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Rapid decline in Legal Aid work

Richard Miller, Director of LAPG

 

A recent survey conducted by the Legal Aid Practitioners Group, the Law Society Gazette and the Criminal Law Solicitors Association shows that a substantial proportion of firms currently offering legally aided services are planning to give up legal aid work altogether or cut substantially the amount they do. These results come as no surprise. Remuneration, bureaucracy and the persistence of change are all taking their toll, with the result that many people now question the viability of the current system of provision of legally aided services through private practice firms. All the signs are that we are in for a turbulent few years in the legal services market, particularly in the field of legal aid.

In April 2002, the Legal Services Commission lost 6% of its entire Community Legal Service (CLS) supplier base. With many firms giving up some but not all of their contracts, the total number of contracts lost to the CLS was 8%. These figures were already substantially down on the start of contracting.

Initial figures from the Commission for April 2003 suggest a similar drop again this year. In family it appears that 10% of the remaining suppliers have given up, with under 3,400 left of the 4,377 who took up contracts in January 2000.

There are a number of reasons for firms giving up legal aid. First and foremost is the issue of remuneration. Over the past twelve years, the remuneration rates for legal aid have been frozen in all but three years. In 1995, there was an inflation-rate increase. In 2000, there were some small increases in some parts of the scheme. In 2001, for the only time in well over a decade, there were relatively significant increases (in the order of 10%) for advice and assistance and for most family work, as well as additional payments for specialist family solicitors with advanced panel membership. Despite these increases, however, the rates for advice and assistance remain at around one third to one half of the rates payable for privately funded work. Between the parties costs scales allow about £90 per hour for unqualified staff. Legal aid advice and assistance rates for all staff range from £50 to £60 per hour. Time spent travelling and waiting at Court is paid at £26 per hour.

Since April 2001, there has been no increase in these rates; indeed, on the contrary, despite the LSC’s statement in its Corporate Plan that rates should be increased in autumn 2002, what talk there has been in recent months is of further freezes or even cuts. More and more firms are finding that it is no longer economic to offer legally aided services. The pioneering specialist immigration firm Winstanley Burgess has taken the difficult decision to close down because it cannot construct a viable business plan on legal aid rates.

But remuneration is not the only issue causing concern. The bureaucracy firms face is also causing problems. This would not be an issue if the remuneration rates were more realistic, but the combination of low rates and heavy bureaucracy is increasingly difficult to cope with. The contract compliance audit process is the latest bureaucratic nightmare causing firms to reconsider their position.

The process is based on the principle that when firms receive public money, the LSC must ensure that the money is being claimed properly. No one could seriously object to that principle. However, the way it is being implemented leaves a lot to be desired.

The Commission sends a firm a request for 20 named files in each legal category in which the firm holds a contract. The auditors then assess the file against the costs claimed, and identify any items that have been claimed that should not have been. Firms that have more than 20% assessed off the sample of their bills in the audit are classed as Category 3. Between 10% and 20% results in a Category 2 rating, and 10% or less is Category 1.

The first objection is the poor quality of many of the audits. Auditors are making far too many basic mistakes that reflect carelessness in the work, a lack of understanding of what solicitors do, and a lack of understanding of their own guidance. For example, one firm had an attendance note of a Court hearing that was headed “Coram DJ X”. The auditor disallowed the entire attendance because the firm did not have a fee earner called “DJ X”. Instances of the auditors claiming that documents or attendance notes were missing when they were clearly present have been far more numerous than is reasonable. Inconsistencies between the regions led to 58% of Nottingham firms being classed as Category 3, but only 18% of Cambridge firms.

The second objection is that the auditors do not identify any elements of underclaiming. The assessment is not therefore a fair reflection of whether the costs claimed were reasonable overall. It is a one-way only process.

The third objection is that to consider and challenge the results involves many hours of work, for which firms will not be reimbursed even if they are completely vindicated. Many firms that have been deeply unhappy with the results have nonetheless concluded that it is not worthwhile challenging them.

The result is that many solicitors have lost faith in the audit process.

This is a serious aided work from April 2004.

For many firms, rather than submit to what is seen as an unfair audit process that could lead to their livelihood being removed, the decision is being made to reposition the firm to get out of legal aid altogether.

Behind the figures of firms giving up legal aid altogether, there are many more that are giving up some areas of law, or cutting down on the amount of work they do under the scheme. Statistics from the Commission do not indicate where or to what extent this is happening. However, it is estimated that around half of all firms with a legal aid contract rely on public funding for only around 20% of their income. This represents a substantial part of the supplier base with only a tenuous commitment to legal aid.

Another issue frequently cited as a reason for giving up legal aid is the relentless pace of change. The LCD is undertaking a major review of the legal aid system. The Times recently reported that a “severe shake-up” of legal aid is to be announced by the Lord Chancellor. More broadly, the Office of Fair Trading may introduce new rules in the light of its report on competition in the professions, to allow non-solicitors to provide conveyancing and probate services. There is uncertainty about the possible impact of the Law Society’s proposal to allow employed solicitors to undertake work for their employers’ clients. This change in the rules would enable supermarkets, banks and other organisations to enter the legal services market in a big way. The loss of more profitable areas of work as a result of such changes could be the final nail in the coffin for many legal aid firms.

The unsurprising effect of all of these factors is that survey after survey shows increasing numbers of firms starting to plan for life without legal aid. Increasingly, the partners who are not doing legal aid are questioning why they should support work that is at best marginally profitable and at worst actually loss-making. The partners who are doing legal aid are questioning why they should tolerate the heavy burden of bureaucracy associated with publicly funded work when the rewards are so low.

If this was just about the solicitors, it would not matter much. But it is the clients who suffer. By definition, legal aid clients are among the most vulnerable and socially excluded people in the community. In some fields of law, notably housing, there are large areas of the country without a single solicitor to assist clients on legal aid. Many large towns have only one legal aid firm left, and some no longer even have that. Although it is true that the new system has identified gaps in the system that were there before contracting was introduced, it is undeniable that the gaps are growing more rapidly every year. For growing numbers of the population, access to justice is being denied.

Something has got to give. The solution we would all like is for the Treasury to take seriously the extent of the impending crisis, and to make available to the LSC the funds to avert the worst of it. The crisis is in large part caused by policies in other Government departments, especially the Home Office, increasing the need for legally aided services with no matching increase in the resources available to meet that need. That is a situation that cannot be allowed to continue. However, even if the Treasury does provide some additional money, it is unlikely to be enough.

The LSC therefore has to look closely at other methods of reducing the costs in the system. One key element is likely to be the extension of graduated fees for advocates. Solicitors have been squeezed as far as they reasonably can be and then some. Compared with what solicitors have faced over the past decade, the Bar has been relatively unscathed. That is unlikely to continue.

Some in the Government are keen to remove legal aid altogether for certain fields of law. It is rumoured that clinical negligence may be abandoned to the conditional fee market, despite the fact that none of the key players in such litigation want that, and despite the current chaos in the system. The scope of financial eligibility for legal aid may also be reduced.

The Law Society has put out a consultation document on possible models for the future, including wider use of insurance, the extension of salaried services, and a greater role for the not for profit sector. All of these will probably happen to a greater or lesser extent if private practice continues to withdraw from the provision of legally aided services.

When the franchising and contracting systems were being introduced in the 1990s, many solicitors recalled the saying (wrongly described as an ancient Chinese curse), “May you live in interesting times”. It is difficult to foresee how the structure of the legal professions, and particularly those providing legally aided services, will develop over the next few years, but it is safe to say that the longed-for boredom is some way off yet.

 
   
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