LSB to reduce levy on profession as Law Society reveals £57m surplus

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By Legal Futures

16 June 2011


Hudson: bid to wind up pension scheme

The Legal Services Board (LSB) is to reduce its funding call on the legal profession after coming in under-budget for the 2010/11 financial year.

The news comes as the Law Society revealed a £57m surplus for 2010 and that chief executive Des Hudson enjoyed a 14% pay rise – even though his counterpart at the Solicitors Regulation Authority, Antony Townsend, saw his package drop in value.

The LSB’s newly published annual report shows that it spent £4,734,000 in 2010/11 against a budget of £4,931,000.

The £197,000 shortfall will be set off against the coming year’s budget and result in a 4% reduction in the levy on the legal profession – based on the number of authorised persons overseen by each of the eight regulators – for 2011/12.

LSB corporate director Julie Myers told Legal Futures that the under-spend was a result of “rigorous cost control, robust procurement processes and an ingrained commitment to delivering value for money to those asked to fund us”.

She added: “Alongside this, we have already committed to delivering our 2011/12 work programme for a cash-level budget of £4,931,000 – despite taking on additional work related to immigration advice, the increase in VAT on goods and services, retail inflation and the additional 1% employers National Insurance increase. In real terms this equates to approximately a further 5% reduction in costs.”

The Law Society identified four factors behind its huge surplus, which was three times that of 2009:

  • £8.8m from higher-than-expected receipts from the first year of the new system of individual and firm fees, “which have been ring fenced and set against next year’s funding requirement”;
  • £16.5m from the decision to exercise a profit share agreement under the contract of re-assurance set up when the Solicitors Indemnity Fund was closed in 2000
  • An under-spend against last year’s budget – reduced costs of £15m and better income of £5m; and
  • £10m from a technical revaluation of the pension scheme driven by accounting standards.

As first revealed on Legal Futures, this is set to lead to a 17% reduction in the practising certificate fee, from £428 to £350, and a greater drop in the fees paid by firms.

Mr Hudson said: “This surplus is set against the backdrop of our ongoing intention to reduce the cost of the Law Society in the coming years. One of our key targets is to remove from the profession the burden and risk of the society’s final salary pension scheme.

“We are in advanced talks with the trustees of the scheme that, if agreed, may result in the closure to future accrual of the scheme and it being wound up. This would require a significant one-off payment in 2011 the cost of which can in part be met because of the 2010 surplus.”

The accounts show that Mr Hudson received pay, benefits and pension contributions of £380,780 in 2010 (£334,895 in 2009 and £304,849 in 2008), Mr Townsend £221,815 (£224,051 in 2009 and £205,445 in 2008) and Legal Complaints Service chief executive Deborah Evans £198,758 (£196,620 in 2009 and £160,821 in 2008).

In a statement the society said: “The CEO’s pay and performance is set by the office-holders of the Law Society and affirmed by the remuneration committee. There was no increase in his base pay for that period either.” Mr Hudson’s pension contribution stayed static as well.

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