The proposed new regulatory authority for the legal profession will cost between €5.3 million and €8.6 million more to run than the existing regulatory regime, leading to increased costs to consumers, according to an economic study of the proposal.
The study questioned the need for the model of regulation set out in the Legal Services Regulation Bill, stating that no regulatory impact assessment had been published prior to the publication of the Bill, and it argued that proper oversight of the existing model of self-regulation was a better and cheaper alternative.
The study was carried out by Comecon-Competition Economics for the Bar Council, and examined the proposed new Legal Services Regulatory Authority, the tasks set out for it under the new Bill, the alternative proposals made by the Competition Authority in its 2006 report and the existing regulation regime.
At the moment regulation of the legal professions is carried out by the Law Society for solicitors and the Bar Council for barristers. In 2011 this cost the Law Society €11.6 million, including running the Solicitors' Compensation Fund (which compensates clients where solicitors have misappropriated money) and the Bar Council's regime cost €130,000. Very few complaints are made against barristers, who do not handle clients' money.
The report pointed out the Government had stated that a regulatory impact assessment (RIA) should be carried out in advance of proposals for new regulation, but that such an assessment had not been done either prior to the Competition Authority report or prior to the publication of the Bill. The Bill was now in its second stage in the Dail and still no RIA had been published, raising the possibility that such an assessment, if and when it was published, would be an ex post justification rather than an objective analysis, it said.
The Government's Better Regulation White Paper had set out six principles for evaluating new regulatory proposals, according to the report. These were necessity, effectiveness, proportionality, transparency, accountability and consistency, and the consultants argue that the model outlined did not meet these principles.
Self-regulation reduced the cost of regulation because it reduces the cost to the regulator of acquiring information. While self-regulation can be abused, such abuses can be prevented, they said.
Neither the Competition Authority nor the Minister for Justice had put forward a case to show why changing the regulatory structure of the legal profession would lower prices, they said, arguing that it was likely to increase them, and the increased costs would bear particularly heavily on barristers.
The report assesses the costs of the proposed new regime on the basis that it would take 47 of the Law Society's existing 59.3 regulatory staff, and take on another three to deal with the regulation of the Bar. The Bill proposes a number of additional tasks for the new authority, and this, along with the need for administrative and support staff, would bring the number of staff to approximately 80 full-time staff.
The report compared examined the payroll costs of various regulatory bodies, including the Commission for Aviation Regulation, the Medical Council, the Commission for Energy Regulation (CER) and ComReg, and set out two costs scenarios, one based on CER average salaries of €74,452 and the other on ComReg average salaries of €94,706. It calculated that there would be a 50/50 split between payroll and non-payroll costs, though added this was likely to be conservative, as the non-payroll costs of the Medical Council, including legal expenses, were much higher than the payroll costs.
Based on these comparisons, the report estimated that the cost of running the new authority would be between €17 and €20 million, compared with €11.7 million at the moment. As the Bar would have to bear more than 10 per cent of this under the Bill, this would increase the cost of regulation to the individual barrister between 14 to 18 times, leading to some being forced out of the profession and the increased cost being passed on to clients.