 Good morning and welcome to the third meeting of the Economy, Energy and Fair Work Committee for 2019. May I ask anyone in the public gallery to turn their phone to silent or off so that it doesn't interfere with proceedings? Item 1 on the agenda is a decision by the committee to take items 4, 5 and 6 in private. Are we agreed? Yes. We turn now to the Damages, Investment Returns and Periodical Payments Scotland Bill. We are now at stage 2. I welcome the Minister for Community Safety, Ash Denham, who joins us this morning, along with her team Alex Gordon, Scott Matheson, Jill Clark and Frances McQueen. We will move item 2 on the agenda, which is the amendments at stage 2 for the Damages, Investment Returns and Periodical Payments Scotland Bill. I will first call amendment 1 in the name of the minister. My clerks have corrected me to say that the first bit that I am to start with is the question is that sections 1 and 2 be agreed to. Are we all agreed as there are no amendments proposed to these sections? Yes. I will now turn to the minister and call on her to move amendment 1, which is grouped with amendments 2, 3, 4, 5 and 6. I will ask the minister to speak to all amendments in that group. Thank you, convener, and good morning to the committee. Currently, there is no statutory requirement for the discount rate to be reviewed regularly. It is clear that a lack of that regular review is detrimental to all parties. In consultation, most consultees agreed that the rate should be reviewed regularly on occasions that are specified in legislation. Whilst taking account of the views of respondents, the Scottish Government decided that a review should be carried out every three years, with the possibility of a review being instigated earlier if circumstances were to point to that need. That would provide a significant degree of certainty but also tempered with a proportionate degree of flexibility. Stakeholders have suggested that, with the three-year review, settlement of cases may be delayed if one or other party anticipates a more favourable rate coming into force. They argue that a five-year review period would go some way to address the issue that is sometimes known as gaming. I have always maintained that the Scottish Government's imperative is that reviews are regular. As I outlined in my response to the stage 1 report during the stage 1 debate, I have listened carefully to those who gave evidence and also to the conclusion of the committee that, in the interests of finding the balance between flexibility and certainty, five years would be preferable to three. Those amendments alter the frequency of review from every three years to every five, but the facility to co-front out-of-cycle review remains. As no members have indicated, they wish to speak on this. Minister, do you wish to wind up or shall we simply go straight to the vote on it? I think that we should go straight to the vote, yes. The question is that amendment 1 be agreed to. Are we all agreed? Yes. The second question is, I will call amendments 2, 3, 4, 5 and 6, all in the name of the minister and spoken to by the minister. I invite the minister to move amendments 2 to 6 on block. I move, convener. Does any member object to a single question being put on amendments 2 to 6? If not, in that case, the question is that amendments 2 to 6 are agreed to. Are we all agreed? Yes. Thank you. I now move to amendment 11 in the name of Jackie Baillie, which is grouped with amendment 13 in the name of Dean Lockhart. I turn first of all to Jackie Baillie to move amendment 11 and speak to both amendments in the group. Thank you very much, convener. I have pleasure in moving amendment 11 in my name and will speak to the others in the group. It was recognised by the minister as well that injured people are not necessarily ordinary investors. I think that we would agree that most would not invest in the stock market and where they do. They are likely to be quite risk adverse. I recognise that the Scottish Government has tried to get the balance right, but we need to be sure as a committee that all the assumptions about deductions are accurate, as any award will of course be for the rest of that person's life. Amendment 11 in my name seeks to address an area where I think that the Government has underestimated the cost of taxation and investment advice. The Association of Personal Injury Lawyers, whom the committee took evidence from at stage 1, highlighted their concerns that the adjustments in schedule B1 need to reflect as closely as possible the costs incurred by the pursuer. I have had an opportunity to reflect further since the stage 1 report. Let me point to the following pieces of evidence in support of my amendment. First, the Government's Actuary Department showed reasonable allowances for expenses and tax anywhere between 0.5 and 2 per cent. I know that the Scottish Government preferred the lower end of that spectrum, but it stressed, in evidence given to the committee, that a larger adjustment could be plausibly justified. Richard Cropper, from personal financial planning, put the estimate at 1.5 to 2 per cent because he believes that the Scottish Government figure is materially underestimated. Paul Rosson, an independent financial advisor, said that, if the smaller the award, the closer it is likely to be to 2 per cent, that is just simply for independent advice, not including any tax. He does recognise that, while a moderate award would be 0.5 per cent across the industry, it does not include any tax whatsoever. Finally, Graham Lind from Tilney Financial Planning, which is based in Edinburgh, said that the standard kind of rate would be 1 per cent plus that. Taxation takes the figure north of 1.5 per cent per annum. In arriving at 1.5 per cent, I have tried to give recognition to the broad range of factors there. The general consensus, whether it is from the Government's Actuary Department to the range of financial advisors, indicates that 0.5 per cent is perhaps just a shade too low to cover both taxation and investment advice. I would pause at that point and invite the committee and the minister to agree with me. It concludes my comments at this stage. I will now turn to Dean Lockhart and ask him to speak to amendment 13. Amendment 13 in my name would change the further margin adjustment from 0.5 per cent to 0.25 per cent. In its policy memorandum, the Government made clear that the further margin adjustment is to reduce the risk of undercompensation in certain cases. However, the policy memorandum also states that, as a result of the new further margin adjustment, there will inevitably be a probability of overcompensation. Many stakeholders therefore see that as a departure from the principle of 100 per cent compensation. The underlying principle is that damages have the purpose of placing the injured person insofar as possible in the position that they would have been safe for the injury incurred. The courts are very careful at the beginning in setting the level of compensation at a level that is likely to meet future financial losses and care costs. The legislation where debating is not designed to revisit the basic principles of restitution, but instead is aimed at making sure that the level of compensation as set by the court is adjusted to reflect how the damages may be invested over the longer term. Based on stakeholder feedback, there is legitimate concern that is drafted at 0.5 per cent as a further margin adjustment. The legislation will change those underlying principles of fair compensation, 100 per cent compensation, and that will come at a cost to the NHS, other public bodies and potentially higher insurance premiums. As a matter of public policy, while we want to avoid cases of undercompensation, it is widely recognised that the probability of the further margin adjustment being set at 0.5 per cent is that that will result in overcompensation and that comes at a cost, and that is something that we have to recognise. I will end my remarks there. Did the member wish to say anything about amendment 11? In the name of Jackie Baill, I should have invited him to speak on that as well, whereas he covered that. Well, very briefly, the underlying concern is the same, that if we have a 1.5 adjustment in addition to the 100 per cent compensation, there is a risk that that will end up with the compensation, the quantum of the compensation over the longer term being resulting in overcompensation. I think that there is wide recognition that the notional investment portfolio is cautious, would largely be made up of passive funds and debt fixed asset investments, and therefore those types of investments do not require active management. As a result, those types of investment portfolio usually result in a lower management fee being incurred. My concern over amendment 11 would be that we end up revisiting the underlying principles of 100 per cent compensation if we adjust that tax and investment charge adjustment to 1.5 per cent. John Mason has indicated that he would like to speak, and I will take other members following his comments. Thanks very much, convener. We have two amendments here. First, Jackie Baillie's amendment 11. I think that we have had briefings—obviously, we have had all the evidence that we got during the report stage 1 report, but even since then, we have had further briefings that go in opposite directions. The Association of British Insurers wants to go one way, and the Association of Personal Injury Lawyers wants to go in a different way. There is a real issue here, and I think that we did consider it. However, I am not convinced, I have to say, by Jackie Baillie's amendment. It seems to me that if we were to amend it, it would need to be a lot more sophisticated. For example, I think that we had evidence that at the beginning people might have greater costs for an investment because they obviously need to take advice from scratch, whereas, on an on-going basis, they would not need so much advice, especially if it was a passive investment. That is an issue that could be looked at, but I am not sure that it is covered by this amendment. Another factor is the size of the settlement, because it is a very large settlement. You will tend to have a smaller percentage in investment advice, and if it is a very small investment, you will tend to have a larger percentage. I do not feel that we are really improving an awful lot by making everything 1.5 per cent instead of 0.5 per cent. I am persuaded by the argument that most investors will probably take the passive approach, but if they are going for an active approach and spend a bit more in fees, then, over the long term, they should actually be making more of a gain and that will match out with the extra costs. I am also not convinced, I have to say, by amendment 13 from Dean Lockhart. We did take a lot of evidence and I think that we are all committed to the principle that people should be properly compensated. I think that, though the evidence that we had was that inevitably, some people will be overcompensated and some people will be undercompensated. That is always going to be the case and you can never get round that, unless you have a different discount rate for every single person. I think that the 0.5 per cent seems to me to be a pretty reasonable figure. You could go higher, you could go lower, but I think that, on the evidence that we heard during the stage 1, I am convinced that we should stick to the 0.5. Thank you very much, convener. Like Mr Mason, I would be concerned with respect to amendment 13 in that that may lead to pursuers being undercompensated, but the minister will have our own views. On Jackie Baillie's amendment 11, during the stage 1 evidence, some pursuer representatives did indeed feel that the adjustment may not be enough. I know that it was something that committee did test the minister on when she was last here. I wonder if, in our closing remarks, if the minister had any thoughts about that, if 1.5 per cent was too high, would she, perhaps, prior stage 3 consider 0.75 or 1 per cent, given that there are some concerns around that? Thank you. Does any other member wish to come in at this point? If not, I will turn back to the minister to respond to those comments. I am grateful to Jackie Baillie and to Dean Lockhart for setting out the reasoning behind their respective amendments, although, in fact, they do opposing things. One would significantly increase the level of damages awarded to a pursuer and the other would decrease the level of damages, but it probably makes sense for me to address both of them at the same time. The approach that we have taken in the bill on how the discount rate should be calculated is based on a portfolio that meets the needs of the hypothetical investor, as described in the bill. The asset clauses and percentage holdings contained in the notional portfolio have been balanced in such a way as to support an approach in terms of investment choices, which is capable of limiting volatility and uncertainty. That is the starting point. Thereafter, the bill introduces two standard adjustments that the rate assessor must deduct from the rate return that they have arrived at. The first is intended to take account of investment advice, management costs and taxation. The adjustment is set out on the face of the bill, with regulation making powers for Scottish ministers to change the adjustment if required. The Scottish Government accepts that there will be a need to take investment advice, and indeed one of the characteristics of the hypothetical investor is that they are properly advised. Scottish ministers sought views from the Government's actuary's department on the appropriate level for the adjustment for tax and passive investment management costs. Jackie Baillie raised that in her comments. Whilst GADS considered that the reasonable allowance in tax might fall into the range of 0.5 to 2 per cent, it was also of the view that allowance at the lower end was likely to be more appropriate because of a number of reasons. It is reasonable to assume that pursuers will shop around to get the most competitive fees. It is reasonable to assume that pursuers will directly invest in passive funds. In the current economic environment, income yields, particularly on bonds, are low, which eases the possible pressure of higher tax charges, and there are further prudence deductions included elsewhere in the discount rate. On the other hand, amendment 13 alters the second standard adjustment, that of the further margin, by reducing it to 0.25 per cent from 0.5 per cent. The intention of the further margin is to recognise that any investment, however cautious, does carry some risk and a proxy cannot take account of an individual's particular circumstances. As set out in the GAD report, the inclusion of the further adjustment is to improve the chances of the pursuer having sufficient funds to meet their damages. The composition of the portfolio and the level of adjustment that is set out in the bill have been very carefully arrived at. They are the result of analysis, actuarial advice and an analysis of all the available evidence. I very much welcome the conclusion of the committee, as set out in their stage 1 report, that they were satisfied with this approach. Altering either the standard adjustments will alter the final discount rate. In the case of Jackie Baillie's amendment, the impact of increasing the level of adjustment for tax, investment and management costs to 1.5 per cent would be significant. In terms of the illustrative examples that were included in the financial memorandum, it would increase the claim worth £3.6 million to £5.9 million, a claim worth £1.4 million to £2 million and a claim worth £0.77 million to £0.92 million. The balance would be tipped too far in favour of pursuers and their chances of being overcompensated would increase significantly. It is defenders who would have to fund these increases, be they private sector businesses or indeed public sector services such as the national health service. I cannot imagine that we would want to place an unwarranted burden on businesses and on our public services any more than we would want to reduce the chances of our pursuer being properly compensated for their injury, which is what Dean Lockhart's amendment would do. It is worth stressing when we talk about over and under compensation that we are talking about the likelihood of it happening or the probability of it happening. It is not an absolute and there is an element of risk involved for the pursuer, no matter what the award basis is. The analysis around the distribution of returns generated by the investment portfolio in the bill shows that, if the return were not to be adjusted, it would result in a 50 per cent chance of the pursuer being undercompensated and a 50 per cent chance of a pursuer being overcompensated. A 50 per cent chance of undercompensation is, in my view, not acceptable. That is why a further adjustment is needed in order to reduce the chance of undercompensation. Altering that level of further margin downwards would alter the balance of risk faced by the pursuer to their detriment such that the chances of being undercompensated would increase in our view to an unacceptable level. I hope that it is of some reassurance that Scottish ministers will review the portfolio and the adjustments ahead of each regular review. Of course, we will take advice on these matters so that any changes will be the result of professional and expert advice and sound analysis. I maintain that that is the appropriate approach to take. Both amendments undermine the considered and balanced approach that has been adopted in the bill, so I urge Jackie Baillie and Dean Lockhart not to press their amendments. Thank you minister. I will turn back to Jackie Baillie for her closing comments or an indication whether she wishes to press her withdrawal. Thank you very much, convener. The purpose of my amendment was very specifically based on expert advice and professional opinion, and indeed the Government's own words was to increase damages to cover taxation and investment advice based on the practical experience of practitioners. Can I remind the minister that the Government actually said and stressed that larger adjustments could be plausibly justified? Whilst I understand that she put it at 0.5 per cent, the Government actually said that it could be substantially higher. Can I pick up on two member's contributions, firstly from Dean Lockhart? I am sad to say that Dean Lockhart is entirely wrong. This is about reflecting the real costs of tax and advice. It is based on evidence, experts and practitioners with knowledge of what they are doing. The day of experts has not gone. I think that they have been extremely helpful in providing advice to the committee. Of course, it was not just at stage 1. There has been further information provided to committee members, hence the amendments down today. I am interested in what the minister said about reviewing the portfolio ahead of each regular review. That is welcome. I would be interested to know—and she does not have an opportunity to respond—who is going to be involved at a later stage? Is that review set out in statute? I would be minded to consider withdrawing the amendment if the minister was to agree to a discussion before stage 3 on the issue. I am struck by John Mason's comment that he would perhaps support a more sophisticated amendment that reflected a variation in costs, and I am happy to consider that along with him. If the minister is willing to agree to a discussion, I would be happy to withdraw amendment 11. I would encourage the committee not to support amendment 13. Minister, do you wish to respond to that at this stage? Yes. I am happy to take Jackie Baillie up on an offer and would be glad to meet her to discuss this if she is willing to withdraw the amendment at this stage. Happy to do so, convener. Is there any objection to Jackie Baillie withdrawing that amendment? In that case, we will move to amendment 13 in the name of Dean Lockhart, already debated with amendment 11, and for Dean Lockhart to wind up and to indicate whether he wishes to move or not to move his amendment. I think that John Mason was right when he said that we had received briefings on both sides of the argument for and against the operation of the further margin adjustments for and against how they might operate in practice. That reflects the fact that each adjustment cannot be viewed in isolation. They both operate in the same way to adjust the original damages award. The draft bill currently sets out total adjustments of 1 per cent, 0.5 per cent for tax and investment charges and 0.5 per cent for further margin adjustment, making a total of 1 per cent. The draft amendment or the amendment lodged by Jackie Baillie. I think that it is just a brief winding up, as opposed to a general recap of the arguments that we are looking for at this stage, and then the indication whether you wish to move or not to move your amendment. I will not press my amendment for the time being, but I will reserve the ability to revisit amendment 13, depending on what other amendments are brought forward at stage 3. Is there any objection to Mr Lockhart not moving the amendment at this stage? No, in that case. We then move on to amendment 7, in the name of the minister, which is grouped with amendment 9. I would ask the minister to move amendment 7 and speak to both amendments in the group at this stage. We have taken the opportunity at stage 2 to lodge an amendment in order to improve the readability of the text, which introduces the notional investment portfolio in paragraph 12 of the schedule. Amendment 7 splits up sub-paragraph 1 into two sub-paragraphs, so that some of the text is moved into a new sub-paragraph 1A following sub-paragraph 1, and that comes ahead of the notional investment portfolio itself. The amendment makes some connected adjustments to tidy up the narrative, including introducing the notional investment portfolio, and this amendment is merely of the minor and drafting variety, and the overall sense of the text is not altered. The amendment does not make any change whatsoever to the notional investment portfolio that is set out in the table in sub-paragraph 2. Amendment 9 makes a minor and separate adjustment in the provision for variation or suspension of agreed periodical payments. A reference to injured person replaces the slightly more descriptive wording in section 2h2b2, so that it relies on the nearby definition of injured person. The result is unchanged, and the adjustment is consistent with the approach in various other provisions for periodical payments. I move amendment 7. Does any member wish to come in on that amendment? If not, Minister, there is probably no need to come back to wind up, although I would give you that opportunity if you wished it. In that case, the question is whether we agree to amendment 7. We then move to amendment 14, in the name of Dean Lockhart. I invite Dean Lockhart to move and speak to amendment 14. This amendment requires the Scottish Government to review the notional portfolio in the bill before every review of the discount rate by the ratesetter and to embed the duty to consult stakeholders before doing so in the legislation. The mix of investments in the notional portfolio is an important part of the framework for setting the discount rate. Given that investment markets are fast-moving and the nature of investments changes rapidly, it is important that the Scottish Government reviews the mix of investments before each review and consults widely in doing so. That consultation approach will enable the Government to take account of the existing market conditions between reviews and the change in investment practice, which will inevitably happen between the five-year reviews. The Minister for Community Safety has accepted that the Government will, in practice, review the notional portfolio before each review anyway. Our review is that it would be better for this review to be embedded within the legislation expressly and for the duty to consult to be included. Also, a formal duty to consult would have the advantage of making this clear and making the process more transparent. Does any member wish to come in on this particular amendment? If not, I will give the minister an opportunity to respond. It is helpful to hear Dean Lockhart's explanation of the intention behind this amendment. He is right to say that the bill currently provides that Scottish ministers must have regard to the need to ensure that their portfolio remains appropriate, but it may be helpful if I outline the intended process ahead of each regular review. The first review will be carried out on the basis of the portfolio and adjustment figures set out in the bill. Ahead of the second and subsequent regular reviews, Scottish ministers will engage with GAD to review whether the portfolio is still appropriate, desk-based research of low-risk portfolios, whether the margins are still appropriate, whether a drill rate is applicable, based on analysis from GAD, commenting on the extent to which investment returns differ over different time periods, whether also the period over which the investment returns are to be assessed should be altered, and whether RPI remains the appropriate inflation measure. Decisions on any change to the portfolio, the adjustments, the period over which expected returns are based and the inflation measures are for Scottish ministers and any changes will be made by regulation using the affirmative procedure before the review commences. It follows, of course, that the Scottish ministers could not carry out such a review without consulting others and taking appropriate professional and expert advice, nor could they lay the necessary regulations to make any changes without demonstrating that proportionate and relevant consultation had taken place. Having said that, I can understand that making express provision on the face of the bill would formalise those matters, and for that reason I'd be happy if the member were to press his amendment today. I should mention in passing that if the amendment is approved by the committee, the Government will need to consider whether there are any drafting adjustments that are necessary in stage 3 in order to ensure that the provisions work properly, given the possibility of interim rate reviews in addition to rate reviews in the regular cycle of reviews. That is as well as the need for the Government to ensure that the overall wording and the structure of the provisions reaches the desired result in the best and also the clearest way possible. Does the member wish to press his amendment? Yes, I do, convener. The question is that amendment 14 be agreed to. Are we all agreed? Yes. Thank you. The second question on this is that the schedule be agreed to. Are we all agreed? Yes. We now move to amendment 12 in the name of Jackie Baillie and Jackie Baillie to move and speak to amendment 12. Thank you very much, convener. I'm happy to move amendment 12 in my name. Purpose of the amendment is very straightforward. It's designed to give effect to the committee's recommendations in the stage 1 report and it allows the pursuers' voice to be heard about their preference for either a periodical payment order or a lump sum and gives weight to their preference. We debated this in Parliament and, as I recall, I think that both Angela Constance and I raised the issue and the minister said that she would reflect further on it. The amendment is designed to tease out that reflection. Periodical payment orders are helpful, particularly in cases of personal injury, which tend to be catastrophic and have conditions that will therefore be lifelong for the pursuer. That continuing regular payment will protect on-going costs, but that said, there will be circumstances where a pursuer really doesn't want a periodical payment order. They would prefer the lump sum instances such as wanting to make a very large upfront capital investment in perhaps an adapted house. I don't want to see a circumstance, and I don't believe the committee did, where the pursuer was forced to have a periodical payment order. They've taken a very long road off into compensation, particularly if there have been catastrophic injuries. Getting a positive decision and award at the end of that process can be very empowering. I don't want to remove that and disempower them at that very final stage because their views haven't been listened to. That really is about ensuring that the court gives due weight to their preference. John Mason Thank you, convener. I should perhaps say that I'm speaking here on my one behalf and not necessarily on behalf of my colleagues, but I have to say that I do agree with Jackie Baillie's argument for this amendment. I think that periodic payments are inherently good because they take away some of the risk that we've just been debating for the last half hour and give people a constant income that they can live on, and that's got to be inherently good when we're talking about vulnerable people. However, I think that there are some exceptions. People, as Jackie Baillie has already said, may want a large capital upfront sum, and the courts can split those, as I understand it. However, there's also the situation where a pursuer wants a clean break from the defender and really does not want an on-going relationship, even if that is purely on a legal basis. I think that the word imposing a PPO does get some of our backs up that the court can do that. I think that we all know that the courts will listen to both sides, but it is quite good to specifically say that they must. It's not giving a veto to the pursuer, but it is re-emphasising the fact that the pursuer's desires and fears should be seriously taken into account by the court. If the amendment is pressed, I'm happy to support it. I'm on the record as being sympathetic to what Ms Baillie is trying to achieve with her amendment. I think that we should be looking for extra efforts or assurances within the bill to ensure that there is meaningful consideration given to the views of the pursuer and that the court process isn't adding to that sense of powerlessness that people who've suffered a catastrophic injury may well feel. I'm less prescriptive about how that is achieved. I just want to see it in the bill in the best way so that we're not reliant purely on the judiciary. I think that it's important that this is in legislation. The minister gave a very clear commitment during the stage 1 debate and followed that up in correspondence that she would indeed be giving this matter consideration prior to stage 3. I suppose that what I would like to hear from the minister today is just to flesh out how she will consider that, what is the scope of her considerations and how she will work with members across the political divide. I understand the sympathy and the concerns expressed by Jackie Baillie and others. I have some concern about the wording of amendment 12 and the fact that it would cut across the court's discretion to decide the best form of payment, which will be in the best interest for the injured party. Perhaps instead of that being embedded in the legislation, that could be covered by the rules of court. With regard to the wording, I have concerns in subparagraph B that the statutory presumption will work unless the court considers that there are compelling reasons not to do so. Compelling reasons is legally a very high threshold to meet. Rather than this being a presumption in favour of PPO, it would almost automatically result in PPO's unless compelling reasons were shown otherwise. I have concerns about the wording used in amendment 12 at this stage. If no other members wish to speak at this point, I will offer the minister the opportunity to respond. I am grateful to Jackie Baillie for bringing forward this amendment. During the stage 1 evidence sessions, I listened to those who had raised concerns that the bill did not provide the court when considering whether or not to impose an order for periodical payments that should give precedence to the views of the pursuer. In response to the stage 1 report, I explained that I was not keen to ffetter the ability of the court to make the best decision according to the facts and circumstances at hand. I went on to say that because of the strong support expressed for an amendment, providing that the court should have regard to the pursuer's preference that I would give this matter further consideration. I appreciate from what I heard at stage 1 that not giving effect to the views of the pursuer can be disempowering to those individuals. Having reflected further, in particular, on the position of pursuers in those types of cases and the importance of not adding additional distress in an already very distressing situation, I am pleased to support the principle that underlies this amendment. However, we need to think very carefully about how the provision could best balance the rights of the pursuers and defenders when aiming to give preference to the pursuer's position. With that in mind, I would like to offer to work with Jackie Baillie ahead of stage 3 so that, to settle with her the precise approach to be adopted in order to address the matter appropriately. I am sure that a revised version of the amendment, in workable terms, that we can all agree on could be devised for bringing forward at stage 3. Accordingly, I would ask Jackie Baillie not to press her amendment at this stage. I will turn to Jackie Baillie to wind up and to press her to withdraw her amendment. Thank you very much, convener. I think that Angela Constance summed it up best for me when she said that this needs to be in the bill so that it is absolutely clear. Therefore, I think that Dean Lockhart, with due respect, is wrong to say that we could simply put it in guidance or in court rules. My understanding of what the minister is offering is indeed to put it on the face of the bill. On that basis, I will happily withdraw work with the minister and, indeed, other members to make sure that we get this right for stage 3. Is there any objection to Jackie Baillie withdrawing that amendment at this stage? None, thank you. We now turn to amendment 8 in the name of Stuart Stevenson. At this point, I will invite Stuart Stevenson to move and speak to his amendment. Thank you very much, convener. Let me commence before I forget my moving amendment 8 that stands in my name. I spoke in a stage 1 debate on this important piece of legislation and identified a relatively small but important issue in relation to periodical payments. The bill provides for a more subtle and varied way of setting periodical payments. In the case of future pecuniary laws, for example, with or without the consent of the parties, there are important duties that the court has to undertake. The court will also get re-engaged in the issue of periodical payments by the introduction of section 2C to the damages act to a where it may come back to the subject of periodical payments to very previous orders. It is quite important that the whole issue of periodical payments be considered. There is also provision under 2C for a scheme under section 213 of the financial services and markets act. Of course, the ownership of schemes may well change over the period over which periodical payments might be made. They might be made for 60 or 70 years, so there is a whole series of things that place a significant duty on the court when deciding that there is reasonable security of periodical payments to explain why they have come to that conclusion. It may be that, quite frequently, they will simply point to the relevant following part of the act, but given that there are private sector ways of securing periodical payments, it would be proper that the person who is likely to be in receipt of that periodical payment has the opportunity to understand why the court has concluded that it would reasonably secure and outwith the bill, but by other means if it were felt in extremis necessary to challenge it, but also to allow the representatives to have the opportunity during the court process to challenge it if they had doubts about the security of a periodical payment, that is the basis in which I bring forward my amendment and I hope that colleagues around the table will be prepared to support it as I have no vote on the matter. I wonder before I ask other members, the committee, if they have any questions, if I might clarify or point out one or two things that I would appreciate clarification on. I am not, by doing so, disagreeing in principle with what Mr Stevenson is saying, but there are a couple of points. The first is that if a pursuer makes a periodical payment order application on a certain basis, then the assumption would be would it not that the pursuer is satisfied as to the security of payment or perhaps not, and perhaps Mr Stevenson could address that point in closing up his remarks. The second is more to do with the wording of the amendment and how it fits with the other provisions of section 3 of the bill before us. Mr Stevenson alluded to the fact that, under section 3, 2C1, there is an assumption that the court is required to make, and if the court is required to make an assumption that continuity of payment is reasonably secure, I am not sure how the court can be required to go behind that and give reasons for that assumption when the act will require it to make the assumption. I take the point on board that the court might make an order relating to a scheme that is not covered by the various bodies or, for example, the guarantee under section 2C181, but I am just wondering if the wording is quite right as worded at this stage. I wonder if Mr Stevenson could come back to those two points. Does any other member wish to comment on this? If not, I will turn to the minister and invite her to respond to this or comment on this. Thank you, convener, and I am grateful to Stewart Stevenson for bringing forward this amendment. It is the case that courts do, as a matter of course, issue opinions or notes to give the reasonings behind their decisions, and not only is this a long-standing practice of the courts, but it is part of the right to a fair trial, guaranteed by the European Convention on Human Rights in article 6. In cases that fall within the provisions, it is likely that reasoning will be that the party funding the PPO will fall within the sources identified in the legislation as reasonably secure, and there has been no evidence to contradict that position. Nevertheless, there may be others whom the court is satisfied are reasonably secure, and so it will be important to expose the reasoning. I am happy for Stewart Stevenson to press his amendment while reserving the possibility of bringing forward Government amendments to make any necessary technical changes at stage 3 so as to ensure that his provision fully dovetails in with existing provisions. Stewart Stevenson, why not press or withdraw? Thank you very much, convener, and you asked me some quite specific questions. The important thing is that, even where the pursuer is applying to the court for a periodic order, as you referred to, it is the court that is in control of the outcome. In particular, if I look at what is inserted in 2C at section 2 subparagraph A, for example, the court specifies the method by which payments are to be made. The court clearly has the control over the way in which periodical payments will be made. It can, of course, 2C enable an application to be made to the court for variation of provision, but it does not require that to be done. Therefore, it is important right at the outset that there is clarity about the decision making that is made by the court in this regard. The minister helpful pointed out that this is not a particularly novel provision requiring the court to explain its workings. On that basis, I am certainly happy to watch what the Government might do by way of further modification of the provision at stage 3, if that is required. However, I would like to press my amendment at this stage, convener. The question is that amendment 8 be agreed to. Are we all agreed? The question is that section 3 be agreed to as the next question. Are we all agreed on that? Yes. I now call amendment 15 in the name of Dean Lockhart, which is grouped with amendment 16, and I would invite Dean Lockhart to move amendment 15 to speak to both amendments in the group. Thank you, convener. I would like to move both amendments. Amendment 15 is a probing amendment to ascertain the intended operation of this section. Amendment 15 seeks to clarify that the court may not award any further, in other words, additional lump sum when considering an application to vary the PPO. In other words, increase the overall original settlement. That would avoid the risk of the court being asked to reopen the original settlement generally when considering how to vary the PPO award in future circumstances. The amendment is not intended to stop the court from being able to award a lump sum instead of a periodic payment, which might be required depending on the individual's circumstances. The amendment is instead trying to clarify that the court cannot award a new lump sum over and above the quantum of the original award. That is important because otherwise the benefits of finality and certainty of damages would be undermined. The single award concept is crucial for reasons of finality and certainty for both sides—the pursuer and the defender—and that provision in the bill would create some uncertainty and leave open the potential for further lump sum awards to be reopened in particular circumstances. There might be another way to address the issue by retaining the words in addition to but adding clarification at the end of the subsection to say that any payment of an additional lump sum shall not increase the quantum of the original compensation awarded. I am very happy to work with the minister to clarify the operation of this subsection. Does any member wish to speak on the amendment? If not, I will invite the minister to respond. Once again, I thank Dean Lockhart for providing a bit more detail about the amendments. On amendment 15, it might be helpful if I first summarise how awards of damages for personal injury may be made. The method of award, which is a lump sum or periodical payment, is not mutually exclusive. A pursuer who receives their award by way of an order or agreement for periodical payments would rarely receive their entire award in that way. At the point at which a settlement figure is agreed or ordered, the pursuer may already have experienced losses. For example, his past salary, past care or treatment and his settlement may include a capital sum to them to purchase a piece of equipment to assist them. Such payments would be paid in a lump sum and it would only be the future pecuniary losses that could be made in the form of periodical payments. Even just looking at those future losses, the award or settlement may provide for those to be addressed by a mix of lump sum and periodical payments. That flexibility for the courts is maintained in the bill's provisions, which relate to the variation of periodical payments. If we were to restrict or hamper that flexibility, it would mean that if a court were presented with evidence that a pursuer's losses have increased due to a change in the pursuer's condition, it would no longer be open to the court to award a lump sum in addition to the periodical payments as originally awarded. It would be restricted to a choice between varying the level of the periodical payments or replacing the whole of the periodical payments with a lump sum when increasing the level of compensation. Additionally, the court can only vary an order or agreement where there is actual change in the pursuer's condition and that change results in significant over or under compensation. Section 2f for orders and section 2h for agreements do not permit the court to reopen the original award altogether. Therefore, the result of amendment 15 would not be the right approach. Amendment 16 does include a causation link to the original injury on two fronts. The original court order must include provision, which enables an application to vary in the future in the first place. Any changing condition has to result in significant over or under compensation. The bill does not change the underlying principles in Scots law, which require a causal connection between the injury and the loss for which the pursuer is to be compensated. If the original order awarding periodical payments does not include any provision enabling variation in the future, the court could not even entertain an application from either party to vary. Where the court enables the future variation in this way, it must specify which must occur before an application can be made. In doing so, the original court will be acting in light of and subject to the essential rule in law, and there being a causal connection between the injury and the loss. Therefore, there is already a clear and necessary link between the original injury and the circumstances, which may result in variation. The link in the words at 2f3b2 to significantly, and I am quoting over or undercompensate the injured person, also links the variation to the original injury and makes it clear that it must be a significant and not a trivial change to the pursuer's condition. In addition, the wording of the amendment refers to a change being attributed to the injury, and it is not clear how that would work, where the change is an improvement, as that would not be attributable to the injury. Simply put, nothing more needs to be said in the bill to achieve what amendment 16 seems to be designed to do. The amendment is, in my view, not needed. For those reasons, I urge the member not to press either amendment 15 or 16, and, if they are pressed, I would ask the committee to reject them. Dean Lockhart, wind up and press or withdraw amendment 15. Thank you, convener. On amendment 15, I thank the minister for clarifying the intended operation of how this section is intended to work. I think that my concern relates to the drafting of this subsection, and I am happy not to press amendment 15 if I can work with the minister to clarify wording that might address my concern before stage 3. Thank you very much. With regard to amendment 16, the minister slightly preempted my arguments in favour of amendment 16, but she is completely right to say that causation is inherent as an underlying principle of Scots law. There has to be a link between the original injury and the change in medical condition. My amendment 16 was designed to add to the provisions in section F, which already sets out how and when a court can review a PPO. We heard evidence from stakeholders during the committee session, in particular BTO solicitors, that what is missing in section F is an explicit reference for the requirement for the change in condition to be the cause of the additional compensation. I am happy not to press that amendment if I can work with the minister to clarify that the underlying principle of causation is indeed embedded within the draft legislation at stage 3. I think that we have been quite clear that this amendment is not needed because it is already covered in the bill. Jackie Baillie wishes to say something else. I am preempting your next question, convener, where you are going to ask if members are content. I will just wait for your question and then I will... Indeed, the procedure has slightly got out of sync here. First of all, I have to ask members if they are content for Mr Lockhart to withdraw amendment 15. No, I am not content, convener. I would seek to move amendment 15. I am entirely happy with the minister's response to that, so in moving amendment 15, I am inviting the committee to vote it down. In that case, we will go to the question. Is amendment 15 agreed to? Are we all agreed? No. Show of hands, please, for those who are for the amendment 3. Against? Against. Against the remainder. The rest, okay. In that case, there are no abstentions. So I will now move to amendment 16 and invite Dean Lockhart to move or not to move. I will not move amendment 16. Is there any objection to that amendment being withdrawn at this stage? Jackie Baillie. Yes, convener, I am going for a clean sweep. I wish to move amendment 16 on the basis that I am entirely content with the minister's response, and therefore I would encourage the committee to vote against it. Very well. We will move to a vote who is for the amendment, against the amendment and that is no abstentions. We will then move to amendment 9, in the name of the minister who has already debated with amendment 7, and I will invite the minister to move that amendment formally. In that event, the question is, is amendment 9 agreed to by the committee? Yes. The further question is that section 4 be agreed to. Are we all agreed? Yes. I will now call amendment 10 in the name of the minister, which is in a group on its own minister to move and speak to amendment 10. During stage 1 evidence sessions, I listened to those who raised concerns about the costs involved. Should a pursuer return to the courts in order to have an order for periodical payments varied due to a change in their physical or mental condition, which would result in them being significantly over or undercompensated by the damages being awarded for future pecunary loss. When I tended to give evidence at stage 1, I was asked if I would consider whether I could commit to ensuring that those costs fall on defenders as this was regarded as a fairer approach. I undertook at that point to look at the interaction between the civil litigation legislation, which was passed earlier this year, and how that interacted with the damages bill. Whilst that issue did not feature as either a conclusion or a recommendation in the committee's stage 1 report, the matter was raised again during the stage 1 debate. As I indicated in my recent letter to the committee, I agree that the right approach here is to ensure that, where such proceedings are raised, the pursuer should continue to receive the protection of quantified one-way cost-shifting, or coax, as it is known, in the spirit of the 2018 legislation, as it relates to personal injury actions. Amendment 10 will therefore replicate the protection of coax as provided for in the 2018 act but adapted for applications relating to the variation or suspension of an order for periodical payments. That means that, regardless of who raises such proceedings, be it the defender or the pursuer, the pursuer will not be required to meet those expenses. Where parties have agreed periodical payments without recourse to the courts, or have settled an action through an agreement and a subsequent action relating to variation or suspension arises, the same default position will apply. That is, the pursuer will be protected by coax unless the agreement provides differently. In that way, the amendments will not interfere with what has already been agreed between the parties. The protection will extend to proceedings where the injured person is represented by someone such as a guardian, or a judicial factor, or acting under power of attorney. In those cases, the proceedings may not be in the injured person's own name, and I move amendment 10. Before other members may wish to come in on this, I wanted to raise a point about drafting and the form in which the amendment takes. Putting to one side the principle, which, as the minister correctly said, brings this area of periodical payment orders in line with the Civil Litigation Expenses and Group Proceedings Scotland Act 2018. I suppose that this might be a question for members of your team to explain the basis on which this has been approached, but my question is why this has not been done as a simple addition that is in an amendment to the Civil Litigation Act 2018, where all the other expenses rules are contained relating to coax in this area, rather than being put in as an amendment to the damages act 1996, which is becoming a rather clumsy beast after 20 years of amendments and use. At the minute, I am not persuaded that this is the best way to do it, and I should just clarify that it might perhaps be easier dealt with by simply putting into section 8.2 a subparagraph C, which includes any application for a variation of an order, that is, of a periodical payment order, suspension of a right in relation to such an order, or an appeal in relation to any such order, because then that would be in the 2018 act rather than having to reproduce what are quite lengthy provisions about this in a completely different act altogether. I am happy for you minister to intervene and perhaps clarify that. I thank the convener for raising this, and it is important that I perhaps put a few notes on the record about why it has been done in the way that it has. The Government gave careful consideration to how best to deal with coax in a new section at 2J, as contained in the amendment. Whilst I accept that the section 2J for coax is quite long, it is necessarily long in order to cover the details required in the context of the other provisions regarding periodical payments. However, the main rule is captured succinctly in subsections 1 and 2, and my view is that it is worth stating here for reading right alongside the other provisions on periodical payments. That allows the provisions on periodical payments, including as coax operates in connection with them, to stand as a complete set as one single package. The remaining details are narrated in subsections 3 to 9, partly by freestanding propositions and partly by referring to the civil litigation legislation where it is appropriate. There is no neat way of shortening that, at least not without compromising on the absolute clarity needed in the context of the provisions for periodical payments. No matter how it is done, the essence of subsections 3 to 9 is essential for everything to work as it is intended to do. For example, the precise proceedings to be covered by the rule in subsections 1 and 2 B, what the rule is subject to in two different situations, and how to properly tie up in with civil litigation legislation where that is required. Critically, the rule stated up front in subsections 1 and 2 cannot be missed. Moreover, I would suggest that the key subsections are pretty simple on their own terms for the reader to follow. I hope that that answers your question. I am not sure that answer is my question, because if one looks at the Civil Litigation Act 2018, one sees fairly detailed provisions in section 8. I am not persuaded that the drafting set out here is necessary, but Jackie Baillie wishes to come in. I am not going to argue about drafting. I will stick to the principle of this amendment, and I very much welcome and support the amendment in the name of the minister. I raised this during the stage 1 debate. She promised to reflect on it. I am delighted that she has done so and agreed with the approach taken, so I will be supporting it when we come to taking a decision, convener. Very well. Any other member, if no other member wishes to speak? I will just ask the minister to wind up. I hope that that answers the convener's question. The approach that the convener set out is not one that we want to take. We want to do it specifically in this way, so I hope that that answers the convener's question. Very well. Thank you. In that event, the question is that amendment 10 be agreed to. Are we all agreed? Yes. Well, I think that there is a no, so we will go to a vote. Those agreed in favour against and those abstaining. I think that the final question then with the minister, sorry, it is not the final question. The next question is that sections 5 to 9 be agreed to. Are we all agreed? Yes. And another question is the question that the long title be agreed to. Are we agreed to the long title of this bill? Yes. Thank you. That ends stage 2 consideration of the bill, so thank you to the minister and her team. I'll suspend briefly before we move into the next section to allow the minister and her officials to leave. We now turn to item 3 on the agenda, which is to do with the European Union withdrawal act 2018. We are looking at the insolvency EU exit Scotland amendment regulations 2019, which are made under the powers conferred on the devolved authorities in terms of the act that I've just mentioned. Under the protocol between the Scottish Parliament and the Scottish Government, the committee is required to consider whether the procedure attached to the SSI is appropriate or should be changed. This instrument is subject to the affirmative procedure that reflects previous practice for instruments in the area of cross-border insolvency, which makes changes to primary legislation. Is the committee content that this Scottish statutory instrument is subject to affirmative procedure? Mr Mason. Just by way of comment, my understanding is here that today we're purely looking at whether it should be affirmative procedure and we're not looking at the content of what's going to happen later, so on these grounds I'm happy to support. Yes, this is purely to do with the procedure. In that event, the committee being content that is confirmed, I'll now suspend the meeting and move into private session.