Proposals to tackle unaffordable growth in legal aid

Cabinet has agreed on a package of proposals to get the legal aid cost growth curve back under control, while ensuring access to justice for those who need it, Justice Minister Simon Power announced today.

“We cannot continue to ignore the substantial cost pressures the system is facing, particularly at a time when New Zealand is being forced to borrow an average of $300 million a week.”

Legal aid expenditure has grown substantially in the past decade, and in the past three years has increased by 55 per cent, from $111 million in 2006/07 to $172 million in 2009/10.

“That growth is forecast to result in a $402 million gap between forecast and baseline legal aid expenditure over five years.

“Two-thirds of the cost increase stems from the previous government’s decision in 2006 to extend eligibility for legal aid, and in 2008 to increase lawyer remuneration.

“To be blunt, these changes were completely unaffordable and unsustainable then and they are even more so now.”

Mr Power said the proposals agreed to by Cabinet were the first stage of the Government's plan to tackle the expenditure growth curve. They will be implemented in 2011/12 and are expected to reduce expenditure by $138 million over four years.

“The changes are designed to target areas which do not necessarily require legal representation and groups with relatively higher incomes.

“I want to make it very clear up front that any changes will not affect cases involving vulnerable parties, care and protection of children, and serious criminal matters.”

The proposals are in four parts and deal with legal aid eligibility, purchasing approaches, revenue collection, and court-ordered Lawyer for the Child services.

Adjusting legal aid eligibility

This will apply particularly to family and civil cases. Eligibility for domestic violence and personal protection matters will not be affected. Proposals include:

Tightening the merits test for family cases so the 2006 criterion to take into account the interests of other parties to proceedings is replaced with a narrower test which focuses on the prospects of success of the case.
Introducing the means thresholds that already apply for family and civil legal aid cases ($22,000 per year for a single adult and $50,934 for an adult with two dependants) to less serious criminal cases, most of which cost less than $650.00. At present there is no set threshold for such cases. People above the means threshold will still be able to apply for legal aid but will have to prove their case is likely to be an expensive one, or that they are genuinely unable to pay for their lawyer. Those no longer eligible for legal aid will still have access to the services of a duty solicitor.
Adjusting the special circumstances test for family and civil cases when an applicant is above the means and merits thresholds to focus solely on expensive cases.
Discontinuing the automatic inflation adjustment of eligibility thresholds, to allow adjustments to be made in line with other Budget priorities.

These are expected to save $48 million over four years.

A new purchase approach

Expanding the Public Defence Service to take on up to 50 per cent of criminal legal aid cases in Auckland, Hamilton, and Wellington (currently 33 per cent) over time, and expanding to Tauranga, Hastings, Dunedin, and Christchurch (when circumstances allow).
Introducing fixed fees for cases that have more standard cost structures, including criminal summary cases, most family cases, and some civil cases.
Establishing high-cost case management for the most expensive cases which would involve agreeing on a price for services in advance.

These are expected to save $73 million over four years.

Improving revenue

Introducing compulsory repayment orders.
Charging interest on debts.
Re-introducing a user charge of $100 (GST inclusive) for family and civil cases (but excluded domestic violence, mental health, and criminal cases). A $30 user charge was introduced in 1969 (equivalent to $440 in 2010 dollars) and increased to $50 in 1999 ($75 in 2010 dollars). However, it was repealed by the 2006 Legal Services Amendment Act.

These are expected to save $19 million over four years.

Better management of court-ordered Lawyer for the Child services

This will be achieved by:

Extending the quality assurance framework that will be established under the recently passed Legal Services Act to Lawyer for the Child and youth advocates.
Requiring parties to contribute to the cost of Lawyer for the Child to encourage the early settlement of cases (excluding cases of abuse and violence).
Reviewing the criteria so a lawyer for the child is appointed in only more appropriate cases. The current presumption is that the court appoints a lawyer for the child unless it would serve no useful purpose.

Mr Power said the proposed changes will balance cost reduction against access to justice.

“They’re designed to encourage parties to resolve more minor matters between themselves rather than through the court system. It’s important that legal aid is targeted to those who actually need it, and that taxpayers can have confidence in the way it’s managed.

“I must make it very clear that where vulnerable parties have been harmed or are at risk of being harmed, the state will provide legal means to secure protection. There is no question of that.

“But legal aid was never intended to be used to decide how many weeks a child spends on an overseas holiday, or to determine petrol costs associated with taking a child to school.”

Changes to the purchase approach can be implemented immediately, while the other changes will require legislative amendment, with a bill expected to be introduced to Parliament mid-way through the year.

However, Mr Power said even with this package of proposals there is still forecast to be a $243 million gap in legal aid funding over four years.

“I will be reporting to Cabinet in September with further options to address the remaining funding gap after officials provide me with advice on a closer review of the purpose of legal aid and associated cost drivers predominantly in the Family Court.”

The review will cover off the following matters:

The potential for tighter criteria for what matters can proceed to litigation.
Areas of Family Court expenditure such as counselling, counsel to assist, and specialist reports.
How parties may contribute to the cost of Family Court services and processes.
Youth advocates and associated costs.
Whether civil legal aid should be available where the Crown is not a party in the proceedings.

So far the Government's legal aid reform has focused on improving the quality of services following Dame Margaret Bazley’s report in 2009. Those improvements are being implemented through the Legal Services Bill, which was passed into law last week, and operationally by the Legal Services Agency.

Proposal details are available here.

Q & A

Why does expenditure need to be constrained?
Legal aid expenditure increased 55% over three years – from $111 million in 2006/07 to $172 million in 2009/10 (including both the Public Defence Service and payments to private providers). This is not sustainable, particularly during a time of serious fiscal pressures. The Government cannot afford to continue funding large annual increases in legal aid expenditure.

Who will no longer be eligible for legal aid?
People with serious legal matters will still be eligible for legal aid. The changes are designed to target areas which do not necessarily require legal representation and groups with incomes above the prescribed financial eligibility thresholds. Better targeting of legal aid will ensure the scheme’s ongoing viability.

How will the changes affect legal aid providers?
Hourly remuneration levels for legal aid lawyers are not changing. The new purchase approach will alter the way in which legal aid providers are paid for their services. Fixed fees and the high cost case management system will provide greater certainty in the level of payment for different tasks and reduce the administrative burden associated with providing legal aid services.
Fixed fees are a method of paying for services that have been successfully used in other areas of public expenditure in New Zealand. They are also used successfully to fund legal aid in overseas jurisdictions, for instance Australia, Canada and Scotland.

How will the changes affect legal aid clients?
The changes to the purchase approach will not affect clients who will still receive high quality legal aid services, no matter who is providing the service. Eligibility changes will mean legal aid is less available for relatively higher income groups, and there will be a greater level of monetary contribution expected from legal aid clients. Most recipients of family and civil legal aid will be required to pay a user charge. All recipients who have debts will be required to pay interest on those debts.

Will there be an opportunity for public consultation on these proposals?
Further legislation will be introduced later this year to implement the eligibility and revenue proposals. Public consultation on these proposals will occur when this bill is before select committee. The Legal Services Act will allow for the implementation of the new purchasing approach.

When will the changes come into effect?
Changes to the way in which legal aid services are purchased will be phased in from October 2011. Changes to eligibility and revenue will be made through legislation introduced in 2011 and implementation will occur in 2012.

How do these changes fit with the current legal aid reforms?
The legal aid reforms progressed through the Legal Services Act address issues with the quality of legal aid services and the administration of legal aid that were identified by Dame Margaret Bazley’s review of legal aid. The review did not address funding issues associated with legal aid. The new proposals seek to ensure the long-term sustainability of legal aid funding.

Are further changes planned?
These changes make the necessary reductions in expenditure, while maintaining the integrity of the legal aid system. However, they are only a first step. During 2011 the Government will consider whether further changes are needed to legal aid. This work will involve a closer examination of the relationship of legal aid to other parts of the justice sector.

How much do you envisage contributions to Lawyer for the Child could be?
Work is currently underway to design how this proposal will operate.

Can you expand on the changes under way to simplify the use of attachment orders to improve repayment rates for income-related debt?
The Courts and Criminal Matters Bill will enhance the court’s powers to collect fines, reparation payments and civil debt. This will include streamlining the process for getting attachments orders, making them easier to use.