Droughts and deserts: a study of legal aid market failure

Droughts and deserts: a study of legal aid market failure

Desert road, Flickr, Creative Comms licence, moominsean

Barrister Jo Wilding today publishes new research on the supply side of the market for immigration and asylum legal aid services. It is the first study taking a single-sector perspective across the branches of the legal profession in England and Wales. It looks at the interaction between financial viability for providers, quality of work and the matching of supply and demand. You can read the report here.

Justice Gap readers will already know there are advice deserts for various areas of law all over the country, and asylum and immigration law are no exception. The map below shows large areas (in grey) where there are no providers at all. But even in areas where there is at least one provider, my research into the immigration legal aid market showed that ‘advice droughts’ can arise where there is no meaningful access to advice and representation.

It works like this: the standard fee for asylum work is lower than the amount it costs for a lawyer to do the work properly. Solicitors said the average cost is double the fixed fee; barristers worked out that the simplest cases cost 1.5 times the fixed fee. Lawyers who insist on continuing to provide a high-quality service – ‘doing what needs doing in that particular case’ – lose money on every standard fee case they do. The possibility of escaping the fixed fee, when the case costs triple the amount paid, does not mitigate the losses.

That means lawyers depend on subsidy to reconcile quality with financial viability. Subsidy comes from privately paid work or other areas of law that pay better or more promptly. For not-for-profits, it comes from a wider charity or from grant funding, but that may divert resources into non-legal work or contract management. Barristers chambers which do a lot of legal aid work are unnervingly dependent on a very small number of high earners who no longer do legal aid work themselves, whose chambers contributions are much higher than they would pay elsewhere.

Even so, there are limits to subsidy, so the practitioners and organisations in my study had both limited their legal aid capacity and made prioritisation decisions which meant that most of their work would be paid at hourly rates. One had halved its team size and focused its reduced capacity on unaccompanied children, vulnerable individuals and judicial review work. Another had become referral-only, taking on the most complex cases, which were outside the standard fee scheme. A third prioritised detention, unaccompanied children and trafficking cases.

This is not cream-skimming: these organisations committed to doing the most complex work, at risk of non-payment (particularly for judicial review work) and often with long delays in getting paid, and having to ‘protect’ their work against downward assessment, but with the possibility of eventually being paid for (most of) the hours they worked.

But it means that, for an adult walk-in, first-time asylum applicant, there is virtually no chance of being taken on by a high-quality representative because they cannot afford to do the work, however evidentially or legally complex the case might be. In an ‘access point’ (administrative area) with only one or two providers, that might mean that would-be clients have to travel a long way to find an alternative representative.

It also means that, even where there are multiple providers, there may be no capacity. The 2018 contracts have moved away from the previous restrictions on new matter starts, and no provider should now be unable to take on a client because it has run out of matter starts. But they may still find themselves unable to open any new cases: in Manchester, which had several providers at the relevant time, a barrister explained that clients were unable to find representatives, to the point that the Tribunal had to adjourn cases. When I contacted providers in Manchester, they explained that they still had matter starts available, but no capacity. Demand far outstripped functional supply so that there was no meaningful access to representation, even where the map would have suggested an ample supply. These are the advice droughts.

 

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The evidence suggests that providers can reconcile quality and financial viability only at the expense of client access. Refugee and Migrant Justice, which tried to maintain client access and quality, suffered a catastrophic loss of financial viability. Other firms choose to maintain client access and financial viability but, except in very limited circumstances, this comes at the cost of quality. Some appear to explicitly cap their work at the amount paid on the fixed fee: two participants had been told, in job interviews elsewhere, that ‘we don’t go over the fixed fee and we don’t do escape fee.’ Another talked about low-qualified, minimally supervised caseworkers (or ‘least cost labour’) missing obvious but vital points in a previous firm they had worked in.

It is difficult to criticise the firms which take the financially rational approach of only doing the work they are paid for. Nobody expects a car dealer to sell a Rolls Royce for the price of a Ford Cortina – and the dealer would soon go bankrupt if he did. But, except in the simplest of cases, the quality of the work done isn’t adequate for the client’s needs and adds little value to the case: particularly taking limited instructions from clients and failing to produce detailed witness statements, but also failing to prepare the client adequately for interview, failing to get reports which might have benefited the case, failing to refer clients to medical experts and so on.

What’s more, by capping the work at the level paid, the lawyer adds to the impression that the fixed fee is adequate, because the information the Legal Aid Agency or Ministry of Justice receives is that most cases cost around the fixed fee. The fixed fee becomes an attractor point that falsely reassures the funder that it generally represents the average cost of a case.

When Lord Carter of Coles published his report in 2006, advocating a move to market-based procurement of legal aid services, competition was supposed to both determine the price the funder would pay for legal aid services and to ensure quality, underpinned by peer review and professional regulation.

 

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But it appears that market forces are not capable of ensuring quality in this particular market – if indeed they really do in any public service market. There are three main strategies for maintaining quality: ‘choice’, ‘voice’ and ‘exit’ (see Hirschman, 1970). The evidence from this study and others (see Refugee Action’s ‘Tipping the Scales’ report) suggests that clients often have no ‘choice’ on entry to the market. There may only be one provider within reach, and they must use a provider within their geographical access point if that provider has capacity. If there are multiple providers, still there may only be one with capacity. In any event, newly arrived asylum seekers have no meaningful basis for judging quality. Level three (threshold competence) on peer review is sufficient to hold a contract, and there is no discrimination on grounds of quality, meaning even the providers who offer a bare minimum service are guaranteed a flow of clients.

‘Voice’ does not work. The Legal Ombudsman jointly commissioned research with the Solicitors Regulation Authority, which was published in 2016 (here), because of concerns that the low level of complaints to the ombudsman and professional regulators did not reflect the level of issues raised by the Legal Services Board. I was a member of the research team, and we found that asylum-seeking clients rarely understood their right to complain, even when it was set out in the client care letter as required. They also felt the process was intimidating because they had to first complain to their own representative, before going to the ombudsman. In any case, they rarely understood there was a problem with the quality of advice until it was too late, and there is no legal aid to help with making a complaint (in a foreign language about a system they’re unfamiliar with).

‘Exit’ is explicitly barred to asylum clients in England and Wales. Unless they have made a complaint about the existing provider to the ombudsman or regulator, which has been upheld, no other provider can grant them legal aid. Dissatisfaction with the service, or even outright loss of trust and confidence, doesn’t justify a change.

What happens to quality in the market overall in this scenario? The economist George Akerlof wrote a paper in 1970, called The Market For Lemons, using the second hand car market as a metaphor for explaining declining quality in a market. When buyers cannot readily inspect (or cannot understand) the quality of a used car, they will only be willing to pay the average price for any item in that market. Sellers with a poor-quality car to sell – a lemon – have an incentive to sell because they can get a price that is more than the value of the car. Sellers with a high-quality car to sell – a peach – cannot get a price that reflects the car’s value, and are likely to withdraw it from the market. The quality in the market degenerates, perhaps to the point where buyers no longer have any confidence in the quality of the goods in the market.

Of course, legal services are not used cars. But the metaphor works: the Legal Aid Agency audits the procedural quality of files, but there is little inspection of the substantive quality of work. Clients cannot inspect quality, for the reasons given above. The Legal Aid Agency pays a standard price which represents the notional average. Those providers who are willing to provide a service at that cost can afford to maintain or increase their market share. Their market position is protected by the fact that dissatisfied clients cannot leave (akin to returning unsatisfactory goods). The providers who have high-quality services to trade, which are not covered by the notional average price, must reduce their market share to limit their losses to the amount they can afford to subsidise. They then trade their remaining services in other markets (private work, better paid work, non-legal services) or they downsize and trade fewer services. The overall quality in the market goes down.

That is not susceptible to numerical proof. Even if you compare peer review scores over time, perceptions of reviewers are not static, so the comparison is not like-for-like. In any case, peer review mainly targets providers where quality concerns have been raised, much more than by random sampling. But the Public Accounts Committee severely criticised the Ministry of Justice in 2015, saying:

The Agency’s own quality assurance processes indicate that the quality of face-to-face legal advice is unacceptably low, with almost one in four providers failing to meet the quality threshold. This has serious implications in terms of both value for money for the taxpayer and access to justice for legal aid claimants. The Agency could not explain why these results were so bad, or whether they are related to the reduction in fees paid for civil legal aid. It seems to have done nothing to understand why some providers are falling short of the quality standards expected.

In 2017-18, the peer review data shows far more immigration providers achieving the top level (level one) on peer review than in any other category of civil legal aid work. But it also shows very significantly more providers receiving level four (below competence) on peer review than in any other area. Again, this may not be directly comparable because of different sampling methods and different reviewer perceptions. But it amounted to twelve providers, meaning that more than five percent of the supplier base (234 contract holders in August 2017) was below competence.

The LASPO post implementation review report concluded that the market, despite the cuts, is ‘sustainable at present’. The findings of my research suggest otherwise, that there is already a state of market failure, both in terms of access to services and their quality. Supply is not matching demand, with advice deserts and advice droughts leaving vulnerable people without advice and representation, even when it appears to be available, while the current pricing and auditing system drives out quality and protects the market position of the poorest-quality providers.

The ‘market’ in legal aid is a monopsony – a term coined by the economist Joan Robinson for the situation where there is only one buyer but multiple sellers, as compared with a monopoly, where there is only one seller, and multiple buyers. Either situation creates an imperfectly competitive market, and a high risk of market failure. The government and its ministries and agencies need to urgently recognise the limitations of markets like this. In a monopsonistic market, only the buyer can ensure adequate availability and quality of services. It needs to be properly resourced to do that. But if there is no realistic prospect of increased funding, then it needs to spend smarter. As the monopsonist in this market, the Legal Aid Agency and Ministry of Justice have got to get to grips with these issues.

But the analysis of demand from my study demonstrates that a large proportion of demand is pulled into the system through failures – poor-quality decision making in the Home Office and other state bodies escalating demand, performance target clashes shifting demand and cost around the system, wasted transaction costs on all sides from the auditing and management of contracts, demand recycled back into the system in emergency work and fresh claims because poor-quality providers still get legal aid contracts.

So looking at legal aid on its own will never be enough. It’s time to build a whole-system view of this – a whole-system understanding of what demand is, where it comes from, how demand can be reduced without reducing access to justice, how lawyers mediate supply to meet the demand they face.

I hope this report will kick start that process.