Everyone has an opinion on the Interest on Lawyers’ Client Accounts (ILCA) scheme - but so far, everybody is dancing around the reality.
ILCA is the government's proposal to divert law firms’ interest on client accounts into the justice coffers. Laughably, we have to still call it a proposal, and await the response to a consultation, despite the Ministry of Justice's advertisement for two new senior civil servants to lead the scheme. If the department does choose not to proceed, it will be employing two people on at least £58,511 to count paperclips for the next few months.
Let’s be clear at the outset: there is a legitimate argument for clients to benefit from the interest generated by their money. But that doesn’t answer the question of who should fund the justice system.
For the Ministry of Justice, this is hardly some noble mission to strengthen the justice system. If the government really wanted a system that is fair, accessible and fit for purpose then it should be prepared to pay for one out of taxation.
Read more
What has probably happened is some bright spark has realised you can squeeze a few quid out of this apparently unclaimed pot of money and top up the justice budget without having to beg from the Treasury.
The potential use for this money is noticeably vague. Funds raised through the ILCA scheme will ‘help strengthen the justice system’ but the MoJ does not propose to designate it for specific projects. It’s not a huge leap to see this cash disappearing down the black hole of prison costs amid public demands for harsher sentences.
But if the government is obfuscating, law firms too cannot be completely open about their objections to this raid on client account interest.
There are legitimate concerns about how the costs of handling money would be met without this extra income. To a certain extent, the money brought in by firms is offset by the risk they take on by handling client money in the first place.
But the opposition, we must acknowledge, is not entirely altruistic. For some firms, the interest on client accounts is a revenue stream that helps to bolster end-year profits. This is a tough sell. As one chief executive told me recently, law firms can hardly make the case in public that money can’t go to justice causes just because they need it.
But firms can make the case privately that this is a false economy for the government. For many years, the system has increasingly relied on pro bono work by lawyers to fill in the gaps in the justice system. That might be through providing free legal assistance in disability benefit appeals, or advising victims of domestic abuse or people trafficking.
No one is yet threatening to ‘work to rule’, but if the government wants to help itself to client account interest to fund the justice budget, law firms would be entitled to assume they no longer need to work pro bono. The temptation will to say: ‘You’ve got the money, now you make it work.’
Ultimately, all of this debate around the ILCA misses the obvious point that this is the client’s money everyone is scrabbling over. But if the government does insist on depriving firms of the income they currently receive, don’t be surprised if those same firms decide they can no longer provide the free help on which the system has come to rely
1 Reader's comment