As expected, the main recommendations of the Jackson report affect personal injury (PI) cases. Jackson proposes to dismember the system put in place by the Access to Justice Act 1999 and pass the cost of losing cases on to litigants and their lawyers.

The report considers PI fast-track costs to be disproportionate. Fixed costs are therefore proposed for PI cases at all stages and the report sets out figures. The costs in the boxes of the report are derived from research by Professor Paul Fenn into what is currently being paid. If insurers will pay the same total under fixed costs, why bother with the boxes? The wrong amount will be paid in every case – too much or too little.

The figures quoted will not cover the work needed in cases with average complexity, but there is practically no chance of escape from the fixed amount. From the claimant side, we see costs driven by insurer behaviour. Insurers can settle at any time. If they lose at trial or settle at the door of the court, they are responsible for the higher costs because they could have settled earlier. Jackson cites evidence that insurers are failing to get to grips with cases because they do not put sufficient resources into claims handling. Fixed costs will make this worse. Insurers will have the incentive to be inefficient.

Success fees are no longer to be paid by losers but deducted from damages. Deductions will be capped at 25% of damages and general damages will increase by 10% to compensate. The increase in damages is welcome, but most clients will face some deduction, especially in the bigger cases where general damages form a smaller proportion of the whole. Claimant solicitors will be wary of taking difficult cases and unable to recover many success fees because of the cap.

After-the-event (ATE) premiums are no longer to be recoverable and in PI, defamation and judicial review, unsuccessful claimants will have the same protection against costs as legal aid clients – they will not have to pay the costs of losing a case unless the claimant is wealthy. This is a brilliant idea but fraught with problems.

It will probably cause the collapse of the ATE and before-the-event (BTE) markets because such insurance will no longer be needed for most litigants. Jackson proposes that clients, their lawyers or even the Legal Services Commission should pay the disbursements in losing cases. He goes on to say that referral fees should be banned. This is complicated because everyone pays an acquisition cost in one form or another for work. Such costs have never been recoverable under the rules, even though it is asserted that referral fees increase litigation costs. Some firms prefer to outsource their marketing to claims companies. If this is banned, the profession will revert to doing its own marketing. However, a firm will have to pay an equivalent sum to get the same work.

The Office of Fair Trading was asked by the Jackson team for its current policy and confirmed that a ban on solicitors paying referral fees would unnecessarily impede competition. Referral fees affect huge swathes of UK business. It must be for the government and the OFT to decide whether banning them is feasible or desirable and not just the Solicitors Regulation Authority.

Some proposals require rule changes, but the radical ideas require primary legislation. Piecemeal implementation will be a bad thing. The system is complex and interrelated and one change alone can wreak unexpected damage. We need more debate about whether the package will bring benefits. An impact assessment of the changes on victims of accidents is essential.

Liability insurers will be delighted with the report because the sum of the changes means a massive switch in resources to them from litigants. Claimant lawyers, BTE and ATE insurers face great uncertainty. Victims of accidents were not consulted for this report and currently have few complaints. In the future they face reduced damages, a cut-down service in smaller cases and less access to justice.

Patrick Allen is senior partner at Hodge Jones & Allen and a claimant PI solicitor. He was president of the Association of Personal Injury Lawyers in 2003 and is a member of the Law Society Civil Justice Committee