The Solicitors Regulation Authority (SRA) is set to increase its budget by £5.3m in the coming year, with staff costs and the Solicitors Qualifying Exam (SQE) the main drivers.
As a result, its share of the annual practising certificate fee (PCF) will rise £6, with the Law Society seeking an extra £5 for its representative activities.
The PCF has either fallen or stayed the same for the last nine years but the Law Society announced last month that the current £266 would increase to £287.50 by 2024/25, through increments of £11, £6 and £4.50, in part to pay for more of its representative work.
Practising fees largely to pay for the work of the SRA and other parts of the regulatory structure – the Legal Services Board, Legal Ombudsman, Solicitors Disciplinary Tribunal and Office for Professional Body Anti-Money Laundering Supervision.
However, the Legal Services Act 2007 allows the Law Society in its representative guise also to use them for ‘permitted purposes’ – certain prescribed non-regulatory activities, such as law reform.
The SRA revealed its spending plans on Friday as part of a consultation on its 2022/23 business plan, saying cost-of-living pressures and “demands of new activities, for example in relation to anti-money laundering and sanctions”, meant it was proposing a £6 increase in the SRA portion of the PCF to £151.
In all, the SRA budget would be £84.7m, of which £60.5m would come from practising fees.
It is not clear what will happen to firm fees, which make up 60% of the money generated by practising fees.
The increase in the PCF would be offset by a £10 reduction in the individual Compensation Fund contribution to £30; the contribution for firms is expected to be £70 lower at £690.
The consultation warned that “the likelihood is that the SRA practising fee requirement will increase in absolute terms over the course of our next corporate strategy [from 2023 to 2026], for additional activities that area determined as the new strategy is developed, to cover inevitable inflationary pressures, and to build our reserves to the required level”.
For the coming year, the consultation said, cost pressures include staff expenditure, expected to increase by £4m in the next financial year: “Inflation is currently at levels not seen for more than 30 years, and this is already beginning to increase pressure on salaries in the employment market.”
Areas benefiting from increased investment included the investigation and supervision function, “and activity leading to reductions in time taken to investigate cases”; the focus on compliance with the transparency requirements and engagement from firms in relation to diversity data; and more proactive supervision of money laundering risks as well as managing “increased referrals” from the National Crime Agency.
The cost of the SQE is expected to rise £1.5m to £9.3m this year as more candidates take it. This is covered by income from candidate fees, which offsets the direct costs of delivering it and internal costs associated with monitoring the assessment provider and delivering the results.
The SRA has reduced its property costs by more than £1m this year, while its long-running IT modernisation project has realised cost reductions totalling over £1m too.
Among the new commitments in the draft business plan for the next year were:
- Developing the police station representatives accreditation scheme around a statement of expected behaviours;
- Expanding the numbers of firm inspections and desk-based review activity in relation to anti-money laundering;
- Working to promote retention and progression for under-represented groups, with a focus larger law firms;
- Partnering with the Ministry of Justice and others on access to justice initiatives and working to explore the application of technology solutions towards regional access problems;
- Conducting a quantitative analysis of the professional indemnity insurance market, “providing detailed analysis and exploration of the market’s impacts for solicitors, law firms and consumers”;
- Promoting the benefits of innovation and technology in relation to unbundled legal services; and
- Refining and rerunning a pilot web-scraping exercise to map unregulated legal service provision.
SRA chief executive Paul Philip said: “Our plan focuses on making sure we are as efficient and effective as possible in protecting the public, maintaining standards and improving access to legal services for all.”