Plans to merge not-for-profit and private practice legal aid contracts could compound damage to the former’s economic fragility caused by local authority funding cuts, says Jon Robins

Life on the high street for legal aid firms – with a decade-long pay freeze – might seem a pretty threadbare existence. But the not-for-profit (NFP) sector can be just as precarious.


The story of the demise of Humberside law centre provides a cautionary tale of the perils of funding in the voluntary sector. Last year, the centre closed its doors after 15 years’ service, following a slow death by a series of cuts. Humberside County Council was abolished back in 1996 and replaced with four unitary authorities – last year North-East Lincolnshire stopped funding altogether, North Lincolnshire cut back drastically a few months later, and then finally East Riding put all its money into the Citizens Advice Bureau (CAB), leaving only Hull City Council. It was the decision of East Riding to withhold a mere £15,000 that represented the killer blow.


‘Humberside illustrates the problems that we’re all in,’ reckons Steve Hynes, director of the Law Centres Federation. ‘It was an excellent law centre, but it had six or seven funding streams, and if you lose a number within a short space of time, plus key members of staff, then a centre can simply implode.’


In November, the Legal Services Commission (LSC) revealed that it plans to merge private practice and not-for-profit legal aid contracts for lawyers operating in social welfare law (see [2005] Gazette, 17 November, 4). The LSC is the major funder of the voluntary sector, and so a redesign of the contract potentially represents a fundamental change in the fragile economic health of the voluntary legal advice sector.

In a bulletin to practitioners, the LSC announced that it was ‘considering moving towards more holistic social welfare law contracts covering debt, employment, housing and welfare benefits, which are neither solicitor nor NFP specific’. An LSC spokesman explained that, from 2007, there could just be one social welfare contract. Private practice firms currently work under LSC rules, which combine fixed fees for legal help with hourly rates in most cases, whilst NFP agencies operate under block contracts.


The future of the NFP contract is ‘the biggest issue that we have with the whole legal aid system’, reckons James Sandbach, policy director at charity Citizens Advice. Legal aid is ‘a limited pot’, he reflects, with the result that there is ‘always going to be need for robust monitoring requirements to ensure quality in the system’. But Mr Sandbach adds that it should not be disproportionate. ‘At the moment, it is so disproportionate that we find some bureaux end up subsidising the contract from other sources of income,’ he says.


So what does Citizens Advice make of the LSC’s plans? That depends on what happens to the contract. The group has been campaigning for the past few years for a better contract, one that is based on the number of cases rather than the number of hours, with ‘a balance between the target number of cases and outcomes’. Mr Sandbach says: ‘The current contract is a bit of a nightmare. Advisers spend almost as much time managing the contract as they spend doing the work; we think that is wrong.’


Bob Nightingale, director of South West London Law Centre, argues that margins under current contracts are tight to the point of being non-existent. ‘We get paid £57,000 for 1,100 hours a year, and to do that properly we have to have one person plus three-eighths of a person working that contract, and they cost us more than £57,000,’ he says. ‘The commission reckons we should be able to do that easily.’


He fears that any redesign of the current contract might introduce restrictions on time spent per case which, he argues, will not provide value for money, as currently his advisers deliver a 90% success rate.


But Mr Nightingale concedes that there are problems with the contracts at the law centre end, with advisers failing to bill properly. He recalls one of his advisers telling former LSC chief executive Steve Orchard that the requirement to record time in six-minute blocks was ‘ridiculous’. Mr Orchard was ‘dumbfounded’ that a publicly-funded adviser should not feel comfortable with being accountable for time spent on work, and Mr Nightingale shares his reaction. ‘The fact that some of our workers don’t bill to industry standards can cause us more problems than the actual contracts,’ he says.


Kirklees Law Centre, based in Dewsbury, West Yorkshire, opened in February 2005, and is funded in equal measure by the local authority and the LSC. ‘There are some big problems with focusing too much on LSC contracts,’ acknowledges practice manager Nick Whittingham. ‘It is a difficult system to run in a commercial environment.’ He points out that a lot of the work the law centre undertakes falls outside of the contract remit, and that the administrative burden of managing the contracts eats into the time that should be devoted to publicly-funded casework.


Mr Whittingham – who spent 12 years at the LSC working on contracting, auditing and policy work – is also nervous about the prospect of merging contracts. ‘Operating under a fixed-fee system would cause us problems,’ he says. ‘Cases that a law centre takes on tend towards the high end, with complex areas of work which do not easily fit into fixed-fee systems.’


He reports that advisers are already ‘stretched’ to perform the hours that they are required to do under contracting. ‘It is unclear whether anyone would want to take on any additional contracts at the moment anyway,’ he says. ‘If the system was changed to make life even less attractive, that would be of great concern.’


In the east midlands, funding for the not-for-profit legal sector has been in ‘continuous recession’ for the last 15 years, reports Glenda Terry, practice manager at Leicester Law Centre. Leicester had a CAB until 2001, when it was shut down by a Labour council, which shaved £100,000 from its advice budget. Three years later, the ruling Liberal Democrat and Conservative coalition cut £460,000 from six advice groups, including the law centre. The last drop-in advice centre shut down as a result.


Up until late 2004, three-quarters of the law centre’s funding still came from the local authority, which went to cover the former CAB service plus a further allocation for a certain amount of casework for those clients who fell outside the legal aid scheme. That second stream of income has since gone, and the CAB funding is expected to go this year. ‘If we rely totally on commission funding, we would not be viable because there isn’t sufficient money to provide for rent,’ Ms Terry says. ‘We are always in a precarious position.’


There have been hopes that the government’s fundamental legal aid review would address funding and the troubled relationship between agencies, local authorities and the LSC. It was a theme that came up in the LSC’s recent ‘Making legal rights a reality’ consultation paper, in the context of community legal advice centres (CLAC) and the community legal and advice networks (CLAN). The LSC proposes to pilot CLACs, which are ‘jointly funded, face-to-face legal and advice services specialising in social welfare law, under a more client-focused service specification’ than existing LSC contracts. A CLAN would consist of a group or consortium of quality-assured providers that have signed up to a common specification of services.


Could a CLAC make a difference? ‘It is only going to work if it is given sufficient funding to do the job,’ warns Bob Nightingale. There has been talk of a CLAC in Leicester. ‘The bottom line is whether there is going to be any additional funding or if it is going to be a simple re-jigging of the funding that exists already,’ says Glenda Terry. ‘To meet need and create security within the sector, you need the funding to be adequate.’


Jon Robins is a freelance journalist