… as LSB chair accuses Law Society and Bar of wanting to stifle competition


Edmonds: self-regulation inevitably introduces more regulation, not less

The Law Society and Bar Council’s call for the government to return large swathes of regulation to them is self-serving and aims to restrict competition, the chairman of the Legal Services Board has claimed.

In a sustained attack on the idea of a return to self-regulation in a speech to the Regulatory Policy Institute in Oxford, LSB chairman David Edmonds insisted that “turning back the clock is not an option”.

The Law Society and Bar Council both responded to the government’s call for evidence on legal regulation by saying representative bodies should regain responsibility for training, authorisation and standards setting, with their regulatory arms handling enforcement and discipline.

Mr Edmonds said the argument that this move would cut the cost of regulation missed the point. “What matters is not who regulates, but how they regulate. The problem is that self-regulation inevitably introduces more regulation, not less, through, for example, making greater attempts to restrict competition. This is how it was before the introduction of the Legal Services Act 2007.

“And it’s hard to imagine why, in all likelihood, it would be different should self-regulation return.

“Let us remember that the complicated rule books and the significant quantity of poorly targeted and burdensome regulation that the LSB is trying to tackle was put in place before the LSB existed – by the professional bodies.

“And since the LSB has been in place, it is the professional bodies that have resisted multi-disciplinary partnerships, resisted foreign ownership and private equity, resisted a flexible legal labour market and tried to slow down the pace of change.”

Mr Edmonds said this resulted in higher costs of regulation, higher costs for business and higher costs for consumers.

“This unaccountable self-regulation gave us bans on advertising, controls on firm names, restrictions on forms of funding and ownership for firms and other restrictive practices that did little beyond protecting the lawyer from change.

“And yet, despite all this intervention by the self-regulators, we still saw significant lawyer involvement in mortgage fraud, scandals such as miners’ compensation and systematically poor consumer complaints handling in firms and regulators alike.”

He argued that independent regulation has started to challenge this “negative legacy”, saying that the LSB’s decision to allow the Institute of Chartered Accountants in England and Wales to grant members the right to conduct reserved probate work and form alternative business structures would not have occurred if the decision had been with the Law Society.

“It would not even have reached the drawing board, let alone the recommendation stage,” Mr Edmonds said.

In his report to today’s meeting of the Law Society council, chief executive Des Hudson made it clear that the society’s proposal is being taken seriously by government. He wrote: “The Lord Chancellor has indicated that it is important that the professions should be agreed on this issue if it is to be taken further and we have been holding discussions with the Bar and CILEx [Chartered Institute of Legal Executives] who seem to share our aims.”

Mr Edmonds – who steps down after six years in post in April – also used his speech to explain the rationale behind the LSB’s blueprint to radically reform the regulatory regime, which would go the other way and culminate in the creation of a new single regulator for the entire profession.

He said that, in his view, ensuring access to justice is the most important of the eight regulatory objectives that underpin the current system, even though the explicit intention was that none would have priority over any other.

Access to justice is “what makes rights real”, he said, and as such “the failure of the legal market – or the legal profession as many prefer to call it – is to innovate to meet the huge latent demand among individuals and small business that is our access to justice crisis”.

Mr Edmonds said that despite what he saw as the many achievements of the LSB, the regulatory regime had failed to deliver its full potential because it was “over-engineered”.

“It is exceptionally complex with 10 regulators plus oversight plus a statutory ombudsman scheme. The regulators operate inconsistent lengthy codes of conduct, and with only six reserved legal activities actually requiring regulation.

“Arguably, much of the culture and behaviour of the frontline regulators still rests on detail not outcomes. And understandably perhaps, it still starts from a focus on ‘their’ part of the profession rather than seeing matters as a whole.”

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