SRA response

SRA submission to the HM Treasury 2016 Autumn Statement

Published on 17 October 2016

The SRA is the regulator of solicitors and law firms in England and Wales. We protect consumers and support the rule of law and the administration of justice. We do this by overseeing all education and training requirements necessary to practise as a solicitor, licensing individuals and firms to practise, setting the standards of the profession and regulating and enforcing compliance against these standards.

This submission outlines what we believe is needed to support our vision for a modern, open legal market which, in turn, will support a competitive UK economy post-Brexit. In addition to our clear commitment to supporting and growing the UK share of the international legal market, a competitive domestic legal market also provides accessible, affordable services to the small businesses that are not only the backbone of our economy but also the big businesses of the future.

We believe the Treasury should use the autumn statement as an opportunity to:

1. Reaffirm and acknowledge the importance of a diverse, strong, effective and independent legal profession providing high quality legal services internationally and to the UK commercial market, as well as to the public, and the importance of the rule of law and administration of justice underpinning our economy and international trade.
2. Highlight work already underway to create the conditions that help regulators and firms to reduce unnecessary bureaucracy and barriers to entry so that law firms can grow, innovate and compete, while ensuring the high professional standards that secure the international reputation of English and Welsh law.
3. Acknowledge the wider support throughout government of measures being developed within the sector to support diversity and social mobility through the creation of different routes into the profession, as well as ensuring the high consistent standards that are fundamental to both the public interest and the solicitor brand.
4. Recognise the importance of opening up data and information in the legal market, so the market is better understood and businesses and consumers can make better, more informed choices, helping to meet unmet need and to grow the market.

Further details of the SRA's work in each of these areas can be found in Annex A.

Making the case for full independence for legal regulators

The Autumn Statement also provides an opportunity for the Treasury to provide an update on proposals first put forward on 30 November 2015¹ for full independence of all legal service regulators from their representative bodies. This paper stated that we "will launch a consultation by spring 2016", yet this consultation's publication remains pending.

At present the SRA is part of the Law Society Group and we have welcomed these proposals to provide legal service regulators with full independence from their representative bodies. We regulate in the public interest and are clear that regulation should be separate from the representation of professional interests and accountable to the public through Parliament or the judiciary. We believe that independent regulation will command greater public confidence, better serve the public, deliver better outcomes and be more cost effective.

The Treasury touched on the case for independence in its anti-money laundering consultation document of April 2016², flagging up the problem of perceived conflicts of interest. It stated "it might be easier for law enforcement to share information with supervisors if the supervisory arm is distinct from the representative arm".

The Competition and Markets Authority (CMA) has also recently added to the case for fully independent legal regulators in its current market study into legal services in England and Wales. The CMA's interim report³, published 8 July 2016, recognises the progress already made by the SRA, including its work to remove unnecessary bureaucracy, and promote competition by removing barriers to new firms, with new business models entering the market. It also states that, as a key principle, regulation should be fully independent from the providers of legal services.

The oversight regulator, the Legal Services Board, also made the case for independent regulation in September 2016⁴. It stated, "the current lack of full independence between the legal services regulators and their associated professions is unlikely to be sustainable" for a number of reasons, including:

it fosters complex governance arrangements to manage relationships between the regulatory and representative functions of approved regulators, which do not achieve full independence of regulation and which distract senior management attention on both sides from regulatory and representative matters respectively"

it risks undermining the credibility of regulation in the public perception in that some professions are still seen by consumers to be policing themselves (and therefore – whether true or not – inferentially to be ‘protecting their own’)"

it creates scope for representative bodies to delay reforms which would benefit competition and consumers generating regulatory uncertainty and deterring investment"

it results in lack of transparency of the cost of regulation, as a result of (i) sharing of some resources and costs between the regulators and their representative bodies, and (ii) some costs that should be collected from providers as part of optional professional membership arrangements being imposed as a compulsory regulatory levy"

it leads to confusion in other parts of government about which body is responsible for wider regulatory functions, for example under anti-money laundering and insolvency regulations."

The Autumn Statement should re-establish the commitment first made in November 2015, with details of a timetable for its implementation. This is not the time to put the brakes on reforms that will support a healthy legal market, inject more competition and innovation, provide more opportunities for solicitors and improve access to law. Rather than retreat into the past as we leave the EU, there is now an opportunity to reform legal service regulation and make sure legal service providers are able to compete nationally and internationally, while at the same time enhancing public and business access to solicitors.

Annex A