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A Law Society-commissioned report warned last week that the impact of the Carter reforms of legal aid could see the elimination of virtually all small solicitors' offices carrying out criminal defence work.
The report says that 800 small firms will be forced to close if Lord Carter's recommendations are implemented, creating an imbalance in local supply and impacting on both criminal and civil legal aid.
The Law Society asked research group LECG to carry out the study, following the publication of Carter's review of legal aid procurement in July this year. LECG reviewed the distribution of casework and revenues for the 2004-05 financial year to come to its conclusions.
Carter recommended that firms and individual offices should be handling 200 cases a year in order to be able to pitch for a contract. However, LECG found that around 1,700 of the 2,700 offices currently doing criminal legal aid work undertake fewer than 200 cases a year. This equates to 1,300 firms.
The study also found that firms are likely to make less money from legal aid work under the Carter proposals, further stretching profit margins, which are already as low as 2 per cent. LECG warned that the reforms may force hundreds of solicitors to leave legal aid work entirely.
The report said: "A major risk for the reforms is that, following a long history of limited firm profits and related problems, the transition to a new structure may be disruptive. Many experienced practitioners and firms may leave legal aid work and prospects for long-term performance may not be attractive enough to attract new recruits. This could do lasting harm to sustainability and leave the system in little better condition than at present."
Law Society chief executive Desmond Hudson said the figures produced by LECG showed the "extreme fragility" of legal aid work. He added that it was unclear how the profit figures could enable firms to develop and run a sustainable business model.
A public consultation, ending later this month (12 October), is currently underway to canvas views on Carter's proposals.