Once upon a time, there was the Legal Aid Board.

It gave out public money for the running of legal actions, although not nearly enough, criminal law specialist practitioners thought; they had not been given a pay rise since 1992.

Then the government decided that things should cha nge.

It wanted an efficient, 'value for money' criminal legal aid regime, which would provide a safeguard against lawyers 'playing the system'.

It also wanted a shiny new organisation to administer it.Last year, the Legal Aid Board became the Legal Services Commission (LSC), and it set about implementing a system of criminal contracting.

The aim was to have it all in place by2 April of this year, and it stuck to the timetable -- just about.But almost four months on, criminal law firms are saying that the fairytale has turned into a nightmare, with them billing just 55% of what they were bringing in last year (see [2001] Gazette, 19 July, 3).The contracting system means that firms are paid set rates for work done, based on the average amounts they billed between November 1999 and November 2000.

Targets for the amount of work are set in each contract, with the aim of bringing firms up to the same level of income they earned under the old system.

Firms receive 12 structured payments over 12 months, and any shortfall is dealt with through a reconciliation process at the end of the year.'Across the board, people are not making those targets [set in the contracts],' says Andrew Bishop, of Brighton-based Bishop & Light.

'When you look at the evidence, there is no doubt that contracting has had an adverse effect on firms' fee income.

Criminal firms are already existing on the margins of profitability; if they are subjected to any more cuts, they will start going under.'For criminal practitioners, feeling like the poor relation is nothing new, which is why they were suspicious about contracting from the beginning.'It has all gone wrong, but this is not a surprise to us,' says Franklin Sinclair, chairman of the Criminal Law Solicitors Association (CLSA) and partner in Manchester-based Tuckers.

'We knew it would mean a pay decrease and not a pay rise, and that we would lose 10% or more.

We have been proved right.

My firm is at 62% of what we should be billing, even though we have done more work than we did last year.

It definitely isn't working for us.'The Law Society also had its qualms.

Criminal contracting means that firms' billing all comes under the umbrella of the same agreement, as opposed to the five former payment structures which governed funding: advice and assistance, police station advice, court duty solicitor work, assistance by way of representation, and magistrates' court representation.The Society did not like the government's suggestion that solicitors could not be trusted, and that they were 'double claiming' under the schemes that were previously in place.But what everyone was more concerned about was rates of pay.

The problem was that no one would tell firms how much they would be paid, and the draft contract itself omitted this detail.The issue came to a head in the spring.

Practitioners in Brighton boycotted a meeting with the LSC, and firms went on strike.

A national day of action was called and Michael Napier, the then Society President, urged firms not to sign the contracts.It was resolved at the last minute.

'There was a big meeting in Birmingham on 1 March,' explains Mr Bishop.

'More than 1,000 criminal lawyers gathered with the threat of not signing the contracts.

This led to intense negotiations with the LSC and the Society, which recommended in the end that we signed, and most of us did.'The LSC had to back down.

'One issue was the structure of police station rates, so firms were given the choice of sticking with the existing structure or choosing the new one,' explains Richard Miller, director of the Legal Aid Practitioners Group.'There was also an agreement that there would be a nine-month period where terms would be continually negotiated, and a criminal contracts' monitoring group would be set up to look at any changes to procedures or policies.' The LSC hoped that it was an end to what its chief executive, Steve Orchard, has admitted was a 'turbulent' time.

This has not been the case.Malcolm Fowler, chairman of the Law Society's criminal law committee, says this is because the government 'dispensed with a period of reflection' and failed to put its money where its mouth was.

'[The new regime] requires us to speed up our disposal of cases more and more, and at the same time drive up and sustain quality,' he says.'There is a shortfall between one proposition and the other.

Wherever you look with criminal defence systems, the question is not about having a model for delivering access to justice; the challenge is delivering adequate funding.

Quality carries a price tag,' adds Mr Fowler.The mad rush has backfired, Mr Miller maintains, and not just in terms of payment.

'It was the best package we could get, but it was by no means ideal, and it has gone badly.

There is a lot of confusion over forms, and the software systems have not been developed in time.

The payment structure was set up in March and was expected to operate in April, which means there are numerous areas in the system which make it far from clear how firms should be paid for work done.'Moreover, firms do not know where they stand because the Criminal Defence Service -- which was set up to deal with contracting on a daily basis -- is giving out inconsistent advice.'The CDS just doesn't seem to know the answers,' says Mr Bishop.

'You can accept that a new system will have teething troubles and that certain anomalies arise, but the worrying thing is that you get different answers from different CDS staff.'Firms' income is also being chipped away elsewhere, they complain.

The CLSA is up in arms this month about, as an official statement reads, 'the unfair nature of the mileage charge allowed to solicitors which, at 36p per mile, puts us behind the CPS [Crown Prosecution Service] and every other service and well below the rate of 45p accepted by the Inland Revenue'.Mr Bishop describes the mileage charges as 'just one indication of how the LSC treats us with contempt', and a reason why firms are at the end of their tether and are losing patience.'What is annoying us is that the LSC was anticipating spending the total monthly payments, but they are not spending all of it,' he says.

'This will mean a windfall for them while firms go to the wall.

The LSC needs to increase the rates or pay standard fees, and the savings made so far should be ploughed back into the criminal firms that so badly need the money.'Mr Sinclair is not optimistic.

'The LSC agreed that if they got it wrong and people weren't making as much money, they would increase the rates,' he says.

'Now they will try and get out of that.

When they do, in one or two months' time, this will become a political hot potato.'Mr Miller says the situation can be resolved and is looking to the reconciliation of bills with payments made for the first sign of how the LSC will deal with the situation.

'It depends on the LSC now; we are hoping that it will respond flexibly and sympathetically.

If it doesn't, it will put firms out of business.'However, the LSC says it has been kind to the firms.

'Given the value of claims actually submitted by many firms, we have been entitled to drop monthly payments in accordance with these rules, but we have not done so,' a spokesman says.'Instead we have been telephoning firms to discuss the position with them.

This has been done precisely because we recognise the need to work with firms as they implement the new arrangements.'This week the LSC is expected to start ringing around again, to discuss 'individual positions' and amend monthly payments 'where appropriate'.With Mr Orchard admitting that 'change is never easy', criminal practitioners will be looking for developments that will turn what many practitioners perceive to be a contracting nightmare into a workable and profitable practice area.