Income: LeO receiving far fewer £400 case fees than expected

The Legal Ombudsman (LeO) is to reduce its budget by 14% – amounting to nearly £3m – over the next year, it has revealed.

However, there will not be a similar fall in the levy the legal profession pays to fund LeO, because its reduced income will in large part be accounted for by a far lower receipt of case fees last year than had been expected.

The budget also reflects the significantly lower caseload that has materialised against LeO’s planning assumptions, which is set to lead to lower staff numbers at its Birmingham base.

LeO’s £17m budget for 2012-13, as published last week in its business plan, is made up of £16.8m from the levy and just £212,000 from case fees. Last year its budget was £19.7m, made up of £17.5m from the levy, £1.9m from case fees and £281,000 from other income.

A spokesman confirmed to Legal Futures that it underspent significantly in 2011-12 and so the lower income from case fees had not had an adverse affect on the levy.

Lawyers against whom a complaint is lodged have to pay a £400 case fee unless the outcome is in their favour and the ombudsman is satisfied that they took all reasonable steps to resolve the complaints under their own procedures. They also have two ‘free’ complaints a year before a fee is charged.

LeO had expected case fees would provide around 5% of its income, but it has proven to be only about 1%. There are three reasons for this: the proportion of cases where the reasonable steps exemption applies has been higher than expected; very few firms or lawyers are exceeding the ‘free’ case allowance; and many cases where case fees have been charged involved failing firms which go out of business without

paying. As a result, LeO does not expect to collect around 18% of cases fees charged to date.

The 2011-12 business plan was based on receiving 165,000 contacts and opening around 14,000 investigations in the year. The reality is around half of these figures, although numbers are rising. At the same time, there have been substantially more complaints going to a formal ombudsman’s adjudication than expected.

The 2011-12 business plan anticipated a headcount of 304, but this year it expects to have an average of 258.

The LeO spokesman said: “As the underspend this year shows, we have been able to match the staffing needs of the Legal Ombudsman with the level of activity we are undertaking. This has been taken into account for the next financial year and we’ve therefore been able to reduce our budget accordingly.

“Employee numbers are based on assumptions in the business plan. If current trends continue, then we expect numbers to reduce through natural attrition. Equally, if we see a rise in the number of complaints received, we will have to consider the best response to that, taking into account that we believe we will become increasingly efficient over the course of the year.”

Meanwhile, LeO will begin publishing the names of lawyers against whom complaints are made in July, it has confirmed. The controversial new policy – which formally began on 1 April 2012 – will see LeO publish quarterly a table that summarises the number of ombudsman decisions each legal entity has been the subject of, what the outcome was (remedy or no remedy) and the area of law in each case.

Further, where there is a pattern of complaints, or circumstances where it is in the public interest to publish the details of a lawyer or law firm, then, pending approval from the board of the Office for Legal Complaints, LeO will publish this information immediately. This is regardless of whether there has been an ombudsman decision on the case.

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