More than a quarter of firms expect to walk away from legal aid work in the next five years, a report slamming the Legal Services Commission?s poor administration has revealed.

The report by public spending watchdog the National Audit Office (NAO) showed that one in six firms made no profit from publicly funded criminal defence work, and 14% made only 1-5% profit.

NAO head Amyas Morse said the LSC must make it a ?priority? to ensure that ?it is paying a fair price for legal aid services that both sustains a competitive supplier base and provides value for money?.

In October the NAO qualified the LSC?s accounts for the legal aid fund for 2008/09 because it found that the commission had overpaid solicitors on criminal and civil cases by an estimated £25m. Legal aid minister Lord Bach has asked the LSC to implement an action plan to recover the overpayments from solicitors.

A survey of 369 firms published in the report revealed that only half expected to be doing criminal legal aid in the next five years, with 28% saying they were unlikely to be doing so due to its unprofitability, the prospect of tendering or retirement.

Law Society legal aid manager Richard Miller said: ?We are deeply concerned at the catastrophic picture this paints of the economically precarious position of the majority of the solicitors providing legal aid in criminal defence work.

?This report goes a long way in dispelling the belief that legal aid lawyers are profiteering from the system. Many are not even earning any income from the work they do. This is a picture of a supplier base on the point of crumbling into insolvency.?

LSC chief executive Carolyn Regan said work was already under way to implement the NAO?s proposals, which would be discussed with the Committee of Public Accounts next week.