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Westminster update: Public affairs coronavirus update
Your weekly update from the Law Society’s public affairs team on all the latest developments and debates in Parliament and across Whitehall.
While Parliament is in recess, I thought it would be useful to run through some of our work this week advocating on behalf of our members, and working with government to support solicitors through this crisis.
Coronavirus is having a significant impact on how solicitors up and down the country are working. One of the key concerns is the impact the virus is having on the sustainability of businesses - with concern regarding the advice on social isolation and a consequent drop in client demand coupled with difficulties for solicitor’s ability to practise efficiently. This impacts significantly on short-term cash-flow, but also on medium and longer-term income prospects.
The government has announced a wide range of measures to support businesses.
However, there are inevitably gaps and further issues to resolve, and as the situation develops more will need to be done to support firms through this difficult time.
We've been working hard to share the concerns of the profession with government, and have been making the case to the Treasury, the Department for Business, Energy and Industrial Strategy and the Ministry of Justice among others, with a view to strengthening the support on offer.
Here are some of the issues we've been discussing.
Liquidity support (Coronavirus Business Interruption Loan Scheme and Covid-19 Corporate Financing Facility)
Ensuring liquidity through this time is vital to avoid firms going out of business. Concerns have been raised with us regarding eligibility for the two key liquidity support schemes, namely the Coronavirus Business Interruption Loan Scheme of the British Business Bank and the Covid-19 Corporate Financing Facility of the Bank of England.
We wrote to the Treasury, and have spoken multiple times to BEIS to highlight that some large firms will not be eligible for the loan schemes as they were originally announced. We've also flagged that some small firms were being asked for personal guarantees when applying for loans, which was a deterrent to getting much needed funding.
The government has already changed its approach. Last Friday, it was announced that the government will be extending the support available for businesses affected by coronavirus. They'll launch a new Coronavirus Large Business Interruption Loan Scheme (CLBILS) later this month to enable banks to make loans of up to £25 million to firms with an annual turnover of between £45 million and £500 million. The government has also announced that no personal guarantees will be required for loans up to £250k. This is a welcome move, which shows that the government is listening and taking on board feedback. Please keep telling us about the issues you are experiencing, so we can pass this information on.
Self-employment Income Support Scheme
The announcement of the Self-Employment Income Support Scheme might help many solicitors, particularly those operating as a sole practitioner. However, we've urged the Treasury to reconsider the restriction that prevents someone from qualifying for this support if they have earned over £50k profits for the preceding years.
While we appreciate the need to control costs and acknowledge the scale of the total support package offered, a restriction of this nature will see many individuals face hardship. We've argued to the Department for Business, Energy & Industrial Strategy (BEIS) and the Treasury that the £50k restriction should be removed. We've argued that payments should be limited to £2,500 a month, to control costs in line with the employee retention scheme, and that people should not be denied eligibility altogether because their profits were over £50k.
We've also highlighted the fact that sole practitioners whose income was predominantly taken in the form of share dividends have fallen between the various government support schemes, and asked for this to be urgently reconsidered.
Business rates support
Many solicitor firms in England and Wales have highlighted business rates as a key area of concern.
Although a firm may be open for business, this does not mean it is business as usual. While our firms remain open, the doors to the offices on high streets up and down the country are closed.
Many firms are working remotely, and we anticipate a significant drop in new business for firms due to the strict social distancing requirements and changing client behaviour. We've pointed out to the government that professional services are likely to have large and expensive premises which are mostly empty through this period. These firms, as things stand, will be expected to pay business rates through this period – which will put even greater pressure on their cashflow.
We've called on the Treasury to implement a 50% business rate relief scheme for firms in England and Wales which remain open throughout the period affected by the social distancing requirements.
Coronavirus Job Retention Scheme
We welcomed the launch of the Coronavirus Job Retention Scheme, a government scheme to pay wages of furloughed staff at 80% of their salary up to £2,500.
Staff costs are typically the largest cost for firms, and many of our firms have reported that they will look to furlough some staff during this period. We've encouraged the Treasury to publish greater clarity on what will happen after the initial 3-month period to provide certainty to businesses and individuals alike. Our Employment Law Committee has in particular been spending a lot of time analysing this.
We also know that some legal aid firms were concerned that they would not be able to make use of the option of furloughing staff, as they were in receipt of public money. We sought clarification on this point from the Ministry of Justice (MoJ), who have confirmed that the fact your firm has a legal aid contract does not preclude you from furloughing staff.
Support for legal aid firms
There are a wide array of concerns for legal aid firms, who are continuing to provide vital legal advice to some of society’s most vulnerable throughout this difficult time. We've been liaising closely with the MoJ and the Legal Aid Agency and calling on them to provide further support for firms to help through the short-term cashflow problems.
The Legal Aid Agency last week unveiled a support package for civil, family and criminal legal aid practitioners to ensure access to justice during the coronavirus outbreak. The initiatives will make hardship payments easier to access and pause some debt repayments to the LAA.
We know what a worrying time this is, and we're doing all we can to ensure that the government is hearing about your concerns immediately and at the highest levels.
Over the coming weeks we'll continue to push for more support for law firms to ensure the sustainability of the legal sector throughout the crisis. Do not hesitate to contact us if you have any queries. You can contact us at email@example.com.
Director of Public Affairs