tiintax

I am grateful to Ian Brownhill for his article on the Justice Gap blog with the news that the government is changing what happens if you are accused of a crime.  From this autumn, if you are accused and found innocent, you will no longer be able to claim reasonable costs of your defence but only an amount equivalent to the amount which would have been paid out if you’d been on legal aid.  So no fancy forensic work and no high profile barrister and you might at some point have to make a Sophie’s Choice between keeping your house and keeping out of prison.

Where does this come from?  The legislation is in The Costs in Criminal Cases (General)(Amendment) Regulations 2012.  So, yes, I thought I’d have a look for the impact assessment.  And, no, there isn’t one.  This is what the Explanatory Memorandum says:

10.1 The impact on business, charities or voluntary bodies was set out in the final Impact Assessment that was published with the Legal Aid, Sentencing and Punishment of Offenders Act 2012 which can be found at www.justice.gov.uk/downloads/legislation/bills-acts/legal-aid-sentencing/ia-central- funds.pdf

OK, so there’s no impact assessment for this particular statutory instrument, but the impacts were taken into account in the IA for the enabling legislation.

Let’s look there, then.

What is the problem under consideration?  Why is government intervention necessary? Individuals who are found not guilty (or acquitted) in criminal cases and who have paid privately for their defence may have their expenses reimbursed, including legal costs, from central funds.  The central funds budget is a Ministry of Justice budget.  The problem under consideration is that central funds spending has exceeded its set budget, which cannot be extended because of the Government’s fiscal deficit reduction objectives.  Government intervention is required to maintain central funds within budget.

All right, that’s plain enough.  There’s no more money.  The budget is fixed.  The problem is how to stay within a fixed budget with a fluctuating and presumably increasing set of costs.

The impact assessment should then go on to consider the options available to meet that objective. (para 58 of the IA toolkit:)

it is Government policy to regulate only as a last resort, having demonstrated that satisfactory outcomes cannot be achieved by alternatives, self-regulatory or non- regulatory approaches. These options should be considered during this step.

What do we think?  “The government should give them more money” is one obvious option that’s ruled out by the way the question is framed; what we’re looking at is ways to stay within the set budget limit.  Well what about using money that we get from elsewhere?  Fines and penalties, for example?  There was a spare 59.5 million from the Barclays fine that was only going to be used to lower the fees the other bankers paid for self-regulation, as I recall – couldn’t we use that?

The impact assessment doesn’t contain any options other than cap the fees or do nothing.  Hmmmm.

It also suggests that the amount to be raised by making the change is about fifty million a year – hey, Barclays could pay for this year and we could set a higher budget next year?  No??  Just a thought!

Legal Aid Clients and Providers: An estimated loss of up to £50m in nominal cash from central funds payments. £10m of this is from companies being excluded from central funds on the basis that they might be able to buy insurance. £40m is from paying only legal aid remuneration rates. The burden would be shared between providers and clients depending on whether clients choose to pay their provider over and above legal aid rates.

All right then – this is the important bit.  The change means that companies can’t claim back their expenses any more but are expected to have (or obtain) insurance, which saves around £10m a year.  The remaining £40m is shared between providers and clients.  Track that thought, it’s important.

Because impact assessments are all about the impact on businesses.  The theory is that if the state makes you and me fill in a form on a Sunday afternoon, well, we’re annoyed but we haven’t lost anything financially.  But if the state makes a business fill in a particular form, then – the theory goes – the business has suffered an “administrative burden” – has been forced to pay someone to spend some time doing something that doesn’t earn them profits.

And that’s why impact assessments are all about the costs and benefits to business – you and I, as citizens, may think that it’s unconscionable that we wouldn’t be reimbursed our legal fees were we to be falsely accused of something but, in Impact Assessment terms, that doesn’t matter.  What does matter here, I think, is that the government hasn’t followed its own rules.

Part of the impact assessment, as I’ve said before, is to look at the impact on small businesses.

Now, it says clearly that the burden of this change will fall on both “clients and providers” – both the people wrongly accused and the people who defend them.  The people who defend them who might be solicitors or barristers, in small or large firms.

Because what is a “small firm” for the purposes of the small firms impact test?  It’s a firm with fewer than 20 employees.  Not partners, not members; employees.

How many solicitors are in small firms within that definition?  I don’t know, but I’d suspect a large number.  How many barristers?  I don’t know, but I’d suspect nearly all of them.  And the government has made this regulatory change without taking that into consideration.

Look at clauses 56-60 on the impact assessment for the main legislation.  Most of it is about the removal of repayment provisions for companies accused of wrongdoing: the only consideration of small firms who are legal services providers is in paragraph 60:

Small firms which are legal services providers may be affected by these proposals if their income and/or levels of business is lower in future.

Well big hairy woo – how many of them might be affected and in what way?  We don’t know and we don’t care, seemingly.  But look again at the explanatory memorandum to the actual SI making the change:

11. Regulating small business

11.1 The legislation does not apply to small business.

I put it to you that this is nonsense.  The statutory instrument fixes “the amount to be paid to the accused”: how many wrongly accused people are also small business owners (one man or “micro businesses” in the jargon)?  We don’t know, and MoJ doesn’t care.  How much of the impact of this change will affect legal services providers who are also small businesses?  Again, we don’t know, and MoJ doesn’t care.

Yes, I agree, I’m finding a piece of legislation I don’t like and trying to find a way of overturning it on a technicality.  But for heaven’s sake, the government makes these rules to regulate its own conduct, because it knows that some of its members and servants think it appropriate to say “Yes, Minister” when they ought to be saying “are you sure, Minister?”

One final thought.  I had a not tremendously helpful response from BIS to my Open Letter to Mark Prisk on the subject of the small firms impact test.  It tells me that “independent scrutiny of IAs through the Regulatory Policy Committee” ought to drive up the quality of IAs in the medium term.  I did look on the RPC site for their opinion on the Central Funds IA but couldn’t find it, and to date they haven’t answered my phone message or email asking them for  a link.  But if you look here, at their last annual report, and turn to pages 60-62, you’ll see the MoJ has a less than stellar record of having not one impact assessment scored as “green” on the RPC’s red/amber/green ratings grid at its first attempt, and it only managed to get two of its twenty eight listed IAs through the “green” hurdle on the second attempt.  Maybe a nice little judicial review of whether this legislation should be sent back and its impact on small firms given proper consideration might encourage them to pay more attention in future?