The Law Society today told MPs that the government’s reforms to litigation funding will cause ‘rejoicing in the boardrooms of insurance companies’.

Chief executive Desmond Hudson appeared before the Health Select Committee to tell MPs that coalition government proposals go too far.

The Committee is holding an inquiry into the reasons for the sharp rise in NHS complaints and the impact of conditional fee arrangements (CFAs) on litigation against the service.

Hudson warned of the dangers of capping the amount of damages that may be taken as a success fee, and switching the burden of CFAs onto the claimant.

He told the committee: ‘It cannot surely have been the intention of the government to institute a new system of costs funding which would mean that many innocent victims of negligence and sufferers of injury would no longer be able to pursue entirely legitimate claims – and be denied much-needed compensation for the injuries they have suffered at the hands of wrong-doers.

‘The current proposals will cause grave uncertainty in the system, and lawyers will find it much harder in future to advise a client whether or not to pursue a claim because of the increased complexity that will be introduced into the system.

‘What, however, is without doubt is that the insurance industry has been calling for these proposed changes for years and many insurers will be delighted with them.

‘It means that insurers’ liability to pay out damages could be much reduced – at the expense of the victims of negligence who need compensation – in some cases for very serious injury.

‘While with one hand the government is trying to place the victim at the heart of the criminal justice system, on the other it is taking the victim away from the heart of the civil justice system and replacing it with the insurance lobby.’

Health ministers want to examine the issue of litigation after seeing the cost of insurance premiums for NHS institutions rise to hundreds of millions of pounds a year.

A report based on the findings of the inquiry is expected later this year.