How To Create A Criminal Legal Aid Means Test

Transcription

1 REVIEW OF THE ARRANGEMENTS FOR THE ASSESSMENT OF FINANCIAL ELIGIBILITY FOR ACCESS TO CRIMINAL LEGAL AID Report prepared for Northern Ireland Court Service Public Legal Services Division March 2007

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3 REVIEW OF THE ARRANGEMENTS FOR THE ASSESSMENT OF FINANCIAL ELIGIBILITY FOR ACCESS TO CRIMINAL LEGAL AID Report prepared for Northern Ireland Court Service Public Legal Services Division By Tony Dignan Economic Research and Evaluation March 2007

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5 TABLE OF CONTENTS Executive Summary... i 1 Background... 1 Introduction...1 Aim and Objectives...2 Approach...2 Structure of the Report The New Means Test in England and Wales... 5 Introduction...5 Re-introduction of Means Testing: Rationale...5 Aim and Objectives...8 The New Means Test...10 Stage 1 The Gross Income Screening Test Stage 2 The Disposable Income Test Design of the Test...15 Meeting Objectives Simplicity versus Fairness Setting the Income Limits...20 The DCA Approach The Gross Income Limits Modelled Eligibility, Take-up and Costs Conclusions...26 Annex 2.A The Criminal Defence Service (Financial Eligibility) Regulations 2006: Summary Implications for Northern Ireland: Eligibility and Take-up Introduction...31 Present Arrangements...32 The tests...32 Certificates granted Modelling Approach...35 Take-up and Expenditure Eligibility Model Modelled Eligibility...41 Predictions from Age, Sex and Location Age and Location Low-income Targeting Economic Research and Evaluation March 2007

6 Economic Status Receipt of Benefit Section Profile of Eligibility...53 Take-up and Expenditure...60 Concluding Remarks...64 Annex 3.A Northern Ireland Statement of Means Form...67 Annex 3.B Family Type and Economic Status of the Benefit Unit: Definitions...69 Annex 3.C NIPS/PBNI Strategic Review of Resettlement Strategy: Key Findings...71 Annex 3.D Modelling the Change in Total Expenditure Options for a Northern Ireland Test Introduction...75 The Disposable Income Test...75 The Screening Test...79 Criteria The England and Wales Limits NI Income Limits Take-up Effects...85 Section Conclusions Conclusions and Recommendations Introduction...95 Conclusions...95 The options Access to justice Transparency Simplicity...98 Assessment Recommendations Bibliography Appendix A Statistical Tables Economic Research and Evaluation March 2007

7 Executive Summary Introduction 1) This is a report on a review of the current arrangements for the assessment of financial eligibility for criminal legal aid in Magistrates Court cases, prepared on behalf of the Northern Ireland Court Service (NICtS). 2) In accordance with the Legal Aid, Advice and Assistance (Northern Ireland) Order 1981 ( the 1981 Order ), the granting of criminal legal aid is determined by the Judiciary in Northern Ireland. Presently, there are no fixed financial eligibility criteria for applying the means test. 3) The Criminal Defence Service Act, which extends only to England and Wales, received Royal Assent in March and took effect from 2nd October From that date means testing was re-introduced in magistrates' courts in England and Wales. 4) The Public Legal Services Division (PLSD) of the NICtS is now considering the introduction of the means-testing element of the Criminal Defence Service Act 2006 to Northern Ireland, with the following aims: To ensure fair and equal access to justice. To guarantee transparency. To simplify the determination of financial eligibility for criminal legal aid. Aim and Objectives 5) The primary objective of this study is to undertake research into the financial arrangements for criminal legal aid as a basis for making recommendations on the introduction of the means-testing element of the Criminal Defence Service Act 2006 to Northern Ireland, including a set of upper and lower financial limits which are consistent with the social and economic environment in Northern Ireland. 6) The specific objectives of the research are as follows: Build a statistical model that aims as far as possible to capture the demographic, domestic and financial circumstances of magistrates court defendants; Provide a detailed profile of the eligible, partially eligible and ineligible groups, as a result of the implementation of the proposed eligibility limits with specific reference to those groups Economic Research and Evaluation March 2007 Page i

8 covered under section 75 of the Northern Ireland (1998) Act; and, Provide a picture of the consequences of a potential new means test to estimate the impact on take-up and expenditure, again with particular reference to section 75 groups. Approach 7) The approach to this study is based upon the following three main elements: A detailed examination of the new means test for criminal legal aid in magistrates courts in England and Wales. Modelling and analysis of the potential consequences for Northern Ireland of the adoption and implementation of the new means test for England and Wales. Appraisal of the options for a criminal legal aid means test in Northern Ireland. The New Means Test in England and Wales 8) The new magistrates courts scheme is based upon a two-stage procedure: An initial filter, based on the gross income screening test. A full assessment of means, based on the disposable income test. 9) In the first or screening stage, the applicants gross income is compared against specified upper and lower eligibility limits. Where gross income is less than the lower limit, the applicant is deemed fully eligible. Above the upper limit, the applicant is considered ineligible for legal aid. Where income falls between the limits, a full assessment of means is carried out to determine whether the applicant should receive legal aid, based on the disposable income test. 10) A key element in the design of the test is the choice of upper and lower limits for the gross income screening test. These are important both from a fairness perspective and in shaping the efficiency and effectiveness of the test. 11) In particular, the screening test serves as an indicator of affordability, rather than acting as a definitive measure. The screening test therefore runs the risk of errors in the assessment of affordability that Economic Research and Evaluation March 2007 Page ii

9 may in turn affect the utility of the system in aligning financial eligibility with affordability. 12) Based on the experience in England and Wales, it is necessary to examine the gross income distribution of those potentially subject to means testing in order to determine the upper and lower income limits that are appropriate to circumstances in Northern Ireland. Implications for Northern Ireland: Eligibility and Take-up 13) The report assesses the potential consequences for Northern Ireland of the implementation of the new England and Wales means test under three broad headings: Eligibility rates. Profile of eligibility. Take-up and expenditure. Eligibility rates 14) The eligibility rate is measured by the percentage of the relevant population meeting the means test criteria. When eligibility of persons proceeded against at magistrates courts is modelled using age, sex and location according to the NI Measure of Multiple Deprivation (MDM), the main finding is that eligibility is markedly higher amongst sub-groups of the population that are most at risk of being on a low income. This conclusion can be illustrated as follows: Low-income households. Almost all (98 per cent) of those in the bottom 20 per cent of the household income distribution would be classed as financially eligible, compared to around one in ten in the top 20 per cent of the income distribution. Labour market status. Eligibility rates are also close to 100 per cent for individuals living in families without work, falling to less than 40 per cent for families with one or more in full-time work. This reflects the linkage between being in a job and the risk of income poverty. Receipt of benefit is another key attribute of those living in lowincome households and modelled eligibility is well above average for individuals in receipt of means-tested benefits (97 per cent) and any disability benefit (80+ per cent). Age group. Persons in the age range have a modelled eligibility rate of around 80 per cent, falling to about 40 per cent for those aged Economic Research and Evaluation March 2007 Page iii

10 Location. In the 10 per cent most deprived areas, modelled eligibility is 70 per cent, falling to around 40 per cent in the least deprived areas. 15) The low-income targeting in the new England and Wales means test also has implications for the section 75 categories for which eligibility rates could be estimated. In addition to age, these were gender, dependents, marital status, disability and religion. 16) Overall, while there are a number of differences in eligibility rates within the various section 75 categories, these can be explained with reference to the distribution of income by age group and variations in the factors that are associated with the risk of a low income, notably economic or labour market status and receipt of benefit. Profile of eligibility 17) The age-sex-location model is useful for examining eligibility rates amongst different sub-groups of the population, and is based around observable characteristics of defendants proceeded against at magistrates courts. However, when the profile of modelled eligibility is considered in light of other information on receipt of benefit by applicants for civil legal aid and labour market status of defendants and prisoners, there are indications that the age-sex location model may be under-estimating overall eligibility amongst the population. 18) This issue was addressed by estimating a range of models, using different assumptions for the labour market status of the defendant population and with a focus on persons proceeded against for an indictable offence (and hence most likely to satisfy the merits test for legal aid). 19) For such defendants, the statistical models give estimated financial eligibility under the new England and Wales means test within the range per cent. The eligibility model which appears most plausible in relation to the modelled profile for receipt of benefit and labour market status produces an estimated overall eligibility rate of 72 per cent under the new test. Take-up and expenditure 20) In Northern Ireland, there is a financial eligibility test for criminal legal aid, but the criteria are not formalised. For that reason, it is not strictly possible to construct a model-based scenario to illustrate the current, or baseline position against which the England and Wales test can be compared. 21) However, based on the available criminal legal aid data, it is possible to generate an estimated baseline eligibility rate under the present Economic Research and Evaluation March 2007 Page iv

11 arrangements of around 80 per cent for persons proceeded against at magistrates courts for an indictable offence. When compared with the estimated eligibility rate of 72 per cent under the new England and Wales test, this would suggest that adoption of the new test in Northern Ireland would result in a reduction in financial eligibility. 22) Associated with this, it is predicted that expenditure could fall by 10 per cent, at least for those proceeded against for indictable offences. The estimated expenditure effect from the new England and Wales test is subject to an unknown margin of error. 23) However, when the financial details from a sample of Statement of Means Forms was processed through the new England and Wales means test, some eight per cent of applications were classified as ineligible. This provides further evidence that the adoption and implementation of the new England and Wales means test would result in a reduction in expenditure. Options for a Northern Ireland Test 24) The two main options identified for a new Northern Ireland test are as follows: The NI version of the England and Wales means test, retaining both lower and upper income limits in the screening stage. A modified version of the England and Wales means test, with an upper income limit only in the screening stage. 25) Both options retain parity of eligibility with the England and Wales means test. The NI version does this by replicating the criterion used to specify the lower income limit in the England and Wales test. The modified version achieves the same overall eligibility rate by increasing the personal allowance in the disposable income test, by 10 per cent. 26) Focusing on defendants proceeded against at magistrates court for indictable offences, the two options yield approximately equivalent eligibility rates (68-69 per cent). Take-up and expenditure effects are difficult to gauge. It is, however, estimated that either option would reduce take-up by around 14 per cent, compared to present arrangements. 27) The main advantage of the modified version is that it is able to match eligibility with affordability - all those who satisfy the requirements of the disposable income test are deemed eligible. 28) The two-stage NI version incurs errors in matching affordability with eligibility. This occurs because some of those who are deemed eligible in the gross income screening test would otherwise fail the disposable income test. Economic Research and Evaluation March 2007 Page v

12 29) Conversely, considerably fewer defendants would be subject to the full disposable income test in the NI version (26 per cent) by comparison with the modified version that screens only on the upper gross income limit; 60 per cent would be subject to the disposable income test. 30) Notwithstanding the design differences, the two options produce very similar results for the profile of eligibility. Partly, this is because they share certain common elements, that is, passporting and screening out on gross income. Overall, the two tests give the same modelled results in 97 per cent of cases for defendants proceeded against at magistrates court for indictable offences. Access to justice 31) Both of the options perform equally well in respect of low income targeting. Neither test results in adverse differential effects on the section 75 groups for which data are available. Though there is not a perfect overlap, the disposable income test in the England and Wales criminal legal aid scheme produces broadly similar levels of eligibility as in the NI Civil Legal Aid scheme. 32) However, the modified version of the England and Wales means test is superior to the NI-tailored version in matching affordability to eligibility. That is, all those in the same circumstances as defined by the measure of disposable income are treated the same. Transparency 33) Compared to present arrangements, both options enhance transparency because they set out explicit and measurable criteria for the assessment of financial eligibility for legal aid. 34) However, as the modified NI option has a lower risk of inconsistent results across the screening and disposable income tests, it would seem to perform better in meeting the transparency criterion. Furthermore, as it is rather more akin to a single-stage test based on a defined measure of affordability, it may prove more readily communicated to key stakeholders. Simplicity 35) In the England and Wales means test, the screening test acts as a source of simplification by reducing the requirement for full means assessments based on the disposable income test. Considered in those terms, the option for an NI version of the England and Wales means test would appear to offer a distinct advantage over the alternative route of relying primarily on the disposable income test. Economic Research and Evaluation March 2007 Page vi

13 36) That advantage is, however, subject to some uncertainties. First, in both of the options identified, the disposable income test itself is a simple one, especially by comparison with existing means tests such as Income Support and also the Civil Legal Aid scheme. 37) Further, both the screening and disposable income tests require the measurement of gross income. This can often be an element of complexity in means assessment where individual applicants themselves have relatively complex affairs. 38) Second, there is a different context for the introduction of means assessment in Northern Ireland. In England and Wales, simplification was viewed as desirable on cost-effectiveness grounds as well as avoiding delay. This was on the basis that a simpler test would be more straightforward and hence less costly to administer. But present arrangements in Northern Ireland already feature a means test. Conclusions 39) The new means test was only introduced in England and Wales in October It is therefore still too early to say if it is meeting all of its objectives, including the projected simplification benefits of avoiding delay and generating administrative cost savings. 40) A full review of implementation and the first six months operation of the scheme is planned to begin in May To that extent, it may be prudent to await the outcome of the review, before drawing a definitive conclusion on the NI version of the new England and Wales means test. 41) However, the analysis in this report leads to the conclusion that a modified version of the England and Wales means test, with an upper income limit only in the screening stage, is the preferred option on the grounds of access to justice and transparency. In addition, the preferred option can be said to meet the objective of simplifying the determination of financial eligibility for criminal legal aid. In practice, it may not be much less simple than the alternative NI version of the new England and Wales means test. Recommendations 42) The main recommendation is that a modified version of the new England and Wales means test is the preferred way forward in meeting the objectives of equal and fair access to justice, transparency and simplicity. 43) The preferred option includes a screening stage, but with an upper income limit only in the screening stage. This can be set at a level that is comparable to the upper limit in the new England and Wales means Economic Research and Evaluation March 2007 Page vii

14 test. As in the England and Wales test, the screen should be based on adjusted gross income to allow for differences in family size and composition. 44) The preferred option does not include a lower income limit at the screening stage. 45) The main focus of the new test should be on the disposable income test. Primarily, this is on the basis of better ensuring that affordability is matched to eligibility. 46) The disposable income test in the preferred option has the same basic structure as in the England and Wales. This includes a personal allowance, but set at a level that is 10 per cent higher than in the England and Wales test. This is to maintain parity with the position in England and Wales regarding eligibility for criminal legal aid. 47) Passporting should be on receipt of Income Support, income-based Jobseekers Allowance and the Guarantee Credit of Pension Credit. 48) The preferred option includes the principle of aggregation, that is, the means of the applicant s partner, if any, should be included in the assessment, except where there is a contrary interest. 49) The income thresholds and the personal allowance in the preferred option would need to be reviewed and uprated on an annual basis. Economic Research and Evaluation March 2007 Page viii

15 1 Background Introduction 1.1 This is a report on a review of the current arrangements for the assessment of financial eligibility for criminal legal aid in Magistrates Court cases, prepared on behalf of the Northern Ireland Court Service (NICtS). 1.2 The criminal legal aid scheme in Northern Ireland allows for the granting of a certificate to persons who have been charged with a criminal offence or who have been brought before a criminal court on a summons. 1.3 In accordance with the Legal Aid, Advice and Assistance (Northern Ireland) Order 1981 ( the 1981 Order ), the granting of criminal legal aid is determined by the Judiciary in Northern Ireland. In considering whether to grant legal aid, the Judiciary must apply two tests: The means test. Does the applicant have sufficient means to fund his or her defence? The interests of justice test 1. Is it in the interests of justice that the defendant should have free legal aid? 1.4 Presently, there are no fixed financial eligibility criteria for applying the means test. For aid to be granted, it must appear to the court that the applicant s means are insufficient to obtain legal help in preparing and conducting a defence (Dickson, p. 138). 1.5 The Criminal Defence Service Act, which extends only to England and Wales, received Royal Assent in March The Act provides for the re-introduction of means testing, which had been abolished in April Also, under the Act, the power to grant criminal legal aid was transferred from the courts to the Legal Services Commission (LSC). 1.6 The Act took effect from 2nd October From that date means testing was implemented in magistrates' courts. The magistrates courts scheme is based upon a two-stage procedure. In the first stage, the applicants gross income is compared against specified upper and lower eligibility limits. Where gross income is less than the lower limit, the applicant is deemed fully eligible. Above the upper limit, the applicant is considered ineligible for legal aid. Where income falls between the limits, a full assessment of means is carried out to determine whether the applicant should receive legal aid. 1 The NICtS has commissioned a separate research project to review the interests of justice test (also called the merits test ). Economic Research and Evaluation March 2007 Page 1

16 1.7 Recent research undertaken by the NICtS as part of the Fundamental Legal Aid Review (FLAR) has identified inconsistency in relation to the administration of criminal legal aid in Northern Ireland and highlighted the need for a more robust and transparent means assessment. 1.8 The Public Legal Services Division (PLSD) of the NICtS is therefore considering the introduction of the means-testing element of the Criminal Defence Service Act 2006 to Northern Ireland, with the following aims: To ensure fair and equal access to justice. To guarantee transparency. To simplify the determination of financial eligibility for criminal legal aid. Aim and Objectives 1.9 The primary objective of this study is to undertake research into the financial arrangements for criminal legal aid as a basis for making recommendations on the introduction of the means-testing element of the Criminal Defence Service Act 2006 to Northern Ireland, including a set of upper and lower financial limits which are consistent with the social and economic environment in Northern Ireland The specific objectives of the research are as follows: Approach Build a micro-simulation model based on the Family Resources Survey (FRS). The FRS will have to be fused with demographic data (to be collated from various sources) on NI defendants i.e. age, sex and a neighbourhood profile to create a synthetic database of defendants that aims as far as possible to capture the demographic, domestic and financial circumstances of magistrates court defendants; Provide a detailed profile of the eligible, partially eligible and ineligible groups, as a result of the implementation of the proposed eligibility limits with specific reference to those groups covered under section 75 of the Northern Ireland (1998) Act; and, Provide a picture of the consequences of a potential new means test to estimate the impact on take-up and expenditure, again with particular reference to section 75 groups The approach to this study is based upon the following three main elements: Economic Research and Evaluation March 2007 Page 2

17 A detailed examination of the new means test for criminal legal aid in magistrates courts in England and Wales. Analysis of the potential consequences for Northern Ireland of the adoption and implementation of the new means test for England and Wales. Appraisal of the options for a criminal legal aid means test in Northern Ireland The examination of the new means test in England and Wales focuses on the rationale for as well as the aim and objectives of the new test and how these affected the choices made in designing the test, particularly the criteria used for specifying the financial eligibility thresholds A detailed understanding of the new test, including the context in which it was designed, is important in assessing the potential implications for Northern Ireland of adopting the new means test, especially the modifications that may be required to suit the particular circumstances of Northern Ireland The following issues are addressed in the analysis of the potential consequences for Northern Ireland of the adoption and implementation of the new means test for England and Wales: The financial eligibility of defendants at magistrates courts. Variations in eligibility, with specific reference to those groups covered under section 75 of the Northern Ireland (1998) Act. The impact on take-up and expenditure The approach taken to addressing these issues follows that used by the Department for Constitutional Affairs (DCA) in the design of the new means test for England and Wales. The approach is based around the construction of the Northern Ireland Criminal Legal Aid Model (NICLAM), centred on linking the Northern Ireland Family Resources Survey (FRS) with information provided by the Northern Ireland Office (NIO) on the characteristics of defendants proceeded against at magistrates courts in Northern Ireland, that is, age, sex and location according to the deciles of the NI Measure of Multiple Deprivation (NISRA, 2005) The NICLAM is used to generate modelled or predicted variations in financial eligibility amongst sub-groups of the population, including the section 75 categories in addition to the key correlates of eligibility such as labour market status and receipt of state benefits. Economic Research and Evaluation March 2007 Page 3

18 Box 1.A The Family Resources Survey The Family Resources Survey (FRS) is a large-scale continuous household survey which gathers information about the living conditions and resources of families and households, focusing mainly on income, receipt of social security benefits, housing costs, care/child care costs and savings/assets. The sample size in any one year is in the region of 2,300 family units, containing around 3,400 adults. For the purposes of this study, data were pooled for the years and , giving a sample size of 6,782 adults in 4,713 family units The final element in the approach is to specify and appraise a range of options for a new means test for criminal legal aid in Northern Ireland, as a basis for making recommendations on the introduction of the means-testing element of the Criminal Defence Service Act 2006 to Northern Ireland. For each of a range of options, the NICLAM is used to provide a picture of the consequences of a potential new means test to estimate the impact on take-up and expenditure, with particular reference to the section 75 groups. Structure of the Report 1.18 The remainder of this report is structured as follows: Section 2 examines the new means test for criminal legal aid in magistrates courts in England and Wales. Section 3 focuses on the potential consequences for Northern Ireland of the adoption and implementation of the new means test for England and Wales. The Section includes a brief overview on the present arrangements, followed by an outline of the modelling of eligibility and take-up in the Northern Ireland context. The Section then presents the main results from the financial eligibility model, including the predicted effect on takeup and expenditure. Section 4 presents the findings from the appraisal of options for a new Northern Ireland means test. Section 5 presents the conclusions and recommendations. Economic Research and Evaluation March 2007 Page 4

19 2 The New Means Test in England and Wales Introduction 2.1 This Section examines the new means test for criminal legal aid in magistrates courts in England and Wales, under the following headings: Rationale for the re-introduction of means testing in the criminal justice system. The aim and objectives of the new test. The form of the test. The design of the test, particularly the criteria used for specifying the financial eligibility thresholds. 2.2 The examination of the new means test in England and Wales serves as a prelude to the assessment in later Sections of this report of the potential implications for Northern Ireland of adopting the new means test. In particular, in assessing the modifications that may be required to suit the particular circumstances of Northern Ireland it is important to understand the choices that were made in designing the new test for England and Wales. Re-introduction of Means Testing: Rationale 2.3 Until its reintroduction in October 2006, means testing for criminal cases in England and Wales had been abolished as part of the package of reforms introduced by the Access to Justice Act Under the old regime, means testing had become a costly and bureaucratic system (DCA, 2004a), for the following reasons: Very few applications for legal aid (less than one per cent) were rejected on the ground of means. But all applications had to be processed in line with the regulations 3, including both income and capital tests as well as the calculation of contributions. Of those granted legal aid, one in 20 were required to make a contribution, but the value of contributions actually collected was insufficient to pay for the direct costs of the system. 2 The interests of justice test was retained. 3 That is, the Legal Aid Act 1988 and the Legal Aid in Criminal and Care Proceedings (General) Regulations Economic Research and Evaluation March 2007 Page 5

20 The system also imposed indirect costs on the criminal justice system as a whole, such as delays through adjournments, resulting from the need to obtain supporting documentary evidence of means before legal aid could be granted. 2.4 It would also appear that there was inconsistent application of the regulations; the 1996 National Audit Office (NAO) report on criminal legal aid means testing in the magistrates courts found a wide variation in performance in the collection of evidence of earnings or receipt of social welfare benefits. 2.5 For all of the above reasons, it was anticipated that the abolition of the means test for legal aid would yield both cost savings and efficiency gains for the criminal justice system. The cost savings were expected to accrue from the removal of processing requirements associated with legal aid applications. The criminal justice system would benefit from the reduced risk of delay that had previously arisen from the need to obtain documentary evidence of means. 2.6 The old means test was partially abolished in October 2000 and fully in April Initially, some increase in applications had been considered likely 4. As it transpired, there was a pronounced step-change in the number of applications for criminal legal aid (Figure 2.1). Prior to the abolition of the test, from June 1999 to March 2000, the average number of applications per quarter was 121,000. By 2003/04, the average per quarter had reached 170,000, an increase of 41 per cent. 2.7 Furthermore, orders granted as a percentage of applications remained relatively static both before and after April 2001, in a range from 92 to 96 per cent. Consequently, the increase in applications translated directly into a rise in orders made (+43 per cent). 2.8 A number of factors have been mooted as underlying the sharp increase in representation orders, such as changes to sentencing guidelines and growth in the number of offences (see DCA, 2004a; CAC, 2004). However, pointing to the step-change in legal aid applications that followed so closely on the abolition of the old means test, the DCA concluded the increase was in considerable part due to defendants, who would have previously been excluded from legal aid because their means would have been considered sufficient to fund their own defence, no longer having to satisfy the means test. It supports the view that numbers of applications rose considerably and rapidly once that element of financial self-selection was removed. (DCA, 2004b). 4 For example, under the old regime, there may have been individuals who had not applied due to lack of documentary evidence of means or unwillingness to disclose their financial circumstances (DCA, 2004a). Economic Research and Evaluation March 2007 Page 6

21 '000s Figure 2.1 Representation orders for criminal legal aid England and Wales Applications Orders Made 100 Jun-99 Sep-99 Dec-99 Mar-00 Jun-00 Sep-00 Dec-00 Mar-01 Jun-01 Sep-01 Dec-01 Mar-02 Jun-02 Sep-02 Dec-02 Mar-03 Jun-03 Sep-03 Dec-03 Mar-04 Source: HoC Constitutional Affairs Committee (HC746-I), based on data supplied by DCA. 2.9 The increased demand for legal aid post-april 2001 clearly eroded the anticipated administrative cost savings. The various reports and framework documents that have been prepared to inform the debate regarding the re-introduction of means testing do not say if the absence of a means test levered efficiency gains for the criminal justice system; for example, by reducing the risk of delays 5. Rather, the focus has been on the rising costs associated with criminal legal aid According to the Legal Services Commission, since 1997/98, the cost of legal aid has increased from 1.5bn to over 2bn in 2005/06. The desire to exercise greater control over legal aid costs is the main underpinning rationale for the reintroduction of means testing In addition, government is also seeking to rebalance how the legal aid budget is spent. Presently, criminal legal aid is entirely demand-driven. As the overall budget for legal aid is constrained, the escalating cost of criminal legal aid has the effect of reducing the amount that can be spent on civil legal aid, which is controlled Finally, there is a desire to ensure that those who can afford to pay for their own defence costs should do so, to ensure that legal aid resources are more fairly targeted on those who most need them (LSC, 2006). 5 Though, this would be a very difficult hypothesis to test, particularly in isolating the influence of any one factor such as the removal of means testing. Economic Research and Evaluation March 2007 Page 7

22 Aim and Objectives 2.13 The main purpose of the re-introduction of means testing in England and Wales is to exercise greater control over the costs of criminal legal aid, while still meeting the government s obligations under the European Convention on Human Rights (ECHR) to ensure that, where required by the interests of justice, legal aid is available to those who cannot afford their defence costs. Article 6.3.c of the ECHR guarantees the right of a defendant: To defend himself in person or through legal assistance of his own choosing or, if he has not sufficient means to pay for legal assistance, to be given it free when the interests of justice so require The ECHR has also influenced the setting of objectives for the development of a new means test, in two respects 6 : The requirement that any system of means testing be structured so as not to impair the efficient administration of cases, in order to best ensure compliance with the right to trial within a reasonable time (Article 6.1). The need to allow decision making to be sensitive to individual circumstances (the Article 14 right to non-discrimination) In light of the above, the government has sought to meet the following objectives in developing the new means testing model 7 : Simplicity. The new scheme should be administratively simple and straightforward to operate. Sensitivity. The scheme should be sensitive to the individual circumstances of the applicant. Transparency. That the scheme should be transparent and easily understood by practitioners, defendants and court staff alike The benefit of simplicity is that this minimises the risk of delay to the wider criminal justice system. A simple test is also likely to be more easily understood by the various interested parties. 6 See the note from the Joint Committee on Human Rights to the Chairman of the House of Commons Constitutional Affairs Committee, reproduced as an Appendix to CAC, As set out in the Criminal Defence Service Bill: Supplement to the Framework Document (DCA, 2005c). Economic Research and Evaluation March 2007 Page 8

23 2.17 However, the simpler the test the greater the likelihood of lack of sensitivity to individual circumstances and hence the more difficult it becomes to achieve fairness. For example, a test based solely on a single gross income cut-off is perhaps the simplest possible form of a means test. But such a test could hardly be considered fair. An individual with dependant children will typically have higher unavoidable outgoings and hence a lower level of discretionary or disposable income from which to meet their legal costs - than will a person without dependants having the same amount of gross income For that reason, means tests generally make some allowance for the effect of variations in family size and composition on required expenditure for outgoings such as food, housing, warmth and light, as a basis for comparing the financial resources of applicants with an estimate of their needs (CPAG, 2006) A second general principle of means-testing is that of aggregation, that is, the inclusion of the resources of an applicant s partner, if any, in the calculation of means. The rationale for this is that those living as couples will typically share their financial resources to meet necessary outgoings. This also has a fairness dimension. In the absence of aggregation, single persons who are not in a position to share housing and other costs would potentially be treated less fairly than applicants living in a couple There is, therefore, a trade-off between simplicity and fairness in devising a means test. This trade-off exists regardless of the circumstances in which the means test is being applied. If anything, the trade-off is perhaps even more acute in the specific context of criminal legal aid, where trial within a reasonable period is of critical importance, both in protecting the rights of the defendant and for the efficiency of the criminal justice system as a whole. As noted in the CAC report on the initial version of the Criminal Defence Services Bill: Reconciling the conflicting imperatives of simplicity and fairness to the defendant is the greatest challenge that any means testing system must overcome. A substantial risk exists that means testing would cause delays, both while evidence of means is being obtained and considered and because the number of unrepresented defendants would increase if the availability of legal aid were restricted. (CAC, 2004) Similar considerations prompted the DCA to develop a new test, rather than simply adopting the existing civil legal aid test: The state brings a prosecution against the individual. He has no choice other than to enter the criminal justice system, and must have access to independent legal advice.. Criminal cases are brought quickly to the courts, the means test for criminal grant must therefore be simple, yet robust, and to be able to be administered swiftly so as to avoid delay. (DCA, 2004a). Economic Research and Evaluation March 2007 Page 9

24 The New Means Test 2.22 The new means test to determine whether a defendant is financially eligible for criminal legal aid representation has two stages, as follows (Figure 2.2. See also Annex A at the end of this Section): An initial filter, based on the gross income screening test. A full assessment of means, based on the disposable income test. Stage 1 The Gross Income Screening Test 2.23 The initial filter stage examines the gross income of the applicant. If the applicant s gross income is below a lower threshold - currently 11,590 per annum the applicant is deemed to be financially eligible for legal aid. Where the applicant s gross income is in excess of a specified upper limit currently 20,740 per annum - then he or she is deemed to be ineligible for legal aid on the means test. In the event that the applicant s gross income falls between the upper and lower limits, a full assessment is carried out to assess his or her disposable income (discussed in detail below) Applicants, or their partners, who are in receipt of a stipulated meanstested benefits are automatically deemed to be financially eligible. This is called passporting. The current passport benefits are Income Support (IS), income-based Jobseekers Allowance (JSA-IB) and the Guarantee Credit component of Pension Credit (PC). Young people below 16 years of age and those aged in full time secondary education are also passported In computing gross annual income under the new scheme, the following principles apply: Aggregation. The income of the applicant s partner, if any, is included in the calculations. Equivalisation. Actual gross income is adjusted to take into account the number of persons in the family unit, and the age composition of any dependant children. This is known as equivalisation (see Box 2.A. See also Table 2A.1 for a worked example) Equivalisation was introduced to the gross income screening test as a means of enhancing sensitivity to the individual circumstances of the applicant, thereby seeking to improve the accuracy of the gross income test as an indicator of whether the applicant could afford to pay for their own defence costs, or not. Economic Research and Evaluation March 2007 Page 10

25 Figure 2.2 The Criminal Legal Aid Means Test in England and Wales Stage 1 The Gross Income Screening Test Stage 2 Disposable income Test Outcome Greater than 20,740 (equivalised) Ineligible GT 3,156 Adult Defendants Between 11,590 and 20,740 (equivalised) LE 3,156 Under 11,590 (equivalised) Eligible Passport benefit Box 2.A Equivalisation Equivalisation is the process whereby income measures are adjusted to take account of variations in the size and composition of households in which people live. The process is based on the assumption that, the larger the number of individuals in a family the higher the income that is required in order for them to enjoy living standards that are comparable to some benchmark family unit (e.g. a single person with no children). For example, suppose that a single person, a couple and a couple with two children (aged four and seven) each have an annual income of 25,000. Using the McClements scale, the equivalised income for the single person is 25,000 he or she would fail the gross income screening test. The adjusted gross income for the couple with no children would be 15,244, hence falling between the upper and lower gross income limits. The adjusted gross income for the couple with children would be 10,965, which is below the gross income limit and hence passes the gross income screening test. The calculation of the adjustment factors is outlined in Table A2.1 in Annex A. Economic Research and Evaluation March 2007 Page 11

26 2.27 The actual gross income of a single applicant without dependants can be compared directly with the specified upper and lower income limits in the test. By contrast, an applicant with one or more dependant children would see their actual gross income adjusted downward, to take account of the additional costs of supporting dependants, before being compared with the income limits (see Box 2.A). Thus, an applicant living in a couple with children is predicted to have a greater risk of inability to afford his or her legal costs by comparison with a single person having the same level of unadjusted gross income On the other hand, the principle of aggregation means that the test takes into account those circumstances where individuals live in a couple and hence can be expected to share their resources. Stage 2 The Disposable Income Test 2.29 The gross income screening test serves to provide an indication of whether an applicant could be expected to afford his or her legal costs. The purpose of the disposable income test is to determine, in more precise terms, whether applicants for legal aid actually possess sufficient resources to fund their own defence costs In order to achieve this purpose, the disposable income test takes account of the specific circumstances of the applicant. The basic approach is to derive a measure of net income which is then compared with an amount that takes into account the applicant s living expenses (Figure 2.3. See also Annex 2.A). The difference is an estimate of the applicant s disposable income; that is, the financial resources from which an applicant may be able to fund his or her defence costs. If the estimated disposable income is less than or equal to 3,156 per annum the means test is passed and the applicant is deemed to be eligible The calculation of net income in the criminal legal aid means test follows a standard approach. All sources of income count in the assessment. Deductions are allowed for tax and national insurance payments as well as childcare costs and maintenance payments. Certain state benefits are disregarded, notably those which reflect the additional costs associated with a disability. All other benefits, such as Tax Credits, child benefit and Incapacity Benefit 8, count as sources of income. 8 Incapacity Benefit is an income replacement benefit for those who cannot work due to sickness or ill-health. By contrast, disregarded benefits such as Disability Living Allowance (DLA) are not assessed on an income or insurance basis; rather they are paid to persons with specified disability conditions. Economic Research and Evaluation March 2007 Page 12

27 Figure 2.3 The Disposable Income Test Living expenses Income Personal living allowance = 5,304 Income From all sources Adjustment to living allowance by family size & composition Housing costs & Council Tax Deductions Tax, Nat l Ins Childcare Maintenance payments Disregarded benefits = Total living expenses allowance = Net Income Difference = Disposable Income Less than 3,156 Eligible Greater than 3,156 Ineligible 2.32 In calculating the total living expenses allowance, applicants are first given a personal living allowance. Presently, this stands at 5,304 on an annual basis, representing a weekly amount of 102. In arriving at this figure, the DCA relied upon the findings from the Expenditure and Food Survey, which is conducted on an annual basis by the Office for National Statistics. The Survey classifies weekly household expenditure under 12 broad headings (Box 2.B). Three of the expenditure categories were excluded in deriving a personal allowance for necessary outgoings, that is, alcohol and tobacco, recreation and culture and hotels and restaurants. The figure of 102 per week was then computed as the average expenditure per person within the seventh household income decile 9, as published in the Family Spending report Income deciles are derived by first ranking all households on the basis of their income levels and then allocating each household to one of ten equal-sized groupings (deciles) based on their position in the income distribution. So, the 10 th or highest decile contains the 10 per cent of households with the highest income levels. 10 Table A.6. Available at Economic Research and Evaluation March 2007 Page 13

28 Box 2.B Expenditure and Food Survey: Broad categories 1 Food & non-alcoholic drinks 2 Alcoholic drinks, tobacco & narcotics 3 Clothing & footwear 4 Housing (net of mortgage interest payments, Council Taxes and NI rates), fuel & power 5 Household goods & services 6 Health 7 Transport 8 Communication 9 Recreation & culture 10 Education 11 Restaurants & hotels 12 Miscellaneous goods & services 2.33 This was felt by the DCA to provide a guide to a reasonable living amount, for a number of reasons. First, the disposable income test was specified to also include a deduction for housing costs. Second, the seventh income decile was virtually certain to encompass all of the income groups that would be affected by means-testing. Finally, the implied equivalised amount for a couple ( 167 per week, or 102 multiplied by 1.64) was approximately the same as the maximum state pension for a married couple as of In the disposable income test, allowance is made for the presence of an applicant s partner and any dependent children by weighting the personal living allowance using the same equivalence scale as in the gross income test. The way in which the allowance varies by family size and composition is illustrated with some examples in Table Finally, the disposable income threshold was set at the same level as the lower income threshold for full eligibility in the income test for civil legal aid in England and Wales. The reasons for this were as follows: At 3,156 the limit was approximately six times the average legal aid cost of 515 for a case involving an indictable offence proceeding to trial in the magistrates courts. The expectation is that an individual with an estimated disposable income in excess of 3,156 would therefore be able to afford their legal fees, even if at private rates solicitors were to charge a multiple of the legal aid rate. By setting the threshold at a level which is six times the average legal aid cost, it was hoped to minimise the number of hardship claims. Economic Research and Evaluation March 2007 Page 14