Civil Legal Service

HC Deb 08 March 2001 vol 364 cc135-70WH

Motion made, and Question proposed, That the sitting be now adjourned—[Mr. Dowd.]

2.30 pm

The Parliamentary Secretary, Lord Chancellor's Department (Mr. David Lock)

I am pleased to have the opportunity to debate public funding for civil legal services. It is almost a year since the launch of the community legal service, which introduced several crucial reforms to the old civil legal aid system. It was a manifesto promise and fundamental to the implementation of the Access to Justice Act 1999. In place of the old fragmented, unco-ordinated system of legal aid, the CLS is a comprehensive, network of legal service providers working together to ensure that people have access to good-quality, local legal advice.

The lack of vision and focus of the old legal aid system was one of its greatest failings. Providing access to justice is not only about funding those who are eligible and wish to pursue or defend a case. People have differing legal concerns and want to access advice in different ways. People are no longer prepared to be told, "ask a solicitor", and in the past many people have found it difficult to follow that advice. By contrast, through the community legal service we have identified priorities, targeted resources and created partnerships with other funders.

The CLS has a clear vision of funding for legal services. It recognises the importance of other advice providers, such as the National Association of Citizens Advice Bureaux, and understands the need for a variety of information points, including leaflets, telephone help lines and a comprehensive website. That vision at the heart of the funding reforms is of improved access to legal services for everyone. I have no intention of dwelling on the past. The current developments of the CLS and our vision for the future of civil legal services are of much greater interest. However, it is important to remember that the old system was in desperate need of reform.

It may be helpful if I remind hon. Members of some of the principal failings of the old legal aid scheme. Expenditure increased each year, yet the number of people receiving help remained the same. Spending was fragmented, with no connection between legal aid services and the services provided by other funders. Lawyers had no incentive to provided cost-effective services. Areas of greatest need were not targeted. The quality of service varied according to where one lived. Some areas were devoid of advice centres. Other areas offered an overwhelming mass of unconnected options and no way of finding out which option might be the right one. The old system lacked the flexibility to tackle such problems effectively and a completely fresh approach to providing legal services was needed.

The CLS identified three key vehicles for ensuring access to good-quality, local legal services: partnerships, which bring together all the local funders and providers of services, so they can plan provision on the basis of meeting local needs and priorities; the CLS quality mark, so that members of the public can identify suppliers of quality assured legal services and the CLS website, which is called, "Just Ask!" With the launch of the CLS came the community legal service fund, which replaced the civil and family legal aid budget. The fund is administered by the Legal Services Commission. In the same way as the method of providing legal services needed to be reviewed, the funding of legal services had to be modernised.

There are three tiers to that modernisation. First, funding is now allocated on the basis of priorities, which are set at both a national and local level. The Lord Chancellor's national priorities include cases involving the welfare of children, domestic violence and cases that help people to avoid or climb out of social exclusion.

Secondly, the priorities have been given effect by the introduction of contracts, which enable the Legal Services Commission to target taxpayers' money on the areas of greatest need and choose which services to provide. They are also an incentive to provide good quality services cost-effectively. The quality of service is closely monitored because all suppliers must pass the Legal Services Commission's quality assurance standards. From April, suppliers that are under contract to the commission will provide all civil and family legal services.

Thirdly, the merits test for legal aid has been replaced by the funding code. That code also gives effect to identified priorities by deciding which cases should receive funding and setting more or less stringent tests, according to the priority of the case category. The code helps to ensure that only worthwhile cases receive funding.

This year, the Government expect to spend about £810 million on the community legal service fund. Over the next three years, we expect to spend, on average, £700 million pounds a year, of which £235 million will be spent on legal help.

Some hon. Members will have made a mental note comparing this year's expenditure of £810 million with the lower average sum of £700 million a year for the next three years. That lower expenditure reflects the fact that personal injury is no longer within scope. Additionally, since April last year, we have refocused expenditure on national and local priorities by the letting of contracts and the introduction of the funding code. That has allowed more money to be released to support the CLS. More money than ever is being spent on legal help—formerly civil legal advice and assistance—so that a greater number of disputes can be resolved more quickly without involving the courts, and thereby avoiding the higher costs that would be incurred.

Mr. Edward Garnier (Harborough)

I could not hear what the Minister said about the figures. I think that he mentioned average spending of £700 million on the CLS, not this year, but in each of the next two years. He then said that a proportion of that money—something like £200 million will be spent on a particular purpose. However, I did not hear what it was, and he did not tell us how the balance will be spent—or if he did, I did not catch it.

Mr. Lock

Approximately £700 million will be spent on the community legal service fund. That is not the same amount of money as is spent on procuring legal services—that is a much higher sum—because the costs of winning cases are returned to the fund and, therefore, the money is circulated. One can draw an analogy with a water cistern. The money is the amount that is used to top up the cistern every year, rather than the total amount flowing around it. Of that sum, approximately £235 million will be spent on contracts for legal help, which is the successor to the green form scheme.

Approximately £70 million of the balance will be spent on money and damages claims, and the vast majority of the remainder will be spent on family litigation. The spending on money and damages claims represents a small proportion of the number of claims that are funded and represents only the top-up each year that is required to support such claims.

Mr. Andrew Dismore (Hendon)

Will my hon. Friend give his assessment of the likely consequences on additional services that are not claims for money, damages or property, if the community legal service was abolished by a future Government?

Mr. Lock

At various times, there have been proposals to run money and damages claims through a contingency fund. That would not be appropriate if we continued with conditional fee agreements because there would be adverse selection and the fund would quickly go bust.

It would be impossible for advice on a range of issues, such as benefits, housing and immigration, to be run on a contingency fee basis; it would not work. Equally, family cases cannot be run on a contingency fee basis. For example, how could contingency fees be used to fund the parents of a child who had been taken away by a local authority? They have the right to be represented, whether or not they have a good case. I am not aware of any way of moving such litigation out of the subsidised market, although perhaps we shall hear more about that later this afternoon. It would be a disaster for the lawyers and a much greater disaster for the clients who need those important services.

Some people argue that greater access to legal advice will lead to more people taking cases to court. The Government, however, take the opposite view. Good advice and assistance at an early stage can often prevent a legal problem from getting worse and lead to an early resolution, thereby avoiding the need to involve the courts. I am aware of complaints that the Government are not spending enough on public legal funding, although such expenditure must be considered against other Government priorities such as health and education. No matter how worthwhile and deserving we might believe legal funding to be, it will never be as high a priority as other areas such as education and health.

The Government have a duty to obtain the best possible value from the money that is available to invest in public legal funding. We have achieved that aim. The success of contracting and the funding code in reprioritising expenditure has released funds to be spent on expanding legal services. I should like to talk about three key examples of that—contracting and innovation, remuneration and eligibility.

Through targeted funding and expansion packages, as well as the continued development of new and innovative methods of service delivery, there are now sufficient numbers of contractors in most categories to ensure access to services across the country. We firmly believe that, through contracting, higher standards can be achieved to improve the quality of publicly funded legal services and value for money in the future. Levels of service are subject to constant review, and if the need for additional funding in any category of law is established, additional funds can be made available.

We acknowledge that not all suppliers have found the transition to the contracting system easy, but I assure hon. Members that I spend considerable time listening to practitioners, whose views are taken into account in policy making. One matter raised by practitioners is the amount of administration involved in the contracting process and the quantity of forms. I have been involved in a review of the amount of paperwork in the contracting system with Mr. Steve Orchard of the Legal Services Commission. I have also asked the LSC to consider the design of forms and ensure that information is requested in the simplest possible way and only when it is really needed.

We have also introduced incentives since April 2000 to encourage firms to expand their services in areas of law that have been targeted for priority funding within the community legal service. The first of those was introduced on 3 April 2000, when the Lord Chancellor announced details of an additional £46 million legal help package, which is intended to boost legal services in areas such as immigration, education, community care and mental health The number of contracts in those categories has increased significantly as a result, and nowhere more so than in immigration and asylum work. Of the £46 million package, £23 million was made available solely to develop legal services in immigration and asylum. The additional funds have enabled the LSC to fund immigration training courses to allow firms to expand and retrain staff. It has also enabled the Legal Services Commission to introduce several targeted expansion packages aimed at encouraging new and existing firms to undertake more immigration and asylum work in areas of need, which were identified following the Home Office's dispersal programme. The remaining £23 million of the legal package has been used to fund new and innovative methods of service delivery across all priority categories of law, including second-tier, outreach and telephone services to contracted organisations.

Remuneration is an essential consideration when creating a system that can provide good advice and accessible services. Good-quality people are required to meet the legal needs of local communities. We must examine continuously what services the LSC should procure and what it must pay. We have listened to the concerns that the legal profession has expressed about remuneration, and we recognise that many public sector lawyers are dedicated, efficient and caring individuals who provide important services to the poor and disadvantaged for modest returns. We recognise that the fees earned from publicly funded work fall short of the fees paid in the private market, but the public purse cannot—and, indeed, should not—try to match those fees.

To safeguard the good range of quality assured legal firms that do CLS work, in addition to the increases made last year, the Lord Chancellor recently announced proposals for a package of remuneration increases for family law and social welfare solicitors. The increased rates are aimed at solicitors working in CLS priority areas such as domestic violence, children's welfare and social exclusion.

The package has been generally well received by the profession. It includes increases of about 10 per cent. in legal help rates in most priority categories of law and the introduction of payments for file review. To encourage greater specialisation and expertise within publicly funded work, the Government also propose to introduce a further guaranteed minimum 15 per cent. enhancement for legal representation for solicitors who have achieved accreditation to either the Solicitors Family Law Association panel or the Law Society children's panel. However, many respondents to our consultation expressed concern about the proposal not to increase rates in other important categories such as welfare benefits and debt. I am pleased to announce that legal help work in all the categories that are not included in the originally proposed increases will now receive an increase of about five per cent.

I turn to eligibility. Since April 2000, the CLS has been targeted on those who most need help. However, the Government believe that the CLS fund has the potential to help even more people. In July 2000, we published a package of proposals to reform eligibility for funding. These proposals have several objectives: to make the financial limits fairer and more consistent; to ensure that the financial conditions reflect priority needs; to introduce a simpler means test that could be used for all levels of service and that would be easier for applicants to understand and to ensure that there is a fair balance between publicly and privately funded litigants.

This week, following consultation on the proposals, the Government published their conclusions and a plan of action for achieving their objectives. First, we will increase significantly the eligibility limit for legal help. In the past, people were often forced to seek help through legal representation because they were not financially eligible for legal help. In future, we hope to be able to set exactly the same financial eligibility limits for all levels of service. The proposed increase to the legal help limit is a crucial step towards that goal. The changes announced last week will bring about 5 million more people within the scope of legal help.

The Government will not introduce contributions for people who benefit from legal help. Therefore, the people who are brought within its scope by the increase will receive legal advice entirely free of charge. That will also make the scheme much more easy for solicitors and advice agencies to administer. When the legal help limits are increased to the same as those for legal representation, a further 2 million people will be brought within its scope.

The simplified means test will apply to all levels of service. As it contains a gross income cap and a small number of allowances, applicants will need only to supply a little information to have their means assessed. That will make the means-testing process more transparent and easier to understand.

The changes will be implemented from 1 October 2001. The effect of the changes is that the package will cost more. Over the next three years, the estimated additional cost will be £30 million. That money can be released because of the control mechanisms for spending that the Government have already introduced into the system, and which were not present under the old legal aid system.

The Government have decided not to introduce contributions from equity. During the consultation period, the main argument against such contributions was that they could deter people on low incomes from applying for publicly funded legal services. We have listened to the public's concerns on the matter, and we have decided not to go ahead with the proposal.

I conclude this part of my observations by mentioning some of our future plans for developing the community legal service. The new relationships formed through the CLS have distanced us from the old thinking and structures and unleashed a great deal of energy and new ideas. We want to encourage that, especially in the context of partnerships.

At the end of last year the Lord Chancellor announced that we were setting up a partnership innovation budget worth £15 million over the next three years. That money should produce new initiatives to help those communities badly served by existing services, such as socially excluded groups, and provide services in rural areas for the disabled, for example, who find it difficult to get to a solicitor's office or access legal services in other ways. The funds will provide essential seed-corn money for new initiatives by local partnerships. The proposals for the partnership innovation budget have been put out to consultation, but we are working to a strict timetable, as we want the first money to be paid out to successful bids by this autumn.

There are now clear alternatives to the Government's proposals for a community legal service. The Conservatives have published their plans for civil legal aid, which make chilling reading for the clients, because they propose to abolish all the provisions to which I have referred. The partnerships and the co-ordination of funding will be forgotten.

Mr. Patrick Hall (Bedford)

I thank my hon. Friend the Minister for giving way. Is he aware that the community legal service partnership steering group in the Bedford area has only recently started its work, and that the partners involved are extremely positive about their task of mapping the needs for specialist legal advice and representation among the local population and the availability of that advice? The partnership is intended to plug the gaps by attracting funding for that purpose. Does the Minister agree that leaving those gaps unfilled—which would be the case if the Conservative party gets its way—would leave large numbers of people without access to legal advice, with damaging personal, social and economic consequences?

Mr. Lock

I am grateful to my hon. Friend for making that point, based on his own experience in Bedford. Throughout the country there are 165 partnerships that do the work that he describes. Some have existed only for a short time, others for a couple of years. They analyse the needs in their area for legal services, which provide ladders out of social exclusion, and work out how people in their area are able to access those services and where the gaps are. They can do that only by prioritising the funds available and co-ordinating the funds between different providers. The Legal Services Commission is not the only body that funds legal advice: local authorities, the National Lottery Charities Board and Government Departments are also involved. Without that co-ordination, it is impossible to be sure that people will receive the services that they need in the priority areas of law in places such as Bedford.

I commend the work of the Bedford partnership, to which my hon. Friend has given his support. The enthusiasm shown in Bedford is matched throughout the country, so it is a tragedy that the Conservative party proposes to abolish not only the partnerships but the quality mark and to return to a demand-led system in which any lawyer could take any case, whether or not that lawyer had expertise in that area of law. They propose, too, to establish a contingency legal aid fund for money and damages claims but would allow conditional fee agreements to continue. That fund, it is said, would pay costs to losing parties and anyone, regardless of income limits, could take part. All that would be financed through a 10 per cent. levy on damages for cases that win.

We considered in detail the concept of the contingency legal aid fund during the consideration of the Access to Justice Bill. I assure the House that the Opposition proposals are a combination of economic illiteracy and political foolishness of the highest order. Our best guess is that the fund would work only if it won approximately nine cases for every one that it lost. A tough merits test would be set, and only cases with a 90 per cent. chance of success would need to apply. Even then, in our judgment, adverse selection, with the better cases being dealt with through conditional fee agreements and the more dubious ones staying in the fund, would ensure that the proposal would collapse under the weight of its own contradictions in a short time. However, that is not the worst aspect of the proposals, as I understand them—no doubt the hon. and learned Member for Harborough (Mr. Garnier) will correct me if I am wrong. The abolition of the community legal service fund and the return of £525 million a year from legal aid to the Treasury would mean that funding for legal help for family cases would be abolished in its entirety.

Labour Members value the help that is provided for debt, housing, domestic violence and immigration cases. The answer to people who cannot afford to pay for legal services themselves is not to turn the clock back to before 1948 or say that the state should not fund them, but to accept our duty to such people and provide them with quality advice when they need it.

Mr. Michael Jabez Foster (Hastings and Rye)

Is there not a risk that the proposals might offend the Human Rights Act 1998?

Mr. Lock

My hon. Friend makes an important point. Let us take the example of a local authority that takes two children into care whose parents want to resist the application. The full force of the state would be applied to take the children into care for what the state perceived to be the children's best interests. Is it right or possible under the Human Rights Act to say that the state will provide no funding to help those parents in dealing with lawyers, social workers and the court case to determine whether it is in the children's best interests to be taken into care? I would be astonished if it would be compliant with duties under the Human Rights Act to allow the state to take children into care without providing any legal help to the parents to assert their rights in a forum that is likely to involve language that they find difficult to follow, legal concepts that are new to them and serious consequences. Leaving them alone without any help would be a travesty and, undoubtedly, a breach of their human rights.

I am confident that Labour will win the general election and that the Tories' plans for the funding of legal services will not come about. However, they are destructive and damaging and go against the grain of all our experience over the past three years of building a community legal service with quality mark services throughout the country and the enthusiasm and commitment of many people to providing civil legal services.

Having come so far and done so much in the community legal service, it would be a travesty and a tragedy if it were all to be ripped up by the Opposition. I am confident that that will not happen, but a year on, the reality is that the CLS is enabling more people to receive good-quality advice early on from quality assured providers, which undoubtedly contributes to the public good.

2.58 pm

Mr. Edward Garnier (Harborough)

I declare an interest as a practising member of the Bar, although I have not for many years done any publicly funded work. I regret that the Parliamentary Secretary did not find time to express our sadness at what the President of Zimbabwe is doing to the legal system in that country. Although Zimbabwe is a long way away, it inherited its legal and judicial system from this country, and the undermining by an authoritarian president of the judiciary's freedom to exercise its lawful duty—President Mugabe has summarily and unconstitutionally caused the removal of office from the Chief Justice of Zimbabwe—is a matter of great regret.

It is also a matter of regret that neither the Foreign Secretary, nor the Lord Chancellor nor the Parliamentary Secretary has thought fit to deprecate the activities of the President of Zimbabwe in that field. It is equally regrettable that the conduct of the Lord Chancellor throughout his tenure, and especially recently, has caused the reputation of his Department and that of the Office of the Lord Chancellor to fall into disrepute. It is also regrettable that, as head of the judiciary, the Lord Chancellor has become involved in party political fundraising by inviting lawyers to spend large sums to attend a dinner. In so doing he will muddy the waters of the civil justice system and allow members of the public and members of the legal profession who received invitations to think that their future careers as providers of civil justice, both publicly funded as advocates and as members of the judiciary, have been interfered with.

I also regret that the Home Secretary, who is a member of the Bar, sought fit to attack publicly funded lawyers, who give their services to the people of the United Kingdom for little remuneration. Both the Lord Chancellor and the Home Secretary have done themselves and the Government no good at all. I assure the Minister that lawyers who practise in the publicly funded civil justice system are appalled at the way in which those two senior Cabinet Ministers have behaved.

A letter in The Times on 2 March, from the chairman of the Bar, Mr. Roy Amlot QC, refers to the Home Secretary's recent criticism of publicly funded lawyers. He wrote: His latest diatribe surely points up the need for an independent legal profession able to withstand an authoritarian government, the dangers of a salaried government-run defence service, and the vigilance and ability the Bar and solicitors can bring to avoid further miscarriages of justice. That is the immediate context of today's debate.

Recently, I received a letter from the general secretary of the Public and Commercial Services Union, Mr. Barry Reamsbottom, which refers to the Lord Chancellor's Department's announcement. He wrote that they intend to carry out a wide ranging reform of the court service in their consultation document "Modernising the Civil Courts". The document proposes major changes, in fact the first major organised changes since 1840. The Public and Commercial Services Union which represents over 5,000 members at all grades within the Lord Chancellor's Department and county courts, is concerned that this will mean over 140 of the 222 county courts in England and Wales closing and losing up to half the current staff. At this stage the union does not know which courts are to be closed or where they are, hut it is undeniable that the closure of a large number of county courts will severely inhibit access to civil justice.

Mr. Lock

Has the hon. Gentleman read the document, "Modernising the Civil Courts"?

Mr. Garnier

Yes, I have.

I return to the second area of context that is germane to the debate. Shortly after the Government were elected in May 1997, the Lord Chancellor and his Minister, who is now the Secretary of State for Defence, began their plans for reforming the provision of publicly funded civil justice. It was announced in autumn 1997 that the effect of the Government's proposals would be to create a faster, cheaper and more open civil justice system that would be available to everyone who needs it. It was claimed that it would be a civil justice system in which there is fairness between the very poor, the very rich and the very great majority in the middle. The Government's aim is to make access to justice a reality, not simply a slogan. The then junior Minister went on to proclaim that he and his colleagues in Government would transform the legal aid scheme and allow it to bring help where it is most needed and can do most good." —[Official Report, 21 November 1997; Vol. 301, c. 531.]

Mr. Dismore

I am grateful to the hon. and learned Gentleman. Perhaps he could tell us how cutting £500 million pounds from the community legal service, as he would propose if he were in government, would improve access to justice?

Mr. Garnier

I regret to say that the Minister so mis-described my proposals that it would take too long even in this three-hour debate to correct every inaccuracy. In any event, this is a Government-sponsored adjournment debate on the Government's proposals. The purpose of Parliament, although the Government and their Back Benchers may have forgotten it, is to hold the Government to account. The hon. Member for Torridge and West Devon (Mr. Burnett) and I are here to do precisely that. I fully accept that the area of legal public policy has not, sadly, attracted a huge number of Back Benchers of any party into this Chamber. It is not a party political point, but it is none the less regrettable that the only members of the Government party here—there was a Whip here a minute ago but I believe the Minister's speech already pushed him out of the room—are a PPS, who has to be here, although she is dealing with other matters and not concentrating on the debate, and the hon. Member for Hendon (Mr. Dismore), who at least has the decency to attend, albeit that he is barracking from a sedentary position. He has not been wholly favourable to every Government proposal on civil justice. No doubt he will be causing the Lord Chancellor further trouble following the Office of Fair Trading report, which came out today. I dare say that he cannot wait to remove from the Attorney-General and the Solicitor-General the suffix "Queen's counsel".

Mr. Dismore

And from the hon. and learned Gentleman.

Mr. Garnier

No doubt when the hon. Gentleman gets around to it and manages temporarily to shut his mouth, he will want to make the requisite arrangements to remove the suffix from me as well—good luck to him. However, that does not appear to be the current policy of his political master; that is to say, the noble and learned Lord Chancellor. No doubt when the junior Minister returns to his private practice after the election he will wish to reconsider the comments of the hon. Member for Hendon.

The Minister asked me about the Government's document, "Modernising the Civil Courts". I read out the contents of a letter that I had received from the general secretary of the Public and Commercial Services Union about the closure of 140 of the 222 county courts. The word "closure" no doubt stung the Minister because he is the man who, when standing as a candidate for election in 1997, promised the electors of Wyre Forest that he would oppose through thick and thin the closure of Kidderminster general hospital. Hardly a day had passed following the election when he completely changed his tune. Here we have a Minister who pretends to be the champion of the poor, the disabled and children in the realms of civil justice, who said one thing before the election and within minutes, in order to advance his political career, said quite another. I fear that after the general election he may have more time to consult the people of Wyre Forest and those in the queues at Kidderminster general hospital.

In his announcement in autumn 1997 the then Minister, now the Secretary of State for Defence, said that civil justice was too expensive and too exclusive. He said: The very rich have access because they do not need to worry about the costs of litigation. The very poor have access because they are financed by the legal aid fund paid for by the taxpayer. However, the vast majority of people who go out to work and fund legal aid through their taxes dare not risk pursuing their rights through the courts. Those people cannot litigate because lawyers' fees are so high and because they cannot afford the risk of losing and having to pay their opponent's costs as well as their own. He continued: The great majority of the population are not eligible for legal aid. They are effectively excluded from obtaining access to justice in our courts. That cannot be right and it must change. In future, legal actions brought by ordinary working people will usually be paid for by way of one of two routes: conditional fees and legal expenses insurance. The Government are proposing to extend conditional fee—or no-win, no-fee—arrangements to most money recovery civil proceedings, except family cases. Clients will be put in a stronger position to negotiate with their lawyers the fees that they are willing to pay to bring a case. At a stroke, legal help will become affordable to deal with disputes with insurance companies, banks, builders, mortgage lenders and pension funds—provided, of course, that the lawyer has sufficient confidence in his or her legal judgment of the case to enter a no-win, no-fee arrangement. He concluded —I suspect more in hope than with any other emotion: At last, the vast majority of people will be able to afford to uphold their rights in court if they need to."—[Official Report, 21 November 1997; Vol. 301, c. 532–36.] The one problem that he was unable to deal with, and which the Government remain unable to deal with, was the requirement that if access to civil justice was to be provided through conditional fee arrangements, a mature insurance market was required to underpin them. At the time—and subsequently—the Government signally failed to demonstrate that CFAs have been so underpinned. I had discussions with representatives of one of the biggest legal insurance providers only this morning. They were sceptical about whether CFAs were turning out to be the answer to the removal of legal aid in more or less every cause of action brought about by the Government.

How have the Government managed to perform? They said that—

Mr. Dismore

Will the hon. and learned Gentleman give way?

Mr. Garnier

During the long sittings of the Committee that considered the Access to Justice Bill, I accused the hon. Gentleman of having a spring in his back. I am sure that he is itching to criticise the Lord Chancellor about the QC system. If he manages to catch your eye, Mr. O'Hara, we will listen with rapt attention, as always.

What I find interesting about the way in which the Government have approached the whole question of destroying legal aid—[Interruption.]

Mr. Eddie O'Hara (in the Chair)

Order. I am being extremely patient about sedentary interventions, but they are becoming a little too frequent and intrusive.

Mr. Garnier

I find it interesting that the Lord Chancellor, at the outset of the Government's period in office, said that his watchword would be consultation, listening and responding to the advice of those who knew more about the matter than he did. In October 1997, in his Law Society speech in Cardiff, he said that he was there to announce an integrated package of proposals, on every one of which I intend to consult the profession. He said: Change is on its way, and the best thing to do with change is to manage it through consultation and in a spirit of consultation."— [Official Report, 21 November 1997; Vol. 301, c. 550.] If there is one thing that this Lord Chancellor is noted for—and for which his junior Minister has become noted—it is to consult by megaphone and not to listen to the voices of those who are trying to respond. In this field of public policy, the Government have not listened to anybody, but have simply trampled all over the rights and interests of a host of people, many of whom are now hugely disadvantaged.

I have no doubt that the late Clement Attlee is spinning in his grave at the way in which this so-called Labour Government have destroyed access to justice. They have cruelly and cynically called the Act of Parliament that overlays this debate the Access to Justice Act. It can be more properly described as a denial of access to justice Act. I think that most practitioners in the publicly funded civil jurisdiction would agree.

Mr. Michael Jabez Foster

Will the hon. and learned Gentleman tell us how many constituents have complained to him that they have been unable to gain access to an adviser in a legal issue in which they are concerned, during the past year?

Mr. Garnier

I cannot give the figure off the top of my head, but a good many have complained to their solicitors, who have then complained to me.

It is not just in my constituency. When I was shadow Parliamentary Secretary, Lord Chancellor's Department, from 1997 until the summer of 1999, I made it my job to meet provincial law societies around the country, and the law societies and their officers in London and in other major urban areas that have many solicitors' firms. I got the message. nationally and locally, from individual practitioners, from officers of local law societies and from the national Law Society, that the Government had not undertaken—I was about to use an unparliamentary expression—the consultation that the Lord Chancellor had promised. Those societies recognised that the Government had just bullied their way towards the goals that they desired, without taking notice of anybody else's concerns. They continue to do that. At the outset of this shiny new Government, the Labour party published a policy document entitled "Access to Justice". On conditional fee arrangements, it said: We regard conditional fees as an experiment to be monitored closely and in the light of the Scottish experience". It did not expect the introduction of conditional fee arrangements to make a significant improvement to access to justice. They are at present little more than a gimmick designed to mask the chaotic state of the legal aid scheme and the courts service. That was what Labour believed before the last election. Within minutes of the election being over, it decided to change its mind, without carrying out any adequate research, displaying any consistency of thought or policy or caring two hoots for the consequences of its actions on those who had been protected by the legal aid system before the passing of the Access to Justice Act 1999.

Much criticism could be made of the way in which the Government have imposed conditional fee arrangements on the public. I have always made it clear that I have no principled objection to conditional fee arrangements, but I find fault with the Government because they have sought to strip out, except in one or two areas, access to legal aid in its entirety, and replace it wholesale with the use of conditional fee arrangements.

There are, and will be, cases in which conditional fee arrangements work, especially in personal injury work, where the real issue, as often happened under the legal aid system, is not liability, but quantum. If a lawyer picks up a case that he is reasonably sure will be more about quantum than liability, of course he will take a CFA because he knows that he is in no danger of not being paid. However, as the hon. Member for Hendon candidly admitted earlier in this Parliament, the personal injury side of the legal aid fund made a profit. I was not as optimistic or bullish about the profit element, but the fund's net expenditure up to the abolition of the legal aid system was around £36 million a year.

Mr. John Burnett (Torridge and West Devon)

The hon. and learned Gentleman knows my views on conditional fee agreements. Does he agree that when a personal injury case involves quantum, the lawyer who pushes his client into a conditional fee agreement will ensure that he receives not just his fee, but a substantial uplift?

Mr. Garnier

That is a consequence. Lawyers with conditional fee arrangement cases have a personal interest, as opposed to a professional disinterest, in the outcome of the case. I cannot provide this Chamber with examples of lawyers who have encouraged a client to settle on unfavourable terms because it might be favourable to the lawyer. That information is not available and the hon. Gentleman would not expect me to have it. However, the thrust of the Government's policy is to push us towards the American system of funding justice.

The conditional fee arrangement system is, if not explicitly, at least by implication, a move towards the contingency fee system. Before hon. Members become over-excited, I candidly admit that the principle of conditional fee arrangements was introduced under my noble and learned Friend Lord Mackay. However, it was under the present Government's Access to Justice Act 1999 that the system was introduced wholesale and I submit that, if the Government remain in office, we can look forward to increasing erosion of professional disinterest in the provision of civil legal services and a further move towards a contingency fee system such as that in the United States.

Mr. Dismore

This problem arose during our consideration of the Access to Justice Bill. The hon. Gentleman seems to think that conditional fees and contingency fees are the same, but they are completely different. Will he tell us which American states operate a conditional fee system, as opposed to a contingency fee system based on the level of damages, which is what the hon. Gentleman advocates? He wants the American system; the Government do not.

Mr. Garnier

I think that we are talking at cross-purposes. I know precisely the difference between conditional fee arrangements, which Lord Mackay admitted to this jurisdiction, and contingency fee arrangements, which apply in the United States. I do not need a lecture from the hon. Gentleman on the subject.

I am suggesting—the hon. Gentleman may disagree and no doubt he will tell us why at great length—that the Government's wholesale move towards expansion of the conditional fee arrangement system is a move towards the American contingency fee system in the provision of legal services. I say that with some confidence because there have been meetings at the Labour party headquarters at Millbank at which I understand the Parliamentary Secretary was unable to be present. However, Professor John Peysner, professor of law at Nottingham law school, chaired those Labour party policy meetings, and, with Mr. Brian Raincock, an interesting figure in the legal insurance world, and other citizens advised the Labour party on how best to advance non-publicly funded legal services to replace legal aid. It is no secret that Professor John Peysner is a supporter of the American system.

Mr. Burnett

The hon. and learned Gentleman is making a powerful and correct point. I regret to say that I cannot remember the exact title of the statutory instrument that we were debating in Committee—I think that the hon. Member for Surrey Heath (Mr. Hawkins) was the Conservative spokesman but—I believe that the question of conditional fees was raised. I pointed out at the time that, in effect, the Government were being put under pressure to acknowledge and agree to unlimited uplifts. They resisted, and I hope that the Minister agrees that a conditional fee agreement would lead to unlimited uplifts that were nothing but contingent fee agreements.

Mr. Garnier

The hon. Gentleman exposes a further reason for the Government to be embarrassed about their handling of the provision of legal services in this area of public policy, and he will doubtless tell us more about that in due course.

The Minister drew to our attention to a document entitled "The Government's Conclusions Following Consultation: the Community Legal Service—financial conditions for funding by the Legal Services Commission", which was published this week. I received a copy of it in this morning's post, for which I am grateful, along with a document entitled "Community Legal Service: financial conditions for funding by the Legal Services Commission", which deals with the revised eligibility limits.

The outcome of the Government's deliberations has been the subject of some criticism. It is fair to say that the president of the Law Society has in part welcomed the announcement, not least because the equity in a house need not be taken into account when assessing eligibility for legal aid, but in the Law Society's response the president said: There is still a long way to go before eligibility for legal aid is at a level which ensures effective access to justice for all". Before I am criticised for not completing the president's sentence, I should point out that he adds that today's announcement is an important step in the right direction. I suppose that that is true, but it is an unusual step for the Government to take if they have taken on board criticisms of the consultation paper that were made last autumn. I think that it was Lord Goodhart who, on asking in the other place last November about responses to the consultation document, was told by the Lord Chancellor that 34 responses had been critical and two or three were in favour. I may have got the exact figures wrong but the ratio is broadly correct.

In any event, today the Law Society, whose voice can be heard in this Chamber only through Members of Parliament, issued a response to the proposals that the Minister outlined a little while ago. It states: The Society has considered the eligibility proposals in the light of the extent to which they meet the objective that public funding should be available to ensure that all citizens can enforce their legal rights. It has considered the proposals from two perspectives: the public interest, and the impact on solicitors' businesses and the likely consequences for the public. It roundly rejects the Government's view that, unless additional measures are put in place, either clients, or by implication, their solicitors, will seek to lengthen their cases, having no incentive to bring them to an early end. The Society is concerned that the Government appears to consider that financial considerations occupy the entirety of, or indeed are uppermost in clients' minds in the conduct of litigation. That is in line with the Government's continual insulting of lawyers who work in the publicly funded sector. The Lord Chancellor inaccurately, stupidly and rudely accused legal aid lawyers of being fat cats—[Interruption.]

Mr. Eddie O'Hara (in the Chair)

Order. It might be appropriate to withdraw "stupidly".

Mr. Michael Jabez Foster

On a point of order, Mr. O'Hara. The Lord Chancellor appointed the hon. and learned Gentleman as a Crown court recorder, so perhaps the word was not out of place.

Mr. Eddie O'Hara (in the Chair)

That is not a point of order.

Mr. Garnier

That is not funny, let alone relevant. The Lord Chancellor appointed me a Crown court recorder, but I did not have to pay £200 for the privilege.

The Law Society has rejected the Government's view, but its attack on the publicly funded legal profession is of a piece with the unfortunate and uncalled for remarks of the Lord Chancellor. He has had to accept the unwisdom of calling legal aid lawyers fat cats, which was in line with the Home Secretary's unfortunate remarks last week. Interestingly, the Government seek to bend the facts to suit their propaganda and spin, which is designed to infect the public's mind against lawyers who do this valuable work. The Government have come up with nothing sensible and their conduct in dealing with the legal profession, and especially the publicly funded legal profession, has been shoddy.

Mr. Lock

Does the hon. and learned Gentleman recall the enormous cut in eligibility that occurred shortly after he entered the House in 1993. Would he agree that that cut was reversed by this week's announcement that provided 5 million more people with legal help. Can he explain how returning £525 million from the community legal service fund to the Treasury would assist eligibility?

Mr. Garnier

I cannot recall that cut and I joined the House in 1992.

The Law Society concludes that although one aim of the community legal service is to ensure that needy people can pursue their legal rights, the new proposals will act as a disincentive on many needy citizens. The proposal would adversely affect homeowners—especially in areas of high housing costs—employed people who incur travel and/or child care costs and those who are in receipt of tax credits. The groups most likely to be affected would include pensioners, working single parents and disabled citizens who are in receipt of benefits. I spoke on behalf of those groups during the consideration of the Access to Justice Act 1999 and the debate in the House on 21 November 1997.

The Government have never paid attention to my remarks, but they might pay attention to bodies such as the Law Society and those who practise in the publicly funded civil jurisdiction before continuing their attack upon the way in which the publicly funded legal profession works. It is not surprising that the Law Society concludes: At a time when many solicitors are considering carefully the impact which publicly funded work has upon their viability as businesses, the new proposals and in particular the proposals concerning collection of contributions will serve only to drive solicitors away from publicly funded work thus limiting the availability of publicly funded services to those most in need. The Government's record on that aspect of public policy is bad and it is getting worse. Their response has been so arrogant that I suspect few members of the legal profession will vote for the Labour party in general and the Parliamentary Secretary in particular at the next general election—whatever its result may be.

3.34 pm

Mr. John Burnett (Torridge and West Devon)

I would like to tackle the Government's announcement earlier this week, which has been largely welcomed. I want to raise some points about eligibility with the Minister.

I expect that the Minister will receive a number of submissions about the announcement and the papers that the Government have circulated. I would like the Minister to address three points concerning the financial eligibility for civil legal aid and say whether the Government have plans to change the rules for eligibility—[Interruption.]

Mr. Eddie O'Hara (in the Chair)

Order. If there is to be communication between those in the Chamber and those outside, it should be by note, and not verbal.

Mr. Burnett

Thank you, Mr. O'Hara.

A reconsideration of eligibility by the Government would be welcomed by a number of people across the land. My first point concerns housing costs—including council housing costs—and whether allowances should be made for council tax and service charges. My second point concerns employment costs, including full travel costs, child care costs and other necessary subscriptions. My third point, which was alluded to by the hon. and learned Member for Harborough (Mr. Garnier), concerns equity in a dwelling. What proportion of the equity value of an individual's home does the Minister believe should be taken into account when assessing eligibility? Will the Minister respond to those points in his conclusion?

It is imperative that we have a system that is available to large sections of the public. We all agree that we cannot offer a blank cheque. I look forward to hearing the Minister's view on eligibility.

During the debates on the Access to Justice Bill, we discussed at length the amount of legal aid that would remain for civil cases, year on year. We know that, as far as criminal legal aid is concerned, the quantity will be demand led.

Although the Government's announcement is welcome, I am anxious to know about their long-term strategy for funding civil legal aid. If the Government are re-elected, will there be a finite group of individuals with specific incomes and needs who will always qualify for civil legal aid, or will there be a finite sum for the legal aid budget that is indexed to inflation or earnings?

I did not hear all of the Minister's speech, but I believe that he referred to a growth in civil legal aid of about 5 per cent. per annum. We were keen, during the debate on the Access to Justice Bill, to see the criminal legal aid fund separated from the civil legal aid fund. We understand that the civil legal aid fund cannot be left to grow like Topsy; there must be constraints. However, I am anxious to know the Government's long-term strategy. We expressed the concern that legal aid will be left to wither on the vine and that concern is shared on both sides of the Chamber.

Test and lead cases are important and affect not only miners and people with legitimate claims, but organophosphate victims, about whom I have written to the Minister recently. We hope that the Government are seriously considering funding test and lead cases and class actions, which are in the long-term interests of the taxpayer. By setting a decision, individuals will have the chance to claim their damages not as a result of a plethora of cases, but following one test and lead case.

Mr. Lock

I assure the hon. Gentleman that the wider public interest in cases has been set out as a priority for the Government within the funding code. Does he accept that decisions about the funding of individual cases should be taken not by Ministers, but by the Legal Services Commission under the funding code? The Government have done as much as they can, which is to identify the importance of cases with public interest within the code and have then passed the matter over to the LSC, which is operationally independent, as it should be.

Mr. Burnett

I agree. Such action is entirely fair. We should have some acknowledgment, however, that a finite pool of money can be drawn on for such cases, which are in the taxpayer's interest. If we can consolidate a series of cases, it is cheaper than it would be case by case.

Much was made of the abolition of civil legal aid for personal injury cases during the debates on the Access to Justice Bill. Have the Government had second thoughts about that? Now that there has been a change to the system, I do not know whether there are any reliable statistics on whether the Government have saved any money as a result of that abolition. When we debated the Access to Justice Bill, I said that if we stripped out the value-added tax element and the benefit savings, there were unlikely to be any savings in the legal aid budget if we abolished legal aid for personal injury cases. The then Minister's comments to me were that the Government anticipated that there would be the same amount of cases post-abolition as before, and therefore the same amount of value-added tax would be levied and paid to the Exchequer.

Mr. Lock

It may assist the hon. Gentleman to know that the cost to the legal aid fund for personal injury cases in its last year of operation was more than £100 million. It could have been as high as £170 million. I do not know the exact figure. More than 100,000 litigation insurance policies have been written in support of conditional fee agreements. About 60,000 claims—the number is rising—have been undertaken through Claims Direct. All the evidence that the Department has from the insurance industry—defendant insurers, not legal expenses insurers—is that claims are increasing substantially. There does not seem to be a reduction in the number of people who are claiming under defendant insurance policies.

Mr. Burnett

I am grateful for the Minister's explanation, but I would appreciate knowing either this afternoon or in due course the Government's best estimate of legal aid costs that they have saved through abolishing legal aid for personal injury cases, bearing in mind the benefit savings of the litigation. He has answered the benefits point by saying that litigation has increased, which means that the value-added tax element has increased and that significant savings have been made. I should like to know exactly how much they have been, or, at least, be given a best estimate.

The Government's solution to individuals who have personal injury cases and to the fact that it is difficult for middle-income Britain to get access to justice is to increase widely the class of case that can be dealt with through conditional fee agreements. As may be obvious from my earlier intervention, I object on principle to CFAs on the grounds that they cause a conflict of interest between lawyer and client. None the less, they exist and we must live with them. A paper was published in January by the Society for Advanced Legal Studies on the ethics of conditional fee agreements. The chairman of the committee that produced this excellent piece of work is Mr. Richard Southwell QC. Will the Minister confirm that he has had an opportunity to study that paper?

Mr. Dismore

I wonder whether the hon. Gentleman has seen the article by David Marshall of the Association of Personal Injury Lawyers in this week's edition of the Law Society Gazette. He comments on the paper that the hon. Gentleman mentioned and says that it could only have been compiled before all the new changes came into effect.

Mr. Burnett

I have not see that article and am grateful to the hon. Member for Hendon (Mr. Dismore) for bringing it to my attention. None the less, I would like to make a few points arising from the excellent paper compiled by Richard Southwell QC, and look forward to hearing what the Minister says about the conclusions and recommendations set out in it.

Have the Government considered the role and conduct of insurance companies in the litigation process? Have they done an appropriate amount of research and independent scrutiny into that role? I referred to the conflict of interests between solicitor and client caused by conditional fee agreements; nowhere is that more pronounced than when a commercial insurance company is involved. We are worried that the insurance companies may drive the litigation, select the lawyers to act and tell the client when, or when not, to settle.

I hope that the Government have done research and scrutiny into the role of insurance companies. Are they satisfied that there is a sufficient open market for insurance for CFAs and that it is not a cartel? Do they believe that not only are there sufficient providers but that their policies are provided at a fair and competitive rate, and that their terms and conditions will not contradict the best interests of litigants?

Will there be a firm cap on the total costs at a particular percentage of the damages? I would hope that that could be applied compulsorily but, none the less, I look forward to hearing the Minister's view. The paper to which I referred also mentioned the cooling-off period between the presentation of a CFA and its signing. The paper referred to that as a period of contemplation between the explanation of the draft CFA to the client and the client being requested to sign.

Will the Minister say something about the definition of the terms success and win? One of the problems of conditional fee agreements is that lawyers are given an incentive to get their clients to enter such agreements, thereby doubling their fees. Lawyers are also given an incentive to settle the case too quickly, getting insufficient damages for their clients. Richard Southwell's paper suggests that success and win should be properly defined.

During discussions on the Access to Justice Bill, which is important in relation to conditional fees, we raised a point about experts and other witnesses. It is hoped that no expert can participate in litigation based on a speculative, contingent or conditional fee agreement.

I have raised five points and there are further points that relate to the Bar's code of conduct. There should be stronger provisions that require barristers always to act in their clients' interest, and not in their personal interest. Problems of inter-chamber conflict should be covered by a specific provision in the code of conduct. Judges should play an appropriate part in maintaining and raising ethical standards in the legal profession.

We must learn to live with conditional fee agreements, however. Subsequent Governments will come under great pressure to change from conditional fee agreements to contingent fee agreements, as they have in the United States. Such pressures will be unstoppable. However, we have a system of conditional fees and it is an important part of civil litigation. It replaces much of the legal aid that was previously available. I hope that the Government are monitoring the system and I look forward to hearing from the Minister about exactly what progress they have made, through monitoring, to try to make that system fairer.

3.52 pm

Mr. Andrew Dismore (Hendon)

I declare an interest because I am a solicitor and I have specialised in personal injury work for over 20 years. Unlike the hon. and learned Member for Harborough (Mr. Garnier), I am not moonlighting because I regard myself as a full-time Member of Parliament. I do not think that hon. Members should have the time to practise in the courts, as he does.

I was appalled by the hon. and learned Gentleman's disgraceful attack on my right hon. Friend the Lord Chancellor regarding the fund-raising dinner. I was at that dinner, and I do not think that there is any chance of me currying favour with the Lord Chancellor for judicial or Queen's counsel appointments. Indeed, by the time that I am old enough to be a QC, I hope that such appointments will have been abolished.

I welcome the introduction of the community legal service. In Barnet, my local authority, we have worked with the authority and community to develop a partnership with the Lord Chancellor's Department to provide, for the first time in the borough, access to legal services through an advice centre. I am grateful for the encouragement that the Minister and the Department have given that project.

I am sorry that the hon. and learned Member for Harborough has left the Chamber because I would like him to hear some points that follow on from his speech.

Mr. Eddie O'Hara (in the Chair)

Order. I understand that the hon. and learned Member for Harborough will return. The hon. Member for Hendon (Mr. Dismore) may wish to defer some of his observations until that point.

Mr. Dismore

In that case I shall pass over my points that relate to conditional fees until the hon. and learned Gentleman returns.

Mr. Burnett

The hon. Gentleman has reminded me that I did not declare an interest. I am a tax solicitor, although I no longer practise because, like him, I am a full-time Member of Parliament. I apologise to you, Mr. O'Hara, for not making that point earlier.

Mr. Dismore

I am pleased that the hon. Gentleman has had the opportunity to clarify the position. As the hon. and learned Member for Harborough has decided to absent himself from this Chamber, I shall respond to the points made by the hon. Member for Torridge and South Devon.

Mr. Burnett

My constituency is Torridge and West Devon. I do not want to appear too pedantic, but strictly speaking it should be Devon, West and Torridge, although it is referred to colloquially as Torridge and West Devon.

Mr. Dismore

Clearly, the hon. Gentleman is from somewhere in the west country. I am afraid that my knowledge of geography does not extend that far.

The hon. Gentleman referred to the report by the Society for Advanced Legal Studies, and I was grateful that he took a short intervention from me on that point. He would do himself a favour were he to read the article by Mr. Marshall in the Law Society Gazette in which he makes some important points. It shows the extent to which the report by the Society for Advanced Legal Studies is out of date, and that its methodology is suspect. Only one member of the working party is likely to have had significant experience of CFAs in practice, and the working party as a whole appears to have undertaken no independent evidence gathering.

The hon. Gentleman referred to a cap on the level of damages, but the committee undertaking the inquiry seemed to be unaware that that no longer appears in the Law Society's model agreement. The original purpose of that provision was to protect the client, although that issue no longer arises, given that the losing party and not the client now pays the risk element of the success fee. It is important to stress that under the new rules on CFAs and the new civil procedure rules accompanied by the practice direction, CFAs must be the most closely regulated method of funding litigation ever. When my hon. Friend the Minister replies, I hope that he will clarify some of those points in more detail. The study, which I have looked at briefly, is behind the game compared with how things have developed.

As the hon. and learned Member for Harborough has returned, I shall deal with some of his points about CFAs. First, he prayed in aid Mr. John Peysner, an academic from Nottingham university. I can only assume that he has not read this week's The Lawyer magazine, because it contains a lengthy article by Mr. Peysner on this subject. Mr. Peysner writes: In many respects the present policy of supplementing and replacing legal aid by conditional fees, backed by after-the-event insurance (AEI), has been remarkably successful. Risk-based litigation has had a very limited role in the UK. And while conditional fees have been available since the early 1990s, they were little used, and the Scottish speculative fees system has never really taken off. The secret was to offer the stick—the removal of legal aid—with the carrot, AEI giving clients protection against the opponent's costs and, if required, their own lawyer's fees. The ability to recover the success fee and insurance premium after the Access to Justice Act seems to have completed a neat and self-sufficient package. If the hon. and learned Gentleman is quoting from academics, he might like to quote from their most up-to-date work, such as that published this week, rather than that to which he referred earlier.

The hon. and learned Gentleman also prayed in aid information from the Law Society. I have the Law Society brief, which was faxed to me today at 13.19 pm. Michael Napier, president of the Law Society, said: The Law Society welcomes the announcement for an improvement in eligibility for legal help. This will provide access to justice for a number of people who are at present excluded. We also welcome the Government's decision to abandon the plan to require those with house equity above £3,000 to contribute towards the cost of legal representation. Again, therefore, the hon. and learned Gentleman is a bit behind the game. I know that he is a Queen's counsel, and QCs are not good at doing their own research—they tend to ask solicitors to do the research for them. As a solicitor, I like doing my homework and research, unlike the hon. and learned Gentleman, who tries to commission it from other people. I can only assume that he has been badly briefed by whoever did the job for him on this occasion.

The issue of conditional fees created a lot of controversy when it first arose. As Mr. Peysner said, however, they have proved remarkably successful. In his intervention on the hon. Member for Torridge and West Devon, my hon. Friend the Minister provided some statistics to show how well it has been working. Nevertheless, a few potential glitches were identified during the debate on the Access to Justice Bill, and a couple of them have worked their way through. If the system does not deal with them as it develops, the Government must do so.

The first glitch concerns the recoverability of after-the-event insurance premiums, particularly in cases that are not litigated. I am sure that my hon. Friend is aware of last month's decision at Chester county court, which upheld the recoverability of insurance premiums. The success fee in that case was 40 per cent. The technical calculation would have produced a success fee of about 35 per cent. On appeal, the judge decided that it was sufficiently within the deputy district judge's discretion to admit the original 40 per cent. charge. The after-the-event premium was in the region of £200 to £300, which is not excessive.

A few months ago, my hon. Friend responded to an oral question that I put to him at Lord Chancellor's questions by emphasising that the Government believe that insurance premiums should be recoverable, and that that was the intention behind the legislation and the subordinate legislation. That answer can, no doubt, be used on a Pepper v. Hart basis to construe the legislation.

I regret that the insurers are, apparently, planning to challenge the decision in the Court of Appeal. One or two of its members take a slightly dinosaur approach to conditional fees, so I hope that, if it construes the legislation differently, the Government will look sympathetically at the detailed wording of the subordinate legislation. Will the Minister find out whether the Court of Appeal can deal with the matter expeditiously, because if the uncertainty continues, that could create considerable difficulties for practitioners?

Mr. Burnett

The hon. Gentleman has made a sweeping comment that some members of the Court of Appeal are dinosaurs in their approach to conditional fee agreements. Will he explain that?

Mr. Dismore

There is little doubt that. before the Government began their reform programme, the Court of Appeal took a very suspicious approach towards the conditional fee issue. That is evidenced by its decisions on the old CFA arrangements that were introduced by Lord Mackay, and it has not liked the way in which the Government have taken the issue forward.

I am not castigating the entire Court of Appeal. Some of its judges are far-thinking. However, a couple of them are suspicious of the Government's approach to the matter but, when the issue comes before the Court of Appeal, I hope that it will examine in particular my hon. Friend's response to my question about the intention of the scheme.

I also want to highlight collective conditional fees. They have greatly improved access to justice for trade union members. Traditionally, trade unions have provided the backbone of legal aid support, particularly for personal injury claims. They are also the backbone of a range of other services, such as employment tribunals, which are not covered by CFAs. Trade unions were potentially at a disadvantage until arrangements could be made to introduce collective conditional fees. The arrangements that have been produced are more complicated than they might have been had my hon. Friend and his colleagues in the Lord Chancellor's Department accepted the point of view that I expressed on the indemnity principle in the Access to Justice Bill debates.

The issue has been referred to the civil procedure rules committee for further consideration, but if we can get rid of the indemnity principle, that would provide a major step forward in simplifying the operation of the conditional fee scheme. Section 31 of the Access to Justice Act 1999 allows for rules of court to limit or abolish the indemnity principle. The indemnity principle acts as a bar to progress given the introduction of another aspect of conditional fees; the whole concept of fixed fees and capped fees. There is much pressure to introduce them, particularly for fast-track cases. Realistically, we cannot have fixed or capped fees in fast-track cases until the indemnity principle has gone. The whole concept behind fixed fee arrangements is that the client will pay the fixed fee come what may. If the case is successful the fee is passed on to the insurers, and, in personal injury cases, to the defendant.

If the work done amounted to less than the fixed fee, that would infringe the indemnity principle, and the system of fixed fees could not operate. If we strive for greater simplification of the way in which civil justice is funded, the indemnity principle will inevitably go. Under today's commercial arrangements, it no longer serves the purpose for which it was originally intended in funding litigation involving individual or collective clients. It is a relic of the past that should go.

I raise the activities of companies such as Claims Direct. I am concerned that the arrangements under which such firms operate no longer provide the advantages that existed before recoverability of insurance premiums and success fees from insurers. Those firms have an enormous marketing operation, and I am concerned that members of the public should be aware that they may not be getting as good a service as they would if they went to a solicitor on the Law Society personal injury panel.

I contrast the Government's efforts to improve access to justice, especially for victims with personal injury claims, with the views expressed by the hon. and learned Member for Harborough on his class scheme. He must explain how his scheme could possibly interact with the success of the conditional fee arrangements. I have challenged him several times on that issue, especially on the distinction between conditional and contingency fees, and I do not believe that he understands the difference. Perhaps that is not surprising. Barristers do not want to get their hands dirty with the nitty gritty of funding—they only want to pocket the cash at the end.

Mr. Garnier

On a point of order, Mr. O'Hara. That is a gross insult that impugns my integrity. The hon. Gentleman should withdraw it at once.

Mr. Eddie O'Hara (in the Chair)

Would the hon. Member for Hendon like to reconsider his remarks?

Mr. Dismore

I would be happy to, Mr. O'Hara. I simply made a general point about the practice of barristers that was not aimed at the hon. and learned Gentleman, but which might explain why he does not understand the difference between conditional and contingency fees. Barrister's fees are negotiated by their clerks. Barristers do not involve themselves in the nitty gritty of negotiation and, frankly, few barristers understand the detail of how costs are assessed and how cost schemes work. These days, barristers are beginning to get a better grip on conditional fees in the world of personal injury because they are now offering those fees. I understand that the hon. and learned Gentleman does not practice in that world, so I suspect that he does not have direct experience, which may explain why he does not seem to understand the difference between the two types of fees.

Mr. Garnier

May I interrupt the hon. Gentleman, as he is so keen to insult me continuously and unattractively? His comments tell us more about him than about the quality of his arguments. As it happens, I have done a conditional fee arrangement case. Should the hon. Gentleman wish to visit my chambers, I would be happy to show him the valuable work that my chambers and I give to the public.

Mr. Dismore

I am grateful to the hon. and learned Gentleman for that offer, but I have seen the inside of many barristers' chambers, and I do not suppose that his are very different.

Mr. Burnett

I practised in a field of law in which I was only occasionally required to refer a case to a barrister for an opinion. Without exception, I received an excellent service from a strong, independent Bar. I hope that the hon. Gentleman will reconsider his castigation of the profession on which he has just pronounced without any qualification. It is not in the best interests of the House to make such sweeping statements.

Mr. Dismore

I was not suggesting that barristers are not competent in arguing their cases in court. Some are, and some are not. I was referring in particular to their grip on costs, how costs are calculated and funding methods. In 20 years in practice, I have always found that their knowledge is not what it should be. I do not know whether the hon. Gentleman's experience is the same, but in dealing with assessments of costs, I have found that, with the exception of one or two barristers who specialise in that field, their grasp of the facts and issues is lacking. It is always the solicitor's job to get his hands dirty with the nitty-gritty of such work.

I digress from the main thrust of my argument, which relates to the difference between a contingency legal aid fund and conditional fees. Conditional fees are not linked to the level of damages awarded. A client whose conditional fee case is successful will not see his damages eaten away as they would be under a contingency fee system.

Under a contingency fee system, lawyers are funded out of damages. Conditional fees are completely different, because they are linked to the amount of work that the lawyer does on the case, and are subject to scrutiny. The problem with contingency fees—which is the American system—is that they are linked to the compensation that the client recovers. The lawyer's interest is therefore directly linked to the amount of compensation. That is less healthy than a conditional fee. Moreover, the people who lose out, in the personal injury world, are those who suffered the injury, and they need compensation in full. Despite what hon. Members may read in the newspapers, compensation in this country is not over-generous for personal injury. Under a contingency legal aid fund scheme, such as has been suggested, damages would be eaten away, and that would be abhorrent.

Mr. Burnett

Does the hon. Gentleman acknowledge that conditional fee agreements have shortcomings? I hope that he has read the correspondence that I have seen, which suggests that, under conditional fee agreements, a huge amount of the damages—more than 80 or 90 per cent.—has sometimes been taken up in fees. Although 1 do not espouse contingency fee agreements, at least they motivate the lawyer involved to maximise the client's damages.

Mr. Dismore

I do not accept the hon. Gentleman's point. He is referring either to the conditional fee agreements that predate the reforms that the Government introduced, under which, unlike under present arrangements, the success fee was recoverable from the client, or to the Claims Direct scheme, which, he will recall, I criticised only a few moments ago because I believe that it rips off clients, which a legitimate conditional fee agreement does not do.

Contingency fees would take us down the American road. I have reservations about that because, unlike conditional fees, contingency fee arrangements put pressure on lawyers to maximise damages. It is their professional job to do that anyway, but there is always the risk that the client could lose out if the case is pushed too far in that direction through, for example, failing to beat a part 36 offer or payment. For those reasons, I find the concept of a contingency legal aid fund scheme abhorrent.

At the last election, I spent a lot of time researching the concept, because I believed that it might provide a way forward for legal aid reform. I ultimately concluded that it was a non-runner. The hon. and learned Member for Harborough must be about four years behind where I was when I was researching the scheme.

My first concern about the CLAF scheme is that the client loses money that he or she can ill afford. My second is that I cannot see how a CLAF system could run alongside the conditional fee agreement system. There would always be a risk of adverse selection, which would weaken the financial viability of any CLAF. The fund would try to attract the stronger cases to ensure that contributions would be received from damages awarded. The figures that I have seen suggest that there would have to be a 90 per cent. success rate, because under the hon. and learned Gentleman's proposals, on average, 10 successful cases would be needed to pay for each case lost.

If solicitors were to decide, as they often would, to take stronger cases on a CFA basis, the claimant would not have to make a contribution from damages and the solicitor would earn fees commensurate to the risk taken, and so stand to earn more. The CFA system, therefore, is a win-win situation whereas the CLAF system is a lose-lose situation for both client and solicitor. There are ways of trying to prevent adverse selection, but they are far worse than the benefits that they create. The only sure way to prevent it would be to make use of the system compulsory in every case, and that is a non starter.

Mr. Burnett

I agree with the tenor of the hon. Gentleman's remarks. It is very difficult to run a conditional fee agreement system alongside a CLAF system, because the CFA system will, in effect, cherry-pick all the best cases. The hon. Gentleman said that adverse selection could be overcome. How?

Mr. Dismore

The only way to overcome adverse selection would be to make it compulsory for every case to go through the CLAF system. That would be unacceptable, and might breach human rights legislation on the right to a fair trial. There is no other way round the problem.

Adverse selection has been largely overcome in relation to conditional fees, because solicitors who undertake conditional fee agreements, through schemes such as Accident Line Protect, undertake not to operate on an adverse selection basis. That means swings and roundabouts for the insurers. Some adverse selection probably still goes on through the back door, but in practice it has been overcome by contractual arrangements. Those would not be operable in a nationwide CLAF scheme. Choice and the opportunity to have a case funded on a genuine no win, no fee basis would be lost under the Tories' scheme to take people's damages away and rob Peter to pay Paul.

The scheme is just another Portillo black hole, which has been dropped into the lap of the hon. and learned Member for Harborough. It is an attempt to find £0.5 billion to cut from the legal aid budget. Despite being challenged to do so, the hon. and learned Gentleman still has not come up with a sensible idea of where to find such a cut without seriously damaging advice services. Such services include those for women seeking injunctions to prevent domestic violence, for parents seeking court orders for custody of, or contact with, their children, and for parents challenging local authorities' decisions to take their children into care. Those matters are all currently funded through the community legal service system, which would fall by the wayside should the hon. and learned Gentleman get his way.

That is all that I want to say about conditional fees, but I will not disappoint the hon. and learned Member for Harborough by failing to refer to Queen's counsel. I am sure that he was eagerly anticipating such remarks, in the light of the report that the Office of Fair Trading published yesterday on the internet. The issue is fundamental to how civil justice is funded in the UK. In the Committee that debated the Access to Justice Bill, and on other occasions, I have argued at length that the Queen's counsel system is an anti-competitive, price-rigging cartel, whose sole purpose is to line lawyers' pockets at the expense of the public. I am pleased that the OFT's report agrees with me.

I was pleased to be invited to give evidence to the inquiry conducted by the OFT. Its fat and detailed consultants report makes some cogent criticisms of the QC system. I have advanced the case that it is not a genuine accreditation scheme, that it is not objective, and that the Government should play no part in it, should it continue—it should be run by the profession. I cannot see why we should have Queen's counsel when we do not have Queen's plumbers, Queen's electricians, Queen's accountants, Queen's lecturers or Queen's anything else. One of the criticisms in the OFT report is: Although no area of work is formally reserved to QCs, in practice major litigation almost always requires the use of a QC. This is partly because of a perception that judges are more likely to take notice of a QC and partly because, if one side hires a QC, the other feels at a disadvantage if it does not do the same. Given this, we think that the system as currently operated restricts competition because: There is anecdotal evidence of a quota on the number of new appointments, and the numerical evidence is consistent with the anecdotal: Selection is done by government, rather than by any market-based process; and, There is dissatisfaction among solicitors and some barristers about the fairness and accuracy of the selection process. It goes on to say: We do not think that a mark of quality or experience is necessarily anti-competitive so long as award is governed by transparent and objective criteria and restrictions are on a qualitative, rather than quantitative, basis. On the evidence available to us, however, the current system does not pass these tests. That is another indication of the fact that legal costs are higher as a result of the QC system.

The report continues, at paragraph 276: Even if there is no quota in operation (and we do not have sufficient information to establish with certainty whether there is or is not), the appointments system (despite recent reform following the Peach report)"— which hon. Members have debated before— does not appear to operate as a genuine quality mark. The system is secretive and, so far as we can tell, lacks objective standards. It also lacks some of the key features of a recognised accreditation system, such as examinations, peer review, fixed term appointments and quality appraisal to ensure that the quality mark remains justified. We were told that many solicitors and some barristers criticise the lack of objectivity of the system. In its conclusions, the report states: In our view, therefore, the existing QC system does not operate as a genuine quality accreditation scheme. It thus distorts competition among junior and senior barristers. Our evidence indicates that clients do not generally need the assistance of a quality mark, but if there is to be such a scheme, it should be administered by the profession itself on transparent and objective grounds. Furthermore, there is some evidence that an informal quota is in operation within the current QC appointments system, and that it appears to have the effect of raising fees charged to litigation clients. We do not think that a mark of quality or experience is necessarily anti-competitive, so long as the award is governed by transparent and objective criteria, and restrictions are based on qualitative, rather than quantitative, factors. On the evidence available to us, however, the current system does not pass these tests. That is virtually a complete precis of a speech that I made at greater length in the Committee on the Access to Justice Bill, as my hon. Friend the Minister and other hon. Members who sat on the Committee can confirm. I know that the hon. and learned Member for Harborough is a member of the cartel, and may therefore have an interest in maintaining it, but I feel entirely vindicated by the excellent work done by the OFT and its consultants.

When my hon. Friend the Minister replies to the debate, I hope that he will assure me that the Government will bear in mind the need to deal with competition within the legal profession to break down the restrictive practices that make justice more expensive and less accessible. That will ultimately provide a better and much fairer system for the public. I end with a plea to my hon. Friend that the Government implement in full the OFT recommendations.

4.23 pm

Mr. Michael Jabez Foster (Hastings and Rye)

My comments will be briefer and somewhat more modest than those of my hon. Friend the Member for Hendon (Mr. Dismore). I certainly do not intend to take on Queen's counsel. His contributions on that subject have been consistent, and it seems that that may bring rewards.

I applaud the Government on the concept and application of the new legal services arrangements through the community legal service. It is still developing and has not yet reached its goal, but it is certainly going in the right direction.

Like many hon. Friends, I was one of those country solicitors who entered the House in 1997. I should declare an interest in that I have retained my practising certificate, although in the hope that I will not need it. If I need it again—the theoretical possibility always exists—I know for sure that the profession to which I shall return will, with the advent of the CLS, be that much more robust and efficient in the service it provides to its clients and the opportunities it provides to practitioners who want to offer a service to the public. I should add the caveat that if the Conservatives come to power, God forbid, their public service cuts would result in the virtual end of legal aid, which would be regrettable. Forgive me, Mr. O'Hara, for wasting time on such a remote scenario.

I congratulate the Minister on the way in which the CLS has performed during the past year and the changes that will be introduced in April. The CLS has scored well in three essential areas. First, it has ensured higher quality services. Secondly, it has made better use of the professional time that is paid for out of the public purse and has reduced unnecessary red tape. Thirdly, as a consequence, it has provided better value for public money than was achieved previously.

On quality of advice, there was a time when solicitors of limited knowledge advised on any matter under the green form system. Someone came to me once asking for complicated advice on admiralty law. I turned him away, but many solicitors would have failed to do so. My area of experience is employment matters, but I know that many solicitors have signed a green form and given advice of questionable quality. The problem is that many folk of modest means do not know when they have received bad advice, so they lose out. Better off folk often have contacts and know the professions, and experience shows that they often go to experts through recommendation. The average person—I do not like the phrase "working class"—does not have experience of the legal system and does not know any lawyers. People on the Broomgrove estate in my constituency do not know where professionals hang out. They certainly do not know who to go to beyond the legal aid sign in the window. They have been short-changed in the past. The care that the CLS takes in approving and auditing solicitors who can offer legal help is admirable, and gives a seal of approval which is often a better guarantee than that available to clients who pay but who enter a lottery when deciding from whom to seek advice.

Some criticism may be made of the new system, and one disadvantage of allowing only those who have been approved to offer advice is that folk sometimes have to travel. That is particularly troublesome in areas of lower population, as in Hastings in my constituency and along the Sussex coast. I suspect that it is an even greater difficulty in other parts of the country, but it is a price worth paying. However proximate, helpful and charming my general practitioner may be, I would rather go to King's hospital for my heart bypass than have him deal with it in the surgery. The same applies to legal advice. It is surely worth travelling to obtain the expertise to ensure quality legal advice.

I want to comment on the problem of unnecessary bureaucracy. Red tape has a bad name. I read recently that the Opposition were complaining about red tape, but they were talking about the minimum wage, the working family tax credit and so on. I am referring not to that sort of red tape, but to the interminable blue forms—which were covered by the green form—that I used to have to fill in to obtain legal aid for clients. The public purse paid not only for legal advice, but for form filling.

The hon. and learned Member for Harborough (Mr. Garnier) will not know about filling in legal aid forms, but I do not expect him to, because he is not a solicitor. Solicitors did not intend to cheat the legal aid system, but that is how it was abused. Standard practice entailed filling in a green form and spending the next two hours dealing not with the issue, but with a blue form that went to the Legal Aid Board. During the process, one would receive telephone calls from people asking what had happened to their application. Applicants would often receive no advice for six weeks before discovering whether their application had been accepted.

I acknowledge that the previous Government started contracting through their franchise system, but the Government have developed that through the CLS, so they are putting their faith in expert practitioners. Those solicitors are not only expert practitioners, but they audit themselves in that they are allowed to determine which cases should proceed. The process admittedly occurs under strict guidelines, but it does not require form filling and red tape.

The new system provides better value because people are going to experts. We no longer pay people for looking up the law. When solicitors were paid by the hour, the less they knew—

Mr. Burnett

I must confess that I have never done legal aid work and I have not had much to do with getting costs. However, I thought that one could never recover costs for looking up the law because a lawyer, regardless of his or her speciality, is presumed to know the law.

Mr. Foster

Indeed, if that were true there would not be a problem. However, I assure the hon. Gentleman from both my experience in a legal aid practice on the south coast and my contacts in the profession that that is not the case. When expertise was not a prerequisite for giving advice, solicitors of wide experience but no particular expertise would take on legal aid cases without an audit. They would listen to clients' pleas, give the best advice they could and tell them that they would write as to the rest. I am assured that that no longer happens when contracts are in place, because only lawyers who are expert in a certain field are contracted to provide advice. Furthermore, it is more satisfying for the legal profession to give good advice rather than floundering around wondering whether they are exactly correct or whether they need to check. Experts who know that they are giving correct advice waste less time.

The changes have been good for both the profession and the public. Earlier in the debate I put it to the hon. and learned Member for Harborough that the litmus test we should use to determine the success of the Government's changes is what our constituents say. In the past year, I have had not a single complaint from a constituent about the non-availability of legal assistance, and nor, I suspect, has he. Other hon. Members would doubtless express concern if they felt that there was a problem. In the past year, no one has complained about an incompetent contracting solicitor, the non-availability of legal assistance, or the non-availability of assistance in pursuing personal injury claims through conditional fee agreements. For me, that is the litmus test. People write to me about all manner of other matters, but they do not write to say that legal services are falling short. I believe that the Government are doing an extremely good job, and I should like to thank them.

Mr. Burnett

I do not want to be disputatious, but I can assure the hon. Gentleman that many of my constituents have complained about not being able to get legal representation. I should add that I have not examined the merits of their cases, but there is no doubt that a number of people feel that they do not have access to justice.

Mr. Foster

This is perhaps not the time to ask such a question, but I should be interested to know how many people felt that way and the relevant circumstances. As the hon. Gentleman pointed out, he does not know whether their complaints were merited and involved non-accessibility. Certainly, none of my constituents has complained about non-availability of legal assistance.

It has been argued that conditional fee arrangements—I do not want to go too far into this issue—lead solicitors to give different advice from that which they would have given under the old system, but that cannot be right. Under the old system, if there was no good case to pursue, a solicitor was bound to say so. The same constraints apply under the conditional fee arrangements, although it is true that there may be a personal interest. As we know, the reality was that solicitors often said, "We'll have a go because legal aid is involved." That is a different practice, and although it was not widespread, it certainly occurred and should not be encouraged. The conditional fee arrangements will merely require greater thought to be given to the answer to a question that should always be put.

I congratulate the Government on the proposals, which are working well. I also congratulate the Minister on working hard to ensure a justifiable outcome for ideas that used to be criticised.

4.37 pm

Mr. Lock

With the leave of the House, I shall speak for a second time.

This debate has been interesting in some senses, because it has dealt with issues other than those relating to its title. It has also been somewhat tetchy and bad-tempered in places. Unfortunately, all the places were those where the hon. and learned Member for Harborough (Mr. Garnier) intervened. He began with a rather personal attack on the Lord Chancellor, and proceeded to attack my right hon. Friend the Home Secretary. However, when he himself was attacked by my hon. Friend the Member for Hendon (Mr. Dismore)—who has worked in this field for 20 years, and whose knowledge is considerable—he tetchily replied that such complaints reflect badly on the person who makes them.

Mr. Garnier

What is the Minister talking about? He should get on with the debate.

Mr. Lock

Yet again, the hon. and learned Gentleman fails to appreciate the effect of his comments. I accept that he is entitled to make such attacks—they are what we would expect in a low form of politics—but we are here to discuss the funding of public legal services, not to attack the Lord Chancellor and the Home Secretary. I agree that making remarks that have nothing to do with the funding of public legal services reflects badly on the person making the attack.

Mr. Garnier

Will the hon. Gentleman give way?

Mr. Lock

No.

Mr. Garnier

On a point of order, Mr. O'Hara. I assume that had you not thought that the remark made by the hon. Member for Hendon (Mr. Dismore) should be withdrawn, you would not have asked him to withdraw it.

Mr. Eddie O'Hara (in the Chair)

That is not a point of order. The matter has been resolved satisfactorily. Hon. Members whose remarks caused offence have addressed it.

Mr. Lock

I am grateful to you, Mr. O'Hara.

We have had a strange debate. I raised what happened in 1993 concerning eligibility for legal aid with the hon. and learned Member for Harborough because it was interesting example. Year zero did not begin in 1997. Time and Government existed before then—a different party was in Government. In 1993, when the hon. and learned Gentleman was in the House, there was a drastic reduction in eligibility limits. In particular, eligibility for what was then green form advice was slashed, which meant that millions of people could no longer benefit from public legal services. Millions of people who had been able to get help on the range of issues mentioned by my hon. Friend the Member for Hastings and Rye (Mr. Foster) suddenly found that their modest income—and very modest it was—could no longer receive legal assistance. One intention behind my announcement earlier this week was to put right the damage that was done in 1993.

Despite the fact that the hon. and learned Member for Harborough was a Member of Parliament in 1993, and a lawyer, albeit not a legal aid lawyer—legal aid has never been available in defamation cases—he is entirely unaware of the radical changes that then led to the reduction in eligibility. Those changes are the recent history of the legal aid system, creaking as it was with bills going up year on year—[Interruption.] I note that from a sedentary position, the hon. and learned Gentleman is attempting to change the subject. That sums up his attitude.

This Government has made a forensic attempt to examine access to justice. There have been difficult balancing acts and the Government have faced difficult issues. It is true that we can only spend money once.

It is fascinating that at no stage was the hon. and learned Gentleman prepared to say that these are important services for the public. He would not say that it was important that people who have housing cases should have access to a lawyer who can advise them when they are threatened with unlawful eviction, or that those who suffer domestic violence should be entitled to go to a lawyer to get an injunction for protection from their partner. He would not say that taxpayers' money should be invested in such an important area.

The reason for his attitude is that, worse than slashing eligibility, as proposed in 1993, the Opposition propose to take £525 million out of the legal aid system as part of their effort to appeal to the electorate with tax-cutting proposals. Their proposals would drastically affect access to justice, but the hon. and learned Gentleman is not prepared to debate them. He will not explain or defend them, or say what effect they would have on clients. He only repeats the concern of the Law Society that the extent to which the Govt have increased eligibility is not enough. From the lawyers' perspective, I am sure that it is not enough, but they are not carrying out the balancing act of government in determining how much money goes to health and education and how much to legal services.

One person who should not cite the Law Society in support of his argument is an Opposition Member whose party is proposing to remove £500 million from legal services and who would deny access to important services to those who are currently eligible for them.

It was remarkable to hear a bitty attack on small parts of the Government's scheme, given that my hon. Friends the Members for Hastings and Rye and for Hendon, who have practical knowledge of the development of the community legal service, can say that it is working well, and bedding down well in its early stages.

The hon. and learned Member for Harborough expressed a concern about insurance. As I mentioned in an intervention on the hon. Member for Torridge and West Devon (Mr. Burnett), some 100,000 litigation policies have been written to support CFAs and we think that Claims Direct has taken on a further 60,000 cases. Last November, the Law Society published facts and figures on different insurance products, and I commend it for that. The insurers that it mentioned included Accident Line Protect, which provides insurance for personal injuries and criminal negligence at premiums of above £300, and the Motor Accident Solicitors Society, which provides insurance for road traffic cases at a premium of £195.

Some policies now available provide that premiums are payable only on settlement of the case or at the trial. Other policies provide that the premium is to be paid only if the case is successful, so it is a disbursement at the end of the case, like any other. The hon. and learned Member for Harborough asked about the development of a mature insurance market. As my hon. Friend the Member for Hendon explained, that is happening only because of the removal of personal injury cases—the money can be spent better elsewhere—combined with the recoverability of both the success fee and the insurance premium. The hon. and learned Member for Harborough did not mention the latter point, but anybody who understands the operation of the insurance market knows that it is crucial. Without that recoverability, money that has to be paid to lawyers cuts into damages, which in our system are purely compensatory. That is the defect both of the system of conditional fees that we inherited and of the CLAF system that the hon. and learned Gentleman's party wants to use to replace the current legal aid system.

Mr. Burnett

The Minister referred to Claims Direct. Does he believe that its conduct is governed by sufficient rules and disciplinary procedures? If he thinks that it should be governed by more stringent rules, what should they be, who should provide them, and who should regulate the company's activities?

Mr. Lock

As the hon. Gentleman knows, the Government established the Blackwell Committee to examine the provision of non-qualified legal advice, especially in the fields of personal injury and employment. It has never been illegal in this country to provide legal advice outside court proceedings, and the process has never been regulated.

It is very important that the market for people with personal injury claims should be vigorous and active. People must have a means of asserting their rights. Claims Direct is part of that market. Lawyers who want to encourage business, and who have specialisms that non-lawyers do not have, can learn from the marketing techniques, advertising and client care that some non-lawyer organisations have developed. It is important to note that the Blackwell Committee found no evidence of substantial abuse—although there were some areas of concern—nor a sufficient case for regulating free action. The Government are considering that report, but I encourage lawyers who want to operate in the personal injury sector to look at their own client care and advertising, and to market their own expertise. If they believe—what is undoubtedly true—that they have expertise that Claims Direct and other claims management companies do not have, they must sell their benefits to the public. Now that insurance premiums and success fees are recoverable, there is no reason why clients should recover anything less than the full amount of damages to which they are entitled.

Mr. Dismore

I am grateful to my hon. Friend for his last comment that no one should lose anything out of the damages. Did the Blackwell Committee consider the issue before or after the new arrangements came fully on stream? That would make a big difference to the outcome in terms of protecting the public. Will he also consider how a firm of solicitors could advertise on an equal basis with Claims Direct, which is a multi-million pound organisation which is floated on the stock exchange?

Mr. Lock

My recollection is that the Blackwell Committee reported in February last year and that the new arrangements were implemented in April. It is therefore important that the Department should continue to monitor the operation of the market. As for the relative size of some claims management companies and some associations of solicitors' firms, there are 100,000 solicitors in the country. The profession is diverse, but not poor. There are considerable benefits of solicitors joining together to market their expertise. I am sure that they will do so effectively. They have a skill to sell. They are a proper regulated body and the Government want to encourage the maintenance of a strong and independent legal sector. However, it is up to solicitors themselves to organise their own marketing and not complain if other companies come into an unregulated part of the market and advertise effectively.

I can provide the assurance sought by the hon. Member for Torridge and West Devon in respect of equity in homes. When assessing an applicant's eligibility for funding, the first £100,000 of equity in a home is disregarded. That has been the position for several years. It is about the average cost of a home. Contributions from equity will not be introduced as was proposed in the consultation paper last year. It was never proposed that equity below £100,000 would be taken into account for determining eligibility. It was only proposed for contributions and that is a step, which, thanks to other controls that the Government have taken within the funding of legal services, we now do not need to take. We have listened to those people who have responded to our consultation and have noted their reasons for objecting to that change.

I am grateful to my hon. Friend the Member for Hendon for his supportive comments. I noted with interest what he said about the anti-competitive, fee-fixing cartel, as he described the Queen's counsel system. Clearly, the Government will be reflecting carefully on the report from Office of Fair Trading, "Competition in professions". It has only recently been received and it would be inappropriate to give any concluded views now.

My hon. Friend also asked what would happen if the case that is presently proceeding to the Court of Appeal in Chester is reversed. I am sure that he appreciates that I cannot comment on individual cases. The Government's view is that it is entirely reasonable for solicitors to take out insurance at the commencement of a case that, because of the highly successful operation of pre-action protocols, will inevitably be before the issue of proceedings. It would not be inappropriate, nor is it the intention of the legislation, for there to be any bar on recoverability on insurance premiums that are paid at the commencement of a case.

Indeed, if the insurance premium were recoverable only when insurance was taken out at the point when the proceedings were issued, a substantially smaller number of insurance premiums would be issued and the risk associated with each one would be substantially higher. Therefore, each individual premium would involve considerable cost and the benefit of scale—which we have at the moment and which is why Accident Line Protect and the Motor Accident Solicitors Society can purchase premiums for a few hundred pounds—would be entirely lost. There are sound policy reasons for supporting pre-action protocols and for taking out insurance at the commencement of instructions, but the exact terms of the individual case would have to be determined by the court. It would be inappropriate for me to comment on an individual case.

Mr. Garnier

Is the Minister coming to the point about the numbers of county courts that will be closed—a point about which he intervened on me? Will he tell us whether the suspicions expressed by the writer of the letter to which I referred are unfounded? Will he tell us the precise number of county courts that the Government intend to close?

Mr. Lock

I am grateful to the hon. and learned Gentleman for reminding me about that. Although it is not strictly within the terms of the debate, I am more than happy to respond. I was surprised when he said that he had read the "Modernising the Civil Courts" consultation document. As he has read it, he must understand the distinction between a proposal to close an entity known as a county court and a proposal to move to a system of centralising. In that system, one would have the benefit of scale in the administration of the paperwork associated with county courts and the maintenance of a large number of hearing centres at which cases may be heard.

It is not important to the public that there should be a single building in which both hearings and paperwork are dealt with. They simply need to know that when they seek an injunction for domestic violence, or when there is a possession hearing, the hearing will be heard in a place accessible to them. The division proposed in the "Modernising the Civil Courts" paper between the traditional county court unit and the administration—between business centres and hearing centres—will not lead to the sort of the radical closure of courts, in the sense of the removal of hearing centres, described in the letter quoted from the Public and Commercial Services Union. I was surprised that the hon. and learned Gentleman, having read the paper, did not understand that that position had a fundamental lack of logic.

Mr. Garnier

Can I test the Minister on that?

Mr. Lock

No, I have answered the point and, besides, the hon. and learned Gentleman on several occasions refused to give way either to me or to my hon. Friend the Member for Hendon.

Mr. Garnier

rose—

Mr. Eddie O'Hara (in the Chair)

Order. It should be clear to the hon. and learned Member for Harborough that the Minister will not give way.

Mr. Lock

The real issue for the debate is the public funding of civil legal services. The development of the community legal service over the past year has been a great success, and I pay tribute to the hundreds of thousands of people involved. We have expanded the concept of legal services, so that they no longer involve lawyers alone. We acknowledge, for the first time, the valuable role played by law centres, citizens advice bureaux, housing advice centres and a myriad of other organisations that provide important advice and help to those that need it. I hope that through this debate and the work of the community legal service partnerships, the spread of funding will increase so that the community legal service continues to thrive and we have better legal services.

Question put and agreed to.

Adjourned accordingly at one minute to Five o'clock.