Setting the tone for the next four and a half years, previously made commitments set many of the parameters of yesterday’s spending reviews. In practice it was largely an exercise in distributing spending cuts across the non-ringfenced departments – affording protection to some (health, education, defence) by making inevitable cuts to others (including the Home Office and Justice).

In amongst the big-ticket issues of infrastructure, energy and the like, some surprises were revealed for the personal injury arena. Chancellor George Osborne has pledged to raise the small claims limit for personal injury claims from £1,000 to £5,000 and end general damages for minor whiplash claims. 

Key policy announcements   

Personal Injury

  • The Government will bring forward measures to reduce the costs arising from unnecessary whiplash claims.
  • Measures expected to remove £1 billion from the cost of providing motor insurance.
  • To include removing the right to general damages for minor soft tissue injuries.
  • To also include removing legal costs by transferring personal injury claims of up to £5,000 to the small claims court.
  • Motorists expected to see an average saving of £40 to £50 per policy per year.

Justice

  • The Government will close under-used courts and increase the total investment to more than £700 million to modernise and fully digitise the courts – moving from a paper-based to an online system.
  • The Government will invest £1.3 billion in the next 5 years to bear down further on costs, including investing in new technology and prisoner education to support rehabilitation and video links with courts.

Osborne has confirmed his determination to continue to tackle fraud and the compensation culture surrounding whiplash claims. However, he and others within Government must consider the potential for unintended consequences. 

Increasing the small claims limit goes beyond whiplash and motor-related injury claims (if that is the intention). Employers’ liability and public liability claims will fall within the change, including lower value disease claims, such as noise induced hearing loss claims. 

The opportunity for non-regulated claims management companies to step into this arena is apparent. Regulatory measures will be needed to ensure that claims farming practices are prevented; thereby protecting the genuine consumer. 

As always, such proposals for reform will need proper thought and consideration. We assume that a Government-led consultation will follow in the New Year and that if the proposed changes are implemented, it seems likely to impact on litigation commenced after April 2017. We will be monitoring these developments closely. In particular, the detail behind removing compensation rights for ‘minor’ whiplash is awaited with interest.