75. Schedule 2 establishes the scope of the CLS Fund for the time being. People (but not corporate bodies) will be able to receive information on any matters of English law. The Schedule provides for restrictions on the more substantial services that will be available in different categories of case. For some categories a full range of services will be available (subject to priorities). For some others, all services except representation at court by a lawyer will be available. Finally, for some categories, only the provision of information and basic advice will be possible. Subject to the changes described in paragraphs 76 and 77 below, the intention is that the scope of the CLS fund should initially mirror the current scope of civil legal aid; but that it may change over time. In particular:

• as conditional fees, legal expenses insurance and other forms of funding develop more widely, it may be possible to exclude further categories which can generally be funded privately.

• as resources become available through the greater control of spending and value for money provided by the new scheme and the development of private alternatives, it may be possible to extend the scheme's scope to cover services that are excluded now because, although they would command some priority, they are unaffordable.

76. The following changes to the scope of the current legal aid scheme will take effect immediately. In future, subject to any exceptions that the Lord Chancellor may make by direction, only basic information and advice will be available for:

• disputes involving allegations of negligent damage to property or the person ("personal injury"), apart from those about clinical negligence. These cases are generally considered suitable for conditional fees.

• allegations of defamation or malicious falsehood. Generally, legal aid is not currently available for representation in defamation, but it is sometimes possible to get legal aid by categorising the case as one of malicious falsehood. The Government's view is that these cases command sufficient priority to justify public funding; and, in any event, they may often be suitable for a conditional fee.

• disputes arising in the course of business. Legal aid is not available for firms and companies, but a sole trader can currently get legal aid to pursue a business dispute. Businessmen have the option of insuring against the possibility of having to take or defend legal action. The Government does not believe that the taxpayer should meet the legal costs of sole traders who fail to do so.

• matters concerned with the law relating to companies or partnerships; matters concerned with the law of trusts or trustees; boundary disputes. The Government does not consider that these command sufficient priority to justify public funding.

77. In addition, funding for representation at proceedings before the Lands Tribunal or Commons Commissioners will no longer be available. Other services, including assistance with preparing a case, will continue to be available.

78. Clause 8: persons for whom services may be funded. This clause allows the Lord Chancellor, in regulations subject to the negative resolution procedure (see clause 23(4)), to set financial eligibility limits for people to receive services funded by the CLS fund. It allows him to set different conditions, or no conditions, for different circumstances or types of case or service.

79. In essence, the clause repeats provisions in the Legal Aid Act 1988 about financial eligibility: sections 9 (advice and assistance), 13B (family mediation), and 15 (civil legal aid). There are no immediate plans to make any substantive changes to the present financial eligibility limits, although it is intended to uprate them each Spring. In due course, the Government intends to expand the availability of advice and assistance to people who can afford to make a contribution (see Annex A to these Notes).

80. Clause 9: Code about provision of funded services. This clause provides for the Commission to prepare, and the Lord Chancellor to approve, a Code setting out the criteria for determining whether services funded by the CLS fund should be provided in a particular case, and if so what services it is appropriate to provide. The Code will also set out the procedures for making applications.

81. The funding assessment under the Code will replace the merits test for civil legal aid (set out in sections 15(2) & (3) of the Legal Aid Act 1988, and supplemented by Notes of Guidance published annually by the Legal Aid Board). The new assessment is intended to be more flexible than the existing merits test. It will be possible to apply different criteria in different categories according to their priority. It will also be possible to take account of factors, such as a wider public interest, which attach to particular cases, rather than those whole categories of case for which contracts might be let. The reform of the merits test, which regulates the demand that qualifies for help, complements the reforms of the supply of services outlined in clauses 5-7, with the intention of creating a flexible system for deploying resources to meet a range of priorities within a controlled budget.

82. Clause 9(3) lists a range of factors that the Commission must consider when preparing the Code. The criteria for funding the various types of service in different categories of case will be defined by considering these factors. The Code will define which factors are relevant in a given category, how they should be taken into account, and what weight should be given to them. For example, prospects of success will not be a relevant factor in cases about whether a child should be taken into local authority care. The Board will be publishing a draft Funding Code consultation early in 1999. This will set out in more detail how it is intended to apply the various factors in different circumstances.

83. The Code is required to reflect the principle that in many family disputes mediation is more appropriate than court proceedings. This is intended to reinforce the development, under the Family Law Act 1996, of mediation as a means of resolving private law family disputes in a way that promotes as good a continuing relationship between the parties concerned as is possible in the circumstances. The Government believes that mediation is more constructive than adversarial court proceedings, and that litigation in these cases usually serves only to reinforce already entrenched positions and further damage the relationship between the parties. In addition, the cost of court proceedings is higher than that of mediation, and additional costs have to borne by the property of the family, reducing the amount available to the parties and their children in future.

84. Clause 10: Terms of provision of funded services. This clause enables the Lord Chancellor to set financial conditions to apply to people receiving services funded by the CLS fund. Subject to two additions, the effect of clause 10 is generally to replicate the provisions of the 1988 Act.

85. As now, it will be possible to make regulations requiring people to contribute towards the cost of the services they receive by way of flat rate fees, contributions related to disposable income and capital, and from any property recovered or preserved as a result of the help given. In general, the intention is to replicate the existing regulations, subject to the changes described in Annex A.

86. Clause 10 extends the potential scope of financial conditions in two ways, although there are no immediate plans to use either of these powers.

• It will be possible to make the provision of services in some types of cases subject to the assisted person agreeing to repay an amount in excess of the cost of the services provided in the event that their case is successful. This might make it possible to fund certain types of case on a self-financing basis, with the additional payments from successful litigants applied to meet the cost of unsuccessful cases. It would also be possible to mix public funding with a private conditional fee arrangement, subject to the same conditions about the uplift to the costs in the event of a successful outcome. This might be appropriate, for example, where a case could not be taken under a wholly private arrangement, because the solicitors' firm was not large enough to bear the risk of the very high costs likely to be involved.

• It will be possible to require the assisted person to repay, over time and with interest, the full cost of the service provided (for example through continuing contributions from income). This will make it possible to provide services in some categories of case in the form of a loan scheme.

87. Clause 10(2)(b) provides for regulations about determining the cost of services for the purpose of applying regulations about the assisted person's contribution. This is necessary to allow for the possibility of block contracts which do not define the costs of individual cases, and contracts based on an average price for a set number of cases. Some cases require less work, and some more; and these contracts would remunerate the service provider on a 'swings and roundabouts' basis. However, it would often be inequitable to ask each individual assisted person to make a contribution based on the average price.

88. Clause 11: Costs in funded cases. This clause provides for regulations about determining the award of legal costs between the parties in cases involving persons supported by the Community Legal Service Fund. Subject to the changes described in Annex A, it is intended to replicate the position that currently applies under the legal aid scheme, (in effect, this clause brings together provisions which are presently contained in sections 12, 13, 17, 18 and 34 of the Legal Aid Act 1988).

89. Clause 11 empowers the Lord Chancellor to make provision, by regulations, for limiting any liability of the person receiving funded services, or of the Commission, to pay costs to the unassisted party and the circumstances in which a costs order may be enforced against the person receiving funded services. It also provides for regulations to set out the principles that are to be used in determining any award of costs made in favour of the person receiving funded services, to whom any costs recovered in this way is to be paid, and governing which court or other body may undertake the determination of the amount of any costs due.

90. Those regulations which limit: the liability of the person receiving services from the Community Legal Service to pay costs; the circumstances in which the costs order may be enforced against this person; or the liability of the Commission to meet any costs order on behalf of the person receiving funded services, are made subject to approval under the affirmative resolution procedure (by clause 23(3)). Making these provisions to be dealt with in affirmative regulations, rather than in primary legislation as at present, provides greater flexibility to deal with problems that may be caused by the protection from costs creating too great an advantage in litigation for the person receiving funded services.