Mulcahy: Funding crisis
A project exploring new funding streams for the not-for-profit legal advice sector – including interest on client accounts and levies of large law firms – went live this month.
The two-year ‘mixed funding models for free and early legal advice’ project is being run by the Centre for Socio-Legal Studies – together with the Access to Justice Foundation and Surrey University – and funded by the Nuffield Foundation.
With funding for the advice sector “widely agreed to be in crisis”, researchers will look at a range of models which do not exist or remain under-developed in the UK.
These include residual funds from collective action cases, IOLTA (interest on lawyers’ trust accounts), legal expenses insurance, levies on large commercial law firms, the apprenticeship levy, and the re-direction of dormant client monies.
IOLTA is traditionally limited to client money that is pooled because it is either a small amount or only held for a short period of time, and cannot earn interest for the client in excess of the costs incurred to collect that interest.
Since being allowed in the US in 1981 – Australia and Canada have had similar schemes in place since before then – IOLTA has generated over $4bn in revenue.
We revealed last year that the Ministry of Justice was conducting research on whether an IOLTA scheme might be appropriate for the UK.
The project will involve an in-depth examination of overseas schemes to assess their potential for the UK, informed by “stakeholder engagement” workshops.
It will result in an open access database, a series of policy briefings, and a project report with practical recommendations.
The researchers are Professor Linda Mulcahy of the Centre for Socio-Legal Studies, Professor Neil Rickman of Surrey University and Clare Carter, chief executive of the Access to Justice Foundation.
Professor Mulcahy said the project brought together expertise from the world of practice and universities.
“Adopting a multi-disciplinary and comparative approach, it seeks to draw on expertise from within a range of sectors including the free legal advice sector, regulators, professional bodies, banking and insurance.
“Our innovative methodological approach will involve us testing out evidence-based proposals with a range of practitioner stakeholders on a regular basis.
“Most importantly, we hope that the project will play a part in resolving the funding crisis which means that many of the most disadvantaged in our society do not have access to the support they need in asserting their rights.”
The future of client account interest has been in the headlines in recent months as the Solicitors Regulation Authority considers the issue as part of its client protection review.
Separately, a report earlier this month urged regulators to explore “alternative funding streams” for access to justice work, such as interest on client accounts, levying wealthy law firms, and residual funds from collective actions.
The report – commissioned by the Legal Services Consumer Panel in collaboration with the Legal Services Board – also said regulators should work with the insurance sector to explore the feasibility of expanding legal expenses insurance.
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