What a shock.  No one anticipated such a change.

At face value the announcement is a straight forward admission that claimants have been undercompensated for years.

However as well as announcing the dramatic rate change the Ministry of Justice ("MOJ") have promised another consultation into compensation claims to be "launched in the coming weeks".     

Under the Damages Act 1996 the Lord Chancellor must consult the Treasury and the Government Actuary. Why then, as the Bank of England has indicated it's desire to raise the rates of return on Treasury listed stocks, set the discount rate at a level which probably underestimates the rate of return on Treasury stocks in the future. 

The change is to be implemented on 20 March and will form a reference point to the MOJ's announcement that:

"the government will launch a consultation in the coming weeks to consider whether there is a better or fairer framework for claimants and defendants, with the government bringing forward any necessary legislation at an early stage"