News releases
Detailed proposals published on how regulation should be paid for
10 December 2009
The Solicitors Regulation Authority (SRA) has published detailed proposals for a new structure for paying for the regulation of solicitors.
The consultation paper sets out the preferred model for sharing the costs of regulation, following responses to an initial paper published by the SRA and the Law Society in June, and gives examples of how the new structure might work for different sizes of firms.
Both organisations believe that the current system, where the cost is allocated through the practising certificate fee, leads to anomalies and unfairness with firms of similar size, turnover, and types of practice paying widely varying fees. Changes brought about by the Legal Services Act 2007, including firm-based regulation, provide the opportunity to create a fairer system, involving a combination of individual and firm-based fees.
Feedback to the first consultation paper provided broad agreement on the principles and objectives for a new fee structure, and on the proposal to use banded turnover as the basis for calculating the firm-based fee.
Key proposals in the second paper are:
- Firm-based fee should be based on banded turnover. This takes into account how much business a firm does, and links to ability to pay.
- Cost should be allocated so that around 40 per cent of the total funding of regulation is raised through the individual fees, and 60 per cent through the firm fees (note, in the longer term it is proposed that this should move to 20 to 40 per cent for individuals, and 60 to 80 per cent for firms).
- The types of exceptions and discounts that are currently allowed for individuals should be simplified and minimised, taking into account the fact that the fee for individuals will reduce significantly.
The paper also seeks views on options for the allocation of Compensation Fund costs.
SRA Chief Executive Antony Townsend said: "We are grateful to all those who responded to the first consultation. There was broad agreement on key principles and this has helped us shape these more detailed proposals. The current fee system is clearly unfair: we want to build a new system which spreads contributions more equitably, though there will inevitably be winners and losers in any reform we make. We would like as much input as possible from the profession to help us achieve a fairer and simpler system, so please give us your views."
Des Hudson, Law Society chief executive, said: "I am confident that the SRA will ensure that this consultation is as extensive and thorough as possible. These are potentially significant changes and that is why it is vital that the entire profession, from local authority solicitors, to sole practitioners and those in the commercial sector, engage with the SRA to give their views. We will be making representations to the SRA on behalf of the profession. A fairer fee policy for all was highlighted as a priority in the recent Hunt report of regulation of law firms and the SRA need a full response to the consultation if they are to deliver on that."
Notes to editors
- The second consultation is at www.sra.org.uk/consultations
- Feedback from the first consultation is at www.sra.org.uk/sra/consultations/moving-toward-fairer-fee-policy-june-2009.page
- The second paper seeks views on two options for calculating the fees: a two-stage process where firms submit turnover information in July, which is used to calculate the fees for the renewal process that October, or a one-stage process, where fees are calculated on the previous year's turnover, i.e. fees for October 2010 would be based on the turnover figure submitted in October 2009.
- Three options for the allocation of Compensation Fund costs are set out in this second paper, all based around an individual plus a firm-based contribution.