MSPs recommend discount rate and periodical payments bill

The bill to change the method of setting the discount rate used in calculating damages for personal injuries, and to enable courts to order periodical payments of damages, has won the backing of a Holyrood committee in its stage 1 report on the bill.

MSPs on the Economy, Energy & Fair Work Committee are recommending that the Parliament agrees the general principles of the Damages (Investment Returns and Periodical Payments (Scotland) Bill, while drawing attention to points where they want the Scottish Government to provide more detail.

Under the bill, the discount rate would be set by an official rate assessor, considering a hypothetical investor investing over a 30 year period in a “notional portfolio” of various classes of assets, taking a “cautious but low risk” approach. This moves away from the index-linked gilts approach used at present, and would empower ministers to alter the adjustments (to reduce the risk of undercompensation) set out in the bill, and the makeup of the notional portfolio, by secondary legislation.

The committee recognises that the number of cases affected by the discount rate is small, but that the calculation of compensation is of “vast importance” to those affected. There is also a significant division of opinion between pursuers' and defenders' representatives as to the risks of over- or undercompensation.

It agrees with the minister that the aim should be to provide a standardised approach that can work in the interests of fairness, regularity and credibility across a range of cases, but calls for more detail from the Government on its commitment to considering more than one rate if a significant difference emerges between investment returns over different periods of time.

It also believes that a five year review cycle would be preferable to a three year one (with a failsafe provision for out-of-cycle reviews), and asks ministers to consider further how to prevent people advancing or delaying proceedings to suit the timing of a review.

For periodical payment orders, the bill would enable the court to impose an order where at present it can only make such a decree if both parties agree. Such orders would be an alternative to a single lump sum in appropriate cases of long term future loss, and again would probably only feature in a few cases a year. The committee welcomes the new power, as did most witnesses before it, while inviting the Scottish Government to bring forward amendments to give more weight to the pursuer's views when a court is asked to decide on an order. The bill contains provisions for the variation and suspension of periodical payment orders and similar agreements reached by parties.

Click here to view the committee's report.