On 11 June Rachel Reeves, the Chancellor of the Exchequer, is due to stand at the despatch box and announce what is arguably the most significant set of decisions the government is set to make this parliament – the spending review.
Whilst it might sound technical, it will undoubtedly be of huge importance. The spending review will set out how much each department has to spend per year through to 2029 – effectively confirming the feasibility of many policies and proposals. The announcement will lay the groundwork for the conditions under which the next general election takes place, and will have a real impact on the public services utilised by tens of millions of people across the UK each year.
In the months leading up to it, one narrative has been clear above all others – money is in short supply. In this context, looking at reforms within departments to free up funds for investment is key. One of the major opportunities to do so is in relation to clinical negligence.
Clinical negligence may not be the most eye-catching of issues, but the sums are significant. In 2023/24, the NHS in England spent over £2.8 billion on it. For perspective, this is more than was spent subsidies to farmers (£2.4 billion), on the combined cost of food and cleaning in hospitals (£2.3 billion) and the winter fuel payment (£2 billion). We spent more on it than on GPs in the Midlands, who serve approximately 10 million people. In the near future, the cost is also forecast to rise significantly – potentially to over £4 billion per annum by the end of the decade.
Spending such vast sums on this issue is a relatively new phenomenon. Less than 20 years ago, we were spending only £600 million a year, the equivalent of just over £1 billion today. This is still a sizeable amount, but nearly £2 billion less than what we actually spend now. Which raises the question – why?
The Department of Health and Social Care is clear that they do not believe it to be due to a fall in standards of clinical care. The MDU agrees. In 2021, the government stated in evidence to the health and social care select committee that “we do not believe any measurable decline in safety is driving the long-term rise in the cost of clinical negligence claims”. So, given we can rule out the most obvious potential cause, what is behind this increase?
One potential explanation lies in the rising costs being incurred towards claimant legal fees. In 2006/07, claimant legal fees amounted to approximately £98 million (the equivalent of around £165 million in today’s money). In 2023/24, this figure stood at over £545 million. For lower value claims, in which the claimant is awarded up to £25,000, the average cost of legal fees in 2023/24 stood at over £96 million. According to NHS Resolution, this meant that for claims valued at up to £25,000, the average legal fees now stood at £26,095 – more than the amount actually awarded to claimants. It is an area that the public accounts committee and the government have both stated needs to be examined.
In recent years it felt like action was finally imminent. Alas, this proved to be a false hope. Following a consultation in 2022, it was announced that the government would implement a system of fixed recoverable costs (FRC) for lower valued claims. This would effectively enforce a set amount of legal costs that can be claimed back from the losing party by the winning party in litigation. It is an established practice in most personal injury claims. However, despite the announcement being made in 2023, no progress has been made since, despite these changes potentially resulting in a saving of around £454 million over a 10-year period.
This is only one part of a wider package of potential reforms that the MDU has long called for. We also, for example, support the repeal of section 2(4) of the Law Reform (Personal Injuries) Act 1948. This legislation, enacted before the NHS came into existence, forces courts to disregard NHS services when awarding compensation for clinical negligence and instead base funding on the basis of private healthcare. This means that if the claimant then uses the NHS for restorative work, the NHS is effectively paying double. It is clear that change is needed.
These changes are just two of the potential ways to reform the current system. Both of them will result in savings and help to offset the rapidly increase we are currently seeing on clinical negligence costs.
Those who are harmed as a result of clinical negligence should receive appropriate compensation, but reforms are needed to help address what is rapidly growing fiscal problem for the Exchequer.
For more information about this issue, please visit the MDU website at: Our impact – The MDU.
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