The Legal Services Board (LSB) has fired a warning shot across the bows of the Law Society in the wake of the latter’s decision to spend £61m over four years on new IT systems for both its representative and regulatory arms.
In a letter approving the level of practising fees for solicitors for 2016/17, the board highlighted the importance of addressing any potential overspend on the project.
We reported last month that the society’s ruling council had signed off the expenditure after hearing that the Law Society as a representative body and the Solicitors Regulation Authority (SRA) had each developed “IT strategies and roadmaps” and now plan to “proceed with the implementation of these roadmaps in order to address the very significant deficiencies in the IT on which both bodies rely”.
The total gross capital investment between 2015/16 to 2019/20 was estimated at £61m, with the net cost being £37m after accounting for “the realisation of programme benefits”.
The council was told that the investment was front-loaded, with up to £30m being spent in 2016/17. Some £13.8m will be funded from practising fees, with the rest paid for by any under-spend in the 2016 capital budgets and then reserves. Practising fees will be kept steady so as to restore the reserves in the later years.
At the end of May 2016, the Law Society Group had cash reserves totalling £122m.
In his letter, LSB chief executive Neil Buckley said that before approving the society’s budget plans, the oversight regulator had asked how Chancery Lane intended to manage the risk of overspend on the investment and potential consequent calls on reserves.
He wrote: “It has been confirmed that the cost estimates for the IT transformation programmes are based on a detailed analysis and planning, and including amounts for contingency. It was also confirmed that at this stage, a conservative approach has been taken in modelling the potential financial benefits.
“Given the way in which the programmes have been planned and costed, and the way in which they will be delivered, you have said you do not expect cost overruns. We are reassured by your confirmation that if you see early indications of a funding problem arising later in the programmes, you would revisit issues such as scope, timing and delivery approach, rather than automatically accepting an increased cost of delivery.
“If such an event arises, please would you advise us.”
As a result of the decision, the cost of practising for individuals will fall from £320 to £290, which Mr Buckley welcomed.
Nonetheless, of the 96 solicitors who responded to a Law Society consultation on the reduced fee, 60 said it still did not represent value for money.