The government led by Andy Burnham is set to proceed with a £100 million stealth tax raid on law firms, with HM Treasury set to receive interest earned on client money held in accounts for mortgages and wills. The Law Society of England and Wales has expressed disappointment that the Prime Minister is pushing ahead with the plans.
The move revives a proposal originally introduced by former Labour Party Justice Secretary David Lammy, under which interest on client money currently retained by lawyers would instead be redirected to the Treasury. The change would apply to funds held by law firms for transactions such as property purchases and will administration.
Law Society criticises 'stealth' approach
Brett Dixon, vice-president of the Law Society, accused the government of “moving forward with stealth” to implement the tax raid. He said: “We are disappointed to see the MoJ advertising a role that appears to indicate the ILCA scheme is moving ahead despite near-universal opposition from the legal profession.”
Dixon added: “The proposal is a raid on clients’ money to generate an unreliable source of revenue for the justice system and to address general budget shortfalls. It would fundamentally change the rules of the game by making the MoJ a tax-raising department funded through clients of legal services.”
MoJ advertises senior roles for scheme
The Ministry of Justice is advertising for two new senior civil servants to lead the government's raid on client account interest. The job advertisement, for the position of “head of additional funding policy”, explicitly states that the role will involve developing a scheme “to unlock funding from interest generated on legal client accounts.”
The job ad says: “This is a complex, high-profile reform that offers a rare opportunity to shape policy from primary legislation through to implementation. The successful candidates will play a leading role in developing and delivering primary and secondary legislation, establishing new operational arrangements, and creating a sustainable funding stream that will have a lasting impact on the justice system.”
Government response
A Ministry of Justice spokesman said: “This is a routine hiring practice for an existing role, which will include responsibility for responding to the ILCA consultation. It is not an indicator of government policy.” The Law Society’s criticism comes despite this assurance, with the organisation maintaining that the scheme would fundamentally alter the financial relationship between legal professionals and their clients.
