The government’s decision to save referral fees has received cross-industry criticism.

The government’s new Justice Bill, unveiled earlier today, includes no moves to ban referral fees.

Lord Jackson’s recommendation to curb referral fees is one of his few proposals not to be taken forward in the bill.

John Spencer, director of law firm CS2, said: “Instead of seizing the opportunity to tackle one of the most glaring deficiencies in the personal injury market, the government has instead demonstrated a total disregard for the groundswell of calls to tackle the issue of referral fees. This is a profoundly disappointing choice which I believe undermines the entire aim of proper reform.”

Spencer, who is a former chairman of the Motor Accident Solicitors Society, said:“Referral fees damage the system by creating a myriad of perverse commercial incentives which threaten access to justice and cost consumers dearly by pushing up insurance premiums to unsustainable levels.

“By skirting the issue of referral fees, we are now left with rushed-through, half-baked legislation which does not implement the transparency, regulation and outright ban of referral fees which the system needs.

“It is my profound hope that the industry will pull together and fill the leadership vacuum sadly left by the Government by challenging the deeply entrenched commercial interests which add no value to claimants, damage access to justices and present a bad and costly deal to consumers.”

ABI general insurance and health director Nick Starling urged the government to implement Jackson’s recommendations on referral fees.

“The government must stay the course now and implement the proposals put forward by Lord Justice Jackson in full, including banning referral fees paid for tipping off lawyers about accidents and looking at solicitors’ fixed and hourly fees. We need to make sure we overhaul the whole system to make it fairer for genuine claimants.

But overall, Starling said the bill was a step forward.

He said: “This bill is good news for the millions of honest motorists who have ended up paying more for their motor insurance due to spiralling legal costs. The removal of the ‘no win, no fee’ arrangements will go a long way to stopping frivolous claims encouraged by ambulance chasing lawyers.”