No compound pre-judgment interest on debts and damages

UK Government proposals (10 pages, PDF) to give the Lord Chancellor power to prescribe an interest rate to be applied to debt and damages between the time at which they accrue and the time of judgment. The rate would be set by reference to the Bank of England base rate, and the Government thinks that “there is a case” to index the prescribed post-judgment interest rate in the same way.

The Government rejects the recommendation in the Law Commission's 2004 report (130 pages, PDF) to empower judges to award compound interest in all cases. The Government would need “further consultation and a more detailed and quantified impact assessment” before accepting this recommendation, and “the issue does not command sufficient priority to justify the necessary work on impact assessment and IT development”. The IT development in question would be to create a “web-based programme to make the necessary calculations”.

The same result on compound interest seems to have been reached by a different route in Scotland: see the Scottish Law Commission's 2006 report (124 pages, PDF) recommending simple interest (paragraph 7.39), and Scottish Government's January 2008 consultation (54 pages, PDF).

For further information or advice please contact Franck Latrémolière.

Filed under Guidance, Impact assessment.

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