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Funding Code: Criteria and Procedures

My Lords, the funding code, which is created under Section 8 of the Access to Justice Act 1999, sets out the merits criteria for granting civil legal aid in different types of cases and the procedures for operating the civil legal aid scheme. Those cover, for example, application, refusal and appeal procedures. The funding code’s criteria and procedures are being modified under Section 9 of the Access to Justice Act 1999. That section requires any changes to the code criteria, as here, to be approved by both Houses of Parliament before coming into effect. This is done by laying the whole funding code, as amended, before each House, rather than by laying amendments alone. The funding code does not set out the remuneration arrangements for civil legal aid, which are set out in orders and contracts. Nor does it cover financial eligibility rules for civil legal aid, which are in regulations. The funding code instead covers the test that cases must meet, in the judgment of the Legal Services Commission, in order to merit civil legal aid funding. This merits test includes considering the likely costs of a case against the likely damages and how likely the case is to succeed. It also sets out considerations that apply to cases which are not primarily about money. Generally, the intention is to model the approach that a reasonable, privately-paying client would adopt with regards to litigation, taking into account the importance of the issues at stake, the likelihood of success and all the other circumstances. This helps to ensure a level playing field between those who can afford to litigate privately and those who do not have the financial resources to do so. It follows that public funding should not be provided if a case is insufficiently strong for a private client to risk his or her own money, and to bear the risk of having to pay the costs of the other side. The revised funding code before the Committee introduces a number of changes to the operation of civil legal aid. We devote very significant resources to civil legal aid—around £1 billion annually—so it is important that we review regularly how that money is being spent, and the cases and matters on which it is being targeted, to ensure we are achieving value for money. Following a review of the funding code by the Ministry of Justice and the Legal Services Commission, we published a range of proposals to refocus and target resources on to more meritorious cases. These changes have not been driven primarily by financial considerations. Indeed, the savings from these changes of £5 million per year are relatively modest, compared with the overall expenditure on civil legal aid. Rather, we have looked critically at the existing funding rules to identify areas where they can be strengthened to ensure that funds are being properly targeted. These changes were the subject of a full consultation last year, and we have had further useful discussions with interested parties following the consultation. As a result of the representations we received, we have very substantially revised our original proposals. For example, we are no longer pursuing proposals to withdraw solicitors’ authority to self-grant funding for judicial review challenges to the Government, and we have dropped plans to restrict funding for individual damages claims against public authorities. In addition to discontinuing some proposals, we have substantially modified many of our other proposals in the light of suggestions from stakeholders. For example, we are acting to restrict legal aid for low-value multi-party action damages claims, but we are retaining funding for multi-party claims for discrimination, child abuse claims and cases of wider public interest, as suggested by consultees. Stakeholders have expressed gratitude for being fully engaged in the process. This is a series of somewhat technical changes, and it may assist your Lordships if I summarise the key changes we are making. In section 2 of the code criteria, we have tightened the definition of the wider public interest test so that not only must the case have the potential to produce real benefits for individuals other than the client, but the case must also be considered on its particular facts to be an appropriate case to realise those benefits. This change is to ensure that when funding is sought for a weaker case—one with borderline prospects of success—on the basis that the case could benefit others, it receives funding only if the outcome has a realistic prospect of delivering benefits to others, rather than just a theoretical possibility. Section 5 of the code criteria sets out the criteria of general application. Here we are withdrawing funding for claims that are part of a multi-party action where the likely damages, as assessed by the Legal Services Commission, are £5,000 or less. However, we have retained funding for lead claims as we consider that this will allow legal aid to fund the initial determination of the issue, and further cases can then proceed on a private or conditional fee basis. We are imposing an identical restriction, through the Lord Chancellor’s direction on the scope of the Community Legal Service, for out-of-scope cases that are funded on the basis of wider public interest, such as some personal injury claims. The direction is not subject to parliamentary approval, but has been provided to noble Lords for information. Section 7 of the code criteria covers funding for judicial review. Here we have made two changes. The first is to ensure that funding is available only to individuals seeking a benefit for themselves or their family. Legal aid is intended to assist individuals with their personal legal problems. It should not be used as a tool for those who wish to campaign about matters with which they have no personal connection. It is important that we focus our resources on our priorities, such as debt, employment and housing advice in the current economic climate, and that resources should not be diverted. Of course, campaigning organisations are free to seek judicial reviews, although they are not eligible for legal aid, which is only provided to individuals. The second change is to remove the existing presumption of funding. The presumption applies to cases of wider public interest, overwhelming importance to the client, or raising serious human rights issues. In practice, the presumption means that where a judge has granted permission for a judicial review, legal aid funding follows without any consideration by the Legal Services Commission of the likely costs or benefits of the case or the prospects of success. While a judicial decision will always carry very great weight indeed, it is the proper role of the Legal Services Commission to decide whether the use of public funds is justified, and we want to ensure that it is able to carry out this role. While we want these roles to be clear, we anticipate that funding would be withheld in only a handful of cases. Section 8 of the code criteria sets out the criteria for damages claims against public authorities. Here we have included an additional prompt by referring to the prison and probation complaints schemes. There is already a general requirement to this effect, but this is intended to highlight the need to consider alternative forms of dispute resolution before commencing litigation. Sections 12 and 13 of the code criteria relate to mental health and immigration matters respectively. Here we have taken the opportunity to update the references to the tribunals to recognise the reformed Tribunals Service implemented under the Tribunals, Courts and Enforcement Act 2007. This is not a substantive change to legal aid for these cases, but simply a change in terminology. The code procedures set out the operational procedures for civil legal aid. Here I shall confine my remarks to the two main changes we are making. Section C15A of the procedures sets out the new process we are introducing to fight fraud. Before legal aid is granted in an ancillary relief or a private law children case, the Legal Services Commission will notify the other party to invite it to provide evidence if it believes that the applicant is financially ineligible for funding. The other party will have 14 days to put forward any evidence, after which funding will commence in the usual way. This notification requirement does not apply to domestic violence cases or to urgent cases, where it can be waived. If the commission receives any evidence that the applicant may not be eligible, it will pass it to its fraud team to investigate or will contact the Department for Work and Pensions if the allegations concern benefits entitlement. Our intention is to consider this process for all areas of civil legal aid, but the changes before the Committee are confined to private law children and finance cases. We currently receive the highest proportion of genuine representations about client eligibility in these areas and 50 to 60 per cent of representations about client eligibility in these areas are of substance. We have therefore chosen to start the new process in these areas because we are conscious of the risk that the new process may increase the number of vexatious representations made. The new power is drafted as a discretion, so that the Legal Services Commission can roll out the new process gradually. If we were to find that it was not as effective as anticipated, the process could stop and we could reconsider. Section D of the procedures sets out the new special controls regime. This brings together the existing oversight panels for public interest and multi-party action cases and expands their remit to cover individual weaker cases—those with borderline prospects of success—which depend on the case being of public interest or raising human rights issues to merit funding. Cases subject to the new special controls regime can be referred to the new special controls review panel for advice on their merits, or, where funding is refused, cases will be referred to the panel for reconsideration. The panel will then report and the Legal Services Commission will make the final decision, taking into account the panel’s findings. Some noble Lords have asked why we are making changes to legal aid now, in advance of the transformation of the Legal Services Commission into an executive agency. Transforming the commission into an agency will require primary legislation. It will inevitably be some time before any changes can take effect, so the current system continues in place for the time being. Clearly, any changes we implement will need to ensure that decision-making in individual cases is independent of Ministers. In conclusion, I hope that the Committee has found this explanation of the revised funding code of help. These are technical but important changes that will help to ensure that funding is directed towards cases of the highest merit. I commend the revised funding code to the Committee.