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Baroness Scotland of Asthal: My Lords, I add my thanks to those of the noble Lord, Lord Hunt. The noble Lord is absolutely right: we aim to create a fairer system; and we seek to create balance in order to avoid over or under compensation. Complex and important issues surround both these matters.

Before I respond to this group of amendments, perhaps I may raise one issue on the previous group. The noble Lord, Lord Goodhart, raised a very important point. I fear that there may have been an oversight in relation to whether we have similar provisions for Scotland and Northern Ireland. We shall look into the matter. If there has been an oversight we shall take steps to ensure that that lacuna is also addressed. I thank the noble Lord, Lord Goodhart, very much for that point.

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I turn to this group of amendments. As I said in Committee, we agree that it is important that the real value of periodical payments is preserved over the whole period for which they are payable. I expressed concern that, although at present it is common practice to link payments to the retail prices index—and it is likely that this will continue to be the case—it would not be appropriate to prescribe this as a blanket index to which all payments must be linked.

Amendment No. 148 addresses these concerns and preserves the court's flexibility to link periodical payments to other indices where appropriate. We do not consider that the amendment is necessary as the need to allow for inflation is an inherent part of assessing the quantum of damages, which is already within the court's discretion. The calculation of lump sums allows for inflation, as do structured settlements.

Nevertheless, we recognise that periodical payments ordered under these proposals will differ from structured settlements as they are now—for example, they will not require the consent of the claimant. Given the importance of inflation-proofing damages against future loss, we agree that there could be—I repeat, could be—some merit in removing any doubt that the court has power to index-link periodical payments. Therefore, if the House considers that it will act as a useful guide to the courts and parties, we are willing to consider bringing forward an amendment to make this power explicit, provided that—and I must emphasise this—a provision can be drafted in a way which is workable.

The noble Lord, Lord Hunt, correctly identified the difficulties that we have had historically with setting the discount rate. Furthermore, on previous occasions, I—and others before me—have emphasised the need for certainty for claimants in this very difficult time. If we are moving to a more settled arrangement for them, we obviously want to limit the opportunity for added insecurity to be built in. Therefore, I add that caveat.

There are several issues which we will need to consider—for example, when and how adjustments for inflation should be calculated and the most suitable definition of the retail prices index. It will also be necessary to ensure that any amendment does not affect out-of-court settlements where, of course, the parties should be able to settle on whatever terms they choose.

So although I am making a clear commitment to look at the matter, I should tell the House that I can by no means guarantee that we will be able to make any movement on the issue. However, I think it is right that we should have a vigorous look to see whether anything may be possible.

Amendment No. 149 provides that a court may order that periodical payments for medicinal care and treatment costs are increased in line with care costs inflation, but should not exceed it. It goes on to provide that if, as a result of those increases, the amount of a payment exceeds that which would have been paid had payments been linked to the retail prices index, then the excess should be defrayed out of moneys provided by Parliament. I do hear what the

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noble Lord, Lord Hunt, says in relation to the similarity of that provision with earlier provisions, with which we were not able to find favour.

In these cases, the uplifted payments would seek to reflect the true cost of compensation. It is an important point of principle that the negligent party should pay for the costs of his or her negligence. There is no reason why the taxpayer should have to meet those costs. The operation of such a scheme would be complex and would itself create additional costs. Of course we are aware of concerns that there are no suitable investments that would allow life insurers, who are subject to close matching regulations, to offer annuities that would match care and earnings-based indices exactly.

However, it would currently be possible for insurers to provide annuities linked to the retail prices index plus a certain percentage. So it would be open to the court, if it thought that was the most appropriate way to quantify certain future losses, to order that they be linked to the retail prices index plus a percentage as a proxy for some other index. We should also keep in mind that not all periodical payments will be backed by insurance products and that the same regulatory considerations will not apply where payments are funded by other means.

As I explained, the court already has the power to order payments linked to whatever index it considers suitable. A provision allowing it to order payments linked to care costs inflation is therefore unnecessary. It is important that the courts are able to take a flexible approach, so that where the circumstances of the case make it appropriate—if a defendant is unable to meet the terms of the proposed order because funding could not be adequately secured—he or she can inform the court and a different order can be made.

I hope that I have given the noble Lord a comprehensive answer. I therefore invite him to withdraw the amendment.

6 p.m.

Lord Goodhart: My Lords, I am most grateful to the noble Baroness for what she said about Amendment No. 148. Although I recognise that she has given no undertaking to act, I am grateful that the Government will at least consider whether something can be done to make clear beyond any doubt that Clause 92 permits payments that are linked to an index—and therefore not ascertainable at the time of the order, which was my concern.

On Amendment No. 149, I am most grateful to both the noble Lord, Lord Hunt of Wirral, and the Minister. The matter thoroughly deserves debate although, as I said, I recognise that it cannot be decided during the course of debate on the Bill. The noble Baroness implied that the Government would keep it in mind. There is plainly nothing that I can do to take Amendment No. 149 further at this stage. Returning to Amendment No. 148, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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[Amendment No. 149 not moved.]

The Deputy Speaker (Viscount Allenby of Megiddo): My Lords, before I call Amendment No. 150, I must inform the House that if it is agreed to, I shall be unable to call Amendments Nos. 151 to 156 inclusive because of pre-emption.

Lord Hunt of Wirral moved Amendment No. 150:

    Page 46, line 16, leave out from beginning to end of line 13 on page 47.

The noble Lord said: I immediately point out to the noble Baroness that I do not intend to press the amendment, but it gives the House a further opportunity to consider the whole question of variability or reviewability of the periodic payment provisions. The noble Baroness will be aware that there is ongoing concern about the detail of their implementation. I hope that she will take this opportunity again to address those concerns. There is grave concern about the scope of the review and its operation. It may introduce unwelcome uncertainty into the setting of reserves.

The noble Baroness made clear that the power to vary will be tightly drafted and carefully controlled. Indeed, in Committee, she said:

    "Such a restricted system of variation should not require additional compensation over and above that already payable. Insurers are already providing for such eventualities".—[Official Report, 27/3/03; col. 1006.]

That came as considerable reassurance, but the detail has yet to be set out. The noble Baroness would do a great deal to reassure those outside the House if she were now able to enlighten us about the timetable that will operate; the drafting of the regulations; or the extent of the consultation.

Obviously, these are early days, but the noble Baroness will recognise that there has been a desire to write much more of the detail into the primary legislation. She has rightly resisted including too much detail on the assurance that there will be widespread consultation and time during the drafting of the regulations to consider the range of opinion advanced. However, it would reassure a number of people if she were able to provide more detail about the timetable.

She may also be able to assure us that within the draft regulations there will be sufficient control on the use of the power to vary to avoid what could otherwise be endless satellite litigation. When we debated conditional fee agreements, I strongly urged that there should at least be a pilot scheme from which we could learn lessons and that more safeguards should be included.

I suppose that in many ways I have benefited from that. Noble Lords will be aware that I am senior partner of Beachcroft Wansbroughs, which is one litigation firm involved in some of the satellite litigation. But I do not think that anyone has welcomed the extent of that satellite litigation—certainly not those involved in it—as we seek to clarify the extent of the conditional fee agreements. I am indeed pleased to hear the

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announcement from the Lord Chancellor's Department that the whole matter of conditional fee agreements will be reconsidered.

I should not want us to go further down the road of periodic payments only to discover that a massive amount of satellite litigation again arises as the parties seek to explore the meaning of and intention behind particular words and phrases. Perhaps the noble Baroness can take this opportunity to reassure us all that that is most unlikely to happen. Bearing in mind that the provisions must work, we should like some assurance as to when we may see the draft order and rules of the court and exactly when the noble and learned Lord the Lord Chancellor will consult.

Finally, grave concerns remain about how reviewability may operate. An early view of the draft order might do a great deal to alleviate those concerns. We approach Third Reading, with all the proceedings still to follow in another place. I hope that before the Bill finishes its passage through Parliament we may see at least something of the draft order so that we can turn our minds to it during the Bill's final stages.

There is a genuine wish on all sides of the House for periodic payments to be made into a workable alternative. I recall that I, the noble Lord, Lord Brennan, and others spoke at reasonable length on a previous occasion about the need for legislation similar to the periodic payments provisions in Clause 92—although we did not then refer to reviewability—as being a much better system than the rather distasteful practice of producing a lump sum that is then imposed on families least able to cope with it. The guarantee of receiving payments for as long as one may live has enormous attractions when trying to break through the existing straitjacket of difficult and complicated calculations.

We would not want a system to be set up that is even more complicated and difficult to administer than the current one. I hope that the noble Baroness will give us some reassurance about that. I beg to move.

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