Legal Aid, Sentencing and Punishment of Offenders Bill

Lord Stevenson of Balmacara Excerpts

Monday 12th March 2012 Lords Chamber

Moved by

[Lord Stevenson of Balmacara]

74A: Schedule 1, page 141, line 3, at end insert—
“Debt management and relief or remedyCivil legal services in relation to any debt management relief or remedy available under Part 5 of the Courts, Tribunals and Enforcement Act 2007.”

[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.

--- Later in debate ---

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

The noble Lord, Lord Clinton-Davis, was always known for his impetuosity.

I pay tribute to the noble Lord, Lord Stevenson, and his ongoing interest in debt matters. However, this amendment would have the effect of broadening the availability of legal aid for debt cases, contrary to our current proposals, which are to retain legal aid for priority debt cases only, where the individual’s home is at immediate risk of possession because of rent or mortgage arrears or involuntary bankruptcy.

It is never an easy decision to restrict the availability of funding but economic reality dictates that we focus scarce resources on the cases that are the highest priority. The Government have taken a principled approach to making spending reductions, prioritising funding for those categories of case that are most serious, such as where life, liberty or immediate loss of home are at stake. The necessary corollary of protecting funding in the most important areas is that we have to make tougher choices in the lower-priority areas.

When making these decisions, we have taken into account the presence of alternative appropriate forms of advice. It is simply not the case that legal advice is the only—or even the best—response to debt problems. Figures show that liability for the debt itself was reported as successfully contested in fewer than 2 per cent of cases in 2009-10, and also reveal that 62 per cent of legal help funding for debt matters was spent not on complex matters of law but on negotiating payment arrangements and advising clients on managing their affairs better.

We recognise that debt problems can be difficult and stressful for the individuals concerned, but we believe that what people often need is practical advice and support, rather than specialist legal advice. This help is quite widely and effectively available from organisations such as Credit Action, the National Debtline, the Consumer Credit Counselling Service and the Insolvency Service inquiry line and website. Local authorities also signpost people to local sources of advice and assistance on debt matters. In addition, the Money Advice Trust, to which the noble Baroness, Lady Coussins, referred, has recently launched “My Money Steps”, an online tool for providing advice for people with debt problems. The Consumer Credit Counselling Service also offers a free online “Debt Remedy” service.

Such sources of help are best placed to deal with issues like debt relief orders, which this amendment suggests should be brought back into the scope of legal aid. These orders are relatively informal procedures, used by people who owe limited amounts of money and do not have assets. Indeed, the current legal aid scheme does not pay for their completion.

Given the availability of alternatives, and the pressing choices forced upon us by the economic situation, it does not seem a wise use of scarce resources to continue funding widely available legal advice, much of which replicates advice available elsewhere. We must move away from the assumption that for many problems that are fundamentally non-legal, the only answer is for the state to pay for legal advice.

I understand that this amendment is motivated in part by the noble Lord’s concerns about funding for citizens advice bureaux to provide debt advice. As I have said in earlier debates, we share that desire to see what can be done to help to ensure sustainability for the non-profit sector. However, let us not overstate the impact of our changes in legal aid on CABs. Legal aid funding is intended for specialist advice, not for cross-subsidy of other activities. As a matter of practice, in 2010, 85 per cent of all bureaux funding came from sources other than legal aid and half of all bureaux do not hold a legal aid contract at all. Moreover, it should be borne in mind—I am sure that the Opposition will be glad to know this—that we have already provided £20 million, which has come ahead of reductions in legal aid spend.

It is worth remembering that CABs have not had any cut in legal aid spend and will not until 2013. Of that £20 million, £16.8 million assigned to England is being used for the Advice Services Fund to support not-for-profit providers in delivering essential advice on debt, welfare benefits, employment and housing. Despite the concerns of the sector, the Money Advice Service will continue resourcing the existing free face-to-face debt advice services after 31 March, so that people in need have access to good, free advice. The Financial Services Authority has agreed to fund this provision from April.

I also understand that the Cabinet Office’s review is expected to conclude shortly and will provide recommendations on proposals to secure long-term sustainability of the sector. As my noble and learned friend Lord Wallace pointed out, it is only nine days to my right honourable friend the Chancellor’s Budget. Therefore, I would ask the House to be patient and to allow us to bring this important work to its conclusion.

It is always easy to make the case for spending but tough times require tough decisions. I hope that even our critics accept that we are making genuine attempts to protect the not-for-profit advice sector, not least by the pressures brought to bear by my noble friend Lord Shipley at earlier stages of this Bill and by other Members of this House who have raised the specific issue of the CABs and the not-for-profit sector. I have given assurances about this and, against that backdrop, I urge the noble Lord to withdraw his amendment.

[Lord Stevenson of Balmacara]

My Lords, I thank the noble Baroness, Lady Coussins, for her contribution to this debate and for sharing her experience of working directly in this field, which I echo. I recognise many of the points that she made around that. It was also nice to have the unprompted support of the noble Lord, Lord Clinton-Davis. I seem to be having a little run of these things because the previous time I tried to speak about this subject, the noble Lord, Lord Best, came in on housing, which, although again relevant, was not exactly helpful to my support. Never mind, we will battle on.

At last weekend’s Lib Dem conference, a Motion was passed calling for:

“The protection of fair and equal access to justice, through … A properly funded system whereby access to legal advice and representation before the courts is not denied to those otherwise unable to bear the costs”.

It was unanimously passed but I notice that the Minister did not mention it when he made his remarks a few minutes ago.

A lot of the points that I made, which were picked up by the noble Baroness, Lady Coussins, were about the difference that had to be made between legal advice and generic advice. It is certainly true that a lot of work is going on in the generic debt advice field but we have been facing problems in terms of legal advice. I notice that in his comments the Minister made more of a case for support of the voluntary sector in this area, which of course we are grateful to have, than about the individuals who we think will be affected by this. For example, if the bailiffs are at the doorstep seeking to seize someone’s goods and chattels, I think that everyone in this House would agree that they are reasonably said to be facing serious direct consequences. Yet, under the present proposals, they would neither be eligible for legal aid to contest the original order nor would they be able to access legal aid to challenge the manner in which the order had been carried out. Indeed, we know a lot about that. There are quite serious difficulties within the legal advice sector of debt which have not really been picked up in this debate so far.

It was interesting that the Minister made the point that currently debt relief orders were not being funded to any great extent by legal aid and that, to some extent, legal aid should perhaps not be used at all for this. The key reason why the DRO scheme is successful is its lower cost, which was much trumpeted by the Insolvency Service. That is because the administration fee is £90, of which £80 goes to the Insolvency Service, leaving £10 for those who have to administer it. I have looked carefully at the way in which these forms are created. It would take me a great deal of time to work through these things and I am an accountant. However, specialist support and advice is needed. I think that it is ingenuous of the Minister to say that somehow this will survive. My charity estimates that it costs us about £350 per case to deliver a completed DRO. Where will that money come from? I do not think that we have had any answer to that.

Finally, the way in which the noble Lord went on seems to suggest that he has not read the BIS Select Committee report on debt management, which was published last week. The report states:

“Citizens Advice informed us that the legal aid budget for debt advice in England and Wales is due to fall by 75 per cent from 2013”.

The noble Lord admitted that there would be some changes after 2013. The report continues that the,

“figures, from the Justice Department, suggest that the number of people currently helped with debt problems will fall by 105,000”,

which is a significant number.

Later in the report, a BIS Minister is reported as recognising that,

“the cuts to legal aid could be a problem. Clearly for particularly some Citizens Advice Bureaux and other advice agencies, it may well have quite a big impact … I am afraid these are not easy times. There are cuts being made”.

The situation facing those in debt in this country—very often not of their own accord and they certainly are not the feckless poor—is really difficult. I do not think that these proposals will help. I should like to seek the opinion of the House.