An independent review of the Legal Services Board has revived debate about the case for a root-and-branch review of professional regulation. But we’ve been here before – many times
Could this be the week that heralded the first shot of a second revolution in legal services regulation?
Calls by academics and thinktanks for an overhaul of the 2007 Legal Services Act seem to have been around almost as long as the legislation itself. But some hope Richard Lloyd’s review of the operation of the Legal Services Board may prove an inflexion point.
As expected, Lloyd focused on the failures of the oversight regulator to carry out its most basic function. He concluded after five months of assessment that the organisation had ‘lacked strategic clarity’ and ‘lost its way’ in recent years, becoming distracted by issues beyond its remit and allowing frontline regulators to make fundamental and costly mistakes.
Lloyd, who is chair of the Independent Parliamentary Standards Authority, said: ‘[The LSB] has not sufficiently prioritised in a pragmatic and proportionate way among its strategic objectives. Its oversight of the performance of frontline regulation has fallen short of what the government and parliament could reasonably expect.’
LSB chair Monisha Shah was appointed after the start of the review but avoided the temptation to throw previous leaders under the bus. Instead, she described the report as an ‘important moment of reflection about our impact in protecting and promoting the interests of consumers’. Former clients of PM Law and Axiom Ince, whose cash went missing when the firms collapsed, and those of SSB Law, who were hounded for wasted costs after its demise, would be entitled to ask why this reflection could not have come sooner.
Lloyd concluded that the LSB should be capable of playing a more effective and influential oversight role within the current regulatory framework – and that the steps taken towards improvement should accelerate.
But the clock is finally ticking on the framework itself, if the wider recommendations of the review are heeded at Westminster.
'The review’s focus was on the operation of the LSB as a public body within the existing statutory framework established by the Legal Services Act 2007, rather than on wider legislative reform. That is a subject for another day'
Sarah Sackman, justice minister
The report calls on the Ministry of Justice to carry out a ‘comprehensive review’ of the regulation of legal services – with consideration given to what activity should sit within or outside the current regulatory perimeters.
This model should be developed by 2029 with a view to implementing a new regime during the next parliament, with the LSB and existing regulators working closely together in anticipation of a ‘more integrated regulatory framework’.
That could reasonably be interpreted as a call for the MoJ to revisit the 2007 act in order to reduce from eight the number of frontline regulators currently under the supervision of the LSB.
This is hardly the first time such a proposal has been put forward. The Competition and Markets Authority, after two assessments of the legal services sector, concluded in 2020 that ‘wholesale reform’ of the act was necessary.
The Legal Services Consumer Panel, meanwhile, yesterday welcomed Lloyd’s report and set out its own case for reform. Declaring that ‘legal services regulation is broken by design’, the panel stated that eight separate regulatory frameworks have left legal services consumers unable to rely on consistent protection.
‘This wider review should conclude with a single, independent regulator replacing the current eight regulator architecture, with the regulatory perimeter redrawn around risk rather than historical professional titles, a universal compensation scheme, and a technology-ready mandate to govern AI in legal services,’ it added.
As the 2007 act approaches its 20th anniversary, it is also showing its age in respect of the far-reaching technological and structural changes affecting the regulated community.
The stumbling block, as ever, will be the government’s appetite for taking on such a complex project: it is hardly an obvious vote‑winner.
The current ministerial team at the MoJ, which commissioned Lloyd to carry out his review, still appears ambivalent about whether it should act on all of its recommendations.
Justice minister Sarah Sackman acknowledged that unacceptable regulatory failures across the system had resulted in significant consumer detriment. She noted the Lloyd review’s conclusion that decisive action is needed to address these shortcomings, and identified an opportunity to strengthen and support the sector through a more ‘collaborative and effective approach’ to regulation.
But she added: ‘The review’s focus was on the operation of the LSB as a public body within the existing statutory framework established by the Legal Services Act 2007, rather than on wider legislative reform. That is a subject for another day.’
Impatient reformers might suggest it was ever thus.
1 Reader's comment