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Government legal aid proposals: economically unworkable, possibly unlawful

2 May 2013

Criminal lawyers who read 'Transforming Legal Aid' will be forgiven for feeling they’ve nothing left to lose. While the Law Society certainly has no illusions about the pressures on the Ministry of Justice to save money, the criminal legal aid proposals still came as a shock. The biggest shock was the scale of the cuts the ministry intends to extract, while expecting the lawyers to do even more work than at present.

It is hard to reconcile this pro-business government making a proposal so at variance with what businesses realistically need to operate.

With changes like this, the first reaction is often to say that it cannot be done. Then, as the shock wears off, practitioners start to think about how it might in fact be feasible. However, in this case the reverse applies.

As the shock of the 17.5 per cent cut wears off, practitioners realise that they are also expected to provide magistrates' court duty solicitor services for free, and travel and subsistence costs will no longer be paid separately. They will have to provide a member of staff to sit behind counsel again. They will have to commit to investing in the IT necessary to engage with the government’s digital strategy. They will have to pay for peer review.

The plan is that practitioners should be able to spread costs over a larger volume of work, and thereby generate economies of scale. But instead of serving their local town, small firms will have to provide services across an entire county. Capital investment will be essential, along with ongoing costs to manage it. Firms will also have to fund the significant increase in the amount of work in progress that will result. These extra costs mean that this looks like a non-starter for smaller firms.

Larger firms will fare little better. In each criminal justice area, the ministry proposes to award a fixed number of precisely equal contracts. Firms will not be able to grow through running a successful business, as in a proper market. Instead, they will be constrained by the allocation they get from government, and can do no more business and no less. The number and size of contracts in each area varies, and it is not easy to discern the basis on which these figures have been set. Contracts are likely to vary from around £7-800,000 in some areas to around £2m in others.

Many larger firms are already reaching or exceeding the limits set for their area, and would therefore be required to absorb the 17.5 per cent cut without getting the benefit of any increase in volume which is supposed to enable them to survive. In some cases they would have to downsize. Consequently, the inability to expand and increase volumes means this looks like a non-starter for larger firms.

The Ministry of Justice envisages giving firms just three months from being notified that their bid was successful to the date of commencement of the new service. This is patently unrealistic from a business perspective: restructuring of the market will take far longer to achieve, with firms having to deal with financing, mergers and redundancies.

The government's proposal to remove a client’s choice of solicitor is central to its ability to deliver its fixed number of exactly equal contracts. Throughout the last eight years of discussions about proposals for price competitive tendering, the ministry has always accepted that client choice is one of the few effective mechanisms the government has to drive quality of service.

Almost as disturbing is the fact that firms that seek to provide anything above a minimum threshold of quality will be at a financial disadvantage in any tender round compared with those offering only the bare minimum. Firms won’t just be encouraged to offer threshold quality only, they will be economically unable to do anything else.

There is, however, a bigger problem with the proposal to remove client choice. Clause 27(4) of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 says, “An individual who qualifies under this Part for representation for the purposes of criminal proceedings by virtue of a determination under section 16 may select any representative or representatives willing to act for the individual, subject to regulations under subsection (6).”

The explanatory note to the bill explains what such regulations may do: “the regulations may limit the choice to a specified group of providers or may limit the number of legal representatives who can act for any individual at any one time. They may also restrict the right of the individual to appoint a new legal representative in place of one previously chosen.”

Jonathan Djanogly, while under-secretary of state for justice, also gave an unequivocal assurance when questioned about possible restrictions on client choice. During the committee stage of the bill, he said, “In criminal cases, people will be able to select their own representative, subject to regulations in clause 26, which may limit choice in the ways referred to in subsection (6)… Our intention is that in criminal cases, as at the moment, an individual must select a provider with whom the Lord Chancellor has entered into a contract or other arrangements.”

It may well be that the primary statute does not permit the government to remove the client’s right of choice without exception. This is backed up by the explanatory note and the express words of the then minister. Yet that is what will happen under the government’s proposed scheme.

The proposal is economically unworkable and possibly unlawful, and it is difficult to see any straightforward changes the government could make to overcome the difficulties. The whole model needs to be completely rethought. But the government has no time to rethink it.

Notwithstanding all the issues set out above, the Treasury is demanding that the Ministry of Justice makes massive cuts within a very short period of time. Even if the ministry scrapped competitive tendering, we still face the prospect, as an alternative, of an unprecedented administrative cut in the rates.

The Law Society issued its own consultation paper on 5 April to get practitioners’ views on what could realistically be done to give them the best chance of surviving such cuts. It is debatable whether enough firms will remain viable for the government to continue to deliver the service it is obliged to provide.

We hope to secure an outcome that will enable practitioners who wish to continue providing criminal defence services to do so, even if not in the same sort of business model they are currently in. Do make sure you respond to the consultation.

On the information currently available to us, we believe that this proposal takes the government past the point of no return. No amount of tinkering with the system of procurement will solve that fundamental difficulty.

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