My Lords, with the leave of the House I should like to make a statement on improving access to justice.
At present the legal aid system is failing us all. It is failing the many millions of people on modest incomes who do not qualify for legal aid and who simply cannot contemplate going to law because of the potential legal costs if they lose. It is failing people on legal aid, because the Government cannot direct money to those who need it most and to those cases where there is a public interest in seeing justice done. Finally, it is failing the taxpayer who year on year is being asked to pay more and more, and yet can rarely get help from legal aid when it is actually needed.
But even though legal aid is costing us all more and more with costs running away ahead of inflation, it is helping fewer and fewer people each year. It is, therefore, our intention to modernise the way in which civil cases are paid for. We want a system of civil justice which is there for everyone when they need it, not just for the rich or for the very poor. We intend to transform the legal aid scheme so that we ensure we get good value for money from those lawyers who are paid from legal aid; and so that we spend taxpayers' money on those who need it most and on those areas where it can do most good.
Achieving all of our reforms will require the approval of Parliament through new primary legislation. But even using existing powers we can start the process of change. It is this first stage that I wish to concentrate on today.
The publication of this consultation paper marks the first stage of our modernisation of legal aid and legal services. When I announced the programme of reform at the Solicitors Annual Conference in October last year I said "...it is essential that the details [of our proposals] are right. We shall be consulting widely and openly". That is precisely what we have been doing in the four months since October and will continue to do for a further two months of the formal consultation period. This is a listening Government and we are listening to views on these proposals - and we will continue to do so. We have had detailed discussions with the legal profession and with many interest groups. More are planned. Their comments have contributed to the development of these proposals. But we will not confine our listening to the legal profession, because our aim is justice for all.
The consultation paper invites views on a proposal that will allow the majority of people in England and Wales to secure access to justice. We propose to allow conditional fee agreements (no win no fee agreements) to be used in all except family and criminal cases. Conditional fees offer a new way for people to bring their cases. Lawyers share the risk of litigation with the client by agreeing to work without a fee if the case is lost. If the lawyer is successful he or she is entitled to claim a success fee in addition to his normal fees. Although the maximum success fee can be up to 100%, normally it is 50% or less. In nearly all cases the lawyers also voluntarily limit the success fee to no more than 25% of the damages in any event. Conditional fees have been available since 1995 for a limited range of proceedings - personal injury, insolvency and human rights cases and they are working well.
Over thirty thousand people have taken advantage of this approach to bring personal injury claims. Many of them would have been unable to afford to pursue their claims at all without conditional fees - people only just above the legal aid limit, people who are far from well-off. They are the great majority of the population who are in work - with families, mortgages, savings, or other assets, which mean that they are not eligible for legal aid, but who cannot contemplate the open ended commitment of meeting lawyers' bills. Only the very rich can face the thought of lawyers' bills without any financial fears and even they must worry sometimes. To continue to restrict narrowly the use of these agreements is to deny an avenue of access to justice to the majority of the people in the country.
The consultation paper also seeks views on any changes to the current law and practice that might improve the operation and use of conditional fees, for example by allowing the success fee and the insurance premium to be recoverable from the losing party.
Secondly, the paper invites views on the Government's plans to begin modernising legal aid. Over the past seven years, the cost of civil and family legal aid has tripled to £671 million. The average cost has grown from £1,442 to £2,684 - 53% above inflation. The number of acts of help funded in 1996/97 fell by about 39,000. Taxpayers are paying more and getting less. That cannot be right and it cannot continue.
We need a modern legal aid system in which only cases which cannot reasonably be funded in any other way and which have the necessary priority are backed by the taxpayer. It has never been our intention to abolish civil legal aid as has been wrongly claimed. We want to focus taxpayers' money where it is most needed and can do most good: on social welfare matters - employment; housing; debt; state benefits; and actions against officialdom and bureaucracy.
To achieve this clear focus on social welfare issues, the Government therefore intend that, in future, most money or damages claims will be funded through conditional fees. Consequently, they propose to transfer most money and damages claims currently supported by legal aid to conditional fees.
However, as I told the House on 9 December, we do not intend to remove legal aid from housing cases where very often the main purpose of the action is to achieve a home fit to live in. This is precisely the kind of area to which legal aid ought to be directed. In addition, the ability to challenge public authorities through judicial review is a necessary check on the use of the power of the State, and a positive encouragement to maintain high standards in public administration or by public bodies. The poor must also be able to exercise this right of challenge. Legal aid will remain available for those who qualify. We also believe that legal aid must continue to be available where a person claims to be the victim of wrongdoing by public authorities, for example the police. Here too, the ability to challenge misdeeds is an encouragement to maintain high standards and proper behaviour to those over whom public bodies exercise authority.
The extension of the availability of conditional fee agreements will provide an alternative means for people to bring most money or damages claims without public funding. Our aim is to create the conditions in which anyone can use conditional fees to bring cases, regardless of their financial status, across the whole range of litigation in which money or damages are the main remedy sought. However, we recognise that solicitors' firms may not presently be financially structured to do this, and that the insurance and finance industry need time to develop products to assist in the expansion of the use of conditional fee agreements. The Government, therefore, proposes a measured approach to encouraging this change to take place.
The Government propose to remove from the scope of legal aid most personal injury actions by the middle of this year. Lawyers working in this area have considerable experience in taking cases using conditional fees. Similarly, the insurance industry has developed products with premiums which in most cases are £155 or less. The Government will be working with the insurance and banking industries to help them develop more and still better products to allow everyone, regardless of their financial standing, to bring cases using conditional fees. This combination of the experience of lawyers in this area of litigation together with developed insurance products is sufficient to allow these cases to be alternatively financed through conditional fee agreements.
In addition, there are certain categories of proceedings which the Government believe no longer have sufficient priority to command continued public funding. It is important that scarce public funds are directed to where help is most needed. The Government are not persuaded that cases which involve, for example, disputes arising from running a business, inheritance, partnerships or trusts meet this criterion. Nor do they believe that taxpayers' money should be used to help neighbouring landowners' to settle disagreements over disputed boundaries. In these cases there will be assets at issue which would allow the case to be taken with a conditional fee arrangement. In any case, the issues will generally be too narrow or too specific to deserve the use of public money, when such support means less for other matters of greater public importance. The consultation paper seeks views on the proposals to remove these categories from the scope of legal aid.
The Government has been listening carefully to the comments we have received in relation to medical negligence cases. The Government believe that many lawyers practising in this area need to modernise the way they run their firms, so that they can structure their finances to enable them to take cases on behalf of clients regardless of their financial standing. We accept, however, that this will take time. The Government does not therefore propose to remove these cases from the scope of legal aid for the present.
We do however intend to do what we can to reduce the high failure rate of these cases. It cannot be right that it is only in as few as 17% of all the cases that are supported by a legal aid certificate that more than £50 is recovered in damages. Medical negligence cases should be conducted by practitioners who are experienced in this field of litigation. We cannot any longer allow inexperienced practitioners to take cases. I have no doubt that part of the reason that the failure rate is so high is that lawyers take these cases on without the necessary experience. They are therefore unable to make timely, informed decisions on the merits of a case or whether an offer of settlement is appropriate or reasonable in amount.
It serves no one's interests if cases are brought with little prospect of success - least of all the victims of the alleged negligence. The consultation paper therefore invites views on a proposal to allow only experienced practitioners to be able to take cases on behalf of assisted persons in this field. We propose that the Legal Aid Board should establish contracts only with lawyers of sufficient experience. Anyone who is granted legal aid to pursue a medical negligence case will be required to use a lawyer who holds a contract with the Board. We are keen to hear what criteria could be used to establish whether a lawyer is sufficiently experienced to hold a contract to take cases on behalf of those receiving legal aid.
We intend to remove the remaining money or damages claims from the scope of legal aid as experience of conditional fees among lawyers and insurers develops and they become more widely and readily available.
The Government recognise that help will be needed during a transitional period to assist in the change of funding away from legal aid. There may be some extraordinary cases, among those categories to be removed which the lawyers may not initially be able to fully support on conditional fees. In time, the Government believe that these cases will be able to be financed solely through conditional fees. Therefore, the Government intend to establish a limited transitional fund. This fund would provide support in cases, for example, where presently few lawyers' firms are structured financially to carry a very high costs case, because they could not afford the risks of losing, or where there are high investigative costs of establishing the merits of the case. We would expect that the need for the fund to support this kind of case will cease because in the long term the Government believe these cases will find lawyers who are financially structured to take them on under conditional fee agreements. The transitional fund would also provide help in those cases which we exclude from legal aid which demonstrate a significant wider public interest. This would allow us to begin to provide assistance in this kind of case under the transitional arrangements ahead of primary legislation to establish a public interest fund. The size of the transitional fund will be set each year according to other priorities for spending legal aid money and the diminishing extent to which the fund is needed.
The Government will develop a modernised legal aid system. We are working towards a system in which we can control expenditure; obtain good value for public money; and target legal aid where there is the greatest need and it will do most good. In future, the Government's main priority for using public money to provide legal services will be to assist those who are excluded from society because they are unable to exercise their legal rights. The Government will achieve this through the legal aid scheme and through the creation of a Community Legal Service.
This consultation paper sets out the steps towards that goal which can be taken now. By making conditional fee agreements more widely available; targeting civil legal aid on social welfare matters; and creating a special fund for public interest cases. What we propose will significantly widen access to justice. We welcome responses on the consultation paper and will consider them carefully before we arrive at considered decisions on specific proposals to bring before Parliament.
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