3Recent changes to the LGFS
The LGFS cap on pages of prosecution evidence
26.The LGFS includes a cap on the number of pages of prosecution evidence (PPE) for which the defence solicitor receives payment under the graduated fee; up until 1 December 2017, the cap was set at 10,000 pages. Every page up to this cap raises the graduated fee that is paid. A defence solicitor who reviews any PPE over this cap may only be remunerated at the discretion of the Legal Aid Agency once the case has concluded, and at much lower “special preparation” rates that only cover time spent reading the material; Daniel Bonich estimated that this was just below £45 an hour.39
27.Because of the evolution of various forms of electronic evidence, the legislation then governing criminal legal aid payments was amended in 2012 to give discretion to include as PPE certain types of intrinsically electronic evidence (such as on CD-ROM) that had never previously existed in paper form.40 Official guidance interpreted this discretion very narrowly. In September 2014, the costs case of Napper was decided by the courts;41 this decision adopted a much broader definition of the electronic evidence that could be claimed as PPE, including mobile phone records, social media content and computer hard drives. The effect of this ruling was to reverse the interpretation given in the Legal Aid Agency’s guidance.
The MoJ’s 2017 proposals for revising the LGFS
28.In response to this judgment, and as an alternative to the additional 8.75% fee cut that Michael Gove, the then Lord Chancellor, had suspended in January 2016, the MoJ consulted in February 2017 on proposals to reduce LGFS payments for Crown Court work; proposals were also put forward to cap the fees for court appointees at legal aid rates.42 The MoJ expressed its justification for the proposed changes by explaining that it had needed to address a substantial rise in LGFS costs:
…which had occurred, despite a fall in the volume of cases, partly as a result of the Costs Judge decision in the case of Napper [ … ] which revised the interpretation of the definition of PPE, broadening its scope. The Government had never intended to pay for electronic evidence in this way. We proposed amending the LGFS to achieve a return to the types and amount of electronic evidence we pay for to the levels we saw prior to the Napper ruling by lowering the point at which we stop counting PPE and start assessing work reasonably and actually done in relation to considering any additional pages under the “special preparation” provisions … ..43,44
29.From the outset, the February 2017 proposals met with a negative reception from solicitors. In total, 1,005 responses to the consultation paper were received, the vast majority of which were from legal representatives and their professional bodies; almost all expressed opposition to the proposals. In its response to the consultation, the MoJ announced that the second intended fee cut of 8.5% for criminal legal aid would not be implemented, but it would proceed to reduce the cap on the number of claimable pages of prosecution evidence from 10,000 to 6,000. The Ministry’s Impact Assessment that accompanied its response to the consultation estimated that legal aid providers would receive around £26m to £36m less for LGFS payments as a result of reducing the cap.45 However, the MoJ claimed that around half of the firms currently holding a contract would be “unaffected by the proposal”; according to the MoJ, electronic and social media evidence is not always relevant to the case, and it is possible to carry out electronic searches rather than reading all the material.46
30.Richard Miller from the Law Society told us that he believed that the nature and mix of criminal cases had changed:
The reason [the MoJ] gave was that they felt they were paying more now [per case] than they had in the past. We think that is not correct. We think that they have read the data in a particular way that does not actually match what is going on in reality, and that there are other factors to do with changes in the case mix, with more historical sex abuse cases, for example, and perhaps the CPS is now prosecuting only more serious cases because of its resource constraints.47
31.Mr Miller also expressed the view that the MoJ’s consultation process on the new LGFS had been flawed. As the LGFS consultation process is the subject of an application for judicial review by the Law Society, we do not discuss this issue further or offer any comment on the merits of the judicial review application.
Impact of the revised LGFS on criminal defence solicitors
32.We asked Richard Miller and Daniel Bonich what concerns they had about the impact of the revised LGFS.48 Mr Bonich emphasised that the concept of case mix was one of the features of a fixed fee model; the so-called “swings and roundabouts” approach. He explained that some areas of work did not pay well, compared to the time they demanded, “but other cases perhaps [pay] disproportionately more, so, if you had a good mix of cases, you would be fine.” Mr Miller observed that, while the average claim under the LGFS scheme was around £1,500 to £2,000, many firms relied on a small proportion of higher value LGFS cases to bring in most of their income—he thought perhaps 1% of cases could account for about 30% of LGFS payments. He illustrated the financial impact of reducing the PPE cap by citing an example quoted to him by a solicitors’ firm of one of these unusually high value cases; their LGFS fee for a multi-handed murder case had previously been around £90,000, but under the revised scheme this would drop to somewhere in the region of £60,000.
33.Mr Miller also discussed some other practical implications of reducing the PPE cap for criminal defence cases:
The scheme was set up on the basis that you would be paid on the PPE and the other factors, in a system calculated to ensure that it reflected both the work done in considering that material and all the further evidence you had to get—the interviews with your client, the statements that had to be prepared and the expert evidence you had to commission. Now, for all cases where there are more than 6,000 pages, the LAA has just dropped the axe, so that work is no longer paid for.49
34.The witnesses explained to us that special preparation payments only cover the cost of reading pages above the cap; they do not cover any work arising out of this, such as taking instructions from the client or interviewing additional witnesses.50 When asked about the potential role of the “special preparation” rate in relation to PPE in excess of the new cap of 6,000 pages, Mr Miller described this as:
… a low hourly rate, relatively speaking. It is discretionary and many claims are knocked back. It is quite expensive for firms to submit those claims, so, in many cases, even when potentially it would be possible to make a claim for special prep, it is not economically viable to do so, and a lot of times firms feel that the only economic way to go is to write off that work.51
The sustainability of criminal defence firms
35.Daniel Bonich observed that the changes to the LGFS were part of a cumulative problem, taken alongside the inflationary pressures on the fees paid under the scheme and the imposition of the 8.75% cut in 2014. He commented:
The difficulty is that, when you take all of that together, even the slightest change puts the market at risk. […] Fast forward to 2018, and anything that reduces the amount that firms can claim for the work they are doing causes concern.52
36.Both Mr Bonich and Mr Miller drew our attention to the findings of analysis undertaken by Otterburn Legal Consulting, jointly commissioned by the MoJ and the Law Society in 2013, when the Government was considering introducing competitive tendering for duty solicitor contracts, together with a 17.5% reduction in LGFS fees (the first tranche of which—8.75%—was implemented the following year). The findings of the Otterburn report53 included the following:
- On average firms were achieving a 5% net profit margin in crime, although larger firms (those with 40 solicitors or more) had lower margins than smaller firms.
- The finances of many crime firms were fragile, with most of them lacking significant cash reserves or high excess bank facilities.54
- If the first reduction in fees of 8.75% were to take place before the market had any opportunity to adjust to the change, firms’ profitability could be significantly weakened.
37.Mr Miller also referred to 2013 research by the Solicitors Regulation Authority (SRA),55 which requested data from 2,000 firms based on criteria relating to the probability and impact of financial difficulty. The SRA found that 5% of these firms had a high risk of financial difficulty and 45% faced a medium risk. Generating at least 50% of a firm’s revenue from legal aid, particularly crime or family, was identified as a risk factor.56
38.Daniel Bonich considered it possible that, following the recent changes to the LGFS, firms might decline more complex cases: “you are asking them to make a choice, because they cannot continue to subsidise the lower [paying] cases”. He believed there was already some evidence of firms refusing to take on cases that did not generate sufficient payment to justify the work involved; it was also significant, in his view, that the Law Society had issued guidance 18 months previously to remind solicitors that they had an obligation to consider declining work that did not pay enough and that might consequently place the firm’s financial stability at risk. He suggested that many such cases might involve vulnerable defendants and witnesses or those with mental health problems, as well as historical sex offences, and that it would be “a real concern if firms start blanket-refusing that type of case just so they can keep the lights on.”57
39.There are also broader concerns about the sustainability of criminal defence firms, and particularly of duty solicitor schemes that operate in the police station and the magistrates’ court. In April 2018, the Law Society published a “heatmap”58 which indicated that the average age of duty solicitors was 47, and in many regions the average is higher. For example, in Dorset, Somerset, Wiltshire, Worcestershire, West Wales and Mid Wales, over 60% of criminal law duty solicitors are over 50 years old; and in Norfolk, Suffolk, Cornwall and Worcestershire, there are no criminal law solicitors aged under 35, with only one each in West Wales and Mid Wales, and two in Devon. In comparison, across the whole solicitors’ profession, only 27% of solicitors are aged over fifty.
40.In a media release accompanying the heatmap,59 the Law Society suggested that “[c]riminal defence lawyers in England and Wales could become extinct”. According to the Society, government cuts to criminal legal aid are deterring young lawyers entering the field of criminal defence work, leading to concerns that in five to ten years’ time there could be insufficient criminal defence solicitors in many regions. This would appear to throw into question the viability of duty solicitor schemes in some parts of England and Wales.
41.Richard Miller of the Law Society gave us his personal view, which was similarly pessimistic.
The situation is that the scheme is becoming threadbare, and we are on the point of the crisis really biting. What I mean by that is that, as far as I am aware, we have not yet had an example of someone in the police station who has requested a solicitor not being provided with a solicitor, but we are getting very close.60
Mr Miller gave an example of a duty solicitor scheme in Kendal where only one solicitor remained, forcing a merger with a neighbouring scheme; the consequences of doing so were that the lawyers had to travel greater distances to provide their service, making the work less economic, “so it becomes a vicious spiral”.61
42.Richard Miller described criminal defence work as a “vocation”, a factor that for many years had overcome the problems of making an economically viable career in this field.62 He now feared that young lawyers considering whether they had a future in this work would have taken a clear message from recent reductions to LGFS fees, together with criminal defence solicitors’ low morale, that there was no prospect of the situation getting better:
Lawyers are retiring. Lawyers are dropping out of the schemes. Lawyers are choosing to go off and do other types of work. Young lawyers are not coming in to replace them. The schemes will continue to shrink and shrink, and there is nothing happening to turn that trend around.63
Likewise, Daniel Bonich warned that these trends would take a long time to reverse: “[i]f we decide to fix it today, it may be years before we have qualified people entering the profession again.” He also pointed out that there needed to be at least two criminal defence firms in any area, to deal with situations where there was a conflict between two defendants, as one firm cannot represent both people.64 He was aware of more senior solicitors who were turning down offers of partnerships65 in criminal law firms, because “they do not want to have to face the burden and the risk to their own finances of subsidising a practice that may be struggling.”66
43.The evidence we have received suggests that solicitors have serious grievances about the Litigators’ Graduated Fee Scheme, given the absence of index linking for two decades, the 8.75% cut in fees imposed in 2014, and the recent reduction to the cap on pages of prosecution evidence.
44.The Law Society’s judicial review of the Government’s decision to revise the LGFS means that it would not be appropriate for us to offer comment on the details of the scheme at this point in time. However, we have received evidence indicating a worryingly high level of demoralisation among criminal defence solicitors and threats to the economic sustainability of criminal defence firms, with negative implications for the criminal justice system—especially for defendants. We return to this issue below.
45.We consider it regrettable that the Law Society has had to resort to bringing a judicial review to pursue its grievances about the LGFS. We recommend that the Ministry of Justice take urgent steps to avoid this dispute having to be resolved by the courts. Whatever the outcome of the judicial review, we consider there should be a wider review of criminal legal aid.
41 R v Napper [2014] 5 Costs LR 947
42 Under section 38(4) of the Youth Justice and Criminal Evidence Act 1999, where a defendant is prohibited from personally cross-examining a prosecution witness, the court can appoint a lawyer to cross-examine the witness(es) on behalf of the defendant. Under section 4A of the Criminal Procedure (Insanity) Act 1964, a defendant found unfit to stand trial can be represented by a court-appointed lawyer. Such work was paid at private rates, four to five times higher than legal aid rates.
43 Litigators’ Graduated Fees Scheme: response to consultation. Ministry of Justice, October 2017
45 Litigators’ Graduated Fees Scheme, final stage Impact Assessment IA No: MoJ013/2017, October 2017
46 Litigators’ Graduated Fees Scheme: response to consultation. Ministry of Justice, October 2017. Page 5
48 The revised LGFS was introduced by the Criminal Legal Aid (Remuneration) (Amendment) Regulations 2017 (SI 2017 No. 1019)
53 Transforming Legal Aid: Next Steps; A Report for The Law Society of England and Wales and the Ministry of Justice. Otterburn Legal Consulting, February 2014
54 Ie, the difference between a firm’s actual bank balance and its overdraft facility.
55 Navigating stormy seas: Financial difficulty in law firms. Solicitors’ Regulation Authority, November 2013
65 Many criminal defence firms operate as unincorporated partnerships; partners share the profits and also share personal responsibility for the firm’s liabilities.
Published: 26 July 2018