MPs warn on compensation move

Legislation designed to tackle Britain's 'compensation culture' could have the effect of increasing the number of court claims, a Commons committee has warned.

A report from the constitutional affairs committee cautioned that the first clause of the Compensations Bill could generate perverse effects because of a vaguely worded clause.

The legislation is designed to protect people who undertake desirable or useful activities from being sued.

But the MPs warned that in the short term the number of cases could increase because of the need to define what a 'desirable activity' is.

However, plans to regulate organisations that refer claims to solicitors were broadly welcomed by the committee.

There was caution, though, about insufficient details of how the regulations would work regarding the potential mis-selling of insurance products and the quality standards for authorised firms.

The committee also recommended that advertising by claims managers and solicitors should be limited.

The Department of Health came under similar criticism for the compensation scheme outlined in the NHS Redress Bill.

MPs expressed concern at the "relaxed" attitude towards the cost of the scheme.

"There is a real problem with excessive risk aversion in Britain today, but it is not caused by personal injuries litigation or the 'no-win-no-fee' system," said committee chairman Alan Beith.

"The problem will not be solved by clause one of the Compensation Bill, which could even make matters worse.

"The root causes of excessive risk aversion, such as misunderstanding of risk assessment, are what need to be addressed.

"However, we do warmly welcome the move to regulate claims handling and want to see this made effective."