A law firm has dropped legal action against the government over legal aid fees for welfare benefits work following a decision by the lord chancellor to improve the payment regime, the Gazette can reveal.

London based Osbornes Law issued a claim for judicial review late last year over the government’s decision to maintain a fixed fee of £208 with no escape fee under the 2024 Standard Civil Contract.

An escape fee allows providers to claim total costs at hourly rates when the costs of the claim exceed three times the fixed fee.

The 2013 legal aid cuts narrowed the scope of public funding for welfare benefits to appeals in the Upper Tribunal, Court of Appeal and Supreme Court. Osbornes Law argued that the availability of an escape fee has been gradually removed and legal help work has become financially unviable.

However, Osbornes Law has now withdrawn its legal action after being told the lord chancellor will introduce an escape fee mechanism for welfare benefits legal help. The High Court approved a consent order last week. 

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The legal challenge was led by Osbornes Law partner William Ford, assisted by Emma Vincent-Miller.

Ford said: ‘I am very pleased that the lord chancellor has taken the step to settle this case and reinstate an escape fee mechanism for welfare benefits cases. Without this Osbornes would have to have given serious consideration to terminating our welfare benefits contract due to significant concerns regarding the financial viability of undertaking this work where we would only be paid a fixed fee of £208.’

A Ministry of Justice spokesperson said: ‘We are committed to working with the legal profession to ensure the legal aid sector is on a sustainable footing both now and in the future, which is why we are introducing an escape fee for welfare benefits cases. This change underscores our dedication to supporting the legal aid sector and maintaining access to justice for those in need.’

The lord chancellor is consulting on higher fees for housing and immigration work. A decision on nine other contracted categories of law, including welfare benefits, will be made following the government's spending review.

Ford wants legal aid restored for early advice and representation before the first-tier tribunal.