Cuts to put half of legal aid firms at risk of closure
The ‘catastrophic impact’ of the government’s proposed legal aid cuts could leave 50% of firms doing publicly funded work at risk of closure, according to research commissioned by the Law Society, seen exclusively by the Gazette.
Consultants Andrew Otterburn and Vicky Ling surveyed 163 civil and criminal law firms to assess the potential impact of the Ministry of Justice proposals, which will cut fee rates and remove large areas of civil work from scope.
The study found that the removal of work from the scope of legal aid will have a ‘catastrophic impact’ on firms.
In particular, firms that undertake large volumes of family or Crown court work, or specialise in areas of civil work such as housing, immigration or clinical negligence, will find the impact of the proposals ‘unsustainable’.
‘Many suppliers will not survive the withdrawal of scope and risk closure,’ said the report.
It also found that the reduction in fee levels will weaken firms currently struggling due to the recession, and further squeeze tight profit margins.
The study calculated the impact of the reforms on profits per partner (PPP), after allowing for a notional salary based on the wages of the highest-earning employee, plus 10%.
On average, the study found that PPP will fall from around £27,000 (plus a notional salary of £49,500) to £11,000 after the rate cuts, leading to a £48,000 loss after the removal of work from scope.
The consultants calculated that firms would need to reduce their payroll costs by 40% to retain their current levels of profitability. This would mean funding ‘significant redundancy liabilities’.
As with other sectors, the report found that the last three years had been ‘extremely difficult’ for firms, and most have seen profits fall, partner capital depleted, and have made redundancies.
The study showed that median capital was just under £69,000 per partner, and the median bank balance was an overdraft of £2,000 per partner.
The median profit was £27,000, but a quarter of firms are barely covering the salaries of equity partners.
Otterburn said: ‘We may see a 50% reduction in the supplier base [if the proposals go ahead] and an end to the large firm model because the volume of work, except in public law family and crime, will no longer exist.’
He advised firms to start scaling back their operations now, and to begin reducing their capacity and payroll in a controlled way.
He said firms should also try to diversify out of legal aid, and take advice to protect their personal assets, particularly if they are still partnerships with unlimited liability.
The research did not take into account the likely impact of the proposed increase in telephone advice work, which is expected to reduce civil work even further.
See the full report.
Comments
A shocking prediction, but
A shocking prediction, but not at all surprising to me and to those who have given some thought to "the bigger picture"- the way the State has proven itself to operate in capitalist society since the rise of the Multinational, engaging in a constant restructure to facilitate the recovery and reproduction of international capital (that so recently fell into a deep crisis of its own utterly reckless and criminal making). Infuriatingly though, this seems to mean that we all have to pay for the consequences, not the billionaires who caused it. This much links UK coal miners and legal aid lawyers . Both have been and are to be, eliminated as the progressive ideology of "the common good" and the lifeblood of the welfare state, is sucked out to facilitate profit and for the private-capital ASB Vampires to devour.
Have a nice day !
Confusion
On average, the study found that PPP will fall from around £27,000 (plus a notional salary of £49,500) to £11,000 after the rate cuts, leading to a £48,000 loss after the removal of work from scope.
Have I read this wroing? Or is it suggesting that the average annual drawings, for a partner in such a firm, is currently £76,600.00 ? That must be wrong.
legal aid yet again... yawn
Yet another highly objective study (not) in relation to the necessary, warranted and long-overdue cuts in the unsustainable, ever-growing drain on public funds otherwise known as the legal aid gravy train. Yes it probably will be painful, but structural change is coming so get used to the idea that you willl have to do something else instead. The days of the partners' car park in legal aid firms' car parks being full of BMWs, Mercedes and Lexus etc. (as was the case when I was a trainee in a major legal aid firm in the North West in the mid-1990s) are probably over. It's not exactly easy for those of us not doing legal aid work at the moment either.
You do have a valid point to
You do have a valid point to some extent because I also worked for a legal firm in the late 1990's and saw how partners milked the legal aid gravy train with fraudulent claims from the public purse. The GF1 scheme (aka 'the green form' ) was one of the worst things ever to be brought in because it was abused by a lot of firms. So was the hourly rates scheme paid to firms. I worked for a lot of firms that were notorious for 'bumping up' the work on a file in order to claim more money at the end of the case. The legal aid system has to change for a number of reasons.
You have exhumed every
You have exhumed every rotting brain-dead cliche about gravy trains, BMWs (copyright Jack Straw) , drains on public funds blah blah blah. The one thing you don`t mention is the purpose of legal aid-to give vulnerable people equal access to justice. Either you care about that or you don`t. If you don`t, then please be upfront about it rather than glib references to "restructuring", because -never mind your fat cat solicitors, reality or not-you cannot have cuts of this scale without seeing people who need legal advice, suffer.
......And no rise in legal aid rates in 12 years is a sort of "fact"(awkward things aren`t they ?) that suggests legal aid lawyers might be struggling now.
The solution
Legal is incredibly important because it gives the most vulnerable a voice and in our society legal aid, much like healthcare is expected. So if the government cuts legal aid funding they are essentially turned their back on the poorest in society. The solution is actually quite straightforward. All the law graduates who are battling away to get a job should get together and become the ultimate legal aid firm. Obviously there are lots of reasons why this wouldn't work but what this highlights is that there are thousands of lawyers out there without a job and thousands of people who need legal aid.
In denial
you can seek to deny it as long as you can but the simple fact is that legal aid has been abused and exploited for years by grasping lawyers and feckless claimants because it has all been "free". The spongers get free representation for hopeless cases while, at the same time, those who pay for the feckless losers can't afford to pay for a lawyer for themselves because they work.
"Tax Payer", Your comments
"Tax Payer", Your comments are the usual we`ve heard from Scrooge onwards and given the gloss of respectability in our noble fearless free Press which is not at all owned by autocratic porn barons and billionaires. For your information, the facts (awkward little things aren`t they) Legal Aid has never all been "free" and it has never been knowingly granted for "hopeless cases". Let`s hope you don`t find yourself a "loser" (feckless or otherwise) in today`s neoliberal ratrace because you probably won`t find a lawyer who`ll be able to help you now.
to Anonymous @ 17.39
Hi Anonymous... funny thing is that I am not a tabloid reader but an admitted current full-time practising member of this "profession" who has seen the abuse of legal aid "from the inside", is well aware of the facts, and decided it wasn't for me . Keep on using terms like "vulnerable", "access to justice" etc. and you might start believing the self-interest based spin yourself. The cuts are long-overdue. If the average tax payer knew what I know, their toes would curl!
Access to Justice is an Act
Access to Justice is an Act not just a term, which you would know if you were a legal aid solicitor, which you are clearly not. The problem you are unable to grasp is that the Access to Justice Act is to enable legal representation to everyone including those who cannot afford it, like the NHS for health.
You like everyone else are the average tax payer, but you allegedly work in the legal profession. If you are working in a legal aid firm, which I doubt, and your firm is as bad with its abuse of public funding as you claim, then you are complicit in being part of the problem and maybe you should leave your firm for a firm which does not abuse the small amount of public funding they receive ,which is most of them.
If you are not working in a legal aid firm, then clearly your claims are unfounded and as has always been... empty vessels make the loudest noise.