LeO and LSB in 'deliberate strategy' to keep complaint costs high

LeO and the LSB agreed on a "deliberate strategy" to keep complaint costs "higher than absolutely required" when the legal ombudsman was set up, it has emerged.

In a report published today, the legal services consumer panel said the purpose was "to mitigate the risk of being unable to meet the demand produced by a new scheme".

The report went on: "Now the likely demand levels are clear after three years' experience, being much lower than anticipated, the organisation is bringing its costs down.

"Nevertheless, concerns about the legal ombudsman's unit cost remain."

The benchmarking report, carried out at the request of the LSB, said LeO's cost of £2,168 per complaint was higher than comparable schemes, but described how the organisation was implementing a costs reduction programme.

"It told us that its unit cost in 2012-13 is 5 per cent lower than the previous financial year and that it anticipates reducing this by a further 9.6 per cent in 2013-14.

"Depending on volumes remaining stable, the Legal Ombudsman plans to continue to drive efficiency and to reduce unit cost by at least a further 5 per cent to 6 per cent in 2014-15.

"Ultimately the legal ombudsman is aiming to reduce its unit cost from 2011-12 levels of £2,164 per case down to around £1,500 per case by 2015/16 - a reduction of 31 per cent."

The report said this did not allow for the additional "economies of scale" provided by increased volume, whether in the form of an increased claims management jurisdiction or more use of legal services, and LeO believed £1,000 was an "achievable target".

As part of its plans for a voluntary scheme, the report found that LeO was "conscious of the need to explore the possibility of different pricing models", for example by linking charging to the "pathways" chosen by complainants.

Unregulated providers had "far cheaper" alternatives to LeO.

"While there is value in being able to say to customers that they can access the same redress as for regulated lawyers, the financial considerations may trump this and the public interest objective of a single location for legal services complaints."

The report also found that while LeO compared well with its peers on case resolution times and complainant satisfaction with timeliness, in 70 per cent of cases where it made a decision, complainants rejected it.

Adam Sampson, chief legal ombudsman, said LeO "cost just half of the £32.5m spent by our predecessor bodies".

Sampson said: "Overall, this is a useful report but some of the points made go beyond its benchmarking brief.

"Moreover, some of its conclusions are drawn based on incomplete data sets or where operational differences make comparison difficult. Nevertheless, the questions raised are ones to which we shall give careful consideration."