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Carter Review (Legal Aid)

You will know from that intervention, Mr. Martlew, that there are many hon. Members present who are well aware that in their constituencies there are legal aid providers who do not see how they can provide under the new arrangements the service that they are providing at the moment. Indeed, figures provided to the Committee by the LSC indicate that in London, which is a hotspot of social exclusion and deprivation, the incomes of 63 per cent. of lawyers who provide housing law advice will be reduced under the Government’s plans for new fixed fees for the transitional period if they do not change their working practices. The average loss for those lawyers who face fee reductions will be 18.5 per cent. The picture is even worse for those who provide welfare benefits advice in London, of whom 70 per cent. will see a similar average fee reduction. Some providers in other regions of the country might receive significant increases in their fees—the previous Lord Chancellor talked about that when he gave evidence to the Committee—which could be a positive development, but it is deeply worrying that there is a risk to the provision of social welfare law advice in London and other urban areas that have particular needs. Research for the LSC by Andrew Otterburn on the economic situation of criminal legal aid lawyers demonstrated the fragile state that the supplier base is estimated to be in. He warned that the situation is likely to be even worse for civil and family legal aid lawyers. Despite the obvious risk to the provision of quality legal advice posed by fee cuts and aspects of competitive tendering, the Government appear not to have carried out appropriate, wide-ranging research into the likely impact of the Carter reforms on suppliers and clients. They have not undertaken detailed research into the cost drivers in the legal aid budget or into potential means by which to secure a lasting and sustainable development of the legal aid system that consists of more than simply cutting lawyers’ fees. Their view on evidence was shown rather vividly in paragraph 40 of their response, which states:"““Work is in hand to fill the data gaps identified by the Review, but this is not expected to change our view of the fundamental factors driving cost.””" So they are saying, ““We are going to get some more evidence, but it won’t change our mind, whatever it says.”” I find that very Sir Humphrey. An urgent warning about the effects of the lack of an holistic approach to legal aid came from Michael Robinson, who is a member of the Law Society Council from Northumbria. On the reform proposals for legal aid in child care proceedings, he said:"““It is not appreciated how fragile the care proceedings system is. No one has really undertaken a review of how it operates in each local magistrates’ and county court or how well the non-solicitor/non-barrister professionals cope with the system. The system works very slowly and, in the main, the interests of children or of parents or grandparents are advanced because solicitors are pro-active. This pro-action will cease with fixed fees. Children will suffer.””" Despite the recent child care proceedings review carried out by the Departments for Constitutional Affairs and for Education and Skills, the Government reforms pay too little attention to the recurring problems faced by lawyers and court users in child care proceedings. Such problems include delay, understaffed courts, problems with the Children and Family Court Advisory and Support Service and insufficient case preparation by local authorities, all of which mar proceedings. The legal aid reforms do not take those considerations sufficiently into account. During its inquiry, the Committee was provided with many other examples of how the Government have failed to consider the legal aid system as a whole, carry out adequate research and then address the systemic difficulties comprehensively. For example, little attention has so far been paid to the way in which expert fees have contributed to the rise in the legal aid budget, especially in family and criminal proceedings. The Committee’s report generally welcomed the Government’s intention to move comprehensively to the payment of legal aid providers by case rather than by the hour. However, our inquiry convinced us that neither Lord Carter nor the Government have managed to design fee schemes for the one to three-year transitional period prior to competitive tendering that would provide adequate remuneration for the work that a provider invests in a case. No appropriate set of objective proxies for individual case complexity was employed when deciding the fee levels, and there was almost exclusive reliance on the swings-and-roundabouts effect that is inherent in a fixed fee system with limited graduation. The lack of graduation for differences in case complexity in the initial fee scheme has attracted particularly severe criticism from the most senior family judge in England and Wales, Sir Mark Potter. He called the initial Government proposals for the family fee scheme"““a series of extremely crude averaged fixed fees””" and said that"““the whole thing has to be radically revised””." Although the proposals have been changed, the modifications to the fee schemes can hardly be called adequate. Crude fixed fees or fee schemes with rudimentary graduation will hit hardest the clients who are more difficult to deal with, and potentially the most vulnerable, as they may have greater difficulty in getting their cases dealt with by experienced providers. Fixed fees will waste the knowledge and talent of specialist and niche providers, as they will be forced to take on more straightforward cases to arrive at an economically viable case mix. Such specialists will not be able to deal with as many of the complicated cases that require a high degree of specialisation. There are no economic incentives in the new fee schemes in the transitional period for the provision of dedicated services and specialist advice. The fee uplifts for members of the Law Society’s children panel will be severely curtailed under the revised Government plans. The quality control of legal aid lawyers by means of peer review will provide a quality floor, but will not encourage excellence. Michael Robinson, whom I mentioned earlier, told me:"““Already, as a result of the criminal legal aid reforms, we are seeing firms restructure so that expensive, experienced fee-earners will be got rid of and replaced by cheaper, less experienced young people. It is the experience of solicitors which tends to make the system work, and this is not valued by the Legal Services Commission.””" The Committee concluded that more work needed to be done on the Government’s proposals for what they call the transitional period, with LSC set-fee schemes, and that there needed to be a solid evidence base. Severe fee cuts are envisaged not only in the areas of legal aid in which the budget is still increasing, such as in Crown court cases and care proceedings, but across the board in virtually all areas of the law. The legal aid system is being put at risk even though significant parts of it appear to be operating acceptably and to budget. A wholesale and rushed change to the system is not needed, especially given that the Government have failed to assess the real risk of the reform plans to legal aid clients. The Committee has therefore called for the introduction of the new fee schemes for the short transitional period to be halted. Here is the problem: the dangers of the fixed fee schemes have caused such alarm that they have distracted attention from the main feature of the reform that the Government propose, which is a move to competitive tendering for block contracts for legal aid work. The Committee was astonished by the lack of concrete plans for the tendering process. There are well-known problems with competitive tendering, such as ““winner’s curse””, when the winning bidder bids at an uneconomically low rate and cannot fulfil their contract. Those who travel on the east coast main line will be familiar with that problem, which happened to GNER. It could perfectly well happen in the legal services sector. Another issue is whether there will be an adequate supplier base, especially after the fixed fees period. If that period goes ahead, who will be left at the end of it to compete in the tendering process? Who will be left at the second round of competitive tendering? There is a real danger that there will not be sufficient suppliers to make the second round a process of competitive tendering in any realistic way. We quoted the evidence of Professor Cape, who called the introduction of competitive tendering without proper piloting ““reckless””. We thought that competitive tendering should not be rolled out nationally, even in a phased manner, without such a pilot. The Government’s response to our report, issued on 22 June, was disappointing. None of the Committee’s hard-and-fast recommendations seem to have been taken on board. The fixed, graduated fee schemes for the transitional period are to go ahead in all areas of legal aid, and no significant changes were made to the structure of the fee schemes in terms of graduation or to reflect the differing work costs across the country. There is to be no proper piloting of best-value tendering and no detailed analysis of the cost drivers in the legal aid budget to inform the current or future reforms. In short, the Government have failed to address the main flaws in their reform proposals. There have been some improvements to the previous proposals, such as the phasing in of the new private law family fee scheme, with level 3 and 4 fees coming into force at a later date than levels 1 and 2, which come into force in October, but those improvements do not change the overall picture. The most recent fee schemes and consultations published by the LSC at the end of June and the beginning of this month vindicate the Committee’s concerns. For example, one of the Committee’s main criticisms of the Government and the LSC was the lack of data on which the fee schemes for the transitional period were modelled. This spring, the LSC announced a change to its initial plans to reform the arrangements for the allocation of police station slots for criminal legal aid suppliers. Because of what it described as ““data integrity issues””—a wonderful-sounding euphemism—the initial proposals were stopped and the LSC re-consulted, asking suppliers to provide it with more and accurate data on which further models could be based. Similarly, it had to delay a crucial decision on the introduction of minimum contract sizes for police station and magistrates court work in order to refine its data. The most striking example is the new consultation paper on the litigators graduated fee scheme for Crown court defence work. The LSC acknowledges that certain complicating factors, such as a client being a non-English speaker, would increase the amount of work in a defence case, but it admits to not holding enough data to quantify the increase in work load. It concluded that it was not able to model, with certainty, an appropriate uplift for such complicated cases. In the light of that recognition and the apparent difficulties with modelling the level three fees for the private law family fee scheme, I wonder how the LSC will ever be able to identify the appropriate value for money for pieces of legal aid work, if not through crude cost averaging. Of course, some delay is justified when it is used to collate and apply better and more reliable data, but that should have taken place before fee schemes were published or, in the case of police station slot allocation, before firms engaged in re-organising their duty solicitor working practices. Another example of the undue haste with which the Government are pushing ahead with the reform proposals is the very short consultation period for the Crown court litigators graduated fee scheme, one of the most central planks in the Carter reform armoury. Consultees were issued with a 91-page consultation paper, replete with data and models, given two online calculators and asked to feed back their experience with these mock calculations to the LSC. Only six weeks were allowed for that time-consuming exercise for Crown court defence solicitors. General Government consultation guidance provides for a three-month consultation period, but the LSC is resorting to the pretext of these schemes having been the subject of a previous consultation: the one following the Carter report. Why is the LSC not allowing providers more time to calculate the fee models and come up with a sensible, well-tested response? All that reinforces the suspicion that the current reform plan, especially in respect of the transition period with its Government-set fixed and graduated fee levels, is not a carefully-planned, well-thought-out step based on diligent analysis of extensive and reliable data, but a rushed attempt to save money at all costs in a short period of time. The Government partly acknowledge that, saying in their response that they intend to"““tackle known cost drivers as a matter of urgency””" and that they need"““to act decisively if reductions to scope and eligibility””—" for legal aid—"““ are to be averted.””" So, there is a sense and rush and urgency. Reforms carrying significant risks to the provision of quality legal aid in the near future should not be implemented in this way, without proper reflection and without a solid basis of evidence and piloting. It sounds like a Treasury-driven approach is being taken, and it may be highly damaging to our legal aid system. Along with it has gone something that we were very concerned about: a breakdown in relations between the LSC and the professions and the not-for-profit providers, who are also important in this area. Citizens Advice has said:"““We hope that members will support Citizens Advice in urging the Ministry of Justice and the Legal Services Commission to initiate a consultative process involving all stakeholders in the design of a pilot tender process, supported by robust research on demand and delivery cost drivers.””" Some of the damage has already been done. Many people have given us evidence—right up until this morning—of what is happening. The Association of Major Criminal Law Firms sent me some information this morning, saying:"““Over 80 per cent. of our member firms are contemplating taking or have already taken steps to make staff redundant.””" Large firms have indicated that they are going to ““leave the market”” and others have indicated that they have ““no interest”” in taking on the work that those firms are doing. It is not too late to make a change, even though some damage has been done. As was indicated at the beginning of the debate, an opportunity exists; some legal action may be taking place and we have a new Minister, whom I have congratulated on her appointment. She has an opportunity to take a new look. Any new Minister coming into office would expect to check carefully whether matters already in hand really do fit with the Government’s wider social objectives. In their present form, these proposals cannot be matched to the Prime Minister’s declared objectives for a fairer society. I hope that the Minister will examine the proposals carefully and follow some of our guidance on ways in which not only could they be mitigated, but we could proceed to a much more carefully thought-out second stage without the damage of the transitional fee scheme.