The Parliamentary Under-Secretary of State for Justice (Maria Eagle): I beg to move,

It is a pleasure to serve under your chairmanship, Mr. Bercow. Hopefully, we shall not be here for too long but, obviously, I shall deal with whatever issues members of the Committee raise.

The regulations have been made by the Lord Chancellor under section 15(5) of the Access to Justice Act 1999 and are subject to the affirmative resolution procedure. The instrument will bring into effect part of the changes to the very high cost case (crime) panel recommended by Lord Carter of Coles in his independent review of legal aid procurement. Defendants who receive publicly funded legal representation in criminal cases can generally have a representative of their choice. In very high cost cases, the choice of representative will be limited to membership of a panel set up by the Legal Services Commission. Very high cost cases have been managed under individual case contracts since 2001, and the contracting arrangements will remain largely unchanged under the instrument when the panel comes into operation on 14 January 2008.

The instrument provides that, when an individual has chosen a representative who is not a member of the panel and the case is classified by the Legal Services Commission as a very high cost case, the commission will not be under an obligation to continue funding representation. The instrument also provides that the individual may choose a new representative from the panel membership. However, the commission will have discretion to carry on funding a representative who is not a member of the panel. That is important in certain circumstances; for example, when a case falls within the scope of the regulations only at a relatively late stage in the proceedings, it would seem nonsensical to have to change the arrangements just to finish something that is largely completed. There would be no benefit in taking it under a very high cost cases contract.

Very high cost cases account for about £100 million of criminal legal aid expenditure each year in the longest and most complex cases in the Crown court. In order to exercise control over increasing costs, choice of representation for defendants involved in very high cost cases will be restricted to those defence teams that have had to meet quality criteria and have been able to demonstrate experience of handling such cases. It is in the best interests of all concerned—including defendants, the wider criminal justice system and the taxpayer—if the most experienced representatives conduct the cases.

The management of very high cost cases by the Legal Services Commission will not be changed in essence by the regulations, and those who successfully become panel members will work with the commission in the same way as they do now. The Government’s strategy for legal aid as set out in “A Fairer Deal for Legal Aid” is being implemented. The first panel will run for 18 months from 14 January, and its membership will be sorted out by the Legal Services Commission, which will set the criteria. The commission is currently in discussion with both the Bar Council and the Law Society about the criteria to be set for the second and subsequent panels, because such details will not remain the same.

The criteria for future membership will have to be reviewed, and the Legal Services Commission has undertaken to ensure that providers not currently engaged in that type of work can enter the market in the future; otherwise, we will just end up with a cartel of people who cannot be challenged or replaced. The Legal Aid Commission intends to give an opportunity to those firms that can demonstrate appropriate experience and expertise in cases that were not taken under the very high cost cases contract.

We believe that it is right for the new arrangements to be brought into effect. They offer a much-needed guarantee of experience and expertise in the conduct of such cases, to the benefit of those involved and to the taxpayer, who is rightly concerned about obtaining value for money in extensive and expensive proceedings. On that basis, I commend the statutory instrument to the Committee.

Mr. Henry Bellingham (North-West Norfolk) (Con): It is a great pleasure to serve under your chairmanship, Mr. Bercow. I thank the Minister for her clear and erudite explanation of the instrument, which the Opposition support in principle. We certainly support the thrust of the Government’s legal aid changes, but we are concerned about some of the detail. Obviously, the Committee is not the right forum in which to discuss those worries because we are discussing something very narrow.

I have a number of short questions to put to the Minister. She said that when a case migrates category at a fairly late stage, it does not make sense for the client to change counsel or legal representation because they have got used to them. What happens if a case starts out as routine, but then migrates category at a much earlier stage? Very often, any work done by a barrister on a case or any contact he has made with a client is all about building up a close relationship. If there is a change of personnel at an early stage, that, too, could be damaging. Will the Minister give us more detail about the discretion of the Legal Services Commission to enable the continuation of representation in those circumstances?

The Minister alluded to the concern that was expressed in the other place about cartels being put in place. Lord Thomas of Gresford said very succinctly that

We are concerned about that. We need to have in place a system in which it is not too difficult for firms that are consolidating or expanding to join the panel. We are concerned that one of the thrusts of the proposals is to drive the consolidation of legal practices. Any firm that is expanding through consolidation with other firms should be able to join the panel if they feel that they can put in place the necessary training, expertise and IT investment. Will the Minister comment on that because Lord Hunt of Kings Heath did not deal with that in much detail in the other place?

I told the Whip that I would not be more than four minutes, so I have about 40 seconds left. We are concerned about the very high cost cases. Basically, 1 per cent. of all cases, including the VHCCs, takes up 49 per cent. of the entire Legal Aid budget. On examination of the handling of those cases, we feel that the Government should try to provide better value for money for the taxpayer. We should be looking not just at case management—the changes in the instrument are all about better case management—but at better pre-trial discovery between the prosecution and the defence. In addition, we should be looking at better enforcement of orders for the exchange of documents or exhibits. I am drawing here on my experience as a criminal barrister, which took place when you, Mr. Bercow were still a student at university. Will the Minister tell the Committee how the managing of cases can be further improved with particular reference to those two areas that I flagged up?

With those few comments, I hope that the Minister will be able to answer our questions. We are broadly supportive of the instrument and thank the Minister for her very clear explanation. We wish the measure well.

David Howarth (Cambridge) (LD): It is a pleasure to be sitting under your chairmanship yet again, Mr. Bercow. I hope that this encounter will be shorter than our first one on the Companies Bill.

The hon. Member for North-West Norfolk said that there was a possibility of the panel system creating a cartel. In exchange for that, the offer is that quality standards be put in place, which will ensure the quality of work being carried out for the public purse. The main problem with the proposals is the balance between the two. I want to make three points: first, on how the panel is chosen and whether the method used effectively drives the quality down rather than up; secondly, on whether the proposals are worth it in cost-benefit terms; and thirdly, on the specific method chosen to judge quality.

On how the panel is to be set up, the LSC sets three different rising price levels. It asks the legal profession whether it can fulfil its expected number of cases given the first price; if not, given the second price; and if not, given the third price. Within each price band, the LSC starts by asking those firms that propose to undertake cases at an excellent level of quality. If it cannot fulfil its capacity at that level, it moves down to the next level of quality and continues to go downwards until it realises that it cannot fulfil its requirements at that price band. As people will understand, the problem with that method is that it drives down the quality within each price band. Rather than setting a standard of quality at the start and asking for bids to obtain the most cost-effective solution possible at that desired standard, it seems to look for the lowest level of quality that we can get away with at that price band. I would be interested in the Minister’s comments on that point.

In its report on the implementation of the Carter review of legal aid, the then Constitutional Affairs Committee commented on that method of setting up the panel:

My second point concerns whether the proposals are worth it. In the regulatory impact assessment, the Government say that in the first instance there will be costs due to the method of implementation. It will cost approximately £500,000 more to pay the non-panel firms for their work when cases are transferred—as this provision envisages—from a non-panel firm to a panel firm. There is also a potential extra cost of £200,000 due to extra travel costs as the number of firms available is reduced.

Let us compare that with the benefits in terms of cost savings. The Government say that the savings are about £1 million to £1.5 million. However, in addition to the direct cost to the Government, there is also the cost to the legal profession that includes the costs of organising teams for the purposes of putting in a bid. The regulatory impact assessment says that the Government have not assessed those costs. It is not a good argument to say that because we do not know what the costs are, we are therefore going to ignore them.

On looking at the figures, it seems that if the annualised cost of the set-up expenditure for lawyers were to exceed £500,000, the chances are—looking at the middle estimate of the savings—that the proposal is not worth it in cost-benefit terms. I would be interested to hear the Minister’s estimation of the robustness of the regulatory impact assessment figures.

My final point is about how quality is judged. The proposal is to introduce quality assessments based largely on a firm’s performance in general criminal law, rather than setting specific quality standards for very high cost cases—specialised cases that are often to do with fraud or terrorism, and which are a very particular area of legal practice. The regulatory impact assessment says that a quality assurance system could be set up that would put more emphasis on quality in those cases, rather than in general, but that that would take a long time and might cost something. If it is being said that quality ought to be about very high cost cases, but that we do not want to spend the time doing that, the danger is that we will end up judging quality by the wrong criteria, which will be more costly in the long term. The suspicion must be that because the system is being set up very quickly, the timetable will be governed mainly by the short-term budgetary constraints of this year’s and next year’s expenditure projections, rather than by the long-term needs of the system.

Maria Eagle: Although the speeches from the Opposition spokesmen may have been short, they raised a number of points that I will seek to deal with as succinctly but fully as I can. The hon. Member for North-West Norfolk set out some of his concerns about cases that migrate to very high cost level at an earlier stage than just before trial. At present, it is perfectly possible for the individuals who will be defendants to change their legal teams; it is possible for non-panel firms to act as subcontractors to panel firms. If it is important, the LSC can make a decision that enables an individual to retain a legal team that he trusts.

The hon. Gentleman will be aware that cases that are likely to become very high cost are flagged up, and it ought to be possible to tell what they are at a relatively early stage. For example, it will become apparent at a fairly early stage that multi-defendant cases such as terrorism cases, Serious Fraud Office cases and those involving 10,000 pages or more of prosecution evidence will be complicated and are likely to fall within these arrangements. So although there is a certain amount of flexibility, it should be possible to reach that conclusion at a stage that is sufficiently early for this issue not to be too much of a concern to the defendant. That is certainly the intention.

I turn to the hon. Gentleman’s point about pre-trial discovery and the enforcement of orders to exchange documents, which was really about proper case management and ensuring that procedures are properly followed. I never specialised in criminal law, as he did, but it is some time since either of us practised in the courts, and he might realise if he had a close look at case management that it is done rather better these days than when we were practising. Crown court judges are encouraged more than presiding judges, particularly with very high cost cases, to get to grips with and be very active in case management at an early stage. I suspect that that fact—along with better communication between the Crown court and the Legal Services Commission, earlier notification of the existence of very high cost cases, and the ending of the ex post facto payment brought in by the 2001 changes—has probably encouraged all to be more efficient in the handling of case procedure than perhaps was so when the hon. Gentleman and I were practising in the courts. At least, one hopes that that is so, as it used to be somewhat hit and miss. I think that that is no longer the case.

The hon. Gentleman also referred to the discussion in the other place about whether we are simply legislating to establish a cartel. I do not believe that that is so, partly because cartels pick themselves, whereas in this case, the LSC clearly has a role in ensuring the selection of panel members. I would have some sympathy for his concerns if the panel were to be permanent, but there will be significant turnover and capacity for change, in that there will be a second panel after 18 months.

The LSC is currently discussing with the professions, and others with an interest, precisely how the selection criteria ought to change. That discussion deals with many of the points made by the hon. Gentleman and by the hon. Member for Cambridge about quality and how you measure it, for example. It is not a static arrangement whereby, if we do not get it right now, we will be stuck for ever with a system that does not work. It is an ongoing arrangement that will be reviewed constantly in debate and discussion with interested parties—not only the professions but other stakeholders—to ensure that we develop a system that is as good as it can be and that may well change over time.

The intention is to drive up quality. Those who wish to be on the panel must already meet peer review level 3 as a threshold competence for the first round. One of the benefits to be gained by defendants from having a panel is a certain guarantee of quality in what can be complicated, difficult cases. It will ensure that defendants who choose a representative from the panel can have some confidence that their solicitor and advocates know what they are doing, and that the experts whom they go to will be experienced. I hope that that deals with those points.

On value for money, the hon. Member for North-West Norfolk was right when he said that about 1 per cent. of cases in the Crown court take up almost half of criminal legal aid. While the budget has gone up in monetary terms because of the increasing number of cases, litigants and contracts signed, the LSC has estimated that, as a result of the arrangements that have been in place since 2001, contracting high-cost cases has reduced the spend on them by around £49 million a year, compared with the previous methodology of ex post facto assessment. I am not saying that the standard has gone down by that amount—it has not. The number of contracts signed and the amount of litigation has gone up, but on the cost of these cases, the LSC has managed to get more of a grip on the overall spend by way of contracting

It is anticipated that we should save between £6.2 million and £12.5 million in a full year; I hope that that answers the point made by the hon. Member for Cambridge regarding whether the changes are worth it. Being able to get that much more of a grip on cost is certainly worth while. These are difficult issues and there is no doubt that when one looks at the trend over the last few years, overall costs have been going up.

On the first panel and the fees that it will charge, there is not free and open competition; it is not yet a fully competitive tendering process. We have opportunities over the next few years, as the second and third panels come into play, to make inroads into having a proper competitive process, but we do not want in doing that to put at risk the ability of firms with expertise in these cases to undertake them. We need to ensure that we do not proceed too swiftly; we must ensure that at the end of the day, we can get a real grip on these cases.

Our view is that the proposals are worth it, but they are not the end of the story. As more panels come along under the second and third rounds, we will look at value for money issues more extensively as we move to greater competition. I hope that I have dealt with most of the points that were raised, and on that basis I commend the statutory instrument to the Committee.

Question put and agreed to.

Resolved,

Committee rose at seven minutes to Five o’clock.