Balancing the books

The cost of supporting the Office for the Supervision of Solicitors will mean increasing the Law Society's spending, explains Kenneth Byass

Income 1.

0d, expenditure 19s.

6d - happiness; income 1.0s.0d, expenditure 1.0s.

6d - misery.The Law Society has successfully adopted these Micawber principles for many years, creating surpluses - 1998, 5.3 million; 1997, 7.8 million - which have been applied towards capital expenditure, in particular on IT and premises.In 1999, the Society was forced to commit 10 million over a span of two years towards clearing up the backlog at the Office for the Supervision of Solicitors (OSS).

This expenditure resulted in the surplus for 1999 being markedly reduced to 600,000 and a deficit for 2000 which we estimate will be 6.5 million.

In spite of this, the cash flow will remain positive throughout 2000 (that is to say, we will not go into overdraft), but cash balances held at the end of the year will inevitably be rather less than they would otherwise have been.The Law Society's Council has agreed a practising certificate fee for 2001 at 495 on the basis of which we expect gross income of 66.7 million and gross expenditure of 66.4 million.

This is as close to a balanced budget as we can get.

We predict that the low point of the cash flow cycle in 2001 (August) will be 1.7 million.The Council has had to provide for increased resources for the legal adviser's department - whose work has trebled in the last three years - and the finance department - which has been operating on a wing and a prayer for some time.

The Council's wholly proper decision that the registration fees for the legal practice course should cover only the cost and not yield any profit has resulted in a loss of income of 200,000.

And it is expected that staff numbers at the Society will increase from 500 (excluding those employed at OSS) to 511 in 2001.These increases pale into insignificance in comparison to the rise we expect in OSS expenditure.

In the years 1995 to 1999, OSS expenditure (ignoring overheads) increased from 8.9 million to 9.8 million.

We expect this expenditure to increase to 13.4 million during 2000 and to fall back to 12.6 million in 2001.

It is now clear that during those years when the practising certificate fee stood at 430 we were underspending on the OSS and that future expenditure (excluding overheads) in the region of 12 million to 13 million annually is likely to continue indefinitely so long as complaints received by the OSS run at present rates.

When considering these figures, solicitors should bear in mind that 1 million on increased expenditure amounts to 12 on the practising certificate fee, and that the figures do not include overheads.

During 2000, the OSS's staffing of 500 includes 165 temporary employees, most of whom were taken on to clear up long outstanding cases.

In 2001, the OSS's permanent staff numbers will rise to 413 but the temporary employees are expected to reduce to 17.We try very hard to keep expenditure under control.

All departmental budgeting is on a 'top down' basis, that is to say, we tell the department concerned what they are permitted to spend and they are constrained to work within that figure.

Every appointment of a new permanent member of staff requires the sanction of the finance committee.

However, the OSS, remains our biggest single head of expenditure and will continue to do so until the ongoing level of complaints has been materially reduced.

Kenneth Byass is the Law Society treasurer