Stimulating innovation

There is little doubt that social welfare law services to some of the most vulnerable citizens in our communities will need to adapt to a changed funding environment, writes Crispin Passmore. Legal aid cuts will affect many who have relied on these services in the past. However, these are not new challenges. Research already regularly shows that around two thirds of those with problems fail to get the advice they need. The most socially and economically excluded – the focus of legal aid in recent years – are least likely to get advice. And those on low incomes that fall just outside of legal aid entitlement are also very unlikely to secure access to legal services.

What can be done to increase access for these users? Existing mechanisms will of course continue: remaining legal aid and central government funding; local authority and charitable funding; social investment and philanthropic capital; and pro bono can all play some role. But they remain focused predominantly on existing models of delivery and traditional ways of working, when what may be needed is creativity and innovation.

At the Legal Services Board (LSB), we are conscious that regulation has a role to play in stimulating this innovation. The LSB has made huge strides in delivering its early priorities: an ombudsman service that consumers and lawyers alike can trust; independent regulation that has the public interest at its heart; and removing restrictions on ownership and management to allow for new investment and skills into legal services. That may appear dangerously radical to some in the professions, but it won’t be to most advice services operating in the not-for-profit sector. They have long operated with non-lawyer, specialist management – and delivered legal services alongside a range of other services that their clients need. At its best, the not for profit sector has much to teach its commercial colleagues.

The LSB believes that a market that allows for a variety of business structures has the potential to bring legal services to more people. A more dynamic market should bring expertise from other sectors into legal services. Retail experience that helps legal services reach clients through a range of integrated channels. IT professionals that bring the expertise to ensure new technology can be harnessed in a way that focuses on consumers’ needs. Financial expertise that brings a sharper focus on cost and investment returns.  Perhaps, most of all, the leadership focus on change rather than protecting traditional ways of doing things. One thing that is clear, however, is that change needs to be driven by providers listening to their customers – not by regulators prescribing a single path.

Small business and not-for-profit agencies are often at the forefront of radical innovation. Regulators have to take care that any barriers to that innovation are either removed or justified in the public interest. Often this will mean identifying the risks of the activities or services alongside the nature of the business, and who the consumers are. This process drives regulators towards a more outcomes focused approach rather than a rules based or prescriptive ‘one size fits all’ model.

The question of whether not-for-profit agencies could charge for services is one example. Should a regulator try to prevent a law centre from offering paid-for services? There may be different risks that the regulator will want to know are properly-managed when client money is held – consumers do need protection from theft. Equally an agency delivering services that are low risk – in terms of cost of redress or insurance for example – will not appreciate being regulated as if it is handling millions of pounds of client money each year. The LSB has started to think about how not-for-profit agencies (or special bodies to use the language of the Legal Services Act) are regulated in the light of these differences in risks. The Act provides for a transitional period before special bodies delivering reserved legal services have to become licenced, (those not delivering reserved legal activities cannot become ABS). That period is likely to end in 2014 but what sort of regulation needs to be in place before then?

Regulation has to protect consumers and the public interest and so must not erect barriers to entry that lead to higher prices or restrict access. Getting the right balance means focusing on risk. Our expectation is that regulators will not simply replicate the regulation of law firms for special bodies. But being not-for-profit does not simply remove risks for consumers. Regulators (current or new) will need to consider the activities that are delivered, the clients that receive them and the entity that offers them as a starting point. This risk based, outcomes focused approach to regulation can ensure that consumers get adequate protection without creating unjustified burdens on not for profit agencies or small law firms. That means that the firms that are willing to innovate, to learn from other sectors, and to listen to their consumers, will find new ways forward in the changing legal market. That change in mindset will protect individual agencies – and grow access to justice.



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