Legal Aid, Sentencing and Punishment of Offenders Bill

My Lords, I shall also speak to Amendments 82ZC and 82D in the name of my noble friends Lord Bach and Lord Beecham. In so doing, I declare an interest as chair of the Consumer Credit Counselling Service, the country's leading debt advice and solutions charity. Under the proposals in the Bill all legal aid for debt issues, including advice, is excluded from the scope of legal aid except for legal services provided in relation to a bankruptcy order against individuals under Part IX of the Insolvency Act 1986, where the individual’s estate includes their home. As I understand it, the Government's view is that debt advice is not strictly legal work and that financial matters are a far lesser priority than matters such as homelessness or loss of liberty. We disagree. All debt problems are underpinned by complex contractual obligations, and debt advisers typically need to advise debtors on issues of liability, consumer credit contracts, creditors’ enforcement powers, statutory debt remedies and enforcement processes within the court system and beyond. While some debt advice may appear to be primarily negotiation over repayment terms and schedules, it is important to note that in fact such negotiations take place within a legal framework such as protections under the Consumer Credit Act. It is also true that the experience of my charity, the CCCS, and others in this field, such as Citizens Advice, is that most if not all of those who contact us for debt advice have other issues, such as illness, employment problems or relationship problems which have either caused the problem or contributed to it. It is this compounding effect which makes the withdrawal of legal aid for all debt issues seem such a simplistic proposal. Other areas where we consider that there is a good case for retaining legal aid are the important debtor protections under consumer credit legislation, which allows unfair or mis-sold consumer credit agreements to be legally challenged and ensures that citizens can challenge enforcement actions. However, I mainly want to focus on a clear lacuna that will be left from the withdrawal of legal aid for debt in relation to statutory debt relief remedies. Debt relief orders, or DROs, were introduced by Part 5 of the Tribunals, Courts and Enforcement Act 2007 as a quicker and cheaper alternative to bankruptcy for those with no income and no assets. They require application via an approved intermediary working for organisations which are approved by the Insolvency Service. Approved intermediaries are experienced debt advisers who are often legal aid-funded debt caseworkers. DROs have proved a successful alternative to bankruptcy and are delivered at a far lower cost to the Insolvency Service. They are designed for people with debts of below £15,000 with no income or assets. The scheme enables the applicant to be discharged after 12 months with all their debts written off. It is generally thought to have been effective in supporting people who need debt relief but cannot afford bankruptcy or meet the criteria for an IVA. Indeed, more than 25,000 debt relief orders were made in 2010. The key reason why the scheme is successful is that it is low cost. Under the DRO scheme, the application or administration fee is £90. It is possible for the DRO scheme to work at this low cost only if the approved intermediaries are funded from elsewhere. Fees would have to be substantially increased if the DRO scheme were to be self-funding, which of course would kill it off. Until now, roughly 70 per cent of DROs in 2010 were processed by CAB debt advisers funded under legal aid. When legal aid is removed, as provided for in the Bill, these approved intermediaries will simply not be around. If the Bill goes ahead in its present form, it is not easy to see how the DRO system will survive. Thousands of people who would otherwise be able to write off their debts will not be able to do so. Their problems and suffering can be imagined. I cannot believe that BIS would be happy with that situation. Is this really what the Government intend? The obvious solution to this problem is to retain legal aid in debt cases for remedies under Part 5 of the Tribunals, Courts and Enforcement Act 2007. Citizens Advice has established from its data that approximately 13 per cent of the Legal Services Commission-funded debt casework involves DROs—in other words, about £3 million of what the LSC currently spends on debt advice. We also think that there is a case for keeping within scope advice around other debtor protections and contractual rights under the Consumer Credit Act, unsecured lending, advice around remedies for creditor harassment, disputing liability for debts and court enforcement of debts by bailiffs who, it is alleged, often exceed their legal powers. We estimate that this would be between 20 per cent and 30 per cent of current work—that is, around £5 million of what is currently funded by the LSC on debt advice. We think that this is justified and ask the Government to think again about removing all debt from legal aid. I beg to move.