms and busts that the world has ever seen. I believe that Lord Chancellors will be reluctant to implement the changes until forced to do so, so there will be a bunching of claims as the fixed period nears its end—whether it is three or five years—as defendants and claimants reflect on whether the upcoming review is likely to be to their advantage Perversely, a fixed-term system requires a review where there is no obvious reason to undertake one. If the Bill is planned to achieve fairness, a key objective must surely be to ensure that rate changes are made to reflect changes in the underlying available rates of return on investments as quickly and efficiently as possible. This group of amendments suggests a different approach, making the expert panel established under paragraph 5 of proposed Schedule A1 a permanent feature. At present, it is not: it is dissolved after each review under paragraph 5(3), which is deleted by my Amendment 90 Amendment 61 imposes a new advisory duty on the panel to, "advise the Lord Chancellor to undertake a review of the rate of return when it considers that the nature of return on investment has changed sufficiently to justify such a review" The decision to initiate the review remains with the Lord Chancellor, but he or she is given the comfort of a third party advising that a review is advisable. To ensure that paralysis does not overtake the panel, the second part of Amendment 61 requires that, "where a review under this paragraph has not taken place for a period of 12 months, the expert panel must report to the Lord Chancellor as to why it considers that no review is necessary" How the expert panel would make that judgment is up to it. Bearing in mind that in the new world, investment should be assumed to be in lower-risk categories, there are multiple indices: gilts—not index-linked gilts, I hasten to add—or prime corporate bonds, which together can provide indication of changes in the likely available rates of return. All the other amendments in my name in the group are consequential To conclude, these probing amendments seek to move the undertaking of reviews of the discount rate from an arbitrary, time-based system to one that reflects events in the relevant real world—namely, changes in the available rate of return on investments. I beg to move.