The Solicitors Regulation Authority (SRA) wants to increase law firm fees by 236 per cent in order to rebuild the sector’s compensation fund after it was significantly impacted over the last year.
The legal regulator launched its public consultation on its 2024/25 business plan and budget, outlining the compensation fund as a priority. This fund is for people or firms to recover money in the event a law firm or lawyer regulated by the SRA fails to pay them.
Over the last year, the regulator said the fund had been severely damaged by “unprecedented level cost of claims and interventions in the last year”. This includes law firm Axiom Ince, which collapsed after over £60m of client money went missing.
Last year, the industry was warned that the annual levy lawyers and law firms pay may have to be hiked due to this headline-grabbing collapse. That news angered many solicitors, who had previously said they would disapprove if the regulator decided to hike its fees.
The dispute over potentially rising fees resulted in the SRA appearing in front of a justice select committee back in December. Speaking to the SRA at the time, James Daly MP stated that solicitors may have taken the view that there was a lack of a regulator, and now they are paying the price.
It is now official that the SRA is looking to raise fees. It was revealed on Tuesday that the fees for the compensation fund would jump to £2,220 over 2024/25 for law firms, up from £660. The SRA said individual contributions for regulated lawyers would also be going up to £90, up from £30.
The individual practising fee would remain the same at £162 for 2024/25, it said.
The solicitors’ regulator stated that the increase in fees for its compensation fund would allow fund reserves to be rebuilt over the next two to three years after being “significantly impacted” over the past 18 months.
The SRA’s consultation on the practising certificate fee and the compensation fund closes at midday on Monday 24 June 2024, while its consultation on its business plan closes on Tuesday 2 July 2024.
The SRA’s chief executive Paul Philip said: ‘The SRA compensation fund plays a critical role in protecting the public and maintaining trust in the profession. We have a duty to ensure the fund is maintained and remains viable.”
“This proposed rise has been driven by an unprecedented level and cost of claims and interventions in the last year. We have done all we can to make sure the contributions don’t rise any more than they absolutely have to,” he added.
While the Law Society’s chief executive officer Ian Jeffery noted: “[The] compensation fund provides crucial protection and reassurance to consumers in contrast to the lack of protections offered by unregulated providers.”
He detailed that the “professions can only succeed if they uphold core values, such as integrity, reliability and accountability.”
“Ultimately, we accept that the role of solicitors is to protect the interests of their clients, and that we must do that, even when the costs are high, because the costs of not doing so would inevitably be higher,” he added.