The Association of Personal Injury Lawyers has alleged that a failure by the justice secretary to review the damages discount rate has led to some claimants being under-compensated by ‘hundreds of thousands of pounds’.

Launching a judicial review against the MoJ last week, APIL said the government should lower the discount rate, which is used to calculate the amount deducted from an injured person’s compensation to account for any income they may receive from investing their damages.

The discount rate was set at 2.5% in 2001, and is based on yields generated by index-linked government stock.

APIL said that these yields have fallen to less than 1% on average over the last three years.

It said a rate review promised by justice secretary Kenneth Clarke last year has still not been carried out.

APIL president Muiris Lyons said: ‘We are gravely disappointed that the government has failed to carry out its review, as injured people are continuing to be under-compensated - in some cases, by hundreds of thousands of pounds.’

An MoJ spokesman said it is aware of the action.