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Michael Gove wants to tax City lawyers and use money for legal aid

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Speculation that 1% levy on turnover of top 100 firms could be introduced

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Lord Chancellor Gove’s growing reputation as a left-leaning reformer could be cemented by a new tax that he is apparently planning to hit top City law firms with.

Uneasy with the much maligned court charge brought in by his hated predecessor Chris Grayling — which is basically a way of getting more money from poor people — but also under pressure to balance the Ministry of Justice’s books, Gove has had a bright idea.

According to a report in this morning’s The Times (£), the government is considering scrapping Grayling’s scheme to extract money from guilty defendants in favour of a 1% levy on the turnover of the top 100 corporate law firms.

The article is light on detail, but given that the Lord Chancellor used to work as a journalist at The Times before going into politics, it may be worth taking seriously.

Perhaps most importantly, the report recalls comments made by Gove in June when he noted that “justice is not just a marketplace — it is a community” and urged big-earning corporate lawyers to “look into their consciences” and do more pro bono work. If this didn’t happen, Gove added that legislation was “always open to us”, with proposals for a “lawyers’ levy” apparently already drafted.

The court charge — which is already proving difficult to enforce given how broke many convicted criminals are — is expected to pull in between £65 million and £90 million annually, while the mooted City lawyer tax would boost the Treasury’s coffers by a much larger £190 million. So there is method in Gove’s liberal madness.

Nevertheless, any bid by the government to hit corporate law firms in the pocket is likely to provoke serious opposition. After all, the likes of Clifford Chance have on-site swimming pools (pictured below) to maintain.

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In fairness to the City firms, despite their occasional extravagances, they are huge business success stories that in 2013 were collectively responsible for generating an impressive £22.6bn — equating to a not insignificant 1.6% of total UK GDP.

And the government has been among the first to boast about this, celebrating the nation’s corporate legal profession at events like the Global Legal Summit. So City lawyers will have a fair bit of leverage in their negotiations with Gove if he does try to introduce his “lawyer’s levy”.

Quick off the mark, City of London Law Society chief Alasdair Douglas, who is the former senior partner of Travers Smith, came out against the plan this morning, commenting:

Suggestions of a special tax on only one section of the community to pay for a public service seems intellectually unsustainable.

Gove has won widespread praise in the left-leaning media of late for his rehabilitation-focused prison reform plans and more constructive engagement with lawyers over the legal aid cuts.

22 Comments

Anonymous

Great. They’d only spend that money cleaning shit out of pools anyway.

(7)(3)

Salacious Gossip

I heard that as part of the initiation to become Lord Chancellor you have to take a ceremonial crap in the Clifford Chance pool. True story.

(10)(3)

Mr Pineapples

Why tax law firms? Why not all large corporations? Is there any reason why the lawyers should be more responsible for our legal services than any other business?

(13)(0)

Anonymous

…because they are lawyers… and it’s the legal system?

The same way that financial services businesses have charges levied that support the operation of the financial regulators?

(6)(6)

Anonymous

But financial regulators are necessary in order to regulate financial institutions. City law firms and criminal legal aid firms have nothing whatsoever to do with each other.

I’m not sure what kind of comparison that was supposed to be.

(10)(1)

Anonymous

Presumably courts are required for the law firms to operate as law firms.

(1)(0)

Anonymous

Yes I’m sure the big hitting commercial litigation specialists spend hours in the local crown court and mags…

(0)(0)

Anonymous

I’m sure we already sustain the BSB and SRA (or whatever it’s called now). It’s surely more akin to getting banks to pay directly for benefit payments?

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Anonymous

Not a horrible idea. Much as many right wingers in the City will moan about this sort of thing, I can’t seem to find my miniscule violin.

One concern is that this 1% will likely not come out of equity earnings – firms will likely be faster to refuse a pay rise for a year in order to make up the difference. It would of course be horrible for partners to earn £990,000 rather than £1m per year, but you can hardly blame them.

The larger question is why corporate lawyers have more of a responsibility to criminal justice than anyone else. Obviously, a solid justice system should properly be paid for by everyone’s taxes, especially given that everyone uses them (and corporate lawyers are arguably less likely to end up as defendants than the average person). Sadly, it seems more important to punish the successful firms, who already pay a great deal of tax, than it is to just fund things properly in the first place.

(18)(0)

Random Liberal Commentor

It is 1% of revenue not profit so it will come out of all revenue which is earned. This will mean it must come out of salaries, rent, as well as profit etc. It will effect everybody in the firm AND likely reduce PEP.

I agree with you and the article though that it makes no sense why commercial law firms should pay for the legal system overall. The top100 firms would already be paying a significant amount of tax and putting this additional burden just seems ridiculous. It is tantamount to asking building companies to pay to keep the TATA steel factory alive because they are using its produce. There is no real link between the two.

(9)(0)

Anonymous

Yes, sorry, I was unclear about that point. I think everything except PEP would be cut – it wouldn’t actually be hard to refuse a pay rise for all staff (save maybe 1.5% on payroll) and up hours/utilisation enough to make up the rest. It would just be a bit miserable for all the juniors.

(0)(0)

Anonymous

I agree wholeheartedly with this policy and have been advocating the same for quite some time.

It is quite right that those who make lots of money from the legal system should be taxed to maintain the court system.

If anyone from Clifford Chance object to this, with their swimming pool, gym, and on-site shoe polishers, then quite frankly they are a complete cretin.

(3)(5)

Anonymous

While I am all for higher taxes, including corporation tax, I have no idea why it should just be large law firms that are paying for this. They are in no way connected to Legal Aid, or indeed to criminal law of any sort. There is no reason to impose this levy on these large firms if you are not also going to apply it to other massive conglomerates. This is about funding a public system, not continuing to fuel the assumption that ‘fat cat lawyers’ are in any way connected to the criminal and legal aid systems.

(6)(2)

Anonymous

Maybe we should also impose a levy on private dentists to help pay for the NHS.

(7)(0)

Anonymous

The threat of the UK’s judicial and legal system becoming underfunded and inefficient would actually be a bigger threat to the top 100 UK law firms’ ability to remain competitive internationally, than some 1% levy.

(2)(1)

Anonymous

True, but then you may as well start saying that logistics companies should pay 1% of all revenue towards road maintenance or that airlines should pay 1% of all revenue towards airports.

The point is that all of these companies already pay for the infrastructure necessary for their trade through taxes, and through paying to use those facilities in the first place.

(7)(0)

MC Trainee

This is so monumentally stupid. This is what happens when you make two non-lawyers Lord Chancellors…

There is a huge deficit in funding for legal aid and people are not getting justice in a lot of cases. There is pretty much nothing for civil cases. If George Osbourne, the prat, stopped manically lusting after a surplus we would be able to sustain public services pretty well. But all of the time that he keeps putting the cutting of the deficit as his main priority, society will suffer.

As others have said before, there is nothing wrong with higher corporation taxes or using taxes to pay for a legal system, which is what has always happened. But asking the top 100 law firms to pay for legal aid is ridiculous. This will affect staff more than anyone else.

Justice is a community, but one that everyone is a part of, not just the top 100 law firms.

(7)(1)

Anonymous

Lefties will still find a way to moan about it.

(1)(2)

Anonymous

The lack of logic in this is baffling. As someone else has already said above, the top 100 City firms already contribute a hell of a lot to the country through tax, pro bono initiatives etc. – perhaps the government should get off its high horse and do something about the many multinational companies and individuals that pay virtually no tax in this country and are entirely content to not engage with wider society.

(1)(0)

Anonymous

lol @ contributing through pro bono. You know as well as I that the law firm pro bono is token PR crap.

(0)(0)

Anonymous

It might be perceived as token but I undertake a lot of pro bono work and have seen it actually benefit people in real ways. No matter how cynical you are, you can’t deny that it makes more of a benefit to a society than most people’s apathy.

(0)(0)

Anonymous

If they want to arse fuck businesses then increase corporation tax. Otherwise its just targetting solicitors. Notice how they are not going after barrister chambers.

(0)(0)

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