Law Society and SRA budgets rise but cost of practising to fall


Law Society: Budget going up

The costs of practising for solicitors is set to fall this year even though both the Law Society and Solicitors Regulation Authority’s (SRA) budgets are on the rise.

The individual practising certificate (PC) fee will stay at £278 for a third year, while individual contribution to the Compensation Fund will fall by a third to £60, with the firm contribution reduced from £1,680 to £1,150.

The Law Society has issued a consultation on its plans today that show a proposed budget of £134.3m to run the two organisations in 2019/20 – almost the same as the current year – and pay the levies imposed on the profession for the Legal Services Board (LSB), Legal Ombudsman, Solicitors Disciplinary Tribunal and Financial Conduct Authority (for anti-money laundering purposes).

With £30.6m coming from other sources – a falling figure, including £14m in the society’s commercial income, which continues to drop year on year – that leaves a total net funding requirement from practising fees of £103.7m.

The society proposes to use £1.2m of reserves, meaning £102.5m needs to be collected from PC fees, £2.8m more than last year.

However, with more solicitors on the roll, the society said it has been able to keep the PC fee flat.

But the Law Society said a project due last year to review the operation of firm fees – calculated as a percentage of turnover – would now not happen until 2020.

“We have done a significant amount of work on this, but have decided that we should not propose changes at this time,” the consultation said.

“This is because many of the relevant processes are likely to change because of regulatory reform and work to modernise our IT. The profession is also being asked to handle a lot of change, including anti-money laundering regulations. We now plan to start this work in late 2020.”

The SRA will get the largest slice of the money raised (£54.1m), a rise of £1.5m which the regulator attributed in part to an increase in the amount of work needed to combat money laundering.

The Law Society will receive £31.5m (up £900,000) under the ‘permitted purposes’ provision of section 51 of the Legal Services Act 2007. These are non-regulatory activities for which the Law Society can nonetheless charge the profession.

Once signed off by the Law Society council, the PC fee then has to be approved by the LSB.

There are questions, not least from the SRA itself, about whether the society should have the continuing power to place a compulsory levy on solicitors for its representative work.

The LSB said last year that it was “concerned about the impact of non-regulatory permitted purposes” on the level of the PC fee and its business plan for this year includes a review of how it assesses PC fee approval applications.

“As part of this review, we plan to conduct a targeted review of expenditure on permitted purposes,” it said.

The compensation fund pays grants to those who have suffered financial hardship because of a solicitor’s dishonesty or failure to account for client money.

It particularly underwrites sole practitioners because where there is an innocent partner in a firm where money has been taken, its indemnity insurer covers the loss,

Last year, the SRA increased contributions substantially because of the risk of greater pay-outs arising in particular from solicitor involvement in dubious investments schemes.

The SRA said one of the main reasons for the fall this year was a decline in the number and complexity of interventions – the number of firms closed down by the regulator fell to a 10-year low last year.

But it said the overall contribution remains higher than recent years because of “the continuing risk of a greater number of high-value claims”.




Leave a Comment

By clicking Submit you consent to Legal Futures storing your personal data and confirm you have read our Privacy Policy and section 5 of our Terms & Conditions which deals with user-generated content. All comments will be moderated before posting.

Required fields are marked *
Email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Reports

No larger firm can ignore the demands of innovation – that was the clear message from our most recent roundtable: “The law firm of the future”, sponsored by LexisNexis Enterprise Solutions. It comes in many forms, predominantly but not just technology, and is not simply a case of automating process. Expertise and process are not mutually exclusive.

Blog

22 August 2019

Mind the gap

The gap I am talking about is the one between what PII and the compensation fund covers. It is a surprisingly large gap and so far hundreds of clients, and millions of pounds, have fallen into it.

Read More

Loading animation