Bar Council raises concerns over MoJ plans to collect interest from client accounts
The Bar Council has expressed strong opposition to proposals by the Ministry of Justice (MoJ) to introduce an Interest on Lawyers’ Client Account (ILCA) scheme, describing the plans as “overly broad” and raising concerns about their potential impact on access to justice.
Under the proposed scheme, a proportion of the interest earned on lawyers’ client accounts in England and Wales would be transferred to the government. The Bar Council has set out its objections in response to the consultation, arguing that the proposal raises fundamental questions about whether it is appropriate for the state to collect interest generated on funds held on behalf of clients.
The organisation has also highlighted several specific concerns about how the scheme could operate if implemented. It has been warned that legal aid firms should be excluded from the scope of the proposal, noting that such firms typically operate without profit and have already faced significant closures in recent years.
The Bar Council further stated that low-margin cases could be adversely affected. These include areas such as private family law, housing disputes, employment matters, and small business cases, which have increased following the introduction of the Legal Aid, Sentencing and Punishment of Offenders Act. The organisation suggested that additional financial pressures in these areas could have wider implications for access to legal services.
Concerns have also been raised about the inclusion of interest accrued on damages awarded to clients. The Bar Council argued that compensation for future loss is calculated using the Personal Injury Discount Rate, which assumes a return on invested damages. Removing interest in such cases, it said, could undermine the basis on which compensation is determined.
In addition, the organisation stated that funds managed on behalf of individuals who lack the capacity to oversee their own financial affairs should not fall within the scheme.
The Bar Council also criticised the consultation for lacking clarity on how funds generated through the proposed scheme would be used. It stated that any money collected should be ringfenced specifically for legal aid and access to justice initiatives, and warned against any approach that might lead to reductions in overall government funding for the justice system.
Kirsty Brimelow KC, Chair of the Bar Council, said the consultation does not address whether the scheme should be introduced, focusing instead on its implementation. She described this omission as a significant flaw.
Brimelow added that the proposal risks worsening existing challenges in access to justice, particularly in light of unmet legal need. She stated that without clear safeguards and reinvestment into the justice system, the scheme could have unintended consequences for both legal professionals and those seeking legal support.