Hundreds of charities providing legal services face uncertain futures after new contracts were introduced by the Legal Services Commission.
The commission, which runs the legal aid scheme in England and Wales, introduced unified contracts last month saying that organisations it funds will be paid fixed fees rather than traditional hourly rates.
About 440 voluntary organisations are funded by the commission. Many deal with the most complex and time-consuming cases and fear the new rules could jeopardise their income.
"Smaller groups that work with refugees, asylum seekers and people with mental health problems will probably go to the wall," said Elizabeth Balgobin, chief executive of London Voluntary Service Council, an umbrella group for charities in the capital. Balgobin has written to legal aid minister Lord Hunt saying the contract "runs counter to other Government policies and undertakings towards the third sector" because the commission's strategy lists socially excluded people as a priority group.
"With the introduction of fixed fees, we believe many advice providers will be reluctant to take on too many of these clients," she said.
A commission spokesman said the new contract was designed to achieve "best value for money" and would entitle more people to receive legal aid.
He added that cases where the time taken costs more than three times the fixed fee would be paid on an hourly rate. "Cases involving court proceedings can also move onto a legal aid certificate and be paid for on a different basis," he said.
But Andy Gregg, chief executive of London Advice Services Alliance, which supports advice organisations, said the 'three times the fixed fee' concession was just a smokescreen, because hardly any small organisations spent that much time on individual clients.
He said hundreds of organisations in the capital would be affected. "Our major concern is that specialist agencies such as Lasa and organisations such as law centres that routinely take on complicated cases will lose significant amounts because of their commitment to providing a high-quality service," he said.
"Conversely, if they try to reduce their levels of support to clients with complex cases so as to meet the new charging restrictions, then quality is bound to suffer."
Patrick Jones, advice manager at Asylum Aid, which currently receives about £60,000 a year from the commission, said: "It could lead to a substantial decrease in our income."