Civil Legal Aid (Financial Resources and Payment for Services) Regulations 2013

Lord McNally Excerpts

Wednesday 17th July 2013 Lords Chamber

[The Minister of State, Ministry of Justice (Lord McNally)]

I think there is a line in TS Eliot that says, “Woe unto me when all men praise me”.

This debate gives me the opportunity to clarify the position in the regulations laid before the House on 7 March concerning the issue of capital in relation to financial eligibility for civil legal aid. I will certainly respond to the debate, as I did last Thursday. In fact, I reread the debate and my reply. I think that I covered most of the points raised by the 14 lawyers and two others who contributed to that debate.

The Civil Legal Aid (Financial Resources and Payment for Services) Regulations 2013 set out the rules that the director must apply to determine whether an applicant’s financial resources are such that the applicant is financially eligible for civil legal services under Part 1 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012. These regulations broadly replicate the effects of Parts 1 and 2 of the Community Legal Service (Financial) Regulations, which were made under the Access to Justice Act 1999. Indeed, a number of the points that were raised tonight were in complaint of parts that replicated that Act.

However, as part of the Government’s consultation in 2010, entitled Reform of Legal Aid in England and Wales, the Government proposed several changes to the rules concerning financial eligibility and contributions for civil legal aid. One of these changes was the removal of capital passporting. Two others were to cap the subject matter of the dispute disregard at £100,000 for all forms of civil legal services, and to increase the levels of income-based contributions to a maximum of 30% of monthly disposable income. Before 1 April, someone receiving certain income-based benefits, such as income support, could have up to £16,000 disposable capital but be automatically passported through the means test and be deemed eligible for legal aid. However, a person not receiving a passporting benefit, and who had more than £8,000 in disposable capital, would be ineligible for legal aid.

It is inequitable that applicants with similar levels of capital may or may not be eligible for legal aid depending on the source of their income. To achieve greater internal alignment and fairness to all applicants for legal aid, the Government proposed that in future people in receipt of passporting benefits should have their capital assessed in the same way as it is assessed for others, although they would still be passported through the income side of the test.

The Government’s response to that consultation in June 2011 confirmed that they would take forward the proposal, and this is reflected in these new regulations. Therefore, under the new rules, all applicants for civil legal aid are subject to the same capital eligibility test. This means that any applicant with disposable capital above £8,000 will be ineligible for civil legal aid, regardless of whether they are in receipt of benefits. If the applicant’s disposable capital is more than £3,000 but does not exceed £8,000, they will be required to make a contribution from that capital towards the costs of the legally aided services.

Ensuring that the capital assets of all applicants are subject to the same eligibility test helps to focus limited public legal aid funds on the most financially vulnerable clients and means that those who can afford to pay, or can contribute towards the costs, do so. It is estimated that assessing all applicants’ disposable capital will result in approximately £10 million a year of savings in steady state. This is not insignificant against a backdrop of continuing pressure on public finances, where we need to continue to bear down on the cost of legal aid to ensure we are getting the best deal for the taxpayer. Disposable capital comprises all capital assets, including equity in land and buildings, money held in a bank, investments, stocks, shares and the monetary value of valuable items. However, there are certain disregards in calculating the amount of an individual’s disposable capital, including for mortgages and for equity in an individual’s home.

It may be helpful if I explain what these are. If an applicant is contesting property with their partner, their share of capital is assessed individually. Any outstanding mortgage, up to the value of £100,000, is subtracted from the value of the property. Where assets are in joint names, they will generally be treated as owned in equal shares. Thus the remaining equity is divided equally between the parties. The first £100,000 of the applicant’s equity is then disregarded under the subject matter of the dispute rule. The applicant then receives a further £100,000 equity disregard if the property is their main dwelling. If the remaining equity exceeds the £8,000 capital limit, the applicant will be financially ineligible for legal aid.

In practice, this means that only those applicants who are contesting large amounts of capital, or homes registered in joint names that are valued in excess of £500,000, and where there is a mortgage of at least £100,000, are excluded on capital grounds. We do not think it unfair or unreasonable that people who are disputing substantial assets fall outside eligibility for civil legal aid.

Where a property is not the subject matter of the dispute, is in an applicant’s sole name and worth more than £208,000, that applicant would not normally be eligible for legal aid. However, a further disregard of up to £100,000 would apply if the applicant was aged 60 or over and had monthly disposable income of less than £315. The financial eligibility criteria for civil legal aid are designed to focus our limited resources on those of moderate means and with moderate amounts of capital. This helps to ensure that we can continue to provide services for vulnerable persons, such as victims of domestic violence, children at risk and those with mental health problems.

For domestic violence and forced marriage cases where the applicant seeks an injunction or other order for protection from harm to the person, or seeks committal for breach of any such order, there is a power to disregard the eligibility limits. In this way, we extend eligibility to legal aid for victims of domestic violence irrespective of the value of any property that the individual may own. A contribution may be required from income or capital.

The eligibility waiver for victims of domestic violence seeking protection from harm is a significant concession. This measure improves access to legal aid for domestic violence victims by extending eligibility beyond the original limit. It means that immediate legal advice and representation is available for those who need it and who otherwise would not qualify under the normal eligibility regulations. For those applicants required to pay a contribution, as legally aided clients they will benefit from the reduced cost of representation under legal aid rates as opposed to private rates.

There is a concession for pensioners who are in receipt of an income of £315 a month or below. Disregards of between £10,000 and £100,000 can be applied to any capital assets that they hold, including both property and savings, depending on the level of their income. For example, a monthly income of £76 to £100 attracts a capital disregard of £70,000. This is in addition to the allowances that normally apply, such as the equity disregard. Pensioners who receive a passporting benefit are entitled to the maximum disregard of £100,000.

The financial eligibility criteria for civil legal aid are designed to focus our limited resources on the poorest people. Bringing the capital rules for those receiving benefit into line with the rules for those who are not will help to do that, and will improve the fairness of the system. The substantial provision for disregards that I have outlined will ensure that an appropriate degree of sensitivity to individual circumstances is maintained, in particular as regards capital in the form of equity in the home. This is a sensible and reasonable measure.

The noble Lord, Lord Bach, made a number of points about the difference in the capital tests. Legal aid is not a welfare benefit and should not necessarily be treated in exactly the same way as universal credit, which is a working-age benefit. This is reflected in the different functions of income support and legal aid. The former is intended to lift people out of poverty over the long term while not penalising people for saving, while the latter is for people required to deal with a short-term legal issue and the associated expense.

The noble Lord, Lord Pannick, said that our LASPO reforms have reduced legal aid to skeletal proportions. I remind the House that we are talking about an exercise that has brought legal aid down from £2.1 billion to £1.5 billion. Neither the noble Lord, Lord Bach, nor the noble Lord, Lord Pannick, do their case any good by pretending that a system that will still spend something like £50 million on welfare legal aid and £1.5 billion in total can be described as “skeletal”. The noble Lord, Lord Bach, said how generous the Labour Government were in 2009. In 2010, we had to take some very tough decisions. Again, I question whether the noble Lord, Lord Bach, has any authority to encourage us to believe that in 2015 a Labour Government would try to restore any of these changes to legal aid.

I hear what was said by the right reverend Prelate and the noble Baroness, Lady Deech. However, they do not do the cause that they espouse—desiring to help the poorest and most vulnerable in our society—any good by arguing that these changes, which will affect people with quite substantial assets behind them, are not the right priority in the circumstances in which we find ourselves. The noble Baroness, Lady Deech, mentioned litigants in person. We are monitoring the impact of litigants in person. However, as I pointed out to the noble Lord, Lord Bach, in a more recent exchange we had, LASPO has been in practice for just over 100 days. He has been forecasting perfect storms and disaster for at least a year. We are keeping a close eye on these things and will monitor these various issues. However, the constant argument of disaster does not serve anybody. The very first Statement I made from this Dispatch Box was to the effect that if a part of your spending is directed at the vulnerable and the needy and you cut it, of course you will affect the vulnerable and needy. In those circumstances we have tried to make sure that we concentrate the money we have available where it is most needed. I will have a look at the Social Fund disregard and will write to the noble Lord—unless it was in that bit of paper that was passed to me. Even if it was, I will write to him.

This has been an interesting debate. The modest changes that we have made to the financial eligibility rules for civil legal aid are consistent with the fundamental objective of our reforms. We need to continue to think carefully about how taxpayer-funded money is spent and focus legal aid on the highest-priority cases and those most in need, while delivering the savings needed to address the national financial deficit. I hope that I have covered most of the questions raised in the debate, and I hope that the noble Lord, Lord Bach, will agree to withdraw his Motion.

[Lord Bach]

My Lords, I thank all noble Lords who have spoken in this debate, in particular the Minister for the trouble he has taken to respond to the debate. I am grateful to all noble Lords, particularly the noble Lord, Lord Pannick, for his extraordinarily flattering remarks, which were somewhat exaggerated. However, it was very good also to hear from the noble Baroness, Lady Deech, and from the right reverend Prelate the Bishop of Norwich; the Government should listen with some care to the remarks that he made. I am grateful, too, as always, to my noble friend Lord Beecham for summing up the Opposition’s view so clearly and crisply.

We should remember that we are discussing areas of law where the Government decided that legal aid should continue, not those areas of law where they thought that legal aid was completely meaningless or was not legal or appropriate. These are areas where people’s need for legal aid is acute: for instance, housing repossession, domestic violence or community care. With these regulations the Government have said on the one hand, “These are the areas where legal aid is appropriate”, but on the other, “Those of you who may be poor in income terms but have a small amount of capital cannot take advantage of where we are keeping legal aid in scope”.

That is not a satisfactory position for the Government to take. To say that what has been taken out of legal aid—particularly out of social welfare law—is skeletal seems to be an overstatement rather than an understatement when we look at what is left in scope compared with what has been taken out, which includes all welfare benefit social welfare law, all employment social welfare law, the vast majority of housing social welfare law and nearly all debt social welfare law. The word “skeletal” is not wrong at all.

Legal aid is part of our welfare system and should be so. It is part of our social security system and a protection for all our citizens, or so it ought to be. That was the idea when it was first formulated—an idea that has grown up with Governments of all persuasions over the past 60 years. It is a great shame to hear the Minister say that it can be completely divorced, as it were, from the rest of the social security system. It cannot be: it remains a protection for all of us.

These regulations make the position more complicated, more costly, more unfair and more inflexible. That is not satisfactory. Of course, I am tempted—as I always am—to divide the House on the issue. Noble Lords have spoken in pretty clear terms of what is felt around the House. However, the House has probably voted quite sufficiently in the early part of this evening. We have had the debate and will be able to read it in Hansard. I have no doubt—I know that the Minister will look forward to this—that we will come back to these issues in due course, but probably after the summer rather than before. I beg leave to withdraw my Motion.