246. Deputy Michael McGrath asked the Minister for Justice and Equality if he is empowered under the Civil Liability and Courts Act 2004 to set a rate of return or to set a methodology to define a rate of return in respect of claims made against the State; if so, when a rate of return under the Act will be enabled; and if he will make a statement on the matter. [8488/18]
Minister for Justice and Equality (Deputy Charles Flanagan): The position is that Section 24(1) of the Civil Liability and Courts Act 2004 gives the Minister for Justice and Equality the power to prescribe by regulation “the discount rate that shall apply for the purposes of the assessment of damages in respect of future financial loss”. To date the power has not been exercised by a Minister. Instead the rate has been set at the discretion of the Courts. The Deputy will be aware that Section 24(3) of the 2004 Act also stipulates, in any event, that a court may apply a discount rate other than the rate prescribed under subsection (1) if it considers that the application of the rate prescribed would result in injustice being done.
The discount rate represents the average ‘real rate of return’ that a ‘prudential investor’ could achieve on an award. The size of the award is ‘discounted’ by the percentage return that the plaintiff can expect to make by investing the award.
In the case of Gill Russell v HSE, the Court of Appeal upheld the determination of the High Court that the discount rate of 3% then being applied by the courts to personal injury lump sum awards was too high for cases involving significant long-term care needs and instead set the rate at 1% for future care costs (to take account of the likelihood that care costs would be higher than inflation) and at 1.5% for other future pecuniary losses (to include future loss of earnings).
My Department has already commenced examination of this issue in consultation with the Department of Finance and the State Claims Agency, taking into account the judgments in the case of Gill Russell v HSE, and the recent discount rate changes in England and Wales.
Officials have engaged with counterparts from HM Treasury to discuss their experiences of reviewing and setting the discount rate in the UK. The State Claims Agency has also carried out some analysis on this subject. A key outcome of this process will be whether regulations should be brought forward to set the discount rate and if so at what rate should they be set.
I do not, on the basis of the decision in the Gill Russell case, propose to introduce regulations to set the discount rate at this stage. However, in conjunction with the Department of Finance and the State Claims Agency, I shall be reviewing legislative developments in the UK on this issue and will give consideration to their applicability or otherwise in an Irish context.