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STRATEGIC REVIEW ON THE DELIVERY OF LEGAL AID, ADVICE AND INFORMATION - REPORT TO MINISTERS AND THE SCOTTISH LEGAL AID BOARD

Chapter 8 - Issues In The Supply Of Publicly Funded Legal Assistance

8.1 As has been discussed in earlier Chapters, publicly funded legal assistance in Scotland is delivered by a wide range of providers, in particular on civil matters. There we see providers from the public, private and voluntary sectors, both legally qualified and non-legally qualified, delivering different services in a wide variety of settings. In relation to publicly funded criminal legal assistance the picture is much less diverse. Practically all provision is by legal professionals in private practice, with a very small part for the public sector through the recent development of the PDSO.

8.2 As a broad distinction, it can be said that services currently paid for from the Legal Aid Fund are generally delivered by the private sector (for both civil and criminal matters), whereas services paid for from other funding streams, such as through local authorities, central government and other public bodies are generally delivered by not-for-profit organisations in the voluntary sector or in the public sector (but only in relation to civil matters).

8.3 A number of concerns over the supply of services have consistently been raised in our discussions with stakeholders, whether they are service providers, funding bodies, policy makers or specific interest groups. These issues can be summarised as:

• uncertainty over the continued provision of publicly funded legal services provided by solicitors in the private sector. Concerns were raised over withdrawal of practitioners from legal aid work, and a lack of new entrants to legal aid work. These concerns apply to both civil and criminal work, although, it appears, not in equal form or measure
• in terms of voluntary and public sector provision, concerns over continued supply focus on vulnerability of provision due to insecurity in funding arrangements
• in relation to PFLA on civil matters (by all three sectors) there are specific supply related concerns over the possible lack of specialist provision and difficulties in accessing specialist providers. These are discussed at paragraphs 5.209 to 5.216.

8B SUPPLY BY SOLICITORS IN PRIVATE PRACTICE

8.4 As set out in Chapter 3, where models of delivery for PFLA were discussed, we believe a planned 'complex mixed model' to be best for delivering the policy objectives for civil PFLA in Scotland, whereas a 'mixed model' is proposed for the delivery of publicly funded criminal legal assistance.

8.5 As part of both these models, we believe that 'judicare provision' ¹ should continue to be a primary mechanism for service delivery. In the context of mixed models it has the benefit of flexibility and of potential responsiveness to changing circumstances and can in principle provide extensive geographic coverage whilst incurring no fixed cost.

8.6 There is however consistent anecdotal, if little empirical, evidence that difficulties may arise in the medium to long term in judicare provision, due to a lack of solicitors in private practice being willing and available to take on publicly funded work (legal aid work). This is reportedly due to a lack of new entrants into this work, and a slow withdrawal of existing providers. Generally, low levels of remuneration have been cited as the prime cause along with the administrative burdens associated with legal aid.

Differences in civil and criminal supply issues

8.7 Before discussing the evidence relating to the supply of judicare services, it is important to note that the context in which legal aid services operate differs between civil and criminal matters and therefore the specific supply related issues may be different for each.

8.8 While it is clear that that the current provision of legal aid is almost totally reliant on the private legal profession, the extent to which the legal profession is reliant on legal aid is less clear. In its Cost of Time Survey ² the Law Society of Scotland said that fees from legal aid work as a proportion of total fee income (for practitioners responding to the survey) was lowest in Edinburgh (12%) and highest in Glasgow (27%). The figures do not distinguish between civil and criminal legal aid. Although we do not have figures available that indicate the scale of the difference in this respect between civil and criminal, it appears a fair assumption that legal aid represents a more significant proportion of income for those firms doing criminal work than civil legal aid is for those doing civil work, there being a much smaller private market for criminal work.

8.9 Furthermore, anecdotal evidence suggests that the image of criminal legal aid work is not good amongst legal professionals for reasons that go beyond concerns over remuneration levels (for example unpleasant working environments, lack of variety and quality of work). Civil legal aid work however appears to suffer from a poor image primarily due to its reported lack of profitability.

8.10 Bodies including the Law Society, the Edinburgh Bar Association, the Glasgow Bar Association and a range of local faculties all indicated to the Review Team that the rates of remuneration for civil legal assistance are unreasonable and uneconomic for solicitors. It was repeatedly said that in civil work, private practice subsidises legal aid work and that if the rates are not significantly increased, more and more firms will withdraw from the work.

8.11 A more mixed message was received about criminal legal assistance work. Although many practitioners indicated that the rates are too low and that taking on legal aid cases is not economically viable for many practices, some did say that criminal work, if undertaken in sufficient volume, can be profitable.

8.12 Both civil and criminal practitioners reported a lack of traineeships being offered in legal aid work, creating concerns over a lack of new entrants into this area. The reasons for offering insufficient traineeships may differ however between civil and criminal practice. In criminal legal aid, it is reported that the structure of fixed payments for summary criminal legal aid financially discourages practitioners from taking on trainees. In civil, the problem appears to be that commercial firms are able to offer starting salaries for trainees well outwith the scope of what legal aid firms can offer.

Evidence

8.13 A small body of research evidence exists that can inform the discussion on supply issues in criminal and civil legal aid work. Most of this research looks specifically at issues in civil legal aid, though some research covers both criminal and civil legal aid provision.

8.14 In 2001 SLAB published its research document "Legal aid in a changing world" ³ which explored the reduction in civil legal aid applications in Scotland between 1992 and 2001. The research findings showed that the number of legal aid outlets dropped by 7% in the three years up to 2000/2001, but the number at the end of the period remained as high as at the start of the 1990s. It was suggested that the recent trend may be a cause for concern and that the number of outlets offering a civil legal aid service should continue to be monitored. Nevertheless, it concluded that reductions in supply had had limited impact on the number of applications for civil legal aid.

8.15 One important finding of the research was that, in 2000/2001, 20% of outlets submitting legal aid applications accounted for 58% of applications (the figure was virtually unchanged from the early 1990s). However, the report went on to state that:

"It is also worth stressing that these busy outlets are very much the exception rather than the norm. In 2000/1 only 90 outlets submitted more one application per week on average, with only 17 (1.6%) submitting more than 100 in the year. At the other end of the scale, 106 (10.0%) outlets submitted only one application that year, compared to only 88 (8.6%) in 1992. A further 78 outlets submitted two applications per year (1992 figure not available).

These figures suggest that there are still a great many outlets operating as mixed practices that deal largely with private clients but are willing to use legal aid where necessary for the occasional client…Alongside these outlets operates a relatively small but stable number of more specialist outlets undertaking a substantial amount of civil legal aid work."

8.16 The Cost of Time Survey by the Law Society of Scotland revealed that 32% of fees for sole practitioners came from legal aid, and this declined to 22% for 2-3 partner firms, 20% for 5-9 partner firms and 1% for firms with 10+ partners. However, it should be noted that the statistics used in this survey are based on analysis of completed questionnaires from a self-selecting sample of 271 firms (out of a total of 1,783). Thus it is not known what proportion of the profession's overall income is derived from legal aid work.

8.17 Nevertheless, the general findings are not inconsistent with the Board's information derived from applications and accounts that, in general, it is the smaller rather than the larger firms that undertake significant amounts of legal aid work. The SLAB 'Legal aid in a changing world' research suggests that there are a considerable number of outlets that undertake, or have undertaken, civil legal assistance work fairly infrequently and who do not therefore in business terms rely on this area of work. However, the relatively small number of firms responsible for a substantial share of legal aid applications may be reliant on this work.

8.18 In England & Wales research was recently undertaken on behalf of the Department of Constitutional Affairs and Her Majesty's Treasury ⁴. One main aim of the work was to understand the nature of the supply of legal services for legal aided clients with a view to understanding whether there is evidence to suggest that the price currently paid for legal aid services provided by solicitors is too high or too low and, therefore, whether there is excess supply or excess demand in the market place.

8.19 In broad terms, the results of the research indicated that there is a relatively stable supplier base for the provision of legal aid services. The researchers concluded that:

"The implication is that, if prices for publicly funded work were to fall further behind the price for private client work, there might be a relatively limited response from firms in terms of any reduction in the legal aid hours supplied."

8.20 Practitioners in Scotland raised the issue with us that legal aid rates having remained static whilst private rates have increased, and the gap between the two has become increasingly wide, making legal aid economically less attractive or even unsustainable.

8.21 Solicitors often cited the Society's Cost of Time Survey which indicated that the 'key average all solicitors hourly expense rate' for 2004 is 113.02 per hour, which is significantly higher than the legal aid hourly rates payable to solicitors. ⁵ However, this survey has some limitations in this respect. In particular, responses show a considerable over-representation of the largest firms (those least likely to derive significant income from legal aid), as well as a considerable under-representation of sole partner firms (those most likely to derive a significant income from legal aid). Thus we feel that the results should be treated with some caution when comparing the resultant charge-out rate with the hourly rate set for legal aid. In addition, there is little information available about the way in which firms bill private clients, either in terms of the rates they charge or their methods of charging. It is thus very difficult to draw any conclusions from a raw comparison of hourly rates and even harder to estimate relative levels of profitability for any given hourly rate.

8.22 We have also considered whether the picture may have changed since the Board conducted its 2001 research. It had been expected that the introduction of the process of civil registration as a result of the civil legal aid reforms might shed some further light on the number of firms reportedly withdrawing from civil legal assistance. The deadline for full registration was 1 July 2004; early indications are that the total number of branches registered for civil legal assistance has reduced. However, the initial analysis by SLAB of this reduction suggests that most of those who have not registered had previously undertaken only very little legal aid or civil advice and assistance work. It is too early to assess the impact, if any, on access to services as a result. It is also too early to assess the impact on supply of the new rate and block fee structure for most Sheriff Court civil legal aid cases, and whether this will resolve some of the issue there.

8.23 On the basis of the evidence available to us, we are not convinced at present that remuneration is the sole, or even the most significant cause of any (future) lack of supply, nor can we therefore recommend it as the sole or most significant answer to the problem. In particular, while we share some of the concerns of the profession as regards remuneration for civil legal assistance, we are less persuaded that remuneration for criminal work makes it an unprofitable proposition.

8.24 On the basis of the strong anecdotal evidence and the limited, and at times contradictory, research evidence available to us we do however conclude that the concerns over (future) supply in judicare provision are both significant and genuine. We also conclude that we do not, at this stage know enough about the scale of the (potential) problem, the nature of it, nor the causes of it to be able to recommend exact responses to the situation.

The need for further research

8.25 It follows that, in view of the current reliance on the private sector to undertake legal aid work through the judicare method and the long-term nature of any strategies to tackle potential problems, we do not believe that a 'wait and see' approach is a viable option. However, any strategy to tackle such problems needs to be based on fuller knowledge of the extent of and reasons for the problem.

8.26 The first priority therefore needs to be to undertake the necessary research to establish whether, to what extent and why there is a shortage of new entrants to legal aid work (as well as to small practices generally) Also to apply the same questions to whether or not there is a withdrawal from legal aid work by existing practitioners. We recommend that this be taken forward between the Executive, the Board and the Society as a matter of urgency.

8.27 In this respect, we note that a Working Group for research into the legal services markets in Scotland has recently been set up by the Scottish Executive. This Working Group's agreed research aims are to:

• identify restrictions, whether deriving from statute, professional rules or custom and practice, which may have the effect of preventing, limiting or distorting competition in the different Scottish markets
• identify, describe and analyse the different legal services markets operating in Scotland
• identify access to justice, public interest and consumer protection factors that may justify such restrictions and to evaluate whether the restrictions are proportionate to their purpose
• examine the evidence on alternative systems and structures across comparable jurisdictions including alternative business structures and the availability of rights of audience and rights to conduct litigation

8.28 To address these key aims a number of specific issues will be examined in this research, including:

• entry into legal education and professional training
• supply of legal practitioners, number of potential entrants and career choices
• benefits and drawbacks of different systems and structures
• fee competition
• the role of auditors of court in relation to taxation of fees/accounts
• communication and quality of information flow between legal practitioners and the various users of legal services, including advertising.
• roles of lawyers and non-lawyers in providing advice on legal matters in different markets
• implications of forthcoming EU competition law and policy
• implications of Scottish policy developments such as legal aid reform, community legal services and the Public Defence Solicitors' Office

8.29 Although the key aims of this research are not focused on the potential disengagement of the legal profession from legal aid, some of the issues identified for examination will be relevant in terms of disengagement (in particular entry into legal education and professional training and supply of legal practitioners, number of potential entrants and career choices). In addition, it is noted that other issues to be examined (particularly the role of Auditors of court in relation to taxation of fees/accounts and roles of lawyers and non-lawyers in providing advice on legal matters) will be relevant in terms of other aspects of this review.

8.30 It is therefore recommended that the aims and remit of this Working Group be considered when the specification is drawn up for the recommended research in respect of disengagement. It is further recommended that, more widely, the progress of the Working Group and its research findings be monitored to assist in taking forward any recommendations or work agreed as a consequence of the strategic review.

Strategies to maintain supply

8.31 In the absence of sufficient knowledge and understanding of the underlying causes of any disengagement from legal aid by private practitioners it is difficult to formulate exact strategies to tackle the problem. However pending the findings of further research, it would be appear that the following types of response could all address the situation in part:

• Increase in rate of payment. Without commenting on the financial justification of any increase, we do believe that recent increases (as a result of civil legal aid reform, and in A&A and solemn criminal fees) send a positive message to practitioners and should help maintain engagement with legal aid practice and policy development. However, we do not think that an increase in rates in and of itself will solve (future) supply problems. In addition, we think it neither realistic nor reasonable for the public purse to attempt to compete with remuneration levels in private client work. In any case, it appears, again from anecdotal evidence, that the difficulty in ensuring new entrants is not unique to legal aid work but is felt across all small practices. It seems likely therefore that other measures also need to be considered.
• Non-remuneration based measures to encourage supply and measures to encourage new members. Active consideration should be given to any practical measures SLAB can take to encourage supply of legal aid services by private practitioners, and to practical assistance and incentives that will encourage new entrants. SLAB should have adequate flexibility of operation to implement any practical measures in this context. Examples of such measures include: improving the cash flow of small firms through making advance payments for legal aid work based on a percentage of the previous year's work; assisting in the repayment of student loans for trainees taking on a 'legal aid traineeship', or financial assistance or assistance in kind for firms providing 'legal aid traineeships'.
• Legal education and the image of legal aid work. Legal education may have a role to play in two respects: ensuring an awareness of legal aid, coupled with ensuring a positive image of legal aid work. The Scottish Legal Aid Board should work with universities, the Law Society of Scotland and others to take this forward.

8.32 It needs to be recognised that the judicare method of provision relies on the effective functioning of a market: on demand for services ensuring adequate supply and on supply being appropriate for the demand. Herein lies the weakness of this method: in its reliance on the market and on private practitioners it cannot guarantee supply, whether in terms of specific levels, full geographic coverage or specific legal field coverage.

8.33 Thus we conclude here, as we did at paragraphs 3.25 and 3.27, that other methods of delivery within a (complex) mixed model need to be used to ensure that publicly funded solicitors' services are available. Such methods might include:

• salaried or employed solicitors, based in wholly public sector offices, or placed in private practices or voluntary sector agencies
• the use of contracting with private practitioners to supply specific services to meet specific needs ('spot' contracting)
• a general use of contracting with private practitioners (both civil and criminal) to provide legal advice services
• more formally developed structures for (particularly procedural) work to be carried out by local agents where no local solicitors offer either a legal aid service or a particular specialism, thus enabling remote delivery

8.34 Of these, there is already some precedent for the direct employment of solicitors in the form of the Part V pilots, in which solicitors employed by the Board are based in voluntary sector agencies and the in the form of the PDSO. Although both of these arrangements have been implemented as pilots, the powers in the primary legislation under which both are operated offer some opportunity to respond to market failure.

8.35 Thus, if the private market leaves gaps in provision, public defence solicitors (the PDSO) could be used to ensure access to services where needed. Indeed, such a safety net is provided for by existing legislation, but to date that power has not been required. Longer term, it is also possible that a significant publicly-employed criminal defence service could provide an alternative training and career structure for young solicitors, thereby contributing to any strategy to tackle future under-supply.

8.36 As with criminal defence, the Board and Law Society have agreed arrangements for a transitional 'safety net' for the period immediately following civil registration (as a result of civil legal aid reform). Under this arrangement, the Society will nominate a practitioner to act on behalf of any client unable to obtain the services of a solicitor. In the medium term, however, the Board will seek to use the powers in Part V to directly employ solicitors to meet shortages in supply. These powers are, however, somewhat inflexible, so neither of these responses are ideal in the longer term.

8.37 The current primary legislation does make provision for the use of contracting by the Scottish Legal Aid Board for services in criminal legal assistance (although this is not used at present), but does not make the same provision for civil legal assistance.

8.38 In conclusion, we recommend that the Scottish Legal Aid Board should be given more flexible powers in relation to the funding and provision of solicitors' services, so that it can ensure provision in a (complex) mixed model, by a range of methods (e.g. employed or salaried solicitors, spot contracting, general contracting), as appropriate.

8C VOLUNTARY SECTOR AND LOCAL AUTHORITY PROVISION

8.39 Publicly funded legal advice provided by non-solicitors is an important part of a complex mixed model of provision. Such advice services are already well developed and widely available throughout Scotland, and in the main provided by voluntary sector advice agencies and by local authorities in various ways. However, the vulnerability of such provision particularly, but not exclusively, in the voluntary sector has been identified as a strategic issue which requires to be addressed.

8.40 We recognise that stability and security of funding is essential in maintaining quality provision and skills and to encourage development. We believe that better planning and coordination will contribute towards creating greater stability and certainty for providers, and our proposals in that respect are described in full at paragraphs 5.9 to 5.75.

8.41 We recommend that to encourage greater stability and security for providers in the not-for-profit sector, the Scottish Executive and (N)SLAB should, in supporting local authorities in their planning, coordination and development of advice provision, develop best practice guidance for use by planners and funding bodies, based on the principle of a three year, rolling cycle. In their own funding practice the Scottish Executive, as well as (N)SLAB should continue to follow the Scottish Compact Good Practice Guide on Funding Voluntary Organisations.

8.42 Developing and sharing best practice on funding should create greater consistency in funding arrangements, as well as in reporting requirements. As set out in our discussion of quality systems at paragraphs 5.76 to 5.86, a common quality system will also contribute to the latter. The proposed ability for (N)SLAB to grant fund provision will contribute significantly to the adoption of best practice in funding, as we envisage it to be a condition for any match or joint funding arrangements for all parties to comply with the best practice.

8.43 To address the vulnerability of provision it has been suggested that a statutory duty be placed on local authorities to ensure the provision of appropriate advice services in their area (either by funding voluntary sector provision or through in-house provision). This is discussed in full in paragraphs 5.57 to 5.59, where we conclude not to support such calls for a statutory duty.

Footnotes

1 Judicare: the provision of legal aid services by solicitors in private practice, paid for by public funds.

2 Law Society of Scotland 'Benchmarks and Cost of Time Survey' (2003)

3 Scottish Legal Aid Board, 'Legal aid in a changing world: research into the reduction in civil legal aid applications in Scotland between 1992 and 2001' (October 2001)

4 A market analysis of legal aided services proved by solicitors - Frontier Economics Ltd. (December 2003)

5 For examples of hourly rates payable to solicitors see the table illustrating the remuneration system in Annex 5

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