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Legal aid cuts will save less than half government's forecast, study finds

Analysis by King's College London focusing on three areas of civil law says knock-on costs could be £139m a year

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• Owen Bowcott, legal affairs correspondent
• guardian.co.uk, Monday 9 January 2012 12.41 GMT
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The Ministry of Justice, led by Ken Clarke, says it aims to do away with 'compensation culture' by cutting legal aid. Photograph: Peter Macdiarmid/Getty Images

Savings made by reducing the availability of legal aid for civil cases will be significantly less than half of that predicted by the government, according to a study.

The financial analysis (pdf) by King's College London, commissioned by the Law Society of England and Wales, is published as the legal aid, sentencing and punishment of offenders bill goes into its committee stage in the House of Lords on Tuesday.

The government has talked about saving either £350m or £450m a year by reducing the types of cases for which claimants are eligible for legal aid and through cuts in fee rates. The legal aid budget runs at more than £2bn annually, of which £900m is spent on civil cases.

The study's main focus is the three broad areas of family law, social welfare law and clinical negligence, which are due to be removed from the scope of legal aid with the aim of saving almost £240m a year.

The report claims that many of the savings will be notional because withdrawing legal aid will have substantial cost implications for other government departments.

"Total knock-on costs across the three areas of law could be £139m per annum," the report says. "At this level of knock-on cost, the annual net saving to the public purse would be £100m, or 42% of the net saving predicted in the government's impact assessment for these areas of law. In clinical negligence the costs may outweigh the savings."

The Ministry of Justice has said it aims to do away with the "compensation culture" which, the government alleges, flourished under the last Labour government. It aims to preserve legal aid for those who need it most.

Areas that will no longer be eligible for legal aid include clinical negligence, debt, employment, education, housing, immigration, welfare and family disputes such as divorce. In some exceptions legal aid will be kept, particularly in cases involving domestic violence, child abuse, where there is an immediate risk to a claimant's home and for immigration detention hearings.

The report by Graham Cookson, of the college's department of management, compares the advent of legal aid in 1949 to the creation of the NHS and describes it as "one of the three pillars of the welfare state".

Breaking down the projected knock-on costs, he says: "Mediation is the single largest area with an estimated knock-on cost of £42m per annum. In family law, the government predicted an increase of 4,000-10,000 mediation cases per annum from a potential 'demand' of 210,000 clients no longer receiving family legal aid. [But] this research estimates a doubling in the numbers of mediation cases. Litigation costs are also predicted to increase by £45m per annum."

The report says increased usage of alternative advice services will cost other departments £53m a year. "For example, the government has announced that the £27m financial inclusion fund, which provides debt advice for 100,000 clients per annum, will continue for a further year despite plans to close the scheme this year."

Cookson concludes: "Based upon the assumptions and analysis outlined in this report, the net saving could be significantly less than half of the government's prediction. This undermines the government's economic justification for the changes, especially given the numerous costs that could not be estimated in this study. Given the largely negative response to the consultation exercise, the government should re-evaluate the justification for the legal aid scope changes."

Des Hudson, chief executive of the Law Society, which represents solicitors in England and Wales, said the report exposed fundamental flaws in the government's position.

"This study show that the economics of the argument look far more tenuous than any of us believed," Hudson said. "The government is making massive changes in terms of fairness and access to justice and now the economic advantages claimed are not there or are a shadow of their former selves.

"Other studies done on changes to legal aid in Australia show that money spent on legal aid saves more money if you look at the impact across all government spending. Our study shows that the government is looking to save £10m through changes in legal aid for clinical negligence cases whereas it will cost the courts and the NHS litigation authority £30m – three times as much. The arithmetic doesn't add up."

via guardian.co.uk