Client update: Feb’22. NI PIDR: Waiting for GADot

17 February 2022

The Damages (Return on Investment) Bill was enacted on 2nd February 2022, completing a process which commenced on 1st March 2021. S1&2 and the Schedule to the Act commenced on 10th February as did the 90 day period in which the Government Actuary must complete its review of the PIDR under the new methodology prescribed in the act. It is important to note that GAD did not have to wait until the start of this period to consider the new rate, rather it must have started its work and finished it within that window. The Department indicated back on the 8th December that it had already liaised with GAD asking that it commence its calculations to enable the new rate to be set under the new framework as soon as possible. The timeline ahead is narrow but achievable. The NI Assembly’s current mandate ends on 25th March with new local Assembly elections to follow on 5th May. The recent resignation of the First Minister Mr Paul Givan MLA on 3rd February automatically triggered the collapse of the NI Executive. It did not thankfully bring down the NI Assembly due to some prescient safeguarding that had been mooted since the Executive’s restoration in January 2020. As a result of the passage of the NI Ministers, Elections and Petitions of Concern Act at Westminster on the 10th February last week, the Assembly survived the fall of the power sharing Executive the previous week. Due to a House of Lords amendment to the Bill, it applied retrospectively to the First Minister’s resignation on the 3rd Feb. Prior to the Act, the NI Secretary Brandon Lewis would have been obliged to call an election to the Assembly within 7 days of the collapse of the Executive. Following the passage of the Act, the Assembly now remains in place for at least 6 months so that any legislation already in passage through the Assembly, as with the Damages (Return on Investment) Act will not be affected. When GAD completes its review of the rate, it must be put before the Assembly and voted on (subject to affirmative resolution) before it dissolves on 25th March. All indications would point to the Assembly being focussed on processing as much legislation as it can in that period, as confirmed by the Speaker of the Assembly on Monday past. What then is our new Northern Ireland PIDR likely to be? It will certainly be higher than the current minus 1.75% rate set under Wells v Wells. How close will it be to either the English or Scottish rates? More akin to the Scottish rate, since our new framework more closely resembles the methodology used in Scotland. However, the calculations carried out by GAD as part of striking the NI rate, post-date the work carried out by the same GAD in the rest of the UK by at least 2 years. Markets are no less volatile now. If there might be a clue as to our new rate, we might not look far beyond a letter from the Department of Finance to the Justice Committee dated 6th October ‘21 which was referenced at para 537 of the Report on the Damages (Return on Investment) Bill by the Justice Committee dated 21st Oct’21. In answer to the Committee’s enquiry as to the impact of the new rate, the DoF stated: “Going forward, should the [Bill] be enacted, the PIDR is likely to be set at a rate of -0.75%…” There was no evidence basis quoted. Apart from the phrase “likely”, there was equally no other attempt at qualification. Looking back at the Scottish experience, being the most recent exercise carried out by GAD to strike a rate in the UK, its review spanned the period 25th June ‘19 ending on 27th Sept ‘19. It took the complete 90 day period prescribed under the Scottish framework. It is informative as GAD made reference to “the latest quarterly calibration available” and carried out its modelling based on the financial conditions at 30th June’19 but it also looked back to 31st Dec ‘18. In the case of N. Ireland, the prediction from the DoF on 6th October ‘21 was made just after the 2021 3rd quarter figures might have been to hand but certainly, with the Q2 2021 figures available. If there is to be a new PIDR in NI before the current NI Assembly dissolves on 25th March coming, completion of the Government Actuary’s report is an essential prerequisite. It seems likely that the calibrations and analyses are already complete based on the latest quarterly financial information available. We expect an announcement by GAD imminently. There are now 5 remaining weeks for the rate to be laid before the Assembly breaks up for the new elections. Time enough. Kevin Shevlin, Managing Partner