The Legal Services Board (LSB) has introduced new rules to ensure legal regulators explain more clearly how they spend the money they raise through the compulsory levies on lawyers.
Matthew Hill, chief executive of the LSB, said the new rules on practising certificate fees (PCF), which took effect last week, would help lawyers hold their regulators to account and allow “a more meaningful debate” to take place about the value of regulation.
In their responses to a consultation on the issue launched by the LSB last autumn, the Law Society complained that the new rules would create “increased and disproportionate cost”, while the Bar Council said the new process would be “significantly more time-consuming”.
In its decision document, the LSB described in detail how it had responded to individual complaints from regulators and the changes it had made to the draft rules, without naming the regulators concerned.
The LSB, which every year decides whether to approve PCF applications from all the regulators, said the new rules provided a “clear framework” to improve the process. In particular, they specify the non-regulatory ‘permitted purposes’ to which the PCF may nonetheless be applied.
In the case of both the Law Society and Bar Council, around 30% of the PCF is used for non-regulatory activities and the LSB has acknowledged that, while approving the PCF is a regulatory function, it cannot exercise its powers in relation to representative functions.
The oversight regulator said: “A key aim of the rules is to increase transparency about the approved regulators’ and regulatory bodies’ programmes of activity, which are funded in whole or in part by the practising fee, enabling those who pay the practising fee to drive accountability for its expenditure.”
Responding to complaints about proportionality, the LSB said it had revised its rules on impact assessments and financial information.
An “initial” impact equality assessment is required, but the LSB said the overall amount of financial information regulators needed to produce had been reduced.
On reserves, the LSB said there was no change in the rule allowing reserves of PCF income to be kept, as long as they were “held and accounted for separately from any other funding”.
Where a PCF application is refused, the oversight regulator said a “limited interim practising fee” could be collected, pending resubmission.
Mr Hill commented: “Our process for assessing practising fee applications had not been updated since it was first introduced in 2011.
“As we work with regulators to reshape legal services to better meet the needs of society, the changes will help those who pay the PCF hold their regulators to account and have a more meaningful debate on the purpose, value and benefits of regulation.
“This should, in turn, result in improved standards across the legal services market, which will benefit the thousands of small businesses and consumers who need legal services each year.”
A Bar Council spokesman agreed there should be transparency in how funds raised by the PCF were spent, and said it was “encouraging” that the LSB has listened to many of the concerns expressed in the consultation process.