The Speaker has certified the Civil Liability Bill [Lords] under Standing Order No. 83J as relating exclusively to England and Wales on matters within devolved legislative competence. I remind the House that this does not affect proceedings in the debate on Second Reading, or indeed in Committee or on Report. After the Report stage, the Speaker will consider the Bill again for certification and, if required, the Legislative Grand Committee will be asked to consent to certified provisions.
I beg to move, That the Bill be now read a Second time.
The Bill will make important changes to our personal injury compensation system, which it aims to make fairer, more certain and more sustainable for claimants, defendants, the taxpayer and motorists. It builds on our wider reforms to cut the cost of civil justice claims and strengthen the regulation of claims management companies. The first part of the Bill will deliver a key manifesto pledge to support hard-working families by bringing down the cost of living through a crackdown on exaggerated and fraudulent whiplash claims, which lead to higher insurance costs. The second part will create a fairer and more transparent method for setting the personal injury discount rate. The Bill will provide a compensation system that meets the rightful needs of claimants while saving the public money, in respect of both consumers and taxpayers.
Data from the Department for Work and Pensions shows that around 650,000 personal injury claims relating to road traffic accidents were made in 2017-18. That is almost 200,000 more than were made in 2005-06—a rise of 40%. Of those claims, we estimate that around 85% were for whiplash-related injuries. That is higher than in any other European jurisdiction. At the same time, figures from the Department for Transport show that, in the decade to 2016-17, the number of reported road traffic accidents went down, from around 190,000 to around 135,000—a fall of 30%.
Yes, I do share my right hon. Friend’s concerns. For many people, a car is not a luxury but is essential. The cost of insurance, particularly for young people, can be considerable. Indeed, as I will set out, that cost is likely to increase very significantly if we do not take action, which is one reason we have taken the measures that we have.
I am glad that the hon. Gentleman asked me that question, because not only have we had public assurances from insurance companies that represent 85% of the policies, but we will table amendments to the Bill to ensure that we can hold those companies robustly to account, particularly given their public commitments. If those are his concerns, I think he will find as the Bill progresses that they are met.
I would challenge that. When the Competition and Markets Authority looked at the insurance industry, it found that it is a competitive industry. The factor that is most likely to ensure that benefits are passed on to consumers is competition, and the evidence suggests that there is competition in this area, but we will ensure that insurance companies provide robust information so that they can be properly held to account. As I say, the Government will bring forward amendments in this area, as we have committed to do.
It is key that these savings are passed on to motorists. In the other place, my noble Friend Lord Sharkey tabled an amendment suggesting that one way of doing that was to give some regulatory power to the Financial Conduct Authority to hold insurance companies to account. Will the Secretary of State tell the House now whether, in bringing forward this amendment, real teeth will be used to ensure that insurance companies cannot get away with keeping this cash themselves?
If the right hon. Gentleman will forgive me, we will be coming forward very shortly with those amendments. He will not have to wait long to see the details of the amendments. He will see that we are striking the right balance in ensuring that insurance companies can be properly held to account and that we are not placing unnecessary and expensive burdens that ultimately get paid by policyholders. He will see that we are taking this issue forward.
I thank the Secretary of State for giving way. On this point about cost savings being passed on, does he take further comfort from the following two things? First, with no fewer than 94 car insurance companies operating in the UK, it is an intensely competitive market; and, secondly, in the two years after the reforms in the Legal Aid, Sentencing and Punishment of Offenders Act 2012 were introduced, car insurance premiums dropped by £50, suggesting that, in that case, the savings were passed on.
My hon. Friend is right to raise both points. I come back to the fact that the CMA looked at this area and concluded that this is a competitive one. The history suggests that these benefits are passed on, but we are strengthening the Bill and will bring forward amendments very shortly that will enable us all to hold those insurance companies to account.
Many claims involving road traffic accidents will, of course, be genuine. It is absolutely right that they are compensated appropriately. Our reforms are focused on ensuring that genuine claimants have access to justice, receive a proportionate amount of compensation and that the system works for all who use it honestly. However, with major improvements in motoring safety in recent years, including the increased use of integrated seat and head restraints, it would be remiss of the Government not to ask what is going wrong. The reality is that some of these claims are not genuine. In 2017, the insurance industry identified almost 70,000 motor insurance claims that it considered to be fraudulent. As the learned Lord Hope of Craighead noted in the other place, it is necessary to do something to try to minimise the abuse that has given rise to such a large and disproportionate number of claims. The knock-on effect of all these claims is increased insurance premiums, particularly for young people and the elderly. As Members across the House will know, for many people, owning a car is not a luxury, but a necessity. That is especially true of those in rural communities, but it does affect all our constituents. That is why we have pledged in our manifesto to tackle these costs. Taken together, the whiplash measures proposed by the Government could result in savings of around £1.1 billion a year.
Around 85% of the UK motor and liability insurance market have publicly committed to pass on those savings to consumers. The Government intend to hold insurance companies to account by bringing forward an amendment, as I have said, to introduce an effective means for reporting on both the savings made and how they are passed on.
The purpose of our reforms is to compensate the genuinely injured and to improve the system for all by reducing the number and cost of whiplash claims and deterring fraudulent and unmeritorious claims. The measures in the Bill will do that by introducing a ban on settling whiplash claims without medical evidence. That will discourage fraud and incentivise insurers to investigate claims and provide reassurance to claimants that they are being compensated for the true extent of their injuries.
They will be face-to-face medical examinations, which I believe will provide the degree of robustness in the system that we need.
The Bill will also provide for a new fixed tariff of compensation for pain, suffering and loss of amenity for whiplash claims. The high number of whiplash claims and compensation levels that we are seeing justifies that tariff being set by the Lord Chancellor. We want fair and proportionate compensation. Its cost should not be unfair to the motorists. We will provide some important flexibilities on how the tariff operates to make sure that it remains fair and adaptable where necessary to exceptional circumstances, inflation and changes in the claims market.
Does not the Minister accept that one of the further flaws in the Bill is that the genuine victim of a road traffic accident faces receiving less compensation than someone who has a similar accident but not in a road traffic scenario, who receives compensation set not by the Lord Chancellor, but under the judicial guidelines that exist at the moment?
This must be put in the context of a package of measures we are taking that seek to address the significant problem that exists, which I have sought to sketch out and which other hon. Members have highlighted: the very considerable cost that motorists face in insurance premiums as a consequence of whiplash claims, a number of which are clearly not genuine. Given that the number of road traffic accidents is falling yet the number of claims is going up, it is right that we take action.
In combination with the other measures that we are taking, I think that we are really able to address the problem that my hon. Friend has so eloquently highlighted and that she has personal experience of. What she has highlighted is that we do have a problem and that we do need to take action, and that is exactly what this Bill does.
I am very grateful to the Secretary of State. I have real concerns about the reduction again in access to justice. The group Access to Justice has highlighted that, each year, people injured in road traffic accidents will be denied access to legal advice if they want to go to court to claim for their injuries. How can he guarantee that that will not happen?
We have a system of small claims—by and large, these are very straightforward claims. We want to ensure that support is there so that people are able to bring the claims in person. As I have said, these are simple claims and it is right that we also take action to address some of the concerns that we have. I shall set out more detail in my remarks, but I believe that we have the balance right in terms of the increase to £5,000.
The Bill provides that the tariff will be set in regulations to be debated via the affirmative procedure by Parliament following Royal Assent. We are committed to tabling an amendment in Committee that will require the Lord Chancellor to consult with the Lord Chief Justice before making those regulations. The judiciary will have discretion to increase the compensation payable in exceptional circumstances and, after listening to the views in the other place, we have amended the Bill to ensure that overall compensation levels in the tariff are reviewed at least every three years. We listened carefully to the comments made by the Delegated Powers and Regulatory Reform Committee in the Lords. We accepted its recommendation and tabled an amendment to include a full definition of whiplash injury in the Bill in order to remove any ambiguity about what that constitutes in law.
The Government’s reform programme also includes measures—not included in the scope of this Bill—to increase the small claims track limit for road traffic accident personal injury claims to £5,000, and for all other personal injury claims to £2,000. As these claims are generally not complicated, they are suitable to be managed in the simpler, lower cost small claims track. This route is designed to be accessible to litigants in person without the need for a lawyer, although claimants may still seek legal representation if they wish. To support this, the Government are working with a wide stakeholder group including the insurance industry, claimant solicitor representative groups and consumer groups in order to design and deliver a simple-to-use online service to enable the vast majority of those claiming for low-value road traffic accidents who may well choose not to be represented by legal advisers to receive help and guidance to manage their cases through to conclusion.
The service will be designed for those with no legal advice or training, and will be as simple to use as possible to ensure that the claimant journey is as smooth as it can be. Raising the small claims limit for these RTA cases to £5,000 will work to control their costs, acting as an incentive for insurers to challenge, rather than settle, those cases that they believe to be without merit. This is vital to changing the unhealthy culture that sees whiplash claims as a way to make easy cash. The reality is that, as insurers are forced to offset the cost of the abuse by raising premiums, fraudsters are simply taking money out of the pockets of honest motorists.
I want to make some progress.
I am aware that there has been concern on both sides of the House about the inclusion of vulnerable road users—for example, cyclists, pedestrians and motorcyclists —in the proposed small claims track rise. I am grateful to Members for signalling in their arguments how such road users may be disproportionately affected by this measure.
I am very grateful to hear the Secretary of State say that, because this issue was flagged up by the Select Committee on Justice in our report. If he is going to say that it is his intention to exclude those vulnerable road users from the Bill, that would be a most welcome recognition by the Government of the evidence on the matter.
I think that on this occasion I might be able to satisfy my hon. Friend, which I cannot always say to him as the Chair of the Justice Committee. After listening carefully to the arguments made—including by my hon. Friend—I can now say that we intend to remove these vulnerable road users from the small claims limit changes. They are, of course, already excluded from the Bill.
I wish to say a few words about the timing of the whiplash reforms. Both the Justice Committee and the insurance sector have raised concerns about how quickly the reform programme can be implemented, including the necessity to build and test the online claims platform that I mentioned. We have listened to those concerned and resolved to push back implementation by a year to April 2020. This will enable careful user testing of the IT system to ensure that the system works well for all types of users on full implementation.
The personal injury discount rate is intended to reflect the return that it is reasonable to expect a claimant to receive on investing a lump sum award of damages for future financial loss. We must keep in mind that behind every claim there are real people with life-changing injuries, who need to make fundamental changes to the way in which they live their lives and who depend on their compensation awards. That is why we continue to support the aim that seriously injured people should receive full compensation to meet their expected needs, including care costs. The problem, however, is that on the evidence we have obtained, our discount rate of minus 0.75%—one of the lowest in the world—is leading to awards in personal injury claims averaging at 120% to 125% of the damages awarded, even after allowances are made for management costs and tax.
Such overcompensation is contributing to escalating costs in the NHS, which spent £2.2 billion on clinical negligence claims alone in 2017-18—a figure that is expected to rise to £3.2 billion in 2020-21. This is almost double the amount spent in 2016-17 and seven times the amount spent in 2006-07. This overcompensation is not sustainable. Money is being diverted that could instead have been spent on frontline public services such as our hospitals, schools and armed forces. As well as adding to the financial pressure on the NHS, the current framework for setting the discount rate is also creating pressure that is driving up insurance premiums, particularly for motorists.
The reforms that we propose to the discount rate will also save consumers money, as the insurance industry has committed to passing on these savings. The changes that we propose to make in the Bill to how the discount rate is set will make it fairer and more realistic for everyone. We intend to reflect the reality that claimants are more likely to invest their compensation in slightly higher risk diversified portfolios, than in very low risk investments under the current test.
Very much so. It remains our objective to ensure that people are properly compensated—that they get the right level of compensation. The current process systematically overcompensates, and it is right that we address that because that compensation could be spent on frontline services. I am sure that that is what we would all want to do.
The Secretary of State is being very generous in giving way. Does he accept that we will have to watch the impact of this Bill on personal injury lawyers, as it is already difficult to get lawyers to stay in that field? Will he monitor the situation to ensure that all those involved in serious accidents get proper legal representation?
I think that it would be fair to say that personal injury lawyers have demonstrated adaptability in recent years and that the sector has proved to be resilient. Of course, the purpose of our compensation regime and insurance system is to ensure that those who should be compensated are compensated, and that is what we seek to do. As I said in response to the intervention of my hon. Friend the Member for Henley (John Howell), it is also right that we do not over- compensate.
The Bill contains provisions requiring the Lord Chancellor to review the rate promptly after Royal Assent and then at least once every five years, again providing greater certainty and clarity. Following amendments accepted by the Government in the other place, the first review will continue the current arrangements under which the Lord Chancellor consults the Government Actuary and Her Majesty’s Treasury before setting the rate. This will enable the benefits of the new system to be realised as soon as possible. All further reviews by the Lord Chancellor must be undertaken in consultation with an independent expert panel, chaired by the Government Actuary.
I stress that the Bill will not change the important role played by periodical payment orders, which account for a significant proportion of the compensation paid for future loss in cases involving the most serious and life-changing injuries. PPOs protect claimants against the risk inherent in relying on the investment of lump sums to produce a stream of income to meet their needs as they arise. PPOs are and will remain available in the vast majority of the highest-value NHS clinical negligence claims against hospitals, including those involving brain damage during childbirth, and in the large majority of long-term serious injury cases where the defendant is insured by a UK-regulated insurer.
The Lord Chancellor is being very helpful. I welcome what he says about periodical payment orders, because they are a significant transfer on to the insurance company away from the person who is awarded, in terms of both investment and the longevity risk. Will he make it clear—as the noble Lord Keen indicated in the other House—that when he sets the discount rate, having taken the advice of the panel as part of the Government action, he does so as Lord Chancellor in his own right, and not on behalf of the Government? That point was raised by a number of noble lords in the other House when it was said that this decision is taken not for Treasury or governmental reasons, but on the basis of that advice, by the Lord Chancellor in his capacity as Lord Chancellor, almost quasi-judicially.
Yes, it is a decision taken by the Lord Chancellor. I was in the Treasury at the time when the most recent change to the discount rate was made by one of my predecessors, and I can certainly assure my hon. Friend that it was very much a decision taken by the Lord Chancellor. [Laughter.] Perhaps I should leave it there.
One of the key elements of stopping whiplash claims and so forth was the banning of referral fees. There are more and more reports coming in that, perhaps for the resilience reasons that my right hon. Friend discussed, we are increasingly seeing ways of getting round the ban on referral fees. This is of great concern to many. These people are of course breaking the law. Has he considered this situation?
Of course we continue to look at this area. It is worth pointing out not just what we are doing in this Bill but the measures and action taken in the context of the Financial Guidance and Claims Act 2018, and it is right that we continue to do so. As I say, the Government are determined to find out whether the use of PPOs can be increased. We are very pleased that the Civil Justice Council, which is chaired by the Master of the Rolls, has agreed in principle to consider this issue.
The Civil Liability Bill is an important piece of our wider work to reform the civil justice system, including through the Financial Guidance and Claims Act, which strengthens the regulatory regime for claims management companies and bans cold calling. These reforms are needed to put personal injury payments on a fair, more certain and sustainable footing for the future. In turn, they will save the NHS and consumers money.
The Secretary of State says that the Financial Guidance and Claims Act bans cold calling. In fact, it does not create an outright ban on cold calling. Why not have an outright ban on cold calling before proceeding with proposals to increase the small claims limit, which would deny so many access to justice?
To be clear, we have taken robust action to deal with this issue. I would defend the Financial Guidance and Claims Act, which was a substantial step forward in ensuring that we do not see the abuses that we, in all parts of the House, are concerned about.
Legislating to ensure that genuine whiplash claims are backed up by medical evidence and that claimants receive proportionate compensation will reduce the number and cost of whiplash claims. This will allow insurers to pass on savings to consumers. As I have said, three quarters of the UK motor and liability insurance market has already publicly committed to doing so. In changing the system by which the discount rate is set, we want to continue to ensure fairness so that those who suffer serious long-term personal injury get full and fair compensation within a more informed and transparent system in which the rate is set by the Lord Chancellor at regular intervals with the benefit of independent expert advice. The prospect of the reforms we are proposing both to whiplash claims and to the discount rate has, according to the recent AA British insurance premium index, already triggered a fall in premiums in the expectation that claim costs will fall. I commend the Bill to the House.
Today we are discussing yet another attack from this Government on our justice system: yet another attack on the vulnerable that, perhaps not coincidentally, will enrich the Conservatives’ friends in the insurance industry. The Civil Liability Bill is presented by the Government in its press spin as being about cutting back on fraudulent whiplash claims—and, of course, who could disagree with doing that? But given this Government’s record in justice, I am sure that Ministers will understand why we do not take their assertions at face value, and why we fear that these reforms may in fact be a smokescreen—because under the Conservatives our civil justice system has been undermined all too often, with basic rights rolled back, creating a two-tier justice system.
Take, for example, the Conservatives’ unlawful employment tribunal fees, which made it harder for workers to take on unscrupulous bosses. Eventually, the Supreme Court ruled them unlawful, but only thanks to the dogged campaigning of trade unions and others. Or take the Conservatives’ cuts to legal aid, which make it harder for people to take on dodgy landlords, or to challenge a flawed benefits decision that leaves people out of pocket and relying on food banks. We fear that this set of justice reforms will also undermine people’s basic rights.
This Bill attracted widespread opposition in the House of Lords, with the Government only narrowly defeating amendments that would have substantially altered the Bill for the better. But to do so the Government had to ignore pre-eminent legal experts.
I recognise that the Opposition’s job is to oppose, but would the hon. Gentleman not concede that in the past decade the number of claims in this area has gone up by 40%, whereas cars have become safer and accidents have decreased by 31%? Surely, therefore, does it not make sense that this exploitation comes to an end to benefit his constituents, as policyholders, as well as mine?
I do not quite understand what the hon. Gentleman is talking about when he says that this “exploitation” has to end. In fact, the trend is that whiplash claims are going down. We have heard the Secretary of State himself say, “Of course, many claims are genuine.” Even the way that that is said implies that somehow people are on the make. Most claims are genuine. [Interruption.] I do not see what is so amusing about that. There is not a compensation culture in this county, whatever the Government’s friends in the insurance industry might be telling them.
When I mentioned pre-eminent legal experts, I was including former Lord Chief Justices who expressed their concerns about the Bill’s impact on access to justice and on the independence of the judiciary. So Labour Members are clear that this Bill, in its current form, cannot be supported. Unless it is very substantially amended in Committee, we will vote against it on Third Reading. We hope that the Government will take seriously the amendments that we are tabling this week, which build on the points raised by many colleagues in the Lords.
Before I talk about our opposition to many of the measures included in the Bill, I want to draw Members’ attention to the associated statutory instruments. This Bill, as we have heard, is a part of a wider package of reforms—a package that will make it harder for workers to get compensation for workplace injuries, and harder for genuinely injured road users to get compensation. Through statutory instrument, the Government are seeking to increase—
Hundreds of thousands of workers could be denied access to justice for genuine comprehensive claims. The Union of Shop, Distributive and Allied Workers estimates that up to 350,000 workers could be denied access because of these measures.
My hon. Friend makes a very important point. USDAW and other organisations are right to say that hundreds of thousands of people could be negatively impacted.
Through statutory instrument, the Government seek to increase the small claims limit from £1,000 to £2,000 in all cases and from £1,000 to £5,000 in road traffic accident cases. We are very concerned about what that means in practice. A significant number of claims henceforth will be dealt with through the small claims track procedure, where even in a successful claim, no legal costs are usually awarded.
Without legal fees being covered, tens of thousands of working people will simply be priced out of obtaining legal assistance. Many will drop their cases altogether. Others will fight on but do so representing themselves, not only making their pursuit of justice more difficult, but placing serious pressures on the courts. Others will pay their own legal fees out of their compensation, which in effect means a cut in their compensation levels. Of course, other workers will conclude that when their route to justice through a court or tribunal is removed, they have no alternative but to resort to industrial action to achieve redress.
Is it not a well-established principle both in this country and overseas, in jurisdictions such as France, that for very straightforward, simple matters—these very minor injuries are generally straightforward and simple—having a fast-track process without the involvement of expensive lawyers is a reasonable and legitimate approach?
We need to ask ourselves what “minor injuries” and “small amounts of money” mean. What is being referred to as a “minor injury” may last up to two years. I do not think that that is a minor injury. What is being referred to as “small amounts of money” is actually, in practice, a lot of money for working people who are struggling to make ends meet.
There was a 90% drop-off in employment tribunal claims when employment tribunal fees were introduced. We fear something similar in personal injury cases, with genuine victims priced out of justice and deterred from pursuing a claim for an injury that was not their fault.
Does my hon. Friend agree that for cyclists who have accidents, their bicycle may be their means of getting to work, and therefore that is not minor, petty or small? We should take that into account when looking at what we call “minor injuries”.
I certainly agree with that point, which I will come to later. People also need to consider the psychological effects of some of these injuries.
I must make some progress. I want to talk about the type of people who will be affected by these reforms, and I will now give some real-life examples.
I will not give way when I want to talk about real-life examples. We need to hear from the people who will be affected by these reforms. Once I have given them a voice, I will give the hon. Gentleman his chance to speak. These people include a warehouse operative who suffered a head injury when a heavy metal bolt fell from a roller shutter door and struck him on the head, and a caretaker in a council who was pushing rubbish bags down a chute when he was injured by a needle that had pierced through one of the bags. He suffered a physical and, indeed, psychological injury; just imagine all that worry as he was waiting for the tests. Those are real cases that have been sent to my office and that would be penalised by the new system. We cannot have those voices being drowned out by the rhetoric that calls people fraudsters and says they are on the make when they are anything but.
The evidence does not bear that out. Proven fraudulent whiplash claims amount to 0.25%. To hear some Conservative MPs, we would think that the majority of whiplash claims were fraudulent, when only 0.25% have been shown to be. It is not justice if the honest vast majority are penalised because of a tiny dishonest minority. That is no way to reform things or make the law.
I have to make some progress, I am afraid.
The Government have said that they will drop vulnerable road users from their reforms. They should indeed do so, but they should also concede that the inclusion of people injured at work is equally unjustified.
It is not only we who oppose these measures. The Justice Committee concluded that
“increasing the small claims limit for personal injury creates significant access to justice concerns.”
Is not one real problem with the increase in the small claims limit the fact that a vast imbalance of resources is imposed between the insurance company on the one hand and the individual making a claim on the other? The individual making a claim will not have their legal costs paid for and will not be able to have an expert lawyer on their side as a result in most cases, while the insurance industry will be able to have expert, skilled lawyers on their side, fighting their corner.
My hon. Friend makes an important point. This goes completely against the principle of equality of arms.
We agree with the Justice Committee and the recommendation of the Jackson review that there should be an increase in the small claims limit only in line with inflation. That would mean a rise to £1,500, not the £2,000 currently proposed. If the Government were to propose a £1,500 limit today or to accept Labour’s amendment that we will propose in Committee, that would help to build a much broader consensus around this currently divisive legislation.
Does my hon. Friend agree that in employment cases, it is not just about an inequality of arms, but the fact that a worker has to take on both their employer and their insurance company? It is very difficult for a vulnerable worker who has been injured to look their employer in the eye one on one and take them on. That is why they need legal support.
I agree that people who are injured should receive fair compensation, but when 47p of every pound paid out is going to lawyers, does the hon. Gentleman not agree that unless we reform this, we risk finding that young drivers and vulnerable people cannot get affordable insurance?
Right across the justice sector, the real targets of the Conservatives’ reforms have not been lawyers, but ordinary people. That is the reality.
I will move on to the measures that the Government have included in the Bill. We are very concerned by the tariff system, which would fix the amount of compensation in so-called minor whiplash claims. I will come on to the fraudulent claims later and the measures—or lack of measures—to tackle that in the Bill. However, the reality is that even if the Government’s case about the scale of that problem were correct—I note that the Commons Library says clearly that it is “not universally accepted”—the way the Government are seeking to resolve this would still be wrong. The Government’s main proposal to tackle fraud is to penalise genuine whiplash victims. The proposed new levels of compensation under the tariff system are significantly lower than current average compensation payments. Surely that is unfair.
For example, compensation for an injury lasting up to six months would fall to a fixed £470, down from a current average of £l,750. For an injury lasting 10 to 12 months, compensation would be £1,250, down from a current average of £3,100. For an injury lasting 16 to 18 months, it is £2,790, down from £3,950. Those are considerable drops in compensation for injured people. This will make a real difference to working people and their families in the worst possible way. It is a crude and cruel policy that penalises genuine victims. Who really stands to gain? It will be insurers who will be excused from paying full compensation, even where negligence has occurred.
There was widespread discontent among legal experts in the Lords regarding this tariff approach. Lord Woolf, former Lord Chief Justice of England and Wales, said:
“it results in injustice and it is known to result in injustice. Indeed, no one can deny that it results in injustice.”—[Official Report, House of Lords, 12 June 2018; Vol. 791, c. 1620.]
Lord Judge, another former Lord Chief Justice of England and Wales, said:
“We cannot have dishonesty informing the way in which those who have suffered genuine injuries are dealt with. That is simply not justice.”—[Official Report, House of Lords, 12 June 2018; Vol. 791, c. 1600.]
In a very powerful intervention, Baroness Berridge said:
“I have met many a claimant for whom the difference in damages now proposed by the introduction of the tariff…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…in this Bill, the intended consequence…will be to affect that group of people.”—[Official Report, House of Lords, 12 June 2018; Vol. 791, c. 1611.]
Baroness Berridge is of course a Conservative party peer.
One key point in our opposition is the slashing of compensation for genuine claimants. Another is that it will be the Lord Chancellor setting tariff levels, which risk becoming a political football or, rather, being reduced ever further by the powerful insurance industry lobby. Tariffs are a rather blunt instrument; people should simply get the correct compensation for the specific injuries they have suffered. As former Lord Chief Justice Lord Woolf says, establishing the correct level of damages is
“a highly complex process of a judicial nature”—[Official Report, House of Lords, 12 June 2018; Vol. 791, c. 1593.]—,
and damages might vary from case to case, making the fixed tariff inappropriate. We will therefore propose amendments to delete the power for the Lord Chancellor to set the tariff.
If the Government are set on going ahead with tariffs, the judiciary should be involved in setting them. The Judicial College currently issues guidelines with levels of damages for different injuries. Lord Woolf stated:
“they have been hugely important in the resolution of personal injury claims.”—[Official Report, House of Lords, 12 June 2018; Vol. 791, c. 1594-95.]
I hope that those across this House who profess to defend the independence of the judiciary would agree that tariffs should be determined by the Judicial College and not by political actors, of whatever political persuasion. We will be pursuing amendments to that effect.
That is not an end to the powers that the Lord Chancellor is accumulating. This Bill even allows him to define whiplash. Surely, it would be more appropriate for the definition to be set by medical experts rather than politicians, especially when an incorrect definition could mean people with injuries much more serious than whiplash having them classified as such.
The Government’s justification for genuine claimants suffering substantial reductions in damages is reducing the incidence of fraudulent claims. The Government give the impression that it is an uncontested point that fraud is at the levels that the insurers claim, but that is contested. That is not to say that there are not fraudulent cases—of course a small minority of cases are fraudulent—but we need to properly understand the problem if we are going to have genuine solutions.
That is absolutely right; it is a powerful moral argument. It is immoral to make the honest vast majority pay—literally—for the fraudulent activities of a tiny minority. The Justice Committee explained:
“we are troubled by the absence of reliable data on fraudulent claims and we find surprising the wide definition of suspected fraud”.
Looking at premiums, the insurance industry’s own estimates show that the amount paid out on whiplash claims fell by 17% between 2007 and 2016. What happened to premiums in this time, while the amount paid out on whiplash claims fell by 17%? They actually rose by 71%.
There is therefore little in this Bill, aside from penalising genuine victims, to deter fraud or to prevent the nature of any fraud from changing to circumvent the new measures.
Compulsory medical reports are a good idea, but there is little to limit insurance companies settling too quickly on low claims that they may view with suspicion but pay out on anyway because it is cheaper to settle than to contest them. There is little on controlling unscrupulous claims management companies. Beyond warm words from the insurance companies themselves, there is also no mechanism yet to guarantee that lower insurance premiums will result. The Secretary of State said that something is on its way in relation to that, but we will reserve judgment until we see what concrete measures the Government actually propose.
We will therefore propose amendments that toughen up these measures but do not penalise genuine victims. One amendment would reduce the period for which the tariff applies to one year, not two. It is much less likely that fraudulent cases will be those lasting for the longest time. Two years of suffering is surely too long to be deemed a minor injury. Given that there is no evidence that workers such as ambulance drivers or HGV drivers who suffer whiplash during their employment are behind any fraud whatever, will the Minister find a way to exclude those workers from this legislation?
Finally, where someone has suffered an injury that will leave them with many years, or a lifetime, of disability, they need to be certain that the lump sum compensation award they get has been properly worked out so that it does not run out. The discount rate is key to this calculation. Victims should always get 100% of the compensation they are entitled to. Getting that right means that someone whose mobility is restricted after a serious accident will have enough money over their lifetime to fund the extra costs that reduced mobility will entail. Getting it wrong would leave seriously injured people getting less compensation than they are entitled to, with potentially hugely damaging consequences for their quality of life. That is why we will closely scrutinise the Government’s proposals to change how the discount rate is set, so it is determined not by the powerful insurance lobby but in the interests of society as a whole. That is why we will table amendments to strengthen the safeguards in the Bill and ensure that all victims get 100% of the compensation they are entitled to.
To conclude, the Government have an opportunity—an opportunity to do the right thing and to show that this is not just another attack on access to justice. They can do that by backing amendments to remove the barriers to justice that are all too prevalent in the Bill. If they fail to do so, we are clear that we will vote against the Bill.
In my, I hope, relatively short remarks I would like to concentrate on clause 10 in part 2 of the Bill, which concerns the proposed changes to how we set the personal injury discount rate.
I would just say one thing on whiplash claims. I hope this latest attempt at reform is robust enough to withstand the ingenuity of the more predatory elements of the claims management industry, which, I am afraid, have done much to drive up the costs of insurance for many people.
Turning to clause 10, I would like to thank my constituent Robert Rams for his briefing on this issue, as well as the insurance company Ageas and others for their helpful insights into the matters we are debating.
The case for law reform in this area is strong. The need for change has been acknowledged by not just Ministers but the Justice Committee, the NHS and a number of others. Of course we all agree that people must be properly compensated where liability for personal injury is established. That is especially important for those with life-changing injuries that leave them unable to earn a living and in permanent need of care and support.
However, the discount rate system was supposed to ensure that those who are awarded a lump sum do not end up being over-compensated because of the investment return they will receive on the capital they have been awarded. Unfortunately, it seems clear that the current discount rate is no longer delivering that outcome and that there is now over-compensation. The 100% principle, which has been raised in the debate, is not being adhered to at the moment—it is 100%-plus.
The overarching purpose of this reform must be to provide a way to set the rules that is fairer for both parties. I therefore welcome the proposal to modernise the calculation of the discount rate to ensure it reflects the reality of how claimants actually invest the money they have been awarded. The assumption underlying the existing rate of -0.75% is that claimants are likely to invest solely in index-linked Government securities, which have a minimal return. That leads to a rate that is artificially low, and damages awarded are therefore disproportionately high. Sensible, professional advice would instead see a lump sum invested in a low-risk portfolio of gilts and equities, which is what evidence suggests claimants are doing. That gives a significantly better return than index-linked gilts, so the -0.75% rate does not reflect reality.
The Bill will amend the assumption about future investment so that it is brought into line with what is more likely to be actually happening in practice. I think that is a fairer outcome, which is why I support clause 10. I have two main reasons for doing so, the first of which is that the cost of over-compensating claimants has to be met by insurance customers, thereby driving up the cost of premiums. I have already had the chance to set out my concerns on the real impact that has on young people, particularly those living in rural or suburban areas, where often public transport is not a viable means to get to work. The Financial Conduct Authority estimated that the switch from 2.5% to -0.75% was likely to cost insurers about £2 billion a year, inevitably feeding back into bigger bills for consumers.
Is the right hon. Lady surprised to learn that, due to the ongoing political situation in Northern Ireland, the tariff reduction still stands at 2.5%; that those in Northern Ireland who suffer significant injuries continue to get less compensation than when the adjustment was made, which will also be the case in GB under this Bill? Does she agree that that needs urgently to be addressed?
I am grateful to the hon. Lady for raising that point. I was not aware of it, but it is another example of how the political stalemate in Northern Ireland means that changes that need to be made are not taking place. It will be important, ultimately, for this House to consider whether we need to legislate to ensure that civil servants in Northern Ireland can take more of these decisions. I know that everyone is reluctant to move to direct rule, but we may need to take intermediate steps to ensure that these practical matters are dealt with, alongside, obviously, the issues recently raised in the planning system.
A second important reason why I think it is important to proceed with the measures in clause 10 is, as the Secretary of State has pointed out, the impact of the current situation on the NHS. A system that over-compensates claimants in clinical negligence cases inevitably swallows up resources that would otherwise be spent on frontline care. Last year, the NHS spent £1.7 billion on clinical negligence cases, representing 1.5% of spending on frontline health services. The annual cost has almost doubled since 2010-11, with an average 13.5% increase every year. In 2017-18, an additional £400 million had to be provided to the NHS as a result of the change in the discount rate to -0.75% in March 2017. I understand that if the revised discount rate set under the new procedures is between 1% and 0%, that would save the NHS between £250 million and £550 million a year.
A further reason why the changes set out in clause 10 make sense is that they would bring us into line with prevailing international practice. According to the Association of British Insurers, our -0.75% rate is the lowest of similar common law jurisdictions. Apparently, no other jurisdiction has a single rate of less than 1%, and the majority set rates in excess of 2.5%. As things stand, we are an international outlier, and the proposed legislation would remedy that.
I am conscious of the dismay felt in March 2017 when the change to -0.75% was made, seemingly out of the blue, with a sudden impact on the insurance sector and, of course, ultimately on consumers buying insurance policies. I hope that the regular reviews provided for by the Bill will help prevent such a shock from occurring again. I also welcome the creation of an independent expert panel to be consulted on the factors to consider in setting the discount rate in the future, to bring a wider range of expertise and experience to the process. We need a more transparent and predictable approach to setting that important discount rate, and I welcome the steps made to that end in the Bill.
In closing, I emphasise that it is vital for the insurance sector to pass on to its customers a new reduction in costs that arises as a result of changes to the discount rate or, indeed, the rest of the Bill. I note that companies representing a significant share of the market have provided a written commitment to the Lord Chancellor to do that, but of course it will be very important for the Secretary of State to hold them to that promise, so that the benefit of this Bill and the changes I hope it will bring into effect can be felt as soon as possible by our constituents via reduced costs in their insurance premiums, helping with household bills and providing important benefits.
May I refer the House to my entry in the Register of Members’ Financial Interests? I should put on the record that my partner is a solicitor and chief executive of a personal injury law firm.
Before being elected, I spent 27 years advising and representing injury victims in the civil courts. I acted for victims both in cases worth just a few hundred pounds and in cases worth all the way up to more than £1 million. Those victims had been injured—some of them killed—through no fault of their own. They were predominantly low paid. Most, although not all, were trade union members, and probably about two thirds—possibly more—of those I represented would have been very adversely affected by the proposal to increase the small claims limit. The Bill concerns an issue about which I care very deeply—the principle of access to justice—and my almost three decades of relevant professional experience have informed my views.
May I say from the outset that fraudulent claims must be eradicated? I am sure everybody here would support that. However, the Association of British Insurers’ own figures state that proven fraudulent claims amount to just 0.25% of all motor claims. This Bill, therefore, is a huge, defective sledgehammer trying to crack a very, very small nut.
The ABI states in the briefing it sent me and, no doubt, all Members that the Bill represents a step towards fixing the
“broken system of personal injury compensation in England and Wales.”
That is not just a very bold assertion—it is absolute rubbish. There is nothing “broken” about the system of personal injury compensation for victims of negligence. There is plenty that is broken, however, about access to justice, and the ABI and its powerful lobby operation has, I am afraid, been one of the main drivers behind that.
So desperate is the ABI to peddle the myth of compensation culture and the “broken” system in advance of this debate that yesterday it even resorted to providing and paying for content for Guido Fawkes to promote on Twitter. This Bill, I am afraid, reads like one that has been written by the insurance industry for the insurance industry—an industry that cannot be trusted. Why are the Government pandering to it yet again and refusing to front up and put the increase in the small claims limit on the face of the Bill? I say to the Secretary of State that avoiding proper scrutiny is not an attractive look. Members know that our duty as legislators is not just to look at the consequences of the legislation we make, but to properly consider and take into account the unintended consequences.
That is why thorough impact assessments are so important. I have had a look at the Government’s impact assessment on reforming the whiplash/soft tissue injury claim process under the Bill. Paragraph 2.4 refers to the “optimal” level of claims
“for society as a whole.”
That is an interesting assertion. What is the optimal level? There is nothing in the assessment, the Bill or the explanatory notes to enlighten us. Perhaps the Minister can tell us what it is.
In paragraph 2.10, and peppered throughout the assessment, there is reference to “minor claims” and “low value claims”, and in paragraph 4.8 to “trivial claims”, but none of those terms is defined. Can the Minister define what he considers to be low value, minor or trivial?
If we take workplace accidents in the public sector as an example, Unison tells me that nearly half of its members earn about £17,000 a year, so the proposed increased small claims limit of £2,000 for workplace cases represents almost two months’ wages, and the £5,000 limit for road traffic accident cases represents nearly four months’ wages. Does the Minister really believe that a caretaker or a care assistant in his constituency will think that £2,000 is a minor, low or trivial sum? Under the proposals, most injury victims will lose independent legal representation and will either have to represent themselves or lose part of their damages in costs, most likely to resurgent claims management companies. That will impact on especially vulnerable groups.
Paragraph 4.7 of the impact assessment starts with the statement:
“The current Small Claims Track limit for personal injury claims of £1,000 has remained unchanged since 1991.”
That is disingenuous at best. The Government know that the civil procedure rules were changed in 1999 when special damages were removed from the calculation of what fell within a small claims limit. That was effectively an increase of 20%, so it is simply wrong to say that the limit has not changed since 1991. Does it concern the Minister that in the impact assessment the competitiveness of the motor insurance market is based on an Office of Fair Trading report from 2011 which, aside from being seven years old, was published before the changes to LASPO, since when ABI figures show that insurers have saved £11 billion?
The Government go on to state in the impact assessment that they consider
“that 85% of insurer savings could be passed through to consumers”.
Will the Minister share with the House what
“careful consideration of the evidence”
led to this assumption, as well as the “sensitivity analysis” that has been conducted for pass-through rates of 50% and 70%? Paragraph 5.77 states that
“The increase in the Small Claims Track threshold from £1,000 to £2,000 for all personal injury claims that are not RTAs could lead to a reduction in the number of claims proceeding to court.”
I am tempted to use the phrase involving Sherlock defecating at this point, but I suspect that that would be unparliamentary language, Mr Deputy Speaker, so I will go back to quoting the impact assessment:
“It has not been possible to estimate the impact of the reform because the proportion of claimants who currently have legal representation is unknown.”
Given that the words “assumes”, “assumed” and “assumption” are used nearly 50 times in the impact assessment, how can we take it seriously? The Minister knows the dim view the Supreme Court took of the Government’s introduction of employment tribunal fees and the legacy of that unlawful policy, which is still being unravelled by his Department—a bit of a hospital pass left by one of his predecessors. With that in mind, does he consider that allowing injured people to bring personal injury cases with a general damages value of £2,000 or less without any restriction has no broader social benefit? And can he really say that the proposals in the Bill will not impede access to the courts for injured people with a personal injury case with a general damages value of £2,000 or less?
The Bill will be welcomed by claims management companies. We, I think, are united in this House against their pernicious influence and irritating methods, but in the impact assessment it actually states:
“There may be the potential for a rise in CMC’s seeking to enter the market to support claimants without legal representation”.
There is no “there may be” about it: it will happen. Of course they will move in. They will offer poor legal advice on the cheap, maximising their profits on the back of others’ misery, as they have always done. If the Government really cared about the consumer, they would be listening to public opinion and introducing an outright ban on cold calling for personal injury claims by CMCs.
I hope the Minister will reflect on the concerns I have expressed. There will be more, I am sure, in today’s debate and in the other place, because the Bill really needs substantial amendment to protect the principle of access to justice. Those concerns are widely shared by the Justice Committee, the Law Society and solicitors across England and Wales. Access to justice has already suffered enough under this Government and under the previous Liberal Democrat and Conservative coalition Government. The Bill is a gift to an already obscenely greedy insurance industry that needs to be reined in.
It is a pleasure to take part in this debate and to follow the hon. Member for Cardiff Central (Jo Stevens). She mentioned that she has a history of involvement in this area. I would like to state at the outset that it is important to recognise that there are many personal injury lawyers who do a good job. Over the years, I have had quite a lot to do with personal injury lawyers in my capacity as a constituency MP, as well as in relation to a fatality involving my own family. I am happy to state that there are very, very good people out there doing the work of personal injury lawyers. As in perhaps every professional domain there are good, there are bad and there are the indifferent—and there are snakes. I do not think we should let this debate pass without recording that there are some very good people out there doing important work in the area of personal injury litigation.
It is also important to recognise—we have not heard anything from the Opposition on this—that there has been a significant rise in the compensation culture. I do not think that personal injury litigation lawyers—at least, not all of them—are tools of Satan. I have met one or two who have come close to that description, but listening to the Opposition one might get the idea that all insurance companies are tools of Satan. In fact, they are nothing of the kind. They are an enormously important and worldwide British success story. They manage huge amounts of funds through premium income, which pay many people’s pensions, including the pensions of many people represented by Opposition Members as well as by the rest of this House. A bit of balance on the nature of the problems facing insurance companies and the measures they have taken to tackle them would have been in order. I am afraid we heard nothing along those lines.
I strongly support the Bill. If I have one criticism it is that it is very overdue. I had a meeting with the head of fraud at Aviva—known to old fashioned people as Norwich Union—which is a big employer in East Anglia and of my constituents. In 2006, it set up the Insurance Fraud Bureau because it was so concerned about the scale of what are called induced car crashes—“crash for cash” was the popular phrase. On 16 January 2007, I held a debate in Westminster Hall on this very subject. In preparation for this debate, I glanced at it to see what I had said and to remind myself of some of the facts. Norwich Union’s 2005 report “Shedding Light on Hidden Crime” pointed out that the scale of fraud was growing at a very high rate—I won’t say it was exponential in case there are any mathematicians here to correct me—and that the proceeds from induced car accidents were routinely being used to fund other forms of organised crime, including drugs, people trafficking, benefits and credit card fraud, and money laundering.
The report estimated that between 1999 and the publication of the report in 2005 there had been 22,605 staged or induced car accidents. It broke them down city by city. At the top was Blackburn, with 1,710 staged accidents between 1999 and 2005. That was perhaps the reason that Jack Straw, who many of us remember fondly in this House and who was the MP for Blackburn, took a great interest in induced car crashes and fraudulent claims for whiplash injury. It took six or seven years to generate 22,605 induced accidents. Eleven years ago, the Insurance Fraud Bureau estimated that the rate of growth would mean a further 20,000 induced car crashes in the next 18 months. We heard the Secretary of State say that there are now 70,000 fraudulent claims for whiplash every year, so it has grown much, much more since this phenomenon became more publicly discussed 10 or 12 years ago. Just as it was then, it continues to be a direct threat to public safety.
I will not, because I know there is a time limit and other Members wish to speak. I hope the hon. Lady will forgive me.
The Bill is very welcome. We need to be clear that the insurance companies have done a great deal and want to do more to try to tackle this problem. They said at the time that one of their main concerns was the rise in the cost of premiums for honest motorists. That continues to be a major concern. The fundamental problem, which I do not think I really heard the Opposition address but which the Government certainly did, is that road traffic accidents as a whole have been going down but personal injury claims have been going up. There is obviously something fundamentally wrong, and I am glad that the Bill is beginning to address it.
I shall comment in passing, in the Minister’s hearing, on two other issues that the Secretary of State referred to and which I strongly welcome. One is excluding vulnerable road users, such as cyclists—a welcome move. By the way, on what the hon. Member for Cardiff Central said, I should say that I support stronger moves against claims management companies. I had a phone call from one last week, talking about my accident on 26 January last year, of which of course I had no knowledge whatever. I am up for telling them where to go and for an argument with them at times—as many of us would be, probably—but my concern is that they prey on the vulnerable and deceive people who are not necessarily as robust as most of us in this House would be in such circumstances.
The second issue is about the proposal for a longer period of implementation for the IT system, which was a very welcome announcement from the Secretary of State. I sat on the Public Accounts Committee for 16 years and heard more stories about failed IT systems than about any other subject. The biggest red flag in relation to the putative or prospective failure of an IT system was the compression of the testing timetable. I am glad that the Government have recognised that.
Let us be clear: reform is needed. The Bill makes a proper link between whiplash claims and medical evidence, and that is long overdue. It provides a fixed tariff, which is fair and reasonable in the circumstances, given what has happened in recent years. There will be the possibility of an uplift and there will be flexibility. The tariff is perhaps unfortunate, but I think it necessary. Given what the Secretary of State said as a Treasury Minister about the independence of the Lord Chancellor, I do not have any fears on that score, as Opposition Members appear to.
I hope the Bill will go some way towards addressing my biggest concern: young people in rural areas who need a car to get to work. I represent a very large rural constituency of more than 300 square miles. Twenty or 30 years ago, car insurance premiums were higher for younger people, but they were not a “thing”—they were not so high that it became almost impossible for young people to get on the road. They were not more expensive than the car itself. That is no longer the case. The cost is hugely prohibitive and a direct result of the rise in the compensation culture, which has led to the penalising of honest motorists and which this Government are prepared to do something about. I strongly support the Bill.
The Government talk about reform of the justice system, but I am afraid that on the Opposition Benches we just turn around and say, “Here we go again!” Once again, the Tories are putting more barriers between workers—ordinary people—and access to the justice system. At the same time, they are helping their friends in the finance industry.
The employment tribunals farce has already been mentioned; thankfully, following work by the trade union movement, it was overturned by the courts. Then we had cuts to legal aid—another disgrace. Last year, it was found that there had been a 99.5% reduction in the number of people receiving legal aid for benefits cases. The Tories are pricing hundreds of thousands of people out of the legal system.
This Bill is known as the “whiplash Bill”, but it should really be called the “bogeyman Bill”—it is just a smokescreen to create a bogeyman so that public support can be gathered to increase the profits of the insurance industry. We are told that it will save the insurance industry millions and that that money would be passed on to customers. The same was said in 2013, when a fixed fee regime was brought in for more minor accidents. Costs to the insurance industry were slashed and damages to claimants were reduced as solicitors charged a success fee as part of their damages. The claimants got less and the insurers paid less.
Despite that reduction in costs to the insurance industry and the fact that the number of claims has reduced since 2013, premiums have continued to rise. How is that? Will the Minister explain? The number of motor industry claims has gone down by 17% since 2017 and is now at the lowest level since 2010—that is from the Government’s own figures, which show the biggest annual fall on record. Claims are down, damages are down, but premiums are up. Why? The profits of insurance companies such as Direct Line went up by almost 50% to £600 million last year; Allianz’s jumped 26% to £121 million. This is not a poor industry that needs the Government’s help. Profits are up, yet premiums are up. Why? Let the Minister explain.
When the insurance industry promised to reduce premiums by £35 a case earlier this year, it took less than a week for it to backtrack because of the discount rate that has been mentioned. The point is that the industry has promised to reduce premiums in the past, but has never, ever delivered. These reforms will do exactly the same: reduce the number of claims and access to justice. The insurance companies will be the winners again.
We are told that the reforms will reduce the number of fraudulent claims, which everybody would welcome, but it is important for us to understand a few facts. Insurance companies make their money by taking as much as they can in premiums and paying out as little as they can in damages. It is important for them to convince people that they are getting a bad deal because of fraudulent claims. They say it openly—“We are forced to put up premiums. It’s someone else’s fault and we are sorry but you’re going to have to pay for it.” That is the bogeyman syndrome.
The insurance industry would like us to think that we are in the grip of a compensation culture—that people are getting thousands of pounds for trivial accidents. The poor insurers have no choice but to put up premiums, they want you to think. That is not true and the Government have not brought forward a shred of evidence to prove it. It is a fantasy propagated by the insurance industry to promote profits. To succeed in any claim, people have to convince a judge that what they are saying is correct. The suggestion that any insurer would pay out a claim that it knows to be fraudulent or trivial is ridiculous—they are champing at the bit to expose and publicise fraudulent claims, to add fuel to the fire of the insurance industry’s myth of a compensation culture.
The reason behind it all is to make more money, and the Government are helping. Mark my words, further down the road there will be another bogeyman—a new excuse to raise premiums. Watch carefully: whose fault will it be next? This is all part of the Government’s policy of holding back the advancement of ordinary working people while helping the finance industry in the City. Whether it is the constant interference with people’s benefits—implying that they are skivers and need to be sanctioned—stealing the pensions of the WASPI women, or reducing access to the justice system, it is all the same: attack, attack, attack on the rights and livelihoods of ordinary people, while boosting the profits of the wealthy and the privileged.
At the outset, I refer Members to the Register of Members’ Financial Interests. I am a practising solicitor in England and I am still on the roll of Scots solicitors.
I do not practise in the field of personal injury, but I have in the past—in both Scotland and England. I represented “pursuers”, as claimants are known in Scotland, and claimants in England. I also represented defendants in England—Her Majesty’s Government, most notably.
This debate has excited a lot of passions. We heard the shadow Front Bencher make some deeply unwelcome comments about alleged friendships between Government Members and members of the insurance industry. We also hear outside the Simpsons-esque portrayal of ambulance-chasing lawyers—a poor reflection of the vast bulk of solicitors, barristers and other persons, regulated and authorised under the Legal Services Act 2007, who act in this area. We heard the hon. Member for Cardiff Central (Jo Stevens) outline her own valuable experience in this field.
What is this debate all about? I will concentrate on soft tissue injury—known as whiplash. Whiplash elicits much passion among people and is often undervalued as an injury, and I do not just mean that in the financial sense, in terms of quantum; I mean that it is joked about by members of the public—until, of course, it happens to them and they suffer an accident through no fault of their own, but through the delict, the tort, the negligence of another individual who has breached a duty of care towards them. It is right, moreover, in our mature and well-developed society that when one breaches a duty of care towards another, either through wilful intent or negligence, our system recognises it primarily by way of financial benefit, and that is the primary purpose of a mature and competitive insurance industry.
Back in February 2017, when I was a member of the Justice Select Committee, I questioned both the then president of the Association of Personal Injury Lawyers and the director of insurance policy for the Association of British Insurers. I put various questions to both, but in particular to the latter. I asked him whether he linked the number of whiplash claims with the high cost of insurance premiums, and he confirmed that that was the case, but I also asked him to confirm whether the use of the word “epidemic” was right, given that year on year we had seen a decrease in the number of whiplash claims. His response was that the insurance industry did use that word but that so too did others—namely, colleagues in the Association of Personal Injury Lawyers.
I then asked the director of insurance policy, given that he had accepted a link between the number of whiplash claims and the high level of car insurance premiums, and given the decline in the number of such claims, by what percentage car insurance premiums had declined—what concomitant decline in premiums had been witnessed—and there he stumbled. It was then that he revealed that he did not have an answer for the Committee but that he would write to it subsequently, which he did. When he did, he confirmed that the number of soft tissue injury claims had decreased by 5.8% in 2015-16, but there had been no corresponding decrease in car insurance premiums—in fact, there had been an increase in that year and the following year. The excuse he gave to the Committee was that, as the market cycle started to harden and insurers started to experience inflationary cost pressures from a number of sources, so premiums started to rise again.
I fully sympathise with Conservative colleagues who want us to do the honourable thing in society by allowing vulnerable people and in particular young people to be able to afford car insurance premiums, and it is right that the Government take every reasonable measure that could lead to a reduction in car insurance premiums, but we need to hold the insurance industry to the assurances it has been giving to the Government.
I am afraid that because of time constraints I will not.
I welcome comments the Secretary of State made in answer to Opposition Members. He said several times that the insurance industry would be properly held to account. The Government will bring forward amendments to hold the industry to account for its assurances. On that basis, I feel able to support the Government on Second Reading—on the basis that, as the Bill progresses, those assurances by the insurance industry will be translated into words that we can approve in this place.
The Secretary of State rightly used the word “fraud” at the outset. This is where I differ slightly from the hon. Member for Cardiff Central when she talked about the ABI’s own figure that 0.3%, I think, of claims were fraudulent. It is my view that the insurance industry, as well as the enforcement agencies, including the police, has been reluctant to tackle fraud because of the cost and that therefore we are not seeing the real numbers for fraud.
There is unquestionably fraud, and wherever possible I have encouraged the insurance industry to tackle it more effectively, but we also need to acknowledge that there is a problem with claims management companies. I am talking not about regulated persons, like the hon. Lady, me and other hon. Members, but about cowboys—people who are not authorised persons under the Legal Services Act 2007 and who often act outside this jurisdiction. I have received numerous calls from individuals whom I suspect are based outside any of the UK’s legal jurisdictions—they use sophisticated telephony systems. I wrote to Ofcom, British Telecom, my own mobile service provider and the Information Commissioner’s Office to find out where the numbers originated, and I was told that they were spoof numbers. The problem is there is an industry of unregulated and unauthorised non-lawyers preying on vulnerable people and abusing the system. We have to recognise and tackle that.
Mindful of the time, I will make one final comment that I invite the Minister to consider. The changes that the Government propose that will benefit the British insurance sector will affect the Scottish and English legal systems differently. Let us consider someone with a car insurance policy. The Minister could be travelling from his wonderful constituency of Penrith to his family home in Perthshire, and the oddity is that if he has an accident in the middle lands, as he termed them once, he might get a certain amount of money for a soft tissue injury from a particular insurer, and yet just a couple of kilometres along the road, under the Scottish legal system, the same insurance company might have to pay out considerably more. I ask him to bear in mind the imbalance that that might create in the insurance industry.
It is a pleasure to speak in this debate and to follow the hon. Member for South Leicestershire (Alberto Costa).
Since 2010, under this Government and the coalition before, changes made by the Ministry of Justice have left us with a legal system in a state of utter disrepair. Colleagues across the House, trade unions, lawyers and legal experts have all expressed deep concern about the implications of the Bill and the Government’s policy agenda, put forward under the auspices of cracking down on fraudulent claims. Of course, fraudulent claims are wrong and should be clamped down on, but the Bill is not the appropriate way to do so and its implementation would see a wholly disproportionate impact on access to justice.
Even the statistics being used in the Government’s bid to warrant such widespread changes are highly contested. Recent freedom of information requests showed that the number of whiplash-related injury claims recorded by the compensation recovery unit fell by 18% between 2017 and 2018. Insurance industry data has shown that, in 2016, 0.17% of all motor claims were proven to be fraudulent—a fall from the 0.25% recorded in 2015. We are simply not in the midst of a fraudulent claims epidemic, as Ministers would have us believe. What are indisputable, though, are the consequences of the full implementation of the Government’s legislative agenda and the vast impact it would have on access to justice for many across the country.
On the face of it, the Bill appears innocuous enough, yet it is a shell Bill whose true effect is felt only when combined with the raft of other proposals the Government are bringing forward—namely, the changes to the small claims limit. My concerns with this Bill are threefold: the measures detailed in part 1; the lack of a mechanism to pass on predicted insurance savings to customers; and the overwhelming impact this package of measures with have on access to justice for injured people.
The Bill paves the way for the long-standing and established Judicial Studies Board guidelines to be replaced with a rigid tariff system that would undermine judicial discretion and leave injured claimants much worse off. The draft tariff system presented by the Ministry has shown the reduction in payments for pain, suffering and loss of amenity for road traffic accident-related soft tissue injuries to be overwhelming. Injured claimants could receive up to 87% less than the 2015 average paid out under the existing guidelines.
Moreover, as a result of the proposed changes in the small claims limit—which is closely associated with the Bill—injured people would struggle to achieve access to justice. The raising of the small claims track from £1,000 to £5,000 for road traffic-related personal injury claims, and to £2,000 for all other types of personal injury claim, will cause thousands of injured people to fall out of the scope for free legal advice and representation, and potentially to be denied justice.
My hon. Friend is absolutely right. The proposals constitute an attack on working people who, through no fault of their own, are injured in the workplace.
If the Government are intent on fraud reduction, why are those who are genuinely injured faced with receiving a fraction of what they would currently receive? Most injured people would happily give the money back if it meant that they were no longer injured.
Under the proposed tariffs, people will be given more compensation if their flight was delayed for three hours than they would receive after an injury lasting for three months. The idea of a £235 maximum payment for a three-month injury is not only laughable, but a clear assault on any reasonable definition of access to justice. The move to a tariff system helps no one but insurance companies, while customer premiums continue to rise. There are no measures in the Bill that would make it incumbent on insurance companies to pass on savings that are currently calculated to be £1.3 billion. I know that the Minister has suggested that the Government will table an amendment—as promised in correspondence with the Chair of the Justice Committee, the hon. Member for Bromley and Chislehurst (Robert Neill)—but it is disappointing that that afterthought has not been included in the Bill thus far.
The Government say that they are listening to those who have concerns about their policy agenda. It is true that, following the Justice Committee’s report on the small claims limit, they have postponed their changes until 2020, but the purpose of that delay is by no means a rethink of policy or agenda. These changes are still coming, and their effect will still be felt whether the package of measures is presented this year, next year, or the year after that. The Bill, which is being rushed through on the quick, will leave us with a textbook example of a change in the law with ramifications that we will not truly understand until much further down the line. By that point it will be too late: the damage will have been done, and access to justice will have been eviscerated for many.
We must not forget that Conservative Governments do not have the best track record on justice matters. The Conservatives were repeatedly warned before proceeding with their legal aid reforms in 2012, but the effects of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 have gone further and deeper than was ever intended, with the number of civil legal aid matters initiated falling by 84% between 2010 and 2017. The changes in employment tribunal fees that were introduced under another Tory Lord Chancellor—which have since been found to be unlawful—caused a 68% fall in the number of single cases received per quarter by employment tribunals between October 2013 and June 2017. That was yet another ideologically driven Tory attack on access to justice.
We have just been debating in Westminster Hall the Legal Aid, Sentencing and Punishment of Offenders Act 2012 and the legal aid cuts. A sustained attack on access to justice has been going on since 2010: the Government have not learnt since then. Is the Bill not just another sustained attack on victims, restricting people from getting a fair trial in the courts—as my hon. Friend says—in the interests of no one except the insurance companies, which are major donors to the Conservative party?
My hon. Friend is absolutely right. Had it not been for this debate, I would have attended that important Westminster Hall debate on LASPO and cuts in legal aid.
It is predicted that the Bill, and secondary legislation changes in, for instance, the small claims limit, will deter about 350,000 people from pursuing claims for injuries that were not their fault. Such a vast reduction in the number of cases is not something in which to take pride, but these measures will fail the genuinely injured. A recent survey by Unison showed that 63% of its members would not proceed, or be confident to proceed, with a claim without legal representation, but as a result of the Government’s package of measures, that is precisely what injured people will be faced with.
We cannot find ourselves, a year or two down the line, in a rabbit warren of even more legal advice vacuums, with stories aplenty of access to justice denied as a result of the enactment of the Bill and the forthcoming changes in the small claims limit. We must not be left with an ill-thought-out package of measures and regulations that will leave genuinely injured people with a severely limited ability to access justice.
Let me begin by declaring an interest, in my role as chair of the all-party parliamentary group for insurance and financial services. Before my election in 2015, I also spent more than 20 years working as an insurance broker, so I have had a lot of experience of dealing, in the front line, with claims such as those that we are discussing this evening.
I think it important for Members to understand the scale of the problem that we face, and I want to talk about that before dealing with the specifics of the Bill. Reforming this industry does not just mean tackling the cold calls that I am sure colleagues on both sides of the House have had to endure from people informing them that they have had an accident when, in many cases, they have not; it also means addressing the out-of-hand compensation culture that has been allowed to evolve in the United Kingdom. When so much money is at stake for the multi-million-pound personal claims industry, the reality of whether someone has sustained a genuine injury is often merely an obstacle to be overcome, rather than a barrier to the making of a claim.
Over the last decade, the number of personal injury claims resulting from road traffic accidents has risen by 40%, although vehicles have become safer, and there has been a long-term decline in the number of road accidents of nearly a third. The Department for Transport’s 2016 annual road casualties report showed a 3% reduction in the 2015 figure, and the 2016 figure was the lowest on record. Let me put that in context. According to data from the Compensation Recovery Unit, during 2017-18 the number of personal injury claims rose to 650,000 from 460,000 in 2005-06, about 85% of them being whiplash-related. In the last year alone, the insurance industry was able to identify 69,000 motor insurance claims that it considered to be fraudulent, and undoubtedly many more went undetected.
I am sorry, but given the time constraint and the fact that many other Members want to speak, I will crack on.
During my latter years as a broker, I saw the attitude change. Exaggerated claims were often seen as a “victimless crime”, and as being okay, because the insurance industry would pick up the tab. Although the amounts of compensation paid for soft-tissue claims are relatively small, the associated claims-handling costs—including the costs of investigation, processing, lawyers’ fees and medical reports—are disproportionately large. For example, a claim for about £1,000 may ultimately cost the insurer two or three times that amount. It is clear that fraudulent claims have a direct impact on the cost of every one of our constituents’ motor insurance premiums. Given an average of about 60,000 vehicles per constituency, there is a considerable cost. According to the Association of British Insurers, for every pound paid out in compensation, nearly another 50p is then paid to the claimant’s lawyer in costs.
The Bill gives us an excellent opportunity to fix the current broken system, a system that is not working for millions of motorists throughout the country. It will bring about long-overdue reforms of personal injury compensation. It will provide a fairer system for claimants, insurance customers and taxpayers by creating a more proportionate compensation system in the case of both whiplash-style claims and claims to which the personal injury discount rate is applied, while ensuring that claimants still receive 100% compensation. Part 1 sets a new fixed tariff for pain, suffering and loss of amenity, and sets a higher financial threshold for lawyers’ recovery of their legal fees from insurers. The new system will also make it much easier and faster to make a claim, with a new online portal ensuring that small claims can be processed efficiently.
It is important to note that larger claims following serious injuries, and any payments for medical bills or loss of earnings, will be unaffected. The savings will result from the cutting out of a very expensive middleman, which must be a win-win for our constituents. The findings of a recent survey back that up, showing that nine people out of 10 think that in this area legal costs are too high, and 71% would be happy to use an online portal to make their claims rather than requiring legal representation.
Supporting this Bill will help provide a fairer environment that will inevitably lower motor insurance premiums for millions of motorists. The Government consider that the reforms would lead to savings of about £1.1 billion and rightly expect that to be passed on to motorists, which would result in an average saving per motor insurance premium of about £35. Many insurers have already committed to pass on cost benefits to their customers in a letter to the Lord Chancellor, which was signed by firms representing 86% of the ABI’s UK motor and liability insurance business members. That letter provides the clear intention of the industry and, significantly, the benefits that this Bill represents to every motorist in the UK.
I had hoped to speak a little more about the discount rate, but time is against me. I am, however, very supportive of the reforms and it is striking that the Government have had to set aside £6 billion extra for the NHS alone just to cover potential claims over the coming years. Every day that these reforms are not put into effect customer premiums will remain higher than should be the case, which will have a particular impact on old and young drivers who usually already have to pay the highest premiums.
Finally, although this is not directly attached to the Bill, I welcome the wider proposals which suggest an increase to the small claims track limit to £5,000. The current level has not been increased since 1991 and has been changed to £10,000 for virtually all other types of claim.
It is clear that compensation culture has got way out of hand and penalises everyone who insures a car. When I first started in insurance, whiplash or soft tissue injury claims were virtually non-existent, but over time they have grown to become a significant manifestation, which, as we have heard, cost motorists anywhere between £40 and £90 extra on their policy.
Critically, this is an industry where in many instances the claimant is not the main beneficiary. The measures put forward in the Bill will not, as is suggested by its opponents, affect the ability of people to seek fair compensation for their injuries or suppress access to justice, but will, more reasonably, cut the incentives for a claimant industry to disproportionately profit from our constituents’ misfortune.
I have had dicussions with a range of insurers and they are committed not only to passing on the savings directly to consumers, but also to provide a renewed focus on rehabilitation from the injuries, which from my experience of dealing with genuinely injured customers was exactly what they wanted. These reforms are long overdue and will deliver benefits to millions of motorists, while delivering on the Government’s manifesto commitment to
“reduce insurance costs for ordinary motorists by cracking down on exaggerated and fraudulent whiplash claims”.
That is why I am backing the Bill’s progress today.
This Bill claims to hand power back to consumers and the Government say that it is a mechanism to lower insurance premiums, but I agree with a number of the contributions from my side of the Chamber stating that that is far from proven. The Association of Personal Injury Lawyers points out that in 2017 the motor insurance industry made profits of more than £250 million—the biggest profits since 1994, so this is hardly an industry in crisis. Even the ABI’s own data show that in 2017 the cost to motor insurers of settled bodily injury claims was 9% below the level recorded in 2016 and 2015. So it is no surprise that these reforms will be welcomed by the industry, as it will see its profits rise, particularly through increasing the small claims limit through secondary legislation, which risks denying many potential claimants being able to seek justice. The industry will carry on collecting the premiums and will have an extra windfall from not having to pay fair compensation to those injured through no fault of their own.
Madam Deputy Speaker, you will be pleased to hear that my comments will be brief, because my main point tonight was going to be about vulnerable road users, and I welcome the comments from the Secretary of State in his introduction that the Government have seen sense on this and cyclists in my great city of Cambridge will not have to worry as they have had to. But I just say to the Government that I have been receiving representations on this from people in Cambridge for the past 18 months, so why on earth could this not have been made clearer much earlier when it is apparent that there is consensus across the House that this was not the aim of the exercise? I therefore welcome that Government’s suggestion, although we will obviously want to see the detail and I wish it had been done sooner.
Although my main concern was for cyclists, I cannot help noticing the briefing from the shopworkers’ trade union USDAW warning that doubling the threshold for cases taken in the small claims court to £2,000 will deny legal representation to thousands of workers, and I absolutely believe that that would have a damaging effect on workplace health and safety.
Like many colleagues, I enjoyed my summer holidays, but I also took some serious reading matter with me. I remember Polly Toynbee chastising Members potentially for not reading their copy of the “The Secret Barrister” and perhaps concentrating on the bonkbusters instead. I did read “The Secret Barrister”, however, and found it both shocking and moving, but most of all I found in it a burning desire to make our justice system work properly for everyone. My fear is that too much of the Bill risks moving the justice system and proper representation yet further away from most of our citizens, and I hope that the Government will listen seriously to the concerns being raised in this House and the other House.
My interest in this area stems from a very minor accident that my wife and I had a few years ago, I think, on the M5. We had a minor collision, and for a year after that I was phoned on my mobile on almost a weekly basis by a claims management company trying to get me to submit a fraudulent personal injury claim. No matter how often I told them that I, my wife and my children had no neck injury, they insisted on trying to incite me to manufacture or claim that I had such an injury with the purpose of making a fraudulent claim. I was told, “You can get £3,000 for just saying your neck hurts.” Even as recently as the past two weeks, my wife and I have both separately had automated phone calls—robo-phone calls—from claims management companies asking us to phone back if we think we have ever been involved in an accident.
That experience prompted me to look further into this subject, and colleagues have cited some of the figures. The hon. Member for Jarrow (Mr Hepburn) asked where the evidence is that there is a problem with widespread fraudulent claims. I have my own anecdotal experience of being personally incited to commit fraud, which obviously I did not do, but the figures are compelling. Over the past decade, the number of road traffic accidents has fallen by 31%, so how can it be that personal injury claims have increased by 50%? The answer is of course that these claims management companies are farming claims and inciting people to commit fraud, as they did with me.
I will give way in a moment. The hon. Member for Jarrow also said that judges have decided that injuries—[Interruption.] I am grateful for the heckling from my own side. The hon. Member for Jarrow said that judges had made these compensation awards, but of course that is not true: under qualified one-way costs shifting, insurance companies have a massive financial incentive to settle even claims without merit before they go to court, because even if they win they pay the costs and the costs are often much bigger than the value of the claim. So insurance companies simply settle the claim without a medical examination and without it ever going to court. Therefore, all these compensation claims have not been adjudicated by a judge, although the hon. Gentleman erroneously suggested that they had; they are simply settled immediately because that is the cheapest way of doing it. There is no judicial intervention in almost any of these cases.
My intervention is a question to you, asking how you think the claims management company got hold of your details to be able to phone you and your wife about your accident. Do you agree that your details must have been passed on by insurance companies, who then complain about these very claims management companies, because that is the only place they could have got your personal details and the accident information from? That is what we should be cutting down on.
Thank you, Madam Deputy Speaker. The hon. Member for High Peak (Ruth George) might well be correct in her assumption about where the details came from.
A ban on referral fees was introduced a few years ago, but some insurance companies have sought to circumvent it by using what they euphemistically term “alternative business structures”. This is where an insurance company effectively owns an equity stake in a claims management company or a claimant law firm and extracts value in that way. I know that the Minister is very attentive to these matters, and I suggest to him that we should look at widening that ban on referral fees to include a ban on so-called alternative business structures. We should ban insurance companies from having an equity stake or any other financial interest in claims management companies or in claimant law firms, to make our existing ban on referral fees a little bit more robust. I say that to make the point that not everyone on the Government Benches is batting for the insurance companies.
In terms of public opinion, 58% of the public believe that personal injury lawyers and claims management companies are responsible for creating a compensation culture, and two thirds of the public believe that a compensation culture exists. My hon. Friend the Member for North Warwickshire (Craig Tracey) has described the cost to individual motorists. The cost is being borne by our constituents, many of whom struggle to make ends meet. When 47% of the value of claims is consumed by costs and legal fees, the system is clearly not functioning properly.
I very much welcome the measures in the Bill, particularly the ban on pre-medical examination offers. I was delighted by the Secretary of State’s confirmation that the examinations will be face-to-face examinations. That is an extremely important clarification. As far as I can tell, the only sanction in the Bill against companies making pre-med offers will be a fine levied by the Financial Conduct Authority. I say to the Minister that I hope that those fines will be substantial. The tariff schedule is simple and clear. It is set at about the same level as that of awards made under the current judicial system, so it is not being substantially discounted, but it is simple, transparent and requires less intervention by the judiciary and the justice system, thereby reducing costs. Many European countries, including France, have a similar tariff system. I welcome this simplification and the associated reduction in costs.
The reforms to the personal injury discount rate are long overdue, and I welcome them. If Members are concerned about them, I would just say that periodic payment orders are available to pretty much every claimant if they feel that they would be better served in that way. They would guarantee that every penny due was paid over. I suggest that periodic payment orders are a better mechanism for avoiding the risk of someone being paid a large amount of money on day one and perhaps being given bad financial advice or spending the money on something other than their own care. I suggest that the Government consider making periodic payment orders the default option and that a lump sum award should be made only if a judge decides that there is a good reason not to set up a periodic payment order. I think that PPOs provide better protection for the claimant.
There are one or two important measures that are not in the Bill but are associated with it. I strongly support the increase in the small claims track limit to £5,000 for road traffic accident personal injury claims. The limit for most compensation claims is £10,000, so we might ask why the limit here is only £5,000 when in almost every other sphere it is £10,000. The Government have already made a significant concession by setting the limit at £5,000, rather than at £10,000, as it is for everything else.
I understand that there might be imminent legislation from the Department for Digital, Culture, Media and Sport to introduce a general ban on cold calling in this area. If that is true, it is long overdue and will be very welcome. Claims management companies should not be making these calls at all, and they should be completely prohibited. I have already commented on alternative business structures. I have had personal experience of this; the public are being incited to commit fraud on an industrial scale. There is no reason why the level of claims in the United Kingdom should be so much higher than in other European countries. These are welcome measures, and the sooner they hit the statute book, the better.
If the speech by the hon. Member for Croydon South (Chris Philp) was a bid to get on to the Bill Committee, it was an excellent one, but I fear that I cannot agree with any of the substantive points that he made. As I see it, the Bill will simply increase the profits of insurance companies while reducing the compensation available for those injured in road traffic accidents. Hidden behind the Bill is an attack on all injured people through an increase in the small claims limit. I fear that, as my hon. Friend the Member for Jarrow (Mr Hepburn) implied, it is a classic Conservative Bill that uses the pretence that a serious problem exists even though there is little independent evidence that it does. In practice, it will achieve a reduction in the rights of ordinary working people.
In this case, the alleged serious problem is with whiplash claims, yet the evidence that a substantive problem actually exists is, to be generous, questionable. It is true that there has been a storm of stories suggesting that we have a whiplash injury crisis, but the number of whiplash claims registered with the Government’s own compensation recovery unit has fallen consistently in the past six years. Indeed, it has fallen by 41% since 2010-11. Even when whiplash statistics are combined with the number of injuries registered by insurers with the compensation recovery unit as neck and back injuries, there has been a significant fall of 11% since 2011-12. The claim of an epidemic of fraudulent claims is a popular canard that has been repeated many times by Conservative Members today, yet the Government’s own report from Lord Young after 13 years of a Labour Government concluded that a compensation culture was a perception, not a reality. As my hon. Friend the Member for Cardiff Central (Jo Stevens) noted, the Association of British Insurers’ own data in 2016 showed that a tiny fraction— just 0.17%—of all motor claims were proven to be fraudulent.
Like every car owner and insurance buyer, I would welcome genuine measures to prevent fraud. Greater punishments for convicted personal injury fraudsters and, as my hon. Friend the Member for Lewisham West and Penge (Ellie Reeves) said, an outright ban on cold calling from dubious claims management companies would do more to prevent fraud than the measures in this Bill. Indeed, the Bill and the package of which it is a part appear to start from the position that every claimant is a fraudster or a charlatan trying to make a quick buck from a car accident. It will mean a substantial reduction in compensation for all claimants, including those with genuine injuries who make up the vast majority of claimants.
As for the claim that these measures are going to lead to a substantial reduction in the cost of motor insurance, I think we are entitled to be sceptical. Reforms in 2013 have provided insurance companies with a windfall of £8 billion over the past five years, yet we have all seen premiums rise and rise again. According to the Association of British Insurers’ own figures, average premiums have increased by almost 17% each year between 2013 and 2017. I appreciate that Ministers have been written a letter by some insurers promising that if the Bill passes they will cut their premiums. The Secretary of State has claimed that there will be an amendment that will hold insurers’ feet to the fire. Well, that amendment could and should have been published ahead of this debate. I struggle to think of a single measure that Ministers could add to the Bill that would guarantee that premiums were cut. Perhaps that is why such an amendment has not been published today. Perhaps the only measure that might work would be a legal cap on motor insurance premiums. There would of course have to be a bit of consultation first, and I appreciate that those of us who sat through debates about an energy price cap may be sceptical given that that has not stopped energy bills rising either. At the moment, however, this Bill looks like it will amount to a £1 billion boon to some very big companies.
The Bill proposes a new tariff-based system which, conveniently for insurance companies, reduces the average compensation paid out to injured victims of road traffic accidents. In 2015, the average compensation for a whiplash claim with an injury duration of around six months was £1,850. Under this Bill, compensation for the same injury will be reduced to £450—a reduction of almost 80%. To remedy that supposed overcompensation for the genuinely injured, the Government want to make it even harder to bring a claim by forcing increased use of the small claims track, where a claimant’s legal costs are not recoverable. That would see injuries such as facial scarring, fractured ribs and whiplash classed as small claims. As the trade unions and the Law Society have all set out, it amounts to a huge inequality of arms in the courts system for those who have experienced road traffic accidents. Individuals deprived of legal advice will have no choice but to act for themselves, while the insurance companies defending claims will still have huge resources to pay for lawyers to take on the unrepresented.
Until now, it has been left to independent judges to decide on levels of compensation. This Bill stifles that very independence and replaces the flexibility of our judges to appraise each individual case of injury on the roads independently and on merit with a tariff that reduces value for all of us who pay motor insurance premiums. If the tariff system as proposed in the Bill is introduced, it may well open the door to the introduction of similar tariff-based systems in any area that provides a lucrative saving to the insurance industry. Notably, Lord Woolf noted the dangers of the tariff model being applied to holiday claims, industrial deafness claims and so on. The Bill benefits the insurance industry and will not lead to lower motor insurance premiums. I hope that it will be substantially amended or defeated.
This important Bill touches upon significant issues of civil liability and the way in which we treat of them. The Justice Committee considered both parts of the Bill, and I will refer shortly to our reports in those two regards, but I must first refer the House to my declaration in the Register of Members’ Financial Interests.
First, on whiplash, is there a problem with fraudulent claims? My judgment based on looking at the evidence is yes. I say that not least because I have over the past few weeks received cold calls of the kind that other hon. Members have mentioned asking me to make claims relating to accidents that never happened. Some of the debate in the other House indicated the same. Practitioners know that it happens, but the extent of it is harder to measure. We then have to consider whether the measures in the Bill are proportionate to deal with the mischief, because the limitation that could be put upon the honest claimant must be proportionate and acceptable to deal with the vice of the dishonest claims. The Government must be careful in how they draw forward the evidence base on that.
It is pretty clear that there is a significant and persuasive disparity between the number of accidents and the number of claims. On balance, I am rather in agreement with Lord Hope of Craighead, a former justice of the Supreme Court, who said during the Bill’s proceedings in the other place that the Government had
“said enough to persuade me that it is necessary to do something to try to minimise the abuse that has given rise to such a large and disproportionate number of whiplash claims. The abuse has been going on for some considerable time, and it is time that something was done to address it.”—[Official Report, House of Lords, 24 April 2018; Vol. 790, c. 1490.]
I am happy to go with that. He is a highly experienced judge. I would also pray in aid Lord Judge, the former Lord Chief Justice of England and Wales, who said that
“some claims absolutely reek of fraud”.—[Official Report, House of Lords, 12 June 2018; Vol. 791, c. 1599.]
However, that does not mean that we should assume that everything that is asserted in terms of the benefits will necessarily follow. Like my hon. Friend the Member for South Leicestershire (Alberto Costa), I was sceptical of the evidence of the ABI witnesses, and I found the Medical Protection Society more persuasive. It is therefore important that the Government rigorously monitor such claims and that there is a genuine hold on whether they are actually passed on. That is why there should be some independent monitoring, which the Justice Committee suggested could involve the Financial Conduct Authority as well as the Ministry of Justice, to hold the insurance industry’s feet to the fire.
Secondly, when they are brought in, the tariff levels will be a departure from our norm, although it does happen elsewhere. It is most important that the judiciary are fully consulted on the setting of those tariffs, and I am glad to see the Government recognise that that is the right way to proceed.
Thirdly, in raising the small claims limit, it is most important that we take on board the senior judiciary’s significant evidence on the potential impact in the courts, to which our report refers, and the dangers that will happen if litigants in person—genuine litigants in person—have difficulty navigating the system, which may have the unintended consequence of placing additional burdens on the Courts Service. I recommend the evidence of both the hon. Mrs Justice Simler and his hon. Judge Nigel Bird to our Committee on those matters, on the outworking of the online portals for such claims and on the way in which that matter should be taken forward.
I am glad the Government have agreed to remove vulnerable road users from the Bill, which is an important recommendation of the Select Committee, but they should also consider the position of other claims that are more complex than the normal straightforward whiplash and soft tissue injury claim. In particular, they should consider where we should set the appropriate limit in relation to employment liability and public liability, which almost invariably create more complex issues. It is much harder to expect people, on an equality of arms basis, to deal with issues arising collaterally from the main point in such cases. As the Bill proceeds, we need to look again at how we handle that.
Those are all important issues. It is important that the Civil Procedure Rule Committee is consulted on how those matters should be taken forward. We refer to that in our recommendations, too. None of those is a reason for rejecting the Bill but, frankly, there are areas where the Government need to strengthen the evidence base. Purely relying on the insurance industry is not enough. There is other evidence for strengthening the case on which the Government could rely, and they need to make sure they get the balance right.
The Justice Committee also considered the discount rate, which on balance is a sensible proposal. There was debate among the witnesses who gave evidence to the Committee and among the members of our Committee as to where to pitch it between very risk averse and risk averse. The proposal is realistic, and it is worth observing that the noble Lords who served in the Wells v. Wells case accept that it is appropriate sometimes to revisit the basis of that ruling. We have to reflect real-life practice, so I do not think that is a problem.
I am pleased there will be greater transparency on the way in which the discount rate is set, and all practitioners recognise the value in having a regular reset of the discount rate, rather than having it drift on for a number of years, as it has in the past. If the Lord Chancellor, as I am sure he does, acts independently of Government in a virtually quasi-judicial role and takes proper advice, for which he is accountable to Parliament, it would give us a better system for dealing with the discount rate in future.
I very much agree with the points about periodic payment orders, which should be encouraged more, and there should be much more uptake, as they move risk away from the injured party and towards the insurance company because they are effectively a form of annuity.
We need to do much more to clamp down on cold callers and on the operations of claims management companies, about which my hon. Friend the Member for Croydon South (Chris Philp) made sound points with which I am much agreement. We also need to look at the role of McKenzie friends, particularly paid McKenzie friends, many of whom work for unscrupulous claims management companies and claim to be qualified when they are not. We should probably move to outlaw the use of paid, as opposed to unpaid, McKenzie friends—there is an important difference.
There is much good in the Bill, but there are also things that need to be considered as it goes forward.
It is a pleasure to follow the hon. Member for Bromley and Chislehurst (Robert Neill), the Chair of the Justice Committee, of which I am a member. I welcome his excellent points about our inquiry on this subject, but I do not speak with that hat on.
I co-chair the all-party parliamentary group on cycling, and we are working to shift the transport climate in this country so that more people more often feel safe and able to cycle as a normal means of transport. The Government have said they share that objective because they recognise that having more people cycling improves health and reduces congestion, pollution and costs, but I am concerned that many Conservative Members who have spoken in this debate have generally focused on car drivers and have not appeared to acknowledge that all their constituents are pedestrians at times, that many of them cycle and that many do not drive at all.
My contribution will focus on how those riding cycles, and other vulnerable road users not in a motor vehicle, such as pedestrians and motorcyclists, are affected by this Bill. I was pleased to hear the Justice Secretary indicating that the Government have accepted the recommendation of the Justice Committee and many others to drop the proposal to increase the small claims track limit—the SCL—for personal injury cases from £1,000 to £5,000 for all road traffic collision claims from vulnerable road users. However, I need some clarity on that from the Minister and will be listening carefully to his summing up. First, do the Government mean that vulnerable road users will be excluded from both the tariff and the small claims limit measures? Secondly, I am looking for clarity on how the changes will happen. Will this be through amendments to the Bill in Committee or through statutory instruments?
Notwithstanding my welcoming of the general principle of what the Justice Secretary said and my questions seeking clarity on that, I will continue with my now somewhat revised speech, so that my focus on and concern for vulnerable road users is on the public record.
The Government continue to propose to increase the SCL to £5,000 for all road traffic collision claims, apart from those from vulnerable road users, as we have heard in this debate, although it is also proposed to raise public and employer liability claims limits to £2,000. So there will still be inconsistency among claimants depending on whether the claim is for personal injury or it is a public or employer liability claim. Without change, the Bill would have affected approximately 70% of cyclists’ personal injury claims, and a similar percentage of motorcyclists’ claims, for general damages for pain, suffering and loss of amenity, as many of those—70%—are for less than £5,000. We can assume that for pedestrians the figure is roughly the same, although we do not have the figure. That is why I want to see exactly what the Government mean by removing vulnerable road users from the Bill. VRU claims make up a very small percentage both of all claims and of the total cost of all claims, so doing the right thing will not cost very much.
I wish to focus on three issues, the first of which is the complexity of VRU personal injury claims. The Government repeatedly say that small claims are straightforward and can be achieved without professional support, but often that is not so in the case of road traffic collision claims made by cyclists. Many cyclists’ claims will involve complex arguments concerning what can appear to be conflicting Highway Code rules; there are 14 different rules on junction priority, for example. Even where liability is accepted, contributory negligence arguments are commonly made in courts; arguments are made about a cyclist’s clothing, their position on the road, whether they had their lights on and so on. In pedestrians’ claims, issues are often raised, either in terms of liability or contributory negligence, about where the pedestrian crossed the road; subjective issues also arise, such as whether they took sufficient care for their own safety.
Secondly, I wonder whether one reason the Government are now removing VRUs from the changes is that these road users do not get whiplash injuries and do not make fraudulent claims for whiplash—such claims purportedly being one reason for this Bill. That is because it is almost impossible to get whiplash when on a bike or on foot; those road users generally tend to suffer from broken bones and punctured lungs.
Without these changes being offered today by the Government, we would have had fewer victims of road traffic collisions who were not travelling in a car making a claim. That would have meant a win-win for insurance companies and dangerous drivers, which is unacceptable. Although I am pleased to hear that the Justice Secretary has recognised the concerns of organisations representing vulnerable users—cyclists, motorcyclists, pedestrians and so on—by taking them out of the SCL rate, I still have a concern about the Bill, and it is one raised by other Opposition Members today. It would be fairer to have a uniform small claims limit for all personal injury cases, at or only slightly above the current £1,000 limit. That would achieve the Justice Secretary’s aims of excluding vulnerable road users in a straightforward manner and would also ensure fairness for all road users, regardless of their mode of transport.
Several issues have been raised in this important debate, but I wish to address two main points. Whiplash claims have been a chronic problem in British insurance and road usage for some time. Eight years ago, I joined the Transport Committee, and I served on it for three years. We looked into the issue more than once and found that whiplash claims had gone up in England, so we looked across Europe. What has not been mentioned in the debate is that were Members to look at whiplash rates across the continent of Europe, they would be astonished at how low the incidence of whiplash is. The Transport Committee looked at the issue, including whiplash rates in Germany, five years ago. [Interruption.] I notice the newly appointed Whip, my hon. Friend the Member for Milton Keynes South (Iain Stewart), nodding in agreement. He served on the Committee as well and will remember that we looked into whiplash in Europe and were astonished at the low incidence of claims across the continent. That cannot be because somehow the necks in Germany are more robust than those in Britain. It cannot be a question of Germans being physically different from people in Britain. The case was clearly made that we had a problem with whiplash claims that was specific to the United Kingdom.
My hon. Friend the Member for South Norfolk (Mr Bacon) mentioned the fact that Aviva issued a report more than 10 years ago. Yes, I know that Aviva is a bad, evil insurance company that makes profits, that is successful and that employs people—I know that that is all to be deprecated—but the fact is that its report suggested more than 10 years ago that there was a problem with whiplash. The facts speak for themselves. The idea that over 10 years we could have a 30% reduction in accidents and yet a 40% increase in whiplash claims seems incredible. It cannot be the case that they are inversely correlated. It cannot be the case that as there were fewer accidents, we would have more whiplash claims from accidents. That does not make any sense whatsoever. I am afraid that the Opposition Members who have spoken have failed to address that.
Given the fact that the Transport Committee looked into the issue four or five years ago and that people issued reports more than 10 years ago about whiplash being a problem, and given that we know—as Opposition Members acknowledge—that unscrupulous claims companies are cold calling people, I suggest to Opposition Members that they cannot have it both ways. It cannot be the case that the whiplash increase is simply a scare story whipped up by the insurance industry and at the same time the claims companies are cold calling and being equally unscrupulous. It has to be one or the other. The insurers cannot be suggesting that it is fraudulent while compensation claims companies are at the same time pushing fraudulent claims. The two go together.
The Bill is timely; indeed, it is long overdue in respect of the measures on whiplash claims. My hon. Friend the Member for Croydon South (Chris Philp) was quite right that it cannot simply be a blank cheque for insurers. The Government have to look more closely at how the insurance companies are going to pass on some of the perceived and anticipated benefits of reducing whiplash claims and ultimately reduce premiums for consumers. I fully appreciate that in many ways it has been quite a difficult time for the insurance industry. Insurance premium tax has gone up from 6% at the beginning of the decade to 12%. That is greater taxation. Some of us have argued against such steep increases, but those increases have happened. The idea that, somehow, the insurance industry is a den of profiteers or a wicked industry that acts against the interests of our constituents is silly; it is a crazy idea. It is a very successful British industry, and something that we should be supporting. It is one of a number of industries—not a huge number of industries—in which we are world leaders, so it is very disappointing to hear, once again, the industry being denigrated by Opposition Members.
The hon. Member for Hammersmith (Andy Slaughter) said that, at £250 million a year, the insurance industry was making excessive profits. Bearing in mind that there are 25 million cars in the UK, that works out at a profit of £10 per insurance policy. That is hardly profiteering, is it?
I would not have thought that it could be described as profiteering. It is a legitimate business. I know that many Opposition Members do not even believe in private enterprise or business. [Interruption.] They do not like that. They laugh rather nervously at my suggestion, but we know exactly where they stand. The idea that companies should make a profit—heaven forbid—is anathema to them. This is a party whose shadow Chancellor is, I believe, listed in “Who’s Who” as wanting to overthrow the capitalist system. He is an out and out Marxist. We can laugh at these things, but they are on the record, and it is actually very serious.
The insurance company is a success story. It does make profits, but we have to recognise and be very honest about the fact that whiplash claims are, in many instances, fraudulent. People in this House have described how they have been cold called. I have been sent countless emails asking me to claim compensation for accidents that I did not even know I was involved in and I think many other people have similar experiences. This is a timely piece of legislation. I am delighted that, after many years, we will tackle this issue.
I just want to touch briefly on the discount rate. I remember when it was reduced a little more than a year ago—I think it was in February last year—that there was huge concern about the very low rate. I believe that it was a negative rate. That was not remotely sustainable and I am delighted that the Government’s legislation is trying to put the discount rate issue on a more sustainable and rational basis. There is little to disagree with in the Bill. It is a good piece of legislation and I am very happy to support it on Second Reading.
One of the fundamental principles of the legal system in England and Wales is equality before the law. This Bill skews things even further in favour of the insurance industry at the expense of the general public. It is yet another attempt by the Government to deny access to justice. It is an attack on victims of accidents at work and victims of road traffic accidents.
The insurance industry has been successful in lobbying the Government and already has a huge advantage over the general public thanks to various enactments by previous Conservative-led Governments. In 2012, the Government passed the Legal Aid, Sentencing and Punishment of Offenders Act, which took away legal aid for all personal injury claims and introduced fixed fees, with some costs having to come out of claimants’ damages. In 2015, the Government passed the Criminal Justice and Courts Act, which introduced the “fundamental dishonesty” defence allowing defendant insurance companies to have a claim dismissed if, on the balance of probabilities, the judge was convinced that the claim was fraudulent.
The insurers also set up “askCUE”—Claims and Underwriting Exchange— which, for a fee, can find those who are repeat claimants. The insurers also fund a unit at City of London police to help detect and prosecute fraudulent claims. Insurers have amassed quite an arsenal of weaponry to use against fraudulent claims, but they tell us that this is not enough and that there is widespread insurance fraud. I have yet to see any reliable figures that support that.
In the cases of people who are willing to enter into a criminal enterprise with those companies, we should be going after the claims management companies. I would support targeting those, but not at the expense of attacking the public with the measures in this Bill.
Included in their figures of alleged fraud are people who have withdrawn their claims and those who have had their claims refused over the phone. Figures from the Government’s own Compensation Recovery Unit show that claims are at their lowest since 2009. Government measures are already working and the insurance industry is settling 99% of all road accident claims. This Bill and its measures are totally unnecessary and unwarranted.
As hon. Members have already stated, the increase in the small claims limit from £1,000 to £2,000 generally, and to £5,000 for road traffic accidents, is scandalous. If the Bill passes, claims for the same injury suffered by the same person will be treated differently because it occurred when in a car. How is that equality before the law? We should not forget that claimants are the innocent parties and would be suing someone for the negligence that caused their injury. If claimants are not able to secure the services of a solicitor, they may not succeed in their claim. That will deprive them of damages to which they should be entitled, and may well make things difficult. For example, an employee suing their employer for accident at work would find it very hard to do so without a solicitor.
Clause 1 of the Bill tries to define what a whiplash injury is, but seems to have done so without any medical references. It says that an injury is defined as whiplash if it is a “tear” or “rupture”
“of a muscle, tendon or ligament”.
This clumsy attempt to define whiplash fails to take into account the fact that many of these injuries can be debilitating, requiring serious and complex medical treatment. The definition also unfairly captures serious injuries that could result in the victim not receiving the proper compensation they are due.
Clause 3 then goes on to say that the Lord Chancellor will set the tariffs for compensation for whiplash claims. The draft tariffs seem to have been plucked out of thin air. There is no rhyme or reason when compared with the figures currently set by the Judicial College or the Government’s own figures for the criminal injuries compensation scheme. Under the current criminal injuries compensation scheme, if someone was hit by a driver who was then convicted of a criminal offence, and if they suffered whiplash for over 13 weeks, their claim would be worth £1,000; the Government would pay the claimant £1,000. Under the current proposals in the Bill, a claim for a whiplash injury of between three to six months recovery would be worth only £470. Why are the Government allowing insurers to pay less than half of what would be paid by the Government? The inconsistency is staggering and shows just how much the Government are willing to please insurers.
It should not be left up to the Lord Chancellor to set these tariffs. No explanation has been given for how these figures have been reached. It should be for the judiciary to set the tariffs, as they have daily experience of dealing with such evidence-based claims in court. If the Lord Chancellor is allowed to set these tariffs, figures for whiplash will be unlikely to rise if past performance of the criminal injuries compensation scheme is anything to go by.
Under the criminal injuries compensation scheme, a claim for a whiplash injury from which the victim took six to 13 weeks to recover was set at £1,000 in 1995. These figures have been revised twice—in 2001 and 2008—and the compensation rate of £1,000 remained unchanged despite inflation. In 2012, whiplash claims of six to 13 weeks were removed altogether, and the rate of £1,000 was available only for claims of over 13 weeks. If the figure of £1,000 had been index linked to the retail prices index since 1995, a whiplash claim under the scheme would have been worth £2,780.30 in today’s money.
Let me turn to part 2 of the Bill. Last year, the Justice Committee produced a report on the discount rate. The discount rate applies only to large awards of damages for victims who have suffered catastrophic, life-changing injuries that leave them in need of constant care, adaptations to their home and additional support. The Justice Committee recommended the setting up of an independent expert panel to advise the Lord Chancellor on setting the rate and said that the panel’s advice should be published in full. I can see no reason why the Government are trying to restrict the transparency of this process, and I invite them to amend this measure. I think we would all agree that the rate needs to be reviewed more frequently than it has been over a number of years, but three years is far better than five years, as it would ensure far fewer fluctuations in the figure.
It is also deeply concerning that the Lord Chancellor can take into account other factors than those defined by the Bill when setting the rate. This wide discretion opens up the setting of the rate to potential lobbying that could adversely impact the compensation of those who have suffered severe, catastrophic injuries. It is also worth noting that for the purposes of setting the discounted rate, the Bill changes the level of risk of an investment from “very low” to “low”. The lump sum to be invested is there to last for a victim’s entire life, so reducing the level of risk of the investment in setting the discounted rate is concerning, and it has not been properly explained.
This Bill does nothing for the innocent victims of personal injury. It is littered with inconsistencies, has parts that do not stand up to scrutiny, and loads the dice in favour of the insurance companies. The Bill will result in innocent victims of road traffic accidents being penalised because the insurance companies are unable to deal with the alleged whiplash fraud, which they cannot properly quantify. It is shameful that the Government have indulged the insurance companies to such a degree, to the detriment of innocent, law-abiding people. This Bill puts profit before people, restricts access to justice, and creates further inequality before the law. The basic principle that underpins our system of justice is being undermined. This Bill is plainly and simply unjust.
It is a pleasure to be able to speak in this debate on the Second Reading of the Civil Liability Bill, which brings forward changes that are of great importance to the insurance industry. I am pleased to hear that there has been significant engagement between industry and Government over this essential legislation. Ageas Insurance, for example, is one of the largest providers in the UK, employing more than 400 people in my constituency, and it has communicated to me its enthusiastic support for these changes, shared by the vast majority of the public.
These measures will help to reduce motor insurance premiums for insurance customers by adjusting how the personal injury discount rate is set. Alongside this, the introduction of a new tariff will specifically target exaggerated and fraudulent whiplash claims that have driven up insurance premiums for hard-working households in places such as Stoke-on-Trent. A new fixed compensation level for whiplash injury will be created, putting provisions in place for the court to uplift the compensation available in exceptional circumstances, compared with a final compensation figure being negotiated by the parties involved, as is currently the case.
The compensation culture that has been created, with huge levels of unjustified claims for things like whiplash, saw premiums rise at the fastest rate ever last year. Increases of about 10% a year are totally unmanageable and unaffordable for motorists. These changes must be brought about to reduce the price all motorists are having to pay to compensate unreasonably high levels of claims. Clearly, it is important that these savings are passed on to consumers. I am pleased to hear that the ABI, which represents 93% of the motor insurance market, has written to the Lord Chancellor emphasising its commitment to this. The Government are now working with the industry on a way that this might be evidenced through reporting of savings passed on to consumers—the people who should benefit most from this legislation.
These changes are not about hampering genuine claims; they are about reaching a balance between the costs on motorists and appropriately compensating those who need to make a claim, ensuring that when someone makes a claim for whiplash injuries, it is backed up by a form of medical evidence and is proportionate to the injury suffered. It will also ensure that those who have suffered life-changing injuries continue to receive 100% compensation—a key principle of the legislation.
In the past decade, personal injury claims have risen by 70% while vehicles have become safer and road accidents have fallen by 31%. The number of road accident claims is, remarkably, on an upward trajectory, despite there being fewer injuries. We have even seen people attempting to circumvent the law and take advantage of loopholes to make unreasonable and fraudulent claims. Clearly, the current balance is not right and is unfairly penalising ordinary motorists who must pay the price of over-inflated premiums. This is especially important for younger drivers, such as me, who currently pay double the average. It is predicted by insurers that, without such reform, motor premiums could continue to rise at a rate of about 10% annually. The Government argue that the whiplash reforms in the Bill will deliver around £1.1 billion of consumer savings per year and could lead to motorists’ insurance premiums falling by an average of £35 a year.
As we have heard, the changes proposed are not limited to the motor insurance industry. The adjustment of the personal injury discount rate will, importantly, also impact on compensation of clinical negligence. As we know, our NHS continues to battle with increasing costs, and a significant growing cost is compensation, increasing at around 13.5% each year. In some cases, that is putting undue pressure on NHS budgets, with money designated for health services not being able to be spent on treating patients. Many within the health service have been calling for the creation of a sustainable platform where the level of compensation is more effectively balanced against the ability of the public purse and taxpayers to pay. We have seen increasing expenditure on clinical negligence compensation, and I hope that this legislation will help to limit those costs to a much more manageable level.
The Bill will mean reduced costs for motorists, ending the mounting and unaffordable increases in inflated insurance premiums, limiting the claimant culture that has seen unreasonable and exaggerated claims grow significantly in recent years, ensuring that there is a fair balance between claimants and consumers and allowing my constituents to keep more of their hard-earned money.
I will address my speech to you, Madam Deputy Speaker.
I agree with Government Members that the insurance industry plays a valuable role. It has two main purposes: to ensure that innocent victims are compensated for their suffering and its impact on their lives and that perpetrators are appropriately penalised with higher premiums. Unfortunately, the measures in the Bill will do nothing to effect either of those main aims of the insurance industry, but they will impact heavily on innocent victims and ensure that perpetrators do not pay the costs of their actions.
I agree that we need to combat the problem of claims management companies, as we have heard from Members on both sides of the House. However, as the hon. Member for Croydon South (Chris Philp) set out lucidly, claims management companies are fed information by insurance companies, to enable them to target the victims of accidents. Since that was banned directly, they have been doing it indirectly. Insurance companies are not only feeding claims management companies information to enable them to do that but are profiting from it, and they are now briefing Members that it is a problem with claims management companies.
This may be a naive question, but it seems as though two different arguments are being made by Opposition Members. There was a suggestion from the hon. Member for Jarrow (Mr Hepburn) that the direction of the insurance companies is to try to stop anybody claiming. The hon. Lady seems to be arguing that the insurance companies are also fuelling these claims. Can she explain that paradox? How can they can be involved in both at the same time, and how does that work for them financially?
I cannot answer for other Opposition Back Benchers. I am speaking as an individual Back-Bench MP with experience of the insurance industry, and the hon. Member for Croydon South set out clearly similar experiences.
Along with Government Members, I have met the Association of British Insurers, but I suspect that it was a slightly less happy conversation, and I will certainly read less of its briefings in my speech. I challenged the ABI on the information coming to claims management companies from insurance companies. It agreed that that was happening and said that the Government could look to stop it. When insurance companies are putting information out to solicitors’ firms, they could ban those firms contacting claims management companies to farm out the information.
This is a sincere question. The suggestion made by the hon. Member for Jarrow and a number of others is that the entire profit model of the insurance companies is based on charging big premiums and trying to minimise the number of claims, and that that is how they make money. The suggestion is that the entire Bill is driven by the insurance industry trying to stop anybody making claims. At the same time, perfectly reasonably, you are making the argument that the insurance companies are trying to support claims. How do they—
Thank you very much, Madam Deputy Speaker. If the Minister has questions about other Members’ contributions, he really should have addressed them to those Members rather than to me.
There are two sides of the coin here. The Government are not combating the claims management companies at all in the Bill. What they are doing, which I absolutely welcome, is making provision for face-to-face medicals. One would hope that that will combat the fraudulent claims that are made for deliberate car crashes, as well as the other examples that have been cited by Conservative Members.
We also need to ban cold calling. If the Government were prepared to look at those two additional measures—banning cold calling and banning information going from insurance companies to claims management companies—they would find that the problem of excess claims was dealt with to a large degree. I hope that they would commit to doing that before looking to take the measures in the Bill, which will impact on innocent victims of road accidents and accidents at work.
I speak as a victim of several road accidents over 20 years spent commuting into Manchester. When people are nose to nose in traffic, they shunt into the back of other people’s cars—it happens. I have suffered whiplash several times, but in the majority of cases it was not serious, however long it lasted. However, the—fortunately—final accident I suffered has had a very serious impact on me and on my life ever since. As a new mother, I was unable to lift my baby from his cot. I was unable to take our puppy for a walk, because he pulled at my neck. When I tried to return to work, I was unable to do my job effectively because I was unable to work at a computer for more than a couple of hours. Every hour of every day since that accident, I have felt its impact.
Whiplash can even lead to trapped nerves in the neck, which I can assure Members is absolutely excruciating and can happen months after the accident itself. Therefore, whiplash injuries affect the same person differently, and they can affect different people very differently. That is why a tariff, especially at the lower levels proposed by the Government in the Bill, are not a fair way to compensate people. At the moment, a judge looks at not just the injury but the level of that injury and the impact on the victim’s life. That is surely what we should be looking for in a proper and fair compensation culture.
I want to look at employers’ liability cases. USDAW, the shop workers’ union, has estimated that there would be a fivefold increase in the number of employers’ liability cases from its members that ended up in the small claims court rather than in the fast-track system. To make a claim for employers’ liability, employees have to prove their employers’ liability, and that is very hard to do. Cases can be extremely complicated, especially when more than one company is involved, as in the case of a delivery driver making a delivery to a company and suffering an accident there. Is it the fault of the company that provided the lorry or the company the driver was delivering to? That is why employers and their insurers contest claims, and legal costs end up being so high because claims are constantly contested.
It is important that employees can take cases against negligent employers. If employers do not have to pay out for insurance claims, they have no incentive to improve the safety of their workers. That is the second and very important role of the insurance industry: to effectively police those who perpetrate accidents and those who do not. Employers who have suffered multiple accidents at their work places or drivers who have been responsible for accidents would rightly have their insurance premiums increased, and that is surely what we want.
The Bill will make it more difficult for the victims of accidents to take a claim against their employers or insurance companies, and it and the Minister will restrict the very proper role of insurance companies in policing the system to make sure that the perpetrator pays.
I hope that the Minister will reconsider the Bill’s measures, look very carefully at alternatives that would not make victims suffer or enable perpetrators to get away with negligence, drop the proposals to increase the small claims limit and to introduce a tariff for whiplash claims and make sure that our insurance industry operates fairly for the good of everyone.
A robust and fair system for motor insurance is key to making sure that drivers, passengers, pedestrians and, indeed, all road users are protected. Before I talk about the Bill, may I give a shout out to all road users? It is our first day back after recess and I am sure that everyone has their highlights. One of mine was rising to the challenge laid down by my local riding school in Chelmsford to get up on a horse again after many years and experience what it is like to be in the saddle on Essex roads. Most drivers are great, but some do pass too fast. I pay tribute to the British Horse Society, Cycling UK, British Cycling and the charity Brake for all the work they do to minimise the number of accidents on our roads.
When there is an accident, it is absolutely right that people who are injured are fairly compensated for their injuries and that compensation money must get to those affected. I have learned, however, that for every £1 paid in compensation, 47p is spent on lawyers, so I think things have got out of kilter. Indeed, nine out of 10 people believe that the legal cost of settling a motor insurance claim is too high. I believe that their concerns are justified, because when the costs go up, it is the consumer who bears the price. Many people, especially young people, find that motor insurance premiums are now unaffordable. They simply cannot afford to drive.
Of course, a lot of factors affect the costs of a claim, one of which is the discount rate. When the discount rate goes down, the compensation level in today’s money goes up, so that rate must be fair. There is plenty of evidence that the UK rate is artificially low. It does not reflect the actual way in which compensation money is invested. At less than 1%, the rate in Britain is lower than that in all other European and common law countries, and it is right that the Bill reconsiders it.
I welcome the Bill’s work to reform whiplash claims, especially in ensuring that any future whiplash claims must be based on medical evidence. Whiplash can be a crippling injury and I repeat that it is absolutely right that those who are injured must be fairly compensated, but there is plenty of evidence that something is going wrong. There has been a huge rise in claims—a 40% increase—despite the fact that the number of accidents is down by 30%.
My personal experience tells me that something deeply sinister is going on. Four years ago, on the way to our summer holiday, my family and I were involved in a terrible accident. We were going across the country, from East Anglia to Anglesey, to catch the ferry from Wales, when we found ourselves going along the M6 upside down at 70 mph. How we stepped out of that car is a miracle. The hours that followed were a complete blur. There were ambulances and the entire family were laid up on trolleys in A&E. But none of us had whiplash. We were so lucky. But sometime during those hours I must have been asked whether I was prepared for my phone number to be shared. Ever since then, I have been continually harassed with phone calls from people wanting me to put in claims for accidents that did not happen. Those phone calls are not only morally wrong; they are deeply insensitive and upsetting. Every time the phone goes, one relives the entire experience. That has got to stop.
Some Opposition Members have said that we should just outlaw those calls, but I am not sure that that is the right way forward. There are genuine whiplash claimants who need to be able to put in a genuine claim. Instead, it would be better to put a handbrake on the system and put in the check that a claim for whiplash cannot be made unless there is genuine medical evidence that is aligned with the claim. That is what the Bill will do, which is why I am so glad to support it and the work that the Government are doing tonight.
I will be brief because a number of my colleagues have made important points that I do not need to repeat and because I have not been here for the whole of the debate. The reason for that is that I wanted to take part in the debate in Westminster Hall on the review of the Legal Aid, Sentencing and Punishment of Offenders Act. There is a certain symmetry to the two debates going on at the same time. The onslaught by this and the previous Government on victims and access to justice really began with the LASPO Act. It continues with this Bill.
The measures on road traffic accidents and the change to the small claims limit are basically unfair. A tariff will be introduced in respect of certain types of injury but not others. The tariff will be at a level that is far below—for a year-long injury, about £2,000 below—what would be set by a judicial authority. There seems to be no basis, fairness or logic for doing that. Why should there be two tiers for different types of injury? If the reason is what we have heard about fraud, I think even the ABI would admit that a small minority of cases are fraudulent, so why should the legitimate cases be punished because of the small minority that are fraudulent?
I used to be a personal injury practitioner and most of my work was done for insurance companies. I was always very happy to run a fraud defence and to cross-examine on that basis. Insurance companies usually were not. They preferred to settle; their eye was always on the bottom line. The Minister made a point earlier about there being a conflict between what insurance companies are up to here, but I do not think there is a conflict. Insurance companies want to depress both access to justice, in terms of people getting meritorious claims into court, and the value of that claim, which the Bill does very efficiently for them—I am sure they will be very grateful for it—but if they can make money wearing another hat through claims management companies or the passing on of information, they will be happy to do that as well. Yes, they are commercial organisations in that way, but the eye of the Justice Minister—I would have thought rather better of the Minister—should be on ensuring fairness.
Another basic unfairness is the increase to the small claims limit. It is not on the face of the Bill, but it is integral to this range of measures. I refer to the increase to £2,000 in relation to employer liability, where no fraud is ever alleged or at least only in very rare cases, and the increase to £5,000 in relation to road traffic accident claims. There is no basis for that. These are complex claims. That has been accepted in a bipartisan way. I am sorry that the House is dividing on party lines, with the honourable exception of the Chair of the Justice Committee. I hope that, in Committee, the Minister will listen more carefully to some of the reasons that have been given.
We are deprofessionalising the justice system. People will no longer be able to get representation for even quite complex legal matters and serious injuries. The judicial arm is being removed by the introduction of the tariff and the medical role is also being downgraded, because there is no proper medical definition of whiplash and a number of quite serious soft tissue injuries are likely to be included.
We have heard time and again that there are abuses that need to be corrected. Pre-medical offers are a recipe for fraud, as is cold calling—I am not sure why certain people are saying that that should not be outlawed. It should. Why are those easy targets, rather than the rights of victims, not being tackled? In employer liability cases, trade unions can effectively represent their members by taking cases to court with representation. Unison says that two thirds of people whom it has helped said that they would not have felt confident enough to pursue their claims without such support.
Finally, I turn to the personal injury discount rate. I hope that the Government will be more open to agreement and consensus on that. Tiny changes can significantly affect the damages awarded to or life experiences of very severely disabled people. I urge the Government to look again at the level of risk, which can affect awards over a lifetime, and to look carefully at the issue of the expert panel, allowing it a greater role.
It is a pleasure to follow the hon. Member for Hammersmith (Andy Slaughter).
I grew up in a household with five brothers, and we spent a lot of our time fixing cars: putting them back together and rebuilding them. In those days—the days of the Vauxhall Chevette—people could pick up a second-hand car for 50 quid, go down the tat yard, buy the necessary bits and pieces and bring it back to life.
Now, unfortunately, things are not quite the same. When someone takes a car to a garage, the mechanics do not look under the bonnet; they plug the car into a computer to find out what is going on. That is because cars are now bristling with safety devices, so much so that Volvo has claimed that, by 2020, people will not be able to have fatal accidents in its cars—actually, that is not quite true: the company said that it could not legislate for crazy people who deliberately tried to hurt themselves. But cars will be so safe that it will be really difficult to have accidents.
We live in a world where cars crash less often because they are clever enough to stop drivers crashing. However, there is also a high prevalence of mobile phones, which means that people are distracted and tend to bump into each other. What did this Conservative Government do? We doubled the fine from £100 to £200 and the points penalty from three to six to try to discourage people from driving and texting. As a Government—and it is not just this legislation—we are doing our best to stop people bumping into each other in the first place. But they still do it, obviously: there are 1,500 whiplash claims per day in this country. I personally think it would be a damn good idea if we did something to reduce that number.
I am disappointed that my hon. Friend the Member for Spelthorne (Kwasi Kwarteng) mentioned this, as I thought I would be the only one, but rates of whiplash vary depending on where people crash around the world. For example, according to a study, 91% of 130 accident victims with acute whiplash in Greece had recovered in four weeks. Imagine that! We need some Greek DNA in this country; perhaps we would have fewer whiplash claims. That is one of my policy suggestions for this evening.
Demolition derby drivers—people who crash into each other virtually for a living—suffer very little from whiplash; my hon. Friend the Member for Bexhill and Battle (Huw Merriman) has done some demolition driving and he appears to have no neck problems. There must be some small element of truth in the notion that not all the whiplash claims in this country are always completely bona fide. If this evening’s debate does nothing other than send out the message that we are going to be cracking down and discouraging people from making whiplash claims, perhaps we will have achieved something. We will have saved some money, because insurances premiums will have gone down, and fewer people will be bothering the NHS with pretend illnesses, and as a nation we will perhaps be as safe as they are in Greece when they suffer a road traffic accident.
It is a pleasure to follow my hon. Friend the Member for Walsall North (Eddie Hughes). He referred to my banger racing days in the village of Gawcott, which is in your constituency, Mr Speaker, just up the road from where my family live—happy days indeed!
I am pleased to contribute to this debate because I support the Bill hugely. One of my chief reasons for doing so is my concern about the cost of insurance premiums for young people and my appreciation for what the Government are doing for young people. I speak with two instances in mind. The first is the session held jointly by the Transport Select Committee, of which I am a member, and the Petitions Committee on the back of a petition from 100,000 members of the public who successfully petitioned this place to debate the high cost of motor insurance premiums for the young. The other relates directly to my constituency, a rural constituency of 200 square miles where, without the use of a car, a young person is severely limited in their ability to get to work, to find work and to have those experiences. We are losing young people in our constituency to the cities because they cannot afford to work and live there, and that is having a big effect on our demographics and ultimately on the social care issues facing us as well.
For those reasons, any legislation to tackle the high costs on young people has to be considered, and I urge the Opposition to consider the Bill on that basis. The cost of insurance for young people is almost £1,000— 10% of the average wage of an 18 to 21-year-old being paid out on insurance—and it means that young people have to decide whether they can continue to drive and therefore work or whether they have to do something less meaningful for themselves and for our economy. I am very supportive of the Bill on that basis.
The reforms that the Government have laid over the past few years to reduce the number of fraudulent claims have had some success and seen a reduction in insurance premiums by, on average, £50. There have been good reforms to the civil litigation procedure as well—reforming no win, no fee; banning referral fees and the use of benefits by claims management companies as an incentive to bring a claim; extending the fixed recoverable costs regime; and, for soft tissue injury claims, requiring that a fixed-cost medical report be provided at random by one of the approved medical experts. These measures have led to a drop in the number of claims from 780,000 two years ago to 650,000 last year.
It is clear, however, that we still have an issue with whiplash claims, which account for 85% of the 200,000 extra motor personal injury claim cases over the last 10 years. Of course, that is no surprise. It is very difficult for a defendant in one of these claims to establish whether a claimant has indeed suffered this injury, so there is a disincentive to try to disprove it. Added to that, the legal costs are so high that it is more expensive to fight a claim than to pay out. As a result—because of these settlements, one never knows because one never sees a medical report—we do not know whether that money is being paid out for genuine injury claims. As has been pointed out, given advances in technology and car and seat design, as well as the reduction in the number of road traffic accidents, it is completely illogical that claims are going up. I suggest to Opposition Members who cannot bring themselves to accept that there are fraudulent claims that they look at the evidence.
I want to touch on the small claims increase, which is long overdue and makes great sense, because it brings the amount more towards the limit for most other civil disputes. Consistency makes a lot of sense. I hope the Minister will confirm that it is still the case that a judge can decide not to refer a case to the small claims track although it is worth less than £5,000, because the complexity of the case may well mean that it should be dealt with through a more court-based process. That would, I hope, reassure the Opposition.
The measure on the discount rate makes huge sense, because it will reflect investment decisions and, therefore, the yield that claimants will actually receive. However, like other Members, I should prefer a periodic payment rather than a lump sum to be the norm, or the default option. I should also like a legal test to be introduced, requiring a claimant—and, indeed, the claimant’s family—to prove that they will be able to deal with the lump-sum arrangement and that they understand the risks involved. If that test cannot be met, the system of periodic payments should apply.
Overall, I warmly welcome the Bill. It delivers for consumers and for young people, and I think we should bear that in mind rather than some of the vested interests that have been cited as reasons for not supporting it.
This has been an interesting and wide-ranging debate. I shall try to summarise many of the points that have been made.
The right hon. Member for Chipping Barnet (Theresa Villiers) and the hon. Member for Bexhill and Battle (Huw Merriman) talked about the need to tackle the high premiums applying to young drivers. My hon. Friend the Member for Cardiff Central (Jo Stevens) spoke about her personal experience of representing low-paid workers who would be hurt by the Bill. The hon. Members for South Norfolk (Mr Bacon), for North Warwickshire (Craig Tracey) and for Stoke-on-Trent South (Jack Brereton) focused on insurance fraud and what they perceived to be a compensation culture, and expressed their hope that the Bill would reduce premiums.
My hon. Friends the Members for Jarrow (Mr Hepburn) and for Hammersmith (Andy Slaughter) spoke of a pattern of behaviour on the Government’s part in the last eight years, involving attacks on working people and their access to justice. In an interesting speech, the hon. Member for South Leicestershire (Alberto Costa) expressed his concern about a rise in premiums despite a reduction in the number of claims. My hon. Friend the Member for Lewisham West and Penge (Ellie Reeves) made an excellent speech in which she described a legal system in disrepair and said that the Bill would have a disproportionate effect on innocent victims’ access to justice. My hon. Friend the Member for Cambridge (Daniel Zeichner) spoke of vulnerable road users, and his worries about injured workers’ representation. The hon. Member for Croydon South (Chris Philp) described his experience of weekly phone calls following his accident, and Members on both sides of the House condemned such calls.
My hon. Friend the Member for Harrow West (Gareth Thomas) talked about the attacks on working people’s representation that would result from the Bill, but also asked whether it was time to consider a legal cap on insurance premiums. The hon. Member for Bromley and Chislehurst (Robert Neill), the Chair of the Justice Committee, called on the House to hold the feet of the insurance industry to the fire when it came to reducing premiums.
My hon. Friend the Member for Brentford and Isleworth (Ruth Cadbury) spoke about cycling, and about how pedestrians, motorcyclists and cyclists would be removed from the scope of the Bill, as indicated by the Secretary of State. The hon. Members for Spelthorne (Kwasi Kwarteng) and for Walsall North (Eddie Hughes) talked about international comparisons on whiplash, and asked why there were fewer instances in other countries. Like so many other Labour Members, my hon. Friends the Members for Enfield, Southgate (Bambos Charalambous) and for High Peak (Ruth George) focused on the attack on injured people, and the bonanza for the insurance companies.
The changes proposed in the Bill will leave police officers, paramedics and firefighters who are injured on the roads without legal support and subject to fixed-tariff compensation, which will potentially reduce the damages that they can receive. The small-claims changes hidden behind the Bill will leave workers like the supermarket assistant, who was left unable to work for weeks after suffering a foot injury while moving stock, ineligible for legal support. Why? Because she was awarded £1,705. As a result of the package of changes associated with the Bill, workers like her, with claims worth less than £2,000, will either have to fight their cases alone or pay for lawyers with money that was meant to cover their injuries and losses.
Unison says that nearly two thirds of the people whom it represents—workers injured through no fault of their own, when there is no whiplash and no suggestion of fraud—would not seek justice without legal representation. The general secretary of USDAW, representing nearly half a million workers, says the changes
“will have a knock-on effect for workplace health and safety, as less scrupulous employers let standards slip because they know they’re unlikely to face the consequences in court.”
There is no suggestion of fraud or of increased numbers of claims by people injured at work. The Government should exclude such claims from this package of measures and from any small claims increase. We all want to stop insurance fraud, but a whopping 400% increase in the small claims limit for all road traffic accident claims means all injured road users—HGV drivers, firefighters, parents driving their kids to school—will be treated like fraudsters claiming falsely for whiplash, and be left with reduced tariff compensation and no legal help. Why?
The justice reforms that the Government passed in 2012 have saved insurers an eye-watering £11 billion, yet they want more. Back then insurers promised to reduce premiums, yet they are higher now than ever. Despite that, the Government have again swallowed the insurers’ promises to reduce premiums hook, line and sinker. This Bill saves insurers another £1.3 billion a year. Again, the rich get richer, the poor poorer. There appears to be a collective amnesia from this Government about the Prime Minister’s promise in 2016, so let me remind the House:
“The Government I lead will be driven not by the interests of the privileged few, but by yours…When we pass new laws, we’ll listen not to the mighty but to you.”
Yet here we are, two years later, with a policy created for the mighty: profitable insurance companies call the shots; working people pay the price.
If the Government will not listen to us and will not listen to the trade unions, will they listen to a Justice Committee headed by a Conservative Member or to experts like Lord Justice Jackson? In his report, approved by the Justice Committee, Jackson proposed that the limit should stay at £1,000 until “inflation warrants” an increase to £1,500. Jackson goes on to say that it should not be increased at all until inflation, from 1999, gets it to £1,500. The Justice Committee sends the same message; it could not have sent a clearer signal to the Government to stop this headlong rush to undermine access to justice.
Labour will be abstaining today in the hope that the Government will think again before the Committee stage. Without some key changes, we will vote against the Bill’s Third Reading. We sincerely hope, for the 99% of injured people even the insurers admit are honest, that they reconsider.
It has been a great privilege to be able to sit through this debate with an extraordinary number of Members, many of whom have very direct experience as lawyers in the claimant industry or connections to the insurance industry. It has therefore been a very well-informed debate.
Our proposals in this Bill are serious, but to some extent matters of housekeeping. They follow a lengthy and extensive consultation over a number of years, and they attempt essentially to do three things: first, to try to improve the administration of justice in certain key, but relatively limited, ways; secondly, to address some issues around public morality and honesty; and, thirdly, to make sure we guard resources whether in the interests of people paying motor premiums or those who are supporting the NHS.
A number of objections have been made by Members across the Chamber and seven of them have stood out. Four of those I would respectfully and politely disagree with, but three have some real heft and we will take them into account in proceeding with this Bill.
The first of those objections, from the hon. Members for Ashfield (Gloria De Piero) and for Jarrow (Mr Hepburn), largely focused on the questions of damage in the workplace and to people with non-whiplash-related injuries. This is not strictly relevant to this Bill, which deals with whiplash-related injuries. The change in terms of non-whiplash-related injuries is proposed to be from £1,000 to £2,000, roughly in line with RPI since it was set in 1991, and dealing with roughly the same category of cases that were intended when the legislation was first introduced in 1991.
The second issue that has been raised by some hon. Members is that there is no evidence. This will be somewhat depressing for the people who have conducted an extremely extensive consultation, which has taken evidence not only from the insurance industry, as has been suggested, but from the Department for Work and Pensions, from claimant lawyers, from the Medical Reporting Organisation and from a large public consultation.
Thirdly, the hon. Member for Jarrow and, to a certain extent, the hon. Members for Enfield, Southgate (Bambos Charalambous) and for Cardiff Central (Jo Stevens) suggested that very few fraudulent whiplash claims were being made. This is a difficult issue to pursue, as my hon. Friend the Member for Croydon South (Chris Philp) eloquently pointed out, because of the asymmetry of the information. In other words, it is extremely difficult to prove that someone has a whiplash claim because it is, by its very nature, a concealed injury. Nevertheless, the statistics—in particular, those raised by my hon. Friend the Member for Spelthorne (Kwasi Kwarteng)—show that the number of traffic accidents has decreased by a third while the number of claims has gone up by 40%. At the same time, as my hon. Friend the Member for Walsall North (Eddie Hughes) pointed out, cars have become considerably safer. All this suggests that something is going on in relation to these claims.
The fourth objection, raised by the hon. Member for Lewisham West and Penge (Ellie Reeves), related to access to justice. The suggestion was that it was inappropriate to say that people should proceed to a small claims court for claims of under £5,000. The vast majority of existing claims do not proceed to court at all. The district judges who are ruling on these claims are used to dealing with claims of up to £10,000.
The three more serious objections are those that we are addressing. One of them is the idea that the insurance industry will not pass on the savings to motorists in the form of premium savings. As the Secretary of State has indicated, we will therefore be introducing an amendment, which will be with the House shortly and will be available in Committee and on Report, to address this exact concern, which was expressed by the hon. Members for Harrow West (Gareth Thomas), for Leeds East (Richard Burgon) and for Jarrow, and by my hon. Friend the Member for South Leicestershire (Alberto Costa), as well as by the hon. Members for High Peak (Ruth George) and for Hammersmith (Andy Slaughter) .
The second serious concern was about vulnerable road users, and it was raised by my hon. Friend the Member for Chelmsford (Vicky Ford) and by the hon. Members for Cambridge (Daniel Zeichner) and for Brentford and Isleworth (Ruth Cadbury). There, too, we will be introducing changes to ensure that vulnerable road users are excluded from the scope of the Bill and from the raise in the limit. Thirdly, my hon. Friend the Member for Croydon South and others raised concerns around periodic payment orders. The Secretary of State has written to the Master of the Rolls to ensure that PPOs are introduced more frequently, in order to ensure that vulnerable people suffering problems around lifetime care costs are genuinely able to get regular, sustainable and reliable payments out of the insurance industry to sustain them.
I am very happy to take that issue offline with my hon. Friend. There is a lot to be said for PPOs.
In essence, there are three fundamental arguments that we would make in favour of the Bill. The first is that we need to ensure that the administration of justice is proportionate and sustainable. As my hon. Friend the Member for Chelmsford has pointed out, the fact that nearly 40% of the costs are currently being absorbed by legal fees is a serious issue. Secondly, we need to ensure that the system is straightforward. As my hon. Friend the Member for North Warwickshire (Craig Tracey) pointed out, the introduction of the portal will ensure that the administration becomes more straightforward. Thirdly, my hon. Friend the Member for Croydon South has pointed out that the introduction of fixed tariffs, on the French model, will make the administration of justice more predictable.
The question of fraud and morality is also at the centre of these changes. As my hon. Friend the Member for Bromley and Chislehurst (Robert Neill) said, fraud does happen, and my hon. Friend the Member for South Norfolk (Mr Bacon) has pointed out that it can often be extremely flagrant. My hon. Friends the Members for Spelthorne and for Walsall North (Eddie Hughes) said that even if we cannot prove every case of fraud, it is at least true that claims are becoming more exaggerated. Indeed, as my hon. Friend the Member for Walsall North also pointed out, that can have medical consequences. To quote the polite words of the New England Journal of Medicine:
“The elimination of compensation for pain and suffering is associated with a decreased incidence and improved prognosis of whiplash injury.”
That was the point made by my hon. Friend about the situation in Greece.
The fundamental point is that the Government have a responsibility to balance the administration of justice and honesty with the broader social costs. As my right hon. Friend the Member for Chipping Barnet (Theresa Villiers) pointed out, insurance premiums have been rising, and we need to take them into account. As my hon. Friends the Members for South Norfolk and for Bexhill and Battle (Huw Merriman), premiums are rising in rural areas in particular. Again, as my hon. Friend the Member for North Warwickshire pointed out, the cost of over £1 billion to the NHS that will be addressed through this legislation is one that is borne by every taxpayer and is causing increasing concern among medical professionals.
This is a serious piece of legislation that addresses various focused points. It comes at the end of an extensive consultation, during which we have made several concessions to address the concerns expressed across the House. During the House of Lords’ consideration of the Bill, we introduced new definitions for whiplash, we involved the Lord Chief Justices in the process, and we adjusted some of the timings for the discount rate. Through this legislation we believe that we can contribute towards a more honest and proportional system that takes into account the significant social costs of exaggerated claims. Through a more simple, predictable, effective and rapid administration of justice, we can protect a range of social and economic interests while balancing the rights of road users, claimants, defendants and, ultimately, citizens as taxpayers.
Question put and agreed to.
Bill accordingly read a Second time.
CIVIL LIABILITY BILL [LORDS] (PROGRAMME)
Motion made, and Question put forthwith (Standing Order No. 83A (7)),
That the following provisions shall apply to the Civil Liability Bill [Lords]:
(1) The Bill shall be committed to a Public Bill Committee.
Proceedings in Public Bill Committee
(2) Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Tuesday 9 October.
(3) The Public Bill Committee shall have leave to sit twice on the first day on which it meets.
Proceedings on Consideration and up to and including Third Reading
(4) Proceedings on Consideration and any proceedings in legislative grand committee shall (so far as not previously concluded) be brought to a conclusion one hour before the moment of interruption on the day on which proceedings on Consideration are commenced.
(5) Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption on that day.
(6) Standing Order No. 83B (Programming committees) shall not apply to proceedings on Consideration and up to and including Third Reading.
(7) Any other proceedings on the Bill may be programmed.—(Jeremy Quin.)
Question agreed to.
CIVIL LIABILITY BILL [LORDS] (MONEY)
Queen’s recommendation signified.
Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),
That, for the purposes of any Act resulting from the Civil Liability Bill [Lords], it is expedient to authorise the payment out of money provided by Parliament of any expenditure incurred under or by virtue of the Act by the Lord Chancellor.—(Jeremy Quin.)
Question agreed to.