Business plan 2009

Last updated 21 January 2009

See SRA business plan 2010

Introduction

1. This is the SRA's second business plan, and covers the calendar year 2009.

2. The SRA's purpose is to set, promote and secure in the public interest standards of behaviour and professional performance necessary to ensure that consumers receive a good service and that the rule of law is upheld.

3. Our principles are that we will

• be fair and consistent in our contacts with the public and the regulated community;
• be inclusive and actively promote equality and diversity in the way we undertake all our activities;
• act independently of, but in consultation with, our stakeholders including consumers, the profession and its representative bodies, the judiciary and government;
• operate in accordance with good regulation principles, adopting a risk-based approach to regulation;
• be open and accountable;
• demonstrate value for money.

4. The SRA has no representative role on behalf of solicitors. In anticipation of the requirements of the Legal Services Act, the Law Society decided to separate its regulatory functions from its representative ones. The SRA is an independent regulator acting solely in the public interest.

Planning background

5. The SRA Board published its strategy setting out its strategic objectives in late 2006 and its first business plan early in 2008. Since its establishment in 2006 the SRA has been pursuing a major programme of reform.

6. This reform has been directed in particular towards

• the development of a body of new policy, rules and regulations for assuring the quality of the profession, and for the regulation of legal services bodies (firm-based regulation) under the provisions of the Legal Services Act 2007, and
• the overhaul of our inherited business processes in order to make them fit to deliver modern, risk-based regulation.

7. The SRA has published its first strategic plan, covering 2009–12, building on the work which has been undertaken since 2006. The strategic plan sets out in more detail how the SRA intends to achieve its objectives. It will be reviewed at least annually, and will provide the framework within which each annual SRA business plan will be developed and implemented.

8. The SRA has also consulted on its draft equality and diversity strategy and action plan. This strategy sets out our approach to the promotion of equality and diversity as

• a fair employer, recruiting, developing and retaining a diverse and talented workforce;
• a fair regulator, open, proportionate, non-discriminatory and transparent in the way it regulates a diverse profession;
• an inclusive, consumer-focused organisation.

The associated Action Plan provides the detail of how this be achieved, drawing on the recommendations of an independent review by Lord Ouseley, who reported in August 2008.

9. Each of the Board's Committees — Compliance, Education and Training, Rules and Ethics, and Client Protection — has developed its own workplan for the delivery of the strategic objectives. The SRA's constituent directorates produce annual directorate business plans setting out their key objectives.

10. During 2008 the SRA has developed a timetable for its business planning, and begun regular review of the suite of key performance indicators and the Strategic Risk Register which have been introduced. The Board has established a Scrutiny Committee which has been developing its role of providing the Board with the assurance that there are adequate internal controls in place to manage material risks to the achievement of the SRA's objectives. More work is required fully to embed the planning process, and this will be a priority for 2009.

Progress during 2008

11. During 2008 the SRA made significant progress towards its aim of providing a coordinated approach to ensuring that solicitors are able to achieve and maintain the high standards of professional competence needed for successful modern legal practice. This work was carried forward through a series of initiatives including the finalisation and implementation of the new legal practice course, the review of accreditation schemes, pre-qualification work-based learning and transfer arrangements into the profession for qualified lawyers. We also continued to press forward with the development of arrangements for entity-based regulation flowing from the provision of new forms of legal practice under the Legal Services Act.

12. Some progress was made on the difficult issue of the Law Society Group's corporate governance arrangements — the mechanisms through which the relationships between the SRA, the part of the Group which undertakes public interest regulation, and the corporate and representative functions of the Society, are managed. This is of critical importance for a number of reasons, including public confidence in the ability of the SRA to put the public interest at the heart of its operations, and satisfying the requirement placed on the Legal Services Board under section 30 of the Legal Services Act to make rules for internal governance of approved regulators to ensure that the exercise of regulatory functions is not prejudiced by representative functions. Dialogue between the Society, the SRA and the Legal Services Board will be essential.

13. The delegation of rule-making powers from the Council of the Law Society to the SRA Board in July was a positive and welcome development. The establishment of a Corporate Review Group, which first met in the same month, was a constructive step forward, although the SRA would have preferred it to have been embedded in the Society's formal governance arrangements. During 2009 we will also work to further develop the relationship between the SRA and the Law Society in its representative role as primary consultee for the profession.

14. One significant area of disappointment in 2008 has been in relation to the implementation of new IT systems to replace the legacy systems inherited from the Law Society. In 2006 we identified the introduction of new IT as fundamental to our ability to deliver our strategic objectives. The SRA's work is currently dependant on two main systems which date from the 1990s, and do not meet the needs of modern, risk-based, information-led regulation. New technology will enable us to gather and analyse information more effectively; make better use of information in the proactive identification of regulatory risk; deliver effective entity-based regulation under the Legal Services Act; and allow solicitors to conduct their business with us online.

15. In consultation with the Law Society's IT department, we had selected a suitable product in 2007. We intended to complete the first stage of the implementation — decommissioning the ROAD system — in the summer of 2008, but unfortunately the timetable for implementing a new system to replace the old ones has been subject to very substantial delay. We are continuing to work closely with the Law Society in order to resolve outstanding issues, and ensure that the SRA obtains the IT which it needs to carry out its role as an efficient and effective public interest regulator.

Performance against 2008 Key deliverables

16. The SRA's initial business plan set out a series of Key Deliverables for 2008, grouped under headings derived from the gap analysis undertaken in 2006. A summary of what has been achieved against each individual Key Deliverable is given below.

Standard setting

collection, analysis and communication

Organisational improvement

17. In summary, of the eighteen objectives, all except the two related to IT have been substantially delivered.

Key deliverables for 2009

18. The Key Deliverables for 2009 are grouped below under the themes from the strategic plan, which themselves derive from the Strategic Objectives established in 2006. The Board will conduct a quarterly reviews of progress against milestones and measures during 2009.

Theme 1: Setting the standards

• To set standards for entry to the profession, professional behaviours and continuing professional development so as to maintain and enhance the competence, performance and ethical conduct of solicitors and uphold the rule of law
• To set standards for organisations offering legal services

These objectives will be delivered through the following actions and progress monitored by the associated measures and/or milestones.

Theme 2: Support and monitoring

• To provide information, advice and support to those we regulate to help them comply with the standards set
• To operate processes to monitor compliance with standards, so as to identify cases requiring remedial, investigative or other regulatory action

These objectives will be delivered through the following actions and monitored by the associated measures and milestones.

Theme 3: Consumer protection, enforcement and discipline

• To protect consumers by ensuring effective professional indemnity and compensation fund arrangements
• To tackle unacceptable professional or organisational performance, misconduct and dishonesty by firm, fair, timely and proportionate regulatory and disciplinary action

These objectives will be delivered through the following actions and monitored by the associated measures and milestones.

Theme 4: Access to justice, transparency and consumer information

• To promote choice, innovation and accessibility in the provision of legal services through various types of business structure
• To provide information to help consumers to make decisions about legal services and to understand the standards they are entitled to expect

These objectives will be delivered through the following actions and monitored by the associated measures and milestones.

Theme 5: Organisational improvement

• To demonstrate value for money in all our dealings
• To attract and retain diverse, high-calibre staff who are committed to service excellence through continuous business improvement

These objectives will be delivered through the following actions and monitored by the associated measures and milestones.

Strategic risks

19. As a result of the work done on the development of risk identification and risk registers during 2008 the areas where the SRA has identified risks in relation to the implementation of its objectives include

• The rules and standards for which the SRA is responsible
• Entry to the profession
• The maintenance of professional competence during practice
• Disproportionate regulatory impacts on BME solicitors
• Focus of resource on particular areas of regulatory activity
• Coordination of interfaces between stages in the SRA regulatory processes
• Identification and management of external change
• Meeting consumer needs and providing consumer information
• The Legal Services Board's criteria for regulation
• The governance arrangements affecting the SRA
• Dealing with conduct posing high risk to the consumer
• Changing the SRA's organisational culture
• The SRA's IT systems
• The SRA's resources
• Impact of changes in relation to decision making

20. Many of these risks are closely related to those which were set out in the last business plan. They may, of course, change as the SRA's risk registers are reviewed and amended.

2009 Headcount and Budget

Efficiency savings 2008

21. In its 2008 business plan the SRA set out the approach which it had chosen to adopt resource requirements. It explained that the need to maintain discipline on costs whilst at the same time introducing organisational reform — better, more effective regulation with new powers and more effective use of resources — was a difficult balance to achieve. Faced with a growing regulated population and a challenging strategy to implement, the SRA might have made out a case for expansion of budget and headcount. However, a number of factors had led the organisation to decide that it was preferable to keep headcount at 2007 levels. The proposed headcount for 2008 was therefore at a level equivalent to 2007, adjusted to reflect net transfers into the organisation from the Law Society, but with provision for some additional headcount for the delivery of essential projects.

22. During its first two years of existence the SRA's expenditure reduced in real terms. In 2007 there was an underlying underspend of approximately £1 million, and a larger underspend is also predicted for 2008.

23. Efficiencies realised in 2008 include:

1. The Information Directorate has handled a substantial increase in application and data changes within resource levels comparable to those deployed in 2007:

2. The Conduct Investigations Unit is on track to record a second year of substantial improvement in caseworking efficiency during 2008. We expect a 15% rise and are targeting a further 8% rise in 2009. This will effectively "save" 2.5 FTE (although the saving will be absorbed by increased volumes);
3. The Regulation Investigations Unit has been performing at a high level for some time, is tracking a 3-4% improvement in 2008 and is targeted to achieve a further 3-5% to 95-97% in 2009. This will enable the unit to absorb extra workload with no increase in headcount.
4. During 2008 the Forensic Investigations team has increased the number of inspections undertaken by approximately 20% on 2007 levels. This has been achieved in spite of the team having a lower establishment level for most of the year.
5. In the Client Protection Directorate, claims investigation caseworker grades have been reviewed leading to the introduction of mixed grade 7 and grade 10 staff where previously all posts were grade 10. Two additional posts were required in the Interventions Team to improve operational control and accommodate growth in intervention numbers. One of the two posts has been restricted to a two-year contract. This growth has been offset by the removal of two posts from elsewhere within the directorate, leading to no growth in headcount despite an increase in demand.

Resource requirements 2009

24. The approach adopted for 2009 is to continue to look for efficiency savings whilst allowing for some limited increase in headcount in areas where there is demonstrable growth in demand. There are a number of reasons for this approach:

1. growth in several areas of regulatory activity is already apparent during 2008, including complaints (13% increase over 2007), interventions (40% increase) and Compensation Fund applications (1.7% increase);
2. the uncertain financial and economic climate in 2009 will carry an increased risk of dishonesty and default;
3. the delivery of firm-based regulation will require the implementation of new processes which will place additional demands on the organisation;
4. additional resource will be needed to ensure the delivery of Lord Ouseley's recommendations and the SRA's equality and diversity action plan;
5. there remains a number of gaps in the SRA's provision of specialist support posts, an inheritance of its organisational separation from the Law Society and the Legal Complaints Service.

Increases in headcount will be minimised by:

1. efficiency increases; and
2. the tactical use of fixed-term staff and outsourcing to meet temporary requirements.

25. Although the case for additional headcount is strong, the figures set out in the following section are subject to the following provisions:

1. there remain underlying deficiencies in the current management data. These deficiencies mean that it is difficult to translate actual or anticipated growths in demand into specific headcount numbers. This issue will be addressed during 2009 through the development of robust metrics;
2. there may be further scope for realising efficiency savings during 2009, but at the same time the SRA must be able to deploy its resources effectively in order to meet currently unquantifiable demands which may arise in the course of the year (for example, work-related to the Hunt review or the Legal Services Board). The SRA proposes to review this issue following the completion of the SRA IT business case in January 2009, which will include proposals on benefits realisation: at that point, it should be possible to quantify and schedule further efficiency savings and propose adjustments to headcounts and budgets.

Headcount

26. SRA FTE headcount in October 2008 was 582; including 36 temporary staff and contractors as against a budgeted headcount of 600, i.e. there were vacancies equivalent to 18 FTE posts.

27. Although some difficulties in recruitment have delayed the achievement of budgeted headcount, FTE headcount has grown throughout 2008 and planned recruitment will take the SRA close to the budgeted figure by year-end. The Human Resources department is currently actively involved in the recruitment to a further 26.5 FTE posts, 12 of which are expected to be in place by the year-end. This results in a forecast year-end headcount of 59459 FTE — six below budget. This is the correct baseline for 2009.

28. The SRA's requirement for 2009 is for uplift from its 2008 year-end forecast of 40 FTE. This is represented by:

1. Policy Inclusion Unit (responsible for Equality and Diversity) — 5.5 FTE in support of the SRA's equality and diversity action plan;
2. Client Protection Directorate — 7.3 FTE (Archives, Interventions Officers, and the completion of recruitment for the Statutory Trust Project);
3. Change Programme — 3.7 FTE (project management resource);
4. Policy & Communications Directorate — 2 FTE (a Research Officer and a Scrutiny Committee Officer);

The remaining 21.5 FTE posts are required in response to growth in a number of areas of regulatory activity, including

• 3% general applications handling
• 4% practising certificate applications
• 8% record changes
• 116% qualified lawyer transfer applications¹
• 8 % record changes
• uptake in relation to firm-based regulation
• three yearly peak for authorisation to take trainees
• 20% increase in Conduct Investigation Unit activity
• 5% increase in Regulation Investigations Unit activity.
• In 2007 the monthly average of QLTT applications received was 209. From January 2008 this increased to a monthly average of over 400 applications, and by June 2008 the figure already exceeded the total number of QLTT applications received in the whole of 2007. This trend excludes a peak of 1488 applications received in August 2008, which was attributable to revised guidance taking effect on 1 September.

29. Headcount growth by Directorate is set out in the following table.

Note: the figures for Policy & Communications include those for the Policy (Inclusion) Unit, which is responsible for implementation of the equality and diversity strategy.

Budget

30. The proposed SRA budget for 2009 is £20,781,831.

31. This includes additional expenditure on Equality and Diversity of £164k and one-off expenditure on project headcount for the firm-based regulation and IT projects amounting to £146k.

32. Excluding the amounts above, the 2009 budget is broadly in line with the quarter 2 reforecast, adjusted for a number of cost centres (Finance, Human Resources) that have moved out of SRA and for a number of functions (recruitment, redundancy) that are being funded centrally.

33. Income is in line with the 2008 reforecast at £8.9m, although it was originally forecast to be £380k less. The closure of this gap has been attributed to firm-based regulation income and brings the 2009 budget figure in line with the 2008 quarter 2 reforecast. However, at the current time we have no view on either price or volume, and hence this figure includes a considerable amount of risk.

34. The growth in headcount has resulted in increases in base salary of £1.4m compared to the 2008 forecast. In the main this is offset by reductions in the National Insurance and pension line due to changes in the Society pension scheme.

Temporary and agency staff

35. Temporary and agency staff have increased by £307k, but this reflects some re-allocation of consulting spend into staff expenditure.

36. The Compensation Fund recovery is broadly in line with the 2008 reforecast, but calculation of these have yet to be fully completed — see below.

37. The majority of non-staff expenditure, such as telephone charges and travel and subsistence has increased in line with headcount. However, a few areas are worth noting:

1. Conferences and external meetings have increased by £124k, the majority of which is as a result of the introduction of client care events.
2. Legal fees have increased by £710k reflecting the forecast increase in investigations and interventions as a result of the economic down-turn.
3. Other professional fees appear to have reduced, but this is mainly as a result of re-classification into staff costs.
4. Other administrative expenses have reduced by £196k reflecting the originally budgeted reduction in income.
5. Expenditure on Legal Services Complaints Commissioner (LSCC) fees has reduced by £389k. This reflects the LSCC target of a 50% cost reduction, combined with an over-prudence in the 2008 reforecast.

Legal fees

38. It is this reduction in legal fees where we are carrying the most risk. By their very nature it is difficult to forecast our actual requirements in 2009, since it is not possible to predict what cases might come over the next year.

39. The original proposal for legal fees was for an increase of £1.2m but, in order to meet the budget target figure, the SRA is prepared to reduce its budget for legal fees by £500k. This reduction is made on the basis that, in the event that the SRA needs to spend more on legal fees in 2009, such expenditure will be funded out of reserves, contingencies or underspend elsewhere within the Law Society Group.

Contingency and other areas of risk

40. Although the budget has been calculated to be as realistic a forecast for 2009 as is possible, there are nonetheless areas of uncertainty.

41. The assumptions around staffing involve a relatively aggressive approach to recruitment early on in the year. Historically the SRA has had some difficulty in recruiting suitable staff and has had either to rely in part on temporary staff and contractors or go without. This, coupled with conservative assumptions over staff churn and the resulting potential vacancy factor, may deliver an under-spend.

42. Legal Services Complaints Commissioner costs are targeted to be reduced by 50% in 2009/2010. A contingency of 30% (£61k) has been included in anticipation that this stretch target may not be met.

43. Income was originally forecast to be £380k less than the latest figure. This increase has been attributed to firm-based regulation income and brings the 2009 budget figure in line with the 2008 quarter 2 reforecast. However, at the current time we have no view on either price or volume, and hence this figure includes a considerable amount of risk.

Unknowns

44. The Compensation Fund re-charge includes an element for central costs such as Facilities, Finance and Human Resources. Until such a time that the central costs budget has been completed we are including the 2008 quarter 2 reforecast figure in the 2009 budget. Clearly any movement in this figure will be more than offset by movements in the cost themselves, and as such should not effect any decisions over approval or otherwise of the SRA budget.

Shared services and capital expenditure

45. These are not included in the SRA budget. Central services such as Finance, Human Resources and IT are managed through the Law Society and costs are captured centrally. Group IT is responsible for delivering systems development across the Law Society Group and holds a centralised budget for this.