Vulnerable people in Sussex could be denied access to justice under a Government scheme to cap the soaring legal aid bill, MPs warned yesterday.

Solicitors left out of pocket under a controversial new contract will abandon legal aid, according to a Commons select committee.

Its report accused the Government of creating an "atmosphere of panic" by rushing through a shift from hourly payments for solicitors to fixed fees.

At risk was the funding of vital legal work tackling everything from domestic violence to child care proceedings, welfare benefits, debt and housing disputes.

The Commons Constitutional Affairs Committee highlighted how 35 per cent of firms in the South East acting in cases considering whether children should be taken into local authority care would be worse off under the new system.

In family help proceedings, dealing with disputes such as buying or selling a home, often caused by family breakdown, the situation was even worse - with 40 per cent of firms in the region suffering an income drop.

The report concluded: "We are deeply concerned that the effective reduction in case fees for family legal aid suppliers will make it increasingly unattractive to practice in this field of law."

It added: "Although it is clear that there is an urgent problem with legal aid expenditure, it is no solution to try to introduce changes in an atmosphere of panic.

"We fear that if the reforms go ahead there is a serious risk to access to justice among the most vulnerable in society."

The new contract is the start of a move towards a 'market-based' system for legal aid, which will ultimately include price-competitive tendering for the work.

But critics argue that poorer people will no longer be able to have the solicitor of their choice to represent them - and may even be forced to represent themselves against paid lawyers.

Oliver Heald, the Tory constitutional affairs spokesman, said: "This report confirms how reckless and ill-thought through the Government's plans really are.

"Our network of high street solicitors will be damaged, leaving 'advice deserts' with many vulnerable people unable to access justice close to home."

But Vera Baird, the legal aid minister, said: "In order to safeguard our legal aid system for the future, we need to make sure we are getting the best possible value from it."

The Government is aiming to cut £500m from the £2.1bn annual legal aid bill, by moving to fixed fees and using fewer - but larger - firms.