Clarke unveils series of curbs to cut £2bn a year civil legal aid bill

Kenneth Clarke said funding will be axed for a wide range of disputes, including those over relationship break-ups, school admissions and expulsions, as well as clinical negligence in a bid to save 350m over the next four years.

But asylum cases, mental health cases and debt and housing matters where someone's home is at immediate risk will all still be funded.

Announcing a fundamental rethink of the 2.1 billion-a-year scheme, Mr Clarke told MPs there was a "compelling case for going back to first principles in reforming legal aid".

He said: "It cannot be right that the taxpayer is footing the bill for unnecessary court cases which would never have even reached the courtroom door, were it not for the fact that somebody else was paying.

"I propose to introduce a more targeted civil and family scheme which will discourage people from resorting to lawyers whenever they face a problem, and instead encourage them to consider more suitable methods of dispute resolution."

The importance of the case, the ability of those involved to present their own case and the availability of other sources of funding or other routes to resolve the issue were all considered in the review.

The scope of criminal legal aid will remain the same. At present, anyone with assets worth less than 8,000 qualifies for civil aid – with those worth up to 3,000 paying nothing and others expected to make a contribution.

Under the new system, anyone with assets worth more than 1,000 will have to pay at least 100 towards their legal costs.

Civil legal aid will be axed for cases involving divorce, employment, clinical negligence, and personal injury as well as immigration where the individual is not detained, welfare benefits and school exclusion appeals.

But funding will still be available for prisoners to make claims for gross negligence, claims against public authorities, community care, domestic violence and debt matters where a home is at risk, among others.

Funding for private family law cases will be axed in a move that could save 178m per year, with exceptions made for cases involving domestic violence, forced marriage or child abduction.

Civil legal aid for clinical negligence cases will also be axed, with those involved encouraged to seek other sources of funding, including so-called "no win, no fee" arrangements.

An equalities impact assessment carried out for the Ministry of Justice found that the legal aid reforms have the potential to have a disproportionate impact on women, ethnic minorities and those with disabilities.

The disability charity Scope said it was "difficult" to see "how the reforms will allow disabled people to better hold decision-makers to account for their actions".

Chief executive Richard Hawkes said: "The benefit system is notoriously complex and prone to administrative error.

"In an era of budget cuts, job losses and welfare reform that contains some pretty sharp sticks, what now happens to disabled people who fall foul of public and private bureaucracies?

"The courts have traditionally been the last line of defence against poor, unfair and unlawful decisions."