The Jackson reforms of civil litigation will cost the taxpayer more than £70m a year in employers’ liability cases, according to a report prepared by economists.

The report, published by consultancy firm London Economics, states that much-vaunted savings in damages pay-outs and insurance premiums will be offset if the number of claims falls significantly.

The proposals by Lord Justice Jackson for civil litigation reform have been largely adopted by the government’s Legal Aid, Sentencing and Punishment of Offenders (LASPO) bill, now before the Lords. They include a 25% cap on success fees and the removal of recoverability of success and after-the-event (ATE) insurance from the losing party.

The report’s authors, Moritz Godel and Gavan Conlon, state that local authorities and the NHS will still have to pay for the effects of personal injury accidents even when the victims are not able to claim. This will in turn mean they cannot claim back costs either through the NHS injury cost recovery scheme or the Compensation Recovery Unit.

In total, Jackson reforms are expected to save £34m in damages pay-outs and £11m in saved ATE premium payments. But those savings are outweighed by the £60m cost to the NHS and local authorities from employers liability cases that are not taken on. The report estimates there will be a further hole of £43m in lost tax revenue from lawyers’ and ATE insurers’ income.

The cost savings are a key facet of the government’s argument that claims numbers and associated costs to the public are out of hand.

Lord Collins, a Labour peer, said the taxpayer was the ‘loser’ when he spoke at the second reading of the LASPO bill on Monday.

‘While the direct savings attributable to the Jackson proposals are substantial, estimates based on public data suggest that they will be outweighed by direct and indirect costs resulting in a sizeable net loss to the Exchequer of £70.2 million per year. The main sources of loss are tax and the recovery of payments from public bodies resulting from PI claims.

‘So, on the behalf of the real people behind Britain's dreadful industrial disease and accident statistics, I plead for the government to think again and put fairness and justice first.’

The report was paid for by personal injury firm Thompsons, although there was no editorial influence.