Posted by Legal Futures Editor Neil Rose
Sackman: The ball is in her court
The Legal Services Board (LSB) often generates eye-rolls and irritation from the leaders of the frontline regulators it oversees and of the representative bodies attached to them.
Too busy, too interfering, costs too much money.
If nothing else, the LSB gives the regulators a taste of their own medicine.
Reading between the lines of Richard Lloyd’s independent review of the LSB published yesterday [1] – an impressively rapid achievement, as these things go, given the Ministry of Justice (MoJ) only formally commissioned him in February [2] – I sense the ‘stakeholders’ he spoke to rather enjoyed putting the boot in.
In their ideal world, the LSB would ensure regulatory standards are maintained, approve rule changes and otherwise leave them alone.
Instead, the LSB has issued a plethora of policy statements that require the regulators to meet its expectations around multiple issues, such as transparency, diversity, ongoing competence and ethics. It is pushing them forward on technology and innovation. It is trying to predict the areas of risk for which a regulatory response may be needed.
The LSB’s budget is £5.8m this year [3], recovered from practising fees at a cost of £27.88 per authorised lawyer.
Mr Lloyd’s conclusions, with the comment that the LSB has “lost its way” dominating coverage, do not paint an overly positive picture of the oversight regulator. He wants reform of the LSB in the short term and reform of the wider regulatory regime in the longer term.
Some of the problems he identifies are an inevitable consequence of the imperfect regulatory settlement that is the Legal Services Act 2007.
If you have eight regulated legal professions and eight regulators (the patent agents and trade mark attorneys share one but don’t forget the Institute of Chartered Accountants in England and Wales, which regulates its members that do reserved probate work), then you need someone to ensure they all operate to certain common standards.
The LSB would say – with some justification – that its policy work has also been trying to raise these standards.
But in doing so, it fumbled its fundamental task of holding the regulators to account for the work they were already doing.
I have written before about how the failures at the Solicitors Regulation Authority (SRA) that led to Axiom Ince and SSB Law raised significant questions about the oversight regulator itself – it was only two years ago that the LSB judged that the SRA had passed its annual performance assessment [4].
Now, the SRA is under an unprecedented three statutory enforcement measures imposed by the LSB – statutory directions [5] to address the failures over Axiom Ince, and both a public censure and performance targets [6] given the failures over SSB Law.
Meanwhile, the Bar Standards Board has been on the LSB’s naughty step for years for its poor performance, while the Legal Ombudsman was in a state of near-failure earlier this decade.
While the LSB should receive credit for the improvements now happening at all three, equally it has to take its share of blame for letting these failures occur in the first place.
And Mazur? Well, it appears that everyone dropped that ball. But again a cross-profession issue like this is one where the LSB should have led.
Mr Lloyd’s recommendation that the LSB separate its performance oversight and policy operations is clearly right.
It still has a role to play in convening the frontline regulators where necessary. And there will be areas of policy where it will take the LSB’s broader view to push the profession forward.
And think about the alternatives. No doubt many would welcome a return to the (not so) halcyon days of self-regulation. Unfortunately, as Sir David Clementi clearly showed more than two decades ago, lawyers cannot be trusted to put the public interest before their own.
You could do away with the LSB and have the profession report directly to the MoJ. Imagine the (justified) howls of protest about the necessary independence of lawyers from government.
The third alternative is a new regulatory regime. Mr Lloyd’s is the latest influential voice to call for this.
In 2020, the Competition and Markets Authority said [7] the case for wholesale reform of legal services regulation was even stronger than in 2016, when it first recommended it. In 2024 the justice select committee said the case for reviewing the Act was “growing stronger and stronger” [8], an argument then then Lord Chancellor Alex Chalk accepted [9].
Last year, legal services minister Sarah Sackman said the Mazur ruling was further evidence [10] of “a growing case for re-examining the legislative foundations of legal services regulation”.
However, my understanding was that she did not consider it a priority, particularly given the MoJ’s much bigger challenge of criminal justice reform. Fair enough.
Until now, the MoJ has hedged its bets on the question. The Lloyd review may well require an actual decision one way or the other.
Such a review would likely end up more radical – much more radical – than the Clementi reforms that led to the 2007 Act.
Professor Stephen Mayson’s work offers a template. His independent review in 2020 [11] recommended that all providers of legal services, whether legally qualified or not, should be registered and regulated by a single regulator.
He said it was time to move from regulating lawyers to regulating legal services, but to differing degrees depending on the risk to the public interest of the work. This meant a qualification should no longer be the sole route into becoming a regulated provider.
A supplementary report [12], in 2022, said legal regulation was not protecting consumers from harm – both in their inability to access services and when things go wrong – meaning structural reform was more urgent than ever, while a second one in 2024 [13] said lawyers seemed to have forgotten that the public interest trumps the client interest.
Legal Futures is a child of the Legal Services Act but I have long thought, and written, that it was just a staging post to this more radical reform, starting with a single regulator.
Mr Lloyd said the current regulatory system “can still be described as something of a ‘regulatory maze’”. This is a very deliberate echo of the term Sir David used in 2004 to describe the old system.
He streamlined it to some extent by bringing together the oversight functions many different bodies had into the LSB but otherwise replaced one bunch of acronyms with another.
The profession’s vested interests managed to persuade Sir David and the government to create the hodge-podge we currently have. But times have changed, especially with technology now blurring the boundaries of regulation.
This is one of the reasons the LSB is looking at what it can do within the existing framework – earlier this year, chief executive Richard Orpin said [14] the case for a review of the list of reserved legal activities “is growing, and we intend to make it”, while the LSB is also examining the alternative of establishing voluntary standards in unregulated parts of the sector.
Ultimately, this is unlikely to be enough on its own. Such changes would require MoJ approval anyway and show the fundamental cracks in the current regime. Mr Lloyd may just have tipped the argument for a new Legal Services Act over the edge.