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House of Lords

Monday, 11th March 1996.

The House met at half-past two of the clock: The LORD CHANCELLOR on the Woolsack.

Prayers--Read by the Lord Bishop of Ripon.

Legal Aid Expenditure

Lord Boyd-Carpenter asked Her Majesty's Government:

    What was the expenditure on legal aid in the last year, and what was the largest individual item.

Lord Chancellor (Lord Mackay of Clashfern):My Lords, the net expenditure on legal aid in 1994-95 was £1.299 billion. The largest single item of expenditure identified in that year was a payment to solicitors of £4.57 million made in respect of a lead case in a childhood leukaemia multi-party action. However, the largest single item of expenditure relating to a single case was a payment of £1.02 million to solicitors acting on behalf of a defendant involved in a fraud trial which arose out of the investigation into the BCCI banking fraud.

Lord Boyd-Carpenter: My Lords, I thank my noble and learned friend for that extremely interesting, if depressing, Answer. Can he possibly tell the House whether steps are now being taken to reduce the expenditure on legal aid?

The Lord Chancellor: My Lords, steps are being taken to control further expenditure on legal aid. I have already indicated some of those to your Lordships. The most important is the possibility of taking into account the circumstances of those who may assist persons applying for legal aid to maintain a lifestyle which seems higher than the assets and income that they possess. The second aspect is a new unit to investigate in more detail the circumstances of those whose financial affairs seem to be complicated and who are applying for legal aid.

Lord Irvine of Lairg: My Lords, can the noble and learned Lord confirm that his department's latest estimate is of an underspend of £65 million this year on the legal aid budget? Can he further confirm that that is the third consecutive substantial underspend against the estimate's provision and therefore any assertion that the legal aid budget is out of control is without foundation?

The Lord Chancellor: My Lords, legal aid expenditure is rising. However, it is true that the forecast that we made to date this year indicates an underspend on this year's figure. That is a sign that the controls are effective; it does not mean that the budget itself is in any way being reduced. I believe that the efficacy of the control system is being demonstrated.

Lord Ironside: My Lords, can my noble and learned friend say what proportion of that total was spent on

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personal injury cases? Can he say also how much out of that amount of money was involved in successful litigation and whether any of that was recoverable as a result?

The Lord Chancellor: My Lords, I do not have the precise figures to mind. But quite a high proportion of the expenditure in personal injury actions is recovered by the Legal Aid Board because success is normally attended by an order for costs. As I mentioned in my original Answer, the largest single item of expenditure was in respect of a childhood leukaemia multi-party action which is in the nature of a personal injury action of a special type. However, that case was unsuccessful and therefore would not have given rise to a costs order and recovery.

Lord Cledwyn of Penrhos: My Lords, does the noble and learned Lord agree that when legal aid was introduced over 40 years ago the object was to help the poorer sections of the community? Now that objective has completely vanished and in many cases it is helping extremely dubious people.

The Lord Chancellor: My Lords, the intention of the scheme is still to help those from the poorer sections of the community. The same rules are applied to everyone. However, experience has shown that in some circumstances a fuller investigation of some people's financial affairs is required before a final determination is made. The object of the scheme remains very much as the noble Lord described it.

Lord Strabolgi: My Lords, in view of the noble and learned Lord's proposal that legal aid should be denied to people who own a house worth more than £100,000, does that figure include the mortgaged element? Also, will the noble and learned Lord reconsider that figure since in relation to house property in southern England it appears to be quite unrealistic?

The Lord Chancellor: My Lords, it is a question of whether it is right across the country to have a figure of that sort. The £100,000 refers to the equity in the house. I should have thought that a figure of £100,000 as a disregard is reasonable as a way of trying to ensure that the legal aid scheme serves the interests of those who need assistance.

Lord Boardman: My Lords, is not the main sufferer in the legal aid system the successful defendant who all too often is unable to recover any part of his costs?

The Lord Chancellor: My Lords, this is a matter that I have addressed in the Green Paper because it is seen as a cause of injustice that a successful defendant may not be able to recover his costs. The normal way in which this is applied means that, where there is no contribution, on the whole there is no cost. Yet the person in question might have a house of substantial size. This issue requires to be re-examined and the consultation on the Green Paper will enable that to be done.

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Economic Growth

2.43 p.m.

Lord Ezra asked Her Majesty's Government:

    What are their latest estimates of economic growth in 1996.

The Minister of State, Department of Social Security (Lord Mackay of Ardbrecknish): My Lords, the Government's latest forecast is set out in the November Financial Statement and Budget Report, and shows the economy growing by 3 per cent. in 1996.

Lord Ezra: My Lords, I note the optimistic tone of the noble Lord's response. However, will he accept that the present rate of growth is not at that level, and if this rate is to be achieved over the year as a whole, there will have to be a surge in growth in the latter part of the year? Will he also accept that it is unlikely to be export-led, as our main export markets, particularly on the Continent, are going through a difficult economic period? Moreover, will he accept it is unlikely to be investment-led because of cut-backs in government capital investment and manufacturing and construction investment, and therefore it is likely to be consumer-led? Will the noble Lord accept that in those circumstances, we will be running the risk of once more seeing some overheating in the economy?

Lord Mackay of Ardbrecknish: My Lords, the noble Lord will have to decide whether we shall hit the 3 per cent. growth target or whether we shall overheat the economy. Of course our GDP growth has slowed down, as it has done elsewhere in Europe; but the fundamentals are in place to ensure that good growth will continue. I am sure the noble Lord read Saturday's newspapers where he would have seen the very encouraging headline in the Guardian:

    "'Bumper year' spells poll gloom for Labour.

    Most economists back Clarke's forecast of strong growth, lower inflation and higher prosperity in 1996".

Viscount Chandos: My Lords, does the Minister not also recall a headline from today's Financial Times in which the Government are referred to as having apparently abandoned their safety first policy on inflation in their interest rate reduction in order to achieve the projected rates of growth about which so many noble Lords on this side of the House are sceptical?

Lord Mackay of Ardbrecknish: My Lords, I am not entirely sure how one satisfies the Opposition or indeed the Shadow Chancellor. Week by week they call for lower interest rates; but the moment my right honourable friend the Chancellor lowers interest rates, they then complain. We are in no doubt that the level of inflation is set to continue its current trend which is well within the targets set out by my right honourable friend the Chancellor. The cut in interest rates on Friday is a sensible way to help everyone in the economy, particularly house owners.

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Baroness O'Cathain: My Lords, can my noble friend confirm that growth can indeed be led by both investment and consumer expenditure through this prudent, managed and consistent reduction in interest rates?

Lord Mackay of Ardbrecknish: My Lords, my noble friend is quite right. A number of factors will help this year, including the reduction in taxes which will come into play in April and the fact that TESSAs will be maturing. In particular, as a result of the three interest rate cuts by the Chancellor and the Governor of the Bank of England, the payment for an average mortgage of £33,000 will have fallen by £150 a month since the high point in October 1990. That represents a great deal of extra consumer spending.

Lord Brabazon of Tara: My Lords, as well as having the lowest interest rates, and particularly mortgage rates, for very many years, can my noble friend tell me how unemployment in this country compares with unemployment in the countries of some of our European Union colleagues?

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