Is the government losing its nerve on no win, no fee reforms? The overhaul of the civil justice system was supposed to have been rubber-stamped when the Legal Aid, Sentencing and Punishment of Offenders Act was given royal assent earlier this month.

But now we learn that insolvency claims will be exempt, at least until April 2015, joining mesothelioma cases in escaping the legislative whirlpool.

The act may well have been passed, but in terms of implementing it, there’s clearly a long way to go. In exempting insolvency, the government has opened itself up to charges of incompetence and hypocrisy.

There have been numerous chances to pull insolvency out of reform in the two years since Lord Justice Jackson first announced that recoverability of after-the-event insurance and success fees should be abolished. Ministers were repeatedly warned by insolvency practitioners that their plans would not work.

Ministers in the Commons and Lords have constantly swatted away amendments aimed at the very exemption outlined in parliament today. Why make this U-turn so late in proceedings?

The statement confirming the exemption is worth examining. Justice minister Jonathan Djanogly (sensibly) calls for insolvency practitioners to be allowed ‘time for those involved to adjust and implement alternative arrangements’. But why are other claimant solicitors not granted such delays to refine their business plan? Every solicitor firm will have to make adjustments, but some have less than a year to get their house in order while insolvency lawyers can prepare for almost three.

There is also the ulterior motive of cold, hard cash. Indeed, it’s explicitly outlined by Djanogly’s statement when he remarks ‘insolvency cases bring substantial revenue to the taxpayer’. As far back as October last year, the Insolvency Practitioners Association pointed out that HMRC was a significant unsecured creditor in insolvency cases where conditional fee agreement claims were undertaken. The Jackson reforms, it estimated, would cost HMRC in the region of £125m a year.

Quite simply, the taxman relies on the ability to fund cases against defunct companies, with the money recouped going into public coffers. With George Osborne needing every penny he can get, the last thing the Treasury needed was for a neighbouring department to cut off a source of revenue.

Whilst boosting the public coffers is to be welcomed, this comes down to a fundamental point of principle: if you’re severely handicapped by clinical negligence, your reputation ruined by libel or your phone hacked by a news organisation, you have to dip into your own compensation to pay the legal costs. But if the taxman needs to make a claim, he can do so without the constraints of a rebalanced system that the government has been so keen to promote.

As with mesothelioma, the government has fought a long battle only to concede an exemption with victory assured. If it believes these reforms are the right thing to do, should they not apply to every claimant, no matter who is the recipient?

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