The Legal Services Commission warned ministers before publication of the legal aid reform bill that proposed fee cuts could result in ‘market failure’.
In a letter sent to the lord chancellor in February, LSC chair Sir Bill Callaghan (pictured) advised the government that the ‘scale and scope’ of the proposals on civil fee cuts, the expansion of telephone services and the proposals for price competition risked ‘adverse impacts on clients, access and wider stakeholder confidence’.
He advised the government that ‘realism about the pace’ at which the LSC and the sector can implement and absorb change would mitigate the risks.
‘Our experience in recent years has shown that working to unrealistic timescales has increased risks and resulted in poorer outcomes, as well as putting those most closely involved under considerable pressure,’ he said.
Callaghan said the LSC recognised the need to secure savings, but warned that ‘rushed implementation’ could result in changes having to be halted, for example following a successful judicial review.
The LSC was obliged to scrap its new family contracts following the Law Society’s successful judicial review of the tender process last year.
Callaghan said the LSC supported the government’s proposals to expand the telephone advice service, encourage family mediation and remove private family law from scope.
It also agreed with the introduction of price-based competition for criminal work, but said the timetable appeared ‘very ambitious’ and may ‘increase the resistance that will be mounted’ against it.
Callaghan also warned of the impact that the proposed fee cuts could have on provider sustainability.
He said: ‘Evidence on provider viability is limited; nevertheless we have concerns that fee cuts may result in market failure and premature exits from the market where, for example, a firm or not-for-profit organisation becomes insolvent.’
In what appeared to be a reference to the collapse of the Refugee and Migrant Justice group last year, Callaghan added that where insolvencies had occurred in ‘isolated cases’, the LSC had managed to redistribute work and minimise the impact on clients.
But, in a warning that would appear relevant to the collapse of the Immigration Advisory Service, he added: ‘There are potential risks around our ability to ramp up that activity sufficiently to cope successfully in the event of a significant market failure or sequence of insolvencies, without impacting on clients’ interests.’
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