The Solicitors Regulation Authority (SRA) has put aside up to £550,000 to give staff a one-off pay boost to help with the cost-of-living crisis, it has emerged.
Rising energy costs are also set to help wipe out what had been an anticipated £700,000 surplus in the coming year, which had been earmarked for the regulator’s reserves.
Newly published minutes of last month’s SRA board meeting said it discussed the significant increase in the cost of living and the ways in which its impact on staff might be alleviated.
“It was agreed that it would be appropriate to use part of the forecast surplus to support staff at this time, in particular the lower-paid staff within the organisation, whilst recognising this would delay the building of reserves to within our desired reserves range,” they said.
“The board approved a one-off cost of living payment for staff in post on 31 October 2022, to a maximum cost to the SRA of £550,000, with the detail to be agreed by the executive.”
The board was discussing an update to the draft budget that was used to calculate this year’s practising fees.
They are to rise by 10%, or £10.4m, in 2022-23, with the practising certificate fee (PCF) to rise £20 to £286. In all, the Law Society and SRA will collect £114.7m from the profession, of which £60.5m (53%) will go to the SRA. This was up from £56.8m.
The board heard that the SRA’s total income for the next year would be £87.3m, £4.3m more than expected mainly due to a higher-than-anticipated number of candidates to sit the Solicitors Qualifying Examination (SQE) and income from the planned keeping of the roll exercise.
But costs were expected to be £5m higher, at £87.3m, due to the increased costs of delivering the SQE and inflationary increases in non-staff costs.
A paper before the board said the SRA was likely to realise a surplus in 2021-22, increasing reserves. “It is though not now expected that we will add to reserves further in 2022-23, the largest factor in the change being increased energy costs.
“We saw an increase of around 65% in energy costs in 2021/22 and we have included an increase of 200% in the budget for 2022-23. In the current climate, there is a risk that this is insufficient.”
On the flip side, the regulator was expecting interest income to increase significantly in the coming financial year “as a result of rising interest rates and a more proactive approach towards managing our working capital” under a new investment policy.
“It is now more than 12 months since we began operating as Solicitors Regulation Authority Limited and we have a greater understanding of our cash flow requirements, allowing us to reduce the balances held in lower-paying accounts day to day.
“Rising inflation has increased the interest rates available on working capital. We now expect to receive more than double the original budget in the year and rates may increase the longer inflation remains high. This is helping to mitigate a large proportion of the cost increases.”
The paper warned that, if cost pressures were greater than predicted, “there may be consequences for future years’ funding”.
The board said it was “conceivable” that the SRA executive might seek to call on reserves during the next year at a time when they were “slightly below the preferred position”.
The minutes recorded: “The board agreed this position and noted that the executive would be doing what it could to mitigate against any call on reserves and would be providing the board with regular updates on the position.”