Legal Aid, Sentencing and Punishment of Offenders Bill

Baroness Coussins Excerpts

Monday 12th March 2012 Lords Chamber

[Lord Stevenson of Balmacara]

My Lords, I rise to speak to Amendments 74A and 74B about legal aid for debt, and in so doing I declare an interest as chair of the Consumer Credit Counselling Service. Under the proposals in the Bill, all legal aid for debt issues, including advice, is excluded from the scope of legal aid, except for legal services provided in relation to a bankruptcy order against individuals, under Part IX of the Insolvency Act 1986, where the individual’s estate includes their home. The purpose of our amendments is to reverse that proposal. We believe that it starts from the wrong premise, that it will not save money and that we will lose an effective and well used remedy, the debt relief order, which helps the poorest and most indebted in our society.

Debt problems are sadly increasingly common, and unless dealt with promptly and effectively can have a major impact on individuals, families and communities. A recent report from the Legal Services Commission confirms that there are a variety of causes of debt problems, the most common being changing circumstances such as ill health, relationship breakdown and loss of employment. Qualitative interviews, and I confirm this from my own experience, often reveal particularly distressing impacts on parents’ relationships with their children and on the wider family. More generally, debt problems have been found to make it difficult for people to carry on living normal lives.

In the same report, the average cost to the public and in lost economic output is estimated at over £1,000 per debt case, with more serious problems involving costs of many times this amount. So we can say with some confidence that debt problems are serious and that they can, and often do, have direct consequences. We therefore reject the premise that debt cases should be removed from the scope of legal aid.

When we debated this issue in Committee, the point was made that all debt problems are underpinned by complex contractual obligations and that, in the majority of cases, such advice and support take place within a legal framework that will involve issues of liability, consumer credit contracts, creditors’ enforcement powers, statutory debt remedies and enforcement processes within the court system and beyond.

As I have mentioned already, there is another dimension to this, which is that most, if not all, of those who contact my charity and other providers of debt advice almost always have other issues, such as illness, employment problems or relationship problems that have either caused the debt problem or contributed to it. It is this compounding effect that makes the withdrawal of legal aid for all debt issues such a simplistic proposal. Therefore, my second point is that debt problems should not be removed from the scope of legal aid because the economic and social consequences far outweigh the savings that are being proposed.

Our third point is expressed in Amendment 74B. We think that the withdrawal of legal aid for debt will in effect lead to the closure of the debt relief order system, which is operated by the Insolvency Service. DROs can be considered only by application via approved intermediaries working for organisations that have to be approved by the Insolvency Service. Approved intermediaries are usually experienced debt advisers, the vast majority of whom are based in citizens advice bureaux around the country, and they are currently funded by legal aid.

In 2011, nearly 29,000 debt relief orders were made, of which 70 per cent were processed by CAB debt advisers in their role as authorised intermediaries. Citizens Advice has made it clear that it will not be able to employ a sufficient number of approved intermediaries if legal aid is withdrawn. If the Bill goes ahead in its present form, it is clear that the DRO system will not survive. More than 20,000 families a year who would otherwise be able to write off their debts will not be able to do so.

It is a classic Catch-22; you can proceed with a DRO only through an authorised intermediary approved by the Insolvency Service. If the legal aid funding is cut, there will be no authorised intermediaries and the DRO scheme will simply wither on the vine. This is not just a cut in the legal aid bill; it is the end of a good and effective debt solution introduced in 2007 and used since then by thousands of families faced with disaster. It simply should not happen. I beg to move.

[Baroness Coussins]

My Lords, I support Amendments 74A and 74B, to which my name has been added. I declare an interest as president of the Money Advice Trust. In that capacity I have sat in as an observer at the National Debtline and the telephone helpline service that the Money Advice Trust runs, and I have heard first hand some up-to-date examples of the complexity of debt problems. This has brought me to the conclusion that the problem here—which these amendments are designed to resolve—is that when this proposal was framed in the Bill, sufficiently careful attention was not paid to the distinction between legal advice for people with debt management problems and general debt advice.

The Money Advice Trust tries to prevent existing debt problems running out of control, especially when they are tied up with other issues such as mental health problems or the threat of repossession. While we are talking about complex problems that require the advisers to be quite expert—and certainly sensitive—we are nevertheless talking about first-stage generalist debt advice. This is way beyond the point at which the client needs legal advice.

My understanding is that the Government view debt advice as “not strictly legal work” and feel comfortable about the withdrawal of legal aid because they expect that services such as the Money Advice Trust’s debt helpline will provide appropriate advice services instead by phone—the withdrawal of legal aid is neither here nor there. As I understand it, this shift in service responsibility has not even been discussed, formally or informally, with the Money Advice Trust, and it is precisely because the kind of debt advice that the Money Advice Trust provides is different from advice that is “strictly legal” that legal aid needs to be retained.

The Money Advice Trust describes what it provides as “assisted self-help”—preparing budgets, helping clients seek additional benefits, helping them calculate acceptable repayments to creditors, and so on—but this is not legal advice. The Money Advice Trust is not equipped to provide legal advice; for example, it cannot advise clients on their chances of success in court or prepare them for court hearings, or how to get statutory debt relief or challenge collection and enforcement actions. If people needing formal legal advice were to rely on the Money Advice Trust, it simply would not have the capacity or the expertise to help them. The 200,000-odd people who go to that service every year would get much poorer outcomes.

In the long run, the cost of the gap in provision that would be created by the withdrawal of legal aid in these circumstances would end up being far greater, and would therefore frustrate and subvert the Government’s perfectly reasonable objective of saving money. People with debt problems need the services of organisations such as the Money Advice Trust but they may also need formal legal advice, and when and if they do, it would be uncivilised to deny them access to legal aid.

I urge the Government to think again carefully about the distinction between legal advice and more generalist debt advice of the sort that this charity provides, and to accept these amendments.