Damages (Return on Investment) Bill: Final Stage

Executive Committee Business – in the Northern Ireland Assembly at 3:15 pm on 7th December 2021.

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Photo of Naomi Long Naomi Long Alliance 3:15 pm, 7th December 2021

I beg to move

That the Damages (Return on Investment) Bill [NIA16/17-22] do now pass.

Photo of Christopher Stalford Christopher Stalford DUP

The Business Committee has agreed that there should be no time limit on the debate.

Photo of Naomi Long Naomi Long Alliance

First, I advise Members of a declaration of interest in relation to the personal injury discount rate on account of my husband's membership of a medical and dental defence union.

I am pleased to present the Final Stage of the Bill to the Assembly and to move a significant step closer to the setting of a stable discount rate in Northern Ireland that will better give effect to the core legal principle of 100% compensation. That is in the interest of all those involved in personal injury litigation.

Members will know that, when I introduced the Bill, in March, I had hoped that we could reach this stage expeditiously to enable a rate to be set under the new framework at the earliest possible opportunity. Unfortunately, that did not prove possible, and, consequently, my Department had to proceed to review the rate under the current Wells v Wells framework. The cost of that decision is not insignificant. I recognise and value the importance of the Justice Committee's scrutiny role, however, so I place on record my thanks to its Chair, the Deputy Chair and members past and present for their detailed consideration of the Bill and their comprehensive report. I also take the opportunity to thank the staff who work hard behind the scenes to support the Committee in carrying out its work. If I may, Mr Principal Deputy Speaker, I also place on record my thanks to my officials in the Department of Justice, who, in taking forward the legislation, did an excellent job of researching the options available, settling on a good model and supporting me throughout the process. I acknowledge that stakeholders had differing views on how the rate should be set in future. I thank all those who contributed to the process of shaping the Bill by responding to the Department's consultation and by giving evidence to the Committee.

Having conducted rigorous scrutiny of the Bill, the Committee indicated its support for the Bill as introduced. I welcomed its conclusions, as I consider that the framework for setting the rate provided for in the Bill is the right one: it is clear, transparent and fair. The task of reviewing and determining the discount rate will, in future, be carried out by the Government Actuary, who has the requisite actuarial experience to do so. That is not achieved at the expense of political accountability, however. The Bill requires that the rate be set according to the detailed methodology set out in the Bill. That is based on the return on the prescribed notional portfolio of low-risk investments in which a hypothetical claimant is assumed to invest over a 43-year period, with specified adjustments for tax and the cost of management and investment advice and to protect against the risk inherent in any such investment. Those parameters can be changed only by my Department via secondary legislation and with the approval of the Assembly.

The Bill also provides for greater certainty by requiring regular reviews of the rate, at least every five years. That will also ensure that the rate keeps in step with changes in the marketplace. Subject to the Assembly's approval, the Government Actuary will begin a review of the rate under the new framework provided for in the Bill as soon as the relevant provisions are in operation, and the rate must be determined by him within three months.

As I noted at the outset, the Bill is underpinned by the legal principle of 100% compensation — no more and no less — to which the discount rate is intended to give effect. By its nature, the assessment of damages for future financial losses can never be an exact science, but I am confident that the Bill provides for the rate to be set in a way that better reflects how claimants would be advised to invest their lump sum award. Several businesses and compensators have written to me about the impact on them of the current rate of -1·75% set under Wells v Wells. As Members will know, that is based on gilts and a particularly low-risk form of investment not likely to be used by claimants. The Bill addresses the risk of overcompensation that arises under that framework, which was the only one available until the point at which this legislation passes. Most importantly, however, the certainty and stability that the Bill will bring means that those who have sustained serious injuries, perhaps even life-changing injuries, through no fault of their own, will hopefully now be able to resolve their claims expeditiously and receive the right and proper compensation that is due to them so that they can meet their present and future needs. On that note, I commend the Damages (Return on Investment) Bill.

Photo of Mervyn Storey Mervyn Storey DUP

On behalf of the Committee for Justice, I welcome the Final Stage of the Damages (Return on Investment) Bill. The Committee appreciates the need for a stable, long-term personal injury discount rate to be set in Northern Ireland and for it to be reviewed at regular intervals, particularly given the uncertainty that there has been in recent times, with the reported negative impact in progressing cases under the previous rate and, more recently, the set rate of -1·75%, which, the Committee has been advised, is the lowest in the world and has the potential to lead to overcompensation in a large number of cases. The Minister set out very adequately the issues with that.

It is clear that setting the rate under the Wells v Wells methodology no longer reflects how claimants would be advised to invest their lump sums. Therefore, a new framework for setting the rate is needed for Northern Ireland and will be provided for in the legislation. The key question is what legal framework will achieve as close as possible to the 100% compensation principle without veering too far towards overcompensation or under-compensation. That was the focus of the Committee's detailed and careful scrutiny of the Bill. Achieving 100% compensation is not an exact science, and assumptions have to be made about the future. Therefore, assessing the likely effect of the framework in setting the personal injury discount rate is not easy and poses a challenge.

The Committee considered the elements of the framework individually and in conjunction with each other before agreeing that it was content with the Bill and would not seek to amend it. The Committee also sought further information and clarification from the Department as to why the wider economic and social impacts of changes to the rate could not or should not be considered when setting the rate, given that the personal injury discount rate can make significant differences to the amount of the award.

We must not underestimate the importance of getting the framework for setting the rate right for those who suffer personal injuries, in particular catastrophic, life-changing injuries, due to the negligence of others or who rely on their compensation award to meet future financial losses, including loss of earnings, the cost of future care and support and the provision of specialist equipment. However, we must also ensure that the framework does not lead to overcompensation, given the ramifications of that for health and social care provision, as clearly laid out to the Committee by the Health Minister, and the implications for insurance premiums and businesses in Northern Ireland.

While the Committee did not seek to amend the Bill, it made several recommendations to the Department, including that it should publish an impact assessment setting out the potential implications of different rates for Departments and businesses when a review is due to take place to aid transparency and so that the potential consequences and costs can be fully understood and the necessary mitigations and actions considered by the Government and relevant organisations in preparation for the new rate coming in. The Committee also recommended that the Department should assess the potential options for gathering evidence of claimant investment behaviour. While the Committee appreciates the challenge of obtaining information on how claimants invest their compensation awards, it believes that there are benefits in doing that to inform future consideration of the framework. Potential options to do that should be identified and explored.

I know that the Minister would have preferred accelerated passage for the Bill; however, it was right that the new framework was fully and properly scrutinised by the Committee and the Assembly. Key stakeholders raised a range of issues, and there were distinctly contrasting views in the evidence received on the Bill that needed to be explored and understood. The Committee Stage provided the opportunity for that to take place. While the Bill has not been amended, the decisions taken on the clauses and schedules were better informed than would otherwise have been the case.

As part of the Committee's deliberations on the Bill, we noted the low uptake of periodical payment orders (PPOs) that would reduce the need for lump sum payments calculated using multipliers and discount rates. The Committee wrote to the Lady Chief Justice about that and about how information on and the promotion of the orders could be increased. The Committee welcomed the reassurance provided by the Lady Chief Justice that PPOs play an important part in the settlements of most of the catastrophic injury cases that require approval by the court and that the judges who deal with the cases have a wealth of experience and knowledge of the issues surrounding the personal injury discount rate, the legislation, case law and the practice and procedures that are relevant to the making of PPOs.

I again thank Committee members for their diligence and the time and effort that they gave to scrutinising this complex and technical legislation. I also thank the departmental officials for their assistance during the Committee Stage of the Bill and our Committee staff for their support and advice. I also place on record again the appreciation of the Committee to all the organisations and stakeholders that contributed to our scrutiny by taking the time to provide written and oral evidence. Their expert advice and contributions greatly assisted our understanding of the issues.

On behalf of the Committee for Justice, I am pleased to support the Final Stage of the Damages (Return on Investment) Bill, and I commend it to the House. I look forward to a new personal injury discount rate being set under the new framework in the near future.

Photo of Jemma Dolan Jemma Dolan Sinn Féin 3:30 pm, 7th December 2021

I welcome the Final Stage of the Bill, and I also thank the Committee staff.

The Bill is hugely important in ensuring that victims of personal injuries who have been injured through no fault of their own get the compensation to which they are entitled. It has been a long and complex process to get to this stage, but today is a good day as we pass another important piece of legislation.

The purpose of personal injury compensation is to return victims to the financial position that they would have been in had they not been injured. Although it is an extremely difficult thing to do, given the variables around each case and each claimant, I am satisfied that we have reached the right conclusions.

Throughout the Committee's consideration, we heard from a wide variety of individuals and organisations, including those representing defendants and claimants. It became clear that establishing a legislative framework for setting the personal injury discount rate required a number of highly subjective choices to be made and that it would be difficult to get agreement from all interested parties on how that would be best achieved. I am satisfied that the Bill's final draft provides the best possible framework to ensure the long-standing legal principle of 100% compensation.

Much of the Committee's and the Assembly's deliberations have focused on the Bill's technical elements and on complex equations and financial exercises. Fundamentally, however, at the heart of the Bill are victims who have been gravely injured through no fault of their own. Many of those people have been left with life-changing injuries and trauma. Often, they are vulnerable and require support to navigate the challenges that they face in their new lives. There is a backlog of cases that are awaiting settlement and that were delayed for a number of years because the personal injury discount rate had not been settled. That will no doubt have been a source of huge frustration to all parties and traumatic for those awaiting much-needed compensation. I am pleased that the Bill's passage will close that chapter in their lives, allow cases to progress at a fair and equitable rate, and allow victims to move on with their lives as best they can with the dignity that they deserve. I commend the Bill.

Photo of Stewart Dickson Stewart Dickson Alliance

I will be very brief. I thank the Minister for finally bringing the Bill to its conclusion. I regret the time that it has taken, through no fault of the Department of Justice but a hiatus in the Assembly. Perhaps a faster Committee Stage might have processed the Bill more expeditiously. Today is a day not for recriminations, however, but for welcoming the Committee's work and particularly that of the Minister and her officials in delivering this important legislation.

Photo of Christopher Stalford Christopher Stalford DUP

No other Member has indicated to me that they wish to speak, so I call the Minister to make a winding-up speech.

Photo of Naomi Long Naomi Long Alliance

Thank you, Mr Principal Deputy Speaker. I thank the Members who participated in the debate. Though it was a short one, it was important. It marks the conclusion of the passage of important legislation and has, rightly, focused not just on the Bill's technical aspects but on the impact that it will have on people who have been affected by serious personal injuries. I am confident that the methodology set out in the Bill achieves the aim of giving better effect to the 100% rule by reflecting how a claimant would be advised to invest their lump sum award. That will result in a rate that, insofar as it is possible, will fully compensate claimants but is also fair to compensators.

The clarity and transparency that will be provided by detailing in primary legislation how the rate is to be set, combined with the provision for regular reviews, will provide certainty and stability around the discount rate, which has been absent for a long time, causing difficulties in the settlement of claims for claimants and compensators. I therefore very much welcome, in particular, the impact that the Bill will have on people who have suffered life-changing injuries and who need their award to meet the costs of their care and other financial losses arising from that injury. Today is a huge step forward on that journey. Hopefully, we will be able to set the rate as swiftly as possible after the passage of the legislation to allow the decisions that need to be taken by compensators and claimants to be concluded as swiftly as possible.

Question put and agreed to. Resolved:

That the Damages (Return on Investment) Bill [NIA16/17-22] do now pass.

Photo of Christopher Stalford Christopher Stalford DUP

I ask Members to take their ease for a few moments before we move on to the next item of business.