Small to medium sized law firms could be unfairly and disproportionately penalised under Ministry of Justice (MoJ) plans to redistribute interest from client accounts to fund access to justice, the Chartered Institute of Legal Executives (CILEX) claims.
The proposed Interest on Lawyers’ Client Accounts (ILCA) would represent a “further tax and compliance burden which could adversely affect the sector’s contribution to UK plc,” in addition to the “significant contribution” to access to justice through current regulatory funding, and billions in tax contributions, the membership body believes.
The MoJ’s consultation seeking views on its ILCA plans, which closed yesterday (9th March) after being extended by one month, fails to detail how much money might be raised or how it would be spent, whilst overlooking the possible cost and administrative burden small and medium sized firms would face, CILEX said in its response.
The organisation has concerns that extra funding “would simply be absorbed into the MoJ’s own bottom line without any measurable positive impact on the justice system,” and says there is a lack of explanation of how a potentially complex operation, with fluctuating income levels, would be run by the MoJ without the specialist knowledge to do so.
The proposals do not demonstrate any consideration of the operation of similar schemes in other jurisdictions, nor do they reference ongoing research by the Centre for Socio-Legal Studies at the University of Oxford, which suggests it is not usual for central governments themselves to run such schemes, CILEX added.
Although such a scheme may have potential, the membership body continued, there is little understanding of the impact on, or risk to, vulnerable parts of the sector; firms working in legal aid could potentially lose a valuable cross-subsidy, thereby “exacerbating the growing problem of legal advice deserts”, CILEX suggested.
In common with the Law Society, CILEX also raises the spectre of the additional costs simply being passed on to the client; “particularly by the smaller firms least capable of bearing the additional costs themselves, raising another unwelcome barrier at a time when there is a multiplicity of such challenges to access to justice for many”.
Commenting on the proposals, CILEX president Sara Fowler said:
“Our underfunded justice system is in desperate need and the use of client money interest to fund it is an idea that has potential, provided the impact and practical administration of the scheme is properly thought through.
“As is stands we are being consulted on proposals that lack an underpinning evidence base, fail to assess the impact of the additional cost and administrative burden on law firms or the potential consequences for consumers or access to justice.
“We urge the government to step back and thoroughly assess how such a scheme would operate as well as providing greater clarity on the level of funds likely to be raised and the extent to which they would have measurable, positive benefits for justice.”
