Law Society research suggests housing legal aid work is loss-making for most providers
The Law Society of England and Wales has published a new interim report which has found that the majority of providers of housing legal aid are loss-making.
A study commissioned by Chancery Lane and carried out by Frontier Economics sought to understand providers’ operating model and financial situation.
The findings of the study so far reveal that:
- After adjusting for the recovery of inter-partes costs, all providers are found to be loss-making.
- The average fee earner is only able to recover around half of the full costs of providing housing legal aid.
- There is a high turnover of junior staff as they leave for better pay and work-life balance.
- Providers are working long hours with high levels of stress and burnout, which is exacerbated by the significant administrative costs involved in housing legal aid work.
The report suggested that providers rely on cross-subsidisation to sustain their legal aid housing work. It also warned that providers are exiting the market.
Frontier Economics noted that legal aid fees had not increased since 1996, and in 2011 they were cut by 10%. Conversely, typical legal costs have increased 90% since 1996, and by 40% since 2011.
The report described the administrative burden of complying with legal aid requirements as being “significant and costly, and often higher than other types of legal work”.
The time-cost of some of these compliance activities cannot be recovered from the Legal Aid Agency, it added. These can include:
- screening clients in line with eligibility requirements
- dealing with complex clients
- managing legal aid contract requirements
“Furthermore, current fee rate levels leave very little surplus with which legal aid firms can conduct other activities required to run their practice, such as training and recruitment.”
The report also highlighted a time-lag between completing legal aid works and getting paid for it. “This can take up to two to three years, which has significant implications on cashflow.”
Law Society of England and Wales president Nick Emmerson said: “This vital research reveals the lengths providers have to go to keep housing legal aid afloat in the current environment – routinely working grossly excessive hours and cross-subsidising from other parts of their businesses.
“At a time when the cost-of-living crisis is driving rising numbers of evictions and repossessions, the UK government needs to use its Civil Legal Aid Review to invest in legal aid now before it collapses completely.
“We urge the government to provide the civil legal aid system with the investment needed to ensure there is a future for this vital public service.”
A final report of the ongoing study will be published in due course.
A Ministry of Justice spokesperson said: “We are injecting £10m a year of additional funding into housing legal aid, providing free legal advice so people have the best chance of keeping their homes when they fall into difficult times, with the introduction of the Housing Loss Prevention Advice Service.
“This is an addition to the £1.5m we are providing in grant funding for trainee solicitors to complete their training and qualify with housing legal aid providers and our overarching review of the civil legal aid system.”
Harry Rodd
