If the government effectively seizes the wheel of the super-regulator, does that not signal a lack of confidence in its leader?
It is bizarre that solicitors are facing the prospect of not one but two government-led inquiries into our competitiveness.
First there is the Treasury’s ‘better deal’ trying to bring down bills, particularly by opening the market to alternative business structures.
And now we have the study recently announced by the Competition and Markets Authority, which includes looking at the current regulatory framework governing providers of legal services, to see whether it distorts competition.
First bizarre point: let us look at the Treasury’s own figures. In its paper it says: ‘In order to focus its efforts, the government has examined core markets that working people rely on and that account for a significant proportion of household spending.’ The paper states that the average costs per annum in a household bill come to £9,685, including housing, energy and clothing. Of that legal and banking come to £35 per year (I would love to know how much of that is banking).
In other words, legal and banking come to 0.36% of the whole. 0.36%! And for that, we need two government studies into the competitive nature of the legal services market?
Second bizarre point: we already have the Legal Services Board. It costs more than £4m per year to run. Among its primary regulatory objectives - section 1(1)(e) of the Legal Services Act 2007 - is promoting competition in the provision of legal services. What has it been doing all this time if the government now has to intervene with not one, but two, studies into its core business?
The LSB had no choice but to welcome weakly the two government actions, and say how eagerly it would co-operate with them. But should not Sir Michael Pitt, its chair, be considering his position? If the government has to seize the steering wheel of the body he is driving, and take over one of its crucial planks of activity, does this not signal a lack of confidence in how he is managing the organisation in the first place?
He is supposed to be the lead pursuer of anti-competitive practices in his postage stamp of a market (less than 0.36% of average household spending). Of course, the board has responded by saying it would launch its own study - the third to add to the list! - with ‘our own vision of an effective and “fit for purpose” future legislative framework’.
While you are deciding whether to laugh or cry - while the housing market is in grave crisis, the use of food banks on the rise, the inequality of incomes exploding, newspapers back to their old bullying, and banking culture unreformed - the real threat to the legal services market is going largely unexplored: the rise of the unregulated sector.
It is true that the LSB includes the unregulated sector in its recently published draft Business Plan 2016/17, but its concern appears to be that consumers using the unregulated sector will go without redress. That is true, but - not surprisingly - hardly the most important point. It has nothing to do with the threat to quality and stability in the legal system from unregulated provision.
I advise the LSB to read some of the studies on the importance of lawyers and their being regulated, to ensure economic growth, efficiency in the courts, access to justice and a sound rule of law. There are many such studies, none of which I see highlighted in LSB reports – for instance, Yarrow and Decker on Assessing the economic significance of the professional legal services sector in the European Union, which argues that a regulated legal profession contributes significantly to economic growth, or Copenhagen Economics on Competition and regulation of the legal sector in Denmark, which argues that the regulation of lawyers is important for consumer access to justice.
Must ideology always trump evidence?
Meanwhile, we have the position of Sir Michael. He is responsible for this mess of three reports into his tiny less-than-0.36% patch at the same time. He has chosen to play the government’s game of ever-more competition. You can never win at this game.
Just like in the old Communist days, when there were always more enemies of the people to be uncovered, even in the most unlikely places, so this government can always find more enemies of the market, its ideological equivalent. Sir Michael is in charge of finding enemies of the market in legal services, and has clearly - according to the government’s lights - failed.
Should he not be doing the honourable thing? Or must I whisper the dread word in my friend Dave’s ear: ‘Lubyanka!’
Jonathan Goldsmith is a consultant and former secretary-general at the Council of Bars and Law Societies of Europe, which represents around a million European lawyers through its member bars and law societies. He blogs weekly for the Gazette on European affairs