Law Society warns client account interest plans could raise costs for clients

Body raises concerns MoJ proposals may increase costs, compliance burdens and access to justice risks

The Law Society of England and Wales has expressed strong concern about proposals to redirect interest earned on solicitors’ client accounts, warning that the measures could increase costs for clients and place additional financial pressure on law firms.

The proposals form part of a Ministry of Justice consultation exploring whether interest generated on money held in solicitors’ client accounts should be diverted into a central fund intended to support the justice system. The Law Society has said that, in their current form, the proposals risk unfairly shifting the burden of justice funding onto users of legal services.

Client accounts are used by solicitors to hold money temporarily on behalf of clients, for example during conveyancing transactions or while managing litigation funds. Interest generated on those sums is currently dealt with in accordance with regulatory requirements and client care obligations. The Law Society has argued that altering this position raises both practical and principled concerns, particularly where the underlying funds belong to clients rather than firms or the state.

In its response, the organisation said that redirecting interest away from clients could effectively operate as an additional cost linked to legal services. It warned that firms may ultimately need to absorb new administrative and compliance obligations associated with the scheme, which could in turn be reflected in higher fees. The Law Society suggested that this outcome would be particularly difficult for smaller practices and firms operating in areas already subject to financial pressure.

The representative body also questioned the policy justification for the proposals, noting that the expected financial benefit has not been clearly demonstrated. It expressed concern that funds raised through the scheme would not necessarily be ringfenced for access to justice initiatives, but could instead form part of wider government expenditure. In its view, sustainable funding of the justice system should be addressed through general taxation rather than through mechanisms linked to client money held by legal professionals.

The Law Society further warned that the proposals could have unintended consequences for access to legal services. Additional financial strain on firms, particularly those undertaking legally aided or lower-margin work, could reduce capacity in areas where provision is already limited. The organisation has previously highlighted concerns about declining availability of legal services in some parts of England and Wales, and said further cost pressures risk worsening that trend.

While acknowledging that similar schemes operate in other jurisdictions, the Law Society said the proposed model differs in important respects, including the absence of clear safeguards governing how funds would be used. It maintained that any reform in this area would need to balance the interests of clients, firms and the wider justice system, and that the current proposals do not yet achieve that balance.

The Ministry of Justice consultation remains ongoing, and further responses from professional bodies and stakeholders are expected before any final decision is taken. The issue is likely to remain under close scrutiny across the legal sector, particularly among conveyancing firms and others that routinely hold significant client funds as part of their day-to-day practice.

The Law Society’s intervention highlights continuing debate within the profession over how the justice system should be funded, and whether mechanisms involving client money risk undermining established principles of client care and trust in legal services.