Lawyers overpaid by £76.5m in legal aid cases, watchdog finds

The National Audit Office refused to sign off the accounts of the Legal Services Commission (LSC) after uncovering the sum.

Most of the money – 43.6m – was the result of legal aid providers over-claiming for the work they did in legitimate cases. The rest involved cases with clients "whose eligibility could not be demonstrated".

An additional 2.1m was erroneously charged by the Commission to clients. The NAO said the Commission was seeking to recover the money "where practical".

More than one in three family and immigration cases examined by the NAO were incorrect or not fully supported.

NAO head Amyas Morse called for a "sustained focus at senior levels within the organisation" to build on existing improvement work.

LSC chair Sir Bill Callaghan blamed "a small minority" of legal firms for the overpayments and said work was ongoing to tackle the problem.

The massively increased level of overpayments represents 3.2 per cent of the Commission's annual expenditure.

In December, after the previous year's accounts were also qualified by the NAO, the LSC agreed a "financial stewardship plan" with the Government.

And in March the chief executive quit and the Government announced that the LSC – which is responsible for the provision of both civil and criminal legal aid in England and Wales – would become part of the Ministry of Justice to allow ministers closer control.

The NAO found it was "highly unlikely" that results could be achieved quickly enough to prevent next year's accounts also being qualified.

Legal aid is already in the firing line for public spending cuts, with Justice Secretary Kenneth Clarke unveiling plans this month to slash 350m a year from the budget.

Sir Bill said in a statement: "The National Audit Office acknowledges that the LSC has made progress in correcting the financial issues it raised last year."

He added: "Most providers do an excellent job in delivering legal aid and managing their business.

"However a small minority continue to over – or mis-claim for the work they do. This impacts the legal aid budget significantly each year and can't be tolerated."

A system of auditing cases when there were billing anomalies had resulted in a "significant rise" in the number of contracts being terminated – 90 since April compared with 13 last year, he said.

Automatic, electronic checks and controls would be introduced.