Draft Civil Proceedings and Family Proceedings Fees (Amendment) Order 2015
The Committee consisted of the following Members:
† Abbott, Ms Diane (Hackney North and Stoke Newington) (Lab)
Ainsworth, Mr Bob (Coventry North East) (Lab)
† Campbell, Mr Ronnie (Blyth Valley) (Lab)
† Cunningham, Alex (Stockton North) (Lab)
† Hemming, John (Birmingham, Yardley) (LD)
† Herbert, Nick (Arundel and South Downs) (Con)
† Jackson, Glenda (Hampstead and Kilburn) (Lab)
† McPartland, Stephen (Stevenage) (Con)
† McCartney, Jason (Colne Valley) (Con)
† Metcalfe, Stephen (South Basildon and East Thurrock) (Con)
Paisley, Ian (North Antrim) (DUP)
† Sandys, Laura (South Thanet) (Con)
† Slaughter, Mr Andy (Hammersmith) (Lab)
† Turner, Karl (Kingston upon Hull East) (Lab)
† Vara, Mr Shailesh (Parliamentary Under-Secretary of State for Justice)
† Wallace, Mr Ben (Wyre and Preston North) (Con)
† Zahawi, Nadhim (Stratford-on-Avon) (Con)
Annette Toft, Committee Clerk
† attended the Committee
First Delegated Legislation Committee
Monday 23 February 2015
[Sir Edward Leigh in the Chair]
Draft Civil Proceedings and Family Proceedings Fees (Amendment) Order 2015
4.34 pm
The Parliamentary Under-Secretary of State for Justice (Mr Shailesh Vara): I beg to move,
That the Committee has considered the draft Civil Proceedings and Family Proceedings Fees (Amendment) Order 2015.
As always, it is a great pleasure to serve under your chairmanship, Sir Edward.
The purpose of the draft order is to introduce enhanced fees to commence certain proceedings for the recovery of money in the courts of England and Wales. It prescribes a fee of 5% of the value of the claim for all claims with a value of £10,000 or more, up to a maximum fee of £10,000. It also provides for a discount of 10% for applications initiated electronically via the secure data transfer centre or Money Claim Online.
The draft order also fixes three fees that are above cost: a fee for an application for a divorce; a fee to fix a hearing of a case allocated to the fast track; and a fee for a multi-track hearing. The fees have come to be at a level above cost due to the adoption of a new mechanism for modelling the way that cases progress through the courts and the new methodology for apportioning costs to those cases, which were first used to describe the court fee reforms introduced on 22 April last year.
Let me reassure hon. Members that the fees are not being increased. We made it clear, however, in response to the consultation on fee increases to achieve cost recovery, that we could see no justification for reducing any fee in the current financial climate. The fees are therefore being remade at their existing level, explicitly using the power to prescribe enhanced fees.
The normal rule for public services is that fee income should cover the full cost of delivering such services. For many years, the civil and family courts have operated on that basis, but section 180 of the Anti-social Behaviour, Crime and Policing Act 2014 provides the Lord Chancellor with a power to prescribe fees above cost. In December 2013, in a consultation paper, we set out our proposals for using the power. On 16 January we published the Government response, setting out the fee increases that we intended to take forward. The draft order gives effect to those fee increases.
The principal reason for it is financial, to ensure that the courts are properly funded. They fulfil a crucial function in our society, ensuring access to justice for those who need it, so it is important for the courts to have the necessary funds. A strong economy is a prerequisite for effective and affordable public services. Hon. Members are well aware of the desperate state of public finances inherited by the Government. We made economic recovery
our first priority, which has meant having to take difficult decisions. There can be no exceptions for the courts. The challenge, as with many other public services, is to do more with less. We will invest more than £375 million over the next five years in the courts on much-needed modernisation. The investment is expected to release long-term sustainable savings worth more than £100 million per annum.There is, however, only so much that can be done through cost-efficiency measures alone. In the current climate, we must also look to those who use the courts to contribute more towards their running where they can afford to do so. We sought views on our proposals in a public consultation and we have taken the time to consider the responses carefully. In view of some strong opinions, we decided not to take forward some of our original plans—we are not increasing the fee for a divorce and nor are we taking forward either of the proposals to raise fees for commercial proceedings—but the measures in the draft order will, we estimate, generate £120 million per annum in additional income. Every £1 collected must be retained by the courts.
Fee increases will never be welcome or popular, but I am sure that those who choose to litigate in our courts will continue to recognise the outstanding levels of service and excellent value for money that we offer. I commend the draft order to the Committee.
4.38 pm
Mr Andy Slaughter (Hammersmith) (Lab): It is a pleasure to be here under your chairmanship this afternoon, Sir Edward, to discuss this significant and important statutory instrument.
Let me start with what we agree or, at least, do not disagree with the Government on—that should not take me too long. It is of course reasonable to charge some small fees for commencing proceedings in the civil and family courts that move us towards full cost recovery, which was the original Government proposal. Indeed, we do not find it obnoxious that in some cases the fees should be more than full cost recovery. The supposed reason given by the Minister was prudent dealing with the public finances. The important point, however, is surely that in implementing any particular scheme, we do not fall foul of the principle that we should not impede access to the courts—access to justice—by doing so.
There is therefore nothing fundamentally objectionable in the Government’s basic premise that we should look at whether further sums of money can be raised by increasing court fees, even if that involves in some cases—as the Minister has indicated—some fees already going to more than full cost recovery. I want to be clear on that, so that the Minister can respond as clearly as possible to the objections that I shall make.
We have a tailor-made example of how things can go wrong: the Government’s introduction of fees for employment tribunals. There are two questions to ask: does the introduction of fees, or an increase in fees, impede access to justice; and, secondly, does that policy achieve its purpose, which in this case is to raise a substantial amount of public money, as £120 million a year is not to be sneezed at? Those two matters are not discrete but linked, because if a large increase in fees discourages litigation, including meritorious cases, the
Government will not collect the sums anticipated. The impact assessment highlights an outside risk that the fall in demand could be as high as 10%, but on what basis were the low, medium and high-risk scenarios determined for how fee income might reduce if litigation is discouraged? When those figures were being calculated, was account taken of compensatory savings due to a lesser burden on courts?I am afraid it seems that there is little evidence to back up the proposal and that that not much work has gone into it, and the best illustration of that comes from the Government’s impact assessment. I do not want to be rude, but that assessment is not very good. It says:
“The aim of enhanced fees is…to protect access to justice by ensuring that the courts and tribunals are adequately resourced”
“to reduce the overall taxpayer subsidy for HMCTS”—
I have dealt with those points. Under the heading “Key assumptions”, the assessment states:
“It has been assumed that fee changes will not affect court case volumes. Sensitivity analysis considers a ‘low’ 2 per cent reduction…a ‘medium’ 5 per cent reduction, and a ‘high’ 10 per cent reduction…It has been assumed that there are no detrimental impacts on court case outcomes nor on access to justice from any increase in court fees.”
What is the basis of those assumptions? The Government cannot simply make those statements and say, “Let’s press on regardless of what the outcome will be.”
Let me quote paragraph 19 of the evidence base in the impact assessment because the measure’s critics have principally highlighted two groups: small and medium-sized enterprises that sue to recover money that they are owned; and litigants in personal injury cases. The paragraph states:
“Individuals and small business participating in published external research conducted on behalf of MoJ by Ipsos Mori tended to view going to court as their only remaining option (having exhausted other possibilities) and, as such, emotional motivations tended to be their primary reason for taking their case to court. Users with legal representation tended to have little awareness of the costs, including court fees, and typically viewed court fees as a low proportion of their overall costs.”
That is nonsense. Is a small business that takes the difficult decision of commencing litigation to recover a substantial sum that it is owed really acting on “emotional motivations”? Does it really not care what the court fee is? Even if the Minister is right and the court fee is a relatively small amount—it is stated that it could be as low as 1% of a “typical” personal injury or commercial claim worth more than £300,000—it certainly will not be after the fee increases have been introduced. So rather than saying that at the moment it is not a big consideration—which I am not sure is right, anyway—what should be considered is whether, with these increases of up to 600% in fees, it will be a determining factor in access to justice in the future. The work simply has not been done.
The impact assessment states that
“fees ranked as lower in importance than other considerations such as ‘getting justice’.”
Unless the Minister is able to enlighten me, that is comparing apples and pears. Of course someone goes to court to get justice, but one of the determinants of going to court is whether they can afford to do so in the first place. I have been provided with a lot of case histories—for example, in professional negligence cases
—and I am sure the Minister has had these as well. It could be somebody who has been poorly advised and lost their pension. That may be most of the income that they expected in later life. If they are now being asked to provide 5% of the assessed value of that as a fee, that could be up to £5,000 or £10,000, which they are simply not able to pay.If the Minister intends to go ahead with such a formulation, we need much clearer answers. We are talking about people who may have small businesses, people with life-changing personal injuries, or people who suffer professional negligence. Those are the typical cases likely to be affected by the scheme, and that is why we raise concerns. I could say a lot more, but I will limit myself to four further points that I want the Minister to comment on.
First, why this particular scheme? It sounds straightforward. We are not changing the below-£10,000 fees, partly because they might have to be reduced, which the Minister does not want to do, and partly because of the small claims limit, which I am sure is a factor in that. We are not increasing those for the highest value cases—there is a cap of £10,000—but in that important middle group the fee will be 5% of claim value. In some cases, that will mean only a relatively modest increase in the current fee. In other cases, as I have said, it will mean an increase of up to 600%. That cannot be right.
I appreciate that simplicity can be valuable, but if it has the disproportionate and unjust effect of some people seeing a 600% rise in their fees, does the Minister really think that he has got that right? I think he said previously that 90% of litigants would not be affected, although I am not sure what his rationale for that is. Perhaps he will explain it. May I suggest that he goes back very quickly and looks at the merits of the scheme and whether it can be said to be just? I will come on in a moment to how he may have to do that, whether he wants to or not.
My second point is on consultation. It cannot be said that there has been no consultation. Indeed, there were two. There was a consultation in December 2013, which had two responses from the Government: the first in April last year in relation to full cost recovery and the second in relation to the current proposals in January this year. It is right to say that the bulk of responses, which were authoritative, were hostile to the proposal. It is right also to say that the statutory consultees were consulted last December, but important consultees, including the professional bodies, were not. The Minister might want to say something about that.
The statutory consultees were also not in favour of the scheme. Given the clear importance of this to the conduct of litigation, particularly in relation to the professional bodies, will the Minister explain why they were not further consulted at that stage? I am sure the Minister is familiar with the quote from the Regulatory Policy Committee, which said in response to his consultation document that it was
“supporting evidence or discussion of the risk”
involved. I think that can be said of the impact assessment as well. It all points to something that is simply cost-driven. A sum of money has been set—£120 million—and the
Government have said, “How do we raise that? We will come up with a scheme and not worry about the consequences.”There was some good coverage in the media last week about the paper by Richard Susskind on online resolution, with which I am sure the Minister is familiar. We are likely to move towards more online resolution of cases. In the near—let alone medium-term—future, we are likely to have to look at ways of trying to resolve disputes that are cheaper and easier but still protect access to justice, even for relatively substantial amounts of money, between £20,000 and £40,000. Nothing in these proposals gives even a nod towards ways of making the system simpler and cheaper for all parties—not just the Government, but litigants as well—while protecting that important access to the courts. Has the Minister thought about that?
Finally, the Minister will no doubt have had a chance to read the letter before action from Kingsley Napley on behalf of the Law Society, the Bar Council, the Chartered Institute of Legal Executives, the Association of Personal Injury Lawyers, the Forum of Insurance Lawyers and so on—leading professional bodies—in relation to this proposal. I appreciate that he may have just seen it, but I am sure he has read it. He may want to respond to it today or he may feel, on the basis of not having legal advice here, that he does not wish to do so. He could at least give a general indication of how he intends to respond.
I am impressed that the section of the letter before action dealing with the statutory framework— paragraph 25—begins:
“Section XXIX of Magna Carta 1297 provides so far as is material: ‘We will sell to no man, we will not deny or defer to any man either Justice or Right.’”
I do not often see Magna Carta quoted in letters before action, but it should be a little wake-up call for the Minister. I did not see him at the Not the Global Law Summit earlier today, when I was listening to the excellent speech from my hon. Friend the Member for Kingston upon Hull East. It is a pity that the Minister was not there, as he would have heard a bit more about Magna Carta and the way that justice must be accessible and not priced out of the market. If he looks at the grounds of challenge that the professional bodies have put forward, he will see that they include the fact that enhanced fees are
“not required to fund civil courts services because the income now generated through fee increases broadly covers the full costs of the service.”
Ground 2 is on rationality and there are several grounds resulting from consultation.
I would like a full response to the points set out in that letter, but I am not optimistic enough to think that I will get that in the Minister’s response today. No doubt the Government’s own solicitors will respond to the letter in due course. The fact that the majority of, if not all, the professional bodies that deal on a daily basis with the conduct of litigation are so concerned about these proposals should give the Government pause for thought.
I do not believe that this scheme will be in operation in two years’ time. That does not mean that additional money will not be recovered: it means that I think the
scheme is probably unworkable. Rather than voting against it today, I would like an undertaking from the Minister that that it will be reviewed at a very early stage in the next Parliament were he to be in government, and I also give that undertaking if Labour is in government.Will the Minister admit that the two risks I have put forward are genuine risks? The evidence from the employment tribunals service, where we have seen an 80% fall in cases being issued in the short period since the fees regime was introduced, should ring alarm bells in terms of what may happen, although I do not believe that these changes will be as serious. Employment tribunals incurred no fee, but a substantial fee was introduced and imposed on people at a particularly vulnerable time, when they are likely to be without income. Nevertheless, the effect has been so dramatic in that instance that there must be a risk here that meritorious claims will not be pursued and will then be a burden on the public finances. If serious personal injuries are not compensated through insurers, employers, public authorities or whoever, the burden—the cost to the NHS and so forth—often falls on the state. I do not believe that any work has been done on that possibility, or that the proper risk assessments have been carried out. At the very least, we ask the Government to say that if they are in that position—I hope and expect that they will not be—there will be an early review. That probably means within six months; if the figures are not available, it certainly means within 12 months.
If the Minister is correct that it is possible to raise additional sums of public money without affecting access to justice, I will be the most pleased person here. However, I do not think that will be the outcome of the fee increases. We are likely to see a drop-off in litigation, and not for the right reasons. I will close on that point, but I want the Minister to give as full a response as possible to the points I have made.
4.56 pm
John Hemming (Birmingham, Yardley) (LD): It is a pleasure to serve under your chairmanship, Sir Edward.
Some people have spotted that we sit on Delegated Legislation Committees and have started lobbying us, which is helpful. I must declare an interest, because I work with Justice for Families. It is not really affected by this change, although I ended up paying a court fee for the Latvian Government earlier today, which I hope to get back from the Latvian Minister for Justice when I meet him later this week.
I have a lot to do with court fees from time to time, and I tend to deal with litigants in person. Many of the people I deal with are on means-tested benefits, so they do not pay court fees at all and there is a big jump when they come off means-tested benefits and have to pay court fees. I share the concerns about the good old Magna Carta 1297—as everybody knows, Magna Carta 1215 did not last very long, and the one that is in force is 1297. Clause XXIX states:
“We will sell to no man, we will not deny or defer to any man either Justice or Right.”
It would be interesting to see the outcome if this proposal were taken to judicial review. Previously, the idea of charging fees was taken to judicial review, and the conclusion was that they are administrative fees. The Opposition said that they would like to see a review
of the process, and we need to look more widely at the issue of access to justice. If the court fees are still only a small proportion of the total legal cost because the advisers’ fees are so much more than the court fees, it appears that the proposal would not have much of an effect. I worry about what will happen when people come off fee exemption and start having to pay full fees. I ask the Government, from the perspective of access to justice, to conduct a review into the assessment of people’s ability to pay fees—Mr Slaughter: I am grateful to the hon. Gentleman for making that point. I alluded to it, but did not raise it in those terms. I also ask the Minister to address that matter. Again, the impact assessment says glibly that the remission scheme introduced in 2013 will stay as it is. It really must be reviewed in the light of these proposals.
John Hemming: The point about the proposals is that the fees vary according to the size of the claim, but not according to the means of the individual making the claim. In terms of access to justice, that is the key concern. I deal a lot with litigants in person, for whom that is the main part of the claim. For people who are not litigants in person, the legal costs tend to dominate the legal transactional costs, so this is less of an issue. Access to justice remains important, and I ask for assurances from the Minister that there will be an early monitoring review of the effects of the changes.
4.58 pm
Glenda Jackson (Hampstead and Kilburn) (Lab): I would be grateful if the Minister could provide more detail about what is contained within the sureties with regard to divorce.
Anecdotally, from looking at my constituency caseload, the costs of a divorce are not essentially in the termination of the marriage. The length of time that is taken over a divorce has to do with determining the division of property, the amount of child maintenance and who has custody and control of the child. Those issues not only tend to take a long time in a court, but require constant returns to court. If possible, I would like the Minister—his opening statement was quite consoling in many ways—to define what is contained within divorces and what is outside. I am pretty certain that fine tuning takes place when costs are defined. We know that applications for legal aid have been cut off pretty widely, so who pays the fee when the case is eventually settled, if indeed that happens? If the Minister can give us details about those points, I, for one, will be grateful.
5 pm
Mr Vara: I am grateful that the hon. Member for Hammersmith accepts the general premise behind the order, although I take on board his comments and questions, as well as those raised by the hon. Members for Hampstead and Kilburn and for Birmingham, Yardley.
There have, of course, been critics of the measure, but we believe that the impact assessment’s assumption that there will not be much change is reasonable. Most claims will be unaffected by our plans. A fee will be proportionate to the sum in dispute, and court fees represent a small proportion of the costs of litigation in
the normal course of events. However, I assure hon. Members that we will monitor the data on case loads and keep the position under review.There is no evidence to suggest that SMEs will be disproportionately affected by the measure. We have heard about the critical issue of access to justice, so it is important to remember that 90% of claims will be unaffected, and that even for the remaining 10%, fee remissions—waivers—will be available. The fees will be proportionate to the sums in dispute, and we must accept that court fees represent a small proportion of the overall cost of litigation.
Karl Turner (Kingston upon Hull East) (Lab): Will the Minister explain how he reached his assertion that 90% of litigants will be unaffected, because the figure seems to have been pulled from thin air?
Mr Vara: Clearly we have carried out research, and we have reached that conclusion on the basis of our work. The hon. Gentleman might not be happy with that but, as I said, we will monitor the situation. People will be able to judge for themselves by standing in a courtroom and seeing how many cases are above £10,000 and how many are below. The figures have not been picked out of the air.
Karl Turner: It is not good enough, frankly, for the Minister to say, “Well, we’ve done some work and that’s the figure we’ve come to.” Will he tell the Committee what work the Government did that would explain their assertion that 90% of litigants will be unaffected?
Mr Vara: The standard process by which civil servants arrive at such figures is no different now than it was when Labour was in government. The figures for which he is asking were not available when his party was in government. They are not being cited in Committee willy-nilly; they were arrived at after proper assessment. The normal rule is that costs, including the fee, will be recoverable from the opponent if the claim is successful.
Karl Turner: I am genuinely confused. It is not good enough for the Minister to say, “Look, 90% of litigants will not be affected and that’s the end of the matter. We’re not prepared to tell you how we worked that statistic out. Hard luck; keep guessing.” That seems ridiculous.
Mr Vara: It might seem ridiculous to the shadow Solicitor-General, but I would have assumed that he had the basic knowledge that such information would be available. The information comes from the management information system in Her Majesty’s Courts and Tribunals Service, and it is currently the case that 90% of claims are for less than £10,000.
Mr Vara: There is no point in the hon. Gentleman chuntering away. If the previous Labour Government had not created the economic mess that we are now in, which has left us to take the difficult decision—[ Interruption. ]
The Chair: Order. Let us all calm down now so that the Minister can get on with his speech.
Mr Vara: Thank you for that direction, Sir Edward, but I think it is always useful to point out what the cause of a problem is and why the Conservatives and Lib Dems are having to sort it out now.
The employment tribunals experience was mentioned by the hon. Member for Hammersmith. We will be reviewing that, but it is too simplistic to quote the figures. He will be aware—or ought to be aware—that the trend for the number of cases in employment tribunals had been going down. The economy has certainly been improving, and there were therefore fewer cases arising for employment tribunals. Also, many people who were simply trying it on on a speculative basis are taking a second look and saying, “Maybe I’m going to lose this, so I will not waste everyone’s time.”
Mr Slaughter: I do not think the Minister can say things such as that. If he has evidence, what percentage of cases were “trying it on”? It is deeply insulting to people. People do not rush into litigation readily. If people have been discriminated against and lost their job, and then have to go through the doubly stressful process of going to court, it is insulting to describe that, with no evidence at all, as “trying it on”.
Mr Vara: All I would say to the hon. Gentleman is that he is being rather simplistic. I am disappointed that as a barrister he takes the view that he does, because he knows full well that there are such people out there. As Members of Parliament, we get them in our surgeries, and those who have practised law would certainly be aware of those who say, “I know it is going to be tough and I know that it is going to be difficult, but I would like to try and see how far it goes. He might pay up without going to court.”
Returning to the issue at hand, the hon. Gentleman is aware—
John Hemming: Having studied the issue for some time, I think a computer database existed within the Ministry prior to the election of the coalition Government, so they were able to work out what sorts of cases were going through at that stage. However, is the Minister wiling to review the cliff-edge effect of fee remission, whereby, once someone goes above a certain means, they pay full fees?
Mr Vara: As I have said, we will be reviewing the matter. There are no limits on what we will be reviewing. Yes, of course, the whole issue will be looked at. As far as the pre-action letter is concerned, which the hon. Gentleman mentioned, we have received a pre-action letter on behalf of various parties, including the Law Society and the Bar Council, which seek to challenge the decision to introduce enhanced fees. We will respond in accordance with pre-action protocol. The hon. Gentleman would not expect me to say anything more than that.
Magna Carta was mentioned. If access to justice was an issue in this country, we would not have had the Global Law Summit today in the Queen Elizabeth II centre across the road, with 100 justice Ministers and attorneys-general from 110 jurisdictions. They are here because they recognise the value of British law over the centuries and its continuing importance.
I am grateful to hon. Members for all their contributions. What we have before us is a sensible measure. It is also a recognition that we are in the economic position that we are in because of the previous Government’s mishandling of the economy, and we would not be introducing this measure if we genuinely believed there was a serious risk that it would reduce demand or damage our legal services.
That the Committee has considered the draft Civil Proceedings and Family Proceedings Fees (Amendment) Order 2015.