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Mr. Robert Marshall-Andrews (Medway): While my hon. Friend is on the subject of insurance, will he tell us in detail what discussions have taken place between the Lord Chancellor's Department and the insurers about the premium burden? I apologise for this early intervention if he had already intended to do so.
Mr. Hoon: There have been meetings between the Lord Chancellor and representatives of the insurance industry. More significantly, we have had a series of meetings between my officials and the insurance industry, and the industry showed considerable interest in the prospects on offer.
In particular, I refer my hon. and learned Friend to what I said about streamlining the civil justice system. The biggest single difficulty facing the insurance industry in providing cost-effective insurance is the fact that it cannot predict with any accuracy how long cases will take or how much they will cost. When we streamline the system and add predictability, when we suggest to potential litigants, and therefore to their insurers, the likely costs involved in cases, insurance becomes practical and possible for most people. That is the virtuous circle at which we aim.
Mr. Marshall-Andrews:
Is that all the information that my hon. Friend intends to give us on the subject?
Mr. Hoon:
That is all the information that I intend to give at the moment. The discussions are continuing; I have said that we are consulting on the subject with the legal profession and the insurance industry.
I want to make it clear that the changes will not benefit the poor alone. Without the requirement to meet up-front costs, conditional fees will make the law more easily accessible to everyone. That is why officials are pressing ahead with further analysis of the business case to see how, in the absence of legal aid, lawyers will have to change the way in which they do business so as to be able profitably to take on cases on behalf of the less well-off.
The House may think that the real obstacle to access to justice here is not the long-suffering taxpayers' unwillingness to continue to subsidise the lawyers, but
rather the way in which lawyers choose to conduct and structure their businesses so that their clients--or in legally aided cases, the taxpayers--bear all the risk, while the lawyers take the profit.
Mr. Mitchell:
I do not want to spring to the defence of the legal profession, but, despite my hon. Friend's criticism of legal aid work, many small firms are devoted defenders of the rights and claims of the people, and so devote themselves to legal aid work. Those firms will be badly hit by a conditional fee system, because such a system demands scale, so that the risk can be spread over more cases. It demands fat firms, whose fat will enable them to sit out the waiting periods, so it will penalise the very firms that now do the most devoted and effective work for the people.
Mr. Hoon:
I do not entirely accept the way in which my hon. Friend makes his case. If a firm is competent and specialises in a particular area, nothing in our proposals will interfere with that. Indeed, our proposals will encourage specialisation. If my hon. Friend seeks to defend the kind of firm that does a bit of this and a bit of that, and tries to be competent across a wide range of what have now become complex areas of law, I do not agree with him; I do not think that that is sensible. What is sensible for lawyers is to develop specialisation, and that can be done by small firms as well as by large ones.
Mr. Garnier:
What study has the Lord Chancellor's Department, or the Minister personally, made of the financial worth of firms of solicitors that practise predominantly legal aid work, outside the big firms in the City of London and in the other conurbations? Has he any idea of the financial standing and ability to borrow of small firms of provincial solicitors?
Mr. Hoon:
As I have said, we are considering such issues in our consultation. I am sure that we shall receive representations from the Law Society and others on the subject. As I have also said, the proposals will be introduced over quite a long period, which will allow solicitors the opportunity to adjust their business management to a new reality.
I am surprised to have to remind the hon. and learned Gentleman of the fact that firms of solicitors are in business; they are in private practice as commercial operations. We are offering them the opportunity to extend those commercial operations to new categories of work that have not previously been economic. I am surprised that the hon. and learned Gentleman does not welcome that.
Mr. Graham Brady (Altrincham and Sale, West):
Is the Minister saying that he does not believe that the small general practice in a small town has an important role to play in providing a service for that community? Surely specialisation is not always possible or appropriate.
Mr. Hoon:
I am not saying that at all. Small firms in small towns, as the hon. Gentleman says, make a considerable contribution to the community. However, when we seek to allocate scarce taxpayers' resources in the form of legal aid, they should be allocated to specialists--to those who are competent to practise in particular areas. That is how we intend to develop legal aid through contracting.
I shall set out for the benefit of the House some figures for the main area of litigation about which concerns involving investigative costs and insurance are most commonly voiced--medical negligence cases. Let us look at cases concluded in 1996-97 and funded by legal aid. May I remind the House that lawyers, supported by legal aid, were paid in every single such case that finished in that year, whether it was won or lost?
However, in only 17 per cent. of cases did the client receive damages of more than £50; 83 per cent. of clients got either nothing or next to nothing. Moreover, when we talk about legal aid, it is important to remember that many clients have to pay substantial contributions towards the cost of the legal aid certificate--and among those who paid contributions towards their legal aid, 70 per cent. failed to recover all or part of those contributions.
In addition to the uncertainty and anxiety associated with litigation, people were required to contribute an average of about £420 towards the legal aid, and that money was not recovered. At the end of the day, people were therefore receiving nothing at all from those cases; instead, in 70 per cent. of them, they had to pay an average of £420 towards the costs.
Mr. Hoon:
First let me finish my statistics, but I shall give way in a moment.
If we exclude the top 32 cases, which recovered £500,000 or more, the average damages awarded are £4,107, at a cost to the taxpayer of £4,122. In other words, for every pound the client receives, the lawyers get a pound, too. The total cost of medical negligence cases to the taxpayer was £54 million, of which only half was recovered.
Mr. Grieve:
First, the Minister says that legal aid encourages people to litigate irresponsibly, then he starts to criticise the fact that clients who have made their own contributions to legal aid do not get their money back when the case fails. Is he suggesting that those people have not been properly advised by their lawyers?
Mr. Hoon:
Yes, I am suggesting precisely that. As the hon. Gentleman knows, before legal aid is granted, a lawyer is required to certify that the case has a reasonable prospect of success. There cannot be a reasonable prospect of success when 83 per cent. of cases produce less than £50 for those who have been so advised. Furthermore--this seems to me deeply disturbing for those in receipt of legal aid certificates--clients are paying an average of about £400 for the privilege of losing their cases. That does not sound to me like great protection for some of the poorest people in our society.
Mr. Garnier:
Perhaps some lawyers are giving bad advice; that idea is not controversial--but has the Minister analysed the reasons behind the figures that he has given us? I do not deny that those figures are accurate, but the Minister has given us no analysis of the reasoning behind them.
Mr. Hoon:
I am sorry if I am being slow this morning, but I would not have thought it necessary to give those figures much analysis. The analysis is clear: lawyers are
Mr. Garnier:
Does the Minister know that for a fact as a result of research, or is he simply making an assertion?
Mr. Hoon:
It may be that I got up too early this morning, but, to me, the facts speak for themselves. If it is necessary before a legal aid certificate is granted for a lawyer to assert that the case has a reasonable prospect of success and if, in 83 per cent. of those cases, £50 or less is recovered, it would seem that lawyers are not exercising their professional judgment responsibly. If there had been privately paying clients in those cases, I suspect that the statistics would have been different.
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