Lawyers who drag out criminal cases to boost their fees could be fined under plans being considered by the Government.

In a scathing report on the running of the criminal justice system, the Audit Commission found court delays were wasting £80m a year. It suggested turning around the way lawyers are paid so they earn more for resolving cases promptly.

The £80m wastage – enough to pay for an extra 3,800 police officers – was squandered by "delays and inefficiencies throughout the system. Radical change is vital if real improvements are to be made," the report concluded.

Current arrangements for criminal lawyers mean it may be in their interests to cause delays, it said. "This could be countered by the establishment of a culture in courts that challenges inadequate preparation and measures the performance of lawyers, and a payment scheme that rewards the expedition of cases where possible. The Government is considering fines to deter lawyers from stalling criminal cases to boost their fees."

The criminal justice system is "struggling to bring more offenders to justice", the report said, pointing to the gap between the 5.2 million crimes recorded in 2000-01 and the 326,000 offenders sentenced in court during the same period.

There was also a clash between local targets and national ones, it found. Although the Home Secretary, the Lord Chancellor and Attorney General have set out targets, "at the point at which services are delivered, objectives become more narrowly defined and it is not always easy to see how they fit with the national objectives".

The report also found sentencing was not deterring criminals from reoffending, and they often did not receive the support and rehabilitation they needed to help them.

"Within two years of starting a community sentence or finishing a prison sentence, over half of all offenders are back in court on other charges," it said.

Responding to the report, a Lord Chancellor's Department spokesman said: "We're looking at the ways in which lawyers are regulated and paid to ensure that this reinforces good professional behaviour.

"Our thinking is still at an early stage."

Janet Paraskeva, chief executive of the Law Society, which represents 80,000 solicitors, said the Audit Commission's conclusions were simply not right.

"There is no evidence that solicitors are prolonging cases unnecessarily," she said. "The current payment systems for lawyers is based on standard fees rather than payment by the hour, so they already provide a powerful disincentive to lawyers stringing out cases."

A Bar Council spokesman said: "Recent reforms, which are now beginning to bite, have removed the overwhelming majority of incentives to prolong cases, which are now categorised and paid according to their type.

"Judges have full powers to penalise lawyers who unnecessarily drag out cases and we would urge them to use them."