Legal Aid, Sentencing and Punishment of Offenders Bill

My Lords, we now to come to the first of 60 or so amendments dealing in detail with Schedule 1. It is safe to assume that all of those amendments would be likely, in one way or another, to add to the cost of legal aid. The amendment now before your Lordships is different. It is true that Amendment 28 would add £6 million to the legal aid bill, but, coupled with Amendment 139, to which I shall also be speaking, it will save the taxpayer at least three times that amount, and probably a great deal more. It is because of that special feature that I wrote to the noble Lord, Lord McNally, on 16 November and asked to see the Lord Chancellor and the Minister in charge of the Bill in the House of Commons. I received a very courteous reply from the noble Lord, Lord McNally, on 1 December, for which I am grateful. It refers to the point which I had raised in some little detail, but, if he will forgive me for saying so, it does not actually answer the point. It is a point, I hasten to add, which is not my point, but is a point which has been made by Lord Justice Jackson. I would not normally refer to the views of a member of the judiciary in moving an amendment, but as he is the author of the report on costs in litigation which forms the whole basis of Part 2 of this Bill, it seemed right to make an exception in this case. So what, after all that, is the point? As I suspect your Lordships know all too well, clinical negligence cases are currently funded in two ways: either by legal aid or by conditional fee agreements—CFAs—supplemented in almost every case by ““after the event”” insurance. The purpose of taking out the ““after the event”” insurance is, of course, to cover the claimant against an adverse order for costs. The premium is paid by the claimant, as one would expect, but since 2000, when the 1999 Act came into force, the cost of the premium has been recoverable from the defendant—usually, although by no means always, the National Health Service—whether the claimant wins or not. That is the whole point. It was hoped that in that way the cost of legal aid would be reduced. But of course it has not worked out, as these things seldom do, exactly as intended. The reason is the huge increase in the cost of taking out such insurance. It is now a major element in the cost of bringing clinical negligence proceedings. It is also a cost which, as I have said, currently falls on the National Health Service, one way or the other, and is therefore ultimately borne by the taxpayer. Therefore, the Government’s original intention, as one can well understand, was that the cost of ATE premiums should cease to be recoverable from the National Health Service. That was clear enough; whether one agrees with it perhaps does not matter. However, the Government then listened to representations and decided to make an exception in the case of expert reports. They had a principle but then made an exception. The point was made very clearly by the Minister in the other place, Mr Jonathan Djanogly, when he said: "““One particular aspect of clinical negligence cases is the significant up-front costs involved in obtaining expert reports. Following consultation, the Government are seeking a tightly drawn power in the Bill to allow the recoverability of after-the-event insurance premiums in clinical negligence cases””.—[Official Report, Commons, 31/10/11; col. 710.]" Perhaps even more clearly, on 2 November he said: "““Such reports, which can be expensive, are often necessary in establishing whether there is a case for commencing proceedings, which raises particular issues if recoverability of ATE insurance is abolished. In responding to these concerns, clause 43””—" Clause 45, as it now is— "““provides, by way of exception, for the recoverability of premiums in respect of ATE insurance taken out to cover the cost of expert reports in clinical negligence cases””.—[Official Report, Commons, 2/11/11; col. 1027.]" I imagine that we would all agree that, if clinical negligence claims are not to be covered in toto by legal aid, there should at least be legal aid to cover the cost of expert reports, including legal advice, without which a claim for clinical negligence simply cannot get off the ground. I suspect we would all agree with that. The trouble is that the Government have set about achieving that result in the wrong way. You have only to look at Clause 45, which is the subject of the other amendment to which I am speaking, to see why. In a lecture given in Cambridge on 5 September last year, Lord Justice Jackson did not mince his words. He described Clause 45 as, "““the most expensive and inefficient mechanism which it is possible to devise in order to achieve””—" the Government’s ““policy objective””. Those words are repeated in the recent report of Professor Cookson of King’s College in paragraph 8.3.4. In the article in the Guardian to which the noble Lord, Lord Howarth, referred, the Lord Chancellor said that it was his ambition to simplify and deregulate civil litigation. We would all say amen to that; nobody could seriously quarrel with it. However, if we look at Clause 45—starting with ““unless”” at line 29—we find the exception to which the Minister in the other place referred in the passages which I have read out. How is that exception to be achieved? The Lord Chancellor must make regulations concerning all manner of things, including the contents of the policies and the maximum premiums to be charged in any policy. The subject matter to be covered by these regulations takes eight sub-paragraphs and 20 pages of text. One can only imagine what the regulations themselves would look like if the subject matter is as lengthy as that. If the Lord Chancellor wants to simplify and deregulate civil litigation, surely Clause 45 is not the way ahead. It would be far simpler and better to allow legal aid to remain for the very limited purpose of obtaining reports in clinical negligence cases. However, there is a far graver objection to Clause 45 than that, which is cost, as I mentioned at the outset. The cost of providing legal aid for expert reports is £6 million. That is the one figure on which, happily, everybody seems to be agreed. What, then, is the projected cost of implementing Clause 45? Clearly, one must make some assumptions. In an average case one can assume that the cost of the reports will be £5,000. In a simple case, it will be less; in a difficult case, it will be a great deal more. Let us assume that claimants in general have a 50 per cent chance of success in clinical negligence cases. If the insurer is to break even in the course of a year, it follows that he must charge not less than a £5,000 premium for £5,000 of cover. However, to that he must add 25 per cent for his overhead expenses and profit and 6 per cent to cover the cost of insurance premium tax. Therefore, the minimum premium for £5,000 of cover will be £6,265. We know that in 2010-11, the National Health Service settled some 5,400 cases. If one again assumes that the funding in half those cases was by way of ATE cover, one can work out by a process of simple arithmetic that the cost would have been 2,700 cases times £6,265: that is, £18 million. That is almost exactly three times the legal aid cost of £6 million. Those figures were given to me by a distinguished solicitor who is familiar with insurance law and practice. However, more importantly, he was one of the small panel of assessors who advised Lord Justice Jackson during the year he spent writing his report. Therefore, there is no reason to doubt his figures, or the figures I have given to your Lordships. Indeed, I am told that they are conservative. If one assumes that three-quarters of the 5,400 cases are funded by ATE insurance rather than half, the saving would be £27 million. If one assumes that the average cost of the reports was £10,000 rather than £5,000, the saving would be £61 million. These are very alarming figures and bear out, in an entirely different context, the sort of concerns expressed all around the House during last Tuesday’s debate on the amendment of the noble Lord, Lord Bach. I do not expect the noble and learned Lord the Minister to be able to comment on these figures in any way but hope that he will provide an answer as soon as he can. For if the figures are correct, they suggest very strongly that the Government are set on the wrong track and that the funding of expert reports should be by way of legal aid and not by way of the complex and expensive procedure under Clause 45. I beg to move.