Solicitors Regulation Authority and Bar Council warn scheme could raise costs, hit smaller firms and undermine access to justice
Proposals to redirect interest earned on lawyers’ client accounts to fund the justice system have drawn sharp criticism from across the legal sector, with regulators and barristers warning of unintended consequences.
The Ministry of Justice’s proposed Interest on Lawyers’ Client Accounts (ILCA) scheme would require a portion of interest held in client accounts to be paid to the Government. The plan is intended to support a more sustainable justice system, but responses to the consultation reveal significant concern about its impact.
The Solicitors Regulation Authority (SRA) has taken a measured approach, acknowledging the potential policy objective while highlighting practical and regulatory challenges. It said the scheme could require substantial changes to its existing rules, particularly around how firms calculate and return a “fair sum” of interest to clients.
The regulator also warned that implementation could increase costs for law firms. Many respondents to its earlier consultation indicated that firms may pass on additional administrative burdens and lost income through higher legal fees. Smaller firms were identified as particularly vulnerable, with concerns raised about financial stability and reduced access to legal services.
The SRA further noted that managing interest at an individual client level could create operational complexity, especially given the wide variation in how firms currently assess interest payments. It added that any expanded regulatory role such as monitoring or enforcement would carry resource implications that could ultimately increase practising costs across the profession.
In contrast, the Bar Council has taken a more direct stance, describing the proposals as “overly broad” and fundamentally flawed. It warned that the scheme risks undermining access to justice, particularly if applied to legal aid firms and low-margin areas of practice.
The Bar Council argued that legal aid providers should be excluded entirely, noting that many already operate without profit and have faced sustained financial pressure in recent years. It also raised concerns about the inclusion of damages held for clients, stating that removing interest could undermine established principles used to calculate compensation.
Additional concerns were raised about funds managed on behalf of vulnerable individuals, including those lacking capacity to manage their own financial affairs. The Bar Council said applying the scheme in such cases would be inappropriate.
A further criticism focused on the lack of clarity over how funds raised through the scheme would be used. The Bar Council said any money collected must be ringfenced specifically for legal aid and access to justice, warning against the risk that overall justice funding could be reduced elsewhere.
Chair Kirsty Brimelow KC also questioned the scope of the consultation itself, arguing that it assumes implementation of the scheme rather than asking whether it should proceed at all.
Both organisations indicated they will continue engaging with the Government as proposals develop. However, they urged ministers to carefully consider the wider impact on firms, clients and the justice system before introducing any final measures.