Ogden rate change timeline 'optimistic' – lawyer

The early 2018 target for implementing proposed new legislation that will raise the Ogden discount rate is “optimistic”, according to Weightmans partner David Johnson.

The new legislation is expected to increase the Ogden rate to between 0% and 1%, after it was cut to minus 0.75% in March.

The Justice Select Committee met last week to discuss the proposed reforms to how the Ogden rate is set. At the meeting, Ministry of Justice spokesman Lord Keen set early 2018 as a target date for legislation to come into play.

The committee heard evidence from both sides of the debate and looked over evidence that includes a government actuarial report demonstrating that claimants are likely to be overcompensated by 35%.

’Packed’ meeting

Johnson attended the “packed” meeting last week. He is optimistic that the Ogden rate legislation will be passed, though less expectant than Lord Keen on the timeline. He cites a Brexit backlog as the primary reason that the government will take its time in getting the legislation through.

The most difficult hurdle, Johnson thinks, will be for the government to find a way to quickly get the changes debated by the two houses. However, once royal assent is granted he thinks it will be relatively plain sailing.

“I think that [Lord Keen’s timeline] is viewed by many, including myself, as quite an optimistic aspiration. At the moment, parliamentary time is taken up quite heavily by the question of Brexit and all the legislation around that and it is quite difficult to get new legislation through the door,” says Johnson.

There is some uncertainty on whether the bill will go through with the Civil Justice Bill or be a standalone piece of legislation. Law firm Kennedys partner Mark Burton has said it seems likely that the government will introduce it as standalone legislation, while Johnson is less certain.

“We are not sure whether this proposed legislation would have to be a standalone bill and a complete new piece of legislation to put through the courts, or whether it might get tacked onto the civil justice bill,” Johnson commented.

‘Lack of evidence’

Johnson recalls that MPs picked up on a “lack of empirical evidence” on undercompensation put forward by those on the other side of the debate.

“Representatives from the claimant fraternity talked about how claimants might be undercompensated, while the suggestion from myself and the ABI was that there is distinct lack of evidence to support that,” says Johnson.

 “There is another mechanism that claimants can opt for to avoid having to invest their funds – periodical payments (payment order payments). The fact that claimants quite rarely take up that option lends itself to idea that there isn’t a real perceived problem,” he explains.  “They are investing money in a way that gives the funds the need to be very expensive.”

Tweaks required

Johnson has identified a few tweaks that may need to be made to the proposed legislation, but says these are “mainly wording issues”. He felt that nobody left the session with “fundamentally changed views” on the discount rate, though MPs left with a renewed sense of urgency.

Burton corroborated this, saying: “The fact that the MoJ’s consultation found that the courts are presently overcompensating personal injury claimants highlights the need for the more rigorous methodology proposed in the draft reforms, including periodic reviews and independent expert analysis of actual investment returns, to be enacted quickly in order to avoid future controversy and ensure a fairer process for all.”