Legal Aid (Hansard, 4 March 1998)

§ The Parliamentary Secretary, Lord Chancellor's Department (Mr. Geoffrey Hoon)
With permission, Madam Speaker, I should like to repeat a statement on improving access to justice that is being made in the other place by my noble and learned Friend the Lord Chancellor.
At present, the legal aid system is failing us all. The system is failing the millions of people on modest incomes who do not qualify for legal aid and simply cannot contemplate going to law because they would have to pay legal costs if they lost, and it is failing people on legal aid, because the Government cannot direct money to those who need it most and to those cases where there is a public interest in seeing justice done. Finally, the system is failing the taxpayer, who, year on year, is being asked to pay more and more, but can rarely get help from legal aid when it is needed.
Although legal aid is costing us more and more as costs run away, ahead of inflation, it is helping fewer and fewer people each year. It is, therefore, our intention to modernise the way in which civil cases are paid for. We want a system of civil justice which is there for everyone when they need it, not just the rich or the very poor. We intend to transform the legal aid scheme to ensure that we get good value for money from lawyers who are paid from legal aid, and so that we spend taxpayers' money on those who need it most and on those areas where it can do most good.
Achieving all our reforms will require the approval of Parliament through new primary legislation, but, even using existing powers, we can start the process of change. It is on that first stage that I wish to concentrate today.
The publication of the consultation paper marks the first stage of our modernisation of legal aid and legal services. When my noble and learned Friend the Lord Chancellor announced the programme of reform at the solicitors annual conference in October last year, he said: it is essential that the details of our proposals are right … We shall be consulting widely and openly". That is precisely what we have been doing in the four months since October, and will continue to do for a further two months of the formal consultation period. This is a listening Government: we are listening to views on these proposals, and will continue to do so. We have had detailed discussions with the legal professions and with many interest groups—and more are planned. Their comments have contributed to the development of the proposals, but we shall not confine our listening to the legal profession, because our aim is justice for all.
The consultation paper invites views on a proposal that will allow the majority of people in England and Wales to secure access to justice. We propose to allow conditional fee agreements—no win, no fee agreements—to be used in all except family and criminal cases.
Conditional fees offer a new way for people to bring their cases. Lawyers share the risk of litigation with the client by agreeing to work without a fee if the case is lost. If the lawyer is successful, he is entitled to a success fee in addition to his normal fees. Although the maximum success fee can be up to 100 per cent., normally it is 1060 50 per cent. or less. In nearly all cases, the lawyers also voluntarily limit the success fee to no more than 25 per cent. of the damages in any event. Conditional fees have been available since 1995 for a limited range of proceedings—personal injury, insolvency and human rights cases—and they are working well.
More than 30,000 people have taken advantage of this approach to bring personal injury claims. Many would have been unable to afford to pursue their claims without conditional fees. I refer to people who are only just above the legal aid limit—people who are far from well off. They constitute the great majority of the population who are in work, with families, mortgages and savings—or other assets—that mean that they are not eligible for legal aid, but who cannot contemplate the open-ended commitment of meeting lawyers' bills. Only the very rich can face the thought of lawyers' bills without any financial fears, and even they must worry sometimes. To continue to restrict narrowly the use of conditional fee agreements is to deny an avenue of access to justice to the majority of people.
The consultation paper seeks views on any changes to the current law and practice that might improve the operation and use of conditional fees—for example, by allowing the success fee and the insurance premium to be recoverable from the losing party. It also invites views on the Government's plans to begin modernising legal aid. Over the past seven years, the cost of civil and family legal aid has tripled to some £671 million. The average cost has grown from £1,442 to £2,684–53 per cent. above the rate of inflation. The number of acts of help funded in 1996–97 fell by about 39,000. Taxpayers are paying more and getting less. That cannot be right, and it cannot continue.
We need a modern legal aid system, in which only cases that cannot reasonably be funded in any other way, and which have the necessary priority, are backed by the taxpayer. It has never been our intention to abolish civil legal aid, as has been wrongly claimed. We want to focus taxpayers' money where it is most needed and can do most good—on matters connected with social welfare, such as employment, housing, dealing with debt, state benefits and actions against officialdom and bureaucracy. To achieve that clear focus on social welfare issues, the Government intend most money or damages claims to be funded through conditional fees in future. Consequently, they propose to transfer most money and damages claims currently supported by legal aid to the conditional fee system.
However, as my noble and learned Friend told the other place on 9 December, we do not intend to remove legal aid from housing cases, in which the main purpose of the action is often to achieve a home fit to live in. That is precisely the kind of case to which legal aid ought to be directed.
In addition, the ability to challenge public authorities through judicial review is a necessary check on the use of the power of the state, and a positive encouragement to maintain high standards in public administration or public bodies. The poor must also be able to exercise that right of challenge.
Legal aid will remain available for those who qualify. We also believe that legal aid must continue to be available when a person claims to be the victim of wrongdoing by public authorities—for example, 1061 the police. There, too, the ability to challenge misdeeds is an encouragement to maintain high standards and proper behaviour to those over whom public bodies exercise authority.
The extension of the availability of conditional fee agreements will provide an alternative means for people to bring most money or damages claims without public funding. Our aim is to create conditions in which anyone—regardless of financial status—can use conditional fees to bring cases, across the whole range of litigation in which the main remedy sought is money or damages. However, we recognise that the current financial structure of solicitors' firms may not allow that, and that the insurance and finance industry needs time to develop products to assist in the expansion of the use of conditional fee agreements. The Government therefore propose a measured approach to encouraging this change to take place.
The Government propose to remove most personal injury actions from the scope of legal aid by the middle of the year. Lawyers working in that area have considerable experience of taking cases using conditional fee agreements. Similarly, the insurance industry has developed products, with premiums that, in most cases, are about £155 or less. The Government will work with the insurance and banking industries to help them develop more and even better products to allow everyone, regardless of their financial standing, to bring cases using conditional fee arrangements. That combination—the experience of lawyers in that area of litigation, and developed insurance products—is sufficient to allow such cases to be alternatively financed through conditional fee agreements.
In addition, there are certain categories of proceedings that the Government believe no longer have sufficient priority to command continued public funding. It is important that scarce public funds are directed to where help is most needed. The Government are not persuaded that cases that involve, for example, disputes arising from the course of running a business, inheritance, partnerships or trusts meet that criterion. Nor do we believe that taxpayers' money should be used to help neighbouring landowners to settle boundary disputes. In those cases, there will be assets at issue, which would allow the case to be taken with a conditional fee arrangement. In any case, the issues will generally be too narrow or too specific to deserve the use of public money, when such support means less for other matters of greater public importance. The consultation paper seeks views on the proposals to remove those categories from the scope of legal aid.
The Government have been listening carefully to comments that we have received regarding medical negligence cases. The Government believe that many lawyers practising in that area need to modernise the way in which they run their firms, so that they can structure their finances to enable them to take cases on behalf of clients, regardless of their financial standing. However, we accept that it will take time. Therefore, the Government do not propose to remove such cases from the scope of legal aid for the present.
However, we intend to do what we can to reduce the high failure rate of such cases. It cannot be right that only in as few as 17 per cent. of the cases that are supported 1062 by a legal aid certificate is more than £50 recovered in damages. Medical negligence cases should be conducted by practitioners who are experienced in that field of litigation. We cannot any longer allow inexperienced practitioners to take such cases. I have no doubt that part of the reason why the failure rate is so high is that lawyers take such cases without the necessary experience. Therefore, they are unable to make timely, informed decisions on the merits of a case, or on whether an offer of settlement is appropriate, or reasonable in amount.
It serves no one's interests if cases are brought with little prospect of success—least of all the victims of the alleged negligence. Therefore, the consultation paper invites views on a proposal to allow only experienced practitioners to take cases on behalf of assisted persons in that field. We propose that the Legal Aid Board should establish contracts only with lawyers of sufficient experience. Anyone who is granted legal aid to pursue a medical negligence case will be required to use a lawyer who holds a contract with the board. We are keen to hear what criteria could be used to establish whether a lawyer is sufficiently experienced to hold a contract to take cases on behalf of those receiving legal aid.
We intend to remove the remaining money or damages claims from the scope of legal aid as experience of conditional fees among lawyers and insurers develops and they become more widely and readily available.
The Government recognise that, during a transitional period, help will be needed to assist in the transfer of funding away from legal aid. There may be some extraordinary cases among the categories to be removed that lawyers may not initially be able to support fully on conditional fee arrangements. The Government believe that, in time, it will be possible for such cases to be financed solely by conditional fee agreements. Therefore, the Government intend to establish a limited transitional fund. That fund would provide support, for example, in cases involving very high costs—few lawyers' firms are financially structured to carry such cases, because they could not afford the risk of losing—or where there are high investigative costs of establishing the merits of the case.
We expect the need for the fund to support such cases to cease because we believe that, in the long term, those cases will find lawyers whose practices are financially structured to take them on under conditional fee agreements. The transitional fund would also provide help in cases that we exclude from legal aid but which demonstrate a significant wider public interest. That would allow us to start to provide assistance in that type of case under the transitional arrangements, ahead of primary legislation to establish a public interest fund. The size of the transitional fund will be set each year according to other priorities for spending legal aid money and the diminishing extent to which the fund is needed.
The Government will develop a modernised legal aid system. We are working toward a system in which we can control expenditure; obtain good value for public money; and target legal aid where there is the greatest need and it will do most good.
In future, the Government's main priority for using public money to provide legal services will be to assist those who are excluded from society because they are unable to exercise their legal rights. The Government will achieve that through the legal aid scheme and through the creation of a community legal aid service.
1063 The consultation paper sets out the steps towards that goal that can be taken now: making conditional fee agreements more widely available; targeting civil legal aid on social welfare matters; and creating a special fund for public interest cases.
We shall welcome responses to the consultation paper and will consider them carefully before arriving at considered decisions on specific proposals to bring before Parliament.

§ Mr. Edward Garnier (Harborough)
I begin by thanking the Minister for giving me an advance copy of his statement after lunch, and for giving the press an advance copy after dinner last night. Does he accept that the Lord Chancellor's plans, which were announced at the Law Society conference in Cardiff in October, were ill thought out, socially divisive, economically illiterate and politically inept? Does he not recall that the Lord Chancellor proposed to abolish legal aid for money claims, largely personal injury cases, and to replace it with conditional fee arrangements? Does he agree that everyone, apart from the Lord Chancellor, knew that, far from increasing access to justice for the least well-off, his proposals would deny access to justice to a great many people who, thanks to legal aid, are currently able to get to court?
Does the Minister not agree that, far from staunching a financial haemorrhage in the legal aid budget, the Lord Chancellor was intent on abolishing the very part of the system that the hon. Member for Hendon (Mr. Dismore), an experienced personal injury lawyer, says makes the Treasury a profit, while doing nothing at all about legally aided family and criminal law cases which most certainly need to be looked at? That still seems to be the case, judging from the Minister's statement.
Does the Minister further agree that the Lord Chancellor launched his new policy in October without having had any real discussions with the insurance industry, the professions and consumer and welfare groups? Is it not the case that they are all deeply sceptical and that, as a result, the Lord Chancellor is deeply unpopular? The Minister will recall the speech by the present Lord Chancellor at the Bar conference in 1996 when he said: Supporters of legal aid must never cease to emphasise that it is a highly successful public social service. Does he not recall the Lord Chancellor, then the shadow Lord Chancellor, saying: In civil cases which reached judgments in 1995 to 1996, there were judgments in favour of the assisted person in 81 per cent. of the cases. The proportion of cases where there was either a settlement or judgment in favour was 91 per cent"? Does he not also recall the then shadow Lord Chancellor saying: Personal injury litigation as a category was 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"? No doubt the Minister recalls those words very well.
The Minister says that, over the past seven years, the cost of civil and family legal aid has tripled to £671 million. What analysis has he done to discover the reasons for that increase? He made a similar complaint in 1064 the House in November. Surely by now he should have done his homework and found out why there has been that increase.
May I congratulate the Minister on having finally grasped the point that I put to him in November, which is that many solicitors' firms, especially those in the smaller towns and urban communities outside the big centres of population, cannot afford to carry conditional fee arrangement claims, and there is also no adequate insurance available to protect litigants? He says that the Government will work with the insurance and banking industries to develop products that will enable everyone, regardless of financial standing, to bring personal injury claims. Why did not he start that work last year?
I welcome the Minister's decision to think longer and harder about medical negligence cases—which, again, he should have done last year. Will he also look at industrial diseases claims in the same light? Will they remain within the scope of legal aid?
Will the Minister tell us more about the transitional fund? How long is "transitional"? How big will it be? Are there to be restrictions on its use? For example, will it be available only to assist in claims for £100,000 or more? The Minister says that it is available for public interest cases. Will they also be limited to claims for £100,000 and over? When will the preliminary legislation come before Parliament?
The Minister also referred to his consultation paper. In the context of the Lord Chancellor's Department, that must be an oxymoron. When, precisely, will the consultation period close? Last November, I described the Government's proposals—accurately, as it now turns out—as a thorough mess. Yesterday, the Lord Chancellor said that other events that he was being questioned about by the Public Administration Committee were no more than a storm in a tea cup. Does the Minister agree that if the hand on the saucer were a good deal steadier, we would not have to put up with these troubles, and nor would the hon. Gentleman have had to make this statement?

§ Mr. Hoon
I am just a little disappointed that the hon. and learned Member for Harborough (Mr. Garnier) chose to prepare his case on the basis of the rhetoric that he might use to address a jury, rather than on homework that he might have done were he to address a High Court judge.
On the hon. and learned Gentleman's first point, if he had read the Lord Chancellor's speech at Cardiff a little more carefully than he appears to have done, he would have noticed that my noble Friend said that it was the Government's intention to abolish legal aid for most money claims. Most money claims does not mean all money claims. Indeed, our proposals, if carried through, will result in 60 per cent. of money or money damages claims being removed from legal aid.
I am also disappointed that the hon. and learned Gentleman did not give the Government credit for listening carefully to the responses to a four-and-a-half-month period of consultation. In his speech at Cardiff, my noble Friend the Lord Chancellor stressed on no fewer than 12 occasions his determination to consult all those affected. Precisely because we have consulted and listened, we are able to bring forward this consultation paper today—which, in any event, will allow for a further two-month period.
1065 In answer to one specific question, I anticipate that the consultation period will end on 30 April, after which the Government will reflect upon the answers to the questions set out in the paper and bring forward proposals for Parliament ultimately to decide upon.
There is no doubt that the Government intend to look more carefully at family and civil law cases in general. I anticipate that, whenever opportunities arise, the Government will bring forward further proposals for primary legislation that will affect the existing rules on the granting of legal aid in this area.
I continue to be impressed, if I may say that, by the hon. and learned Gentleman's ability to avoid answering any questions on the subject. In particular, the House would be interested in his observations on legal aid and whether he judges that its present cost is too high, too low, or about right. In the course of the various opportunities that the Government have afforded to the hon. and learned Gentleman, he has not answered those quite important questions. It is quite easy to come before the House and criticise; I have yet to see any example of the hon. and learned Gentleman explaining the Opposition's policy in these important areas, which affect the great majority of citizens in our society.
The purpose of the transitional fund is to make available financial support for important cases between now and whenever primary legislation is approved by Parliament. That will not necessarily be limited to cases involving costs of more than £100,000, although clearly that is a useful guideline for the sort of support that might be available. In particular, the purpose of the transitional fund—as, indeed, will be the purpose of a public interest fund, assuming that Parliament approves such a proposal—is to allow those who have cases that are dependent upon important matters of public interest to bring those matters before the court and have those important issues resolved.

§ Mr. Gerald Bermingham (St. Helens, South)
I welcome the Minister's proposals on legal aid, particularly as they affect housing cases. Perhaps we should consider whether, when a housing case is won against a public corporation or other body, it should be beholden upon lawyers to obtain costs on behalf of the legal aid fund. Is he aware that if, as is proposed, the small claims court extends its jurisdiction to cases involving up to £5,000, there is a risk that some housing cases might fall within the category in which legal aid would not be available and costs would not be recoverable?

§ Mr. Hoon
I am grateful to my hon. Friend for his remarks. I appreciate his concern, and assure him of the importance of housing matters to the Government. However, the jurisdiction of the small claims court is a matter for separate consultation. We are carefully considering the matter and have received representations on it. I shall certainly take his views into account.

§ Mr. John Burnett (Torridge and West Devon)
Will the Government let us know, first, what research they have made into conditional fees—a system that is riven with conflicts of interest? Last year, the Policy Studies Institute concluded that it was far too early to gauge the effectiveness of those fees.
1066 Secondly, who will pay the insurance premiums of the poorest and most deprived in our society, who will now be denied legal aid?
Finally, what are the Government's views on using a contingency legal aid fund as the best means of opening access to justice to middle-income Britain?

§ Mr. Hoon
Research has been conducted—the hon. Gentleman mentioned the PSI research, which was not nearly as depressing in its conclusion as he suggests. PSI's report stated: Many of the potential problems identified before conditional fees were introduced seem to have been successfully addressed. On balance, the institute felt that the operation of conditional fees had been successful.
I add to that a further piece of evidence: more than 30,000 cases have now been agreed to be taken under conditional fees. Moreover, the rate of negotiation of those agreements has increased month-on-month and year-on-year, presumably as lawyers get more accustomed to operating under such agreements.
My Department has not received a single complaint on the operation of conditional fees funding—in contrast to the complaints that I receive daily on the deficiencies of legal aid. Hon. Members on both sides of the House will have had constituents writing to them and appearing at their surgeries to complain about the operation of legal aid, whereas, in my knowledge, constituents have not been complaining about the operation of conditional fees funding, which seems to be remarkably successful.
We continue to study carefully proposals on the operation of various contingency funds which have made to us by the Bar and by the Law Society. However, as our consultation document says, we are concerned that if we allow development of conditional fees and the creation of a fund, there is a clear danger that the best cases will be dealt with on a conditional fees basis, leaving weaker cases to the fund—therefore making it unlikely that the fund will be financially self-sustaining. Both the Bar and the Law Society are attempting to deal with that problem, and we await with interest the outcome of their efforts.

§ Mr. Dennis Skinner (Bolsover)
Does the Minister agree that one factor in the escalating cost of legal aid is the reduction in union membership? The fact is that, 20 years ago, there were 30 million trade unionists, every single one of whom would be represented free of charge—either by their union representatives, or by lawyers paid for by their representatives—in cases of personal injury at work, allowing them to make their case. Now, the number of trade unionists is just over 6 million, creating a gap that has undoubtedly made a massive contribution to the number of people in various types of employment who have to go to legal aid. We will have to take that factor into account.
Will the Minister take it from me, and from others, that one of the biggest issues in legal aid that the Government will have to address is that, regardless of what legal aid system is introduced, we are not convinced that people such as the Maxwells and the Levitts will be deprived of large legal aid sums—which should be going to the many thousands of people who want to fight their little case on its merits with the help of the legal aid system? That is 1067 the problem. How will the Government deal with multi-million pound fraud cases? Will those cases continue to get those sums?

§ Mr. Hoon
My hon. Friend is absolutely right to draw attention to the excellent schemes operated by trade unions and their lawyers, which provide effective, specialist representation to a wide range of people who receive support as a result of their trade union membership. Indeed, my hon. Friend may well have seen towards the end of last year an interesting suggestion from John Monks on behalf of the Trades Union Congress that those schemes should be extended to people who are not trade union members, so that the expertise available could be used to benefit the generality. That is something to which we refer in the consultation document. It is an interesting development which I hope my hon. Friend would welcome.
On my hon. Friend's second point, about people in receipt of legal aid in large-scale fraud cases, I assure him that the Government will continue to bear down on those who seek to secure legal aid when they are not financially eligible. It is vital for the integrity of the scheme that we channel legal aid to those who need it, not to those who are disguising their assets overseas or elsewhere.

§ Mr. Douglas Hogg (Sleaford and North Hykeham)
May I welcome the Minister's statement that his Department is looking further at the contingency fee fund concept? Within the profession, there is a feeling that if a choice has to be made between contingency fee funds and conditional fee agreements, there would be a strong preference in favour of the contingency fee fund because it avoids the conflict of interests already referred to and because it avoids the necessity of plaintiffs having to find the insurance premium.
On the question of medical claims and legal aid being confined to lawyers who have special expertise in that sphere, does the Minister understand that he will be creating monopolies, and that in many areas—for example, rural areas—there will be no lawyer to whom a plaintiff can turn for advice and assistance?

§ Mr. Hoon
I am grateful for the right hon. and learned Gentleman's support. On the question of a fund, I suspect that he is speaking unconsciously on behalf of the Bar, which would probably prefer a fund to the arrangements that are currently in place. I am not entirely sure that the Law Society would prefer a fund in place of the opportunity for its individual members to take forward conditional fee agreements. However, that is clearly a matter for the professions, and we would await with interest the outcome of their deliberations.
I also suggest that it might well be possible to create a fund in a narrower category of cases, that it might be appropriate to establish a fund in discrete areas of litigation. Indeed, the Government are seriously considering taking appropriate powers, whenever Parliament might approve such a course, that would allow the creation of such funds. That might well be a way of reconciling the right hon. and learned Gentleman's concerns with mine.
I appreciate the right hon. and learned Gentleman's comments about medical negligence cases. These are sensitive and difficult cases which require extensive 1068 investigation before any return can be made. That is why the Government are convinced that it is appropriate only for those who are experts to conduct such litigation. While the right hon. and learned Gentleman makes a good point about the importance of securing access to local justice and of having a lawyer available nearby, I hope he will agree that it is much better to have a lawyer available who knows what he or she is talking about and who has dealt with that kind of case before, rather than simply to go down the road to someone who might recently have done one's conveyancing but who knows nothing about medical negligence.

§ Mrs. Sylvia Heal (Halesowen and Rowley Regis)
Having been a magistrate for more than 20 years, I am well aware of the value of legal aid and, indeed, of the rising cost of legal aid. However, I am also aware that many people do not qualify for legal aid. Can my hon. Friend assure me that the Government's proposals will be fair to those people who currently do not qualify for legal aid?

§ Mr. Hoon
I very much appreciate my hon. Friend's comments. The complaints that I referred to earlier, which people bring to their Members of Parliament in writing or at their surgeries, generally turn on financial eligibility for legal aid. The way in which successive Governments have controlled the cost of legal aid has been by bearing down on eligibility. Clearly, one option available to this Government to restrict the cost of legal aid is simply to continue to bear down on eligibility; to take out more and more people so that, ultimately, only a handful of people would qualify for legal aid. That was not the course on which we decided. We believe that it is much better to try to find the appropriate means of funding cases. That is why we propose an extension of conditional fee agreements. That will make the legal aid fund go further and allow us to concentrate it on those people and areas of real need. I hope that, in that way, I will be able to satisfy my hon. Friend's concerns.

§ Mr. Ian Bruce (South Dorset)
The Minister will know that I have an interest in expert witnesses in personal injury cases. I wonder whether he can say more about how expert witnesses will be paid for. Some lawyers are telling them, "You should share the same risk as me, whether we win the case or not." That is inappropriate because the expert witness is supposed to be giving unbiased evidence to a court. What will the Minister do about that and how will he ensure that the losing litigant will not face a massive bill at the end? We must remember that the Department of Social Security is the first to be paid after a personal injury case is paid out.

§ Mr. Hoon
I shall confine my remarks to personal injury and I hope that that will satisfy the hon. Gentleman's concern about expert witnesses. Expert witnesses appear in a range of cases. I share the hon. Gentleman's reservation at the prospect of such witnesses sharing in the costs of a case. One of the great weaknesses that we have identified about the way in which civil litigation operates is the development of an expert witness industry, where expert witnesses are available for any argument that a lawyer wishes to advance. Too many cases are made expensive simply because both sides have teams of expert witnesses and, inevitably, have to pay for them.
1069 I look forward to a day—these are proposals contained in our consultation document on reform of the civil justice system—when expert witnesses are genuinely expert and give objective advice about a case. In those circumstances, it is important that their fees—as the hon. Member for South Dorset (Mr. Bruce) said, they can be considerable—are paid for. That is why we believe that it is important to establish the conditions in which lawyers, the insurance industry and, where appropriate, the banking industry can work in partnership to fund certainly the more expensive cases, and to seek the development of the insurance products that will allow for the cost of expert witnesses to be properly met.

§ Mr. Chris Mullin (Sunderland, South)
I broadly welcome my hon. Friend's statement. The fact that he has obviously taken on board many of the representations made in the past few months is a cause for celebration, not criticism. It was always inevitable that there would be teething troubles with such a radical change. As long as he is prepared to listen to the representations made from benign quarters, I see no long-term problems with the changes.
On medical negligence, should not we be moving towards no-fault compensation for the most serious cases? They can sometimes drag on for up to seven years and that is in nobody's interest except the lawyers.

§ Mr. Hoon
Benign is not a word that I have often associated with my hon. Friend, but I can see that I am wrong. I appreciate his support. The figures for recovery in medical negligence cases show that only 17 per cent. of cases produce recovery of more than £50. The average recovery appears to be about £4,000, with £4,000 paid in costs to achieve that. That makes a strong argument for no-fault compensation.
There are other difficulties about no-fault compensation that we would have to address. This might be one of the areas where such an approach is appropriate and, together with colleagues from other Departments who have a clear interest in this matter, we will be considering carefully whether that is the appropriate way of taking these cases forward.

§ Mrs. Eleanor Laing (Epping Forest)
While I welcome the Government's aim of reducing the burden of legal aid on the taxpayer, is not the Minister concerned that making solicitors' firms bear the financial risk in some cases is an unbearable burden for smaller firms and makes the lawyer personally involved in his or her client's case? Is he not concerned that there is a danger that the objective nature of the legal profession itself will be undermined?

§ Mr. Hoon
May I deal first with the point about whether solicitors can afford the costs of this sort of approach? The Government have commissioned some research by KPMG into the business case for solicitors' firms undertaking much of their litigation under conditional fees. The report has been received and will be published in due course. I hope that the hon. Lady will study it with care and decide, in the light of the research conducted, whether or not it is possible for small firms to conduct widespread conditional fee arrangements. We 1070 must bear in mind the fact that lawyers earn their money from a number of different sources, of which legal aid is one; and legal aid will continue to be available in range of cases.
Conditional fees, particularly as we propose to extend them to the great majority of cases, will extend the opportunities of the great majority of citizens to take legal cases before the court. I said that only the very rich and the very poor are currently in a position to take cases before the court. I hope that the hon. Lady will accept that our proposals will open up access to justice for the great majority of people in our society. That should provide lawyers with financial opportunities that are not currently available to them.
I appreciate the hon. Lady's concern about lawyers being involved in their clients' cases and that potentially affecting their judgment of what is appropriate. However, I hope that she accepts that there is no evidence so far of that happening under the conditional fee agreements that have been concluded to date.
Moreover, the fears to which I referred when replying to the hon. and learned Member for Harborough (Mr. Garnier) have not been borne out in any of the research. Indeed, in the more complex cases, there will in any event be a member of the Bar who ought to be able to bring a degree of objectivity to bear on the assessment of the case. We should see a degree of partnership developing between solicitors and banisters in the assessment of risk in given cases and the appropriate level of recovery.

Several hon. Members
rose—

§ Madam Speaker
Order. We cannot continue with these long questions and very long answers. I understand the complexity of the statement, but I should like to call as many hon. Members as possible and for that we need to have shorter questions and answers.

§ Mr. Andrew Dismore (Hendon)
As a specialist personal injury solicitor, may I ask my hon. Friend whether he agrees that, if fewer cases succeed under the revised proposals, the Government could be a net loser; and that the acid test will be whether more cases succeed? In that context, I welcome the proposal to extend the recovery of the success fee and insurance premium from insurance companies, as opposed to taking them out of the victim's pockets. Will my hon. Friend comment on whether block contracting will still be permitted as part of these developments?

§ Mr. Hoon
We anticipate that more successful cases will be brought as a result of these proposals, because one of the advantages of allowing lawyers to participate and risk their own funds in the prosecution of cases is that they will have an interest in selecting good cases to take forward. We believe that that is a good thing. As for my hon. Friend's various more technical points, I hope that he will accept that we are concerned to take forward a modernisation of the justice system and that contracting will be a feature of it.

§ Mr. Edward Leigh (Gainsborough)
The Minister used the word "modern"—naturally—several times in his statement. Why is it necessarily modern or right to move 1071 in the American direction, towards a highly litigious society plagued by unscrupulous lawyers, in which doctors and others who work in the public interest are saddled with huge insurance costs?

§ Mr. Hoon
I do not accept for a moment that we are moving in the American direction. I hope that the hon. Gentleman will accept that we are seeking to achieve a situation where only good cases are brought before the courts and our courts are not occupied by cases of dubious merit that are drawn out over weeks, months or even years. That will be precisely the opposite of the American experience. We do not intend to go down that route.

§ Ms Hazel Blears (Salford)
One of the attractions of conditional fee agreements is that they should free considerable resources to enable us to extend our community legal service. That will be of great assistance to my constituents in the inner city, where legal advice is often thin on the ground. Will my hon. Friend tell us about the time scale for the community legal service and when we can hope to see some flesh on its bones?

§ Mr. Hoon
I am grateful for my hon. Friend's observations. Unless we can control the cost of the existing traditional legal aid system, we shall not have the resources to create a community legal service. Work is being conducted as a matter of urgency in the Department. A team has been established to develop proposals for a community legal service. I hope to be able to tell my hon. Friend the outcome of that work as soon as possible.

§ Mr. David Ruffley (Bury St. Edmunds)
The Minister skated over the crucial issue of the affordability of insurance premiums for those poorer households that want to go down the conditional fee route. Which insurance companies has he spoken to? Have they given him reassurances that they can price insurance policies so that the premiums are affordable to the poorest?

§ Mr. Hoon
Ministers and officials in the Department have had meetings with a range of insurance companies. The speech in Cardiff last October in which my right hon. and noble Friend the Lord Chancellor set out the principles has concentrated minds remarkably. Lawyers are thinking more constructively. The insurance industry is interested in such work. The average cost of PI insurance is in the order of £155. Insurance products are being made available that will avoid those costs being borne by individual litigants who are unable to meet them. There are a variety of ways of funding insurance. A partnership between insurers and lawyers to sustain the costs of litigation in this developing market should satisfy the hon. Gentleman.

§ Mr. Michael Jabez Foster (Hastings and Rye)
I congratulate my hon. Friend on having listened and on making it clear that this is not a cost-cutting exercise, but a means of redistributing the funds available. When litigants cannot afford to take out insurance, would it be possible for the premiums to be paid from the transitional fund? Would it be possible to extend legal expenses insurance, perhaps by tax relief, so that many more folk could choose solicitors without personal cost?

§ Mr. Hoon
My hon. Friend has made valuable suggestions in the past. I am grateful to him for 1072 acknowledging that we have listened to him. I hope that he accepts that I cannot give him an answer today on his further suggestions, but we shall look at what he has said.

§ Mr. Elfyn Llwyd (Meirionnydd Nant Conwy)
I have mentioned previously two savings that the hon. Gentleman's Department could make without affecting anyone. First, an appointments system in magistrates courts would save £42 million at a stroke. Secondly, in family and ancillary relief cases, arguments over the slightest issues can often result in lawyers' fees 10 or 12 times greater than the sums being argued about. May I draw the hon. Gentleman's attention to those economies before he hits people who validly want to make personal injury claims and have no lawyer to take them on?

§ Mr. Hoon
The process of modernisation of the justice system will continue on a number of fronts simultaneously. I assure the hon. Gentleman that we shall consider carefully any proposals for saving money in the magistrates courts and on family cases. We shall establish a system of contracting, which will bear down on the considerable costs of family work.

§ Fiona Mactaggart (Slough)
Does my hon. Friend agree that, in most areas of public expenditure, there are robust mechanisms to ensure the quality of the service that the public are paying for? Is the proposal for allowing perhaps only a limited number of expert firms to take on medical negligence work a first step so that in other areas where specialist legal knowledge is needed, we might examine ways of ensuring quality for people who depend on legal aid?

§ Mr. Hoon
That is exactly the direction in which the Government intend to go. I hope that the use of experts in relation to medical negligence cases will establish a useful precedent for the use of expert lawyers elsewhere. Once Parliament has approved any legislation that we bring forward, contracting will allow us to contract only with those who are expert and knowledgeable in particular areas of law. That seems a wholly welcome development, for the benefit of practitioners, and, above all, for the benefit of those whose cases go before the courts.

§ Mr. Richard Allan (Sheffield, Hallam)
The Minister will be aware that many disadvantaged people use law centres to access the legal system. Law centres depend on voluntary workers, solicitors and bits of local authority spending. Does he envisage direct Government support for law centres as part of his legal aid reform package?

§ Mr. Hoon
Very much so. Indeed, in the summer, Parliament approved changes in statutory instruments that allow legal aid money to be used to pay the salaries of lawyers who work in law centres and for citizens advice bureaux and similar advice-giving agencies. As part of the community legal service, I look forward to an extension of that provision, to move the traditional legal aid away from simply supporting particular cases towards supporting institutions that are providing advice and assistance to those most in need.

§ Mr. Ross Cranston (Dudley, North)
I, too, warmly welcome my hon. Friend's statement. Does he agree that, parallel to the changes in the legal aid system, we need to 1073 be thinking about new ways of resolving disputes? I know that his Department is involved in developing protocols, for example. Does he agree with the Woolf inquiry recommendation that private ombudsmen or alternative forms of dispute resolution need to be encouraged?

§ Mr. Hoon
My hon. Friend was a very distinguished member of the inquiry. He probably knows rather more about the details of the preparation than even I do. I am most grateful to him for his suggestions. The Government are determined to develop alternatives to going to court. Mediation is certainly one. A range of other options are available to us. Anything that can reduce the cost and time taken in litigation must be welcomed.

§ Mr. Dominic Grieve (Beaconsfield)
Does the Minister agree that one of the consequences of the proposals is that the power of the state will be greatly increased? The system will involve discrimination by the state about which categories of litigation should command state support through legal aid.
In that context, the Minister made a differentiation in ring fencing housing cases but excluded, as an example, disputes between neighbours over boundaries. It is my experience that disputes over boundaries often involve the harassment of a person with no means by a neighbour with considerable means and a willingness to resort to litigation, which makes the life of the former a complete misery. How is the distinction between the two categories of housing and boundary disputes to be drawn?

§ Mr. Hoon
If the hon. Member will forgive me for saying so, I did not entirely follow his reasoning about the power of the state. That may be my fault. I assure him that legal aid will continue to be available to those who wish to bring actions against the state in its various guises.
On neighbourhood disputes, the issue is not whether the state has an interest in determining who should or should not bring a case but whether it is possible to fund such a case—whether by legal aid or some other means. We are simply proposing—I hope that the hon. Member will respond to the consultation—that, in disputes between neighbours, particularly over where a fence should be or how much land is owned by one party or the other, a fund is available which allows such litigation to take place on the basis of conditional fees, rather than having to expend taxpayers' valuable and scarce resources on paying for such private disputes.

§ Mr. Gareth Thomas (Clwyd, West)
May I welcome my hon. Friend's statement? Those who have been involved professionally in this area know that radical reform to improve access to justice is long overdue. However, as I am sure that he would agree, difficult questions need to be resolved. Will any fixed costs under any fast track for litigation which may be developed take into account the fact that, to some extent, solicitors will be using successful cases to subsidise unsuccessful cases?

§ Mr. Hoon
My hon. Friend knows that the question of fixed costs and the regime that will operate are subject to separate consultations. He has made his views on the matter known on previous occasions. We are still 1074 considering the results of that consultation, and will continue to do so before bringing specific proposals before Parliament.

§ Mr. Steve Webb (Northavon)
On affordability, the Minister suggested that the figure of £150 or so, which would be way beyond the means of the poor, might be covered by some sort of further insurance for legal expenses. However, as the poor typically cannot afford to insure even the contents of their homes, would not taking out further insurance—unless they were forced to do so—be the last thing that they would think of doing?

§ Mr. Hoon
I am sorry if I gave that impression to the hon. Gentleman. What, essentially, I would say about such cases is that there is no reason why innovative insurance products should not take up the cost of the up-front insurance—it is not always absolutely necessary for someone to pay the £150 in advance of litigation. Alternatively, there is no reason why a firm of lawyers, confident of the outcome, should not meet the cost of insurance in an appropriate case. I sought to explain that we expect partnerships to develop between lawyers and insurance companies, perhaps involving the banking sector, too, to allow such cases to go to court for such litigants.

§ Dr. Brian Iddon (Bolton, South-East)
Like other Members, I am worried about medical negligence cases, especially the serious cases involving the death of a young breadwinner. Is my hon. Friend aware that many such cases are carried all the way almost to the day of entering court, when everything is almost proven, but that, at the last minute before the court hearing, solicitors try to put pressure on plaintiffs to drop cases or to accept paltry damages out of court, on the ground that the legal aid, which appears to have been capped, is running out? Does he agree that when so much legal aid money has been spent and the case is almost proven, it should go to court so that justice is seen to be done? I have given my hon. Friend an example of such a case, although obviously I cannot cite the details now.

§ Mr. Hoon
I appreciate my hon. Friend's concern, and I would certainly welcome from him in writing the details of any particular case; I hope that he will accept that it would not be appropriate for me to comment on a particular case at this stage.
It is unlikely that a legal aid certificate will run out. One of the problems with legal aid is often that once it is granted it supports a case to the conclusion of a court hearing, even when those who have heard the case might judge that it was not entirely appropriate for it to have been brought in the first place. The Department has received several representations from judges questioning whether legal aid should ever have been granted in certain cases.
I hope that my hon. Friend will accept that our proposals for medical negligence cases will guarantee access to legal aid for the moment for those who presently enjoy it, but will also point the way to significant change by ensuring that only those who are expert and specialist in the field will be able to act on behalf of plaintiffs. I hope that that safeguard will satisfy him that we are carefully considering the position of such plaintiffs.

§ Mr. David Kidney (Stafford)
Several hon. Members have made suggestions about the best use of any savings 1075 to public funds that may result from conditional fee agreements. Can the Minister confirm that such savings will be available for use, rather than being returned to the Treasury? If so, what will be the role of regional legal services committees in deciding their own regional priorities on such matters as extending eligibility and paying for more local law centres?

§ Mr. Hoon
I am grateful to my hon. Friend for his observations. I have made it clear that to fund our manifesto commitment to create a community legal service, the Government need first to bring the costs of traditional legal aid under control. When we have done so, we can consider ways of funding the community legal service. We see the regional committees as providing a local element in terms of identifying the needs of different parts of the country. In rural areas, there may be different needs and priorities, and we expect that the regional committees will be in a position to identify those and to communicate local needs and concerns to the Legal Aid Board.