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4 August, 2023
The CLC is consulting its regulated community as it proposes changes to its current practice fee rates.
The CLC is proposing to increase practice fee rates by up to 10%, while individual practicing fees will remain unchanged. The last amendment was in 2021 when the fee bandings were improved to better reflect practice turnovers and reduced its rates by 23%.
Fee rates are calculated based on turnover data submitted to insurers each June when CLC regulated practices renew their Professional Indemnity Insurance (PII). The CLC uses these turnover declarations to calculate the practice fee payable for the next licensing period which runs from November to October.
This year, for the first time since 2009, the CLC has seen the aggregate practice turnover fall by 4%. This means that the revenue received from practice fees will also decrease. At the same time, the costs and requirements of oversight regulators are on the rise. This year, the Legal Services Board estimates a 21% increase and the Office for Legal Complaints an 18% increase in their charges to the CLC’s regulated community. The CLC must collect these amounts, over which it has no control, from the regulated community.
The CLC is proposing a freeze on contributions to its Compensation Fund and its Legal Ombudsman (LeO) levy allocation. In September 2021, the CLC stripped out the cost of Legal Ombudsman from practice fees and moved to recharging firms based on complaints numbers. The LeO levy is now collected separately in two parts: a basic availability fee that all firms pay in recognition of the importance of LeO to consumer protection, and a usage fee based on the number of cases from a firm that have been accepted for review by LeO.
Sheila Kumar, Chief Executive, said: “We have worked hard over many years to keep our costs as low as possible whilst developing our regulatory role proportionate to risk and in the consumer interest. Since 2016, we have reduced the practice fee contribution rates by 61% and our Compensation Fund contributions by 60%.
“The CLC will need to run a surplus budget to maintain and grow reserves to protect against future uncertainty and business needs. We understand the financial pressures that everyone is facing and the CLC is not immune from these. The work we have done in previous years to implement a cost effective, scaleable and flexible regulatory model means the increase will have only a small impact on an individual practice but taken together will enable us to continue to be the regulator we need to be.
“Because the CLC is funded by the practices and individuals that we regulate, it is important that they, and other stakeholders, have an opportunity to review and comment on the source and application of the funding. This helps to ensure the burden on practices and individuals is kept to a minimum while ensuring that we have sufficient resources to execute our statutory objectives.“
The practice fee contribution rates together with individual license fees and other administration charges are reviewed annually to ensure that revenue collected through these charges are sufficient to cover the forecast expenditure for the next financial year. The Council of the CLC reviews the forecast and, if necessary, makes changes to fee rates and or expenditure to ensure there is sufficient resources available to the CLC to execute its statutory responsibilities.
The proposed fees are then consulted on and interested parties have an opportunity to comment on the fee proposals for the next licensing year. After considering the responses received and if necessary, amending the proposal, an application is made to the LSB for approval.
The consultation can be accessed here and will run for six weeks, closing on the 8 September 2023.
Alternatively, respondents can complete a short form survey here.