FOR IMMEDIATE RELEASE
Tuesday, 24 May 2016
The cost of regulation:
Improving transparency and awareness
The Legal Services Board (LSB) publishes today the latest findings of its cost of regulation project and sets out the next steps for further investigation and analysis.
This work looked at two aspects of the cost of regulation to providers:
- awareness of and transparency of regulatory costs (including the practising certificate fee (PCF) and ongoing compliance costs), and
- perceptions of value for money.
In a series of reports, the LSB has analysed not only the costs associated with each of the legal services regulators but also its own costs. Key findings from the research include:
- practitioners do not differentiate between legal services regulatory costs and other 'costs of doing business' such as non-legal regulatory requirements and membership of quality assurance schemes. This contributes to dissatisfaction with the cost of regulation
- solicitors and barristers understand that their PCF pays for both regulatory and their representative bodies, and
- barristers and solicitors regard the PCF and compliance costs as being of poor value.
Improved levels of financial transparency by the regulators could help address low awareness amongst legal services providers about the cost of regulation. Overall levels of transparency are mixed. Some regulators publish comprehensive and clear financial data. Others do not.
Legal Services Board's Chairman Sir Michael Pitt said:
"The aim is to improve value for money and, wherever possible, drive down the cost of regulation.
Unnecessary regulation can stifle innovation and the costs are borne by businesses and ultimately by consumers. This is why the LSB has been reviewing the costs associated with regulation to legal services providers.
This work underpins our regulatory objectives. It has repeatedly been highlighted as a problem for the profession and we now have meaningful evidence on this issue.
It is clear from the findings of this work that there is general lack of understanding about the true cost of legal services regulation.
The challenge is to ensure that the regulated community and the public greater clarity of the costs of legal services regulation. Without this, a robust assessment of value for money cannot be mounted.
As the oversight body for regulation in the legal sector we will continue to scrutinise and encourage openness on all regulatory costs, including our own, in the expectation that general awareness grows over time and that costs will reduce as a consequence."
ENDS
For further information, please contact the LSB's Communications Manager, Vincent McGovern (020 7271 0068).
Notes for editors:
- The Cost of Regulation report and individual regulators reports can be found here.
- The Legal Services Board operates at nil cost to the public purse. It is funded by a levy on the approved regulators. This levy is calculated based on the number of individuals authorised to undertake reserved legal activities per approved regulator as at 1 April each year. The number of individuals has increased by 14% in the period 2010-14. At the same time the levy income has reduced by 11% and the approximate cost of the LSB per individual has reduced by 22%.
- The seven regulatory bodies whose costs have been assessed in this process are the:
- Bar Standards Board (BSB)
- CILEx Regulation
- Costs Lawyers Standards Board (CLSB)
- Council for Licensed Conveyancers (CLC)
- Intellectual Property Regulation Board (IPReg)
- Master of the Faculties, and
- Solicitors Regulation Authority (SRA).
There is also a report specifically dedicated to the Legal Service Board.
- The key findings under awareness and transparency of regulatory costs include:
- a lack of awareness of what is paid for by the PCF though there is an understanding that the PCF includes mandatory contributions to fund representational activities
- some voluntary commercially driven costs are included within providers' understanding of the cost of regulation, and
-increasing transparency by regulators about their costs could help to address low awareness among providers about how the PCF is spent and offer assurance around value for money.
- Under value for money the key findings are:
- nearly half of all solicitors and barristers judged their PCF and compliance costs as being poor value for money.
- wide variation in views exist about particular problem areas with responses differing according to size of business, whether a lawyer was regulated as part of an entity or as an individual, and who is the regulator
- there was no consistent view on what the area with the highest cost was but the five areas of most concern were:
- Professional Indemnity Insurance
- the administration involved in the process of the annual renewal of the practising certificate
- continuing professional development
- enforcement mechanisms, and
- money laundering
- The Legal Services Act 2007 (the Act) created the LSB as a new regulator with responsibility for overseeing the regulation of legal services in England and Wales. The new regulatory regime became active on 1 January 2010.
- The LSB oversees nine approved regulators, which in turn regulate individual legal practitioners. The approved regulators, designated under Part 1 of Schedule 4 of the 2007 Act, are the Law Society, the Bar Council, the Master of the Faculties, the Chartered Institute of Legal Executives, the Council for Licensed Conveyancers, the Chartered Institute of Patent Attorneys, the Institute of Trade Mark Attorneys, the Association of Costs Lawyers and the Institute of Chartered Accountants in England and Wales.
In addition, the Institute of Chartered Accountants of Scotland and the Association of Chartered Certified Accountants are listed as approved regulators in relation only to reserved probate activities.
- As at 1 April 2015, the legal profession comprised 142,109 solicitors, 326 alternative business structures, 15,237 barristers, 7,848 chartered legal executives and 5,678 other individuals operating in other areas of the legal profession such as conveyancing. The sector is valued at £32 billion per annum (2015) which is up 23% in cash terms since 2012. For more information see here.