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SLAB challenges Society claims over legal aid lawyer earnings

23 February 2017

"Very serious concerns" about the way practitioners' earnings have been calculated in the Law Society of Scotland's new report on the financial position of legal aid firms, have been expressed by the Scottish Legal Aid Board.

The report, published yesterday (click here for Journal news item), claimed that smaller legal aid firms in particular are strugglng to survive, with owners of small practices earning less than the national living wage for legal aid work they take on. However in its response, SLAB claims that on the basis of the report, the financial health of legal aid firms "appears to be fairly robust".

SLAB said it had pointed out siome "major errors" in the analysis, some of which had been corrected, "but the report still presents an inaccurate and misleading picture". It calls on the Society to make the data and assumptions underpinning its profitability figures available to the independent review of the legal aid system under Martyn Evans, recently announced by the Scottish Government.

According to SLAB, the Society's calculations use assumptions based around the workloads and overheads of busy, profitable legal aid firms in relation to the small number of sole practitioners doing legal aid work, covered by the research.

"In its own reporting of the findings, the Society has chosen to focus on the small minority of firms that between them earned only 1% of the total fees, and 2% of the legal aid fees, generated by the firms who responded to the survey", SLAB states.

"The level of fees generated by these firms, over 40% of which came from private fees rather than legal aid work, suggests that many of them simply have too little business to support a full time solicitor.

"Placed alongside the level of profit achieved by most of the legal aid firms in the research, it is unclear why the Society has concluded that the challenges faced by firms with too little income to be economically viable are caused by the level of legal aid fees and the operation of the legal aid system."

SLAB's own analysis of the research "suggests that most firms undertaking legal aid work are profitable, with a median annual profit per equity partner of around £80,000. Firms which specialised in legal aid were found on average to be slightly more profitable than firms with a higher share of private fee income".

It adds: "The firms which undertook most legal aid work – accounting for over two thirds of the legal aid income generated by the legal aid specialists – were most profitable, with average fees per equity partner of over £260,000 and pay per equity partner of over £102,000."

And the Board claims the Society ignored its warnings about the methodology chosen, "and as a result the report contains mistakes, anomalies and inconsistencies".

SLAB believes the hourly rate derived for sole practitioners has been reached by using a number of notional figures, including annual hours worked of 2,544 whereas the true picture reported by those concerned is 1,845 hours. SLAB calculates the true hourly earnings, on 2,544 hours worked per year, at £10.19, compared to the Society's £6.65, or £14.05 if the figure is 1,845 hours, "more than double that quoted by the Society in its report".

Andrew Otterburn, the consultant who produced the figures in the report, responded that the report highlighted "a small number of key themes":

  • excessive bureaucracy and micro-management by SLAB;
  • that firms in rural areas are giving up legal aid, due to the poor rates of pay but also due to the bureaucracy of the system itself;
  • the difficulty most firms in Scotland have in running a viable legal aid practice – nearly 90% of suppliers do under £250,000 legal aid a year and the analysis suggests that most of these firms are not viable and that their partners earn less than they would working for someone else;
  • that just 4% – those doing over £500,000 a year – were running a successful practice.

He added: "Our report was shared with SLAB in advance of its publication and their staff very helpfully queried one chart which on checking was found to be incorrect and was very quickly changed. Another calculation was also corrected resulting in a change of 36p. We were very grateful to SLAB for their help in spotting this but were surprised that their press release focused on this minor error rather than the substance of the report.”

Click here to read the full SLAB response.

 

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