Since 2007, and the implementation of proposals from Lord Carter's review of legal aid (Carter, 2006), most immigration and asylum application and appeals work is paid for on a system of fixed fees. The premise of the fixed, or standard, fee is that providers are paid a sum which represents the average cost of a case. Some cases will cost more and some less, but overall the payments should roughly equal the work done – the ‘swings and roundabouts’ principle. The fee varies depending on the type and stage of the case, and is set out in regulations (secondary legislation) which are updated periodically. Cases which cost three times the fixed fee will ‘escape’ the fixed fee and be paid at hourly rates, which also vary according to the type and stage of work.

Even before the Carter Review and the LASPO Act (2012), which reduced fees further, Moorhead noted the discrepancy between the government view that the legal aid scheme was generous and practitioners’ arguments that it was a ‘toxic job’ and they could barely survive on legal aid rates (2004:p186). He pointed out the lack of robust data on the operation of firms and not-for-profits working in legal aid, the relationship between legal aid and commercial practice, and how legal aid practices responded to economic changes. He also discussed the increased bureaucracy and surveillance and the passing of administrative costs to the providers even before the fixed fee and the most recent cuts were implemented, which made those cuts more difficult to manage. Still less is known about how barristers manage these issues.

This chapter explores in more detail the economics of immigration legal aid businesses and practitioners, arguing that there are five main threats to financial viability in the market-based system:

• 1) The fixed-fee scheme causes significant financial losses.

• 2) A great deal of financial risk has been placed on practitioners.

• 3) Delays or lag between doing the work and getting paid cause severe cash-flow difficulties.

• 4) The transaction costs of doing legal aid work are too high and have not been factored into the price paid for the work.

• 5) Economies of scale are not available, or had already been maximised before the fixed-fee scheme was implemented.