Legal Services Board strategy and business plan 2022/23 – Law Society response

The proposals

The Legal Services Board (LSB) has proposed its new business plan and budget for 2022/23.

Under the new plan, the LSB proposes to undertake new workstreams:

This work aims to ensure that the right balance is struck between protecting consumers and the associated costs of that protection.

The LSB plans to identify the factors that are contributing to a hardening professional indemnity insurance (PII) market and possible solutions.

It also plans to carry out econometric analysis of the cost of current PII and compensation fund arrangements to consumers.

The LSB plans to building on its previous work on enforcement, which included looking at other regulators’ approaches to oversight and requesting information about regulatory bodies quality assurance arrangements.

The LSB now proposes to focus on:

  • establishing and embedding clear principles on enforcement that underpin public and professional confidence in regulators’ processes and outcomes. This will encompass elements that are already part of its regulatory performance framework review, such as transparency, proportionality, consistency and timeliness
  • drawing on appropriate evidence from the operation of existing enforcement and disciplinary processes. This could encompass evidence from all regulators or a subset of regulators

As part of this work, the LSB will:

  • explore opportunities to expand consumer redress for those who use unregulated legal services
  • review its 2016 rules and guidance on first-tier complaints handling to ensure that they support good outcomes and reflect current thinking on best practice in this area
  • continue to oversee the Office for Legal Complaints (OLC) as part of its statutory duties, including working with the Ministry of Justice and OLC on reform should the Legal Ombudsman’s performance not improve

In the light of increasing public criticism of legal professions and the legal sector, the LSB considers it important to ensure that the essential role legal professionals play in the functioning of society continues to be valued and promoted.

The LSB proposes to undertake work on the role of legal services regulation in supporting the rule of law by inviting external contributors to help the LSB to articulate what this means in practice.

This work aims to contribute to recognising the invaluable role of legal professions in society.

The LSB proposes to review its 2014 guidance on regulatory arrangements for education and training, to ensure that it remains fit for purpose and aligns with its work on ongoing competence.

The LSB also proposes work to monitor developments in litigation funding.

It said that historically, third-party litigation funders have focused on corporate litigation, but they are increasingly funding collective redress claims involving citizens.

Without the significant financing these businesses provide it's possible that some recent cases may not have gone ahead.

However, there are also concerns on the increasing role of these businesses, including:

  • funders controlling the litigation acting in their self-interest rather than the best interests of clients
  • clients left with little funds once funders have recovered their share of the damages and legal fees are paid
  • a lack of transparency

In addition to the new workstreams, the LSB will continue work on:

  • discharging its statutory duties, including monitoring regulators’ performance and overseeing the OLC and SDT
  • implementing the recommendations from the Competition and Market Authority’s report on legal services through its consumer empowerment project
  • finalising the statement of policy on ongoing competence following a public consultation and ensuring that regulators have in place effective frameworks to monitor and assure the ongoing competence of professions throughout their career
  • finalising a review of its regulatory performance framework
  • continuing the diversity and inclusion (D&I) project to support a profession that reflects wider society and that can meet consumers’ differing needs, including identifying how counter-inclusive behaviours in the legal sector are impacting on D&I within the legal profession, and reviewing its expectations of regulators
  • continuing the technology and innovation project, by working closely with regulators to explore the development of a central regulatory database, including identifying options through a ‘proof of concept’-style study

As part of the consultation the LSB proposes 4.6% increase (£189,000) of its budget for 2022/23 to £4.287 million, in comparison to the budget for the current business year.

The LSB is also seeking views on whether to carry out a review of reserved activities.

Given the LSB’s current work commitments, including the proposed work on PII, the LSB believes that now is not the right time for a statutory review.

Our view

We welcome the LSB’s business plan and are pleased to see a continuation of work on D&I and technology and innovation, policy areas that align with our priorities.

We’re keen to continue to work together with the LSB in these areas, providing insight of our members’ views and experiences.

We encourage the LSB to make sure that our efforts are appropriately coordinated, especially when considering new research.

We also support the LSB’s work on ongoing competence and to build a better understanding of the unregulated market. We look forward to further opportunities to engage and provide input.

Continuing a collaborative approach will be critical as the LSB publishes initial outcomes of these workstreams and progresses the work.

While we broadly support LSB’s proposals on the other workstreams, we would like to see a greater prioritisation of work and resource on the LSB’s core function of discharging its statutory functions, including monitoring regulators’ performance and overseeing the OLC and SDT.

The LSB should especially focus its work on:

  • addressing performance failures of the LeO
  • increasing monitoring and evaluation of the OLC/LeO’s progress against deliverable targets work to ensure clients and the profession have confidence in the redress mechanism

Work prioritisation is also vital to ensuring that the LSB is cost effective and manages its budget effectively.

We’re concerned by the LSB’s proposal of another budget increase at the time many firms and practitioners are facing significant financial challenges.

Finally, while the overall economic health of the sector is good, the business plan should take account of the challenging economic conditions for small firms, including high street practices and sole practitioners.

These practices were hit worst by the COVID-19 lockdowns and will struggle most with the cost-of-living crisis and increasing financial pressures including rising inflation.

It’s critical the LSB works closely with the SRA, other regulators and professional bodies to maximise efforts to help the worst hit parts of the sector recover economically and help the profession to fulfil their role in promoting access to justice and the rule of law, and facilitating economic activity.

What this means for solicitors

The way the LSB regulates, in its capacity as an oversight regulator, will impact on the profession and the whole sector.

For the strategy to have its desired impact, the LSB will need to be cognisant of the perspectives and experience of the professions.

Next steps

The consultation ran from 6 December 2020 to 4 February 2021.

The LSB will consider responses to the consultation from all stakeholders before deciding on how to proceed.

Read the consultation on the LSB website (PDF)

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