MoJ: Roundtables next month
The Ministry of Justice (MoJ) is taking forward work on whether interest on lawyers’ client accounts could be diverted to fund legal services for people unable to afford advice.
Legal Futures revealed in May 2024 that it had commissioned research into the issue and the MoJ has now invited stakeholders to take part in a series of roundtable discussions next month.
The ‘Interest on Lawyer’s Client Account’ (ILCA) scheme “would require law firms to forgo the interest they currently receive on their client accounts”, according to the invite.
It went on: “There are significant demand and pressures on the justice system and advice sector. With wider funding constraints across both the public and third sectors securing additional financial resources to address these challenges will be difficult.
“In response, and as part of the future development of the legal support strategy, we are considering innovative approaches to generate additional funding for key areas including access to justice.”
The MoJ has drawn inspiration from international models commonly known as Interest on Lawyer Trust Account (IOLTA) schemes. Since being allowed in the US in 1981 – Australia and Canada have had similar schemes in place since before then – IOLTA has generated over $4bn in revenue.
The invite says the roundtable discussion aimed to generate feedback on an ILCA scheme “and better understand the implications such a policy could have on legal aid providers”.
In 2011, in response to a legal aid consultation, the MoJ rejected adopting IOLTA schemes and did so again in 2014 in response to a recommendation of the independent Low Commission.
There now appears to be greater urgency to find new ways to fund free legal advice, however.
In April, a report commissioned by the Legal Services Consumer Panel in collaboration with the Legal Services Board on how regulation could improve access to justice said regulators should explore “alternative funding streams”, such as interest on client accounts, levying wealthy law firms and residual funds from collective actions.
We also reported in April on a new project run by the Centre for Socio-Legal Studies – together with the Access to Justice Foundation and Surrey University – exploring new funding streams for the not-for-profit legal advice sector, including interest on client accounts and levies of large law firms.
Then the Civil Justice Council’s review of litigation funding in June said the government should consider whether to introduce an access to justice fund, “a new and supplemental aspect of civil legal funding” funded by a small percentage of the profits from litigation funding, conditional fee agreements and damages-based agreements. It would back early legal advice and alternative forms of dispute resolution.
Meanwhile, Parliament’s justice select committee last week announced a new inquiry into access to justice, with its terms of reference including what potential funding options would increase access to justice without impacting the public purse, including an “access to justice fund levy”.
According to Law Society research, almost all of the 21% increase in profits per partner seen by SME law firms last year came from client account interest.
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