The Legal Ombudsman is increasing its budget by £1m for the next financial year – the first time the organisation has increased spending since its formation.
Umbrella body The Office for Legal Complaints has proposed a total budget for 2017/18 of £14.63m, with £11.63m covering the legal services jurisdiction and £3m to cover complaints about claims management companies. This is £1m more than budgeted spend for 2016/17.
The increase, revealed in documents presented to last month’s Legal Services Board meeting, reflects what are termed as ‘CMC bad debt expenses’, which are expected to increase significantly.
These are incurred when a case fee is charged but cannot be recovered - for example when a large CMC goes into administration.
The OLC is preparing to consult on changes in scheme rules which would allow it to waive case fees where there is little prospect of recovery. This would likely be implemented in April 2018.
The OLC told the Legal Services Board that the spike in its budget should also be regarded as part of an ‘invest to save’ strategy, as the ombudsman works on its modernisation programme.
Case numbers are expected to be static at 7,000, but the complaints-handler will face higher staff-related costs and intends to spend more on research, surveys and communication.
The OLC said: ‘We continue to achieve significant cost reductions, and will make critical investments in 2017/18 that should allow us to improve efficiency and reduce future costs.’
The increased budget does not necessarily mean increased spending: in 2015/16 actual spending was £11.6m, reflecting a significant fall in the number of cases investigated. Headcount at the ombudsman is expected to remain at 243 in the next year.
The budget report noted that efforts continue to transfer regulation of CMCs to the Financial Conduct Authority. The latest timescale suggests this will not happen before October 2018, although it is ‘very possible’ that the transfer date could be further delayed due to the requirement for legislation.