Buckinghamshire County Council has become the first local authority to form an alternative business structure (ABS), after the Solicitors Regulatory Authority (SRA) granted it a licence.
The new venture, Buckinghamshire Law Plus, becomes effective on 24 November. It will combine the council’s existing in-house team with that of the Buckinghamshire and Milton Keynes Fire Authority in order to provide legal services to local authorities, emergency services and charities.
Both parties initially expected to be operating as an ABS by this summer, having applied for the ABS licence on 16 December 2013 (2 January 2014). However, the two authorities faced several regulatory hurdles before getting to this point.
According to Buckinghamshire County Council’s legal head and compliance officer for legal practice Anne Davies, adapting existing legislation to meet the needs of a local authority was a challenge. In particular, the issue of where control lies in a council with elected members.
“There was an argument about the level of influence and how the elected members fit to make sure that no one member can override another,” Davies said.
She added that securing professional indemnity insurance also caused a six-week delay in the licensing process, due to the council’s insurer being unfamiliar with the risk profile of an ABS.
Insurance was eventually sourced through a specialist legal insurance broker. Implementation is now subject to the provision of a full indemnity certificate by the 24 November deadline.
In September, the new business is scheduled to begin rolling out in a series of tranches spanning the following six months. During that time, elements of the county council’s constitution will be redrafted to ensure no member has greater decision-making power than another.
There are also changes to be made to the terms and conditions related to employees of the business, all of which must receive cabinet member agreement before proceeding.
Davies said the firm is expected to bring in a projected £1.7m shared profit over the first five years.
“The income generation will bring in much-needed revenue for the council in times of austerity,” she noted, while “the public and voluntary sector community will reap the benefit of having a trusted, and extremely competitively-priced, law firm at their disposal”.
As a majority stakeholder, the council will retain a proportion of the law firm’s profits. The move is intended to decrease the burden on taxpayers to cover the cost of essential services.
SRA executive director for policy Crispin Passmore said: “The concept of ABSs was introduced to liberalise the market and encourage innovation in the way that legal services are delivered. The creation of a public sector ABS is a great example of this innovation coming to the fore.”
Buckinghamshire is one of a growing number of councils looking to launch an ABS, primarily as a means of forming revenue-generating legal teams.
In March, Cambridgeshire County Council’s legal team confirmed it was considering setting up an ABS vehicle in a bid to cut the council’s legal expenditure (26 March 2014).
Cambridgeshire’s plans mirror those of London Boroughs’ Barnet and Harrow, which merged their legal teams in 2012 (5 April 2012) and together became the first local authority to apply for an ABS conversion (20 November 2013).
Other authorities considering the move include Kent County Council and the London Borough of Lambeth (18 March 2013). Lambeth is considering two ABSs – one that is tied to the borough, known as a ‘safe’ ABS as the team can be awarded contracts without a procurement process, and another which is entirely separate from the authority.
The rapid privatisation of public sector services has also contributed to the rise in ABS applications.
For more on the rise of local authority ABSs see Local authority law: Public enterprise