So cosy was New Labour with accountancy’s Big Five firms that the government engineered the 2000 LLP legislation specifically at their request. As I have written before, lawyers benefited almost as an afterthought.
What is now a Big Four – PwC, EY, Deloitte and KPMG – have also been assiduous in ensuring they remain deeply embedded in government. Not only by offering consulting expertise, but also seconding staff to work in – and keep tabs on the policy machinations of – Whitehall departments. This surely pays for itself, and in spades.
So, has this apparently symbiotic relationship suddenly broken down? It would seem so. For chancellor Rachel Reeves is reportedly poised to raid LLP partners for tens or even hundreds of thousands of pounds by removing their tax breaks.
Lawyers are in her crosshairs too, of course – though hardly as an afterthought this time around. Many top partners at the City’s leading legal LLPs earn substantially more than the elite cadre of beancounters.
I observed in this space a year ago that these tax advantages were in jeopardy. Seemingly, removing them was contemplated, but a plan to do so was quietly ditched from the autumn budget of 2024.
Will Reeves steel herself this time? The chancellor’s fiscal privations have hardly diminished, so reform must again be a possibility for this year’s Treasury set piece on 26 November.
There is some reason to be sceptical, nevertheless.
First, and most obviously, why fly a kite? Reeves could just have done it.
Second, City professionals are formidable lobbyists and generous to political parties (as indicated above). Senior representatives from the Big Four and their trade bodies have already met ministers to push back against the proposal. One excitable Big Four partner even claimed to the Financial Times that his industry might collapse.
Lawyers have plenty of flak to loft into the air, too. Big Law is supposed to be one of the government’s flagship growth sectors, yet the move would likely benefit US firms based in London who are competing hard with our indigenous giants. Own goal.
Moreover, do we really want some of the Square Mile’s most profitable enterprises offshoring talent (and tinkering with their corporate structures) at a time when they are shouldering an ever more onerous regulatory burden?
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