The Legal Services Board (LSB) is to tell the approved regulators that they must consult those they regulate about setting the level of practising fees beyond what is needed simply for regulation, it has emerged.
It will also ask searching questions about how the regulators use the millions of pounds they receive.
Currently, under the ‘permitted purposes’ provision of the Legal Services Act, all of the approved regulators are able to use practising certificate fee (PCF) income for certain non-regulatory purposes, such as law reform work and practice support.
In the case of the Law Society this amounts to around a quarter of the money it raises from solicitors and firms, and is the primary source of income for its representative work.
As part of its ‘blueprint’ for the future of regulation, the LSB has questioned whether this is appropriate any longer, and instead suggests that individuals and firms should be able to choose whether or not to fund these activities.
However, in newly released papers from the LSB’s March meeting, the board recognised that “progress on that issue may be slow” and so instead it is to change the way it approaches the current task of approving the level of PCFs.
The board was told: “As part of our work on the approval of PCFs, we will shortly be writing to approved regulators to highlight two areas on which we will have a particular focus in the next assessment – assurance on the allocation of PCF income to permitted purposes and the need for greater transparency (through consultation) with the fee payers on the level of PCF and where the income is spent.”
The LSB said it will also remind the approved regulators that PCF income can only be spent on the permitted purposes. The issue has arisen from a specific question from the Solicitors Regulation Authority on unused PCF income that is applied to the Law Society’s reserves.
“The Law Society and SRA need to be able to assure themselves and us that any reserves that consist of unused PCF income are subsequently only applied to permitted purposes,” it said. “We are considering whether there may need to be more general guidance on use of PCF to build up reserves and its subsequent use.”
Separately the LSB has begun a year-long investigation into the cost of regulation, with a particular focus on “the duplication inherent within the present system” – this would aid its call for a single regulator.
The first stage of the review is collecting and analysing available data ahead of deciding which aspects of the cost of regulation to prioritise.