A new, independent economic analysis of the impact of the Carter proposals on criminal legal aid warns that more than 800 legal aid firms could be forced out of business ? double the number predicted by Lord Carter.
The LECG report cautions that after years of restricted rates and limited profitsthe supplier base is fragile. Criminal legal aid firms are at best marginally profitable. Typical profits, allowing for all costs, range from only 2% down to about -6%, a significant loss.
Commenting on the report, Desmond Hudson, Law Society Chief Executive, said:
?Solicitors go into legal aid work with a commitment to public service, but that commitment must not be exploited. 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.
?Solicitors inEnglandandWaleshave had their legal aid pay rates frozen for several years. They have achieved efficiencies and kept control of their coststo an admirable extent but this report illustrates the extreme fragility of this sector.
?The report proves what an unattractive prospect it can be to run a legal aid firm. Lord Carter?s own figures show that a firm of 47 fee earners with three equity partners could only achieve a 5% profit. It is not clear how those figures enable development, investment and reward at sufficient levels to provide a sustainable basis for a business.?
Andrew Holroyd, Law Society Vice President, will today tell delegates at a Citizens Advice conference inYorkthat the stakes are high for the Government:
?If the Government getsthe implementation of these proposals wrong there could be very few qualified advisers left in the legal aid system. If the Government is not careful, even more people will be unable to get legal aid advice on domestic violence, unfair dismissal and housing cases.
?The Law Society?s own surveys of legal aid practitioners on the Carter proposals reveal that our members have serious concerns about the fee rates proposed across criminal and civil legal aid work. It is already obvious that the rates proposed for civil legal aid work are set at lower levels than current remuneration.
?This report blows away the myth of hidden profitsfor legal aid firms and shows that the sector is dangerously fragile in economic terms. Many legal aid firms are making the thinnest of profitsor no profit at all. There has been an alarming reduction in the number of law firms doing legal aid work in recent years and there are few incentives for the legal aid lawyers of tomorrow.
?We will be pressing the government for increases in rates that allow viable businesses to develop and the entire sector to return to health. By introducing fixed fees now the Government is trying to achieve savings before firms can re-structure and make efficiency gains. The Government is proposing to push through many of these changes in the next three years. It is unrealistic to expect firms to be able to re-structure in that time scale.
?The Government?s pledge to provide a ten million pound transition fund to help firms adapt to the new environment is a step in the right direction but given the scale of the change much more support will be needed.?
Notes to editors
95% of civil legal aid practitioners responding to the Law Society?s on-line surveys believe that the introduction of fixed fees would mean the work is not viable. 88% said the pay rates proposed would make it less likely that they could afford to do civil legal aid work in the future. 436 people responded to the survey.
Criminal legal aid solicitors received their last pay increase in 2001. During the last five years, civil legal aid solicitors have received one increase in rates of pay of 2.5% in 2004.
Numbers of solicitors? offices providing criminal defence services:
3,500 offices provided criminal legal aid services in 2001. The number of solicitors? offices under contract at September 2005 was down to 2,651.
The number of solicitor offices with general civil contractsdecreased by 7.2% between March 2004 and March 2006, falling from 4,301 to 3,632.
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