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Regulation of legal services in 2017

24 January 2017

Robert Bourns considers the Competition and Markets Authority report on competition in the legal services market, developments on the SRA handbook and Solicitors Qualifying Examination, and potential changes to professional indemnity insurance.

Our profession has a long and proud history of focus on the interests of our clients and on delivering value, always subject the rule of law, our higher duty. This is as it should be, and it has ensured that the legal service sector is a major factor in the UK economy. In 2015 we contributed £25bn to the economy and £3.6bn of net exports. We train and employ over 370,000 people through nearly 10,000 businesses, providing the network of provision right across England and Wales. We support and enable the economy.

As the organisation representing 170,000 solicitors throughout England and Wales, the Law Society has a responsibility to ensure this contribution is recognised and sustained, and that the legal sector works in the best interests of everyone. For the legal sector to thrive, a stable regulatory environment is required.

In late 2016 the Competition and Markets Authority (CMA) released its long awaited report on competition in the legal services market. Last week I joined a panel discussion on the report’s findings at an event organised by the London School of Economics. My speech setting out our position on the report is available to read.

In this context, we can expect the following developments on legal regulation in 2017:

1. The government’s response to the CMA report.

The government is committed to responding to the CMA’s recommendations, indicating any steps it may take in response now or in the future.

The CMA report recognises that consumers believe the ‘solicitor brand’ is a proxy for high quality and trustworthiness. Broadly, the report concludes that a more intensive market study of the legal services sector is not necessary – there is no market abuse – but says more transparency on price is needed in the market so that ‘consumers’ can make informed decisions.

We are concerned, however, that the report focuses too much on competition and price in isolation. It is too simplistic to judge competitiveness by monetary value alone. In an industry such as ours, one has to look at value as defined by our clients. Issues of transparency, price and service, and access to information cannot easily be decoupled from these broader perceptions of value.

The CMA itself expresses concern that individuals and SMEs have limited understanding of the different types of legal service providers, the differences between regulated and unregulated providers and the significant differences in client protections. The CMA asks for improved Public Legal Education (PLE), so that people can make properly informed decisions. PLE is therefore an important part of the response to the report, as it is to broader access to justice. We agree – it is important that benefits of using a solicitor are understood, and hope the regulator will support this initiative, rather than create further confusion by stripping away the client protection offered by some solicitors working in unregulated businesses. We understand the differences – on the evidence of the CMA report, potentially vulnerable individuals do not.

2. The SRA will shortly publish its response to the consultation process run last year on proposed changes to the SRA handbook.

We are hopeful that the majority of our recommendations have been taken on board, and we are grateful to the SRA for the opportunity to engage constructively on this issue. We remain very concerned about the serious implications for the profession and clients if the proposals, as set out in the SRA consultation document, come to fruition. The proposals risk creating a two-tier profession which may result in the lowering of standards and high levels of consumer confusion. The proposals would potentially damage the standing of all solicitors in England and Wales and internationally, undermining confidence in our legal system.

3. We are also following developments on the Solicitors Qualifying Examination (SQE).

As many of you may be aware the SRA published a second consultation document in October 2016.

We welcome the fact that the SRA has substantially re-worked its proposals to address many of the concerns the Law Society and others raised. In particular, we are pleased that our two main points from the first consultation – that a solicitor should have a degree-level qualification, and that they should have two years' work-based training to assure standards – have been taken on board and are included in the reworked proposals. We also argued for clearer pathways to entering the profession, which is important from a widening access perspective. It is also heartening to note that the SRA has accepted that it needs need to provide exemplar pathways and a toolkit to address this point.

These are positive developments but the Society remains very concerned by the availability of funding to cover the SQE preparatory courses and assessments. Our hope is that this matter can be revisited, not least to ensure that candidates from a diverse range of less privileged backgrounds are not deterred from a legal career. We also remain seriously concerned by the use of multiple choice questionnaires to test legal skills.

4. Looking further ahead, we are also conscious of potential changes to professional indemnity insurance.

We will continue to track this issue and provide more information in the future. It is suggested that protection offered to our clients is a gold-plated, unnecessarily costly regime. Insurance costs reflect the value of claims made. Claims made reflect client losses. The only way to cut costs is to reduce claims or withdraw indemnification to those who have lost out. I challenge those who propose reducing cover to identify which clients they would wish to leave without protection.

Above all, I believe it is vital to maintain a constructive and positive dialogue with regulators, government and stakeholders to ensure that the UK legal services market is understood and continues to be recognised as a world leader, providing the best possible service to the public. We hope that the CMA, SRA and others will see the value and wisdom of steady, incremental improvement at this time of political and economic instability, and we stand ready to make our own further contributions to that dialogue and to a properly informed public.

Tags: politics | president | Parliament | SRA | diversity and inclusion | professional indemnity insurance

About the author

Robert Bourns was the 172nd president of the Law Society. He is a senior partner at TLT Solicitors, where he specialises in employment law. Robert is one of five representatives for the City of London constituency, a member of the Law Society's Equality and Diversity Committee, and a member of the Regulatory Affairs Board Regulatory Processes Committee.
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