The Government is to introduce legal aids means testing for less serious criminal cases and bring in a user charge among measures to cut the legal aid bill.
Justice Minister Simon Power announced the changes on Wednesday morning.
Income thresholds of $22,000 for a single adult and $50,934 for an adult with two dependants will be applied to less serious criminal cases. The means tests already apply to family and civil cases.
Fixed fees will be introduced, and a user charge of $100 re-introduced for family and civil cases, excluding domestic violence, mental health, and criminal cases.
The merits test for family cases will be tightened to become a narrower test which focuses on the prospects of success of the case.
The Public Defence Service (PDS), which employs salaried staff rather than contract lawyers, will be expanded and will take on up to 50% of criminal cases in the main centres.
Mr Power says legal aid expenditure has in the past three years increased by 55%, from $111 million in 2006/07 to $172 million in 2009/10.
He says that growth is forecast to result in a $402 million gap between forecast and baseline legal aid expenditure over five years.
Mr Power says spending on legal aid is being reined in because it has become an enormous open cheque book the Government cannot afford.
The minister says legal aid must be for those who actually need it and the changes will not affect cases involving vulnerable people, children and serious criminal matters.
"But the truth is, a whole lot of things go on in our court system on a daily basis where you have to ask yourself 'should the taxpayer seriously be funding cases of minor disputes between parties which rational people should be able to sort out themselves?'"
Mr Power says the Government will also review the Family Court and prosecution services to try to find more savings.
More innocent will go to jail - Labour
The Labour Party says changes to legal aid will result in more innocent people going to jail.
Justice spokesperson Charles Chauvel says New Zealanders will be denied their right to legal defence and more people, including those who are innocent, going to prison.
Mr Chauvel says the changes are a false economy because each prisoner costs the Government $100,000 a year.
The Government's support partner, the United Future Party, says changes to legal aid will deny people the right to justice.
United Future leader Peter Dunne says while the Government must address the high level of funding for legal aid, he is concerned at how low the threshold has been set and people must have access to quality legal representation.
PDS will become monopoly - Law Society
The Public Defence Service began as a pilot scheme in May 2004, and was made permanent in 2008. It operates in Auckland and Wellington at present and will be extended to the regions in due course.
The Law Society says the expected changes would effectively turn the Public Defence Service into a monopoly.
It is promising to pressure the Government over legal aid, saying its changes to cut down costs are a threat to children.
It fears fewer lawyers will be appointed to represent a child in family law cases. And it says new and narrower testing will mean only cases likely to succeed will get legal aid.
The convener of the society's criminal law subcommittee, Jonathan Krebs, told Morning Report that if the PDS takes over many of the cases there will be issues about independence.
He says it would also impinge on lawyers' private practices and the rights of a person to choose their lawyer.
Auckland barrister Catriona MacLennan told Morning Report the Public Defence Service has a history of hiring young or inexperienced lawyers.
She says most people who get legal aid have to pay the money back and therefore should have the right to choose who represents them.
Auckland barrister Grant Illingworth told Nine to Noon that people who do not qualify for legal aid but cannot afford to pay for a lawyer will fall between the cracks.
He says they would have no choice but to plead guilty or defend themselves, which would mean they are not getting the fair trial they are entitled to under the New Zealand Bill of Rights.
Ted Faleauto, a criminal lawyer with 20 years' experience in legal aid work, believes there will be less quality representation available, as more experienced lawyers will not work for reduced pay.