There were some mixed views on the policies proposed at Labour Party conference a couple of months ago, but many in the legal profession have strongly supported the findings of the Labour-backed Bach Commission report, published by the Fabian Society last month. A two year long review led by former Labour justice minister Lord Bach, The Right to Justice, condemns the damaging impact austerity has had on legal aid, and is highly critical of the coalition government’s Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LAPSO).
This issue may seem at odds with the traditional topics concerning investors, however, nearly a third of UK law firms expect private equity to be an important source of external funding for their sector in the next few years, according to a recent survey conducted by Smith & Williamson.
The Bach report highlights that access to justice is a fundamental democratic right, a right that, according to the Lord Chief Justice, “has become unaffordable to most”. Lord Bach regularly argued points such as this from the Labour front bench in the Lords when opposing aspects of the 2012 LAPSO Bill and the regulations made under it by the then Lord Chancellor, Chris Grayling MP.
Legal aid was first established in England and Wales 65 years ago for those too poor to afford basic legal services. In 2012, the LAPSO Act turned off public funding for most private family cases, welfare benefit law, clinical negligence, employment, housing disputes, debt, immigration and education law – removing legal advice and representation from thousands of people.
Is the government planning to address these concerns?
Although seemingly distracted by the business of Brexit, the Ministry of Justice announced a long-awaited review of the impact of LASPO in January this year, but is not expected to report until April 2018.
Within the Conservative Party, pressure is certainly mounting for a re-think of legal aid policy. Senior figures, including Lord Chancellor and Secretary of State for Justice, David Lidington MP, have indicated that they are ready to support a re-evaluation of the government’s approach. Backbenchers are also riled, with legal aid featuring heavily at party conference fringe events, and MPs expressing their dissatisfaction with elements of the current policy.
Current legal aid policy has many critics: the National Audit Office, Supreme Court Judges, and the Justice Select Committee have all argued that cuts to spending have harmed access to justice for the most vulnerable due to an underspend in the civil legal aid budget and a lack of public information about the extent and availability of legal aid post-reform.
They have also raised concerns that these changes have simply increased legal costs elsewhere and added to the difficulties people may face in obtaining help with legal problems.
As is often the mantra in government: it’s the economy, stupid. Responding to the Bach Commission, Justice Minister Dominic Raab MP said the Ministry of Justice spent £1.6bn on legal aid last year, a quarter of its budget, “recognising the cost of this support is met by the taxpayer”. However, last year’s legal aid spending was down £950m on 2010 figures – surely the damage to the legal sector was far greater than parliament intended?
The few legal aid lawyers left to provide the service have not seen a rise in their remuneration since 1995, whereas the Retail Price Index has increased by 129 per cent over this same period. Not surprisingly, it is near impossible to find a legal aid lawyer in many parts of the country – new research has shown that legal aid providers have fallen across the UK by over 20% in the past five years.
So what does this all mean for investors?
Affordability is a key factor in why people choose not to access legal advice or use a lawyer in court. Increases to legal aid funding would widen the eligibility criteria for claimants, thereby spiking demand for solicitors’ services. Those eligible for legal aid are significantly more likely to use legal services than those who are not. Demand for legal aid services are only set to increase in the long term and regardless, the need for access to justice is a constant.
Recent cases of private investor backed legal aid services, despite unforgiving policy conditions, have returned considerable profit. For example, private equity investors Livingbridge and Business Growth Fund (BGF) have both backed medium sized law firms who have a focus on legal aid cases. They have both posted significant revenues, showing that, with the right financial backing and investor confidence, legal aid can turn out to be a shrewd investment.
Cuts to legal aid have magnified instability in the smaller traditional law firm business model. This potential policy shift would make way for more favourable market conditions, rendering the operating environment more attractive and thereby encouraging new entrants and investors into the sector.
There’s no doubt that calls for urgent legal reform will continue to grow and pressure will mount. It’s only a matter of time before legal aid reform is firmly back on the government’s agenda.