Supplementary memorandum submitted by
the Ministry of Justice
/ COMPACT COMPLIANCE
Fixed fees have been introduced to ensure that
cases are dealt with efficiently and that a larger number of people
can be helped within the limited legal aid budget. The Legal Services
Commission (LSC) introduced fixed fees in October 2007 for the
Not for Profit (NfP) sector, bringing payment arrangements in
line with that for solicitors (from quarterly payments in advance
for hours worked, to payment linked to submission of bills). Under
the system, providers receive a standard monthly payment against
which cases are reconciled at a fixed rate at the close of a case.
Where cases are assessed as exceptionally costly (i.e. at three
times the standard fee) the LSC will continue to pay for these
at hourly rates, meaning that providers are not discouraged from
undertaking complex cases.
The LSC consulted NfP representative bodies
prior to the introduction of fixed fees and agreed transitional
arrangements for all NfP providers. Between April and October
2007, the LSC changed the payment system for NfPs by moving from
quarterly payments in advance to monthly payments in advance to
help NfP providers to prepare for the new fee scheme. Other transitional
arrangements were introduced to give a staggered approach and
gradually align reconciliation processes with that for solicitors.
As part of this, the LSC and the NfP representative bodies agreed
a transitional buffer up to 31 March 2010, allowing agencies to
be overpaid by up to three times their average claim value (based
on a 12 month average) at 31 March 2008; falling to two times
at 31 March 2009. This effectively allowed continuation of payments
in advance for those that needed them.
The Ministry of Justice (MoJ) and LSC remain
committed to working constructively with the third sector and
discussing ways in which to reasonably support providers. However,
the LSC must also follow legislation such as competition law and
EU procurement law and must treat all contracted providers equitably.
The LSC must operate in a financially responsible way and has
agreed payment extensions where there is a good chance that an
agency will be in a position to repay monies in due course. It
would be irresponsible and inappropriate for the LSC to do otherwise
and to offer ongoing funds to agencies that are unlikely to be
Since the introduction of fixed fees, LSC contracts
have not been withdrawn for any NfP agency purely because of the
level of debt owning. The transitional arrangements in place are
in effect a two and a half year plan to bring levels of overpayment
to within one monthly claim (i.e. effectively one month's payment
in advance) in line with payments to providers on solicitor contracts.
The LSC will continue to work with agencies to provide practical
assistance and to help improve performance wherever possible.
I recognise however that some agencies are facing
difficulties in adapting to the new system, despite the further
flexibilities introduced to the transitional arrangements. Through
the MoJ Third Sector Strategy, published this June, we are committed
to ensure best practice in funding and procurement practices overall,
and will continue our discussions with the Office of the Third
Sector and advice organisations on these issues. The local advice
study I have commissioned will also explore this further by examining
the impact of fixed fees on local providers. The LSC, however,
is not the only funder of advice providers. Some NfP organisations
receive funding from a variety of other sources, such as local
authorities, the Big Lottery Fund and other grant-making bodies.
Changes to these funding streams for their own reasons have contributed
to the problems experienced by a number of providers and this
will also be looked at as part of the study.
The LSC is committed to the Third Sector compact
and has published a statement explaining how they will implement
it. The statement can be found at Annex A. The LSC Third Sector
officer assists staff working with NfP agencies on compact compliance.
The LSC meets regularly with Third Sector representative bodies
on both policy and operational issues, including, for example,
implementation of fixed fees and the transitional arrangements.
Issues relating to the Compact are also discussed at these meetings.
As part of the review he is undertaking, Lord
Laming has been asked by the Government to consider the issue
of legal costs to local authorities of care proceedings, with
particular reference to the increased court fees. I should stress
though that the fee increases do not form part of the wider care
proceedings reform programme. We firmly believe that the introduction
of the fee increase will not have any impact on local authorities
fulfilling their statutory obligations, and we are not aware of
any evidence to the contrary.
As I said to the Committee, the fee increases
for Public Law applications were set at a level that would increase
total fees paid by £40 million in a full year if paid in
every case. An additional £40 million was therefore reflected
in the local authority Comprehensive Spending Review 2007 Spending
Settlement and built into allocated spending totals with effect
from April 2008-09 till 2010-11. Not only is this £40 million
in excess of the likely total court fees actually payable by local
authorities as a result of the increase, the allocation mechanism
used by DCLG means that it is directed preferentially to those
local authorities that are likely to need it.
Four local authorities recently brought Judicial
Review proceedings against the decision to introduce the new fees
structure. This was rejected by the court on all grounds. Lord
Justice Dyson, in summing up, said that the overall compensation
given to local authorities was "sufficient to avoid any real
risk that the new fee regime may lead to the interests of vulnerable
children being harmed."
Parliamentary Under-Secretary of State
LEGAL AID PROCUREMENT: COMPACT WITH VOLUNTARY
& COMMUNITY SECTOR IN ENGLAND
The Compact between the Government and the voluntary
and community sector (VCS) exists because of a shared commitment
to recognise distinct roles and build upon shared objectives and
common values. The Legal Services Commission is committed to the
Compact. Here I set out some of the key challenges that we face
in taking Compact forward within legal aid.
The two areas that are perhaps most apposite
for legal aid are consultation and procurement: both have their
own Compact Code of Good Practice. It is worth restating some
of the key principles from these as we consider how best LSC and
VCS can work within Compact to deliver the Government's legal
aid agenda. These are both considered within the recognition that
the VCS must always remain independent and is neither an arm of
Government nor commercial business.
In many ways the relationship between the LSC
and the VCS can be split into two distinct parts. The first is
the contractual relationshipVCS agencies acting as the
LSC's delivery channel for legal aid. That is of course central
to Compact but it is also more fundamentally subject to contract,
procurement and public law. The second area is about recognising
the unique position of the VCS in terms of client engagement.
A much wider spread of VCS agencies can contribute to this element
of our relationship than the former and it is vital that the two
are not confused.
The LSC is committed to consultation and has
its own code of consultation based on the Cabinet Office Code
of Practice on Consultation.
We aim to ensure the sector's position is being
considered in relation to policy. We recognise the need to consult
widely with providers and other stakeholders on overarching policy
direction and have done this in examples such as the LSC strategy
for the Community Legal Service "Making Legal Rights a Reality"
and on Lord Carter's report "Legal aid: market based approach
to reform" through "A Sustainable Future".
We are also committed to providing clarity about
what is and what is not open to change. Thus, after setting out
the way ahead for legal aid reform in November 2006 (in response
to the above consultation exercise) subsequent consultations have
been focused on implementation of those reformsthe detail
of some fee schemes, specification of services and indeed as we
move forward the implementation of a competitive process for procuring
The Commission must and will remain flexible
in its consultations. Written, formal consultation is necessary
where widespread views are sought and this may need to be supported
by presentations, road shows and meetings with representative
bodies. But equally, informal consultation on more specialist
issues or where the likely number of interested parties is lower
may be appropriate. A range of approaches is often necessaryespecially
if we are to encourage responses from a diverse population. Whatever
the approach, it is important that we ensure we specifically engage
with VCS wherever they, their users or beneficiaries are affected.
This leads to another important element of consultation.
The VCS should always be clear about whom they represent and who
their constituency is in replying to consultations. Where ever
possible VCS should involve service users in developing their
response and remain evidence basedidentifying the interests
of their users and taking account of the specific needs, interests
and contributions of women, minority groups and the socially excluded.
The LSC would like to encourage a much wider spread of VCS agencies
to contribute to consultation from the perspective of users of
legal aid servicesit is distinct from consultation about
the relationship (financial or otherwise) between LSC and VCS
For consultation to be effective there needs
to be trust and that is often based upon an open and transparent
recognition of different roles and responsibilities and a respect
for those parties. In bringing VCS agencies into the provision
of legal aid in recent years and in encouraging a level playing
field in funding terms the Commission continues to demonstrate
its commitment to the partnership.
The LSC currently contracts with about 500 VCS
providers and our investment in the sector currently stands at
about £80 million per annum. In 2006-07 NfP providers delivered
201,875 acts of assistance out of a total of 796,563.
The LSC cannot provide funding to VCS to deliver
their objectives. It exists only to procure legal aid services
within the statutory framework set by Parliament. Equally, that
VCS do not exist just to deliver legal aid services must also
be recognised. Within these differing frameworks is a clear overlap
for many agencies delivering legal aid services and involved in
the delivery legal aid services.
We recognise the right of VCS to include overheads
in costing legal aid service delivery and indeed have sought to
implement real equality in treatment between the VCS and private
sector in this regardfixed fees apply regardless of sector.
This is important as it means the most efficient VCS provider
delivering at a cost comparable to the best private sector firms
is able to retain a surplus equivalent to that firms profit. Such
profit actively supports the independence of the VCS as it is
unrestricted funding that can be used to further other charitable
objectives. This not only recognises the `added value' of the
VCS but supports and enhances it.
The NAOs office of Third Sector report "Implementation
of full cost recovery" recognises that there are a range
of financial relationships that exist between the Government and
VCS. The legal aid relationship is moving squarely into what it
characterises as a "shopping" relationship "where
a purchaser [the LSC] designs a specification for a service it
is statutorily obliged to provide, and seeks a supplier to provide
that service". The typical characteristics of this relationship
are that it is contract based, market contestable, price based,
defined outputs, certainty, enforceable, defined outputs, risk
with providers and provider keeps surplus.
This "shopping" approach is entirely
consistent with both the LSC move towards competition and the
Compact. We welcome the sector's involvement in the legal aid
market and, like all providers, will help and encourage it to
bid for a higher stake in the £2 billion spent each year
on legal aid. It falls to the VCS bidder to know their costs and
bid appropriately. It falls to the VCS provider to deliver the
agreed services and it can expect to be managed against agreed
key performance indicators. In return it can expect certainty
through longer-term contracts.
Underpinning all of thisfor both LSC
and VCSis a real commitment to improve client engagement
and thus make legal aid services organised around the needs and
experience of clients rather than the preference of providers
or convenience of funders. Inevitably the LSC contracts with a
narrow group of VCS agenciesthose able to deliver complex
legal advice that falls within the scope of legal aid. However
this should not prevent a much wider group of VCS agencies from
engaging with us to help us shape services around clients needs.
Joint research projects such as between Youth Access and LSRC
provide good examples of how to do this so that we have a real
evidence base for policy-making and service delivery.
In the spirit of Compact LSC will seek to improve
its engagement with VCS groups that can represent clients experienceand
often this is the experience of the clients who do not get advice,
because it is these clients that legal aid and its providers are
It is vital that we do not allow clients to
be a political football in the contractual discussions that inevitably
follow LSC procuring services from VCS agencies. We must all rise
above that to ensure that client voices are heard over and above
the voices of commissioners, advisers and lawyerstogether
that is possible.
The move towards a market based procurement
regime for legal aid is undoubtedly challenging for all stakeholders.
However, we believe it represents the best opportunity to enhance
our shared objectives:
It is good for clients:
Increased access to client focused
services delivered by high quality providers;
It is good for VCS providers:
Real reward for delivering innovatively
to meet client need;
It is good for LSC and government:
Priorities are met and value for
Only if we continue to seek to align the interests
of VCS providers, the LSC and clients can we make the Compact
a meaningful enabler of our shared objectives.
Legal Services Commission