The extent of the losses incurred by law firms from doing civil legal aid work – and the challenges preventing them from breaking even – have been laid bare in a new report from the Law Society.

Chancery Lane urged the Ministry of Justice, which is reaching the final stages of a major civil legal aid review, to use the research to set fees at a realistic and sustainable level.

Frontier Economics was commissioned to identify the costs of applying for and maintaining a civil legal aid contract, and the associated profits and losses from doing the work. An interim report published in February revealed that lawyers were losing money doing housing legal aid work but felt morally obliged to keep going.

A final report published this week reveals that losses per housing provider range from nearly £80,000 to £180,000 a year.

The final report also covers family legal aid, exposing a ‘notable difference’ in profitability between private and public family work. Providers said the administrative burden associated with doing family legal aid work was a significant driver of costs.

One firm revealed it spent £40,000 a year on a helpline to deal with new enquiries, triage them and assess if they meet the means and merits test. Providers must upload legal aid claims to two separate ‘outdated and not particularly user-friendly’ systems, and then comply with stringent Legal Aid Agency audit requirements.

A provider said: ‘Eligibility is a huge issue in private family law, due to how much the government has restricted the eligible areas and who can access it. There are huge costs associated with just determining if someone is eligible which is part of why we don’t really do this kind of work and just focus on child care proceedings.’

While the findings are based on 45 civil legal aid providers, ‘our work has demonstrated that it is possible to gather the required financial data from providers even though this has required significant effort and time’, the report says.

‘It is our view that this research could be replicated or expanded upon in the future, based on the level of engagement received and the data which providers were able to supply. This would support a robust understanding of the sustainability of different segments of civil legal aid, and how this sustainability changes over time, which is critical for informing policy decisions.’