Meeting of the Parliament 19 March 2019
I thank members of the Economy, Energy and Fair Work Committee for their careful and helpful consideration of the bill; I have very much welcomed the committee’s thorough scrutiny of the bill. It is clear that members appreciated the importance of getting things right; they also appreciated that the process is not always straightforward. I thank the committee clerks, too, for their hard work.
I also thank the stakeholders who contributed views and opinions as part of parliamentary scrutiny of the bill. The Scottish Government has had useful engagement with stakeholders. At times, we heard differing and—dare I say it?—opposing views on some aspects of the bill, which is perhaps not surprising, given that there are pursuers on one side and defenders on the other.
Despite the differences, there is a commonly held view that the current process for setting the discount rate is flawed, and that the law needs to be changed to make it better. The context of the bill is therefore the widely held view, which is born of extensive consultation over the past seven years, that the law on how the discount rate is set needs to be changed.
I will briefly remind members of the key provisions in the bill, and what they are intended to achieve. Part 1 reforms the law on setting the personal injury discount rate. The provisions are intended to ensure that the method and process for setting the discount rate are—as far as is practical—clear, certain, fair, regular, transparent and credible. The fact that there have been seven years of consultation on the matter serves to demonstrate that this is not an easy subject and that there are no easy answers.
The bill provides that the job of reviewing and assessing the rate will, in the first instance, fall to the Government Actuary’s Department. We have adopted an approach whereby determination of the discount rate is regarded as an actuarial exercise that should be free from political interference. In any system for setting a personal injury discount rate, there must be an element of political judgment. The approach that the bill takes separates the actuarial exercise from political judgments, with the latter being set out transparently in the legislation. The scrutiny process for the bill has provided the necessary parliamentary accountability to ensure that we have a framework that is fit for purpose. It will be for the Government actuary to apply the methodology and arrive at the rate. We are of the view that his professionalism and expertise make him the best fit for that role.
The bill also establishes a timeline for review of the discount rate. That is important, because we are aware that the impact of no change having been made for more than 15 years was considerable. The bill, as introduced, provided for a review every three years, but we listened to stakeholders and the committee on that point and amended the bill at stage 2 to reduce the frequency from every three years to every five years, on the basis that the committee considered that such an approach would represent a
“balance between flexibility and certainty”.
One of the most complex aspects of the bill is the methodology for calculating the discount rate. The bill provides a framework for doing that.
It is important to remember that at the heart of the bill are people who have suffered significant, if not catastrophic and life-changing injury, and their right to fair and full compensation. An award for damages is designed to compensate a wrongly injured person for the losses and harm that are caused by the injury—no more and no less.
That is easy to say, but hard to do. The most likely cause of a person’s damages not being enough or being too much stands separate from calculations around the discount rate: it is the assessment of the person’s life expectancy. There are no absolutes; we can only improve or diminish the chances of overcompensation or undercompensation happening.
When I talk about a framework, that terminology is important. The composition of the portfolio, the standard adjustment and the assumption about the award duration are fully integrated and operate together to produce the discount rate. They are a package. For example, a riskier portfolio would attract a different adjustment for tax and investment management costs.
The courts will now have the ability to impose orders for periodical payment, which is provided for in part 2. It is worth noting that the intention behind the bill’s provisions that require a court to consider whether an award should take the form of a periodical payment order, and whether to make such an order without the consent of the parties, is to address effectively the current scenario, which has sometimes been described as the defender holding the trump card, because the defender can, in effect, overrule the pursuer by simply not agreeing to their preferred method of award. I am sure that we all agree that there are good reasons for remedying that position. Where there is disagreement, it is considered that the best independent arbiter is the court—not one or other of the parties that are involved.
I am convinced that the provisions in the bill will result in methods and processes that are clear, certain, fair, regular, transparent and credible.
I move,
That the Parliament agrees that the Damages (Investment Returns and Periodical Payments) (Scotland) Bill be passed.
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