The deteriorating justice system in England and Wales is hindering economic growth

The Labour government has made economic growth^[1] its top priority, committing to planning reforms, business partnerships and millions of pounds of investment in science and technology.

But economic growth is not just about innovation, investment and businesses. How the law functions is of fundamental importance for economic growth. The UK’s highly-regarded system of justice plays an important role in creating the environment of trust that underpins commerce and investment.

The legal system should be regarded as part of the national infrastructure, just as much as rail or electricity networks, or health and education. But like them, it has suffered a sustained drop in funding^[2]. And with the civil courts now in a state of neglect^[3], their reputation – and the trust placed in them – is at risk of crumbling.

For both people and businesses, the forum for resolving disputes and securing rights against one another, or against the state, involves the legal system. County courts, tribunals and bodies such as Acas^[4] (the Advisory, Conciliation and Arbitration Service) are just a few of the bodies involved in civil and administrative law, employment law, tax law and corporate law.

The Ministry of Justice budget^[5] for England and Wales, which funds courts and tribunals, started to fall in real terms in the 2011-12 financial year. This has led to under-resourcing, underequipping, and understaffing of services. Justice is an “unprotected”^[6] government department, and continues to be a low priority compared to others such as health and education.

Get your news from actual experts, straight to your inbox. Sign up to our daily newsletter^[7] to receive all The Conversation UK’s latest coverage of news and research, from politics and business to the arts and sciences. The chancellor’s spending review announced^[8] “up to £450 million additional investment per year for the courts system by 2028-29, compared to 2025-26”, which the government says will help tackle court backlogs. But years of decline have already deteriorated the system significantly. The key question to measuring the success of publicly-funded legal systems is, are they fast, fair and predictable? It would be difficult today to answer positively. There are large backlogs due to staff shortfalls compared to caseloads. When it comes to civil claims in the courts, aside from the very smallest claims, the average period from a claim to a hearing is now 77 weeks^[9]. This is an increase from 48 weeks^[10] pre-austerity. In either case, it’s plenty of time for a small business or startup to go under while trying to reclaim a debt. The position in the tribunals is not much better. According to the latest Ministry of Justice statistics, the backlog^[11] of open tribunal cases rose by 4% overall in the quarter to June 2024, to 668,000. There was a 17% jump in employment tribunal open cases, and a huge surge in appeals to the special educational needs and disability tribunal, taking the backlog up 61% to 9,200. Another example is the 79,000 appeals^[12] outstanding at the social security and child support tribunal, where eligibility for personal independence payments for disabled people is determined. This was up 12% on the year in mid-2024, causing a large number of mostly financially struggling people to wait too long for the money they are due. This has the effect of draining spending power in the local economies that need it most. So much for speed. What about whether people and businesses can rely on justice that is fair and predictable? Unfortunately, the tribunal statistics contain worrying signs that this is not reliably happening. For instance, with the social security and child support tribunal, three-fifths of hearings^[13] resulted in administrative decisions being overturned in favour of the claimant. The economic impact of fraying civil justice is hard to discern. The academic and policy literature^[14] alike tend to focus on the high-profile areas of law that affect corporations, such as property and contract disputes. Yet there are assuredly costs across the system. Employers may be unable to recruit staff until a tribunal case is settled; meanwhile, employees can’t find a new job. And small businesses may be unable to get bills paid, even for large amounts well over what their cash flow can sustain.

For countries where slow and unpredictable justice has long been acknowledged as a problem, there is solid evidence of its detrimental effect on the economy. For example, Italian growth has been shown to be hampered by the uncertainty^[16] around civil law processes, increasing the risks involved in business decisions. Economists – including Nobel prizewinners Daron Acemoglu, Simon Johnson and James Robinson – have identified the legal system as essential underpinning^[17] for the economy.

The justice system needs to be regarded as part of national infrastructure, the collection of physical and institutional systems and networks without which the economy cannot function. People do not want courts any more than they want bridges or cables for their own sake, but for all the indispensable activities they enable.

The value of the courts is indirect but fundamental. If they crumble, the economic transactions and investment enabled by a predictable, rapid justice system are held back^[18].

Civil and administrative justice does not leap to mind when contemplating the demands of the growth mission: battery factories, graphene labs and building sites all provide ministers with better photo ops. But unless there is improvement in the timeliness of decisions by courts and tribunals, growth in the UK will be facing yet another powerful headwind.

References

1. ^{^} economic growth (www.gov.uk)
2. ^{^} sustained drop in funding (ifs.org.uk)
3. ^{^} state of neglect (post.parliament.uk)
4. ^{^} Acas (www.acas.org.uk)
5. ^{^} budget (ifs.org.uk)
6. ^{^} “unprotected” (www.thenational.scot)
7. ^{^} Sign up to our daily newsletter (theconversation.com)
8. ^{^} announced (www.gov.uk)
9. ^{^} is now 77 weeks (www.gov.uk)
10. ^{^} 48 weeks (assets.publishing.service.gov.uk)
11. ^{^} the backlog (www.gov.uk)
12. ^{^} 79,000 appeals (www.gov.uk)
13. ^{^} three-fifths of hearings (questions-statements.parliament.uk)
14. ^{^} literature (repository.tilburguniversity.edu)
15. ^{^} JessicaGirvan/Shutterstock (www.shutterstock.com)
16. ^{^} hampered by the uncertainty (doi.org)
17. ^{^} essential underpinning (economics.mit.edu)
18. ^{^} held back (onlinelibrary.wiley.com)