Discount rate reset cuts long-term lump sum damages

The change, announced this week, is effective from 11 January 2025, and matches rates set in Northern Ireland and Scotland.

While the independent expert panel advising the Lord Chancellor recommended a rate between 0.5% and 1%, Mahmood considered ‘the likelihood of under-compensation with all rates above 0.5% to be too high’.

At 0.5%, ‘the three core claimants modelled will have, at least, an approximately 55% chance of receiving full compensation or more,’ she said, in her statement of reasons for the change.

‘They also each have no more than a 25% chance of significant under-compensation. At this rate, no core claimant is more likely to be undercompensated than over-compensated, which I consider an appropriate outcome.’

According to the Medical Defence Union (MDU), the change could save the NHS millions of pounds in compensation payments.

David Pranklin, MDU head of claims, said: ‘In recent years, changes in the PIDR have led to a huge increase in the cost of clinical negligence claims.

‘This has had serious implications for the NHS, and for MDU members who have been shouldered with the increased costs. This change will provide some relief in the current difficult medico-legal climate.’

However, Gordon Dalyell, treasurer of the Association of Personal Injury Lawyers, said: ‘Even under the current rate of -0.25 per cent, we know that a third of people with life-changing injuries will not meet the costs of their necessary care and support.

‘Any increase in the discount rate makes it more likely that more injured people will be undercompensated. People with catastrophic injuries are particularly susceptible to the rising costs of living we’re seeing across the board, which includes increases to carer wages and the cost of specialist aids and equipment.’