The 'rocketing' value of clinical negligence claims will have an 'inevitable impact' on NHS finances, the head of the NHS Litigation Authority has warned.

Speaking after the launch of the authority's annual report last week, chief executive Steve Walker said the rising value of claims was 'more of a problem' than the number of claims, which may have fallen slightly.

The annual report says 'the most significant event' for the authority in 1998-99 was a House of Lords ruling that claimants can protect compensation for 'future loss' by investing in government stock, rather than equities, which have a higher rate of return.

It says the Wells v Wells ruling alone means that 'many of our larger claims, typically for birth asphyxia, will increase in value by between 25 and 40 per cent, depending on life expectancy'.

Other pressures include Law Commission proposals to 'significantly increase' damages for pain, suffering and loss of amenity, and a campaign to reduce the discount rate, which would push up the 'multiplier' used to work out the cost of future care.

Mr Walker said these proposals would affect litigation in general, but hit the NHS in particular because it dealt with 'more multi-million pound claims than the rest of the industry put together'.

The authority's annual accounts show its future liabilities for claims reported to it as£312m.

Ministers have expressed hope that mediation could offer an alternative to litigation. But the report says that 'notwithstanding our best efforts', third parties are reluctant to mediate.

A Department of Health pilot scheme 'encountered little enthusiasm'.

'Solicitors will get less cash for settling earlier, ' said Mr Walker. 'Cynics would say that is the reason. If it is not, then it may be people are suspicious of something new. If not, we do not have the answer.'

He pointed out that although 'mediation is a great idea', people could not be forced into it and some wanted 'their day in court'.

Litigation authority medical director Dr Maureen Dalziel has set up a committee to look at clinical risk reduction around birth.

At the moment, birth asphyxia accounts for 50 per cent of expenditure from the clinical negligence scheme for trusts.

The authority has developed clinical risk management standards, but after three years only 58 per cent of trusts have achieved the basic level and just 0.7 per cent are ready to be assessed for the highest.

'The real way to reduce the cost of claims is to get better standards, ' said Mr Walker. 'What will not be coming down is the cost of a claim once it is established.'

The National Health Service Litigation Authority Report and Accounts 1999 . Napier House, 24 High Holborn, London WC1V 6AZ.

See legal briefing, page 32.