The Public Accounts Committee has today lambasted the Legal Services Commission for its handling of legal aid funds.

Committee chairman Edward Leigh MP said financial controls at the LSC were ‘lax’, noting that ‘it does not know enough about the costs and profitability of firms to know if it has set its fees at an appropriate level’.

He added: ‘The commission’s plans, recently abandoned, to introduce price competition in the legal services market were hamstrung by its lack of knowledge of that market.

‘It must now gather much better information on the costs and profits of firms providing legal aid.

‘Without this basic information, the commission will not be able to set prices which are good value for money for the taxpayer and, at the same time, make legal services work attractive enough to firms.’

He continued: ‘The commission’s lack of grip of the basics and lack of a clear strategic direction were compounded by a muddled relationship with its sponsoring department, the Ministry of Justice.

‘Both commission and department must now adopt a more coherent approach to introducing reforms to the legal services market.’

The committee published a report on the procurement and administration of legal aid today after taking evidence from witnesses from the MoJ and LSC.

The MoJ and LSC were questioned by the committee on the findings of two previous reports by the comptroller and auditor general: his report on the qualification of the LSC’s accounts for 2008–09 and his value-for-money evaluation of the procurement of criminal legal aid.

An LSC spokesman said it would ‘consider the report carefully’ and a formal response would be issued in due course.