The Solicitors Regulation Authority’s (SRA) budget is to fall 7% – or £6m – in the next year, its new business plan has revealed.
But this comes against the background of the regulator failing to meet two of its three performance targets.
The SRA also appears to be cooling rapidly on its proposed reform of professional indemnity insurance, part of which would see the compulsory level of cover reduced from £2m to £500,000.
The 2018/19 budget is £76m, down from £82m in the year to 31 October 2018, which SRA chief executive Paul Philip explained in a press briefing this week was mainly due to its major IT overhaul coming to an end.
He said the project was coming in on budget and the SRA was now deciding “when to switch everything on”.
The SRA has three key performance indicators (KPIs). It exceeded the target of closing 90% of firm authorisation applications, where the firm is deemed to be medium to high risk, within three months.
But it was short of closing 93% of cases about potential misconduct closed within 12 months of receipt – achieving 89% – and completed 81% of Compensation Fund claims within 12 months against a target of 90%.
The business plan said the drop in performance resulted from training and development in preparation for the implementation next year of SRA Standards and Regulations – the new name for the revised SRA Handbook – and the introduction of the new IT.
Further, the regulator received nearly 22% more claims on the Compensation Fund during 2017/18 than in the preceding year – up from 2,174 to 2,648.
“We have restructured our client protection team, to better help us with claims on the Compensation Fund. This will give us more flexibility to deal with these peaks as we move forward into 2019.”
Though the new handbook and IT “will have a positive impact in the long term”, the SRA said the transition period would “continue to put real pressure on our performance against our current KPIs”.
Planned reforms to the Compensation Fund are also being prioritised. The SRA consulted on changes to both the fund and PII earlier this year, and Mr Philip said the former would be going to the SRA board next month.
The board would then consider “in late spring” whether it was going to take forward PII reform at all. The business plan said simply that it would “review all the responses [to the consultation] and then decide on our next steps”.
The reforms have drawn heavy criticism from the Law Society and insurers, while their main champion within the SRA, executive director Crispin Passmore, is leaving the organisation shortly.
Mr Philip also told journalists that it was a “foregone conclusion” that some firms would not comply with the new transparency requirements that came into force last Thursday; a snap survey by Legal Futures that day found only 28% of websites compliant.
He said the SRA would send firms “lots of reminders”, after which it would then be “forced to take regulatory action”.
Stressing the SRA’s approach was about “encouragement”, he said it would conduct a thematic review of compliance next year.
Meanwhile, as of Tuesday, 609 law firms had voluntarily downloaded the SRA’s new digital badge.