The Legal Ombudsman (LeO) is set to make its first ever in-year call for supplementary budget, seeking an extra £344,000 to make up in part for previous miscalculations, Legal Futures can reveal.
LeO has a £12.8m budget for 2020/21 – a standstill budget after a disastrous attempt earlier this year to secure a 20% increase – but said “exceptional circumstances have led to significant pressures” on it, meaning there was a risk of overspend by the end of the financial year on 31 March 2021.
It has applied to the Legal Services Board to approve the 2.7% increase, as permitted by the Legal Services Act 2007; if agreed, it will be levied on the profession, although the timing of when it would be paid is unclear. This is the first time LeO has sought an increase mid-year in its decade of operation.
The extra costs total £654,000, but LeO has identified mitigating savings of £310,000.
A paper before the recent meeting of LeO’s governing board, the Office for Legal Complaints (OLC), said the extra costs were the result of the pandemic, restructuring the senior leadership – including the creation of a chief operating officer role – and £283,000 of “calculation errors” in the formulation of the current budget by now-departed staff.
The paper said: “Taking into account the risks posed by resolving the budget pressures without additional funding, the executive consider the proposed increase represents value for money and appropriately prioritises spend on a risk basis.
“Measures that will be required to achieve a balanced budget, if a variation is not agreed, will carry significant risk and those risks are better mitigated or avoided by a variation to the existing budget.”
However, LeO has reserves of nearly £18m and the paper said it was talking to the Ministry of Justice about whether some of this could be released.
It carries reserves to ensure that the organisation could be wound up if statutory changes made that necessary, but the estimated cost of this is only £5.5m.
The paper said accessing the reserves would provide “a means of funding the expenditure necessary to support performance recovery and longer-term improvement, without requiring a significant increase in levy funding”.
It noted that other ombudsman schemes have used reserves in response to budget pressures arising from the Covid-19 pandemic.
Speaking to Legal Futures, OLC chair Elisabeth Davies said the budget error was symptomatic of a lack of “grip” that the organisation has had over its operational and financial performance, which the current interim executive team was working hard to recover.
A new chief ombudsman and the chief operating officer were announced last week.
Ms Davies – who took on the chair in April – said the Ministry of Justice has indicated that it would be difficult to access the reserves at the moment.
She said she wanted to be transparent as part of efforts to “reframe” LeO’s relationship with the profession, even if it was “uncomfortable” for the organisation.
We have reported in recent months about LeO’s faltering performance, which Covid-19 has only exacerbated.
While the OLC board was told that work to improve complaints handling should improve matters in the coming months, LeO is still likely to receive more cases than it resolves, leading to the already growing number of cases in the pre-assessment pool – complaints taken in but not yet allocated to an investigator – continuing to go up.
There are now 4,000 cases in the pool and could reach 5,000 by the end of the financial year, meaning that complaints are taking longer and longer to resolve.
Ms Davies said the current priority was stabilising LeO from the effects of Covid – its offices reopened last month, with 25% of staff electing to return in some capacity – and looking at “targeted interventions” that could help with the pool.
“The bottom line is that everyone recognises performance is nowhere near where it should be,” she said. “But September was best month for case closures since the start of lockdown – the team is getting on top of performance management.”
The transparency push also meant being open with consumers about waiting times, while avoiding “unintended consequences”, such as people not bothering to progress their complaints as a result.
Ms Davies said previously there had been underinvestment in staff – “You cannot improve performance unless you improve the people” – and a focus on “changing process in the short term rather than building capability in the long term”.
There will soon be a consultation on LeO’s business plan and budget for 2021/22. Though she would not put a figure on it yet, Ms Davies said these would seek a budget increase but she acknowledged: “They need to set out a really clear case.”