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Post-Election political developments now creating a challenging environment for key reforms

The unexpected result of last week's General Election has opened a period of political uncertainty of unknown length. We await additional detail this week as the Conservative government looks to identify the priorities which it can reasonably expect to be able to take forward, alongside ongoing negotiations with Northern Ireland's Democratic Unionist Party as to what support is available from them.

Additional time is going to be needed. While parliament reassembles tomorrow, the Queen's Speech which was to have taken place on 19 June has been delayed presumably to allow the ongoing negotiations to be advanced. The negotiations with the European Union are currently due to open on 19 June concerning the UK's intended departure from the EU though it is unclear now whether they will do so.

Yesterday, Theresa May as Prime Minister announced her cabinet appointments including the replacement of Liz Truss as Justice Secretary and Lord Chancellor by David Lidington, the 60 year old non-lawyer MP for Aylesbury. Details of other ministerial appointments in the MoJ, as well as shadow ministerial appointments by the Labour leader Jeremy Corbyn are currently awaited though Labour are likely to delay their appointments for the time being.

Against the background of these ongoing developments, what from the perspective of insurers are now the prospects for ongoing reform in the various areas of concern, including those measures which were progressing during the last parliament? There is a strong argument that the reform agenda should proceed, but what are now the potential hurdles to overcome?

A minority government?

The Conservatives are short of a majority in the new parliament and has been widely reported are in negotiations with the Democratic Unionist Party in order to try to reach an agreement so that the government can count on the support of the 10 DUP MPs in order to achieve a majority in the Commons when required. Those negotiations are expected to continue throughout this week, though it appears that rather than a formal coalition agreement, the result is more likely to be a 'confidence and supply' agreement so that the Conservative government can count on DUP support in key votes.

Assuming those negotiations are indeed concluded this week or early next, the Queen's Speech should then assist in obtaining clarity as to the result of those negotiations and therefore the parliamentary measures which have attracted consensus from discussions both within the Conservative Party and with the DUP and which we can expect the new government to try to take forward onto the statute book.

It seems inevitable however that this will have to be a shorter list than the last government had on its agenda. The Brexit Secretary David Davies has referred today to the need to "prune" the manifesto. Anticipating dissent and planning the reform programme accordingly was an important part of life in the last parliament where the Conservatives had a small majority, and this of course led into the reason for Mrs May calling the General Election.

However, the position will now be even more acute where the government lacks a majority. As a matter of mathematics, the key question for any proposed new legislation will be the extent of any dissent within the ranks of Conservative MPs, and whether DUP support can be relied upon.

Brexit issues

A further factor limiting the chance of some reforms progressing will be the additional time and energy needed to deal with Brexit related issues. The effects of the diminished authority of the PM, alongside the make-up of both the new cabinet and the new House of Commons have produced a new mix from which the outputs are currently uncertain.

It may be that as is anticipated by some, a more consensual approach will be needed. Indeed the mathematics in the Commons would point towards that. The type of Brexit that would be appropriately sought by the UK in negotiations with the EU and whether that needs now to be a 'softer' form remains unclear. Whether the UK should remain in the Customs Union or indeed the Single Market are questions now being asked. The question of passporting rights within the EU for insurers is connected to some of those answers.

What does seem obvious however is that the issue of Brexit will remain centre stage for a lengthy period and will dominate the agendas of government and also of parliament, so reducing the opportunity of other measures progressing.

David Lidington MP

While Ms Truss's departure from her position as Secretary of State for Justice had been widely anticipated, the appointment of Mr Lidington in her place had not been. There had been speculation that after three non-lawyers holding the role in succession, and in view of concerns regarding Ms Truss's performance of it, that the PM might have seen the advantage of appointing a lawyer this time out.

However, it is not to be. Unlike with the appointment of Ms Truss, a safer option seems to have been aimed for on this occasion.

Mr Lidington is of Mrs May's generation, has a history PhD, and is a double University Challenge winner. He is a staunch Remainer, having been Europe minister for a lengthy period, and is a supporter of the European Convention on Human Rights. He was most recently Leader of the House until the General Election, in which role his duties included standing in for the PM at Prime Minister's Questions.

His appointment has impressed legal commentators though in truth the fact that Ms Truss has been replaced may be part of the reason for this. He is though already on record as recognising the importance of the independence of the judiciary and seems to appreciate the constitutional role which he has to play as Lord Chancellor in support of that.

Indeed he has continued that theme by saying in response to his appointment:

"Democracy and freedom are built on the rule of law, and are protected by a strong and independent judiciary. I look forward to taking my oath as Lord Chancellor, and to working with the Lord Chief Justice and his fellow judges in the months ahead, to ensure that justice is fairly administered and robustly defended."

As to his voting record, he supported the LASPO reforms including the concept of limiting success fees paid to lawyers in CFA cases. His views on issues such as whiplash reform and the discount rate are currently unknown, though in 2000 in a speech he made clear his fear of "growth of a culture of litigation and compensation mirroring some of the worst examples that we have seen across the Atlantic".

The new MoJ

The other ministers in the team currently include Oliver Heald, Minister of State for Courts and Justice, and Lord Keen, MoJ spokesman in the Lords. News of whether they are to remain in post or will be replaced is expected this week.

With interesting timing, the former MoJ minister in the Lords, Lord Faulks, was writing in the Times on Thursday, the day of the General Election, regarding concerns about third party funding. He resigned as minister over the appointment of Ms Truss expressing prescient concerns regarding her ability to stand up for the independence of the judiciary. His reappointment to the MoJ could not be discounted and would be seen as a positive to the prospects of civil justice reform.

The position of other parties

We know something of the legislative intentions of the Conservative government from their manifesto, despite certain aspects of it receiving criticism in the aftermath of the election result. This promised to "reduce insurance costs for ordinary motorists by cracking down on fraudulent and exaggerated whiplash claims". This can be seen as a desire to press on with Part 5 of the Prisons and Courts Bill on the assumption that the developments of this week show that it is appropriate for the measure to be reintroduced to the new parliament.

Pre-General Election, the Lib Dems as well as Plaid Cymru were quoted as also being in favour of the government's reforms to whiplash and the small claims track.

The DUP's manifesto had nothing to say in that area, nor would this have been expected where Northern Irish priorities lie elsewhere. A former DUP Member of the Legislative Assembly of Northern Ireland interviewed on the BBC Radio 4 Today programme this morning refereed to his party as being "fairly compassionate" which would want to avoid "the extremes of austerity".

Nor did the Labour manifesto disclose a specific position on these reforms.

Labour and the Prisons and Courts Bill

Perhaps the best guide to the likely Labour position remains the somewhat ambiguous speeches of their spokesman, then shadow Justice Secretary, Richard Burgon during Second Reading of the Bill. He disagreed with Liz Truss's claim of "a rampant compensation culture" and took the APIL line on its claim of reducing numbers of whiplash claims, as well as wanting the government to win guarantees from insurers as to the passing on of savings.

But Labour did not oppose the Bill at Second Reading, Mr Burgon saying that he welcomed and supported much of its content. However, he though, "the Bill itself must transform if it is to transform". The position was not advanced from there as scrutiny by the Public Bill Committee did not reach Part 5 before parliament was dissolved in the lead up to the Election.

The current view of Labour as to this proposed reform following the result of the General Election and potential growth in confidence is unknown. A minority government will need to pick its battles more carefully. The extent to which measures set out in the Bill which can proceed with cross-party support may well need to be explored.

Discount rate

The consultation run by the MoJ ran until 11 May and during purdah civil servants in the department will have been analysing responses in order to brief Mr Lidington and his ministerial team.

Insurers will properly see the matter as a priority to resolve, and the demotion of Ms Truss and her move away from the MoJ to her new position at the Treasury may well be seen as positive. While there is room for continued Treasury interest in the issue, this is probably unlikely to be best placed with Ms Truss as Chief Secretary.

Instead, Mr Lidington will be the fourth Justice Secretary to pick up the ongoing issue of the discount rate and will need to form policy in response to the consultation. The impact of the current negative discount rate on the public purse does of course have additional impact beyond that felt by insurers and on insurance premiums, and creates an additional incentive for action.

As to the DUP angle, the Northern Irish discount rate remains at 2.5% as there has been no devolved government in place since January follow the collapse of power-sharing to consider reducing the rate in that jurisdiction. The expectation has been that the rate would be lowered in Northern Ireland as well once there was machinery in place to do so, at which point the need for reform would be the same across the rest of the UK.

The future

Beyond the events leading up to the delayed Queen's Speech, the other uncertain political aspects include the length of Mrs May's appointment as Prime Minister and any future challenge to her position, and the potential for another General Election, all set against the way in which the vote in favour of Brexit at the referendum is taken forward.

At the time of the Queen's Speech, the future of previous measures including the Prisons and Courts Bill and the Vehicle Technology and Aviation Bill should have become clearer. In due course we will have the MoJ response on the discount rate.

The approach taken by Mr Lidington himself will be relevant on all of those issues, and he can be expected to be in favour of the reform agenda being taken forward by the last government.

But as a minority government, the broader issue now is to the extent that there is time to progress matters beyond Brexit and other priorities, which other measures can realistically be advanced through the parliamentary process as having a good prospect of success. There is a need to bear in mind any dissent within the ranks of Conservative MPs and also the approach taken by DUP members where in Northern Ireland there may be less experience of the issues experienced elsewhere in the UK which have been driving the reform agenda. 

And with a minority government there is also greater need to consider and to cater for the views of opposition parties when it comes to adding up the numbers of likely votes. Engagement with all political parties has become more important. The strong case for reform of the current issues in relation to whiplash and to the discount rate needs to be made both firmly and now more widely.


For more information please contact Simon Denyer, Partner on +44 (0)161 604 1551 or email simon.denyer@dwf.co.uk

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.