Overview of consultation

Between November 2025 and January 2026, the Scottish Government called for submissions on the the inflation index for the calculation of the personal injury discount rate and the methodology for calculating the judicial rate of interest. 

MPS response

Question 1: Do you have a preference for CPI or CPIH or another index as the appropriate inflation index to be referenced in the legislation?

• CPI
• CPIH
• Neither

Please give your reasons.

Medical Protection Society (MPS) supports the use of CPI as the appropriate inflation index.

This position is consistent with MPS’s approach across other UK jurisdictions. CPI provides a well‑established, widely used and transparent measure of price inflation, and is already embedded within the economic and actuarial modelling used to determine expected investment returns for the purposes of setting the PIDR. Maintaining CPI as the core reference point therefore supports consistency within the PIDR framework and avoids introducing additional complexity or forecasting uncertainty.

Whilst CPIH can have advantages in capturing housing‑related costs, it is not based on long-term investment return modelling. Any claimant‑specific inflationary pressures, such as wage‑based care costs or medical equipment inflation, are better addressed through the controlled discretion to apply an adjustment to CPI, rather than switching the underlying statutory index.

Question 2: Do you agree that the Damages Act 1996, schedule B1, should be amended to enable the possibility of a modified or adjusted inflation index to be used in the calculation of the discount rate?

• Agree
• Disagree
• Neither

Please provide reasons for your answer.

MPS supports amending Schedule B1 of the Damages Act 1996 to enable the possibility of a modified or adjusted inflation index to be used in the calculation of the PIDR.

There is a clear need for the assumptions underpinning the PIDR to reflect the inflationary pressures relevant to future losses, as accurately as possible. The current framework relies on a single specified index without adjustment; this creates the risk that price inflation and earnings‑related inflation may diverge from the assumed rate over time.

This also may result in injured claimants receiving more than 100% compensation, particularly where earnings‑linked costs such as care or long‑term support rise faster than general consumer prices. Over‑compensation is inconsistent with the principle of full but fair award, and may place upward pressure on indemnity costs for healthcare professionals and also on the total cost of claims incurred for health and social care.

The implications of volatility in the PIDR also extend beyond individual claims handling. The approach used to set the PIDR is fundamental to the stability and adequacy of pricing across the healthcare indemnity and insurance market; actuarial reserving decisions and financial stability of organisations responsible for meeting the cost of claims, could also be impacted. For these reasons, increased flexibility should be accompanied by a stable, evidence‑based actuarial framework, with adjustments made only when justified by robust analysis.

MPS therefore supports introducing flexibility, provided it is implemented in a way that preserves transparency, predictability and long‑term stability.

Question 3: Do you prefer Option A or Option B as a means of enabling the possibility of a modified or adjusted inflation index to be used in the calculation of the discount rate?

• Option A
• Option B
• Neither

Please provide reasons for your answer.

We consider Option A to provide the most appropriate balance between clarity, transparency, stability and technical accuracy.

Prescribing a clear inflation index in primary legislation, while allowing the Government Actuary to apply an evidence‑based adjustment, enables the PIDR to remain grounded in a transparent statutory framework while accommodating changes in the composition of damages inflation over time.

This approach maintains consistency with the modelling used to forecast long‑term investment returns, while allowing the rate‑assessor to reflect shifts in earnings‑based or claimant‑specific inflation, when supported by robust evidence.

Importantly, it would also prevent the need for frequent legislative amendments, which Option B may cause.

Overall, Option A offers a stable and proportionate mechanism to introduce flexibility, while ensuring that any adjustments remain grounded in actuarial evidence and are subject to appropriate scrutiny.

Question 4: Do you have an alternative option for enabling the possibility of a modified or adjusted inflation index to be used in the calculation of the discount rate?

Please fully describe the alternative option and provide reasons for your answer.

We do not propose an alternative option beyond Option A.

In our view, prescribing a clear inflation index in primary legislation, while allowing the Government Actuary to apply an evidence‑based adjustment, strikes a balance between legislative clarity and actuarial judgement, subject to any adjustment being supported by clear reasoning and evidence.

Question 5: Do you agree that the mix of inflationary pressures affecting lump-sum awards of damages in Scotland is likely to be the same as that in England and Wales?

• Agree
• Disagree
• Neither

Please provide evidence for your view either way.

The mix of inflationary pressures affecting lump‑sum awards of damages in Scotland is likely to be broadly comparable to that in England and Wales. The main components of future losses, including earnings linked costs such as paid care, and price linked elements such as equipment or therapy, are generally comparable across the jurisdictions.

However, some local variation does exist. Regional differences in housing costs, social care wages or public‑sector pay settlements may lead to some differences in the inflationary pressures faced by claimants. These differences do not fundamentally undermine the comparison of inflationary drivers, but they do reinforce the importance of retaining a framework that allows the Government Actuary to incorporate Scotland‑specific evidence when setting the rate.

On this basis, MPS supports a model that recognises the overall comparability with England and Wales, while retaining the flexibility needed to reflect Scottish-specific circumstances when required.

Question 8: Are you aware of any subsequent case law or legislation which impacts the SLC’s recommendation on determining the judicial rate of interest?

• Yes
• No
• Don’t know

If yes, please provide details.

We agree with the below suggestions, as provided by the ABI:

In Farstad Supply AS v Enviroco Ltd (2013), the Inner House of the Court of Session reduced the applicable rate of pre-decree interest following the 2008 financial crisis, recognising that the prevailing judicial rate no longer reflected economic reality given sustained low base rates. However, post-decree interest has continued to be applied by reference to the longstanding 8% rate.

More recently cases such as F v Gordon Chalmers & Others (2025), which was heard in the Outer House of the Court of Session, illustrate how the application of judicial interest – particularly over long periods – can result in the interest component forming a disproportionate part of the overall award. This is to the detriment of the premium -paying public and of taxpayers.

Question 9: Are you aware of change in practice which impacts the SLC’s recommendation on determining the judicial rate of interest?

• Yes
• No
• Don’t know
  

Question 10: Do you agree that the Bank of England base rate should be used to establish the Judicial Rate of Interest?

• Agree
• Disagree
• Neither

Please provide reasons for your answer.

The Bank of England base rate should be used to establish the judicial rate of interest. This is a widely publicised, transparent and objective benchmark that accurately reflects the current market. The current 8% judicial rate of interest does not reflect current conditions and is significantly too high.

Question 11: If the Judicial Rate of Interest is to be pegged to the BoE base rate what should the percentage increase on the base rate be?

Please provide reasons for your answer.

We would also concur the position of the ABI - that the percentage increase on the Bank of England base rate should be around +1%.

Question 12: Is there suitable, published and accessible data which would inform what the percentage increase to the base rate should be?

• Yes
• No
• Don’t know

Please provide reasons for your answer.

There is widely available information which would inform what the percentage increase to the base rate should be, as well as provide a transparent and accessible evidence base. This includes published Bank of England data, information on average borrowing and savings rates, and rates applied to other awards for compensation or redress.

Question 13: Should the Scottish Ministers have power to amend by regulation the percentage modification of the base rate, either upwards or downwards? If not, please provide reasons for your answer.

• Yes
• No
• Don’t know

Please give reasons for your answer.

Scottish Ministers should have the power to amend the percentage modification of the base rate by regulation, provided that this is done with an approach that is clear, transparent and evidence‑based.

Any adjustment should be grounded in robust actuarial evidence, be subject to appropriate scrutiny, and avoid unnecessary volatility or frequent change.

Question 14: Do you have an alternative option for determining the Judicial Rate of Interest?

• Yes
• No
  

About MPS

MPS is the world’s leading protection organisation for doctors, dentists and healthcare professionals with more than 300,000 members around the world. 

Our in-house experts assist with the wide range of legal and ethical problems that arise from professional practice. This can include clinical negligence claims, complaints, medical and dental council inquiries, legal and ethical dilemmas, disciplinary procedures, inquests and fatal accident inquiries.

MPS is not an insurance company. We are a mutual non-for-profit organisation and the benefits of membership of MPS are discretionary as set out in the Memorandum of Articles of Association.

Contact

Should you require further information about any aspects of our response to this consultation, please do not hesitate to contact us.

Megan Bennett
Policy and Public Affairs Manager
[email protected]