Staight: MoJ removed from the realities of law firms
Legal aid firms will be the first to suffer if the Ministry of Justice (MoJ) presses ahead with the idea of using interest on lawyers’ client accounts to fund free legal services, it has been told.
The ‘Interest on Lawyer’s Client Account’ (ILCA) scheme “would require law firms to forgo the interest they currently receive on their client accounts”, according to the invite [1] to a series of online roundtables that have taken place this month.
Legal Futures revealed in May 2024 that the MoJ had commissioned research [2] into the issue and it sees ILCA as a possible way to generate additional funding for its legal support strategy.
The agenda for this week’s roundtable asked participants if it was common for legal aid firms to hold client money and, if so, whether it derived from legally aided or privately paid work.
It asked too how the interest accrued on client accounts was primarily used and “roughly what proportion of interest generated is returned to clients”.
Further questions were on the potential impacts from no longer being able to retain interest and whether there were any areas of legal aid practice that were more or less likely to be affected.
Finally, participants were asked to lay out any other concerns they had about an ILCA scheme and how they could be mitigated.
According to Jenny Staight, a director at accountancy firm Hazlewoods and a council member of the Institute of Legal Finance and Management, who attended the event, the MoJ “couldn’t say how the scheme would work or what the money would be used for, although they did confirm that they are talking about interest for all law firms”.
Writing on LinkedIn, she said attendees “made it clear that if the interest is removed then [legal aid] work is likely to be the first area that suffers, there may be redundancies across the industry and that there are firms who will go under”.
Ms Staight added that the MoJ said it was talking to the Solicitors Regulation Authority (SRA) in light of its ongoing work on the future of client account and the rules around holding client money.
In response, Jatinder Loyal – who left the SRA last year after many years of policy work around the accounts rules – asked whether any other regulators had been approached, given that solicitors are not the only lawyers to hold client money. The answer to this is not known.
“If there’s no parity then I won’t be surprised if SRA authorised firms seriously think about switching to another regulator,” wrote Mr Loyal, who is now a policy manager at the General Medical Council.
“It would be ironic if some firms change control and ownership and think about moving to CILEX Regulation.”
Replying to the suggestion from retired solicitor Mark Dunkley that “those apparently charged with making the decisions know not what they are doing”, Ms Staight agreed. She said: “It seemed as though the MoJ were completely removed from the realities of actual law firms.”
Another attendee, Victoria Jordan, risk and compliance partner at Manchester law firm JMW, stressed that no decision had been made, also writing on LinkedIn: “In essence any interest earnt on client money would be used to fund ‘access to justice’ via the Legal Aid Agency.
“My first thought is I’m not sure I actually have any trust in any governmental body to properly handle this money better then they handle any other money (HS2 springs to mind). Would it actually go to help access to justice or would the majority of it be wasted?”