Lord Chancellor Elizabeth Truss has introduced a new statutory discount rate under the Damages Act 1996. The discount rate, which has changed from 2.5% to -0.75%, is to be taken into account by the Courts when setting multipliers and calculating damages for future losses in England and Wales.
The new rate came into effect on 20 March 2017. Prior to this, the rate had been unchanged since 25 June 2001. However, with plummeting interest rates over the years campaigners had been calling for a reduction in the rate, with the Association of Personal Injury Lawyers (APIL) stating that the rate of 2.5% was too high.
This reduction is a significant movement which will substantially increase Claimant’s compensation sums for future loss. The principle behind any compensation award is to put the Claimant back in the financial position he / she would have been in had the injury not occurred. In some claims, this will include compensation for future loss of earnings and care costs. The law provides that Claimants are to be treated as investors and reflects that, due to the injuries suffered, they would be financially dependent on the payout for a lengthy period of time if not indefinitely.
The Lord Chancellor said:
“The law is absolutely clear – as Lord Chancellor, I must make sure the right rate is set to compensate claimants. I am clear that this is the only legally acceptable rate I can set”.
In announcing the change to the London Stock Exchange, four fundamental pledges were made by the Lord Chancellor:
• The government has committed to ensuring that the NHS Litigation Authority has appropriate funding to cover changes to hospitals clinical negligence costs.
• The Department of Health will work closely with GPs and Medical Defence Organisations to ensure that appropriate funding is available to meet additional costs to GPs, recognising the crucial role they play in the delivery of NHS.
• The government will launch a consultation to consider whether there is a better or fairer framework for claimants and defendants, with the government bringing forward any necessary legislation at an early stage.
• Chancellor of the Exchequer Philip Hammond will meet representatives of the insurance industry to assess the impact of the rate adjustment.
A consultation will be launched before Easter to consider a suitable framework for Claimants and Defendants, with the necessary legislation to be introduced at an early stage.
The first case that settled following implementation of the new discount rate involved East Lancashire Hospitals NHS Trust and a 10-year-old Claimant who was diagnosed with cerebral palsy following medical negligence. The total value of the settlement under the old discount rate was £3,772,500, which was increased under the new rate to £9,296,673.
Moosa-Duke Solicitors welcomes this positive change made by the Government upon reflection of the volatile financial climate and the need for injured Claimants to have the financial ability to meet their future needs.
Moosa-Duke Solicitors has many years’ experience of representing families whose loved ones have suffered as the result of substandard NHS care. If you or a loved one has suffered as a result of poor care from a medical professional, please contact us on 0116 254 7456 for a no obligation conversation.