The cost of NHS clinical negligence claims may come down following a decision from the Treasury to increase the personal injury discount rate (PIDR) from January.
Today, Lord Chancellor Shabana Mahmood has announced an increase in the PIDR from -0.25% to +0.5% in England and Wales, following a review of the rate which takes place at least every five years.
The change will come into effect from 11 January 2025 and it brings the two countries in line with the rest of the UK.
This news was welcomed by the the Medical Defence Union (MDU), which said the change could save the NHS ‘millions of pounds in the costs of compensation payments’.
The discount rate determines the size of lump sum damages paid out to people who suffer serious and long-term personal injury, with the size of damages reducing when the discount rate increases.
In Scotland and Northern Ireland, following a review by the Government Actuary, the personal injury discount rates were increased on 27 September this year to +0.5%.
In England and Wales, NHS GPs have been automatically covered by state-backed schemes since 2019 – however, this does not entirely remove the need to have their own indemnity cover.
Responding to the announcement for England and Wales today, MDU head of claims David Pranklin said the Lord Chancellor’s decision ‘will mean more money can be retained in the NHS to benefit patient care’.
He continued: ‘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, he warned that despite the ‘good news’, the cost of claims continues to rise and the ‘plan to introduce fixed costs in lower value clinical negligence cases has stalled’.
What is the personal injury discount rate?
The personal injury discount rate (PIDR) is used to determine lump sum damages awards to people who suffer serious and long-term personal injury.
Damages are awarded to people who have endured life-changing events which have led to serious and long-term injuries. The lump sum payments are intended to provide people with full and fair financial compensation for all expected losses and costs caused by their injuries.
Where part of a claim for future losses is settled as a cash amount, the lump sum is calculated allowing for the:
- period over which losses and costs are expected to be met
- assumed investment return that the individual is expected to earn on the lump sum award after allowing for investment expenses, tax and damages inflation
The assumed investment return is referred to as the Personal Injury Discount Rate (PIDR).
Source: UK Government
