The Government has launched a consultation on methodology to be used by the Lord Chancellor and his counterparts in Scotland and Northern Ireland in independently setting the discount rate for personal injury damages in their respective jurisdictions.

Damages awarded by a court in a personal injury case are intended to compensate the pursuer for the loss wrongfully caused to him or her by the injury. In principle, this compensation is intended to put the pursuer back in the position he or she would have been in if it had not been for the wrongfully caused injury. The compensation should, therefore, be as full as possible, but should not under-compensate or over-compensate the pursuer.

Despite the availability of periodical payments as a means of compensating the pursuer, the majority of awards of damages for personal injury are paid in a once and for all settlement. The pursuer therefore receives all the compensation for future care and future loss of earnings, perhaps for many years into the future, when the award is paid. As this sum may be invested by the pursuer, allowance has to be made for its accelerated receipt otherwise the pursuer would probably be over-compensated. The lump sum is therefore reduced by the application of a discount rate.

The Lord Chancellor, the Scottish Ministers and the Department of Justice in Northern Ireland have each decided that the discount rate ought to be reviewed to ensure that it is still set at an appropriate rate. As part of those exercises, following advice from the relevant statutory consultees, they have decided to consult on how the rate ought to be set.

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