Legal Business Blogs

Gove’s City levy kicked into long grass amid Treasury opposition

A tax on City lawyers floated by the Ministry of Justice (MoJ) to subsidise the criminal court system has been effectively abandoned amid Treasury opposition, according to senior City sources.

The levy was floated by the MoJ in October last year as a means to replace revenue generated from a controversial court charge on convicted criminals that was supposed to bring in £65m to £90m annually.

Following Justice secretary Michael Gove’s (pictured) suggestion that the country’s top law firms pay a 1% levy, Legal Business understands that a number of City firms directly lobbied the Treasury with their concerns after discussions in October. However, management at a number of leading firms in the City have been informed earlier this year by the MoJ that plans for the levy are not being pursued.

One senior partner at a major UK firm said: ‘The Treasury doesn’t like different departments having their own tax-raising powers. It’s no longer on the table.’

The original proposal sparked a heated debate between City lawyers and the MoJ at Clifford Chance (CC)’s Canary Wharf headquarters in October, with the entire Magic Circle, White & Case, Fieldfisher, Ropes & Gray, Reed Smith, Simmons & Simmons, Travers Smith, Shearman & Sterling, DAC Beachcroft, Stephenson Harwood, Herbert Smith Freehills (HSF), Hogan Lovells and Ashurst all attending.

At the meeting, the MoJ told firms it expected them to do more pro bono work to help cover the justice funding gap. The MoJ has been one of the worst-hit departments from the government’s austerity agenda, with its budget on course to drop from £9.1bn in 2010/11 to £6bn by 2019/20.

Another lawyer party to the discussions says the MoJ has indicated to the profession that it is still intent on pressing City firms to increase their commitments to the justice system through pro bono and other means. However, Gove’s agenda is likely to be dominated by other matters after the justice minister in February committed himself as a prominent member of the group campaigning for the UK to leave the EU in the referendum in June.

An MoJ spokesperson said: ‘The justice secretary has been clear that those who benefit financially from our legal culture must do much more to help protect access to justice for all. We have begun constructive discussions with the sector about how we can best achieve this aim and will continue to explore a wide range of options with them.’