Posted by Legal Futures Editor Neil Rose
Starmer: Fixing the foundations, like Sarah Rapson
The proposed 29%, or £25m, increase in the Solicitors Regulation Authority’s (SRA) budget announced last week should really come as no great surprise.
The still relatively new chief executive, Sarah Rapson, has been slowly preparing the profession for this by laying out the scale of the challenge she inherited last November from Paul Philip.
While the past six months can in no way be described as a honeymoon period – indeed she told me last week that the disconnect between regulator and regulated was the biggest surprise she encountered during her initial ‘listening’ phase – Ms Rapson has the benefit of being a clean pair of hands tasked with sorting out what has been painted as a greater mess than anyone realised.
Indeed, one might see echoes of the position of Sir Keir Starmer two years ago. But for all Ms Rapson’s talk of “fixing the foundations” – a phrase much used by the prime minister too – the comparison might not provide her with much comfort right now.
(Perhaps Sir Keir should look to the SRA board to see how chair Anna Bradley has survived for more than five years, brushing off calls to take responsibility for what the SRA has become.)
From receiving a gold star from the Legal Services Board (LSB) just two years ago to now being very much on the oversight regulator’s naughty step, as well as receiving a welter of criticism from its regulated community, this is a perilous time for the SRA.
Indeed, somewhat performatively, the LSB issued a statement just two days before the SRA put out its draft business plan that only served to heap on further pressure by promising even greater scrutiny in a bid to prevent more high-profile law firm collapses.
In a perverse way, the demise of PM Law in February came at a good time for Ms Rapson (but not for its clients or staff, obviously).
First, it provides real-time support for the need for her reform programme. Second, it gives her the chance to show that the SRA can act swiftly and decisively in response. Third, it has showcased her more open and empathetic approach to communication.
Aided by a new director of communications, there has been a welcome improvement in the SRA’s attitude to the media, and Ms Rapson released information about the potential £40m fraud at PM Law that the previous regime would never have done, at least not so early on in the investigation.
Her immediate decision to commission an independent investigation into whether the SRA missed warning signs at PM Law – as it so disastrously did at SSB Law – is also positive (so long as the findings are made public). With Axiom Ince and SSB, there were just internal reviews that were kept private.
While there are many items in her in-tray, foreseeing the next Axiom Ince/SSB Law/PM Law is surely at the top. To see the SRA stumbling to catch up in the wake of these failures has not been a pretty sight.
This is easier said than done, of course. Sometimes bad people do bad things and regulators, however good they are, cannot stop them.
But in ensuring the SRA collates all the data it can about every firm in one place, and ramping up its risk function, Ms Rapson is surely on the right track. It will be exciting to see how AI analysis can augment this.
Nobody can argue with her ultimate goal of moving to a regulatory model prioritising prevention rather than cure but that is a long-term fix.
The draft business plan is also clear about the need for difficult choices. The SRA, like the Legal Ombudsman and Bar Standards Board, has seen a sharp rise in the number of complaints it receives over the last couple of years.
The speed with which the SRA handles complaints has been a longstanding problem and, after Mr Philip finally appeared to have this going in the right direction, delays are growing again under the weight of investigations.
Against a background also of Ms Rapson wanting to focus on the “big” issues – such as the high-volume claims market, the Post Office, safeguarding client money and risky law firm business models – this is why the bar in the assessment threshold test, used to decide whether to take action over a complaint, is to be raised.
Essentially, in the same way that the police might no longer come out because of a minor break-in, the SRA will in future not investigate some minor rule breaches that today it would.
This might not sit easily with the profession, but if you want the SRA to deal with every possible rule breach, then you are going to have to pay for it. If you think 29% is a lot, then wait until you see the bill for a souped-up SRA.
It will, however, be interesting to see what the LSB, which ultimately has to approve the SRA’s practising fees, decides to do, having recently rejected the ombudsman’s plea for an 11.1% increase, or £2.2m, on its current £20m budget and instead approved an alternative 6.5% (£1.3m) proposal.
The background is different – LeO needs even more radical reform of its operating model than the SRA – but the LSB made the decision knowing that it will only make things worse in the short to medium term. The SRA’s budget approval is not guaranteed.
Of course, one way to reduce practising fees is to reduce or eliminate the Law Society’s take from it.
Though the fees largely pay for regulation, the compromise behind the Legal Services Act 2007 allows the Law Society in its representative guise also to use them for ‘permitted purposes’ – certain prescribed non-regulatory activities, such as law reform and practice advice.
This means that, even though solicitors do not need to be members of the Law Society, they have to pay towards its upkeep.
Last year, solicitors paid nearly £150m in practising fees – for the SRA (£87m) and Law Society (£38m) and levies that pay towards the LSB (£3.6m), the ombudsman (£17m), the Solicitors Disciplinary Tribunal (£3.2m) and the Office for Professional Body Anti-Money Laundering Supervision (£0.7m).
It remains an ongoing debate about whether solicitors should have no choice but to fund the Law Society – one Chancery Lane is not keen on, fearing the answer to the question of how many solicitors and firms would pay for membership if given the choice.
As ever, the society is being opaque about its proposed budget but says it is utilising reserves to keep the increase in its part of the practising certificate fee to just £1-2 (compared to £50 for the SRA). But it’s still £38m or so of the profession’s money.
That debate is for another day, however. In the meantime, Ms Rapson will likely get her extra funds and will then have to deliver what she has promised.
As Sir Keir could tell her, patience will not be in abundance. Her hands are clean for now but it’s time to get them dirty.
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