Solicitors have only themselves to blame for the rise of claims management companies, the Better Regulation Task Force said last week.

In a report on litigation in the UK, the task force, which is an independent advisory body attached to the Cabinet Office, also found that while in reality there is no compensation culture, there is a perception of one.

This is encouraging people to 'have a go', which in turn is leading to organisations facing rising costs in the bureaucracy of dealing with claims, even if no pay-out is made.

The task force called on key players in the field, from government to lawyers, to play their part in dispelling the myth.

Teresa Graham, who chaired the group that carried out the study, told the Gazette: 'Claims management companies wouldn't have emerged with the strength they did had lawyers been better able to market their services.'

The report, entitled 'Better routes to redress', recommended that if progress by the Claims Standards Federation in having its code of practice adopted is not forthcoming by the end of 2005, the Department for Constitutional Affairs (DCA) 'should step in and regulate the sector'.

As an immediate step, the task force called for a ban on claims companies advertising in hospitals and GP surgeries.

The task force also called on the DCA to carry out, by May 2005, research into the potential impact and effectiveness of contingency fees.

It said contingency fees 'need not lead to an explosion in the "compensation culture"' if there were safeguards, such as cost shifting and a maximum percentage law firms could charge.

However, firms could charge less, encouraging competition.

Ms Graham said 'we sense a thawing of attitude' towards contingency fees.

The task force's other recommendations included research into raising the limit for pursuing personal injury claims under the small claims track.

Currently 1,000, it said the research should justify any figure less than 5,000.

The government is committed to responding to task force reports within 60 days.

Law Society chief executive Janet Paraskeva said: 'This report reinforces what the Society has been saying for a long time that the idea of Britain being compensation crazy is itself insane.

But lawyers and insurers must work together to ensure the costs of getting compensation don't outweigh the cost of compensation itself.'

While welcoming the report, Association of Personal Injury Lawyers president Colin Ettinger cautioned against greater use of the small claims track for complex claims such as personal injury actions, and said that for contingency fees to be introduced, the method of calculating damages would need to be changed.

Forum of Insurance Lawyers vice-president Andrew Underwood welcomed the report, but he had reservations about whether contingency fees would address 'the more fundamental issue that claimants enter the claims environment "risk" free'.

Neil Rose