Examination of Witnesses
Legal Aid, Sentencing and Punishment of Offenders bill
1:00 pm

Frances Coulson, Ann Lewis, Julie Bishop, Gillian Guy and Simon Pugh gave evidence.

Frances Coulson: My name is Frances Coulson. I am president of R3, the insolvency trade body. We have 97% of insolvency practitioners as our members, and I am a lawyer.

Ann Lewis: My name is Ann Lewis. I am policy director at the Advice Services Alliance. We are the umbrella body for the advice networks, and some of our members, but not all, are represented in this room.

Julie Bishop: My name is Julie Bishop. I am director of the Law Centres Federation. There are about 56 law centres around the country, and they are staffed mostly by lawyers.

Gillian Guy: I am Gillian Guy, chief executive of Citizens Advice, which is the central body for citizens advice, and I am representing that and almost 400 separate bureaux, which are particularly affected by the legal aid proposals.

Simon Pugh: I am Simon Pugh, head of legal services at Shelter. We are a national social welfare law provider, specialising particularly in housing debt and welfare benefits.

Q 243243

Julie Bishop: The one thing that we would say is that law centres’ specialty is within the area of social welfare law, but our involvement with domestic violence is often where it is a trigger for social welfare law problems. In relation to your question, though, according to the impact statement, only an additional 1,000 people will be assisted under the widened definition. We believe that means that it has only been tweaked, as opposed to widened. We support the submission from the Women’s Institute and the definition that it proposes for domestic violence.

Gillian Guy: Broadening the definition is helpful, but the main issue is identifying where domestic violence occurs. Our experience in Citizens Advice is that it is very often a secondary issue. If we are not giving advice on the primary issue—debts or housing issues—we are unlikely to pick it up and therefore get the representation that people need.

Q 244

Gillian Guy: First, I would have to agree with the Prime Minister’s assessment. There are two sets of issues that really bother us about the reforms. One is the taking out of scope of debt, housing and benefit advice, which will leave an advice gap. If those things are, indeed, to come out of the scope of legal aid, the Government will need to make proper alternative provision to fill that gap. That is the first argument. The second is that if they do come out, people cannot just land nowhere. Where will they go? I suspect that they will go to MPs’ surgeries, but they have to have somewhere to go to get advice. We have to be able to realise the return on investment in early intervention and early advice, which will have gone if we do not have alternative provision. We have to make sure that vulnerable people are not unassisted going through proceedings or getting themselves out of the chain of events that takes them into proceedings. The first set of issues therefore relate to the fact that there has to be an alternative if these proposals are to go forward.

The second set of issues relate to the fact that the legal aid that is in scope under the proposals is particularly complex in terms of eligibility and hard to apply, so there will need to be more clarity and simplicity around that. There would also need to be something to bring two particular issues together, because there is an intention under the proposals to segregate what is seen as general advice and what is seen as pure legal advice. People do not present as purely one thing or the other; they present with a number of issues, many of which are intertwined, and we need to make sure that there is a way of not segregating advice, because life is not like that, and people are not like that. We have to look at the whole system to make the proposals work.

Q 245

Gillian Guy: I know what we currently get to do that—£25 million. That is a stretch as it is, as is the case with all these resources. I would also like to point out to the Committee that that should not be seen in isolation. We face local government cuts in the localities where bureaux give advice. We face financial inclusion money cuts, which were given a reprieve, but we still have to face that issue. And here is another £25 million being taken out of the advice system. We would need at least as much as we get currently, but demand is not standing still. We have welfare reform coming along, which will bring an increase in demand. We also have a recession, as I think we have all noticed, that is increasing debt and housing problems so that demand is burgeoning.

Q 246

Ann Lewis: I think we would all agree that if the benefits system could be made more straightforward and less legalistic, that would be a good thing. However, at the moment it is legalistic and complex. I have quotes from judges, which I will not read out to you, who use words like “labyrinthine” and “bewildering” when talking about the benefits system. Before I came this morning, I checked out the handbook that is used by many welfare benefit advisers, the Child Poverty Action Group handbook. It has 1,600 pages and refers to 45 Acts of Parliament and 185 regulations. The system at the moment is complex and some people in the system need specialist welfare benefit advice. That is our view.

Ann Lewis: Yes, at the moment the system is so complex that some people in some situations—not all people, and not for all problems—need specialist welfare benefit advice. That is legal advice; this is a legal structure.

Julie Bishop: There are two things to answer. One is that to resolve the client’s whole problem we need to provide a number of services to them, some legal and some non-legal. However, our agencies work together in a streamlined and co-ordinated fashion. I have put an example of one in our evidence, where in fact we have referral routes. In the case of law centres, the problem does not come to us until it is a legal problem, so we use legal skills and legal aid to resolve legal problems. We do not provide generalist advice to deal with a legal problem.

The second point I wanted to answer was your question about the scope being narrower in other countries. As you can hear from my accent, I can speak about the Australian jurisdiction. The equivalent of social welfare  law there is handled differently—you are correct—but it does come out of what is called the Attorney-General’s Department. Sixty million Australian dollars is given to the equivalent of law centres, which have a wide jurisdiction. There are 200 of those. They serve a couple of hundred thousand people per year. Those people are not means-tested. The funding is flexible, but the centres are also funded to do public legal education and to have a look at systemic issues and provide solutions to Government, with respect to the knowledge and learning that comes from that.

When you talk about legal aid, therefore, there are different formats for it, and I think a number of your pieces of information do not include Aboriginal legal aid, or the community legal advice service, or something called the family violence centres. They—again, out of the legal aid pocket—deal with issues of family violence.

Q 247

Julie Bishop: I am not an economist, but I think another really key difference is that legal aid in Australia is by and large a salaried service. That means that there are grants of legal aid, but private lawyers are so poorly funded with their grants of legal aid in Australia that they regard it as pro bono, more or less. So it is true to say that the hourly rate is much lower. However, the bulk of legal aid is actually delivered through a salaried service. So the format—the way legal aid is delivered—is actually quite different, and that can help to explain some of the differences.

I can get you some more information, and I will.

Q 248

Gillian Guy: To answer two questions in one, it would be great if none of us were needed any more. That is where we would probably aim for; but I think things are going to get worse before they get better. When we talk about welfare reform, for example—solving those issues—we have got to go through transition and dual running first. There is going to be a lot of confusion that we will have to pick up. The danger I see in being legalistic about what is legal and not legal is that it is very difficult to make that kind of definition and draw that line. That is why we are arguing that we need a whole-system approach to advice. We also need to be mindful of the fact that early intervention advice saves things from becoming technically legal and costing the system an awful lot more once they get to that point. If we are able to resolve issues at an early stage, we save the court system, the tribunal system and all those things a lot more cost further down the line.

In terms of international comparisons, we need to be aware that it is difficult to compare jurisdictions, benefit systems and those kinds of things. That is all very  complicated. But there are certainly assumptions here that the only cost driver for legal aid is the scope. There are potentially many other cost drivers that ought to be looked at before that, one of which is how things are screened. There is early advice and prevention that goes on. One cost driver relates to an entirely bureaucratic system that we have all suffered at the hands of for some time, which wastes money and takes it away from the front line, and one cost driver relates to the balance. If we look at the legal aid expenditure, in relative terms, there are just a few very, very expensive cases that are funded through that system. Investment early on in many, many more cases bears considerably more fruit in terms of cost coming out of the system.

Simon Pugh: I would add that the overall spending on social welfare law, which is what we are talking about here, is a small part of the legal aid budget—it is only about 5% or 6%. I echo the importance of giving early advice at an early stage of the problem to resolve it and stop it getting worse and reaching the point where you need very expensive court proceedings. That early advice—important though it is—is still legal and is still on a matter of and a question of law, but it is a way of avoiding having to go to court proceedings or tribunal proceedings. If we can intervene at an early stage, we can stop cases spiralling to the point where they cost more later on.

Q 249

Simon Pugh: I would argue that that is largely because of the complexity of the work that we are dealing with. Ann has pointed out how complex the welfare benefit system is. That law is very complex and difficult, which is why people need the help of lawyers to navigate it. You could reduce costs by simplifying the system and making it easier for people and easier to prevent most mistakes from happening in the first place. That way, you reduce demand rather than simply cutting out the supply.

Ann Lewis: The situation is that, in most tribunals, legal aid is not available to fund representation in any event. It is available for, for example, mental health and immigration. That argument cannot apply to the larger tribunals, such as employment and welfare benefits or social security, or whatever it is called.

Q 250

Gillian Guy: The answer needs to be that we are optimists by nature. Obviously, the whole aim of the provision is to simplify the system, so that we do not  have to duplicate data and information. We need to make sure that people understand what benefit they are entitled to. We are also realists about, as you say, that transitional part, which will be extremely complicated. The other point is that there is an intention to simplify but, as ever, the devil will be in the detail. We are trying to be constructive and to work with the Government through that detail but, ultimately, the question will be: is this achievable and will it be as simple and clear as it sets out to be?

Q 251

Gillian Guy: I suspect that they will always need assistance and that is why at Citizens Advice we are protecting our face-to-face advice as well, because another feature of these proposals, of course, is telephone access, which immediately excludes a large number of people who just need to empty out a carrier bag of things in front of someone, sort through them and get some advice.

Q 252

Gillian Guy: That was a proposal put forward by Citizens Advice to try to deal with the issues that I outlined earlier, which are about needing a whole system and not having an artificial separation between what is seen as general and what is seen as legal, because the complication and the continuum go through an entire system. It was an attempt to say that if we drew out the advice from what is proposed in the Bill and put a whole system together, we could take it into local commissioning so that it dealt with local advice need from beginning to end.

I know that that does not particularly meet the Government’s policy objectives, and that is because the Government want to be very clear about what is in legal aid. I understand that from the perspective of not having the growth and the creep that have gone on in past years. I understand that proposal. It is not necessarily attractive, but we think that that could work to resolve some of the issues that we have spoken about. The alternative is to ensure that at least we have some more provision at the advice end, which is currently a gap in the Bill, and we have to work together to think how that interface will be affected. Otherwise we will have the separation.

Q 253

Gillian Guy: Our idea was that it would involve all local advice givers, so that we were not tripping over  each other, we understood what the local need was and we worked together to meet that need in the most cost-effective and efficient way.

Julie Bishop: I just want to add to what Gillian said. The Committee might be interested to visit a well-functioning example of that, which is called Advice Services Coventry. It already uses technology appropriately and it has streamlined methods for referral. It does hot referrals, whereby if you walk into one agency and they are not able to deal with an issue, that agency can send the notes on via computer. It has protocols to work with local private advisers and it has been running for the past five years.

That is but one example, but if you were interested it is quite a good example to have a look at to see how a conception, such as the one that Gillian is putting forward, is actually working in practice. It also fits in with the Government’s agenda, because it is bottom-up, it is local and addresses local needs, and it provides needs-based strategic planning. It uses Legal Services Research Centre needs analysis to provide mapping of where it has to target services, etc.

Q 254

Julie Bishop: Yes. That is exactly the protocol that is in place in Coventry, where someone can come in for advice. If they arrive first of all at the law centre and it is not deemed appropriate, their case would be sent off to a more general agency to deal with those other problems. For example, with an employment matter, if it is something that ACAS can deal with, the other agency would have assisted them to deal with it that way. It is only once a person is dismissed, or needs something that is of a more legal nature, that they are actually referred to Coventry law centre.

It is our view that the Government have a very difficult rationing problem. As grass-roots agencies, this is the nature of our game. That is what we do—we ration services every day. So the Coventry example has been a mechanism to try and effectively ration very limited resources. The collaboration is one means of doing it. What the Coventry example gives us is the ability to deal with the person who has a multiplicity of needs. It is not someone who happens to say, “Hi, I’m in debt and please ignore my loss of job”.

Gillian Guy: If I may add another point, what I think we are trying to describe together is getting the right people, the best people with the suitable qualifications, to deal with the right level of problem. What we would not be talking about, which we currently endure, is a system whereby we have that dictated by funding streams. The reason that we are particularly anxious about segregation of issues is that we can have legal advisers, funded through legal aid, who sit idle for hours during the day when they could be giving advice on other funding streams, but there is that accountability for how that is managed. That is why we do not want to see people parcelled up and sent from one place to another. We want a collaborative approach that allows us to pool our resources and use them most effectively to resolve problems.

Q 255

Julie Bishop: I can speak for law centres directly. I think we have supplied in the evidence that around 80% of our legal aid funding will go. We have already lost 53% of local authority funds. That is not foreshadowed; that is lost already. We estimate that, when you add all the bits of funding together, a minimum of 40% of our funding will be removed. That clearly means that we have to reduce and really think very carefully about who we can see and who we cannot, and what we do and do not focus on. The short of it is that for law centres alone, 80,000 people will not be served. Of those 80,000, 79.5% are not white. More startling, more than 90.5% earn less than £6,000 a year. So I am not sure what will happen. Many of our clients will not be at MPs’ surgeries, because they do not have the wherewithal to get to them. They will be in doctors’ surgeries, hanging around churches and sitting on streets begging for money. They will be adding cost to Government elsewhere in the system. That is where our clients will be.

Simon Pugh: Shelter estimates that if the proposals go through we would lose approximately 45% of our income from legal aid. All of our advice centres across the country do legal aid in combination with other things. The impact of that on the viability of each individual advice centre is something that we would have to think about very carefully. We would not expect our charitable fundraising to be able to expand sufficiently to fill that gap. We help about 25,000 people a year through legal aid and we would lose many of those cases. There would be large numbers of people who we would no longer be able to help.

We are also concerned about the impact on the people whom we would be able to help. We deal with housing, welfare benefits and debt, in many places, and, as has been said repeatedly, people do not have a housing problem, a debt problem or a benefits problem: they have all three. If we can no longer deal with the whole issue, we are not solving the problem.

If we have a client who comes in, who is in arrears and at risk of having their home repossessed because they have housing benefit issues, at the moment we can get the possession proceedings adjourned and deal with the housing benefit issues. When the case comes back to court, the benefit problems are resolved, the arrears are brought down, and the client is allowed to continue to stay in their home.

Under the proposals in the Bill, we would not be able to deal with the underlying issue and resolve the cause, so we would simply be able to adjourn the case, and send the client off to do their own benefits work: it is not going to happen—we would come back to court and nothing would have changed. If we cannot solve the underlying problem, because we cannot deal with the whole issue, that will have a significant impact on the people we are still able to help.

Gillian Guy: As I said earlier, we currently get £25 million through legal aid. The impact on Citizens Advice is that £20 million of that would go under the proposals. That is an 80% cut in funding. That would mean that about 450 advisers would go from within the Citizens Advice system. Clearly, that starts to hit, with the other funding issues that I have mentioned, at the viability of bureaux—particularly in the context in which it is not spread evenly among bureaux. Only about half of them have legal aid contracts, so the percentage of their relevant income is much higher than if the funding were spread across the whole piece.

Also, the impact is random, and that is particularly dangerous given where advice will and will not be available. There will be areas, we imagine, that will be hit higher. The smaller contracts that could come out of legal aid will probably not be economically viable or attractive, so we could see advice agencies and, indeed, small firms of advisers and lawyers, going out of business or, certainly, keeping out of legal aid work.

Ann Lewis: I would just like to put that evidence into the wider context of what is going on with our other members. We have members including Age UK—previously Age Concern—Youth Access and DIAL UK, which is a network of disability advice organisations. All those organisations report that their members are losing funding to the tune of between 20% and 40%, so the capacity in the wider sector is also going down. I think that we shall find clients, or potential clients, having to go from place to place trying to find someone with the capacity to help them.

Q 256

Simon Pugh: If we are not able to help people who present to us with arrears problems early on, we may not be able to negotiate a solution, for example with the landlord, to give them time to repay it. If we can deal with something only when the risk is immediate, it may well be too late to solve the problem by then.

Julie Bishop: I think the answer is that it is poor value for money. Instead of spending less than £200 resolving the issue early on we will be waiting until it has to go to court. It will cost more money. It is not just poor value for money in terms of pounds; it is poor value for money in terms of stress and heartache for the person who must get to that stage.

Ann Lewis: Even if you are able to resolve the debt issues that result in threat of loss of the home, if there are other debt issues, any solution in relation to the potential homelessness risks being only a temporary one. People are likely to come back again unless you have resolved all the debt problems, in so far as that is possible.

Gillian Guy: It is a feature of any system that is geared towards a crisis point that it exacerbates and multiplies the number of crises that we will have to deal with, because it will not be possible to give the advice at an earlier stage. The social cost to that, as well as the economic cost, is enormous.

Gillian Guy: I said it was a feature of any system where the accountability says certain people, under funding streams, can do only certain work, that inevitably other work will come in through the door that they cannot pick up. So there is a possibility that, on any one day or on any one occasion, they could be left idle while there is work to do.

Q 257

Gillian Guy: The explanation was about the unforeseen and probably unintended consequences of having strict funding. The reality on the ground is that I would be hard pressed to find anyone who was actually sitting doing nothing. But it is a feature of the system itself. Actually, I am sure that we find ways around all of that, as that is what we do as advice agencies on a daily basis—every one of us—because we are dealing with more demand than we can cope with. But in terms of accountability, we are not supposed to do that. So when we have to tell the Legal Services Commission what we spend the money on, we cannot spend it or be deemed to have spent it on anything that is not within the remit of that legal aid contract.

Q 258

Julie Bishop: There are two answers to that question. The first is that the way that law centres try to solve problems is always diversionary. That is what they were set up to do. It was to use legal skills and to bring an understanding and knowledge of the law to people’s problems so that they could be resolved effectively, but that does not mean going to court. So the choice is always to ring and to try to get a negotiated settlement. That is our practice as it is. The staff may not be licensed mediators, but their method of working is alternative dispute resolution in the broadest sense. That is one answer to the question.

The second answer to the question is, yes, like all other organisations we are looking more extensively at mediation and at what sort of training there is. There are many issues with mediation, not least of which is that there are a lot of different qualifications and different styles of mediation, and so on.

So it is a big area, but the simple answer is, “Absolutely, that’s what we’re looking to.” But I want to stress that our practice is one of diversionary early resolution anyhow.

Q 259

Julie Bishop: I would not say that we have a funded active programme of doing it, but we certainly have an active project of investigating and determining where we might get money to do it. Remember that we have lots of big ideas, but we have very limited resources. Often our resources are running up behind the ideas.

Ann Lewis: For the advice sector, many of the problems that people bring to us concern issues about services provided by the state: benefits; housing; community care; education; and so on. One of the difficulties in that situation is that often mediation is not possible because the arms of the state are not able to engage with mediation either, and that is a limiting factor.

Gillian Guy: As Citizens Advice, we think that mediation is one of the tools, in its loosest sense, that we have. But like the Law Centres Federation, it is not about having registered mediation.

It is important to say that that is one of the things that drives us—trying to stop people getting caught up in the whole of the legal system, which we know is costly, including emotionally costly, and it tends to extend the period of time that a problem exists for. That would be our aim, but it is important not to mislead the Committee that suddenly there could be a mediation system that grows up in the voluntary sector and operates on thin air, because that will not happen, it cannot happen and, although we are extremely good value, we are not free.

Simon Pugh: For the reasons that everybody has given, many of our cases are not suitable for formal mediation, but we try to avoid the need for court proceedings wherever possible. In many cases, that is the absolute last thing that our clients want to do. They want to avoid court. We actively try to seek an early resolution. We try to negotiate, discuss and settle cases, and it is an achievement when we do that.

Q 260

Julie Bishop: Yes. Earlier in the year, we surveyed every law centre to find out what was happening on that question. We found one law centre that got a 12% increase, many that had had a 100% cut, and all varieties in between.

Gillian Guy: For citizens advice bureaux, there is no uniformity. Some of the differences are explicable and probably desirable, but generally, there is no uniformity on funding. Where authorities have taken a positive decision to keep supporting the advice service, it is very  often because they have seen, registered and acknowledged the return on investment argument for it, which is the argument that we are making for legal aid as well.

Simon Pugh: That has very much been our experience as well. We have a range of centres that have contracts with local authorities for either advice work or Supporting People-type contracts. It is completely variable from area to area what is happening with those contracts.

Q 261

Simon Pugh: My worry on a number of fronts is that if we lose substantial amounts of our legal aid income, there will be a number of clients whom we will just not be able to help any more. We will not be able to expand our charitable resources sufficiently to fill that gap. A further worry is that that will lead, not just within Shelter but across the entire advice sector, to a loss of the skills base. A lot of people will no longer be able to work in the advice sector and do this type of work. Therefore, there will not be people there to help in future.

Q 262

Simon Pugh: Clients and advisers now, and clients in the future, who will not have advisers with the appropriate skills to help them when they need it.

Q 263

Simon Pugh: All of those: the homeless, people in receipt of benefits, homeowners who are going through a difficult time, tenants having difficulties with their landlords or with local authorities. Anybody who is vulnerable and who currently needs legal advice might not get it in the future.

Gillian Guy: The majority of the people who present themselves to citizens advice bureaux come for debt, benefits, employment and housing advice. It will be those people, as a result of these proposals and the other squeeze, who will begin to get even further rationing of that advice. That is obviously not where we want to go as an organisation. We also have a responsibility to make sure that we are as effective as possible. We are trying to make sure that we do not stick with old cumbersome methods of getting through giving advice to people. We are looking at different ways of doing that and different operating models.

It is also important to say that if there is to be alternative provision for social welfare advice—we urge Government to put it together, and there has been some indication of that, with £20 million being set aside to look at it—it must be sustainable, and it must go on into the future, so that we do not give people hope and then take it away again. As ever, it will be the most vulnerable—those who do not know their way around systems and those who have multiple problems, because one problem brings another and another—who will suffer the most as a result.

Q 264

Julie Bishop: Clearly, that is the issue, is it not? Who do we turn away, why and how? That is our problem every day—how do we ration and how do we do it? Rather than nominating today who we will turn away, one thing that I will say is that one of our key focuses in the Law Centres Federation and in law centres themselves is young people. We are concerned that young people are being particularly disadvantaged by this Bill. By young people, I do not mean under-18s; I mean under-25s. We have also submitted evidence about the impact on young people and we believe that if you do not resolve a young person’s civil legal issues—such as housing, education, income support, etc.—there is a direct correlation between that and criminality. Getting young people early, not only do you set them up for life but you also divert them from other, bigger costs to the Government in the criminal system. So we have a particular concern about young people and how they will be dealt with.

Secondly, I want to say something about rationing and what the endgame will be of this loss of funding. The Government are not only rationing but with the closure of any of our agencies they are also losing all the resources that we bring. This is not a saving figure, but for every £1 that we give to the Government we estimate that we bring in about another £15 worth of additional resources. That is from the big law firms that support us and that house the pro bono, the charitable funds that the Government are not able to access, and so on. That is to say nothing of our community links and the work that we do with community agencies, because it is that work with the non-advice sector that also gives you a full solution to the problem. What we are able to do is not only solve the legal problem, but address, through our community links, the compounding issues. When a law centre goes, you not only lose skilled workers but you will not recapture that resource that we bring.

Q 265

Gillian Guy: We do have other calculations, because in times of justification for the kind of service that we provide it is important to have the business case set out. I am very happy to provide the Committee with any other statistics that members want.

Q 266

Gillian Guy: Okay.

Q 267

Frances Coulson: We do not get much legal aid in our office.

Q 268

Frances Coulson: Yes, indeed. We certainly see it as an unintended consequence. A lot of the consultation, and the Bill itself, is framed towards personal injury. We have heard a lot about cuts in legal aid budgets today, and about agencies. What we are looking at is removing the ability of insolvency practitioners to recover funds for the state.

To explain a little, quite frequently an insolvency practitioner will go into a company, or a bankruptcy, where there is no money, because the directors or third parties have, either through mismanagement or, at the extreme end, through organised crime, conspired to make sure there is no money there. The only way any money can be recovered for creditors is for the insolvency practitioners to make an investigation, which they are obliged to do, and then to bring insolvency proceedings against those third parties, for recovery.

The cases can range from mismanagement at the low end to the extreme end, such as cases that fund terrorism. I have seen several such cases myself—very serious crime. Without the ability, in those cases, to recover the success fee in litigation, the lawyers will have to work on risk, and the adverse cost premium, which, obviously, as it is an after-the-event premium, is quite high. Those costs simply come off whatever is recovered, which is supposed to go back to creditors.

In about 25% of general insolvency cases, the Revenue is the unsecured creditor. I think that the figure is probably significantly higher in cases where there has been fraud, because the Revenue is a target for fraud anyway, and tax fraud funds serious crime.

There would be three unintended effects, I think. First, cases would become uneconomic for practitioners and their lawyers to take on at all. Therefore there would be no recovery. Secondly, there would be a massive reduction in return to creditors. Creditors are obviously not only the taxpayer generally, but small businesses,  employees and other people. Thirdly, there is obviously a massive deterrent effect; if you pursue people who have committed fraud and take their ill-gotten gains from them, they and others they know do not do it again.

There are other types of fraud and I have dealt with cases involving gangmasters, who can cause untold misery at the very basic level. We did one case where a non-EU national was running a company—running agricultural workers; they were on minimum wage, and there were deductions of things like £1.50 for registering them with an NHS dentist, and taking the rest of the money off them for putting them in appalling, overcrowded rooms and so forth; and the company was not paying tax either.

That company was provisionally liquidated by the Revenue. The insolvency practitioner who was appointed pursued the director, who had a house worth £250,000, with no charge on it, and took all his assets away from him; he was eventually deported. Better than that, the business was sold to a legitimate business, which employed the people with proper health and safety, a proper minimum wage and so forth. If those cases cannot be taken on a proper economic footing, the ability to do that will be removed.

Q 269

Frances Coulson: I understand that the Revenue has been speaking to the Ministry of Justice. We do not know the final outcome of those discussions, but I certainly understand that they are very concerned about this. If you take some of the areas in which they have used these weapons as one of the tools in their toolbox, if you like, £2.6 billion a year is lost to the country through carousel fraud.

Q 270

Frances Coulson: £2.6 billion is the published figure for loss in VAT fraud on carousel. That is where insolvency is used extensively. In terms of removing a tool for tackling these things, in other general insolvency cases losses would be very significant—in billions.

Q 271

Frances Coulson: It takes away at least half of those cases. Insolvency is one of those exemptions that was a reason why the original Act was introduced—to enable insolvency practitioners to bring these sorts of proceedings. They did not have the wherewithal to do that in sufficient  numbers of cases before that, and I think we would go back to that situation. In fact, because the CFA work and the numbers of people willing to take it on has developed, it would probably have a worse effect—we would go backwards.

Q 272

Simon Pugh: That is not something that I have a detailed picture on, but I can certainly take that back and we can write to the Committee on that.

Q 273

Julie Bishop: I have mentioned the Coventry example several times now because there is a real potential for doubling up on services and so on. I raised it because I wanted to highlight the fact that the more common way we work is in collaboration with each other, rather than doubling up. The second thing to say is that we are currently not meeting demand as it stands, so would it be that we were doubling up? The fact of the matter, as we have discussed, is that we are rationing services already. Although there appear to be a lot of agencies working in the sector, we are doing it because none of us, even together, are meeting the demand that is there—that is the first thing.

The second question was about technological solutions—telephone lines, e-mail advice and so on. Law centres have long used telephone advice lines. Again, in certain situations, that is very effective. But what we have discovered in using it is that you need to have an experienced lawyer on the phone who is able to deal with the matter, understand what the problem is, be able to address whether a face-to-face appointment is required, and bring them in. The way we do telephone advice lines is to front-load the expertise, rather than have someone just read from a sheet. We do explore various other forms of technology, but what we talk about is the appropriate use of technology. Technology is a tool; it is not a solution. We try to tailor our services to client needs.

On our client profile, I have said that they earn less than £6 million—sorry, £6,000; I would prefer to be one of the former at the moment—a year, but I have not said that on average, they have low educational attainment. They have often left school early and have poor literacy and numeracy. One of our biggest problems is people’s ability to deal with the technology. Where we can, we do. Where people can help themselves, we encourage that. That is already our practice, and that is one reason why we get good value-for-money figures.

Simon Pugh: We take much the same approach at Shelter. We have an advice website where people can log on to receive advice and information, we have a telephone helpline, and we provide legal advice over the telephone through contracts with the Legal Services Commission. We have experience of delivering legal advice and information through all the different channels. They all work, and they all deliver good advice in some cases for some people, but in some cases that is not suitable. Some people need face-to-face advice. It depends on the circumstances of the individual and their case. Where it works, it can work well, be very effective and save money, but it is not suitable for everybody or every case.

Gillian Guy: To pick up the point about unmet demand, it is undoubtedly the case that there is enough work and more to go round all our organisations. Currently, there is quite a squeeze on the resource that we have for them. That said, I am sure that there is room for improvement. In any movement that has grown from the ground up over a number of years—our organisation has grown over 70 years—there is room to look back at that and see how we operate. Also, even with unmet demand—this is something that we would have a responsibility to look at—we sometimes trip over each other, and there is a degree of duplication, which we are mindful of and looking at. A squeeze on resources tends to make us focus on doing that, because we have a responsibility to keep services running.

I said earlier that as Citizens Advice and in the bureaux, we are looking at opening up different channels and providing advice to people in the way that they would like to receive it. That echoes the point that Simon Pugh made. In our view, there will always be a need for some face-to-face, but we ought to have the most effective and cost-effective method for each person.

It is also about public accountability. We all receive some public money, and we have to be accountable for it. I think that we are transparent about that, but there is more room around being able to share services, support services, premises and so on. That is what was in the proposal that we put forward to deal with the legal aid situation.

Ann Lewis: I would like to respond to the question about the use of technology. I know that the Ministry of Justice has suggested that telephone advice is cheaper. That might well be the case, but if you dig into the statistics, it appears that the telephone advice system currently being run by the Legal Services Commission attracts different people from those who use face-to-face services, and possibly different cases. That information has been given to the Ministry of Justice in our response to its original consultation. It appears that telephone advice tends to be used more often by people who need information, although they get information. It also appears, for example—certainly in housing—that more people who receive face-to-face advice are rehoused or retain their homes than those who receive telephone advice. I suggest that that is because people ring about different issues.

The other issue relates to different people using the phone as opposed to face-to-face advice. It seems, as we pointed out in our evidence, that more non-white people use face-to-face advice on housing. It also appears that in relation to other benefits, 63% of users of face-to-face advice are disabled, whereas the equivalent figure for the telephone is 22%. I emphasise that when comparing  costs, it is important to remember that they might well be different people and different cases, so they are not directly comparable.

Q 274

Simon Pugh: We are starting to see additional queries about housing benefit changes by the people affected by those changes, but I think that that will happen during the next two to three years as the various Bills pass through Parliament and come into effect.

One of the things that is a real concern for us is that with the combination of the Welfare Reform Bill, particularly the changes to housing benefit, and what is in the Localism Bill, in terms of discharging homelessness duties into the private rented sector and so on, there will be a lot more people with problems in the private rented sector who will need housing advice and housing help. The part of the safety net that is there for them—the legal advice—may well not be there in the future, unless and until they get to the point of being immediately at risk of losing their home. But in terms of dealing with poor landlords, landlord harassment, problems of disrepair and so on, short of people being at serious risk of harm to health, we will no longer be able to deal with all those early problems. During the next two or three years, there are likely to be more people pushed into the private rented sector, with changes to benefits and housing benefit going on in the background, and during that time it will be a real problem.

Q 275

Simon Pugh: Yes. And then there is more.

Q 276

Gillian Guy: The trends we are seeing at the moment are that the volumes of requests to us are increasing and continuing to increase, and we are trying to project that forward. The issues are changing somewhat and debt, housing and employment are beneath that, but debt and housing are the main issues.

Something that is quite alarming is the increase in inquiries from 16 to 25-year-olds about homelessness; they are threatened with potential homelessness or actually being made homeless. That is of particular concern to us. The time frame is probably more like seven to 10 years when we are trying to look at our projections, because there are many changes coming together. One of the things that we urge the Government to do across Departments is that, instead of doing individual  departmental impact assessments, they should look at the cumulative impact that these changes will have on individuals and families. Then we can work with a whole assessment and we will be able to project what that demand for our advice will be.

Q 277

Frances Coulson: The insolvency practitioner brings the litigation as a representative, effectively, for all creditors, and statute dictates how that money is distributed once it is recovered. If you take my earlier answer, a quarter of those creditors are the Revenue. Of course, there will be some larger corporations in there, such as utilities, British Telecom and so forth, but there will also be large numbers of smaller trade creditors, individuals and employees. As a body, those individual and trade creditors have already lost money and asking them to dig into their pocket again is difficult, particularly when a lot of this litigation can be quite complex and last a long time. I still have a case that we have had open for eight years now. We have recovered money and assets but one of the properties is owned by a Delaware company, and there has been a fake identity and so forth. So there can be a huge investment of time and energy to get money back for creditors.

On other cases, we are about to send a cheque for £700,000 to the Revenue from one case. It was not a fraud, but a mismanagement of the company. There are large sums that can be recovered. You cannot expect individual creditors to fund these things. They are done on risk by the practitioner and their lawyers.

Q 278

Frances Coulson: I do not think we are necessarily talking about cross-subsidy of cases. In an average litigation case, any lawyer will tell you that there is 25% litigation risk just because of the nature of litigation. The lawyer and the insolvency practitioner will have to pay their staff and certain statutory fees. They have to keep going because litigation can last a long time. That is the risk they are being paid for: the fact that they may  not get paid at all on that case and that, in any event, they have to wait a long time for their money. In insolvency cases, it is not a matter of winning the case; it is actually recovering the money. I take your point, Mr Wallace, that it might just be a business that has failed through no fault of the person concerned. In fact, the insolvency litigation that we are talking about ranges from wrongful trading, which is trading at the expense of creditors when you should have known better, to put it in plain terms, through to fraudulent trading and that sort of end. You can take early advice if your business is in difficulties and you do not trade at the expense of other creditors because it knocks other businesses over. That is the problem.

Q 279

Frances Coulson: The defendant will have had ample opportunity to settle matters early. In this sort of litigation, unless it is a fraud where you have to freeze assets because you cannot give them notice, there have invariably been investigations and interviews. There will have been letters before action and possibly a part 36 offer to give them an opportunity to settle early. There will also have been frequent offers of mediation. It is the wrongdoing of a defendant who fights and loses that causes the costs and the risk. The creditors will end up paying for that. In litigation, we are not just talking about the success fee, which may be negotiated up or down. Practitioners want to give a return to creditors, but they are taking a personal risk on adverse costs and they are not excused just because they are taking a representative action for creditors. That is a high premium. There is no reason why the defendant, who is the person who has committed the wrong at whichever end of the scale it is, should make the creditors pay for that.

Q 280

Julie Bishop: No.

Gillian Guy: No. It will exclude people from seeking that advice.

Simon Pugh: No. And it will exclude people.

Ann Lewis: I agree with the others.

Frances Coulson: I agree.