Civil Justice and Legal Aid

HL Deb 09 December 1997 vol 584 cc41-117

4.47 p.m.

The Lord Chancellor rose to move, That this House take note of Her Majesty's Government's proposals for the reform of civil justice and legal aid.

The noble and learned Lord said: My Lords, this debate concerns two inter-related issues: the Government's plans for modernising the civil justice system and taking control of the cost of civil legal aid. They are often seen separately but they are linked.

Our civil justice reforms are based closely on the two historic reports of the noble and learned Lord, Lord Woolf. The Government—in fact, the whole justice system—is indebted to him for his perceptive analysis of the problems of the civil justice system, and for the practical solutions he put forward. Our proposals for both civil justice and for taking control of legal aid have been shaped by the excellent report prepared by Sir Peter Middleton and published in October. The Government made a manifesto pledge to review civil justice and legal aid together, as two halves of a single package. The Middleton review fulfilled that pledge.

I announced the Government's initial response at the solicitors' annual conference in Cardiff on 18th October. Today I explain how our proposals have developed over the past two months; and the steps we are taking to consult widely on how best to tackle the problems facing us, not least on legal aid.

The present legal aid scheme is costing more and delivering less. Eligibility has steadily fallen because costs have risen. Over the past seven years, the cost of civil and family legal aid has tripled to £671 million. The average cost for proceedings that received full legal aid in 1990-91 was £1,442. If that cost had grown in line with inflation, that would represent £1,760 at today's prices. The actual average cost was £2,684. That represents an increase of 53 per cent. above inflation, or an average increase of 8 per cent. per year. While civil and family legal aid continued to rise last year, the number of acts of assistance that it funded fell by 39,000. That cannot be allowed to continue. We are paying more and getting less from the lawyers.

Let me refute the assertion that our proposals for reform are Treasury-driven in order to cut the legal aid budget. This is wrong. We do not intend either to increase or reduce the cost of legal aid in real terms. We plan to spend not one penny less than the previous government planned to do. But we also plan to take control of the legal aid budget. We plan to do that by buying services from lawyers through the mechanism of block contracts. Lawyers will be asked to contract for work at fixed prices. Our intention is that block contracting should be used to take control of both civil legal aid and criminal legal aid.

I have mentioned previously the sums that some lawyers receive from the public purse. Lawyers in the private sector are free to charge what the market will bear. But I make no apology for saying again that the level of fees being charged to the public purse is too high. I intend to bring this to an end. In 1996–97, 35 barristers received between £270,000 and £575,000 for criminal work. In 1996–97, 20 barristers received between £203,000 and £41 1,000 for civil work and that apart from any income they earned from privately paying clients.

A High Court judge earns £112,011. A Lord Justice of Appeal earns £124,511. Many hospital consultants earn £56,000 to £70,000 a year. Judges and hospital consultants work hard over long hours. Judges and hospital consultants have highly responsible jobs. The lives of many people depend on their professionalism. Yet almost 1,000 barristers earned from legal aid last year more than hospital consultants are paid.

It is against that background that our reforms need to be seen. I want to see legal aid reformed to benefit the people who most need help. I will use the same amount of money available for legal aid but, using a combination of better planning and block contracting, will ensure that it will be spent providing the right kind of help at the right time and at the right price to the most needy. Block contracts will be overlapping to ensure constant availability. This way we can both control and plan how much we spend, but also make sure that the money does not run out before the end of the year.

Regional legal services committees will involve local people in drawing up plans which will match services to the needs of a particular area and determine how they can best be delivered. This chimes with the Government's wider objective of returning power to the community.

Using these locally determined plans, the Legal Aid Board will be able to let contracts for services that meet local needs and national priorities in the best way. In particular, that will include contracts for advice work. Advisers who work in areas which are not traditionally of interest to lawyers—for example, housing—will be contracted to provide services.

Hand-in-hand with block contracting, the Government are looking again at the mechanisms available to make sure that taxpayers' money is spent on the cases which are the most deserving. Cutting eligibility, as the previous government did, is a crude and unfair instrument of control. This Government have turned their attention to the operation of the merits test. I want to see it tightened so that only cases with a high probability of success are granted legal aid. I will be issuing a consultation paper next year setting out these proposals in more detail.

Merits bring me to the connected issue of how to identify and deal with public interest cases. These will include cases under the Human Rights Bill when it becomes law. Many of the finest solicitors and barristers in this country work on behalf of the disadvantaged in our society. They represent the poorest and the disempowered. Their commitment is in the best traditions of public service. They provide access to the law for those who are often worst served by the legal system. These are lawyers who do not become rich. They act for refugees, asylum seekers, prisoners, mental patients and victims of abuse and assault. When public authorities or public servants make mistakes or abuse their power, it is regularly the most vulnerable in our communities who are at the receiving end. It is this phalanx of lawyers who take up the law to fight for redress for them.

Only too recently our criminal legal system was shaken by acknowledged miscarriages of justice. If committed lawyers had not spent long unrewarded hours upon those cases, terrible wrongs would never have been put right.

To all of these lawyers, I say that their commitment to their clients will be matched by my commitment to them. In seeking reform of the legal aid system, I intend to focus it sharply on cases involving the social welfare of disadvantaged citizens and cases that raise issues of wider public interest. Within that overall pattern, cases where an individual citizen is challenging an institution of the state will command a high priority. This could include cases where the allegation is of police malpractice. I am determined to ensure that people with serious claims of this kind will be able to obtain the legal help they need under the reforms I am introducing.

I see considerable force in the argument that funding these cases might be justified at a lower threshold of merit than is appropriate for the general run of cases. One of the strengths of our proposals is that the new merits test will be flexible. It will be possible to use different criteria and set the hurdles at different heights to reflect the priority and importance of different types of cases. But a number of fundamental issues are still to be resolved. Is there a category of "public interest cases" that would be better handled by a separate fund rather than within the main legal aid scheme? If so, how precisely are we to define public interest cases? In either event, what criteria should individual cases have to satisfy in order to receive funding? I intend to consult on these issues in the New Year.

I have been talking so far about legal aid and people turning to legal aid in order to secure advice and representation. Legal aid is restricted to the very poor. But it is not the only means of paying for advice. The Government are proposing, subject to consultation, to extend the availability of "no-win, no-fee", or conditional fee agreements, so that the vast majority of people in this country can afford to have real access to justice. The vast majority are those who are not poor enough to have full legal aid, nor rich enough not to have to care how much litigation will cost. The Government will be issuing a formal consultation paper in the New Year setting out their proposals in detail. But we are already engaged in discussions with the professions and others.

I know that some of your Lordships feel very deeply that conditional fee agreements should not have been introduced to this country. I know that some believe that conditional fee agreements put the integrity of lawyers, and their duty to the court, under stress by giving them a direct interest in the outcome of the case. But I have to say that that does not appear to have been borne out since conditional fees became lawful in 1995. The ethics of the legal profession are strong and are strongly enforced. In the recent research, 97 per cent. of agreements included a voluntary 25 per cent. cap on the proportion of damages that could be taken by the success fee. The average mark up for success was 43 per cent. This is a good demonstration of the ability of lawyers to ensure that the needs of the client are not simply suborned to maximising profit, and that they are able to balance duty to the client with the needs of their firm to show profits overall.

The Government are set to begin the task of reforming legal aid by refocusing expenditure towards those areas where publicly-funded legal services are the only option available to the poor. As part of this, we propose to remove from the scope of civil legal aid most cases involving claims for money or damages which we believe can, in future, be funded through conditional fee agreements.

Our critics object that poor people will not be able'to use conditional fee agreements because they will not be able to pay for the preliminary investigations which are needed to determine the strength of their cases; nor, it is said, will they be able to pay the insurance premiums needed to back the conditional fee agreement.

One of the objections that I have heard from lawyers is that they expect insurance premiums to be high. Fortunately, this is not the message that I am getting from the insurance industry. I have been much encouraged in the discussions that I and my officials have had with them. I can tell your Lordships that the scare stories of uniformly high premiums are no more than that. Of course, in some cases premiums will be high to reflect the risk being underwritten. But, equally, premiums are being offered at much lower figures than in the scare stories. Rather than the headline-grabbing £15,000 for medical negligence cases often quoted, I am told that cover has more often been provided at much lower sums—in the region of £3,000. Provided only really strong cases go forward, it is not impossible for a well-run solicitors' firm to run the risk of losing money of that order in the few cases where costs are not recovered from the other side—especially given the costs they will recover, and their entitlement to a success fee in cases that they win.

The insurance industry is competitive. It is already developing the products that will be needed, including products where there would be no up-front costs and where lawyers could protect themselves from an unlucky run of losing cases by "stop-loss" insurance.

There is a wide range of products already available. These fall into the two broad categories of "before-the-event" policies and "after-the-event" policies. Before-the-event policies are traditional legal expenses insurance policies which people buy in conjunction with their motor or household contents insurance. They have been available for over 20 years. Seventeen million people are already covered by one of them. They usually cost between £4 and £20 a year.

There are also after-the-event products available which will cover costs at reasonable premiums. The policies can apply whether there is a conditional fee arrangement in place or not. One product which was quoted to me covered both sides' costs to a limit of £6,000 for a premium of £362 without there even being a conditional fee agreement. The innovative capacity of the industry to match insurance cover to need should not be doubted. The industry has told me that it expects to move sufficiently quickly to develop and launch new products so as to have them available by the time that the changes that I propose to conditional fees and legal aid are made.

I ask your Lordships to contrast that with the gloom and doom of the lawyers' professional bodies when faced with changes which they fear threaten their traditional vested interests.

I do, however, recognise that affordable insurance is only one part of the picture. It is equally important to look at other ways of funding investigative costs and premiums. It could be that in certain types of case—and medical negligence is often the special case cited—the risks and costs cannot be borne by the lawyers. In these cases alternative arrangements may be necessary. I will therefore be talking to banks and financial institutions to see what arrangements can be made. Here again I can tell your Lordships that the insurance industry is already engaged on this task of producing products that marry cover for the risk with funding to run the case as it proceeds.

Some have suggested that I should consider establishing a contingency legal aid fund. The Bar—the main proponents of that—has to work-up its proposals into final form to put to me. My door remains open; but, as I said in my speech in Cardiff, I have doubts how a contingency legal aid fund could operate alongside conditional fees. It seems to me self-evident that the cases with the highest chances of success would inevitably be funded by conditional fee agreements, leaving riskier cases to be paid for from the fund. That would inevitably mean that the fees charged on winning cases would be much higher, or the taxpayer would have to continue to provide money to keep the fund solvent. Also, a contingency legal aid fund would mean that lawyers bear no part of the risks of litigation. It is that which my reforms seek to change. But I say this: if the profession can meet my concerns in these areas, I am more than willing to consider them carefully. I have the opposite of a closed mind on this subject.

It has been said that our intention to change the scope of legal aid by April 1998 is too rushed. I do not agree. I am deeply concerned to begin to meet the areas of need which are not presently covered by legal aid as quickly as possible. I am talking about real people with real problems—and they need help now, not in a year or 18 months or longer. But I cannot provide them with help until I am able to bring the legal aid budget under proper control. I ask your Lordships not to forget that the legal aid budget is rising more quickly than any other area of public expenditure. I make no apology therefore for seeking to move quickly to begin the reforms which will re-focus, not cut, legal aid.

My officials are working hard to ensure the timetable can be met. But I also want to engage in a constructive dialogue along the way with people who understand the work of the civil justice system and the needs of consumers—who are in particular the poor and vulnerable. My officials are currently discussing the issues and problems with a range of professional bodies, consumer groups and other interested groups. I am determined to go wider than any statutory obligation to consult. The Government welcome constructive comment on the whole sweep of our proposals.

Early in the New Year, I shall be issuing consultation papers, which will be informed by the discussions we are having, on conditional fees; the changes to scope of civil legal aid; and public interest cases. These consultation papers will be made widely available. I hope they will encourage a more informed debate. All this moves hand in hand with our proposals to create three routes to civil justice. The first will be an expanded small claims procedure with a £5,000 upper limit. But the small claims procedure, though very successful, is not suitable for every case.

The Government have therefore decided to adopt the proposals of the noble and learned Lord, Lord Woolf, for more "hands on" management of cases by judges, through the creation of the second and third routes, a fast track and a multi track. Power will be transferred from lawyers to judges. Judges will allocate cases to the appropriate track. The courts will have greater control over the progress, cost and length of cases as they move to trial. Both the fast track and the multi track will be up and running by April 1999.

We have been, and will continue, consulting widely on the detail of our proposed civil justice reforms. We consulted on proposed procedures for the fast track and the multi track in the summer. I shall shortly be making policy decisions on the outcome. Consultation papers on clinical negligence procedures, multi-party situations, the other specialist jurisdictions and on our proposals to increase the small claims and fast track upper limit have also been issued. Forthcoming consultation will cover our proposals for a fixed costs regime which we intend should accompany tough judicial case management in the fast track.

Finally, I know that the court fee structure is of concern to many of your Lordships. Some may go so far as to suggest that I should not charge court fees at all. I have said before in your Lordships' House that, while I accept that citizens have what may be called a constitutional right to a court system, I do not accept that they have a right to a free court system. I reiterate that what the state provides free, or at a charge, is a matter of policy for government. I do not believe that any constitutional issue arises in government deciding that, in principle, those who use the civil courts are required to meet the costs of doing so.

However, I am on record as accepting that people should not be excluded from the court system because the fees they are asked to pay are unaffordable. I have already taken steps to help the many who cannot afford the existing fees because of their low incomes. In response to concerns raised in this House, in particular by the noble Lord, Lord Mishcon—whose lifetime's service to the objectives of a just legal system is so well recognised—I have extended exemptions to those in receipt of income-related job seeker's allowance, or family credit, or disability working allowance. This change came into effect on 1st December. Those in receipt of income support have been, and continue to be, exempt from all court fees. The civil fee structure, however, is irrational and hopelessly out-of-date. It needs to be reformed. I will therefore be issuing another consultation paper inviting discussion on the principles which should underlie a new fee structure.

All those reforms, combined with extending conditional fees and taking control of legal aid, will build a civil justice system in which there is equality between the very poor, the very rich and the vast majority in the middle.

Our citizens need and deserve a modern, tailored legal advice service to help them gain access to a reformed civil justice system. In the short term, the work of regional legal services committees in providing better planning mechanisms, together with the use of block contracting by the Legal Aid Board, will enable local people to be involved in making decisions about the kind of advice services they need and how those services should be delivered.

In the longer term, the Government will fulfil another manifesto pledge by creating a community legal service. The service could provide telephone helplines, education in rights and obligations; legal advice on the internet; referrals to alternative dispute resolution; legal representation in tribunals; even interactive kiosks in every high street or supermarket dispensing basic information about the law and the legal system. Those are some of our ideas. There is a project team at work in my department, which is looking forward to learning the ideas of others.

Our reforms will retain a legally-aided safety net for the poor while, at the same time, creating real opportunities for everyone to have access to justice—for the vast majority of the population, not just the very rich and the very poor. This access will be to a civil justice system that is cheaper, faster, simpler and more certain than the one we have today. I am convinced that everyone in due course will benefit from these reforms. I commend them to your Lordships. I beg to move.

Moved, That this House take note of Her Majesty's Government's proposals for the reform of civil justice and legal aid.—(The Lord Chancellor.)

5.11 p.m.

Lord Campbell of Alloway

My Lords, it is a privilege to follow the noble and learned Lord the Lord Chancellor, not only to be able to disagree respectfully with the substance of his speech on the proposed reform of legal aid, but also to scotch the rumour that, during the restoration of his residence, someone found a funny-shaped hat stuffed up a chimney covered with ages of soot. I have it on the authority of Father Christmas that this is just one of those silly jokes. According to today's edition of The Times, a fairy godmother (Mistress Hoon) with a wave of a magic wand, has ordained that the Government shall listen to what is said on all sides of your Lordships' House in this debate; but your Lordships may be given to wonder, having heard the tone and content of the speech of the noble and learned Lord, whether such be the case.

The proposals for reform of civil justice are indeed very much welcomed in principle. No doubt other noble Lords will deal with that aspect of reform. As to the proposed reform of legal aid, the noble and learned Lord's figures speak for themselves. It is common ground that steps can and must be taken to reduce the cost of legal aid to the Exchequer. But the means proposed by the noble and learned Lord—for example, the withdrawal of legal aid from all money and damage claims and the extension of conditional fees to all civil, non-family cases—will dismantle a vital social service and inhibit access to civil justice under those proposed reforms. Your Lordships may well think that a major provision of general public importance such as this ought to be introduced by primary legislation, not by secondary legislation on some ex cathedra pronouncement of the noble and learned Lord.

On the chequer board of government fiscal policy, where the end game is to avoid increase in income tax by reducing the cost, range and quality of a variety of services funded by the Exchequer, this is but one move. Other moves, such as raising council tax, withdrawal of tax concessions, and so on, are irrelevant save to set the perspective. This is a very special and distinct area where the public has hitherto enjoyed, and is entitled to continue to enjoy, the highest professional standards of conduct and the highest quality of professional service; and, indeed, freedom of access to our civil system of justice.

The question is whether those legitimate expectations can be fulfilled either by the extension of conditional fees, or by the legal aid regime as it is proposed to be implemented. Assuredly, extensions of "conditional fees" afford no viable or acceptable substitute for the safety-net provision of legal aid.

The "merit test" on grant of legal aid could, if too stringent, undermine its functions in the future: if too lax, as at present, it could destabilise the financial structure of the system; as, indeed, has been the case. What is needed is the urgent introduction of an effective system of control. For where legal aid would remain available, the Government propose to apply a 75 per cent. assurance of the probability of success. That would remove almost all difficult and complex cases, but nonetheless deserving cases. Assuredly there must be a measure of flexibility.

For many years, and rightly so, the Law Society has pressed for improvement to the operation of the merits test for the grant of legal aid, and for fundamental revision of the guidelines. All too often has legal aid been granted on the basis of counsel's opinion written upon insufficient, erroneous and incomplete instructions, without seeking further instructions on the merits of the case. At times the point of law is only arguable as an open question on the ground that it has not been raised before, although the prospects of success are indeed slender.

As to the merit test, surely it should be the same as when advising a non-legally-aided client: that there should be a substantial prospect of success which some of us put at the order of 60:40, and that account must be taken of the probable costs of litigation (win or lose) of which some estimate is given to the client, as well as the warning of the inherent incertitude of all litigation. It is rare, but it happens, that a client may say, "I have come to you to fight my case at all costs, which I can afford. Will you take it on?" But that has nothing to do with the merits test. It has nothing to do with the legal aid situation.

There is no doubt that the representations of the Law Society are entirely well founded and that there should be a complete overhaul not only of the merits test but of the current regime as to the grant and continuance of legal aid. For example, those who maintain an affluent lifestyle in apparent luxury having disposed of their assets to family, friends or—dare one say it these days?—some trust, thus having little or no income, should have no entitlement to legal aid. The margins of expenditure on any one case should be limited. Some £600,000 spent on one civil case which failed would hardly have been acceptable even if it had succeeded.

All welfare provision is open to exploitation: housing benefit, social security benefit and the common agricultural policy with its set-asides, fictitious vineyards and fanciful olive groves. Legal aid is no exception to any other aspect of welfare, but why not introduce a new, stringent regime of control of legal aid? Why dismember it in favour of a no win, no fee system which can only be workable if insurance is available to provide protection against paying the other side's costs if the case is lost? It is not understood how those on low incomes, eligible for legal aid, will be able to afford the cost of such insurance. It is not understood how they may obtain access to justice. Who will pay? I think the noble and learned Lord mentioned the figure of £3,000. Who will pay that £3,000? My information is that it is much more than that. The whole question of insurance as explained by the noble and learned Lord is in serious dispute. I refer to the alternative arrangements with banks and so forth. Those are nebulous suggestions, but who will pay? Will the solicitor have to underwrite this? Someone has to underwrite it. If the banks are to underwrite it, where is the security? This is all extremely nebulous and unsatisfactory.

Any lawyer who takes on a case on a no win, no fee basis will have to satisfy himself that the damage claim is sufficiently substantial to cover his usual fees with a contract mark up. In order to satisfy himself on that he will have to take proofs of witnesses, obtain documents and very often obtain extra reports which will have to be paid for on demand. It will be up to the lawyer to decide whether he takes on the case on a 50:50 basis; a 60:40 assessment; or a 75:25 prospect of success. However, few would operate very much under 75:25. There is no reason, no compunction and no obligation why they should do so. If the case is taken up, the litigant never receives the true measure of compensation. There is always the temptation to advise settlement at a substantial discount to safeguard the payment of fees.

I apologise for the length of my speech. In conclusion, the steps which should be taken are steps to reduce the cost of legal aid to the Exchequer. They are steps which would introduce a new stringent control to avoid exploitation of a system which in essence is a valuable system in both civil and criminal matters. There is no time for me to deal with the block contracts proposal. I must leave that to other noble Lords. I find it unsatisfactory and abhorrent. The proposed reforms are neither necessary to implement government fiscal policy nor are they well conceived. Litigants whose financial means would have otherwise entitled them to apply for legal aid will not get a fair deal. That is a matter of concern to noble Lords irrespective of where they choose to sit in your Lordships' House.

5.26 p.m.

Lord Lester of Herne Hill

My Lords, I greatly welcome the readiness of the noble and learned Lord the Lord Chancellor to implement the radical recommendations of the noble and learned Lord, Lord Woolf, to reform the civil justice system. I hope that he will be able to provide the necessary resources to make them work in practice. I respectfully join issue with him on one matter of principle, as I did with his predecessor, the noble and learned Lord, Lord Mackay of Clashfern, namely, the notion that the costs of the civil courts should be paid by the users of the civil courts rather than by the general body of taxpayers. I make an exception for commercial users of the commercial court. However, I shall not elaborate on my objection to that principle this evening. There is no time and it goes beyond the debate. It raises a matter of political philosophy which is one's view of the role of the state and the role of public taxation.

I shall confine my remarks to the much more controversial proposals made in the powerful speech of the noble and learned Lord the Lord Chancellor in relation to the public funding of legal services, in particular cutting legal aid for cases where money or damages are claimed and replacing legal aid with conditional fee agreements. I begin by observing that in his keynote address to the Bar annual conference in 1996, when he was shadow Lord Chancellor, the noble and learned Lord, Lord Irvine of Lairg, said that, supporters of legal aid must never cease to emphasise that it is a highly successful public social service. In civil cases that reached judgments in 1995–96, judgments were in favour of the assisted person in 81% of cases. The proportion of cases where there was either a settlement or a judgment in favour was 91%.". I hope that the noble and learned Lord the Lord Chancellor remains of the view that, in his words, legal aid, is a highly successful public social service", even though I did not hear much in his speech referring to the high success of the system.

As I shall try to explain, I agree with most of the long-term aims of the noble and learned Lord the Lord Chancellor, but I do not agree with the means that he has chosen at this stage to implement them. The fundamental question that these proposals raise is, why should public funding of legal services be a priority? I agree with the answer given by the Legal Action Group's admirable 1992 study, A Strategy for Justice. It stated: Legal services provide an important counterbalance to the evident inequalities in society, thereby helping to secure equal access to justice for all citizens". The ultimate aim should surely be, in LAG's words, that, anyone with a legal problem has equal access to its just conclusion so that disputes are determined by the intrinsic merits of the arguments of either party, not by inequalities of wealth or power. To achieve that, legal aid policy alone provides too narrow a focus. It is necessary to consider a more comprehensive range of policies relating to the totality of public funded legal services". That means making public funds available for a community legal service that is able to give more attention to public education, information, advice and representation in social welfare law cases—an important manifesto pledge made by New Labour that has now been relegated to a longer-term goal.

I am all in favour—I agree with the noble and learned Lord the Lord Chancellor—of strictly controlling the burgeoning cost of civil and criminal legal aid, ensuring real value for money, and preventing the undoubted misuse of public funds by some members of the legal profession, whether they are fat cats or leaner members of the species. I am also entirely in favour of preventing lawyers from overcharging for their services where the market place fails to do so because market forces are not working properly. But I cannot support changes made in the name of middle Britain that are likely to be detrimental to the interests of the poor.

Unlike some members of my profession, I have no rooted hostility to the existence of conditional fee agreements in appropriate cases, and subject to effective safeguards. Indeed, I persuaded the then Attorney-General, Sir Patrick Mayhew, to extend them to human rights cases in Strasbourg. But I am troubled by their ethical dangers—the point was not referred to by the Lord Chancellor—for members of an already unpopular legal profession. I find it difficult to understand how the extension of conditional fee agreements will improve the public standing of lawyers whose clients will lose a substantial percentage of their damages to their lawyers, accused, fairly or unfairly, of being shysters.

Nor do I understand how replacing legal aid with conditional fee agreements will in many cases benefit the poor and vulnerable unable to find solicitors to act for them, unable to afford the cost of insurance, and unable properly to assess whether or not their solicitors are accurately assessing their prospects of success.

The Vice-Chancellor, Sir Richard Scott, pointed out in an article in the Guardian on 28th October that there are formidable practical problems about the wholesale extension of conditional fee agreements, and the need to ensure that deserving cases do not fall into a black hole where neither conditional fee agreement nor legal aid is available.

Those problems also apply to middle Britain. To give the example cited by the Vice-Chancellor, first, conditional fee agreements are unsuitable for cases in which substantial costs need to be incurred before it is clear whether or not there is a viable claim—for example, where expert evidence is needed for an opinion on liability to be formed in a medical negligence claim. Secondly, they do not cater for cases in which a successful plaintiff's damages or costs are unlikely to be paid by the proposed defendant. Thirdly, such agreements depend on the loser paying the winner's costs and enough damages for the lawyer to collect a success fee. But there are many cases in which the main purposes of the action are not to claim damages but to obtain, for example, an injunction. Fourthly, conditional fee agreements will not work for defendants. Fifthly, as Sir Richard pointed out, since conditional fee agreements need to be backed by insurance protecting against liability to pay the opponent's litigation costs if the proposed action should fail, access to the civil courts will be possible only for those who can afford to pay the premiums.

Access to justice will effectively be determined by the judgment of the solicitor, whether he or she is willing to take on a high risk case, the availability of insurance, and the ability of the individual to pay the insurance premium and other disbursements. In practice, that will mean that those currently eligible for legal aid, the poorest and the most vulnerable, will have no effective access to justice. The Government have recognised rightly that effective access to criminal justice is a basic human right. The same applies to effective access to civil justice. The right of access to civil justice is just as effectively guaranteed by Article 6 of the convention as is the right of access to criminal justice.

I do not agree also with the Lord Chancellor's proposals to tighten the merits test, not to 60 per cent. as he suggested in his keynote address to the Bar annual conference in 1996 as shadow Lord Chancellor, but to 75 per cent. now that he sits on the Woolsack. It is misleading to suppose that one can possibly forecast the prospect of success with precise percentages in the way suggested. But, more than that, after more than 30 years of practice at the Bar—having read earlier some of the remarks of the noble and learned Lord the Lord Chancellor, I hope that I do not shock him in saying this—I cannot remember a single case, whether legally aided or otherwise, in which I have advised my client that he had a 75 per cent. likelihood of success. And all of my really important successes—and there have been some—have involved an even, or slightly better than even, prospect of success. A requirement of a 75 per cent. prospect of success would operate as a powerful deterrent against litigation which is in the public interest as well as in the interests of justice for the individual citizen.

Lord Mishcon

My Lords, will the noble Lord accept a humble compliment from this side of the Chamber? Is he not aware that he indulges in specialist cases of great complexity where it would be impossible even to forecast what any judge might decide?

Lord Lester of Herne Hill

My Lords, I always find it extremely difficult to forecast what any judge will decide. That is why I would never hazard a 75 per cent. prospect of success, in particular before some of my best friends on the Bench. But I cannot recall any case in which I have been so confident of persuading, for example, noble and learned Lords who sit in this House, that I have been able to advise a 75 per cent. prospect of success. A threshold as high as that will severely restrict the less well-off in their access to legal services and to justice.

The Lord Chancellor has recognised that it would be right to make special arrangements for the public funding of public interest cases. That is most welcome; and I am glad that he has recognised also the contribution that lawyers make in such cases. I am sure that he did not mean to confine his praise only to that class of case. He has not been able to give information about how much will be available for this special fund for public interest cases, how it will be available, according to what criteria, or who will be the judge. Nor has he made clear whether it would be administered independently of the state and its agents. I very much hope that he will be able to give the House more information about what is intended when replying to the debate.

With respect to the other alternatives for controlling public expenditure and increasing access to justice, I am glad that the Lord Chancellor has not ruled out the sensible proposals first advocated not by the Bar Council but by Justice in 1966 for a contingency legal aid fund (CLAF). My noble friend Lord Goodhart is one of the main architects of the Justice scheme. I am sure that he will wish to explain its virtues in a way that I cannot. But a CLAF scheme such as that successfully operated in Australia would allow people requiring financial support to pursue a money recovery case to have their legal costs covered by the fund on condition that they agree to contribute to the fund a proportion of any damages recovered. The fund would be self-financing and could operate alongside conditional fee agreements and civil legal aid for those for whom neither CLAF nor conditional fee agreements are available. I very much hope that the Lord Chancellor, who has an open mind on the question, will look favourably on the idea as modified by the Law Society in its memorandum, Better Value Better Justice, published in June 1996.

Almost 30 years ago I was privileged to work with the Lord Chancellor's former pupil master, the wise and compassionate Morris Finer QC, and Professor Michael Zander and Geoffrey Bindman, when we wrote a Society of Labour Lawyers' report, Justice for All. In it, we examined the problems of the unmet need for legal services and the various factors contributing to the failure of the urban poor to obtain equal access to justice. We pointed out that the legal aid scheme had been grafted upon the traditional structure of the legal profession and had therefore been shaped and restricted by the limits of that structure. Those limits may mean, for example, that there is only one firm of solicitors in a particular working-class neighbourhood which is open only during working hours, which discourages unprofitable work and whose solicitors know much about conveyancing and little about social security. Within such a system the legal aid scheme works fairly well; but the legal profession is simply not organised to provide a social service in areas of special need.

Instead of recommending a vast increase in legal aid, our alternative strategy was, and remains, comparatively inexpensive and cost-effective: a community legal service of legal centres and legally-supported CABs in the heart of areas of special need, staffed by properly paid, full-time qualified lawyers, open in the evenings as well as during the day, giving expert advice on the special legal problems of local residents and, where necessary, referring cases to social workers or private lawyers. Such centres would be independent of government, and would provide a means of protecting the weak against the abuse of government or private power. They would not undermine the independence of the legal profession, nor would they erode its private structure. They would supplement the services already given by lawyers in areas where legal services are not adequately provided.

I still hope that the Lord Chancellor will be able, as he would wish, to give a community legal service high priority, together with the speedy and effective implementation of the vital proposals of the noble and learned Lord, Lord Woolf, to reform the civil justice system. I hope he will reconsider his other proposals in the light of this debate.

In his powerful essay in Law Reform for All, published last year, the noble and learned Lord the Lord Chancellor wrote:

The ambition of any Labour Lord Chancellor must be to restore legal aid to the status of a public social service which is so highly regarded for its economy and efficiency in securing access to justice that, with the support of the public, it can compete for scarce resources with the most highly regarded services such as health … Legally enforceable rights and duties--enforceable in reality and not only in theory—underpin a democratic society under the rule of law. Rights without a means of enforcement make a mockery of justice". Those are the ideals of those of us on these Benches, too. I hope that this New Labour Government will transform them into practical reality in the lifetime of this Parliament.

5.43 p.m.

Lord Ackner

My Lords, fellow feeling makes us wondrous wise, and I feel for my noble and learned friend the Lord Chancellor. Many years ago, when I was a judge of the Queen's Bench Division, I was addressed by a highly eccentric Irish litigant in person as, "your worshipful holiness"! Having read much in the newspaper recently about the Lord Chancellor, I can well understand his anxiety at the prospect of early canonisation.

I respectfully express my deep disappointment at the Lord Chancellor's attitude to civil legal aid and his proposals basically to abolish it. At the end of September last year my noble and learned friend was the Shadow Lord Chancellor. The shadow was to change to substance in less than nine months. He gave the keynote address to the Bar Conference, a "tour d'horizon", as he described it, across legal policy. When I read it I was immensely cheered by his statement: let me begin with some basic points. I accept that a Lord Chancellor should fight his corner for justice in Cabinet. He must not be a mere hand-maid of the Treasury". He spoke at length about legal aid, pointing out that, by its very nature being demand led, it attracted Treasury hostility. But under the heading, "Success of legal aid", he made the observations which have already been quoted by the noble Lord, Lord Lester. Perhaps I may read on from where the noble Lord ended: Personal injuries litigation for assisted persons is as a category conspicuously successful. Obviously the greater the success rate the closer the legal aid system can approach self-funding. These success figures tell against any argument that legal aid is generally granted too readily, but it must he remembered that there are a small number of very high cost cases which account for a large proportion of expenditure". I interpose here to say that I understand that when credit is taken for the costs recovered in successful legal aid cases together with contributions made by the plaintiff to his legal aid, plus the clawback of social security payments, the cost to the Revenue is only approximately £100 million. I say "only" because, relative to the total costs of legal aid—some £1.5 billion—it is a very small proportion.

A little later in his address, the Lord Chancellor went on to say: There may however he a case for tightening the merits test so that, for example, legal aid should only he granted if Counsel can advise that on current information the prospects of success are at least 60/40". I believe that 75 per cent. is quite unrealistic. I only once advised that a case would succeed—and succeed it did, in the county court. When it went to the Court of Appeal, my opponent was led, and the entire case was recast. It bore no relation to the pleadings at all. I protested, and the noble and learned Lord, Lord Denning. said, "Oh, we don't worry about that in my court"—and I lost. That cured me once and for all in relation to ever being dogmatic about the prospect of success.

To answer the noble Lord, Lord Mishcon, in regard to the difference between complex and simple cases, perhaps I may give him an example of what I thought was a very simple case. I refer to Smouldon v. Whitworth and Nolan, 1997. The plaintiff's neck was broken when a scrum collapsed during an under-19 colts rugby game. The referee was sued for negligence. I should have thought that that was pretty straightforward and simple. It was the first case of its kind. The case as lost at first instance, and on appeal. Leave to appeal to the House of Lords was refused, and there was an appeal against that refusal. When it reached the House of Lords on its fourth hearing, the plaintiff was successful. Now what on earth does one do about the 75 per cent. costs? Are you forecasting for success in the House of Lords, or are you forecasting for success at first instance?

I also wish to refer to another part of my noble and learned friend's remarks in the course of his speech today which has not been mentioned. He said that, one way or another, he was going to bring the legal aid budget into control. This is what he said nine months ago, when he was but a shadow of himself: The legal aid budget is currently within estimate and under broad control so there is no immediate imperative for cost-capping". I fear that, despite the macho image that has recently been spun around the Lord Chancellor and the unparalleled powers that he apparently wields in and out of Cabinet, imposing his authority on waning political heads of departments, he is, when all is said and done, as he said: a mere handmaid of the Treasury". Having listened to or read the speech to which I made reference, who would have thought that a little over a year later he would be proposing to deprive the poorest in society of access to justice by abolishing legal aid and putting in its place a form of speculative litigation, of which those who have been in receipt of legal aid would be unable to take advantage--if "advantage" is the right word.

Speculative litigation has in recent years been covertly a favourite of the Treasury. It was banged firmly on the head by the Royal Commission on Legal Services, presided over by the late Lord Benson. His recommendation was accepted some four years later in a White Paper by the then government. There was a civil justice review within the Lord Chancellor's Department, presided over by a layman, with a majority of laymen on the review body. That review suggested that conditional fees—or contingent fees—should be looked at again.

Two Green Papers were produced by the then Lord Chancellor at the behest of a sub-committee of the Cabinet Economic Committee, chaired by the then Chancellor of the Exchequer. There was a separate Green Paper all on its own about conditional fees, based on the fact that in Scotland conditional fees were permitted but with no uplift. It was proposed that there should be an uplift of a mere 5 per cent. In due course Section 58 of the Courts and Legal Services Act was passed. The uplift proposed by the Lord Chancellor was 10 per cent. It was later proposed to be 20 per cent., which was agreed to by his advisory committee. It was later proposed to be 100 per cent., 10 times the initial figure he had proposed, so keen was the Treasury to ensure that the system could be put into operation, would work and be capable of being extended. That was firmly disagreed to by his advisory committee.

The noble Lord, Lord Mishcon, with wise cynicism, said: "Hey, if you are going to have this new procedure, it should not impinge in any way upon legal aid". As a result, provision was made in Schedule 19 to that Act to the effect that legal aid should not in any way not be granted merely by reason of the fact that the case was equally appropriate to be taken on a conditional fee basis. Now, without prior consultation either with the professions or, more importantly, with the insurance companies, this radical proposal is made. Yet in his speech in Cardiff the noble and learned Lord the Lord Chancellor had said: The thing to do with change is to manage it through consultation and in the spirit of consultation". By reason of the inadequacy of consultation, not only has insufficient thought been given to the practicabilities of the proposals but they have proceeded on a false basis.

In his Review of Civil Justice and Legal Aid, published in September, Sir Peter Middleton expressed the following view: Since 1995, solicitors and their clients have been allowed to make conditional fee agreements in limited areas of work. Although the results of the research into this experiment have not yet been published, there seems to he a widespread consensus that conditional fees have worked well and achieved their primary purpose of improving access to justice for those who do not qualify for legal aid. It seems to me that the value of conditional fee agreements has now been sufficiently well established. Their scope should therefore he widened to embrace all civil proceedings (although in practice, of course, they are mainly relevant where a money claim is involved)". Sir Peter Middleton, not being a lawyer, did not appreciate the ethical problems that the extension of conditional fees gives rise to. They are conveniently summarised in Chapter 16 of the report of the Royal Commission on Legal Services to which I referred.

The commission accepted, having consulted widely with the public and the professions, that: The fact that the lawyer has a direct personal interest in the outcome of the case may lead to undesirable practices including the construction of evidence, the improper coaching of witnesses, the use of professionally partisan expert witnesses (especially medical witnesses), improper examination and cross-examination, groundless legal arguments designed to lead the courts into error and competitive touting". The results of the very limited research, to which I shall refer in a moment, were published in September. In his Cardiff speech on 18th October—after the publication of the report—the Lord Chancellor made no reference to it but said: Conditional fee agreements have been working well in the personal injury field". As long ago as 1995 the Lord Chancellor's advisory committee had advised that, given the novelty and potential risk to the litigant inherent in setting up conditional fees agreements, there must be effective monitoring of the results. The committee did not believe that monitoring would be effective if it had to rely on a sample which might well be unrepresentative. Nevertheless, all the advisory committee was permitted to do was to commission the Policies Studies Institute to provide a report on sampling.

The institute surveyed 300 firms, all specialists in personal injuries; only 120 responded. Those 120 firms were doing on average less than one conditional fee agreement a month. A figure of 28,000 conditional fee agreements to date has been advanced, though one has yet to see any authoritative source for that. Even if it is accurate, it is a remarkably small figure, bearing in mind that conditional fee agreements are available in personal injury cases for the majority of the population who do not qualify for legal aid. The figure for legal aid certificates issued in personal injury cases over the same period is of the order of 250,000.

Far from confirming that conditional fee agreements have been working well, the following was stated in the report entitled The Price of Success: However, on the basis of the evidence so far available, there is potentially cause for serious concern about the way risk is being assessed and uplift calculated. Fairness of the uplift does, of course, hinge on the accuracy of an original assessment of risk and there are some doubts about the accuracy of risk assessment among solicitors' firms. Information about the outcome of these cases, the damages, costs and fees paid is necessary for a full evaluation whether the uplift is fair. However, on the basis of the evidence currently available there is potentially serious cause for concern about whether the scheme is operating fairly and consistently. The proportion of conditional fee cases with low estimated chances of success is surprising and raises questions about the way in which solicitors are assessing risks. This could cast doubt over the fairness of the entire scheme". I am surprised that no reference was made to that work, particularly as the Lord Chancellor, in the debate in 1995 on the order to be made with regard to conditional fees, accepted that 95 per cent. of personal injury cases succeed and that in his view a 20 per cent. uplift was quite sufficient. In fact, the uplift has averaged 42 per cent.

I end by saying this. The present position, put quite bluntly, is that we simply do not know enough about the manner in which conditional fee agreements are operating to switch to a system for which they are primarily a means of funding litigation. Matters are still at an experimental stage. There is insufficient material to make a properly informed decision.

The Lord Chancellor recently left the Bar, where he operated with considerable success. Indeed, he is a self-confessed "fat cat". It would be a tragedy of gargantuan proportions if he should rush in, abolish legal aid and take away from the poor and those suffering from various disabilities the means of access to the courts which have been recently referred to as a fundamental constitutional entitlement.

6.1 p.m.

Lord Mishcon

My Lords, perhaps a very slim cat can express his sympathy to his brethren and sisters in this House who, whenever there is a debate in regard to legal matters, find themselves afflicted by one lawyer after another delivering at times rather obscure speeches.

I am reminded, if your Lordships will permit it, of a famous story about Serjeant Sullivan, who was known, as the Irish representative that he was at the Bar, as being fearless. He was addressing the Court of Appeal on behalf of a workman who had suffered injuries at work. The presiding judge of the court turned to Serjeant Sullivan, "Has your client never heard of the maxim of volenti non fit injutia?"; to which Serjeant Sullivan replied, "My Lord, it is the sole topic of conversation in the little village of Antrim from which my client comes."

I feel for your Lordships when somewhat complex arguments are advanced in legal language, and I shall endeavour, if my arguments are not forceful, to at least make them easy to understand. But before I say anything, perhaps I may say that my intervention when the noble Lord, Lord Lester, was speaking was meant as a compliment to the very abstruse cases in which he deals.

Percentages are difficult. I can remember when I was a young solicitor practising in the suburbs. It was at a time when, if anybody walked into my waiting room, there were strict instructions that the door was to be locked and so was the door to the few steps that took one up the stairs of that office. However, a gentleman did come to consult me. He told me that his son had been injured while walking on a pavement by a vehicle which had mounted the pavement. Memories of my final examination reared in front of me and I muttered the words, Res ipsa loquitur, saying to him, "My dear sir, you cannot lose. This case speaks for itself; the very facts speak for themselves". On inquiring further into the case a week later, I found that the gentleman whose vehicle had mounted the pavement had had a heart attack and had never had one before. The result was that my 100 per cent. had to be reduced to 0 per cent., since obviously there was no negligence.

These percentages are difficult for any lawyer to work out. One cannot summarise the speeches so far by saying that they were laudatory in favour of the speech made by the noble and learned Lord. But they have not been particularly constructive in regard to the main task that fell to the noble and learned Lord on his accession to office. We have all made remarks in shadow capacities and turned out to be shadows of ourselves later on. I do not believe that that is particularly relevant.

My noble and learned friend faces a dilemma with which we have been trying to deal for years but never really grasped. It is often said in your Lordships' House that justice for the very poor is all right, and that it is all right for the very rich. But what about the people in the middle? They find it impossible to enter into civil suits by virtue of the costs of their own lawyers, let alone the risk of the cost of the lawyers on the other side if they lose. Yet nobody—I say this with deep respect to those who preceded me—dealt with that question at all.

It is a fact that if one was brought up in the generation of lawyers in which I was brought up, the words "maintenance and champerty" would make one tremble. If one was in the generation of lawyers that I had the privilege of being among, questions of conflict of interest made one worry oneself into insomnia. They were matters of grave importance professionally.

But time marches on. In order to make a constructive contribution to your Lordships' debate, I have been trying to think of a solution. If we take for granted that we adopt all that is in the eminent report of the noble and learned Lord, Lord Woolf, and take for granted that we do not make the lawsuits into the nightmares into which they sometimes develop so that they are speedily heard, we still find a gap in our justice system. It is still too expensive for people in the medium income group.

Incidentally, I am indebted to my noble and learned friend for merely quoting some of the average fees of the Bar and not walking into the sphere of a solicitor's income. I know that it was because he realised how much less those incomes are.

My Lords, where do we go from here? I am forced to the conclusion that, unless we walk into the sphere of conditional fee agreements, there is no answer, unless we have a Treasury that is prepared to pour out not only what we are faced with—that is bad enough at £1.4 billion—but also however many billions we would have to pay if we were trying to cover the medium income group.

I have but one concern, having reached that conclusion. It is this. There is no doubt that if we remove from legal aid most of the money and damages claims, there is a gap in the programme. It is the question of the other side's costs if you lose; it is therefore the question of the insurance premium; and it is the question of disbursements that would have to be incurred.

One of the major problems one faces in this context is one that the noble and learned Lord was good enough to mention. I refer to medical negligence claims. This featured in a letter to The Times sent by members of the Bar who specialise in this field. One of the instances of those claims is brain-damaged children, where parents are agonised by the cost of such children during infancy and childhood and who say to themselves, "What will happen when we are no longer here?" That is the field in which the investigatory work to be carried out by psychiatrists, neurologists, and a whole gamut of expertise, has to be gone through with the lawyers before getting to the stage—you do not measure 75 per cent. or 50 per cent.—of being able to make any adjudication on whether the case is likely to succeed.

Are these people to be dumped into walking into one solicitor's office after another, with the solicitor saying. "I am perfectly prepared to take on this case. I would have taken it on a year ago under legal aid; I would have got the preliminary expenses for the investigatory fees paid. But I am afraid that I am not here as a philanthropic institution—I wish I were. I cannot pay £5,000, which may be incurred in all those experts' fees and investigatory work, or £2,000 or £1,000. I have enough hardship as it is".

I say this to the noble and learned Lord—it is said in a letter to The Times this morning, not just from the Bar Council but from the Consumers' Association, the Law Society, and other bodies which are interested on behalf of the man in the street—let there be a trial of this and more research into this. That research is so necessary because it is idle to talk in terms of experience, if I may humbly say this, since 1995 when personal injury cases, European Court cases and some insolvency cases were transferred out of legal aid. We all know that personal injury cases will, once in a lifetime of professional activity, require a deep knowledge of the law. They are factual. They are easy to assess as a rule. If a car bumps into the rear of another car, we all know that the driver of that car must be negligent. These are cases where conditional fee arrangements work very well. There is little expenditure in any event in investigating them. You have only to apply for a police report and take statements.

The noble and learned Lord has—I say this with deep respect—behaved very gallantly in taking on these challenges. They have been largely neglected up until now. I repeat the need for the middle-income group to be allowed to walk through the courts of justice. He has tackled it. I personally admire him for that. I admire him for bringing these matters before the House and before the country. But I ask for further time for this research to be done and I ask for further consideration to be given to the parents of whom I have spoken.

6.15 p.m.

Baroness Wilcox

My Lords, I contribute to the debate not as a lawyer but as someone whose sole concern today is to ensure that the ordinary person, particularly the poor and vulnerable, will benefit from the changes the noble and learned Lord the Lord Chancellor proposes. I want to concentrate particularly on conditional fees and whether they will be an adequate replacement for legal aid.

When I chaired the National Consumer Council, following as I did my noble friend Baroness Oppenheim-Barnes, who is to speak later in the debate, we supported the cautious introduction of conditional fees. Perhaps I can begin with their advantages. They are likely to increase access to justice for those of moderate means by enabling them to limit the costs of losing. And conditional fees are potentially fairer than legal aid to a winning party, who is able to recover costs from an opponent funding the case by a conditional fee agreement. By comparison, legally aided parties do not normally pay the other side's costs.

If, despite all this, I am rather tentative in my hopes for conditional fees, it is for the reasons I now give. I should like to concentrate on three aspects of the proposed changes to conditional fees and legal aid: safety, outcome and quality. On the point of safety, I have before me the model agreement for a conditional fee drawn up by the Law Society and widely used by solicitors. It is written in commendably plain English and every effort has been made by the Law Society to make it understandable. However, the terms of the agreement are fiendishly complicated. I doubt that many non-lawyers would understand them. But even my non-legal mind can see that a lot of things could be going wrong with conditional fee agreements such as people being rejected unfairly or agreements coming to a premature end. And yet, the noble and learned Lord the Lord Chancellor seems to be proceeding on the assumption that they are trouble free. I wonder by what evidence he judges that.

As far as I am aware, the only research into conditional fee agreements was undertaken by the Policy Studies Institute at a very early stage in the short life of conditional fees. The PSI, mentioned earlier by the noble and learned Lord, Lord Ackner, looked at the initial terms of 197 of the first conditional fee agreements, a tiny proportion of the 30,000 or so now in existence. That research only examined the initial terms of the agreements. It did not follow any of these cases to completion. It did not ask any of the clients how they felt the agreement worked in practice. It did not attempt to identify any problems that arose beyond the original calculation of risk and setting of a success fee. The research raised concerns about the ability of solicitors to estimate risk consistently and to charge a success fee that was commensurate with risk. That is understandable in the early days of conditional fees. But it is vital to know that things are improving with time.

The PSI referred specifically in its research report to what further information would be needed in order to support a decision to withdraw legal aid and replace it with conditional fees. It said: Until information is available … on outcomes. costs, damages and the eventual fees paid, a full assessment will not he possible. Any plans to extend conditional fees or … to substitute them for legal aid in areas of law where they are available, needs to take into account that there are many unanswered questions". It appears that the noble and learned Lord the Lord Chancellor has chosen to proceed without knowing the answers to any of those questions. I hope it is not, but it may now be too late for research into clients' experiences of conditional fees in advance of the withdrawal of legal aid. The objective is to withdraw legal aid from most money and damages claims by the middle of next year. However, it is not too late to begin a programme of monitoring clients' experiences so that they can inform the further development of conditional fees.

I ask the noble and learned Lord whether he will commit his department to undertake this vital monitoring; publish the results of that monitoring and take steps to deal with any problems arising from such monitoring.

In my view, one piece of client monitoring is particularly urgently needed. It is vital to know who is being turned down by solicitors for a conditional fee agreement and on what grounds. The fear of consumer groups is that solicitors—who will only be paid when they win a case—will choose the most straightforward cases and reject cases that appear complicated. A case may be entirely winnable, but raise complex issues of law or fact. A complicated case is not necessarily a weak case, yet under the new payment regime, as far as I can see, complexity may become considerably less attractive to solicitors.

In other cases, it may be the client, and not the issues, that is perceived to be the problem. Clients who are not articulate, or whose first language is not English, may not be attractive prospects to solicitors seeking sure, quick or easy winners. Therefore, will the noble and learned Lord ensure that the grounds for refusal of a conditional fee are based on merit and not unduly influenced by other, less justifiable factors? Will he undertake to monitor this aspect of conditional fees particularly carefully?

Next I come to outcomes. Compensation in cases involving money and damages claims is carefully calculated to reflect loss. Its objective is, as far as possible, to put people back where they were before they suffered the loss. I am aware that even under legal aid, people are sometimes required to repay money out of their damages to the Legal Aid Board to make up shortfalls in costs recovered from the other side. However, conditional fee agreements introduce new deductions from compensation that could far exceed those deducted under legal aid.

I have a fear on this point and I hope that the noble and learned Lord will put my mind at rest. As far as I am aware, successful clients will still have to make up any shortfall between their own costs and what is recovered from the other side. That will come out of the compensation. In addition, clients will pay a success fee of up to 25 per cent. of the compensation. And, in addition to that, clients will have to pay the cost of the premium to insure against losing, which could run to hundreds or even thousands of pounds, and may not be recoverable from the losing opponent.

My concern is that, with all of these additional deductions, people made vulnerable through loss will not recover enough to have made the ordeal of litigation worthwhile, or to enable them to put the loss behind them. And I have a further concern: that the deductions from compensation could increase over time.

Once the commercial reality of running a legal practice substantially dependent on conditional fees begins to bite, I fear that the success fees demanded by solicitors will start to creep up. At the same time, solicitors will feel under pressure to settle cases as quickly as possible, and certainly at the first sign of difficulty, whether or not an adequate offer of compensation has been obtained. If cases settle quickly, that is often in the client's interests, but not if they settle badly.

My fear is that compensation could be squeezed progressively from various directions: higher and higher success fees; higher and higher insurance premiums from one direction, and lower and lower settlements in another direction. Will the noble and learned Lord reassure us that he will monitor the levels of damages actually recovered by successful litigants under the new arrangements? We need to ensure that the costs of the new payment regime do not outweigh the benefits, particularly for the poorest.

My final point is about quality. Over several years, the Legal Aid Board has been developing an extensive system of franchising for solicitors' firms. While franchising criteria are not yet perfect, they are nonetheless a useful indicator of certain aspects of quality for inexperienced consumers. Holding a franchise suggests that a firm is well-managed, has a reasonable standard of client care, and is experienced in a particular area of law. Once legal aid is withdrawn from all claims for money or damages, franchising for these areas is likely to be abandoned. Perhaps the noble and learned Lord can tell us how he intends to replace those signposts which reassure consumers. Perhaps, if the Legal Aid Board paid the insurance premiums for those previously eligible for legal aid, some form of franchising would remain.

We all want to improve access to the civil justice system and to get value for the money we spend. At the same time, we must be sure that the changes we make to improve access to justice for the middle income earners offer adequate protection for the poor. When we close one door to the poor, we must ensure that what replaces it is not narrower and less accessible to those who deserve entry.

6.25 p.m.

Lord Taverne

My Lords, the Lord Chancellor has described the dilemma which we face. We clearly cannot allow the costs of legal aid to escalate in the way in which they have done in recent years. On the other hand, the system in which only plutocrats or paupers can litigate is a denial of justice: indeed, it is a blot on our claim to be a fair society. So I welcome most of the proposals which the Lord Chancellor has made and in particular the commitment to block contracting on the basis of fixed fees.

But like previous speakers, I want briefly to discuss the major issue; namely, the basis on which lawyers are to be remunerated. The law is a noble profession and I have no doubt that the majority who practise law are concerned to do the best for their clients and are concerned with justice as well as their own rewards. But lawyers are human and how they behave depends partly on the incentive which the legal system provides. Unfortunately, these incentives do not always encourage them to put their clients, or the interests of justice, first.

The Lord Chancellor's solution of extending no win, no fee would set our legal system on the road towards the American system. That has appalled a number of American lawyers who are only too aware of the low regard in which that profession is held in the United States. I do not believe that American lawyers are individually any less honourable than British lawyers, but the incentives of contingency fees have almost certainly had a corrupting effect. One can see that from the way in which they have given rise to an ever-growing, yet far from effective, concern with codes of ethics.

I quote from an excellent lecture recently given by Professor Colleen Graffi of Pepperdine University in California, who also happens to be a member of the English Bar: God was able to set out the code of conduct for all of mankind in Ten Commandments, with no commentary, on two tablets of stone. While in the United States, the American Bar Association's code of conduct for lawyers amounts to over 400 pages of text, comment and footnotes. At that rate Moses would have needed the Rock of Gibraltar and full time professional engravers to set out the rules for just one profession". In the long run there is bound to be very considerable conflict under a no win, no fee system, between the needs of justice and the interests of lawyers. I quote one example from a speech recently made by the chairman of the Bar Council, Mr. Robert Owen, to the Bar Parliamentary Group: What happens when a lawyer, who may be a year or two into the litigation and has committed considerable resources to it, suddenly turns up a document which demolishes the case? A conflict is clear.

Professor Graffi also points out in her lecture that intensive competition has led to excesses in the adversarial system and a decline of courtesy and civility among lawyers. In my relatively short career at the Bar, when I had to refer to my opponent as "My learned friend", it was rare that he was my friend and there were many cases in which it could in no way be said that he was learned. But the formalities at least acted as a restraint against abuse. Civility will not necessarily last if lawyers market themselves on getting results or through more competitive pricing.

My main objection to the direction in which we appear to be proceeding is that the incentives would tend to turn the law into a business instead of a profession, as they have done in the United States. However, we cannot rest on the status quo. If the only way out which will enable middle income citizens to litigate is to have a conditional fee arrangement, we may have to accept it. However, if I may make a submission "with the greatest respect" (as lawyers tend to say when they intend to show a total lack of respect), the legal profession itself must bear a large part of the blame for the escalation of legal aid costs. That is because the incentives of the present system, whereby lawyers are paid by the hour, also have a harmful effect. At present, there are no incentives whatever to simplify or shorten trials. There is every incentive to complicate proceedings and to draw them out and however dedicated some lawyers—most lawyers—may be to promote justice and not their own earnings, as in America the incentives work in the other way, in the wrong way.

The report produced by the noble and learned Lord, Lord Woolf, proposes a move towards greater judicial control. I welcome the announcement that that will be in force by April 1999, but fixed fees would still play only a limited role in our system. I know that it goes against national sentiment to suggest that we should learn from other countries and, with some justice, we are proud of our own legal traditions. But it is worth noting that there is a system of fixed fees which seems to work well. I refer to Germany where the national costs of legal aid per head are much lower than those in this country. The ordinary citizen can still afford to litigate and lawyers still seem to make a good living. I know that the German system is very different, with many more judges who are professional judges. We cannot simply transplant the German system even if we want to. But there is no reason why a system of fixed fees should not be more widely applied in Britain.

I realise that the idea of extending the principle of fixed fees has been received by the legal profession with well concealed enthusiasm, but lawyers cannot have it both ways. They rightly argue that no win, no fee provides the wrong incentives and they are right to argue that a system of incentives matters; but the same argument also applies to the system of payment by the hour or day. The taxi meter principle is no way to limit costs; it should be urgently reviewed.

6.32 p.m.

Lord Hoffmann

My Lords, the provision of justice to the people was the noble aspiration of the legal aid scheme introduced in 1949. Justice is a public good of very high importance. But it cannot be pursued regardless of cost because the provision of, for example, education, health care and public housing are also important public goods and justice has to compete with them for resources. Lawyers sometimes speak as if justice was a thing of infinite value; whatever resources are needed to attain it should be provided. I have detected some of that this afternoon. Doctors feel the same about life and health and teachers about education. They all want to do the best possible job and quite naturally feel that the state should provide whatever is necessary. However, it cannot be done: hard choices have to be made and the consequence has to be faced that, inevitably, some people will suffer injustice. It is easy for noble Lords to produce examples of an injustice which may be suffered as a result of any change in the procedures—there are always winners and losers—but there are people who will not get justice and that must be accepted.

A government can do only two things: the first is to try to reduce legal costs overall, so that there is more money to go round. The second is to allocate the available resources so that they go to the more deserving cases rather than the less deserving ones.

The Lord Chancellor's proposals on civil justice and legal aid recognise these truths and I say at once that they seem to me a bold and imaginative attempt to improve matters on both the points which are within the power of government.

Let me first address the question of reducing costs. The noble and learned Lord, Lord Woolf, has put forward some admirable proposals for simplifying the civil procedure. This will provide a framework within which justice can be delivered at lower cost. It is, however, only a framework. It is one thing to provide a set of rules which will enable lawyers to litigate more cheaply. It is quite another to ensure that they actually do so. The fundamental problem is that under the present system lawyers are paid according to what they do and they decide how much they are going to do. It is therefore in their financial interest to do as much as possible.

It is no moral reflection on lawyers to point this out because this is a case in which the lawyer's self-interest and his duty to his client go hand in hand. The lawyer wants to do the maximum for the client, out of a sense of professional duty and in order to avoid being sued for omitting some step which he might have taken. The same pressures cause the problems of overuse of drugs in the National Health Service. But with lawyers there is the additional factor that they have a personal financial interest in as much as possible being spent on the case. So the result is that rules of court are not the whole answer to reducing the cost of litigation: what lawyers do is driven not only by what the rules say, but by what they can charge for. This is a classic situation in which decisions on the amount of production are wholly in the hands of the producer, who cannot lose by producing too much. Even where the client is paying out of his own pocket, he usually lacks the expertise to exercise proper control. With a fund like the Legal Aid Fund or an insolvent estate or an insurance company, there is even less control because the interest in keeping control is more diffuse.

Perhaps I may give your Lordships an example. I recently attended a conference on the use of information technology in the law. I heard the registrar of the High Court in Liverpool (it may have been Manchester) say that he had introduced a system of video conferencing so that lawyers in London who had cases before him need not send someone up to conduct the case because it could be conducted via the video conference link, thus saving costs. The registrar said that he had been operating the system for six months and that not a single firm had used it—because more could be charged for sending someone up on the train in order to appear at that High Court and then sending them back again.

The noble and learned Lord, Lord Woolf, recognised the problem and his solution is to have more hands on control by judges. They will take a grip of the case and cut down on unnecessary work. Sir Peter Middleton, in his admirable report on the noble and learned Lord's proposals, is willing to take this proposal on trust and see how it works. I must confess to being rather less sanguine. Judges are good at deciding disputes on arguments presented to them by opposing sides. They are much less good at protecting the interests of people who are not represented before them, like the Legal Aid Fund. It is hard for a judge to go against the arguments of both the parties before him and it is often in the interests of the lawyers on both sides to agree that the case is very difficult and important and needs a lot of money spent on it.

These difficulties arise whenever the cost of litigation is being met out of some fund and it is for that reason that I am equally sceptical about the proposal for a contingency legal aid fund. I think that my noble and learned friend the Lord Chancellor's proposals address the problem in the right way, by giving the lawyers a stake in the outcome of the case. It means that when they decide that more work needs to be done, they are potentially spending their own money and must take into account whether the expense is likely to be cost-effective in terms of the prospects of success and the amount likely to be recovered; and they are the people best placed to make an informed judgment on these matters. It seems to me that there is no other way in which principles of cost-effectiveness, or what the noble and learned Lord, Lord Woolf, calls proportionality between cost and outcome, can be properly enforced.

Furthermore, the scheme also advances what I have called the second thing which a government can do, which is to ensure that the more deserving cases come to court. Again, it will be the lawyers, those best placed to make a proper judgment, who will decide which cases they will back with their own money and which they will not.

I would indeed urge my noble and learned friend the Lord Chancellor to adopt the suggestion of Sir Peter Middleton and take his proposal to its logical conclusion, by allowing the lawyers to agree to act simply for a proportion of the amount recovered. For one thing, that would satisfy the requirement of the noble Baroness, Lady Wilcox, that the agreement should be less complicated.

The present scheme, under which they are allowed to charge at a higher rate up to a certain proportion of the amount recovered, still encourages them to do as much work as possible in cases where the recovery is likely to be high and even charging at a higher rate would produce a figure within the maximum proportion of the recovery. I think that it would be in everyone's interest for that incentive to be removed.

It is said that giving lawyers a financial stake in the litigation would tempt them to resort to unethical practices to win. Reference has been made to the practice in the United States of America. I think well enough of our own legal profession to doubt whether this is a serious problem, but in any case if lawyers behave unethically the other side will complain. There will be no collusion as there is now over costs and judges will be able to resolve these questions and impose penalties much more easily than they can keep control of costs. I have no doubt that they are much better at that. That is what they are trained to do.

I turn finally to the distribution of resources and the proposal of the Lord Chancellor that those cases which continue to be funded by legal aid should be certified as having a very high prospect of success.

Lord Lester of Herne Hill

My Lords, I am grateful to the noble and learned Lord for giving way. Does he accept that there is a serious problem for the poor living in slums and areas of deprivation obtaining access to lawyers and being able to assess whether or not conditional fee agreements are in their interests? Does he accept that as regards the poor there are serious concerns about these proposals?

Lord Hoffmann

My Lords, I hope that in those areas the poor will be given assistance perhaps by citizens advice bureaux and so forth to enable them to make an informed choice among the conditional fee agreements that are offered. That is the only way in which some kind of transparency can be introduced into the market as between lawyers offering their services.

I come to the question of certifying those cases which have a high prospect of success for the purposes of legal aid. I applaud this proposal. It is not enough that a case should be, as the lawyers say, arguable or have a realistic prospect of success. There are few cases that are not arguable to a barrister and solicitors who will be instructed if legal aid is granted. Is 75 per cent. too high? There is no logical figure.

Lord Simon of Glaisdale

My Lords, perhaps my noble and learned friend will allow me to intervene. Is it not a question of whether a case is more likely to succeed than not, rather than that it is arguable?

Lord Hoffmann

My Lords, as I understand it the present criterion is that the case is more likely to succeed than not. But there is no logical threshold. Wherever one puts the threshold it is designed to prefer cases with better prospects over those with worse ones. Where one puts the figure depends on how much money is available. If there is plenty of money one can afford 40 per cent. or 50 per cent. The Lord Chancellor must be entitled to say that the resources at his disposal require 75 per cent. Critics say that means that cases that might have been successful under the previous system will now not be fought. That is quite right. That is the inevitable consequences. However, that is inherent in any system. Your Lordships would be wrong to compare the proposals of the Lord Chancellor with an idealised system in which everyone got his desserts. The question is whether it is likely to be better than what we have now, and in my view it certainly is.

Lord Ackner

My Lords, before my noble and learned friend sits down, does he agree that there is a very marked difference between the English and American systems? This relates to the suggestion, following the proposal of Sir Peter Middleton, of a contingency fee where a percentage of the damages is taken. In America, juries realise that that is the system and they lay off for it; in other words, if the damages are x they add on y knowing that that represents what the lawyer should get. Here the damages will continue to be calculated as to what is fair compensation. If one takes the case of a child who has been badly injured, the figures will be worked out so that the child can be compensated with regard to future care and so on. All that money is calculated on the basis of the child's need. If one has a contingency arrangement 30 or 40 per cent. of that will go to the lawyer. Therefore the child or any other injured party will be substantially uncompensated. That can change only if the judges here lay off for the contingency figure, which from a forensic point of view would in my view be most unjust visa á vis the defendant.

Lord Hoffmann

My Lords, my noble and learned friend Lord Ackner is quite right. Figures for damages awarded by juries in America are vastly inflated. Indeed, that is probably one of the temptations to unethical practices which exist in the United States. It would be difficult to resist behaving unethically if the temptation was to win a case which would result in one gaining 40 per cent. of ş200 million. As a result of these proposals those children who receive damages—I include in that any other litigant—will get less because they have to pay part of the damages to their lawyers. On the other hand, those people who previously could not go to law at all will get something. There are winners and losers.

6.45 p.m.

Baroness Kennedy of The Shaws

My Lords, I begin by welcoming the important and principled start of the Lord Chancellor in reforming legal aid. He is absolutely right in identifying the escalation of costs to the public purse. It is a source of shame among many of us in the legal profession that there are individual lawyers earning £200,000, £300,000, £400,000 and even £500,000 per annum out of the legal aid fund. It is nothing short of a scandal that remuneration paid for by the taxpayer should reach such levels. Undoubtedly, changes must be made. I am delighted that the Lord Chancellor has repeated his willingness to enter into constructive dialogue with the legal profession and any interested parties in pursuit of reform.

The noble and learned Lord, Lord Hoffmann, reminds us that legal aid was invented by the post-war Attlee government. It was not created so that lawyers could make money out of human misery; it was about servicing need. That great Labour government understood all about social exclusion. It knew that our legal system was like the Ritz. It was of the highest quality and was open to all as long as they could pay. The principle at the heart of the system which was then created was the belief that access to justice had to be available to all and that it was one of a decent society's objectives. The post-war government believed with a passion that the poor were just as entitled as the rich to legal remedies and something had to be done to give meaning to that belief.

When I was a small child my mother, a doughty working-class woman in Glasgow, was struck by a falling slate. It fell from the roof of a tenement building on which men were working. Her head was split open, her eye was damaged and she was out of action for several weeks. I remember well that concerned neighbours advised her to see a solicitor. But the concept of legal aid was still very new and even she, the doughty woman that she was, was fearful of stepping into a lawyer's office. She was worried that it would involve an outlay of money, which was all too sparse.

Those who are not well off do not go willingly to law even today. They are afraid of the legal system because they do not believe that it belongs to them. The challenge of ensuring that the law is not the privilege of the rich remains with us. We should be as clear now as the Attlee government were then that making the law available to all is one of the measures of a just society. The Lord Chancellor will be as concerned as that government to ensure that the principles of access to justice for all should inform whatever changes take place.

The noble Lord, Lord Lester, referred to fat cats. I speak as perhaps one of the leanest lawyer-cats in this House. I have spent the whole of my professional life doing legal aid work—and not of the overpaid fraud trial variety. I believe that I speak from a position of knowledge when I say that there are many solicitors and barristers who are deeply committed to representing those who have the least voice in our society. They are not lawyers who make very much money but they believe in liberty and justice—lawyers who seek to expand the frontiers of the law in a changing world. They are lawyers who act for poor litigants in actions against public authorities where their rights have been wickedly abused.

Those lawyers will be greatly reassured by the commitment to them and the work that they do of my noble and learned friend the Lord Chancellor. Those lawyers are probably not in the least self-interested or self-serving when they express their anxieties about a new form of legal aid. They ask that the noble and learned Lord consider, in the Government's review, the maintenance of legal aid for poor litigants who want to find out whether they have a case. That is the exploratory funding to which some other speakers have referred. The opinion of an expert is sometimes necessary before it is possible to evaluate whether someone has a good case. That was mentioned by my noble friend Lord Mishcon.

Noble Lords may feel that lawyers should be prepared to invest money in the potential return referred to in the Lord Chancellor's opening speech. However, there are lawyers whose firms are run wholly on legal aid and who are in communities such as those described by the noble Lord, Lord Lester. They may be in slum areas. There are lawyers whose commitment is real and where there is no slack in the system that they operate. Their profits are marginal. Those tight margins would not allow them to put forward the sums of money which may seem meagre but which would be considerable for them. So we must be concerned. I know that the Lord Chancellor will be concerned to ensure that such firms of solicitors are protected and that there is legal provision for the type of client that I have described.

Noble Lords will be aware that the public funding of dentistry is supposed still to exist. Yet it is hard for us to find a dentist who still performs under the NHS. There are good reasons for that. Many would say it is because of the way the cuts have taken place. It would be terrible to see that happen in relation to legal provision.

Among the lawyers of whom I speak there is also concern that a poor client might have a reasonable case but that damages would not be at a level which would make the case a commercial proposition for the lawyer. The sums involved may be only £5,000, £10,000 or £20,000. The rewards for the lawyers would not be enough to justify the risk of taking on such cases. So, for example, it may not be worth a solicitor taking on the case of someone like my mother with her head injury because the compensation may not be great enough for him or her. It would have been significant for my mother.

The market does not work well for the poorest in our society. I was recently involved in a review of the availability of further education. Market principles have been introduced into the running of colleges. What has happened is that the colleges pursue the obvious student—the student who is likely to succeed easily. Many of the students who are fearful of continuing education, who find it harder to get in and who have problems about staying in are those that the colleges do not feel worth pursuing because of the resources involved in keeping those students on board. I ask my noble and learned friend to consider ways in which people might fall through any new system and to seek to prevent that happening.

I am especially pleased that my noble and learned friend recognises the importance of ensuring that public interest cases are funded properly. It is crucial that public servants do not abuse the law, hold themselves above it and cock a snook at the citizens. It is clearly in the public interest that officials should be accountable.

In the set of chambers in which I work, a significant number of actions over the years have been taken against police officers, prison officers, immigration officers and other officials for abuse of their power. Knowing that remedies may be sought in the courts is one of the ways of keeping certain kinds of policemen honest, I am afraid.

The problem I raise with the House is not that the plaintiffs in cases alleging police assault are invariably lying. They are often people with previous convictions. They may often be people with mental illness or drug problems. They are not people who will be readily insured. I ask that that is taken into consideration when the Lord Chancellor considers reform.

Those are not people who are readily believed. It would be difficult for lawyers taking on such cases to say that they fulfilled the 75 per cent. chance of success criterion. Yet those people can often be telling the truth about having been beaten up in police custody. They would never be accepted on a conditional fee basis. There is a famous case of which most criminal lawyers are aware. It is known about in the civil courts also. It is the case of a man with previous convictions called Treadaway. He was taken in by the West Midlands police, whose behaviour became somewhat notorious, as the House will be aware, in cases throughout the 1970s and 1980s. He was taken into custody in an inquiry about an armed robbery. He was subjected to what became known as the "bagging" procedure. A plastic bag was put over his head until he was on the point of losing consciousness. He ended up confessing to a crime. He was convicted. He sought to take legal action against the officers in the case.

That case was successful. It was tested to a high level by Mr. Justice McKinnon. Those police officers were found by him to have behaved appallingly against a man with a criminal background by forcing him to confess to a crime which, on balance, it could not be accepted had been committed. The conviction was overturned ultimately in the Court of Appeal. That case pointed out how vulnerable people in police custody can be. It is crucial that legal aid be maintained for such cases—cases against public officials and arms of the state where people might be abusing power.

The black community is worried because a number of the most prominent cases in recent years relating to police assault have involved young black men being arrested unfairly, manhandled and assaulted by police officers. If legal aid were not available in such cases, the public interest would not be served.

I am sure that I share with many members of the legal profession a welcome for the idea of a public interest fund: for example, for test cases, although I hope that legal aid will be maintained for the kind of cases that I have described. However a public interest fund might be invaluable for taking on test cases of public significance, such as cases involving informed consent or the sterilisation of the mentally ill. It is important for the medical profession to know what are the rules. Clarification of the law is always to the public benefit.

If my noble and learned friend the Lord Chancellor is seeking new ways of finding money for the Legal Aid Fund, which would keep the Treasury happy, I shall make a number of suggestions. The idea arose in the past but it has not been considered recently. Solicitors' client accounts earn interest. When people pay money to a solicitor during the preparation of a case that money goes into an account. It creates interest, which could make a sizeable contribution to the Legal Aid Fund. In New Zealand and Australia the interest on solicitors' client accounts is used for the furtherance and development of the law.

I have a friend who is a judge in New Zealand. He was in this country recently and he explained to me that that money was used for conferences to advance a legal issue. There is a precedent for such a use of that interest in that the Bank of England is funded by the interest on deposits made by commercial banks. That is one of the reasons why the wine is so good if one goes to a dinner or another function at the Bank of England. Will the noble and learned Lord consider whether the interest on solicitors' client accounts can be used as I suggest; that is, to supplement the Legal Aid Fund and to ensure that it is maintained at a level which will satisfy the anxieties expressed by committed lawyers?

Lord Hacking

My Lords, will the noble Baroness kindly give way? I am a practising solicitor and I may be able to help her on the issue of interest on client accounts. That interest belongs to the client.

Baroness Kennedy of The Shaws

My Lords, but why can it not be used? It is used in New Zealand and Australia where people pay over money, as do any of us when, for example, we have builders working for us; we pay over a contribution for the work to be done. We never ask that the interest accruing on the money might be paid back to us. I suggest that we should look at ways in which other jurisdictions make use of the money creatively in furtherance of the law.

Noble Lords may ask why rich litigants should contribute in that way to their poorer brothers. I suggest that there are good reasons. The majority of the developments of the legal system occur on legal aid. Many of the beneficiaries are involved in commercial cases. The common law and commercial litigants are able to take advantage of the law as it is developed under legal aid. It is not inappropriate for client accounts to be used in the way that I suggest for the benefit of the law as a whole.

I hope that the noble and learned Lord the Lord Chancellor will do as was suggested in the report of the noble and learned Lord, Lord Woolf; that is, to require judges to hold the reins tighter in the management of cases. Furthermore, it might be worth considering the appointment of an inspector of courts who would be able to control the profession in its use of legal aid. There is too much double manning—of leading counsel with juniors in cases where it is wholly unnecessary. There is a protraction of cases, to which other noble Lords have referred. Perhaps we should even consider a right of action by legal aid boards against lawyers whose careless advice causes the continuation of funding beyond a certain point. That would certainly sharpen legal acuity.

I submit to this House that priority must be given to access to justice. I am glad that the noble and learned Lord the Lord Chancellor has been creative and has expressed his willingness to listen to those who have ideas to offer. Those opportunities should be seized by everyone to engage in fruitful dialogue because the justice system is essential to the well-being of this nation.

7.3 p.m.

Lord Hacking

My Lords, having listened to every speech in the debate, I reflect that we are living in unusual days. I was only a schoolboy, as was the noble and learned Lord although perhaps a little younger, when the post-war Labour Government introduced their great social reforms of the late 1940s. Of those, undoubtedly the most important were the foundation of the National Health Service and the legal aid scheme. In today's parlance, those important measures provided access to healthcare and to justice for every citizen in the land, from the poorest to the richest. Both are close to celebrating their fiftieth birthdays—the legal aid fund in 1999—and both have been subject to such massive changes that their original forms are hardly recognisable.

I use those bold words because at the heart of the noble and learned Lord's proposal on legal aid is the removal from the legal aid net, subject to consultation. of all money and damages claims from next April. I use those bold words because the noble and learned Lord has described legal aid as becoming a leviathan with a ferocious appetite That is not a description that one of his predecessors as Lord Chancellor, Lord Jowitt, would have recognised when he introduced the legal aid scheme into your Lordships' House in the 1940s. If it had been my government which introduced such a measure, as opposed to the noble and learned Lord's, there would have been an uproar.

During my early years at the Bar, more than 50 per cent. of my practice was under legal aid. It worked reasonably well: there was access to justice; good co-operation between the legal profession and legal aid; we accepted fees which were usually half the market rates; and no great excesses arose. Certainly, we were not in receipt of the riches to which the noble and learned Lord referred.

At that time, I served on an area legal aid committee in Leicester. I believed it important that I should do so. The committee met once a month and we did not hesitate to return papers to the applicant or his solicitors when we believed that a prima facie case had not been made out or to reject the application for legal aid when there was not sufficient justification.

The question which must be asked—and many questions must be asked about the proposals—is: what has gone wrong? The issues are not in the control of lawyers. There has been an increase in the range of civil claims; for example, in the field of negligence. We have become a more litigious society. Court proceedings— functioning, I emphasise, under increasing volumes of paper—have not been functioning so well and legal aid has been too easily granted. It is not that the threshold has been too low, but that the test has not been properly applied. Your Lordships may have read about the extraordinary applications made in the past few years to the Legal Aid Board by defendants who claim that bevies of plaintiffs should not have been granted legal aid, in response to which the board withdrew the legal aid certificates.

I believe that our starting point is one of sympathy with the noble and learned Lord the Lord Chancellor over the problem that he faces and his proposals to deal with the shortcomings in the civil justice system and the legal aid scheme. I read with great care the noble and learned Lord's speech to the Law Society on 18th October. I also read with great care the speech made in another place by his Parliamentary Secretary when it held a debate on these proposals on 21st November. I entirely agree with all noble Lords who have spoken that justice should be accessible to everyone, not just to the very rich and the very poor.

I believe that the noble and learned Lord has begun with sound proposals relating both to the civil justice system and to legal aid. As regards the latter, a number of sensible proposals emanate: for instance, contracting for legal services and fixed fees. The noble Lord, Lord Taverne, will take pleasure in that, although I, as a member of the Bar of the State of New York and a practising solicitor, did not take pleasure from some of the noble and learned Lord's remarks.

Other sound proposals were the application of quality standards, monitoring predictions on the opinions of merit, the merits test and that more hard reasoning should support claims. It was good to hear that we have a listening Government and that the noble and learned Lord intends to continue to consult with the professions and other interested parties. Congratulations should be extended to him on his conversion—I do not describe it as a Pauline conversion—as regards the conditional fees scheme, remembering the reservations which he expressed in this House when those proposals were put through by my government.

So far so good, but real concerns have been expressed. Your Lordships have expressed them during the course of the debate; for instance, the merits test of 75 per cent., the difficulties over the funding of disbursements and insurance, particularly in medical negligence cases, and the substitution of legal aid by the conditional fees scheme. I need not enlarge upon the comments made about the merits test of 75 per cent., although the noble and learned Lord received some support from the noble and learned Lord, Lord Hoffmann. However, I wish to enlarge upon the problem of funding disbursements and insurance.

When the Government have been pressed on that aspect, the answer has been given, certainly by the Parliamentary Secretary, that the solicitors can fund those disbursements; they can fund the premiums on the insurance. I have certain personal experience of that. At the moment I am supporting a case being brought by my son who was grievously injured in a motorcar accident in 1991. Without going into the details—it is a brain injury case—I can tell your Lordships that the cost of the medical reports and the expert witnesses for that car accident have now exceeded £25,000. That litigation is not taking place in England; it is taking place in New South Wales. Just transfer that type of expenditure on to any law firm, whether it be a country, provincial or London law firm and one can work out what the law firm would have to fund if it had 10 or 20 such cases.

The real worry in relation to the substitution of the legal aid fund is not as regards the introduction of the conditional fee scheme but as regards the cutting off of the legal aid fund. Sir Peter Middleton, in his report at paragraph 5.48 stated: My preferred approach, therefore, would be to allow the Legal Aid Board to consider, as part of the merits test for granting legal aid, whether a case was suitable for funding by some form of private arrangement". Therefore, the crucial question which we should address is not the extension of the legal aid fund but whether, as of 1st April, it should be substituted by the conditional fee scheme.

Those concerns have been expressed in many quarters. I chaired a meeting in your Lordships' House which was addressed by the Law Society, the National Consumer Council, the Consumers' Association, Shelter, the Legal Action Group and the Advice Services Alliance. Out of those, only one represented a legal group and the Bar was not represented. At that meeting, all the concerns expressed in your Lordships' debate were expressed.

Subsequently, I have received representations, as, I know, have other noble Lords, from the National Association of Citizens Advice Bureaux, the Law Centres Federation and Justice. Again, all took up those concerns. I was minded to read from the Justice report but since one of the authors of that report, the noble Lord. Lord Goodhart, is about to address your Lordships, I shall not do so but I hope he will.

The noble Lord is receiving the same representations. When the noble and learned Lord the Lord Chancellor sums up at the end of the debate, we should all like to know what heed he is taking of those representations.

What about other questions? How are the issues relating to disbursements and insurance being addressed? What are the precise arrangements for that agreement with the insurance industry about which the noble and learned Lord expressed pleasure? What form does it take? Is it binding? Are the premiums affordable? What are the experiences which have been gained so far in relation to the conditional fee scheme? Where is the evidence? How does the noble and learned Lord propose to deal with public interest cases? Why are there no proposals for mediation, conciliation or other forms of alternative dispute resolution, although those have been extremely successful and highly recommended by that noble and learned Lord, Lord Woolf? Above all, why is the noble and learned Lord proposing to substitute the legal aid system with the conditional fee scheme rather than following the good advice of Sir Peter Middleton; namely, that before you can receive a grant of legal aid you must satisfy the Legal Aid Board that alternative funding is not available? Of course, that would require a statutory change because under the present arrangements that is not a test which can be applied.

In posing those questions, these words of the noble and learned Lord at his Law Society speech ring in the ears: "If you act in haste, you repent at leisure". Of course, like his predecessor, the noble and learned Lord the Lord Chancellor must work with the Treasury, but to dismantle the legal aid system to satisfy the Treasury accounts of next year or the year after is an act in haste which we shall all repent.

7.15 p.m.

Lord Goodhart

My Lords, I share the concern expressed by almost all noble Lords who have spoken this evening in relation to the proposals of the noble and learned Lord the Lord Chancellor for the reform of the legal aid system. In particular, I share the concern expressed by many noble Lords as regards the over-hasty substitution of conditional fee agreements (or CFAs) for legal aid in money claims.

CFAs have advantages; they appear to be working in personal injury cases. They are undoubtedly here to stay. I accept that and, to some extent, welcome it because I believe they provide a facility for those who are just above the level of legal aid which has not previously existed.

However, personal injury cases and in particular, motor accident cases have special factors which, as the noble Lord, Lord Mishcon, pointed out, make them particularly suitable for CFAs. First, it is clear that there has been an accident. Secondly, that accident is almost always someone's fault. There may be the occasional accident like a tree falling on top of your car in a high gale which is not due to the fault of any human being, but that is quite exceptional. Thirdly, in motor accident cases which result in personal injury, there will have been a police investigation which will have helped very greatly to establish whose fault it is. The result is that the plaintiff can obtain insurance against liability for the defendant's costs for a fairly modest premium.

In other types of cases, that is much more unlikely to happen. Let us take as an example, as have many other noble Lords this evening, the case of medical negligence. In that case, one must start by asking the question: has there been an accident at all? It is true that the treatment or operation that the patient has undergone may not have worked, but that does not of itself show that there has been anything which could be described as an accident, let alone establish that someone is at personal fault for it.

Therefore, in such cases and other cases of professional negligence in other professions, a much more elaborate preliminary investigation is needed and at the preliminary stage at least, there is much less certainty of success. It is not at all clear in such cases that conditional fee agreements will work; nor is it clear that an acceptable insurance product can be provided in such cases for an acceptable premium. Whatever the insurance companies promise now, we must remember that their promises in cases of this kind are untested. We wonder what premiums will be charged in a few years' time.

Therefore, I ask the noble and learned Lord the Lord Chancellor to consider trying proposals for a contingency legal aid fund (or CLAF). CLAF is not a new idea. It was first proposed by Justice in our report on motor accident cases in 1966. That proposal was followed up by a report published by Justice in 1978. I was chair of the working party which drafted that report. Another small working group of Justice, of which I am a member, has looked again recently at our proposals and confirmed our support for them, although with a modification to which I shall turn later. CLAF is indeed supported rather strongly by the Bar Council.

So, for the benefit of those who are not familiar with it—and that may include a number of lawyers—what is CLAF and how does it work? The basic idea is that a potential plaintiff with a money claim (and, like CFAs, this will work only where there is a money claim), applies to the fund for help. If the application is accepted, the fund will pay the plaintiffs legal expenses in the same way as legal aid does at present. If the plaintiff loses, the fund will pay the defendant's costs. If the plaintiff wins, or gets damages in an out of court settlement, the defendant will pay to the fund the costs that it has incurred on behalf of the plaintiff. The fund will also be entitled to a deduction from the damages payable to the plaintiff in the same way as a solicitor is entitled to deduct a success fee from damages under a conditional fee agreement.

The original Justice proposal was that the deduction should be a specified proportion of the damages awarded to the plaintiff. At that time there were no CFAs. Our revised proposal, in the light of the existence of CFAs, is that the deduction should be calculated as a percentage of the costs incurred on the plaintiff s behalf in the same way as CFAs. That percentage need not be fixed as the same percentage for all cases, but can be assessed on a case-by-case basis.

Therefore, one might ask why a CLAF rather than a CFA? The latter has the advantage of simplicity. A potential client can go to a solicitor, agree a success fee—I was going to say "negotiate", but it is unlikely that much negotiation will take place—then the solicitor arranges the insurance policy and he can get on with it. That is true enough, but I also suggest to your Lordships that CLAF has significant advantages over CFAs. For example, CLAF has advantages for solicitors. Many solicitors would prefer the certainty of getting their normal fees to the risk of getting no fee at all if they enter into a CFA. That is especially true of smaller firms which will not have enough CFA work on a regular basis, to enable them to know how accurately to calculate the risk, and which do not have regular contact with insurers.

CLAF has advantages for the administration of justice. Lawyers will not be at risk of losing their fees if they lose the case. It removes the risk that, for example, a lawyer may be tempted, as has been suggested, to withhold the disclosure of damaging material which emerges at a late stage in the proceedings. At the same time, the fund can negotiate fixed-fee contracts to ensure that the problems quite rightly pointed out by the noble and learned Lord, Lord Hoffmann, are held in check. Finally, CLAF has advantages from the point of view of the client. He will not have to pay the up-front costs of preliminary investigations or of an insurance policy which, certainly in medical negligence cases, are not only enough to put off those who currently qualify for legal aid but also many who do not qualify for it.

Will CLAF be more expensive than CFAs? There is no reason why it should be. It is true that there is the cost of administering the fund which would have to be met, but the wider pooling of risk, the greater experience of risk analysis and the absence of need to buy an insurance policy from a profit-making insurance company, should offset that fact. CLAF is, of course, intended to be self-financing. It could be administered by the Legal Aid Board or perhaps contracted out, as the administration of legal aid originally was, to the Law Society or some other organisation. The most that would be required in terms of finance would be a possible short-term loan or guarantee to cover payments that would have to be made out of the fund before the success fees started coming in.

I do not share the fears expressed by the noble and learned Lord the Lord Chancellor in his speech to the Law Society conference; namely, that if CLAF and CFAs are in competition, the latter would necessarily cream off the stronger cases. It is possible that CFAs would become the predominant method of financing certain types of case, in particular road accidents and other straightforward personal injury cases. However, in others, such as medical and other professional negligence cases, I believe that most potential litigants would actually prefer CLAF to a CFA. CLAF is not a panacea. However, I believe that it is an idea well worth trying. Indeed, an experimental scheme in Hong Kong has worked so well that it has been considerably expanded.

In his speech to the Law Society conference in Cardiff, the noble and learned Lord the Lord Chancellor promised to consider CLAF. He repeated that promise today. I ask him to do so and to take the next step; that is, to set up a pilot scheme, perhaps on a regional basis in some part of the country, for an experiment in CLAF to see whether it will work. I believe that he may well be pleasantly surprised by the result of that experiment.

7.25 p.m.

Lord Simon of Glaisdale

My Lords, there has not been one speaker who has addressed your Lordships today—and none, I believe, who is to follow—who has not put access to justice high among the social goods. However, as has been pointed out, that is not alone. There is access to health; there are such fundamental matters as national security, both external and internal; there is our duty to the poorest of our fellow citizens, and so on. Indeed, one could go on almost infinitely.

My noble and learned friend the Lord Chancellor hastened to say in his opening remarks that his scheme was not Treasury driven. I do not believe that it would require an apology if it were. I say that because, unless accounts are kept in the counting house, there will be no bread and butter to eat in the parlour. The figures that have been given show that by 1992 the Legal Aid Fund was utterly out of control. My noble and learned friend Lord Mackay of Clashfern, as Lord Chancellor, brought in measures to curb it. They mainly—I believe almost exclusively—went to the eligibility test. As your Lordships have been reminded, when the legal aid scheme was set up there were two tests. The first was that of eligibility—in other words, you had to show that you need support to have access to legal aid. The second was a merits test. The case had not to be, as my noble and learned friend Lord Hoffmann seemed to think, merely arguable; it had to be the sort of case which was worth presenting to the court and was more likely to succeed than not.

My noble and learned friend Lord Mackay of Clashfern was furiously attacked on that occasion. It was in a debate which took place on 3rd February 1993, initiated by my noble and learned friend the Lord Chancellor who presently sits on the Woolsack. I took note of some of the terms that were used, not all of them by my noble and learned friend. For example, it was said that the proposals "would destroy access to justice"; that they were "a disaster" and, indeed, an "outrage". Reference was also made to the "madness" of the scheme.

It would be naïve politics to suppose that the invective of opposition is automatically transposed into the policy of government. In fact, finding that legal aid costs have increased despite the measures of his predecessor, my noble and learned friend on the Woolsack has gone on to further them. As I understand it, the main components are threefold: first, contracting for legal aid services from the professions; secondly, upping the merits test to require a 75 per cent. chance of success; and, thirdly, mopping up by a comprehensive no win, no pay scheme, thereby pushing further the proposals of the noble and learned Lord's predecessor.

As regards the contracting, I wish to ask only one question. Much depends on the terms and particularly the length of the contract. Is it likely to lead to a scheme of public defenders? That would, I think, be regarded very much askance by all who are conversant with the criminal system. That is all I have to say about the first item.

The second item, a 75 per cent. chance of success, eliminates an enormous tranche of those who were previously eligible; all those, in other words, whose chance of success was better than 50:50, whose case was more likely to succeed than to fail. They will have to show instead a 75 per cent. chance of success. I agreed with what was said by the noble Lord, Lord Lester of Herne Hill, and I believe others. I cannot remember ever having quoted a percentage figure. One generally said that there was a good or a reasonable chance of success. One was warned against the rare cases where a client had been told that he was sure to win and the case was infallibly lost. Therefore, there is an enormous number eliminated from access to justice through legal aid.

When my noble and learned friend's scheme comes into operation, there must be only a few "middle incomes" left who would be eligible. How does my noble and learned friend propose to deal with the vast numbers of "middle incomes" that the Rushcliffe Committee counted on bringing under the legal aid scheme—legal aid which had previously been available only under the forma pauperis' scheme and the Poor Prisoners Defence Act, on which many young counsel cut their teeth, and sometimes no doubt a client was lucky enough to light upon an Erskine, a Clarke or, dare I say it, an Alexander, a Gardiner or a Baroness Mallalieu? I am being invidious as I have missed out the noble Baroness, Lady Kennedy. There was luck in the draw but some were lucky. All those who badly needed it obtained the service. However, my noble and learned friend proposes to deal with all those who are now included—and will be excluded—by a generalised no win, no pay scheme.

The first thing to say is that it reaches only money and property cases. The second is that the cost of insurance has been dealt with and is likely to be far more discouraging than any legal aid contribution that there has been in the past. The third thing is that it is not only those financial and technical matters that should concern your Lordships. We have had examples of no win, no pay. My noble and learned friend says that the scheme so far has not thrown up examples of abuse. However, as has been pointed out, it has been barely tested. Moreover, we know what it has led to in America. There are grave signs that it may go the same way here. An advertisement caught my eye which asked people if they had any complaints about medical treatment or mistreatment in a hospital. They were advised to communicate that with the advertising solicitor.

Moreover, in my time in practice there were one or two who practised no win, no pay, although that was quite unprofessional. I remember one member of the Bar who was habitually instructed by his brother, a solicitor. I am sure that the noble Lord, Lord Mishcon, will immediately recognise the malign pair. They were up to every mischief that could be performed in a court of law. On one occasion counsel was rebuked for telling a jury that the defendant was insured. Counsel said blandly, "I did not know that that was illegal. I thought it was merely a gross breach of professional etiquette". Do we really want that? Are we not in danger of that? Of course, little has gone wrong so far because the members of the legal profession have been brought up in a tradition that discountenanced that sort of behaviour where the financial result to the practitioner depended on his winning the case. But it is a serious temptation to people whose career might be in balance, who perhaps have calls on their finances which they must meet, and so on. It is dangerous.

That process might be acceptable if it were the only way of plugging this enormous gap that has been created by my noble and learned friend and his predecessor and indeed by ordinary economic events—affluence moving people out of the scope of eligibility. If that were the case we might be prepared to accept it, however reluctantly, but it is not the only expedient.

The noble Lord, Lord Goodhart, whom I am glad to follow, has explained in detail and with great clarity the advantage of the Contingency Legal Aid Fund. I urged it on your Lordships when we were discussing legal aid in the context of the Human Rights Bill. It has now been put forward with great authority and cogency. At one time it was thought by the Royal Commission that it was not viable: there would be too many bad cases and too few good cases. But now we have all those cases ranging from a 50 per cent. to a 75 per cent. chance of success. Many cases are likely to succeed; they will be well worth taking on. It would be an affront to shut those people out from access to justice. Moreover, as the noble Lord, Lord Goodhart, mentioned, the scheme has been tried out in Hong Kong. It was a success and has been expanded there. It has also been practised in two Australian states. There, too, I think that it has been successful.

In summary, I am entirely with my noble and learned friend in his aim to contain the legal aid budget. But I have the deepest trepidation about his main theme; namely, demanding an eligibility test of 75 per cent., and having recourse to plugging the gap from the no win, no pay scheme, with all its disadvantages and dangers. I urge my noble and learned friend to consider seriously the criticisms of the no win, no pay scheme that have been made overwhelmingly today from all parts of the House and instead to consider the scheme propounded by the noble Lord, Lord Goodhart.

7.41 p.m.

Lord Windlesham

My Lords, when I put my name down to take part in the debate, I had intended to make a short speech concentrating on a single aspect of the Government's proposals to curtail, if not to withdraw completely, legal aid from most civil cases. However, your Lordships will be pleased to hear that in the light of the opening speech by the noble and learned Lord on the Woolsack, it will be possible to shorten my remarks even further.

I hope that I am right in understanding that legal aid will continue to be available to eligible applicants charged with criminal offences. But for a few moments I wish to draw the attention of your Lordships to those persons with one foot on either side of the line dividing criminal and civil proceedings.

What will be the situation when prisoners, many of whom are indigent, bring civil actions by way of judicial review seeking remedies for wrongful decisions or policies relating to their detention in custody? We must remember that not all such applicants will have been convicted of a crime. The growth in the remand population means that a substantial proportion are held pending trial, or sentence or awaiting deportation. Civil actions are brought by prisoners on various grounds. Their challenges may include the lawfulness of detention or continued detention after the expiry of the penal term. We must expect a considerable growth area in that category in the light of the extended sentences which are forecast in the recently published Crime and Disorder Bill.

Litigation may arise also from conditions in custody, prison rules or regulations, or many administrative decisions made by officials. Some of the grounds for complaint will fall within the ambit of the convention rights under the European convention which are due to become part of our domestic law when the Human Rights Bill is enacted, as it will be shortly.

I had intended to raise the funding of civil cases brought by prisoners claiming violations of convention rights after incorporation during the Committee stage of the Human Rights Bill. In the event, I was unable to be present when the amendments on legal aid were finally reached; but I gave notice that I intended to raise the matter again today. Although the noble and learned Lord the Lord Chancellor spoke rapidly in the early part of his speech—he had much ground to cover—I believe I heard him accurately to say that cases brought in the domestic courts under the Human Rights Bill when enacted will be subject to legal aid. If that is so, I am delighted to hear that the Government have avoided what would have been the illogicality of one procedure at Strasbourg—British prisoners, having exhausted their domestic rights, take their case before the Commission and Court of Human Rights at Strasbourg where there is a limited amount of legal aid payable once a case has been found to be admissible—and another procedure, and a less favourable one, in our own courts.

At a later stage, if not when the noble and learned Lord winds up the debate, I hope that it will be possible for the Lord Chancellor to confirm that consistency with the Strasbourg procedures will be maintained by not requiring an unsuccessful applicant to contribute to the costs of the Government against whom he has made a charge of breach of a convention right.

That leaves us with the prison litigant who cannot bring his or her claim within the enumerated convention rights. But in the light of the Lord Chancellor's mildly encouraging comments about public interest cases—

Lord Lester of Herne Hill

My Lords, I am grateful to the noble Lord for allowing me to intervene. Since he presses upon the House with great force, and in my respectful view with reason, the need to ensure that we have the same advantages in our systems in Strasbourg, is the noble Lord aware that one of the advantages of the Strasbourg system is that an unsuccessful applicant does not have to pay the Government's costs? Therefore, there is no risk as to the other side's costs in those proceedings. That is not the case under our domestic proceedings.

Lord Windlesham:

My Lords, I am grateful to the noble Lord for that point. I had thought of making it, but in the interests of brevity I have not done so. I am glad that he has placed it so clearly on record. Therefore there is this remaining sub-group, the status of which will be the subject of a consultation process forecast for the New Year.

Finally, based on many years' experience, I am well aware, as are others in the House, that prisoners are not the most popular of litigants. But effective redress against the abuse of arbitrary power must not be jeopardised by these reforms. I am mildly encouraged by what the noble and learned Lord the Lord Chancellor said in his opening remarks. I hope that that spirit will be preserved in this instance throughout the consultation procedure and the legislation which will follow it next year.

7.49 p.m.

Baroness Williams of Crosby

My Lords, as one of, I think, only three speakers in the debate who have previously been Members of another place, my experience of the law as a Member of Parliament may be a good deal less favourable than that of a number of people who have spoken who happen to be professionally involved in the law. Indeed I remember, on many occasions, deeply confused constituents coming to me who, in some cases, had paid £50 or £100 which they could not afford in order to have a letter written to a Minister by a solicitor which could have been written by their MP for no more than the cost of a stamp, if that.

I remember repeatedly coming across the extraordinary degree of illiteracy in relation to the law that exists in this country because we teach nothing of it in our schools and little enough in our colleges, and therefore the way in which many of my poorest constituents were open to exploitation. I found the profession deeply divided between those who were all too ready to exploit the ignorance of those I represented (and of myself) as compared with the handful of lawyers who devoted themselves a great deal of the time to some of the most tremendously serious cases I have ever encountered—and still do: cases of women, for example, gaoled by lower courts because they have failed to pay debt, who are then taken out of custody only as a result of a judicial review, usually brought by a lawyer who is paid little or nothing for his services. So I see the profession as profoundly divided. I have considerable sympathy with the phrase used by the noble and learned Lord the Lord Chancellor. He described the present system as, "too expensive and too exclusive". He is right in saying that substantial reforms need to be made.

Perhaps I may draw a momentary comparison with the other service which is publicly funded and which we discussed today, the National Health Service. It is less clear to me that the professional interests of those in the health service have been as predominant in terms of the way in which the money flowing to that service has been used as have the interests of at least some in the legal profession. I apologise for putting it so strongly, but I was reminded time and again of the saying of Anatole France that, The law in its majesty forbids the rich and the poor alike from stealing bread or sleeping under bridges". That saying rings through my head from that day to this. As the House will appreciate, I have no financial interest in this debate.

I welcome particularly the remarks of the noble and learned Lord the Lord Chancellor about fixed fee contracts. I am delighted that so many noble Lords and noble Baronesses have recognised the force of that argument. Listening to the noble and learned Lord introducing the debate, I began to wish that he might relent for a short while and regulate rewards in the City, which perhaps require his ministrations even more than the legal profession. I welcome that measure. I welcome, too, the noble and learned Lord's efforts in trying to bring about an extension of the conditional fees, at least in those areas where cases are straightforward and where the matter of conditional fees works satisfactorily.

I wish, however, briefly to raise four concerns, some of which were mentioned by other speakers in the debate. I do not wish to pursue them, but merely to ask the noble and learned Lord whether he will be so kind, in replying, as to address them.

The first, raised by the noble Baroness, Lady Kennedy of The Shaws, and my noble friend Lord Lester, concerns public interest cases. Like the noble Lord, Lord Windlesham, I am conscious of the fact that cases where the chances of victory are certainly not 75 per cent. or are uncertain, may be cases where the public interest is of central importance. The noble Lord referred to the absolute necessity of ensuring that public servants are not above the law. Nobody who has been a Member of Parliament, or for that matter an active member of a non-governmental organisation, can pretend that everything in our police force, our prisons, our Immigration Service and, not least, our treatment of refugees is such as to deserve no legal sanction should their powers be abused. If their powers are abused, every time that happens it is another blow against trust in the democratic system, and rightly so. It is the wretched of the earth who tend to be the victims in such cases, and their public interest must be defended.

I therefore wish to press the noble and learned Lord the Lord Chancellor with regard to public interest cases where it is difficult to make an estimate as to a likely outcome of 75 per cent. or more. In particular, would he be willing, in exceptional cases, to consider the possibility of including not only those who are qualified lawyers but perhaps one or two others drawn from the ranks of Citizens Advice Bureaux and law centres to share in decisions as to the cases that might go ahead? I do not believe that lawyers have an absolute monopoly on wisdom in selecting which cases are of such importance that they should be further considered.

My second consideration—the first being public interest cases and the link to the 75 per cent. test—concerns the issue of "up-front" costs, addressed so eloquently by the noble Lord, Lord Mishcon. Again, I do not wish to delay the House, but ask the noble and learned Lord the Lord Chancellor to say a little more about those cases where the up-front costs of finding independent witnesses and so on are likely to be high before any decision can be made about the likelihood of success.

Thirdly, I wish to turn briefly to the civil justice proposals so admirably advanced by the noble and learned Lord, Lord Woolf, and ask about cases involving small claims of under £5,000 where, although the claim itself may be for less than £5,000, much more is at stake for the person involved. The noble Baroness, Lady Kennedy, referred to the case of her mother. Another case that comes to mind is that of tenants seeking repairs from rapacious landlords where the actual cost of the repair may be much lower than £5,000 but for the tenant the likelihood of being able to stay in a house, and the house being livable in, is of central importance to his or her quality of life. Will the noble and learned Lord the Lord Chancellor comment further on up-front costs for those on low incomes?

Penultimately, perhaps he will say something about mediation. I have seen a good deal of the effects of mediation in the United States, particularly in the states of Massachusetts and Maine. I have been very impressed by its effectiveness, particularly in cases, for example, of marital conflict in relation to the division of property, but also in some cases relating to boundaries between gardens and matters of that sort. I noted how large a proportion of the costs that would otherwise be involved was saved by the use of mediation in appropriate cases.

Finally, I turn to the noble and learned Lord's remarks about community law services. I said that as a nation we are relatively legally illiterate. Most of us do not even understand what a plaintiff is; most of us cannot understand legal language; and I have seen many of my constituents totally confused and in awe before a court because they simply do not know what is going on, except that at the end of the day they will probably find themselves behind bars.

The community legal service is therefore of crucial importance. I would like the noble and learned Lord to say more about it, remembering what he also said on the Human Rights Bill with regard to the possibility of assistance and help in respect of learning about human rights as well. Will he address the possibility of making legal expert systems available in public libraries and in the offices of other non-governmental organisations? Such systems sound very swish. They are not; they are often very simple descriptions of people's legal rights, including, not least, their rights to social security. Will he also consider a more radical proposal; namely, making such on-line legal advice services available in prisons?

7.59 p.m.

Baroness Mallalieu

My Lords, I should declare an interest: I owe my living to the Legal Aid Fund as a practising member of the Bar, albeit the criminal Bar, and certainly not one eligible for the list that the noble Lord the Lord Chancellor gave in his opening remarks; and I am also the paid chairman of an independent council of an ombudsman scheme, which is relevant to something I shall say.

I believe that the House will be grateful to the noble Lord the Lord Chancellor for giving it an opportunity to discuss what are, on any view, radical reforms to the legal aid system and the criminal justice system. There has been a great deal of detailed examination by noble Lords from all sides. Perhaps I could go back for a moment to the first principles of what civil justice, as I understand it, is all about. The civil justice system surely exists to serve the public. It should be run in their interests and for their benefit, not for the judges, the lawyers, the Lord Chancellor's Department or the Treasury. Its purpose is to ensure that justice is done between our citizens when disputes arise which cannot be resolved in other ways. Our Government bear the ultimate responsibility for ensuring that the system works, and I hope they accept the responsibility for ensuring that, where possible, given their other priorities, public money is available to see that it does work.

Civil justice, after all, underlies good order in our society. If it breaks down or fails, so does public respect for and compliance with the rule of law. A civil justice system can surely be said to be working well only when it fulfils five criteria. First, it should deliver justice of a high quality in which the public has confidence. That, I hope, is a principle which will never be sacrificed in the interests of expediency or cost. Secondly, the system should be as simple as can be devised. It should not be necessary to have to take the hand of a lawyer every time one needs to enter the labyrinth of the law, particularly in its lower reaches. Thirdly, it should be speedy. Wrongs must be righted quickly or their effects magnify. Fourthly, the system must be worth the money. Those who pay for it, whether they are individuals or the public, must get their money's worth. Finally, it must be accessible to all. No one should be excluded by reason of cost.

The noble and learned Lord the Lord Chancellor inherited a system which is open to criticism under each of those five headings. I believe that under some of them it seriously fails the public. The measures which the noble and learned Lord proposes are all intended to restore that system to good health, given the constraints which every government department faces at the present time. Most of the proposals he makes are right on course and will have much of the effect that is desired. About one of them, I, in common with many noble Lords who have spoken this evening, have some reservations, to which I shall refer.

First, I believe that the proposed community legal service should be the starting point for the necessary changes. The court should for most disputes be the port of last resort. "Do not litigate" is usually the best advice that any lawyer can give; too often it is advice which is simply not given. By expanding the work of the citizens advice bureaux and the legal advice agencies, giving active support to alternative forms of dispute resolution, such as ombudsman schemes, financed by their respective industries, and pointing members of the public in the right direction redress can in many cases be provided in a way which is cost-effective, widely accessible and fair and without recourse to the courts at all.

If cases do come before the courts, implementation of the proposals of the noble and learned Lord, Lord Woolf, particularly in relation to small claims jurisdiction, fast-tracking and judicial case management, is particularly welcome as a means of tackling the delay, complexity and waste which riddle the present system. Greater predictability about the likely costs should also result—and about time, too.

My main reservation with regard to these proposals centres around the plans of the noble and learned Lord the Lord Chancellor for tackling an area in which the current system is most manifestly deficient—accessibility. As the noble and learned Lord has pointed out in the past, we are failing to produce a system which is affordable to a significant proportion of our people. Ironically it is not the same proportion of our people who were denied access to justice back in the late 1940s when legal aid was introduced by a Labour government. The very poorest are now covered by legal aid. Indeed, I understand that most recipients of legal aid are in receipt of state benefits. The dispossessed are now those who have little—sometimes only a very little—and those on middle incomes.

It is universally accepted that action is necessary. The Lord Chancellor's choices are limited. Legal aid cannot realistically be extended to them, much as many, if not most, would wish it to be; nor can the Government do nothing. Unlike some noble Lords, notably the noble Lord, Lord Campbell of Alloway, and the noble and learned Lord, Lord Ackner, while I retain instinctive reservations about conditional fee agreements, I am not implacably opposed to them. I suppose that those instinctive concerns are because I was brought up in a profession in which to have a direct financial interest in the outcome of a case was regarded as undesirable. I can see that in certain circumstances the interests of a lawyer will not be those of his client: they may indeed be opposed to his client's interests. His interests may not necessarily be the interests of justice either. However, I am bound to say that my views are philosophically incompatible with those of the noble and learned Lord, Lord Hoffmann. who would appear to go much further in his wish to see contingency fees.

The change from a professional ethos to a commercial approach will he an uncomfortable one for many of us within the profession; but, if it needs to be made, it must be made. My discomfort is in part because, as experience in other jurisdictions has shown, this is not necessarily a change which is of benefit either to the public or to the profession. I was glad to hear from the noble and learned Lord the Lord Chancellor at the outset that in his view these conditional fee agreements are working well. But I retain considerable reservations about whether the system could cope with the massive explosion which would undoubtedly and necessarily occur if legal aid were to be terminated for such cases, as he proposes, in April of next year, in just over three months' time.

My main concern was articulated most eloquently by the noble Lord, Lord Mishcon. I am concerned that smaller high street firms, which at present offer the public a choice, will reject complex cases, partly because they will require what I think are known as work-up costs, the preparation of the kind of reports to which he and the noble Lord, Lord Hacking, referred, experts' reports, and so on, particularly if the costs are to be borne by the solicitors themselves. It may be that the noble and learned Lord the Lord Chancellor has had promising discussions with the insurance industry. But at the end of the day someone will have to pay the premiums, and many people will not be able to afford even those which are considered reasonable. Larger firms may be prepared to take such risks and loss-leaders; they may not. I am afraid that litigants with a good case who need help may find themselves going from door to door to door, down the high street and beyond, until their cases are taken on, if they can find anyone to take them on, by the least well qualified and least reputable firms. Lawyers' profit margins, and still less insurance companies' profit margins, are not necessarily the same as the interests of justice.

Like other noble Lords, I am pleased and relieved that the Government accept that public interest cases will require special provision. I am also encouraged that the noble and learned Lord the Lord Chancellor accepts that the merit test will in some cases have to be flexibly applied and, who knows, might even be applied so as to allow some of the cases of the noble Lord, Lord Lester, to be treated in such a way. I hope that, in view of all that has been said, particularly by those with great experience in the profession over many years, the Government will not contemplate the hasty removal of the present legal aid provisions in April without first having in place satisfactory insurance provisions to guarantee that the poorest people are not put back into the pre-1949 position.

The noble Lord, Lord Goodhart, spoke of the contingency legal aid fund. I add my voice to the numerous voices which urge the Lord Chancellor to consider that to be an idea well worth trying. If it should prove to be something which, after initial start-up costs, could be self-financing, it would appear to offer an alternative means of ensuring that the litigant with a good cause, whatever his means, has access to the courts. Without such a provision and in the absence of legal aid, I have grave doubts as to whether conditional fee agreements could fill the void that would be left behind. Also, I am troubled by the apparent timetable of April 1998.

I therefore ask my noble and learned friend to assure us that the present system will not disappear before he is quite satisfied that that part of our present population which is least able to pay will not be worse off under the new one. There is universal support for change; it has to come. There is universal support for modernisation of our civil justice system, and I congratulate my noble and learned friend for grasping the nettle and, if I may put it this way, thinking the unthinkable. But before we make these changes, we must be quite sure that they are also improvements.

8.10 p.m.

Lord Brightman

My Lords, I intend to speak quite briefly on one subject only; namely, the legal aid scheme which is known as the contingency legal aid fund—commonly called CLAF. It gave me great satisfaction to hear it supported by the noble Lord, Lord Goodhart, by my noble and learned friend Lord Simon of Glaisdale and by the noble Baroness. Lady Mallalieu.

As your Lordships will know, the purpose of CLAF is to protect a plaintiff who has a good cause of action against liability for his own costs and liability for the defendant's costs if, contrary to expectations, his action fails. The prospective burden of costs is undoubtedly one of the most frightening features of civil litigation for the ordinary person. It is the factor that is most likely to deter a plaintiff from enforcing his rights, however just his case may seem to be, for almost all litigation contains an element of risk.

A CLAF scheme has three undeniable advantages. First, if properly managed it is self-financing and costs the taxpayer nothing. Secondly, it does not displace other forms of legal aid, but can exist alongside them. Thirdly, it is not subject to any means test because, being self-financing, it needs none.

CLAF works in this way. A central fund is first established. I will mention later how that has been done elsewhere. A plaintiff who wishes to be indemnified against the risk of having to pay his own and the defendant's costs must show that he has a good case which, prima facie, ought to succeed; an arguable case, a case with a mere 50:50 chance of succeeding is not acceptable under a CLAF scheme. CLAF is not intended for speculative litigation. It is for what my noble and learned friend the Lord Chancellor described as a case with a high probability of success.

The percentage of damages recovered by successful plaintiffs payable to CLAF is intended to cover the costs payable by unsuccessful plaintiffs and the administrative costs of running the CLAF scheme. It will be appreciated that CLAF is not designed for the protection of defendants; it is a service for the benefit of plaintiffs. The beauty of CLAF is that it gives legal assistance to deserving plaintiffs without any resort to central funds and without involving lawyers in the outcome of the law suit because they are not affected.

CLAF has been under consideration in this country for a long time. It was first advocated in 1966. It was mooted before the Royal Commission on legal services in 1978—the Benson Commission. It was debated in a consultation paper issued by the Lord Chancellor's Department in 1991 and in the report presented to the Lord Chancellor by Sir Peter Middleton in September of this year. Sir Peter advised that the possibility of establishing a CLAF, "is definitely worth exploring".

A CLAF scheme was set up in Hong Kong in 1984 as an adjunct to legal aid. The initial funding consisted of a loan from the State Lotteries Fund. That loan was fully repaid in 1988. In the first six years the success rate of accepted cases was approximately 95 per cent., which was adequate to cover the liabilities arising out of unsuccessful cases and also the administrative costs. In the year 1994-95, which is the last year for which I have been able to obtain any details, income comfortably exceeded expenses by about 125,000.

I ought just to say a word about the arguments against CLAF which were outlined in Chapter 6 of the Lord Chancellor's 1991 consultation paper. At paragraph (11) it was said, It might be thought wrong in principle to expect successful litigants to subsidise the unsuccessful". So it would he if such subsidising were imposed on a successful litigant. But there is nothing wrong in principle in allowing a potential litigant to agree to such an impost, if he thinks fit, in return for the cover against costs that would be afforded by a CLAF scheme.

Paragraph (12) states: It might be thought wrong in principle that successful parties should have to forgo a proportion of their recovery to finance their case". The CLAF system is merely a type of voluntary insurance. Whereas normal insurance involves paying a fixed premium at the commencement of the period of risk, a CLAF scheme involves paying a variable premium at the termination of the period of risk and then only if the risk insured against does not materialise. The litigant in effect insures against the risk that he will lose his case and be liable for his own and his opponent's costs by promising to pay a premium if and only if he wins. Of course it results in successful litigants financing unsuccessful litigants. But there is nothing wrong in that. Take an ordinary policy of insurance; the insurance company takes money from those who do not have fires in order to compensate those who do have fires. I see nothing wrong in principle in a CLAF taking money from those litigants who win their cases so as enable the CLAF to compensate litigants who lose their cases.

Paragraph (14) states: Litigants with good prospects of success would decline to use the scheme, putting its financial viability in jeopardy". I do not agree. However good a case may appear to be at the start, litigation—particularly in personal injury cases—involves some element of uncertainty. Few cases are 100 per cent. certain of success. No doubt when the surgeon amputates the wrong leg, negligence and causation present no problem and the only area of dispute will be the quantum of damages. But most cases involve some element of risk and if there is an element of risk prudent persons will wish to insure against that risk. For those reasons I do not accept the generalisation that litigants with good or very good prospects for success will decline to make use of a CLAF scheme.

Paragraph (16) states: Although a CLAF would ultimately be self-financing, some initial funding would be required while it established itself". That is so. In Hong Kong a loan facility of 1 million Hong Kong dollars was made available from the State Lottery Fund when the scheme was set up, but only £31,000-400,000 Hong Kong dollars—was drawn down; and, the debt was paid off in two-and-a-half years. If cases are accepted with due care and the percentage fees payable by successful litigants are appropriately fixed, I see no reason why a comparable result should not be achieved in this country.

Paragraph (17) states: It may not be possible for a CLAF to cover all classes of case". I agree, and suggest that a cautious and selective approach is essential, particularly in the beginning. The scheme can always be widened later, as it has been in Hong Kong.

Lastly, paragraph (20) states: A CLAF imposes little or no discipline on litigants, in terms of weighing prospects against the cost of their case". I think it would be wise for a CLAF scheme to impose discipline by requiring a plaintiff to pay a small percentage of the costs payable by him to a successful defendant. By this means an applicant for CLAF support would have an incentive to take a realistic view of the prospects of his case. I do not find the arguments against a CLAF scheme in the 1991 consultation paper particularly overwhelming.

I would ask my noble and learned friend the Lord Chancellor to accept the conclusion of Sir Peter Middleton, that: The possibility of establishing a CLAF is definitely worth exploring". I would submit that the Government should embark on that exploration.

8.21 p.m.

Baroness Oppenheim-Barnes

My Lords, I was fortunate enough to make my maiden speech in your Lordships' House in 1989 in the debate on the reform of the legal profession. I apologised then for my presumption, as I do now, for I am only too well aware of the great wealth of legal expertise and skill in advocacy in your Lordships' House. which, unfortunately, I do not have. My only appearance in court was as a defendant in a speeding case, so I cannot claim any qualification. However, I have the temerity to take part in this debate because my feelings are so strongly engaged.

At the time of the 1989 debate I was chairman of the National Consumer Council. In that debate I referred to what was then our recent publication Ordinary Justice, my main concern being access to justice for those at the lower end of the income scale. Indeed, I particularly welcome today the proposal to raise the limits for small claims court cases. It is interesting to recall that back in 1972, when the then Conservative Government were proposing new ideas on the small claims court in order to make them less daunting for ordinary people, there was uproar from honourable Members in the legal profession on both sides of the House. I am sure that noble Lords will not be surprised to hear that that was the case even then.

At the time of that debate I was concerned mainly that the costs and the delays in going to law made it a daunting experience for many people. Since then, as has been said often in today's debate, legal aid costs have soared, as have legal costs outside legal aid. One must wonder what the connection is. A bonfire has been lit and if noble Lords will excuse the mixed metaphor, at the same time the pendulum has swung far too far against the interests of a very large sector of the public—those on middle incomes, those on lower middle incomes and even those on upper middle incomes—for whom there is virtually no access to justice. They cannot possibly afford to prosecute or defend a case in which their opponent is legally aided. Even if they win the case and costs, they are usually landed with the bill for their own costs because their legally aided opponent has no means with which to pay. That is deterring a large section of the community—not litigious people but people who are defending themselves. They may realise that it could be cheaper for them to make an offer than to be landed with costs. That cannot be considered justice.

The Legal Aid Board is fully aware of that when it sanctions legal aid, all too often where the case of its clients is far from strong and where numerous adjournments are used because they will not cost the legally aided party anything but disastrously swell the costs of the other party and the fees of the legal aid lawyers. They go along very happily with these adjournments and anything that will bump up the costs. At the other end of the scale huge sums of legal aid are paid out on behalf of those who have successfully managed to conceal their wealth. I know that the Lord Chancellor has those people in mind just as much as the others.

At this point I should like to emphasise that I do not go as far in my condemnation of the status quo as some people who have said that legal aid is a "gravy train" for unscrupulous lawyers at both end of the scale, that lawyers avail themselves of a blank cheque in legal aid payments and that this has led to a very great increase in legal costs all round. But I do assure your Lordships that one is hearing that kind of criticism more and more frequently these days and some of it is merited.

Many of your Lordships have spoken of particular concerns and anomalies that could arise for certain groups if the proposals go forward unaltered. Many of those examples will, I am sure, be considered by the Lord Chancellor. My chief concern in that category is the effect that the proposals could have on personal injury cases. This point has been raised by noble Lords with great expertise. It is one of the areas that will need careful attention. As for insurance and its cost, it occurs to me that any solicitor defending on a contingency basis a person with no means whatever, and who will not be called upon to pay any costs even if he loses, will not find it beneficial to buy insurance.

A great deal has been said in the debate about ethical questions in relation to contingency fee cases. As someone said, there may be shyster solicitors chasing ambulances and things of that nature. There is not very much difference between that and those lawyers today who use legal aid costs as a blank cheque for their own means. In ethical terms I cannot see that there is a great deal of difference.

A number of noble and learned Lords of great distinction and legal expertise have said, or insinuated often, that the proposals that we are debating are Treasury driven. Maybe they are and maybe they should be. But the principle of giving access to justice, which is now denied to so many by cost, is what we should keep in the forefront of our minds at this time. I believe that the principal purpose of these proposals is right. I congratulate the noble and learned Lord the Lord Chancellor on his courage in bringing these matters forth. I wish him every success in future in what I am sure is going to be a long battle, but if he continues in the same vein he will certainly continue to have my support.

8.30 p.m.

Viscount Bledisloe

My Lords, I have to confess that I am yet another lawyer, albeit one who has not for many years derived much benefit from legal aid. It is a fairly shaming confession to have to make in this debate when one contrasts the extreme length of the speeches made by virtually every legally qualified person with the extreme brevity of the speeches made by those few participants who are not legally qualified. Some cynics might think that that has something to do with the high burden of legal costs.

Much less of this debate has concentrated on the reform of civil justice as opposed to the cost of legal aid. I suggest to your Lordships that the high cost of litigation nowadays is very much a product of our search for perfect justice. I very much endorse what the noble and learned Lord, Lord Hoffmann, said, that there has to be a compromise between the demands of perfect justice and the cost. Some savings may mean that there is somewhat less than full discovery or a somewhat less than perfect trial on every available issue.

The legislation and practice of the past 20 or 30 years have all gone in the opposite direction. Whenever anything goes even slightly wrong in legal proceedings the natural step has been to lay down longer and longer procedures to make sure that that particular matter never goes wrong again. We then have a situation where the search for perfect justice is costing more than I suspect it is worth. If we are to strike a balance, we have to recognise that we may have to sacrifice what is thought to be perfect justice, although I have no great conviction that cases nowadays are decided any more rightly than they were when I started at the Bar and they were tried in a much shorter time.

We must also recognise that if costs are to be controlled and limited, there will be cases where a lawyer is not able to take what he deems to be a necessary or desirable step either because the fixed costs have run out or because he can no longer fund it on the contingency basis. Where on earth does that leave him in relation to negligence? Suing a professional is very much a growing trade, and again, as the noble and learned Lord, Lord Hoffmann, said, the fear of being sued for negligence can often drive people, whether doctors, lawyers or whatever, to take steps that may not be strictly necessary. But they must guard themselves.

I ask the noble and learned Lord whether he will contemplate in his scheme giving protection against negligence where a lawyer says, "I would like to do this, but I cannot manage to do so on the limited fees or on a contingency basis". Therefore, he decides not to take that particular step. It is then said that in an ideal world that step should have been taken. I do not believe that lawyers can be expected to practise with limited resources if they are to be blamed for not doing something which would have cost even more.

Turning to the conditional fee agreement scheme, I find it at this stage—as indeed may have been intended—very vague. I am unclear as to how it would work in practice in relation to those litigants who are poor or fairly poor. The noble and learned Lord sought to explain that insurance would be available at what he suggested was not too inordinate a cost. He quoted £3,000. It seemed to me fairly surprising to contemplate that many solicitors would be prepared to put that sort of money up front. But when the noble and learned Lord quotes £3,000, I suspect that that is for a case with a high prospect of success, perhaps within the 75 per cent. limit target which he mentioned.

I fully agree with the noble Lord, Lord Lester of Herne Hill, that it is rare that one can possibly say, even in a fairly simple case, "You have as much as a 75 per cent. chance of success". It is even rarer to be able to say that at the very beginning of a case. But if an insurance company is going to quote a premium for defence costs, it will surely want to receive an advice as to the merits of the case. In a case of any complexity one will not be able to give that advice until considerable steps have been taken and may be expert reports have been obtained. So the lawyer is to fund the obtaining of expert reports, taking proofs and statements, with the prospect of then having to pay the insurance fee.

But what happens if the insurance is not available because not enough is thought of the prospects of the case or the insurance premium quoted is more than can be afforded? If the case is then dropped, all the costs incurred have been wholly wasted at the lawyer's expense. I am not clear whether the noble and learned Lord contemplates that it will be open to a plaintiff to go ahead on a contingency fee basis without any insurance, saying to himself, "I am so poor that I do not really mind if an order for costs is made against me because there is nothing for it to be enforced against". Is it going to be allowed that he goes ahead without the insurance, and if the solicitor goes ahead without it, is the solicitor himself at risk of being held personally liable for the costs on the basis that he has an interest in the case? Until one has answers to some of these questions it is difficult to know what one thinks of the scheme.

The difficulty to which I have referred and the other difficulties which have been mentioned today, lead me to wonder whether it would not be more appropriate if for many cases legal aid were available at the beginning of the case and then at some pre-ordained stage laid down by the Legal Aid Board the case could be reconsidered to see whether it should then switch to a conditional fee agreement. If legal aid were available until that stage, and then one did not have to go on and pay anything further and it remained a first charge on recovery, the costs of legal aid for each case would be much smaller. One could then have a much higher limit of eligibility, so one would have relieved the point that at the moment it is only the very poor who can have access to justice by this means.

8.39 p.m.

Viscount Dilhorne

My Lords, I must begin by declaring an interest as a practising barrister—of advanced years perhaps but of a short term in practice. A large percentage of my practice depends on legal aid, but I hasten to assure noble Lords that I am far from joining the category of fat feline beneficiaries to which the noble and learned Lord the Lord Chancellor referred in opening the debate. I wish that I could experience being part of that club for even five minutes. However, I am not qualified to comment on that aspect. I have also had practical experience over a number of years in a previous incarnation in the international insurance industry, albeit a few years ago.

The embarkation on a long-overdue reform of the civil justice and legal aid systems is thoroughly welcome and desirable. None of the noble Lords I have heard in this debate disputed the fact that civil justice is too expensive and too exclusive; nor that the legal aid system requires anything other than radical reform. If it is not impertinent of me, I should like to congratulate the noble and learned Lord the Lord Chancellor in the same terms as those used by the noble Lord, Lord Mishcon, on his courage and forthrightness in confronting a dilemma which has not been grasped for years. I sincerely hope that the noble and learned Lord the Lord Chancellor will not find himself metaphorically transported even temporarily from the Woolsack on to the horns of the dilemmas contained in this Bill. I wish him well.

I should like to refer briefly to the report of the noble and learned Lord, Lord Woolf, published in 1996. I think and hope that it will be useful in bringing us back, if necessary, to the purpose that we are trying to achieve, which was clearly expounded by the noble Baroness, Lady Mallalieu. That report was expressly concerned with looking at the civil justice system to make it more possible for all persons in the United Kingdom to achieve justice. Many recommendations were made—all born of careful and meticulous thought, as one would expect from the noble and learned Lord—to increase access to justice, to reduce the cost of litigation and to increase the speed at which justice can be efficiently achieved.

At this stage, I must ask myself whether the proposal to exclude legal aid from money and damages claims will provide a system which gets to the heart of a problem and succeeds in resolving it painlessly, speedily and at reasonable cost. That seems to me to be what we should be trying to achieve. I have every hope that the noble and learned Lord is seeking to achieve those aims.

I shall not speak for long, but I should like to refer to two matters. I refer first to the vexed question of costs from a practical aspect, as I have experienced it. The noble and learned Lord is right in his determination to drive down costs for the benefit of the individual litigant. I suspect that he is also right to look carefully at who the recipients of legal aid are, especially with regard to where assets have been hidden or cannot be touched. There are many aspects to that matter and I hope that the noble and learned Lord will consider how the long hand can reach out and collect some of that money.

A material start to such a campaign is to cut out the waste and duplication. Although that point has been mentioned, I shall go into more detail than hitherto. Waste and duplication are manifest and inherent in the present system. From my experience, I do not think that they are the exception. Sadly, it is more often the rule than the exception that legal aid papers arrive on counsel's desk in a state of muddle and disarray. Money is then wasted by either the instructing solicitor putting the papers into order or the barrister doing it. Time ticks on. Time is consumed. When to that there is added, as I have found, the time taken in making on each and every possible occasion interlocutory applications on every small point, the time consumed becomes enormous. What the action was originally about is forgotten in counsel's mind some six months later—and I have had legal aid cases that have gone on for years.

Added to that, there are constructive delays in the system. There is the pure and simple delay when one might say that "Sleeping Beauty inertia" takes over. When inertia is eventually overcome, often some months later, there are further additional costs to the system without any benefit being derived by the funded litigant. I take heart from the noble and learned Lord's proposals that the judiciary will exercise special management in such matters. Counsel is often in a difficult position and cannot do very much about it.

My next point relates to the application of the "merits test". I am not exactly sure where the noble and learned Lord is going on that because a test was laid down in the legal aid guide some three years ago which required to be followed. Under the present scheme, the test places the barrister under a continuing strict duty to bring to the notice of the Legal Aid Board any matter which might affect the assisted person's entitlement to legal aid at whatever stage the proceedings have reached. The sword of Damocles hanging over the barrister's head is that his advice on the merits may be taken into account at a later stage when a wasted costs order is being considered on the grounds of the barrister's non-compliance with the Act. Many legal aid cases which require later consideration can be considered in full detail if the papers are put in properly ordered form to the barrister in the first instance. He usually gets very near the target.

In giving advice on the merits, the barrister has to look at the legal merits test and the reasonableness test, and to address each separately. He has to address all factual issues and set them out in sufficient detail to enable the board to assess their relative strengths and express a clear opinion. Particular attention is required to be drawn where evidence is likely to be contested and where there is any lack or incompleteness of material. Confirmation is required that the proceedings are cost-effective—that is, that the proceedings are likely to be justified by the benefit to the client bearing in mind the statutory charge.

Counsel is then required to estimate by percentage the prospect of success. Various noble Lords have used percentages, but counsel now has to consider the following: (a) is "very good" and is equal to an 80 per cent. or more likelihood of success; (b) is "good" and is equal to between 60 and 80 per cent; (c) is "reasonable" and is equal to between 50 and 60 per cent. The present proposals of the noble and learned Lord are that those cases considered to be "reasonable" by that test over the past three years—that is, those in the 50 to 60 per cent. bracket—no longer qualify for legal aid and that 15 per cent. of those considered "good" likewise will not qualify. That really means that only the "very good" (at 80 per cent.) and only the top 5 per cent. of the "good" will now be considered in appropriate cases for legal aid. I have to echo the concern that has been expressed by many noble Lords today that there is a gap—there will be people who cannot get legal aid, particularly on civil matters, and who will not get redress. That point concerns me.

Matters are still at an experimental stage. I hope that the Lord Chancellor will allow there to be some trial or some research project, carefully monitored, to test the operation of these interesting and radical steps. That would certainly be merited. In the meantime, I feel that the considerable savings that I have suggested could be effected should be put into operation. I doubt very much whether the advice on the merits is honoured fully in the observance. It never used to be. One used to look at the papers and say, "On the balance, it seems to be a possible runner". One could never go so far as to put a percentage upon it, but now one has to. One must do a good deal of preparatory work if one is conscientious about it. I hope that the sword of Damocles of wasted cost that hangs over barristers and people who do not do this will act as a motivation to do it properly.

I deal with one other small but important matter. I believe that the noble Baroness, Lady Mallalieu, expressed the view that the aims of justice were not compatible with the aims of insurance underwriters. I hope that I do not attribute to the noble Baroness words that she did not utter. My experience of the insurance market, small though it was—I spent about seven to 10 years in it—and at the Bar dealing with insured cases was that the insurer would probably insure on an excess of loss basis. As soon as the upper limit had been reached, irrespective of the legal merits and where one was going, the plug would heartlessly be pulled out and the litigant would gurgle down the pipe so that the insurance company could preserve its profits. This matter must be looked at in order to prevent any poor unsuspecting litigant from gurgling down the pipe into the main drain. That is what will happen. The insurance underwriter is hard-nosed, objective and, following recent adverse experience, will be careful to draft the contract so that he gets a profit out of it. One is very concerned to look carefully at this and tie up the ends of such a project.

8.52 p.m.

Baroness Dean of Thornton-le-Fylde

My Lords, I welcome this debate this evening. I thank my noble and learned friend the Lord Chancellor for giving us the opportunity of this very wide-ranging debate. In my short time in the House I have noticed that it appears to be the practice of those who are not lawyers to apologise when they have the temerity to take part in debates on the law. This evening I should like to break that mould. My brashness—indeed, boldness—is not borne of arrogance that I know better but out of my experience as a trade union leader. I note that the four non-lawyer Members of this House who have had the temerity to enter this debate are all noble Baronesses who have different experiences in life but who have expressed very similar views this evening irrespective of the side of the House on which they sit. On the basis of many years' experience as a trade union officer, I welcome this debate.

It is quite clear from the figures that have been given that—to use an old saying—something has to be done. Something does have to be done. In the newspaper industry Rupert Murdoch once said to me, "Brenda"— I was a general secretary, and still am—"the music has changed but the dance remains the same". I just wonder how people in the legal profession will change given some of the views that I have heard.

I am encouraged by the fact that we have a Lord Chancellor of great experience. Above all, he does not lack courage on this particular issue. Courage will be the name of the game in the debate ahead of us. I also welcome the way in which, almost in a humble manner, my noble and learned friend said several times during his contribution that consultation would take place, that this debate was taking place now and he wanted to hear what people thought. He said that he would not proceed according to the narrow requirement of consultation but would consult widely. A consultation paper is to be published in the coming year. At a training seminar yesterday his honourable friend in another place said—I am sure that he would not have said it without checking—that the final decision would not be taken until consultation had been completed.

I declare my interest, perhaps retrospectively, but it is a very practical interest. I speak of my involvement in the trade union movement. My concern is that, contrary to the intention to save money or to maintain expenditure—in other words, to bring back control over legal aid expenditure—because of the claim that we cannot have special interest or special cases, there will he a fundamental change from what happens at the moment in regard to personal injuries.

When I was general secretary of a union part of my work involved instructing lawyers. Sometimes I took their advice and sometimes I did not. Sometimes I was pleased that I did not take their advice and at other times I regretted it. But my job was to instruct lawyers to act on behalf of union members who when they paid their contributions were unaware that part of them were an insurance so that if they had an accident on the way to work, from work or at work the union would step in and provide legal assistance for them. There would be no cost to the member, win or lose. We were not the only union that did that.

In the past year the trade union movement supported five times more personal injury cases than the Legal Aid Board: 150,000 cases as opposed to 30,000. When we had legal advice sometimes people had to hear the hard words that a particular case could not be pursued. Ninety six per cent. of personal injury cases pursued by unions succeed. Last year £330 million was recovered in damages, and £179 million was paid back to the Department of Social Security in benefits recouped as a result of legal cases.

Injuries at work are an area different from most others, with the exception of road traffic injury cases. Here we already have an employer's liability to insure. The people with whom our lawyers deal are not litigants but insurance companies. My experience was that there was a complete denial irrespective of whether the particular case was patently clear to everyone. A company might admit its fault, for example that a safety guard on a machine had been left up perhaps resulting in a dreadful accident. When the insurance company could no longer deny it it would delay. That delay ratchets up the cost. Many a time such cases are settled on the steps of the court. If we place a ceiling on costs my concern is that such activity will grow.

My other anxiety relates to one part of the Woolf Report that I did not welcome. My concern is that the "loser pays all" principle will be set aside. One will have a situation in which the cost limit is reached. Liability has been denied and there is delay. One knows that if one goes on, one will win but the union will be faced with a claim that it may not be able to afford. At the moment this money is recycled. It will cost £25 million if this scheme completely stops. The money is recycled because one pays out the legal fees. If one wins one gets back the costs. Those costs go back into the fund which then helps to fund other cases that are coming through. That is an efficient use of revenue. That is my concern about some of the issues that we have before us.

I have another area of concern. We have on the statute book now protection for people who suffer from industrial deafness. How did that happen? It happened as a result of unions taking up individual no-hope cases. The unions persisted until they were successful. The pneumoconiosis cases gradually became successful, one at a time, over many years.

Today's modern complaint is RSI. As general secretary, I authorised expenditure with regard to household names such as the Financial Times and other newspapers. They related to men and women doing repetitive work in factories. We knew that they were probably no-hope cases, but we gradually built up experience of such cases.

There is at the moment an RSI case in London relating to five employees of the Midland Bank. Behind those five people there are hundreds of cases. The five employees are a test case. The union is funding the case. The employees know that there is no limit. If they lose the case, the union will have to pay the costs; if they win, they will win their costs and so the cases of those hundreds of people will be able to be processed.

Of course taxpayers' money must be used efficiently, but this is not the taxpayers' money. I hope that I do not embarrass my noble and learned friend the Lord Chancellor when I say that in the courts he represented some of the most vulnerable people whom I was proud to represent. He pulled the rabbit out of the hat on many occasions and succeeded for our members. That leads me to believe that he knows that the issues are real. I ask him to consider those matters because I cannot believe that there is an intention to sweep away the commitment which exists, and which will go if there is a cap on what one can reclaim. That fixed cap means that unions will he funding cases which they will win but in which the costs will not be met.

The individual union member pays nothing. It is part of being a union member. Many members are surprised when they learn that. Many of them, with all due humility, are terrified of lawyers. They would no more dream of seeing a lawyer than of doing something that they would not normally do. They would not know the name of a lawyer to ring. It is something that the legal profession needs to address.

I thank my noble and learned friend the Lord Chancellor for this debate. There will be a response to the consultation document, but I should greatly welcome it if he can respond this evening to some of the points that I have made.

Lord Campbell of Alloway

My Lords, before the noble Baroness sits down. I should like to say from these Back-Benches how greatly her contribution is appreciated. I have, in my professional life, acted for and against unions. She speaks with a wealth of accurate expertise. It is not for her to apologise for her contribution or those other lay contributions; it is for the lawyers to apologise for monopolising so many of your Lordships' debates.

9.4 p.m.

Lord Byron

My Lords, fat cats, thin cats, and possibly even Lord Chancellors, need their dinner, so I shall not detain noble Lords for long. I shall apologise, since I have been invited to do so, by saying that I am yet another lawyer. I am a practising solicitor. I could have some interest in this matter, but the firm of which I am a partner does almost no legal aid work. So I am unlikely to be a loser. Whether I shall be a gainer depends, I suppose, upon whether conditional fee arrangements make their way into the commercial field.

I shall focus on just one or two points. There are some advantages in speaking at the end of the debate. I can tear up my notes, because everything that I was going to say has already been said by those much more eloquent than I am. There are three tests by which the proposals need to be addressed: are they necessary? Are they workable? Are they wise?

With regard to necessity, I believe that the noble and learned Lord has made out the case that something needs to be done to provide better access to the courts. But the case for sweeping away a whole tranche of legal aid has not been made out. As I understand it, the areas of legal aid which might be replaced are among the least burdensome on the Legal Aid Fund. Indeed, personal injury actions nearly wash their face. It is inevitable that some residual form of legal aid will be required, for many of the reasons so eloquently expressed by the noble Baroness, Lady Kennedy. I echo the suggestion made by the noble Viscount, Lord Bledisloe, that cases could perhaps be started on legal aid and then transferred at the appropriate time to a conditional fee agreement. That would overcome some of the hurdles relating to the start-up costs of which we have heard so much tonight, and which make things so difficult for those who cannot finance them. So much then for necessity.

Are the arrangements workable? To get the scheme off the ground there will need to be underwriters prepared to provide an after-the-event insurance product in a wide range of possible cases. It was suggested by my noble friend Lady Oppenheim-Barnes, who I see is not in her place, that impoverished plaintiffs could avoid insuring in the knowledge that they would not be able to meet an adverse costs order. As I understand it, that is not the case, because solicitors financing and supporting plaintiffs would, under normal common law rules, be regarded as maintaining the action, and would themselves become liable for those costs. Insurance is necessary, whether the plaintiff has means or not.

It is difficult to he confident that there will be no substantial gaps in the insurance which can be offered. We have experience only in relation to personal injury where the vast majority of cases are successful and almost all defendants are insured. I do not believe that the present system has been operating sufficiently long for real assessments to be made of the way in which it is working. In relation to general claims for damages, even if we take 75 per cent. as a reasonable threshold expectation of success, there is a 25 per cent. risk of failure and a consequent adverse cost award. If in a substantial case the costs run to £40,000 there would be a possible premium of about £10,000. That is aside from the uplift element which a solicitor would be able to charge if the case were successful.

Practical problems abound. I wish to raise five points for the noble and learned Lord to answer not necessarily tonight but for future thought. First, is it intended that the Law Society's voluntary cap of 25 per cent. of damages should be made statutory? If not, does the noble and learned Lord the Lord Chancellor consider that there should be any restriction on the percentage of damages taken as a conditional fee?

Secondly, does the noble and learned Lord foresee any likely increase in awards of damages to compensate for the impact of conditional fees either as a result of legislation or as a judicial response to the operation of such fees? Thirdly, has there been any research into the attitude of litigants to conditional fee arrangements, including those who fail to get a solicitor to act under such an agreement? If so, with what results?

Fourthly, can the noble and learned Lord give any figures for the projected savings from the legal aid budget if all damages claims have to be brought by means of a conditional fee agreement? Fifthly, do the Government have any plans to address the problem of the inability of low income households to find the insurance premium and disbursements required to get a case off the ground?

So much for practicality. What about questions of policy? Are we right to make lawyers partners in a commercial joint venture with their clients? Perhaps I may give a couple of examples from the coalface of litigation. It has been said that expert evidence should be seen to be the independent product of the expert, uninfluenced as to formal content by the exigencies of litigation. All lawyers know that even lawyers without financial interests in a case, whether they be solicitors or counsel, involve themselves probably far too much in assisting, drafting and preparing expert reports. Is that more or less likely to happen if the lawyers are joint venture partners in the outcome of the litigation? The same could be said for witness statements and many other aspects of the litigation.

I turn to documents and the obligation to give discovery. I doubt whether there are many people, even including those in the legal profession, who understand the pressures put on a solicitor in the middle of a case who is handed a new file of documents which he has never previously seen; documents which will almost certainly be fatal to the case which he is running, but documents which nevertheless must be disclosed. As the system stands, judges as well as lawyers can be reasonably confident that those whose responsibility it is will ensure that the documents are disclosed. But once that confidence is shaken, one will be striking at the heart of the administration of justice as we know it.

It is said that the system is working well and that conditional fee agreements have not given rise to any of those difficulties. However, a few years is a short time. I suspect that all those lawyers who were brought up in a system in which they were denied any financial interest will, when they are given a financial interest, be doubly careful to ensure scrupulous behaviour. But situations can change over time and generations. A different generation may grow up with different expectations and interests and with a more commercial approach and we must be a little more cautious before rushing completely and wholeheartedly down that road.

My final comment is a plea to the noble and learned Lord to progress the debate without the unattractive anti-lawyer spin which has been placed on the proposals. It was said that legal aid, must be made a tool to promote access to justice for the needy and not be seen by the public as basically a means of keeping lawyers in business". Is that really how legal aid is seen? Does legal aid exist to provide a living for, for example, the noble Baroness, Lady Kennedy, or is she there to provide a service for those who need it?

Is the National Health Service seen as basically a means of keeping doctors in business? It can hardly be denied that it does keep them in business and without it, there would be fewer doctors and much less access to medical care. Society is happy to pay for that for we all fear that one day, we may grow old. It is perhaps fortunate that we do not dwell too often on the possibility that we may need to use the courts. I am sure that those who do are grateful that they are able to receive legal aid and no doubt disappointed when they cannot. Whatever else may be said about the proposal, it is patently wrong to suggest that it will promote access to justice for the really needy rather than, perhaps, to those who lie in the middle.

At the conclusion of his speech in Cardiff, the noble and learned Lord the Lord Chancellor suggested that the new regime should go a long way towards heightening the public standing of lawyers. When the widowed mother loses part of her carefully calculated damages to pay for the lawyer's increased fee, will the public and press acclaim the lawyer for his role in obtaining damages for the client or will they rather denigrate him as a greedy fat cat, forgetting that lawyers are merely doing their best to operate a system which they never perhaps expected to have to operate?

There are difficulties and with respect, I urge caution. I believe that we are on the right track and there is undoubtedly a will for these reforms. But I suggest that we are rushing a bit and I urge some caution on the noble and learned Lord.

9.16 p.m.

Earl Russell

My Lords, the noble Baroness, Lady Dean of Thornton-le-Fylde, said that all the non-lawyers who had taken part in the debate were Baronesses. I do not know whether she took me for a lawyer or a Baroness but in either case, I thank her for the compliment but must in modesty disclaim it.

I must apologise also for intervening in the gap. When I had to decide whether to put my name on the list today, I had to calculate whether I should arrive in time for today's debate. I calculated that I did not have a 75 per cent. chance of success. I arrived in time due to the chances of a long Statement, a pupil who had not done his essay and finding a taxi within 30 seconds. That was not a 75 per cent. chance of success but here I am.

Lord Campbell of Alloway

My Lords, I apologise for intervening, but I was brought up by my noble friend Lord Denham to believe that you never intervened in the gap unless you had had the privilege of hearing the opening speeches. perhaps I am wrong. The last person in the world against whom I would wish to make a point is the noble Earl. but is this in accordance with the procedures of the House?

Earl Russell

My Lords, I believe that the noble and learned Lord on the Woolsack will bear witness that I did hear the opening speeches.

Whenever we are considering any proposal for capping, I view it with a certain amount of anxiety because, as many uncomfortable school memories remind me, caps do not always fit. The effects are rife. When one considers any proposal designed to control expenditure, one must consider what will happen instead. The late Cyril Hare, alias Judge Gordon Clark, once compared the law to a chimney by which all the noxious fumes go out of the house. If you close the chimney, where will the fumes go instead? If we attempt to cap the legal aid budget, even if it is not the noble and learned Lord's intention, there will be cases in which people do not manage to get their cases to court. What will happen instead?

There is a Treasury guideline which says that any Minister contemplating a reduction in public spending—and I think in Treasury theology, prevention of an increase constitutes a saving—must consider the resource implications for other departments. Therefore, we need to know the behavioural effects of denying access to the courts. What will those people do instead and what will be the resource implications of those actions? For example, they may take the law into their own hands. They may spread libels and slanders. They may remain ill and on benefit and there will be no compensation recovery. But until that calculation is undertaken and we know those behavioural effects, we cannot know what will be the effect of those proposals.

Also, I feel some misgiving about leaving the Government to be exclusive judges of costs in anything. We have heard about lawyers having an interest, but, equally, the Treasury has an interest. Lawyers at least are competent to judge legal costs; but government are not competent to judge costs in a field where expertise is necessary. In particular, the Treasury seems to be ignorant of the concept of a true cost. It also does not seem to understand that, in a quality market, competition drives costs up and not down. If you are facing a possible sentence of life imprisonment, the market value of the second-best lawyer is nil. Listening to my noble friend Lord Taverne, I wondered whether the effect of these proposals may be to increase public spending and not to control it.

9.20 p.m.

Lord Thomas of Gresford

My Lords, I should, first, declare an interest as a lawyer. I have been in receipt of legal aid fees for as long as I can remember, both as a solicitor and later as counsel. I have also appeared for trade unions. Therefore, I believe that I have some experience in the field.

The rise of legal aid expenditure has been attributed in some parts of your Lordships' House today to rather overblown cases which have been presented to the courts. I regret to say that I do not agree with my noble friend Lord Taverne that there is no incentive to shorten cases in courts. Clearly my noble friend has not appeared in front of the noble and learned Lord, Lord Hoffmann, for some time. I strenuously agree with the noble Viscount, Lord Bledisloe, that it was all different in our youth. Indeed, we went into court, we called our witnesses, we got on with the job and got the judgment. However, these days, as I drag my trolley along the fast track of litigation towards the courts, I am laden down with reports, with photographs, with the bundles of documents and the core bundle, with the skeleton argument, the timetable and everything which is supposed to hasten the proceedings. In fact, that usually causes an adjournment during which the learned judge has to read it all before the case begins.

The true reason for the rise in legal aid expenditure is the relentless increase in legislation—indeed, it affects all parts of our lives—and the problems associated with social deprivation leading to marriage breakdown, difficulties with children and with juveniles, increased crime and bad housing. In addition, there are changes to society which are not necessarily to be deplored, as the noble Lord, Lord Hacking, pointed out. There is also the growth of consumer groups and specialist legal interest groups, together with a growing awareness by the public of rights—rights which are to be exercised and to be exercised by taking proceedings in court. I have no doubt that more litigation is to be expected in the light of the Human Rights Bill which is currently going through Parliament.

When the legal aid scheme was first introduced it covered 80 per cent. of the population but in the years that have gone by that percentage has been reduced by half, although the legal aid bill has risen sharply. So reducing eligibility for legal aid does not seem to have done anything towards reducing costs. However, interestingly enough, 40 per cent. of the population of this country still qualifies for legal aid. There has been something of a tendency this evening to describe those people as "the poor". Indeed, removing legal aid from the poor does not sound too big a job because we do not think that there are so many poor people. But, if we say that we will be removing legal aid from 40 per cent. of the population, that suggests that there is a bigger problem than at first appears to be the case.

As I understand it, over the past two years there have been about 32.000 CFAs (conditional fee agreements), as compared with 230,000 legal aid certificates. What does that mean? If in April, 1998, legal aid certificates are to disappear, over the next two years we can expect 230,000 CFAs, each of which runs to 10 pages and is incomprehensible to anyone, and 230,000 additional insurance policies to cover the liability that goes with it.

There is also the possibility of a denial of justice for a significant proportion of those people. If there is to be a 75 per cent. threshold, what does that really mean? You only have to prove your case in a civil court on a balance of probabilities. You must be more likely to be correct than not. If the 75 per cent. is to be the threshold for getting any legal aid, a significant proportion of people who would have succeeded will not receive any legal assistance.

If the result is obvious and if you are 75 per cent. sure you will win, and your opponent is 75 per cent. sure that you will win, there is never a trial, there is a settlement. No one will appear for the defence if he thinks that he has only a one in four chance of success. It is at the beginning of a case when the solicitor sees the client for the first time that he will consider whether there is a 75 per cent. chance of success. On his instructions, and believing everything that his client tells him—as he is bound to do—and on the case as pleaded, he has 100 per cent. surety that he will win, tempered only by experience and by the knowledge that things go wrong in litigation. That appreciation may be very different as the case proceeds and as witness statements emerge from the other side and so on. So when is this 75 per cent. assessment to be made? It is pointless saying at the beginning that the percentage is 75 per cent. The best test is that which we have at the moment for legal aid; namely, is it more likely than not, on the information that you are putting before the Legal Aid Board, that you will succeed? You cannot put it any higher than that. You cannot say on day one, "I have a 75 per cent. chance of succeeding in this case".

Reforms have already taken place in the legal aid scheme. The Bar Council agreed a system of graduated fees in criminal cases that was successfully introduced earlier this year. Its impact on reducing the cost of criminal legal aid is yet to be assessed. Neither the Bar Council nor the Law Society has demonstrated that they are resistant to change. Indeed the Bar Council is embracing the idea of the contingency legal aid fund. It is far too easy to jump up and down on lawyers. The noble and learned Lord the Lord Chancellor in his article in the New Statesman on 31st October stated, A heavy impediment is the entrenched interests of the legal professions. Not surprisingly, they are attached to the old regime because it was designed to cater for the idiosyncratic ways they do business and to deliver a healthy income from the taxpayer". Today the noble and learned Lord has talked of the legal profession expressing doom and gloom at his proposals. This is part of the "anti-lawyer spin" to which the noble Lord, Lord Byron, referred a moment ago. I respectfully remind the noble and learned Lord the Lord Chancellor that even healthier incomes are derived by lawyers instructed by insurance companies, banks, large commercial concerns, and local government organisations, all of whom derive their funds not from mid air but from the ordinary people of this country as consumers of goods and services. The problem is to maintain some kind of relationship between the levels of remuneration of these commercial lawyers and the rest of us who are engaged in the nuts and bolts of society; those of us who are engaged in criminal defence work, marriage breakdown, children cases, and in winning damages for the man who is injured at the workface or in a devastating car accident. The resolution of the toils and tribulations of the "little" man may be far below the whiskers of the fat cats and may be beneath their notice. But the legal profession must attract men and women of talent, dedication and calibre to be the mechanics who keep society going with the tools of their trade in what New Labour would no doubt wish to call the "people's courts".

The first principle has to be that the lawyer's interest is never in conflict with the interests either of justice or of the client. When we talk about a strong and independent Bar that is not some kind of mantra; it means something. It means that barristers will not settle a case at any price in order to make sure that they are paid. It means that barristers will not wilfully mislead the court to win a case. When the noble Lord, Lord Byron, spoke I was reminded of a situation when His Honour Judge Fricker, who is now a noted judge in York—at that time he was a barrister—approached me on the third day of a civil case and produced a letter which he said his client, a local authority, had not disclosed. He said, "I withdraw from this case". And so he did. We won hands down because he did his duty. He would have done it whether or not he was paid. But some counsel may quietly have forgotten about that letter.

The same applies to solicitors. Are they expected to pay experts up front for complicated medical negligent cases? Are they supposed to pay the insurance premiums for their clients under conditional fee agreements? The Gwynedd Law Society consists of practitioners in Anglesey, Caernarvon and Merioneth. At its AGM on 8th November last, it passed a resolution which stated: Extension of conditional fees will degrade Solicitors from being independent financial advisers to mere financial speculators". The society, of which no doubt the noble Lord, Lord Cledwyn, is a member—it was his brother who wrote to me—regretted that a Labour Government were to be responsible for scrapping vital parts of the legal aid scheme in a way which will have a serious detrimental effect on firms supplying general legal services outside large centres of population. It is all very well to talk in terms of London. But out in the country where I have practised for most of my life it is a very different scene. There the local society requires support.

I join with my noble friend Lord Goodhart, and the noble and learned Lord, Lord Brightman, in asking for consideration of the CLAF scheme. That is not a no win no fee situation. If that scheme is put into effect solicitors will not be mere financial speculators.

The second principle is that access to justice is the priority, not the curbing of the legal aid budget. The noble and learned Lord, Lord Ackner, pointed out that the Lord Chancellor said last year that there was a considerable underspend on the budget. Therefore it does not look as though the legal aid budget has been bursting at the seams for the past two or three years. The conditional fee system may have its attractions, but it is at an experimental stage. It has been operating for two years; 32,000 policies have been written; many have not yet been settled or come to trial; and there has been no detailed analysis of those which have. We do not know the impact in money terms. We do not know the impact in money claims for example, between two small businesses, or in consumer cases. But, more importantly, how is the insurance aspect to be worked out?

In personal injury cases—they have been operating for two years—the insurance industry worked with the Law Society for over three years to produce Accident Line Protect. The ALP scheme limits the risks to insurers in a number of ways. First, it deals only with solicitors who are members of the Law Society's accident line scheme, and therefore employs someone who is on one of the Law Society panels as a specialist. Further, to avoid any participating solicitor sending only his bad cases, he has to undertake to send all cases. That is well and good, but how are those conditions to be spread over the whole range of proceedings where damages are to be claimed? It is not too difficult to predict a result in mainstream personal injury work whereby all the documents are seen. But what will be the situation when one is dealing with actions against the police or prison officers, or where the defence is funded throughout, or public interest cases where the defendants have access to unlimited funds? Many years ago, I recall appearing on my own in a Divisional Court with Treasury Counsel—he is not in his place today—and about six or 10 civil servants instructing him throughout. He was good enough to thank me for coming; and I am glad to say we won.

I hope that the noble and learned Lord the Lord Chancellor will note that there is an almost united voice from all parts of the House asking for a more gradual approach to reform. We heard that view from the noble Baroness, Lady Mallalieu, the noble Lords, Lord Mishcon, Lord Campbell of Alloway and Lord Byron, and others. The Law Society, the Bar Council and consumer groups all seek greater research into conditional fee agreements and the assessment of their success. The noble and learned Lord, Lord Brightman, and the noble Lord, Lord Goodhart, sought a pilot CLAF scheme so that that can be assessed. There is no reason for the noble and learned Lord the Lord Chancellor "to boldly go where no man has gone before". Unless something catastrophic happens, he has perhaps four to four-and-a-half years left in which to deal with this problem; "festina lente" must be the motto. Legal aid in civil cases has a long history of service to the people of this country, and it must not be destroyed without proper thought and without proper schemes in place.

9.35 p.m.

Lord Kingsland

My Lords, the debate has been of an exceedingly, indeed for someone who has to wind up, intimidatingly high standard. I think everybody congratulated the noble and learned Lord the Lord Chancellor on his bold and courageous approach to what seems to all of us to be an intractable problem.

He is absolutely right to set the question of legal aid in the context of the civil justice reforms proposed by the noble and learned Lord, Lord Woolf. Any Chancellor of the Exchequer considering taxation would never dream of doing so without examining the other side of the coin; namely, public expenditure. Equally, any Lord Chancellor considering the financing of legal services has to examine their cost. I was struck by the fact that a great deal was said in the debate about the financing of legal services, but rather less was said about the reforms proposed by the noble and learned Lord, Lord Woolf.

I refer in particular to the fast-track procedure and the fixed cost regime that will accompany it. Sir Peter Middleton expressed some reservations about introducing both at the same time. I wonder whether the noble and learned Lord shares those reservations or whether he thinks that between now and 1999 he can get both on foot.

I wonder, also, whether he shares Sir Peter's reservations about raising the limit for small claims to £5,000. That will inevitably mean that more people will represent themselves in disputes. Is he satisfied that the necessary training is available, and that the necessary resources are available to help people help themselves? Those are important questions. I do not ask the noble and learned Lord to respond to them all now. However, I hope that in the course of the next six months, when he reports to this House, he will be able to keep us abreast of his thinking in this area.

The single most imaginative part of the proposals—and here I share entirely the views of the noble Baroness, Lady Mallalieu—is the proposal relating to a community legal service. Just as preventive medicine makes us a healthier society, so advising people about their rights before they get into deep trouble will make us a less litigious society. As the noble Baroness rightly said, that must be a good thing for a modern liberal democracy.

I also believe that we have, in principle, to endorse the contractual approach that the noble and learned Lord laid out briefly, but rather tellingly, by explaining the way in which the state should relate in future to the provision of legal services. If I have a reservation about the way in which that might operate, it is this. Inevitably, in such a contractual relationship, the state will be in a very powerful position and will, perhaps on occasions, give in to the temptation to make unconscionable bargains. I should therefore like to know more about the contractual framework. What kind of rights will the private sector side which participates in such contracts have? What limitations will there be on the state to impose conditions? We have heard a great deal about overpaid lawyers. But at the largest part of the Bar, the criminal Bar, there is a large number of underpaid lawyers. I believe it is extremely important that their interests are properly represented.

If I have one reservation about the noble and learned Lord's overall approach to the subject, it is with regard to what I would describe as his excessive cynicism towards his own profession. Our history is littered with examples of disinterested lawyers who sacrifice their livelihoods to pursue matters of principle. I can see no logical reason why the legal profession should have baser motives than any other profession. Indeed, the noble and learned Lord has himself displayed throughout his distinguished professional career many examples of disinterested behaviour. I heard with great interest the noble Baroness, Lady Dean of Thornton-le-Fylde, describe the role of the noble and learned Lord the Lord Chancellor in employment cases. And, if I may add a lighter touch, he spent five years as shadow Lord Chancellor. I hope he will not be tempted to ascribe baser motives to other members of the profession when he has himself exhibited such laudable ones.

When discussing his relationship to the Treasury, the noble and learned Lord said that his proposals for reform were not Treasury-driven. Anyone who heard the speech of the noble Lord, Lord Byron, must agree that that is so. Of all the areas of legal aid, civil legal aid is the most cost-efficient, particularly in relation to cases which have money remedies. We cannot be sure because we have not seen the accounts, but it has been said—by the noble Lord, Lord Byron, and by others—that that part of the legal aid system washes its own face. If the proposals of the noble and learned Lord the Lord Chancellor were Treasury-driven, he would be looking not at that aspect of civil legal aid but at family law, criminal law and many aspects of disputes between the citizen and the state, such as immigration law. However, the noble and learned Lord has either left those areas completely alone or dealt with them less fundamentally than the area of civil law.

I was particularly struck by the noble and learned Lord's comments about the application of the 75 per cent. principle in disputes between the citizen and the state; I do not disapprove. He talked about differential hurdles; I believe he is absolutely right. Many of the most important welfare decisions, such as decisions on housing and immigration, would never have been taken in our courts had the 75 per cent. principle applied, because they would never have reached the courts. I applaud his approach to public law disputes between the citizen and the state and endorse what so many noble Lords and noble and learned Lords have said about it.

However, the principle of access to justice does not discriminate between the incarceration of the individual and the expropriation of his property. Effectively preventing individuals from pursuing money remedies in the courts because they have no means of doing so unless they are supported by public funding is an act of expropriation; they cannot obtain property they are entitled to. I am not sure that making a distinction in terms of access to justice between remedies under public law and remedies under private law is justified.

If the noble and learned Lord applied the 75 per cent. test to his own approach to the proposals that he has outlined, and which he intends to introduce by April 1998, I do not believe that they would pass. It is not that I think that they will not work; it is just that there is not yet sufficient evidence in front of us to prove that they will. I share the views of noble Lords who have said, "Let us give it a little more time to see whether the system will work".

Indeed, I believe there is a very good chance that it will work in straightforward personal injury cases. That is what the noble Lord, Lord Mishcon, and many other noble Lords said. But when it comes to much more complicated medical negligence cases, it will fail disastrously unless the approach suggested by the noble Viscount, Lord Bledisloe, is adopted of starting off with legal aid, and then baling out when it is clear that there is an appropriate chance of success—and the way forward is clear-cut. In those circumstances the Lord Chancellor's proposals could be allowed to come into operation.

I am also influenced by the speeches of the noble and learned Lord, Lord Brightman, the noble Lord, Lord Goodhart, and many other noble and learned Lords in relation to the CLAF proposals. They will sit well alongside both our traditional system and the conditional fee system if some variable formula can be introduced in relation to the proportion of damages that is paid back into the fund. That is a matter that can be worked on. If I am proved wrong, well and good. But it certainly deserves much more thought before we plumb for one system rather than another.

I am sure that all noble Lords will agree with me when I say that we are deeply indebted to the noble and learned Lord the Lord Chancellor for bringing these proposals before us. I am sure that I can say with confidence that we all hope that we will be kept in touch with the development of his thinking over the months ahead.

9.47 p.m.

The Lord Chancellor

My Lords, I am grateful to all noble Lords who contributed to this debate. It has been interesting and profitable and I listened to every word. The Government welcome constructive comments on their proposals. Our minds are open to innovative ideas and new solutions. We claim no monopoly on good ideas. We acknowledge that our proposals for the reform of legal aid are controversial in some quarters; they are certainly radical, and the two often go together. We are about looking for radical new solutions to old problems.

Your Lordships will forgive me if I do not at this late hour take an inordinate time to do justice to all the valuable contributions. The noble Lord, Lord Campbell, charges that I propose to dismantle a vital social service and inhibit access to civil justice. That is the opposite of my object. My object is to save and to enlarge access to justice; not to bury it. He attacks a merits test of 75 per cent. I say this. I would not litigate with less prospects of success than 75 per cent. and would probably require a good deal better. I say further that any sensible plaintiff would be well advised to do the same.

Just think of the grief and pain associated with litigation that one loses. I agree with my noble friend Lady Mallalieu that often the best advice is not to litigate. Around 83 per cent. of serious medical negligence cases that fight lose. We heard a great deal about the brain damaged child; but think of the grief and pain of losing 83 per cent. of those cases.

Nor do I see why the state should fund cases which sensible people would not support out of their own funds. Think too, as some noble Lords have addressed—and the noble Baroness, Lady Wilcox, drew attention to it—of the unfairness to a defendant who is sued by a plaintiff with full legal aid and the plaintiff loses. The defendant has succeeded but whistles for his costs. Under our proposals the plaintiff's insurers will have to pay those costs so that major injustice will disappear. The noble Baroness, Lady Oppenheim-Barnes, emphasised that important point. I agree with her. I insist that these steps are not being taken to reduce the cost of legal aid to the Exchequer. They are designed to bring the cost under effective control, not to increase or decrease the legal aid budget in real terms.

The noble Lord, Lord Lester, quoted my description of the legal aid system as, "a highly successful public social service". I said that in my keynote address to the annual conference of the Bar in 1996. I agree with it and I want to make it an even more successful social service. The noble Lord suggested that I had not referred to the ethical dangers perceived by some in relation to conditional fee agreements. In fact, I did refer to them. I spoke of how some saw these as putting the integrity of lawyers and their duty to the court under stress. I said that I rely on the ethics of the legal profession, which are strongly enforced.

Poor people will gain access to conditional fee agreements if they have strong cases. The noble Lord, Lord Lester, said that he tells his clients to proceed only if he thinks that they have even or better than even prospects of success. His modesty is well known and his success rate should have made him more confident. He should have given robuster and stronger advice. I have read far too many opinions by lawyers which are of the "on the one hand" or "on the other hand" variety, when greater precision is what clients deserve.

I entirely agree with the noble and learned Lord, Lord Hoffmann, and disagree, with respect, with the noble and leaned Lord, Lord Simon. I deprecate opinions which say that a case is arguable, or reasonably arguable, whatever that means. Lawyers should offer a precise quantification. That is always what I did myself, so no doubt it was bad for business. I told people if I was confident that they would lose their cases. Then no doubt they went off to some lawyer whom they believed to be more sympathetic to their case who told them they would win. Then no doubt they lost and blamed an unsympathetic judge for the outcome.

Earl Russell

My Lords, before being so confident about offering a precise quantification, should the noble and learned Lord remember that there are many rich bookies?

The Lord Chancellor

My Lords, I do indeed remember that. But all one should say is that this has not less then a 75 per cent. prospect of success. I personally would not find it a very difficult exercise to say that.

The noble and learned Lord, Lord Ackner, expressed deep disappointment with my attitude to civil legal aid. I have always known that the noble and learned Lord, for whom I have a high regard, and I would not agree on everything all of the time. I accept that the Lord Chancellor should fight his corner for justice. I appreciate that the noble and learned Lord was pressing the betrayal button rather early on in his speech. I am not a handmaid or a manservant of the Treasury. I repeat that the costs of legal aid will neither be reduced nor increased in real terms but will be refocused on the most vulnerable in society.

I am grateful to my noble friend Lord Mishcon for pointing out that it is middle income Britain that is shut out from access to justice by the present rules. That is what my conditional fees proposed extension specifically addresses. None of your Lordships, with the exception of those who have advocated a CLAF, has addressed any specific means of bringing middle-income Britain—the great majority of people in our country—in from the cold. I say to the noble and learned Lord, Lord Simon of Glaisdale, that that is the way in which I intend to bring in middle-income Britain. That will be one hundred times better than the present state of affairs where it is simply excluded.

Lord Campbell of Alloway

My Lords, I am much obliged to the noble and learned Lord for giving way. Why cannot these people be brought in without dismantling the legal aid system? That is what I cannot understand.

The Lord Chancellor

My Lords, there is no money to bring them into the legal aid system. That is the short answer. Legal aid for middle-income Britain must take its place in the queue of other candidates for scarce public resources such as schools and hospitals. I am not persuaded that the country would prefer to spend more money on legal aid for middle-income Britain than more money on schools and hospitals. I welcome the support of the noble Lord, Lord Mishcon, for the proposition that this is probably the only way forward.

It is said that the gap in the programme is the matter of the other side's costs, the insurance premiums, disbursements and the like. Conditional fee agreements are profitable contracts for solicitors when they win cases. Every other business incurs investigation costs in assessments of the potential for profitable investment in order to decide whether to enter into a contract on the basis that it is likely to prove profitable. It is only lawyers, reared in a legal aid culture, who are paid, win, lose or draw and who want to be exempt from what every other business in the country would regard as an ordinary business cost to be borne by the business to investigate whether a particular contract is worth their commercial interest to enter into.

Lord Ackner

My Lords, I am grateful to my noble and learned friend for allowing me to intervene. He has said repeatedly, "every other business". Is he drawing no distinction between businesses and professions, or are they all to be treated alike?

The Lord Chancellor

My Lords, I draw no distinction between lawyers as a business and other businesses from the standpoint of determining whether it is right that they themselves should bear the cost of investigating whether it is commercially right for them to enter into contracts as part of their business on the footing that they are profitable.

I enjoyed the contribution of the noble Baroness, Lady Wilcox. It is undoubtedly refreshing to have non-lawyers contributing to our arcane discussions about contentious legal issues. I welcome the fact that many noble Baronesses chose to do that. It may be, as the noble Baroness said, that more research is required, and I am ready to consider that. But I remind her that the PSI research to which she referred accepted that many of the potential problems identified before conditional fees were introduced seemed to be successfully addressed. I shall certainly consider and take account of what she said about the need for monitoring. I shall consider carefully her proposal about monitoring damages to see that successful plaintiffs do not end up paying lawyers too much. It may be that a case will be made out for stronger regulations.

The noble Lord, Lord Taverne, spoke in a supportive sense, although not unqualifiedly. He acknowledged that it may be unfortunate that lawyers are paid by the hour on a time basis because then they have an inevitable incentive to spin out cases. I take that to be implicit support, which I welcome, from the noble Lord for the fixed-fee contracting to which we shall be moving. Nothing concentrates the mind more than a fixed fee. Nothing operates more as a disincentive to spinning out costs.

The noble and learned Lord, Lord Hoffmann, detected in the contributions of many of your Lordships a belief that justice is of infinite value and something on which the Treasury's cornucopia should be boundless. I repeat that I am not the handmaid or the manservant of the Treasury by declining to adopt such an impossible brief. I welcome the noble and learned Lord's realism. It makes his support that much more valuable. He says that the key is to give the lawyers a stake in the outcome of the case so that costs are not unnecessarily driven up to the potential prejudice of their own pockets. I invite your Lordships to remember that if the lawyer has a stake in the outcome, he has an interest to work hard and effectively for his client to secure his own reward.

I welcome the general support of the noble Baroness, Lady Kennedy. I note her concern that some poor people presently protected by legal aid may fall out of protection. That is certainly not my intention. I note her apprehensions with regard to solicitors who have no fat but who provide a valuable service to the poorest parts of our country. My department is analysing the funding and the matter of insuring against the risks and costs of cases to enable me to be satisfied that lawyers will profitably take on poor people's cases. If I find that that is not possible in some cases, I shall of course consider how taxpayers' money might continue to help to fund such cases. That, too, is my response to the noble Baroness, Lady Williams, who expressed a similar concern.

I welcome the sympathy that the noble Lord, Lord Hacking, expressed for the problems that I have inherited and his specific welcome to my proposals to go over to a system for contracting fixed fees.

The noble Lord, Lord Goodhart, complained of an over-hasty substitution of conditional fee agreements, which, he claimed, were spoken of by almost all of your Lordships. We shall all read Hansard, but I do not regard what the noble Lord said as an accurate summary of our debate today. I have experienced broad support for many parts of my proposals from many quarters of the House.

The noble Lord, Lord Goodhart, supports a contingency legal aid fund. I listened carefully to the reasoned speech of the noble and learned Lord, Lord Brightman, supporting that proposition and I shall consider it with care. I note, too, the support for that proposition from the noble Lord, Lord Thomas of Gresford.

It is true that Sir Peter Middleton said that it is worth exploring CLAF. The noble and learned Lord, Lord Brightman, quoted Sir Peter and I agree with what he said, but I remind your Lordships that in his previous sentence Sir Peter wrote:

My preference would be to emphasise the development of conditional fees, because they put the risk on those best able to manage it". I have to confess that despite having listened to the arguments of those who favour a CLAF, I continue to have the reservations that I expressed in my opening speech. The Bar is still the main proponent, but it is still not ready to put before me the fully worked out scheme that I want and which I undertake to consider with great care when it is put to me. I hope to receive it very soon. But that is down to the Bar and not me.

The main argument in favour of CLAF was that the lawyers would always be paid. That is really the point. To my mind, CLAF does not have the merit of a stake in the outcome, which is the critical feature of conditional fee agreements and is an incentive to greater efficiency.

The noble Lord, Lord Windlesham, asked me a number of questions. I hope that he will permit me to write to him so that my reply to this debate is not of inordinate length. In my speech I dealt with the question of how to identify and deal with public interest cases. I said that they would include cases under the Human Rights Bill. I also said that cases brought in domestic courts under that Bill would, when that became law, be covered by the present legal aid system. Once the convention is incorporated, cases brought under it before the English courts will fall within the scope of the present legal aid scheme. Therefore, those bringing such cases, including prisoners, will have to meet the criteria that all civil legal aid applications must meet. It is no part of my intention to remove judicial review proceedings from legal aid. I hope that I have been as clear as I possibly can.

In reply to the noble Baroness, Lady Williams, a lesser merits test may well be appropriate for public interest cases. I have noted and will consider her sensible suggestion that the decision as to which cases go forward as meritorious should not necessarily be taken exclusively by lawyers but that people with a broader experience of the world should be included.

I welcome the generous expression of support for my proposals by the noble Baroness, Lady Oppenheim-Barnes. It is particularly welcome coming as it does from a distinguished past Minister of State for Consumer Affairs and chairman of the National Consumer Council. I also welcome the support of the noble Viscount, Lord Bledisloe, for my daring to grasp the nettle. It is a nettle that must be grasped. I also welcome the support of the noble Baroness, Lady Dean. She was kind enough to commend my courage for tackling this issue. She had the courage to survive as the general secretary of SOGAT. In response to her concerns I can inform her that recently I met the general secretary of the TUC, who was accompanied by distinguished trade union leaders. I am considering the representations that they have made to me about personal injury cases, particularly their concerns about a fixed cost regime in the fast track.

I apologise to your Lordships if any unattractive, anti-lawyer spin is being put on these proposals, but there are some truths about the fees earned from legal aid which simply must be told in the public interest. I like to believe that I am not cynical about my profession. I hope that I am neither an optimist nor a pessimist about legal practice but only a realist.

The noble Viscount, Lord Bledisloe, raised some difficult questions on which I shall write to him. I do not attempt to give an authoritative answer this evening. But the very poor litigant may not want insurance because in practice a successful defendant will be unable to recover costs from him. Middle-income plaintiffs would, however, want insurance cover because it would be worth while for successful defendants to pursue them for costs. As to the more technical position of solicitors, I believe that they may be subject to a different risk if they take cases forward for uninsured plaintiffs. I believe—I shall confirm this—that a Court of Appeal judgment is awaited on the question of whether a solicitor may be legally liable to the defendant in these circumstances for having maintained the action. I also say to the noble Viscount that I do not rule out the possibility that a green form, or special fund, may be created for cases where the investigation costs would be very high if no other alternatives could genuinely be found.

I welcome especially the fact that the noble Lord, Lord Kingsland, thought it right to congratulate me on boldly tackling this, as he put it, intractable problem. I am grateful to him also for the measure of support that he felt able to give me from the Dispatch Box at which he stands.

The noble Lord, Lord Thomas of Gresford, urges festina lente—hasten slowly. I do not wish to proceed with undue haste, but the Latin tag does not live happily with a state of affairs in which expenditure continues to grow at about 8 per cent. per annum—a rate well above inflation.

We are consulting widely. The contributions made by noble Lords today will help to shape the consultative documents which we shall be issuing. I shall gladly listen to any further views from your Lordships and others when those consultation papers are published.

Lord Lester of Herne Hill

My Lords, before the noble and learned Lord sits down, there is one matter with which he has not dealt in his comprehensive reply. It is the community legal service emphasised by the noble Baroness, Lady Mallalieu, myself and other speakers. I wonder whether he could make haste more quickly in that area by indicating to the House his timetable for giving effect to that important manifesto pledge.

The Lord Chancellor

My Lords, that, too, is a matter upon which we shall be consulting and listening to representations. I hope to make a public announcement shortly.

On Question, Motion agreed to.