The government has rejected calls to cancel its court fees hike and dismissed the suggestion it will disproportionately hit smaller businesses.

Shailesh Vara spoke during a heated debate in the first delegated legislation committee of the House of Commons yesterday to defend the 5% fee for all claims valued over £10,000. Fees will be capped for all claims valued at more than £200,000.

Vara said 90% of civil claims will not be affected by the changes and promised a review of the effects on those cases that will be subject to increased fees.

The minister also confirmed the government has received a pre-action letter from various parties, including the Law Society and Bar Council, to challenge the decision to introduce enhanced fees. The Ministry of Justice will respond ‘in accordance with pre-action protocol,’ added Vara.

‘What we have before us is a sensible measure,’ said Vara. ‘It is also a recognition that we are in the economic position that we are in because of the previous government’s mishandling of the economy, and we would not be introducing this measure if we genuinely believed there was a serious risk that it would reduce demand or damage our legal services.’

He added that the impact assessment’s assumption that there will not be much change was ‘reasonable’ and that there is ‘no evidence’ to suggest small and medium-sized enterprises will be disproportionately affected.

The change is set to recoup £120m a year to fund court services, with every pound collected retained by the courts.

Shadow justice minister Andy Slaughter said Labour did not ‘fundamentally object’ to the basic premise that further sums of money can be raised by increasing court fees.

However, he cited the introduction of employment tribunal fees – and the subsequent drop in claims – as proof that large increases in fees will discourage meritorious cases.

If the number of claims drops significantly, he argued, the government could also not hope to collect £120m a year as envisaged.

Slaughter added: ‘If the minister intends to go ahead with such a formulation, we need much clearer answers.

‘We are talking about people who may have small businesses, people with life-changing personal injuries, or people who suffer professional negligence. Those are the typical cases likely to be affected by the scheme, and that is why we raise concerns.’

The committee, a majority of which was made up of coalition MPs, resolved to approve the fees. The House of Lords will debate the matter on 4 March.