Legal Business Blogs

‘Slow evolution’: Government plans further shakeup of legal regulation to encourage alternative providers

The government is to kick off a new consultation in spring 2016, part of which will be on making legal services regulators independent from their representative bodies and lowering barriers to entry even further for non-legal businesses to offer legal services.

A document published by HM Treasury yesterday (30 November), dubbed ‘A better deal: boosting competition to bring down bills for families and firms’, which is aimed at boosting productivity in the UK, includes the objective to encourage ‘open and competitive markets that are free from distortions’. This, the paper says, means ‘removing barriers – including unnecessary regulation – that stop small and innovative businesses from growing and exploiting market opportunities.’

Buried within the paper presented to parliament by Chancellor George Osborne is the government’s intent to make it easier for businesses such as supermarkets and estate agents to offer legal services on areas including conveyancing, probate and litigation. In effect, the proposals would lead to an overhaul of the provisions of the Legal Services Act that established alternative business structures (ABS).

With alternative business models now around 15% more likely to introduce new legal services than other types of regulated solicitors’ firms, according to a YouGov survey referenced in the paper, the government argues changes are necessary to ensure ‘innovative businesses are able to enter the market, providing greater choice for consumers.’

However, representative bodies have expressed mixed support for such a move. Law Society chief executive Catherine Dixon said: ‘We support the government’s aim to ensure a fair and balanced regulatory regime for legal services. However, public protection demands that setting of rules and standards for legal services must be independent of government and ensure that there is no perception, or otherwise, that government is interfering with the independence of the legal profession.’

Legal Services Board chair Sir Michael Pitt welcomed the change and said: ‘These proposals will lighten burdens on business and streamline regulatory processes, all in the interests of delivering better services for consumers while promoting competition, deregulation and economic growth.’

‘As our work with the other regulators earlier this year showed, there is a strong case for fundamental reform of the regulatory framework in this sector. Lack of independence between regulators and representative bodies is slowing reforms that would otherwise benefit both the profession and consumers.’

Significant moves in the profession to separate representative bodies from regulators in recent times saw the Law Society stripped of its power to appoint the Solicitors Regulation Authority’s new chair in May 2014, a move brought in after months of infighting and designed to give the regulator greater independence.

Lewis Silkin partner Fergus Payne, who is joint head of partnership and LLP law at the firm, told Legal Business: ‘It has the potential to make a difference to one part of the market – such as High Street firms, particularly if it relates to advice on litigation, probation and conveyancing matters. ABS models have been very focused on consumers. On the face of it, it doesn’t look like it’s aimed at making a significant difference to the more sophisticated types of legal services.’

‘The ABS model is a slow evolution. There are mixed headlines surrounding it when you look at the numbers – approaching about 400 licences – for the most part it’s still taken out by smallish firms who aim to get non-lawyer ownership.’

Read the full Treasury paper here.