LAWYERS have warned the Government that its plans to shake up the legal aid system will put 800 law firms out of business and threaten the whole scheme.

An independent report commissioned by the Law Society of England and Wales says that the scheme will virtually collapse in three years? time, leaving the most vulnerable in society without legal help.

The report, published yesterday and conducted by the analysts LECG, examines the economics of the legal aid reforms put forward this year by Lord Carter of Coles. It says that legal aid pay rates, which have been frozen for several years, are expected to take a cut and that the running costs of the ?2 billion-a-year scheme have risen by ?34 million to ?96.4 million since 2000.

Desmond Hudson, the chief executive of the society, said: ?That ?34 million increase in administration costs would fund 14,866 extra domestic violence cases.? Yet last year, the Legal Services Commission spent ?605,000 on stationery, he said. ?So if you can?t find a legal aid solicitor when your partner has assaulted you, at least you have the recompense of knowing the civil servants won?t go without their pens.?

Mr Hudson added: ?By 2010, don?t find yourself assaulted by a partner; don?t have matrimonial or domestic problems; don?t get in trouble with the police ? because it?s very likely that no one will be around to provide support.?

Lord Carter?s reforms envisage a new market-based model with firms on contracts and fixed fees replacing hourly rates. However, based on the figures, says the report, only large firms would survive, and then on the slenderest of profit margins. A firm of forty-seven lawyers, three of them partners, could achieve only a 5 per cent profit, leaving no room for investment or development.

The report accepts that the reforms will mean a radical reorganisation of law firms, but it says that about 63 per cent of all offices may be below the minimum contract size of 200 cases a year ? about 1,700 of the total of 2,700 offices. In terms of law firms themselves, this is the same as about 1,300 firms. To meet the target, the report predicts that ?a minimum of about 800 of these small firms would need to merge into larger firms?.

Mr Hudson said: ?This report shows that the Carter reforms can only succeed if there is more money on the table to make fee levels viable. Without reasonable and fair fee levels, many solicitors will be driven out of legal aid work or out of the law altogether. The most vulnerable people in society will end up paying the price.?

Andrew Holroyd, the vice-president of the Law Society, said that there had been an ?alarming reduction? in the number of law firms doing legal aid work. In 2001, some 3,500 offices provided criminal legal aid; in September 2005, the figure was 2,651. Offices providing civil legal aid work fell from 4,301 in March 2004 to 3,632, this March.

Mr Hudson said that most legal aid solicitors had not had a pay rise since 2001. ?We have long argued that we need a new legal aid system and that the current system is failing. We believe these proposals can be made to work if legal aid is put on a sustainable footing.?

The Department for Constitutional Affairs said that it would consider the report.

CASE AGAINST

• Vast majority of legal aid solicitors have had no pay rise since 2001
• Typical profits (or losses) range from 2 per cent to minus 6 per cent
• At best a 47-lawyer firm could achieve only a 5 per cent profit
• Administration costs of legal aid are up from ?62.4 million in 1999-2000 to ?96.4 million in 2004-05
• A survey of students has found that only 21 per cent will enter legal aid work ? although 60 per cent would like to