The Ministry of Justice has announced an impending Discount Rate change from -0.75% to the possible range of 0% -1%. This potential new Discount Rate was announced by the Lord Chancellor and Justice Secretary, David Lidington.
The most recent statement said that ministers are keen to engage on the issue ahead of a bill being introduced into Parliament with draft legislation published to change the current law.
Background - what is the Discount Rate?
The Discount Rate is the percentage used to adjust compensation awards for victims of serious personal injury, according to the amount they can expect to earn by investing it.
The background to this announcement is that on the 27 February this year the previous Lord Chancellor announced changes to the Discount Rate applied to awards of damages for personal injury. The February decision, which was made more than four years after a previous consultation on the issue closed, was made to reduce the Discount Rate from 2.5% to -0.75%. The current Discount Rate of -0.75% came into force on 20 March 2017.
When the government announced the rate of -0.75% it stated that consideration would be given to further options for reform. A consultation paper "The Personal Injury Discount Rate: How it should be set in future" was published on 30 March 2017, jointly by the Ministry of Justice and the Scottish Government.
The proposed legislation
Under this new proposed legislation the Discount Rate will be set by reference to rates of return on "low risk" rather than "very low risk" investments as at present. The Ministry of Justice announced that the Discount Rate will be reviewed at least every three years. Given that the Discount Rate had remained unchanged from 2001 until 2017, the proposed regular review of the Rate is welcome.
The Scottish position
The law in Scotland on the setting of the Discount Rate is devolved and the decision as to whether the law should be changed in Scotland is the responsibility of Scottish Ministers.
Why is the discount rate so important for people who are injured?
It is a basic principle of the Scottish legal system that people who are injured should be compensated in full for the losses they have suffered. The objective of applying the Discount Rate is to support this 100% compensation rule.
It is imperative that people who are seriously injured, require care in the future and/ or have limited or no income as a result of not being able to work, are put back in the financial position they were in should the accident not have occurred.
Specialist Solicitors - get in touch
Our Personal Injury team are experienced in representing those injured and will give first class legal representation, support and care to an injured person and their family. We have experience of dealing with high value cases and the application of the discount rate in Scottish Personal Injury cases.
Our solicitors can help you secure the justice and compensation you deserve. Get in touch now for a free chat about your claim.
- Call us on 0800 904 7777
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The small print: This blog is for information purposes only and should not be construed in any way as providing legal advice.