Jackson reforms could see claim costs soar for local authorities, says shadow minister

The government’s implementation of the Jackson reforms to civil litigation is “likely to have a huge impact on local authorities and could see claims costs soar”, a shadow minister has claimed.

Speaking at a DWF local authority claims conference, Roberta Blackman-Woods MP highlighted key features of the reforms such as:

• Conditional Fee Agreement success fees and After The Event insurance premiums no longer being recoverable from the losing party;
• The 10% increase in general damages to cover the claimant’s costs;
• Reforms of the Civil Procedure Rules to encourage early settlement; and
• Qualified one-way costs shifting, where claimants will not normally be required to pay defendants’ costs if a claim is unsuccessful.

Blackman-Woods, MP for City of Durham and Shadow Minister for Planning and Procurement, predicted that qualified one-way costs shifting would increase the amount local authorities have to spend on legal costs each year.

She said: “The potential cost impact of the Jackson reforms is huge. One of the only ways to avoid such costs is to admit liability or settle early.

“However, the difficult fact is that it might be more cost effective for local authorities to admit liability, even where [that is] not actually the case, than fight a long and costly court battle to prove their unaccountability.”

The shadow minister suggested that, ideally, the legal system would be reformed “to encourage mediation and early settlement and all firms would seek a resolution as quickly as possible”.

But she argued that the reforms instead placed the onus on involved parties rather than the process itself “and so risk encouraging resolution at the risk of justice”.

The MP also claimed that the reforms might also indirectly increase financial burdens on local authorities.

She cited the estimated savings to the NHS of between 3% and 7% of the costs of medical negligence claims, but pointed out that this gross figure ignored the additional costs of welfare benefits for injured parties no longer able to obtain damages.

“Many of these benefits will be payable by local authorities,” the shadow minister argued. “As such, these plans look set to reduce the costs of claims for central government by shifting the burden to local authorities and claimants.”

Blackman-Woods said Labour accepted in opposition that the issue of costs in civil proceedings was worth investigating, and had done so while in government. However, she added that people who had suffered injury through the negligence of public and private bodies, and could not fund actions privately, must be able to have recourse to the civil justice system.

The shadow minister also cited research by London Economics which claimed that when indirect costs are taken into account, the Jackson reforms would result in a net loss of £70m to government spending.

Blackman-Woods said: “The Jackson reforms will be a challenge for local government, increasing financial burdens and changing the way in which councils must respond to civil claims.

“These changes would have been difficult in any circumstances, the fact that they are being introduced in the midst of deep spending cuts and a radical overhaul of local government powers looks set to exacerbate this effect.”

The government recently announced that it would delay implementation of the Jackson reforms until April 2013, with the Ministry of Justice saying the extra time would allow it to "get the complex details right".

Philip Hoult