Maxwell Scott: Inflation is the elephant in the room
Many fixed recoverable costs (FRCs) for personal injury cases have not been increased since 2013 and are in need of “immediate review”, the Association of Consumer Support Organisations (ACSO) has said.
Matthew Maxwell Scott, executive director of ACSO, said inflation was an “elephant in the room” and, without a review, law firms might have to increase the costs they deducted from clients’ damages by 40-50%.
The £800 FRC for a road traffic portal case settling at more than £10,000 should have increased by now to nearly £1,020 based on the retail prices index (RPI).
For a similar case, the £180 FRC set in 2014 for an initial medical report should have risen to almost £225.
“The government has already slashed the fees paid to lawyers representing injured people; added to this a failure to review FRC in a sensible manner risks many law firms beginning to refuse cases because they are uneconomic or even leaving the market altogether,” said Mr Maxwell Scott.
“In the alternative, many predict a substantial increase in damages deductions for solicitors’ own client costs, possibly up to 40 or 50%, in order to make ends meet.”
Mr Maxwell Scott called on the Civil Procedure Rule Committee and the Civil Justice Council (CJC) to review the FRCs for PI cases as part of its ongoing costs consultation.
“There is an elephant in the room when it comes to inflation and the FRC regime. While PI costs have remained static for almost a decade, elsewhere ministers have committed to a review of the discount rate every five years.
“The Judicial College guidelines for general damages have climbed in line with the RPI, yet the Ministry of Justice intends to update the extended FRC proposed matrix at the lower services producer price index (SPPI) rate. Why are officials using different indices?”
Mr Maxwell Scott said the “entire process” for dealing with adjustments in fixed costs, rates, fees, damages and discount rates was arbitrary and needed a “complete overhaul” if consumers were not to lose out from lack of legal support.
He said the CJC recommended in October last year that “inflation ought to be applied” to the guideline hourly rates for solicitors and considered the issue of “regular, even annual, updates” before concluding that it should be guided by later reviews on the FRC in personal injury.
Meanwhile the Judicial College guidelines for general damages introduced in April 2022, over two years since the last update, “increased by a percentage close to the RPI increase” for the period at an average of just over 6.5%.
Mr Maxwell Scott commented: “Damages levels tie directly into FRC calculations, a relationship that the disjointed approach to adjustment processes fails adequately to manage.”
He said Ministry of Justice consultation papers had shown that there was an intention to “uplift the proposed matrix” for FRCs in the new extended fast-track to £100,000 by using the lower SPPI rather than RPI.
He added: “The costs regime has been managed in a piecemeal manner for too long, and it is high time it was overhauled.”
