The government is this week expected to rule out the possibility of introducing contingency fees and also to give claims management companies a last warning to get their house in order.


The announcements are expected in the Department for Constitutional Affairs' (DCA) long-awaited response to the Better Regulation Task Force's (BRTF) report in May on the compensation culture, which found that while there is no such culture in reality, there is a damaging perception of one (see [2004] Gazette, 4 June, 3).



The Gazette understands that the DCA will reject the BRTF's recommendation that it conduct research into the potential impact and effectiveness of contingency fees, arguing that conditional fee agreements (CFAs) need to be given a proper chance to work.



Following extensive consultation, it is hoped that a revamped CFA scheme will begin by Easter 2005.


For the first time, the DCA is expected to tell the claims management industry that moves by the Claims Standards Council to introduce a code of practice are the last chance to get its house in order.


The BRTF said that if the code of practice was not approved by the Office of Fair Trading and in place by December 2005, the DCA should step in and regulate the sector. It is thought that the DCA will demand a shorter timescale.


The move is also against the backdrop of the forthcoming Clementi review of legal services, which may make recommendations about regulating the claims sector.


The DCA is set to accept the controversial BRTF call to carry out research on raising the small claims limit for personal injury claims from the present £1,000. The BRTF said the research should justify any limit below £5,000, but it is understood that the DCA recognises the strength of feeling against the proposal - such as the concern that people would be forced to deal with powerful insurance companies without representation - and will not proscribe the research in such a manner. In addition, it will investigate other ways of dealing with small personal injury claims.


The DCA should also make its strongest statement yet that it opposes solicitors and claims management companies adver-tising in hospitals and doctors being paid to refer patients to solicitors. However, it is unlikely to take any particular action, leaving it to the NHS and professional bodies.


It is believed that a ministerial working group, supported by an 'action group' of interested parties, will be set up to push forward work on the recommendations and also to take other steps to combat the perception of a compen-sation culture.