Published: 8 August 2014
High street firms that handle legal aid-funded family law cases could face a serious shortfall of legal aid fees. Mediation experts have estimated that they could soon see a drastic shortfall in legal aid fees year-on-year. Compared to the same time in 2012/2013, before the cuts, this could be up to £109 million.
Lawyer Supported Mediation (LSM) reached the estimate through analysis of recently-published data from the Legal Aid Agency (LAA). According to their analysis of the figures, the Ministry of Justice remains on track in its effort to cut spending on solicitors fees. The result is that legal aid fees paid to law firms this year are forecast to be more than £100 million lower than in 2012/2013.
According to the data analysed by LSM, family law firms on the high street have so far managed to remain largely protected from the effects of the legal aid cuts. Excluding those cases that do not come under the scope of government funding activity, such as domestic violence, they received £132 million from the LAA in the 2013/14 financial year. This compares to £143 million received in 2012/13, representing a year-on-year drop of just 7%.
However, according to estimates from LSM, this could just represent a delayed impact as cases that began before the cuts continue to work their way through the system. As these cases reach their conclusions, firms could now be hit by a much more drastic drop in fees from publicly-funded cases. If the full estimated shortfall of £109 million compared to 2012/2013 proves accurate, this year will see a shortfall of around 74% compared to last year. The total drop in income over two years would be 76%, with just £34 million of legal aid fees being received by high street family law firms in 2014/2015.
LSM expects these cuts to affect 1,208 separate law firms. With the total loss of income forecast to reach roughly £109 million, this means an average of £90,000 per firm. They will need to try and replace this through an increased volume of private fees in order to keep their financial situation steady. Otherwise, lawyers and other staff may face redundancies as the firms face reduced revenue.
According to LSM founder and trained mediator Marc Lopatin, the situation is "actually an opportunity for impacted solicitors to innovate and bring down the cost of family law services." Lopatin goes on to point out that over a quarter of a million people separate every year, and almost 50% of those do not seek any professional advice from solicitors. He suggests that "hourly rates of more than £200 per hour put thousands off and divorce solicitors will need to find new ways of their fixing fees for a meaningful service if they’re going to attract new business and survive in their current numbers."
Though solicitors practising family law are only now preparing to feel the full force of legal aid cuts, family barristers have not had such a reprieve. In 2012/13, the LAA paid out £38 million to family barristers. The following financial year, this experienced a sharp drop of 61% to just £15 million. LSM's analysis of the data suggests that this figure will continue to fall.
K J Smith Solicitors have a team of experienced family mediators who only undertake private work and do not operate a legal aid franchise. If you wish to discuss your circumstances or to arrange a free 45 minute consultation, please contact our team today on 01491 630000 (Henley-on-Thames), 0118 418 1000 (Reading), 01753 325000 (Windsor) or 020 7070 0330 (Central London.