Key political, legislative and structural changes

3.21     Although the international dimension is important, it is equally essential to ensure that the system is capable of delivering what is required by the domestic legal system in increasingly challenging and complex circumstances. Many areas of domestic political decision-making will have the potential to shape the future direction of the legal services market, not least decisions about general monetary and fiscal policy. However, the focus in this section is on more immediate legal services policy and developments.

Devolution issues

3.22     Wales has distinct economic and social attributes relevant both to legal services and to LSET.[1] In legal services provision, with lower overheads, Wales may be a target for law firm outsourcing and ABS provision. The infrastructure of local and Welsh Government suggests that there is a comparatively high proportion of lawyers employed in the government sector (Law Society, 2010). Welsh language standards for organisations – including providers of legal services – are planned to become effective before the end of 2014.

3.23     Twenty areas of legislative competence, largely in health, education[2] and social care, are devolved to the Welsh Government under the Government of Wales Act 2006. During the LETR research phase, the Welsh Government consulted on a separate legal jurisdiction.[3] The consultation paper specifically sought views on the changes which might be necessary or desirable in relation to the regulation and education, training and qualification of the legal professions in Wales in the event either that a separate jurisdiction was, or was not, instituted (Welsh Government, 2012a). Responses to that consultation raise questions about the cost and resources required for separate training and regulation; distinct questions of Welsh culture, language and identity and, from practitioners in particular, a desire for individuals to be authorised to practise in both countries (Welsh Government, 2012b).

3.24     Although a separate jurisdiction is not yet planned, in a submission to the Silk Commission investigating constitutional and financial arrangements in Wales, the Welsh Government recently indicated its intentions as follows:

While it would not be appropriate to establish a separate legal jurisdiction for Wales now, such a development is very likely in the longer term[4] and action can be taken which would help to ensure a smoother transition to such a jurisdiction in due course. These include achieving a more clearly Welsh identity in the higher courts of England and Wales; new Welsh offices for the Court of Appeal and the High Court; and acceptance of the principle that the legal business of people in Wales should be administered and dealt with in Wales wherever possible.

Welsh Government (2013:2)

3.25     Question 25 of the LETR online survey invited participants to respond to the question ‘Should the education and training of legal professionals in Wales differ from the education and training of legal professionals in England?’ Cross-tabulation permitted evaluation both of responses from those located in England and located in Wales and by national identity (wherever located).

 

Table 3.2: Should the education of legal professionals in Wales differ from the education and training of legal professionals in England?

Unweighted data.

 

Residence and National Identity	No, never	No, not now, but perhaps in the future	Yes, small differences	Yes, large differences	Yes, there should be completely separate systems
Resident in Wales, identifies as Welsh	40.7%	29.6%	18.5%	3.7%	7.4%
Resident in Wales, does not identify as Welsh	60.0%	20.0%	20.0%	.0%	.0%
Not resident in Wales, identifies as Welsh	57.1%	28.6%	14.3%	.0%	.0%
Not resident in Wales, does not identify as Welsh	58.6%	27.9%	12.7%	.4%	.4%
All respondents	58.2%	27.8%	13.0%	.4%	.5%

 

3.26     Several participants in focus groups[5] endorsed the idea that any wholesale change (to the extent of, for example, separate degrees or separate training regimes) was premature. Concern was expressed about overloading the curriculum. Some respondents, however, indicated that undergraduates, and not just those in Wales, should at least be aware of the developing differences: the JASB statement refers explicitly to the law of ‘England and Wales’.

Changes to legal services funding

3.27     Changes to legal aid and civil litigation funding are key structural changes to the legal services market and the legal system. In terms of LSET these are important because financial and other pressures on providers within the civil and criminal justice systems could, as well as impacting on access to justice:[6]

• Impact on training opportunities and diversity, including creating a risk of training/advice deserts;
• potentially drive providers towards particular forms of business structure/process innovation (with implications for workforce demand, needs for different skills set and competencies); and
• create new risks for regulation, particularly as regards the current and future competence of the workforce.

Legal Aid reforms

3.28     The reform of legal aid under the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO) and associated reforms presents a major challenge to a number of ‘High Street’ law firms, chambers and not for profit legal service providers, by further cutting payment rates for civil and criminal legal aid, and removing large elements of social welfare and family law from the scope of funded activity. Multiple reforms to the system have already led to a growing specialisation and concentration of legal aid in fewer and generally larger providers (see Moorhead, 2004). While overall spending between 2008/09 and 2010/11 remained more or less constant at 6-8% of total industry turnover, changes to remuneration saw funding being redistributed across suppliers in a way that affected around a quarter of all solicitors’ firms and self-employed barristers (LSB, 2012:21).

3.29     Evidence of concentration is apparent from the Time of Change study (Pleasance et al, 2012). Nearly a third of those firms sampled undertook legally aided work in 2010-11. For a significant proportion of these firms, legally aided work was core to the business: over half reported that 50% or more of their clients were publicly-funded, and over a quarter of them were entirely, or almost entirely dependent on legal aid. Within this latter set of firms entirely dependent on legal aid, 70% of firms were criminal legal aid specialists, and another 20% worked in family law (Pleasance et al, 2012:17). With these levels of concentration there are concerns that further cutbacks are likely to have dramatic consequences for local access, with the risk of increasing ‘advice deserts’ as more organisations withdraw, or are forced out of business. Pleasance et al (2012:44) reported that nearly a third of legal aid firms were considering leaving one or more areas of publicly-funded work. The research also indicated that new firms set up in the three years preceding the study were significantly less likely than established firms to be undertaking legal aided work.[7]

3.30     The impact on particular areas of work is likely to be profound. The number of regulated immigration advisers has fallen in general, and specialist advice on the complex matter of asylum appears particularly vulnerable (Trude and Gibbs, 2010; Asylum Aid, 2011). Welfare benefits advice is also seen as highly vulnerable. In more ‘mainstream’ areas like family law, the courts are already reporting a substantial increase in self-represented litigants (Civil Justice Council, 2011), and the recent removal of the right to legal aid in many family proceedings will compound such increase yet further, but the largest impact on practitioners across the sector is likely to be on criminal practice. Even before the latest round of reforms, over half the criminal legal aid firms surveyed for the National Audit Office in 2009 doubted that they would still be undertaking legally aided work five years hence (GfK NOP, 2009).[8] The Time for Change report simply describes criminal practice as ‘in decline’ (Pleasance et al, 2012:54) with falling volumes of work and revenues. The 2011 survey of the Bar (Pike and Robinson, 2012)[9] offers a similar snapshot of the state and morale of the criminal Bar, which relies heavily on public funding. A third of barristers in independent practice have criminal law as their main practice area. Sixty per cent of those have seen their work decline over the last year, and 50% had also seen a decline in fee income. When asked, some 40% of criminal law practitioners stated they would not choose the Bar if they could start their careers again.

3.31     The high cost of legal training and the relatively low return on publicly funded work were seen by respondents as creating real risks to the quality of legal aid services and the diversity and representative nature of the professions in this field:

At the publicly funded bar the government prizes ability far lower than it prizes affordability. For this reason the general level of candidates’ competence and potential is reducing every year and the ability of those from a lower socio-economic background to even study for the bar is being damaged; the low remuneration at the criminal bar combine with the massive training costs to make the career increasingly unviable for all but the wealthiest.

Barrister (online survey)

…there’s certainly going to be fewer trainees in the legal aid subjects … they will use paralegals where they can which means that in ten, twenty years time the qualified solicitors are not going to be there to do that sort of work.

Solicitor

3.32     The risk that the changes will negatively impact upon the diversity of the professions is highlighted by research which shows high concentrations of women and BME lawyers in publicly-funded work (Pike and Robinson, 2012). BSB data indicate that there are very different demographic profiles for self-employed barristers across different categories of work, with BME and female barristers working in areas associated with public funding. Twice as many women work in family as in any other practice. BME barristers are most likely to work in civil law (14%) and family (10%). Publicly funded work dominates crime (87%) and family (58%). LSB analysis of SRA data suggests that a greater proportion of BME firms undertake work in immigration, crime, and family compared to non-BME firms. Furthermore, 23% of all BME firms derive more than 50% of their income from public funding compared to just 7% of non-BME firms (LSB, 2012:35).

3.33     The changes could also have a significant impact on the viability of specialist service providers, such as regulated immigration advisers and legal aid costs lawyers:

The cuts in legal aid will impact particularly in relation to family law costs. I would guess that is the bread and butter – but potentially a hundred [costs lawyers] will be in serious difficulty as a result, it may be that they still get work but of less income. They may decide there’s no longer any benefit of being a costs lawyer …

Costs lawyer

3.34     Whilst a degree of self-interest doubtless informs responses on this topic, it is also clear that the survey and interviews elicited genuine concerns about the social consequences of these cumulative changes:

We’ve met with local MPs and Lords to voice our opposition to [the reforms to public funding] not least because they don’t make any financial sense from the Government’s point of view and would only end up damaging the entire judicial system in the country, in our opinion, because there won’t be enough resources to deal with all these litigants in person. So it won’t just be the poor in society who’ll be disadvantaged but also businesses and others who are trying to gain access to the courts. Their cases will take longer to go through and so forth and we’ve already seen local firms close down and that will only continue … I think our greatest concern perhaps is that the public again are being let down and they will not have the access to the legal advice that they need. The local Citizens Advice Bureaux are under a tremendous pressure as well and they are nationally now voicing their concerns that they aren’t going to be able to cope.

Solicitor

Which means that people that require the best representation … are not necessarily going to get it because many chambers are saying well let’s look at disciplinary work, let’s look at branching into other areas of work. I think that is a threat to the Bar in the sense that the Bar should be seen as providing the best representation for the most vulnerable members of society. It should be able to say to the public: that’s what we are here for. And unfortunately there are only certain sets with a particular ideological view that are actually willing to say we’ll take the hit and just do publicly funded work.

Barrister

3.35     As these quotations highlight, the reforms have implications for access to justice, consumer choice and the quality of the legal system in England and Wales, all matters of concern to the approved regulators and likely to have consequences for LSET in the future.

Civil litigation cost reforms

3.36     Changes to the civil justice costs system following Lord Justice Jackson’s review (Jackson, 2009) and related reforms may similarly reduce the value and the volume of non-commercial civil litigation. There are four key developments that could have significant consequences on civil justice; although the precise effects remain uncertain while the detail of the reforms are being finalised.

3.37     First, the profitability of conditional fee agreements (CFAs) has been restricted by preventing claimant solicitors from recovering their success fees from unsuccessful defendants and capping the amount of recoverable success fees from clients. Insurance premiums are also no longer recoverable. This will probably have the effect of making more high risk or marginal cases less attractive to lawyers, while the changes to the recoverability rules may make lower value cases less attractive to clients.

3.38     Secondly, the Jackson proposals on third party funding could provide a growing source of funding for certain types of civil proceedings. Traditionally, third-party funding has tended to focus on cases that offer a one-off strong return on investment, ie, high value commercial claims with good chances of success. The third party funding market is still relatively new, and not without risks. Concerns exist over whether the current proposals sufficiently regulate the role of intermediaries, and control what is, from the funder perspective, essentially an investment activity (see, eg, Harris, 2012).The impact of third party funding will depend on the market creating funding models that may make a wider range of cases attractive to funders. There are some indicators that such approaches are already being considered, eg, models spreading risk by enabling investment in a portfolio of cases; there is also interest in the potential for third party funding to play a role in complex group litigation.

3.39     Thirdly, the introduction of Ontario-style damages-based agreements (DBAs – contingency fee arrangements with percentage fees based on damages) may increase the attractiveness of cases with relatively low cost to value (damages) ratios. DBAs could also provide law firms with a vehicle to compete directly with third party litigation funders. DBAs were only introduced in April 2013, and consequently their precise implications are yet to be realised.

3.40     Lastly, the introduction of lower fixed payments for personal injury cases through the road traffic accident portal is also likely to have an adverse impact on the viability of this area of personal injury work.

3.41     Combined with the growing use of ‘claimant capture’ technologies by insurance companies, which encourage potential claimants to settle directly with insurers, these various changes threaten to transform personal injury work, which has, until recently, been a growth area for law firms. Indications that a growing number of firms operating in the high volume end of the market may collapse highlight the vulnerability of many legal businesses to external forces, with significant implications for the workforce involved.

 

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