Law Society: ‘key to market sustainability is consolidation’

The_Law_Society

The MoJ’s original proposals for criminal legal aid would have led to three quarters of all firms not getting a contract, and the remaining quarter having to restructure radically in order to stay in the market while absorbing a cut in rates of at least 17.5%. Even now the MoJ has conceded that client choice must be retained, the threat of PCT has not gone away, writes Richard Miller.

  • Richard Miller is the Law Society’s head of legal aid

It was simple to identify what we did not like about the proposals. But that begged two questions. How could we avoid the MoJ pressing ahead regardless? And what might the MoJ be persuaded to do instead? The Ministry is free to choose whatever approach it wants, regardless of anything we say. We were not developing the alternative we would like the MoJ to adopt in an ideal world, but one that might persuade the Ministry off its chosen path of price competition.

In constructing our alternative, we drew on extensive work we have been doing for the past year. The Law Society conducted a survey of members before Christmas. In April, we held a consultation with the profession. We undertook roadshows and focus group meetings. We consulted extensively with our committees, Board and Council Members, and with all of the relevant practitioner groups, including the Bar.

From all this information, we identified a number of key features that our alternative had to have. Price competition had to be shelved. Every firm that met the threshold standards should be entitled to a contract. Client choice was essential. The resulting contracts should be economically sustainable.

That last part has proved controversial. The Ministry has accepted our argument that the profession as currently structured cannot sustain a cut of the levels they are proposing. We remain strongly of the view that however you restructure the market, it won’t be able to sustain such cuts.

But the economic analysis we commissioned shows that the key to the medium to long-term sustainability of the market is for there to be some degree of consolidation; and in both our survey and our consultation with the profession,  a majority of respondents supported some degree of consolidation.

Some small firms have challenged that view. By stripping overheads to the bone, they have become lean and efficient. Not unreasonably, they ask why they should be penalised for finding an effective way of dealing with the squeeze on rates over the past 20 years.

The difficulty is that what is sustainable for particular firms is not the same as what is sustainable for the market as a whole. There are currently 1600 firms that have to pay for premises, computer systems, quality marks and accreditations, and all the other overheads of business. Three or more lawyers sharing such costs is likely to be cheaper than each incurring them. In some towns there are several firms each sending a lawyer to Court to handle one or two cases, whereas in others, there are a smaller number of firms, sending a smaller number of lawyers to Court with several cases each. While the benefits of economies of scale can be overstated, and the risk of diseconomies of scale is real, there is little doubt that by getting together, firms can reduce their costs, particularly if the consolidation is carried out gradually over time rather than at speed and under duress.

Another challenge to the longer-term sustainability of the market is the question where the lawyers of the future are going to come from. Someone needs to train them. Many firms are not sharing in the cost of doing so. Those that are training new lawyers need to be able to carry on doing so.

Any doubts we had as to whether our model should ensure a degree of consolidation were swept away by the attitude of MoJ officials. It was clear that they were not interested in any approach that did not result in consolidation. This brings us back to the crucial point that if we fail to persuade the Ministry not to proceed with price competition, all other arguments about our model are moot.

Our model adheres to our aims. Price competition would be shelved. Every firm that wishes to operate in this market and meets the minimum standard would be free to do so. The owner of every firm that wishes to remain should be able to see a clear path forward within this market, even if they will have to make changes to how they operate. The economic viability issue is in the hands of the Ministry, but we believe our model strikes the best available balance between consolidating the market and maintaining a stable supplier base. The contrast with the MoJ proposals to leave three quarters of all firms without a contract, and have a market consisting only of large firms with CJS-wide contracts, could hardly be starker.

 

 

 

Richard Miller

About Richard Miller

Richard is head of legal aid at the Law Society. He was previously director of the Legal Aid Practitioners Group

There are 1 comments

  1. As the stalwarts of the profession with decades of Criminal Law experience look for an escape route away from all the political meddling and interference I am happy to announce for the first time that I am unlikely to apply for my 31st Practicing Certificate this year mainly due to a bout of I’ll health caused by the negligence of a state controlled body, the same state that wishes to render me penniless before compensating me for my lost earnings over a four year period and hopefully for the future.
    It is often said that the dissolusioned vote with their feet , both mine are in. If anyone out there is interested in a S.Yorks Crime practice with a £1m plus turnover built up over a quarter of a century please get in touch.

    Ged Hale. 07710118973

    Reply

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