10 February 2006 | Anusha Bradley

Law firms will be forced to bid for legal aid contracts under proposed reforms aimed at curbing the government's soaring legal bill.

Spending on legal aid has increased from £730 million in 1997 to £1.2 billion in 2005, according to figures from the Department for Constitutional Affairs.

The report by Lord Carter, Procurement of Criminal Defence Services: Market based reform published this week, recommends that fixed pricing be applied to all criminal legal aid work for police stations and magistrates' and crown courts. It also proposes suppliers are rewarded for efficiency and says flexibility in working with rural and minority communities is required.

Reform would occur over a three-year period to give suppliers time to adjust.

The changes are expected to lead to a number of the 2,500 suppliers merging, resulting in a "larger number of more efficient, quality suppliers who profit from increased volumes of work," the report said.

Lord Carter said the current system of paying lawyers on the basis of hours worked provided little incentive to work efficiently.

Instead, firms would bid for one- to two-year regional contracts, providing the government with greater predictability of costs and enabling it to develop a sustainable base of preferred suppliers.

"Such a market structure will mean the price paid for criminal defence reflects the costs of delivering that service," the report said.

A further report specifying financial details of the proposal will be published in the spring.

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