Tuesday 13 August 2013 by Kathleen Hall

Reforms to legal aid are at odds with - and could even imperil - the prime minister's ambition to break big businesses' stranglehold on government contracts, the Gazette can reveal.

Announcing 'nothing less than a wholesale change in attitude' David Cameron three years ago committed the government to increasing the proportion of public spending going to small and medium-sized enterprises (SMEs) to 25% by 2015. SMEs currently account for just under 20% of the government's £43.5bn annual spending on procurement.

However figures published this week reveal that the Ministry of Justice, which currently accounts for one-fifth of all government spending on SMEs, is heading in the opposite direction to government policy.

The ministry's spending with SMEs fell 3% in 2012/13 compared with the previous year, against an overall rise of 0.4% across Whitehall. The majority of the MoJ's £1.56bn direct spending with SMEs comes from legal aid contracts, which account for 31% of its total procurement budget.

In the Cabinet Office report Making Government More Accessible to SMEs: two years on, the MoJ says: 'The slight reduction in direct spend with SMEs in 2012/13 represents efficiencies that have been made in procurement expenditure during this financial year.'

The department said it is on track to increase spend with SMEs to 38% by 2015.

However a Law Society spokesperson said that proposals for price-competitive tendering will shrink SME spend further as contracts go to larger suppliers.

'Legal aid represents about a quarter of all MoJ expenditure, over 90% of it with SMEs. As a direct result of government policy, that expenditure is falling. It is hard to see how the ministry can reconcile this with its confident assertion that in future an even higher proportion of expenditure will be channelled to SMEs,' he said.

The MoJ said it would achieve its 38% target by advertising opportunities over £10,000 on Contracts Finder, the single advertising portal for government opportunities; publish a pipeline of forthcoming opportunities on the MoJ website; remove red tape on tenders and split large requirements into 'lots'.

'In addition we are about to commence a programme of targeted supplier events for our Rehabilitation Programme to ensure that SMEs are afforded maximum opportunities to participate,' it said.

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