The Minister of State, Ministry of Justice (Lord McNally)
My Lords, I wish to repeat a Statement made earlier today by my right honourable friend the Lord Chancellor and Secretary of State for Justice:
“With permission, Mr Speaker, I wish to announce today proposals for the reform of legal aid in England and Wales and proposals for the reform of civil litigation funding and costs in England and Wales. I have today laid before Parliament two documents, Proposals for the Reform of Legal Aid in England and Wales and Proposals for the Reform of Civil Litigation Funding and Costs in England and Wales, which consult on these issues and copies of which will be available in the Vote Office and on the Ministry of Justice website. The changes will require primary legislation and, subject to consultation, I hope to include proposals in a Bill as soon as parliamentary time allows.
Legal aid forms a vital part of a system of justice of which we are rightly proud. The Government strongly believe that access to justice is a hallmark of a civilised society. However, I believe that there is a compelling case for going back to first principles in reforming legal aid. The current system bears very little resemblance to the one that was introduced in 1949. Legal aid has expanded—so much so that it is now one of the most expensive systems in the world, costing the public purse more than £2 billion a year. It is now available for a very wide range of issues, including some which do not require any legal expertise to resolve. It cannot be right that the taxpayer is footing the bill for unnecessary court cases, which would never have reached the courtroom door were it not for the fact that somebody else was paying.
The previous Government made many attempts to reform legal aid, conducting more than 30 consultations since 2006. However, successive changes have been of a piecemeal nature and have failed to address the underlying problems. I have gone back to basic principles to make choices about which issues are of sufficient priority to justify the use of public funds, subject to people’s means and the merits of the case. I have taken into account the importance of the issue at stake, the litigant’s ability to present their own case, and the availability of alternative sources of funding and of alternative routes to resolving the issue, as well as our domestic and international legal obligations.
My proposals have also been designed with the aim of achieving significant savings. No other Government in the world believe that the taxpayer should pay for as much legal aid and litigation as we do in the United Kingdom. We have made clear our commitment to reducing the fiscal deficit and encouraging economic recovery. Last month’s spending review set out the scale of the challenge. My department’s budget will be reduced by 23 per cent over four years. Legal aid needs to make a substantial contribution to that reduction. I estimate that the proposals in the consultation paper, if implemented, will achieve savings in the region of £350 million in 2014-15.
I do not propose any changes to the scope of criminal legal aid. However, I propose to introduce a more targeted civil and family scheme, which will discourage people from resorting to lawyers whenever they face a problem, and instead encourage them to consider more suitable methods of dispute resolution. Legal aid will still routinely be available in civil and family cases where people’s life or liberty is at stake, or where they are at risk of serious physical harm or immediate loss of their home. For example, I plan to retain legal aid for asylum cases, for debt and for housing matters where someone’s home is at immediate risk, and for mental health cases. It will still be provided where people face intervention from the state in their family affairs which may result in their children being taken into care, and for cases involving domestic violence or forced marriage. I also propose that legal aid should remain available for cases where people seek to hold the state to account by judicial review and for some cases involving discrimination which are currently in scope. Legal assistance to bereaved families in inquests, including deaths of active service personnel, will also remain in scope. However, prioritising these areas requires that we make clear choices about the availability of legal aid in other areas. Therefore, we propose to remove from the scope of the scheme issues which are not, generally speaking, of sufficient priority to justify funding at the taxpayer’s expense. I therefore propose to remove private family law cases, unless there is domestic violence, forced marriage or child abduction involved. I will continue to provide funding for mediation which can benefit those involved in family disputes by avoiding long drawn-out and acrimonious court proceedings.
Other cases which I am proposing to remove from the scope of the civil legal aid scheme include clinical negligence, where in many cases alternative sources of funding are available such as no-win no-fee arrangements. They also include education, employment, immigration, some debt and housing issues and welfare benefits, except where there is a risk to anyone’s safety or liberty or a risk of homelessness. In many of these the issues are not necessarily of a legal nature but require other forms of expert advice to resolve.
I recognise that there will be some cases within those areas of law which I propose to remove from scope which international or domestic law will require to be funded by the taxpayer. I therefore propose a new exceptional funding scheme for excluded cases. I want to ensure that those who can either pay for, or contribute to, their legal costs do so, so that we ensure continued access to public funding in those cases that really require it for those who have little or no funds of their own. I therefore propose that all clients with £1,000 or more disposable capital should make a minimum £100 contribution to their legal costs and that the capital of any prospective legal aid clients is taken into account when considering eligibility.
I have also looked at how best to reform the way in which we pay lawyers who provide legal aid services. I want to ensure that criminal cases are resolved quickly and cost-effectively and that legal aid fee structures support that aim. In the long term, I propose to fulfil the recommendation of the noble Lord, Lord Carter of Coles, to the previous Administration to move towards a competitive market to replace the current system of administratively set fee rates. However, it will not be possible to fulfil that aim in the short term. Therefore, I propose some more immediate changes to the current fee structure. I propose to ensure that in Crown Court cases that could realistically have been dealt with in the magistrates’ court, a single fixed fee for a guilty plea will be paid based on fee rates in the magistrates’ court. I also propose that the same fee should be paid in respect of a guilty plea in the Crown Court regardless of the stage at which the plea is entered, and to do more to contain the costs of very high-cost criminal cases.
These proposals complement other reforms to the justice system which I will be bringing forward, designed to encourage cases to be brought quickly and efficiently to justice, so sparing the victim the ordeal of giving evidence in court unnecessarily and the justice system significant but avoidable costs. It is important to strike a balance between the need to ensure that legal aid provision is innovative, efficient and good value for taxpayers’ money on the one hand; and ensuring that people can continue to access legally aided services where necessary on the other. I believe that there is more that can be done to strike that balance. I propose to reduce fees paid in civil and family cases by 10 per cent across the board and make similar levels of reductions in rising experts’ fees. I also propose to extend telephone access to advice through the Community Legal Advice telephone helpline, which has a high rate of public satisfaction, to help people find the easiest and most effective ways to resolve their problems. I am also consulting on proposals to make much better use of alternative sources of funding for legal aid. In particular, I would welcome views on making use of the higher rates of interest generated on money invested in a pooled account used by solicitors to hold their clients’ money, and on making use of a supplementary legal aid scheme. Lastly, I seek views on how to make the administration of legal aid less bureaucratic for solicitors and barristers doing legal aid work. I recognise that processes have become overly complex and want to do what I can to simplify these while remaining consistent with the highest standards of accounting practice.
Also, Mr Speaker, on 26 July this year, the Government announced their intention to consult on implementing Lord Justice Jackson’s recommendations on the reform of civil litigation costs and funding arrangements. Sir Rupert Jackson’s independent and comprehensive report published in January 2010 makes a clear case that the costs in civil cases in England and Wales have become too high, and he makes a broad range of recommendations for reducing those costs. I am convinced by Sir Rupert’s argument that achieving proportionate costs and promoting access to justice go hand in hand. I believe that the consultation proposals for the reform of civil litigation funding and costs presented today will help rebalance access to justice with proportionate costs in civil cases.
In particular, Sir Rupert’s proposals would reform the operation of no-win no-fee conditional fee agreements or CFAs. CFAs are funding agreements under which lawyers are not paid if they lose but may charge an uplift or a success fee of up to 100 per cent on their base costs if they win. CFAs as they currently operate allow claims to be brought at no financial risk to individual claimants, but the other side of the coin is that CFAs impose substantial additional costs on defendants. The Government have already accepted the recommendations of my right honourable and noble friend Lord Young of Graffham’s recent report on health and safety and the compensation culture, Common Sense, Common Safety. My noble friend’s typically cogent report endorses Sir Rupert’s proposals. The key proposal is to abolish recoverability of success fees and the associated after-the-event insurance premiums in CFA cases. Under the current regime, defendants must pay these additional costs if they lose. These additional costs can be substantial, as the success fee can be double the base legal costs. In addition, significant costs can arise from claimants’ purchase of after-the-event insurance. After-the-event insurance can be taken out by parties in a CFA-funded case to insure against the risk of having to pay their opponent’s costs and their own disbursements if they lose. We are proposing that claimants should have to pay their lawyers’ success fee and will therefore take an interest in controlling the costs being incurred on their behalf. This will also reduce the disproportionate costs burden on defendants.
We are also seeking views on implementing other recommendations which are designed to balance the impact of these major changes, in particular to assist claimants. These recommendations include a 10 per cent increase in general damages to help pay the success fee and introducing a mechanism of qualified one-way costs shifting. This would protect the vast majority of personal injury claimants from paying a winning defendant’s costs and will therefore reduce the need for after-the-event insurance. We also propose to allow damages-based agreements or contingency fees in litigation before the courts. These are another form of no-win-no-fee agreement under which lawyers can take a proportion of the claimants’ damages in fees. This would increase the funding options available to claimants.
Other proposals would further encourage parties to make and accept reasonable offers, as well as introduce a new test to ensure that overall costs are proportionate. We also propose to increase the modest costs which can be recovered by people who win their cases where they represent themselves without lawyers.
Taken together, my reform proposals complement the wider programme of reform which I will be bringing forward to move towards a simpler justice system: one which is more responsive to public needs, which allows people to resolve their issues out of court, using simpler, more informal remedies where they are appropriate, and which encourages more efficient resolution of contested cases where necessary.
I commend this statement to the House”.
My Lords, that concludes the Statement.
Lord McNally
My Lords, first, I agree with the noble Lord about the press coverage over the weekend. I wonder what advantage it gives, with something that is going to be the subject of a three-month consultation, if somebody leaks to or briefs the press. I will say that neither report is entirely accurate, but this is the world that we live in. I would much prefer that Statements were made to the House of Commons and to the House of Lords and then reporters could do their job.
I welcome the noble Lord’s assertion that we are talking about one of the most fundamental parts of our society: namely, access to justice. I also welcome his recognition that a £2 billion legal aid fund is not sustainable in present circumstances. The Statement, all the comments that the Lord Chancellor and other Ministers have made and we in the Ministry of Justice all recognise that these decisions are influenced in part by our having to cut £2 billion from our budget over the next five years of the spending regime, and that legal aid is one of two or three big-ticket items in the MoJ budget.
I hear what the noble Lord says about social welfare law. In reviewing this, we are trying to focus legal aid on the most serious cases. We are looking at where other sources of funding may be available and where advice can be given to take some of these matters out of the legal system to tribunals and other instruments of resolution. However, we are not trying to pretend anything other than that we are taking hard but necessary decisions to move some cases out of scope and out of legal aid.
The noble Lord asked about the Legal Services Commission. We will take action on that as soon as parliamentary time is available. We are battling for that time at the moment. The 10 per cent across-the-board cuts will apply to the assistance that the noble Lord referred to, and to social welfare work. The noble Lord asked in particular about housing cases. We made it clear that in cases where there is the threat of absolute homelessness, assistance will be retained. We propose that legal aid will be retained for both housing and debt cases where there is the risk of homelessness, and for housing cases where there is a serious problem to be addressed. We propose that legal aid ceases to be available for employment and welfare benefit matters, because the vast majority of these are heard before tribunals. We propose no changes for community care. On the question of contributions, it is critical that those who have the resources to pay for or contribute towards their legal costs should do so, and that the public purse must be the fund of last resort where people own substantial assets.
I hope that I have covered most of the specific points. I understand that the noble Lord will want to study carefully what Lord Justice Jackson said. Like the previous Government, we are trying to take away the inflation pressures caused by the way in which no-win no-fee operated and by the way in which costs, damages and add-ons were calculated. Our old system was inflationary in costs, and encouraged litigation. We hope that what we have extracted from Lord Justice Jackson's recommendations will address problems that were recognised by all parts of the legal profession.
Lord Thomas of Gresford
My Lords, I cannot welcome the Statement, but I welcome the fact that the Minister has said that not principle but finance has caused the reductions that we have seen. When I read the Statement, I thought that the noble Lord, Lord Bach, could easily have issued a similar Statement in the previous Government. No doubt that is why his criticisms were so muted.
This is a considerable challenge to the legal world. Here I declare an interest as a practising criminal Silk, paid very often by legal aid. The suggested reforms set out in the Green Papers require very considerable attention from both the criminal Bar and the family Bar. It is the latter that will really suffer under the provisions that are being put forward.
I ask the Minister about the suggestion that there will be a new exceptional funding scheme for excluded cases. I had a number of discussions with the noble Lord, Lord Bach, when he was in the previous Government, on that very issue. Its importance is that it is wrong for an individual to be in a court, tribunal or inquest and to find himself facing a state-funded organisation such as the Army or the Air Force, or a well funded public company, when an allegation of negligence has arisen. The previous provisions for an exceptional funding scheme were largely concerned with inquests. The noble Lord, Lord Bach, will recall that it was not easy through that mechanism to obtain proper funding for families in distress who faced paid advocates at a very high level who were trying to make sure that their clients were not accused of any negligence. What is the new exceptional funding scheme? Will the mechanisms be improved? Will they be more apparent so that people understand how to obtain exceptional funding in the future? That is a very important issue and I hope that the Minister will be able to respond.
Lord McNally
I thank my noble friend. His question gives me the opportunity to mention a point raised by the noble Lord, Lord Bach, to which I did not respond. If not exactly ring-fenced, criminal legal aid is more protected because we take the view that when people are on trial for a criminal offence, it is important that they have access to justice and legal aid. However, that does not mean making a choice between criminal and civil cases, other than that, in terms of access to justice, a criminal charge is more serious.
The exceptional funding scheme will go wider than assistance for inquests, and it will indeed be available for those who may find themselves out of scope in these decisions but who have an exceptional case to make. I note what my noble friend says. We are well aware that we are making tough decisions that are needed to ensure access to public funding in cases that really require it and in protecting the most vulnerable in our society, as well as encouraging the efficient performance of our justice system. As we have made absolutely clear, those decisions are motivated partly by economic circumstances but also by a view that the legal aid system, as the noble Lord, Lord Bach, acknowledges, needs to be recalibrated and rebalanced, and that is what we have tried to do.
Lord Davies of Stamford
I am very sorry that the noble Lord just brushes aside the leaks in this case—
Viscount Slim
My Lords, following on from what the noble Lord said just now, I should like to thank the noble Lord, Lord Bach, for the sensitive way in which, during the previous Government, he dealt with many issues relating to the military and, in particular, veterans and war widows. He would always listen and I know that he then went off and did his best. I did not like the phrase “out of scope” and I am not sure about “eligibility”, but there are many veterans and military widows who, the moment they leave the protection of the services, are on the streets and very vulnerable. I feel that somewhere in the Minister’s and the Ministry of Justice’s plans there should be special provision to see that these very fine people are not left out in the cold.
Lord McNally
My Lords, I associate myself with the comment of the noble Viscount, Lord Slim, about the noble Lord, Lord Bach, and his record in this area. Within the constraints in which we find ourselves, we certainly intend to make sure that our responsibility to service personnel and their families remains. Exceptional funding will remain available where there is a significant wider public interest in the applicant being represented at an inquest. Therefore, the families of service personnel will still be able to access legal aid funding for representation at inquests into their loved ones’ deaths. Rebuilding the military covenant is one of the top objectives of this Government, and the Ministry of Defence is currently considering how best to fulfil that covenant.
Lord Davies of Stamford
My Lords, I am very sorry that the Minister just brushed aside the leaks in this case, as the Government always seem to do, by saying that it is just a matter of the world that we live in. It is a matter of the world that we live in only because it is tolerated. It is about time the Government adopted a slightly more rigorous approach to investigating and pursuing these things, as the Ministry of Defence did in the previous Parliament. I very much welcome the Government’s decision to propose that success fees should no longer be chargeable to defendants. It seems quite wrong to penalise defendants because of the funding structure that plaintiffs agree with their lawyers. Does the noble Lord agree that one of the great anomalies and problems of legal aid is that the costs incurred by a successful defendant cannot be claimed against the plaintiff? That is not only unfair, unjust and unbalanced between plaintiffs and defendants and legally aided plaintiffs and non-legally aided plaintiffs; it clearly reduces the financial disincentive to litigate marginal cases. Do the Government have any plans to deal with that anomaly?
Lord McNally
I think that I had better duck for cover in this case. I hear the point that the noble Lord makes. If we already have specific plans in this area, I shall write to him; if not, I shall make sure that that point is fed into the discussions that will be part of the review, which will go on for the next three months.
On investigating leaks, at the very beginning of my career I recall the Labour Party, under Harold Wilson, setting up a leaks inquiry and the first meeting of that inquiry being leaked to the Guardian. I was not dismissing the issue; I deplore it and, as I said at the beginning, I wish that we could get back to the rather old-fashioned idea that statements are made to Parliament and then the newspapers report them.
Baroness Browning
My Lords, can my noble friend clarify the response that he gave the noble Lord, Lord Bach, just a few moments ago, when I believe I heard him say that welfare cases are to remain the same? The House will be aware that, with all-party support in both Houses during the previous Parliament, the Autism Act is now on the statute book. One thing that triggered the need for that Act was the fact that many adults and adolescents with autism find themselves in dispute with their local authority over not being able to access appropriate packages of support. That applies not just to those with autism but to people with a great many lifelong disabilities. One of the difficulties in challenging a local social services department is that often the key person who knows most about you is the social worker, who is an employee of the very department with which you have to negotiate. These disputes often become legal cases, although those in social services departments to whom I have spoken about this openly put up their hands and say that, once a legal challenge is made, they very often settle out of court before the case reaches that stage. However, I should be very concerned if vulnerable adults—and they are vulnerable—across the disability spectrum were denied the support of the courts.
Lord McNally
My noble friend’s question points to many of the problems that we face. If legal aid is automatically given in many of the areas that we are removing from scope, it becomes almost a first stop. We are actively trying to promote a different, cheaper and quicker mechanism for settling disputes. A dispute between someone suffering from autism and the local social services department almost automatically ends up as a battle between lawyers in court. We have got something wrong somewhere. We have taken tough decisions; we have taken people out of scope; and we shall look at different ways of getting advice. We propose that legal aid be retained for community care cases and for judicial review in community care cases. As I said before, we are not hiding the fact that this is a removal of legal aid from areas and cases that have previously been covered. We seek to encourage the alternative resolution of disputes, partly because, as the noble Lord, Lord Bach, said, successive Governments have found that the creep of legal aid makes it very difficult to keep overall control of it.
Lord Boateng
My Lords, no one would seriously suggest that we should not reform the legal aid and civil costs regime. However, citizens advice bureaux and the law centre movement have long played a distinguished part all over our country in providing access, not just for the most vulnerable but for the middle classes, to the law and to legal advice. It is cost effective and involves paid volunteers, lawyers, mediators and experts from a whole variety of sources who are needed to ensure that people get justice. The Minister’s right honourable friend has been silent in his Statement about the role of citizens advice bureaux and the law centre movement. Can he give some words of encouragement and support for the contribution that they currently make? Can he indicate whether they will have an opportunity to play an enhanced role in the future and perhaps do something about the crisis in funding that CAB centres face up and down the country, even as we speak?
Lord McNally
My Lords, I can give some limited encouragement. It is true that the law centre movement and other such bodies, which rely on certain cases of legal aid, will have difficulties with this Statement. I also think that there are likely to be difficulties for the CABs which, as the noble Lord indicates, face the problem of the impact of cuts in local authority funding and the likely loss of legal-aid work in the legal advice that they cover. My right honourable friend the Lord Chancellor is fully seized of these problems and is very willing, during the period of consultation, to talk to those bodies and to explore alternative assistance and funding. The noble Lord points to the real impact made by the decisions that we have taken.
Lord Maclennan of Rogart
My Lords, I welcome the reference to promoting alternative dispute resolution to accelerate and simplify the resolution of disputes. Can my noble friend indicate what the criteria are to be where exceptional funding for excluded cases is awarded? In particular, will he recognise that it is an issue not just for the excluded individual but for the courts, because if a case is of a particular complexity it can clog up the courts: a point that was made by a former Lord Chief Justice and a former Master of the Rolls when a previous Conservative Government cut legal aid?
Lord McNally
My Lords, if we are going to recalibrate legal aid, we shall have to explore the alternative resolution of disputes through mediation and other means. On the exceptional cases fund, part of the consultation will be about the criteria and the range of that fund. The recommendations of the Legal Services commission to the Secretary of State will determine how the fund is used, but the opportunity to consult will be taken to ensure that the fund is flexible to the needs of those who really need access to justice.
Lord Beecham
My Lords, does the Minister agree that the conflation of the costs of civil and criminal legal aid in the sum of £2 billion, to which my noble friend Lord Bach referred, disguises the greater proportion devoted to criminal legal aid? What will the percentage cut on the civil legal aid budget be? Can he also indicate where he expects alternative provision to be made and at what cost, and who will fund that cost? Perhaps he could also identify an estimate of the number of cases currently in receipt of legal aid in the categories that will no longer receive legal aid: that is, as the Statement made clear, education, employment, immigration, debt, housing and welfare benefits.
On a slightly tangential matter, will the Minister ask his right honourable and learned friend the Secretary of State for Justice and Lord Chancellor to look again at the court fees that local authorities are required to pay in child protection cases and which are widely thought to inhibit the necessary promotion of those cases? I declare an interest as an unpaid consultant in my former practice as a senior partner in a Newcastle firm of solicitors.
Lord McNally
My Lords, I shall write to the noble Lord on the specific numbers that are being dealt with in areas that are now going out of scope. I shall raise the issue of court fees with the Lord Chancellor. The target saving is £350 million, and I made it clear that that would come mainly from the civil side.
Baroness Kennedy of The Shaws
My Lords, first, are the Government aware that the greatest advances in the development of law happen in legal aid cases? By diminishing legal aid, you end up undermining law as a whole. Secondly, family law has already suffered cuts, and we are seeing legal aid deserts in certain parts of the country. Women, for example, are not getting the kind of expert help that they need in cases of domestic violence. Thirdly, if the Ministry of Justice is concerned to look at spending on legal matters, has consideration been given to the money paid to lawyers by government, not as legal aid money but money paid by government departments to lawyers at the market rate, which is often excessive? Perhaps we should do something to drive those costs down instead of limiting access to the law by the poor.
Lord McNally
My Lords, my noble friend Lord Strathclyde is encouraging me to cheap populism by agreeing that we should drive down the cost of legal advice to government. Legal costs in general are certainly being looked at. I can reassure the noble Baroness that in the key areas of family law, which I referred to as domestic violence and child protection, legal aid will be retained.
On the breakdown of the savings, I have a slip of paper that says that the aim is roughly to try to find £100 million savings on criminal aid and £250 million on the civil side.
On the Statement’s intention, I can say to the noble Baroness only that, against the financial constraints that we face and a general agreement that legal aid needed recalibrating, we have tried to take some tough decisions in a way that protects the vulnerable and retains the core sense of our system: that all have a right to access to justice.