Leading debate on the discount rate

Woman getting advice from solicitor

Digby Brown is leading the debate on the discount rate applied to personal injury damages. 

The UK Government launched a consultation on the issue earlier this week and Digby Brown expressed our concern that the proposals in the consultation would further disadvantage those who have suffered injury and merit an award which properly reflects the costs of not being able to work or requiring care for the rest of their lives.

The article below was written by Gareth Rose and published in The Scotsman newspaper on Thursday 14th February 2013. 

Moira Kay is a partner in Digby Brown's Serious Injury department. 

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Lawyers hit out at ‘pay-out cash threat’

VICTIMS of the most serious injuries stand to lose millions of pounds in compensation under changes being considered by governments, lawyers have warned.

A consultation exercise launched by both the Ministry of Justice and the Scottish Government suggests victims currently receive too much.

Scottish lawyers fear more people will be pushed into making riskier investments in an eff-ort to ensure their money lasts.

They have accused the governments of kowtowing to the insurance lobby and trying to protect public health organisations.

The review focuses on the discount rate, which is used to calculate the total payment. The rate is based on how much interest victims can expect to claim on their payout – the higher the rate, the less they receive.

At present it is set at 2.5 per cent, on the understanding people will invest in index-linked government stocks, although even this is optimistic.

Without stating what the rate should be, the consultation suggests it is currently too low.

“There is evidence that recipients of these lump sums do not invest in the cautious way that is envisaged by the guidelines,” it says. “Instead, the initial evidence indicates they seem to invest in mixed portfolios, including higher-risk investments.”

Moira Kay, partner in serious injury at Digby Brown, said: “To me the consultation document indicates the discount rate is seen as too expensive in relation to clinical negligence cases and to the insurance industry. It seems the government is being driven by the insurance lobby.

“It means victims of accidents will be forced to take the same position as an investor in the stock market.”

A Ministry of Justice spokeswoman said: “We are consulting on options for the process of how compensation payments are made in personal injury cases to ensure it remains fair for all parties.”