The task of collecting the charges will be given to the compensation recovery unit, which is part of the Benefits Agency. It will levy a flat- rate fee of £354 for patients treated in accident and emergency departments or outpatient clinics, and a daily rate of £435 for those admitted to hospital as inpatients.

The law will be changed so an insurance company will have a statutory duty to notify the CRU that it intends to make a compensation payment to the victim of an accident.

The unit will then contact the hospital for details of the treatment so a certificate of insurance can be issued to the insurer.

All hospitals will have to do is provide the CRU with information on whether a patient was treated as an inpatient, in A&E or at an outpatient clinic. If the patient was admitted, the trust will have to state the number of days they stayed.

Fees will be paid directly to the hospital. Where a patient is treated in more than one hospital, each will receive a proportion of the fees, but this will be capped.

The CRU already has extensive links with the insurance industry as it recovers state benefits where the victim of an accident, injury or disease has also received a pay-out from an insurance company.

After the legislation is passed, if the offending driver is not insured, or cannot be traced, costs will be recovered from the Motor Insurers' Bureau, which currently compensates victims in these situations. There will also be provision for situations in which there is more than one compensator, such as in motorway accidents involving many vehicles.

The new system is due to be introduced for England, Scotland and Wales in April 1999. It will apply to the costs of treatment for accidents that happened on or after 2 July 1997 - the date the government signalled its intention to change the law. Northern Ireland will get similar legislation in the near future.