Purpose

Legal Services has been based upon a shared services model
with neighbouring district councils since 2008 but needs to
evolve to recover the full cost of service delivery.
This can only be done once service costs are better understood
and a fees benchmarking exercise has been undertaken to
ensure hourly fee rates are appropriately set to achieve
profitability and sustainability.
Service Level Agreements (SLAs) are in place with West Lindsay
District Council, South Kesteven District Council, North Kesteven
District Council, East Lindsey District Council, Boston Borough
Council and South Holland Borough Council.
The hourly fee rates have not been increased since April 2024.
An increase of 5% was agreed, pending decisions being made
about the future service model.
Contractual arrangements with district councils were updated in
June 2025 to expire on 1st June 2027.
New SLAs permit Legal Services to increase hourly fee rates
annually with effect from the 1 April each year in line with the
percentage increase in the Retail Prices Index (RPI) in the
preceding 12-month period, and the first such increase shall
take effect on 1 April each year and shall be based on the latest
available figure for the percentage increase in RPI.
RPI was at 4.6% at April 2025 and was tracking at 4.5%
(December 2025 rate) and will likely fall further before April
2026, having peaked at 4.8% in July 2025.
An increase in hourly fee rates by 5% from April is required as a
move towards a full cost recovery model as part of a wider
strategic review of Legal Services.
From 27/28 onwards, a three-year stepped fee recovery plan is
envisaged to realign with benchmarks and to ensure that the
costs of legal services are reflective of their value. Such costs to
be appropriately communicated with clients prior to
implementation.
Variations to the fee increase clause in the SLAs can be made by
agreement of both Parties at any time in writing to reflect any
necessary increases above RPI and there is a voluntary break
clause of a minimum of 3 months’ notice in favour of both
Parties should necessary increases be unable to be agreed.
Similar SLAs / arrangements to provide legal services are in
place with other external partners including schools and
academies, Probation Services, LCC Pension Fund, PSPS Ltd (a
local trading company owned by the district councils) to which
the 5% increase in hourly fee rates would also apply from April
2026.
Internal recharge arrangements for legal services are also being
reviewed but fall outside the remit of this report.

Decision

Approval to increase Legal Services hourly fee rates from April 2026.

Alternative options considered

Retaining the current fees would not move Legal Services towards full cost recovery and contribute towards achieving efficiency savings within timescales.

Alternatively, increasing fees by a higher percentage at this point prior to a detailed review being undertaken would risk losing the business of district councils and other external partners before costs are fully understood and a phased cost recovery programme has been agreed.

LCC Finance Officers have been consulted on the proposed 5%
rise. The districts have been notified of the proposed 5% rise in fees,
No objection has been raised.