Legal aid has ‘failed the very people it was set up to protect’ the minister in charge, told a debate hosted by the Law Society this week to mark the 60th anniversary of the Legal Aid Act.

In the discussion, chaired by the Guardian’s Polly Toynbee, Lord Bach, legal aid minister, said there would be no rise in the £2bn a year legal aid spend for many years – whichever party was in power - but the government wanted to provide high-quality help to more people.

‘Given our limited resources, have we got the priorities right? What should we do with the money?’ he asked.

Answering his own question he said the £1.2bn spent on crime was too much, with £600m on family and £200m in social welfare law. ‘I am fast coming to the view that it is in the civil area - and social welfare in particular - that the system has failed – the very people it was set up to protect.’

He said there is a high demand for legal help and a large unmet need, in part due to widespread ignorance of the legal system and who funds it, and a reluctance to go to law.

‘A Mori poll shows that 83% of the population know at best a little about legal aid and the sort of problems it can help resolve,’ he said, and hoped the Public Legal Education project would improve that.

Steve Hynes, director of the Legal Action Group, said legal aid should be a service for ordinary people, not just the poorest: ‘There should be a degree of universal access.’

The internet, which has given people the ability to access knowledge themselves, made the possibility of a universal service backed up by legal aid possible. ‘It just needs a bit of imagination,’ he said.

Looking to the future, Hynes said there are questions about the expectations of the criminal bar – it should not expect pay rates at the same level as the commercial bar, but look more towards the pay of consultant surgeons.

Hynes said social welfare law had always been the poor relation of the civil legal aid system, due to the cost drivers in the system. ‘The real problem is that no one has even done zero-based budgeting or an analysis of the need within the system.’

The system can be improved, he said, but it will be a long process, and developments such as the Public Law Outline and the Baby P case are putting cost drivers back into the system.

Hynes also spoke of his concern about the ‘dumbing-down’ of quality, with firms that were only ‘borderline competent’ being able to deliver legal aid work. ‘That is not acceptable.’

Legal aid lawyer Lucy Scott-Moncrieff said the majority of civil legal aid is spent on challenging bad decisions made by public bodies, and money could be saved by improving that initial decision-making.

She said at present there is no comeback for decision-makers whose mistakes had to be challenged with the use of public funds, and thus little incentive to improve.

Lawyers acting for individual clients against public bodies, Scott-Moncrieff said, are ideally placed to help identify where things have gone wrong and should be the government’s ‘best friends’ in helping to improve services.

‘Part of the access to justice agenda must be to get public bodies to raise their game, so that mistakes become unacceptable instead of routine.’

She suggested the National Audit Office could play a role.

Improving the availability of advice through existing services such as the Citizens Advice Bureau, would also help to achieve this, she said.

‘Legal aid should become a second tier service, with specialist lawyers taking cases that the first-tier advice service has not been able to help.’

Scott-Moncrieff said the government’s initiative to use empty high street premises for community projects presents lawyers with an opportunity to start improving advice provision right away. This she said would also provide an opportunity for redundant lawyers and LPC graduates whose training contracts have been deferred.

The final speaker was Peter Grindley, an economic consultant and principal with LECG in London, who has been working with the Law Society for the last three years looking at the legal aid system.

He said many of the concerns raised at the time of Lord Carter’s review, about the reforms’ effect on sustainability, quality and access, had still to be addressed fully.

He questioned the drive to get firms to pursue greater economic efficiency when it was apparent that there is limited scope for savings, given the fee rates.

The reforms, he said, have come a long way, but the main change – best value tendering– is still to come. He predicted that tendering will trigger significant restructuring within the legal profession and lead to a more standardised provision of advice.

Grindley was concerned that the current policies did not adequately address the questions of the scope, quality or funding of legal aid into the future.

The discussion was then opened up for comments from the floor. Sundeep Bhatia, chairman of the Society of Asian Lawyers, questioned: ‘Why does the government seem hell-bent on destroying diversity in the legal profession? The cuts are aimed at driving smaller firms out of business and will have a disproportionate effect on black and minority ethnic (BME) lawyers and firms and their clients and lead to fewer BME lawyers from which the judiciary can be drawn. It is important for clients to see lawyers and judges who reflect their community.’

Malcolm Fowler, Law Society Council member for Birmingham and district, said: ‘There is a lot of talk about economies of scale through volume of cases, but what cases?’ He said he spent most of his time dealing with bureaucracy and was doing fewer cases in a week than he used to deal with in two days.

Henry Bellingham MP, shadow legal aid minister, suggested splitting the criminal and civil legal aid budgets, and ring-fencing legal aid in terrorism cases. Other members of the audience included Dominic Grieve MP, the shadow justice secretary, Carolyn Regan, chief executive of the Legal Services Commission and Roger Smith, director of Justice.