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The Discount Rate – all set to rise again

The Ministry of Justice has published its response to the consultation, The Personal Injury Discount rate: How Should It Be Set In Future?

The consultation was launched on 30th March 2017, a month after the Lord Chancellor announced the long awaited reduction of the personal injury discount rate from 2.5% to 0.75%, and just ten days after the new discount rate came into force.

The consultation examined whether changes were needed to the way the discount rate is calculated in order to ensure that injured claimants would not be over-compensated. It also asked whether the discount rate should be reviewed more regularly,  whether changes should be made to the way the Lord Chancellor sets the rate and whether steps should be taken to encourage greater use of periodical payment orders (PPOs).

Responses were received predominantly from the insurance industry (25%), with additional contributions from National Health Service bodies, medical defence insurers, trade unions, solicitors for claimants and defendants, and professional organisations representing the legal profession and the judiciary. Based on these responses, the Ministry of Justice has announced its intention to proceed as follows:

  • The key premise of the law of damages will be upheld. Claimants should be compensated in full for the losses they have suffered owing to personal injury caused by the defendant. (The 100% compensation rule refers to the claimant’s entitlement at law to claim sufficient compensation to cover the losses over the claimant’s lifetime in full, but no more or less. This does not mean that all claims must be settled at 100% of their claimed value. Where the defendant is found liable only for a proportion of the claimant’s loss, or the ‘litigation risk’ of losing an aspect or the entire case at trial is significant, discounted settlements may be negotiated to safeguard the claimant’s interests.)
  • The present situation whereby claimants can choose whether to take their compensation as a lump sum, PPO or combination of both, remains unchanged. This is good news, because as I’ve discussed before, despite the long-term benefits of PPOs there are reasons why they might not be appropriate in every case.
  • Opinion was divided, based on respondents’ vested interests as defendant/insurers or injured patient/claimants experience, as to whether claimants should be assumed to be ‘very low risk’ or merely ‘low risk investors’, but all agreed that claimants should be treated as more risk averse than ordinary investors for the purposes of setting the discount rate which reflects their investment behaviour. Unsurprisingly, the predominantly defendant/insurer responses suggested that claimants invest in low risk (but not very low risk or risk free) diversified portfolios. The assumption on which the law is currently based (that they are very low risk investors) is therefore now regarded as unrealistic and can be assumed (at minus 0.75% discount rate) to over-compensate claimants. Given the supposed impact on taxpayers via increased costs to the NHS and higher motor insurance premiums the Ministry of Justice will now set the discount rate on the revised assumption that claimants are low risk but not very low risk investors.
  • The principles for setting the discount rate must now be set out in statute. This means that the government must pass legislation in Parliament to change the basis on which the discount rate is set. The principle will be that the rate reflects what a properly advised recipient of a lump sum of damages for future financial loss could be expected to receive if they invested the lump sum in a diversified, low risk portfolio, which ensured that the money would meet the losses and costs that it was designed to cover on time, and that the damages would run out at the end (not later or sooner) of the period for which they were awarded. In setting the rate, the Lord Chancellor must consider investments that are available and claimants’ investment behaviour, making allowances for taxation, inflation and investment management costs.
  • The Lord Chancellor will continue to set the rate but with advice from a panel of independent financial experts.
  • The current rate of minus 0.75% will be reviewed as soon as the new legislation comes into force and then at intervals of not more than three years after that.

For these proposed changes to come into force, the government must now pass legislation to enact the proposed changes as law. When or whether they succeed in doing so remains uncertain and any changes will not have retrospective effect.

A new discount rate, set according to the new principles, is likely to fall between 0% and 1%. The effect will be a sizeable reduction in claimants’ damages for future loss, although they will not fall back to the levels that preceded the increase in February 2017. In the context of a legal environment in which the 100% compensation rule must be seen to be preserved, and strength of feeling and opinions of claimant and defendant interests remain entrenched, have the events of the past six months enabled the Ministry of Justice to take an approach which, in essence, simply splits the difference?

The bad news for claimants is that, if successful with the proposed legislation, the Ministry of Justice will have made only a modest overall decrease in the discount rate whilst undermining, by law, the principle on which seriously injured claimants’ damages are paid.

In commenting on the proposed changes, the President of the Law Society reiterated that claimants’ needs and their entitlement to receive 100% damages should be considered to at least the same extent as the interests of defendants and the public purse. Given the insurance industry and political pressure to reduce damages for medical negligence and personal injury claims, one must question whether the interests of the many are outweighing the needs of the severely injured few. He called for the Ministry of Justice now to commission further and more in-depth research into claimant investment behaviour to confirm whether the government’s assumptions are correct.

In the meantime, until the law changes we will continue to value our clients’ future losses at the prevailing rate of minus 0.75%. However, given the likelihood of change and the impact of an increased discount rate on the value of maximum severity medical negligence claims, NHS Resolution can now recalculate its projected outlay for these types of claims.

At Boyes Turner our specialist clinical negligence lawyers are committed to serving the best interests of our severely injured clients. We are experts at securing maximum value awards. We ensure that the structure of each client’s award, whether a lump sum, PPO or combination of both, and the timing of the payments, as interim payments, final settlements and ongoing management of the money, provide the claimant with the best possible provision and future security that the individual circumstances of their case allow. Settlement in each case is quantified, negotiated, structured and implemented with the best interests of the claimant in mind after expert assessment of their short and long-term physical, psychological, educational, social and financial needs.

If you are caring for a child who has been disabled by medical negligence and would like to talk to us call 0800 029 4666 or email

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NHSLA’s Annual Report – Uncertain times ahead

NHS Resolution, (formerly NHSLA), has presented its Annual Report and Accounts for 2016 -2017 to Parliament. The annual report is the first following the expansion of its remit and change of strategic focus and argues NHS Resolution’s case for a greater role in helping NHS organisations learn from their mistakes, and in resolving, settling and defending claims, in order to preserve funds for patient care.

In the Chairman’s welcome, the report refers to the good news that for the third year in a row, the number of clinical negligence claims reported to NHSLA has fallen by 10% – a claim that appears to contradict the previous suggestion in its business plan that claims were increasing in frequency: “ There has been significant growth in both the frequency and severity of liabilities being reported to the CNST scheme in recent years. The increasing frequency reflects in part increased treatment activity, but also changes in the legal environment…”  However, the cost of payments continues to rise, increasing NHS Resolution’s financial provision in its accounts for the future.

NHS Resolution’s rising costs are attributable not only to the number of clinical negligence cases which arise from avoidable harm to NHS patients each year, of which 50% (in terms of financial value) arise from maternity claims. The economic and financial climate, including low interest rates which determine the valuation of NHS Resolution’s future financial obligations as a current liability, has also had an impact on the balance sheet. Meanwhile, the reduction in the personal injury discount rate from 2.5% to minus 0.75% earlier this year has increased the multipliers applied to future loss elements (such as the cost of future nursing care and loss of earnings) of severely injured claimants’ claims, significantly increasing the compensation payable in those cases. Whilst the report acknowledges the additional £1.2 billion allocated by the government to help meet the increased cost of claims resulting from the reduced discount rate, NHS Resolution repeatedly speculates as to the impact of “a change in claimants’ behaviour” although it can report no evidence of significant change so far.

Aside from discount rate concerns, part of the difficulty arises from the increasing cost of NHS Resolution’s future liabilities for settled claims in which it remains responsible for the disabled patient’s lifetime care costs. In cases of maximum severity where the disabled claimant patient’s life expectation is long or uncertain, unless there are high capital costs or other factors which demand a lump sum settlement, many claimants and their families prefer their compensation to be paid, at least in part, with a periodical payment order (PPO). A small lump sum is paid for contingencies and essential capital costs but the remainder of the patient’s compensation is met by the defendant at an agreed rate as a guaranteed, annual payment for the rest of the patient’s life. The claimant, who is unable to work and usually has no other means of financial support, now has the certainty of lifetime financial provision for their essential needs which have arisen from the disability caused by the negligent medical care.

NHS Resolution acknowledges in its report that there are also benefits to the NHS in deferring payment for the severely disabled claimant’s future needs via a PPO to a future date. Funds remain available to the NHS for patient care rather than being paid out to the claimant as a lump sum for cautious investment and protection in the hope that there will be enough to last for their lifetime, however long that may be. However, these future liabilities remain on NHS Resolution accounts for the uncertain lifetimes of all settled PPO claims. Over time, the payments will come due. Meanwhile, NHS Resolution tells us, 200 new claims are settled by way of PPO each year – a greater number than come to an end as the patients reach the end of their lives. The certainty here is that the cost of these lifetime care responsibilities will increase, exponentially.

So how could “a change in claimant’s behaviour” make this situation any worse?

The claimants’ injuries and lifelong dependency has arisen from the clinical negligence which gave rise to the claim. The feared change of “behaviour” assumes that higher lump sum settlement values, boosted by the negative discount rate, and the possibility of an increased lump sum payment, will lure claimants away from PPOs, leaving NHS Resolution with 200 high value, lump sum compensation awards to meet in full each year.

At Boyes Turner we specialise in achieving maximum value compensation awards for patients who have suffered brain injuries and severe disability from negligent medical care. Many of our clients are children who were injured at birth and will be totally dependent on others for as long as they live. Over 20 years’ of helping these clients, we have seen first-hand the concerns and fears of their families. NHS Resolution tells us that it wants to understand injured patients better – particularly these claimants who account for nearly 50% of its payments –  but at least in relation to these claimants, it has failed to understand what many defendants, insurers and the Department of Health (DoH) seem unable to grasp. Their compensation is not about windfall money. They have been dealt a devastating blow which has left them severely disabled and permanently dependent and as NHS Resolution accepts in its report, they are entitled to their full compensation. But in our experience, once the child’s essential capital needs are met, (e.g adapted housing to enable the disabled child to participate in family life), the certainty of lifelong future care and financial provision for their child overrides all other considerations. The reduction in the discount rate reflects the genuine difficulty faced by necessarily risk-averse claimants who struggle to invest their damages in the current financial climate in a way that guarantees that the money will provide for all their needs for an uncertain lifetime. Once essential capital costs are met, then given the option of certainty via a PPO, we don’t foresee many of our most severely injured clients risking the prospect of lifelong security in order to capitalise their compensation.

For NHS Resolution, and for claimants alike, there remains a great deal of uncertainty in the foreseeable future. The Ministry of Justice’s response to the consultation on the discount rate has still to be determined, as does the DoH’s response to the consultation on RRR. Lord Justice Jackson’s final word on fixed costs for lower value medical negligence claims has still to be implemented, and may bring about a change in behaviour of claimants in meritorious lower value cases as they struggle to meet the cost of bringing their claims.

And of course, NHS Resolution awaits the outcome of the National Audit Office’s review of how government manages the cost of clinical negligence in trusts, “the publication of which was delayed by the general election” in which the spotlight will be turned on its own “behaviour” in handling claims.

If you are caring for a disabled child and would like to talk to us call 0800 029 4661 or email

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Better Births for all – there’s no such thing as “normal”

The Royal College of Midwives (RCM), the midwifery trade union, have confirmed that they are bringing to an end their 12-year-long campaign to promote “normal” births. In a statement dated 14th August, the RCM confirmed that following its decision to discontinue its Normal Birth Campaign as part of a Better Births initiative which seeks to improve care for all women, including those with medical and obstetric complications, “out of date” references to the campaign were removed from its website in May of this year.

Midwives will now be required to use less value-laden or pejorative language in relation to the different methods of giving birth. Spontaneous vaginal delivery should properly be called “physiological” birth, a term which describes the unassisted method of childbirth without the implied assumption that midwife or mother have failed if the mother requires medical intervention, such as epidural anaesthesia, instrumental delivery with forceps or a caesarean section.

The Nursing and Midwifery Council (NMC) is the regulatory body for midwives in the UK. The introduction to the NMC’s Standards of Competence for Registered Midwives says, “Registered midwives will be expected to understand, promote and facilitate normal childbirth and identify complications that may arise in women and babies. They will know when to call for assistance and implement emergency measures, often in conjunction with other health professionals. It is important for midwives to promote health and wellbeing and to provide unbiased information and communicate effectively with a range of women and their families.” They have a dual obligation to facilitate “normal” childbirth whilst identifying complications and calling for medical assistance when needed. Over emphasis on the former to the extent that they fail in the latter can have devastating consequences for both mother and child.

Whether in a home or hospital setting, “natural”, “normal” or “physiological” childbirth is the domain of the midwife. However, unassisted, unmedicated spontaneous vaginal delivery is not appropriate or possible for all. Obstetric intervention might be required for physiological reasons, e.g where the baby’s head is expected to be disproportionately big for the mother’s pelvis, or as a result of other health risks, e.g. where the mother has had a previous caesarean section or complications during pregnancy and is at risk of uterine rupture, eclampsia or other devastating injury. Many of these risks can be identified before the mother goes into labour, allowing an appropriate means of delivery to be planned and discussed with the mother, and carried out with adequate midwifery and medical support for the safety and wellbeing of both mother and baby.

The real dangers inherent in a “normal birth” campaign come to light where unforeseen risks or complications arise during the labour and delivery. In such circumstances, causes for concern, such as abnormalities in the baby’s heart-rate, and emergencies, such as cord compression and abruption, require midwives to act quickly, acknowledging that the patient requires medical review which might lead to intervention to expedite a safe delivery. In units where there is poor communication and in some cases a competitive power play between the midwives striving for a “normal birth” and the medical team to whom they are reluctant to hand over control, delays in accepting that medical review is required seriously put the health of both mother and baby at risk. In these challenging situations, the midwife’s recognition of her vital role in recognising potential problems and calling for assistance from obstetricians, anaesthetists, and paediatricians is critical. Prompt action in this area is as much a life-giving service as delivering the baby by natural means.

In 2015, The Report of the Morecambe Bay Investigation attributed the avoidable deaths of 16 babies and three mothers at Furness General Hospital between 2004 and 2013 to “a lethal mix” of deficiencies which included, extremely poor working relationships between obstetricians, paediatricians and midwives at the “dysfunctional” maternity unit, and “a growing move amongst midwives to pursue normal childbirth at any cost”. Several of the midwives at the heart of the Morecambe Bay problem have been investigated by the NMC but the Secretary of State for Health, Jeremy Hunt, has recently ordered an investigation into the NMC’s deficient handling of those complaints.

The Royal College of Midwives has now commissioned a team at Nottingham University, led by Professor Helen Spiby, to update the RCM’s Guidelines for Midwifery Care in Labour. The review of the guidelines will be evidence-based and aims to support midwives in providing safe and effective care to all women.

As specialists in birth injury claims of maximum severity, Boyes Turner welcome the RCM’s long overdue change in approach. Over more than 20 years we have acted for severely disabled clients whose brain injury and consequent disability were caused by delay or failure on the part of midwives to call for timely medical review and intervention.

In one recent case we secured an admission of liability for a five year old girl with severe dyskinetic cerebral palsy. Her injury was caused by an acute period of hypoxia (lack of oxygen) in the minutes leading up to her delivery, which was delayed by negligent midwifery care. Throughout the mother’s pregnancy, labour and delivery, the need for obstetric and paediatric involvement was ignored, despite abnormalities in the fetal growth, a history of bleeding, and heart-rate abnormalities indicative of a near terminal lack of oxygen. With appropriate medical intervention at any stage of the pregnancy, labour and delivery, our client’s severe brain injury would have been avoided.

If you are caring for a child who has been disabled by Cerebral Palsy, call us 0800 029 4661 or email

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