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Government rejects Low Commission call to make use of client account interest


Lord Low: urged government to make client account interest scheme compulsory

The government has poured cold water on the use of interest on solicitors’ client accounts to fill the social welfare advice and support gap as recommended last week by the Low Commission [2].

The commission suggested a number of “lawyer fund generation schemes” to raise cash for a £100m national advice and legal support fund, and called on the government to implement a compulsory interest on lawyers’ trust account (IOLTA) scheme.

According to the Low report, a number of similar schemes have operated successfully in the US, Australia and Canada.

However, in a parliamentary written answer this week, the Ministry of Justice highlighted the fact that in June 2011, in response to a legal aid consultation, it had rejected adopting IOLTA schemes.

In answer to a question asked by Liberal Democrat MP Julian Huppert, justice minister Shailesh Vara continued: “The government currently has no plans to revisit the viability of [these] schemes for England and Wales.

Mr Huppert’s question related to the Caisse Des Règlements Pécuniaires de Avocates (CARPA) system in operation in France, asking whether it was potentially applicable in the UK.

Mr Vara said the government had considered and rejected importing the CARPA scheme as an alternative source of legal aid funding and volunteered the information that neither the US or Australia schemes should be pursued at that time.

Shadow justice minister Andy Slaughter responded: “It’s appalling that the government is already pouring cold water on the Low Commission report. This is a thorough, methodical examination of the crisis in legal aid and advice which this government has caused.

“Ministers should be looking at the many sensible and moderate ideas in the report with an open and engaged mind, not trying to bury it before the ink is dry. This explains why no minister attended the launch of the report this week. Labour has assured Lord Low that we will work with him and his colleagues in exploring further the work they have done.”

The commission described an IOLTA scheme as one taking advantage of “the extra interest that lawyers can achieve through grouping together funds they hold on behalf of clients (eg mortgage deposits) and thereby getting a higher interest rate than they would on the individual sums”.

It said it had received evidence from the London Legal Support Trust that “over the past five years, they have received over £200,000 from voluntary IOLTA-style arrangements”, but concluded: “However, given its use in other jurisdictions, we support a compulsory scheme in the UK for firms with profits above an agreed threshold, which would raise much higher sums.”