Litigation lawyers across the country have been anxiously awaiting the Government’s final word on the proposals to slash the amounts that claimants in Personal Injury Cases are allowed to recover by way of legal costs.
I have mentioned before that this is an agenda which is driven by the insurance industry –
Following the announcement in November 2012 there was a consultation process. Many firms responded and we have today had confirmation that for the most part the cuts will be introduced without any amendment. This means that a claimant in a motor accident case which settles early will only recover £500 for legal costs as opposed to the current figure of £1200.
Many arguments have been made that the figure seems to have been calculated on the back of an envelope following rhetoric from the insurance companies. This has been to the effect that firms currently pay £700 per case by way of referral fees. When those fees are banned in April then they will save that amount, which can be sliced off the recoverable costs. This completely ignores the fact that most firms have never paid anything like that amount for motor accident cases. It also ignores research published by the Law Society that the existing rate of £1200 was unrealistic after inflation, marketing and general management costs are taken into account –
Most of us have been expecting this result. The government appear to only hear the arguments of their friends in the insurance market.
This is going to have a marked impact on the legal profession. A large number of firms will not be able to continue in business. If the recoverable costs do not match expenses then we cannot avoid the wisdom of Dickens’ Mr Micawber –
"Annual income twenty pounds, annual expenditure nineteen pounds nineteen shillings and six pence, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery."
Others will have no alternative but to do the work as cheaply as possible with inevitable effects on quality.
Either way it will be far more difficult for ordinary people to get independent professional advice in cases againt insurers who make no secret of their wish to have lawyers taken out of the system altogether.