The cost of practising certificates for local government solicitors could fall significantly under proposals put out for consultation this week by the Solicitors Regulation Authority.
Under the plan, the costs of regulation would be split on a 40%-60% basis between individual fees and firm fees. Local authority lawyers – or ultimately their employers – would not have to pay towards regulatory activities that are only relevant to law firms.
If adopted, the split would lead to a fee burden shift of 15% - or an estimated £16m – from solicitors in the employed sector onto private practice.
Other key proposals in the consultation paper include basing the firm-based fees on banded turnover in a bid to link fees to how much business law firms do and their ability to pay. The existing system of exceptions and discounts is set to be minimised and simplified on the basis that the fee for individuals will fall.
One potential area of dispute between private practice and in-house lawyers – whether in the public sector or commerce and industry – is the speed at which the changes are introduced. “Views from the profession on the possibility of phasing, as anticipated, showed a majority of respondents from private practice favoured phasing, with the opposite view strongly held by in-house respondents, who feel they have been waiting for these reforms to make their contribution fairer for some time,” the consultation paper said.
The paper said change was partly necessary as “the present system is grossly unfair for solicitors employed in local government or commerce and industry, who are charged the same practising certificate fee as solicitors in private practice, despite the fact that most of the SRA effort relates to private practice.” The consultation will also seek to address some of the other anomalies and unfairness of the current system, where firms of similar size, turnover and types of practice pay widely varying fees.
SRA chief executive Antony Townsend said: “The current system is clearly unfair: we want to build a system which spreads contributions more equitably, though there will inevitably be winners and losers in any reform we make.”
The SRA's initial move has been welcomed by local government lawyers. Dr Mirza Ahmad, president of the Association of Council Secretaries and Solicitors, said he looked forward to debating the detail of the proposals. “Our emphasis will, of course, continue to remain on obtaining value for money from any regulator and ensuring the public interest is given prominence to self-interests of the legal profession, which has undoubtedly benefited hugely from direct funding from local government with little in the way of return benefits for local government,” he argued.
Dr Ahmad, corporate director of governance at Birmingham City Council, added that practising certificate fees must be proportionate to risk, pointing out that local government lawyers do not carry client monies or rely upon the indemnity fund provided by practising fees. “Accordingly, I am anticipating – and will continue to push for – equality with the practising fees exemption applicable for the Government Legal Service.”
The shifting of the costs of regulation to private practice could nevertheless prove controversial at a time when many law firms of all types are struggling with sharply declining levels of profitability.
Des Hudson, Law Society chief executive, said it was vital that the entire profession - “from local authority solicitors, to sole practitioners and those in the commercial sector” - give their view on the proposals. “A fairer fee policy for all was highlighted as a priority in the recent Hunt report of regulation of law firms and the SRA need a full response to the consultation if they are to deliver that.”