Bag a lawyer
The Legal Services Act has generated pages of gloomy predictions about the threat to law firms, but it could offer fresh opportunities for the publicly funded sector. Jon Robins reports
What has the bright and shiny world of 'Tesco law' got to do with the publicly funded sector of the profession? Not much; at least that is the prevailing view of legal aid lawyers. Lord Phillips of Sudbury, the Liberal Democrat peer and solicitor, best summed up that view when he wished that the legislation, as it went through Parliament, would be 'thrown into the deepest hole in hell. If this wretched Bill goes through you may get the likes of Tesco, Barclays and the Wal-Marts deciding that there is money to be made but they'll only be interested in the profitable bits such as property, wills and employment,' he said. The other stuff '“ i.e. non-remunerative legally aided work, such as social welfare, immigration housing and family '“ would be left on the shelf gathering dust.
In an interview for a new study '“ 'The Big Bang report: Opportunities and threats in the new legal services market', commissioned by the Byfield Consultancy in partnership with the City law firm Fox Williams '“ chief executive of the Legal Services Commission, Carolyn Regan, was keen to scotch the cynicism.
Has the Legal Services Act 2007 got much to do with legal aid, she was asked. 'Absolutely,' Regan insisted, adding that there was 'a link between alternative business structures and legal aid'. More specifically, there was an obvious synergy between ABSs (which will enable the eternal ownership of law firms, allow firms to sell equity and float on a stock exchange) and the CLAC (Community Legal Advice Centre). The LSC's recently revived CLAC policy envisages providers and prospective providers tender for jointly funded, face to face legal and advice services. 'There should be real benefits for clients in terms of better choice and greater consumer focus and there should be benefits for us as purchasers,' she says. Regan believes people were 'hesitant around publicly funded opportunities but I think that they are there in droves'.
Unsurprisingly, legal aid lawyers struggling to make a decent living from publicly funded law are bemused at the prospect of private sector interest in their patch. The report asked Lucy Scott-Moncrieff whether her legal aid practice (Scott-Moncrieff, Harbour & Sinclair, 42 fee earners) would be interested in an injection of outside capital. 'I'd love alternative forms of investment, but for some reason I do not think they are going to be that interested,' says Scott-Moncrieff. 'But, seriously,' she added, 'I don't think we need external investment.'
So, why would the private sector be interested? According to Carolyn Regan, it's a no-brainer. 'First of all, there is a steady stream of clients, plus, with legal aid eligibility rates going up, you have more clients than you had last year and, of course, there are more people unemployed,' she explained. Then there was the £2bn budget which she likens to a 'government bond backing legal aid. It is quite a good bet. Even if it was £1.8bn, it's still a big whack of government guaranteed dosh.'
Then there was the prospect of dragging old-fashioned, cash-starved solicitors' practices into the new technological age realising the kind of economies of scale delivered through the deployment of IT.
'It is an old-fashioned market out there,' said Regan. 'Most practitioners still operate 9-to-5 in high street premises.'
Outside interest
Interest from outside of private practice in legal aid has been limited, with a couple of notable exceptions. At the 2006 Legal Aid Practitioners Group conference, Max Pell, of the call centre giant Capita Insurance Services, told delegates his company was well on its way to becoming the largest provider of remortgaging services and, as such, was easily capable of undercutting firms on commoditised work. Pell argued that because of the cross-subsidy of legal aid by private paying work, there would be 'a culling' of the high street.
Of the big retailers, it has been the Co-op (ironically, not Tesco) that has been showing the keenest interest in the Legal Services Act. One of the Co-op's press releases rather hopefully noted the store's long-standing interest in what 'has already been dubbed 'Co-op law' by some commentators'.
The superstore has expressed tentative interest in legal aid. Eddie Ryan, managing director of the Co-operative Legal Services, told Legal Action in 2008 that the store's brand meant that it was well placed to offer legal help to the socially excluded (he talked of the Co-op 'wrapping our arms about people who need our help'). 'Legal services are a distress purchase or a purchase of necessity,' he said. 'We are there when people need us or in times of distress.' As to whether they would move on to legally aided services depended on demand and 'how the membership might view it', said Ryan.
The Sheffield-based company A4e, through its partnership with legal aid firm Howells, has been most active in the sector over the last two years. A4e/Howells won a series of tenders '“ the telephone helpline Community Legal Advice (where it's the second biggest provider) plus the Leicester and Hull CLACs. 'Our view is that ABSs are a good thing,' says Jon Trigg, the company's project director.
A4e view legal services as a natural fit with their business which was set up in the 1980s to help unemployed Sheffield steel workers back into work. 'We have been a welfare-to-work provider for over 20 years and work with people who are the furthest removed from the labour market, the most socially excluded and vulnerable and who have a need for our welfare services whether it's legal aid, health, education, or financial inclusion advice services,' explains Liton Ullah, A4e's senior business development manager.
So, was the Legal Services Act an opportunity for A4e to develop into the market? 'Yes, but not just for us. It is an opportunity for the whole market,' says Ullah. Was there really enough money in legal aid to satisfy a commercial organisation like A4e? Ullah admits to being 'acutely aware'¦ that the margins aren't massively high. There has to be a genuine passion and commitment. Legal aid is classed as an essential welfare service but if you compare it against the likes of health and other essential services the £2bn budget for legal aid wouldn't keep the NHS going for a matter of weeks.'
There was considerable unhappiness locally in Hull when A4e/Howells won the local CLAC threatening the future of the local citizen's advice bureau, one of the oldest and largest in the network. Hull CAB lost funding from both the local authority and the LSC. Some lawyers complained that A4e had no record in legal aid and feared that they are using the CLAC initiative as 'a loss leader' to gain a foothold in legal services. In terms of their ambition, Ullah assures other legal aid lawyers 'there isn't a master plan to take over the legal aid world'.
'Significant dangers'
Where does this all leave the client? 'Improving access to justice' was one of the regulatory objectives binding all approved regulators including the SRA, the Law Society pointed out in their response to a Solicitors Regulation Authority consultation last year. Chancery Lane reckoned that there were 'significant dangers' arising from the possibility that the new entrants would provide legal services 'on a much greater scale than most existing law firms', endangering existing firms and, secondly, from the fact that new entrants were 'unlikely to have the same degree of commitment as many existing firms to providing effective access to justice for individuals. ABSs are instead likely to operate almost entirely for commercial motives.' Chancery Lane did not criticise potential ABSs for this. 'It is possible to operate primarily for commercial motives and yet provide an entirely professional service,' it conceded. 'But it is necessary for policymakers to guard against the possible dangers to the public interest arising from the approach.'
Chancery Lane made the case that ABSs should be made 'to offer financial support to existing law firms to safeguard access to justice'. Legal aid lawyers (including Lucy Scott-Moncrieff) supported section 106 'planning gain' arrangements for new providers. 'You might want to have rules whereby Tesco's would have to charge a profitable price so as not to undercut local competition by having a loss leader,' say Scott-Moncrieff.
Most commentators, however, dismissed the Law Society idea as clashing with the spirit of deregulation envisaged by the reforms as well. Others saw it as somewhat self-serving. 'Protectionist,' was the view of Jonathan Gulliford, operations director of Co-operative Legal Services. Gulliford argued that it was an attempt 'to put the problems of legal aid funded work into the court of ABSs. Nobody is asking Silverbeck Rymer or Clifford Chance to subsidise legal aid work? To say that the Co-op isn't allowed a financial model to compete with the likes of Silverbeck Rymer in the personal injury sector because it has to fund social welfare and immigration work is completely ridiculous.'