Oral question asked in the House of Commons, by Jack Straw (Labour). It was answered on Tuesday, 28 June 2011 on behalf of the Ministry of Justice.

Compensation Claims

Question: But will the Minister acknowledge that what is in the Bill that comes before the House tomorrow implements only part of Lord Justice Jackson's recommendations; that, critically, the Minister has failed in that legislation to tackle at all the scandal of referral fees paid all the way along the chain, from the informant who passes on individuals' details up the line to insurance companies, where it is then also paid by the insurance companies; and that this scandal will continue, notwithstanding any changes to be introduced in the structure of ownership of solicitors firms, until he and his colleagues implement in full Lord Justice Jackson's recommendations, which are to abandon and outlaw referral fees altogether?

Answer: It was Labour who brought in the ability to recover success fees and ATE—after the event—insurance premiums in 1999. This became the key mechanism of the rotten compensation culture, of which referral fees are a symptom. Claimant costs represented 56% of damages in 1999, but by 2010 they represented 142% of damages—and yes, we are looking at referral fees in the context of the reforms as a whole.

Secondary information