Bureaucracy
76. We received a great deal of evidence, both formal
and informal, from solicitors about the system of Cost Compliance
auditing. Cost Compliance Audits are used by the LSC to check
that claims for contracted work are supported by evidence from
case files and that they only relate to work covered by the General
Civil Contract. (These audits are not yet fully in place for NfP
providers).
77. The principle of the Cost Compliance Audit is
that an auditor (who the LAPG complain is often a recent graduate,
given training by the LSC[75])
examines a sample of a firm's files and assesses whether the firm
has claimed the correct amounts. The firm is then put in one of
three categories, dependent upon the extent of the differences
between the firm's claims and the auditor's assessments.
78. If an LSC auditor discovers significant levels
of 'failure' in contract compliance across a sample of case files,
this can lead to a reduction in payments (by 'extrapolation')
right across the board in relation to all the provider's case
files, on the assumption that the failure is a systemic one.
79. The system has been subject to almost universal
criticism. Reputable solicitors have discovered that their firms
have been given a Category 3 ("poor") Mark following
a Cost Compliance Audit.[76]
One example (among many), was that of Lucy Scott-Moncrieff, who
described her experience:
"What happens is that practitioners get a piece
of paper saying that they have been overcharging on their files.
In my firm they started off by saying that we were overcharging
by 53%. That just made me angry, because that is the way I am,
but the case workers concerned were dreadfully upset because they
were either being told they were incompetent or they were being
told that they were cheats and liars. It is a terrible thing to
say to people when it is not true. In the end it was down to 2%
and we could probably have got it lower if we had argued for long
enough. A great deal of damage was done to the relationship between
our practitioners and the Legal Services Commission. They are
the ones who say mutual trust and respect, partnership. They do
not treat firms with mutual respect, they do not work in partnership
and it does not look to me as though their new schemes are very
much better…For a practitioner who is trying to keep up a
case load and deal with the Legal Services Commission, dealing
with ignorance and obstinacy and arrogance and complacency…
is very upsetting.[77]
It is worth noting that Ms Scott-Moncrieff's firm
is sufficiently highly regarded
by the LSC to be undertaking a pilot on its behalf on auditing
on-line.[78]
80. The LAPG is highly critical of this system:
"The auditors, never having done the work, do
not have the experience necessary to make these subjective judgments
appropriately…. There is a fast turnover of auditors, so
that the first problem is not being put right through further
training, even though the LSC is trying to address this concern.
As a result, auditors end up making foolish and untenable decisions
that have resulted in a number of the most trusted and respected
firms in the country being place in Category 3 [the worst category]
while other firms that do not have the trust and respect of their
peers but know how to tick the right boxes are assessed as performing
acceptably".[79]
81. There is widespread agreement among solicitors
that many of these 'failures' are rooted in differences of interpretation
of complex guidelines between the practitioner and the LSC auditor,
or a misunderstanding on the part of the auditor—who is
not necessarily legally qualified or with experience of having
worked in a solicitor's office—as to what is professionally
necessary to ensure that the solicitor is acting in the client's
best interests.[80] We
have received many written submission complaining about the standard
of auditing conducted by the LSC and the administrative burden
which this causes. In particular, concerns have been raised that
the audit does not check the actual quality of the work undertaken.[81]
82. A concrete example of the apparent lack of thought
behind the cost compliance auditing process was given by a representative
of the Welfare Rights and Advice Service Centre (among others)
who said that the standard times for producing and reading standard
correspondence did not reflect the time costs involved in retrieving
files and recording or documenting activity in any common sense
fashion.[82]
83. We received evidence on this point from Bell
Hoare Bell Solicitors, which is typical of the views of solicitors
with legal aid contracts:
"We are audited yearly. We accept that we should
account for public money. However the audit process is oppressive
and might have been designed to drive firms like ours, with a
wide range of civil work, out of the system. This would happen
even if the vast majority of our categories of work were found
on audit to have been billed perfectly. The LSC rules contain
no discretion. Even if it is clear that there is a specific problem
confined to a single area of work, or even a specific member of
staff, they will penalise an entire firm's work because their
rules say they must. The annual audit thus puts at risk not just
our livelihood, and that of many staff, but also the very existence
of what the LSC tells us is a valued firm. This system disproportionately
affects firms like ours which run a number of small social welfare
departments, since 1 or 2 mistakes inside one of those departments
can give rise to vast recoupments across the whole contract. It
would be a simple matter for the LSC to change their rules so
that extrapolation was restricted to the specific areas where
fault had been found or where there were clear patterns of misclaiming."[83]
84. The Law Society summed up the situation:
"…the current legal aid system has become
unnecessarily bureaucratic. Under the terms of their contracts,
providers of legal aid services are audited on costs and quality.
Each claim for costs is subject to assessment by the LSC and providers
are required to submit a number of files for assessment against
amounts claimed. Providers are also audited against the Legal
Services Commission's quality standards (SQM). The original vision
for contracting assumed that quality assurance would supersede
case-by-case checking. Instead we have a system that has simply
loaded one check onto another—a system which has proved
very expensive; a recent report by the Public Accounts Committee
commented that there were 1000 LSC staff monitoring 5000 contractors.
The Legal Services Commission's administration costs have increased
by 17.6% over 3 years…"[84]
85. At our session in Hackney, a number of issues
were raised about the auditing process. There were complaints
that there was a focus on "trivial matters" rather than
quality. One solicitor complained that he had been placed in category
3 (the lowest category) for "technical errors", with
no criticism of the quality of work. All the solicitors at the
session were in favour of peer review. This was justified on the
basis that firms could be judged on quality and not formalities.
86. There was some difference in emphasis in the
oral evidence given to us by the LSC. Philip Ely, the Chairman
of the LSC, said that on the basis of his experience as a practitioner,
those who ran their business and their files properly and who
were open to audit on that account were more likely to be giving
sound advice at the right stages because they were required to
do it at the right stages.[85]
In relation to the issue of 'peer review' of files, Mr Ely said
that he had:
"….. little doubt that those who do not
like interference with their time will complain as much about
that as they do about the existing process, because that is the
nature of the market in which we work."[86]
However Clare Dodgson, the Chief Executive of the
LSC, acknowledged that the audit process was not "perfect
at all" and that LSC needed "to do more on [the] concept
of earned autonomy."[87]
87. Those who receive public money for providing
a public service need to maintain proper professional standards.
However, the current system of auditing solicitors costs is arbitrary,
inaccurate and bureaucratic. Furthermore, it is not linked to
quality of advice given. It is clearly punishing competent and
honest solicitors and is operated in a way which completely fails
to attract the support of the profession. This is the most serious
criticism of the current system for managing legal aid work that
we have found. A solution is urgently needed.
88. A further refinement of the problem is that the
LSC has a rule that two category 3 markings mean automatic loss
of the contract to carry out legal aid work. This rule was applied
with little warning. The practical effect of this is that solicitors
firms must waste a lot of otherwise chargeable time in arguing
the auditors decisions. If they do not, the auditors will report
that they have overcharged and they will receive a category 3
mark. This rule imperils the existence of firms which concentrate
on legally aided work.
89. The principle that two successive category
"3" marks means automatic loss of contract—"two
strikes and you are out"—is unnecessarily draconian.
Even if it were based on a recognisably fair system it would be
harsh, but the combination of this rule with the arbitrary application
of the LSC's rules make it unacceptable. A similar mark should
begin a process of consultation and assistance which would help
solicitors, who may be providing a perfectly good service to the
community, to improve their management systems. Simply eliminating
them from the list of contract holders is wasteful and counter-productive.
90. LAPG suggests that instead of using the system
of contract compliance, audits should be abolished in favour of
a system of peer review, combined with analysis by the Commission
of the range of data at its disposal.[88]
91. We are pleased to note that the LSC is committed
to introducing 'light touch audits' for firms that it assesses
as producing high quality work ('category one' suppliers) and
to developing the Quality Mark so that it is better able to measure
the 'real' quality of advice rather than measuring management
proxies. It has also indicated a willingness to explore the increased
use of peer review as a means of assessing quality.[89]
92. In March 2004, the LSC invited applications from
suppliers to take part in a 'Preferred Suppliers' pilot. To participate,
suppliers will need to be able to demonstrate high levels of performance
in terms of quality, cost and commitment to publicly funded work.
The pilot will run from June 2004 and will explore a variety of
relationships and packages tailored to individual suppliers and
their needs. Benefits will include innovative business incentives
and simplified systems and processes. The objective is to establish
the best working methods so that the scheme can be introduced
nationwide in April 2005. At that point, 'preferred' status would
not be confined to an elite few, but available to all who meet
specific performance criteria.[90]
93. LSC intends to introduce independent peer review
using a process developed by the Institute of Advanced Legal Studies
to assess the quality of advice provided and whether it represents
value for money. The LSC explained:
"Although not an inexpensive process, peer review,
in combination with a file assessment process, would significantly
reduce the need to conduct on-site audits."[91]
94. Peer review has been accepted by all parties
as providing an appropriate means of audit for practitioners.
If properly implemented it should reduce bureaucracy and provide
a much clearer picture of the value of the service provided.
Lack of esteem
95. Throughout our formal and informal evidence sessions
we heard a lot of evidence from practitioners about the depressing
impact of the popular perception of all solicitors as "fat
cat" lawyers who were milking the legal aid system. Before
the 1999 Act there were no doubt solicitors who were not providing
a good service. The new system has operated successfully in removing
such practitioners from the system. We were impressed with
the strong commitment of many of the solicitors and advice sector
workers whom we met. The public service which they carry out deserves
wider recognition, as they are often the only barrier between
a citizen and complete denial of legal rights. A proper system
of access to justice for all the community depends entirely on
such professionals.
Incentives for legal aid practitioners
96. We have mentioned above (paragraphs 42 to 49)
important concerns about the recruitment of new practitioners
into the legal aid system, despite the increase in the number
of solicitors who are qualifying. One of the main complicating
factors is the burden of student debt which new entrants to the
profession carry with them as they start their professional lives.
97. The Trainee Solicitor's Group indicated that:
"The general perception is that those considering
a career in law who may be attracted to legal aid, simply cannot
afford the costs of qualification if they are then to train and
practice in a legal aid firm. It may therefore assist if the DCA
and LSC were to provide some kind of financial assistance towards
the cost of study to those who had secured a placement in a legal
aid practice."[92]
98. This was echoed by other witnesses. LAPG said:
"…many students are emerging from their
undergraduate courses with substantial debts. They tend to gravitate
towards those firms that can offer them sponsorships through their
Legal Practice Course. Legal Aid firms are rarely able to do this.
The LSC has recently introduced an admirable scheme whereby they
fund students through both the LPC and their training contracts,
but the scheme is limited to only 100 students per year. About
5,000 students start training contracts each year, and several
hundred others seek such contracts unsuccessfully."[93]
99. The Young Solicitors Group make a number of suggestions
for potential improvements:
- In order to meet the future
demand for qualified legal aid solicitors, the Legal Services
Commission should extend the operation of its training support
scheme.
- That those outside the Legal Services Commission
Training Support Scheme should have access to low rate student
loans for the Legal Practice Course if they commit to working
in Legal Aid for a minimum period.
- That the Law Society of England and Wales works
with the providers of the Legal Practice Course to develop a dedicated
Legal Practice Course to meet the needs of aspirant legal aid
lawyers.[94]
Nigel Bastin, the Head of Education and Training
at the Bar Council has set out some figures as to how much it
would cost to complete professional training requirements after
the introduction of "top-up" tuition fees.[95]
The figures for solicitors are broadly comparable:
