Law Society voices concerns on MoJ account interest consultation

Earlier this month, the Ministry of Justice (MoJ) published proposals as part of a  consultation to redirect interest earned on lawyers’ client accounts into the MoJ’s budget. Law Society of England and Wales President Mark Evans criticised the plan, stating: "Firms will close, fees will rise and clients will be impacted if the MoJ goes ahead with the proposal.”

The consultation, which will close on 9 February, proposes that the MoJ could claim up to 75% of interest generated on pooled client accounts and 50% from individual accounts, according to Legal Cheek. This would divert the income that firms currently retain from the small amounts of interest generated on client funds.

Unlike comparable schemes overseas, where the money is typically directed towards legal aid or access to justice initiatives, the MoJ doesn’t intend to ringfence the revenue. Instead, it proposes using the funds flexibly across the justice system wherever pressure is greatest.

Commentators have argued that this change would disproportionately affect smaller firms that rely on this income to offset operational costs. Evans said: “As its own consultation reveals, [the MOJ] has no clear idea how this proposal will work in practice and no understanding of the serious consequences this will have on high street firms and access to justice throughout England and Wales.”

Evans explained: “The cost of doing business in the legal sector is already high, with recent rises to National Insurance contributions meaning businesses are paying more. The proposal comes at a time when small firms will have to manage new regulatory burdens on anti-money laundering supervision and tax adviser registration. High street law firms will face a perfect storm of new bureaucracy, undermining the UK government’s efforts to achieve growth and revitalise local economies.”

Responding to concerns, the MoJ cited its 2024 survey of more than 600 legal service providers, which found that 92% said they don’t rely on client‑account interest to operate. Most firms also reported that clients generally don’t expect to receive interest, as funds are usually held only briefly.