Select Committee on Constitutional Affairs Minutes of Evidence


Examination of Witnesses (Questions 180-199)

ALISON HANNAH, RICHARD JENNER AND ADAM GRIFFITH

30 JANUARY 2007

  Q180  Julie Morgan: This is a follow-up question. In parts of rural Wales it is quite hard to get specialist advice on housing, debt and welfare benefits. What tends to happen is that a client will go to a CAB which has a contract with the LSC or to a solicitor who has a contract in one bit of work, but they are backed up then by the Wales Specialist Support Service to support them. How do you think that sort of arrangement would be affected?

  Richard Jenner: As you may know, the Specialist Support Service is currently still under review.

  Q181  Chairman: We hoped that we had saved them!

  Richard Jenner: Obviously we support them. We think precisely one of their values is to provide that back-up and particularly in areas where provision on the ground is a bit thin. That is why we want to see it continue. We are hoping that the Commission will, in the end, take the same view.

  Adam Griffith: In Wales, there is a serious problem with the lack of supply, as we understand it. The Commission and the Assembly Government have recently published a Strategy for Wales, as I am sure you know, which actually said that in their view the majority of social welfare law advice in Wales should be provided over the telephone. We think that this raises a number of issues that this committee has highlighted previously: the danger of drifting into a two-tier system where some people get advice face-to-face and other people, like people in Wales, will largely have to rely on a telephone service. There are changes going on at the moment in relation to CLS Direct, the telephone service, in the way it has been re-contracted out and the lack of quality review so far. I think there are serious concerns about what will happen in certain areas, particularly rural areas and in Wales.

  Q182  Chairman: It has been suggested to us that one way of proceeding in order to assess the impact of the reforms, especially the best value competition, might be to limit it to the criminal legal aid side with the civil legal aid side not following until the reforms in the criminal area have been assessed. Do you agree with that? Do you think there are any dangers in that staged approach? Obviously that begs the question of whether you want to oppose all the reforms. If the Government is going to proceed on roughly the lines which it intends, would it be helpful to wait on the civil side until the criminal side has been done first?

  Alison Hannah: I think it would be a great deal of help if it was started with crime and the effects of that were monitored, not least because of course the major expenditure of the legal aid budget is on crime. If they are looking to make savings, then it is obvious that the first place to look would be on the high spending crime sections particularly . I think most people accept that there is quite a lot of difference between criminal practice and social welfare law. The social welfare law costs are relatively quite small compared to both crime and family. In terms of more bangs for your bucks, it would certainly make sense to start with crime. It would certainly make sense to monitor and maybe to pilot some of the criminal changes as well. To that extent, I think it is a good thing that the fixed fees that incorporate travel and waiting will be trialled in the 16 urban areas before being rolled out. I think that makes a lot of sense.

  Richard Jenner: It is worth adding that the contracting regime that emerged in 2000 was very carefully piloted over a number of years and was independently assessed and researched. It is a little disappointing that what are probably more far-reaching changes are not being piloted. I am not sure whether you could learn from a pilot on crime how that would impact on social welfare law. I think we would want to make a plea for more piloting before going ahead with the proposals in general.

  Q183  David Howarth: On that piloting point, there was the rather unfortunately named London Competitive Criminal Tendering Pilot. I do not know what a competitive criminal is, but never mind! Was that the kind of thing that should have been tried, do you think, before going ahead with the best value regime on a geographically limited basis?

  Alison Hannah: I was probably more involved in the crime project than Advice Services Alliance. I think there was intended to be a pilot. The price competitive tendering project was supposed to be a pilot for London. If you were going to go down the route of competitive tendering, I think the proposals put forward in the Carter Review made a great deal more sense than the Legal Services Commission proposals, which were a pretty crude price Dutch auction really because at the time it was accepted that there was going to be a very low quality threshold. At the time, I think they were saying that only 5% of providers would be eliminated on quality grounds. Then it would be a straight bid for what proportion of duty solicitors slots you would take at such and such a price, so it was a real downward spiral. Having gone to many of the meetings that took place around that, there were some very daft comments being made about "I am going to put in a bid of £1 a case because then I know I will be guaranteed the Crown Court cases". It was a real illustration of how straight price competitive tendering would be a complete disaster because the stakes were so high for firms to make sure that they got the business that they really threw caution to the wind in some of the comments that were made. I do think the Carter proposals make a lot more sense because they were very much intended to have tendering on the basis of price, quality and volume. It is interesting now that the volume bit seems to be a little less certain. If you were to buy the economic package that Lord Carter was putting forward, then that has to be a worry. If you think the future lies—and I am not saying that I do—in a small number of bigger firms and you are not offering any more money, indeed you are offering to drop a lot of the income for some firms, then you really have to be able to make those economies of scale to make it practicable. At the moment, we really do not know whether it is going to be practicable or not. All the evidence about the provider base of solicitors is that it is extremely fragile and the research that has been done all indicates that even with big firms, the margins of profitability can be pretty low. There is an awful lot of risk involved in the move towards tendering certainly.

  Q184  David Howarth: That does raise the question of precisely what is going to happen in the second round. You have one round of competition and then you say that the supplier base is quite fragile. What happens in the next round? Are we going to have competition in the next round?

  Alison Hannah: I see no crystal ball here! It is almost impossible to imagine who would be in for a second round, particularly because of the preferred supplier scheme, which is going to be one of the key factors. In order to become a preferred supplier, you have to have a contract; you have to have your key performance indicators measured in accordance with the contract; you have to have this new file assessment value for money to make sure that you have been administrating the legal aid scheme properly in terms of devolved powers and legal aid eligibility for clients; you have to have your peer review. If you get through all those, then you may become a preferred supplier, but how can that work in a second round? Where would there be a new entrant that could possibly supply that number of preconditions? It is very difficult to see how it would work, not least because peer review is going to be organisation-wide. You could not see a situation where maybe a department would split because the peer review would be for the organisation, not for the department. I think it is really hard. I do not know that this is answered by Carolyn Regan. I find it really hard to see who would be left to put in a bid in the second round. Then you have the worry that prices will actually be driven up by competitive tendering. If there is only a small number of bidders, then they can form cartels and why would not the prices go up?

  Q185  David Howarth: It is not just splitting off old firms; you cannot see how a new firm could get together, organise itself and get the various qualifications to be in a position to bid. That raises the question: can we have this sort of bidding system but differently so that there would be some possibility of competition in a second round and, if so, what would that look like? How would it be different from the system we are being offered?

  Richard Jenner: Like Alison, I am very sceptical about this. It is worth saying, particularly when we are talking about social welfare law, that we are not convinced that there is a huge market out there. In practice, in most towns there may be three, four or five suppliers doing some social welfare law. Very often that work has been divided up between them on the basis of custom, practice and possibly by agreement. There may be a firm doing housing cases; the local CAB will be doing the bulk of the debt and benefit cases; a law centre may be doing employment; and one or two may be providing across more than one subject. That does not really look to me like a market ripe for competition. I do not believe, under the changes in regulation, that in social welfare law you are going to have a lot of new types of supplier coming in and wanting to compete for that kind of work. There is a possibility that in relation to certain basic benefits claims you might get some new commercial suppliers showing an interest. I suspect that will be more at the level of doing telephone advice. I am not convinced there is a market out there. Certainly, in relation to a second round, I cannot envisage that if not-for-profit agencies have been unsuccessful in the first round they will be around for the second round. Some of them are so reliant on legal aid funding that they will close if they lose out. My instinct tells me that some will manage to stagger on, possibly with local authority funding, but I am not sure you will get large numbers of them wanting to go through all the effort and procedures that Alison has talked about to become involved a second time round. Certainly, as far as our sector is concerned, I think there will be one round.

  Q186  David Howarth: You also mentioned peer review. What are your views about how that might or might not work? Can a peer review system of the sort envisaged guarantee quality over the period of the contract. Is this really going to work?

  Richard Jenner: We do not know for certain. There are issues for example about peer reviewing organisations rather than individual advisers. We do strongly support peer review. We do not think it is the only measure of quality. There are issues like client care and client satisfaction that have to be taken strongly into account. We do think that peer review is probably the best available measure of the quality of legal work. We strongly supported the development of the scheme by the LSC. I think that is an example where the LSC worked well with practitioners and representative bodies to get agreement for what is a robust and independent scheme. We have some concerns that there are two initiatives here. One is the coming of competition and the other is the preferred suppliers' initiative. We have concerns that the timescales for those two schemes will be wrong and that you will be getting into competitive tendering long before it is clear exactly who the preferred suppliers are. That is one difficulty we have with it. It is also worth pointing out that, as things stand, peer review is at the end of the assessment process for preferred supplier. People have to jump through very many other hoops first, many of which are proxies, not direct measures, not peer review. It is also worth pointing out that organisations with small contracts may, in the end, only be peer reviewed in one of their subject areas, so there is no guarantee that everyone who will eventually become a preferred supplier will have achieved the peer review. Our concern, therefore, is that you might get some organisation that you really would not want to contract with getting through. The real doubt is whether the timetables will keep in step with each other. We think that, as things stand at the moment, competitive tendering is very likely to be introduced before it is clear who the true preferred suppliers really are.

  Alison Hannah: I agree with what Richard has said. May I add two things about peer review? I think everybody does agree that peer review is a good system for assessing the quality of advice; it is certainly an improvement on the audit process. Of course, it has been designed for the present situation. The question is, as Ed Cape put it: how robust will it be over time? That must be a question. Leaving aside the question of it being organisational and therefore you do not really know that any particular department at any particular time might be up to the same level over time, will there effectively be grade inflation? If the peer reviewers, who are themselves working under the same pressures, are going to think `It is not as good as it was two years ago but, on the other hand, what do you expect for the fees that are available?' effectively will you end up with people purportedly being at the same level but actually not providing as good quality. That is a bit of a concern as to whether, over time, it is going to be able to maintain its level.

  Richard Jenner: It will not pick up cherry picking. If suppliers cut corners because of the pressures of fixed fees, it may pick that up, but if suppliers simply decide they are not going to take on the complex cases that we were talking about earlier, there is no reason to think peer reviews will pick that up. All peer reviews are there for is to say: has this particular firm handled that claim properly? If it was, it was. As far as I understand it, it is not in the job description of peer review to make an assessment of whether suppliers have actually changed their case mix, so they will not necessarily pick up many of the issues and concerns that we raised earlier.

  Q187  Chairman: It should be.

  Richard Jenner: Yes. We would support that if it was made part of the job of peer review to look at those issues. In my view they would have the expertise to do it, yes.

  Adam Griffith: It is a complicated statistical issue. Peer review works on the assumption that if you take 20 files and peer review 15, there is something like a 97% probability that it is all right and a good indication of something. As I understand it, that is the principle of peer review. If you come back to the same organisation and pick up another 20 or 15 files, will you find in there something that you can compare to the 20 or 15 files you looked at three years ago and detect a shift? I think it would be very difficult to do. If there had been a very major change, if you suddenly found that all the cases you were looking at were short cases and lasted two hours, maybe, but if one or two more were on the short side, I do not think you could draw any conclusions from that. I do not think as a tool it is designed to do that.

  Q188  David Howarth: I have a final point on peer review. I think it was Professor Cape who put to us the point that one difficulty with applying peer review to all aspects of the system is that it is a file-based way of making an assessment, but some of what we are talking about, like oral advice in a police station, will not appear on the files. How do you assess the quality of that in a way that does not either involve excessive cost or somehow interferes with the system of giving advice itself in the first place?

  Alison Hannah: I think there has been talk of trying to assess advocacy quality. You had quite a session on that. That is one issue. Quality is more than simply quality assuring. Peer review is a method of quality assurance but it does not necessarily of itself provide quality. You can learn from it, obviously, but if you are going to have a good quality professional advice giver, then it is only one factor. Obviously experience, training, morale, supervision, good quality information and educational resources all come into it. The research in America suggests that one of the main factors in deciding quality is to maintain what would be called an appropriate level of case-load. If you are overburdened with too many cases, then the quality of the work is going to drop. Peer review only, as you say, looks at what is in the file. There are many other issues around quality that peer review is not designed to address at all.

  Richard Jenner: That was one of the concerns we had about Lord Carter's recommendation, that panels might not be needed any more because of peer review. I think that probably is not true, for the reason that Alison has just given.

  Q189  Julie Morgan: On remuneration schemes, the not-for-profit providers have strongly criticised the proposals to merge the remuneration schemes for civil legal aid solicitors and not-for-profit providers. Is there any justification for retaining the difference in pay schemes between not-for-profit suppliers and specialist legal aid solicitors advising on the same issues?

  Richard Jenner: No, not in my view. It is worth saying that some of our members have certainly criticised that. There are mixed views about the principle of having a unified contract. Our position is that it is difficult to argue as a matter of principle that people should be being paid on an entirely different basis for doing the same work. We would not want to start by saying that advice agencies should be paid fundamentally differently. The issue is what the terms are on which the payments are being made. We are concerned, and we are still in negotiation over the details of the contract, that there is proper sharing of risks and that the terms are fair on both parties. We still have some way to go in those discussions. One point I would want to flag up, and I think this is probably one of the biggest concerns raised by our members, is the move from paying in advance at the moment to a situation where you would be paid in arrears. Two things need to be said about that. Firstly, the transitional arrangements for that will need to be very carefully handled because in practice there is a real risk that that will create huge cash flow problems for agencies suddenly moving from one system to another. Certainly our members are very anxious about that. Secondly, that approach to payment certainly does not appear, in our view, to comply with the compact that has been agreed between the Government and the voluntary sector, which does say that in normal circumstances voluntary sector organisations should be paid in advance for work being done. We are not entirely clear why the Commission feels that payment under legal aid contract should be done differently from what is suggested by the compact. That is an issue about which we are also still in discussions with them.

  Q190  Julie Morgan: Do you think there is a real danger that voluntary sector providers could go out of business?

  Richard Jenner: Yes, without a shadow of doubt, particularly if the transitional arrangements from one system to another are not sufficiently worked out.

  Q191  Chairman: There could be cash-flow problems?

  Richard Jenner: Yes. They will just simply find that they have not got the money.

  Adam Griffith: The way it is proposed to work is that it will at least start off essentially with payments in advance, and then there would be a reconciliation process. The danger that we see is that agencies that are unable, for whatever reason, to finish cases and record them close enough to the fixed fee levels to reflect their costs may find, over time, that the amount essentially that they owe the Commission is not going down, or indeed is even going up. At that point, they will be in a terrible position if they cannot see the light at the end of the tunnel. They will be under considerable pressure just to cut their losses and get out. That is a real danger. It is a combination of two things. It is partly just moving on to fixed fees altogether, which is a big shift. Obviously for some agencies it will be all right but for many agencies that requires them to turn over cases more quickly than they have done before. It is going to be quite a problem.

  Alison Hannah: I am not sure whether this is quite on the same point but on the question of the fixed fees in general, there are two issues about the level of the fixed fee and also the flexibility of the fixed fee. Following on from what Adam has said, the problem with the system as presented is that the argument is swings and roundabouts. If you only have swings, then you cannot make it up on the roundabouts. There are going to be different organisations that specialise in different things. On the whole, for example, law centres specialise in the complex cases where there are not necessarily legal aid certificates and there may be clients who are in particular a high majority of black and ethnic minorities or disabilities and those tend to be the more expensive cases. Although the Legal Services Commission says that they need to manage their case mix, they really are not suggesting that the complex cases and the clients with complex language or other needs should not fall within the system. Of course, there is the perverse incentive in the system that is being proposed that people will want to make sure that their fees come within the level of fixed fees and the clients are again going have to squash into the fees rather than the fees fit around the clients. That is a pretty fundamental change. It is going to be quite hard to prevent some element of that happening because if you know that you will go out of business because you have too many complex cases, what are you supposed to do? If your mission is to help those people, it is pretty difficult to say, "I am sorry. Here is the phone number for CLS Direct or try so and so down the road". It could be pass the parcel with the most vulnerable people not getting the service and the service ironically helping those with either the less complex problems or the greater ability to present their needs in a nice simple clear way that makes it easy for the adviser. That is the last thing that anybody, including the LSC, wants, but there is going to be that incentive.

  Adam Griffith: May I add one point on that? There is a particular concern. Where the advice sector and the local solicitors are well organised and there have been quite clear demarcation lines as to who does what and it is agreed that the more complicated cases of a certain kind go to certain agencies and so on, in many places you actually have a system which was what the Community Legal Service was supposed to be about, where there is agreement on the ground as to who would do what. One of the many dangerous side-effects of introducing fixed fees is that it breaks that up because the people who are doing the more complicated cases will have to come down and take some of the easy cases from the people who otherwise would have done them. Those in fact include many cases that are done by agencies in work that is not funded by the Commission. It goes back to the earlier question about the numbers. One thing that will happen is that agencies will be going out and making legal aid cases out of things that could have been dealt with outside the legal aid scheme before and, at the same time, will be disrupting the relationships that have been built up on the ground between the different agencies as to who will do what. It will purely be so that those agencies that are working under an LSC-funded fixed fee system are able to survive. We think that that would be very sad.

  Q192  Julie Morgan: Do you think a system of fixed or graduated fees could be made to work for the not-for-profit sector?

  Richard Jenner: We suggested some alternatives. Notably, we suggested in relation to social welfare law that there should be more categories of different types of fees to take account of different types of work. If you look at employment, we would be proposing three categories: one for unfair dismissal cases; one for discrimination cases; and one for the rest. The suggestion would be that the rest would be slightly lower than was currently proposed in order that the more complex areas of work be paid by a higher fee. That was rejected. The other suggestion we made is that there could be some kind of graduated fee in social welfare law cases to take account of the level of work undertaken on behalf of the client. We accept there are some potential difficulties in that. Certainly our view is that a scheme would be better if it had more flexibility along those kinds of lines.

  Alison Hannah: The other complement is the cases, but also the clients can make the cases particularly longer and boost the costs. Although the Legal Services Commission is very unwilling to go down that route, the research does show that black and minority ethnic clients do tend to take longer and therefore are more expensive, as are clients with disabilities. If you were able to have an add-on for particular clients, in some ways I think that would also help towards the cherry picking, to prevent cherry picking. It would make more financial sense for organisations to take on these complex or lengthy cases because they would be paid a bit more and they would not have to worry about: are we going to make it into an exceptional, three times the expense case or are we just going to lose money on it by going over the fixed fee and hoping possibly that we might make it up at some other point. I think it would help with that.

  Chairman: We have covered cherry picking quite a bit. I am conscious of the time restraint. I am going to ask Bob Neill to come in with a couple of other points that I do not want us to miss.

  Q193  Bob Neill: I was talking to a lady yesterday who has a problem with child custody issues. She also has divorce issues, which stem from the same thing. She also has some housing problems. It is what we call a problem cluster. At the moment, the solicitor can do some of those other things under the tolerance work, but it seems as if the proposals we have from the Department and the LSC are positively designed to make it unattractive for solicitors to do tolerance work and in fact to phase it out when you get the preferred suppliers. Is that going to make my constituent's situation worse? Is it going to be an even greater deterrent or is there some way that it will all come out all right and she will get a service without having to go round half of Bromley?

  Richard Jenner: I am not sure that problem can really be satisfactorily resolved within the existing resources for the scheme, to be honest. That problem, to be properly resolved, would need expanded provision in many areas. The issue around tolerance has always been a difficult one because it is a balance between an access and a quality issue. It can be argued that allowing solicitors to do work under tolerance provides access which would not be available otherwise because it is very specialist. There is a problem with that argument, though, which is that nearly all the research that has ever been done into this issue suggests that there are real quality concerns when people start providing services outside their areas of expertise. I think that in the longer term it is probably not unreasonable to say that we should be moving away from tolerance towards actually filling the gaps with proper specialist supply. The difficulty at the moment is that it is not clear that that can happen under the new arrangements. I do not know if you intend to ask us about CLACs and CLANs. We have a number of issues about CLACs and CLANs but we are supportive of the aim of CLACs and CLANs, which is to try to ensure that there is a more holistic service, if you like to improve upon the kind of arrangements that Adam was talking about earlier and get practitioners with different types of expertise working together, better referrals and more joined-up services. That is something we think that the Commission is right in saying it wants to achieve as opposed to just carrying on with the current way of dealing with the number of tolerances.

  Q194  Bob Neill: I understand your point about the quality control approach. We may come back to that. It has been suggested sometimes that this stops the development of silos and that if firms are doing tolerance work, that may be the first route into building up some expertise.

  Richard Jenner: Yes, I think we would accept that. There is an argument that has not really been resolved. What you have to be careful about is forcing individual solicitor or advisers down the road where it is impossible for them to develop skills in new areas of law. I think that is a genuine issue that has not really been resolved under the current scheme.

  Q195  Bob Neill: There is a balance between that and maintaining quality control?

  Richard Jenner: Yes, there is. At the moment, the research does appear to be very clear. There is not an issue about whether we are talking about a level two or a level three. There is a real issue about some providers doing tolerance work that is of quite poor quality because they simply do not have the expertise to do that.

  Q196  Bob Neill: I get the impression that is a view that is generally shared.

  Alison Hannah: I think that is right. The research does show that. The only problem, of course, is that some firms may not be able to get the volume to get a contract. They may not want it obviously either. In some areas, particularly rural areas, they may be better than nothing. It is obviously better to have somebody giving you some help perhaps than none.

  Q197  Chairman: It is not much help to be told in an area like mine by the local solicitor, "I could do this work but you probably ought to go to a solicitor 65 miles away who might be able to help you". It is not realistic.

  Alison Hannah: No, that is right.

  Q198  Bob Neill: You mentioned CLACs and CLANs. Perhaps we could come on to that because I am interested in how you see that developing. One thing that strikes me is that actually what we are doing is potentially creating monopolies here.

  Richard Jenner: Yes. One thing that puzzles ASA is that it is not clear really how the CLAC model as opposed to the CLAN model really fits into the market-based approach advocated by Lord Carter and now the Government. It is also not clear to us exactly how it fits in to the current Government's emphasis on increasing choice in the provision of public services. It is absolutely clear that if you set up a CLAC, you are creating monopoly provision, at least in social welfare law. My understanding is that the Commission accepts that in the family services you have to have at least one or two other providers in the area; otherwise you get the obvious problem of conflict of interest, although it is worth saying that that can arise in relation to areas of social welfare law as well. Leaving aside that puzzlement, if you like, our view is that it is quite risky. It is a very risky strategy for the Commission to put all its eggs in one basket. It really comes back to the points that you were raising earlier about second rounds of competition. If anything, the problem is going to be even more acute in relation to CLACs because any not-for-profit sector providers that do not win the contract to run the CLAC or at least be a subcontractor for part of it will, almost certainly, go out of business. In the case of CLACs, you are not only losing your legal aid money, but you will be losing your local authority funding. Therefore, if a CLAC fails, there will not be any not-for-profit sector providers available in the area to build up. I suspect that by the time legal aid firms have lost their contract in the current difficult climate, given the low level of morale that you see with a lot of private practitioners, they will not be interested in coming back after it has failed and saying, "Oh, well, we will pick up the pieces". It does seem to me a very risky strategy. Our view is that we would like to see piloting and testing of models of provision that we would describe as more akin to community legal service networks, possibly consortia, possibly federations of different providers, and working with the Commission on probably a less top-down approach than has been taken so far in relation to CLACs actually to work out on the ground how practitioners can work together to provide, as we talked about, a more joined-up service. We are interested in seeing that. It has to be tested. It will not be providing an identical model in every town. It seems to me that that is a more sensible approach than trying to set up monopoly supply.

  Alison Hannah: I agree with everything that Richard has said on that. Certainly anecdotally you get the feeling that there is a lot more interest in setting up networks and that people are looking for ways to try to get those implemented in an informal way as really a way of testing out how they might work. People are much more sympathetic to that than the one-size-fits-all CLAC.

  Q199  Bob Neill: The other point that struck me when looking at this aspect of it is that whatever the situation, whether a private firm or a not-for-profit provider, be it CLACs or CLANs or whatever, you have a three-year contract and you can get three-months notice of termination. What are the implications of that?

  Richard Jenner: My understanding from Adam is that that is not the situation now.


 
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