The Ministry of Justice (MoJ) recently announced that a consultation will take place in relation to the discount rate applicable to damages awards in personal injury and clinical negligence claims. The initial consultation will consider the methodology to be used to calculate the discount rate, with the consultation closing on 23 October 2012.

The discount rate was last set by the Lord Chancellor in 2001, when the current rate of 2.5% was applied, and has not been reviewed since, despite much lobbying by interested parties and attempts by APIL (the Association of Personal Injury Lawyers) to get this failure judicially reviewed.

The discount rate directly impacts on damages that are paid as a lump sum, as it is used to determine the multiplier applied to future loss claims and is supposed to factor in the return on investment that a claimant might achieve if his or her damages were invested in low risk investments. It is felt by many that the rate has been out of kilter with what might actually be achieved and hence there is a risk that a claimant will be out of pocket. If the discount rate goes down, damages for future loss will rise and, if it goes up, such damages will decrease.

It is hoped that a speedy decision will be made in relation to the discount rate following consideration of all the consultation responses.