Economy 12 June 2013 If the Government's ruining law, the solution is not more Government More lawyers should be hired directly by the state; but the rest should get used to living without legal aid, writes Preston Byrne. Print HTML It seems that the entire legal profession – solicitors, barristers, and social welfare advocates alike – opposes the Coalition's reforms to legal aid, arguing that jobs will be lost, firms will close, lawyers will earn less, and the rule of law will be undermined. Under the Coalition's watch, the extent of legal aid for civil proceedings has already been limited; now, the Government proposes to reduce it still further, by: introducing competitive tendering for publicly funded criminal defence work, reducing the fees payable by the state to private lawyers for legal aid work, and restricting the types of work and classes of claimants eligible for legal aid. Very few have come out in support of the Government, and those who have point to the system's significant costs, arguing that the only problem with the budget cuts is that they “don’t go far enough.” They assert that “we’ve let a small group of not particularly gifted people monopolise the legal control of… routine, if crucial, acts” some of which, they maintain, only requires an online form and some simple instructions. In the hands of high street lawyers, it is argued, this results in a “staggering waste of money." This is, however, the minority view. The New Statesman's David Allen Green likened the proposals to “[bulldozing] an entire market square,” cutting the number of criminal defence firms eligible to provide legal aid from 1,600 to 400. This constitutes, in his view, an “attack on a whole sector of small and medium sized enterprises.” Similar pessimism is heard from the Chairman of the Criminal Bar Association when he said that the cuts will “destroy… the criminal Bar” and “we are facing absolute devastation to what is the finest legal system in the world.” Opposing this perspective is the view that their professional ire is misdirected, taking the position that in the legal aid arena, budget cuts are merely the symptom of a wider problem: the state's role in providing legal aid in the UK is so significant that it distorts the market for legal services in general. Using criminal defence as an example, where assistance is presently granted automatically for serious crimes and in Magistrates' Courts a government study (pdf) showed that “nearly all” of the represented defendants “were publicly funded,” legal aid has been criticised as being a “publicly funded monopoly.” (page 119) But is this view correct? Remuneration structures for legal aid mean that service providers have traditionally had no incentives to “compete on price,” competing instead on “the basis of reputation.” This arrangement, pointed out the final report of the Labour-commissioned Carter Review in 2006, penalises “the efficient practitioner who manages to dispose of a case efficiently in circumstances where this is the right course of action” as he or she would “receive less in case fees than the inefficient practitioner who does not succeed in addressing case issues efficiently.” (page 26) The inefficient practitioner, in certain circumstances, is thus rewarded. This is not to say that reputation should not be a factor in selecting a lawyer – far from it. Even with classes of goods that are more homogenous in function, such as toasters, an individual product can command a higher price if it is of better quality. In the private sector, a client's selection balances a lawyer's reputation against his or her fee, with the client benefiting from price competition between equally talented providers. No such competition, however, exists, nor can it exist, within the current legal aid structure. The Labour government attempted to address these issues in 2008 by introducing graduated fee arrangements – termed differently, price controls. Lawyers found these problematic when they were introduced, (paragraph 11) and continue to find them problematic today (paragraph 389); much of available state-funded work is “plainly inadequately remunerated,” says the Bar Council, despite the fact that the cost of the system to taxpayers continues to rise. But where the Spectator's Harry Mount blames “Georgian terraced houses, Buckinghamshire country piles and children’s school fees” for the high and rising cost of legal aid, anyone who knows junior practitioners in either of the two professions (apart from City solicitors or the Chancery Bar) will know such a statement is sensationalist in character. The proposition put forward by the Carter Review, that despite “many well-known anomalous and exceptionally high cost claims on the legal aid budget, the scale of the continued rise in spending… is the result of systemic weaknesses in the way legal aid services are procured and therefore inefficiencies in the way those services are delivered,” seems more likely to be correct. Which goes some way to explain why both taxpayers and lawyers are unhappy with the system. To lawyers competing with the state for clients (particularly volume criminal work), legal aid is a monopoly. To lawyers competing with other lawyers for funding, legal aid is a price-controlled monopsony. To the taxpayer, it is a system that by its very nature rewards inefficiency. But by opposing the cuts, does the profession demand access to justice, or state aid for lawyers? Simply refusing to accept the Government's proposals while making no alternative suggestions is to ignore the fact that two sets of competing and equally valid interests are at play: the need to reduce costs and the need to ensure the fair administration of justice. Is a hybrid approach possible? Can we widen access to justice while reducing costs? Given a fixed pool of taxpayer money and a state monopoly, no: any increase in legal aid service provision requires either (1) cuts to lawyer remuneration or (2) additional support from the taxpayer, a problem which is potentially never-ending for, as the Ministry of Justice has suggested, increasing legal aid funding creates a positive feedback loop which only draws more lawyers into the system (page 11). Create a free market, however, and no-one has to choose how much legal services are "worth" – leaving only the matter of how to widen access for the needy. On the criminal side, the the all-encompassing state apparatus would need to be replaced with an expanded corps of salaried public defenders to (1) act as a backstop guaranteeing representation for all in criminal matters as a last resort and (2) ensure the continuation of steady work for the segment of the profession which currently services the indigent (though in exchange for this security, public defenders would give up the possibility of taking on privately-paid work). Free from state dominance, lawyers whose primary practice would be in the newly-private markets would be able to compete for contracts at reduced rates to supplement the corps of civil legal aid lawyers or public defenders. Such a system would operate on the understanding that (1) the quantity of cases which would be received supports the practitioner's overhead costs in a reliable way and (2) at the junior end, achieves the objective of developing expertise which can be leveraged in that practitioner's private practice. Though clearly a greater proportion of middle class clients would be made to bear the costs of their representation than is the case today, a greater number of private sector lawyers servicing this new pool of (formerly legal aided) clients should drive down the market price of private representation. Reducing the threshold of eligibility for civil legal aid, in particular, such that only those who are genuinely unable, rather than merely unwilling, to pay for a lawyer receive representation would eliminate market-distorting effects of legal aid in relevant areas. Services for the indigent could be provided by non-profit legal aid providers which compete with each other for a substantially smaller pool of state funding (hundreds of millions of pounds, rather than billions). Such a model has, at least in the United States, been found to generate positive outcomes for clients, while still incentivising a significant part of the population to shop for a lawyer based on reputation and price. Add to this an hour-per-hour alternative to Continuing Professional Development by donating time on a pro bono basis to eligible non-profit legal aid providers, and the profession could generate a robust and high calibre legal aid sector at no additional cost to the taxpayer, profession or state. Despite all this, there would be gaps. As lawyers would stand to gain the most from market reforms of the legal aid sector, it only seems fair that – post-liberalisation – responsibility for addressing any shortcomings should be the profession's burden, not taxpayers'. This realisation is not new: in a 1954 article in the Louisiana Law Review, Professor John S. Bradway pointed out that “if we work out a [voluntary] system whereby everybody… actually does get the same quality of justice according to law… reasonable men will find fewer grounds for criticism,” thus heading off the “threat of socialized law… we see in Great Britain.” Ultimately, it is up to the lawyers to make the choice between a self-sufficient profession where individual members volunteer their energies to ensure access to justice out of a sense of professional obligation, or allowing the state – and the changing whims of one government to the next – to make those decisions for us. I know which I prefer. › Hailo - the taxi app that's killing minicabs The Royal Courts of Justice. Photograph: antmoose/Flickr, CC-BY Preston Byrne is a fellow at the Adam Smith Institute. 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