New road

Budget restrictions and financial pressures will cause many councils to place increasing demand on their legal teams to deliver efficiencies, while maintaining high professional standards. Most struggle to do this in the traditional way '“ by reducing overheads, removing staff or cutting service levels. But is there an alternative?

Could local authority lawyers become players in the wider market and generate external income by charging or trading with, for example, council employees and members of the public, as well as private and public sector organisations?

Over recent years, Kent County Council legal services has built up a thriving external practice based on providing high-quality, low-cost legal services to local authorities and public sector bodies across the country, which now accounts for more than 25 per cent of its overall income and generates £1.5m per annum.

By recruiting and developing a flexible and highly motivated team of 96 lawyers (many from private practice with a strong commercial 'nous'), a legal practice with a turnover of more than £6m and at least 250 clients has been created. Kent's legal team is now well placed to match, and often exceed, whatever the private sector can offer.

To achieve this, it has primarily used the powers contained in section 1 of the Local Authorities (Goods and Services) Act 1970 to make agreements and trade with other public bodies for the supply of legal services.

But, until relatively recently, the professional conduct rules governing local government solicitors and barristers were inequitable and outdated with regard to their ability to work for clients other than their employers and other public bodies. And while the statutory powers for local government lawyers to charge and trade with the private sector were already established under sections 93 and 95 of the Local Government Act 2003, in reality they were restricted from doing so by their own professional body's rules.

Rule 4 of the Solicitors' Practice Rules, introduced by the Law Society in 1990, provided that a solicitor who was employed by a non-solicitor could not work for anyone other than their employer, except as permitted by the Employed Solicitors' Code. The code permitted local government solicitors to work for other public sector bodies, but little else. In light of the code's restrictions, the ability to generate additional external income for the council, its taxpayers and the wider community was extremely limited.

Opening doors

Now, however, following revisions to the code made in 2007, solicitors employed in local government can act for any other organisation or person to whom the council is statutorily empowered to provide services. No longer are local government lawyers restricted to providing services only to their employers or to public bodies recognised under the 1970 Act.

The potential impact of revising the current code in this way is immense. It has opened up the prospect of local government solicitors providing '“ and charging for '“ legal services to anyone permitted under section 93 of the 2003 Act which, using the wellbeing powers, includes virtually anyone in the authority's area, including the private and voluntary sectors and individuals. The ability to generate significant income from such external sources can go a long way to not only paying for the legal function, but also subsidising the delivery of frontline council services.

With the introduction of section 93 and a relaxation of the code, combined with the Audit Commission's 'costs-plus' approach to calculating charges, local government lawyers should now realise there are few situations they cannot target to expand their client base. It also opens up the potential for greater collaboration between local authority legal departments, raising standards and generating greater efficiency savings through economies of scale and providing a healthy income generation stream '“ all of which will be of benefit to the councils, taxpayers and the community.

New environment

The ultimate goal could be to enable local government lawyers to provide legal services direct to the private sector in the same way as they do to the public sector. However, this would either require the establishment of a company to deliver legal services, or the creation of teams of non-solicitor lawyers to handle private client work, neither of which is currently possible or even desirable.

There must be few lawyers working in local government who are under any illusions about what the future holds. Just 'doing more with less' won't be enough, with demand for legal services rising at a time when local authorities face prospective cuts of between 20 and 40 per cent to their budgets. With the pressure to protect frontline services intense, 'back office' services are under threat and more radical solutions are needed.

This environment will become even more challenging for legal departments in October 2011, when the introduction of alternative business structures will allow the major outsourcing providers '“ among others '“ to own legal businesses for the first time. This is a 'Darwinian' prospect '“ and local authority lawyers need to adapt if they are to survive.

Joining forces

The response the legal team at Kent County Council has devised together with law firm Geldards, known as Law:Public, is a brand under which the two organisations aim to provide a cost-effective service and a viable alternative to the panel system. This resulted in the launch of their own unique combined offering, which is set to herald a period of rapid change in the provision of legal services to local authorities and the public sector.

Both Kent and Geldards were pursuing parallel tracks without realising it. Having seen various private sector panels set up and also complex arrangements such as the 'hosting' model (where local authority lawyers from one authority transfer to another, which then provides legal services back to the first authority) they felt there was scope for another model of provision. There had to be a simpler and more pragmatic solution '“ a third way.

Many heads of legal and chief executives in local government know that the large panels are all very well, but they often fail to provide the one thing that everybody wants, which is trusted, professional relationship with personalised contacts; commercial expertise combined with public sector ethos and value.

Law:Public provides the best of both worlds in terms of what the public and private sectors have to offer, with a combined roster of more than 100 lawyers and exceptional value for money.

There are a lot of extremely valuable assets that the private sector can contribute in delivering public sector work. The problem is the prohibitive price tag that goes with this '“ something that local government simply will not be able to afford as belts are tightened.

By combining under the one brand, Geldards and Kent can offer a much more complete package than they would as individual organisations but '“ crucially '“ at an affordable price. The target is a maximum hourly rate of £150, taken as an average of the two organisations' rates.

Clients who might have thought twice about going to Geldards before, because they may have lacked some of the areas they wanted in a law firm, will now go to them because they know that it has the backing of a large local authority legal department. And those who might not have gone to Kent, because they may have had some reservations about its capacity and geographical reach, will now go to them because they have the backing of a top 100 commercial law firm, with offices in Derby, Nottingham and Cardiff.

The two organisations did not enter into this blind. A pilot with an unnamed local authority before the launch was sufficiently successful for them to press ahead.

Room to grow

In terms of structuring, the arrangements have necessarily been kept fairly informal. This is because there needs to be flex in the process for each partner and also to allow it to grow organically. It also allows Kent and Geldards to remain within the Solicitors Regulation Authority's regulations on joint marketing, fee sharing and charging for their services.

The prospect of Law:Public becoming an alternative business structure is a possibility, but Kent and Geldards are holding off exploring this and are waiting to see how the service develops ahead of October 2011 before committing to any such move.

At that time the likes of Capita could soon be significant players in legal services provision to local authorities. After all, management consultants have been itching to add legal services to the bundle of services such as IT, finance and payroll that have already been outsourced. The introduction of ABSs will sweep away the legal obstacles to this happening.

It is time for local authority legal teams to throw off their blinkers. The opportunities are there to be taken but few have so far done so. But there is going to be blood on the floor in the next few years, and there will be victims of the financial crisis as local authority budgets are slashed. It is time now to look at the means of survival.