Monday, 27 July 2009

Practising Certificate & the Law Society

Legal Week's headline today is about the "20% increase in the Practising Certificate". Actually it is an increase of 18.6% - but I suppose that we have to allow for journalistic licence.

So - will the new certificate represent value? Well firstly that may not matter since, as you will all know, the Solicitors Act of 1974 requires practising solicitors to have the certificate. The fee covers the work of the Law Society and the SRA - so both the "trade union" and the regulatory body.

Legal Week quotes the certificate rising to £1,180.00 from £995.00. In fact there is a range in subsidised prices available - including £665 if you work for the CPS and £500 if you qualify for "low income fee reduction". Of the full fee, the SRA are to get £492 (49% or 42% - it's not clear whether £492 is for this year or next).

It is a brave organisation that increases its fees by nearly 20% in the face of a reduction in its members (of about 5%) and in light of some of the most difficult economic circumstances in a generation. A brave organisation or a monopoly, that is.

So - value for money. Well that's difficult to tell as an outsider. As a solicitor, I hope that you are given copies of the annual report and accounts - as well as using any opportunity to question the Society on any aspect of its governance. As a non-solicitor, I rely on the published accounts for 2008 (I should note that I didn't have the easiest time finding the accounts and had to use the site's search facility. The accounts are on the "Governance" page. I suppose this makes sense, but it shouldn't be hard to have a menu item of "accounts" should it?).

There are some items of interest in the 2008 accounts:
  • Of the total income of nearly £130 million, practising certificates, and other fees (exams, admission etc) accounted for over 83%
  • There was a surplus for the year of nearly £18 million from continuing operations and another £5.8 million from discontinued operations (the surplus includes investment income, and surplus from insurance operations of about £10.7 million)
  • Over £115 million was spent on "Administration" including nearly £67 million on its 1,324 staff; nearly £6.9 million on legal fees and £12.2 million on other professional fees.
  • The balance sheet reserves are £50.3 million
  • There is an actuarial deficit of £59.1 million in the defined benefit pension scheme
Let's just focus on the surplus for the moment. £17.7 million in 2008, £9.9 million in 2007 and, looking further on £11.1 million in 2006 and £22.6 million in 2005. This seems to suggest that the requirement for an extra £16 million or so in income from practising certificates may not be so desperate. I hope that, as a practising solicitor you are content with the use made of the surplus

I'm sure that the Society is working efficiently - but then I don't pay a practising certificate. If I did, I should want to be sure that the Society was acting as efficiently as possible and that, as one of the people funding the organisation (and remembering that the Law Society is suppose to be representing me as a solicitor), I should want to have lots of detail about the way the money was spent and the use being made of the surplus. I admit to reading the accounts quickly, but I didn't see a statement of use for the surplus - I'd be happy to be corrected.

The issue of the pension scheme is, I'm sure, also under debate. With a deficit of nearly £60 million, this may be a "benefit too far".

Returning to the cost of the practising certificate, I'm not sure that £1,180 a year is that expensive. It's 1.2% of a £100,000 income; it's about £3.23 a day; and, in larger firms at least, it's often paid by the firm. Yes, a 20% increase in anything at the moment is difficult, but I'm not sure that many solicitors could argue that £1,180 is so large they can't afford it. The issue for the Law Society is to justify the fee on the grounds of efficiency and service to its members.

Over to the solicitors, then, to comment.

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