C 10 2006 2 Item 12
STRATEGY IN RELATION TO LEGAL AID REFORMS
Summary
This paper summarises the legal aid reforms proposed by Government in the wake of
the Carter Review of legal aid procurement and outlines the strategy adopted by the
Law Society to date. It invites the Council to review that strategy in light of the
independent economic analysis undertaken by the LECG consultancy.
Recommendation
The Council is invited to:
1.
2.
review the Law Society’s approach to date to the legal aid reforms proposed
by the Government; and
agree any appropriate changes to the strategy with reference to the options
outlined in paragraph 23 at the end of this paper.
Financial and Resourcing implications
There are no unbudgeted implications
Equality and Diversity implications
The Society will continue to stress that the proposed reforms should not discriminate
against black and minority ethnic firms and the communities they serve
Freedom of Information
This paper is public.
Consultation
This paper has been prepared directly for the Council at the request of the Corporate
Governance Board at its meeting on 21 September 2006.
Director of Representation and Law Reform
Author of Report
Date of Report
Evlynne Gilvarry
Evlynne Gilvarry
29 September 2006
Strategy in relation to Legal Aid reforms
Introduction
1. This paper summarises the legal aid reforms proposed by Government in the
wake of the Carter Review of legal aid procurement. It outlines the strategy
adopted by the Law Society to date and invites the Council to review that strategy
in light of the independent economic analysis undertaken by LECG (download
LECG report).
Recommendations
The Council is invited to:
1. To review the Law Society’s approach to date to the legal aid reforms proposed
by the Government.
2. Agree any appropriate changes to the strategy with reference to the options
outlined in paragraph 23 at the end of this paper.
3. The final report on legal aid procurement by the Carter Review was published on
13 July, following a year-long review in which the Law Society was closely
involved. The report’s broad ranging proposals in relation to criminal, civil and
family legal aid will, if fully implemented, bring about wholesale, phased change
in the legal aid sector over a period up to 2010/11 when ‘steady state’ is expected
to be achieved. Essentially, the Carter Report proposes a phased move over
three years (up to 2009/10 in the case of criminal legal aid, 2010/11, in the case
of civil) to a market model:
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Starting with widespread application of fixed or graduated fees
Followed by contracts awarded on basis of volume resulting in a smaller
number of larger suppliers;
Moving to ‘best value’ competitive tendering based on quality (all suppliers in
future must achieve ‘preferred supplier’ status) and price;
transfer of responsibility for quality assurance from the Legal Services
Commission to the Law Society;
a £10 million package of grant aid to enable law firms to restructure and equip
themselves with necessary IT – such aid to be administered by the Law
Society
A new stakeholder engagement structure (within which the Law Society would
be represented prominently) to monitor the reforms
A major reduction (30%) in the Legal Service Commission’s administrative
costs
Background
4. The background to the Carter Review was set out in the Government paper
entitled ‘A Fairer Deal for Legal Aid’ published by the DCA in July 2005. It
highlighted the need to improve legal aid procurement, particularly in relation to
criminal defence services where the costs (in the Government’s view) were rising
alarmingly and at the expense of the civil legal aid system.
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5. The Law Society believed the review, led by Lord Carter of Coles, offered a
unique opportunity to resolve difficulties faced by the legal aid sector. The stated
aim of the Review was to design a procurement system that would ensure:
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clients’ access to good quality legal advice and representation;
a good quality, efficient, sustainable supplier base for the future;
value for money for the Government and the taxpayer; and
a more efficient, effective and simple justice system.
6. A major aim of the Carter Review was to achieve control over legal aid
expenditure which had increased in real terms from £1.5 billion in 1997 to over £2
billion in 2005/06. That growth is largely attributable to criminal legal aid and it is
acknowledged that many factors, outside the control of the defence solicitor, not
the least of which is a vast quantity of recent criminal justice legislation, have
contributed to the growth.
7. The Law Society engaged intensively with the year-long Carter Review from the
outset. A team comprising Rodney Warren, Rob Brown and Lucy Scott Moncrieff
along with staff, participated in an iterative and confidential process of talks in the
lead up to publication of Lord Carter’s interim report on criminal defence services
in February, and even more intensively, in the final months of the Review.
8. The final report presents a considerably modified and more flexible model for
procurement of criminal legal aid services. It also proposes a new approach to
procuring civil and family legal aid. In the course of Review, the Law Society
argued successfully for several changes to the original scheme design. Examples
of these include many features of the schemes for the police station and
magistrates’ court; e.g. wider client choice; the preservation in the medium term
of standard fees in the magistrates’ courts. It also secured a £10 million package
of grant aid to prepare firms for the change, and agreement to a new body,
comprising key stakeholders, to monitor the changes.
9. Immediately following publication of the report of the Carter Review, the
Department for Constitutional Affairs and the Legal Services Commission issued
a statement accepting the Carter blueprint and published a consultation
document setting out an implementation schedule of the proposed reforms. As
part of this, it published, for the first time, proposals for fixed and graduated fee
schemes for civil, private family and public law children work.
The Law Society’s approach
10. From the outset, the Law Society fully endorsed the need for reform of the legal
aid system and, in response to the report of the Carter Review (download press
release) stated its belief that the proposed reforms, with careful implementation,
had the potential to achieve sustainability of the supplier base, thereby preserving
access to justice. As part of this, the Society acknowledged that the market
approach had a role to play in securing the future of the legal aid system.
However, we warned that reforms on the scale envisaged would require a major
restructuring of the supplier base and great care would be needed to avoid
market de-stabilisation. We also warned that best value tendering would not be
appropriate in all circumstances and particularly, in many geographical areas.
11. The Society stressed that the critical issue in taking forward these proposals
would be to ensure not only that the current supplier base remained viable, but by
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attracting new lawyers into legal aid, its sustainability was secured. Crucial to this
would be the level at which fees are set. The Society also highlighted the
importance of preserving the diversity of the supplier base to ensure those
minority communities, often served by small firms and those operated by black
and minority ethnic solicitors, continue to receive the service that meets their
needs.
12. The Carter Review was conducted on the basis that there would be no new
money available for legal aid in the current spending round due to run to 2007/08.
Indeed, as the review progressed, it became clear that a budget deficit estimated
at £100 million in 2007/08 meant that efficiencies would be sought at every level
of the criminal defence service, rather than largely confined to the top end of CDS
work. There would be no attempt to reduce overall expenditure on civil legal aid.
The final Carter report predicts that the proposed reforms will achieve legal aid
cost control by 2010 (see table below), at which time, conditions should be ripe
for best value tendering. This amounts to 4% efficiencies (before inflation) from
the supplier base over three years.
Table 6.1
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Expenditure profiles for each of the main areas of legal aid addressed by the review in the
transition years up to best value tendering in 2010-11 compared to historic expenditure
£m
(RAB)
Cash
growth
1997-98 to
2004-05
Outturn
2005-06
Forecast
Outturn
2006-07
Year 1 of
Transition
2007-08
Year 2 of
Transition
2008-09
Year 3 of
Transition
2009-10
Defence in police stations
and magistrates’ courts
32%
523
531
508
503
503
(+2%)
(-4%)
(-1%)
(0%)
Defence in the Crown Court*
96%
609
586
560
535
(-4%)
(-4%)
(-4%)
(-4%)
378
390
377
377
(0%)
(+3%)
(-3%)
(0%)
360
373
388
405
(5%)
(+4%)
(+4%)
(+4%)
1,878
1,857
1,828
1,820
(0%)
(-1%)
(-2%)
(-1%)
191
217
223
219
(+21%)
(+14%)
(+3%)
(-2%)
2,069 (+2%)
2,075 (0%)
2,055 (-1%)
2,044 (-1%)
Legal help scheme for nonfamily work and private
family scheme
n/a
Public law children scheme
and legal help scheme for
family work
n/a
Sub-total
All other expenditure (e.g.
single asylum fund,
administration costs, Court
of Appeal, central funds)
Total
26%
n/a
37%
635
377
342
1,877
158
2,035
*Crown Court figures exclude disbursements which cost £48 million in 2005-06 and forecast to increase to £65 million in
2010-11.
13. The Law Society very reluctantly reconciled itself to the fact that no additional
money would be available. It did so on an assessment that the Treasury would
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simply not agree to extra legal aid investment until it saw evidence that legal aid
expenditure was under control.
14. However, the Society has argued forcefully that there should be no attempt to
seek efficiencies, particularly from the lower end of criminal defence work, in
advance of firms being able, through restructuring, to take advantage of any
efficiency gains that materialise. Accordingly, it has pressed the case for
appropriately designed fees schemes with fees set at levels that ensure firms
remain viable during the transition phase.
Independent economic analysis by LECG
15. To assist in its representations, the Society commissioned an independent
economic evaluation of the legal aid reforms proposed by the Carter Review.
The report by economists, LECG, identifies some potential benefits of the reforms
but also highlights significant risks. It supports the Society’s stance that the
reforms will require the most careful implementation in order to avoid destablising the current supplier base, which it judges to be in a fragile economic
state. It draws attention to the fact that the scale of restructuring required is likely
to be far greater than projected by the Carter Review. For example, it predicts
that some 800 firms will need to make major adaptations though closure or
merger, in order to continue doing legal work. The Carter Review put the figure at
around 400. LECG also warns of the risks of seeking efficiency savings, through
imposition of fixed fees, in advance of firms being in a position, through
restructuring, to benefit from projected efficiencies.
16. The work of LECG focussed largely on criminal defence services where the scale
of reform is arguably greatest and where, contrary to civil legal aid, details of the
proposed reforms were known in time to allow for detailed analysis. However,
LECG’s overall evaluation is that the reforms are on a scale that will affect every
legal aid firm and practitioner. A major consequence of the reforms will be a
significant constriction in the supplier base, making it necessary for many firms to
merge and practitioners to seek employment in larger units if they wish to
continue doing legal aid work. LECG predicts that the entire legal aid system
could suffer lasting damage if the reforms proceed at a pace and in a way that
undermines the current supplier base.
17. The main benefits of the reforms for practitioners as identified by LECG are:
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Greater certainty as a result of volume contracts.
More autonomy of operation.
Efficiency gains as a result of restructuring.
Equalisation of bargaining power with procurer as a result of best value
tendering.
However, there are significant risks:

Imposition of fixed fees in advance of market restructuring could render firms
unviable.
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Government may be grossly underestimating the number of firms that will
have to make major adaptations. Current timetable risks disruption or outright
failure of supply.
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Proposals may limit ability to enter the market leading to a concentration of
market power in a few, large suppliers.
Feedback from the Profession
18. Since the start of the consultation period in July, the Society has actively
canvassed the views of practitioners on the reforms through its Defending Legal
Aid Campaign on the web (include link). It also picked up detailed feedback as a
result of agreeing to host a series of 10 meetings around the country where
practitioners put their views to the legal aid minister, Vera Baird, QC.
19. It is very clear that there is great apprehension amongst legal aid practitioners in
the face of the reforms. It is unwise to over- generalise as some practitioners
undoubtedly see opportunities in the reforms. However, even those who do,
have significant concerns about aspects of the changes. In general terms,
criminal legal aid practitioners express concerns about the viability of their firms if
fixed fees are imposed prematurely. Many practitioners express equal concern
about the effect of fixed fees on quality of work – in particular police station work
where practitioners are subject to the vagaries of the system. Smaller firms, and
solicitors from black and minority ethnic groups are concerned about being
excluded from legal aid altogether and point to the Government’s responsibilities
under discrimination legislation.
20. Concerns articulated by civil and family legal aid practitioners have related to the
perceived crudeness of the design of proposed fixed and graduated fees
schemes and the levels at which fees have been set. There is also deep concern
at the proposal to establish Community Legal Aid Centres in locations where
there is already adequate, high quality provision by existing suppliers. In contrast
to their criminal legal aid peers who had earlier notice of the reforms as a result of
publication of an interim report by the Carter Review in February, civil legal aid
practitioners were confronted with the changes, including the fee levels, for the
first time in July. With a bare 12 weeks to respond, this has made it especially
difficult for them.
21. All of the issues of concern highlighted by practitioners are being taken up by the
Society with the DCA and the LSC during the consultation period. Promisingly,
the legal aid minister has acknowledged that the design of the fee scheme for
public law children cases is inappropriate and will be amended. The minister has
also undertaken to reconsider other aspects of the reforms such as the timing of
introduction of fixed fees in police stations, the design of the graduated fee
scheme for crown court litigators and the ‘own solicitor’ provisions . Lastly, the
minister has committed her department and the Legal Services Commission to
conducting a full, minority impact assessment of the reforms.
22. The Society will continue to press for these changes aided by detailed analysis of
the proposed fee schemes conducted by our strategic research unit (Annex A).
The Society is also preparing a proposal on how the package of transition funds £4 million for growth and consolidation, £6 million for IT investment – should be
deployed to enable firms to prepare for the changes.
23. However, in light of the independent evaluation of the reforms by LECG, the
Council is invited to review the Society’s strategy in relation to the legal aid
reforms as outlined in this paper, to confirm that strategy or recommend any
changes deemed appropriate. The following options are open to the Society:
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Options
1. To challenge the Government’s insistence that there is no additional money
for legal aid in the current spending round.
2. To seek a delay of the civil legal aid proposals for a year to enable a proper
assessment of the potential impact to be made.
3. To require that changes to fee structures ensure that the cost and risk of
system inefficiencies are not passed from the government to suppliers.
Option 1
To seek new investment in legal aid
The case for doing this is based on the findings of the LECG report which
highlights the economic fragility of the current supplier base. There is a strong
case for new money to invest in a smooth transition to steady state. However, in
the event that no extra money is made available, we will continue to argue that at
the very least, there should be no attempt to achieve efficiency gains at the levels
projected during transition through the imposition of uneconomic fixed fees.
Option 2
Seek a delay of the civil legal aid proposals.
The case for this is strong. Civil legal aid was not as fully considered as criminal
legal aid in the course of the Carter Review, although it is arguable that it raises
even more complex issues. In addition, the fee schemes proposed for civil, family
and public law children cases were not known until July when the DCA and LS
published its joint consultation paper in response to the Carter Review.
In the course of the consultation period, very many concerns about the civil legal
aid proposals have been raised. Chief amongst these are proposals for
operation of Community Legal Aid Centres as monopoly providers and poorly
designed fee schemes with fees set at levels that do not reflect the complexity of
the work.
The scale of the change envisaged for criminal legal aid practitioners has
significant implications for the provision of civil legal aid as over 50% of firms do a
mixture of both kinds of work. It follows that any risks to the viability of criminal
legal aid practices poses similar risks to civil legal aid provision.
The Government has stated the aim of preserving current levels of investment in
civil legal aid. One of the ways in which it can guard against an unintended
erosion of civil legal aid is to postpone the changes to enable the earlier stages of
transition of criminal legal aid to proceed carefully. The extra 12 months could be
used to evaluate properly the current pilots of Community Legal Aid Centres
before further roll-out and to devise fee schemes that are sufficiently sensitive to
the work.
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Option 3
To require that fee structures should not transfer cost and risk of system
inefficiencies to legal aid practitioners.
The case for this is also linked to the necessity of guaranteeing the viability of
firms in the interests of maintaining supply. Legal aid practitioners, perhaps
particularly those working in crime, are at the mercy of practices, procedures and
delays by other partners in the system e.g. police, CPS. Operating on fixed fees
set at uneconomic levels could see a major and unacceptable transfer of risk to
them.
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