Amendment 2 gets to the heart of our issues with the Bill and would remove the whiplash compensation tariff system altogether. We are dealing with human beings who experience pain differently, who have different lives and who will all be affected by a similar injury in a slightly different way. We would not accept a pricing of insurance premiums that did not take account of whether we drove a Mini or a Maserati, and we would not accept a standard payment for damage to a car, regardless of its state after an accident. Where is the justification for using such a blunt instrument as a tariff to calculate pain?
We all want to stamp out false whiplash claims, but why should HGV drivers, firefighters or parents driving their kids to school be treated like fraudsters claiming falsely for whiplash, left with tariff compensation and no legal help? As Lord Woolf, the eminent former Law Lord who carried out a review of civil justice after being commissioned by a previous Conservative Government, pointed out in the Lords:
“The effect of whiplash injuries, with which we are concerned, can vary substantially according to the physical and mental sturdiness of the victim. This means that the appropriate amount of damages for a whiplash injury can vary substantially... I suggest that they are not suited to a fixed cap, as proposed by the Government.”
He went on to say that a tariff
“offends an important principle of justice, because it reduces the damages that will be received by an honest litigant because of the activities of dishonest litigants.”
The Government’s proposals will punish the honest based on the behaviour of the dishonest, but how big is that dishonest group? The ABI said in 2017 that insurers paid out in 99% of all cases and that fraud was proven in only 0.22% of cases. Woolf decried the Government’s move to
“interfere with the Judicial College guidelines by substituting tariffs or a cap, which lack the flexibility of the guidelines.”
He went on in speaking against the proposed dismissal of a tried and tested system of justice to say that the Lord Chancellor
“is motivated, at least in part, not by the normal principles of justice as I understand them but by saving insurers money, in the belief that this will result in a reduction in premiums for motorists who are insured when they come to pay for their insurance.”
Later, he put it as strongly as simply saying:
He went on to quote Sir Rupert Jackson, who said:
“It is the function of judges (not Parliament) to set the tariffs for pain, suffering and loss of amenities in respect of different categories of personal injuries”.
Lawyers who deal with such issues all the time have pointed out how people who are already suffering, and perhaps unable to earn a living due to their injury, will be worse off under the proposed tariff. They include experienced legal practitioners from the Tory Back Benches, such as Baroness Berridge, who said:
“I have met many a claimant for whom the difference in damages now proposed by the introduction of the tariff, taking some damages from four figures—£1,200 or £1,400—down to the likes of £470 is a significant matter for many peoples’ incomes up and down this country. I cannot have it portrayed that this might not make a great deal of difference to many ordinary people in the country.”—[Official Report, House of Lords,
Vol. 791, c. 1611.]
That is from a Government Back Bencher.
The hon. Lady is making fair points, but it is important to take into account that the claim may consist partly of a general damages component and also a special damages component. Does she agree that if the individual had, for example, been required to take time off work and had incurred costs—or losses—in the process, he would still be able to litigate and seek to recover those damages?
We have to be really careful in this debate to draw a distinction between general damages, which are for pain, suffering and loss of amenity, as with whiplash, and special damages, such as the cost of taxis or lost employment. Does the hon. Lady agree that special damages will still be recoverable in the normal way and that we should not be confusing the two?
I am choosing to focus on the injuries incurred. For a soft tissue injury lasting six months, an individual would today get between £2,150 and £3,810 but, if the Bill passes, they would get £805. I am choosing to focus my speech on those huge differences. That is the practical reality of what this tariff system will mean.
There is another important principle. It is a significant step to mess with the proud tradition of an independent judiciary in this country, and the Government should not take that lightly. The Justice Committee, too, could not have been clearer in its criticism of how the tariff system will harm access to justice. We hope the Government will listen to the Justice Committee and eminent judges—and, yes, us—and accept this amendment to remove the tariff system.
It is a pleasure both to speak in support of the Bill and, unfortunately, against the amendment put forward by Gloria De Piero. It is really important that the Bill is proportionate in achieving the outcomes we want of ensuring that the public get the protection they need from injuries that can be so devastating, while at the same time compensating them in such a way that we do not burden the wider consumer with unsupportable bills. Earlier, I spoke about the fact that premiums need to remain affordable.
Amendment 2 would remove the ability to set a fixed tariff for whiplash compensation in regulations. As I mentioned earlier, the tariff system will ensure that claimants receive a proportionate level of compensation. This will significantly reduce and control the spiralling cost of whiplash claims and disincentivise unmeritorious claims. As with any such tariff system, I can understand the concern that it may not provide the flexibility necessary to ensure that compensation accurately reflects the true nature of someone’s injuries.
However, the Government have taken a number of important steps to ensure that such flexibility still exists. First, the tariff would not be flat for all cases, but staggered, depending on the severity of injury. Secondly, in addition to a tariff payment, all claimants will continue to receive special damages covering compensation for any actual financial losses suffered as a result of their accident. Finally, clause 5 gives the court discretion to deviate from the tariff in exceptional circumstances and when it is clear that a higher level of compensation would be appropriate.
This therefore seems to me to be exactly the type of Bill we should be bringing forward. It is sensible, and it does indeed allow us to provide the protection that people need, without the risk of putting up premiums. I do not believe that amendment 2 would achieve very much, other than wrecking the central point of the Bill, which as I say is to achieve such an upsurge in affordability.
My hon. Friend makes a fair point. Opposition Members have referred to the Justice Committee’s report, but has he noted that although the noble Lord Woolf was indeed critical of the changes in the terms that have been quoted today, the noble Lord Brown of Eaton-under-Heywood, a former justice of the Supreme Court, did not have an in-principle objection to the tariff system? Does he agree that the devil in the detail is what will be in the regulations on the exceptional circumstances uplift and how that will apply? Is he, like me, pleased to see that there is a commitment to consult the Lord Chief Justice on those regulations, and does he agree that it is important that that consultation is real, thorough and detailed?
My hon. Friend speaks with the authority of not just a Select Committee Chair but someone who thinks deeply about these issues. There are safeguards built into the Bill, precisely to ensure that we achieve the robust, balanced and responsive framework that good legislation should aim for. I noted earlier that the Lord Chancellor will have a duty to keep all the relevant legislation under review on a triennial basis, so there will be checks to ensure that compensation thresholds do not become wildly out of kilter. Indeed, part of the reason why the Bill is necessary is that the thresholds have been allowed to drift for a very long time without being amended. That has led to a more dramatic uplift than is customary or than I would ever hope to see in future. We want to ensure that we always have a rolling programme rather than dramatic changes, which unfortunately affect more people than a more staged mechanism would. However, that does not mean that there is not a case for acting, so unfortunately I cannot support amendment 2.
I will speak only briefly, because a number of the points to be made in this debate are the same ones that we made in the previous debate. There is no logic or sense to the Government’s rationale; they simply want to minimise the damages paid to litigants who have legitimate and in some cases serious injuries.
The noble Lord Woolf has been quoted several times. The Woolf report led to progressive and now legendary reform of the civil justice system, so he very much knows what he is talking about on this issue as on so many others. He said that the tariff
“results in injustice and it is known to result in injustice. Indeed, no one can deny that it results in injustice. There has never been a case where legislation deliberately introduces injustice into our law. It may be that it is only in regard to small claims, but surely it is important that we pause before we do that.”—[Official Report, House of Lords,
Vol. 791, c. 1620.]
I agree that the Government should pause, and I would say that there is an objection in principle to the tariff in this case. No good reason has been given why this should not be a judicial process rather than an administrative or politically affected process.
There is also an issue of quantum to consider. The proposed sums in the tariff are derisory for what are often quite serious injuries lasting for periods up to 24 months. An injury that lasts for two years is likely to be serious and is certainly a persistent one that will cause a lot of pain and suffering. It has been pointed out that at the lower end of the spectrum—nought to three months, which still includes cases of pain and discomfort lasting a significant time—the proposed sum is £235. The Law Society’s briefing compares that with the amount of compensation that somebody might get for a flight that has been delayed for three hours, which could be considerably in excess of that amount. As well as the matter of principle, there is the point that the actual financial compensation is being minimised for no good reason.
The hon. Gentleman talks about injustice. Is it not an injustice that many motorists are paying inflated insurance premiums because some people are getting an unreasonable level of compensation for their injuries? Is that not what the Bill is intended to prevent?
Please give me a moment to answer the first point, then I will willingly give way.
I do not know whether the hon. Gentleman is saying that it is unreasonable because these injuries are exaggerated or fraudulent, or that people should not be compensated according to accepted judicial tariffs. Nobody has ever said—that I know of—that the levels of compensation that are awarded under the Judicial Studies Board guidelines are over-generous in this country. What we are doing is simply taking those realistic—some would say, rather parsimonious—levels and reducing them by a substantial degree, so I think the point is nonsense, frankly. However, I give way to Rebecca Pow , who will make a much more sensible point, I am sure.
On that point, from the general public’s point of view, there is a consensus that people are taken for a ride over all these claims. Many of them are encouraged to go into this system of claiming when perhaps they do not necessarily have a great case. A great deal of money is made through the legal system, and people want to see fairness. My hon. Friend Kevin Hollinrake is absolutely right: most people’s motor insurance is going up and up to compensate. Does Andy Slaughter agree that that is not fair? What we are trying to do with the Bill is to introduce fairness to a system that frankly—many people would say—has got out of control.
I congratulate the hon. Lady on getting a helter skelter of nonsense into one intervention, with every prejudice and false statement that has been made in the tabloid press about these matters for about the last 10 years—well done on that. I could make a long speech dealing with the specific issues of—[Hon. Members: “Go on!] We have got time, haven’t we? No, I will not. I could go into detail about some of the myths about whiplash and soft tissue injuries and what is actually happening in relation to accidents, the insurance industry and premiums, because I have been an observer of that for a long time. However, let me limit myself to a fairly narrow point.
I have listened to the arguments from Government Members, and they are just non-sequiturs, frankly. We have heard that insurance premiums are the issue. Let us imagine that we give the benefit of the doubt there, which I certainly do not, and say that premiums are likely to fall significantly and that that is a factor relating to claims rather than to insurance companies’ profits, the other activities that they indulge in and the way that their businesses are run. I do not accept that, but let us assume that we do for a moment.
Alex Chalk is no longer in his place, but he made a surprisingly illogical—for him—intervention. He said, “Look, people will still get special damages.” Of course they will get special damages, but special damages are what the name suggests—they are to compensate for specific items of loss. Why should the fact that someone still gets compensation for their loss of earnings or their medical bills, or something of that nature, mean that it is right to diminish their compensation for pain and suffering and loss of amenity? These are all non-sequiturs. The worst calumny of all is to say, “We are reducing the level of damages from slightly mean levels to absolutely parsimonious levels because of fraud”, which is exactly what we heard in relation to the small claims limit. So many members of the senior judiciary and indeed, of Select Committees, including not just the Justice Committee, but the Transport Committee, have said that it is plain wrong to say that because there may be instances of fraud, of which very few are identified, all litigants should suffer by having their damages reduced.
I understand what the hon. Gentleman is saying about quantum, but I would be interested to know, theoretically, whether he objects to the idea of tariffs being appropriate for this sort of compensation. I remind him that Lord Brown said
“I am in broad agreement with the whole idea of tariffs for injuries, certainly for lesser injuries, and indeed even of reducing awards in respect of a number of these lesser injuries.”—[Official Report, House of Lords,
Vol. 791, c. 306.]
Does the hon. Gentleman agree that tariffs can be appropriate with, for example, criminal injuries compensation?
There is an element of semantics going on here. We have guidelines at the moment. Judges do not pluck figures out of thin air. They look at the guidelines and hear submissions, or they would have heard submissions when representation was available—it seems it no longer will be—and they make a decision, but they have discretion around the individual circumstances of the case. That is a basic and fundamental principle of law, but one that we are deviating from. I cannot say strongly enough that that is wrong.
To add insult to injury—if I may put it that way—rather than taking the average in the guidelines and having a rough rule of thumb that someone will get a bit more or a bit less than their individual case deserves, or going for an average and calling that a tariff, we are saying that a tariff should be a tiny percentage of the current award. This is nothing but an attempt to say, “We do not wish to pay out money in this way. We wish to diminish both the ability to make a claim and the compensation paid.” Whatever one’s view on fraud, the massive majority of cases will be meritorious and honest cases in which people have genuinely suffered injury.
“What I cannot accept is a solution which means that a dishonest claim is handled in exactly the same way as an honest one. We cannot have dishonesty informing the way in which those who have suffered genuine injuries are dealt with. That is simply not justice. There should not be any idea that an honest claim for a whiplash injury made by the victim of a car accident should be less well compensated than an identical injury suffered by someone at work.”—[Official Report, House of Lords,
Vol. 791, c. 1600.]
That is what the Government are doing in the Bill and what is so inherently unfair, and they are doing it at the behest of special interests. They may genuinely believe that there is a problem to be resolved with whiplash. I could dispute that—we could go on for a lot longer than we are today—but even if they are right, there are other, better and fairer ways to tackle that issue.
Is my hon. Friend aware that under the criminal injuries compensation scheme someone gets £1,000 for a whiplash injury lasting six to 13 weeks but that under this tariff scheme the proposal is for £470 for three to six months?
My hon. Friend, who knows far more about these matters than I do—and more, I suspect, than many on the Government Front Bench—is quite right. He draws attention to the fact that there is no logic in the system.
I feel a bit sorry for the Minister as he has to push these proposals forward; he is normally a very logical and fair man. It is difficult to speak at the Dispatch Box having been given a brief of this quality. When parliamentarians of his stature and of the stature of the hon. Member for Cheltenham, with his spurious points about special damages, are reduced to this level, and when Government Back-Bench Members are hauled in here, as we saw in the previous debate, to make speeches only to be told to stop making them because they are talking such arrant nonsense, one does despair. I hope even at the 11th hour that the Government might take pity on us, listen to the wise voices in the other place and support us on these amendments.
A number of the things that Andy Slaughter suggested as being completely outrageous many of his constituents and certainly a lot of mine would completely agree with.
The Transport Committee, of which I was a member for three years, looked at this issue, and it was apparent even then that whiplash was a peculiarly British phenomenon. On the continent, particularly Germany, they do not have nearly as many whiplash injuries. I suggested at a previous stage of the Bill that this had nothing to do with the physiognomy of Germans as against that of British people. I made the point very clearly that I did not believe that their necks were more robust than good old-fashioned British necks. It was a flippant way of making a salient point: this is a national issue. In Britain, we seem to suffer from these injuries a lot more than people in other countries.
My hon. Friend has made an amusing start to his speech. Is it not strange that while the number of traffic accidents has gone down, the proportion of whiplash claims has gone up? Is it that our necks have become flimsier? What does he put this down to? Do we not need to seriously address this issue, as we are doing in the Bill?
I am not an anatomist. I am not a biological specialist. I cannot give any scientific explanations for why our necks have become flimsier, or less sturdy, over the last 10 years. It may be related to obesity; I do not know.
This is, however, a serious issue, which has come up again and again over the last 15 years. As my hon. Friends have suggested, the number of claims has risen while the traffic accident rate has gone down. It is entirely legitimate for a Government, and, indeed, parliamentarians to ask what is going on. Something is not quite right. It is apparent that many people are making claims, which may or not be fraudulent—let us give them the benefit of the doubt—and clearly it often makes sense to an insurer to do a deal, as it were, and pay the money before the veracity or otherwise of the claim has been established, simply because the legal process would take too long.
The hon. Gentleman cannot have it both ways. It may well be the case that the companies are paying early, and clearly if they are paying early, people will be incentivised to make claims. The hon. Gentleman’s colleagues, however, are suggesting that no fraudulent claims are ever made, or that only a tiny proportion of claims are fraudulent. Logically, the more that insurers pay early, the more incentive there is to make a fraudulent claim. That is pure logic, and no great subtlety is required to appreciate it.
We have a problem. I think it entirely legitimate for insurers to pay out in order to forgo expensive legal costs. They have to manage their books and their businesses on a daily basis, and they will take a hit—if that is the right way to describe it—in order to facilitate business and manage cash flow. As we have heard throughout the debate, they are quite likely to make early payments, and as the hon. Gentleman has suggested, the more an insurer pays early, the greater incentive that gives someone to make a fraudulent or insubstantial claim.
Surely the answer is to fight those claims so that they do not succeed, and send the message that insurers will fight them and there will be no easy money for allegedly fraudulent claims.
If the hon. Gentleman were an insurer, managing a business on a daily basis, he would have to make a call every single day on which claims to fight and which not to fight. Often, for reasons of cost, the insurer will simply pay the money, without regard to the veracity or otherwise of the claim.
Does my hon. Friend accept that there is also the serious issue of asymmetry of information? In the case of injuries lasting less than six months, it is very difficult to prove through any medical means whether or not the injuries occurred, and therefore very difficult to defend against the claim.
In his usual philosophical way, the Minister has made an observation that goes to the heart of the problem. I opened my remarks by suggesting that insurers were very likely to pay out on claims early. He has made the point that even if it were possible to test the veracity or otherwise, it would be very difficult. Given the nature of evidence and the question of how it can be proved that an injury has actually been sustained, this will often resolve itself into an issue of one person’s word against another’s. The Minister has backed up my initial argument in his characteristically pithy way. The whole process is expensive, and for an insurer managing a business and managing a book, it is much easier and, I think, much more tempting to come up with an easy, quick-fix settlement or payment.
As Bambos Charalambous suggested, that in itself will incentivise and motivate claims that may be frivolous, which is a problem. He has eloquently described the circumstances in which fraudulent claims can be made, yet other Opposition Members are saying that such fraudulent claims are rarely if ever made. They are suggesting that all the claims are true and that somehow grave injustices would be perpetrated if, as often occurs across the judicial system, we were to set a tariff in this particular case.
It is entirely reasonable to set a tariff on these claims. The average taxpayer and the average person who has insurance does not want to see fraudulent claims. Let us review some of the evidence. We have anecdotal evidence. Even on Second Reading Members were suggesting they were getting texts the whole time encouraging them to make specious claims. Some Members read out the texts they were receiving from insurance companies, or from claimants who were making a great deal of money, to encourage people to make spurious claims. This is going on and to pretend otherwise is wilfully naïve.
Where we are is exactly where we should be: it is absolutely right that we should be setting a tariff on these injuries and that there is some degree of political oversight of that process. It is not right, however, that judges should exclusively be in charge of the tariff rates. There is a role for the courts, but there is also a role for the Executive, and that is captured in this proposed legislation.
My hon. Friend is making some fair points. He says that this is not necessarily a role for judges, but would he conclude that while it may well be, as Lord Brown said in the other place, appropriate for Government to legislate for tariff-isation as a matter of policy, the views of the judges must be fully taken into account by way of consultation in setting what the level or quantum of that tariff should be and how it should operate and what practical impacts it should have?
My understanding given the nature of the Bill is that there is ample scope for a dialogue or conversation between judges—the judiciary—and the Government. However, what I am reluctant to see, and what I think many of our constituents and voters would be reluctant to see, is the power exclusively residing in the hands of judges. The Government have a duty of care to the taxpayers and to people who have insurance to try and keep these costs low. It is very funny to see Opposition Members frowning when I suggest the Government have a role to play. They are on the side of the political argument that believes in wholescale nationalisation; they want the Government to control everything. Yet in this particular instance they are expressing surprise and bewilderment, and I suggest that is completely spurious and fake.
Does my hon. Friend agree that the logic of his position, which I understand, is that if we are to have credibility in taking this policy decision, those savings must actually be passed on to motorists? Does he recognise that there has been some cynicism about that in the past? We need to have mechanisms to measure very carefully that the insurance industry comes up to the mark, because it has not always had a terribly good track record in the past on that?
I agree with my hon. Friend. He is right that the insurance companies have in the past—I stress in the past—had a questionable record on some of these issues, but I repeat what I said on Second Reading: it is entirely unhelpful to bash the insurance industry or denounce it as a bunch of shysters who are ripping the public off. As I said in that debate, the insurance industry is one of our world-leading industries. We should celebrate it and be grateful for it: our insurance industry is a world-beating industry. There are not that many industries left in Britain that we can call truly world class, but the insurance industry happens to be one that is. It was nauseating and disconcerting on Second Reading—it has not happened so much today—to hear speaker after speaker on the Opposition Benches denouncing the insurance industry. They were scandalised that, God forbid, the industry should make profits, as though making a profit were in itself a moral crime. We have to try to shift the nature of the debate. The insurance industry is a world-beating industry. As my hon. Friend Robert Neill has suggested, we need to have some oversight to ensure that savings are passed through to the customers, our constituents.
Is my hon. Friend aware that, according to statistics from the ABI, the myth about profit-making by insurance companies is a little bit overstated, and that motor insurers are actually not making a profit? The figures are being conflated with those of other parts of the insurance industry.
My hon. Friend makes an excellent point. As any student of basic economics will know, in a highly competitive industry the ability to make extraordinary profits is severely reduced. There are hundreds, if not thousands, of insurers in our highly developed, highly sophisticated market. As I have said, we are a world beater in this area, and that means that we have lots of diversity in the insurance market. Lots of insurers are going bust, but many are making money because they are well managed. That is exactly what we would expect in a competitive industry that has reached a high degree of maturity, as the insurance industry has in this country.
Going back to the provisions in the Bill, I believe that the Government are trying to do a very measured and reasonable thing. We are trying to limit the fraud—or the escalation of whiplash claims to the point that they drive up pricing in insurance. We are also saying that we will engage with the courts, as my hon. Friend the Member for Bromley and Chislehurst suggested. There is a role for the judiciary to play in this debate and in the management and setting of tariffs. Also, I would expect Opposition Members to be more enthusiastic about the fact that there is a role for the Government and the Lord Chancellor in ensuring that insurance premiums do not become excessive. There is absolutely a role for political engagement in the ability to cap a tariff, to ensure that premiums are low. This makes for a very reasonable and equitable set of demands, which is to be welcomed, and I hope that the Bill proceeds on its serene course through our Parliament.
It is a pleasure to contribute to the debate, and I am proud to follow my hon. Friend Kwasi Kwarteng. I freely admit that having a tariff system in place could well result in some people receiving less compensation, but that is exactly why I support the Bill. At its heart lies an acknowledgement by those on this side of the House that insurance premiums have got too expensive and that we have to look at measures to try to reduce them.
Let us look at the logic of the position. Cars now have much safer designs and there are fewer claims overall, yet we are seeing an extra 200,000 category claims, 85% of which relate to whiplash compensation. It strikes me as completely illogical to state that there is not an issue here, when the statistics are so counter-intuitive. Something very strange is going on. The analysis shows that it is impossible to ascertain whether these extra claims are genuine, because the nature of the legal system means that it is much cheaper to settle a case and never even consider any medical evidence or reports on whether there has been an injury. To a certain extent, we could say that that is no skin off the bone for the insurers, because the cost is always paid on to the consumer. I am surprised at the Opposition’s attitude in that regard because this is one of the principles that benefits the many—those who have to pay the insurance, which is mandatory—versus the few who abuse the system. I believe that the Bill is needed.
I know that my hon. Friend has a financial background. Does he accept that, if he were managing an insurance book, it would be very tempting—indeed, almost obligatory—to reach a settlement and to make the payments? Insurers are not being vicious or in some way prejudicial if they just pay the settlement. That is how a business is managed—it just has to cut its losses at some point.
My hon. Friend is spot on. In the seven years before I came to this place, I managed the legal team that was unwinding the Lehman Brothers estate. In many instances, we looked to sue, but of course, we considered the cost of the claim and then worked out whether settlement was a better option. Settlement should always be a better option. For someone running a business, it will always be the better option if it is cheaper to settle than to pursue. All businesses operate in that manner.
It is all well and good for Bambos Charalambous, who is no longer in his place, to say that there should be a duty on insurers to take those cases forward, but they will not because it is not cost-effective. In addition, it is difficult to disprove those particular injuries.
Does my hon. Friend accept that there is an emotional gain from settlement? Even those of us who are lawyers and enjoy the cut and thrust of the legal process know that bringing cases forward is a stressful experience for all claimants. It is important that we put energy and effort into making claims settlable at an early stage.
My hon. Friend is right. When I was running the legal team, it always distressed me when we settled because, as a lawyer, I found the whole court process incredibly interesting, but those on the financial side insisted that we settle because that was the better business decision to make. However, my hon. Friend is right about the distress of individuals going through the process. Of course, insurers have to focus not just on the money, but on the valuable human resource implication—the manpower it takes to fight the claims.
That comes back to my point that it is not an issue for insurers if ultimately their costs are covered because the price of premium for everybody else goes up. It is no skin off the bone for them to settle, and that is what occurs. For change, Government action is required. Although I readily accept that a tariff situation is genuinely not to be found in common law, the position that we have got ourselves into means that we need to look at the system akin to the way that we consider the Criminal Injuries Compensation Authority, which fixes the tariff in the same way. That is not unusual if we look at our European friends such as Italy, France and Spain, where similar systems are in place.
I represent a largely rural constituency of 200 square miles. I have many younger constituents who find the price of insurance too great. Studies show that, for those aged between 18 and 21, 10% of their wage will be taken just to cover their insurance. In a rural constituency, there is no choice. If people do not have a car, they find it very difficult to travel. The bus services are not as they were and, without a car, people cannot get from A to B or go to work. That has a knock-on effect because 28% of my constituents are over 65—the national average is 17%—so I have a lot of older constituents who need looking after. We have high social care bills. If we lose our younger people to the cities because they cannot afford to travel around a rural constituency, the balance goes completely.
Thirsk and Malton also has high social care bills, so I understand exactly what my hon. Friend says. His point about reducing the cost of premiums is very important but, fundamentally, the Bill’s provisions were set out in our 2017 manifesto. The measure is a manifesto promise, and amendment 2 simply wrecks a key premise of the Bill. That is contrary to what most people would expect when we have made a promise in our manifesto.
My hon. Friend is absolutely right. The amendment drives a coach and horses through the Bill. Yes, of course it is right to clamp down on those who claim fraudulently, and the Bill will act as an incentive for people not to do so, but the ultimate gain is that the money saved will go back into the pockets of those consumers who are currently being overcharged because of fraudulent claims. Like him, I intend that we legislate on all our manifesto commitments, this being one of them, which is why I support the Bill.
I have been a member of the Transport Committee for the past three years, and we have been considering the cost of insurance. We had a joint session with the Petitions Committee because more than 100,000 petitioners asked us to consider insurance, and the points made today, particularly by my hon. Friend Robert Neill, the Chair of the Justice Committee, are right. We have to make sure that insurers actually pass on this payment, and we are fixing it with the insurance industry so that they do.
It is strange that some are saying that Conservative Members are in cahoots with the insurance industry, because I am regularly lobbied by the insurance industry.
What strikes me as perverse is that the original impetus for the initiative on which we are now legislating came from Labour Members. I remember Jack Straw waxing lyrical about the need to deliver what we are delivering now, and we are right to do so.
I lack my right hon. Friend’s longevity in this place to make such historical references, but it would strike anyone as common sense to look after the bulk of our constituents—our voters—by making sure they have more money in their pocket. We should all subscribe to that.
Does my hon. Friend agree that the insurance industry in Britain is something we should broadly celebrate? This idea that anyone is in cahoots with the industry, and that the industry is trying to rip off the public, needs to be addressed squarely and rejected.
My hon. Friend is right. Britain is the leading country in the European Union when it comes to insurance. The top 10 insurers are based in London, and I celebrate this international market.
Of course, the insurance industry is very critical of the Conservative party for introducing and increasing the insurance premium tax, so any suggestion that this party does everything the insurance industry would like us to do is not backed up by our decisions.
It is undoubtedly the case that our cars are now much safer and that design and technology mean that injuries should not be as prevalent as we are seeing. We have also seen the growth of claims management companies, which have driven and fuelled claims. Sometimes we see such industries moving on from one sector to take advantage of another—holiday insurance is a good example; the claims management companies have already moved into that sphere. Equally, I would like to see more done with technology to address the ability of such companies to contact me and my constituents directly. People register with BT in order not to receive unsolicited calls, yet such calls still come through regularly. I hope that the technology will eventually keep pace and close down such calls.
I have made my points more than once, and I absolutely support the Bill. Although I can see that the Opposition’s intentions are good, if the amendment were accepted, it would drive a coach and horses through the very intention of this Bill, which is to reduce premiums for all our constituents and to make it easier for them to manage and live their lives.
Although I originally studied law and was called to the Bar, I never practised, so I hope I may speak in the debate without being tied to any particular interest. This debate is increasingly showing a division between those on the side of personal injury practitioners, and those on the side of the overwhelming majority of our constituents who face the costs arising from an ever-escalating number of claims, of escalating value, for relatively minor injuries. My right hon. Friend Sir Desmond Swayne was right to draw the House’s attention to the remarks of the former Lord Chancellor, Jack Straw. If my memory serves correctly, he told The Law Society Gazette that he was in favour of banning compensation for soft tissue injury altogether. Clearly the Bill does not go anywhere near as far as that.
“Whiplash is an innovation of fertile legal minds which has no real foundation in medical knowledge. Everybody knows the vast majority of whiplash claims are completely unjustified. I support any measures to eliminate soft-tissue injuries.”
I understand that he was referring to compensation for soft tissue injuries, rather than eliminating the injuries altogether.
Hon. Members have spoken about the apparent paradox when we have the long-term reduction in the number of road traffic accidents, the increasing safety of more of the cars on the road and the long-term reduction in the number of deaths and serious injuries as a result of road traffic accidents, and yet the number of personal injury claims for whiplash and other minor injuries having increased significantly—it has gone up by 30% in 12 years. That enormous statistical increase cannot be dismissed as coincidental.
It has been suggested that the idea of a compensation culture is more about perception than reality, but how many of us have not had regular phone calls inviting us to claim for an accident that we have not had, encouraging us with the idea that a fortune was surely around the corner if only we referred the case to the firm that was ringing us up. I have no problem with solicitors—some of my best friends are solicitors, as they say. Indeed, many years ago my wife worked with one of the country’s leading personal injury solicitors’ firms, mostly doing administration on road traffic accident claims. But we need to look at the state we are now in. All the empirical evidence suggests that the initial intentions behind addressing no-win, no-fee claims for personal injuries have generated a spiralling increase in claims that are not the result of pecuniary loss—they are about not loss of earnings or quantifiable losses, but a figure being placed on pain, suffering and loss of amenity.
Previous studies have suggested that, contrary to what others have been saying, the amounts awarded by courts in England and Wales are significantly higher than those awarded in most other European jurisdictions for personal injury claims. When there is a serious injury, especially if the effects are permanent or long-lasting, or even if it results in disability, clearly no one disputes that it is right that there is compensation, especially for the loss of opportunity and amenity caused by that injury. However, shorter-term soft-tissue injuries do not really fall within that category. That is why it is proportionate for the Bill to introduce a tariff that sets out the amounts payable for certain categories of minor, non-permanent injuries.
Is the hon. Gentleman aware that, under the criminal injuries compensation scheme—one of the Government’s own schemes—a person can get £1,000 for a criminal injury of whiplash? Under these tariffs, however, someone would get £470 for the same injury, except it would not have been the result of a criminal event.
I understand the hon. Gentleman’s point, but there is clearly a distinction between being the victim of crime and being involved in an accident, even a road traffic accident.
Does my hon. Friend agree that these discrepancies already exist, because the criminal injuries compensation scheme is, in fact, already an example of a tariff-based system? As those discrepancies have existed since 1962, nothing in the Bill changes their basic nature.
The Minister, as ever, speaks straight to the point that bringing this system in line with the criminal injuries compensation scheme is actually making parallel systems more consistent, and it is entirely logical that they should operate on similar tariff-based systems. One of the flaws in the current system is that, as the Judicial College is setting its guidelines, the awards it uses for deciding the amounts in the guidelines are not the overall amounts that are payable in the event of a road traffic accident leading to personal injury, but are based on the awards made by the court in the relatively small proportion of claims that proceed to trial and are then adjudicated by a judge. The system does not consider the very large number of claims that are settled at an earlier date when the figure would tend to be lower.
Clearly, cases that proceed to full trial are more likely to be the more complex ones. This has the effect of institutionalising an inflationary element within the guidelines as they are reviewed, because the review is only ever based on those types of claim that actually end up being the higher awards anyway. It can only ever lead to an increasing amount. The impact of that falls clearly on our constituents. We rightly insist on mandatory motor insurance. As hon. Members have said, motor insurance premiums increase rapidly. One reason why they increase rapidly is that there has recently been a large increase in the average amounts paid out for personal injury claims. If we fail to take this sensible action, those amounts can only increase, and we can expect premiums to continue to increase at around 10% annually, quickly putting them out of reach.
I am delighted that my hon. Friend is making this point. What is his view on whether the Lord Chancellor should be setting the tariff? Does that not bolster what my hon. Friend suggests—that there is a role for the Government in trying to keep insurance premium costs low?
Absolutely. Although I tend to argue for a slightly slimmer role for the Government, I do think that there is a place for them in this regard. When we insist on mandatory motor insurance, there is a clear role for the Government in ensuring that pressures on the price of that mandatory insurance are kept under control as much as possible. Having the Lord Chancellor’s oversight of the tariffs is one way in which we can ensure that the people who are already struggling with the escalating costs of motor insurance do not see them taken even further out of reach.
There is a clear risk of a serious moral hazard when it comes to escalating motor insurance. The more that premiums increase, the greater the risk—the greater the temptation, we might say—for some people to take the chance to illegally fail to take out motor insurance and to drive on our roads uninsured, with everything that that implies for safety and for coverage of third parties. Given the current high levels of motor insurance premiums, research suggests that around a quarter of 18 to 24-year-olds have been tempted to try to make savings by not taking out or not renewing their motor insurance policy—driving without insurance. Surely that number can only increase if the cost of motor insurance becomes ever more expensive and increases by far more than inflation or incomes.
As the real cost of motor insurance spirals, more people will be tempted to take the risk of driving without insurance, and young people are more vulnerable to this by far because their premiums are already so much higher. Such behaviour puts other people’s safety at risk and leaves them in an even more difficult situation in the event that they need to make a claim. The number of claims against uninsured drivers increased significantly last year.
The measures in the Bill are designed to keep insurance premiums under control, which is essential if we are to have a functioning motor insurance system. That is why I am not able to support the amendment, why I shall be supporting the Bill, and why I believe that the tariff system for minor injuries is absolutely necessary and must be retained in this legislation.
It is a pleasure to follow my hon. Friend Mike Wood.
Whether we sit on the Government Benches or the Opposition Benches, the first thing that hon. Members have to recognise is that we do have a problem in this country; of that there can be no doubt. Other hon. Members have mentioned the statistics, but they bear repeating. In 2005-2006, there were 460,000 or so road traffic accident-related personal injury claims. Just a decade later, that number had soared by 40-odd per cent. to 650,000. There must be concern that the circumstances exist in our country to create an unnecessarily fertile ground for spurious and unfounded claims. What are those circumstances? They include the fact that instead of challenging whether a whiplash claim is dishonest or otherwise unfounded, insurers will take a commercial decision to pay out, because that will be in their interest. As other Members have indicated, the effect of that is that ordinary people living on modest incomes are finding themselves having to pay more for their car insurance than would otherwise be the case.
It is a great mistake to say, as some do, that a car is a luxury—to say, “You don’t need your car; alternative transport methods should be satisfactory.” For plenty of my constituents, that simply is not the case. We currently have a big issue in Cheltenham with the closure of Boots Corner, a key arterial route through the town. One argument made by those who favour closing off the road is that people can get around on bikes. That might be okay for some people, but for plenty of my constituents—including nurses, people ferrying around their children, and people with disabilities—it is not. We have a duty in this House, wherever we stand, to drive down the costs of living for hard-working people and their families.
We have to be clear on what the legislation is not about. A lot of the points made by Opposition Members are motivated by the best of intentions. I have served on the Justice Committee with several Opposition Members, and they have shown great distinction—if I may be so bold—and argued vigorously and passionately for the principle of access to justice and on employment tribunal fees, to which Ellie Reeves referred. But that is not what this legislation is about. It is important not to set up straw men to knock down. Were this debate about LASPO, access to justice and ensuring that people could get early legal advice and assistance, I would have an awful lot more sympathy, but in fact is far more restricted, calibrated and proportionate.
First, this debate and the provisions in the Bill are not about people who sustain whiplash injuries and whose pain, suffering and loss of amenity last beyond two years. If they do last for longer than two years, the case of course falls outwith the tariff system. Secondly, this debate is not about special damages. Let us consider a run-of-the-mill case in which somebody is involved in an accident, makes a whiplash claim because they have a sore neck, spends time off work and incurs taxi fees going to and from the doctor and various other fees. Such special damages would not be subject to any kind of tariff and could be claimed in the normal way. In other words, if someone was off work for, say, nine months, the mere fact that their general damages for pain, suffering and loss of amenity had been capped would not in any way preclude them from seeking the full extent of their special damages. That is why it is important to draw a distinction.
I should say that I have secured a three-hour Westminster Hall debate on the LASPO review, access to justice and all such matters on
On this issue, the hon. Gentleman may want to address specifically the issue of the level of the tariff. I hear what he is saying, but what about the level of damages, which cannot in any way compensate for what are in many cases real injuries?
I am grateful to the hon. Gentleman for making that point about LASPO, because if I may say so he is on stronger ground on that territory and I look forward to attending his debate and making some observations. That debate truly is about a cardinal principle that we in this Chamber should all share: whatever a person’s circumstances, they should be entitled to access to justice. It would be quite wrong, though, to conflate that debate with the one we are having.
On the tariffs, I do not suggest that this is the case for the hon. Gentleman, but there cannot be synthetic outrage. If someone has suffered pain, suffering and loss of amenity to the extent that their symptoms endure beyond two years, they are entitled to get whatever the judge thinks appropriate. We are dealing with claims that, although not insignificant, are towards the lower end of the spectrum. That needs to be borne in mind.
The hon. Gentleman is right in saying that special damages are not included in the tariff. However, the point that needs to be made is that under the tariff system someone could, as he rightly points out, be off work for a very, very long time, but because of the way that the tariffs are set, their claim would fall into the small claims track, meaning that they would not be able to have their legal costs covered, so would be unlikely to get representation for their claim. That is likely to mean that they could have a big special damages claim that is never recoverable because they will be unable to pursue their claim as they will not be able to afford to. Does he agree?
No, I do not. First, in any event, as the hon. Lady knows, if the person’s claim extends beyond £5,000, it will go on to the fast track, so they will be entitled to get that cost. Secondly, the concern that a number of solicitors raise about this is to say, “The really difficult thing that you need to claim—the thing that is hard sometimes to prove—is the general damages element.” That is why they have become so indignant about it. In fact, the special damages claim is rather easier to quantify, and I do not think that people would, in effect, be frozen out of justice. Thirdly—if this aspect of the Bill had not been changed, I think I would be opposing it—for the really difficult claims where, for example, somebody has been injured at work and faces, as I accept entirely, the added burden of having to take on their employer, the threshold does not apply in the same way. It is absolutely right that the Government have moved on that to ensure that anything above £2,000 means that people go on to the fast track.
On the hon. Lady’s specific point about the tariff, is it right to say that this is an egregious departure from anything that we have known before in English law? That is putting it far too high. My hon. Friend the Minister has already indicated that the Criminal Injuries Compensation Authority sets that principle in any event. Furthermore, it is a principle adopted in plenty of other countries that are signatories to the European convention on human rights, Italy for one.
It is also worth stepping back to consider the criminal law. Before the Sentencing Guidelines Council, as it was then called, started to set its guidelines in terms of tariffs for criminal penalties, there was a concern that it would be intruding on the discretion of the courts, but in fact it has worked very well. Defendants, lawyers and judges have really welcomed the guidelines, which set clearer tariffs, because that provides a degree of clarity. Of course, it is not a direct equivalent because judges still retain some discretion within the guidelines, but it does make the point that completely open-ended discretion does not exist everywhere throughout the legal system.
There are other mitigating factors that allow me, and people like me, to conclude that these are fair and proportionate proposals. First and most important is the exceptional circumstances uplift. Clause 5(1) says:
“Regulations made by the Lord Chancellor may provide for a court—
(a) to determine that the amount of damages payable for pain, suffering and loss of amenity in respect of one or more whiplash injuries is an amount greater than the tariff amount relating to that injury”.
In other words, there is a safety net in circumstances where the law would otherwise do an injustice. That is really important and ought to give a lot of comfort to Opposition Members who might otherwise be concerned. The second reason I feel comforted is that the tariffs are clearly going to have the engagement and input of the judges. That is why Lord Brown concluded that there was nothing wrong in principle with a tariff system.
There are of course things that have to be got right. It is critically important that any savings that are derived from this are truly passed on to motorists. I want to ensure that constituents in Cheltenham do receive the benefits of this. We need to ensure that young people who are setting out on their careers and need their car for work, for whom every last £10 is critically important, will be receiving these benefits. If they do, then my clear view is that these principles are sensible, proportionate and calibrated, and have a safety net. Even though—I probably ought to have declared this at the beginning, Madam Deputy Speaker—my wife is a personal injury lawyer, I feel confident that I can take on the domestic dispute just as I have taken on Opposition Members in this House.
It is a pleasure to follow my hon. Friend Alex Chalk and to speak in the debate, to oppose amendment 2, tabled by those on the Labour Front Bench. I will add to the remarks that I made on Second Reading and in the Public Bill Committee.
This is a very important piece of legislation for the insurance industry and, more importantly, for customers of the insurance industry—our constituents up and down the country—who will benefit from it. As I found in my Westminster Hall debate on road safety last week, which I was pleased to secure, there is great interest from Members right across the House in matters relating to traffic accidents and the causes and mitigation of crashes. It is not a surprise to me that this legislation regarding appropriate compensation for certain collisions has attracted a great deal of interest and scrutiny.
Our debate in Westminster Hall attracted a range of thoughtful and personal contributions about specific cases in Members’ constituencies. That is relevant to this amendment, because many Members raised the importance of addressing this not just through legislation but, importantly, through action on the entire road network. I was pleased to see the report by the Parliamentary Advisory Council for Transport Safety, in association with Ageas Insurance, which looks at a systemic approach to improving road safety, so that we can reduce the number of whiplash claims and, most importantly, the number of people seriously injured or killed on our road network.
I am grateful to the Minister for the clarity that he brought to aspects of the Bill in Committee. Although I thought the Committee was dealt with very efficiently and we got through it pretty quickly, we had a great number of interesting contributions from Members across the Committee. I am sure the Minister’s remarks will be similarly informative and comprehensive today.
I want to move on to safer vehicles, particularly in relation to whiplash. One notable feature of any debate on road safety and traffic collisions is the focus on how much safer our cars, vans and lorries are today than they were only a decade ago. They are safer by design, and the advances in building motor vehicles that cause much fewer more serious injuries on impact are hugely welcome. Indeed, the number of accidents has fallen by almost a third since 2005.
As the Minister noted in Committee, the percentage of cars with safety features specifically designed to reduce whiplash has increased from only 15% in 2005 to nearly 85% now—that is to say, the position is completely reversed. Whereas only 15% of cars used to have anti-whiplash safety features, now only 15% do not have them. That is still too high a percentage, but vast progress has been made. Despite the 30% reduction in road traffic accidents, the number of whiplash claims has increased remarkably, by 40%. Something does not add up, and the Bill seeks to address concerns that certain claims are either exaggerated or unfounded, forcing up insurance premiums at an alarming rate.
I have something of an interest to declare. As I said on Second Reading, as a young driver I will be particularly advantaged by this legislation. I have been hit by higher insurance rates, which are adding significant costs for people of my generation and for our constituents right across the country. I am reassured that there has been meaningful engagement with the insurance industry by the Government throughout the process of the Bill, with both Government and industry working to get the legislation right for consumers and focusing on how we can ensure that insurance premiums do come down.
As I have said before, Ageas Insurance, which is one of the largest insurance providers in the UK, employs more than 400 people in my constituency. It has very much given me the assurance that it absolutely persists in its support for the changes proposed, which will entirely benefit its policy holders and our constituents. Those policy holders have faced massive increases in bills, but they should now at last see some respite and reductions.
The insurance industry’s support for the legislation is shared by the vast majority of the public. This is not just about the insurance industry pushing an issue; it is about the majority of the public pushing for what they believe is the right thing to do. We are fair-minded people in this country and, particularly in Stoke-on-Trent, we are not comfortable with the idea of a compensation culture. While resolutely recognising that, where there is clear medical evidence, liability must of course mean consequences for those at fault, that should not apply to those who seek to abuse the system.
What will the Bill do? It will reduce insurance premiums for hard-pressed motorists by adjusting how the personal injury discount rate is set. It is not about stopping those who genuinely deserve compensation from getting the settlement they justly deserve. It is of course a matter of justice that we have a system of rules under which everyone plays by those rules, without allowing them to play the system.
It is very welcome that the Government are introducing a new tariff specifically to target the exaggerated and fraudulent whiplash claims that have driven up insurance premiums. The creation of a new fixed compensation level for whiplash injuries is exactly the right thing to do to address the general and obvious anomaly that the number of accidents is going down but the number of claims for whiplash is going up. Equally, it is the right thing to do to ensure that there are provisions to increase compensation in exceptional circumstances. That stands in stark contrast with the current situation, where financial compensation figures are negotiated by the force of will and expertise in the opaque language or legalese of the interested parties.
I stress that these changes are not about denying genuine claims, but about discouraging speculative or exaggerated claims and claims with no just foundation. Such claims have the unjust consequence of forcing up insurance premiums to pay claims-chasing lawyers. I am glad that the Government have been so clear in attempting to get the balance right. As the Minister said in Committee, the Lord Chief Justice should be consulted on the levels of tariffs, as well as on the percentage uplift for judicial discretion. It is right that this should be done in an accountable, responsible, transparent and predictable fashion. I am sure the Lord Chancellor will be in no doubt about the feeling of this House that that should be done. He is accountable to this House, of course, and it should be reassuring to Members that his Ministry has modelled its approach to setting the tariff on that used in other countries, such as France and Italy.
It should be remembered that the bone of contention is not damages paid out for serious, long-lasting cases of whiplash but the anomalous prevalence of minor claims. The Bill addresses that by ensuring that when someone makes a claim for whiplash injuries, it is backed up by medical evidence and the damages are proportionate to the injury suffered. It will also ensure that those who have suffered life-changing injuries continue to receive 100% compensation—that is a key principle of the Bill.
Clearly the current balance is not right, with ordinary motorists being unfairly penalised through needlessly over-inflated premiums. That does not seem the best value for taxpayers’ money. Without reform, motor premiums could continue to rise by about 10% a year, which is shockingly high and unsustainable for working families and, especially, younger motorists. The Government argue that the whiplash reforms in the Bill will restore a sense of balance to the insurance and claims system, delivering about £1.1 billion of consumer savings every year. That could mean motorists’ insurance premiums falling by an average of £35 a year, with the high level of competition that is currently prevalent in the industry ensuring that it is the customers—our constituents—who benefit by far the most. This cannot and will not, of course, be a straight switch from a money grab by lawyers to a money grab by insurers.
I want to go through some of the key things that the Bill will achieve in this area. About 650,000 road traffic accident-related personal injury claims were made in 2017-18—nearly 200,000 more than in 2005-06. The Government estimate that about 85% of them were for whiplash-related injuries. Those figures remain high despite a reduction in the number of road traffic accidents reported to the police and improved vehicle safety. The continuing high number and cost of claims increases the cost of motor insurance premiums to ordinary customers and consumers, which was why, as has been said today, the 2017 manifesto included a commitment to reduce insurance costs for ordinary motorists by tackling fraudulent and exaggerated whiplash claims. That is a key commitment for the Conservative Government.
The introduction of a tariff will both simplify the process for genuinely injured whiplash claimants and ensure that they receive proportionate compensation. In addition to a tariff payment, all claimants will continue to receive special damages covering compensation for any actual financial losses suffered as a result of their accident. The new measures will reduce and control the cost of whiplash claims and disincentivise unmeritorious claims. A tariff system is consistent with other schemes, such as the criminal injuries compensation scheme, which other countries right across the world use.
Having introduced a tariff system, it is essential that we provide that the Lord Chancellor must regularly review the level of the tariff, as clause 4 provides for. However, the Government recognise that there may be exceptional circumstances in which higher levels of compensation are needed, and I very much welcome that. For that reason, clause 4 also allows a judge to determine a higher level of damages. It is right that that remains part of the Bill.
In short, the Bill is about the system being fair and about public confidence in the system being fair—it is not currently obvious that the system is fair, I am afraid. The Bill will mean reduced costs for insurance customers, who currently pay the costs of unfounded claims, and rebalance the system for the emergent compensation culture that has seen unreasonable and exaggerated claims grow significantly in recent years. Most people want an insurance system that has a fair and just balance between claims and premiums. Hard-pressed motorists and taxpayers in my constituency will gain from the Bill, much more so than any insurance company, and I am happy to support it tonight.
I rise to speak in support of the Bill and to oppose amendment 2. First, however, I will remind the House why we need the Bill; we have heard it over and over again in the debate. I know that other Members have had similar experiences of nuisance calls from ambulance-chasing companies, and many of my constituents certainly have. As of this week, I am still receiving calls from companies telling me that they had heard I had been in a car accident that was not my fault—this must have been the 10th time that I received such a call this year. Needless to say, I have not been involved in any car accident then or since.
However, this debate is not about nuisance calls, but about the incentives behind them, which are to encourage unnecessary and, in many cases, fraudulent insurance claims that are difficult, if not impossible, to prove. If we remove the incentive for claims companies to act in this way, we will get rid of the ones encouraging fraud and probably the nuisance calls as well. So many would welcome this. Because of the actions of these companies, insurance premiums for honest, safe and sensible drivers reached a record high of £493 at the end of 2017. As other Members have mentioned, young drivers in particular already pay over double the average premium.
For so many of us, motor insurance premiums are one of the highest bills we pay. The Government have repeatedly expressed that their mission is to get a country that works for everyone, and reducing costs for the “just about managing” is one way to do that. It has also been said several times in the debate that these measures, alongside the secondary legislation, will reduce the cost of motor insurance premiums on average by around £35 a year. I know that many of my constituents would appreciate much lower motor insurance premiums.
I also echo the points made by my hon. Friend Huw Merriman about the strain on public services. At present, with a discount rate of minus 0.75%, the NHS is overpaying on claims for clinical negligence, which is adding to pressure on the public purse. In 2017-18, around £400 million in additional funds had to be provided to the NHS as a consequence of the change in the discount rate. In 2016-17, the NHS spent £1.7 billion on clinical negligence cases. The annual cost has almost doubled since 2010, with an average 13.5% increase every year. Like everyone in this House, I am looking forward to the end of austerity, and perhaps this Bill can help us to get there.
My hon. Friend is making an excellent speech. She brought up the discount rate and I could not resist the temptation to intervene. I absolutely welcome changes to the discount rate, but would she like to see a future in which, rather than one lump sum being paid out for compensation for the rest of someone’s life, we look more at doing this on an annual basis? That may make the overall costs more reasonable and make it less likely that investments will go wrong.
I thank my hon. Friend for making that very good point. This argument was made during the Justice Committee’s evidence sessions, and I am in two minds about it. There are good reasons to have both. An annual payment can help to reduce strain in the long term, but for some people, the constant payments would be a reminder of a particularly traumatic accident. Perhaps we need a flexible system that can accommodate both, depending on a claimant’s particular circumstances, but I thank him for raising that point.
I do not believe we need amendment 2. The purpose of the tariff as set out in clause 3 is to simplify the process for those who have been injured while ensuring they receive compensation that is proportionate. Not only that, but claimants will continue to receive special damages for any financial losses they suffer as a result. Similar systems are in use in countries such as Italy and Spain, which have already seen positive impacts on both the number of claims and the cost of premiums.
The Opposition are concerned that the tariff cannot be varied according to individual circumstances, but this is not the case. As my hon. Friend Mr Clarke has already noted, the tariff is staggered to account for the duration of the injury, whether that be between four and six months or, at the highest end of the spectrum, 19 and 24 months. Furthermore, clause 5 allows judges the discretion to make awards above the tariff level when the individual circumstances merit it. Amendment 2 seeks to remove this clause, as well as clause 4, under which the Lord Chancellor can regularly review the tariff. That would not be right.
The Government have noted that about 650,000 road traffic accident personal injury claims were made in 2017-18. An estimated 85% of those claims were for whiplash-related injuries. That is over 550,000 whiplash claims. As many Members have said, however, there has simultaneously been a reduction in the number of road traffic accidents reported to the police, while improvements continue to be made in vehicle safety. This is leading to increasing premiums for my constituents, and that cannot be right.
It seems to me, from listening to this debate, that Parliament is caught in a technical argument between the insurance lobbyists and the legal services lobbyists. I speak here on behalf on my constituents. I am keen to hear from the Minister how the Government can ensure that cost savings reach the consumer and are not negated by future policy proposals. Having said that, the Bill is an opportunity for the Government to bring down premiums and let people keep more of their own money in their pockets. That is a principled and Conservative ideal. Removing clauses 3, 4 and 5 would go against all efforts to help them and the taxpayer.
Would my hon. Friend also recognise that we have a good track record on this? A few years ago, when the Government made changes to the civil litigation procedure, an average of £50 was knocked off insurance premiums as a result.
I thank my hon. Friend for making that point. It is something I would have liked to say earlier, and I am glad he was able to make it for me.
In conclusion, the Bill fulfils a manifesto commitment by my party and should make it easier for genuine whiplash claimants. I will be supporting it tonight, but not, I am afraid, Opposition amendment 2.
It is a pleasure to follow my hon. Friend Mrs Badenoch. As we have heard, the Bill makes important changes to our personal injury compensation system, and although I broadly support its aims and measures, I would like to put on the record a few of my concerns and those raised with me by lawyers and constituents.
The Bill is long overdue. The last increase to the small claims limit was made in 1991. As we have heard, data from the Department for Work and Pensions reveal that about 650,000 road traffic accident-related personal injury claims were made in 2017-18 and that about 85% of these were for whiplash-related injuries—a higher rate than in any other European country. Department for Transport figures, however, show that from 2007 to 2017 reported RTAs fell by 30%.
Clause 3 introduces a tariff for compensation in whiplash claims. Lawyers who have contacted me and met to discuss this have supported the arguments made by the Access to Justice Foundation, which has estimated that the proposed new tariff would deny 600,000 people injured on our roads each year the right to legal advice when seeking compensation.
The question I have asked is: how does this value equality and fairness in comparing types of injury under the compensation regime? For instance, under the proposed tariff, if I experienced an injury in a road traffic accident that lasted up to three months—as I have in the past—I would receive £235 in compensation. Compensation varies across many sectors. If my train journey from London to Stockport, a route on which I travel every week, were delayed by two hours, I could receive up to £338. Under these proposals, the same injury would attract less compensation simply because it was sustained in a road traffic accident rather than in another way.
I am interested by my hon. Friend’s speech. She said that she would be entitled to compensation amounting to £338 for a two-hour delay. Is that compensation for the ticket that was purchased? What is the nature of the compensation?
I am talking about the compensation that would normally be paid by train operators.
It is important that we tackle whiplash fraud, but it is hard to explain to those who are injured that the same injuries sustained in different circumstances—for example, a comparable injury at work—should be compensated differently. Under the reform proposals, someone who had been involved in a road accident would be entitled to £3,910 for a whiplash injury lasting up to two years, but would be unable to recover the cost of paying a lawyer to assert their rights. Someone who suffered an identical injury at work would be entitled to £6,500, and would be able to recover costs. For many people, it goes to the heart of ensuring fairness that comparable injuries should attract comparable awards—if awards are indeed to be given—whether those injuries were sustained in a road traffic accident or incurred at a place of work.
If, as is hoped and predicted, these changes result in savings to the insurance industry, it is important for members of the public to see that the savings are passed on via reduced premiums. Concerns were raised about that in Committee, and I am encouraged that the Government accepted amendments that will hold insurers to account. As amended, the Bill places a statutory requirement on insurers to provide the Financial Conduct Authority with certain information to enable Treasury Ministers to report to Parliament on whether the insurers have upheld their public commitments by passing on savings. The Government have estimated that these measures would lead to a reduction in motor insurance premiums of approximately £40 per customer per year. I expect the industry to demonstrate that savings are being appropriately passed on, so that consumers can see fairness in the insurance system.
Is my hon. Friend aware of the support for the Bill in its current form? A survey conducted by Consumer Intelligence showed that the most important factor in a low-value personal injury claim was a simple claims process, and the least important factor was the ability to claim back their legal costs.
It is absolutely right that people support reform of the system, and I support the Government’s action in doing so. I am keen to ensure that we can secure fairness for everyone through the Bill.
According to the recent AA British insurance premium index, these reforms have already triggered a fall in premiums owing to the expectation that claim costs will fall, and only yesterday it was reported that motor premiums had fallen for the first time in years: last month they were almost 10% lower than they had been in the same month in 2017. That means that the average driver is £45 better off as a result. Consumers will be pleased with lower premiums, but they must be convinced that that is worth any detriment that they may experience should they become victims of traffic accidents.
We might not be having this debate at all were it not for fraudulent claims. I can almost guarantee that, at some point in the past year, every Member—including, perhaps, the Minister—will have been contacted by a claims management company, usually wrongly asserting that they have been involved in a car accident recently, and can lodge a claim. That seriously concerns and aggravates many people. A 2017 YouGov report shows that more than two thirds of people are in favour of a ban on cold calling for personal injury claims. Cold calling is a particular issue for the vulnerable and the elderly, who may be talked into making fake or exaggerated claims. A Justice Committee report earlier this year stated that the recent restrictions on cold calling by claims companies
“do not go far enough and that an outright ban should be introduced.”
My hon. Friend will know that I introduced a ten-minute rule Bill on nuisance calls. This Bill goes some way towards addressing the issue—there is no denying that—but does she believe that we could go further and hold the directors of companies who are responsible for cold calling directly responsible for any fines that arise from their activities?
I am grateful to my hon. Friend for making that point. That should be explored and people would welcome it because they would see that we were being positive in addressing this.
Throughout the Bill’s passage, I have met regularly in my weekly surgeries with solicitors and law firms that have been engaged in this process. They have impressed me, and impressed upon me their pursuit to help the vulnerable who are injured and to ensure that we have a justice system that works, is fair and protects people.
I thank the Minister for his continued engagement and openness with me and colleagues as the Bill has progressed through both Houses. He has been open to all my questions and I am grateful for the way he has dealt with them. I look forward to this Bill progressing. I know that there will be a spirit of openness and transparency as it does.
I again thank all Members who have participated.
Amendment 2 relates centrally to the core of this Bill, which is about the question of the setting of tariffs. We have discussed this with great verve and vigour from many different sides. The first debate that has taken place in the last hour and a half has been about the purpose of these tariffs: why we are introducing them in the first place. The reason why comes out of a perception of an anomaly. That anomaly can be seen either, as my hon. Friend Huw Merriman pointed out, in terms of the fact that the number of car crashes is coming down and cars are getting safer, but at the same time the number of whiplash claims over the same period has increased dramatically; or, as my hon. Friend Kwasi Kwarteng pointed out, in terms of national differences. There are many more whiplash claims from Britain per head of population compared with Germany or France, leading to my hon. Friend speculating on biological differences.
The second debate has been about proportionality. That argument was made by, for example, my hon. Friend Mr Clarke. He was essentially arguing, along with the former president of the Supreme Court, Lord Brown, that there needs to be a closer relationship between the amount of compensation paid and the nature of the injury suffered. As Lord Brown said in the House of Lords:
“lesser injuries were altogether too generously compensated, certainly in comparison to the graver injuries”.—[Official Report, House of Lords,
Vol. 791, c. 306.]
The idea of proportional compensation for a type of injury was central to the argument of my hon. Friend the Member for Middlesbrough South and East Cleveland.
My hon. Friend Mike Wood reminded us that the former Labour Lord Chancellor, Jack Straw, had serious concerns about compensation for soft tissue injury and that this form of car insurance is mandatory, putting a particular obligation on the House of Commons when it considers it. But, characteristically, the most “sensible, proportionate and calibrated” speech came from my hon. Friend Alex Chalk, who, by using those three adjectives to define the nature of the tariffs, brought us, in a huge move, from jurisprudential reflections on the nature of tariff systems to a disquisition on rural transport in Cheltenham. My hon. Friend Jack Brereton brought it down to earth with a good focus on safety in vehicles.
I cannot let the Minister move on from the important and significant points of my hon. Friend Alex Chalk without observing that he emphasised the role of the Lord Chancellor in consulting with the Lord Chief Justice in the setting of the tariffs. That is an important safeguard. Can the Minister tell us a little more about how it is envisaged that that will work?
Absolutely. This is a concession that we have inserted into the Bill partly due to pressure from my hon. Friend, the Chairman of the Justice Committee, and from other Members, including my hon. Friend Mary Robinson. It means that the Lord Chancellor, when reflecting on the nature of the tariff in a judicial capacity, will consult the Lord Chief Justice. That concession in the Bill, combined with the strong emphasis on judicial discretion allowing the tariffs to be uplifted, will be central to our attempt to reconcile a tariff-based system with the tradition of English common law. Through it, we hope to address some of the concerns raised by Lord Woolf.
We have discussed the purpose of the Bill, and the way in which getting rid of the tariffs as suggested in amendment 2 would undermine the central purpose of getting a more affordable system into place. We have made a number of concessions in order to meet concerns raised by many distinguished colleagues around the House, including individuals with experience of personal injury law and those with experience as constituency MPs of the honourable and serious work done by personal injury lawyers. I shall show respect to the House and touch on some of those concessions.
In the initial proposals put forward by the Chancellor of the Exchequer in the autumn of 2015, the suggestion was that there would be no general damages payable at all. That was roughly the argument made by the former Labour Lord Chancellor, Jack Straw. We have moved away from that position and accepted that general damages should be paid, but we have suggested that there should be a tariff for those damages. As my hon. Friend Robert Neill has said, we will consult the Lord Chief Justice on that tariff and there will be judicial discretion. There is a precedent on tariffs—they exist in Italy and Spain—and there is even a precedent in English common law in the criminal injuries compensation scheme.
The benefits that we believe a tariff system will deliver include a reduction in the cost of this form of transaction and, hopefully, through that, a reduction in the number of potentially exaggerated or fraudulent claims. That would have an advantage for general public policy in that people would not be encouraged to make fraudulent claims. We believe that the system will also provide certainty and predictability to claimants, especially when they are connected to an online portal that will ensure that they follow a particular sequence. They will proceed to the online portal, then, for the first time, they will be required to go to a medical practitioner specialising in whiplash claims who would give them a prognosis of, for example, six months, 12 months or 24 months. On the basis of that prognosis, through the portal, a fixed tariff would then tell them exactly how much they would be given. This should mean that in the overwhelming majority of cases there would be absolutely no requirement to proceed to court. In any cases where we did proceed to court, we would rely on the small claims process in order to settle the claim, using the tariffs to reinforce the process.
The speeches so far have not touched on Government amendment 1, which I hope all Members, including Opposition Members, will be happy to accept. Clause 5(7)(a) states that the term “tariff amount” means
“in relation to one or more whiplash injuries, the amount specified in respect of the injury by regulations under section 3(2)”.
Clause 3(2) refers to the
“amount of damages for pain, suffering and loss of amenity payable in respect of the whiplash injury or injuries”.
In other words, clause 3 refers to “injury or injuries”, whereas clause 5 refers simply to “the injury”. The proposal in Government amendment 1, recommended by parliamentary counsel, is that we deal with the discrepancy by inserting “or injuries” after “the injury” in clause 5(7)(a). I hope that the Opposition will be happy to accept that suggestion.
That brings us back to the central issue of the way in which tariffs are set. Andy Slaughter focused a great deal on the notion that the tariffs were somehow inequitable in terms of the damage that individuals have suffered. Ruth George said several times that we should not refer to these types of injuries as minor. I want to emphasise that the phrase “minor injuries” is derived from Judicial College guidelines, not from the Government or any political party. It is simply a long-standing convention to refer to injuries of under two years’ duration as minor injuries, and that relates to Sentencing Council guidelines for injuries of under two years’ duration.
As hon. Members have pointed out, people who suffer, particularly from whiplash injuries of longer duration, might also lose earnings, have considerable medical costs, have to go to a physiotherapist and so on. Although those arguments were well made, for example by Mrs Moon on Second Reading, they overlook the central fact that the tariffs will apply only to general damages. An individual who has suffered loss of earnings or who needs extra care costs can apply for special damages in the normal way. The Government propose no change to special damages.
On the arguments of the hon. Member for Hammersmith about the levels of the tariffs, we have attempted to achieve a reduction in the tariff at the lower end. For example, an individual who suffers an injury of under three months’ duration could receive damages considerably less than those in the current guidelines, but I hope that the hon. Gentleman accepts that, as we approach a duration of two years, the compensation offered begins to merge much more closely with the existing guidelines at a level of £3,600.
In addition, as the Chairman of the Justice Committee pointed out, the levels of the tariffs are currently proposals about which the Lord Chancellor will consult the Lord Chief Justice. He will do that not just once but regularly, on a three-yearly basis, to ensure that our calculations on pain, suffering and loss of amenity reflect judges’ views.
It must be remembered that, ultimately, judgments on pain, suffering and loss of amenity are difficult. As my hon. Friend Alex Chalk pointed out, the question of how much compensation somebody receives for a loss of earnings is relatively easy to calculate, because the figure can be derived from the earnings. The amount of money to which someone is entitled for medical costs is, of course, directly derived from the cost of medical care provided. However, in the case of general damages, a judge must attempt to decide the subjective impact of pain on the individual and assign a financial cost to it. That cannot be anything other than a subjective judgment. There is no objective scientific formula for comparing pain with cash, because the cash is designed not to eliminate that pain, but in some way to acknowledge it. Whether we are talking about the criminal injuries compensation scheme, under which our constituents frequently come forward with examples of what they rightly and subjectively experience as a huge discrepancy between the depth of horror they have suffered at the hands of criminals and the amount of compensation offered, or the tariffs for pain, suffering and loss of amenity under the Bill, in the end the compensation provided cannot constitute anything other than a symbolic judgment, with the court or the Government acknowledging that no amount of money can remove the pain, but with the amount designed to be a public recognition that that pain exists.
The former Justice of the Supreme Court, Lord Brown, is an important guide, and his statements in the House of Lords give us all a sense of reassurance on a tricky bit of law. He feels that two important principles are at stake. The first is that there is a moral hazard and societal issue taking place, in that both the incidence of car crashes and, on a national comparison with Germany and France, the disproportionate number of whiplash claims compared with what would be expected both in terms of automobile design and the biology of the human body, need to be addressed—in other words, fraud needs to be addressed. The second is that there has been an anomaly in law whereby some of the graver injustices, and graver injuries and suffering, have been proportionally undercompensated compared with cases of suffering minor whiplash injuries—the majority of cases before the courts—which involve a duration of only three or six months.
I ask the House to accept Government amendment 1. On the basis of the concessions we have made throughout the passage of the Bill, both in the upper House and in Committee, particularly with regard to passing savings on to consumers, I politely ask Gloria De Piero to withdraw amendment 2.
Question put, That the amendment be made.
The House proceeded to a Division.
I ask the Serjeant at Arms to investigate the delay in the No Lobby.
The House divided:
Ayes 243, Noes 298.
Division number 247