What Happens When the State Saves Money on Justice?

Sam Barton

This article argues that budget cuts to legal aid expenditure may have been successful in short-term fiscal savings but have resulted in expenditure shifts and increases in other areas downstream.

Why and how was legal aid expenditure cut?

According to the Ministry of Justice, legal aid expenditure in England and Wales reached its peak between 2010 and 2011 at around £2.1 billion, which is equivalent to around £39 per head of population^[1]. During and following this period, after the 2008 financial crisis, the leading language of public spending changed. Governments went from investors to cost-cutters, prioritising ‘belt tightening’ and efficiency over effectiveness and equality. It was this economic and political background that led to the implementation of The Legal Aid, Sentencing and Punishment of Offenders Act in 2013, more commonly known as ‘LASPO’. This legislation significantly reduced the scope of civil legal aid in England and Wales, removing funding for family, housing, debt, and employment cases, moving from a system where most cases were included, to one that funded only specific areas. In pure fiscal terms, this was successful in its aim, demonstrated by a £728 million (28%) real-terms reduction in legal aid spending in 2022-23 compared with 2012-13^[2].

Legal Aid as Preventative Infrastructure

Legal aid largely operates in the same way as preventative healthcare or regulatory compliance, in that it incurs upfront costs to avoid significantly higher expenditure downstream. This can be clearly seen in housing law. The Law Society has found that, as of 2024, 42% of the population do not have access to a local legal aid provider for housing advice^[3], leaving “advice deserts” where people cannot access help to prevent homelessness. Additionally, Amnesty International has said that LASPO has made it much more difficult for people to access the early specialist help they need, which could have helped to resolve rent arrears, making it more likely that relatively minor problems would escalate and lead to possession proceedings and evictions.^[4] This is likely to have contributed to increased preventable downstream temporary accommodation costs for local authorities. The Local Government Association has published that in the past five years, there has been a £737.3 million gap between the amount that councils have paid out in housing benefit to households living in temporary accommodation, and the amount they have been reimbursed by the Government.  The data shows that the size of this subsidy gap in 2022/23 was double what it was in 2018/19 (£104.5 million in 2018/19 compared with £204.5 million in 2022/23).  This gap is in addition to the huge sums of money which councils pay over and above housing benefit limits to meet the total cost of temporary accommodation, which reached £1.75 billion in 2022/23 alone. As councils bear the higher and higher proportion of the costs of temporary accommodation, this limits their ability to fund homelessness prevention services^[5]. Although this data does not demonstrate a direct link to legal aid, it does demonstrate an increasing reliance on costly emergency interventions as opposed to low-cost, early, preventative measures. LASPO cuts operate within, and work to exacerbate, this clearly overstretched system.

Additionally, the downstream costs of unresolved legal issues are not confined to housing issues. There is evidence that legal issues such as welfare benefits disputes, debt disputes and employment disputes often manifest as mental health issues. This can increase strain on already strained NHS services. A survey from the World Justice Project found that 31% of respondents in the UK facing a legal dispute had developed a stress-related or physical illness as a result of their experience^[6]. Additionally, the Guardian reported that 70% of the clients at a free legal advice centre, Harrow Law Centre, suffered from “a mental illness ranging from depression and social anxiety through to paranoid schizophrenia”, according to director Pamela Fitzpatrick.^[7] The potential consequential reliance on NHS services represents a further displacement of costs, as more people are subjected to such mental health issues than if early legal aid intervention was available to solve their disputes. This demonstrates that legal aid cuts can have wider economic consequences, reinforcing the argument that cuts to legal aid does not reduce public spending, but shifts costs elsewhere and potentially increases total costs.

If this is economically inefficient, why does the system tolerate it?

A report by Professor Graham Cookson and Dr Freda Mold in 2014 reported that “for every £1 of legal aid cost on housing advice, the state potentially saves £2.34, on debt advice a saving of £2.98, on benefits advice £8.80, and on employment advice £7.13”^[8]. This data, combined with the data above, is persuasive in demonstrating that legal aid budget cuts are not economically sound decisions for governments to make. One explanation of why they have occurred is that legal aid expenditure falls inside the Ministry of Justice’s budget, while many of the aforementioned downstream costs fall within other departments, such as local authority and NHS budgets. Therefore, substantial savings within one department budget may generate increased expenditure elsewhere, but without one single department bearing its full weight. Additionally, politicians are incentivised, by short election cycles for example, to undertake short-term, visible cuts instead of preventative spending which may reduce overall costs in the long run. Therefore, these cuts are likely attributable to political systems and incentives, as opposed to a deliberate intent to be fiscally inefficient.

Conclusion:

In conclusion, LASPO cuts were successful in delivering visible and substantial short-term savings to the Ministry of Justice’s budget. However, they have also shifted costs downstream to the NHS and local authorities through increased mental health and temporary housing costs for example. This demonstrates that unresolved legal problems generate preventable economic costs. Legal aid therefore operates as preventative infrastructure by providing support for individuals to effectively address legal disputes early, yet budget silos and short-term political incentives have allowed this inefficiency to occur and persist. Recognising legal aid as an investment that leads to long term savings is an essential step towards improving the economic efficiency and sustainability of government finances.

^[1] Ministry of Justice, ‘International Comparisons of Public Expenditure on Legally Aided Services’ (2011).

^[2] Committee of Public Accounts, ‘Value for Money from Legal Aid – Report’ (2024).

^[3] ‘Urgent need to fund legal help for renters at risk of eviction’ The Law Society Press Office (14 November 2024) https://www.lawsociety.org.uk/contact-or-visit-us/press-office/press-releases/urgent-need-to-fund-legal-help-for-renters-at-risk-of-eviction.

^[4] Amnesty International UK, Cuts that hurt: The impact of legal aid cuts in England on access to justice (2016) 20.

^[5] ‘Temporary accommodation subsidy gap has cost councils more than £700 million over the last five years’ Local Government Association (5 December 2024) https://www.local.gov.uk/about/news/temporary-accommodation-subsidy-gap-has-cost-councils-more-ps700-million-over-last-five#:~:text=In%20the%20past%20five%20years,to%20fund%20homelessness%20prevention%20services.

^[6] World Justice Project, General population poll survey module on legal needs and access to justice (2018) https://worldjusticeproject.org/sites/default/files/documents/Access-to-Justice-2019-UnitedKingdom.pdf.

^[7] Will Bordell and Jon Robins, ‘One in three people with legal problems in UK develop health issues – report’ The Guardian (29 January 2018) https://www.theguardian.com/inequality/2018/jan/29/one-in-three-people-with-legal-problems-in-uk-develop-health-issues-report.

^[8] Professor Graham Cookson and Dr Freda Mold,  ‘Social Welfare Advice Services – A Review’ (The Low Commission, 2014) https://www.familylaw.co.uk/docs/pdf-files/Social-Welfare-Advice-Services-Final-Report-20140603-Main-Text.pdf.