The Damages Act 1996 gives the Lord Chancellor power to prescribe a discount rate for calculating damages in personal injury cases when a lump sum is intended to provide for future care costs and loss of earnings. The discount rate will reflect the amount that the claimant could be expected to earn from interest by investing the award in a low risk way. Too high a rate would mean that claimants could not be sure of receiving the income they need. Too low a rate would unfairly penalise defendants (including the NHS), and lead to higher insurance premiums. In June 2001, the Lord Chancellor set the rate at 2.5 per cent.
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