Legal Aid Reform in Uk by mtr17658

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									 Title:
                                                                         Impact Assessment (IA)
 Legal Aid Reform: Financial Eligibility
                                                                         IA No: MoJ 27
 Lead department or agency:
                                                                         Date: 15 November 2010
 Ministry of Justice
 Other departments or agencies:                                          Stage: Consultation
                                                                         Source of intervention: Domestic
                                                                         Type of measure: Primary legislation
                                                                         Contact for enquiries:
                                                                         legalaidreformmoj@justice.gsi.gov.uk


Summary: Intervention and Options
 What is the problem under consideration? Why is government intervention necessary?
 Although the principal driver for reform is financial, there are also compelling reasons for reforming legal aid.
 Since its inception the scheme has expanded beyond its original intentions. It now costs over £2bn a year,
 and, while comparisons are not straightforward, we believe is generous compared with similar schemes in
 other countries.
 The Government is responsible for the terms and conditions of access to legal services funded by the legal
 aid budget, hence government intervention is necessary in order to make any changes.
 What are the policy objectives and the intended effects?
 The main policy objectives and intended effects are to reduce expenditure on legal aid and in so doing to
 ensure that clients who can afford to pay for, or contribute to, their legal aid do so.




 What policy options have been considered? Please justify preferred option (further details in Evidence Base)
 The following options have been assessed against the base case of ‘no change’ in the eligibility for legal aid:
 Option 0: Do nothing.
 Option 1: Applicants for legal aid who are in receipt of ‘passported’ benefits should be subject to the same
 capital eligibility rules as other applicants (‘passporting’ is a term used to describe the automatic eligibility for
 legal aid if a client is in receipt of particular income related state benefits, even where the client possesses a
 certain level of capital).
 Option 2: Introduce a capital contribution fee of £100 for clients with disposable capital of over £1000.
 Option 3: Abolish ‘capital disregards’ (no longer disregarding capital held by the client when applying the
 means assessment for legal aid) in cases not involving contested property, but retain a waiver scheme for
 those who cannot access their equity. In cases involving contested property, abolish capital disregards but
 retain a disregard relating to the disputed asset.
 Option 4: Increase income contributions for all legally aided clients who make contributory payments.
 The preferred choice is to adopt a combination of Options 1-4.
 When will the policy be reviewed to establish its impact and the extent to which       2016
 the policy objectives have been achieved?
 Are there arrangements in place that will allow a systematic collection of             Yes
 monitoring information for future policy review?

SELECT SIGNATORY Sign-off For consultation stage Impact Assessments:
I have read the Impact Assessment and I am satisfied that, given the available evidence, it
represents a reasonable view of the likely costs, benefits and impact of the leading options.


Signed by the responsible SELECT SIGNATORY:............................................... Date: 11 November 2010.......


                                                           1                                   URN 10/899 Ver. 1.0 04/10
Summary: Analysis and Evidence                                                                        Policy Option 1
Description:
Applicants for legal aid who are in receipt of ‘passported’ benefits should be subject to the same capital
eligibility rules as other applicants
 Price Base      PV Base      Time Period                         Net Benefit (Present Value (PV)) (£m)
 Year 08/09      Year 11/12   Years 10           Low: Optional          High: Optional            Best Estimate: N/Q

 COSTS (£m)                          Total Transition                     Average Annual                          Total Cost
                              (Constant Price)   Years      (excl. Transition) (Constant Price)                (Present Value)
 Low                               Optional                                         Optional                          Optional
 High                              Optional                                         Optional                          Optional
 Best Estimate                             0                     £6m legal aid reduction                                  N/Q
 Description and scale of key monetised costs by ‘main affected groups’
 Legal aid clients and providers: In aggregate it is estimated they would no longer receive £6m worth of
 resource transfers in the form of legal services funded by the legal aid budget. Of this around £2m would
 relate to increased contributions from clients and around £4m would relate to the reduction in legally aided
 business no longer provided.
 Legal Services Commission (LSC): May be subject to negligible increases in administration costs primarily
 related to IT systems and training.
 Other key non-monetised costs by ‘main affected groups’
 Client related: In some cases the economic efficiency of dispute resolution may fall depending upon clients’
 behavioural responses to no longer receiving legal aid. Wider social and economic costs may arise if
 disputes are resolved significantly less fairly for those no longer receiving legal aid.
 LSC: There is likely to be a significant ongoing administration cost from the increased volume of capital
 tests.
 BENEFITS (£m)                       Total Transition                     Average Annual                        Total Benefit
                              (Constant Price)   Years      (excl. Transition) (Constant Price)                (Present Value)
 Low                               Optional                                         Optional                          Optional
 High                              Optional                                         Optional                          Optional
 Best Estimate                             0                     £6m legal aid reduction                                  N/Q
 Description and scale of key monetised benefits by ‘main affected groups’
 Legal aid fund: In aggregate it is estimated this would save £6m, taking the form of reduced resource
 transfers.
 Other key non-monetised benefits by ‘main affected groups’
 Wider economic benefits: The reforms would contribute to reducing the Government’s fiscal deficit.
 Client related: In some cases the economic efficiency of dispute resolution may rise depending upon clients’
 behavioural responses to no longer receiving legal aid. The reduction in subsidisation associated with less
 legal aid spending might be associated with other economic efficiency gains.
 LSC: Might save costs from a reduced volume of cases which receive legal aid.

 Key assumptions/sensitivities/risks                                                              Discount rate (%)      N/A
 Risk that administration costs to the LSC might be greater.
 Uncertainty regarding the number of people affected and the capital available to those who might seek legal
 aid.
 Uncertainty regarding how clients might respond to a reduction in legal aid.
 Uncertainty regarding how legal services providers might adjust to changing demand, including the not for
 profit sector.


 Impact on admin burden (AB) (£m):                                  Impact on policy cost savings (£m):           In scope
 New AB: N/Q           AB savings: N/Q           Net: N/Q           Policy cost savings: N/Q                      No


                                                             2
Summary: Analysis and Evidence                                                                        Policy Option 2
Description:
Introduce a capital contribution fee of £100 for clients with disposable capital of over £1000
 Price Base      PV Base      Time Period                         Net Benefit (Present Value (PV)) (£m)
 Year 08/09      Year 11/12   Years 10
                                                 Low: Optional          High: Optional            Best Estimate: N/Q

 COSTS (£m)                          Total Transition                     Average Annual                         Total Cost
                              (Constant Price)   Years      (excl. Transition) (Constant Price)               (Present Value)
 Low                               Optional                      £1m legal aid reduction                          Optional
 High                              Optional                      £3m legal aid reduction                          Optional
 Best Estimate                             0                     £2m legal aid reduction                                N/Q
 Description and scale of key monetised costs by ‘main affected groups’
 Legal aid clients and providers: In aggregate it is estimated they would no longer receive between £1m and
 £3m worth of resource transfers in the form of legal services funded by the legal aid budget. Of this it is
 estimated £1m would relate to increased contributions from clients and up to £2m would relate to the
 reduction in legally aided business no longer provided.
 LSC: Subject to negligible increased one-off implementation costs primarily related to IT changes and
 training.

 Other key non-monetised costs by ‘main affected groups’
 Client related: In some cases the economic efficiency of dispute resolution may fall depending upon clients’
 behavioural responses to no longer receiving legal aid. Wider social and economic costs may arise if
 disputes are resolved significantly less fairly for those no longer receiving legal aid.
 LSC: There might be ongoing administration costs from collecting the fee.



 BENEFITS (£m)                       Total Transition                     Average Annual                       Total Benefit
                              (Constant Price)   Years      (excl. Transition) (Constant Price)               (Present Value)
 Low                               Optional                      £1m legal aid reduction                          Optional
 High                              Optional                      £3m legal aid reduction                          Optional
 Best Estimate                             0                     £2m legal aid reduction                                N/Q
 Key monetised benefits by ‘main affected groups’
 Legal aid fund: In aggregate it is estimated a saving of between £1m to £3m, taking the form of reduced
 resource transfers.


 Other key non-monetised benefits by ‘main affected groups’
 Wider economic benefits: The reforms would contribute to reducing the Government’s fiscal deficit.
 Client related: In some cases the economic efficiency of dispute resolution may rise depending upon clients’
 behavioural responses to no longer receiving legal aid. The reduction in subsidisation associated with less
 legal aid spending might be associated with other economic efficiency gains.
 LSC: Might save costs from a reduced volume of cases which receive legal aid.

 Key assumptions/sensitivities/risks                                                              Discount rate (%) N/A
 Uncertainty regarding percentage of people choosing not to pay the £100 contribution and not accepting
 legal aid, 5% assumed for illustrative purposes.
 Uncertainty regarding how clients might respond to a reduction in legal aid.
 Uncertainty regarding how legal services providers might adjust to changing demand, including the not for
 profit sector.

 Impact on admin burden (AB) (£m):                                  Impact on policy cost savings (£m):          In scope
 New AB: N/Q           AB savings: N/Q           Net: N/Q           Policy cost savings: N/Q                     No


                                                             3
Summary: Analysis and Evidence                                                                        Policy Option 3
Description:
Abolition of Capital Disregards (no longer disregarding capital held by the client when applying the means
assessment for legal aid) in cases not involving contested property, but retain a waiver scheme for those who
cannot access their equity. In cases involving contested property, abolish capital disregards but retain a
disregard relating to the disputed asset.


 Price Base      PV Base      Time Period                          Net Benefit (Present Value (PV)) (£m)
 Year 08/09      Year 11/12   Years 10
                                                 Low: Optional          High: Optional            Best Estimate: N/Q

 COSTS (£m)                          Total Transition                     Average Annual                         Total Cost
                              (Constant Price)   Years      (excl. Transition) (Constant Price)               (Present Value)
 Low                               Optional                       £4m legal aid reduction                         Optional
 High                              Optional                      £20m legal aid reduction                         Optional
 Best Estimate                             0                     £12m legal aid reduction                               N/Q
 Description and scale of key monetised costs by ‘main affected groups’
 Legal aid clients: In aggregate it is estimated they would no longer receive £4m to £20m worth of resource
 transfers in the form of legal services funded by the legal aid budget. Of this up to £2m would relate to the
 reduction in legally aided business no longer provided and the remainder would relate to increased
 contributions from clients.
 LSC: May be subject to negligible one-off implementation costs.
 Other key non-monetised costs by ‘main affected groups’
 Client related: In some cases the economic efficiency of dispute resolution may fall depending upon clients’
 behavioural responses to no longer receiving legal aid. Wider social and economic costs may arise if
 disputes are resolved significantly less fairly for those no longer receiving legal aid.
 LSC: there might be ongoing administration costs as a result of increased waiver applications.


 BENEFITS (£m)                       Total Transition                     Average Annual                      Total Benefit
                              (Constant Price)   Years      (excl. Transition) (Constant Price)               (Present Value)

 Low                               Optional                       £4m legal aid reduction                         Optional
 High                              Optional                      £20m legal aid reduction                         Optional
 Best Estimate                          N/Q                      £12m legal aid reduction                               N/Q
 Description and scale of key monetised benefits by ‘main affected groups’
 Legal aid fund: In aggregate it is estimated a saving of between £4m-20m, taking the form of reduced
 resource transfers.
 Other key non-monetised benefits by ‘main affected groups’
 Wider economic benefits: The reforms would contribute to reducing the Government’s fiscal deficit.
 Client related: In some cases the economic efficiency of dispute resolution may rise depending upon clients’
 behavioural responses to no longer receiving legal aid. The reduction in subsidisation associated with less
 legal aid spending might be associated with other economic efficiency gains.
 LSC: Might save costs from a reduced volume of cases which receive legal aid.

 Key assumptions/sensitivities/risks                                                                                   N/A
 1% to 5% of legal aid clients are assumed to possess sufficient equity in their property to be subject to the
 scheme, but these figures are subject to uncertainty.
 10% of those affected are assumed not to apply successfully for the discretionary waiver. Of those applying
 successfully, 10% are assumed to repay legal aid at the end of their case and the statutory charge on
 property is assumed to apply to the other 90%. For the latter, legal aid is assumed on average to be repaid
 after 10 years and 21% of all legal aid is assumed not to be collected for ‘bad debt’ reasons.
 Impact on admin burden (AB) (£m):                                  Impact on policy cost savings (£m):          In scope
 New AB: N/Q           AB savings: N/Q           Net: N/Q           Policy cost savings: N/Q                     No

                                                             4
Summary: Analysis and Evidence                                                                        Policy Option 4
Description:
Increase income contributions for all legally aided contributory clients
 Price Base      PV Base      Time Period                         Net Benefit (Present Value (PV)) (£m)
 Year 08/09      Year 11/12   Years 10
                                                 Low: Optional          High: Optional            Best Estimate: N/Q

 COSTS (£m)                          Total Transition                     Average Annual                         Total Cost
                              (Constant Price)   Years      (excl. Transition) (Constant Price)               (Present Value)
 Low                               Optional                      £3m legal aid reduction                          Optional
 High                              Optional                      £8m legal aid reduction                          Optional
 Best Estimate                             0                     £5m legal aid reduction                                N/Q
 Description and scale of key monetised costs by ‘main affected groups’
 Legal aid clients: In aggregate it is estimated they would no longer receive £3m to £8m worth of resource
 transfers in the form of legal services funded by the legal aid budget. Of this it is estimated £4m would relate
 to the reduction in legally aided business no longer provided and the remainder would relate to increased
 contributions from clients.
 LSC: May be subject to negligible increased administration costs primarily due to IT changes and training.

 Other key non-monetised costs by ‘main affected groups’
 Client related: In some cases the economic efficiency of dispute resolution may fall depending upon clients’
 behavioural responses to no longer receiving legal aid. Wider social and economic costs may arise if
 disputes are resolved significantly less fairly for those no longer receiving legal aid.



 BENEFITS (£m)                       Total Transition                     Average Annual                       Total Benefit
                              (Constant Price)   Years      (excl. Transition) (Constant Price)               (Present Value)
 Low                               Optional                      £3m legal aid reduction                          Optional
 High                              Optional                      £8m legal aid reduction                          Optional
 Best Estimate                          N/Q                      £5m legal aid reduction                                N/Q
 Description and scale of key monetised benefits by ‘main affected groups’
 Legal aid fund: In aggregate it is estimated a saving of between £3m and £8m, taking the form of reduced
 resource transfers.



 Other key non-monetised benefits by ‘main affected groups’
 Wider economic benefits: The reforms would contribute to reducing the Government’s fiscal deficit.
 Client related: In some cases the economic efficiency of dispute resolution may rise depending upon clients’
 behavioural responses to no longer receiving legal aid. The reduction in subsidisation associated with less
 legal aid spending might be associated with other economic efficiency gains.
 LSC: Might save costs from a reduced volume of cases which receive legal aid.

 Key assumptions/sensitivities/risks                                                              Discount rate (%) N/A
 Uncertainty regarding the number of people affected and their income distribution




 Impact on admin burden (AB) (£m):                                  Impact on policy cost savings (£m):          In scope
 New AB: N/Q           AB savings: N/Q           Net: N/Q           Policy cost savings: N/Q                     No




                                                             5
Enforcement, Implementation and Wider Impacts
    What is the geographic coverage of the policy/option?                                                 England and Wales
    From what date will the policy be implemented?                                                        Oct-12
    Which organisation(s) will enforce the policy?                                                        MOJ / LSC
    What is the annual change in enforcement cost (£m)?                                                   N/Q
    Does enforcement comply with Hampton principles?                                                      Yes
    Does implementation go beyond minimum EU requirements?                                                No
    What is the CO 2 equivalent change in greenhouse gas emissions?                                       Traded:             Non-traded:
    (Million tonnes CO 2 equivalent)                                                                      N/Q                 N/Q
    Does the proposal have an impact on competition?                                                      Yes
    What proportion (%) of Total PV costs/benefits is directly attributable to                            Costs:                Benefits:
    primary legislation, if applicable?                                                                   N/Q                   N/Q
    Annual cost (£m) per organisation                                         Micro         < 20          Small          Medium        Large
    (excl. Transition) (Constant Price)                                       N/Q           N/Q           N/Q            N/Q           N/Q
    Are any of these organisations exempt?                                    No            No            No             No            No


Specific Impact Tests: Checklist
Set out in the table below where information on any SITs undertaken as part of the analysis of the policy
options can be found in the evidence base.
    Does your policy option/proposal have an impact on…?                                                           Impact           Page ref
                                                                                                                                    within IA
    Statutory equality duties1                                                                                    Yes                  p22
    Statutory Equality Duties Impact Test guidance

    Economic impacts
    Competition Competition Assessment Impact Test guidance                                                       Yes                  p22
    Small firms Small Firms Impact Test guidance                                                                  Yes                  p23
    Environmental impacts
    Greenhouse gas assessment Greenhouse Gas Assessment Impact Test guidance                                      No                   p23
    Wider environmental issues Wider Environmental Issues Impact Test guidance                                    No                   p23
    Social impacts
    Health and well-being Health and Well-being Impact Test guidance                                              No                   p23
    Human rights Human Rights Impact Test guidance                                                                No                   p23
    Justice system Justice Impact Test guidance                                                                   Yes                  p23
    Rural proofing Rural Proofing Impact Test guidance                                                            Yes                  p23
    Sustainable development                                                                                       No                   p23
    Sustainable Development Impact Test guidance




1
 Race, disability and gender Impact assessments are statutory requirements for relevant policies. Equality statutory requirements will be
expanded 2011, once the Equality Bill comes into force. Statutory equality duties part of the Equality Bill apply to GB only. The Toolkit provides
advice on statutory equality duties for public authorities with a remit in Northern Ireland.

                                                                         6
Evidence Base

Annual profile of monetised costs and benefits* - (£m) constant prices
Abolish ‘capital passporting’
(2008/09 Prices and Volumes)         Y0      Y1       Y2       Y3       Y4       Y5    Y6   Y7   Y8   Y9
 Transition costs
 Annual recurring cost
 Total annual costs                   0        1       4        5        5        6    6    6    6    6
 Transition benefits
 Annual recurring benefits
 Total annual benefits                0        1       4        5        5        6    6    6    6    6



Introduce a capital
contribution fee of £100
(2008/09 Prices and Volumes)         Y0      Y1       Y2       Y3       Y4       Y5    Y6   Y7   Y8   Y9
 Transition costs
 Annual recurring cost
 Total annual costs                   0        0       1        2        2        2    2    2    2    2
 Transition benefits
 Annual recurring benefits
 Total annual benefits                0        0       1        2        2        2    2    2    2    2



Abolish ‘capital disregards’
(2008/09 Prices and Volumes)         Y0      Y1       Y2       Y3       Y4       Y5    Y6   Y7   Y8   Y9
 Transition costs
 Annual recurring cost
 Total annual costs                   0        1       2        3        3        4    4    4    5    5
 Transition benefits
 Annual recurring benefits
 Total annual benefits                0        1       2        3        3        4    4    4    5    5



Increase income
contributions
(2008/09 Prices and Volumes)         Y0      Y1       Y2       Y3       Y4       Y5    Y6   Y7   Y8   Y9
 Transition costs
 Annual recurring cost
 Total annual costs                   0        1       4        5        5        5    5    5    5    5
 Transition benefits
 Annual recurring benefits
 Total annual benefits                0        1       4        5        5        5    5    5    5    5




* For non-monetised benefits please see summary pages and main evidence base section




                                                           7
1. Introduction
1. This Impact Assessment (IA) accompanies the Ministry of Justice's (MoJ) consultation on a
   fundamental programme of legal aid reform: Proposals for the Reform of Legal Aid in England and
   Wales. The associated consultation paper was published on 15th November 2010 and may be found
   at www.justice.gov.uk.

2. Legal aid involves the public procurement of legal services and determining the terms and conditions
   of access to these services. Legal aid expenditure was around £2.1bn in 2008/09, approximately
   25% of the Ministry of Justice’s (MoJ) budget. Approximately £1.2bn was spent on criminal legal aid
   and the remaining £0.9bn was spent on civil legal aid, including private family matters. Legal aid may
   take the form of pre-court advisory support (‘Legal Help’) or court-based support (‘Legal
   Representation’). The Legal Services Commission (LSC) is responsible for administering the legal
   aid scheme in England and Wales and the LSC is overseen by the MoJ.

3. The proposals in this IA relate to reforming the financial eligibility criteria which determine whether a
   person might receive legal aid and, if so, whether they might pay a contribution to their legal aid
   costs. Other legal aid reform proposals, which are subject to other IAs, relate to; legal aid scope (i.e. what
   types of case should be covered by legal aid, e.g. family matters); alternative sources of legal aid funding;
   reforms to fees paid to legal aid providers, and; the provision of more legal aid advice by telephone.

Economic rationale for government intervention

4. The economic rationale for government intervention may relate to securing macroeconomic
   objectives, especially in relation to fiscal policy, as well as to microeconomic considerations. On the
   macroeconomic side the proposals in this Impact Assessment (IA) involve reducing the scale of
   government expenditure. This will contribute to the Government’s objective of reducing the size of
   the budget deficit.

5. On the microeconomic side the conventional economic rationale for government intervention is based
   on efficiency or equity arguments. The Government may consider intervening if there are strong
   enough failures in the way markets operate (e.g. monopolies overcharging consumers) or if there are
   strong enough failures in existing government interventions (e.g. waste generated by misdirected
   rules). In both cases the proposed new intervention itself should avoid creating a further set of
   disproportionate costs and distortions. The Government may also intervene for equity (fairness) and
   distributional reasons (e.g. to reallocate goods and services to more needy groups in society).

6. Legal aid may be regarded as a redistributive transfer of resources from taxpayers to those who are
   most needy, in relation to both the nature and merits of their case and also to their financial position.
   The proposals in this IA involve reducing the scale of these redistributive transfers, in particular to
   focus legal aid more tightly on issues which merit public funding the most. This will help the
   Government secure the wider macroeconomic benefits associated with reducing the fiscal deficit
   whilst minimising the impact of these reductions on clients.

7. Legal aid does not involve providing direct financial transfers to clients but instead involves providing
   legal services which are funded, to differing extents, by the legal aid budget. As such legal aid
   subsidises a particular type of service. The proposals in this IA involve reducing the scale of this
   subsidisation. This may generate improvements in the efficiency of resource use. For example
   subsidisation of a service may lead people to consume this service when better and cheaper
   alternatives are available.

8. The reduction in legal aid will lead to behavioural changes in the way people address their disputes.
   For example people no longer in receipt of legal aid might seek an alternative means of resolving
   their dispute. If the alternative means involved securing the same dispute outcome whilst using less
   overall resource then an economic efficiency gain would be generated. As a result the proposals take
   into account the availability of alternative means of resolution.

9. On the other hand it is possible that these behavioural changes might be associated with losses in
   economic efficiency. For example, for people no longer in receipt of legal aid, less resource may be
   devoted to resolving their dispute, delivering a resource saving. But if dispute outcomes were much
   less fair then the economic value of these resource gains might be more than outweighed by the total

                                                       8
   economic cost associated with reduced fairness, i.e. with increased injustice. This would include wider
   social and economic costs, both tangible and intangible. As a result the proposals in this IA have been
   targeted at those categories of legal aid where these adverse impacts are less likely to occur.

10. Overall the proposals in this IA have been designed to reduce government expenditure in a way that
    continues to target support to those cases where there is the strongest rationale for government
    intervention.

Policy proposals and objectives

11. The modern legal aid scheme was established in 1949 with a laudable aim: to provide equality of
    access, and the right to representation before the law. However, the scope of legal matters covered
    was very tightly drawn. Since then the scope of legal aid has expanded beyond its original intentions,
    and is now available for a very wide range of issues, including some which should not require any
    legal expertise to resolve. There is a compelling case for going back to first principles in reforming
    legal aid, to ensure access to public funding in those cases that really require it, the protection of the
    most vulnerable in our society and the efficient performance of our justice system. Taxpayer funding
    of legal advice and representation will be reserved for serious issues which have sufficient priority to
    justify the use of public funds subject to people’s means and the merits of the case.

12. Alongside this, the Government has made clear that its first priority is to reduce the burden of debt by
    reducing public spending. The Government’s spending plans, set out in the 2010 spending review,
    included a real reduction in income of 23% in the budget of the MoJ over the four years to 2014-15.
    Legal aid must therefore make a substantial contribution to the required savings.

13. The proposals in this consultation seek to deliver substantial savings in a fair, balanced and
    sustainable way. They will encourage people to resolve their problems themselves and to use
    alternatives to the courts where they are effective. They will help reserve the courts for serious legal
    issues where there is a public interest in assuring access, and then only as a last resort. They also
    seek to ensure that scarce resources are targeted efficiently and effectively, delivering overall value
    for money.

14. The proposals for reform therefore cover all aspects of the legal aid scheme: its scope; those eligible
    for assistance; and the fees paid to those who provide legally aided services.

15. The proposed reforms in this IA relate to civil legal aid, including private family matters. They do not
    relate to criminal legal aid. The proposals apply only to those who are means tested - see below for
    an explanation of means testing. The proposals apply to both Legal Help and Legal Representation.

16. The legal aid means testing framework considers both the applicant’s income and their capital. The
    Government has looked carefully at the current means testing framework and considers that it should
    be reformed in a number of ways to ensure that limited resources are targeted more effectively. This
    includes seeking greater contributions from clients who would be eligible under the current system to
    receive legal aid, but can afford to pay some element of their costs and refocusing legal aid
    resources away from those with disposable capital or equity, while preserving access to legal aid for
    those with the very lowest incomes with little or no disposable capital.

17. In particular, the Government’s rationale for financial eligibility reform is to ensure that those who can
    afford it should pay for, or contribute towards, the costs of their case.
      Option 1: Abolish ‘capital passporting’ (i.e. passporting is a term which affords automatic eligibility
       for legal aid if a client is in receipt of particular income related state benefits even where the client
       possesses a particular level of capital). The eligibility rules for passporting benefits are more
       generous than the eligibility rules for legal aid. The abolition of automatic passporting on capital is
       to ensure that all applicants for legal aid are treated fairly;
      Option 2: Introduce a capital contribution fee of £100 for clients with disposable capital of over
       £1000. The Government considers that it is desirable for legally aided clients to have a direct
       financial interest in their case by contributing personally towards the costs of it, where they can
       afford to do so. Where clients contribute to the costs of their case, we consider that they are more
       likely to approach litigation in a similar way to privately paying litigants, and unnecessary litigation


                                                       9
       may be deterred. Such contributions also off-set the costs to the public purse of providing legal
       aid and help to ensure that funding is available for other individuals;
      Option 3: Abolish ‘capital disregards’ (i.e. no longer disregard the amount of capital held by the
       client when applying the means assessment for legal aid).
       (i) Non-contested property cases – the Government believes that it is inappropriate that limited
           legal aid resources should be directed at clients who potentially have a substantial amount of
           equity or other capital which could be used to fund their case.
       (ii) Contested property cases - while the Government recognises that people may find it difficult
            to have ready access to capital in cases where property is the subject of dispute, we believe
            that it is not appropriate for limited public resources to be used in cases where people are
            arguing over very substantial assets;
      Option 4: Increase income contributions for all legally aided clients who make contributory
       payments. The Government believes that it is appropriate for people with disposable income to
       contribute towards the cost of their litigation, and considers that a limited increase in contributions
       from income would encourage even greater financial ownership of the case for those who can
       afford it.

Main affected groups

18. The following key groups are likely to be affected by the proposals:
      Legal aid recipients who are means tested. Civil legal aid is not means-tested for parents
       involved in childcare or supervision proceedings, for child abduction proceedings, or for persons
       detained under mental health or mental capacity legislation seeking release. The proposals do
       not affect these types of case. For all other applicants civil legal aid is means tested.
      Legal services providers. This may include; legal firms contracted with the LSC for publicly
       funded work; not for profit organisations contracted with the LSC for publicly funded work, and;
       advocates conducting legal representation for clients who are legally aided.
      The LSC, which is responsible for administering legal aid.
      Her Majesty’s Court Service (HMCS), and the Tribunals Service (TS) through potential changes
       in court business.

2. Costs and Benefits
19. This IA identifies both monetised and non-monetised impacts on individuals, groups and businesses in
    the UK, with the aim of understanding what the overall impact on society might be from implementing
    the options identified. The costs and benefits of each option are compared to the do nothing option. IAs
    place a strong emphasis on valuing the costs and benefits in monetary terms (including estimating the
    values of goods and services that are not traded). However, there are important aspects that cannot be
    sensibly monetised. These might include how the proposal impacts differently on particular groups of
    society, or changes in equity and fairness, either positive or negative.

20. The expected impact of the four Options is outlined below. Each Option has been assessed
    individually. The preferred choice is to adopt a combination of Options 1-4. A separate overarching IA
    assesses the cumulative impact of the Government’s proposed overall package of reforms.

21. All estimates are relative to the 2008-09 baseline and hence take account of the assumption that, as
    in recent years, fees will not be uprated by inflation over the four years to 2014-15.




                                                     10
Option 0: Do nothing

Description

22. Currently those in receipt of particular state benefits are 'passported' for legal aid, meaning they are
    eligible for legal aid without needing to be subject to a detailed assessment of their means by the
    LSC. This ‘passporting’ takes place because those in receipt of the state benefits in question have
    already had their financial means assessed by the Department of Work and Pensions (DWP).

23. The DWP has recently closed a consultation on changes to the welfare benefits system, 21st
    Century Welfare. It proposes combining existing welfare benefits into a single, universal credit to
    support working-age households and removing a number of the ‘passporting’ benefits used to assess
    legally-aided clients’ means by proxy. If these proposals were adopted then the LSC may need to
    introduce consequent changes to the LSC eligibility rules and their application, and the base case
    might differ. In this IA, however, the base case relates to current DWP arrangements.

24. If the ‘do nothing’ option was pursued then the current eligibility rules would continue to apply. In
    summary the criteria, in those civil cases where representation is means tested are:
      clients on ‘passported’ benefits (Income Support, Income based Job Seekers Allowance, Income
       related employment and support allowance, State Pension Credit Guarantee) are deemed eligible
       and are not means tested for income or capital (as this would have been undertaken by DWP);
      all other clients are means tested by the LSC for income and capital;
      clients with up to £3,000 of disposable capital (and less than £316 in monthly disposable income)
       currently make no contribution towards their case;
      clients who have under £733 disposable monthly income and under £8,000 disposable capital)
       pay contributions as follows:

        Band          Monthly disposable income                          Monthly contribution

           A                   £316 to £465                      Quarter of income in excess of £311

           B                   £466 to £616                   £38.50 + third of income in excess of £465

           C                   £617 to £733                   £88.85 + half of income in excess of £616

25. Under the current rules, clients are required to make a lump sum contribution towards their legal
    costs from their capital if their disposable capital exceeds £3,000. Contributions are payable where
    clients receive ‘certificated’ levels of service such as Legal Representation, but not for Legal Help
    (initial advice and assistance) nor for mediation. The level of the contribution varies with the
    anticipated costs of the case, but clients can be asked to contribute all disposable capital in excess of
    £3,000 (up to the disposable capital eligibility limit of £8,000, above which they no longer qualify for
    legal aid).

26. Because the ‘do nothing’ option is compared against itself its costs and benefits are necessarily zero,
    as is its Net Present Value (NPV).

Option 1: Applicants for legal aid who are in receipt of ‘passported’ benefits should be
subject to the same capital eligibility rules as other applicants

Description

27. The LSC means assessment covers both income and capital. The criteria applied by the DWP for
    these state benefits are not identical to those applied by the LSC for legal aid. Under current DWP
    eligibility criteria, individuals can hold up to £16,000 in disposable capital and still receive the state
    benefits in question. The LSC currently allows individuals to hold up to £8,000 of disposable capital
    and still receive legal aid.



                                                       11
28. Under Option 1 those in receipt of the DWP benefits outlined above would only be ‘passported’ in
    relation to their income. In relation to their capital they would be subject to a separate capital means
    assessment by the LSC which applies the applicant’s disposable capital criteria. ‘Disposable capital’
    includes savings, equity held in the client’s home and valuable items. This would mean that:
         applicants on the particular state benefits identified who have more than £8,000 in disposable
          capital would no longer be financially eligible for civil legal aid;
         applicants on the particular state benefits identified who have more than £3,000 in disposable
          capital would be liable to pay a capital contribution towards their legal aid costs. This contribution
          could be all of their capital above £3,000, but may be less depending on the likely cost of the case.

29. These reforms would apply to both Legal Help and to Legal Representation.

Option 1: Costs

Net costs related to legal aid clients

30. Client-related costs may take the following broad forms:
   (i)     Clients would receive a reduction in resource transfers equivalent to the reduction in legal aid
           spending. In total it is estimated clients would receive around £6m worth less of legal aid
           services. This is a stand alone long term steady state figure. In terms of derivation, the Family
           Resources Survey (FRS) was used to estimate the legal aid eligibility of the population as
           whole and the amount of disposable capital that legally aided clients possess. There is a risk
           that the FRS may not accurately represent the distribution of capital for the legally aided client
           base. The average case was assumed to cost £3,739. The savings relate to around 4,000
           previously passported clients who have savings of more than £8,000 and less than £16,000
           and who would not receive legal aid in future. In addition another around 1,500 previously
           passported clients with savings of between £3,000 and £8,000 would pay contributions to their
           legal aid.

   (ii)    As a result of this reduction in resource transfers those people who no longer receive legal aid
           will address their disputes in different ways. They may pay for alternative resolution services
           which are not court-based, may represent themselves in court, may seek to resolve issues by
           themselves without reference to courts, may pay for services which support self-resolution, or
           may decide not to tackle the issue at all. As a result of people who no longer receive legal aid
           tackling disputes in different ways, or of disputes remaining unaddressed, there may be a
           deterioration of case outcomes. In particular case outcomes might be less fair than beforehand.
           A significant reduction in fairness of dispute resolution may be associated with wider social and
           economic costs such as:
              reduced social cohesion. For example failure to apply the rule of law fairly may generate an
               inclination not to respect rules and regulations and not comply with social norms and
               expectations, generating social costs. In relation to family cases children would also be
               affected as well as their parents;
              increased criminality. This may arise if unresolved civil or family disputes escalate, or if
               criminal means are used to resolve disputes in future, or if a known lack of legal aid
               encourages people to take advantage of others who might find it harder to defend
               themselves in future;
              reduced business and economic efficiency. Failure to enforce rights and not applying the
               rule of law may undermine work incentives, business uncertainty and the operation of
               markets;
              increased resource costs for other Departments. If civil and family issues are not resolved
               effectively people might continue to rely upon the state, including because failure to resolve
               one issue may lead to another arising. This may include health, housing, education and other
               local authority services including services provided by the voluntary and community sector;
              increased transfer payments from other Departments. Similar to the above, reduced
               resource transfers from the legal aid fund might lead to increased financial transfers to the
               poorest, e.g. via welfare benefits or tax credits. For example people who previously


                                                        12
               received legal aid might use their own savings in future to finance a case, and in doing so
               they might pass a benefits threshold.

               The proposals aim to reduce or remove eligibility for those who can afford to pay or
               contribute to their legal aid. As such the proposals aim to minimise any wider social and
               economic costs.

   (iii)   As a result of people addressing their disputes in different ways there may be implications for
           the economic efficiency of dispute resolution. Some possibilities include:
              in some instances, case outcomes for the client may remain the same, the fairness of
               dispute resolution may remain the same, and the same overall resource may be used to
               resolve the dispute (although this would be no longer provided by the legal aid fund, so the
               client may be worse off in that regard). This would be associated with no change in the
               efficiency of dispute resolution;
              in some instances, case outcomes for the client may remain the same, the fairness of
               dispute resolution may remain the same but less overall resource may be used to resolve
               the dispute (although the client may have to provide more resource in the absence of legal
               aid funding, so the client would be worse off in this regard). This would be associated with
               increased efficiency of dispute resolution. For example cases which were previously
               resolved via resource intensive court cases might in future be resolved with comparable
               outcomes via less resource intensive alternative means;
              in some instances, case outcomes for the client, may be significantly worse (but would be
               better for the other party), the fairness of dispute resolution may be significantly worse, but
               less overall resource may be used to resolve the dispute (although the client may have to
               provide more resource in the absence of legal aid funding, so the client may be worse off in
               that regard). This would be associated with reduced efficiency of dispute resolution if the
               economic saving from devoting fewer resources was more than outweighed by the total
               economic costs associated with the reduced fairness of dispute resolution. This would
               include the wider social and economic costs outlines above, both tangible and intangible.

           An overall reduction in economic efficiency might arise depending upon the aggregate position,
           for example if lots of cases fell under the last possibility outlined above and few fell under the
           other possibilities. What happens would hinge upon the behavioural response of clients, which
           is unknown, and upon the nature and effectiveness of different ways of addressing disputes
           aside from using legally-aided service providers. The proposals aim to reduce or remove
           eligibility for those who can afford to pay or contribute to their legal aid. As such the proposals
           aim to minimise any adverse impact on the economic efficiency of dispute resolution (and in
           some cases may lead to more efficient dispute resolution).

31. There is a risk that some of those with savings of between £3,000 and £8,000 who are asked to pay
    a contribution in future decide not to pay the contribution and not to accept legal aid. In which case
    the impact on these legal aid clients would be similar to the impacts outlined above for applicants
    who are no longer eligible for legal aid.

Costs for legal services providers

32. The impacts on legal services providers relate to the impacts on legal aid clients. In total it is
    estimated they would provide around £4m worth less of legally aided services. This is a stand alone
    long term steady state figure. This relates to previously passported clients with between £8,000 and
    £16,000 of savings who no longer receive legal aid.

LSC administration costs

33. The one-off costs from this proposal are likely to be negligible. These relate to amending IT systems
    to take account of the changes and training. The ongoing costs are likely to be relatively significant
    as a result of an increase in the number of capital assessments.




                                                       13
HM Court Service and Tribunals Service costs

34. The proposed reforms might lead to a reduction in the total volume of court and tribunals cases. A
    reduction in total case volumes might be associated with some types of one-off court and tribunal
    capacity adjustment costs and with other types of one-off court and tribunal capacity adjustment
    savings. The net position is subject to further consideration.

35. In addition the proposed reforms might lead to an increase in the volume of cases where people
    choose to represent themselves in court or at a tribunal without using legal representation (litigants in
    person). In this IA it has been assumed that on balance any such effect should not have a significant
    impact on ongoing court and tribunal operating costs.

Distributional costs

36. Legal aid recipients are amongst the most disadvantaged in society, reflecting both the nature of the
    problems they face as well as the eligibility rules for legal aid.

37. Reliable administrative data is not captured on the income of legal aid recipients but estimates have
    been made applying data on family characteristics and income levels from the Family Resources
    Survey to the civil legal aid population according to the eligibility rules (e.g. passported benefits or
    eligible for free or contributory aid) and scaling the figures down to the legal aid claimant population.
    Whilst this analysis cannot provide a perfectly accurate picture of recipients, the results are indicative
    of their likely income distribution.

38. This analysis shows that the vast majority (97%) of community legal aid recipients in 2008-09 were in
    the bottom two income quintiles, with almost 80% in the bottom quintile and a further 17% in the
    second bottom quintile for Legal Help. Less than 1% are in the top two quintiles (including just 0.1%
    in the top quintile). This distribution for those in the bottom two quintiles is very similar for Legal
    Representation, however there is a higher proportion in the bottom quintile (around 90%).

39. Approximately 76% of legal aid clients affected by abolishing the equity disregard are from within the
    bottom income quintile, whereas approximately 1% are from the top two quintiles. The policy is
    based upon a clients ability to access their capital not the amount of income they possess. Therefore,
    due to the characteristics of the legally aided population, the policy is still likely to disproportionately
    impact upon those at the bottom of the income distribution.

Wider economic costs

40. The section on client related costs incorporates consideration of wider social and economic costs,
    tangible and intangible. In general these wider costs might stem from an increased unfairness in
    dispute resolution.

Option 1: Benefits

Legal aid fund

41. Savings to the legal aid fund equate to the reduced amounts of legal aid set out above and mirror the
    reduction in resource transfers to clients. The total sum is estimated to be around £6m. This is a
    stand alone long term steady state figure.

Wider economic benefits

42. A reduction in government spending associated with the reduction in legal aid would contribute to
    achieving the Government’s macroeconomic objectives, in particular reducing the size of the
    Government’s fiscal deficit.

43. In general the reduced subsidisation of particular goods and services is associated with increased
    economic efficiency. For example subsidisation of a service may lead people to consume this service
    when better and cheaper alternatives are available. The proposals in this IA will involve reducing the
    provision of subsidised services and will involve clients adopting alternatives in some cases, as
    explained in the earlier costs section.

                                                      14
HM Court Service and Tribunals Service savings

44. As explained, a reduction in total case volumes might be associated with some one-off capacity
    adjustment costs, with other one-off capacity adjustment savings, and the net position is subject to
    further consideration.

45. A reduction in total case volumes might also be associated with a reduction in ongoing court and
    tribunals operating costs. The extent of any savings would depend upon the nature of the court and
    tribunals cost base.

Option 2: £100 capital contribution fee for clients with disposable capital over £1,000

Description

46. The capital contribution scheme would be reformed so that any client with a disposable capital
    (defined above) of £1,000 who receives Investigative Help, Legal Representation, Family Help
    (Higher), or Controlled Legal Representation in Immigration cases, would be liable to pay a capital
    contribution of £100 before they can access legal aid representation. As under the present scheme,
    this capital contribution would be in addition to any contributions required from income. The £100
    capital contribution would be applied to clients with disposable capital of up to £3,100, except for
    immigration case where it would be for disposable capital up to £3,000. Beyond this amount clients
    would be required to contribute to their costs under the Option 1 proposals.

Option 2: Costs

Net costs related to legal aid clients

47. Client-related costs may take the following broad forms:

   (i) Clients would receive a reduction in resource transfers equivalent to the reduction in legal aid
       spending. In total it is estimated clients would receive around £1m to £3m worth less of legal aid
       services. This is a stand alone long term steady state figure. In terms of derivation, the Family
       Resources Survey (FRS) was used to estimate the legal aid eligibility of the population as whole
       and the amount of disposable capital that legally aided clients possess. There is a risk that the
       FRS may not accurately represent the distribution of capital for the legally aided client base. 4%
       of passported clients (1,000 people), 10% of clients who do not pay contributions (9,000 people),
       and 5% of clients who pay contributions (1,000 people) were considered to possess between
       £1,000 and £3,100 of disposable capital. A £100 charge was applied to this population to
       generate the lower end savings. The upper end of the savings range relates to 5% of the
       population choosing not to pay the £100 capital contribution. Whilst there would be a saving for
       these (now) ex-clients from not paying the £100 contribution this would be more than outweighed
       by the value of legal aid resources no longer transferred to these people.

   (ii) As a result of this reduction in resource transfers those people who no longer choose to claim
        legal aid will address their disputes in different ways. They may pay for alternative resolution
        services which are not court-based, may represent themselves in court, may seek to resolve
        issues by themselves without reference to courts, may pay for services which support self-
        resolution, or may decide not to tackle the issue at all. As a result of people who no longer
        choose to claim legal aid tackling disputes in different ways, or of disputes remaining
        unaddressed, there may be a deterioration of case outcomes. In particular case outcomes might
        be less fair than beforehand. A significant reduction in fairness of dispute resolution may be
        associated with wider social and economic costs such as:
          reduced social cohesion. For example failure to apply the rule of law fairly may generate an
           inclination not to respect rules and regulations and not comply with social norms and
           expectations, generating social costs. In relation to family cases children would also be
           affected as well as their parents;
          increased criminality. This may arise if unresolved civil or family disputes escalate, or if
           criminal means are used to resolve disputes in future, or if a known lack of legal aid
           encourages people to take advantage of others who might find it harder to defend themselves
           in future;

                                                    15
          reduced business and economic efficiency. Failure to enforce rights and not applying the rule
           of law may undermine work incentives, business uncertainty and the operation of markets;
          increased resource costs for other Departments. If civil and family issues are not resolved
           effectively people might continue to rely upon the state, including because failure to resolve
           one issue may lead to another arising. This may include health, housing, education and other
           local authority services including services provided by the voluntary and community sector;
          increased transfer payments from other Departments. Similar to the above, reduced transfers
           from the legal aid fund might lead to increased financial transfers to the poorest, e.g. via
           welfare benefits or tax credits. For example people who previously received legal aid might
           use their own savings in future to finance a case, and in doing so they might pass a benefits
           threshold.
       The proposals aim to reduce or remove eligibility for those who can afford to pay or contribute to
       their legal aid. As such the proposals aim to minimise any wider social and economic costs.

   (iii) As a result of people addressing their disputes in different ways there may be implications for the
         economic efficiency of dispute resolution. Some possibilities include:
          in some instances, case outcomes for the client may remain the same, the fairness of the
           dispute resolution may remain the same, and the same overall resource may be used to
           resolve the dispute (although this would no longer be provided by the legal aid fund, so the
           client may be worse off in this regard). This would be associated with no change in the
           efficiency of dispute resolution;
          in some instance, case outcomes for the client may remain the same, the fairness of the
           dispute resolution may remain the same, but less overall resource may be used to resolve the
           dispute (although the client may have to provide more resource in the absence of legal aid
           funding, so the client would be worse off in this regard). This would be associated with
           increased efficiency of dispute resolution. For example, cases which were previously resolved
           via resource intensive court cases might in future be resolved with comparable outcomes via
           less resource intensive alternative means;
          in some instances, case outcomes for the client may be significantly worse (but would be
           better for the other party), the fairness of dispute resolution may be significantly worse, but
           less overall resource may be used to resolve the dispute (although the client may have to
           provide more resource in the absence of legal aid funding, so the client may be worse off in
           that regard). This would be associated with reduced efficiency of dispute resolution if the
           economic saving from devoting fewer resources was more than outweighed by the total
           economic costs associated with the reduced fairness of dispute resolution. This would include
           the wider social and economic costs outlines above, both tangible and intangible.
       An overall reduction in economic efficiency might arise depending upon the aggregate position,
       for example if lots of cases fell under the last possibility outlined above and few fell under the
       other possibilities. What happens would hinge upon the behavioural response of clients, which is
       unknown, and upon the nature and effectiveness of different ways of addressing disputes aside
       from using legally-aided service providers. The proposals aim to reduce or remove eligibility for
       those who can afford to pay or contribute to their legal aid. As such the proposals aim to minimise
       any adverse impact on the economic efficiency of dispute resolution (and in some cases may
       lead to more efficient dispute resolution).

Costs for legal services providers

48. The impacts on legal services providers relate to the impacts on legal aid clients. In total it is
    estimated they may provide up to £2m worth less of legally aided services. This is a stand alone long
    term steady state figure. This would relate to up to 5% of clients choosing not to pay the £100 fee
    and no longer taking up legal aid.

LSC administration costs

49. The one-off implementation cost from implementing the fee is likely to be negligible. This relates
    primarily to training costs. The ongoing costs are likely to small, however these are likely to be offset
    by the ongoing savings from resulting from the reduction in volumes.

                                                      16
HM Court Service and Tribunals Service costs

50. Courts and Tribunals Service might be affected only in relation to clients who do not wish to pay the
    £100 capital contribution and who subsequently choose not to tackle their dispute in court or at a
    tribunal. There might therefore be a reduction in the total volume of court and tribunal cases. A
    reduction in total case volumes might be associated with some types of one-off court and tribunal
    capacity adjustment costs and with other types of one-off court and tribunal capacity adjustment
    savings. The net position is subject to further consideration.

51. Alternatively some of these people who choose not to pay the £100 capital contribution might choose
    to represent themselves in person in courts or at tribunals (litigants in person). Any increase in the
    volume of cases with litigants in person instead of cases involving legal representation is unlikely to
    be significant. In this IA it has been assumed that on balance any such shift should not have a
    significant impact on ongoing court or tribunal operating costs.

Distributional costs

52. See Option 1 for methodology explanation.

53. Around 4 out of 5 legal aid clients affected by the £100 capital contribution are within the lowest
    income quintile, with only 1% from the top two quintiles. The policy is based upon a client’s ability to
    access their capital not the amount of income they possess. Therefore, due to the characteristics of
    the legally aided population, the policy is still likely to disproportionately impact upon those at the
    bottom of the income distribution.

Wider economic costs

54. The section on client related costs incorporates consideration of wider social and economic costs,
    tangible and intangible. In general these wider costs might stem from an increased unfairness in
    dispute resolution.

Option 2: Benefits

Legal aid fund

55. Savings to the legal aid fund equate to the reduced amounts of legal aid set out above and mirror the
    reduction in resource transfers to clients. The total sum is estimated to be between £1m and £3m.
    This is a stand alone long term steady state figure.

Wider economic benefits

56. A reduction in government spending associated with the reduction in legal aid would contribute to
    achieving the Government’s macroeconomic objectives, in particular reducing the size of the
    Government’s fiscal deficit.

57. In general the reduced subsidisation of particular goods and services is associated with increased
    economic efficiency. For example subsidisation of a service may lead people to consume this service
    when better and cheaper alternatives are available. The proposals in this IA will involve reducing the
    provision of subsidised services and will involve clients adopting alternatives in some cases, as
    explained in the earlier costs section. In particular, by giving the client a financial interest in their case
    these proposals may lead to litigation being pursued only if absolutely necessary. This is represented
    by the illustrative 5% demand reduction outlined in the earlier costs section.

LSC administration savings

58. There may be reductions to ongoing LSC administration costs. These would relate to any reduction
    in case volumes. A marginal net ongoing saving maybe possible.

HM Court Service and Tribunals Service savings




                                                       17
59. A reduction in total case volumes might be associated with some one-off capacity adjustment costs,
    with other one-off capacity adjustment savings, and the net position is subject to further
    consideration.

60. Any reduction in total case volumes might also be associated with a reduction in ongoing court and
    tribunals operating costs. The extent of any savings would depend upon the nature of the court and
    tribunals cost base.

Option 3: Abolition of Capital Disregards

Description

61. In relation to cases not involving contested property the financial eligibility rules for all clients would
    be tightened by abolishing the existing rule that:
       disregards the first £100,000 of equity (the equity disregard);
       disregards up to a further £100,000 of equity held by low income pensioners (the pensioner
        disregard).

62. This means that if a person holds equity (in a property) then all of that equity would be taken into
    account in the LSC financial means assessment – currently the first £100,000 is not taken into
    account (£200,000 in the case of low income pensioners).

63. In addition, it is proposed to introduce a gross capital limit of £200,000 for all levels of service.
    Pensioners with a monthly disposable income of £315 or less would have a higher gross capital limit
    of £300,000. The gross capital limit would apply to all of the individual’s properties whether main
    dwelling or not.

64. In addition for mortgaged properties the financial eligibility rules would be applied to the assessed
    actual amount of equity held in the property. Currently the rules are applied to a notional amount of
    equity, calculated using various rules, and the two sums can differ. If the equity disregard and
    pensioner disregard were abolished then the means assessment should consider the actual amount
    of equity held in a property, especially if this is lower than the notional amount – otherwise it is
    possible that legal aid might not be offered when it ought to be.

65. A discretionary waiver scheme would be applied (excluding contested property cases) in certain
    circumstances where a person is no longer eligible for legal aid as a result of these proposed
    changes but is unable to obtain the funding needed for their case. The scheme would apply to
    properties worth £200,000 or less for all apart from pensioners, where a £300,000 limit would apply.
    Clients benefiting from this waiver would be expected to repay their legal aid costs at the end of their
    case. If they are unable to do so a charge similar to the current statutory charge regime would be
    placed on their property.

66. The equity disregard, and the discretionary waiver, would only apply in respect of the property that is
    the main dwelling of the applicant.

67. An 8% simple interest rate would be applied to all statutory charge debt in accordance with the
    current regime. 2008/09 LSC figures indicate that 79% of statutory charge debt might be recovered.

68. All of these reforms would be applied to Legal Help, mediation and Legal Representation. However,
    the Government does not believe it would be appropriate or practicable to operate the discretionary
    waiver to applications for Legal Help, Help at Court and mediation. Instead, there will be an
    exemption for these services so that individuals who are financially ineligible on the basis of
    disposable capital held as equity will automatically qualify for the property eligibility waiver for these
    services if they satisfy the gross capital test.

69. In relation to cases involving contested property the financial eligibility rules for all clients would differ
    slightly. In particular the rule that allows the first £100,000 to be disregarded in relation to property
    that is the subject matter of the dispute would be retained. This means that if a person holds equity
    (in a property), then all of that equity above £100,000 would be taken into account in the LSC
    financial means assessment. Currently the first £200,000 is not taken into account (£300,000 for low

                                                        18
    income pensioners). In addition it is proposed to introduce a gross capital limit of £500,000 in
    contested property cases for all levels of service, including legal help and representation. The gross
    capital limit would apply to all of the individual’s properties whether main dwelling or not.

70. As with cases not involving contested property the means assessment would take into account the
    actual equity in the property (i.e. the value of the property less any mortgage) rather than the notional
    equity under the current capital means assessment.

Option 3: Costs

Net costs related to legal aid clients

71. Client-related costs may take the following broad forms:

    (i) Clients would receive a reduction in resource transfers equivalent to the reduction in legal aid
        spending. In total it is estimated clients would receive around £4m to £20m worth less of legal aid
        services. This is a stand alone long term steady state figure. In terms of derivation, the Family
        Resources Survey (FRS) was used to estimate the legal aid eligibility of the population as whole
        and the amount of equity that legally aided clients possess. The FRS suggested that around 1%
        of the eligible legal aid population may be affected (1,000 people). There is a risk that the FRS
        may not accurately represent the legally aided client base hence an assumption of 5% (5,000
        people) has also been applied. The 1% and 5% figures should be regarded as assumptions. Of
        these 1,000 to 5,000 clients, 10% are assumed not to apply successfully for the property eligibility
        waiver and not to take up legal aid. Of those who secure a waiver, 10% are assumed to repay the
        cost of their legal aid at the end of this case and 90% are assumed to repay their legal aid when
        they move home (although a 21% bad debt provision is applied to this latter group). These
        figures should all be regarded as purely illustrative assumptions.

Reduction in transfers to clients if 5,000 clients are affected (figures rounded to nearest £1m)

                      Clients obtaining        Clients paying       Clients accepting           Total
                     finance on capital      costs at the end of    a statutory charge
                           market                 the case           on their property

 Family                      £1m                     £1m                    £9m                 £11m

 Civil                       £1m                     £1m                    £8m                 £10m

 Total                       £2m                     £1m                   £17m                 £20m


Reductions in transfers to clients if 1,000 clients are affected (figures rounded to nearest £1m)

                      Clients obtaining        Clients paying       Clients accepting           Total
                     finance on capital      costs at the end of    a statutory charge
                           market                 the case           on their property

 Family                      £0m                     £0m                    £2m                 £2m

 Civil                       £0m                     £0m                    £2m                 £2m

 Total                       £0m                     £0m                    £3m                 £4m

    (ii) As a result of this reduction in resource transfers people who no longer receive legal aid may
         address their disputes in different ways. They may pay for alternative resolution services which
         are not court-based, may represent themselves in court, may seek to resolve issues by
         themselves without reference to courts, may pay for services which support self-resolution, or
         may decide not to tackle the issue at all. As a result of people who no longer receive legal aid
         tackling disputes in different ways, or of disputes remaining unaddressed, there may be a
         deterioration of case outcomes. In particular case outcomes might be less fair than beforehand. A

                                                     19
       significant reduction in fairness of dispute resolution may be associated with wider social and
       economic costs such as:
          reduced social cohesion. For example failure to apply the rule of law fairly may generate an
           inclination not to respect rules and regulations and not comply with social norms and
           expectations, generating social costs. In relation to family cases children would also be
           affected as well as their parents;
          increased criminality. This may arise if unresolved civil or family disputes escalate, or if criminal
           means are used to resolve disputes in future, or if a known lack of legal aid encourages people
           to take advantage of others who might find it harder to defend themselves in future;
          reduced business and economic efficiency. Failure to enforce rights and not applying the rule
           of law may undermine work incentives, business uncertainty and the operation of markets;
          increased resource costs for other Departments. If civil and family issues are not resolved
           effectively people might continue to rely upon the state, including because failure to resolve
           one issue may lead to another arising. This may include health, housing, education and other
           local authority services including services provided by the voluntary and community sector;
          increased transfer payments from other Departments. Similar to the above, reduced transfers from
           the legal aid fund might lead to increased financial transfers to the poorest, e.g. via DWP welfare
           benefits or tax credits. For example people who previously received legal aid might use their own
           savings in future to finance a case, and in doing so they might pass a benefits threshold;
       The proposals aim to reduce or remove eligibility for those who can afford to pay or contribute to
       the cost of their legal aid. As such the proposals aim to minimise any wider social and economic
       costs.

   (iii) As a result of people addressing their disputes in different ways there may be implications for the
         economic efficiency of dispute resolution. Some possibilities include:
          in some instances, case outcomes for the client may remain the same, the fairness of dispute
           resolution may remain the same, and the same overall resource may be used to resolve the
           dispute (although the client may have to provide more resource in the absence of legal aid
           funding, so the client would be worse off in this regard). This would be associated with no
           change in the efficiency of dispute resolution;
          in some instances, case outcomes for the client may remain the same, the fairness of dispute
           resolution may remain the same, but less overall resource may be used to resolve the dispute
           (although the client may have to provide more resource in the absence of legal aid funding,
           so the client would be worse off in this regard). This would be associated with increased
           efficiency of dispute resolution. For example, cases which were previously resolved via
           resource intensive court cases might in future be resolved with comparable outcomes via less
           resource intensive alternative means;
          in some instances, case outcomes for the client may be significantly worse (but would be
           better for the other party), the fairness of dispute resolution may be significantly worse, but
           less overall resource may be used to resolve the dispute (although the client may have to
           provide more resource in the absence of legal aid funding, so the client may be worse off in
           that regard) This would be associated with reduced efficiency of dispute resolution if the
           economic saving from devoting fewer resources was more than outweighed by the total
           economic costs associated with the reduced fairness of dispute resolution. This would include
           the wider social and economic costs outlines above, both tangible and intangible.
       An overall reduction in economic efficiency might arise depending upon the aggregate position,
       for example if lots of cases fell under the last possibility outlined above and few fell under the
       other possibilities. What happens would hinge upon the behavioural response of clients, which is
       unknown, and upon the nature and effectiveness of different ways of addressing disputes aside
       from using legally aided service providers. The proposals aim to reduce or remove eligibility for
       those who can afford to pay or contribute to their legal aid. As such the proposals aim to minimise
       any adverse impact on the economic efficiency of dispute resolution (and in some cases may
       lead to more efficient dispute resolution).

Costs for legal services providers


                                                      20
72. The impacts on legal services providers relate to the impacts on legal aid clients. In total it is
    estimated they may provide up to £2m worth less of legally aided services. This is a stand alone long
    term steady state figure. This would relate to 10% of affected clients not successfully applying for an
    eligibility waiver.

LSC administration costs

73. The one-off costs from this proposal are likely to be negligible. These relate to one-off costs such as
    IT and training. The ongoing costs are likely to be as a result of the increase in waiver applications
    and charges placed on a clients home, however these are likely to be partially offset savings from the
    abolition of the equity disregard.

HM Court Service and Tribunals Service costs

74. The proposed reforms might lead to a reduction in the total volume of court and tribunals cases. A
    reduction in total case volumes might be associated with some types of one-off court capacity
    adjustment costs and with other types of one-off court or tribunal capacity adjustment savings. The
    net position is subject to further consideration.

75. In addition the proposed reforms might lead to an increase in the volume of cases where people
    choose to represent themselves in court or at a tribunal without using legal representation (litigants in
    person). In this IA it has been assumed that on balance any such effect should not have a significant
    impact on ongoing court or tribunal operating costs.

Distributional costs

76. See Option 1 for methodology explanation.

77. Around 4 out of 5 legal aid clients affected by the abolition of the equity disregard are within the
    lowest income quintile. The policy is based upon a clients ability to access their capital not the
    amount of income they possess. Therefore, due to the characteristics of the legally aided population,
    the policy is still likely to disproportionately impact upon those at the bottom of the income
    distribution.

Wider economic costs

78. The section on client related costs incorporates consideration of wider social and economic costs,
    tangible and intangible. In general these wider costs might stem from an increased unfairness in
    dispute resolution.

Option 3: Benefits

Legal Aid fund

79. Savings to the legal aid fund equate to the reduced amounts of legal aid set out above and mirror the
    reduction in resource transfers to clients. The total sum is estimated to be between £4m and £20m.
    This is a stand alone long term steady state figure.

Wider economic benefits

80. A reduction in government spending associated with the reduction in legal aid would contribute to
    achieving the Government’s macroeconomic objectives, in particular reducing the size of the
    Government’s fiscal deficit.

81. In general the reduced subsidisation of particular goods and services is associated with increased
    economic efficiency. For example subsidisation of a service may lead people to consume this service
    when better and cheaper alternatives are available. The proposals in this IA will involve reducing the
    provision of subsidised services and will involve clients adopting alternatives in some cases, as
    explained in the earlier costs section.

LSC administration savings


                                                     21
82. There may be saving in LSC ongoing administration costs resulting from a reduction in volume of
    means assessments. These would correlate to the reduction in case volumes.

HM Court Service savings

83. A reduction in total case volumes might be associated with some one-off capacity adjustment costs,
    with other one-off capacity adjustment savings, and the net position is subject to further consideration.

84. Any reduction in total case volumes might also be associated with a reduction in ongoing HMCS
    operating costs. The extent of any savings would depend upon the nature of the HMCS cost base.

Option 4: Increase income contributions for all legally aided contributory clients

Description

85. Legal aid clients who are assessed as having a disposable monthly income of £316 or more are
    currently required to make a monthly payment to contribute towards their legal costs over the length
    of the case. Under the current scheme contributions vary from 0.25% to 20% of the client’s
    disposable income, with clients with greater disposable incomes required to contribute a larger
    proportion of their income. The proposal would introduce an increase in contributions, would limit the
    increase to no more than 30% of a client’s disposable income, and would apply a smaller increase to
    those who are less well off. The proposal sets out two sub-options based on the principles above.
    Under both sub-options the lower and upper income thresholds would remain as now:

Sub-option A

86. Sub-option A is based on the current scheme, in that it requires a larger proportion of disposable
    income from those who earn above a certain threshold. Under this option, the proportion of
    disposable income required ranges from 0.6% to 27.8%. See the following table for more details.

                                              Sub-option A
        Band          Contribution       Monthly          New          Contribution   Current
                         rate           disposable       monthly          as % of     monthly
                                          income       contribution     disposable contribution
                                           above:                         income    in this band
     A              Increased from         £316             £1.75           0.6%            £1.25
     (£316-£465)    25% to 35% of
                                          £390.50          £27.82           7.1%           £19.88
                    income over
                    £311                   £465            £53.90          11.6%           £38.50
     B              £54 [highest           £466            £54.45          11.7%           £38.83
     (£466-£616)    contribution
                    from band A] +
                    increased from         £541            £88.20          16.3%           £63.83
                    33% to 45% of
                    income over
                                           £616            £121.95         19.8%           £88.83
                    £465
     C              £122 [highest          £617            £122.70         19.9%           £89.35
     (£617-£733)    contribution
                    from band B] +
                                           £675            £163.30         24.2%           £118.35
                    increased from
                    50% to 70% of
                    income over            £733            £203.90         27.8%           £147.35
                    £616

Sub-option B

87. Sub-option B is based on a simplified scheme which consists of a single band, regardless of monthly
    disposable income, where 50% of all disposable income over £311 is required as a contribution. This
    proposal does not taper the level of contribution from those on lower incomes, but because these
                                                      22
   clients have a lower disposable income they still pay a smaller proportion of their disposable income
   than clients with greater resources.

88. The table below quantifies the impact such a scheme would have on each of current three bands (the
    nine sets of figures represent the bottom, middle and top of each band) for ease of comparison. As
    the table shows, the contributions under the scheme range from 0.8% to 28.8% of disposable
    income, which lies within the proposed modest increase in contribution level (of no more than 30% of
    disposable income).

                                             Sub-option B
     Contribution        Monthly         New Monthly      Contribution       Current monthly
        Rate            Disposable       Contribution        as % of          contributions
                          Income                           disposable
                           above                             income
     50% of                £316             £2.50              0.8%                £1.25
     disposable
                          £390.50           £39.75             10.2%              £19.88
     income above
     £311                  £465              £77               16.6%              £38.50
                           £466             £77.50             16.6%              £38.83
                           £541             £115               21.3%              £63.83
                           £616             £152               24.8%              £88.83
                           £617             £153               24.8%              £89.35
                           £675             £182               27%                £118.35
                           £733             £211               28.8%              £147.35

Option 4: Costs

The costs for sub-options A and B are expected to be the same for each affected group set out below,
except where outlined.

Net costs related to legal aid clients

89. Client-related costs may take the following broad forms:

   (i) Clients would receive a reduction in resource transfers equivalent to the reduction in legal aid
       spending. In total it is estimated clients would receive around £3m to £7m worth less of legal aid
       services under sub-option A, and between £4m to £8m worth less of legal services under sub-
       option B. This is a stand alone long term steady state figure. In terms of derivation, the Family
       Resources Survey (FRS) was used to estimate the legal aid eligibility of the population as whole
       and the amount of disposable income that legally aided clients possess. There is a risk that the
       FRS may not accurately represent the distribution of income for the legally aided client base.
       Around 19,500 clients would be subject to the higher contribution rates. For illustrative purposes
       it has been assumed that up to 5% of clients, i.e. around 1,000 people, might not wish to pay a
       higher contribution and might no longer take up legal aid.

   (ii) As a result of this reduction in resource transfers those people who no longer choose to claim
        legal aid may address their disputes in different ways. They may pay for alternative resolution
        services which are not court-based, may represent themselves in court, may seek to resolve
        issues by themselves without reference to courts, may pay for services which support self-
        resolution, or may decide not to tackle the issue at all. As a result of people who no longer
        choose to claim legal aid tackling disputes in different ways, or of disputes remaining
        unaddressed, there may be a deterioration of case outcomes. In particular case outcomes might
        be less fair than beforehand. A significant reduction in fairness of dispute resolution may be
        associated with wider social and economic costs such as:



                                                     23
            reduced social cohesion. For example failure to apply the rule of law fairly may generate an
             inclination not to respect rules and regulations and not comply with social norms and
             expectations, generating social costs. In relation to family cases children would also be
             affected as well as their parents;
            increased criminality. This may arise if unresolved civil or family disputes escalate, or if
             criminal means are used to resolve disputes in future, or if a known lack of legal aid
             encourages people to take advantage of others who might find it harder to defend themselves
             in future;
            reduced business and economic efficiency. Failure to enforce rights and not applying the rule
             of law may undermine work incentives, business uncertainty and the operation of markets;
            increased resource costs for other Departments. If civil and family issues are not resolved
             effectively people might continue to rely upon the state, including because failure to resolve
             one issue may lead to another arising. This may include health, housing, education and other
             local authority services including services provided by the voluntary and community sector;
            increased transfer payments from other Departments. Similar to the above, reduced transfers
             from the legal aid fund might lead to increased financial transfers to the poorest, e.g. via DWP
             welfare benefits or tax credits. For example people who previously received legal aid might
             use their own savings in future to finance a case, and in doing so they might pass a benefits
             threshold.
     The proposals aim to reduce or remove eligibility for those who can afford to pay or contribute to
      their legal aid. As such the proposals aim to minimise any wider social and economic costs.

     (iii)   As a result of people addressing their disputes in different ways there may be implications for
             the economic efficiency of dispute resolution. Some possibilities include:
                in some instances, case outcomes for the client may remain the same, the fairness of
                 dispute resolution may remain the same, and the same overall resource may be used to
                 resolve the dispute (although the client may have to provide more resource in the
                 absence of legal aid funding, so the client would be worse off in this regard). This would
                 be associated with no change in the efficiency of dispute resolution;
                in some instances, case outcomes for the client may remain the same, the fairness of
                 dispute resolution may remain the same, but less overall resource may be used to resolve
                 the dispute (although the client may have to provide more resource in the absence of
                 legal aid funding, so the client would be worse off in this regard). This would be
                 associated with increased efficiency of dispute resolution. For example, cases which were
                 previously resolved via resource intensive court cases might in future be resolved with
                 comparable outcomes via less resource intensive alternative means;
                in some instances, case outcomes for the client may be significantly worse (but would be
                 better for the other party), the fairness of dispute resolution may be significantly worse,
                 but less overall resource may be used to resolve the dispute (although the client may
                 have to provide more resource in the absence of legal aid funding, so the client may be
                 worse off in that regard) This would be associated with reduced efficiency of dispute
                 resolution if the economic saving from devoting fewer resources was more than
                 outweighed by the total economic costs associated with the reduced fairness of dispute
                 resolution. This would include the wider social and economic costs outlines above, both
                 tangible and intangible.
             An overall reduction in economic efficiency might arise depending upon the aggregate
             position, for example if lots of cases fell under the last possibility outlined above and few fell
             under the other possibilities. What happens would hinge upon the behavioural response of
             clients, which is unknown, and upon the nature and effectiveness of different ways of
             addressing disputes aside from using legally-aided service providers. The proposals aim to
             reduce or remove eligibility for those who can afford to pay or contribute to their legal aid. As
             such the proposals aim to minimise any adverse impact on the economic efficiency of dispute
             resolution (and in some cases may lead to more efficient dispute resolution).

Costs for legal services providers


                                                       24
90. The impacts on legal services providers relate to the impacts on legal aid clients. In total it is
    estimated they may provide up to around £4m worth less of legally aided services. This is a stand
    alone long term steady state figure. This would relate to 5% of clients who no longer take up legal
    aid.

LSC administration costs

91. The one-off costs from the reduction in rates are likely to be negligible. These relate to one-off costs
    such as IT and training. The ongoing costs are likely to be offset by the ongoing benefits as a result
    of a reduction in volumes.

HM Court Service and Tribunals Service costs

92. Overall impacts on HMCS are not expected to be significant. Where people no longer accept legal
    aid the impact on court and tribunal case volumes is likely to be negligible.

Distributional costs

93. See Option 1 for methodology explanation.

94. Around 3 out of 4 legal aid clients affected by the increase in income contributions are within the
    lowest income quintile. Greater usage of Legal Aid amongst individuals at the bottom of the income
    distribution means that, in general, the impact of policy proposal is also concentrated amongst these
    individuals. However, the policy proposal has less of an impact on individuals in the bottom income
    quintile than other proposals, such as scope and other eligibility proposals. Individuals that pay
    income contributions are likely to possess higher incomes than the overall population of legal aid
    clients, therefore the policy has less of an impact on the bottom of the income distribution.

Wider economic costs

95. The section on client related costs incorporates consideration of wider social and economic costs,
    tangible and intangible. In general these wider costs might stem from an increased unfairness in
    dispute resolution.

Option 4: Benefits

The benefits for sub-options A and B are expected to be the same for each affected group set out below,
except where outlined.

Legal aid fund

96. Savings to the legal aid fund equate to the reduced amounts of legal aid set out above and mirror the
    reduction in resource transfers to clients. The total sum is estimated to be between £3m and £7m for
    sub-option A and £4m and £8m for sub-option B. These are stand alone long term steady state
    figures.

Wider economic benefits

97. A reduction in government spending associated with the reduction in legal aid would contribute to
    achieving the Government’s macroeconomic objectives, in particular reducing the size of the
    Government’s fiscal deficit.

98. In general the reduced subsidisation of particular goods and services is associated with increased
    economic efficiency. For example subsidisation of a service may lead people to consume thjis
    service when better and cheaper alternatives are available. The proposals in this IA will involve
    reducing the provision of subsidised services and will involve clients adopting alternatives in some
    cases, as explained in the earlier costs section. In particular, by giving the client an additional
    financial interest in their case these proposals may lead to litigation being pursued only if absolutely
    necessary. This is represented by the illustrative 5% demand reduction outlined in the earlier costs
    section.

LSC administration savings
                                                     25
99. Any savings from LSC administrative cost reductions would stem from a reduction in case volumes
    and are likely to be marginal as the majority of clients are expected to continue receiving legal aid.

HM Court Service and Tribunals savings

100. Overall impacts on courts and tribunals are not expected to be significant as in the majority of cases
     a similar number of people are expected to continue receiving legal aid as under the current
     arrangements. Where people no longer accept legal aid the impact on court and tribunal case
     volumes is likely to be negligible.

3. Enforcement and Implementation
101. The assumption for all the proposals on eligibility is that they will be implemented in 2012.

4. Specific Impact Tests
Equality Impact Assessment

102.   The published equivalent Equality Impact Assessment (EIA) details the equality impacts.

Competition Assessment

103. The proposed reforms to the eligibility for legal aid may directly affect the number, and possibly the
     range, of civil and family legal aid providers. The net impact of eligibility proposals is likely to reduce
     eligibility for legal aid and therefore lead to a reduction in demand for legal aid services. This may
     negatively impact upon competition if the proposed reforms cause some civil and family legal aid
     providers to cease trading.

104. The impact on the incentive to compete vigorously is dependent upon provider reaction to the
     proposed reform. Competition for legal aid contracts could be positively impacted if the same
     numbers of providers are competing for less legal aid clients. On the other hand the level of
     competition may remain the same or decrease slightly if the number of civil and family legal aid
     providers fall in line or more than the reduction in legal aid clients.

105. The impact on competition will be assessed further as part of the consultation exercise.

Small Firms Impact Test

106. Small firms will be affected by the proposals to restrict the eligibility of legal aid. The proposed
     reforms are likely to reduce the number of cases entitled to receive legal aid and negatively affect a
     large proportion of legal aid service providers. The majority of legal aid providers are small firms
     therefore, when comparing to the legal services population as whole, small legal aid providers are
     likely to be disproportionately affected by the proposed reforms. However, if the impact of the
     proposals on small legal aid providers is compared to the legal aid service provider population only,
     then small firms are unlikely to be disproportionately affected.

107. Overall, due to the dominance of small legal services providers in the legal aid market, the majority
     of providers impacted by this proposal are likely to be small providers.

108. The impact on small firms will be assessed further as part of the consultation exercise.

Carbon Assessment

109. We do not consider that there will be any significant change in Greenhouse Gas emissions as a
     consequence of this proposal. The proposals may lead to clients having to travel further for legal
     assistance, although this is dependent upon the impact on the number and range of providers which
     is subject to uncertainty.

Other Environment

110. We do not anticipate any significant impact on the environment as a consequence of this proposal.

                                                       26
Health Impact Assessment

111. Clients who no longer receive legal aid might potentially experience a negative impact on their
     health. This may stem from the outcomes of disputes being resolved less fairly and this having an
     adverse impact on health due to the subject matter of the dispute, e.g. housing, employment or
     education. More broadly there may be health implications for clients from the financial implications
     of these proposals, and also from the customer experience implications e.g. of people representing
     themselves in court.

112. There are unlikely to be any significant impact on lifestyle related activities, such as diet or physical
     activity, or demand for health and social services.

Human Rights

113. The proposals in this IA have been subjected to a Human Rights screening to ensure it is compliant
     with the Human Rights Act.

Justice Impact Test

114. The overall impact on the Justice System is outlined in the evidence base of this Impact
     Assessment.

Rural Proofing

115. Approximately 10% of legal aid clients with location data are from rural areas and 90% are from
     urban areas. It is not possible to determine precisely which cases might not be funded in future as
     we cannot link geographical client data with their capital and income. As such, it is not possible to
     determine whether the cases assumed to no longer be funded would impact on clients in either rural
     or urban areas. However, there is a risk that the eligibility proposals will negatively impact upon
     clients living in rural areas.

116. Approximately 3% of civil providers with location data are based in rural areas, and 97% of civil legal
     aid providers are based in urban areas. It is not possible to determine precisely which cases might
     not be funded in future as we cannot link geographical client data with their capital and income and
     therefore cannot identify precisely which providers would be affected. As such, it is not possible to
     determine whether the cases assumed to no longer be funded would impact on providers in either
     rural or urban areas. However, there is a risk that the eligibility proposals will negatively impact upon
     providers in rural areas.

117. This will be considered further as part of the consultation exercise.

Sustainable development

118. The proposed eligibility reforms set out in this Impact Assessment are consistent with the principles
     of sustainable development. In particular, the proposals on eligibility lead to a more sustainable
     economy and a just society. They are designed to ensure clients that have the appropriate means
     make appropriate contributions or fund their own legal cases, therefore ensuring the Government
     provide legal aid only for those most vulnerable in society.




                                                      27
Annex 1: Post Implementation Review (PIR) Plan
Basis of the review:
It is intended to review each policy in 2016. The review will form part of a wider review of the entire package
of Legal Aid Reform policies implemented following the November 2010 Consultation on the Legal Aid
Reforms.
Review objective:
To ascertain whether the suite of eligibility policies have had the expected impact on the affected groups
outlined in this IA.


Review approach and rationale:
The intention is to review the impact of the eligibility proposals on all affected groups outlined in the Impact
Assessment. This is likely to take the form of an Impact Evaluation. This will include reviewing the actual
impact of the eligibility proposals on the legal aid fund, customers, providers and HMCS. We intend to use
data the LSC routinely collect to assess the impact on eligibility for legal aid, income and capital
contributions and the provider/customer population.
Baseline:
All eligibility policies will be assessed against a 2008/09 baseline for LSC expenditure and volumes data
which all eligibility costs and savings figures in this IA are based upon.

Success criteria:
Whether the implementation of the eligibility policies proposed successfully increases contributions to the
extent income outlined in the IA.

Monitoring information arrangements:
It is intended to make use of the data LSC systems routinely collect. This will allow the impacts of the
eligibility policy to be assessed at the appropriate date. In absence of this we will continue to use the FRS in
combination with aggregate LSC data to assess the success of the eligibility proposals.

Reasons for not planning a PIR:
N/A.




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