Proposals by the Ministry of Justice to recover interest generated on client accounts held by law firms are unlikely to receive support from the not-for-profit legal sector in their current form, MPs have been told.
The proposal would require law firms to remit 50% of interest generated on individual client accounts and 75% of interest generated on pooled client accounts to a central Ministry of Justice account. The funds would be used to support the wider justice system.
Appearing before the House of Commons Justice Select Committee, Professor Linda Mulcahy, who is leading a two-year research project examining mixed funding models for free and early legal advice, expressed concern about the structure of the scheme.
Professor Mulcahy noted that interest on lawyer trust accounts has been used successfully in other jurisdictions to support access to justice. However, she indicated that the absence of clearly identified beneficiaries within the Ministry’s proposal presents a significant obstacle to support from the not-for-profit sector.
She explained that many legal aid firms currently rely on client account interest to cross-subsidise their publicly funded work. She further emphasised the financial pressures facing law centres and free legal advice organisations nationwide, suggesting that any interest-based scheme should directly support those providing frontline legal services.
Concerns were also raised about the administration of the proposed fund. Professor Mulcahy observed that in comparable international models, such schemes are typically administered by independent foundations rather than directly by government. She described placement within the executive branch as unusual and cautioned that, without safeguards, funds intended to support access to justice could be redirected to other areas during periods of financial pressure.
The Ministry’s proposal forms part of broader discussions on sustainable funding for the justice system. The Justice Select Committee continues to examine the potential implications of the scheme for law firms, clients, and access to legal services.
