Law Society’s £30m cut of practising fees faces scrutiny

Phillips: Tackling the big policy issues

The £30m that the Law Society levies on solicitors for its representative work is to be put under the microscope by the Legal Services Board (LSB) next year.

The oversight regulator said it was “concerned” about the impact of this on the level of the practising certificate fee (PCF).

The Law Society, Bar Council, Chartered Institute of Legal Executives and others levy fees on their parts of the profession that are mainly for regulatory activities carried out by the Solicitors Regulation Authority and so on.

However, under section 51 of the Legal Services Act 2007, they are also allowed to levy fees for certain non-regulatory representative activities, so-called permitted purposes.

In its current budget, the Law Society receives £30.6m of the £99.7m being raised from practising fees on individuals and firms; this is by far its main source of funding.

At the Bar, £3.7m of the £13.8m it raised from the PCF was used for permitted purposes.

All budgets and proposed fees have to be approved by the LSB. In its draft 2019/20 business plan, published yesterday for consultation, the LSB said it was “concerned about the impact of non-regulatory permitted purposes on the level of the PCF”.

It continued: “During 2019 we intend to review our rules, guidance and approach to assessing PCF applications. As part of this review, we plan to conduct a targeted review of expenditure on permitted purposes.”

The SRA has in the past questioned whether the Law Society should have the continuing power to place a compulsory levy on solicitors for its representative work.

The LSB said it also planned to review the way legal regulators ensure those they regulate remain competent throughout their careers.

“We have noted that, unlike other professional services environments, eg healthcare, there is no regular formal assessment of practitioners during their careers beyond requirements on continuing professional development.

“Particularly in the wake of QASA no longer being pursued, we consider the time is right to look again at this issue from first principles.

“Therefore, during 2019-20 we will carry out a thematic review of how regulators ensure that the people they regulate remain competent throughout their careers.”

The oversight regulator has been criticised in the past for not doing enough to promote the regulatory objective of improving public legal education (PLE), but in the draft business plan said it wanted to build its understanding of the range of organisations active in PLE and engage with possible partners.

“There may also be a role for the LSB in encouraging the frontline regulators to simplify their public-facing processes, and to develop more cross-regulator coherence in those processes, to build public confidence in navigating the sector,” it said.

“We will also use existing research and data, and where necessary originate our own research, to identify key gaps in public knowledge and to establish a baseline of legal capability to allow impact monitoring in future years.”

Another issue the LSB plans to examine is ethical issues around greater use of new technologies such as artificial intelligence and blockchain.

“Our work in this area aims to help the frontline regulators identify the key risks to the public interest and consumer protection and develop the appropriate regulatory approaches.”

It recently started a project to examine the regulatory implications of developments in technology, with a particular emphasis on ethical as well as consumer protection dimensions, with the Centre for Ethics and Law at University College London

In addition to this policy initiative, the LSB said it would also promote wider use of “regulatory sandboxes” in the sector.

These allow providers a ‘safe space’ to develop innovative ideas that could test regulatory boundaries, for example by making use of waivers and not taking enforcement action for technical breaches of rules.

The SRA already does this with SRA Innovate, and the LSB said it would explore “what similar arrangements other legal services regulators are currently using, or might use, to encourage providers to innovate”.

The oversight regulator said another task would be considering its role in addressing the concerns around the use of non-disclosure agreements.

LSB chair Dr Helen Phillips said: “I am keen to make sure that we tackle the big policy issues that affect us all. As an organisation the LSB is uniquely well placed to bring people together to share our experience and evidence, to ask the difficult questions, debate and discuss the issues, and identify the right solutions.”

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