The government is planning to offload £100m of corporate fraud legal defence costs on to the insurance market by withdrawing legal aid for the sector.
The Department for Constitut-ional Affairs (DCA) has consulted legal expense insurers on shifting the bill from the public to private sector. It is tipped to move on to discussions with directors' and officers' (D&O) insurers after the election.
A source close to the DCA said: "The department is determined to do something. It is very high on its agenda. The problem is perception. You have corporate fat cats being protected by the public purse. Legal aid should be going to the poorer end of society."
But the breakdown of the £100m annual legal bill to an average of just 20 cases per year makes the sector highly unattractive to the legal expenses market.
A legal expenses insurer said: "It is high risk for a low number of claims and the average claim is
£4m-£5m. Premiums would be too high for after-the-event insurance while take-up would be too low for before-the-event. This sort of thing fits more comfortably into the D&O market."
The DCA was unavailable for comment.
The £60m case that collapsed
The recent Jubilee Line fraud case that collapsed last month is a perfect example of why insurers are loath to get involved in fraud cases.
The trial against six executives cost an estimated £60m, lasted nearly two years and ran up a legal aid bill of £14m. It had to stop for 52 days as jurors called in sick and another three weeks as three jurors became fathers; five lawyers also fathered babies during the trial.
At one point the jury was reduced from 12 to 10 people when a juror was arrested for fraud.
The Attorney General Lord Goldsmith immediately announced an inquiry into the debacle.
