Budget: Frustration over inability to access reserves
The Legal Ombudsman’s (LeO) first ever in-year call for supplementary budget, seeking an extra £344,000, has gone to the Lord Chancellor for approval after being given the green light by the Legal Services Board (LSB).
We revealed last month that LeO said “exceptional circumstances have led to significant pressures” on it £12.8m budget, meaning there was a risk of overspend by the end of the financial year on 31 March 2021.
The extra costs totalled £654,000, but LeO has identified mitigating savings of £310,000.
Explaining the LSB’s decision, chair Dr Helen Phillips cautioned that the power to levy extra budget mid-year contained in the Legal Services Act 2007 “should only be used rarely, not least to avoid causing uncertainty for levy payers. The board is mindful of the financial pressures facing the sector due to Covid-19”.
But she said the LSB was satisfied the request was “rational, proportionate, and that alternatives had been considered”.
The areas where the additional money would be spent, especially in relation to strengthening LeO’s leadership, “were a necessary investment to address performance issues”, she wrote.
Dr Phillips said the board shared LeO’s frustration that the MoJ had indicated it would be hard for LeO to access its reserves, which at nearly £18m are more than three times what it needs to hold as a contingency should the organisation have to be wound up.
“It is imperative that together we will continue to explore this issue with government officials,” she said.
She added that the board was “disappointed” that a significant proportion of the amount requested – £283,000 – related to calculation errors in the original 2020-21 budget application. “It took some assurance from hearing that the errors were discovered due to more robust controls.”
She highlighted also the £100,000 budgeted for costs associated with accrued annual leave and providing for staff to carry over additional leave – this could defer performance problems to next year while also impact wellbeing in the current year, she said – and another £100,000 for “one-off high-performance pay rewards”.
Dr Phillips said: “The board was surprised to note the quantum given the current performance situation.”
The Lord Chancellor must approve the amount to be raised through the levy on the profession to pay for LeO and so the decision moves on to him.
Subject to this approval, the additional budget will not be invoiced on the profession until March 2022.
LeO is currently consulting on a 19% budget hike [1] for 2021/22.