A legal anomaly is costing the NHS billions

The NHS is one of Britain’s most cherished institutions, providing care to millions of patients each year. Yet questions remain about whether every resource is directed towards its core purpose of treating patients. One example is a law predating the NHS that requires it to pay out vast sums each year for private treatment that may never be used.

This is the real-world consequence of an obscure provision: Section 2(4) of the Law Reform (Personal Injuries) Act 1948.

The provision requires courts, when awarding compensation for clinical negligence, to disregard NHS care and assume the claimant will use private healthcare. Yet nothing in law obliges the claimant to do so. Someone injured through negligence may receive compensation for private treatment but still return to the NHS – effectively charging the NHS twice. Repealing this provision would not force claimants to automatically return to the NHS for their future care. Rather, it would allow courts to decide what is reasonable in each case.

The Act was introduced to modernise personal injury law. Yet unlike many other legacies of the Attlee ggovernment, this change has failed to stand the test of time. Much of the Act has since been repealed or replaced. The survival of Section 2(4) is therefore all the more puzzling.

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When Section 2(4) was drafted, the NHS was only just being established, and the healthcare landscape looked very different. Private treatment was more common, and the idea of a universal health service untested, so the provision could be justified. In today’s world, it no longer makes sense.

In practice, courts must calculate the cost of private treatment even when the claimant has no intention of using it, and even when equivalent NHS services are available. This inflates settlements and creates a financial burden that falls on the public purse. Every pound spent here is a pound diverted from frontline healthcare.

The problem has been recognised for decades. In 1973, a Royal Commission – commonly known as the Pearson Commission – examined the issue and recommended repealing Section 2(4) when it reported in 1978, warning of the risk of double payment. But by then Jim Callaghan was in Downing Street without a workable majority, and the proposal went nowhere.

Calls for repeal persisted. The matter resurfaced repeatedly in parliament, and in the 1990s Rosie Barnes introduced a private member’s bill to abolish the provision, backed by figures including Tony Blair, Jeremy Corbyn and Charles Kennedy. Like most such bills, it ultimately failed to progress.

Today the stakes are even higher. The current clinical negligence framework – including Section 2(4) – is contributing to spiralling costs. In 2024/25 the NHS in England spent £3.6 billion on clinical negligence, according to the latest National Audit Office (NAO) report. This figure is projected to exceed £4 billion a year by the end of the decade. Patients harmed by negligence must receive appropriate compensation, but it’s difficult to deny that our current system is costing more than necessary, in part because of this law.

Escalating costs have brought renewed attention to Section 2(4). Late last year, the National Audit Office recommended re-examining the provision. The public accounts committee followed in January, urging the government to set out within six months what legislative steps it will take to address this outdated law.

Support is also growing across the political spectrum. Since the General Election, MPs and peers from Labour, the Conservatives and Liberal Democrats have raised questions about the provision’s future. The tide is clearly turning in favour of reform.

This week a bill introduced by Catherine McKinnell will directly address Section 2(4) as part of a wider package of clinical negligence reforms. It is the first such legislation in years, and parliament should seize the opportunity.

With cross-party support, authoritative reports and legislation now before parliament, the question is simple: why not act now?

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