'Industry must meet government half way'

A week is a long time in politics, former prime minister Harold Wilson once said. This time last week, Jack Straw was limbering up to ban referral fees via a 10-minute rule bill. Then on Friday justice minister Jonathan Djanogly shot Straw’s fox by rushing out an announcement that the government would end the controversial practice. The thought of the Labour greybeard as consumer champion had no doubt concentrated minds at the Ministry of Justice.

The bill to implement the Jackson Review of civil litigation costs, now grinding its way through parliament, is a ready-made vehicle for implementing a ban. But the lack of detail with the minister’s announcement is a source of concern.

The industry is right to argue that a referral ban should only take place alongside a review of the fixed fees paid to personal injury lawyers for motor cases. It would be rich indeed if the prime beneficiaries of a fee ban were claimant lawyers rather than hard-pressed motorists.

Nevertheless, many of the arguments against a ban are self-serving. A ban is likely to be highly disruptive to those businesses, including personal lines brokers, that have benefited so richly from the referral fee gravy train over recent years.

Consumers are unlikely to lose out as much as their self-styled champions protest – finding a lawyer is not as hard as it was in the pre-internet age.

However, the government will be looking for a quid pro quo from the industry for its concession on referral fees.

The Office of Fair Trading probe into the motor insurance market increases the pressure on the industry over rising premiums.

With household incomes being squeezed across the board, insurer bosses will have questions to answer from ministers if the Jackson Review-inspired reforms do not translate into lower motor insurance rates.