The Ministry of Justice’s proposed scheme for Interest on Lawyers’ Client Accounts (ILCA) is fundamentally flawed, lacks adequate evidence and is a crude sector-specific tax on clients of legal services, the Law Society of England and Wales has warned.
Commenting on the release of its response to the government consultation on ILCA, The Law Society said it is “extremely concerned about the serious consequences these proposals could have for access to justice”.
“We are particularly concerned about the impact on clients, the lack of financial merit and lawfulness, increased regulatory burdens and operational and practical challenges,” the organisation said.
Law Society president Mark Evans added:
“The ILCA scheme cannot and should not proceed. The proposal is flawed, sets a damaging precedent and conflicts with wider government commitments on growth. It is not fit for purpose.
“The justice system is a vital public service and the government should fund it sustainably through general taxation, not through the appropriation of client money.
“The government have not explained how much money they expect the ILCA scheme to generate and have not guaranteed the money will go back into the legal system, as it is expected to go into the MoJ’s general budget.
“The proposals would have serious consequences for access to justice, with firms having to find ways to manage additional costs created by the scheme. Some clients will ultimately have to pay higher legal fees, and law firms may no longer be able to offer some services, including legal aid, affecting vulnerable clients. Our research shows vast legal aid deserts* and it is clear these deserts will only increase should the ILCA scheme proceed.
“Given the complexity of this consultation, which impacts nearly every solicitor’s firm and their clients in England and Wales, this consultation period should have been significantly longer, and to extend the deadline with four days’ notice is unsatisfactory.”
Evans concluded:
“The justice system is a core public service that all members of society benefit from.
“It is fair that we all pay for this system through general taxes, in the same way that we all pay for our healthcare system, rather than patients contributing more.
“The Solicitors Regulation Authority (SRA) makes clear that client money belongs to clients. Interest is client money and whilst in some circumstances, firms can retain some interest and use it towards things like lowering the cost of delivering services, they must make policies around interest clear to clients. The ILCA scheme means the government will be using client money as an unreliable source of revenue to address general budget shortfalls.
“Solicitors already make a significant contribution to the justice system, including by self-funding the profession’s regulation and consumer protection, paying income and business taxes, as well as paying court and tribunal fees. In 2024 alone, the legal sector contributed an estimated £38 billion to the UK economy, approximately 1.5% of all gross value added.
“The proposal sets a precedent for solicitors’ firms and clients that does not apply in other industries. The ILCA scheme is not fit for purpose and should not be implemented.”
Last week, the government extended the deadline to response to the consultation by four weeks, until 9th March.
Open consultation: Interest on Lawyers’ Client Accounts Scheme
