MAIN POINTS-- Widest possible extension of conditional fee arrangements and removal of legal aid from all civil money or damages claims.-- Introduction of contracts for legally aided work at agreed, fixed prices.-- Tightening of the merits test where legal aid is still available.-- Adoption of Woolf reforms.SUMMARY-- Contracting of legal services in civil and criminal cases.

In medium term a majority of criminal work to be under contract.-- Merits test for grant of legal aid to be raised to 75% to reflect pressure on legal aid budget.-- Solicitors' predictions of the strength of cases to be monitored by the Legal Aid Board against achieved outcomes.-- Award and continuation of contracts to be dependent on outcomes and other quality measures to be consulted upon.-- Special arrangements for public interest cases, perhaps funded by a LAB-run reserve and supervised by judges.-- Consultation on maximum possible extension of conditional fee agreements to all civil cases except family, from April 1998.-- Consultation on a contingency legal aid fund, on legal aid being available to fund legal costs insurance premiums and on making medical negligence a special case.-- In the longer term a community legal service to co-ordinate work of voluntary sector agencies, advised on local priorities by regional legal services committees.-- Extension of court fees exemptions to wider range of benefit recipients.-- Adoption of Woolf's judicial case management proposals.-- Creation of a fast-track route for cases subject to fixed timetable with cases usually heard within 30 weeks.

Creation of a multi-track route for other cases.

Both tracks to be running by April 1999, accompanied by fixed costs regime.-- Small claims limit to be raised to £5,000-- Consultation on whether to raise fast-track limit to £15,000.KEY SECTIONS OF LORD IRVINE'S SPEECH:There are two major priorities, two main targets.

First, legal aid has become a leviathan with a ferocious appetite.

I have to grapple with that.

Second, the civil justice system is a machine with many faults.

I plan to remove them.

Those are my targets, taking control of legal aid and modernising civil justice.Legal aid must be re-focused.

It must be made a tool to promote access to justice for the needy -- not be seen by the public as basically a means of keeping lawyers in business.

It is the people's needs that justify a legal aid system in the first place.-- LEGAL AIDI have thought for a long time about the future of legal aid.

The future lies in contracting for services, in both criminal and civil cases.

The way ahead is contracts that will specify in advance just what services are being bought, and at exactly what prices.

It is only through contracting that the government can hope to gain sufficient control over the shape of the legal aid scheme to ensure that resources are targeted on the needy.Legal aid work will, in time, be restricted to those providers who have a contract with the Legal Aid Board.

No longer demand-led, as now, the civil legal aid scheme will become more responsive to the Legal Aid Board which will purchase, at agreed and fixed -- I emphasise fixed -- prices, services which have been determined in advance under plans made locally on the advice of regional legal services committees.No lawyer can be compelled to contract at a fixed price.

Lawyers must make a commercial judgment.

Depending on how each case progresses, the fixed price in every case will, at the end, seem too high or too low.

It is called 'taking the rough with the smooth'.

It is the overall outcome from all contracts on which lawyers' profitability will depend.Lawyers must become more precise in their predictions.

Those predictions should be monitored by the Legal Aid Board, against achieved outcomes.

This is an important means by which the board will judge whether particular firms deserve to continue to be awarded contracts.

But there are no doubt other ways in which competence and quality can be assessed.

Clearly, this is something that demands consultation between the government and the professions.I propose also to extend contracting to criminal legal aid.

In the medium-term, the greater part of criminal work will be drawn into contracting arrangements.

But we need to work hard to decide how the interests of justice in criminal cases -- particularly the rights of defendants and the need to avoid delay -- can be dovetailed with a contracting system managed through the Legal Aid Board.

That work is already in hand.-- MERITS TESTSA grant of legal aid depends on the case passing what is commonly called the merits test.

That test needs tightening.

Too often the Legal Aid Board is told that a case has a 'good' or an 'average' chance of success...

without the lawyer having to nail his colours to the mast of a precise percentage prospect of success.

Lawyers will be required to do that in future.In cases where it is the prospects of success which are central, I hope to see the merits test stipulate a 75% likelihood of success...

No prudent person would run the risk of litigating out of his own resources with less than a 75% likelihood of success.I also intend that the merits test should, in future, reflect the pressure on the legal aid budget...

It is only by bringing the overall availability of resources into play that the government can guarantee keeping legal aid within an annual pre-determined budget.

But by careful planning in the contracting process -- and granting overlapping contracts that last for several years ahead -- we shall ensure that there is a steady level of services available at all times to meet the priority cases identified through the merits test.-- EXCEPTIONAL CASESBefore I move on from the merits test, I acknowledge there are categories which would not pass the test, and where the predicted cost would be disproportionate to the likely benefit to the individual -- but where it is plainly in the public interest for a particular point of law to be examined, or for a precedent to be established.

I believe it would be right to make special arrangements for these cases.I am attracted by two proposals...

for handling these cases of public importance.

First, that the Legal Aid Board should establish a separate fund specifically designed to carry them forward.

And, second, that consideration should be given to placing them under special judicial management.Sir Peter Middleton...

concluded that it would be reasonable for the government to ask for a contribution of five or ten pounds, even from those who are dependent on income support.

This is one of the few recommendations from Sir Peter Middleton which I am unable to accept.-- CONDITIONAL FEESMy department will be consulting over the next few months on the maximum possible extension of conditional fee agreements to all civil proceedings, other than family cases, from April 1998...

The extension of conditional fee agreements to a wide range of cases must prompt the question: 'Should legal aid also be offered in cases where other arrangements already exist to support litigants?'I think not.

Subject to consultations, I expect to exclude most claims for money or damages from legal aid.

Legal aid will continue to be available for all civil cases not claiming damages or other money: for example, care of children; judicial review; and the threat of homelessness, not to mention the whole of criminal legal aid.An alternative approach which has been suggested is that, rather than leaving the less well-off to make 'no-win no-fee' agreements, there should be a contingency, or conditional, legal aid fund -- a CLAF for short.

This is a listening government, so I am willing to consider this proposal.

I do, however, have major concerns about the way this fund would work...

would there not be a real risk that only weaker cases would be supported by a CLAF, because lawyers would prefer to cream off the stronger cases under no-win, no-fee agreements?-- FUNDING INSURANCEI have already received suggestions: for instance, that there should perhaps be provision for the legal aid fund to meet the insurance premiums, to protect against the risk of loss those who are eligible for legal aid, and wish to enter into conditional fee arrangements.There is also an argument that medical negligence is a special case, because substantial costs are incurred in investigating it before a view can be formed whether it has the prospects of success to merit carrying it forward.

The question is whether the lawyers should accept these costs as a commercial risk they should bear in arriving at a decision whether to make a beneficial conditional fee agreement.We are an open government, committed to openness...

I am willing to consider any arguments made to me, but I will always test them against the principle that legal aid exists only to remedy an imbalance between the poor and those who are better-off, not to put the poor in a privileged position.Three key changes are at the heart of my vision for the future of legal aid: altering the basis of payment to contracts at agreed, fixed, prices; tightening the merits test; and the widest possible extension of conditional fee arrangements, and reliance on them in preference to legal aid from the taxpayer.-- WOOLF PROPOSALSThis government embraces Lord Woolf's vision of a more efficient civil justice system: a modern civil justice system designed for the 21st century, in which people who are legally aided, and those who are not, have equal access to simpler, faster procedures for securing their rights.I....

propose that the small claims limit should be raised to £5,000 as part of an overall package of reform.We will adopt Lord Woolf's proposals for more 'hands on' management of cases by judges, transferring power from lawyers to judges, and giving the courts greater control over the progress, cost and length of those cases as they move to trial.

I intend to oversee the cre ation of two new routes through civil justice to replace the complexities of the present: a 'fast-track'; and a 'multi-track', designed to deal appropriately and proportionately with civil cases which are not suitable for the small claims court.Cases allocated to the 'fast-track' will be subject to a fixed timetable, requiring the case usually to be heard within 30 weeks of allocation.I have considered the views of those who have advocated that all personal injury claims should be in the 'multi-track' and excluded from the 'fast-track'.

I do not believe so extreme a case to be made out.-- WOOLF IMPLEMENTATIONThe government intends to have these two tracks up and running in April 1999.

This is six months later than the last government's plans.

My view is that even more litigants should be able to benefit from the speed of the 'fast-track'.

I therefore intend to initiate consultation on whether the 'fast-track' limit should be set at £15,000.The introduction of the fast-track, in April 1999, should be accompanied by an associated fixed costs regime.

Much work, however, remains to be done on the detail of how the regime would operate in practice.In response to concerns raised in Parliament, I propose to extend [court fee] exemptions to those in receipt of income-related job seeker's allowance, or family credit, or disability working allowance.

I intend that this change should come into effect at the end of next month.-- COURT FEESThe civil fee structure is irrational and hopelessly out of date.

It needs to be reformed.

I will be issuing a consultation paper next month inviting discussion on the principles which should underlie a new fee structure.-- COMMUNITY LEGAL SERVICEI have my sights set on another, longer-term, goal -- a community legal service...

There are many existing information and advice sources: the CABs, the Law Centres, the advice centres, and mediation bodies.

We intend to co-ordinate these services under a coherent scheme which will provide a service to the whole public which is both easy to access and to understand.The package I envisage will bring great benefit to you; extending conditional fees into so many new areas means more business; the public will believe that the risks and the benefits for lawyers in these new arrangements will motivate lawyers to do their very best for their clients.

More rapid procedures in the civil courts will enable you to deal with more cases, more quickly -- upping your overall caseload -- as more people, especially from middle income Britain, gain access to justice though the new terms.

I doubt if anyone in this hall would seriously argue that the legal profession in recent years has done anything other than fall lower and lower in public estimation.

I want to reverse that.