The government has further delayed a crucial decision on compensation deductions - almost two years after closing a consultation on the issue.

Justice secretary Chris Grayling has appointed a panel of three financial investment experts to advise on the question of the discount rate, on which the deductions are based. 

Currently 2.5% is discounted from large settlements – usually involving medical negligence – on the premise that individuals will invest their money in index-linked government stocks and receive a similar return.

The issue has divided claimant and defendant lawyers who respectively argue for a reduction and increase in the rate.

In a letter to the Association of Personal Injury Lawyers (APIL), the MoJ said Grayling saw ‘no reason’ to publish a timetable setting out how long the decision will take.

A tender process for the appointment of the expert panel has yet to be completed, with those chosen required to analyse all the responses to a consultation on the discount rate that closed in October 2012.

Each expert will provide input from a particular area of expertise: the first in relation to the financial management of investments; the second in relation to actuarial issues; and the third will have knowledge of relevant financial services market issues.

The government’s initial response to its consultation was that successful claimants were prepared to invest in higher-risk investments than currently assumed.

But research published in August 2013 suggested claimants are more cautious than previously thought about how to invest their compensation.

APIL has accused the government of ‘dragging its heels’ on the issue of a discount rate that has been set at the same level for 13 years.

‘People with life-changing injuries continue to miss out on the right level of compensation to cover their needs while the government drags its heels on rectifying the problem,’ said APIL president John Spencer.

‘Establishing a panel just creates yet another delay while the Ministry of Justice is seen to be doing something. Meanwhile, injured people continue to have their damages unfairly docked.’