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Baroness Jay of Paddington: My Lords, I am grateful for the observations of my noble friend and his congratulations. I well remember the debate on the 50th anniversary of the Royal Assent to the National Health Service Bill which took place almost this time last year. My noble friend made his contribution from the very place where he had stood behind the then Secretary of State during the passage of that Bill. In a sense that reinforced our understanding of the continuity of the values represented by the NHS. My noble friend is right to say that as a proportion of our national income

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the NHS is an extremely cost-effective organisation. That is precisely what we wish to build upon in ensuring that the evidence-based approach to cost-effectiveness reinforces those standards.

I do not wish to be drawn too much into discussion about the semantics of the "New NHS". However, I would remind my noble friend that in the last paragraph of the Statement we talk of:

    "A new National Health Service based on its timeless principles".
I hope that he will accept that.

The question of the organisation of the general social policy as reinforcing those timeless principles is of course essential. That is what I hope we shall see developed within the health action zone pilots, where at least as much emphasis will be put on the policies about which my noble friend talks--local employment, local environmental policies and local education problems--as the delivery of NHS care. I agree with him that policies such as the minimum wage and other similar policies contribute at least as much to the health of the population as the organisation of the health service.

Lord Alderdice: My Lords, there is much in the Statement that will be welcomed by those who work within the health service, especially the warmth, enthusiasm and vigour, the words about partnership and working together, and all the assurances about how much might be available. I welcome in particular comments about health and social services working together, as they have been integrated in Northern Ireland for almost 30 years.

I wonder whether everything in the Statement is quite what it appears to be. While there is talk about ending the internal market, and no more fundholding, it seems to me that in a curious way all GPs will become fundholders. They will not have funds of course; they will have budgets. They will not work as individual practices but as large commissioning groups. I wonder whether that will achieve all the radical changes that are suggested, although I suspect that it might help a little with bureaucracy.

There are then the words about corrosive commercialism. I entirely share that view. However I see little evidence that PFI will disappear. Rather it seems likely to take an increased share of the health service's revenue expenditure in the future. The biggest issue which has not been addressed is that while we can talk about scientific excellence, quality, making everything available and ensuring that everyone has everything that they need, there are questions of resources and whether services have to be rationed.

The health service has available to it now forms of treatment and approaches which were not available when it began, or even 10 years ago. There are expensive treatments and ways of working. There are ways of working which were always available, even in the health service's heyday, but more in the south east of England than in the north of England or the other provinces. However unappealing it may be, there needs to be a national debate on what the NHS can do and some of the things it cannot do.

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I am a little disappointed that the opportunity to look at the future of the health service has not faced that issue realistically, albeit that the warmth and robustness of the presentation will give a good feeling to many of those working in the health service and those dependent upon it, at least for this afternoon.

Baroness Jay of Paddington: My Lords, I am grateful to the noble Lord for his comments, especially those on the position in Northern Ireland, which, I agree, provides an interesting model. I shall pick up on a point from the Statement which answers the general points that he made. We are determined to ensure that what counts with us is what works. We believe that what has worked has been the effective division between planning and having a strategy for local services and providing. We do not believe that that maintains anything to do with the market.

On the noble Lord's point about the cost drivers of introducing more effective evidence-based healthcare, I believe that there will be a balance. The question will be how that balance works out. I shall give him one example of how scientific evidence has reduced costs. There has been great pressure in this country, much of it led by people who are concerned about their own health, to introduce the prostate screening programme for cancer. The health technology assessment organisation at Southampton, about which I spoke earlier, demonstrated clearly that that was not an effective way of dealing with the matter, and therefore it has not been introduced. There will be a balance.

Lord Glenarthur: My Lords, this is an important Statement which has given those of us who work in the health service much cause for thought. I declare an interest as chairman of St. Mary's NHS Trust, as the Minister is aware. There may be much in the Statement that can be praised in certain ways. The one element that I would take up, which the noble Baroness, Lady Robson of Kiddington, mentioned, is extending the contract for three years. I am sure that that will be supported.

There are a couple of other matters. Will the Minister say what progress is being made, and when an announcement is to be made, on the London review, because that will have a major impact, at least in one part of the country, about what the Statement can achieve? An area upon which she might touch, which does not seem to feature at all, is the role of academic medicine. That, at least in part, helps define how NHS delivery of service is obtained, where and how it can be done and how trusts could co-operate with one another. Will she also enlighten me about what appears to be a contradiction on page 6 of the Statement which states:

    "NHS Trusts will have statutory obligations to co-operate with other parts of the NHS, and to meet quality standards"?
The Statement then continues:

    "Hospital doctors will have a greater say in shaping local services for patients".
Will those doctors be expected to operate outside the terms of their own trusts or within them?

Baroness Jay of Paddington: My Lords, I am grateful to the noble Lord. On the point about London,

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I am afraid that I cannot give him a date. It is something which is progressing as rapidly as we can make it progress, and it will emerge shortly.

On the point about academic medicine, I believe that I touched upon that briefly in my response to my noble friend Lord Winston. There is an important part for academic medicine which is dealt with extensively in the White Paper, particularly the R&D side. I am sorry, but I have forgotten the noble Lord's third point.

Lord Glenarthur: My Lords, the doctors.

Baroness Jay of Paddington: My Lords, that is not a contradiction in the two parts of the Statement. There will be the introduction within NHS trusts of what is called clinical governance, which will enable the doctors and the managers to work together. The chief executive of the health trust will be responsible for the hospital's financial and clinical standards. The planning for a locality's health improvement programme could well bridge a hospital and a community trust.

Civil Justice and Legal Aid

4.47 p.m.

The Lord Chancellor rose to move, That this House take note of Her Majesty's Government's proposals for the reform of civil justice and legal aid.

The noble and learned Lord said: My Lords, this debate concerns two inter-related issues: the Government's plans for modernising the civil justice system and taking control of the cost of civil legal aid. They are often seen separately but they are linked.

Our civil justice reforms are based closely on the two historic reports of the noble and learned Lord, Lord Woolf. The Government--in fact, the whole justice system--is indebted to him for his perceptive analysis of the problems of the civil justice system, and for the practical solutions he put forward. Our proposals for both civil justice and for taking control of legal aid have been shaped by the excellent report prepared by Sir Peter Middleton and published in October. The Government made a manifesto pledge to review civil justice and legal aid together, as two halves of a single package. The Middleton review fulfilled that pledge.

I announced the Government's initial response at the solicitors' annual conference in Cardiff on 18th October. Today I explain how our proposals have developed over the past two months; and the steps we are taking to consult widely on how best to tackle the problems facing us, not least on legal aid.

The present legal aid scheme is costing more and delivering less. Eligibility has steadily fallen because costs have risen. Over the past seven years, the cost of civil and family legal aid has tripled to £671 million. The average cost for proceedings that received full legal aid in 1990-91 was £1,442. If that cost had grown in line with inflation, that would represent £1,760 at today's prices. The actual average cost was £2,684. That represents an increase of 53 per cent. above inflation, or an average increase of 8 per cent. per year. While civil

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and family legal aid continued to rise last year, the number of acts of assistance that it funded fell by 39,000. That cannot be allowed to continue. We are paying more and getting less from the lawyers.

Let me refute the assertion that our proposals for reform are Treasury-driven in order to cut the legal aid budget. This is wrong. We do not intend either to increase or reduce the cost of legal aid in real terms. We plan to spend not one penny less than the previous government planned to do. But we also plan to take control of the legal aid budget. We plan to do that by buying services from lawyers through the mechanism of block contracts. Lawyers will be asked to contract for work at fixed prices. Our intention is that block contracting should be used to take control of both civil legal aid and criminal legal aid.

I have mentioned previously the sums that some lawyers receive from the public purse. Lawyers in the private sector are free to charge what the market will bear. But I make no apology for saying again that the level of fees being charged to the public purse is too high. I intend to bring this to an end. In 1996-97, 35 barristers received between £270,000 and £575,000 for criminal work. In 1996-97, 20 barristers received between £203,000 and £411,000 for civil work and that apart from any income they earned from privately paying clients.

A High Court judge earns £112,011. A Lord Justice of Appeal earns £124,511. Many hospital consultants earn £56,000 to £70,000 a year. Judges and hospital consultants work hard over long hours. Judges and hospital consultants have highly responsible jobs. The lives of many people depend on their professionalism. Yet almost 1,000 barristers earned from legal aid last year more than hospital consultants are paid.

It is against that background that our reforms need to be seen. I want to see legal aid reformed to benefit the people who most need help. I will use the same amount of money available for legal aid but, using a combination of better planning and block contracting, will ensure that it will be spent providing the right kind of help at the right time and at the right price to the most needy. Block contracts will be overlapping to ensure constant availability. This way we can both control and plan how much we spend, but also make sure that the money does not run out before the end of the year.

Regional legal services committees will involve local people in drawing up plans which will match services to the needs of a particular area and determine how they can best be delivered. This chimes with the Government's wider objective of returning power to the community.

Using these locally determined plans, the Legal Aid Board will be able to let contracts for services that meet local needs and national priorities in the best way. In particular, that will include contracts for advice work. Advisers who work in areas which are not traditionally of interest to lawyers--for example, housing--will be contracted to provide services.

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Hand-in-hand with block contracting, the Government are looking again at the mechanisms available to make sure that taxpayers' money is spent on the cases which are the most deserving. Cutting eligibility, as the previous government did, is a crude and unfair instrument of control. This Government have turned their attention to the operation of the merits test. I want to see it tightened so that only cases with a high probability of success are granted legal aid. I will be issuing a consultation paper next year setting out these proposals in more detail.

Merits bring me to the connected issue of how to identify and deal with public interest cases. These will include cases under the Human Rights Bill when it becomes law. Many of the finest solicitors and barristers in this country work on behalf of the disadvantaged in our society. They represent the poorest and the disempowered. Their commitment is in the best traditions of public service. They provide access to the law for those who are often worst served by the legal system. These are lawyers who do not become rich. They act for refugees, asylum seekers, prisoners, mental patients and victims of abuse and assault. When public authorities or public servants make mistakes or abuse their power, it is regularly the most vulnerable in our communities who are at the receiving end. It is this phalanx of lawyers who take up the law to fight for redress for them.

Only too recently our criminal legal system was shaken by acknowledged miscarriages of justice. If committed lawyers had not spent long unrewarded hours upon those cases, terrible wrongs would never have been put right.

To all of these lawyers, I say that their commitment to their clients will be matched by my commitment to them. In seeking reform of the legal aid system, I intend to focus it sharply on cases involving the social welfare of disadvantaged citizens and cases that raise issues of wider public interest. Within that overall pattern, cases where an individual citizen is challenging an institution of the state will command a high priority. This could include cases where the allegation is of police malpractice. I am determined to ensure that people with serious claims of this kind will be able to obtain the legal help they need under the reforms I am introducing.

I see considerable force in the argument that funding these cases might be justified at a lower threshold of merit than is appropriate for the general run of cases. One of the strengths of our proposals is that the new merits test will be flexible. It will be possible to use different criteria and set the hurdles at different heights to reflect the priority and importance of different types of cases. But a number of fundamental issues are still to be resolved. Is there a category of "public interest cases" that would be better handled by a separate fund rather than within the main legal aid scheme? If so, how precisely are we to define public interest cases? In either event, what criteria should individual cases have to satisfy in order to receive funding? I intend to consult on these issues in the New Year.

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I have been talking so far about legal aid and people turning to legal aid in order to secure advice and representation. Legal aid is restricted to the very poor. But it is not the only means of paying for advice. The Government are proposing, subject to consultation, to extend the availability of "no-win, no-fee", or conditional fee agreements, so that the vast majority of people in this country can afford to have real access to justice. The vast majority are those who are not poor enough to have full legal aid, nor rich enough not to have to care how much litigation will cost. The Government will be issuing a formal consultation paper in the New Year setting out their proposals in detail. But we are already engaged in discussions with the professions and others.

I know that some of your Lordships feel very deeply that conditional fee agreements should not have been introduced to this country. I know that some believe that conditional fee agreements put the integrity of lawyers, and their duty to the court, under stress by giving them a direct interest in the outcome of the case. But I have to say that that does not appear to have been borne out since conditional fees became lawful in 1995. The ethics of the legal profession are strong and are strongly enforced. In the recent research, 97 per cent. of agreements included a voluntary 25 per cent. cap on the proportion of damages that could be taken by the success fee. The average mark up for success was 43 per cent. This is a good demonstration of the ability of lawyers to ensure that the needs of the client are not simply suborned to maximising profit, and that they are able to balance duty to the client with the needs of their firm to show profits overall.

The Government are set to begin the task of reforming legal aid by refocusing expenditure towards those areas where publicly-funded legal services are the only option available to the poor. As part of this, we propose to remove from the scope of civil legal aid most cases involving claims for money or damages which we believe can, in future, be funded through conditional fee agreements.

Our critics object that poor people will not be able to use conditional fee agreements because they will not be able to pay for the preliminary investigations which are needed to determine the strength of their cases; nor, it is said, will they be able to pay the insurance premiums needed to back the conditional fee agreement.

One of the objections that I have heard from lawyers is that they expect insurance premiums to be high. Fortunately, this is not the message that I am getting from the insurance industry. I have been much encouraged in the discussions that I and my officials have had with them. I can tell your Lordships that the scare stories of uniformly high premiums are no more than that. Of course, in some cases premiums will be high to reflect the risk being underwritten. But, equally, premiums are being offered at much lower figures than in the scare stories. Rather than the headline-grabbing £15,000 for medical negligence cases often quoted, I am told that cover has more often been provided at much lower sums--in the region of £3,000. Provided only really strong cases go forward, it is not impossible for a well-run solicitors' firm to run the risk of losing money

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of that order in the few cases where costs are not recovered from the other side--especially given the costs they will recover, and their entitlement to a success fee in cases that they win.

The insurance industry is competitive. It is already developing the products that will be needed, including products where there would be no up-front costs and where lawyers could protect themselves from an unlucky run of losing cases by "stop-loss" insurance.

There is a wide range of products already available. These fall into the two broad categories of "before-the-event" policies and "after-the-event" policies. Before-the-event policies are traditional legal expenses insurance policies which people buy in conjunction with their motor or household contents insurance. They have been available for over 20 years. Seventeen million people are already covered by one of them. They usually cost between £4 and £20 a year.

There are also after-the-event products available which will cover costs at reasonable premiums. The policies can apply whether there is a conditional fee arrangement in place or not. One product which was quoted to me covered both sides' costs to a limit of £6,000 for a premium of £362 without there even being a conditional fee agreement. The innovative capacity of the industry to match insurance cover to need should not be doubted. The industry has told me that it expects to move sufficiently quickly to develop and launch new products so as to have them available by the time that the changes that I propose to conditional fees and legal aid are made.

I ask your Lordships to contrast that with the gloom and doom of the lawyers' professional bodies when faced with changes which they fear threaten their traditional vested interests.

I do, however, recognise that affordable insurance is only one part of the picture. It is equally important to look at other ways of funding investigative costs and premiums. It could be that in certain types of case--and medical negligence is often the special case cited--the risks and costs cannot be borne by the lawyers. In these cases alternative arrangements may be necessary. I will therefore be talking to banks and financial institutions to see what arrangements can be made. Here again I can tell your Lordships that the insurance industry is already engaged on this task of producing products that marry cover for the risk with funding to run the case as it proceeds.

Some have suggested that I should consider establishing a contingency legal aid fund. The Bar--the main proponents of that--has to work-up its proposals into final form to put to me. My door remains open; but, as I said in my speech in Cardiff, I have doubts how a contingency legal aid fund could operate alongside conditional fees. It seems to me self-evident that the cases with the highest chances of success would inevitably be funded by conditional fee agreements, leaving riskier cases to be paid for from the fund. That would inevitably mean that the fees charged on winning cases would be much higher, or the taxpayer would have to continue to provide money to keep the fund solvent. Also, a contingency legal aid fund would mean that

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lawyers bear no part of the risks of litigation. It is that which my reforms seek to change. But I say this: if the profession can meet my concerns in these areas, I am more than willing to consider them carefully. I have the opposite of a closed mind on this subject.

It has been said that our intention to change the scope of legal aid by April 1998 is too rushed. I do not agree. I am deeply concerned to begin to meet the areas of need which are not presently covered by legal aid as quickly as possible. I am talking about real people with real problems--and they need help now, not in a year or 18 months or longer. But I cannot provide them with help until I am able to bring the legal aid budget under proper control. I ask your Lordships not to forget that the legal aid budget is rising more quickly than any other area of public expenditure. I make no apology therefore for seeking to move quickly to begin the reforms which will re-focus, not cut, legal aid.

My officials are working hard to ensure the timetable can be met. But I also want to engage in a constructive dialogue along the way with people who understand the work of the civil justice system and the needs of consumers--who are in particular the poor and vulnerable. My officials are currently discussing the issues and problems with a range of professional bodies, consumer groups and other interested groups. I am determined to go wider than any statutory obligation to consult. The Government welcome constructive comment on the whole sweep of our proposals.

Early in the New Year, I shall be issuing consultation papers, which will be informed by the discussions we are having, on conditional fees; the changes to scope of civil legal aid; and public interest cases. These consultation papers will be made widely available. I hope they will encourage a more informed debate. All this moves hand in hand with our proposals to create three routes to civil justice. The first will be an expanded small claims procedure with a £5,000 upper limit. But the small claims procedure, though very successful, is not suitable for every case.

The Government have therefore decided to adopt the proposals of the noble and learned Lord, Lord Woolf, for more "hands on" management of cases by judges, through the creation of the second and third routes, a fast track and a multi track. Power will be transferred from lawyers to judges. Judges will allocate cases to the appropriate track. The courts will have greater control over the progress, cost and length of cases as they move to trial. Both the fast track and the multi track will be up and running by April 1999.

We have been, and will continue, consulting widely on the detail of our proposed civil justice reforms. We consulted on proposed procedures for the fast track and the multi track in the summer. I shall shortly be making policy decisions on the outcome. Consultation papers on clinical negligence procedures, multi-party situations, the other specialist jurisdictions and on our proposals to increase the small claims and fast track upper limit have also been issued. Forthcoming consultation will cover our proposals for a fixed costs regime which we intend should accompany tough judicial case management in the fast track.

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Finally, I know that the court fee structure is of concern to many of your Lordships. Some may go so far as to suggest that I should not charge court fees at all. I have said before in your Lordships' House that, while I accept that citizens have what may be called a constitutional right to a court system, I do not accept that they have a right to a free court system. I reiterate that what the state provides free, or at a charge, is a matter of policy for government. I do not believe that any constitutional issue arises in government deciding that, in principle, those who use the civil courts are required to meet the costs of doing so.

However, I am on record as accepting that people should not be excluded from the court system because the fees they are asked to pay are unaffordable. I have already taken steps to help the many who cannot afford the existing fees because of their low incomes. In response to concerns raised in this House, in particular by the noble Lord, Lord Mishcon--whose lifetime's service to the objectives of a just legal system is so well recognised--I have extended exemptions to those in receipt of income-related job seeker's allowance, or family credit, or disability working allowance. This change came into effect on 1st December. Those in receipt of income support have been, and continue to be, exempt from all court fees. The civil fee structure, however, is irrational and hopelessly out-of-date. It needs to be reformed. I will therefore be issuing another consultation paper inviting discussion on the principles which should underlie a new fee structure.

All those reforms, combined with extending conditional fees and taking control of legal aid, will build a civil justice system in which there is equality between the very poor, the very rich and the vast majority in the middle.

Our citizens need and deserve a modern, tailored legal advice service to help them gain access to a reformed civil justice system. In the short term, the work of regional legal services committees in providing better planning mechanisms, together with the use of block contracting by the Legal Aid Board, will enable local people to be involved in making decisions about the kind of advice services they need and how those services should be delivered.

In the longer term, the Government will fulfil another manifesto pledge by creating a community legal service. The service could provide telephone helplines, education in rights and obligations; legal advice on the internet; referrals to alternative dispute resolution; legal representation in tribunals; even interactive kiosks in every high street or supermarket dispensing basic information about the law and the legal system. Those are some of our ideas. There is a project team at work in my department, which is looking forward to learning the ideas of others.

Our reforms will retain a legally-aided safety net for the poor while, at the same time, creating real opportunities for everyone to have access to justice--for the vast majority of the population, not just the very rich and the very poor. This access will be to a civil justice system that is cheaper, faster, simpler and more

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certain than the one we have today. I am convinced that everyone in due course will benefit from these reforms. I commend them to your Lordships. I beg to move.

Moved, That this House take note of Her Majesty's Government's proposals for the reform of civil justice and legal aid.--(The Lord Chancellor.)

5.11 p.m.

Lord Campbell of Alloway: My Lords, it is a privilege to follow the noble and learned Lord the Lord Chancellor, not only to be able to disagree respectfully with the substance of his speech on the proposed reform of legal aid, but also to scotch the rumour that, during the restoration of his residence, someone found a funny-shaped hat stuffed up a chimney covered with ages of soot. I have it on the authority of Father Christmas that this is just one of those silly jokes. According to today's edition of The Times, a fairy godmother (Mistress Hoon) with a wave of a magic wand, has ordained that the Government shall listen to what is said on all sides of your Lordships' House in this debate; but your Lordships may be given to wonder, having heard the tone and content of the speech of the noble and learned Lord, whether such be the case.

The proposals for reform of civil justice are indeed very much welcomed in principle. No doubt other noble Lords will deal with that aspect of reform. As to the proposed reform of legal aid, the noble and learned Lord's figures speak for themselves. It is common ground that steps can and must be taken to reduce the cost of legal aid to the Exchequer. But the means proposed by the noble and learned Lord--for example, the withdrawal of legal aid from all money and damage claims and the extension of conditional fees to all civil, non-family cases--will dismantle a vital social service and inhibit access to civil justice under those proposed reforms. Your Lordships may well think that a major provision of general public importance such as this ought to be introduced by primary legislation, not by secondary legislation on some ex cathedra pronouncement of the noble and learned Lord.

On the chequer board of government fiscal policy, where the end game is to avoid increase in income tax by reducing the cost, range and quality of a variety of services funded by the Exchequer, this is but one move. Other moves, such as raising council tax, withdrawal of tax concessions, and so on, are irrelevant save to set the perspective. This is a very special and distinct area where the public has hitherto enjoyed, and is entitled to continue to enjoy, the highest professional standards of conduct and the highest quality of professional service; and, indeed, freedom of access to our civil system of justice.

The question is whether those legitimate expectations can be fulfilled either by the extension of conditional fees, or by the legal aid regime as it is proposed to be implemented. Assuredly, extensions of "conditional fees" afford no viable or acceptable substitute for the safety-net provision of legal aid.

The "merit test" on grant of legal aid could, if too stringent, undermine its functions in the future: if too lax, as at present, it could destabilise the financial

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structure of the system; as, indeed, has been the case. What is needed is the urgent introduction of an effective system of control. For where legal aid would remain available, the Government propose to apply a 75 per cent. assurance of the probability of success. That would remove almost all difficult and complex cases, but nonetheless deserving cases. Assuredly there must be a measure of flexibility.

For many years, and rightly so, the Law Society has pressed for improvement to the operation of the merits test for the grant of legal aid, and for fundamental revision of the guidelines. All too often has legal aid been granted on the basis of counsel's opinion written upon insufficient, erroneous and incomplete instructions, without seeking further instructions on the merits of the case. At times the point of law is only arguable as an open question on the ground that it has not been raised before, although the prospects of success are indeed slender.

As to the merit test, surely it should be the same as when advising a non-legally-aided client: that there should be a substantial prospect of success which some of us put at the order of 60:40, and that account must be taken of the probable costs of litigation (win or lose) of which some estimate is given to the client, as well as the warning of the inherent incertitude of all litigation. It is rare, but it happens, that a client may say, "I have come to you to fight my case at all costs, which I can afford. Will you take it on?" But that has nothing to do with the merits test. It has nothing to do with the legal aid situation.

There is no doubt that the representations of the Law Society are entirely well founded and that there should be a complete overhaul not only of the merits test but of the current regime as to the grant and continuance of legal aid. For example, those who maintain an affluent lifestyle in apparent luxury having disposed of their assets to family, friends or--dare one say it these days?--some trust, thus having little or no income, should have no entitlement to legal aid. The margins of expenditure on any one case should be limited. Some £600,000 spent on one civil case which failed would hardly have been acceptable even if it had succeeded.

All welfare provision is open to exploitation: housing benefit, social security benefit and the common agricultural policy with its set-asides, fictitious vineyards and fanciful olive groves. Legal aid is no exception to any other aspect of welfare, but why not introduce a new, stringent regime of control of legal aid? Why dismember it in favour of a no win, no fee system which can only be workable if insurance is available to provide protection against paying the other side's costs if the case is lost? It is not understood how those on low incomes, eligible for legal aid, will be able to afford the cost of such insurance. It is not understood how they may obtain access to justice. Who will pay? I think the noble and learned Lord mentioned the figure of £3,000. Who will pay that £3,000? My information is that it is much more than that. The whole question of insurance as explained by the noble and learned Lord is in serious dispute. I refer to the alternative arrangements with banks and so forth. Those are nebulous suggestions, but who will pay? Will the solicitor have to underwrite this?

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Someone has to underwrite it. If the banks are to underwrite it, where is the security? This is all extremely nebulous and unsatisfactory.

Any lawyer who takes on a case on a no win, no fee basis will have to satisfy himself that the damage claim is sufficiently substantial to cover his usual fees with a contract mark up. In order to satisfy himself on that he will have to take proofs of witnesses, obtain documents and very often obtain extra reports which will have to be paid for on demand. It will be up to the lawyer to decide whether he takes on the case on a 50:50 basis; a 60:40 assessment; or a 75:25 prospect of success. However, few would operate very much under 75:25. There is no reason, no compunction and no obligation why they should do so. If the case is taken up, the litigant never receives the true measure of compensation. There is always the temptation to advise settlement at a substantial discount to safeguard the payment of fees.

I apologise for the length of my speech. In conclusion, the steps which should be taken are steps to reduce the cost of legal aid to the Exchequer. They are steps which would introduce a new stringent control to avoid exploitation of a system which in essence is a valuable system in both civil and criminal matters. There is no time for me to deal with the block contracts proposal. I must leave that to other noble Lords. I find it unsatisfactory and abhorrent. The proposed reforms are neither necessary to implement government fiscal policy nor are they well conceived. Litigants whose financial means would have otherwise entitled them to apply for legal aid will not get a fair deal. That is a matter of concern to noble Lords irrespective of where they choose to sit in your Lordships' House.

5.26 p.m.

Lord Lester of Herne Hill: My Lords, I greatly welcome the readiness of the noble and learned Lord the Lord Chancellor to implement the radical recommendations of the noble and learned Lord, Lord Woolf, to reform the civil justice system. I hope that he will be able to provide the necessary resources to make them work in practice. I respectfully join issue with him on one matter of principle, as I did with his predecessor, the noble and learned Lord, Lord Mackay of Clashfern, namely, the notion that the costs of the civil courts should be paid by the users of the civil courts rather than by the general body of taxpayers. I make an exception for commercial users of the commercial court. However, I shall not elaborate on my objection to that principle this evening. There is no time and it goes beyond the debate. It raises a matter of political philosophy which is one's view of the role of the state and the role of public taxation.

I shall confine my remarks to the much more controversial proposals made in the powerful speech of the noble and learned Lord the Lord Chancellor in relation to the public funding of legal services, in particular cutting legal aid for cases where money or damages are claimed and replacing legal aid with conditional fee agreements. I begin by observing that in

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his keynote address to the Bar annual conference in 1996, when he was shadow Lord Chancellor, the noble and learned Lord, Lord Irvine of Lairg, said that,

    "supporters of legal aid must never cease to emphasise that it is a highly successful public social service. In civil cases that reached judgments in 1995-96, judgments were in favour of the assisted person in 81% of cases. The proportion of cases where there was either a settlement or a judgment in favour was 91%.".
I hope that the noble and learned Lord the Lord Chancellor remains of the view that, in his words, legal aid,

    "is a highly successful public social service",
even though I did not hear much in his speech referring to the high success of the system.

As I shall try to explain, I agree with most of the long-term aims of the noble and learned Lord the Lord Chancellor, but I do not agree with the means that he has chosen at this stage to implement them. The fundamental question that these proposals raise is, why should public funding of legal services be a priority? I agree with the answer given by the Legal Action Group's admirable 1992 study, A Strategy for Justice. It stated:

    "Legal services provide an important counterbalance to the evident inequalities in society, thereby helping to secure equal access to justice for all citizens".
The ultimate aim should surely be, in LAG's words, that,

    "anyone with a legal problem has equal access to its just conclusion so that disputes are determined by the intrinsic merits of the arguments of either party, not by inequalities of wealth or power. To achieve that, legal aid policy alone provides too narrow a focus. It is necessary to consider a more comprehensive range of policies relating to the totality of public funded legal services".

That means making public funds available for a community legal service that is able to give more attention to public education, information, advice and representation in social welfare law cases--an important manifesto pledge made by New Labour that has now been relegated to a longer-term goal.

I am all in favour--I agree with the noble and learned Lord the Lord Chancellor--of strictly controlling the burgeoning cost of civil and criminal legal aid, ensuring real value for money, and preventing the undoubted misuse of public funds by some members of the legal profession, whether they are fat cats or leaner members of the species. I am also entirely in favour of preventing lawyers from overcharging for their services where the market place fails to do so because market forces are not working properly. But I cannot support changes made in the name of middle Britain that are likely to be detrimental to the interests of the poor.

Unlike some members of my profession, I have no rooted hostility to the existence of conditional fee agreements in appropriate cases, and subject to effective safeguards. Indeed, I persuaded the then Attorney-General, Sir Patrick Mayhew, to extend them to human rights cases in Strasbourg. But I am troubled by their ethical dangers--the point was not referred to by the Lord Chancellor--for members of an already unpopular legal profession. I find it difficult to understand how the extension of conditional fee

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agreements will improve the public standing of lawyers whose clients will lose a substantial percentage of their damages to their lawyers, accused, fairly or unfairly, of being shysters.

Nor do I understand how replacing legal aid with conditional fee agreements will in many cases benefit the poor and vulnerable unable to find solicitors to act for them, unable to afford the cost of insurance, and unable properly to assess whether or not their solicitors are accurately assessing their prospects of success.

The Vice-Chancellor, Sir Richard Scott, pointed out in an article in the Guardian on 28th October that there are formidable practical problems about the wholesale extension of conditional fee agreements, and the need to ensure that deserving cases do not fall into a black hole where neither conditional fee agreement nor legal aid is available.

Those problems also apply to middle Britain. To give the example cited by the Vice-Chancellor, first, conditional fee agreements are unsuitable for cases in which substantial costs need to be incurred before it is clear whether or not there is a viable claim--for example, where expert evidence is needed for an opinion on liability to be formed in a medical negligence claim. Secondly, they do not cater for cases in which a successful plaintiff's damages or costs are unlikely to be paid by the proposed defendant. Thirdly, such agreements depend on the loser paying the winner's costs and enough damages for the lawyer to collect a success fee. But there are many cases in which the main purposes of the action are not to claim damages but to obtain, for example, an injunction. Fourthly, conditional fee agreements will not work for defendants. Fifthly, as Sir Richard pointed out, since conditional fee agreements need to be backed by insurance protecting against liability to pay the opponent's litigation costs if the proposed action should fail, access to the civil courts will be possible only for those who can afford to pay the premiums.

Access to justice will effectively be determined by the judgment of the solicitor, whether he or she is willing to take on a high risk case, the availability of insurance, and the ability of the individual to pay the insurance premium and other disbursements. In practice, that will mean that those currently eligible for legal aid, the poorest and the most vulnerable, will have no effective access to justice. The Government have recognised rightly that effective access to criminal justice is a basic human right. The same applies to effective access to civil justice. The right of access to civil justice is just as effectively guaranteed by Article 6 of the convention as is the right of access to criminal justice.

I do not agree also with the Lord Chancellor's proposals to tighten the merits test, not to 60 per cent. as he suggested in his keynote address to the Bar annual conference in 1996 as shadow Lord Chancellor, but to 75 per cent. now that he sits on the Woolsack. It is misleading to suppose that one can possibly forecast the prospect of success with precise percentages in the way suggested. But, more than that, after more than 30 years of practice at the Bar--having read earlier some of the remarks of the noble and learned Lord the Lord

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Chancellor, I hope that I do not shock him in saying this--I cannot remember a single case, whether legally aided or otherwise, in which I have advised my client that he had a 75 per cent. likelihood of success. And all of my really important successes--and there have been some--have involved an even, or slightly better than even, prospect of success. A requirement of a 75 per cent. prospect of success would operate as a powerful deterrent against litigation which is in the public interest as well as in the interests of justice for the individual citizen.

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