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Compensation Claims

Oral Answers to Questions — Justice – in the House of Commons at 2:30 pm on 28th June 2011.

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Photo of John Howell John Howell Conservative, Henley 2:30 pm, 28th June 2011

What steps he is taking to change incentives for claiming compensation.

Photo of Jonathan Djanogly Jonathan Djanogly The Parliamentary Under-Secretary of State for Justice

The Government introduced the Legal Aid, Sentencing and Punishment of Offenders Bill on 21 June. The Bill contains provisions to take forward a fundamental reform of no win, no fee conditional fee agreements, as recommended by Lord Justice Jackson. These changes will encourage claimants to take an interest in the costs being incurred on their behalf, and will deter frivolous or unmeritorious claims from progressing to court.

Photo of John Howell John Howell Conservative, Henley

Does the Minister believe that implementing Lord Justice Jackson’s proposals will clamp down on bloated compensation payments, given that in the past some solicitors have profited from cherry-picking claims and are claiming high success fees from defendants, particularly public authorities?

Photo of Jonathan Djanogly Jonathan Djanogly The Parliamentary Under-Secretary of State for Justice

My hon. Friend is right to raise the position of public-funded authorities such as the NHS Litigation Authority and local councils, which currently have to pay substantial additional legal costs to conditional fee agreement claimants. We believe that our proposals will ameliorate that position.

Photo of Jack Straw Jack Straw Labour, Blackburn

But will the Minister acknowledge that what is in the Bill that comes before the House tomorrow implements only part of Lord Justice Jackson’s recommendations; that, critically, the Minister has failed in that legislation to tackle at all the scandal of referral fees paid all the way along the chain, from the informant who passes on individuals’ details up the line to insurance companies, where it is then also paid by the insurance companies; and that this scandal will continue, notwithstanding any changes to be introduced in the structure of ownership of solicitors firms, until he and his colleagues implement in full Lord Justice Jackson’s recommendations, which are to abandon and outlaw referral fees altogether?

Photo of Jonathan Djanogly Jonathan Djanogly The Parliamentary Under-Secretary of State for Justice

It was Labour who brought in the ability to recover success fees and ATE—after the event—insurance premiums in 1999. This became the key mechanism of the rotten compensation culture, of which referral fees are a symptom. Claimant costs represented 56% of damages in 1999, but by 2010 they represented 142% of damages—and yes, we are looking at referral fees in the context of the reforms as a whole.

Photo of Alan Beith Alan Beith Chair, Justice Committee, Chair, Liaison Committee (Commons), Chair, National Policy Statements Sub-Committee

Why does the Minister not merely look at referral fees, but give us a clear commitment that that outrage will be removed under the Bill?

Photo of Jonathan Djanogly Jonathan Djanogly The Parliamentary Under-Secretary of State for Justice

The Legal Services Board reported on that only a matter of weeks ago. We are looking at its recommendations, which go much further than a ban and, in particular, deal with transparency, which was what the Select Committee on Transport focused on. We will look carefully at all these issues.