Osborne - Small Claims up to £5k and no damages for Whiplash

Many of us watched the Chancellor’s Spending Review speech because of controversial proposals such as cuts in tax credits for the low paid. He gave us a pleasing U-turn on that. Then he surprised us all with an attack on lawyers and victims of accidents. Don’t ask me what this had to do with a review of public spending.

He has announced plans to increase the small claims limit for Personal Injury Claims to £5000.00 and to ‘abolish’ the right to damages for ‘minor injuries’ caused by whiplash.

http://www.lawgazette.co.uk/news/spending-review-osborne-raises-pi-small-claims-limit-to-5k/5052389.article

What the first proposal means, in effect, is that victims of accident claims with a value of up to £5,000.00 can no longer recover any legal fees if they win. So they have to represent themselves or lose part of their damages in legal costs. The Conservatives have long been keen on this idea. They proposed it in 2013 but then abandoned it following a report by the Select Transport Committee –

http://thestevecornforthblog.blogspot.co.uk/2013/07/mps-whiplashreport-supports-victims-is.html

That committee was highly critical, saying –

‘We believe that access to justice is likely to be impaired, particularly for people who do not feel confident to represent themselves in what will seem to some to be a complex and intimidating process. Insurers will use legal professionals to contest claims which will add to the problem’.

They also criticised ministers for consulting with insurers but ignoring those who represent victims –

http://thestevecornforthblog.blogspot.co.uk/2013/07/mps-whiplashreport-supports-victims-is.html

There have been murmurings that this would come back onto the agenda once Cameron and Co had a majority. It seems that they now perceive a clear field to give their insurance friends all that they want.

The second proposal is rather more bizarre. It is a plan to abolish the right to damages for injuries caused by somebody’s negligence. So for the first time in UK legal history we will have a non actionable injury. Who will decide what can be claimed and what cannot? This will involve a fundamental shift in legal thinking. Will other injuries follow suit?

Mr Osborne had announced these changes to deal with the mythical 'compensation culture'. This ‘culture’ is a creation of the media and the insurance industry. It is a phrase used to alarm us all and create hostility without a shred of evidence to support it. The other reference made is to fraudulent claims. There are a very small minority of such claims. We all want to get them out of the system. In fact procedures already exist to deal with them. To abolish the right to damages at all is nothing to do with fraud.

It is an all out attack on victims for the benefit of the insurance industry. They will be the main beneficiaries of all of this. Osborne talks of a reduction in insurance costs of about £3 - £4 a month. I would not hold my breath. Insurance costs are going up anyway because he increased Insurance Premium Tax in the last budget.

I can see a long struggle ahead to fight these plans as the government again declared war on a whole professional sector.

In the meantime I predict that this will move us a step closer to USA style contingency fees where those who succeed in their claims will give up part of their damages in legal fees. I also suspect that the level of damages will increase to mitigate the worst effects of all this.