The government has launched a fresh assault on 'compensation culture', warning 'no win no fee' claims companies that they have one last chance to get their house in order before regulations are imposed on them.

Claims companies must now take urgent action to "significantly improve" and ensure they don't raise false expectations through "potentially misleading advertising and sales practices". If these companies refuse to regulate themselves through the new Claims Standards Council then the government will step in, the department for constitutional affairs said.

'No win, no fee' companies should also focus on being more upfront about their processes and fees, better quality control and the speedier conclusion of claims, the department warned.

The lord chancellor, Lord Falconer, said people should not be encouraged to "always have a go however meritless the claim".

"Genuine accidents do happen. The perception that there is easy money just waiting to be had - the so called 'compensation culture' - creates very real problems," he said.

"People become scared of being sued; organisations avoid taking risks and stop perfectly sensible activities. It creates burdens for those handling claims and critically it also undermines genuine claims."

Lord Falconer said that it was only fair for genuine claimants to get compensation when someone else was to blame.

The government said it is working to ensure proper regulation of claims management companies to "stop frivolous claims being encouraged".

It also wants to stop "distasteful" advertising in hospitals encouraging patients to claim against doctors, and doctors being paid to refer patients to a solicitor.

(gmcg/sp)