WALES/ENGLAND – Legal aid cuts are false economy, says study

The report said legal aid cuts will have significant knock-on costs

Planned cuts to legal aid in private family work, social welfare law and clinical negligence will save less than half the sum predicted by the government, according to an independent economic study published today. The Law Society’s chief executive, Desmond Hudson, said the report’s findings ‘fatally undermine’ Ministry of Justice claims about savings to be achieved by measures in the Legal Aid, Sentencing and Punishment of Offenders bill, which resumes Lords scrutiny tomorrow.

In the report, Unintended Consequences: the costs of the government’s legal aid reforms, Dr Graham Cookson from King’s College London’s department of management, suggests that the legal aid cuts will have significant knock-on costs and are ‘unlikely to make a significant contribution to reducing the fiscal deficit’.

Cookson’s economic analysis examined the likely impact of the cuts in three areas – private family law, social welfare law and clinical negligence, which the government claims will save £239m a year. He found that these elements of the proposals could cause unintended extra costs of at least £139m, realising a net saving to the public purse of £100m, less than half (42%) of the government’s predicted figure.

Cookson added: ‘Numerous costs could not be estimated, and this figure is therefore likely to be a substantial underestimate of the true costs.’

He said: ‘At approximately 42% of the predicted savings, this level of saving would make an insignificant contribution to the total spending cuts of £81bn per year that the government seeks to implement by 2014/15. The report concludes: ‘This undermines the government’s economic justification for the changes, especially given the numerous costs that could not be estimated.’

It finds that removing legal aid for clinical negligence will cost the NHS £28.5m a year, almost three times more than the predicted £10.5m saving.

Knock-on expenses include the cost of the telephone triage service, the after-the-event premium for expert fees and reports, and the 10% damages premium paid in all successful cases, which will largely be borne by the NHS through the NHS Litigation Authority.

The report estimates knock-on costs of £100m per year for removing legal aid for private family law cases, set against a proposed budget saving of £170m, resulting in a saving of roughly 40% of the government’s forecast. Mediation will be the single largest area of expenditure, with a knock-on cost of £42m per year. Other costs include £2m towards the telephone gateway, £22m for the increased use of alternative advice services, £8m for exceptional funding of cases and £3m due to problems caused by stress for those who give up trying to solve legal problems.

The report suggests that the increase in the number of litigants in person will generate a knock-on cost of £273.50 per person, which will cost over £7m in private family law matters. Cuts to social welfare law, which the government expects to save £58m a year, will have knock-on costs amounting to £35.2m, generating a saving of 39% of those predicted by the government.

The MoJ’s own impact assessment identified a number of potential knock-on costs, including reduced social cohesion, increased criminality, reduced business and economic efficiency, and increased costs to other departments. But, as the King’s College report notes, the MoJ has identified neither their magnitude nor likelihood.

The report says that the ‘far-reaching’ unintended consequences of the cuts will in part be borne by the MoJ, principally through increased costs to the court service, costs of mediation and the implementation of the telephone gateway. Costs will also be faced by other government departments, led by the Department of Health.

Another key finding of the report was the lack of robust data on numerous elements of the civil justice system, for example on the costs and productivity of the family courts. It points to ‘significant gaps’ in the evidence base justifying the reforms.

The author calls on the government to estimate the impacts fully before implementing any reform, and to carry out an appraisal of knock-on costs before changes are enacted. The report adds: ‘Given the largely negative response to the consultation exercise, the government should re-evaluate the justification for the legal aid scope changes.’

The Law Society commissioned the report in June 2011 in response to the government’s failure to assess the costs to public spending of its proposals to withdraw legal aid from two thirds of the civil and family cases that currently qualify.

The report is being given to members of the House of Lords who resume their consideration of the Legal Aid Sentencing and Punishment of Offenders bill tomorrow.

Among other amendments, peers are expected to debate a delay to the legal aid reforms in the Bill until the government publishes an assessment of the wider costs they will cause for taxpayers.

Hudson said: ‘The MoJ has defended swingeing cuts to legal aid in civil cases, which will deny justice to thousands, on its need to contribute savings to the government’s deficit reduction programme. The Law Society accepts the need to achieve savings, but this report fatally undermines the MoJ’s savings claims, and shows they are being achieved at the expense of other parts of government.’

Hudson said: ‘This is kamikaze accounting and will do little to tackle the deficit while sacrificing access to justice.’

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