Over and out

Optimism about the future is a commodity in short supply among legal aid practitioners at the moment. A big chunk of the provision of civil legal aid will be destroyed after October next year if the government goes ahead with its proposals to cut back drastically on scope, while criminal legal aid practitioners face the threat of competitive tendering. Which leaves lawyers committed to legal aid with one big question: how do they run a legal aid practice in these difficult times?

In 2009 the LSC was forced into a humiliating climb down on the implementation of best value tendering (BVT) for criminal legal aid work in police stations and magistrates' courts. LAG believes that because of simmering tensions between the LSC and the Ministry of Justice over BVT, the then Labour government was increasingly uncomfortable about the role the LSC played in policy formation. The differences over control of policy led to the then secretary of state for justice and Lord Chancellor, Jack Straw, in October 2009, to call in the former civil servant Sir Ian Magee to undertake a review of the legal aid system and its governance.

Magee's report was published in March 2010. In it he acknowledged that, as his review had gone on, there was an increasing focus on what was going wrong with the financial management of the LSC. The National Audit Office's report on the LSC in October 2009 found that just under £25m in solicitors' fees had been claimed incorrectly, and the Public Accounts Committee's report, which was published in January 2010, was also critical of the LSC's financial management. Magee found serious weaknesses in the management and financial systems at the LSC. He discovered that the LSC's financial forecasting process involves the use of over 200 models and tools, including manual analysis. As a result Magee doubted the LSC's ability to accurately predict expenditure.

In response to the Magee review, the government announced its intention to take direct control of the Legal Services Commission by making it an executive agency of the Ministry of Justice. Magee argued that this would lead to 'one policy voice' on legal aid. Lord Bach, the then legal aid minister, told LAG: 'We will be bringing legal aid into the ministry as an agency, in the same way as we have the Courts Service and NOMS [the National Offender Management Service].'

He acknowledged that: 'We cannot do this without primary legislation,' which would involve the amendment or repeal and replacement of the Access to Justice Act 1999.

The LSC chief executive, Carolyn Regan, announced her resignation when Magee's report was published. This was presented as a stepping stone to the LSC's new status, but LAG speculated at the time that Regan had been made the scapegoat for failings in the LSC's financial management which, it should be said, must have preceded her appointment in 2007.

There was agreement among practitioners about the MoJ's move to take over policy. Robert Heslett, the Law Society's president last year, said: 'Lack of clarity on responsibility for policy making between the commission and the MoJ has been a significant problem area and the Law Society is glad that the government has accepted Sir Ian's recommendation that the LSC should become an executive agency of the MoJ.'

Nicholas Green QC, chairman of the Bar Council, also welcomed the report. 'As Sir Ian recognises, there has been a lack of clarity about who is calling the shots over policy,' he said. 'He identifies a number of serious issues which we will need to consider further.'

Financial skeletons

In an important finding, which was welcomed by LAG, Magee recognised the cost drivers in legal aid, pointing out that, among other things, new legislation and the creation of new criminal offences lead to increased costs in the legal aid system. In civil legal aid, the report said that new rights created under the Mental Health Act 2007 and the introduction of working family tax credits were examples of measures which increased the demand for social welfare law advice. Magee came down firmly against the option of separating the criminal and civil legal aid funds, which LAG had argued for, but he acknowledged that there could be an argument in favour of separating out social welfare law advice.

Labour left office in May last year with the legal aid budget under control and contained roughly within a £2.1bn spending cap. They succeeded in doing this mainly through reintroducing the means test in magistrates' court cases and other cut backs in criminal legal aid. Spending on criminal legal aid in the five years to April 2009 fell by 12 per cent in real terms. An increase in eligibility and new matter starts to help meet the demand for legal advice caused by the recession meant a small rise in the civil legal aid budget. The impact of the Baby P case also contributed to an increase in civil legal aid spending. There was, though, a bombshell lurking in the LSC accounts for the financial year ending on 31 March 2010. These were eventually published in November last year.

Much to LAG's surprise the LSC's accounts for 2009-10 showed a figure of £2.37bn for total expenditure on legal aid, an increase of £200m on the previous year. It seems that the new senior management at the LSC had decided to rid itself of a couple of financial skeletons it had found lurking in the LSC cupboards. A provision made in previous years for dormant cases was dropped and the way in which the LSC calculates the recovery of money from outstanding certificated work has been revised, as it seems the previous method used greatly overestimated the cash they could expect back. Expenditure on civil legal aid had also increased by £121m, because of the factors discussed above, and expenditure on criminal legal aid had continued to follow its downwards trend of recent years, reducing by £54m on the previous year.

Before 2009, the LSC accounts, and those of its predecessor the Legal Aid Board, were usually published before the summer parliamentary recess in July. For the last two years the accounts have been delayed as the Public Accounts Office (PAO) has been unhappy with the adequacy of the controls in place to prevent overpayments of legal aid being made. The PAO has identified an estimated £76.5m in overpayments to legal aid suppliers. This figure is arrived at by an audit of a sample number of files and extrapolating the results of this across the entire budget.

New system

In response to the increase in overpayments identified by the PAO, the LSC has been increasing the numbers of contract notices for systematic errors found on audits of files.

In its report, the PAO says in the period April to October 2010 495 contract notices were issued, compared with 259 for all of the financial year 2009-10. The NAO though make no allowance for the changes in the LSC's interpretation over what can be claimed and assumes that all of the £32.9m which it alleges is overclaimed because of lack of evidence on the file means it has gone to clients not entitled to receive legal aid.

Obtaining proof of means from clients with chaotic lives is often challenging and LAG suggests that a system of cross checking legal help applications with benefits claims should be introduced (such a system already exists for licensed work).

The current government agrees that the LSC in its present form needs to go. Legislation on legal aid which was expected to be published this month, but might now be delayed, is certain to contain provisions to abolish the LSC in its present form. LAG has one main concern over these plans.

Many cases funded by legal aid hold arms of the state to account. Part of the purpose of the LSC was to make decisions on entitlement to legal aid independently from the government. While few legal aid practitioners will mourn its demise, if the new governance structure fails to ensure that in both practice and appearance decisions on entitlement to legal aid are made without government interference, it will not be long before those concerned about the administration of justice are calling for the reprise of an independent decision-making body for legal aid.