In depth: NHS claims costs continue to rise - what next?

The change of government was a prompt to contemplate the plethora of reforms brought in by previous administrations to tackle the perceived ‘claims culture’.

From the LASPO changes of more than a decade ago, through to the pursuit of fixed costs for clinical negligence claims, successive Conservative (and Conservative-led) administrations repeatedly sought to reduce claims and cut the money that could be made from them.

The media were often willing accomplices in attacks on the claims sector, though the assault has abated in recent years.

It might be expected that Labour will be more sympathetic to the claimant cause. Yet the temptation to bear down on legal costs will remain compelling in a straitened public spending environment.

This week’s annual report from claims resolution body NHS Resolution is a case in point. It suggests that despite efforts to resolve claims early, the financial burden of fighting them is increasing.

Claimant legal costs for NHS negligence cases went up by 11% in 2023/24 to £545.3m, while defence costs rose by 6.4% to £169m.

For clinical claims valued between £25,000 and £100,000, the average claimant legal costs award per claim was almost £55,000 – a 5% increase. The figure is still lower than the peak reported seven years ago, but has grown steadily since 2021.

For claims valued up to £25,000, lawyers charge £26,000 on average. Damages payments for resolving clinical claims in 2023/24 rose by almost 6%, to £2.1bn.

The level of claimant legal costs – particularly for lower-value claims – may lead a government under financial pressure to revisit the issue. The general election arrived with a plan to introduce fixed recoverable costs set in train, but the fine details have not yet been signed off. The intention had been to implement fixed costs for lower-value cases in October, but this has been in doubt since the Civil Procedure Rule Committee failed to discuss the issue at its meeting last month.

Labour has so far been silent on whether to embrace or spike fixed costs.

The need for action would appear more urgent because efforts to push more claims into mediation, or early settlement schemes, are showing signs of plateauing. In 81% of clinical claims, the matter was resolved without litigation – the highest volume ever recorded, but just one percentage point higher than last year. NHS Resolution said: ‘We recognise that this upward trend cannot continue indefinitely, but will always continue to promote dispute resolution over litigation.’

The number of clinical claims that were resolved in 2023/24 decreased by 1% to 13,382. Of those, 52% resulted in payment of damages, compared with 51% in 2022/23.

The NHS Resolution report effectively dangles another costs carrot in the direction of the government with its year-end provision for future claims liabilities, which has been reduced from £69bn to £58bn. Does this indicate that analysts are confident that ministers will act in their favour when the discount rate is reviewed later this year?

Ominously for the claimant sector, NHS Resolution says that despite a reduction in forecast claim numbers, ‘it is important to recognise that the in-year cost of clinical negligence across the NHS continues to be significant’.

Introducing the report, chief executive Helen Vernon said: ‘Claims trends have remained broadly steady in 2023/24 in terms of the numbers reported and resolved. Around half of clinical claims closed with compensation in 2023/24, as they did the previous year, demonstrating our continued commitment to investigating claims robustly and fairly, making damages payments where the merits of the case warrant it.

‘The overall value of damages, particularly for the most severely harmed, has continued to increase, as have claimant legal costs, but with some welcome positive signs such as a further reduction in damages inflation which has reduced the overall provision for clinical negligence.’

The prospect of more legislative change almost certainly receded when Labour won a landslide victory on 4 July – but it did not disappear. The Treasury has committed to existing spending plans, but newly elected MPs will need evidence of public spending increases to take back to their constituencies. Clinical negligence costs and damages are not historically at their highest, but they are increasing. The financial burden on the NHS from clinical negligence will be just as significant under Labour as it was under the Conservatives. But will Labour draw the same conclusion about whom is to blame?

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