There is “substantial evidence” that the RTA portal fee should go up by £100, rather than down by £700, the Law Society has told the government.
The proposed two-stage fee of £500 is “unjustifiable and will be unsustainable” as it equates to a rate of £50 per hour on the basis of 10 hours’ work – which is what surveys estimate an average portal case takes to complete – or less than four hours’ work at £130, which the society calculated as the correct rate for solicitors handling this work.
It said: “It would be impossible for solicitors to undertake every claim properly in accordance with the RTA protocol and their professional conduct requirements in this amount of time. To do so will result in consumers receiving a less than adequate service… It is likely that such rates will result in many solicitors simply being unable to carry out the work.”
In response to the consultation on the proposed fixed recoverable costs, the Law Society cited its law management section’s financial benchmarking survey, which put the median cost of an employed fee-earner at £40,860, median support staff costs at £12,624 and median spend on non-salary overheads per fee-earner at £37,992, meaning a break-even point of £97,348 per annum.
“It would be usual to calculate that a fee-earner’s billable hours at 1,100 per annum. This would result in a break even hourly rate of £88 approximately (i.e. £97,348/1,100). This is cost only and does not allow for any profit. Using a mark up of 50% (which brings a rate of return on investment of 33%), the corrected rate would be £132 per hour.”
Given that the current £1,200 fee equates to approximately £1,320 today after inflation, the society said “there is substantial evidence to justify” a rate of £450 for stage 1 and £850 for stage 2, making £1,300 in all. It recommended uprating stage 3 costs by 10% to take into account inflation since they were set in 2009, making £275 for a paper hearing and £550 for an oral hearing.
While there is “no empirical evidence available to suggest what the appropriate rate should be” for cases worth between £10,001 and £25,000, using the 62% increase suggested by the government would mean costs of £2,100. On the same basis, lower-value employers’ and public liability cases should be £1,900, with a fee of £3,500 for the higher-value ones.
The response outlined the society’s concerns that the initial government announcement that the fees would cut was made “before any meaningful consultation had taken place”.
It continued: “The society is also concerned that the levels proposed by the government are too low, are not adequately evidenced and do not take into account factors such as the real cost of inflation, marketing costs and solicitors’ practice costs as well as the recommendations of Professor Paul Fenn and his analysis of the data compiled by him for Lord Justice Jackson and the Ministry of Justice (MoJ).
“They are also based on the incorrect assumption that the ban on referral fees will lead to a reduction in costs.”
The society calculated that the proposed non-protocol costs had “bizarrely” been subject to referral fee-related reductions ranging from £350 to £1,075. “This in itself is irrational in that in usual circumstances solicitors will currently pay a referral fee for a lead and that fee will not be based upon the value of the claim or the stage the case has reached when settlement is agreed.”