Time passes quickly. Three months after becoming president it remains the case that the main challenge facing the profession is change.

After all of the changes currently in train are complete, one hopes (prays) for a period of constancy, unlikely as that may seem. Alas, we are not there yet.

On legal aid however, there does seem to be a constant – or at least a constant stream of consultation – on change. The Law Society keeps responding of course, but it is clear that a full-scale settlement of the question of how to provide access to justice in a sustainable manner is what is required. The Society’s ongoing review of access to justice provision will hopefully satisfy that need and I very much look forward to the delivery of its interim report in January.

There also remains concern that some lenders, without providing good reason, are determined to ‘free’ some solicitors from their panels. The challenge, especially for those lenders who profess to possess a social conscience, is to justify the harm that their actions will cause many solicitors’ firms and the communities they serve. To do so may not be as simple as they believe.

PII renewalThe renewal period for professional indemnity insurance has caused considerable difficulty for some (but by no means all), including those who followed the advice of the Society to apply in good time. It is for the Society to thoroughly investigate allegations made by members that some qualifying insurers left proposals unanswered until the last minute (if at all) gave firms as little as hours to take or leave a quote, and ramped up premiums dramatically with no warning and little apparent justification.

So with the added challenges of yet another consultation on legal aid, the organisation and administration of the Legal Services Commission, and ongoing changes within the conveyancing system, the Society is well occupied.

Regulation reviewAnd what change in the future?

For too long, discussion of regulation has been dominated by governance issues. Last year the Society commissioned two reviews from Lord Hunt of Wirral and Nick Smedley on the substance of regulation of the professional community. I am delighted that we now have their final recommendations.

Decisions on which recommendations to adopt lie with the SRA, but both reports provide considerable food for thought. The Law Society council will begin its consideration of the Society’s own representations this week. Any such representations will have at their core the need for regulation which is principles-based. Lord Hunt has added to the mix a primary recommendation of a system of authorised internal regulation (AIR) against such a need.

In the past 18 months, principles-based regulation has had a bad press.

The Financial Services Authority’s use of principles over rules was blamed by many for creating the conditions in which short-term risk-taking overcame measured, long-term growth. However, as Lord Hunt says, it was not the very premise of principles-based regulation which caused the banking crisis, but the inadequate application of the principles themselves. As Hector Sants has since acknowledged, the FSA was perceived as a toothless body lacking effective sanctions and this, in itself, was a contributing factor. But the principles-based approach remains at the heart of new proposals announced by Hector Sants in August.

The lessons for the legal sector are that a principles-based system provides the flexibility required for effective competition, but in order to promote stability and responsibility, the regulatory principles must be firm and the sanctions at the regulator’s disposal must be appropriate. Regulatory certainty is vital. The professional community must have clear guidance on whether a particular approach will get them into trouble, rather than being at risk of regulatory ambush by unintended breach. The benefit of AIR is that it would offer a considerable incentive for effective compliance and rigorous risk assessment in the shape of reduced routine intrusion from the regulator.

Lord Hunt’s recommendations on AIR to a large extent complement those of Nick Smedley. Both agreed on a need for the SRA to acquire the necessary skills to regulate corporate firms effectively. However, I believe that the point was that the required change was one that reflected the move to principles-based regulation and the need for a proportionate system across the board that meets the needs of the clients of a very diverse and complex profession.

I am much encouraged that the SRA has recognised the validity of many of the concerns expressed and has started a process of engagement which I trust will in time encompass the entire professional community. It is my belief that they must also address the question of cost, as I foresee little tolerance of any further increase, not least as the cost for representation and complaints has been frozen or is reducing.

Controlling the cost of regulation is vital for another reason. The switch to entity-based regulation is on the horizon, which will also pave the way for a significant change to the way in which practising fees are raised. A first consultation on this has already been carried out and there is more to come later. The regulatory system must provide value to those who pay for it, offering fairness while protecting the public.

Amid all of this, the Society endeavours to provide stability and solidity amid a sea of change. We know that we must continue to support our members’ best interests and to offer the services and advice that they need in these testing times, and we will certainly endeavour to do so.

Robert Heslett is president of the Law Society