Banning things just draws attention to what you're doing. Sure, sometimes there's a public outcry – or more likely a moral panic – and a politician will ban something to show they're dealing with it. But usually, you don't need to ban anything to achieve your aims. It's much more effective to just make something practically impossible or, better yet, financially ruinous. Capitalist society is full of rights you can't afford to use. Very often, that's what freedom is now: a set of theoretical actions.

And that's what judicial review is about to become.

Chris Grayling's plan to scrap judicial review for anyone but the very rich has been rumbling away in parliament for a few weeks now. It was shot down by the House of Lords in October, returned to the Commons last week and was once again voted through by the Conservatives and the Liberal Democrats. It goes back to the Lords today.

The reforms make it all-but impossible for anyone without very considerable independent wealth to challenge government policies in the courts. They are part of a growing trend in Britain whereby democracy is limited to voting every five years. Every other mechanism for holding government to account is gradually stripped away. Only the bare minimum remains.

This is what judicial review does: it allows the individual to take public bodies to court for breaking the law. When Grayling is done with it, it will only be available to the rich. This is an invitation for authorities to break the law as they please.

Will peers stand up to the Commons on judicial review?

There has been some careless talk in recent days suggesting the attack on judicial review has been overhyped and that it will actually have a modest effect. This comes particularly from Lib Dems trying to justify their actions. It is false. These reforms are just as bad as they have been presented to be by legal experts and liberal commentators.

The dismantling of judicial review does not use a ban. It is done by piling on risk to those who would challenge the government or local authority. It is the legal equivalent of erecting battlements around a castle.

The first step was to cut legal aid.

Before a judicial review takes place, it has to go through permission stage, where a judge decides whether the claim is strong enough for it to proceed. Solicitors will not be paid until this stage is passed.

With this system in place, the Ministry of Justice has then gone out of its way to front-load all the risk and the work at that pre-permission stage. This is made much more severe by the introduction of a new 'highly likely' test, which makes it acceptable for the government to have broken the law as long as the result isn't substantially different from what would anyway have taken place. Try evoking that next time you're caught breaking the law. It won't work. It's one law for the state, another for you.

The 'highly likely' test is to be worked out – you guessed it – at permission stage. This turns it into a dress-rehearsal for the judicial review. It is going to take time. And all that time the solicitors won't be getting paid. In fact, they are quite unlikely ever to be paid.

Solicitors face huge risks in taking judicial review cases under the new system

This creates a clear incentive for whichever public body is in the dock to play chicken. They know the solicitor isn't getting paid. So they know that if they can string out the permission stage for as long as possible, there's a good chance the legal representatives will have to back out.

And what happens when – as is often the case – the authorities decide they want to settle? The solicitor is put in an obvious conflict of interest. On the one hand, they should often advise their client to do so. But if they do, they won't get paid, because the case never made it past permission stage.

If you are an ethical solicitor, you'll need to start asking yourself if you can afford to do public law work. If you’re a specialist public law solicitors, you need to ask if there is a business model which allows you to exist.

Laughably enough, the Ministry of Justice calls this 'streamlining'. It is actually an unbelievable mess. It seems specifically designed to destroy any viable commercial standing for public interest legal work.

Then comes the second attack. Grayling's reforms specifically aim to discourage anyone from helping you with a judicial review. It does this by dangling the possibility of massive costs. Anyone trying to challenge an action by the authorities will have to provide information about their own funding and that of the people supporting them. So if you don't have a lot of money, but you've a wealthy cousin or supportive charity helping you financially, they could be asked for costs if the case is not successful.

Charities who fund litigation will suddenly think twice if they believe they'll be liable for costs. If it's an individual they'll be even less open to the idea. Sure, your cousin wanted to help, but does he want to help so much that he's willing to risk his house? Not likely. Ministers have made some supportive sounds suggesting they won't go for people all guns blazing, but that's not enough. When it comes to the prospect of losing your home or your savings, even a one per cent risk is a decision-making one.

Charities are likely to be put off intervening by the financial risks

Finally, the government has deterred charities and other NGOs from acting as 'interveners' – basically the equivalent of the expert on a given subject called in to a criminal trial. Under the current system they intervene in the judicial review case to contribute their expertise. But under the new system they would face significant financial risks from doing so.

This was the only area in which Chris Grayling appeared to give way following the House of Lords defeat. But it was a ruse.

Under his amendment, interveners would be liable to costs if it's found their evidence was not "of significant assistance" to the court. They will also be penalised for acting "unreasonably" or if their evidence was not necessary for the court to consider.

Again, it's all about risk. All of this will be worked out after the case, so it's up to the charity to consider if it's worth getting involved in something which could land them with such severe financial penalties that it puts them out of business. That sounds dramatic but it's a common concern, especially for the smaller groups whose hands-on experiences often make them particularly useful as experts.

In a way, Grayling's amendment even made things slightly worse. If the charity knew it would face costs, it could at least plan for them and price them into its financial year. But as any business-owner will tell you, it's uncertainty which really puts people off.

The Lords is now in a face-to-face fight with the Commons on this one, but they should ignore the siren voices calling on them to back down. This is not a financial matter. It is not a small policy measure which can be rubbished by virtue of how little press interest it commands. This is a fundamental constitutional issue. It is precisely the kind of thing the Lords are there for. It goes to the heart of the relationship between the citizen and the state.

Last week the Liberal Democrats failed to live up to either their name or their responsibilities. They voted to make the state stronger and the citizen weaker. The Lords must see the plot for what it is. They must stand firm.