Objectives and priorities

• direct the available resources to where they are most needed, to reflect clearly defined priorities.

• ensure, so far as possible, that disputes are resolved in a manner which is fair to both sides.

• provide high quality services that achieve the best possible value for money.

• have a budget which is affordable to the tax payer, and can be kept under control.

• social welfare cases, which help people to avoid, or climb out of, social exclusion; for example, cases about people's basic entitlements, like a roof over their heads and the correct social security benefits.

• other cases of fundamental importance to the people affected. This covers cases involving major issues in children's lives (like care and adoption proceedings); and cases concerned with protecting people from violence.

• cases involving a wider public interest. This category includes two types of case: those likely to produce real benefits for a significant number of other people, or which raise an important new legal issue; and those challenging the actions, or failure to act, of public bodies (including cases under the Human Rights Act), or alleging that public servants have abused their position or power.

Weaknesses of the current legal aid system

• Legal aid is too heavily biased towards expensive, court-based solutions to people's problems. Because the scheme is open-ended, it is impossible to target resources on priority areas, or the most efficient and effective way of dealing with a particular problem. Legal aid is spent almost entirely on lawyers' services. In practice, it is lawyers who determine where and how the money is spent.

• Legal aid is sometimes criticised for backing cases of insufficient merit; and for allowing people to pursue cases unreasonably, forcing their opponents to agree to unfair settlements.

• The scheme provides few effective means or incentives for improving value for money. Because any lawyer can take a legal aid case, there is little control over quality, and no scope for competition to keep prices down. Lawyers' fees are calculated after the event, based on the amount of work done, so there is little incentive to work more efficiently. In recent years, higher spending has supported fewer cases. The number of full civil legal aid cases started each year has fallen by 31%, from 419,861 in 1992-93 to 319,432 in 1997-98.

• It is not possible to control expenditure effectively. The few means of control available, for example cutting financial eligibility, are crude and inflexible. Spending on all forms of civil and family legal aid has risen rapidly, from £586 million in 1992-93, to £793 million in 1997-98. This level of growth in expenditure - 35% compared to general inflation of 13% - cannot be sustained in future.

Fundamental reform

• a planning system (see paragraphs 3.14-16) to allocate resources in the light of national and regional priorities. This will ensure that resources are deployed in the areas of greatest importance and need.

• contracting (see paragraphs 3.17-23). By defining the services to be purchased, contracts will give effect to priorities on the ground. Contracting will set quality standards, and increase value for money, by introducing fixed prices and an element of competition.

• a new funding assessment (see paragraphs 3.24-28) to decide which cases should receive help. This will be better focused than the present 'merits' test. It will take account of priorities, and will be adaptable when priorities change. This assessment will ensure that, within each category of case, the available resources go to the individual cases that most need help.

• developing a larger role for services provided by non-lawyers, in particular non-profit-making advice agencies. We plan to reserve £20m of the annual budget for advice and assistance for contracting with the not-for-profit sector. This figure should be seen as a floor and not a ceiling to the work that the non-profit-making agencies could do.

• developing new ways of delivering information, advice and assistance¹²: on the Internet and through digital television; telephone information and advice lines; and mobile 'outreach' services, providing information, advice and assistance to people in remote communities.

• funding some 'second tier' agencies, offering specialist advice, support and training to front-line service providers. This will be important in helping providers who do not yet meet the required quality standards, but have the potential to do so.

• funding mediation in appropriate civil cases, as well as family cases.

Planning and allocation

Contracting

• by purchasing specified services in specified categories of case, contracts give effect to priorities on the ground.

• contracts will enable the LSC to control its budgets, because they will usually determine expenditure in advance.

• contracting will help to ensure the quality of service consumers receive; only those lawyers who meet prescribed quality standards will be able to obtain contracts, and their performance will be monitored.

• contracting will promote better value for money, by providing the basis for competition; and by fixing prices in a way that encourages greater efficiency.

• by fixing the price, and the timing of payments, contracts can provide greater certainty about cost and cash flow. This is good for providers, because it lets them plan and manage their businesses more efficiently. It is also good for both parties in a case, because it should be possible to tell them at the outset, how much they might have to pay in contributions or costs.

• Contracts for particular types of case will include flexibility at the margins to deal with cases of other types. This will allow providers to deal with novel or unusual cases, and complex cases that fall across several categories.

• Each contract will define when, and by how much, the LSC may increase or, exceptionally, decrease the amount of work it covers. This will give further flexibility to respond to unexpected changes in demand.

• Contracts will not be tied directly to annual budgets. They will run for up to three years, and new contracts will be let in several tranches throughout the year. This means that, at any given time, a number of contracts will be in place, all at different stages in their life cycle.

Quality

Price and workload

The new Funding Assessment

• would another type of service be a better way of dealing with the case? For example, in some types of family case, it will be necessary to show that the case is unsuitable for mediation, in order to qualify for representation by a lawyer.

• could the applicant fund the case in some other way? Unlike now, the assessment will consider whether the case is of a kind suitable for a conditional fee.

• do the merits of the case itself, in the context of the Government's priorities and available resources, justify public funding? The general test will be whether a reasonable person able to fund the case with his or her own money would be prepared to pursue it. The strictness of this general test would be varied if other factors applied - for example if there were a wider public interest involved. The priorities and resources context is important. It cannot be assumed that any case necessarily has an automatic right to public funding because of its intrinsic merits. This is not possible where resources are finite.

• the legal strength of the case and the prospects of a successful outcome.

• the importance and potential benefit to the assisted person, and the likely cost.

• the wider public interest (as defined in paragraph 3.7).

• the availability of resources and the likely demands on those resources.

Financial eligibility, contributions, and costs

• We intend to increase the number of people potentially eligible for advice and assistance under the scheme, to bring it back into line with that for representation in litigation. People brought within the scope of the scheme as a result will pay a contribution. This change reflects our intention to give priority to social welfare issues, and removes an anomaly by which people may be driven by the different eligibility limits to seek a more substantial service than their case warrants. At the same time, we intend to tighten the rules for those who are eligible but can afford to contribute something.

• For the most part, we will retain the existing system of costs protection, which requires the court to consider the means and conduct of both parties, before ordering an unsuccessful litigant on legal aid to pay his or her opponent's costs. Most people on legal aid would be unable to pay costs, even if they were ordered to do so. But, because the value of most homes is not counted when assessing financial eligibility for legal aid, this may not be true of assisted litigants who own all or part of their home. So, in future, the court will be able to take account of the value of the assisted litigant's home when considering the award of costs. We will also give the court power to order the LSC to pay the costs of a successful, unassisted defendant, who would otherwise suffer financial hardship (relaxing the current test of 'severe financial hardship'). These changes will make the scheme fairer on the opponents of litigants whose case is being funded by the taxpayer.<\<>p<\>> The timing of these changes will depend on how quickly contracts and other new systems can be developed to bring spending under control.