While recognising the Government’s objective of securing sustainable funding for the legal system, which plays a vital role not only in facilitating access to justice but also in supporting the economy and providing companies with the confidence to do business, we set out a number of concerns about the design and operational feasibility of the proposed scheme.

 

There is broad agreement that the proposed scheme risks introducing material operational, financial, and competitive distortions across both the legal and financial services industries. These changes would result in substantial systems investment and ongoing administrative burden for banks and client deposit account providers, without a clear or equitable mechanism for cost recovery.

 

We also set out that the substantial new costs and operational burdens which would be imposed by the scheme, would ultimately be passed on to law firms and end customers. Smaller and regional SME law firms – often serving local businesses and vulnerable consumers – are likely to be disproportionately affected, increasing the risk of market exit and reducing access to justice.

 

Given these issues, we strongly encourage the MoJ to reconsider the design and underlying assumptions of the proposed scheme. Alternative, more proportionate mechanisms for supporting funding of the justice system should be explored. At a minimum, the scheme requires a full assessment of the costs and operational impacts on all affected stakeholders – particularly client account providers – before it can progress.