The government has pledged to complete a root-and-branch review of legal services regulation in the next three years – with sweeping change being on the table.
Justice minister Sarah Sackman said today that she supported a ‘reset’ in how the regulatory system operates, as her department accepted in full the recommendations of independent reviewer Richard Lloyd.
The review was prompted by the failure of regulators to act in the face of costly law firm collapses and market consolidation. It was initially intended as a review of the Legal Services Board, the oversight regulator, but the outcome could be more far-reaching.
In its response to the Lloyd review, the government backs ‘significant change’ to strengthen the effectiveness of legal services regulation. The Ministry of Justice will be required to develop a new framework by 2029 with a view to implementation during the next parliament. The LSB and other regulators should not defer swifter action in anticipation of ‘structural change’ coming in the longer term, the government said.
The response added: ‘The government will undertake a comprehensive review of the regulatory framework to consider whether it remains fit for purpose in a changing legal services market.' It will 'work closely with consumers, regulators and other key stakeholders in the legal sector to consider, among other things, the regulatory boundaries, the structure and complexity of the system, and the implications of developments such as AI and lawtech'.
All the recommendations in the Lloyd review will be implemented, the government said. They include the LSB, frontline regulators and the MoJ establishing a shared framework for identifying, assessing and managing market and consumer risk. The LSB should also coordinate an annual assessment of key risks, drawing on the data held by frontline regulators.
The government emphasised that the LSB should refocus its policy activity and ‘clarify’ its responsibilities to reduce duplication and confusion.
Commenting on the response, the Law Society backed the conclusion that the LSB should focus on its core oversight role. Society president Brett Dixon said: ‘‘The Law Society will work with the government to ensure the voice of the profession is heard in any comprehensive review of the regulation of legal services.’
Bar chair Kirsty Brimelow KC said: 'Legal services are essential to the success of the UK economy and they enable people to enforce their rights. Stability and confidence in our legal services should not be put at risk, and care must be taken to preserve the parts of the regulatory system that work well. Any review must be evidence-based and the Ministry of Justice must engage with all key stakeholders.
'We support plans to increase the transparency of the Legal Services Board oversight as this has been lacking in the past. We also support the realignment of some of the Legal Services Board activities including limiting its policy activities to correlate with its oversight role. We have been concerned for some time that the Legal Services Board has been going beyond its statutory remit, to the detriment of its core functions.'
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