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Family Proceedings Fees (Amendment No. 2) Order 2005 Magistrates’ Courts FeesOrder 2005

My Lords, I am grateful to the noble Lord, Lord Goodhart, for the way in which he raised the debate and generally for his constructive approach, although clearly he disagrees with the way in which the policy is developing. Fees and their history have long been important matters of debate but the issue is not new. As the noble Lord will know better than most, fees have always been charged to litigants in civil cases. They were originally paid to the judges of courts who retained them personally. When major reform of public administration took place in the 19th century, including changes to the courts system, its modern form and the introduction of judicial salaries were made. Fee-setting powers were passed to the Lord Chancellor. The county courts, which were established in 1847, were entirely self-financing. Court fees were paid for judges, clerks, bailiffs and accommodation. The original clerks became the registrars and now the district judges. Later in that century it was accepted that fees should cover the remuneration of clerks and bailiffs but that salaries for judges, buildings and ancillary expenses should be met by the taxpayer. That is the origin of policy. In the 20th century much thought was given to the balance of payment for court services between fees and direct subventions from the taxpayer. Interestingly, the Macnaghten report on the Supreme Court in 1922 considered it an authoritative principle that the salaries and pensions of judges should be paid by the state and the rest through fees. In 1982 the Public Accounts Committee questioned what was then described as the limited cost approach adopted by the Lord Chancellor’s Department. The then Lord Chancellor and the Chief Secretary to the Treasury carried out a joint review and reached agreement that the full cost of civil court services, excluding judicial costs, should be recovered from fees in future. In 1992 the Lord Chancellor and Chief Secretary agreed to change the policy to one of generally basing fees on the full cost, including judicial costs, while recognising areas of agreed social subsidy, mainly for family proceedings. The fees order in 1996 sought to remove the exemption for recipients of income support and was to that extent quashed. The consistent policy of the current Government, however, has been generally to set fees on the basis of full cost while ensuring the protection of access to justice for those of modest means through the system of exemptions and remissions. I give that history and background simply because I want the House to understand the options for the funding of the civil court system and to bring some realism to the matter. Essentially there are three ways in which we can fund our modern civil court system. First, to maintain the concept of setting fees to reflect costs, so that those who have sufficient means pay the full cost of litigation while the taxpayer’s contribution is focused on those qualifying for remission or exemption; secondly, to subsidise the level of court fees generally by increasing taxes or taking money—from, say, the legal aid budget—in order to reduce court fees. A wholly free service would cost £400 million. Thirdly, we could cut costs and therefore fees by slashing court services, closing courts and sacking staff—not a strategy that your Lordships’ House would greatly admire. Those who oppose these fees orders or say they object in principle to the Government’s policy on fees, should state which of these other options they prefer. Court fees have to comply with the general policy principles that apply to all services for which the Government charges fees authorised by Parliament. The most important is that fees should not exceed the total cost of providing the service. Fees cannot be set to make a profit. All fee-charging services must have a financial objective agreed with the Treasury. For civil court fees, the objective is to recover the total cost, not counting the cost of providing fee exemptions and remissions. In other words, although the term is often used, the target is not ““full-cost recovery””. A better way of describing the policy is ““full-cost pricing””. Fees should generally be set at levels which, on average, if charged in every case rather than waived, would recover the full cost of providing the service. Full-cost pricing, together with a system of exemptions and remissions to protect the least well-off, is the better way of targeting the taxpayer’s contribution at where it is most needed. Furthermore, many fees in family proceedings are currently set at levels well below full-cost. These include, in particular, the fees for domestic violence, adoption and public law childcare cases. None of these is affected by the amended fees orders, except when the magistrates’ courts childcare fees have been harmonised with county court equivalents. The current financial objective for family proceedings in the county courts and above is to recover 66 per cent of the full cost, discounting the cost of exemptions and remissions, by 2007–08, with an equivalent regime in the magistrates’ courts. For the longer term, we plan to review the objectives for family business as part of the 2007 spending review. So the taxpayer makes and will continue to make a significant contribution to the cost of running the civil and family courts. In 2004–05, the cost of the higher courts exceeded fee income by nearly £104 million, or 23 per cent of the total—and that does not count the fees subsidised by the taxpayer through legal aid. The current fees order for the magistrates’ courts has increased family fees to align with those for the same type of case in the county courts. The increases here are worth about £4 million a year. Harmonising the family fees in magistrates’ courts with those in the county courts supports our policy of delivering a unified family service across the jurisdictions, improving the service to users by enabling many cases to be heard more quickly before the appropriate tier of judiciary. It is only right that the same fee should be charged for what is, effectively, the same overall service. In relation to civil proceedings fees have been increased to bring the majority in line with the estimated cost of work involved. The increases are worth about £16.5 million a year. Many of these civil fees are paid for by public authorities, as the noble Lord, Lord Goodhart, said, enforcing debts such as council tax and child support. However, the cost of these fees can be passed on, in turn, to the debtor. The current fees order increases most fees for private law family proceedings to a level that broadly equates to the full cost of the services provided. The increases are worth about £14 million a year. Following consultation, my noble and learned friend the Lord Chancellor decided to defer the proposed increase on ancillary relief applications. Consultees raised serious concerns due to the size of the increase and potential impact on children, so it was thought better to await the outcome of the review of the exemption and remission system later this year. A significant number of litigants will not be required to pay the fees because they qualify for legal aid or fee exemption or will be granted fee remission. Exemptions and remissions account for about 13 per cent of the total cost of family cases in 2004–05. There are approximately 5 million people in receipt of specified means-tested benefits or tax credits who are eligible for automatic exemption from court fees. Anyone not qualifying for exemption but who would suffer financial hardship if required to pay fees, whether in full or in part, may be granted remission, in full or in part. The test for remission is based on both income and expenditure—it takes full account of all of a person’s commitments and liabilities not just how much money they have or receive. In protecting access to justice through the department’s system of fee concessions, the taxpayer, in effect, paid subsidies in the last financial year with a value of nearly £23 million for those exemptions and remissions, with over £15 million, or 67 per cent, of exemptions and remissions in respect of family proceedings alone. Setting fees generally at levels lower than full cost price would mean that corporations and other wealthy litigants would benefit from the taxpayers’ contribution, increasing its cost and, in turn, putting pressure on other budgets such as legal aid. These are public expenditure decisions for the Government. What the state provides free, or at a charge, is a matter of policy for the Government. They must determine priorities in the allocation of scarce public resources. We recognise that citizens in a democracy under the rule of law have a constitutional right of access to a court system, but it is not a constitutional right to free access, provided those who cannot pay are protected. These fees orders must be seen in the context of our longer term strategy of reviewing and reforming the court fees system. Its objectives are to ensure that the system meets the cost recovery targets for civil, family and probate business, including, as appropriate, the cost of modernisation. Additionally, it protects access to justice through a well targeted system of exemptions and remissions. Thirdly, it ensures that taxpayers’ contributions to the cost of the court system remain affordable. Finally, so far as is practicable, it manages broadly to match the level of particular fees, or sets of related fees, to the cost of the particular process and types of case concerned. Her Majesty’s Courts Service is undertaking two major reviews in 2006 to deliver this strategy. First, Access to Justice is a fundamental review of the system of exemptions and remissions to ensure that it adequately protects access to justice and is operated consistently by courts. That review is to be overseen by a steering group of stakeholders, chaired by my noble friend the Baroness Ashton of Upholland. The other major review will be of the structure of the fees system. That is, the point at which fees are charged, the key objective here being to achieve a closer match of income and cost drivers, both to make the system fairer—as between different types of litigant—and to make it easier to ensure that cost and funding remain in balance as workloads change. Both the noble Baroness and the noble Lord asked a number of questions and made a number of points, which I shall attempt to respond to. The noble Lord, Lord Goodhart, was very concerned about the impact of fees on local authorities. Across the piece we have calculated that it would probably cost an increase from 70p to council tax fees: an increase of £1.5 million, spread across some 300 district, county and unitary authorities, such as the London boroughs. I do not think one can argue that this will be so onerous an impact upon budgets. It is a minor cost pressure on part of their service, though an important one. Clearly it is right that local authorities can recover the cost of, in particular, chasing debtors for council tax. The noble Lord, Lord Goodhart, referred to the importance of departments being responsible for their budgets, effectively asking what would be the point of charging fees to those entitled to legal aid. The department responsible for both budgets and legal aid budgets are planned in light of the fact that it pays the cost of court fees. That has to be very carefully taken into account. The noble Lord, Lord Goodhart, made considerable comment and play on the big percentage increases involved. Yes, raising the existing fee of 70p—which, I am sure the noble Lord would accept is not a fair reflection of the real cost of the service—to £40 produces a big percentage increase. That does not justify a lower fee and, in any event, means that the taxpayer subsidises the cost of enforcement against people refusing to pay maintenance for their children. It is clearly not a particularly effective or efficient use of scarce public resources. There is a larger percentage increase than one might predict for many of these fees simply because they have not been increased very frequently in recent times. I think that the noble Baroness, Lady Morris, also asked me to confirm some of the detail about exemptions and remissions. Automatic exemption is available for those on specified means-tested benefits; that is, income support, jobseeker’s allowance, pension guarantee and, in some cases, tax credits. As I said earlier, some 5 million people qualify for those exemptions and remissions within the current scheme. Those who do not qualify for exemption but who would suffer hardship if required to pay the fee may be granted discretionary remission in full or in part. As I explained, the assessment is based not only on income but on expenditure. There is a leaflet entitled Court Fees—do you have to pay them? which carefully explains the procedure for applying for exemptions and remissions. We are, as I said, undertaking a review of how exemptions and remissions operate. I am sure that both the noble Lord and the noble Baroness will wish to make their views known to those conducting the review, who I am sure will pay considerable and careful attention to today’s debate. Finally, the noble Baroness, Lady Morris, referred to efficiency savings. Of course Her Majesty’s Courts Service is very conscious of the need to maximise efficiency and minimise the cost to fee payers and of course to taxpayers. The Courts Service has recently published its business strategy. Clearly built into that business strategy is an appreciation and understanding of the need to achieve greater efficiency so that the service in general does not become excessively burdensome to fee payers and taxpayers alike. I am grateful to both the noble Baroness and the noble Lord for their contribution. I hope that the policy context within which I have explained the fee increases and also some of the background history will assuage some of their concerns. But clearly this is an issue for further debate in terms of how the two reviews to which I referred will be conducted. No doubt there will be further opportunity to look at some of the issues that have been raised.