Budget and legal aid cuts are forcing law centres to rethink their operation

Times look tough for high street solicitors. This isn't news in the midst of a recession. Unfortunately for law centres and other small practices delivering significant legal aid contracts, times were tough before the recession started. Those that have survived this far, against the odds, are now coping with public sector funding cuts and trying to plan for whatever changes to legal aid emerge from the passage of the Legal Aid, Punishment and Sentencing of Offenders Bill through parliament.

The bill includes measures to remove key areas of social welfare law from the scope of legal aid altogether, and to create a mandatory telephone line as the first point of contact for people seeking help with social welfare law problems. It is estimated that this will reduce the legal aid income of not-for-profit providers by more than 70 per cent. Against this dark background, law centres and advice agencies are looking at options that they have spurned in the past, including that of charging for their services.

Last July I was asked to help Tower Hamlets Law Centre (THLC) to work through the practicalities of adapting to the new environment, including the possibility of charging. The extent to which this reflects the precarious existence of many law centres shouldn't be underestimated. Opinion within the movement is still divided on the ethics of charging for services, and many who are now investigating the possibility do so with a heavy heart. Law centres don't want to charge, even those clients who could afford to pay, but they are facing an ever smaller pool of choices in their struggle to maintain access to justice for those with the fewest resources.

THLC succeeded in getting a grant from the Cabinet Office under their Transition Fund, a programme promoted as an attempt to help the not-for-profit sector cope with cuts by restructuring themselves.

Government budgets mean this has to be done at breakneck speed '“ THLC's award was announced in June and all the work has to be completed by 31 March. Turning around a business does require resources, of course, but sometimes the resource that is in shortest supply is time.

Market rules

The first question we tackled was the obvious one '“ is there space in the market for a new entrant? The experience of the law centre is that some services in which it has considerable expertise, like education law, are in relatively short supply, both locally and nationally, and demand includes those in the more affluent socio-economic groups. Others, like immigration, are in relatively plentiful supply locally, but the quality of suppliers and success rates varies enormously. In both cases there seems a reasonable prospect of developing market share if one plans to start modestly and concentrate on building a reputation for client care and good results.

Next we looked at structure. It's common for not-for-profits to think of collaboration at an early stage of a new project, and knowing that charging is a hot topic at the moment it seemed sensible to consider an approach that would facilitate working with other charities and corporate supporters at some stage. It is for that reason that THLC decided that the new company should be wholly independent, rather than being controlled by the law centre. 2012 is the year of the co-operative, and we were offered help and advice by Co-operatives UK (www.uk.coop), so we set up as a not-for-profit limited company controlled by those who invest their time in making it a success, including the employees. In some ways we are taking the approach of companies such as John Lewis, though we are not anticipating success on that scale just yet.

The board of the new East London Advice Co-operative (ELAC) does include the chair and centre manager of THLC, but the chair of the ELAC board is a trustee of another local advice charity, and ELAC is seeking to increase both its membership and the skills base of its directors.

Regulatory hurdles

One barrier to achieving our business objectives is the regulatory environment. We may have clients willing to pay for our product, and access to dedicated expert staff through THLC, but ABS was definitely not designed with charities in mind. Even with expert pro bono advice from City firms, navigating a route through the red tape that allows ELAC to take instructions from its first clients is the most difficult task facing us.

The statistics new businesses have to confront are as challenging as ever '“ more than 80 per cent of start-ups can expect to close within three years of being established. Add to that the competition in the market, and the complexities of launching a legal services company, especially one run by non-solicitors, and it is clear that a lot of hard work lies ahead if ELAC is to be a success. New ventures that result in a sustainable business can expect to attract a lot of interest, and a lot of imitators, as advice charities try to survive at a time when their help is in greater demand than ever, but their budgets are seen as an easy target.