The Legal Services Board (LSB) has set out plans allowing it to study in more detail spending by approved regulators, such as the Law Society and Bar Council, before it approves their practising fees.
The LSB warned in November  of a “potentially high-profile and contentious” dispute with Chancery Lane over how it uses money derived from practising fees.
Under section 51 of the Legal Services Act, the non-regulatory arms of the Law Society etc are allowed to use some of the money for “permitted purposes”, such as law reform and practice support.
However the LSB said the Act was “silent” as to whether income derived from “permitted purposes”, raised for example by charging solicitors for accreditation schemes, could be used, as the society hoped, to pay off overheads or fund commercial activities.
The oversight regulator said that until now, this “derivative income” had been used to reduce practising fees.
In response, the LSB has outlined new criteria it would consider when deciding whether to approve fees.
These include “clarity and transparency on the allocation of all the approved regulator’s financial resources whether or not those resources arise from permitted purposes”.
Launching the consultation yesterday, Neil Buckley, chief executive of the LSB, said the organisation believed in the importance of reducing regulatory costs in legal services.
“Where possible we use our role in the oversight of legal services regulation to reduce costs to both the profession and the public.
“Practising certificate fee rules have been in place for six years and we think it is now time to test whether they continue to meet the purpose for which they were intended.”
Paul Philip, chief executive of the SRA, welcomed the changes proposed by the LSB, which he said were “in line with our commitment to being transparent about the way that practising fees paid by solicitors and firms are used”.
He added: “We regularly communicate information with solicitors about how fees are calculated and how they are spent, and we are keen to do more. It is important that we are as efficient and effective as possible.”
See blog: Would you give the Law Society £250?