Many people in the media and the government today bemoan the growth of a “culture of compensation”. The notion that public finances are somehow drained by individuals claiming the compensation they deserve is bandied about at will but do the facts support this? It would appear not as two recently released sets of data demonstrate.
The first lot of statistics regard road traffic accident personal injury claims. It has been found that the amount that motorists in the UK pay on parking each year is four times the cost incurred by the entire insurance industry when dealing with personal injury compensation claims. Whilst the insurance industry only pays out £2bn each year, the public using Britain’s roads pay a shocking £8bn just to park. So all things considered, compensation claims are a minor expense.
The government has also been complaining about the legal fees of personal injury solicitors in compensation claims and seems to think that by dramatically cutting these, there will be more money in the public coffers. Under the Legal Aid, Sentencing and Punishment of Offenders Act (LASPO) the government will slash such fees in the expectation that up to £400m will be saved. They appear to have made some basic accountancy errors though. By cutting solicitors fees on compensation claim, the government will lose £200m in VAT revenue as well. This money will have to be made up somewhere, but where? Tax increases? Further cuts to public services? It is unlikely that the public would react well to such changes, so perhaps the government needs to reconsider its priorities.