Legal Aid Review: study shows greater efficiency of larger firms with more unqualified staff

Lord Carter unveiled the research that will influence the outcome of his review of legal aid procurement this week ? including a new study that points to the greater efficiency of larger criminal law firms with high numbers of unqualified staff.

A study of the top-100 crime firms by Otterburn Legal Consulting reported that many are ?on the edge of profitability?, despite having effective systems and strong management.

It found that firms with more than 40 fee-earners had the lowest costs, while those earning ?reasonable profits? tended to have high levels of gearing with a small number of equity partners, higher levels of unqualified fee-earners, and an expectation of higher chargeable hours. The report noted that firms specialising in criminal work have lower overheads than mixed firms.

A separate survey by market research firm FreshMinds, which formed part of the Otterburn work, found that firms with less than five fee-earners actually had the lowest hourly cost, because of the very high number of chargeable hours achieved. It also noted that these small firms offer a high level of client service.

However, the report suggests that the small firm model would be ?hard to sustain?, as small practices tended to be the least profitable. It noted the increasing average age of practitioners in small firms, and the difficulty in attracting young staff who are deterred by poor pay, long hours and lack of security.

The research is likely to be used by Lord Carter to justify his call for greater consolidation in the criminal legal aid sector. In his interim report, published in February, he predicted that by 2009 there will be a ?smaller number of larger, more efficient? suppliers (see [2006] Gazette, 16 February, 1).

Rodney Warren, director of the Criminal Law Solicitors Association, said: ?Small firms achieve their profitability by working very hard, which they are personally motivated to do, and delivering a high-quality service. That quality is one of the jewels in the crown around which the new system should be built.?

He added: ?It may be that the solution is seen to embrace bigger firms, but we have to find a way that enables firms to become bigger, and that includes the capital costs of doing so? It should be underpinned by a payment process that gets away from the optimism that in a flat cash world, the train somehow won?t hit the buffers ? because it will.?

Legal Aid Practitioners Group director Richard Miller said: ?Otterburn indicates that the ideal structure for achieving the lowest cost base is to have larger firms with more staff and fewer partners. But criminal defence work is a service that has to be provided to local communities across the country, in many of which the work is not there in sufficient volume to support this model. Therefore, a system that requires firms to organise themselves in this way cannot produce an economically viable national criminal defence service.?

A Law Society spokesman said: ?This research confirms that legal aid practices are already amongst the most efficient of legal firms. Any new models of delivering legal aid must ensure there is sufficient diversity to meet all the needs of society.?

Lord Carter?s final report is expected in the next few weeks. It had originally been scheduled for late spring.

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