Committee report on procurement of legal aid in England and Wales

• Report: Legal Services Commission
• Committee of Public Accounts
• Legal Services Commission (external website)

Edward Leigh MP, Chairman of the Committee of Public Accounts, said:

"The Legal Services Commission has been doing a far from competent job of buying legal aid from lawyers. It spends large amounts of money - more than £2 billion in 2008-09 – but its financial controls and management information have been lax."

"It is indicative of this poor oversight of spending that the Commission managed to overpay solicitors in 2008-09 by some £25 million, resulting in the qualification of its accounts.

"The Commission’s plans, recently abandoned, to introduce price competition in the legal services market were hamstrung by its lack of knowledge of that market. It must now gather much better information on the costs and profits of firms providing legal aid.

"Without this basic information, the Commission will not be able to set prices which are good value for money for the taxpayer and, at the same time, make legal services work attractive enough to firms.

"The Commission’s lack of grip of the basics and lack of a clear strategic direction were compounded by a muddled relationship with its sponsoring department, the Ministry of Justice. Both Commission and Department must now adopt a more coherent approach to introducing reforms to the legal services market."

Mr Leigh was speaking as the Committee published its 9th Report of this Session. This report covers the Committee’s examination of the procurement and administration of legal aid in England and Wales on the basis of two reports by the Comptroller and Auditor General: his report on the qualification of the accounts of the Legal Services Commission for 2008–09 and his value for money evaluation of the procurement of criminal legal aid.

The Committee took evidence from witnesses from the Ministry of Justice (the Department) and the Legal Services Commission on the Commission’s financial management and governance, on how criminal legal aid is delivered, and on the Commission’s skills and capacity to manage change.

The Legal Services Commission — a Non-Departmental Public Body of the Ministry of Justice —spends £2.1 billion a year on buying civil and criminal legal aid, mainly from solicitors and barristers, and a further £125 million on administration.

The Commission has successfully arrested the increase in legal aid spending in the last five years, but we found it is an organisation with poor financial management and internal controls and deficient management information. These weaknesses resulted in the Commission having its annual accounts qualified for 2008–09 and an assessment that its procurement and administration of criminal legal aid posed risks to value for money.

The Committee was very concerned that such weaknesses in the Commission’s performance had occurred when the Ministry of Justice spends over £2 million a year itself on legal aid policy matters and on overseeing the Commission. We found confusion and uncertainty about the respective roles of the two organisations which had led to duplication of effort on some issues and a lack of clarity about who should be responsible for others.

Because the Commission is the sole buyer of legal aid, it is important that it knows it is paying the right price for this and the effects its policies are having on the sustainability of providers. But it does not know enough about the costs and profitability of firms to know if it has set its fees at an appropriate level. Moreover, there are gaps in the arrangements to assure the quality of criminal legal aid procured which make it harder to assess whether the services delivered represent good value for money.

The Commission considered the introduction of tendering would remove the imperative for it to know the market, because prices would be set by competition. The recently announced abandonment of its plans to introduce its tendering proposals following representations from the legal profession leaves the Commission not able to assess if it is paying a reasonable price for legal aid.

In particular, significant expenditure is incurred on the largest cases that take place primarily in the Crown Court and a small number of barristers are earning substantial fees from such cases. Despite playing a more active role in managing these cases, the Commission has not done the analysis to determine if its current approach is cost effective.

The Commission has been responsible for implementing significant reforms to legal aid, which were recommended by Lord Carter of Coles in 2006. However, constant changes in staff at senior level - which have been costly and disruptive - and poor planning of the changes has meant that reforms have often been delayed, have not always kept to their timetable and have not been properly evaluated to assess their impact.