The latest spat between the Law Society and Solicitors Regulation Authority (SRA) has been rumbling on over the latter’s budget for 2013, it has emerged.
However, Legal Futures can reveal that the SRA is to reduce its budget by around £2m to £30.6m.
An exchange of e-mails last month between the two organisations’ chief executives – the Law Society’s Des Hudson and SRA’s Antony Townsend – shows the pair at odds over how the society’s council should judge the SRA’s funding requirement.
According to the e-mails, which were surprisingly made public in papers going to today’s council meeting, Mr Hudson had emphasised the importance of the budget taking into account returns that were meant to be generated from a variety of investments, such as a headcount reduction as a result of moving the SRA to a single site in Birmingham and benefits from the SRA’s IT upgrade.
Mr Townsend responded that this approach was “wrong”. He wrote: “It sets financial targets without reference to the public interest, and illustrates the dangers which the governance arrangements set out in the Legal Services Act were designed to avoid.”
He said the proper test under the Act is that the council should consider whether the SRA’s proposed budget is reasonably required to regulate in the public interest, adding that “it may well be” that any returns should be used to improve the regulatory system, rather than reduce the budget.
Mr Townsend also emphasised that the SRA is in any case tightening its belt, incorporating “a considerable degree of reprioritisation in both our regulatory functions and in our demands upon Organisation Services [the central services of the Law Society Group] which, in less constrained circumstances, we would not have taken”.
In his reply, Mr Hudson welcomed this “restraint”, but continued: “It seems to be proper that where investments are made, then [the] return claimed as part of the justification for funding the projects should be delivered.
“It is open to any party to advance the argument that those returns should be respent in some other way rather than reducing the budget… but not to take account of that at all before settling the required budget as you seem to suggest would be inappropriate.”
The exchange concluded with Law Society president Lucy Scott-Moncrieff and SRA chairman Charles Plant stepping in, jointly recommending the SRA’s 2013 budget requirement at £30.6m and agreeing a series of steps which will investigate what has happened to the stated benefits of the various investments and what needs to be done to realise them.
Speaking to Legal Futures, Mr Townsend said the SRA and Law Society agreed that expenditure has to be contained in straitened economic circumstances “and that we need obviously to demonstrate that we are getting benefits out of what we’re doing” – although he pointed out that some of the investments, such as in new IT, also benefited the Law Society in its representative role.
He added that the SRA has absorbed a number of additional costs in its reduced budget, such as having to spend over £1m more than expected because of late delivery of IT enhancements and the unexpected enforcement action needed over compliance officer nominations.