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The Lord Chancellor: The noble and learned Lord, Lord Archer of Sandwell, properly concentrated on Schedule 2 and the amendments in relation to it. I cannot accept either of these amendments, but I understand the concerns that may have led noble Lords to table them. In particular, many people have expressed their concerns that excluding proceedings about personal injury on the face of the Bill may in future lead to deserving cases being denied funding of any kind. I have consulted widely on this issue and I am satisfied that those concerns are unfounded. It is my view that the majority of personal injury cases do not warrant public funding in the future because there is a viable alternative in the private sector; namely, conditional fee agreements.

I am confident that conditional fee agreements can provide effective access to justice in this area. Conditional fees represent potentially profitable business for solicitors. And while some of the risk management in operating conditional fees will provide challenges to the way that some firms run their businesses, I must point out that there is nothing new about the approaches that may be required. We all know that for decades well organised firms of solicitors, often acting for trades unions or legal expenses insurers, have taken claims on the equivalent of this basis. What is more, they have done so without demanding money up front to cover the running costs of the cases, arranging loans for the clients or even telling expert witnesses and others that they must wait until the end of the case to be paid.

In recent years such arrangements have been supplemented by allowing lawyers to charge an uplift on their fees when they win. Clause 28 will allow the successful party to recover from the other side the success fee that he has to pay his lawyer under a conditional fee agreement. That means that the successful plaintiff will not have to pay the success fee out of his own damages. Together, these changes have increased, and will increase, the incentives for lawyers and their clients to pursue personal injury cases in this way.

Lord Goodhart: I am grateful to the noble and learned Lord the Lord Chancellor for giving way. If the noble and learned Lord is so confident that this is the case, why would it not be sufficient to say that personal injury cases will not be funded out of the community legal service fund where CFAs are available and leave it at that rather than having an absolute exclusion?

The Lord Chancellor: The object of excluding them is to make available for other purposes the resources that would otherwise be expended on these cases. If the private sector can support these cases--and we are confident that it can--the advantage is that resources are freed for other purposes, in particular the development of the community legal service.

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Insurance has become available to cover the client's risk of having to pay costs. If they want to, even solicitors can insure to cover their own costs if the case is lost. The development of the insurance market is clearly important in this area and I am confident that it is developing well. I know of at least 10 insurers who are willing to provide after-the-event insurance. They include First Assist, Greystoke Legal Services, Abbey Legal Protection and Litigation Protection Limited. We know that one insurer alone has written 50,000 policies. And the prices of policies are not prohibitive. They are well within the kind of up-front costs that a solicitor should be able to bear or which a loan could cover, bearing in mind that the policy itself would cover the loan if the case were lost. For example, the Law Society's package, which is provided by Guinness Mahon, is available for approximately £90 to £170.

The removal of public funding from most personal injury cases is not based on a prayer. It is based on long-established and ever more accessible arrangements for funding these cases in the private sector. It is not just the Government who say that. Some noble Lords may have seen the press notice issued last March by Thompsons, one of the major personal injury firms. It said of the publication of our consultation paper, Access to Justice with Conditional Fees, that this was an opportunity to tackle difficult issues and create a new legal services framework based on fairness, need and value for money. With proper safeguards for the poorest and most vulnerable, the proposals to replace legal aid with no win no fee deals would put people first, not lawyers. Too many lawyers had for too long thought the world owed them a living--those days have now ended. Lawyers would have to wean themselves off the easy money of legal aid and adapt to the new legal landscape. Those are not the words of the Government, but of Thompsons, a leading firm of personal injury lawyers. I agree with those sentiments.

However, because I am aware that it will not be possible overnight to fund personal injury cases through conditional fees in all circumstances, I shall have the flexibility through my direction-making powers under Clauses 4 and 7(7) to allow the funding of such cases in some circumstances. It may be, for example, that some funding will be needed where there are exceptionally high investigative or overall costs, or issues of a wider public interest.

If the worst came to the worst, and the market for conditional fees in personal injury cases, particularly for the poor and vulnerable, was not functioning effectively--I do not believe for a second that that would happen--I would consider making directions or regulations which brought a wide range of personal injury cases back into scope. Alternatively, I could consider making decisions which would allow the commission to intervene in individual cases where someone was having difficulty obtaining a conditional fee arrangement and where there was a clear case of hardship. Of course, the case would still have to be assessed under the funding code. To take that approach to individual cases, I would need to amend Clause 7(7), but, as I have said, I would consider that. Therefore, we

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are not proceeding on a hymn and a prayer but on a soundly based judgment, and I invite the noble and learned Lord to withdraw his amendment.

Lord Clinton-Davis: My noble and learned friend has given a partially encouraging response, but one that is not wholly realistic when it comes to personal injury cases. I am aware of Thompsons and its very big reputation, but I do not agree entirely with that organisation in this matter. I do not wholly disagree with Thompsons, but I do disagree in part. The argument about trade unions and insurers requiring solicitors to bear the costs of disbursements as cases proceed depends on the extent of that disbursement. If the disbursement is very heavy, one must bear in mind that other disbursements are in train at one and the same time and the solicitors are required to bear that under the scheme that my noble and learned friend suggests.

Looking more closely at the background, I invite my noble and learned friend (if, for a moment, he can desist speaking to the Deputy Chief Whip, attractive though that may be) to consider the time before legal aid made interim payments as cases progressed. That was introduced precisely because the burden on those firms that carried out a good deal of legal aid was just too heavy. The very fact that we still have that system indicates that the problem is rather greater than my noble and learned friend suggests. It depends on the extent of the burden confronting the individual firm. There are firms which will find the position difficult. My noble and learned friend the Lord Chancellor should recognise that many experts will still not defer their fees. For the benefit of his client, the solicitor has to find an expert who will defer fees. It does not occur all that easily, in particular as regards medical witnesses.

My noble and learned friend has not given due credit to these difficulties. I am not convinced that a study by KPMG--another excellent firm of accountants--is a satisfactory substitute for the complaints made to me by individual firms of solicitors. My noble and learned friend may be 100 per cent. right. He then has a job of conversion to do. He must be able to persuade those firms which carry a heavy burden at present that what he is doing will provide proper protection for their clients. That is the first priority and of paramount concern. I do not think that that has occurred yet. At best it is a job of conversion; at worst, from the Government's point of view, it is a job of looking again at the situation.

My noble and learned friend says helpfully that he will keep an open mind on these matters to see whether great difficulties arise, particularly for people in personal injury cases. We shall have to rely upon that. I have known my noble and learned friend for many years. I am not sure whether I have ever briefed him; I have briefed many members of his chambers. However, these are problems which arise daily in the

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lives of clients in the areas to which I alluded. I ask my noble and learned friend to keep a very open mind on these matters, otherwise real tragedies can occur.

Lord Goodhart: It is not my intention on this occasion to move Amendment No. 87 or the other amendments in the group. But it is likely to be a point to which we shall wish to return.

Lord Archer of Sandwell: I am most grateful to the noble Lord, Lord Goodhart, and my noble friend Lord Clinton-Davis for their support. I accept that my noble and learned friend has directed his mind to the questions which we raised and that he is satisfied that conditional fee agreements and insurances are sufficiently available to provide alternatives. Those who said that the "Titanic" was unsinkable had directed their minds to the question. They, too, had consulted and made inquiries. My noble and learned friend denies that he is proceeding on a hymn and a prayer. I have more confidence in hymns and prayers than in some confident predictions I have heard.

I do not see at present the answer to the suggestion of the noble Lord, Lord Goodhart, that one might provide that public funding from this source should be available if it transpires in an individual case that

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conditional fee agreements are not available. If I may say so with the greatest respect to my own Front Bench, it is difficult to address arguments to a concerted conversation. The proposal which came from the noble Lord, Lord Goodhart, answered the argument of my noble and learned friend that we want to have resources available for other purposes.

If in a particular case it transpired that there was an alternative provision, the resource would be available for other purposes, so it is difficult to see what is the answer to that proposal. I have no doubt that if there were a crisis my noble and learned friend would intervene. It would give me no great pleasure in two years' time to say, "I told you so". But there it is, we have tried tonight. It may be that we shall return to the issue at a later stage in our deliberations, but for the moment I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 87 to 89 not moved.]

Lord McIntosh of Haringey: I beg to move that the House do now resume.

Moved accordingly, and, on Question, Motion agreed to.

House resumed.

        House adjourned at five minutes past eleven o'clock.

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