What does the future hold for the legal profession?

Tuesday, 14 October 2008 8:37PM

What does the future hold for the legal profession?

OPPORTUNITY OR THREAT - WHAT DOES THE FUTURE HOLD FOR THE LEGAL PROFESSION?

It is an unsettling time to be a lawyer. The common perception of a well remunerated, comfortable existence resulting from being in the legal profession is currently being eroded on two different, but strangely complimentary, flanks.

The Carter Review of the system of legal aid has serious consequences for all those firms which operate in the legal aid sector. The shift from an hourly based remuneration system to that of a graduated and ultimately fixed fee basis of payment will require a fundamental change in the working practices of firms. The effect of the competitive tendering process through 'best value competition' is unknown, as is the effect on the supply and demand equilibrium.

In conjunction with this, the Clementi Review dealing with competition and regulation will open a previously protected monopoly to other entrants when the legislation is enacted. This raises questions of firms regarding their current structure, ownership, financing and service scope, which will need to be considered in advance of the enactment of the reforms to ensure firms are ahead of the game – responsiveness will be key.

The combination of either, or both, of these reforms means that legal firms should carefully examine their future strategy and objectives.

It is clear to most individuals involved in the legal sector that the need for reform was evident. The changes in the way society operates are moving ever faster, as are the structure and expectations of that society. To achieve effective reform, all sectors of society need to be considered, and the overwhelming theme of Carter and Clementi is that of service and quality available to all.

Legal Aid is part of our current welfare system, and plays an important role in ensuring that quality legal advice is available to all. However, Government policy concerning the efficiency of public spending has identified that legal aid needs to be sustainable and that current escalations in spending are unacceptable.

As a result, the Carter proposals are geared to moving towards a competitive market based system whereby firms will tender for contracts with quality, availability and price being the basis of how these contracts will be awarded. The intention is that this market basis will focus on efficiency and drive costs down, but without affecting the quality of advice which will be dealt with through peer review. It is a system based on reward for the delivery of the service as a whole rather than payment being based on the level of inputs into a case – as it is put in the DCA and LSC document Legal Aid Reform: the Way Ahead "A predictable payment encourages a focus on the work required".

In order to ensure that the legal firm is able to make a reasonable return on the services provided, it must ensure that the quality of work meets required standards whilst at the same time having a critical mass of such work that it can ensure the associated overheads are not prohibitive. What this implies is that legal aid work needs to become a ‘sausage factory’ with firms having procedures and systems to ensure the work is processed as quickly as possible with an acceptable level of quality.

Given that the practitioners in the legal aid arena tend to be an ageing and diminishing proportion of the legal profession as a whole, the question which this raises is whether there is likely to be sufficient interest in this area of work. The new system passes all of the financial risk onto the solicitor and, given that profit margins in legal aid work have been reported to range from -6% to 2%, the return does not seem to be acceptable for a worthwhile business. Given the drive of the reforms for efficiency, this is unlikely to improve with competitive tendering.

The threats to the Legal Aid system, and to the firms which operate legal aid franchises are clear – the returns are unlikely to be sufficient, businesses will be threatened, the supply of legal aid advice will reduce, resulting in specialist legal aid ‘factories’ who will monopolise the market and push the cost of legal aid back up - thus potentially defeating the objectives of the Carter Review of sustaining quality, efficiency and availability of legal advice through legal aid.