The Legal Services Commission has dealt a further blow to legal aid firms by reducing the financial help it gives to firms while they wait for their bills to be paid by the commission.

The LSC said it has had to reduce the amount of standard monthly payments (SMPs) that it will provide to firms.

In February 2009, the LSC introduced a temporary concession to protect the size of the SMPs to solicitors when the amount of money owed to them by the LSC reached 5% of the actual work billed.

But from September 2010, the LSC will only step in when underpayments reach 10% of the actual work billed.

A protocol was drawn up in 2008 between the LSC, ­Ministry of Justice and Law Society to govern how SMPs were determined.

An LSC spokesman said the temporary concession, introduced last year, meant the LSC has been stepping in more quickly than originally agreed with the Law Society to reconcile any underpayments.

‘It was made clear when it was introduced that this was a discretionary move, which would be subject to review,’ he said. ‘We have now reviewed our position and decided that we cannot afford to continue this concession.

‘There are now very tight constraints on our budget and this temporary concession has been affecting our ability to fund legal aid work in other areas.’

Head of legal aid policy at the Law Society, Richard Miller, said he was disappointed by the decision and had warned the LSC of the potential damage to firms’ cashflow.