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Jonathan Djanogly's legal aid plans will benefit the insurance industry by 'hundreds of millions of pounds', say experts. Photograph: Rex Features

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Powered by article titled “Conservative MP piloting legal aid cuts may profit from the changes” was written by Randeep Ramesh, social affairs editor, for The Guardian on Friday 16th September 2011 20.09 Europe/London

The Conservative justice minister piloting controversial plans to cut legal aid and curb payouts that could benefit the insurance industry to the tune of a billion pounds a year will personally profit from the changes, a Guardian investigation can reveal.

Jonathan Djanogly, the legal services minister, is pushing a bill through parliament which will attempt to slash the budget for legal aid by £350m as well as forcing claimants to pay out of any awarded damages their lawyers’ success fees and insurance policies that cover court costs. Experts say this will benefit the insurance industry by at least “hundreds of millions of pounds”.

The Association of British Insurers admits that industry will benefit from the reforms – and if Ireland’s experience is any guide the proposals in the legal aid, sentencing and punishment of offenders bill offer a chance to cut premiums by 16%.

Djanogly, who is considered to be one of the 10 richest MPs with interests in a property, a string of stockmarket investments and a Scottish forestry portfolio, also has a personal stake in the insurance industry.

In the Commons register of members’ interests, he lists that he is a “minority partner in The Djanogly Family LLP (member of Lloyd’s)”. This means he takes one sixth of the profits from an Lloyds underwriting partnership that deals in accident, health and motor claims.

In the past three years Djanogly has been entitled to an average annual payout from the underwriters of £41,000. In 2009 Djanogly was eligible to almost £97,000 from the profits of the partnership – more than his current ministerial salary of £89,000.

The ministerial code, issued by the Cabinet Office when the coalition took power last May, clearly states: “Ministers must ensure that no conflict arises, or could reasonably be perceived to arise, between their public duties and their private interests, financial or otherwise.”

Labour said the only people arguing for these changes “are the insurance industry and Conservative ministers”. Andrew Slaughter, the shadow justice minister, said: “There are serious questions for the minister to answer. It would be a serious matter if the minister were pursuing legislation from which he might benefit financially.”

Djanogly issued a statement to the Guardian. “My financial interests are a matter of public record. I have made declarations both as a minister and as an MP.

“The government’s reforms to the no win no fee system are designed to tackle the fear of a compensation culture which inflates legal costs and forces defendants to settle even when they know they have done nothing wrong. The reforms are based on an independent review by Sir Rupert Jackson.”

Lord Justice Jackson, an appeal court judge, was tasked to look at curbing litigation costs by the former master of the rolls, Sir Anthony Clarke. His report was produced in January 2010 and Labour declined to endorse it.

However the coalition has accepted almost all of the controversial recommendations and went further by cutting back on legal aid, something that Jackson has publicly criticised.

In a lecture in Cambridge earlier this month Jackson challenged the government’s plans saying: “The cutbacks in legal aid are contrary to the recommendations in my report. I do, however, stress the vital necessity of making no further cutbacks in legal aid availability or eligibility. The legal aid system plays a crucial role in promoting access to justice at proportionate costs in key areas.”

Legal experts say Jackson’s radical change breaks with “centuries of English legal tradition” where payouts are meant to reflect injuries not the cost of a case. The UN has warned that the reforms will prevent claims, such as those in the Trafigura case, where solicitors took the case on a no win no fee basis on behalf of 30,0000 poor Africans, being brought against multinational businesses. The settlement of £30m made by the commodity trader was seen a landmark in global justice.

Ken Oliphant, current on secondment from Bristol University to head up the Institute for European Tort Law of the Austrian Academy of Sciences, told the Guardian: “Insurers around the world are trying to put pressure on governments to save on liability costs. You have to understand that legal aid was cut and no win no fee arrangements were meant to replace them, to allow people access to justice.

“If you remove that right then you will not allow ordinary people to have access to justice. If they have to pay for legal costs out of damages it may not be worth going to court.”

Since having been selected for Huntingdon, the safest of safe seats, after former prime minister Sir John Major stepped down, Djanogly, 46, rose through the ranks of the Tory party to sit on the justice team. Privately educated and with a law degree from Oxford Polytechnic, Djanogly was a partner in a City law firm until 2009.

He faced calls last year to step down for hiring private investigators to spy on local Conservatives while mired in the parliamentary expenses scandal. Djanogly’s father Harry is the founder of Coats Viyella and reputed to be the owner of the world’s largest collection of Lowry paintings. © Guardian News & Media Limited 2010

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