Where do the latest political post-EU referendum developments leave the government’s civil justice reform agenda?
The task of anticipating future developments on matters of key significance to insurers following the quite unexpected result of last week’s EU referendum vote remains an almost impossible one. The only predication which can be made with any strong chance of being proved correct seems to be that the eventual outcome will arise out of further unanticipated developments in the weeks ahead.
As far as can be said, what though are the likely effects of developments over the last 7 days on future reform of interest to insurers, specifically on the awaited government consultations on the Autumn Statement reforms involving removal of the right to claim general damages in cases of minor whiplash and the SCT rise for injury claims, and on the widening of fixed costs?
The next leader of the Conservative Party will be…
Nominations for the leadership closed at 12 noon today, and of course the winner of this process will become the next Prime Minister. While he was expected to declare his candidacy shortly before that deadline, Boris Johnson in fact announced this morning, to much surprise among his supporters, that he would not be standing.
His decision may have been led by that taken by the Justice Secretary, Michael Gove, and announced earlier this morning, that he was in fact intending to stand. Again, a surprising move in the light of his recent comments that he did not want the role, and that there were others better placed to do it.
As expected, the candidacy of the Home Secretary, Theresa May is also confirmed. Mrs May and Mr Gove are the candidates who are regarded as having the strongest chances of success amongst the 5 who are standing, with latest odds showing Mrs May as an odds-on favourite, though we will need to see how the position develops following the absorption of the news that it is Mr Gove rather than Mr Johnson who is the candidate from amongst the leadership of the campaign for Brexit.
It will not be long before the identity of the next PM is known. The first round of voting amongst MPs is next Tuesday 5 July, and repeat votes will be held with the second on Thursday 7 July and the third if required on Tuesday 12 July. Each time with the loss of the candidate with the fewest votes from the previous round until 2 are left, which point will therefore arise on 12 July unless any candidate withdraws before or during the process. The membership of the Conservative Party will vote to choose a leader between those 2 candidates.
The identity of the 2 remaining candidates, perhaps Mrs May and Mr Gove, will therefore be known by 7 or 12 July. The result of the vote of the membership will be announced on 9 September. The new PM will then assemble his or her new cabinet in the days after that.
David Cameron announced immediately after the referendum vote that the triggering of the processes needed under Article 50 of the Lisbon Treaty to commence the negotiation process to leave the EU would fall to the next PM and his/her cabinet to decide upon. There can be no doubt at all that that issue and the myriad aspects arising from it will dominate the political scene going forward from September.
The awaited consultations
What is the likely impact of these political developments on what pre-referendum were said to be the expected publication by government of consultations on various issues but in particular those on the Autumn Statement reform and on a widening of fixed costs? It is easy to see the basis for taking the view that those matters may well get overlooked in the maelstrom affecting our political processes at present.
How, it could be said, will there be chance to advance these consultations when the Secretary of State for Justice has had his attention diverted first by the Brexit campaign, and now at least until early September by his personal campaign for the leadership of his party?
In truth, there is not sufficient information available as yet to know whether the Brexit factor has put pay to these intended reforms, at least in the short term. It cannot though be assumed that just because the Secretary of State has other matters to deal with, that the consultations will now not be published before the parliamentary summer recess on 21 July or shortly afterwards. They could be released at any time notwithstanding other developments, and insurers should not discount that possibility.
There are at least two reasons for this. Firstly, other departments are involved alongside the MoJ on each of the consultations: the Treasury on whiplash/SCT and the Department of Health on fixed costs. Secondly, it is Lord Faulks who has been taking key responsibilities in this area, as Minister of State for Civil Justice, and his attention has not been subject to the same diversions over recent weeks. He may, if he gets the green light, be ready to proceed.
Any change of heart?
Will the effects of the Brexit vote and the personnel changes likely to take place within government as a result of it affect the proposed course of reform in relation to either of the consultations mentioned?
In the case of the widening of fixed costs, the initial momentum of course came from the DoH with the desire to reduce the cost to the public purse from what were seen as the high level of costs in clinical negligence cases, and none of those pressures will have been changed by the referendum result. The logical point then remains: what is good for that type of claim is surely good for all others. So, subject to time and resource being available, why should that reform not be expected to proceed still, even the timescale has to be lengthened to achieve it?
What of the whiplash/SCT reform?
There are of course 2 proposed reforms within the one package: both the removal of PSLA for minor whiplash, and the raise in the SCT to £5,000 potentially for all injury claims. If it will be more difficult to find the parliamentary time to pass the primary legislation which will be needed for the PSLA package, might the government proceed only with the SCT reform?
Again, nothing can currently be excluded, but a half-hearted reform of that type might cause more problems than it would solve. If the consultation for the Autumn Statement reform is in fact released in July, then we would expect it to include both the PSLA removal and the SCT rise. This would be because the likelihood is that it will have been prepared in advance of the referendum result and in anticipation of both limbs of this reform proceeding without the added complexity of the unexpected result in fact achieved.
If the consultation is released soon, we will then get to see more detail of government intentions on key issues such as how minor whiplash will be defined and whether it will be by reference to period of relevant symptoms such as 6 months, whether the SCT rise will affect all injury claims including EL/PL, and the new processes likely to be adopted.
Progress after the consultations
The consultations are of course only a stage in the process, after which reform needs to be finally decided upon and implemented. It has been reported that Oliver Letwin will lead a “Brexit Unit” formulating policy in that area, while he had been having strategic involvement in relation to whiplash reform at least at one time. Clearly Brexit will be his priority going forward.
To what extent will Brexit issues remove the time for government handling of other issues such as the reforms being considered in this update? The business of government must go on, but is now clearly going to be more difficult to find the time and resource to achieve progress in non-Brexit areas, and there will presumably be a need to prioritise. What side of the line will these reforms fall? We will need to wait and see.
Different personnel in government
The Autumn Statement reform was of course announced by the Chancellor George Osborne, and had the clear support of David Cameron. After September, Mr Cameron will no longer be in government, while the role which Mr Osborne will play in the next cabinet can only be speculated upon. While the reform fell to the MoJ in large part to map out how implementation could be achieved, it was clear that the origin of the policy decisions behind the reform lay outside the MoJ.
Neither the identity of the next PM nor the make-up of the next cabinet will be known before early September. Insurers will be interested in knowing how changes at the highest levels of government may affect likely policy direction.
If Mrs May becomes PM then it may be relevant to recognise her previous involvement in strategic thinking on the whiplash issue with the then Secretaries of State for Transport, Justice, Health and Business at a meeting in 2012, prior to the insurance summit at around that time, and which led onto the subsequent reforms. It may be assumed that her leadership would see a greater prospect of continuity on the issue.
If Mr Gove becomes PM we will need to wait longer for signs of policy direction. Certainly he has been the Secretary of State within whose ministry the plans have been developed this year, though if this has mainly been under the guiding hand of Lord Faulks, the degree of connection between the reforms and Mr Gove may be limited, and we should assume little as a result.
Future for the MoJ
Even if Mr Gove is unsuccessful with his newly-found leadership ambitions he is likely to be in demand elsewhere in government when the new cabinet is set up, so a new Secretary of State will almost certainly be needed. Lord Faulks’ role at the MoJ pre-dates that of Mr Gove, and there is no reason to think that he will not remain in place after September, especially if there remains unfinished reform business to attend to.
Other wider issues for insurers of course remain after the referendum vote. Those matters will need key consideration over the months and years ahead as we approach exit from the EU, subject of course to any other surprising intervening developments in the meantime.
This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.