Speculation mounted over the future of legal aid this week amid reports that the Ministry of Justice plans to slash the £2.1bn legal aid budget by half a billion pounds.

Justice secretary Ken Clarke (pictured) submitted proposals to the Treasury last week, outlining how the department will reduce its overall budget by 25-40%.

The MoJ said that the reported figure of £500m for legal aid cuts was ‘purely speculative’. However, informed sources told the Gazette that savings of that magnitude have been on the cards for more than six months, and the present government is ‘merely carrying on from where the Labour government left off’.

The MoJ is expected to press ahead with the Labour government’s plan to restructure the criminal defence market, awarding larger contracts to a smaller number of bigger providers, to drive down costs. This may involve a resurrection of the concept of competitive tendering. Labour had originally sought to reduce the number of criminal defence firms by 75%, though it is not known whether the coalition government will seek to shrink the market to this extent.

Lawyers had feared that face-to-face advice at the police station would be removed from the scope of legal aid altogether by the new government, but it appears that there will be a drop in rates instead. One source said removing police station advice from legal aid would be too difficult politically and would ‘not be popular with the judges’.

It is anticipated that solicitors will receive the same fee for attending in person as for advising over the telephone, putting the onus on them whether to attend.

Other savings in the criminal budget are expected to come from cutting lawyers’ fees in the most serious and expensive criminal cases.

Sources have indicated that the civil budget will bear a greater proportion of the cuts than many expected, given the keenness of the previous legal aid minister, Lord Bach, to ringfence it.

It is thought likely that limiting the availability of legal aid for immigration appeals and judicial reviews in human rights cases are among Clarke’s proposals.

‘These are areas of the civil budget where the government feels lawyers have taken advantage of the system,’ one senior source told the Gazette, adding that they are ‘luxuries we cannot afford’.

In family law, legal aid is expected to be removed for ancillary relief. Other proposals are thought to include increasing the sentencing power of magistrates’ courts from six to 12 months to reduce the number of Crown court cases; looking at alternative funding streams for legal aid; and requiring people to take out insurance to fund possible legal actions.

The government’s new public expenditure committee will now consider the plans before publishing its spending review in October. The MoJ said it could not comment on the content of its proposals until the settlement was final.