Let’s look at the finances

So the MOJ are looking to cut the legal aid budget by a further £220 million.  For a moment let’s not even consider whether they have to (as some would argue that they’ve already achieved those cuts by basing their maths on outdated figures) or whether criminal legal aid should take another hit (no rise for 20 years and, in that time, only cuts resulting in a real term reduction of fees of somewhere between 43% and 63% – whether it’s 43 or 63, it really doesn’t matter – either way, it’s huge).

Let’s also, for the moment, not even consider the dramatic effect these cuts will have on access to justice – there are already many excellent articles out there already which detail all of the problems that the MOJ have either not realised or have just decided to ignore.

Let’s look at this figure of £220m.  

MOJ figures say that 1200 firms will go out of business.  Some say that figure is more likely to be far higher with some estimates being 1500.  I haven’t the figures on how many staff each of the firms employs, however, the average figure to ‘play’ with seems to be 10 so let’s go with that and let’s be nice to the MOJ and take the middle of the two numbers of firms likely to close – so that’s 1350 with 13,500 staff.

£220m divided between those firms is £163,000 per firm.  Each of those firms will no longer pay tax or VAT or National Insurance…….EVER.  That’s not just no tax, VAT or National Insurance for one year but year on year on year.  They won’t occupy premises in the High Street so a little bit more of our High Streets will die.  Clients who would previously have visited that street and paid parking charges and shopped impulsively will no longer do so.  The staff at that law firm will also no longer do the same.

£220m divided between those 13,500 employees is £16,300 per person.  Each of those people will no longer pay tax or National Insurance.  All that lost revenue – gone.  Granted, some of those people will find new employment but where ?  The new super-firms have staff already.  Those firms currently have spare capacity due to the downturn in work (due to another Govt policy of telling everyone off rather than charging them!!).  Those firms are, in order to make the new fees work, just going to try and soldier on with their current staff working ‘around the clock’.

So, inevitably, a number of those 13,500 are going to end up claiming benefits.  Instead of contributing to the wealth of the country, they will be deducting from it.  Suddenly, does that rush to cut £220m seem worth it ?

Have the MOJ ‘crunched the numbers’ ?  It doesn’t appear to have done so.

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4 Responses to Let’s look at the finances

  1. Pingback: Exhibit A – the “child pornographer” | a barrister's wife

  2. Pingback: sex, self promotion and Stobart: a note for lawyers | a barrister's wife

  3. Mary Clarke says:

    Let’s not forget the potential redundancy payments the government might have to find. Most partners/sole practitioners will go to the wall literally, become bankcrupt. There will be a huge mess to clear up.

  4. Pingback: Why legal aid reforms must be stopped, Exhibit A: the “child pornographer”

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