Practising fees will fall by more than a quarter in 2010/11 for the ‘typical’ fee-payer, if proposals submitted to the Law Society Council are approved next week.

October will see the introduction of the so-called ‘fairer fees’ regime, under which 40% of the cost of regulation will be paid by individual solicitors and 60% by private practice firms based on banded turnover.

The changes transfer part of the cost from the employed sector to private practice, because the employed sector, which does not hold client money, will not pay the firm-based fee.

A paper to council recommends that the total ‘tax on profession’ should be £1,137 for a ‘typical’ fee-payer in 2010/11, a fall of 27.6% on the current year. This includes an individual practising certificate fee of just under £500. The compensation fund fee will fall from £390 in 2090/10 to the equivalent of £19, as reserves are presently higher than necessary.

It is anticipated that the Law Society Council will seek approval for a total of £121.7m to be collected from practising fees – a decrease of £0.5m on the figure collected in 2009/10.

The Society said this is primarily because there was an over-collection last year, as a result of unduly cautious assumptions having been made about the timing of payment of the levies for implementation of the Legal Services Board and the Office for Legal Complaints, and the number of practising certificates to be taken out. It said this factor is largely counter-balanced by the decision of the SRA Board that some costs which were formerly borne by the Compensation Fund should in future be borne by the practising fee account.

The total sum required for the Compensation Fund is expected to be £2.1m, down from £20.9m last year.

The overall cost to the profession is expected to fall from £143.1m in 2009/10, to £123.8m in 2010/11, a 13% reduction. Chancery Lane said this reflected continued stringent action to contain costs throughout all parts of the Law Society Group. In particular, staff salaries, which are the largest item of expenditure throughout the Law Society Group, have been frozen since January 2009.

Although budgets for the Law Society Group in 2011 are not set until later in the year, it is anticipated at present that the practising fee income will be applied broadly as follows:

  • Solicitors Regulation Authority – £69.6m.
  • The Law Society (professional body) – £31m.
  • The Legal Complaints Service – £6.5m.
  • Statutory levies (Legal Services Board, Office for Legal Complaints, Solicitors Disciplinary Tribunal) – £14.6m.

Law Society president Robert Heslett said: ‘The Council is deeply conscious of the difficulties which the recession has caused to solicitors’ firms throughout the country. That makes it even more important than usual that we take every opportunity to contain or reduce costs throughout the Law Society Group. That is particularly difficult at present, because we need to fund a major and essential change programme within the Solicitors Regulation Authority, as well as meeting the great majority of the implementation costs for the Legal Services Board and the Solicitors Regulation Authority.

‘In light of all of these factors, we are pleased that it has been possible this year to reduce the overall precept to a significant extent. However, this reduction reflects an easing of required levels of reserves in the Compensation Fund which is unlikely to be repeated next year, although the containment of cost remains a key priority as we continue to develop new services in support of solicitors.’