Economic response to the SRA Handbook review
In June 2016 the Solicitors Regulation Authority (SRA) published a consultation: 'Looking to the Future - flexibility and public protection'. This consultation proposed a fundamental change to the regulatory framework for solicitors who deliver unreserved services to the public.
The proposed changes to regulation of unreserved services are framed and justified in economic terms. We have therefore assessed the proposals from an economic perspective and find significant weaknesses in key strands of the proposals, both in theory and in practice.
The proposals are a solution in search of a problem
Regulation does not make the market for unreserved services uncompetitive. Indeed, consumers currently have a wide range of choice in unreserved services, from both solicitors and unregulated entities, and new providers face low barriers to entry. Adding a further sub-division of solicitors does not significantly improve consumer choice, but may well lead to consumer confusion.
Economic theory provides little support for the proposals. The unreserved legal services market is not subject to hard entry-restricting regulation, so a deregulatory approach is both risky and unlikely to yield significant benefits to consumers.
Mistaken assumptions about users of legal services
The proposals do not deliver simplification of the regulatory regime from the perspective of consumers. Deregulation is prioritised over simplification, to the likely detriment of the consumer.
'Unmet legal need - a key justification for the proposals - is inappropriately defined:
- Not all problems which could be classed as 'legal' in nature require specialist advice. That some consumers choose not to seek such advice for some types of issue is not, of itself, a problem.
- There are certain disadvantaged groups that have difficulty in accessing legal services and their 'unmet demand' will not be addressed through regulatory solutions such as these proposals.
- Where advice is sought, it is clearly inappropriate to define consumers who have consciously chosen a non-regulated provider of unreserved services as having 'unmet legal need.
No attempt is made to consider the variety in requirements for different types of user, such as small and medium-sized businesses, or by legal need.
Impacts not adequately assessed
The SRA has not done enough to demonstrate that the positive impacts of the proposals are sufficient to outweigh the negative impacts. The analysis does not adequately consider the full range of potential impacts of its proposals. If these proposals reduce public trust in the solicitor profession, then this could increase unmet legal need as people may be less willing to seek legal advice. Any decrease in trust in UK solicitors will have a negative impact on the international competitiveness of the industry, and in the efficient domestic use of law.