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Westminster Hall

Thursday 12 July 2007

[Mr. Eric Martlew in the Chair]

Carter Review (Legal Aid)

[Relevant documents: Third Report of the Constitutional Affairs Committee, Session 2006-07, HC 223, and the Government’s response thereto, Cm 7158.]

Motion made, and Question proposed, That the sitting be now adjourned.—[Mr. Michael Foster.]

2.30 pm

Mr. Alan Beith (Berwick-upon-Tweed) (LD): I am glad to see you in the Chair, Mr. Martlew, and I am grateful for your assistance already in trying to ensure that we can accommodate those who are very interested in the debate. Indeed, I wish that your authority extended to allowing us to change places with the main Chamber, because given the number of hon. Members who want to take part and the wider interest, there might be more interest in this debate than in what is going on in the main Chamber, but alas the Standing Orders do not give you the power to do that. I welcome the Minister to her new post and congratulate her on her appointment. I look forward to hearing from her later.

The debate is on a report that the Select Committee on Constitutional Affairs produced on the Carter review of legal aid. That process—that report—produced more evidence than any other report on which the Committee has worked. Vast quantities of evidence were submitted, which were of great value to us. I am particularly grateful to the staff of the Committee and its advisers for the work that they put into analysing the very large quantity of evidence and dealing with the many responses that we received. The Government issued their response to our report on 22 June, and I shall refer to that as the debate continues.

Legal aid guarantees access to justice and is a fundamental human right. Criminal legal aid is enshrined in article 6 of the European convention on human rights, which is given domestic effect by the Human Rights Act 1998. Scottish cases that have gone to the Judicial Committee of the Privy Council have shown that funding arrangements and fee structures for legal aid providers have serious human rights implications and, if insufficient, violate the right to a fair trial, so let no one be in any doubt about the importance of what we are discussing.

Legal aid is a powerful tool to fight social exclusion: it is focused on the financially weakest and most vulnerable members of society. In the light of the Prime Minister’s recent welcome announcement of his desire to strengthen accountability in local government and public services, it is worth remembering that legal aid can be a powerful vehicle for holding local authorities to account. In the areas of housing, welfare benefit or community care law, for example, it is decisions of local and other public authorities that are often in dispute, and legal aid granted to individuals
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allows them to challenge those decisions by means of court action if necessary. That, in turn, sets standards for the future conduct of public services.

We can be proud of the legal aid system in England and Wales, whereby we spend more than any other democratic country per capita on publicly funded legal advice and assistance for those in need.

Keith Vaz (Leicester, East) (Lab): The right hon. Gentleman will remember the proceedings in the Committee and the evidence given by black and Asian groups representing solicitors and others. Is he surprised that they have commenced legal proceedings against the Lord Chancellor in respect of the review? Does he agree that that gives the Government the opportunity to pause and reflect on what they have done and perhaps review these most unnecessary provisions?

Mr. Beith: The right hon. Gentleman was actively involved in the Committee work on the report, and neither he nor I was surprised. I suppose that it is not really surprising that if lawyers believe that the Government have got something seriously wrong, they are the first people to make use of the mechanisms with which they are familiar, but the right hon. Gentleman is right to say that the Government should take the opportunity to reflect on the problems that have been revealed, and, for various reasons, some of which I shall come to, this is an opportunity to reflect and think again about at least some aspects of the system.

The system has come under severe strain in the past decade. Expenditure, mainly in the areas of Crown court defence cases and child care proceedings, has rocketed and appears to be still on the increase. We now have a legal aid budget of more than £2 billion. No one would disagree with the suggestion that the legal aid system needs some reform, and the Government’s proposals, published on the basis of Lord Carter’s review, are pretty well known. They involve a comprehensive move to remuneration of legal aid lawyers per case—rather than by the hour—at a price set by the market on the basis of competitive tendering for legal aid contracts by providers.

However, until that best value tendering is rolled out nationally after October 2008, new fixed and graduated fees set by the Legal Services Commission will apply to publicly funded legal advice. The planned new fee schemes would lead to significant reductions in fee levels for legal aid practitioners, especially in urban areas and for criminal legal aid. The Constitutional Affairs Committee undertook a thorough inquiry into the proposals and the subsequent modifications to them made by the then Department for Constitutional Affairs and the LSC.

Mr. David Drew (Stroud) (Lab/Co-op): The right hon. Gentleman has said that there is a problem in relation to both criminal legal firms and urban areas. May I assure him that there is a problem in rural areas, where we already do not have criminal cover? There is no steady state, and the proposals will, if anything, probably make the situation worse. I hope that he will bear that in mind.

Mr. Beith: The hon. Gentleman is absolutely right. I intended to come on to the point that he makes, because it is slightly different. The impact on urban areas will be in the form of a very severe reduction in
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the number of suppliers. The problem in rural areas is that there are not enough suppliers now, and even a small reduction in rural areas, even if there is any possibility of a transfer of money from urban to rural areas in this process, means that many small towns are likely to end up in a situation in which if there is one supplier they will be lucky, and of course if there are two contending parties in a case or two defendants in a criminal case, that one supplier cannot meet the needs of both.

Ms Diane Abbott (Hackney, North and Stoke Newington) (Lab): On the question of the reduction in suppliers, does the right hon. Gentleman agree that it is prophesied that there will be a particular impact on black and ethnic minority-led solicitors in inner-city areas because they tend to be smaller and newer firms and to do predominantly criminal legal aid, and that that is a very unfortunate by-product of the so-called reform?

Mr. Beith: The hon. Lady is right: the report says that in terms, and I shall refer to it again.

We focused our inquiry firmly on the potential impact of the reforms on legal aid clients and their needs, and we took evidence from individuals, lawyers, representative groups, academics and senior judges. All the witnesses agreed with the need to reform the legal aid system, but only a few thought that the Government had approached that in the right way. Eminent academics in the field of legal aid and its reform complained of the lack of a more holistic approach to legal aid reform: instead of identifying and analysing the cost drivers in the legal aid budget and then addressing them, the reforms would be focused on short-term gains and cuts in lawyers’ fees. That is despite indications that average case costs in terms of lawyers’ fees in a number of areas were not the only factor that contributed to the recent rise in legal aid expenditure, and certainly were not the most significant.

It is self-evident that cuts to legal aid fees, or at least a further freezing of those fees in the future, could set free funds that could be used to finance a greater number of acts of assistance under legal aid. Although the measure of acts of assistance is one of quantity not quality and there is a limit in its value, I still welcome the significant increase in the number of acts of assistance in terms of civil legal help from fewer than 600,000 to nearly 800,000 in 2006-07 and the associated rise in spending on civil legal aid since 2004.

However, such increases in the quantity of publicly funded legal advice, especially when funded through what are in effect cuts in legal aid fees for a significant number of providers, may come at a price. That price is difficult to quantify, but may be very high. Dedicated and experienced legal aid lawyers and not-for-profit organisations providing legal advice may be forced to leave the market because of significant and unsustainable loss of income as a result of the new transitional fee schemes. The quality of legal aid may deteriorate and, worse, there may even be a risk to the provision of legal aid advice, especially in family and civil law in some areas of the country. Areas of unmet
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need already exist in the north of England, in Wales and in East Anglia, for example, and include rural areas such as those to which the hon. Member for Stroud (Mr. Drew) referred.

David Lepper (Brighton, Pavilion) (Lab/Co-op): In the light of what the right hon. Gentleman has just said, will he consider as an example illustrating his point the case of Brighton Housing Trust immigration legal service? It is the sole legal aid provider of immigration advice in the constituency. It deals with 80 nationalities a year and a case load of 713 cases, which has doubled as this decade has gone on, and it anticipates that the scheme before us will mean a further loss of £44,000 a year in income to the firm. John Holmstrom of that organisation tells me—

Mr. Eric Martlew (in the Chair): Order. Interventions should be short.

Mr. Beith: You will know from that intervention, Mr. Martlew, that there are many hon. Members present who are well aware that in their constituencies there are legal aid providers who do not see how they can provide under the new arrangements the service that they are providing at the moment. Indeed, figures provided to the Committee by the LSC indicate that in London, which is a hotspot of social exclusion and deprivation, the incomes of 63 per cent. of lawyers who provide housing law advice will be reduced under the Government’s plans for new fixed fees for the transitional period if they do not change their working practices. The average loss for those lawyers who face fee reductions will be 18.5 per cent. The picture is even worse for those who provide welfare benefits advice in London, of whom 70 per cent. will see a similar average fee reduction. Some providers in other regions of the country might receive significant increases in their fees—the previous Lord Chancellor talked about that when he gave evidence to the Committee—which could be a positive development, but it is deeply worrying that there is a risk to the provision of social welfare law advice in London and other urban areas that have particular needs.

Research for the LSC by Andrew Otterburn on the economic situation of criminal legal aid lawyers demonstrated the fragile state that the supplier base is estimated to be in. He warned that the situation is likely to be even worse for civil and family legal aid lawyers. Despite the obvious risk to the provision of quality legal advice posed by fee cuts and aspects of competitive tendering, the Government appear not to have carried out appropriate, wide-ranging research into the likely impact of the Carter reforms on suppliers and clients. They have not undertaken detailed research into the cost drivers in the legal aid budget or into potential means by which to secure a lasting and sustainable development of the legal aid system that consists of more than simply cutting lawyers’ fees. Their view on evidence was shown rather vividly in paragraph 40 of their response, which states:

So they are saying, “We are going to get some more evidence, but it won’t change our mind, whatever it says.” I find that very Sir Humphrey.

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An urgent warning about the effects of the lack of an holistic approach to legal aid came from Michael Robinson, who is a member of the Law Society Council from Northumbria. On the reform proposals for legal aid in child care proceedings, he said:

Despite the recent child care proceedings review carried out by the Departments for Constitutional Affairs and for Education and Skills, the Government reforms pay too little attention to the recurring problems faced by lawyers and court users in child care proceedings. Such problems include delay, understaffed courts, problems with the Children and Family Court Advisory and Support Service and insufficient case preparation by local authorities, all of which mar proceedings. The legal aid reforms do not take those considerations sufficiently into account.

During its inquiry, the Committee was provided with many other examples of how the Government have failed to consider the legal aid system as a whole, carry out adequate research and then address the systemic difficulties comprehensively. For example, little attention has so far been paid to the way in which expert fees have contributed to the rise in the legal aid budget, especially in family and criminal proceedings.

The Committee’s report generally welcomed the Government’s intention to move comprehensively to the payment of legal aid providers by case rather than by the hour. However, our inquiry convinced us that neither Lord Carter nor the Government have managed to design fee schemes for the one to three-year transitional period prior to competitive tendering that would provide adequate remuneration for the work that a provider invests in a case. No appropriate set of objective proxies for individual case complexity was employed when deciding the fee levels, and there was almost exclusive reliance on the swings-and-roundabouts effect that is inherent in a fixed fee system with limited graduation. The lack of graduation for differences in case complexity in the initial fee scheme has attracted particularly severe criticism from the most senior family judge in England and Wales, Sir Mark Potter. He called the initial Government proposals for the family fee scheme

and said that

Although the proposals have been changed, the modifications to the fee schemes can hardly be called adequate. Crude fixed fees or fee schemes with rudimentary graduation will hit hardest the clients who are more difficult to deal with, and potentially the most vulnerable, as they may have greater difficulty in getting their cases dealt with by experienced providers. Fixed fees will waste the knowledge and talent of specialist and niche providers, as they will be forced to take on more straightforward cases to arrive at an economically viable case mix. Such specialists will not be able to deal with as many of the complicated cases that require a high degree of specialisation. There are
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no economic incentives in the new fee schemes in the transitional period for the provision of dedicated services and specialist advice. The fee uplifts for members of the Law Society’s children panel will be severely curtailed under the revised Government plans.

The quality control of legal aid lawyers by means of peer review will provide a quality floor, but will not encourage excellence. Michael Robinson, whom I mentioned earlier, told me:

The Committee concluded that more work needed to be done on the Government’s proposals for what they call the transitional period, with LSC set-fee schemes, and that there needed to be a solid evidence base. Severe fee cuts are envisaged not only in the areas of legal aid in which the budget is still increasing, such as in Crown court cases and care proceedings, but across the board in virtually all areas of the law.

The legal aid system is being put at risk even though significant parts of it appear to be operating acceptably and to budget. A wholesale and rushed change to the system is not needed, especially given that the Government have failed to assess the real risk of the reform plans to legal aid clients. The Committee has therefore called for the introduction of the new fee schemes for the short transitional period to be halted. Here is the problem: the dangers of the fixed fee schemes have caused such alarm that they have distracted attention from the main feature of the reform that the Government propose, which is a move to competitive tendering for block contracts for legal aid work.

The Committee was astonished by the lack of concrete plans for the tendering process. There are well-known problems with competitive tendering, such as “winner’s curse”, when the winning bidder bids at an uneconomically low rate and cannot fulfil their contract. Those who travel on the east coast main line will be familiar with that problem, which happened to GNER. It could perfectly well happen in the legal services sector.

Another issue is whether there will be an adequate supplier base, especially after the fixed fees period. If that period goes ahead, who will be left at the end of it to compete in the tendering process? Who will be left at the second round of competitive tendering? There is a real danger that there will not be sufficient suppliers to make the second round a process of competitive tendering in any realistic way. We quoted the evidence of Professor Cape, who called the introduction of competitive tendering without proper piloting “reckless”. We thought that competitive tendering should not be rolled out nationally, even in a phased manner, without such a pilot.

The Government’s response to our report, issued on 22 June, was disappointing. None of the Committee’s hard-and-fast recommendations seems to have been taken on board. The fixed, graduated fee schemes for the transitional period are to go ahead in all areas of legal aid, and no significant changes were made to the structure of the fee schemes in terms of graduation or to reflect the differing work costs across the country.
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There is to be no proper piloting of best-value tendering and no detailed analysis of the cost drivers in the legal aid budget to inform the current or future reforms. In short, the Government have failed to address the main flaws in their reform proposals.

There have been some improvements to the previous proposals, such as the phasing in of the new private law family fee scheme, with level 3 and 4 fees coming into force at a later date than levels 1 and 2, which come into force in October, but those improvements do not change the overall picture. The most recent fee schemes and consultations published by the LSC at the end of June and the beginning of this month vindicate the Committee’s concerns. For example, one of the Committee’s main criticisms of the Government and the LSC was the lack of data on which the fee schemes for the transitional period were modelled. This spring, the LSC announced a change to its initial plans to reform the arrangements for the allocation of police station slots for criminal legal aid suppliers. Because of what it described as “data integrity issues”—a wonderful-sounding euphemism—the initial proposals were stopped and the LSC re-consulted, asking suppliers to provide it with more and accurate data on which further models could be based. Similarly, it had to delay a crucial decision on the introduction of minimum contract sizes for police station and magistrates court work in order to refine its data.

The most striking example is the new consultation paper on the litigators graduated fee scheme for Crown court defence work. The LSC acknowledges that certain complicating factors, such as a client being a non-English speaker, would increase the amount of work in a defence case, but it admits to not holding enough data to quantify the increase in work load. It concluded that it was not able to model, with certainty, an appropriate uplift for such complicated cases. In the light of that recognition and the apparent difficulties with modelling the level three fees for the private law family fee scheme, I wonder how the LSC will ever be able to identify the appropriate value for money for pieces of legal aid work, if not through crude cost averaging. Of course, some delay is justified when it is used to collate and apply better and more reliable data, but that should have taken place before fee schemes were published or, in the case of police station slot allocation, before firms engaged in re-organising their duty solicitor working practices.

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