Governments consult over setting the discount rate

The Ministry of Justice, the Scottish Government and the Department of Justice, Northern Ireland have jointly launched a consultation exercise over how the discount rate for personal injury compensation should be set.

The consultation document explains that awards of damages are intended to compensate claimants for the losses they have suffered as a result of wrongful actions. This principle of full compensation – neither more, nor less – is a cornerstone of the law of damages.

Lump sum awards of damages for future pecuniary loss, such as loss of earnings, cost of medical treatment and cost of care in personal injury cases, have to be adjusted to take account of the income that they might produce before they are spent. This adjustment, which can significantly affect the size of the award, is made by applying a discount rate.

The consultation specifically seeks views on two subjects relating to the setting of the discount rate under section 1 of the Damages Act 1996:

• Whether the legal parameters defining how the rate is set should be changed.
• Whether there is a case for encouraging the use of periodical payment orders instead of lump sum payments.

The consultation will run from 12th February to 7th May 2013

Contains public sector information licensed under the Open Government Licence v1.0.