The Lord Chancellor puts the lawyers on trial

In place of legal aid

There is a brilliantly simple 19th century cartoon of two farmers sweatily tugging at a cow from each end; it's obvious that each is claiming ownership. Underneath the beast is a bewigged and smiling gentleman sitting comfortably on a stool milking. The drawing graphically illustrates a great truth about litigation - that the lawyers never lose. It's a great truth which nevertheless is about to be turned on its head. One criticism of the Government is that it hasn't made many enemies. That may now change. A hard choice is on its way. Tomorrow Lord Irvine, the Lord Chancellor, takes on one of the most entrenched vested interests in the country - his own profession.

He will outline in a speech to the Law Society in Cardiff a genuinely radical reform to the legal system, in its own way the biggest since legal aid was first introduced by the Attlee government. It will extend across much of the civil justice system the revolutionary principle, tentatively and experimentally introduced by his predecessor for a small part of it, that lawyers should only be able to pick up their fees from litigants if they win their cases.

Conditional fees, often known as the "no win, no fee" system, are in essence a simple idea. The lawyer isn't paid if he loses a case for damages but increases his charges by helping himself to a percentage of the pay- out to his client if he wins. That way he covers the costs for the cases he loses. It should make litigation much more plausible for the growing group of people who aren't poor enough to qualify for legal aid but aren't rich enough to meet the costs themselves. It should indeed discourage many of the more frivolous cases; but it may well bring lawyers quite a lot of new business from those on middle incomes who shrink from the costs of litigation. The public will surely like the idea that lawyers at last have a powerful built-in financial incentive to perform well. But while it may be simple it isn't uncontroversial. The Bar Council, now surely the most formidable trade union in Britain, is marshalling its forces. The Law Society cannot be far behind.

What this is about, of course, is the spiralling legal aid budget. The principle that no-one should be excluded from going to court for damages by poverty is incontrovertible; but legal aid is a hungry monster. Since 1990-91, it has increased by 115 per cent, from pounds 682m to pounds 1.477bn. Ninety per cent goes on lawyers' fees. Since 1993-94, it has gone up by 22 per cent in a period of 7 per cent inflation. Legal aid has become for lawyers rather what housing benefit has become for landlords. It pays up relentlessly whatever the standard of service and the chances of a case succeeding. Suddenly, "no win, no fee" looks a much more attractive alternative. And Irvine will couple this with the new fast-track, fixed-cost regime for civil courts, recommended by Lord Woolf, which will deter paid by the hour barristers from spinning cases out as long as they want.

The Bar Council's objections have so far been unpersuasive, to put it mildly. In a letter to Lord Irvine, Robert Owen QC, the Council's chairman, uses the peculiar argument that the amount by which lawyers increase their fees for winning cases will be be fixed according to their assessment of how risky the case is. But since most clients won't be able to asses that risk themselves, they may have the wool pulled over their eyes and end up paying their lawyers more than they deserve. Never mind that this problem could be reduced by capping the fees increase; or that when a leading silk starts warning that lawyers may be paid too well, it strains credulity to breaking point. Is Mr Owen really saying that lawyers are such sharks that they can't be trusted to administer the system properly? And if he is, then shouldn't be looking a little more rigorously at the professional ethics of his colleagues?

There are, of course, potential problems, identified rather more cogently by the Legal Action Group than they have been by the Bar Council. One is that in cases of medical negligence actions - one of the principal deterrents against incompetence by surgeons and physicians - you need to spend around pounds 5,000 on medical examinations, expert reports, and so on, before anyone can even make a sensible judgement about whether it's worth bringing a case at all. If the client has to meet those costs, the poorest NHS patients, who are every bit as vulnerable to medical negligence as the better off, wouldn't even get to first base. Another is the problem of insuring against defeat in all kinds of cases. Even if the risk of defeat would be much less than it is under the present system, paying the other side's costs when that happens is still a daunting prospect for litigants, especially poorer ones. But instead of bleating, in tones of rather unconvincing altruism, about this problem, perhaps the legal profession should consider meeting those costs themselves. After all these will be cases they have already assessed have a good chance of success; for them litigation is a business proposition. Why shouldn't they pay some of the up-front costs themselves? Irvine will keep an open mind tomorrow; he won't rule out the possibility of keeping legal aid for some of these costs. But he will need a lot of convincing that they can't under the new regime be met by the lawyers themselves.

Certainly if the reform means that poor people can't bring cases that they have every chance of winning, then it will have failed. Lord Irvine will make it clear tomorrow that he has not intention of allowing poor litigants with good cases to fall through the net. But equally there is no reason why those who qualify for legal aid shouldn't have to consider the same question as those who pay for legal action out of their own money: has my case a good chance of succeeding?

This is a lot tougher than anything the previous government attempted on legal aid. But it goes with grain of its ideas about welfare reform. The public, if not the lawyers, will probably accept it because they don't believe, as they would have of the previous one, that this government is cutting for its own sake.It is possible, in the long run and within the long term public spending remit laid down by Gordon Brown to imagine saving from legal aid being spent on hospitals, or schools. Lawyers should remember that before they embark on a fight to the death.