54.We begin our consideration of the impact of fees in relation to employment tribunals, where evidence is clearest. We are aware that a judicial review brought by Unison against the fees has proceeded to the Supreme Court, where a hearing is pending. In accordance with the principle of comity between Parliament and the courts, we have not considered the specific arguments which have been at stake in that case: our consideration of the issues is based solely upon the evidence we have received.
55.The Government launched a post-implementation review of the fees on 11 June 2015. This review was intended to assess the effect of the introduction of fees against the following three objectives (expressed in the Government’s words):
The full terms of reference of the review are given at Annex B to the Ministry’s original memorandum to this inquiry. The terms of reference stipulate various categories of data and evidence which the review is required to gather to support its analysis, and they require the review to take into account other factors which may have influenced trends in the numbers of ET cases, such as the impact of improvement in the economy and changes in employment law, as well as whether there has been a reduction in weak or unmeritorious claims. Finally, the review is required to “make recommendations for any changes in the structure and level of fees for proceedings in the Employment Tribunals and the Employment Appeals Tribunal, including recommendations for streamlining procedures to reduce costs”. When the review was announced the Government indicated that it would be completed by the end of 2015 but at the time of agreement of this Report it had not been published.
56.According to the minutes of the Employment Tribunals National User Group meeting on 7 October 2015, a Ministry official, Bill Dowse, reported that the review was then “with the relevant Minister… . Although there was no fixed timetable, it was hoped that the Minister’s position would be known by the end of the year.” In response to a freedom of information request made in December 2015 asking to be provided with a copy of the review, the Ministry, declining the request on 29 December 2015, said that the minutes of the 7 October meeting did not record that Mr Dowse had said the review had been completed, and added: “The review is currently underway and will report in due course”. When Mr Vara gave evidence to us on 9 February 2016, we pressed him on when the review would be published. He said:
I hope it will be sooner rather than later. It is well under way. I do not want to commit myself to a specific date and find that we overshoot it because I have been over-optimistic. I can, however, assure the Committee that this is something that I am personally following through, and I am urging officials to make sure that we have some sort of announcement as soon as we possibly can.
57.Our Chair wrote to Mr Vara on 31 March pressing him to publish the review by 22 April, or alternatively to provide a copy to the Committee in confidence. Dominic Raab MP, Parliamentary Under Secretary of State at the Ministry of Justice, who has taken over ministerial responsibility for policy on courts and tribunals fees from Mr Vara, wrote back on 25 April, declining to publish or provide a copy to the Committee. He said in his letter “the review has taken much longer than originally estimated”. He also said he needed to secure the collective agreement of Ministerial colleagues to the outcome of the review and any proposals he might have to adjust the scheme. The Government has not said that the Unison judicial review has had any delaying influence on publication of the review, so we assume it has not.
58.It will be evident from the chronology in the preceding paragraphs that there are some inconsistencies in the Government’s account of the progress of its review into the impact of employment tribunal fees. It is difficult to see how a Minister can urge his officials to progress a review which they apparently submitted to him 4 months or more previously. And even if Ministers may now be discussing how to proceed on the basis of the review’s findings, and recognizing that Departments other than the Ministry of Justice have an input into this, there can be no compelling reason to withhold from public view the factual information about the impact of the introduction of employment tribunal fees which will have been collated by the review. There is a troubling contrast between the speed with which the Government has brought forward successive proposals for higher fees, and its tardiness in completing an assessment of the impact of the most controversial change it has made. Such assessments are crucial in enabling judgements to be reached on similar proposals, such as those issued in April 2016 on greatly increased fee levels in the Immigration and Asylum Chamber.
59.We find it unacceptable that the Government has not reported the results of its review one year after it began and six months after the Government said it would be completed. On the basis of Mr Vara’s evidence to us on 9 February, we assumed that the review would be published shortly and we put on hold our preparation of this report to enable us to take account of the Government’s review. Following receipt of Mr Raab’s letter of 25 April we decided we could wait no longer to finalise and agree our own report. We have not appreciated being strung along in this fashion; it has been detrimental to our work and occasioned public speculation about the reasons for the delay in production of our own report; and we view this as unhelpful and not good practice. As is often the case in inquiries of this kind, the evidence we have received has been preponderantly critical of the Government’s position. It is impossible for us to gauge whether the case in support of the Government’s policies would be strengthened by the outcome of its review, because they have not yet published it.
60.If our consideration of the impact of employment tribunal fees does not have the benefit of sight of the Government’s review, there is a lot of information on the subject which has been provided to us in evidence or is otherwise available from public sources.
61.The introduction of issue fees and hearing fees for claimants in employment tribunals as of 29 July 2013 led to an undisputed and precipitate drop in the number of cases brought, approaching 70%. The number of single cases brought declined by about 67% to around 4,500 per quarter from October 2013 to June 2015; and the number of multiple cases declined by 72%, from 1,500 per quarter in the year leading to June 2013 to around 400 per quarter since October 2013. Taking into account relevant changes in employment law and an underlying trend predating the introduction of fees showing an ongoing gentle reduction in cases being taken to tribunal, the timing and size of the drop in the number of cases brought places the onus of proof on those who would argue that the drop is not primarily attributable to the introduction of fees.
62.The startling drop was not predicted by the Government. In oral evidence to us, making the case that the effects of fees had not been as dramatic as the figures suggest, Mr Vara placed considerable emphasis on the fact that in the year beginning in April 2014 83,000 early conciliation cases had been dealt with by ACAS. Early conciliation was introduced on a voluntary basis on April 2014, and became mandatory on 5 May 2014. Mr Vara said
That is 83,000 cases which, alternatively, might well have ended up before the employment tribunal.
63.Others gave a very different analysis of the significance of the number of early conciliation cases dealt with by ACAS. The South Eastern Circuit noted that ACAS had recorded that, out of 60,800 early conciliation notifications made in the period April to December 2014, 15 per cent were settled and 22 per cent progressed to an employment tribunal claim; and that in an ACAS survey 26 per cent of claimants who did not progress their cases said they did not do so because they found the fees off-putting. If, of the 63 per cent who did not progress their claim in April to December 2014, a similar proportion were put off by fees, the South Eastern Circuit suggest that about 13,245 people a year were being deterred by fees from making a claim.
64.We heard a considerable amount of evidence that, far from encouraging early conciliation and resolution of disputes, employment tribunal fees were having precisely the opposite effect, because there was no incentive for an employer to settle in cases where the claimant might have difficulty raising the fee. Sir Ernest Ryder, Senior President of Tribunals, told us
There is clear behavioural material as to the way in which respondents are behaving. They are avoiding engagement in conciliation processes and waiting for the next fee to be paid, which means that settlement opportunities are being lost.
Kate Booth, a partner at Eaton Smith LLP, who represents both employers and employees, said
When I advise an employer, why would they engage in early conciliation? You wait for the employee to pay a fee. Ultimately you want to call their bluff—are they prepared to put their money where their mouth is?—so you sit back and see whether they do it.
65.We considered the extent to which deterrence of vexatious claims constituted an objective of the Government in introducing employment tribunal fees in paragraph 37 above. Although most accept that some claims fall into that category, there is no consensus on the proportion of claims which do. Rebecca Hilsenrath of the EHRC told us there was no evidence of the extent of the problem; when pressed to give an estimate, Sybille Raphael of Working Families said that vexatious claims “may be less than 5%, even less than 2%”. Kate Booth said that from her analysis of 185 queries from employees she had received between May and August 2015, she concluded that only in a very small number of cases were people pursuing cases they believed were without merit. Numerous witnesses argued that despite the steep fall in the overall number of claims brought since the introduction of fees, it was not the case that the proportion of cases in which the claimant was successful had increased, so fees had deterred claims which would potentially have been successful to roughly the same extent as potentially unsuccessful claims.
66.A different perspective was provided by the Federation of Small Businesses: in their supplementary written evidence, they said:
The FSB supports the rationale behind Employment Tribunal Fees and welcomed their introduction. Previously, an employment tribunal could be seen as a ‘no cost’ option by a disgruntled or former employee in the absence of fees. Under a fee-paying regime, this is no longer the case. Although it is difficult to make firm conclusions based on the available data, the number of speculative claims is likely to have decreased.
Peninsula Business Services said that
We used to be regularly involved in defending claims that had no genuine prospects of success but were being pursued solely on the basis that it was known that there would be a cost to an employer in defending the matter and the hope that an economic offer to settle the case would be made.
They said that the pursuit of such claims against vulnerable respondents had had the effect of denying access to justice to those respondents, and the introduction of fees had redressed the balance. In very brief written evidence, the CBI said that business had supported the introduction of employment tribunal fees in 2013 “as a mechanism to incentivise dispute resolution outside of a tribunal and deter weak claims”. They said they looked forward to the conclusions of the Government review; and if the review concluded that access to justice had been restricted then the balance of fees and remissions should be recast.
67.The Ministry has advanced to us the case that changes to employment law and the improving economic situation, as well as a pre-existing downward trend in numbers of employment tribunals cases being brought, may account for part of the reduction in the number of cases. These may indeed be factors, but the timing and scale of the reduction following immediately from the introduction of fees can leave no doubt that the clear majority of the decline is attributable to fees.
68.We consider it is a reasonable objective for the Government to seek to reduce the number of vexatious claims through a degree of financial risk for claimants, although we note the comment of Sir Ernest Ryder, Senior President of Tribunals, that it is too soon after the changes to judge whether that objective is being met. The issue for us has been whether fees have unacceptably impacted on access to justice.
69.In coming to a judgement about the impact on access to justice of employment tribunal fees, we consider, on the weight of the evidence given to us, that Mr Vara’s heavy reliance on the figure of 83,000 cases dealt with at ACAS early conciliation to support his contention that access to justice has not been adversely affected by employment tribunal fees was, even on the most favourable construction, superficial. Those cases cannot be simplistically assumed to represent displaced cases which were settled satisfactorily otherwise than by being taken to tribunal. In many cases the existence of fees erects a disincentive for employers to resolve disputes at an early stage. The arguments presented to us by the Government in this inquiry, limited as they are for the reasons we have previously set out, have not swayed us from our conclusion, on the evidence, that the regime of employment tribunal fees has had a significant adverse impact on access to justice for meritorious claims.
70.The Trades Union Congress and Unison provided information on the differential impact that fees were having on the propensity of people to bring different types of employment claims. Their statistics, comparing cases brought in the first three months of 2013 and of 2015, showed the following reductions in the number of cases for the most common types of claims: Working Time Directive, down 78%; unauthorised deductions from wages, down 56%; unfair dismissal, down 72%; equal pay, down 58%; breach of contract, down 75%; and sex discrimination, down 68%. The Discrimination Law Association argued that reduced access to tribunals had fallen disproportionately on women and those from traditionally disadvantaged groups.
71.Several witnesses claimed that ET fees were having a pronounced discriminatory effect in relation to pregnant women and new mothers who received poor treatment at work. A survey commissioned jointly by the Equality and Human Rights Commission and the Department for Business, Innovation and Skills found that 11% of mothers were dismissed, made compulsorily redundant or driven from employment by poor treatment when others at their workplace were not. According to the Fawcett Society, pregnancy discrimination was widespread in the public and private sector, but very few women took action. Rosalind Bragg of Maternity Action said that since fees had been introduced there had been a 40% drop in claims for pregnancy-related detriment or dismissal. Sir Ernest Ryder explained some of the practical factors for women in this type of position:
If you are a pregnant woman saving for your baby—for the toys, bedding and so on—that money falls to be taken into account. All those small capital elements might prevent you from getting remission of fees in an employment tribunal case.
As well as fees, the three-month time limit to bring an action was considered by some as a factor militating against many women bringing claims.
72.Inevitably when deciding whether to bring a case to tribunal a person will weigh the cost of fees against the likely size of an award, if the case is successful. It those circumstances it might be predicted that people would be disproportionately deterred from bringing claims for low amounts of compensation. That appears to have been the case. The Council of Employment Judges told us
Many judges reported that they now hear no money claims at all. Prior to the introduction of fees money claims were often brought by low paid workers in sectors such as care, security, hospitality or cleaning and the sums at stake were small in litigation terms but significant to the individual involved. There are few defences to such claims and they often succeeded.
The Council added that there had been a particularly marked decline in claims for unpaid wages, notice pay, holiday pay and unfair dismissal, the types of cases brought by ordinary working people. In their written evidence Unison used figures for the median awards for different types of discrimination claims in 2012-13, ranging from £4,499 in age discrimination cases to £7,536 in disability discrimination cases, in support of their contention that fees constituted such a high percentage of probable awards that many claims would be impossible or excessively difficult for people to bring. A survey conducted by Citizens Advice indicated that 47% of respondents would have to put aside all their discretionary income for 6 months to afford the £1,200 needed to bring a Type B claim.
73.The categorisation of Type A and Type B claims came in for some criticism from witnesses. The more complex Type B claims include unfair dismissal and discrimination claims, and the Equality and Diversity Forum said
Charging a higher fee—or the highest fee—to those who believe they have been discriminated against adds to further marginalise those people who have a protected characteristic and deterring them from using a service.
Sir Ernest Ryder argued more generally that the classification was too simplistic, and did not match the three-part classification of “short, standard and open” used by the tribunals themselves. Pointing in particular to the range of length and complexity of cases under Type B, he said that if fees were to be levied they should be structured to match the tribunals’ own classification, “the work that the judges recognise”. We agree with Sir Ernest’s assessment.
74.Compounding the deterrent effect of fees for those wishing to bring claims, low value claims in particular, can be the difficulty in some cases of enforcing awards after they have been made. A Department of Business, Innovation and Skills study in 2013, much cited by witnesses to our inquiry, found that only 49% of successful claimants were paid in full, and 35% of them received no money at all; the proportion who received nothing was even higher in Scotland, at 46%. In cases of redundancy claims against employers of limited means, where the Redundancy Payments Service will not usually pay an employee until after a tribunal has established liability and all efforts to secure payment from the employee have proved fruitless, the RPS will not reimburse the fee if the employer is unable to. There is also some uncertainty about whether claimants are able to secure partial or full reimbursement of fees from respondents if they are successful in their claims.
75.We asked some witnesses what a reasonable level of fee for bringing a case to an employment tribunal cases would be in their opinion. Some rejected any fee in any circumstance; of those who were not adamantly opposed, Emma Wilkinson of Citizen’s Advice cited a finding of their Fairer Fees report, published in January 2015, that when people were asked what level of fees they would be willing to pay, 90% said they would not be put off by a £50 fee. We had little evidence beyond this for what might be an appropriate figure.
76.In relation to the suitability of the fee remission system for employment tribunal claimants, Employment Tribunals (Scotland) made an important point in their written evidence. They pointed out that redundancy payments, intended to cushion people during a potential period of unemployment, were counted towards disposable capital, as were other payments commonly made on termination of employment, such as pay in lieu of notice or accrued holiday pay. These factors, together with the three month limit on bringing claims to employment tribunal, meant that many claimants would have artificially inflated means at the time they were being assessed for eligibility for fee remission.
77.Our conclusions and recommendations on what needs to be done in relation to employment tribunal fees are set out in the following paragraph. We have already made clear that we do not object in principle to the raising of income from litigants through fees for bringing cases to the courts. What counts, in our view, is that a fee system should not unreasonably damage access to justice.
78.We do not have the benefit of seeing the factual basis of the Government’s review of implementation of the fees; nor do we have the resources or data to undertake economic modelling of the impact of potential changes to the fees regime. The status of our recommendations, as set out below, is therefore that they should be taken as indicating options for achieving the overall magnitude of change necessary to reinstate an acceptable level of access to justice to the employment tribunals system.
79.We recommend that the Government publish forthwith the factual information which they have collated as part of their post-implementation review of employment tribunal fees. We further recommend that—
We cannot conclusively judge if such changes would adequately address the constraints upon access to justice in employment tribunals which have been identified. Any changes brought in should therefore be subject to further review and modification as necessary.
80.We recognize that the above recommendations would have cost implications for the Ministry of Justice, but note that an increase in the number of legitimate claims would in itself bring in additional fee income, and, secondly, we stress again that if there were to be a binary choice between income from fees and preservation of access to justice, the latter must prevail as a matter of broader public policy.
81.The Ministry’s original memorandum to our inquiry said that, following the introduction of the April 2014 cost-recovery charges, there was no noticeable impact on case volume or quality, with the exception of money claims. Shortly before the increasing of various fees for money claims in April 2014, the Ministry said there was a noticeable increase in demand for these types of claims, followed by a subsequent fall in claims. They said that, for the majority of cases, volumes quickly recovered to pre-cost recovery levels.
82.In the same memorandum, the Ministry said that the introduction of enhanced fees for money claims in March 2015 again saw a significant increase in volumes of higher-value claims in the period immediately before the fee increase, followed by a significant fall following their introduction. Annex A to the Ministry’s memorandum gave figures for various types of money claims in July 2015, running at between 55% and 90% of the levels before implementation of fee increases.
83.We heard evidence from a number of witnesses who expressed concern about the potential effect of the new fees for money claims on the global competitiveness of London as a location for settlement of disputes in comparison with centres such as Dubai, Singapore and New York. The Bar Council of England and Wales, for example, while noting that it was too early to provide evidence on the impact of the March 2015 increases on London’s international competitiveness, expressed concern that London’s attractiveness to litigants would diminish as a result of increased fees. The Bar Council expressed particular concern about the disparity with the fee for issuing proceedings in New York, of as little as $400. The Judicial Executive Board cited the research commissioned by the Government from the British Institute for International Comparative Law (BIICL) to warn, in the context of the Government’s then proposal to increase the cap on fees from £10,000 to £20,000, that “the effect on business since the introduction of the enhanced fees needs to be carefully monitored and analysed prior to embarking on a fresh round of significant fee increases”.
84.Mr Vara, in contrast, interpreted the BIICL research in more sanguine fashion. He told us: “the report said [increasing fees] may have an impact, rather than it would. …. . I got the impression that a lot of people who had been questioned were simply hedging their bets by saying, “Yes, of course it may have an effect”.” Court fees, he said, were “a tiny, tiny proportion of the overall legal costs that parties incur”. When asked whether the Government would measure the impact of the fee increases on international competitiveness, Mr Vara dismissed the idea, saying that the BIICL report had measured the impact and “I am not in the business of duplicating work that has already been done very recently”.
85.The Government has not ruled out returning to its previous proposal of increasing the cap on fees for money claims from £10,000 to £20,000. It would be unsatisfactory if it were to bring forward this proposal again before undertaking an analysis of the impact of the increase which has already taken place, to 5% of the value of a claim up to a cap of £10,000. We recommend that the Government review the impact of the April 2015 increase in fees for money claims on the international competitiveness of London as a litigation centre when sufficient time has elapsed, possibly 2 or 3 years, to enable that impact to be assessed. The Government should not resurrect its proposal to double the £10,000 cap, or remove it altogether, unless such a review has been undertaken.
86.We have described (in paragraph 17 above) the background to the raising of the fee for a divorce petition from £410 to £550, following the Government’s decision not to proceed with its original proposal that it should be increased to £750. We also noted that, with the average cost of proceedings standing at £270 in January 2015, the fee of £410 was already an enhanced fee.
87.The President of the Family Division, Sir James Munby, was highly critical of the enhanced fee which has been introduced in divorce cases. He said that many family judges were of the view that an enhanced fee was wrong in principle, and he added that it was discriminatory against women, who bring the majority of divorce petitions. He continued:
There are only two things that the justice system does where you have no choice but to use the system. One is divorce; the other is probate. …. Therefore, we have a captive market….. I have to say that there is something rather unattractive—particularly if one is selling justice, which one should not be doing—in battening on to the fact that there is a captive market and that, because there is no elasticity of demand, one can simply go on putting up the fees until it becomes another poll tax on wheels.
Contrasting the cost of divorce with the cost of registering a marriage, he said
There will come a point where people start to say to themselves, “Why does it cost six, seven or eight times as much to get divorced as it did to get married in the first place?”
88.The submission of Resolution expressed similar concerns. They said
There is no justification for charging the public more than the actual cost (even as done today) of using a legal service to pursue a remedy which is their right under statute.
Resolution included as part of their evidence comments from some of their members, who are lawyers and others involved in the family justice system. One said: “I feel very strongly that an increase in the divorce petition fee is going to make it very difficult for access to justice for a large number of families”. Another said that “as a mediator and solicitor in a wealthy suburb of Manchester, it will affect the majority of my clients, who are already usually facing a huge financial squeeze and juggle month on month, as a result of separating.”
89.We share the concerns which have been expressed to us about the increase in the fee for bringing a divorce petition. £410 is already an enhanced fee: a further increase to £550, which is approximately double the cost to the courts of providing the service, is unjustified. It cannot be right that a person bringing a divorce petition, in most cases a woman, is subject to what has been characterised in evidence to us as effectively a divorce tax. We recommend that the increase in the divorce petition fee to £550 be rescinded.
90.In paragraphs 24 and 25 above we have described the changes originally proposed to fees in the Immigration and Asylum Chamber, and the new proposals contained in the April 2016 consultation paper, Cm.9261. We give another reminder that the evidence we received on this subject concerned a proposed increase in fees in the First-tier Tribunal of around 100%; the fee increases now proposed are of the order of 600%, and fees are proposed for the Upper Tribunal as well.
91.The Immigration Law Practitioners’ Association (ILPA) argued that the imposition of fees on appellants in immigration tribunals had increased barriers to access to justice. They said that the majority of applicants in cases in which immigration appeals were still permitted were
detained and/or destitute and in many cases will be facing imminent removal. Either they will be unable to pay the fee and will be denied access to justice, or they will be forced into unlawful and potentially exploitative work to pay the fee. Finding the funds to pay court fees or completing complicated applications for remission of the fees is complicated by the urgency of these cases.
In her oral evidence Carita Thomas, co-convener of ILPA’s Legal Aid Working Group, stressed that ILPA disagreed with any fees in immigration tribunals, given the inequality of arms between the individual and the state, and the principle that the state should be held to account for unlawful action. She took us through her experience of the difficulties of seeking fee remission in immigration cases, and argued that one fee remission system should apply to all courts and tribunals.
92.The evidence which we received in our inquiry on the likely impact of the proposed doubling of fees in the Immigration and Asylum Chamber caused us considerable concern. That concern has been magnified by the more recent publication of the Government’s proposals to set fees at a cost-recovery level, involving a six-fold increase in the fees currently charged. Neither do we believe that significant cost-recovery is ever likely to be realistic given the circumstances of most people who come through the immigration and asylum system. If these proposals are proceeded with, there is a danger that they will deny vulnerable people the means to challenge the lawfulness of decisions taken by the state about their immigration and asylum status. Given the experience with employment tribunal fees, we think it is unwise for the Government to have brought forward proposals for fees set at a level to achieve full-cost recovery in the Immigration and Asylum Chamber before having published its review of the implementation of employment tribunal fees.
64 , Annex B
66 , House of Commons Library briefing paper No. 7081, 13 May 2016, p 27.
68 , House of Commons Library Briefing Paper 7081, 13 May 2016; , Ministry of Justice.
70 , paras 15 and 16
75 See e.g. Q316 [Sir Ernest Ryder]
88 E.g. [Unison]
93 para 11
95 See e.g. [Unison]
96 [Law Society of Scotland]
97 [Citizen’s Advice]; [Thompsons Solicitors]
98 , House of Commons Library Briefing Paper 7081, 13 May 2016
105 Q 409
107 Q 304
110 para 8
114 Qq 252, 254
16 June 2016