LSB: More reform needed to build on 'positive' Legal Services Act

The Legal Services Act 2007 has made a positive impact on the legal services market but more legislative reform is needed to protect consumers and ensure their legal needs are met, according to a new report from the Legal Services Board (LSB).

Plans to increase market competition and improve access to justice have progressed slowly between 2007 and 2015 due to regulatory barriers and costly legal fees, an evaluation report published by the LSB found.

The chairman of the LSB, Sir Michael Pitt, said that 'the quality of legal services has improved on most measures following the 2007 reform' amid market growth, but an unmet legal need remained.

Pitt added: 'The LSB believes that the market needs to change further and the pace of change needs to increase. We need to continue to break down regulatory barriers to competition, innovation, and growth. We also want to empower consumers and enable their need for legal services to be met more effectively.'

Turnover in legal services rose to an all-time high of £32bn in 2015, while in 2014 net exports of legal services were 33 per cent higher than in 2007. In 2014/15, entities regulated by the Solicitors Regulation Authority (SRA) showed a turnover of £22bn, with 33 per cent accounted for by legal disciplinary practices (LDPs) and alternative business structures (ABS).

The entrance of new business models into the legal services market has increased competition, although only one in four consumers shop around as limited price transparency, little advertising – only 17 per cent of firms advertise their prices – and an absence of high-profile comparison website services inhibit faster improvement.

This week, justice minister Lord Faulks QC published a consultation to seek views on reducing regulatory barriers for ABSs to encourage greater access to the legal services market following their success.

The report found that the rise in fixed fees deals, from 38 per cent in 2012 to 46 per cent in 2015, is offering consumers greater certainty on price, with significant decreases in the use of hourly rates. Alarmingly, however, the analysis suggested that one hour of litigation advice from a senior solicitor costs nearly half of an individual's average weekly earnings.

Overall, 54 per cent of individuals handle legal problems alone. Cuts to legal aid and the rise in court fees, as well as the greater use of IT in personal applications, especially in probate, have contributed to this figure,but the high cost of legal fees has also led some to DIY justice.

Meanwhile, just under half of the individuals who have used a legal service in the past two years trust lawyers to tell the truth. Earlier this year, the LSB found that the use of legal jargon by lawyers had contributed to this outcome.

The Law Society said it agreed with the LSB that 'broadly speaking the legal regulatory system is working effectively' amid ongoing changes, but an opportunity for simpler and better regulation was possible.

'Sometimes, fixed pricing for less complex issues may be the best pricing solution. For more complex services provided by solicitors, such as family services, the price of the service clients receive will be determined by their individual circumstances and the type of advice they require.'

Paul Philip, the SRA chief executive, said the substantial growth in the sector was 'encouraging' but acknowledged that there was still a long way to go, 'particularly to improve choice and deal with the problem of unmet legal need'.

The SRA believes that its reforms – proposals for an overhaul of SRA Accounts Rules and a simplified SRA Handbook – will increase access to high-quality, affordable legal services by getting rid of unnecessary bureaucracy and further promoting competition.

The SRA reiterated its stance that government proposals to make the legal profession independently regulated will contribute to building trust in solicitors.

Catherine Dixon, the chief executive of the Law Society, said that the definition of regulation was too broad and should not include professional standards, legal education and training, and entry into the profession and awarding the professional title of solicitor.

In the absence of these activities, she said, 'this would leave the regulator to get on with setting independent regulatory rules which consistently apply to the legal services market. Simpler and better regulation would reduce costs while providing more consistent protection for consumers.'

Dixon added that 'the state also has a role to play in ensuring that every citizen has equal access to justice'.

'Since 2007, reductions in eligibility for legal aid, increases in court fees, and court closures have disproportionately affected people on lower incomes, deepening inequalities in the justice system between those who can and cannot afford to pay.'

The chairman of the Bar, Chantal-Aimée Doerries QC, said the report 'contains some mixed messages'. She said the LSB had identified growth of the legal services market and covered innovations in the sector, including public access barristers, which are providing consumers with more choice.

'However, the LSB report does raise some concerns, notably the rise of DIY justice. The growth in the number of people who are attempting to handle often complex legal problems on their own is a particular cause for concern. The rise in court fees and the significant cuts to legal aid have put many litigants in the difficult position where they feel unable to access justice through the courts, or through solicitors or barristers with the appropriate expertise to help them.'

Doerries QC added that the report failed to highlight the difference between barristers and other legal service providers, such as solicitors, and ultimately left 'a gap in its account of the legal services market today'.