Comment: Fletchers Solicitors hopeful that Discount Rate change remains fair

17th April 2019

Comment written by Molly Barker, Trainee Solicitor within Fletchers Solicitors Medical Negligence Department.

The Lord Chancellor, David Gauke recently announced that the first review of the discount rate under the Civil Liability Act commenced on 19th March 2019.

The discount rate (a tool utilised by the Court to calculate future losses) is based on the assumption that a successful claimant will generally invest their compensation in investments when they are awarded a lump sum payment.

The new rate is to be determined by 5th August 2019 and at present, there is no indication as to what the new rate will be.

Historically set at 2.5% (2001 until 2017), the discount rate is as a calculation based on the average return on Index-Lined Government Stock (Government Bonds) over three years.

Government Bonds were selected as the base for this calculation as they are viewed as safe, long-term investments.

However, the economic climate has changed significantly in recent years and in February 2017, Lord Chancellor Liz Truss announced that she was going to change the discount rate.

On 27th February 2017, after much campaigning, the discount rate was changed from 2.5% to negative 0.75%.

This change has ultimately seen the value of an injured claimant’s compensation increase overnight.

One of the first cases that settled under the new compensation rules saw an NHS Trust forced to pay nearly triple the amount of damages.

A 10-year-old girl suffered Cerebral Palsy as a result of hospital negligence and due to the discount rate having changed from 2.5% to the negative 0.75%, the claimant’s damages increased from 3.8 million to 9.3 million.

For this claimant, the change in the discount rate vastly improved her long-term future.

The aim of lump sum awards is to compensate any injured person for all expected losses as a result of an injury or negligence.

This then provides those injured with full compensation in response to the wrong doing they have experienced.

With the new discount rate to be set in summer 2019, claimant solicitors such as Fletchers Solicitors are hoping that the change remains fair so claimants are properly remunerated for their anticipated future losses.

Some seriously injured claimants may be unable to return to work for the rest of their life and may need specialist care and therefore, claimants should be entitled to recover full compensation due to the likelihood of future financial uncertainty.

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