“At the heart of any review of the civil legal aid scheme should be the simple principle that legal aid should always pay enough to cover costs and, if possible, allow just a little profit to invest in its future.”

By Matthew Howgate FCMI, Organisation Development Consultant and Head of the LAPG Management & Leadership Hub

We need to be clearer about how much we all subsidise the legal aid scheme and the true cost that that has on people’s lives and livelihoods!

This year marks 15 years since I left the Legal Services Commission and set up my consultancy practice. A few weeks ago I was scrolling through Twitter when I came across some figures, produced by LAPG, which show again the woeful inadequacy of the payment rates for legal aid. It made me reflect on my experiences as a consultant, often engaged by organisations to help them maximise legal aid income (or survive despite that income).

Across those 15 years, I haven’t worked with a single non-profit advice agency (CAB, Law Centre or similar) that hasn’t had to subsidise its legal aid work from other funding. In NfP parlance, legal aid does not offer full costs recovery. Put bluntly, the income received cannot and does not cover the costs of providing he work. In recent years I have typically found that the income from Legal Help covers less than half the cost of actually doing the work.

Come to think of it, across those 15 years I have rarely found any “for profit” (don’t laugh!) law firms that actually get legal aid to fully cover costs (though to be fair some don’t realise because they don’t apply a full costs recovery approach). Where legal aid does cover costs, it is generally because the firm subsidises inadequate legal aid rates with market rate costs recovered from opponents.

Across the last 23 years, both as a consultant and as a senior lawyer at the LSC, I’ve often heard senior legal aid staff and policy makers say that to make legal aid pay you have to have the right balance of Legal Help, Certificated, and Inter Partes costs. God knows I’ve said it enough myself in training and in consultancy reports. That recovery of market rates costs is spoken about as if it’s part of the legal aid scheme – essentially the bit that makes it financially viable…

Let’s think about what we’re saying here. For a non-profit advice charity to do legal aid work it must rely on grant funding or other funding to meet costs associated with delivering that legal aid work. In effect, those charities are having to subsidise the legal aid scheme from monies that would otherwise be spent on helping other people in hardship.

In private practice the reality is that many if not most firms are having to take profit (from “profit costs” recovered inter partes) and use some or all of that money to subsidise the inadequate legal aid rates. Some prop up their legal aid teams with income received through non-legal aid work. This, in short, equates to a tax on legal aid firms for the benefit of providing legal aid.

It’s worse than that though isn’t it…

The legal aid scheme itself is hugely bureaucratic and feels designed by people with little understanding of the chaotic nature of clients’ lives or record-keeping or of the pressures on charities and small businesses. Contractual and regulatory limitations on what can be claimed along with the time it takes dealing with the LAA mean that huge amounts of work associated with running a legal aid contract and providing legally aided work are not remunerated at all. Contract manager visits, reconciliations, file review, audits, self-audits, peer reviews, appeals, dealing with LAA mistakes – all things that legal aid providers have to endure with no remuneration whatsoever. Worse, the LAA often challenge the costs incurred and time taken helping the most vulnerable clients but the costs of appealing their decisions are greater than any benefit that appeal with achieve, so providers just let it slide – again and again.

This year I am working with several charities that are aiming to tender for legal aid contracts for the first time. In order to be awarded a contract they will all have to pay to obtain a relevant quality standard (LEXCEL or the SQM) and may have to ensure that they employ, from the 10th May (nearly 4 months before the contract start date), a full-time member of staff who meets the Supervisor Standards – not that the current IFA is clear on this issue. Some will have to open their offices for longer than they currently do and pay staff to be available on reception. All will have to implement new systems and processes, and most will have to buy full case management systems. All of this costs money which, in my experience, is rarely recoverable during the life of the legal aid contract. Remember, that the supervisor or caseworker’s full-time salary has to be paid regardless of whether they yet have any legal aid cases to work on or whether any legal aid payments have been received.

If they are lucky, they may start seeing some income from legal aid 3-6 months after the contract start date. It goes without saying that that income won’t cover the costs of the work it is supposed to remunerate. It can take up to 2 years before a new legal aid contract starts to see what you might consider “business as usual” reliable monthly income. Until then all of the associated costs will have had to be covered from other sources of income or lending.

Right now, some of my clients are fundraising for seed funding to get their legal aid contracts off the ground. This means that trusts or foundations are being asked to underpin the costs of setting up a legal aid contract which, once set up, will then always have to be subsidised through other funding. In private practice they don’t have access to grant funding, so those seed costs are met by owners investing in their businesses, rarely to see any real financial benefit from doing so.

When I left the LSC back in 2008 my accidental consultancy career began because I was approached by people who thought that my inside knowledge might be useful in helping their firms or organisations maximise legal aid income. For years I delivered training, sure in the conviction that if you do the work right and observe the contract rules you could make legal aid pay. I don’t know when I stopped believing or saying that but for the last several years I’ve been telling clients that legal aid rarely if ever covers costs but is a helpful part of a wider income / funding portfolio, before whittering on about the benefits of costs protection… “Useful as part of a wider funding portfolio”… what utter nonsense is that when referencing the State funding of a critical service.

The civil legal aid scheme is broken. I’m not sure it ever really worked without practitioners being willing to top-up inadequate legal aid rates with inter partes costs and a great deal of unbillable time. It has certainly not worked for non-profit agencies since they were forced onto solicitor contracts in 2007 and the entire scheme only continues to operate because it is propped up by the generosity of legal aid lawyers, law firm owners and the trusts and foundations that support the advice sector.

Don’t even get me started on the inadequacy of fixed fees set in 2006 and then impacted by the 2013 LASPO scope changes. Best I also avoid discussion about how practitioners have to work to a legal aid contract that is built around the kind of practice I started my career in back in 1988 (an office above Argos in the High Street) rather than some of the leaner, agile digital practices I work with today.

I worried about whether to write this blog post because I am conscious that this entire edifice is built on a huge secret that we all keep lest funders stop funding or the LAA start digging. But unless we are all honest about exactly what it costs to subsidise the legal aid scheme, we can’t hope to persuade Governments to fund it properly.

And when I say cost, I don’t just mean in monetary terms. There are human costs too. Charity service users who don’t get help because the funding that might have helped them is instead propping up legal aid. Staff struggling to make ends meet because the money that could have been used to increase their salaries is being used to prop up legal aid. Lawyers close to burn out because they work 50 – 60 hour weeks just to generate enough income to keep their practices going – because they are having to subsidise the costs of doing legal aid work. Practices that can’t grow or invest in technology or change and innovation. People so ground down by the relentlessness of it all that they walk away from careers that they spent years building. Right now, the entire sector is facing a recruitment crisis like none we’ve seen before.

So, let’s start being honest about how much we subsidise the legal aid scheme. Let’s be clear that we are not just making it work but that it is only working because we are subsidising it in one way or another. Without our good-will, the scheme will completely collapse and many of us have very little left to give.

And if the LAA and this Government doesn’t care then let’s at least be honest with ourselves so that we can talk with authority and power to the next Government.

So, what is the point of this little blog post? It’s simple really – at the heart of any review of the civil legal aid scheme should be the simple principle that legal aid should always pay enough to cover costs and, if possible, allow just a little profit to invest in its future.

Matt Howgate FCMI
Head of the LAPG Management & Leadership Hub
Organisation Development Consultant