The Ministry of Justice’s proposals to recover client account interest from law firms to fund the justice system will not be supported by the not-for-profit sector, an academic conducting major research on mixed funding models to support free legal advice has told MPs.

Under the ministry’s proposed scheme, 50% of the interest generated on individual client accounts, and 75% on pooled client accounts, would be remitted to a Ministry of Justice Central Account.

However, Professor Linda Mulcahy told the House of Commons justice select committee this afternoon that she cannot see anyone from the not-for-profit sector supporting the scheme in its current design.

Mulcahy is currently leading a two-year research project exploring ‘mixed’ funding models to support free and early legal advice. These include interest on lawyer trust accounts, which have operated successfully in other countries.

However, Mulcahy told the committee today that the ministry’s scheme contains no beneficiaries. ‘It’s really obvious to me that we need those beneficiaries to be legal aid firms, who at the moment are using this interest they earn to cross-subsidise so that they can do more legal aid work. We desperately need it to go to law centres and free legal advice services across the country that are in crisis,’ she said.

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‘The fact that there are no named beneficiaries means we all worry the civil justice system is once again cross-subsidising prisons and the criminal justice system, which has happened repeatedly over a 30-40 year period.’

The ministry’s proposal to administer the scheme is ‘a very unusual way to go about it’, Mulcahy added. ‘The funds are normally given to an independent foundation that is separate from government. There are seven schemes we can find in the world that are in the executive branch or judicial branch, but being in the executive branch is very unusual.

‘And one of the problems with that, and we’re seeing this in the US at the moment, is there’s a danger that government will grab that money that has been set aside to support the free legal advice sector - because it starts looking attractive when interest rates are high - and will take it away and put it to a completely different purpose.’