Overall cost of practice to fall despite PC fee breaking £1,000 barrier

Competing Demands: council agrees to cover pensions shortfall and refund SIF surplus

The practising certificate (PC) fee is to go up from £830 to £1,020 this year, the Law Society Council decided last week.


However, cuts in contributions to the fund that compensates the victims of solicitors' fraud, mean firms will see a marginal fall in the overall cost of practice, while the council also set out how it will refund to the profession £50 million of payments to the Solicitors Indemnity Fund (SIF), which were ultimately not needed.


The PC fee has gone up so as to balance the Law Society's 2005 budget, set at £95.8 million, up from £80 million in 2004.


More than half of the extra expenditure is for the regulation directorate, with the Consumer Complaints Service alone seeing its budget rise by 49% to £18.4 million. Law Society Treasurer Geoffrey Sandercock told the council that the PC fee rise had been 'entirely forced upon us'.


He explained afterwards that the injection was needed to meet demands for improvement in complaints-handling from the government and the Legal Services Complaints Commissioner. The Law Society is also required to cover some of the cost of the commissioner's office.


However, there is a 50% reduction in the PC fee for solicitors on low incomes.


In addition, the council had to juggle a demand from the trustees of the Law Society pension fund to make a £50 million contribution to cover a shortfall in the fund, and whether that should be found through the PC fee.


The discussion was held in private, but a Law Society spokesman said: 'The council agreed to meet the trustees' demand in two installments of £25 million each, one before the end of 2005 and one in 2006. We hope to fund most of this requirement from the surplus of the SIF.


'However, the council has also decided to pay £50 million of the SIF surplus back to the profession over two years. The predicted SIF surplus over the next two years is £100 million, which we believe will be enough to honour both commitments.'


Solicitors Compensation Fund contributions have gone down to £500 for solicitors applying for their seventh or subsequent PC (from £700) and £250 for solicitors applying for their fourth, fifth or sixth PC (from £350). As usual, less qualified solicitors make no contribution.


A report to the council said there were no single huge defaults by solicitors in 2004, although £15 million was paid out, £2 million more than in 2003. The number of interventions in practices fell to 56, the lowest since 1990. There is 'no substantial increasing trend of default', it said.


Straightforward theft from client account remains a problem, the report found, as does gross overcharging or misappropriation by solicitors acting as executors or attorneys. There is also a focus on solicitors who facilitate serious dishonesty on the part of others, either in a purely facilitative or advisory role, or as co-conspirator.