The “sustainable consolidation” of nearly 1,200 small criminal law firms could be driven by requiring them to have a minimum number of duty solicitors, the Law Society has proposed as its alternative to price competitive tendering.
It has also suggested that the government underwrite the run-off cover of criminal law firms to ease the exit of solicitors from the market.
The Lord Chancellor, Chris Grayling, yesterday agreed to look in more detail at the society’s plans and not to dispense with clients’ choice of solicitor.
The pair also acknowledged on the need for “managed market consolidation”. The government’s current proposals would reduce the 1,600 law firms that currently deliver criminal defence services to as few as 400.
The Law Society’s blueprint recognises that “there is over-capacity in the criminal legal aid market” – with reported crime falling – and that “despite costs pressures over the last decade, [the] trend has been toward ‘micro’ firms rather than consolidation into larger firms”.
Its model is based on the contracts for GP surgeries. It would see an initial bidding process and then rolling three-year contracts – renewed annually for another year – subject to the firm’s willingness to fulfil the contract at the Legal Aid Agency’s set price and adherence to the conditions of a quality and capacity framework. This greater certainty would make it easier for firms to “attract investment and make long-term business decisions”, the society said.
The framework would specify a number of criteria a firm must achieve in order to retain its contract – such as having one qualified fee-earner for every four unqualified fee-earners – and they would be tightened annually “to drive consolidation and expansion”. The society said this would be “sustainable consolidation”.
As proposed, in 2014/15, firms would need to have at least two staff members accredited by the society’s criminal law accreditation scheme and two duty solicitors; in 2015/16, both requirements would go up to three (with exceptions for rural areas), while the firm would also need to be registered to take on trainees or have an arrangement with another firm to provide a criminal law seat for a trainee.
The society said: “Presently 1,177 firms have been one and five duty solicitors, while only 317 have more than five, suggesting that a relatively low minimum of solicitors could trigger a fair degree of consolidation.
“Furthermore, firms would be required to meet certain service requirements that would encourage broader operations: notably providing a comprehensive service, providing 24/7 police station cover, answering all calls within 45 minutes and adequately dealing with 95% of duty cases.”
Chancery Lane said the need for often unaffordable run-off cover – typically up to 300% of a firm’s annual premium – is blocking market consolidation. “If the government were to offer to underwrite this sum (payouts are fairly low in the legal aid sector) on behalf of those seeking to exit the market, those wishing to retire or change career would be freed up to do so.”
Other key elements of the plan include allocating duty solicitor rota slots to firms based on their legal aid workload in the previous 12 months, rather than attaching slots to individual duty solicitors as now (and thus ending the phenomenon of ‘ghost’ duty solicitors who firms pay for their slots but do not do the work); having the minimum fee for a case paid at the start; introducing a ‘defence costs surcharge’ of up to £20 on top of the victims surcharge; and exempting law firms undertaking publicly funded work from accounting protocol UITF 40, which requires legal practices to pay tax on work in progress.
The Law Society said: “The impact on legal aid firms is that they are being tax on work in progress that the Legal Aid Agency’s rules do not allow them to bill at that time. This situation is unjust, and has a seriously detrimental impact on cash flow. In recent years many legal aid firms have been forced to take out annual loans to meet their tax liabilities.”
It also called for a stricter regime of wasted costs orders, where whichever party causes a delay or additional cost being forced to pay for it – and for wasted costs being paid directly to the solicitor, rather than Legal Aid Agency, where he or she has borne the cost of delay.