Legal aid, the public funding available to people to afford legal representation, is in such crisis that on one trend people living in literal poverty will “earn too much” to qualify for a grant by 2024.
That worst-case scenario will be avoided thanks to a $148 million investment made in Budget 2022 and a new bill introduced to Parliament in November by Justice Minister Kiri Allan. The Government thinks the changes will relieve financial pressures for around 16,000 people and mean 93,000 more people will qualify for assistance in the first year of the funding.
Legislation giving effect to those changes had its first reading at the end of November, and passed with the support of Labour, the Greens and Act. National MPs gave lukewarm speeches in support of parts of the bill, but ultimately voted against it. In a brief speech on the bill, Labour MP Duncan Webb lashed National for voting against the bill saying the party opposed “access to justice”.
People in the sector warn that more needs to be done to ensure people on low incomes are able to have legal representation, whilst not being pushed into poverty because of the cost.
Lawyers also warn that they need to be fairly paid for the legal aid work they do.
Chief Justice Dame Helen Winkelmann recently described the legal aid system as broken and underfunded, warning it was “unbelievably inadequate” and will “collapse if we don’t do anything about it”.
This would have a severe impact on people’s right to justice.
Allan, picking up from predecessor Kris Faafoi, is reforming parts of the legal aid system to ensure that people who already claim legal aid are not pushed further into poverty because of the amount of money they owe the Government for legal aid.
“Recently I introduced a bill which improves access to legal aid assistance for people with low incomes, by repealing provisions in the Legal Services Act 2011 related to the user charge payment and interest charged on unpaid legal aid debt,” Allan told the Herald.
“Legal aid is an important component of accessible justice for low-income New Zealanders. It has been over ten years since the last significant change in legal aid policy settings,” she said.
The funding, and Allan’s bill, essentially rolls back a change made in the last government, to begin charging interest on legal aid debts.
Some people who claim legal aid currently have to replay part or all of the money they receive. That interest is charged six months after a case finishes at 5 per cent a year.
These charges began in 2014.
A regulatory impact statement, recently released, warns that those interest payments are pushing people into poverty. This is because people who claim legal aid often have other debt they owe to the government like Child Support debts, Ministry of Social Development repayments or court-ordered deductions.
Other debts to government often do not incur interest, but these are also the debts that tend to be repaid first.
As a consequence, the interest charged on legal aid debts mounts while other, interest-free debts are repaid, trapping low-income people with rising levels of debt.
A debt to Government Cabinet Paper from February said that 52,000 people owed legal aid debts to the Government totalling $172m. With the cost of living crisis eating into incomes, these people will be under even greater pressure to repay those debts. The same paper warned that with “approximately 80,000 people receiving legal aid each year, legal aid debt is expected to continue to grow without intervention”.
The regulatory impact statement warned that were nothing done, the Government would increasingly be indebting families with children. The Government would reap an additional $3.5 million in interest each year thanks to people who applied for legal aid.
Allan’s bill will also repeal the $50 user charge brought in under the previous government. The charge was intended to “encourage people to think carefully about whether to engage in litigation, and to contribute towards funding the legal aid scheme” - according to the regulatory impact statement, which said it had been ineffective.
“[T]he charge is doing little to achieve [this] as low-income people do not engage a lawyer unless they are serious about proceeding with litigation.
“Further, collecting a charge has been criticised as being inconsistent with the purpose of the legal aid scheme as it may deter people of insufficient means from accessing support”.
The charge was often absorbed by providers of legal aid, eating into their already low rates of pay and further discouraging people from taking on legal aid work.
The Budget funding also contributed to other changes the Government is making to legal aid, going beyond what is in the bill.
One change is to lift the eligibility thresholds for legal aid.
A person’s eligibility for legal aid is based on their income, but eligibility thresholds have not risen with inflation.
This has meant that as incomes have risen over the past decade, fewer and fewer people have qualified for legal aid.
Modelling included in the regulatory impact statement warned that if nothing was done, a single person living in poverty would “earn too much” to qualify for legal aid by 2024.
The thresholds were set in 2008. They were last changed with a 6.5 per cent staged increase over 2016-2018.
This increase was based on general inflation and did not make up for the full depreciation of the thresholds since they were set in 2008.
Allan said the Government’s “15 per cent increase to the eligibility thresholds will make 93,000 more people eligible for civil and family legal aid in the first year”.
“Additional 1.9 per cent increases every year until 2025 will continue to make more people eligible each year,” she said.
Frazer Barton, New Zealand Law Society President, welcomed the funding boost saying it was a “welcome recognition that the system is broken and needs resourcing to continue to provide the access to justice New Zealanders need”.
But Barton warned it was “only a small starting point and will not shift the dial in the way New Zealanders need it to”.
“Our legal aid system needs substantially more investment to ensure lawyers can continue to provide legal aid services and people who need to access legal aid can do so without being worried about cost or delays”.
Barton said a survey from 2021 found that “three-quarters of legal aid lawyers having had to turn away people seeking legal assistance”.
Barton said that the cost to lawyers of doing legal aid work are “often greater than the remuneration received”.
“There are few new and junior practitioners joining the system and progressing because there is no remuneration for training. We are very concerned about an increase in shortages and a lack of providers coming through. If there are fewer lawyers in the system, but more demand for lawyers, backlogs will only continue to lengthen,” Barton said, saying the problem was particularly acute in the field of family law.
Labour and the Greens piled in behind Allan’s bill at first reading.
The Act Party also backed the bill, with Justice spokeswoman Nicole McKee saying it “addresses the expense that some of our most vulnerable actually cannot afford”.
“It provides access to justice for many people, and that access will increase once this goes through, because those thresholds would have also increased, and it will, of course, decrease a lot of debt for many, many people”.
McKee criticised the Government for not providing detailed documentation with the bill when it was presented.
National’s Mark Mitchell and Paul Goldsmith made the same point.
Mitchell said he agreed with making it easier to access justice but he could not see how Allan’s bill would achieve that.
“At the moment, we can’t see that. We can’t see the immediate value in that, we can’t see exactly what they are trying to achieve, and therefore we can’t support the bill in its current form,” Mitchell said.
“This is not sound policy work,” he said.
Goldsmith went further than Mitchell and focused on the two things the bill would actually do, warning they may be ineffective, and encourage people to put-off paying debts.
“It’s far from clear to us that reducing the small barrier in terms of the $50 fine will help with that particularly, and, certainly, doing away with interest on loans will only encourage people not paying them back in any great haste,” Goldsmith said.
The Justice Committee is currently receiving submissions on the bill, and will report back in the new year.
