Lord Hunt says work done on the Compensation Bill by the Lords should not be undone in the Commons

The Compensation Bill has passed its third reading in the House of Lords and sits in limbo, as we wait for it to begin its passage through the Commons. The first part will restate and clarify the law on negligence; the second will introduce much-needed regulation of 'claims farmers'.

Ministers insist this Bill should be seen not as an end in itself, but as part of a concerted and coordinated campaign to restore common sense. This will be a serious test of "joined-up government", but I, for one, am willing to give ministers the benefit of the doubt for now. I prefer a half-full cup to an empty one.

Clause 1 has its critics, not least the Commons Constitutional Affairs Select Committee, but in my view it does move things in the right direction.

Ministers argue it doesn't change the law at all. I fail to see how that can be right, but I do agree that its main effect will be not on the letter of the law, but on behaviour, countering perceptions of a compensation culture.

Following discussions and debate, Clause 1 now extends to breach of statutory duty, without which it would have had no meaningful effect. Although that theoretically includes employers' liability claims, in practice the courts should recognise this would run contrary to established principles of European law and should be resisted.

At report stage in the Lords, I moved an amendment asserting that an apology or offer of treatment should not of itself be seen as an admission of liability. That is not intended to encourage defendants to delay admissions; it is an attempt to foster civility in society, consistent with the overall spirit of the Bill and other government initiatives.

Although Labour initially resisted the amendment, it was passed by a cross-party coalition. Baroness Ashton of Upholland - the sponsoring minister of the Bill - eventually accepted this amendment and her constructive approach was both admirable and entirely characteristic. I hope this measure will now give a much-needed boost to rehabilitation.

Part 2 of the Bill was widely welcomed and ministers are now committed to introducing a tough regulatory regime for claims farmers by October 2006. This will emphasise individual accountability for the 'controlling minds' behind such companies - drawing upon experience of the FSA 'approved persons' regime - with provisions covering competence and transparency of charges, plus other consumer safeguards.

At the time of writing, the identity of the new regulator is still not known. I expect we shall see an interim regime at first, probably lasting until legislation has been passed on legal services regulation, in the light of the Clementi review.

The likeliest outcome seems to be that the Lord Chancellor himself will step in and subcontract functions as a stop-gap.

This Bill left the House of Lords backed by an all-party consensus that it was in reasonable shape. Further amendments may be tabled in the Commons, but I do hope colleagues there will take care not to dilute or undermine what has already been achieved. IT

' Lord Hunt is chairman of the financial services division at law firm Beachcroft