Vulnerable road users (VRUs), such as pedestrians and cyclists, will be completely exempt from the government’s whiplash reforms, the Lord Chancellor announced yesterday.
But David Gauke showed no sign of moving on other aspects of the reforms, despite strong opposition from Labour MPs.
Opening a three and a half hour second reading of the Civil Liability Bill – the stage at which the principles of the legislation are debated – Mr Gauke said: “Our reforms are focused on ensuring that genuine claimants have access to justice, receive a proportionate amount of compensation and that the system works for all who use it honestly.”
The Ministry of Justice had already made a concession in the House of Lords exempting VRUs from the provisions of the bill, but not from the associated increase in the small claims limit.
Mr Gauke said: “After listening carefully to the arguments made… I can now say that we intend to remove these vulnerable road users from the small claims limit changes.”
Much of the debate focused on small claims limit, and Mr Gauke said: “By and large, these are very straightforward claims. We want to ensure that support is there so that people are able to bring the claims in person…
“Raising the small claims limit for these RTA cases to £5,000 will work to control their costs, acting as an incentive for insurers to challenge, rather than settle, those cases that they believe to be without merit.
“This is vital to changing the unhealthy culture that sees whiplash claims as a way to make easy cash.”
He rejected predictions that insurers would not pass on the savings generated by the reforms, saying: “When the Competition and Markets Authority looked at the insurance industry, it found that it is a competitive industry.
“The factor that is most likely to ensure that benefits are passed on to consumers is competition, and the evidence suggests that there is competition in this area, but we will ensure that insurance companies provide robust information so that they can be properly held to account.”
The government has pledged to introduce an amendment to the bill to this effect, although some MPs questioned how that could be done effectively.
Mr Gauke continued: “Many claims involving road traffic accidents will, of course, be genuine. It is absolutely right that they are compensated appropriately.
“However, with major improvements in motoring safety in recent years, including the increased use of integrated seat and head restraints, it would be remiss of the government not to ask what is going wrong.
“The reality is that some of these claims are not genuine. In 2017, the insurance industry identified almost 70,000 motor insurance claims that it considered to be fraudulent.”
Labour MP Dr David Drew Labour asked the Lord Chancellor whether he would monitor the impact of the bill on personal injury lawyers, “as it is already difficult to get lawyers to stay in that field”.
Mr Gauke replied: “I think that it would be fair to say that personal injury lawyers have demonstrated adaptability in recent years and that the sector has proved to be resilient.”
His Labour shadow, Richard Burgon, suggested that the reforms could spark industrial action: “Without legal fees being covered, tens of thousands of working people will simply be priced out of obtaining legal assistance. Many will drop their cases altogether.
“Others will fight on but do so representing themselves, not only making their pursuit of justice more difficult, but placing serious pressures on the courts. Others will pay their own legal fees out of their compensation, which in effect means a cut in their compensation levels.
“Of course, other workers will conclude that when their route to justice through a court or tribunal is removed, they have no alternative but to resort to industrial action to achieve redress.”
He argued that as well as VRUs, the government “should also concede that the inclusion of people injured at work is equally unjustified”.
Mr Burgon said Labour would lay amendments to the bill to reduce the period for which the compensation tariff applies to one year, rather than two.
“It is much less likely that fraudulent cases will be those lasting for the longest time. Two years of suffering is surely too long to be deemed a minor injury.”
He added: “Given that there is no evidence that workers such as ambulance drivers or HGV drivers who suffer whiplash during their employment are behind any fraud whatever, will the minister find a way to exclude those workers from this legislation?
Jo Stevens, a Labour MP and, like Mr Burgon, a former Thompsons solicitor, labelled the Association of British Insurers’ (ABI) description of a “broken” personal injury compensation system as “absolute rubbish”.
She said: “There is plenty that is broken, however, about access to justice, and the ABI and its powerful lobby operation has, I am afraid, been one of the main drivers behind that.”
She, like several others, focused on the ABI’s own figure that proven fraudulent claims amount to just 0.25% of all motor claims. “This bill, therefore, is a huge, defective sledgehammer trying to crack a very, very small nut.”
Ms Stevens warned too about the rule of claims management companies (CMCs): “We, I think, are united in this House against their pernicious influence and irritating methods, but in the impact assessment it actually states: ‘There may be the potential for a rise in CMCs seeking to enter the market to support claimants without legal representation.’
“There is no ‘there may be’ about it: it will happen. Of course they will move in. They will offer poor legal advice on the cheap, maximising their profits on the back of others’ misery, as they have always done.
“If the government really cared about the consumer, they would be listening to public opinion and introducing an outright ban on cold calling for personal injury claims by CMCs.”
Conservative MP Craig Tracey insisted that this was an industry where in many instances the claimant was not the main beneficiary: “The measures put forward in the bill will not, as is suggested by its opponents, affect the ability of people to seek fair compensation for their injuries or suppress access to justice, but will, more reasonably, cut the incentives for a claimant industry to disproportionately profit from our constituents’ misfortune.”
Fellow Tory Chris Philp added: “A ban on referral fees was introduced a few years ago, but some insurance companies have sought to circumvent it by using what they euphemistically term ‘alternative business structures’…
“We should ban insurance companies from having an equity stake or any other financial interest in claims management companies or in claimant law firms, to make our existing ban on referral fees a little bit more robust.”
Bob Neill, the Conservative chairman of the justice select committee, which has been very critical of the small claims increase, welcomed the decision on VRUs but called on the government to consider also “the position of other claims that are more complex than the normal straightforward whiplash and soft tissue injury claim”.
He explained: “In particular, they should consider where we should set the appropriate limit in relation to employment liability and public liability, which almost invariably create more complex issues.
“It is much harder to expect people, on an equality of arms basis, to deal with issues arising collaterally from the main point in such cases. As the bill proceeds, we need to look again at how we handle that.”
He also urged the government to “strengthen the evidence base” for the bill: “Purely relying on the insurance industry is not enough. There is other evidence for strengthening the case on which the government could rely, and they need to make sure they get the balance right.”
Labour’s Ruth George insisted that if the government banned cold calling and information going from insurance companies to CMCs, “they would find that the problem of excess claims was dealt with to a large degree” and the provisions of the bill would not be needed.
The bill now goes into committee, where a group of MPs will examine it line by line and consider amendments. The first day is scheduled to be Tuesday 11 September, with a second day on 13 September, the last day before Parliament goes into recess again for the party conferences.
It begins sitting again on 9 October, the date by which the committee has to finish its work.