I am grateful to have the opportunity to discuss the Government's legal aid proposals because I regard legal aid as embodying an important principle that we should support and empower. Individuals, especially those who do not have the financial means to employ legal services themselves, sometimes find themselves against big organisations, big corporations and power. Legal aid is an important means of addressing imbalances in our society. The people need the law, and now more than ever in view of the complexity and size of the powerful business organisations that they often have to oppose. They need its support and it should be available to them. If we are to have an equal legal system in which individuals have the ability to take on big power they must be backed in some way by public provision.
I am worried because it seems that the Government's proposals tilt the balance against the people in favour of power in a hasty and ill-considered fashion. If the Government's paramount aim is to provide an efficient service for the less well off, which it should be, the obvious approach would he to take the money that is now provided for legal aid—about £1.5 billion—and use it to establish a competing employed service of solicitors and barristers in the form of a public defender service dealing with criminal cases. It would comprise also a nationwide network of law centres dealing with all the civil matters that are raised in the courts. It is worrying that the Government appear not even to have considered such a service. It seems that they have not considered how we can provide better, more efficient, more direct and more committed support. Instead, the Government are engaged in a Treasury raid on legal aid.
Labour Members criticised the previous Conservative Lord Chancellor, Lord Mackay, because his proposals were Treasury driven, yet the Labour Government's proposals seem to be a Treasury nuclear raid on the system which if implemented will effectively destroy it.
I intend to deal primarily with the proposals for compensation cases, which seem to be straightforward and simple and would cut out legal aid completely. I will do so in a spirit which is, of course, helpful to the Government because it will allow them to flesh out their proposals, to tell us what is involved and to demonstrate that the issues have been considered.
Compensation cases are classic instances of the individual against big power—drug companies, industrialists, hospitals or the health service, for example. In many instances, these cases advance the public interest because they prove dereliction of duty and failure on the part of large organisations. In all these instances, the individual is weak when facing the large organisation unless he or she is empowered by some form of public provision.
My hon. Friend the Minister, when he replies, may accuse me of defending vested interests—in other words, lawyers—but instead I am defending the interests of the people, consumers, because they are paramount. I do not care about lawyers squabbling among themselves, with one branch of fat-cat lawyers accusing another branch of being fat-cat lawyers, which is edifying for the rest of us as a spectator sport. The real problem is to decide, against the background of that distasteful argument, how we might best protect the people.
First, I ask my hon. Friend the Minister how much will be saved by removing legal aid from compensation cases. Various estimates range from £600 million to £800. Those figures reflect the cost of civil non-family legal aid. What will be the saving? Are the figures to which I have referred net of recovery? Is recovery to be deducted from the estimated saving? If so, the saving will be comparatively small. There will be a massive shift of power against the people to produce a small saving at the end of the day.
I have no doubt that there are abuses in the legal aid system. The Lord Chancellor has told us, and I agree, that the public should not finance unwinnable cases. I am horrified to be told that the public are supporting such cases. If that is happening, I am sure that the Lord Chancellor has the power to stop the public purse being drained in that way. The issue, however, is to deal with the abuses as they occur rather using abuses as an excuse for scrapping the legal aid system.
We must provide an alternative if we are to cut legal aid. The only alternative is to provide legal aid through a network of law centres.
I would rather not give way because I have a difficult argument to advance and with the need for speed my argument must be somewhat compressed.
Section 202 of the Local Government Act 1972 gives local authorities the power to set up local services. In many instances, that power has not been developed because of lack of finance. If we are to divert massive sums from the legal aid system, surely they should be used to provide community services such as law centres. What a difference a few hundred million pounds would make to law centres throughout the country, but that provision is not being made. Instead, it seems, proposals are to be implemented prematurely without consultation, research and adequate information. That can be said of the proposals that have emerged so far.
The abolition of legal aid for compensation cases and instead placing emphasis on conditional fees did not appear in the Woolf report. That report focused on giving the courts more control over the legal process. Conditional fees put lawyers back in the driving seat because they will have a vested interest in pursuing cases. The Government's proposal was not recommended in the Middleton report either. Sir Peter Middleton did not endorse it. Sir Peter argued in his report that there could be a gradual transition from legal aid to conditional fees, but he did not recommend that legal aid should be scrapped and replaced entirely with conditional fees.
I have no great argument with conditional fees. I remember when the then Lord Chancellor introduced them from Scotland some years ago—an alien import into the British legal system—to cries of protest from the Law Society and from individual banisters. I would go further and have contingency fees. The legal profession must be able to compete in any way that it finds appropriate. The problem is that we are faced with an untried system and we do not know what consequences it will have. It is being put forward as a replacement for a system that is working and which protects the vulnerable.
My hon. Friend the Minister claims that the Government's proposals will open up justice to a range of people who are now excluded from it because at present the legal system is pricing itself out of use by the people, even those with substantial means. The fact remains, however, that conditional fees, as a replacement, are untried. My hon. Friend has no authority for advancing such an argument. We do not know how conditional fees are working since they have been introduced. We do not know of the problems that ensue.
I specialised as a personal injury lawyer for 19 years. There have been conditional fees for the past two years and the system has been working extremely well, but I accept my hon. Friend's argument that they may not be suitable for every type of case. He may not be aware, however, that John Monks of the TUC, while speaking to representatives of the insurance industry on 3 November, made an interesting proposal that will be advanced to the Lord Chancellor, and that is to extend the trade union legal aid scheme to all people who are injured at work. Trade union schemes are a success story and they are not dependent on legal aid. Perhaps my hon. Friend will care to reflect on these points.
I encourage the extension of the trade union legal aid scheme: it is obviously important. However, neither that scheme nor conditional fees can replace the substantial sums in legal aid that will be taken away. People who do not belong to a trade union and who are not able to get access to conditional fees will be particularly vulnerable.
It must be proved to me that conditional fees are not only workingI— did not expect them to be a disastrous failure—but are working for the benefit of the people. All that we have is the research undertaken by the Policy Studies Institute, which involved 200 cases seen from the solicitors' and not the consumers' point of view. How difficult is it for consumers to obtain legal aid? What barriers are put in their way? How much are solicitors proposing to charge? How many cases were turned away because solicitors would not take them up? We know nothing of all that. All that we have is a study of 190 or so cases and the fees charged: we have nothing from the users' point of view. It is the users whom I am defending. It is wrong to put so much weight on conditional fees as an alternative to legal aid without any research.
Conditional fees are inherently loaded against the poor. Compensation cases incur substantial up-front costs, such as medical reports, which are expensive. Insurance premiums will be a substantial charge on the system. Insurance companies will want their own medical reports. A poor litigant will have to pay substantial up-front costs before he can even get his case to court. Present charges are £95 for road traffic accidents, £161 for personal injury cases, and a mere £15,000 for medical negligence cases, which are the most difficult. If insurance is to be required, it will load the odds against the poor. I hope that my hon. Friend the Minister will tell us that the Government will fund the insurance charges for litigants whose income is below a certain level. That would not solve the problem, but it would make the proposal more acceptable.
What cases will be taken? I am sure that conditional fees will work with a sure-fire winner, such as a simple, straightforward personal injury case, but it will be impossible for them to work in a medical negligence case, in drug cases and in consumer product cases. Cases of builders or hairdressers from hell will also be difficult. Conditional fees will not be available in such cases, because the odds will be loaded against them and in favour of cases that will obviously be successful.
What will be the effect on legal practices? Practices devoted to legal aid will be driven out. Only fat practices with large incomes will be able to finance conditional fee litigation, because they will not get a quick return. They will need a large case load to carry them through the lean years. Small practices that presently provide devoted service to legal aid cases do not have large enough case loads: they lack weight and fat, so cases will go to the large practices.
All that is predictable. It is essential for the Government to acknowledge those consequences. I do not want them to abolish legal aid, but if they are going to replace it by conditional fees there should be a period of transition during which the one can be developed to replace the other. Let us have a transitional phase so that we can see that it works. That is the only sensible way to protect the people. The Government propose a sudden, overnight transition. It will take years: there will be no sudden savings. Under a smokescreen of a tax on fat-cat lawyers—with which I totally sympathise—legal aid will be abolished in compensation cases. That is not a responsible policy for any Government, but particularly not for a Labour Government whose commitment must be to protect and empower the poor and those who cannot afford legal services.
Legal aid was becoming expensive. Like the common agricultural policy—which the Government do not criticise much—it is demand led. However, there are ways of dealing with that problem short of abolition. We should consider alternative provisions, such as competition by employed solicitors, or an attack on the restrictive practices of the Bar, which enormously drive up expenses in court cases. It is interesting to note that Sir Peter Middleton has pointed out that these reforms will not damage the incomes of those at the Bar: it is obviously important to reassure the Bar that it will be protected against these changes. We could allow the Crown Prosecution Service to use its own banisters rather than force them to employ outside banisters. More paralegals could be used: legal aid for mediation is not proposed. The Government should not kick away the support provided for the people until they have provided an adequate, proven alternative to protect even more people more efficiently and economically. That is the prime need.
I hope that, as he clarifies Government policy, my hon. Friend will reassure me. The Lord Chancellor used a worrying phrase when he said that it is unfair for the middle classes to pay for poorer people to have services that they cannot afford themselves. Is that the basic new Labour principle behind this reform?
I am grateful to my hon. Friend the Member for Great Grimsby (Mr. Mitchell) for allowing me to speak in the debate. I want to bring a number of points to the Minister's attention, and to seek his assurance that they will be considered when his Department discusses publicly funded litigation.
I broadly welcome the commitment to conditional fees. They will give unity of commercial purpose between the lawyer and the client, and ensure that they are both striving towards the same goal. They will also open up the courts to many who find the doors closed to them at present. It cannot be acceptable for the state to finance only those cases involving a sufficiently bad risk that no commercial practitioner would touch them with a bargepole.
There will have to be insurance against losing the case and having to pay the other side's costs. What discussions has my hon. Friend had with the insurance industry to ensure that insurance products are available?
I urge my hon. Friend to retain the cost protection against the cost of enforcement presently enjoyed by those who qualify for legal aid. I also ask him to bear in mind the cases, such as housing or human rights cases, in which the main aim of the litigation, even though it is a damages claim, is an injunction or interlocutory relief, so there is no final award of damages.
I urge my hon. Friend to make the 25 per cent. mark-up a statutory limit, or at least a statutory limit to be exceeded only in cases in which a taxing master has considered that the solicitors took an exceptional risk in undertaking the litigation in the first place.
I speak as a slightly overweight rather than a fat-cat lawyer, who has had some experience in personal injury litigation. I also speak as one of the vice chairs of the all-party head injury group that meets regularly in the House. One of the valid concerns of that group is that firms of solicitors will not be able to carry the huge disbursements that are necessary to pursue medical negligence or personal injury cases. Typically, lawyers are reliant on medical reports and specialist reports, such as engineers' reports. They will also refer matters back and forth to counsel, all of which costs money.
Smaller firms will not be able to carry those disbursements. The people most at risk are those at the bottom of the pile, and they need to have their cases brought to court. My great fear is that, even with the best will in the world, no firm will be able to take up the cudgels on their behalf.
I hope and trust that the Minister, thoughtful as he always is, will deal with that aspect, because it worries me and many other lawyers. I understand that there is to be a lobby on this subject in the other place next week. I hope that all those who are interested will appear next Tuesday to make their voices heard. I am obliged to the hon. Member for Great Grimsby (Mr. Mitchell) for allowing me to make that brief point.
I am grateful to my hon. Friend the Member for Great Grimsby (Mr. Mitchell) for raising such an important issue—even if he did appear to be playing a new role as the lawyer's friend.
From its creation in 1949, the legal aid scheme in England and Wales was vital in enabling people of limited means to enforce their legal rights, and in many ways it was one of the great successes of the welfare state; but, over the years, the scheme has become less and less able to fulfil its original ambitions. I hardly need rehearse the problems, as they are well known to all of us as constituency Members. Eligibility has fallen from 70 per cent. of households to fewer than 50 per cent., spending has outstripped inflation, although fewer people are being helped, and the average cost of cases has been rising and rising, with no way of stopping it or even slowing it down. That is why this Government will fundamentally reform legal aid.
Sadly, the legal profession has proved deeply conservative in the face of previous attempts at control or reform. I understand why it does not want an end to the present system of payment, as it delivers a healthy income, often largely from the taxpayer, irrespective of value for money. The trouble is that, despite huge expense, legal aid is costing more to do less. Civil legal aid has tripled in six years, to £671 million. Broadly, that means that the income from legal aid going to the legal profession has risen by 20 per cent. a year on average over the same period. While civil legal aid continued to rise last year, there were about 13,500 fewer acts of help. We simply cannot go on like that. I want to help more people, not fewer; I want legal aid to be directed to those with unmet legal needs. I hope that my hon. Friend agrees with that.
My right hon. and noble Friend the Lord Chancellor and I have concluded that—as the first step on the path of reform—because there are areas of unmet legal need but no extra money, legal aid should not be used where alternatives are as good or better. That is why we have decided that those claiming damages or making claims for money should generally use no-win, no-fee arrangements rather than legal aid.
My hon. Friend said that the measure had been introduced overnight. The change will be made, but, obviously, on the first day following it lawyers will continue to obtain their income from all the legal aid cases that they previously had. On the first day of the system, they will perhaps have one conditional-fee case; as the system develops, they will have more and more such cases and, clearly, lower income from legal aid. It will take some time: it is a process of transition. We will not make savings on the first day. Obviously, lawyers will subsequently have no legal aid cases, but the process will not happen overnight. The savings will take many years to work through into the system.
Unfortunately, the lawyers' response has been rapid and all too predictable. They say that the poor cannot use no-win, no-fee arrangements because they cannot afford either the up-front costs of investigating the merits of a case or the insurance against having to pay the other side's costs if they lose—an argument which my hon. Friend repeated. But are the current arrangements, under which the client is expected to meet those up-front costs, the only way of working? Let us go a step further and ask whether they are fair. I have some doubts, and as a result I shall invite the lawyers to consider the following proposition. Why should not lawyers absorb the up-front costs of investigating the merits, bear the risk of the other side's costs and simply factor those into the pricing structure of their overall business?
There have always been lawyers who have taken on cases on the informal understanding that they will not be paid for their work if they do not win. Since 1995, lawyers have also been able to charge their clients a "success fee" on top of their normal prices if they do win. There are few areas of commerce or business in which some money is not put at risk to realise an overall positive return. Why should lawyers in business in the private sector be any different? It may mean that only efficient, professionally competent and busy firms will be able to offer the agreements that we are discussing, but is that not a good thing? Is it not precisely what my hon. Friend's conveyancing reforms achieved, for the benefit of the consumer? His proposals fundamentally changed the way in which conveyancing operated, because he was not afraid to consider alternatives to the existing traditional arrangements. I hope that he will approach our proposals for reform in the same spirit.
It is claimed that conditional fees will not cover some cases that legal aid currently supports, particularly those with a poor prospect of success. I do not consider it fair to help the less well off to sue under legal aid provisions in cases in which the great majority—whose taxes help to pay for legal aid—could not themselves sue. I also cannot see why it is objectionable to keep weak cases out of the courts.
It has been deeply disappointing to observe the speed with which, in the last three weeks, leading lawyers have rushed to use the example of children who were brain damaged at birth to demonstrate that our plans are wrong. They argue that those children, who would receive legal aid now, would not be able to arrange a conditional fee agreement because of the difficulty of their cases. I find it distressing that they need to use those cases in their arguments, or to adopt a moral high ground as if the Government had no regard for the children or their parents.
I shall go on to deal with that.
Those cases are emotive: they engage strong emotions in all of us. The fact that issues are painful, however, is no excuse for refusing to think the issues through; indeed, it emphasises our duty to do that. Whose interest is served if cases proceed on the slim hope that some benefit may accrue? Not, I suspect, that of the parents, for whom the trauma of unsuccessful and pointless litigation will be added to the trauma of the original damage to the child. Nor will such action serve the interests of the health authority, which has to divert effort and resources to meet the claims, or that of sick people whose care may suffer because of the money diverted to fight cases. Meanwhile, the taxpayer is asked to fund the child's lawyers, and when—as most often happens—the litigation fails, the only people who have profited are the lawyers. They do not do so out of malice or malevolence; nevertheless, they alone stand to gain regardless of the outcome. Is that in the interests of the sick and the injured? Is that the best use that we can make of scarce public money?
The issues are difficult and painful, and I would prefer not to face them; but they must be faced. It must be said that we can no longer allow weak cases to be taken up by lawyers and paid for by the taxpayer irrespective of the cost, and the Government have the right and the duty to say so.
My hon. Friend the Member for Wyre Forest (Mr. Lock) raised the important question of insurance. We will certainly look at the ways in which insurance may be available in such circumstances. As I have said, however, I think that in the first place it is a responsibility of lawyers in business and private practice to consider bearing the costs for themselves.
If conditional fees are introduced, will the insurance premiums of those who currently qualify for legal aid be paid by the legal aid fund, and will the fund pay the costs of investigating a case and its merits?
It is for the lawyers to consider whether they should absorb those costs up front as a cost of doing business. If we receive persuasive evidence that that is totally impossible, we may take other considerations into account; in the first place, however, I want lawyers to consider their businesses, and this is a business that they are in.
My hon. Friend the Member for Great Grimsby raised the question whether our action was motivated solely by the need to cut legal aid expenditure, and driven by the Treasury. I emphasise that that is not the case. We will not spend less than is currently contained in the published expenditure plans covering the next three years, but we shall not continue to pay millions more to lawyers to provide ever fewer people with help. The poor can rest safe in the knowledge that they will be able to benefit from conditional fees in money recovery cases while benefiting from the existing legal aid budget for other cases such as those involving family law.
In the longer term, we intend to reform the legal aid scheme further by buying legal services under contract. We will transform the way in which legal aid operates. For too long it has been simply a bill-paying machine, paying lawyers on demand for the work that they choose to do. Instead, it should become a positive system for buying the services that people need. We will establish a system of contracting whereby the Legal Aid Board will buy services from people other than lawyers, such as advice agencies and mediators, and will make suppliers compete in terms of quality and price. That will allow us to help more people pound for pound.
Contracting will give us power to direct services to those in most need, taking account of local demand and the best way of meeting it. That is already a developing reality. The Legal Aid Board is already contracting with agencies such as the citizens advice bureaux and lawyers for legal advice and assistance. The first regional legal services committee has been set up to liaise with local people on local priorities. Here is the beginning of the development of community legal services, and we will move quickly to make it a reality. As elsewhere in Government, we are maintaining our manifesto promises.
I know that my hon. Friend would like a national legal service to be established. Obviously, we want everyone to have access to legal advice, but our preferred approach of delivering services through contracts offers us the flexibility to purchase services in ways that best take account of local conditions. It may well be that when contracting takes place with a firm with high volumes of work—in Grimsby, say—it will be possible in some fields to buy services under a block contract with a unit price per case while in a market town, perhaps in rural Lincolnshire, where there is less volume, cases may have to be paid for on a different and more individual basis. Again, in some areas of legal practice—or in some local circumstances—it may be better to pay for a salaried service, or to buy the time of a supplier rather than a volume of cases. What is more, as the world changes and demand on legal aid and ways of meeting it also change, contracting will allow us to keep the delivery systems up to date. Our proposals will allow for a wide range of flexible services.
The proposals also allow us to refocus legal aid on the problems of the less well off—on the problems of those who need the law to help them to struggle out of social or economic exclusion. I want legal aid to be aimed at social welfare issues and matters of public interest. The diversion of most money claims to conditional fees will help, because we can then use the money that would have been used up in providing traditional legal aid for civil litigation to tackle more effectively issues such as housing, debt, employment, welfare benefits and immigration, and matters of broad public interest.
With legal aid delivered through contracts, we can decide how much to spend each year. For the first time, Ministers will be properly accountable to the House for how much they spend and on what services. The Government will be accountable for how much they spend on legal aid, and how much they spend on other public services such as health and education. As my hon. Friend said, at present legal aid is demand led—