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Legal Services Bill [HL]

Volume 687: debated on Wednesday 6 December 2006

My Lords, I beg to move that this Bill be now read a second time.

The Legal Services Bill is an important landmark in the development, reform and modernisation of our framework for legal services regulation and provision. The Bill puts consumers’ interests at the heart of the regulatory arrangements. It provides for a Legal Services Board to provide strong, independent oversight with day-to-day regulation left to front-line regulators; statutory objectives for those with regulatory duties and principles for the legal profession; alternative business structures to enable lawyers and non-lawyers to work together on an equal footing to deliver legal and other services—external investment will also be possible; a single and fully independent Office for Legal Complaints; and a mechanism to protect consumers if new problems occur.

I pay tribute to Sir David Clementi, whose independent review brought a refreshing new dimension to the debate and set the direction for change which has shaped the thinking of not only Government but the stakeholders. I also thank those members of Which?, the National Consumer Council, Citizens Advice, the Federation of Small Businesses, and the Office of Fair Trading who, through membership of our Consumer Advisory Panel, have helped to shape the Bill before your Lordships today. I would also like to record my appreciation for the constructive way in which the leaders of the professional bodies—the Law Society, the Bar Council and others—have approached this major programme of change.

The Bill was published in draft earlier this year. I pay a genuine and particular tribute to the members of the Joint Committee on the draft Legal Services Bill, chaired by the noble Lord, Lord Hunt of Wirral, whom I am glad to see in his place. The committee carried out a very thorough scrutiny of the draft Bill against a pressing timetable. I consider that the Bill before the House today is now much improved as a result of the committee’s invaluable work.

The law and lawyers will at some stage touch the lives of just about every member of our society. We have a duty to ensure that the regulatory arrangements are fit for purpose. Our analysis is clear. Three underlying issues have led us to conclude that change in this sector is long overdue. First, there is a lack of consumer confidence in the way in which complaints about lawyers are dealt with. This is rooted partly in the way in which complaints have historically been handled by the Law Society, with well documented problems over the speed and quality of complaints-handling dating back to the 1980s. But it is not the Law Society’s problem alone. We hear a great deal about how much better the Bar is at handling complaints. One third of complaints dealt with by the Bar are referred to the Legal Services Ombudsman for reconsideration.

Consumers argue that the handling of complaints takes too long, focusing on technicalities rather than on providing quick and fair redress to the consumer. They argue that they can have no confidence in a system where complaints are dealt with by a lawyer’s own professional body. These public perceptions can have a corrosive effect on the reputation of the sector more generally.

The second issue is the potentially restrictive effect of the way in which the professions operate. In March 2001, the Office of Fair Trading published a report, Competition in Professions, which argued that such restrictions had the potential to drive up costs and prices, limit access and choice, reduce value for money, and inhibit innovation in the supply of services. That is all to the ultimate detriment of the public.

The third issue is what some have called the “regulatory maze”, under which we see a wide range of oversight regulators with overlapping responsibilities and few clear objectives. In July 2003, following an analysis of the regulatory framework, my department published a report which concluded that the current regulatory system was,

“outdated, inflexible, over complex and insufficiently transparent”,

and we recommended that an independent review be carried out. Later that month, I appointed Sir David Clementi to carry out that review. Sir David published his final report in December 2004. In his foreword, he observed:

“Nothing that I have learnt during the 18 month period of my Review has caused me to doubt the broad validity of the Government’s conclusion. The current system is flawed”.

The problems are not restricted to oversight regulators. The legal professional bodies have contributed to the “maze” by failing to separate the exercise of their regulatory and representative functions until now. I congratulate both the Law Society and the Bar on their positive and proactive approach to this problem. They have already established separate regulatory boards to provide for a clear separation of these functions. I am very happy to see many members of those bodies watching in the Gallery today.

While our proposals are based largely on those of Sir David Clementi, a number of stakeholders saw a need for further analysis to underpin some of his main recommendations. The department therefore commissioned leading academics to carry out independent research in the following specific areas: how to make an oversight regulator an effective partner of front-line regulators; drivers for, and benefits of, external financing of law firms; internal incentives under various ownership structures; and the competition impact of restrictions on various forms of partnerships. The academics presented their work to the department in July 2005 and this informed the White Paper which we published in October of that year. As I have said, we have also had the benefit of pre-legislative scrutiny and have further refined our proposals in the light of the Joint Committee’s very helpful consideration. I shall now try to summarise the Bill.

Part 1 sets out the statutory objectives. Regulators must have clear objectives to guide them in exercising their functions and to provide a basis on which consumers can hold them to account. Part 1 sets out these objectives and principles. They will apply to the LSB, approved regulators and the Office for Legal Complaints. Here we have moved further than Sir David’s recommendation and have refined his suggested objective of,

“encouraging a confident, strong and effective legal profession”

so that the Bill refers to,

“encouraging an independent, strong, diverse and effective legal profession”.

“Independent” was added at the suggestion of the Joint Committee. “Diverse” was added to ensure that the board and approved regulators work together to remove the barriers that exist in the recruitment, retention and progression of legal professionals. We have also included a specific duty for the LSB to have regard to the public interest, again at the suggestion of the Joint Committee.

Part 2 of the Bill makes provision for the new oversight regulator, the Legal Services Board, to provide independent oversight of legal regulatory bodies. While day-to-day regulation should remain with the professions, the LSB will have a range of powers available to oversee approved regulators. The Secretary of State will appoint the chair and members of the LSB, and will do so subject to oversight of the Commissioner for Public Appointments. The Secretary of State can also remove members of the LSB subject only to strict criteria set out at Schedule 1 to the Bill. The Joint Committee expressed concerns about this and suggested that such appointments and dismissals should be made only after full consultation with the Lord Chief Justice. While I can see why that would give comfort to members of the legal profession, I have to say it gives little comfort to consumers, who rightly see the Lord Chief Justice, although he is a man beyond reproach, as another lawyer in the process.

There is nothing unusual about the arrangement proposed in this Bill. The chair and board members of many other regulators may be appointed and dismissed by the relevant Secretary of State; for example, the chair of the Financial Services Authority has been appointed since its creation by the Chancellor. I see no evidence that the financial sector is either not independent or suffering as a result of that. The chair and members of the boards of the Competition Commission and the Office of Fair Trading are appointed by the Secretary of State for Trade and Industry, without the requirement for external consultation. Again, I see no indication that the UK is any less competitive as a result of that. Of course the Lord Chief Justice himself has been appointed by the Prime Minister for many years. Nobody has suggested that the judiciary lacks independence as a result.

Part 3 of the Bill deals with activities described as “reserved legal activities”. These are the activities that will come under the regulatory control of the LSB such as the provision of advocacy and litigation services. It provides for the offences of offering or providing these services when not entitled to do so. It provides, too, for alterations to be made to the list of these activities by affirmative order. This is an important change because under the present arrangements additional activities cannot be brought under regulatory control without primary legislation. This involves a delay which can mean that consumers remain unprotected for months or even years.

Part 4 of the Bill sets out the arrangements under which the LSB will regulate “approved regulators” such as the Law Society and the Bar Council. This defines the regulatory and representative functions of approved regulators and importantly, at Clauses 28 and 29, provides for a proper separation in the exercise of these functions. While the LSB is prohibited from interfering in their representative functions it requires approved regulators to have internal governance arrangements that prevent regulatory decisions being unduly influenced by representative interests. The proper resourcing of regulatory boards is also required.

This part of the Bill also provides the LSB with its range of powers. These are that the LSB may set performance targets relating to the performance of approved regulators and that it may monitor their performance, in Clause 30; exercise a power of direction over approved regulators, in Clauses 31 to 33; publicly censure an approved regulator, in Clauses 34 and 35; fine approved regulators, in Clauses 36 to 39; take over a function or functions of an approved regulator, in Clauses 40 to 43; and remove the designation of an approved regulator, in Clauses 44 to 47. These are significant powers but I believe that the LSB must have available to it the widest range of powers possible. There must be safeguards in the exercise of these powers, and I believe that the Bill provides for this.

This part also sets out the purposes for which a practising certificate fee may be levied by approved regulators and provides for the level of these fees to be approved by the LSB, in Clause 50. It requires approved regulators to have rules to prevent conflicts with the rules of other applicable regulators, in Clauses 51 to 53. It provides a power for the LSB to require information from approved regulators, in Clauses 54 and 55. And it provides for the Office of Fair Trading to make a report to the LSB where it is concerned about competition matters. In cases where the OFT and the LSB’s views conflict, the Bill provides for the Secretary of State to decide the matter after taking advice from the Competition Commission, in Clauses 56 to 60. There is also a provision for the LSB, where there is no suitable regulator and following an affirmative order by the Secretary of State, to act as an approved regulator, in Clauses 61 to 67. Finally, it provides a power, subject to affirmative order, for the Secretary of State to modify the functions of approved regulators in order that they may effectively discharge their regulatory responsibilities, in Clauses 68 and 69.

I move from regulation to alternative business structures. Part 5 provides a means of increasing competition and choice for the consumer. Companies and firms will now be permitted to have different types of lawyers and non-lawyers working together on an equal footing and will be able to do so with the benefit of external investment. In the Bill these alternative business structures are termed “licensed bodies”. The Bill requires any firm or company with non-lawyer owners or managers to be licensed under Part 5 if it wishes to carry out reserved legal activities. These firms and companies will have to seek a licence, either from the board or a designated licensing authority, which must be an approved regulator, and will be regulated by licensing rules and by the requirements of Part 5.

It is important to note that the Bill also allows practices with different types of lawyers, but no external managers or owners, to emerge in advance of the Part 5 framework being commenced. These “legal disciplinary practices” are not alternative business structures under the Bill, and will not be regulated under Part 5, but the fact that we are allowing them to emerge in advance of alternative business structures answers a key recommendation from the Joint Committee chaired by the noble Lord, Lord Hunt of Wirral.

This also reflects the substance of Sir David Clementi’s proposals for alternative business structures. Mixed lawyer practices, a type of legal disciplinary practice, will come first. Alternative business structures, including multi-disciplinary practices, can then form the next step, but only where the board and licensing authorities judge that these can be regulated effectively. Sir David Clementi supported this approach in his evidence to the Joint Committee, saying:

“I think LDPs are walking and we should learn to walk before we get into the running and sprinting involved in MDPs, but I think it is right that the Bill does not preclude them and actually the Bill facilitates them”.

The Bill provides a number of important safeguards, which also answer the Joint Committee’s concerns about the impact of non-lawyer ownership and management on legal services. These safeguards include: a focus on the work and professional conduct standards of lawyers within alternative business structures, and a duty on non-lawyers to refrain from causing breaches of these standards; requirements for a head of legal practice and head of finance and administration; approval requirements that must be met in relation to external investors; a power for licensing authorities to apply financial penalties, including an appeals procedure and arrangements for recovery of any penalties; the referral of employees and managers to appropriate regulators; arrangements for the disqualification of persons from being involved with alternative business structures; the suspension and revocation of licences; powers of intervention for licensing authorities; and arrangements for the avoidance of regulatory conflict.

Additionally, we have accepted the Joint Committee’s advice that clients of alternative business structures firms should have the same rights to legal professional privilege in their communications with lawyers in these firms as they would if they retained traditional law firms. Clause 182(3) to (6) in Part 8 provide for this. Clause 182(1) and (2) maintain the privilege of certain authorised persons other than barristers or solicitors, currently provided for by Section 63 of the Courts and Legal Services Act 1990.

Clauses 103 to 106 also provide that special kinds of bodies that represent a lower regulatory risk may be treated differently for the purposes of some of the normal requirements of the licensing regime. Such bodies include trade unions, not-for-profit bodies, community interest companies, and other low risk bodies with less than 10 per cent external investment or management. The lesser regulatory impact on those bodies is consistent with the Joint Committee’s recommendation. We should make it clear that we do not intend the Bill to regulate in any way lay trade union representation, whether whole or part-time in the workplace, nor to place additional burdens on those unions that provide legal advice or representation to their members.

Part 6 deals with legal complaints. This part of the Bill provides for the establishment of a new and independent Office for Legal Complaints. This will provide quick and fair redress and will improve consumer confidence in the system. It also provides that every authorised person must have internal complaints handling arrangements, and approved regulators must set standards for that. We have accepted the Joint Committee’s advice that the OLC will operate a scheme with the word “ombudsman” in the title. There will be a chief ombudsman and assistant ombudsman making decisions on individual cases. The Bill provides for the OLC to levy an additional charge on respondents when a complaint is made; a “polluter pays” levy. That is an important measure. It will act as an incentive on providers to place more emphasis on client care and settling complaints “in house” before they reach a stage of no return for both parties.

The Bill provides that an ombudsman may make orders for redress of up to £20,000. While consumers have argued that the level of redress should be set at a higher level, the highest level of redress in the legal sector is currently £15,000; which is for the Law Society. Implementation of the proposals in the Bill will take some time. We have therefore set the level of redress for the OLC at £20,000, but the Bill allows the limit to be altered by negative order of the Secretary of State following a recommendation from the LSB, its consumer panel, or the Office for Legal Complaints. The Bill also recognises the importance of the legal professions in continuing to discipline their members and provides for any matters of professional misconduct to be referred by an ombudsman to the approved regulator concerned for consideration of disciplinary action. Some have argued that the OLC should have the power to delegate the handling of complaints to approved regulators. I do not consider that would command consumer confidence. However, I do think it is right that an ombudsman should be able to seek expert assistance, and that is enabled by paragraph 15 of Schedule 15.

There have been concerns that there should be an appeal from decisions of an ombudsman. Our aim is to strike a balance between quick, informal redress on the one hand and the rights of the parties to challenge the result on the other. The model that we have chosen, based on the Financial Ombudsman Service, does just that. It combines both adequate protection for the parties’ human rights with a swift and fair redress system. We envisage the scheme having an internal review mechanism, so that parties can challenge a caseworker’s recommendation and request that an ombudsman reconsider that recommendation. We do not think that an external appeal mechanism is required—it is not required by Article 6(1) and it is not a feature of ombudsman scheme best practice. That approach is supported by Which?, which, in its evidence to the Joint Committee, said:

“We support the view that there should be no external appeal body for decisions of the OLC, providing consumers still have the right to go to court”.

Consumers will have the right to go to court and judicial review will be available to both parties.

Part 7 provides for the LSB to publish guidance about the operation of the Bill or the regulatory arrangements generally. It provides for the LSB to enter into voluntary arrangements with the intention of improving standards of service and promoting best practice in connection with the carrying on of any legal activity. It is right that those who are subject to regulation should pay the cost of that regulation, as in Clauses 166 and 167. The alternative, that the changes should be funded through general taxation, does not seem appropriate. The Bill therefore provides for the LSB to make rules providing for the imposition of a levy on approved regulators, bodies designated under Section 5(1) of the Compensation Act 2006, or any other persons prescribed by the Secretary of State by order.

Parts 8 and 9 provide for amendments to existing legislation to align it with the provisions of this Bill. The rules of the Solicitors Disciplinary Tribunal are to be subject to oversight of the LSB. The courts will be able to make a costs order in civil cases in favour of a party whose legal representation has been provided on a pro bono basis. Any such awards will be at the discretion of the court and will be paid directly to a designated charitable body established to administer moneys to organisations who undertake pro bono work. Also, the Bill will give effect to the Legal Profession and Legal Aid (Scotland) Act 2006, once enacted, which provides for new arrangements for handling complaints about lawyers in Scotland and removes functions from the existing Scottish legal services ombudsman. Those parts contain arrangements for the parliamentary control of orders and regulations made under the Bill.

Overall, these measures will help to restore consumer confidence in the handling of complaints and regulation generally. They will enhance competition by enabling lawyers to provide services in new ways. They will sweep away the decades of piecemeal reform, putting in its place a new regulatory system with clear statutory objectives and a single and independent regulator which is fully and publicly accountable.

I realise that the proposals I have set out represent significant reforms. But I believe they are essential to ensure that consumers can have confidence that there is a modern, flexible, transparent and independent system of regulation in place that can and will act to protect their interests.

I apologise for taking so long, but the provisions of the Bill are complicated. While it is right that over the coming months we should consider the detail of these proposals, I hope we can agree that there is a compelling case for change. I commend the Bill to the House.

Moved, That the Bill be now read a second time.—(Lord Falconer of Thoroton.)

My Lords, I am honoured to open the batting, if that is the right description, but I do so with an apology to the noble and learned Lord the Lord Chancellor and to the House. As the result of a medical appointment which over-ran at Moorfields, I missed the first few minutes of the noble and learned Lord’s speech. However, it was a very helpful speech that set out the intentions of the Bill, which I think has a wide measure of support in the House and has been carefully prepared over some time. I would make only one point on its preparation, which I hope is not too cavilling. Only eight weeks were allowed for pre-legislative scrutiny whereas 12 weeks are usually desirable. I hope that the Government might be able to meet that in future.

Clause 1 sets out the regulatory objectives, which I strongly support. I anticipate that they also have the strong support of the Government who have proposed them. The Government may agree—and I would be grateful if the noble Baroness could confirm this—that they have a duty to facilitate those regulatory objectives. One extremely important regulatory objective is to encourage an independent, strong, diverse and effective legal profession. The importance of such a profession to the constitution of any free society can hardly be overestimated. It dates back to the famous case—not within the memory of noble Lords, but they will know about it—in which Sir Thomas Erskine defended Tom Paine over his publication of the Rights of Man at a time when those views, which are now almost universally accepted, were deeply unpopular and controversial. The legal profession must be able to stand up for those who are under attack under very difficult circumstances. That must apply also to those who are under attack and do not have the means themselves or through their friends—as Tom Paine did—to pay for their defence. Consequently, it is important that the legal aid scheme should be adequately funded. I am sure that the Lord Chancellor will agree that it should be adequately funded. There will be some argument about what is adequate, but I hope that he will take a generous view on that.

As for the cost of setting up these proceedings, the importance of an independent and strong legal profession is a matter of very strong public interest. The Bill is intended to further that public interest. But it is heaping considerably more costs on the profession. I ask the Government to think charitably and kindly on the idea that they should pay at least a proportion of those costs, which are for the public benefit and not for the benefit of the profession and will not increase the fees that the profession can properly charge. Otherwise the means of paying the costs will come from the professionals themselves, some of whom are not highly paid although their work is very important, as is that of those who do publicly funded work. Consequently, either they will suffer loss or the public will suffer loss of service. I hope that the Government might reflect a little further on that.

The main point that I want to deal with, in what I hope will be a short speech, is the importance of light-touch regulation. Unfortunately I was not in the Chamber to hear the first few minutes of the speech of the noble and learned Lord the Lord Chancellor but I suspect that he said—as has been rightly said in the past—that the Government are at least aiming at reasonably light-touch regulation. I support the notion that, under that regulation, the Office for Legal Complaints should provide one point of entry. That is obviously sensible. However, there may be a difference in the position of solicitors and barristers. I ought to declare an interest because I still hold a practising certificate as a barrister, although I do not do a great deal of private work at present.

There is a distinction between solicitors and barristers in this respect. I think that solicitors will rightly and warmly welcome an independent solicitors’ complaints system. It has been a deep trial for the solicitors’ profession—for which I have a high regard indeed—to deal with the number of complaints that they have had to handle. We must remember that there are at least 10 times as many solicitors as barristers and they are first in the line of attack when there are complaints. They provide a very important nationwide service although they are sometimes quite small firms and—though it is mildly to be discouraged—often sole practitioners. Handling the kind of complaints that arise in those circumstances has proved seriously difficult over the years. It will be a real benefit that that is no longer placed directly on the Law Society, although it is good to know that a high proportion of those who have been working in the current system will be transferred over—no doubt, if it be relevant, under the TUPE protection of employment provisions—to the new system.

As for the position of barristers, the Legal Services Ombudsman has repeatedly praised the system that the Bar has managed to provide as highly satisfactory. In relation to the Bar—it may also be true of solicitors but I am not as well informed about them—a very high proportion of complaints deal not only with matters of redress but also with matters of discipline. Matters of discipline will be for the profession; matters of redress might be dealt with by the ombudsman. It seems clumsy and unnecessary to divide the two. Therefore, I ask Government to think again on the question of delegating those powers, or at least to think about giving the Office for Legal Complaints the opportunity and power to delegate both discipline and redress to the profession, provided that it continues to carry that out as satisfactorily as it does at present.

The Bar is fortunate as the number of complaints is not massive and it can draw on a great deal of pro bono work that is freely provided by senior members of the profession. They provide a good service at low cost. That is something of value which should be maintained if possible.

This is necessarily a long and detailed Bill and we shall want to consider a large number of points in Committee. That applies also to alternative business structures. The opportunity to have wider business structures and more competition in the provision of legal services has a great deal to commend it, provided that it is very carefully thought through. We will assist in attempting to think that through, and I hope to play my part.

My Lords, with the leave of your Lordships, I shall speak in place of my noble friend Lord Maclennan of Rogart, who will reply on behalf of the Liberal Democrats.

First, I declare an interest: I am proud to be a lawyer. I started my career as a solicitor in a coal-mining and steel-making community, very similar to the sort of community that the noble Lord, Lord Lofthouse, was talking about when he addressed us on the tribunals Bill. It was a small firm in a small town and actually on the high street. It follows that I have considerable feelings on the importance of the high street solicitor. We covered the whole gamut of legal activity and had access to a highly specialised Bar. Even as an articled clerk I was privileged to instruct Lord Elwyn-Jones, as he later became, leading the noble Lord, Lord Hooson. That was a fairly formidable team.

One part of the job was working for nothing. In the side of the firm that I worked on, which was essentially advocacy and litigation, certainly when it came to tribunals, we worked for nothing—pro bono. There was a cross-subsidy from the more profitable work that my brother and other partners did in conveyancing, probate and so on which enabled us to carry out our service to a community that was not the most wealthy, as your Lordships can imagine, particularly at a time when coal mines were closing and steelworks were disappearing.

I later joined the Bar, with, at that time, some difficulty in crossing over the professions. In case your Lordships should think that I am critical of the Government’s proposals at a later stage in my remarks, I should say that it is not because I approach the proposals from a conservative point of view, thinking that all was well in the past. I have always advocated a fused profession and a common qualification for lawyers, advocacy and the disciplines of the Bar being something that should be adopted at a later stage when the person knows the client face to face and has an understanding of the problems that solicitors face.

Since I started, the language of the market has intruded into the legal profession. We used to talk of clients; now we talk of consumers and stakeholders. It was a profession; in the Bill, it is called a “legal service provider”. Advertising was regarded as touting and ambulance chasing; now it is acceptable and promoted. Under the Bill, legal services are to be sold along with a tin of beans. It is interesting that when the Co-operative Society expressed an interest in setting up a legal division in May, Bridget Prentice, the Minister in charge of the Bill in another place, said in a press release that we should perhaps call the Bill “Co-op Law”. It sums up the Bill’s ambition quite well.

We have moved to a consumer-directed legal profession. The proposal is to put the “consumer first”—a phrase in the title of the White Paper. I have always believed that the public interest comes first, but that is not at all the same thing. The Bill will be judged by its ability to maintain the essentials of the legal profession—its integrity and its independence. Contained in those essentials is the basic concept that the lawyer’s primary duty is to the administration of justice and to the court. That was starkly illustrated for me by a client, a barrister, who insisted on disclosing to Her Majesty’s coroner in another jurisdiction an adverse and critical internal report of an accident in which his client, a powerful utility company, was involved. His client sought through its in-house lawyers to withhold the report from the court and instructed him to put forward an edited and anodyne version. Following the basic principle of duty to the administration of justice, he refused. His health was wrecked and so was his career.

The duty to the client as consumer is vitally important although it is secondary to that prime duty that I spoke of. The duty to the client includes client confidentiality, the avoidance of conflicts of interest, and, importantly, the ability and willingness to challenge the various organs of state in whatever guise they impact upon the rights of the citizen. It is interesting that in Clause 184 an automatic exemption from the scope of the regulatory regime is given to government lawyers and that the Government have rejected recommendation 29 of the Joint Committee’s report, to remove that exemption. I would like the Minister to tell us who we complain to about government lawyers if they do not come within the proposed regulatory regime.

Perhaps I may say a word about independence. It was no surprise to me that the draft Bill put before us in July set out a list of objectives that did not include any reference to the public interest, the duty to the court or the independence of the profession. However, following the comments of the Joint Committee so ably chaired by the noble Lord, Lord Hunt, they are included now as either objectives or principles. It may be right to replace the patchwork of supervisors—what the noble and learned Lord the Lord Chancellor described as the “regulatory maze”—with a single, overarching Legal Services Board, as Sir David Clementi proposed in his report. But it must not be a creature of government.

We will want to know why the noble and learned Lord the Lord Chancellor says that it is necessary for him to maintain the Government’s grip over appointments, not only initial appointments but the whole appointments system. That approach was rejected by Sir David Clementi but nevertheless appears in the Bill. It flies in the face of the Government’s policies elsewhere in the judicial system for an independent commission to appoint judges and so on. We have a proposal for the Secretary of State to take power to appoint members of the board personally, and that is matched by his power to remove them. The noble and learned Lord referred to the fact that nobody suggests that the Lord Chief Justice appointed by the Prime Minister is not independent. The Lord Chief Justice has the tenure of his office. He cannot be removed by any Minister. He can be removed only by the votes of Parliament. But here is a system where the Lord Chancellor appoints and the Lord Chancellor removes. In the Bill he also takes the power to amend at will the objectives and powers of the Legal Services Board. Is that independence? I respectfully suggest to your Lordships that it is not.

It is unclear to what degree the Legal Services Board will seek to interfere with or second guess the front-line regulators—the Law Society and the Bar Council being the prime front-line regulators. Is there to be a light touch or not? In response to the Joint Committee’s report, the Government said that,

“the intention of the LSB should be to work in partnership with the authorised regulators, leaving them with the responsibility for day to day regulation. The LSB should exercise its powers only where approved regulators are clearly failing”.

A system which has regulations granting the Legal Services Board swingeing powers to give directions to the Bar Council or the Law Society to “take specific regulatory action” and to issue financial penalties may be quite disproportionate to the powers that should be granted to this overarching body. If the Legal Services Board is to consist of lay persons, how are they qualified to give detailed directions on technical regulatory issues?

I move to the issue of complaints. It is an unfortunate fact, as the noble and learned Lords, the Lord Chancellor and Lord Lyell, said, that the Law Society complaints procedure was a failure. I fully accept that the regulatory functions of the Bar Council and the Law Society should be separated from their representative functions. That, indeed, has already been done. However, looking at the body of complaints, I am not impressed by the percentages of those who complain that they have had a poor service. There are certainly unforgivable delays and incompetence, but that is not always the root cause of a complaint.

In disputes between citizens and conflicts between the citizen and the state, there are winners and losers. The winners never complain but the losers may. Sometimes it is the fault of the lawyers for giving bad advice, but much more often—I do not have to say, in a lengthy experience on both sides of the coin, that I have not received a complaint myself; I just make the point—the advice given is based on inaccurate instructions from the client. The successful lawyer challenges and tests his instructions with the client, and in criminal cases he often has to plead with his clients, “For goodness’ sake, tell me the truth”. Often this attitude of having to test what the client says triggers complaints, particularly when the client loses, of arrogance and hostility because the lawyer does not swallow without question everything that the client tells him. The less successful lawyers, on the other hand, are those who accept everything their client tells them without question and then lose.

I accept that complaints of delay and incompetence should nevertheless be dealt with by an independent office of legal complaints. As I say, the Law Society consumer complaints service was not a success. It was therefore surprising to discover that the proposal for the new office is that it be in the same town as the current Law Society consumer complaints service. That suggests that what is happening is merely a re-badging of a failing service.

It is also proposed that the service will encompass complaints against barristers. That may be very unsatisfactory for them. The noble and learned Lord suggested that all was not well with the Bar complaints system, but the Legal Services Ombudsman has praised the performance of the Bar Council in its handling of complainants. Let us suppose that one-third of Bar Council complaints—which represent only 3 per cent of all the complaints that are made about lawyers—go to the ombudsman. In her report for 2005-06, the ombudsman said:

“I can report that I have seen an increase in the percentage of Bar Council investigations that I was satisfied with, up from 78.7% last year to 88% this year. I welcome this improved performance”.

So, of the one-third of complaints that go on to the ombudsman, she is satisfied that 88 per cent of them have been properly handled. It is not surprising that, in the same report, she said:

“I find my interactions with the Bar Council to be constructive and professional, and I thank them for their openness and transparency in the dealings with my Office”.

The problem that the Bill is designed to overcome has not been a problem with the complaints-handling of the Bar Council.

The division that the Bill proposes between service and conduct complaints may be quite artificial. Often, certainly for barristers, a complaint of poor service includes a complaint of misconduct but, under the Bill, there will be one body considering the service side of the complaint while the Bar Council will consider the conduct side of the complaint. In trying to improve the Bill, we will seek the possibility of the OLC transferring mixed complaints of conduct and service to the Bar Council for its determination. That would give a certain amount of flexibility to the system to be introduced.

I turn to “alternative business structures”. The Bill allows lawyers and non-lawyers to form legal partnerships, as the noble and learned Lord the Lord Chancellor said. There is undoubtedly a case for a one-stop professional service so that accountants, insurance agents, estate agents or architects may make cost savings in marketing, administration and office expenses. There are certainly benefits for the professionals, but I query whether there are benefits for the consumer of having only one door to go through, but then being directed to various offices inside a single building.

So there are benefits to professionals in cost savings—I have no doubt that that is why the Law Society has expressed such support for the idea—but I have considerable doubt that it is possible to ring-fence legal services within a multidisciplinary organisation so as to preserve that important principle to which I referred at the beginning of my remarks: client confidentiality. Do you, as the Bill seems to suggest, extend legal professional privilege to accountants, estate agents and insurance agents just because they are in partnership with lawyers, provided that they can be brought within the provision of some form of legal advice?

Similarly, the scope for conflicts of interest—the second principle to which I referred—seems to me to be considerably widened and may cause serious problems. “Alternative business structures” also allows for outside investment in legal partnerships: for a large, multiple firm or organisation such as the AA, an insurance company, a bank, or a supermarket to get involved in providing legal services. Why? People who are afraid to step inside a solicitor's office on the high street are not likely to step with any greater celerity into a lawyer's office that is part of a bank, an insurance company or a supermarket.

No one enjoys going to a lawyer. Let us face it: it is always because there is a problem. Even when you are making a will, you are contemplating your own mortality, which is not a very pleasant thing to do, especially if someone charges you money for the purpose. In the criminal law, some of us have clients who, even though acquitted, say, “I hope I never see you again”. The experience of contact with a lawyer is not necessarily a happy one.

If you bring in outside money, it will enable partners in a large legal firm to sell out to shareholders and realise the value of their stake in the business. The Government can expect support from that quarter. As for the client, the consumer, he will lose out. If there is national marketing by a large concern with special offers to kill off local competition, the high street firm—the sort of firm for which I work happily and, I hope, with some benefit to my community—cannot survive. The large organisations will concentrate on the profitable side of the business. You can forget about legal aid, access to justice and pro bono work. The Tescos and insurance companies of this nation are not interested in working for nothing.

There are other problems. Lawyers, whether in chambers or a solicitor’s office, enjoy the support of their peers and the ability to discuss the problems that they face. The interest of a bank towards its shareholders may therefore conflict easily with the interest of the customer or consumer. I see there are signs of impatience among your Lordships; I have detained you too long.

The Bill is a free-for-all. It enables investors through the market, without any legal training or qualification, to make a profit out of the provision of legal services. That is new Labour, but I oppose that. The case has not been made out.

My Lords, as a Bishop entering a debate involving the world of lawyers and their language, I am beginning to understand what it feels like to be a lay person caught up in a theological discussion. I therefore hope that the noble and learned Lord will be patient with me and gently direct me when I get things wrong.

I am speaking in the debate because the Bill gives rise to issues affecting the powers and responsibilities of the Archbishop of Canterbury. I know that the noble and learned Lord has given careful thought to these matters, so I thought it right to put something on the record. The Bill provides for the Master of the Faculties, who is responsible for the Faculty Office of the Archbishop of Canterbury—an office that is combined with the Dean of the Arches and Auditor—to continue to regulate the notarial profession. This person is named as an approved regulator. I understand that the Archbishop is content for the Master of the Faculties to come within the terms of the Bill, provided that the office holder continues to exercise the regulatory role that has historically been held by that office.

I further understand that the Government are content not to disturb these historic arrangements, which were established in 1533, for the appointment of the master by the Archbishops of York and Canterbury, with the approval of Her Majesty the Queen. I understand that the Government have established and agreed that the master may continue to be a member of the Church of England in line with the 1533 Act, and that, because of the character of the duties associated with this office, this does not breach the European Convention on Human Rights or the 2006 regulations on employment equality relating to religion or belief.

In 1998, the Society of Scrivener Notaries was admitted as a member of the International Union of Latin Notaries—a non-governmental organisation with associations from 70 countries as its members. Before the society was admitted, the regulatory regime exercised by the Faculty Office was carefully examined. The fact that the regime is independent of government was an important element in securing admission. I gather that there is a real desire that this continues and that the Master of the Faculties continues to regulate it. We might sum this up as, “That which is not broke should not be fixed”; in other words, we have a service that works extremely well and is cost-effective, and we have an agreement with the Archbishop’s office that it falls within the regulation of the new legal board. I simply want the Government to put on record this afternoon that my reading of this is also their reading.

My Lords, I declare my interests: I am a non-practising barrister and a former head of chambers. I was also, albeit briefly but enjoyably, a Minister in the Lord Chancellor’s Department. It is a pleasure to be taking part in the Second Reading of this important Bill. Noble Lords will be pleased to hear that my remarks are few and I will try to keep them short. I congratulate the Government on including this Bill in their programme for this Session and on their decision to start it in this House, as it is just the sort of Bill that should start here.

Of course, the Bill deals with very important subjects. In a free society, how legal services are provided and what protection there is for the consumer are obviously significant issues. But this is the sort of Bill that could have slipped through the net. It is to the credit of my noble and learned friend the Secretary of State and his department that they should have succeeded in the battle over what legislation is in and what is out—a constant battle that, so rumour has it, is engaged in throughout Whitehall. It is a Bill, too, that was eminently suitable for scrutiny in draft form by a Joint Committee of both Houses.

Some years ago, I had the pleasure of sitting on a committee of this House that looked at the draft Freedom of Information Bill. Unfortunately, it was not a Joint Committee—the other place had its own committee. However, having served on that committee, I am convinced that in the right case Joint Committees looking at draft Bills are a real asset to the difficult task of law making. That was certainly the case in this instance. I am determined not to sound overenthusiastic because one of the main factors, if not the main factor, in making this Joint Committee such a success was the performance of the chairman, the noble Lord, Lord Hunt of Wirral. It is the delightful, constant practice of this House to congratulate noble Lords, but on this occasion I really mean it. So, I am sure, would all members of the committee. The noble Lord led the committee with patience, tact and tolerance. I am sure that the House will understand that all those qualities were needed in order to chair a Joint Committee.

Let me make my position clear. I strongly support the changes that the Bill proposes. I am a Clementi man. Sir David’s analysis seems unanswerable and I am delighted that the Government have adopted his proposals. Three main changes are proposed: the creation of the Legal Services Board; the setting up of an office for legal complaints; and the cautious introduction of alternative business structures. They each have my wholehearted support. These changes are needed so that legal services and how they are delivered are brought into the 21st century. Of course, changes of this importance are bound to be difficult for some. There are those, on the one hand, who will feel that this is a mile too far and others, on the other hand, who, while accepting the broad principles behind the Bill, will feel that there are areas where the Government have just got it plain wrong.

The exacting scrutiny that the Bill will undoubtedly receive in this House will, I hope, calm some fears. All I would ask is that the debate remains proportionate. What do I mean by that? Critics should think carefully before attacking the Bill on the grounds that it threatens or removes the independence of the English legal system. In my view, it does no such thing. For example, the provisions for appointment are subject of course to Nolan principles. It is just going over the top for critics to claim that issues of independence are somehow at the forefront of this Bill. I would say to those who argue in this way, “Criticise the Bill. There are of course improvements that should and must be made to it, but just because you do not like it, do not exaggerate it or attack it for something that is not there”.

I am afraid that the press release that went out with the Joint Committee’s report was guilty of some exaggeration in this way. It did not get the agreement of all members of the committee; it was not practical to seek that. In my view, the press release did not represent the conclusions reached by the Joint Committee. Of course, it was picked up by the press, which is what it was for, and I believe that a false impression was gained.

Before completing my speech, I want to say a few words about costs. I have a couple of concerns relating to start-up costs and the potential costs of complaint. On start-up costs, my experience of government invariably leads me—

My Lords, I am obliged to the noble Lord for giving way. The suggestion that the press release was not objective is not right, in my opinion. It was prepared by those who assisted us, who had no political axe to grind whatever; it was an objective presentation. With respect, I hope that the noble Lord, who is a friend of mine—but not a political friend—will accept that what he has said is not right.

My Lords, I am grateful to the noble Lord. Let me make it absolutely clear that I am not criticising in any way the staff of the committee, who did a fantastic job in a very short period of time. Whoever formed the draft release does not matter; it had to go through certain senior members of the committee, of course, otherwise it could not have gone out. So my criticism—if there is criticism—is not directed, nor would it ever be, at the staff of this House and another place who, I repeat, did a fantastic job in a very short period of time last summer.

I was saying a word or two about costs. One of my concerns relates to start-up costs and the other to the costs of complaints. On start-up costs, as I think I began to say, all my experience of government leads me to the very firm view that costs are always understated at this stage. It happens with this Government, it happened with previous Governments—it is in the nature of Governments. I fear that the start-up costs may be understated in this case, too. I very much hope that the Government will look yet again at this issue—I know that they have reviewed it—to see whether current forecast costs are realistic.

As to complaints, I have yet to be convinced that it is appropriate for someone who has been unsuccessfully complained against to have to meet the costs of the complainant. That seems on the face of it unfair. I know that there are problems in meeting costs in questions of complaint and I hope that we will be able to clarify the position at a later stage of the Bill’s progress.

But overall, in my view, this is an excellent Bill. I wish it good fortune and I look forward to playing some small part in debating its detailed contents in due course.

My Lords, I declare my interests as set out in the register, particularly my role as a partner in Beachcroft LLP, a national commercial firm of solicitors.

I, too, thank the noble and learned Lord the Lord Chancellor on behalf of the Joint Select Committee for his generous words. I immediately passed them on to the members, because they did all the hard work. As their chairman, I merely had to hold the ring, so to speak. As just demonstrated by my good friend, if I may refer to him as such, the noble Lord, Lord Bach, that was quite a significant achievement because there was strong feeling on all sides. I thank the noble and learned Lord for his generous praise, which I would also like to pass on to our advisers, particularly our Clerk, and the many witnesses who, at very short notice, virtually dropped everything to assist us. We are very grateful indeed.

The independence of the legal profession was a huge issue for the Select Committee. As my noble friend Lord Campbell of Alloway has pointed out, at the beginning of the report—not in a press release—under the heading,

“A threat to the independence of the legal profession”,

we said how concerned we were about the level of involvement of the Secretary of State in the regulation of legal services. We continued:

“It would be wrong to create any perception of government seeking to exert day-to-day control over the legal profession”.

This is an important issue, which we have to get right for various reasons. I recognise that the Government have accepted a number of the Select Committee’s recommendations, for which I thank the noble and learned Lord and his colleagues.

Because of the speed with which we had to deal with the Bill, we will want to raise a number of issues in Committee. I know that many members of the Select Committee will do so. We missed one or two points. The noble and learned Lord may have thought he had got away with one provision in particular: the old Clause 57(6). What is now Clause 68(6) gives the Secretary of State power to bring forward an order which,

“may modify provisions made by or under any enactment (including this Act or any Act passed after this Act), prerogative instrument or other instrument or document”.

What tremendous powers he is seeking.

Yes it is, my Lords, but it is still a power to modify any Act of Parliament or enactment, including any future Act. I have drawn this to the attention of the chairman of the Delegated Powers and Regulatory Reform Committee. I congratulate the noble Lord, Lord Goodhart; as I have mentioned to him, I cannot think of anyone better to deal with such an issue. I hope that the committee will carefully consider the extent to which these powers are being sought. We will want to raise these and other points in Committee.

We all accept that the Bill is necessary. It was originally prompted by concerns over the complaints procedures but now we have a far broader Bill. We inevitably have a serious responsibility to ensure that this much larger Bill will not make things worse or have unintended consequences. The crucial matter is how to safeguard and entrench the independence of the legal profession. If we fail, the effects will be felt far beyond these shores. If protectionist-minded lawyers elsewhere are able to argue that our profession has become little more than an adjunct of Government, they will be able to force shut the door for our lawyers, which would be highly undesirable.

This is all about balance; it would be quite wrong—indefensible, even—to establish an appointments process so self-evidently lacking in checks and balances. The Legal Services Board must not only be independent, it must be seen to be independent. Sir David Clementi made this one of the key points in his excellent report. I have to say in support of the noble Lord, Lord Bach, that the Select Committee sought to “Clementi-ise” the Bill because we agreed with so much of Sir David’s report, particularly where the Government had departed from the original recommendations. Sir David said:

“Given the need for independence, and the objective of the rule of law, it seems right that the judiciary should be involved in the appointment … The proposal of this Review is that the appointment of the Chairman and Chief Executive should be made by the Secretary of State in consultation with a senior member of the judiciary”.

The noble Lord, Lord Bach, moved an amendment to the original report which stated that provision should be made for the Secretary of State to make the appointment in consultation with the Lord Chief Justice. That very much follows what Sir David recommended. I hope that the Government will think again on that issue.

Another key issue is that the Government are always looking for ways in which they can exercise more power and control. The noble and learned Lord shakes his head. When I had the privilege of serving in government, I found that tendency from time to time, but of course I resisted it; the noble and learned Lord has not done so.

In the draft Bill with which members of the Select Committee were presented, there were 111 references, not to the Lord Chancellor, but to the Secretary of State—any Secretary of State. So the noble and learned Lord can imagine the enthusiasm with which I made the same check in the new Bill, which is not much longer but has been split into two volumes. By how much had he reduced the number of references to power for himself from 111? The result of my word-count—I have since cleared this with all sorts of more technical people—showed that the number of references to the Secretary of State had increased from 111 to 288.

I could not believe it at first. I would love it if the noble Baroness, Lady Ashton, who will make the winding-up speech, explained why the Secretary of State has to take these powers. There is a paradox here. If the Government are seeking to tighten up regulation of the sector, why are they pushing through what looks and smells like a measure which will increase the powers of the Secretary of State to an unparalleled degree? We are talking about not just a government quango but one which will be controlled more tightly by government than any other.

I hope that the noble and learned Lord, when he gazes back over his opening speech in this debate, will recognise that the word “quality” did not appear often enough. We have the highest-quality legal service in this country and we should entrench it. The vital roles of the Law Society and the Inns of Court in education, training and competence must be maintained, because they have established these exceedingly high standards. Some reassurance on that point would be much appreciated.

Furthermore, it is patently absurd to propose that the Secretary of State should enjoy the untrammelled and direct power of appointing the head of the new Legal Services Board while expecting the industry to fund it in its entirety. There are clear parallels with other bodies such as the Financial Reporting Council, whose running costs are one-third funded by the taxpayer. In paragraphs 35 and 36 of his report, Clementi agrees and reinforces the precedent that I have given by stating:

“There is an interesting precedent in the proposed funding of the Financial Reporting Council. Its funding is to be split, two thirds falling to the private sector and one third to Government”.

I hope that the Government will think again on that. It would surely be more sensible, fairer and more balanced for the start-up costs of the Legal Services Board and a proportion of its ongoing costs to be borne by the taxpayer. How else will it be seen to be independent and not merely a creature of the Government or the legal profession?

I am also very concerned about the powers of the Legal Services Board to intervene when the front-line regulator is deemed to have underperformed. Surely the LSB should be a regulator of last resort, no more and no less, and that should be made penny plain in the Bill. Such intervention should be the exception not the rule. I am especially concerned, as was the Select Committee, about the power to impose fines on the front-line regulator. Surely that should apply only when the approved regulator has ignored a direction by the LSB. I would welcome an assurance from the Minister on that point, on which I hope the Government will concede.

Like the noble Lord, I should like the “only the polluter pays” principle to be enshrined within the reconstituted complaints system. The noble and learned Lord will be aware of the Select Committee’s concern about the headlong rush towards alternative business structures. Sir David Clementi made the very good point that there should be a step-by-step approach, and I detected an indication that the noble and learned Lord agreed. No doubt in Committee we shall be able to introduce provisions that would secure what he indicated earlier.

There are widespread worries about conflicts of interest, which will—not may—be created if Ministers press ahead with the ABS reforms. Sir David drew attention to that concern in his report, as did the Joint Select Committee that I chaired, which was unanimous in its report. The provisions in the Bill are very weak and will have to be strengthened considerably, but that will be a matter for Committee stage.

Like many others in this House and elsewhere, I sincerely hope to be able to support not only the principles behind the Bill but its detailed provisions, but I admit to having serious reservations. I will be greatly assisted by the initiative of the noble Lord, Lord Brennan, who led the formation earlier this week of the new UK All-Party Parliamentary Group for Legal and Constitutional Affairs. I warmly applaud his initiative and have the honour to be one of his qualifying members. I look forward to working with colleagues of all parties and none as we approach Committee stage.

My Lords, the noble Lord reminds me of something that I should have declared at the outset. He put in play in the debate the Inns of Court, and I should formally declare that I am a member and bencher of an Inn of Court. I thoroughly endorse what he said about the thoroughly good work that Inns do.

My Lords, I declare my interest. I am a practising member of the Bar; for some years I was on the Bar Council and I was once chairman of the Bar.

I was also a member of the Joint Committee of both Houses which considered this Bill. It was a very interesting process. There are two things to be said about it. On the first point, the noble Lord, Lord Hunt of Wirral, was a little inaccurate when he gave all the praise to the committee members and not himself. No doubt that was modesty, but he was a fantastic chairman of the committee and managed to lead us down paths of tranquillity, which might have been of a different character but for his benign and skilful influence on the conduct of our affairs.

The second point, which I believe the Government have taken on board, is that the time allowed for the preparation of the report was inadequate. At one time we wondered whether we should carry on, because it was uphill work, since we started from scratch and there were a whole lot of background papers to be read. We had to decide which witnesses we wanted to call; we then had to give them time to prepare, call them and then consider the great body of evidence and the written material coming in. To do all that in eight weeks is very tough going. I respectfully suggest that it really should not happen again. I think that that has been taken on board.

I shall deal with one or two major themes. On the independence theme, I know that to a great extent I am preaching to the converted, but it is important. An aspect arises out of one or two observations that have been made. What we do with this Bill is being watched in other countries to see whether we are doing anything that will destroy the perception of independence of this country’s Bar. Frankly, in other countries jealous eyes are cast on the huge success of our legal profession. If it could be shown that it had ceased to be independent, perhaps road blocks could be put in its path. The president of the Law Society is much exercised by this matter. We should not ignore it.

The noble and learned Lord, Lord Lyell of Markyate, referred to the importance of having an independent legal profession. It is vitally important that people should be willing to take up difficult cases and have the moral courage to appear in cases where the forces of power are rallied on the other side. Nothing must be done that alters that. I draw attention to two points in that regard. A very good paper was produced. The only matter in which I played any part in the committee concerned my asking whether the Bar Council could produce a paper on the duty owed to the court by advocates. An excellent paper, which appears on page 70 of volume II of our work, was the response to that request. It has two striking elements. I am ashamed to say that I was not aware that the measure was already embodied in a statute of 1999. One of the Law Lords, the noble and learned Lord, Lord Hope of Craighead, who was present earlier but had to leave to attend to other duties, commented on the matter in a very good passage. The relevant statute is the Access to Justice Act 1999, Section 27 of which provides that every duly authorised advocate has a duty to the court to act with independence in the interests of justice. That is already a statutory requirement. While not talking about the Act specifically but referring more generally to Hall v Simons 2000, the noble and learned Lord, Lord Hope, said:

“While the advocate owes a duty to his client, he is also under a duty to assist the administration of justice ... his duty to the court and to the public requires that he must be free, in the conduct of his client’s case at all times, to exercise his independent judgment as to what is required to serve the interests of justice. He is not bound by the wishes of his client in that respect, and the mere fact that he has declined to do what his client wishes will not expose him to any kind of liability”.

That is an extreme manifestation. You get cases where you come across an authority you previously did not know—a decided case—which is dead against you but your duty is to inform the court. If you come across a highly embarrassing document, every dishonest instinct might tell you to shred it. Your duty is to hand it over, but by so doing you lose the case. The client is not very pleased, but that is your duty. Those are the rules of the game.

I am pleased that the Government have gone a long way to meet us on this. Following one of our recommendations, they have included in the Bill’s general principles, the regulatory objectives, the adjective “independent” in Clause 1(1)(e). Again following one of our recommendations, the duty to the court has been added in Clause 1(3)(d). So far, so good. However, noble Lords would not expect my entire speech to be full of praise. We suggested that the regulatory objectives ought to include a reference to the public interest, with words such as “protecting and promoting the public interest”. That has not been accepted in full, although possibly we will pick up references to the public interest elsewhere. The committee would like to have seen that put squarely on the front of the Bill.

What are the threats to the perception of independence? I identify three, most of which have been identified already. The first is the appointment of the chairman of the Legal Services Board. The Joint Committee, following Sir David, was very keen on involving the higher judiciary. There would be no better person now than the Lord Chief Justice. With great respect to the noble and learned Lord the Lord Chancellor, I cannot accept the populist view is that the Lord Chief Justice is regarded by the public as just another lawyer. He happens to be the head of the legal profession, and he would have attained that position only after an impeccable and very successful career as a lawyer and as a man of the greatest possible integrity. In other contexts, we rely and depend on him. So the view that he would be unacceptable as a person who must be consulted is completely wrong and mistaken. I have begun to think that we should have gone a bit further than “consult”. We should perhaps have said, “with the concurrence of” the Lord Chief Justice on the appointment. For my part, I would go further. I do not see why, once the original appointment has been made and you have a reappointment, you should not just have the Lord Chief Justice as the appointing body. He should certainly be involved in the appointment. That is the first possible threat to the perceived independence.

The second thing would be to have a very interventionist Legal Services Board. Sir David Clementi talked about a “light touch”. If I had been a parliamentary draftsman and someone said to me, “Would you mind putting in some words to say that there has got to be a light touch?”, I would not find that very easy to do. We see the direct opposite of the light touch in the power of intervention to give directions, which has already been mentioned. That appears in Clause 31(1)(a). The intervention can take place if the board perceives that there has been a threat to any one of the objectives in the principles set out in Clause 1. As noble Lords know, there are about seven of them, and if we get our way there will eventually be eight. To some extent, they point in different directions. Many possible actions taken by a regulatory authority could be thought to be a threat to one or other of them. That needs to be changed by amendment in Committee to make the trigger for intervention more difficult.

Thirdly, there is the matter that has been mentioned by the noble Lord, Lord Hunt; our recommendation concerned with the frequent use of the term, “the Secretary of State shall have power to do x, y and z”, right through the alphabet. I had not done the arithmetic that the noble Lord has carried out to see that they double the figure. I am a bit surprised, because the Government responded to our criticism by saying:

“The Government accepts that it should reconsider whether each of the powers proposed for the Secretary of State in the draft Bill is necessary, and [is] currently working with stakeholders to review this”.

The stakeholders must have come along with shovels and added a very great deal more in the way of the need for the Secretary of State. That has got to be looked at.

My next area for discussion is complaints. The Bar has had some of these; the figure that it gives is that 3 per cent of complaints against the legal profession come to the Bar. It has a pretty good record with the Legal Services Ombudsman, which has been mentioned. The thing to concentrate on is the supposed possible split between complaints that relate to service and those relating to conduct. The Bar’s evidence to us is that 70 per cent are hybrid, with allegations of bad service and bad conduct. It would be absurd to have two different bodies; to have an ombudsman looking at part of it and the Bar conduct regulator people looking at something else. Some flexibility is required, as is a power to hand over to the Bar the combined issue that arises on a case, if it is thought appropriate. For example, how do you classify a case where the client says, “I want you to call X. He’s a star witness; he’ll win the case for us”, and the barrister has his own good reasons for thinking that would be a disaster and refuses to call him? Is that service or conduct? It is only one example; we might be able to come up with the answer to it, but I am sure that I could come back with others that are impossible to clarify as truly one or the other. Flexibility must be brought into the Bill, so that the matter can be transferred to the professionals.

We should watch carefully the dogma that professionals cannot be trusted to judge professionals. As a junior barrister, I used to appear in front of various bodies of professionals on behalf of some miscreant professional, and I constantly failed. It may have been my fault, but they were the toughest bunch. If you appeared in front of a lot of surveyors to try to acquit, in the old days, a chartered surveyor on a charge of advertising, or similarly in front of the Institute of Chartered Accountants, you had a snowball’s chance in hell. It is a complete fallacy that such bodies are not to be trusted; they are very tough.

The “polluter must pay” doctrine cannot be fair or right. It cannot stand up to any outside scrutiny that a man who has a false charge made against him has to pay the costs of the proceedings.

I have a concern on how the costs will add up and escalate. At the moment, we have an estimate of £20 million for set-up and another of £20 million for the annual charge, so you start year 1 at £40 million and have the professions paying under the present scheme without any government contribution. We do not want another Dome—I think I can safely say that; the noble and learned Lord has withdrawn—or another Olympic city, with the estimates being blown through the roof. We must try to exercise control, and the Government ought to contribute largely to set-up costs and annually to the annual costs.

My Lords, this is a considerable Bill. Behind it lies work from not only the Government and the key departments of state, but the Office of Fair Trading, Sir David Clementi, and the Joint Committee under the notable chairmanship of the noble Lord, Lord Hunt of Wirral. I want to concentrate on two matters only: complaints about the conduct or service provided by members of the legal profession, which are dealt with in Parts 6 and 7; and alternative business structures—the possibility of legal services being provided with a mixed discipline team of providers—which are considered in Part 5.

The Government are rightly committed to setting up an Office for Legal Complaints that comprises an ombudsman scheme, following 20 or 30 years of ombudsman schemes in central government, local government and a number of private sectors. I shall refer to both “clients” and “consumers” for the benefit of the noble Lord, Lord Thomas, but he is not present; I use the words rather interchangeably myself. Clients, consumers and customers would benefit from a clearly identifiable single point of entry for complaints and towards any redress scheme. But in the detail of working out this scheme for the Bill, the Government have been so concerned to create a nice, tidy scheme, with every complaint about solicitors and barristers being not just sent to the OLC but adjudicated on by it, they have ignored the fact, referred to by several noble Lords already—the noble and learned Lord, Lord Lyell, and the noble Lords, Lord Thomas and Lord Neill of Bladen—that it has been the independent, fair-minded opinion of successive legal ombudsmen in recent years that, whereas the Bar has a very high reputation for handling complaints in a fair, just and effective way, over the years, the solicitors’ profession has lamentably failed in that respect. I am not here to cast blame, but to suggest, in line with other noble Lords, that that is a great distinction. I am all in favour of the OLC being a single point of entry for all complaints about legal services, but we should not lose the many advantages that have been provided by the Bar’s handling of complaints, including the free time at present given by members of the Bar in analysing complaints.

The Bar has properly and rapidly separated its representational functions from its regulatory functions, with the latter being the responsibility of the Bar Standards Board, which has a lay chairman whom I have known for many years—Ruth Evans was the director of the National Consumer Council and has a number of other significant achievements behind her. So it is most appropriate that the Government should listen carefully to the Bar’s case that the OLC should delegate to it the handling of complaints against barristers.

I happen to have a little experience that I can contribute to the debate. I am chairman of the Advertising Standards Authority and we have delegated to us from a statutory body, Ofcom, under the Communications Act 2003, its statutory job of adjudicating on complaints about advertisements. That was achieved between ourselves and Ofcom. I note that the chairman of Ofcom has arrived in his seat at a convenient time for me and he will know that there are agreements and concordats between us whereby Ofcom’s statutory duty is delegated to us, only as long as, through accountability or reporting and so on, the job is properly done.

It would seem a great pity to equate treatment of the Bar and the solicitors’ profession just because solicitors are unable at present to show themselves as fit to handle complaints. As the noble Lord, Lord Neill of Bladen, has indicated, a high percentage of complaints against barristers are hybrid, involving both matters of discipline that the Bar is given to deal with, and complaints about the service provided by a barrister, which involve claims for compensation.

I am not sure that the Lord Chancellor referred to it, but Clause 154 specifically prevents the Bar and the Bar Standards Board providing any redress or compensation. That clause should disappear from the Bill, because if there is the delegation that I desire, that discretionary power to delegate would have to be followed by the ability in law for the Bar Standards Board, the Bar itself, to award compensation.

Incidentally, I—and, I suspect, a number of other noble Lords—question paragraph 2 of Schedule 15, which states that the chairman of the OLC,

“must be a lay person”.

Many of the most successful ombudsmen in recent years in this country happen to have been lawyers. The Financial Ombudsman Service, which is one of the biggest ombudsmen schemes in the country, has had a lawyer as its chairman for some time. The parliamentary and local government ombudsmen have not always been lawyers. I make the simple point that banning lawyers from holding the post is an extreme measure. A legal qualification may not be the only qualification that may be useful in this field but banning lawyers from holding the office is to carry too far the view that lawyers must give way to lay men in this modern age.

I also want to say a few words about alternative business structures. Even in the 1980s, when I was head of the Office of Fair Trading, we began to be concerned, on behalf of the consumer, with restrictions on competition and innovation. That was usually constituted by the professional rules of barristers, solicitors and a number of other professions. Some of those restrictions, such as those on advertising, have been long gone or radically modified. However, there are long-established rules preventing different types of lawyers working together on an equal basis and other rules preventing them working in partnership with others, such as accountants and businessmen, to provide for the customer under one roof a range of legal, financial and commercial advice and assistance.

In more recent years, the Office of Fair Trading has published various reports proposing that alternative business structures, under suitable safeguards, should, to preserve professional integrity, be permitted. Clauses 70 to 105—noble Lords will see in a moment why I refer to the clause numbers—provide for a licensing scheme so that firms offering clients a number of different skills in collaboration may be set up. The positive case for the client being able to purchase under one roof legal, financial and other services and facilitating the injection of capital into such firms has somewhat been lost sight of in recent years in the clamour for safeguards and reassurances. Of course we need safeguards and reassurances but I am worried that in this Bill one has 35 relevant clauses. There may be many potentially useful enterprises of a mixed disciplinary nature that could usefully be set up for the benefit of clients but this mass—I hope that I do not exaggerate too much—provision of 35 clauses on safeguards and so on may be so off-putting that some of the desirable objectives and multidisciplinary firms, which would be for the benefit of clients, will not be obtained.

My Lords, as one of the Members of the House of Lords who sat on the pre-legislative scrutiny committee that considered this Bill in draft form, I would like to contribute to this debate. I do so rather apprehensively as one of the few non-lawyers speaking this afternoon. At the outset, I point out that this is a very important Bill that will improve the quality of legal services available to ordinary people. I agree wholeheartedly with the noble Lord, Lord Hunt, about the fundamental significance of the quality of service offered; that is why I so strongly support its major provisions.

First, I emphasise how effective the pre-legislative process was. It was a short and rather intensive process with a lot of work crammed into June and July, but the committee was able to take the views on the draft legislation of a wide range of legal experts and organisations, and of bodies representing consumers. It did indeed, as the noble Lord, Lord Hunt, said, try hard to embed the essence of the Clementi proposals into the Bill's provisions.

We put forward 58 recommendations, of which 32 were agreed to in principle, and only 14 were rejected by the Government. I think that that is why this Bill now commands wide support in principle, although inevitably there are some important details still to be debated and satisfactorily resolved. The scrutiny certainly improved the quality of the proposed legislation, and I offer my congratulations to the chairman, Lord Hunt of Wirral, for all his hard work and, particularly, his consummate skill in maximising consensus, and to the Clerk, advisers and support team who gave us so much help.

It should come as no surprise that the strongest supporters of this Bill are consumer groups because, as they rightly point out, a sizeable minority of the general public are not well served at the moment by the legal services they receive—mainly from solicitors. There are far too many complaints, not at the highest level of seriousness of gross negligence, but of poor service, incompetence, excessive delays or costs not being clearly spelt out at the outset. Going to a local solicitor is clearly not always a happy experience for people who are often under pressure already, which is why they are seeking legal help.

As Which? has pointed out, in 2005-06 the Law Society received more than one complaint for every six solicitors practising in England and Wales. However, it is not just consumer champions who support the Bill. I am pleased that the Law Society supports the main proposals in principle, albeit with some important qualifications.

Like the previous speaker, I shall focus on two aspects of the Bill—alternative business structures and the proposed Office for Legal Complaints. I particularly welcome the proposals for ABSs, which not only will give existing law firms more flexibility in how they operate, but will bring about significant change for the customer. As a result of the provisions, we can expect to see improved services for consumers and greater convenience, with the establishment, for example, of one-stop shops for related services. Alternative business structures will open the door to the provision of legal services by supermarket chains or high street banks. Your Lordships may refer dismissively to Tesco law, but Tesco has proved itself extremely adept at providing services in a way and at a cost that the consumer values. These proposals will lead to more choice for consumers; they will stimulate competition; and I believe that they will drive up standards.

The Law Society gives alternative business structures a cautious welcome, but is worried that the outcome might be to create legal deserts, especially in rural areas, and rightly emphasises that it is important to preserve access to justice on people's doorsteps. I agree with that view, but I would argue that under the new proposals, access to legal services will be enhanced for the vast majority of people. We will see a greater variety and diversity of legal services being provided, probably at a lower price, and no doubt including the use of the internet. This could indeed lead to a significant shift in the way legal services are provided, and will certainly have implications for many firms of high street solicitors. In future, they will neglect the needs of their clients at their peril, because providing a high quality of service and satisfaction will be the only way to make sure that clients do not vote with their feet for a perhaps more impersonal but certainly more accessible service provided by Tesco or the Co-op.

The establishment of the Office for Legal Complaints is a welcome step forward—not before time—from self-regulation of the legal profession to an independent body that will deal with all consumer complaints, and which will have a majority of members who are non-lawyers and experts in consumer affairs, complaints handling and customer service. I have already indicated how necessary this change is, with levels of dissatisfaction with how the Law Society handles complaints remaining very high. In her most recent report, for 2005-06, the Legal Services Complaints Commissioner pointed out that four of every 10 people remained dissatisfied with how the Law Society handled their complaint. As we know from the work of consumer organisations, large numbers of people do not submit formal complaints about their treatment because they doubt that anything positive will result.

The introduction of the alternative business structures framework and the Office for Legal Complaints are major changes which will bring about a significant improvement in the quality and accessibility of legal services, and in levels of consumer satisfaction in an area of provision which, as noble Lords have pointed out, is crucial to individuals at particular times of need. That is why the Bill is so important.

I realise that I probably address the independence of the Legal Services Board at my peril, but some points must be made. I accept that the board should not just be independent of government, but must be perceived as such. The independence of our legal system is an essential element of its strength, not just in this country but worldwide, and must be cherished and preserved. However, in my experience, the way that current Secretary of State appointments are handled—according to Nolan rules and in strict accordance with the Office of the Commissioner for Public Appointments code of practice—should remove any apprehensions about the suitability, qualifications or independence of the chair and members of the new board. A selection panel, including an independent assessor, will conduct the key stages of the appointments process and recommend specific individuals to the Secretary of State.

I have recently been through such a process myself and can vouch for both how stringent and how independent of government it is. However, if it is felt that, exceptionally, at the end of this process, the Secretary of State should submit the final couple of names for each position to significant individuals—such as the Lord Chief Justice or the chair of the National Consumer Council—in a sort of final vetting stage, I would have no objection. I certainly do not believe that it should be spelt out in the Bill, however. Finally, I share the hope and expectation of the Law Society that the Legal Services Board will operate with a light touch and in a proportionate manner.

My Lords, I declare an interest as the chair of the National Consumer Council, but make it clear that I am not making a bid for the job my noble friend just suggested. It is quite a significant interest, however, since the National Consumer Council is one of the bodies that initiated the process of convincing the Government of the need to regulate legal services some years ago. After the lengthy period of Clementi and its consultation, and then an intense period of Joint Committee consideration, the Bill is close to being fit for purpose. I am not saying that it cannot be improved, or that some noble Lords’ points should not be addressed. The overall direction and structure, however, are right.

The lawyers among us must recognise that the system of self-regulation—certainly that of the Law Society and, to some extent, the Bar—is not held in high regard by the general public. My noble friend Lady Henig has just gone through some of the background figures and I will not repeat them, but the fact is that lawyers are up there with estate agents, builders and garage owners—and possibly politicians—as one of the service providers they are least impressed with. They are also unimpressed with the complaints system that has operated hitherto. As my noble friend just said, very few of them think it more than a waste of time to put in a complaint.

The record shows that there was a need for action. By setting up the Legal Services Board and the Office for Legal Complaints, the Bill reflects the need for independent scrutiny of the provision of legal services. However, the Bill also recognises that the existing bodies should be incorporated within this structure as approved regulators, as a sort of franchising operation, as long as they do their job effectively. This is a typical British compromise and a robust one at that.

Some of the reactions to the Bill seem hugely exaggerated. As almost my first re-entry to public life, about nine months after retiring as a Minister, in my present job, I went along to a discussion arranged by the International Bar Association on the very day that my noble and learned friend the Lord Chancellor announced his intention to proceed with these proposals. I thought it would be a fairly quiet affair, nothing like the meetings with farmers and hunters that I was used to. In fact, it was far worse. I was accused by the assembled luminaries of supporting a proposal that was close to those of Hitler, Stalin and Idi Amin. Given the international context in which people were talking, I can understand where they were coming from, and I am glad that the noble Lord, Lord Thomas, did not express his views about the noble and learned Lord the Lord Chancellor in quite the same way. However, the reaction from the British legal profession is a bit over the top and hysterical.

It may be true that the Bill could say a bit more about independence and could establish a few mechanisms to ensure that independence, but the reaction, including that in this debate, has been an overreaction. Most other industries and services are subject to some form of regulation, and where there is no formal statutory regulation, we rely on general trading standards enforcement or have forms of self-regulation that are more effective than those that appear to operate in the legal field. In others areas, we rely on effective competition to deliver consumer benefits and avoid consumer detriment. However, none of those applies in the legal profession. When self-regulation does not work for the consumer, the consumer has the right to demand that the Government intervene to impose independent scrutiny of the delivery of the service. In that sense, legal services are no different from any other service.

In this system of partial self-regulation, it is important that the role of the regulator is completely separate from the trade union function of the Law Society and the Bar Council. To achieve that, the approved regulators—the Law Society and the Bar Council—should have a majority of lay members on their governance boards. It is important that the consumer voice is effectively heard on the Legal Services Board, which is why I welcome the inclusion of a consumer panel. Indeed, its role could be strengthened to make it closer to that of Ofcom or the Financial Services Authority. However, I do not accept the argument that that panel should be balanced by an additional panel for practitioners. The analogy with the FSA in that respect is flawed. In legal services, the front-line regulator would continue to be professionally based. To mix my food metaphors, it would be having your cake and eating it to have a second bite of the cherry by having a separate practitioners’ professional panel in the LSB.

Often the most important strand of consumer pressure in any industry is to allow competition to flourish. The ABS proposals in the Bill would allow limited competition in the provision of some legal services. That has also been greeted by an overreaction bordering on hysteria. I am not a complete freemarketeer, and I recognise that some inhibitions have to be put on the labour market and, in particular, on the market for professional services. I recognise that some legal services might be provided effectively only by enterprises consisting solely of legally qualified practitioners. However, there is a range of other services in which lawyers are involved that require the skills and expertise of other professions. The concept of alternative business structures of lawyers and non-lawyers is a sensible way to provide a flexible one-stop-shop service to consumers with greater convenience and, potentially, lower costs. I have no objection if people find it easier to seek their legal services in Tesco or, preferably, the Co-op than with a high street solicitor, but it is important that there is some quality control on the licensing system introduced by the Bill. My noble friend Lord Borrie suggested that the provision might be over-onerous, but nevertheless we need a serious licensing system.

The licensing system need not extend to some areas—for example, will writing is not subject to huge consumer detriment, so the mandatory licensing system need not apply. There are other areas—and I was glad to welcome the Lord Chancellor’s remarks about trade union provision of services in employment cases—where again the full provision does not apply, but for services that have hitherto been provided by lawyers we need a robust licensing system.

The licensing system must, as I think my noble friend Lord Borrie hinted, allow for innovation in order for alternative businesses to develop and to deliver services that might be quite mundane for lawyers but which can frequently be traumatic for the people seeking legal services. It is also true that the conditions of licensing will meet some of the objections raised that the system could end up in cherry-picking and drive out services to the most vulnerable potential clients and consumers. I notice that our former colleague, now styling himself Andrew Phillips, had an article in the Guardian today arguing this case. That is hugely exaggerated, but we would rely on a licensing system to minimise it. It would help if the Government felt inclined to improve the provision of legal aid in this context as well—but perhaps that is another point.

I welcome the proposals on the complaints system—the OLC—but I think that they could be strengthened a bit. A compensation limit of £20,000 seems unnecessarily low. The financial services equivalent provision stands at £100,000. I do not think that compensation will frequently reach those levels, but when dealing, for example, with very important property transactions, and sometimes probate, such sums of compensation will need to be paid. To facilitate full protection redress all lawyers should be required, as a condition of practice, to carry professional indemnity insurance. Although many do so, it is not a requirement. Again, that would put lawyers closer to other businesses and professions.

I disagree with my noble friend Lord Borrie on the point about delegation back to the Bar Council. Even though I recognise that its past performance has been somewhat better than that of the Law Society, I think that we are then back into the judge and jury territory. I also disagree with him in relation to the requirement that the chair of the OLC should be a non-lawyer. Lawyers are brilliant at analysing other people’s professions, but for public trust we need a non-lawyer to head this institution.

My final point on the effective implementation of the OLC’s role regards transparency. We should know the names of those who are found wanting, and such names should be made publicly available. The fact is that one-third of all complaints under the present Law Society system are accounted for by only 7 per cent of solicitors. Potential clients should know that. It is also a serious protection for the good practitioners within the profession.

Therefore, I think that the Bill can be improved in some ways, but it is a good Bill. It moves us in the right direction and it will restore consumer trust to the legal profession in a way that present arrangements do not. I do not think that the general provisions of the Bill should be undermined and nor should we be convinced by the rather specious protestations about state control and lack of independence.

My Lords, I declare an interest, in that I was at one time a barrister, then a judge and am now a deputy coroner and assistant deputy coroner. I support the Bill in general, and I am reminded of what Shakespeare put into the mouth of one of the characters in Henry VI, Part II:

“First thing we do is kill all the lawyers”.

Clearly, the public have not changed today.

I am concerned about several matters in this Bill but I shall confine my comments to four. I hope that I shall not be accused either of exaggeration or of hysteria in making these points. What I am about to say has already been said by several noble Lords, but, since there is disagreement on some of them, they bear repetition, even from me.

First, there is Clause 1(1)(c), which refers to the objective of,

“protecting and promoting the interests of consumers”.

The joint report of the two Houses pointed out that there had been a shift from public interest to consumer interest. The government consultation paper issued in 2002 was entitled In the Public Interest? and placed an emphasis on the wider public interest. The terms of reference set by the Government for the Clementi report included consideration of the “public and consumer interest”. The protection and promotion of the interests of those who use legal services is enormously important, but it is not always identical with the public interest. It is possible for narrow consumer interests to be contrary to the wider public interest. At present, there is no provision for promotion or protection of the public interest and there appears to be no explanation for its omission from the Bill. I support the recommendation of the Joint Committee at paragraph 78 that subsection (1)(c) should be redrafted to read “protecting and promoting the public interest and the interests of consumers”.

My second concern arises from a possible threat to the independence of the legal profession—although that has, to some extent, been politely rubbished in this House. I should also like to comment on the perception of a threat to that independence by the impression that the Government have been seeking to exert day-to-day control over the Bar and solicitors. I am, of course, referring to the level of involvement of the Lord Chancellor in the regulation of the legal profession, particularly in his appointment of the chairman and members of the board. A clear and open commitment to the Nolan principles in appointments would go a long way to dispelling that concern—together, despite the view of the noble and learned Lord the Lord Chancellor, with a requirement for full consultation with the Lord Chief Justice in the appointment or removal of the chairman.

I share the view of the noble Lord, Lord Neill of Bladen, that the public do not see the Lord Chief Justice as just another lawyer—certainly not ordinary members of the public whom I meet from time to time, who see him as the head of our profession and as a great man. That was below what might have been said about the Lord Chief Justice.

I am told that at least one European Union country has already expressed concern about the perceived control by the Government over the legal profession. If that were to be the view of countries across the world, it would have a seriously adverse effect upon the high reputation of the English and Welsh legal system held overseas. That is not just a matter for lawyers; it would be to the public detriment. I entirely agree with the recommendations of the Joint Committee on appointments.

My third point is the proposed control by the Legal Services Board (LSB) of the regulators who have been put in place by the Bar and by the solicitors. I support the noble and learned Lord, Lord Lyell of Markyate, on this point. As the other noble Lords have said, the Clementi report recommended a light touch, which is not reflected in the powers of the board contained in the Bill. There is a low threshold for intervention by the board, particularly in Clause 31(1)(a), which entitles the board to intervene if,

“an act or omission … has had, or is likely to have, an adverse impact on one or more of the regulatory objectives”.

The regulatory objectives are, of course, expressed very broadly. There is a lack of guidance on when it would be appropriate to intervene in the work of approved regulators. This is rightly a cause of concern both for the Bar Council and for the Bar-approved regulator, the Bar Standards Board (BSB). The approved regulator may have to exercise discretion in balancing the objectives and to decide that one objective takes precedence over another, in which case there is likely to be an adverse effect on one of the objectives. Consumer protection or the rule of law may, for example, need to take precedence over competition. Under the Bill, that would entitle the board to intervene unnecessarily and in a way that is over-regulatory and might penalise a regulator who had exercised legitimate discretion in a balancing exercise. I urge the Government to amend Clause 31(1)(a) to include “substantial” so that it refers to a “substantial adverse impact”.

My last point relates to the relationship between the proposed Office for Legal Complaints (OLC) and the Bar Standards Board, which, as noble Lords have already heard, is the regulator of the Bar and has a lay chairman. I strongly support what my noble friends Lord Neill and Lord Borrie said about this. My concern arises from a one-size-fits-all scheme for dealing with legal complaints separately from issues of discipline. Clause 154(1) specifically states:

“The regulatory arrangements of an approved regulator must not include any provision relating to redress”.

This prohibits complaints and discipline issues being heard and decided by the same tribunal.

Under the scheme, the Bar Standards Board, for instance, will have the responsibility of dealing with issues of discipline arising from the behaviour of a barrister, whereas there is an entirely separate complaints procedure through the OLC, which can provide redress but may not take any disciplinary action against the respondent to the claim. In some cases, complaints may have nothing whatever to do with discipline, but life is seldom kept in neat compartments. In many cases—one noble Lord has said that the figure is about 70 per cent—the complaint by a dissatisfied litigant against a barrister includes an issue of discipline. Under the scheme, the discipline part of the complaint will go to the Bar Standards Board. On the same facts, the BSB will adjudicate on the part of the complaint that relates to discipline, and the OLC will adjudicate on the part that does not affect discipline.

What happens if one body accepts the complaint and the other does not? It is rather like two referees, one of whom gives the player a red card while the other says that the player was not to blame. I think I am right in saying that, in Adelaide, Strauss was out according to the umpire but the television image showed that he was not out. In that case, the umpire was in control, and Strauss was out, but if there are inconsistent results in which one board accepts a complaint and the other does not, what are the complainant or the public to think? I am not talking of a matter which was sufficient to warrant redress as a complaint but not sufficient for it to be a disciplinary matter. I have in mind a much more basic point: that the facts of an incident involving the complainant and the barrister—I repeat, the facts—are accepted by one board and rejected by another. Apart from anything else, there will be unnecessary duplication and considerable extra expense, but access to the ombudsman would not address this problem. I urge the Government to look again at the interrelationship between the Bar Standards Board and the OLC. In my view, a power is required in the OLC to delegate in suitable cases a dual complaint to the BSB. There should be an amendment to that effect and Clause 154(1) should be deleted.

My Lords, I declare the interest of having been a chairman of the Bar during the passage of the Access to Justice Bill and a practising barrister. However, I must reassure noble Lords that my years in your Lordships’ House have nurtured a complete sense of objectivity about my profession, which I hope to display in my remarks. Regulation is not an end in itself; it is a means by which the consumer or public interest can be balanced in protecting it through the way in which a profession or a financial system operates.

There is no spiritual context to regulation; it is a mechanical system operated by people to help others. So, when we look at this Bill, which I welcome, we should test a new set of regulations about an important profession against the following criteria: are they necessary, proportionate and cost-effective? Do they avoid doing irreparable damage to the profession and service which they seek to regulate? Is this Bill and the new regulation of the entire legal profession, necessary? I say yes, and I am gratified to note that the Bar Council has plainly stated that it supports this Bill. Such concerns that it has go to individual components of it, not in any way to its principle, and I agree. I do not agree that the regulation of a profession should be mixed with its representation. In this day and age they should be separate and be seen to operate separately. This Bill seeks to achieve that. I agree that the profession should be accountable to a Legal Services Board.

I want to reassure the House that my profession, the Bar, recognised that some time ago. In January 2006, we created the Bar Standards Board, which was specifically designed to protect consumer interests and maintain professional standards. It is chaired by a lay person, who is a director of the National Consumer Council. The balance of lay members and professionals on it is entirely reasonable. Its purpose is to give the consumer confidence in the regulation of my profession. That has already happened; the arrangements have been successful. My side of the profession is already doing that which this Bill seeks to develop.

The next and fundamental question about why this Bill is necessary relates to alternative business structures. I very much regret the emphasis placed on the introduction of finance—in capital letters—to law practices by so many of my personal friends in the law. There is an entirely different aspect of alternative business structures, which has thus far been entirely neglected. We must accept that legal aid has reached its ceiling. The impact of that on the provision of legal services nationally is really serious. There is no reason, in my opinion, why alternative business structures cannot be developed to operate legal practices to favour the poor and the disadvantaged—for instance, through social enterprise systems joining in with law firms, and trade unions doing the same—to achieve a new means of ensuring access to justice.

The Bill is therefore necessary, but is it proportionate? That will be tested in Committee by probing and by amendments, but I raise three points. The first concerns the independence of the new system. This is not an opinion put forward by the Bar to protect itself, or by solicitors to protect themselves, from government interference and so on. That would be a staggeringly superficial description of our concerns. We are concerned about powers and appointments because of the principle of independence.

We are also concerned about it at a very practical level. A small group of lawyers—solicitors and barristers—generate for this country in invisible earnings sums approaching £1.5 billion a year. We are the best international lawyers in the world and people come to us and our courts because of our quality. That profit to this country could be put at risk if the images given by the Bill are of interference with the independence which leads to our getting so much work from abroad. Lawyers from other countries, if they can, will seek to use anything they find in our future debates and in the future context of the Bill to undermine our position in international markets. So it is an important question.

My second point concerns the Office for Legal Complaints and its relationship to authorised regulators. If I may be allowed to state the obvious, a solicitor will administer your legal problem, which may or may not go to court; a barrister will advise you, sometimes when there is no question of going to court, but mostly when there is. The two functions are very different. The solicitor’s function raises, in its daily context, the provision of the kind of services which the consumer expects to be given at a proper standard, without which he or she will complain. A barrister’s function is to give advice—often unpalatable, often harsh and often difficult to accept—and if the case goes wrong, the way it was dealt with is never forgotten. This gives rise to a different kind of complaint—not “He kept me waiting months for an opinion”, not “He charged too much and did not tell me that he was going to”, but “He did not look after me professionally”.

The ordinary person makes no distinction between the quality of service and the professional standard which is subject to discipline. What will the Office for Legal Complaints do if it deprives the Bar of dealing with the two kinds of complaints? In 70 per cent of complaints to the Bar system, both types are inextricably mixed. Are we to protect, I say sardonically and intentionally, the consumer in relation to Bar complaints by having parallel proceedings for service and discipline? Is the consumer to be exposed to involvement in two processes when there could be one? If the processes are not to be parallel, which comes first? It is not a position that any reasonable consumer will expect to be put in. The OLC cannot deal with discipline effectively; the profession can. The Bar is simply seeking flexibility—flexibility that serves the consumer—not any special position.

My last point concerns the alternative business structure. I invite my noble and learned friend the Lord Chancellor, during the conduct of the Bill, to make it abundantly clear that the regulatory objectives of Clause 1 apply to all alternative business structures with the same force as they do to ordinary legal practice, especially if we find that one of the clauses provides for foreign investment in an English legal practice. It is asking nothing save for an emphasis that the objectives apply across the board.

On cost-effectiveness, Which? says that consumer complaint handling in the law is a number-one priority, and that consumers deserve quick, fair and accessible treatment. I have no doubt that the Department for Constitutional Affairs will be investigating seriously how the new system will work so as to be reasonably quick, always fair—in so far as one can be—and accessible, not drowning the consumer in a barrage of paper passing between the consumer, the person complained against and the office, and seemingly never coming to an end. That is the risk and it has to be avoided. I cannot imagine that it is seriously contemplated that we can look forward to the assimilation of the failed Law Society system—same people, same arrangements—into a new system. I am sure that that will not happen.

If it will cost £20 million a year to run the LSB and the OLC and more than £20 million to set up the OLC, we are talking about serious money; we expect serious value for the consumer. In Clauses 111 to 118, which create the Office for Legal Complaints, and Schedule 15, I looked for the ultimate sanction. What happens if the system is not working and there is no sanction? I hope that we would not have to look forward to an amendment to an Act of Parliament to change a failing system if it were irreparably failing. I also note that in the structure there is control by the Legal Services Board, but who is to answer for it if it fails? The people who run it and the Legal Services Board? The Secretary of State? If it goes wrong, who can the public look to? I hope that that will not arise; if it works successfully, we might want to find out who has got it right.

My final point is about the impact on the profession that is being regulated. The phrase “legal services provider” is linguistically and intellectually inane. We are talking about professionals—lawyers, doctors. They should give the client the capacity to trust in the ability and service they provide as professionals. That is a fundamental part of our British way of life. Those of us who travel abroad in a legal capacity are always told, “You must really treasure your legal system. Do you know how much we think of it, how much we value it, how much we would like to have it?”. Let us not, in discussing problems like this, forget the much greater importance to us of our legal profession, our system of law, than the essentially important consumer interest.

I am sure that during the conduct of the Bill the Government will look to be astute to proper amendment, reasonably brought, to make this a better Bill.

My Lords, I should like to speak briefly in the gap. I shall be talking about miners and I refer to my interest as declared in my speeches of 11 July and 23 November of this year.

It is beyond doubt that the miners and many other people have been let down by some members of the legal profession. I highlighted this in my speech of 23 November so I have no need to go over it again this evening. I was pleased that the noble Lord, Lord Thomas of Gresford, referred to it. I took no great pleasure in having to name people who, in my view, had been dishonest with some of the miners and their widows, but I know of no other way of trying to get justice for these people. I welcome the Bill and hope that we might reach a situation where regulation will put a stop to the practices that have been followed by a minority of the legal profession.

I have always been keen to ensure that all consumers receive good service from the Law Society. Unfortunately, this has not been the case, and the poor way in which the Law Society has handled complaints about miners’ compensation cases is an example. The Law Society’s complaints office at Leamington Spa has over the years been recognised as a failing organisation; this year it was fined by the Legal Services Complaints Commissioner. It is therefore imperative to restore consumer confidence that the new Office for Legal Complaints, as mentioned in the Bill, is truly a new body and not simply a transfer of current staff and management to the new organisation. It is essential that people such as miners are confident that their cases have been dealt with expeditiously and fairly. There should be regulations to deal with the solicitors who have been reducing miners’ compensation after they have been paid a fee of £2,100 for each case by the Government.

Only a few weeks ago, a gentleman who lives not far from me wrote to me and sent me a cheque. I wondered what it was all about and rang him up. He said, “I have just received a cheque, which I have sent to you”. It was for 37p, to a miner suffering from bronchitis and emphysema. I hope that regulations under the Bill will put a stop to that kind of practice.

My Lords, this has been a truly remarkable debate. In the compass of less than three hours, it has ranged widely and penetratingly across the issues raised by this substantive Bill, which will have a profound effect on the handling of consumer complaints about the provision of legal services, the structuring of the legal profession and the regulation of legal services. It will have an effect also on the perception of the profession.

If I have any note of complaint, it is not about the way in which the noble and learned Lord the Lord Chancellor presented these issues; it is rather that, at some points in the debate, there was an implication that the interests of the law profession and consumers were almost ineluctably opposed. The failure of a part of the profession to provide an adequate system for handling consumer complaints, of which the noble Lord, Lord Brennan, spoke trenchantly, is not an indication of anything that should lead to the legal profession being written off as being incapable of reform. That is clear in the response to the Bill from both the Bar Council and the Law Society, which have broadly welcomed the provisions, subject to some suggested amendments.

The remarkable thing about the Bill—it is in some ways historic—is the detailed pre-legislative consideration that it has been given by the committee chaired by the noble Lord, Lord Hunt of Wirral. Candidly, I doubt that our parliamentary procedures are apt to deal with a Bill of such detail, complexity and size as effectively as has been done in this instance by the committee of the noble Lord, Lord Hunt, the members of which have uniformly testified to his superior chairmanship.

The noble and learned Lord the Lord Chancellor mentioned the pressing timetable under which the committee operated. I have no doubt that working to a timetable of eight weeks, as the noble Lord, Lord Neill of Bladen, said, presented its members with an extraordinarily difficult task, but it is clear that they have performed a high public service in the work that they have done. I have no doubt, too, that there will be further opportunities during the Bill’s passage through the House to raise points that may have come to light too late for the committee to have been able fully to consider in its deliberations.

The general welcome for the purposes of the Bill is clear. It has united those such as the noble Lord, Lord Whitty, who spoke on behalf of consumers and who still hopes to see improvements made to the Bill to strengthen some of its provisions, and those who would like to be careful not to undermine the strength of the legal professions and their perceived independence—their independence in the eyes of those overseas who look covetously on their business. The legal professions generally provide an unrivalled service.

I suppose that I should have declared a past, if not a present, interest in these issues, for I practised briefly at the Bar and served as a consultant for an American law firm for many years and as a consumer Minister in the late 1970s, for which I did not consider myself disqualified by virtue of my legal interest or training.

The underlying question about regulation is whether it in some way jeopardises the independence of the new body. Is the Legal Services Board truly independent as it is being constituted? One can make too much of appointments being separated from the Secretary of State, but I cannot quite understand why the noble and learned Lord the Lord Chancellor takes such strong exception to consulting the Lord Chief Justice, as was proposed by Sir David Clementi. I cannot see that that consultation process would alter the perception of the work of the Legal Services Board, and I hope that the proposal will be reconsidered.

Attention has been drawn by a number of those who have contributed so thoughtfully to this debate to the extraordinary number of times that the Bill provides for the intervention of the Secretary of State in the work of the Legal Services Board. We were assisted by the arithmetic of the noble Lord, Lord Hunt, who said that these powers could be exercised on 288 separate occasions. I believe that the noble and learned Lord the Lord Chancellor has in some respects modified some of these powers in the time between the committee’s report and the publication of the Bill in its present form, but the issue causes eyebrows to be raised. I hope that he will not rest in seeking to eliminate unnecessary interventions.

Will the Secretary of State contemplate importing regulatory principles into the Bill, particularly that of proportionality? This could quieten some of the concerns that have been expressed about the necessarily wide and sweeping circumstances in which it is possible for the Legal Services Board to intervene. Another concern may be—I believe that it has been expressed by the Bar Council—that there is no direct provision for a right of appeal to the High Court on the conclusion on regulation by the Legal Services Board. I understand that recourse to judicial review will be available, but it may be thought that under Article 6 of the European Convention on Human Rights it is necessary to go further. Although that point has not been made so far in the debate, I would be interested to hear the noble Baroness, Lady Ashton, when she winds up, say whether she thinks that an Article 6 issue arises. That applies also to the provisions on the complaints procedures.

Several noble Lords mentioned another important point. The noble and learned Lord the Lord Chancellor in his response to the Joint Committee indicated that he was considering the issue of the trigger as a regulatory action by the Legal Services Board since it should clearly not be set too low. I hope that that will be animadverted on in the winding up.

The single entry point for the complainant is very important. The complexities of service provision, cutting across all the different professions and organisations, make the system difficult for a lay man, as anyone who has served in another place will know. The only difficulty that I have in understanding how this is intended to work in practice is in respect of a complaint that is clearly about professional conduct. The natural route would be to the authorised regulatory body, but that cannot necessarily provide redress. Is it the view of the Government, and will it be clear in the Bill, that such complaints, although they will be ultimately handled by the professional regulatory bodies, should be channelled through the Office for Legal Complaints? Lay complainants will not necessarily have a view about whether or not it is appropriate to go to the professional bodies because the matter was primarily about conduct. It would be helpful to hear what the Government have in mind.

The issue of redress has been raised again in the context of the appropriateness or otherwise of the ceiling of £20,000. I found the argument of the noble and learned Lord the Lord Chancellor very compelling on that point. As the power is being taken in the Bill to raise that level, considerations of its being too low might later cause changes to be made. But at this stage, in the light of the evidence on £15,000 as a summit of compensation awarded for legal inadequacies, what the Bill provides makes a good deal of sense. I do not agree with the noble Lord, Lord Whitty, on that point.

The issue of who is to pay for the complaint is not so satisfactory. The suggestion that the burden should be borne entirely by the “polluter” seems somewhat doubtful. I have been able to find no suggestion in the Bill, although I have not combed it in such a way that would make me confident about my sleuth work, of how to deal with the problem of vexatious or frivolous complaints. Anyone who has had to deal with public complaints is quite aware that there are such complaints—and it would be wrong that the full burden of that should be borne by the person against whom the complaint was made. That raises the wider question whether there should be some sort of compensation fund. I look forward with interest to hearing what the Minister has to say about the Government’s consideration of that issue, which does not lie clearly on the face of the Bill.

The Office for Legal Complaints deals with individual complaints. It is not entirely clear that it will have a specific role in advising how to amend procedures that have given rise to complaints or in advising about professional best practice. Is that intended to be part of the mandate of the Office for Legal Complaints? If it is not, there must be some kind of interface between the Office for Legal Complaints and the Legal Services Board to determine where that responsibility lies, because in that way we will improve our systems to enable a diminution in the total number of causes for complaint.

I raise one question that may be thought to be of less importance than some others. What is to happen to the reports of the inquiry on particular complaints? Are they to be published? There are cost implications of doing that, but there are transparency virtues in publication, not simply because of naming and shaming but because publication could assist in determining what practices are acceptable and what are not. That merits examination in Committee, if not resolution this evening.

Proposals on alternative business structures have been driven very largely by competition considerations. I pay tribute to the noble Lord, Lord Borrie, whom I have known for some time, and his successors at the Office of Fair Trading, who have recognised that the one-stop shop argument is on the face of it attractive and that there are some sections of our community for which and parts of our country in which access to legal advice is not readily obtainable. However, unsurprisingly, I share the views of my noble friend Lord Thomas that these proposals will not necessarily deal with all the problems that arise on access and provision. I cite my own example of representing in another place a very sparsely populated rural constituency where there were important relationships between lawyers and clients. I wonder how such practitioners will be affected by the Tescos of this world. The rural issue has been raised, but I do not think that it has been answered.

I hope, too, that the Minister may have something more to say on the potential conflicts of interest between the legal service providers and the shareholders, for example. Many of these questions seem to point to the necessity not of a headlong rush towards the establishment of these alternative business structures but of the cautious approach that I think the noble and learned Lord the Lord Chancellor was adumbrating.

Finally, is it intended that, in the regulation of these business structures, the rules should be applicable to sectors or to individual applicants? The licensing is of individuals, but if the regulatory system is in place for a sector, would it be automatic that a licence would be given if the criteria were observed? That is very important because we should not nod through structures that would be legally acceptable on the face of it but not apt for particular individual proposals.

My Lords, I begin by associating myself entirely with all noble Lords who underlined the importance of the work that the Joint Committee has done. We could not have had anything like as well informed a debate as we have had today without the work that that committee engaged in during a very short and demanding period. I also congratulate my noble friend Lord Hunt of Wirral on his outstanding chairmanship, which was recognised by noble Lords on all sides of your Lordships' House.

Part 1 is very short, containing only one clause with four subsections. It sets out the regulatory objectives in paragraphs (a) to (g) of Clause 1(1). But apart from the statement of what they are, we learn nothing further about them in the rest of the Bill. Yet they are crucial to the operation of the Bill because these duties are the duties which the Legal Services Board has to address in its regulatory role. I suggest to the noble Baroness that, in order properly to define the role of the LSB, we need a lot more detail in Part 1 than we have.

Three or four years ago I had the dubious honour of leading for the opposition on the Financial Services and Markets Act. Looking at the equivalent passages in that Act, one sees a much more detailed framework. The duties are set out in Section 2, but each duty in Sections 3, 4, 5 and 6 is given about half a page, in which Parliament explains in some detail exactly how it interprets those duties. It goes on to define the functions of the FSA and what it should have regard to in undertaking those functions.

None of that is in this Bill. There is a real concern across the board that there will be a temptation—I put it that way—for the regulator to make up his own law as he goes along. I suggest that, between now and the Committee stage, the noble Baroness might like to glance at the Financial Services and Markets Act and compare it with Part 1 of this Bill.

I give one example. Clause 1(1)(b) refers to “improving access to justice”. That is the only instruction the Legal Services Board has on that very important area. Many noble Lords talked today about alternative business structures. The noble Baroness, Lady Henig, was rather optimistic about the ability of alternative business structures to deliver better access to justice. I listened very carefully to her and I thought that her optimism was commendable. But there is, by contrast, another view; that alternative business structures will effectively cherry pick in the legal area, going only to those areas which are most profitable.

How will the Legal Services Board approach the question of improving access to justice? For example, will it have a universal service obligation rather like regulators in the world of the Post Office, the provision of gas supplies or electricity? Will it take the view that there is a minimum requirement for the provision of legal services in all parts of the United Kingdom? What about the very large number of people who are not very well off and have housing, social security, education or family problems? How will the Legal Services Board address those problems in the context of the access to justice requirement? I think that I have made my point. In Committee we ought to look very carefully at how we can unpack these duties in such a way that we and, indeed, the Legal Services Board, understand much better how it should interpret its duties throughout the Bill.

The second point I want to make is about independence. I think that almost every speaker mentioned this issue. It seems to me that there are two aspects to this question of independence. The first one is the relationship between the noble and learned Lord the Lord Chancellor and the Legal Services Board. The second is the relationship between the Legal Services Board and the authorised bodies, the authorised regulators.

On the first relationship, I must say that I listened with considerable surprise to the arguments of the noble and learned Lord the Lord Chancellor about the importance of his having the kind of powers he has in the Bill in relation to appointments and dismissal. I recall that in 2004, during those long months when we discussed the Constitutional Reform Bill, the noble and learned Lord the Lord Chancellor said that while there was no evidence at all in our constitution of impropriety concerning the Lords of Appeal in Ordinary, or the noble and learned Lord himself in exercising his functions of judicial selection, there might be a perception that there is. As a result of that perception, dramatic changes were made, which included the noble and learned Lord's selfless decision to cease to make judicial appointments and hand them over to the Judicial Appointments Board.

As I understood it, the principle behind all this was that of separation of powers; the importance of the political element being completely divorced from the judicial element. In my respectful submission to the noble and learned Lord, he is advancing completely the opposite philosophy in relation to the independence of the legal profession. I say that with great respect to the noble and learned Lord. He gets so many things right, the law of averages must dictate that he occasionally gets something wrong. I hope that during the Christmas break the noble and learned Lord will reflect on this matter. It must be perfectly clear to him from the speeches made on all sides of the House that there is deep concern about the issue of independence. In my submission that is legitimate concern. It is also a concern that goes beyond our national borders because it involves international perceptions about the provision of our legal services.

There is the second question of the Legal Services Board and the seven regulators. The noble Baroness, Lady Butler-Sloss, made an extremely good analysis of Clause 30. Essentially, what lay behind her intervention was the notion that the ability of the LSB to intervene is made too easy by the Bill. That is precisely why the noble Baroness suggested that the word “substantial” should be interposed. It would be very easy indeed for the LSB to claim that one of the objectives in paragraphs (a) to (g) was threatened in some way and use that as a basis for intervention. I suggest that some sort of guarantee ought to be put in the Bill to make sure that the threshold condition for intervention by the LSB is raised and that it is more difficult for it to intervene. Otherwise, we will find that a wide range of decisions that are taken, as it were on the shop floor, are interfered with by the Legal Services Board. That is the second part of the independence argument.

The third point that I want to make is about appeals. This has not been touched on this afternoon. As your Lordships know, the LSB has a large number of instruments at its disposal—set out in Clauses 30 to 45—to discipline the front-line authorities. The only one that provides an appeals structure in the Bill—at Clause 38(2)—relates to financial penalties. An appeal is admissible only if what the Legal Services Board has done is not within the power of the board. The scope of the appeal is not clear. Would it entail giving the full range of judicial review options to the litigator; or is it intended to be narrower than judicial review? If it is narrower than judicial review, is judicial review also available under Clause 38(2)?

I note that Clause 38(7) has the expression,

“not to be questioned by any legal proceedings whatever”.

That is an ouster clause. I thought that, after the experience of the asylum Bill in 2004, the Government had at last decided to abandon ouster clauses; but it seems to me that there is an ouster clause in the Bill. What about the exercise of the powers in Clauses 30 to 45, other than those involving financial penalties, where there is no provision for appeal at all? Can we assume that, in those cases, judicial review will always be available?

On the question of the OLC, the noble Lord, Lord Brennan, among others, made the point that in 70 per cent of cases it is very difficult to distinguish between service and conduct; and that many of the issues raised by complaints involve an amalgam of both. The noble Lord, Lord Neill of Bladen, made that point most eloquently as well. There is a real difficulty in trying to divide up conduct and service, especially since neither is defined in the Bill. The result is that we may find that a single complaint is, in the end, dealt with both by the OLC and by the frontline regulator. This is a problem that needs managing; it is not a political problem between the Opposition and the Government. It is a problem about the way in which the system works. In Committee, we will have to think very carefully about finding a way around this problem. In my submission, it would help if the power of the OLC to delegate to the frontline authorities was made much clearer in the Bill, and if the Bill made it much easier for the OLC to delegate.

I have already talked about alternative business structures in relation to Clause 1, and the way in which the access to justice obligation might bear on decisions by the Legal Services Board to approve, or otherwise, a proposal. There are, in fact, a lot of other difficulties about alternative business structures. Many noble Lords have already mentioned the international dimension and the issue of legal privilege. There are also, as I am sure the noble Lord, Lord Borrie, would acknowledge, some important competition issues; for example, the issue of cross-subsidisation. You might get a very powerful ABS deciding to try to drive a legal firm out of a particular market by predatory pricing; by subsidising from profitable legal activities in the other part of a firm a particular section of a firm that would sell its legal services below cost to gain a competitive advantage and probably drive several of its competitors out of the market. Those are the sort of problems that will need very careful handling by the Legal Services Board if we are not to have a whole range of competition problems, which seem to me so far to have been unforeseen.

Then there is the question of Chinese walls. Let us suppose that an ABS is instructed on two separate matters by the same client—a client who on the one hand wants to raise money but on the other hand wants to take over another company. Clearly, the information gained in those two separate areas has got to be kept separate. How will that be done? There are a range of technical issues on ABSs which we have not yet begun to confront.

I share the view of all noble Lords who have expressed concerns about the principle of polluter pays. I simply do not believe that it is acceptable under Clause 133 that someone against whom a compliant has been lodged, had it investigated and is found to have behaved faultlessly, is vulnerable to having to contribute financially to the whole process. In my submission, it is more than valueless; it is a corrupt principle. It should not be in the Bill.

Having said all that, I would not want the noble Baroness to get the impression that there are not many things in the Bill that we welcome. As an Opposition, we shall seek to table amendments and argue our corner in the most constructive manner that we can.

My Lords, I am very grateful to the noble Lord, Lord Kingsland, not only for giving me his advice which, as he probably knows, I am often very prone to take, but for his words as he ended his contribution. He echoed much that has been said in your Lordships’ House this evening about the Bill. It is obvious that there are particular issues that we will need to discuss in Committee, and I very much look forward to doing so. In general, there is much to welcome in the Bill. I declare my interest that I am not a lawyer. I was delighted that the noble Baroness, Lady Butler-Sloss, joined us this evening, not least because, with my noble friend Lady Henig, we are starting to have more women involved in our debates; and what women we are.

I add my thanks to those of my noble and learned friend the Secretary of State and Lord Chancellor to all those who have brought this Bill to fruition in your Lordships’ House. I would single out many people, not least the noble Lord, Lord Hunt of Wirral, and his colleagues—as many others have done—for their work on the pre-legislative scrutiny. I hear what they are saying about the timetable, but in a sense they have proved that the timetable was perfect, because their work was extraordinary.

I am fascinated by the new word “Clementi-ise”, which I fear may become a symbol of this Bill in the future. Noble Lords have also talked with great passion about aspects of the backdrop to the Bill. The noble Lord, Lord Thomas of Gresford, talked about integrity, independence and the importance of challenging organs of the state. The noble and learned Lord, Lord Lyell of Markyate, talked about a strong, diverse and effective legal profession. Those are all sentiments with which I can agree. I also agree with the noble Lord, Lord Thomas of Gresford, that working in partnership is an important principle in the Bill, and we will look at that more carefully in the coming weeks.

I am grateful to the noble Lord, Lord Hunt of Wirral, for bringing to my attention—both this morning when we met and in correspondence this afternoon—the additional role of my noble friend Lord Brennan in the new group that is being set up. Noble Lords will be pleased to know that we now have an All-Party Group on Legal and Constitutional Affairs. I gather that my noble friend Lord Brennan is to chair that group; I am delighted that he is doing so. No doubt my noble and learned friend the Secretary of State and Lord Chancellor and I will be summoned before it at some point, with luck, and we very much look forward to the opportunity that will afford us.

It is also extraordinarily helpful in these debates that, when we are inevitably thinking about the legal professions and have before us many people involved in the legal and judicial world, we also have my noble friends Lord Whitty and Lord Lofthouse to remind us of the consumer interest. My noble friend Lord Lofthouse does so passionately and based on his long experience and my noble friend Lord Whitty does so with passion and in his extraordinary new guise.

Four issues have dominated the debate—independence, cost, the complaints system, and alternative business structures—but I will not forget the right reverend Prelate’s desire for me to say something on the issues that he raised; I will do so. Without trying to address all the detailed points—I fear that it would be completely impossible in the time available—I reiterate, as I always do, that I will address all the points that I fail to address this evening in correspondence before Committee.

I will start by thinking about what is at the front of the Bill. I take the point raised by the noble Lord, Lord Kingsland—that it is important to look at previous legislation, and with his help I shall certainly do that. I shall also consider the points about public interest in the front of the Bill raised by the noble Baroness, Lady Butler-Sloss, and about proportionality raised by the noble Lord, Lord Maclennan of Rogart. Noble Lords will know that, in Clause 3(3)(a), we have tried to address the issue in the context of the work of the board. We think that that is appropriate, as opposed to using Clause 1 as noble Lords have suggested. Because we have talked about accountability, proportionality, consistency and so on, we think that that is a way to tackle the issues that noble Lords have raised. However, I would be grateful to discuss whether they think that we have captured that appropriately. The principles of regulation that the noble Lord, Lord Maclennan, raised were important, of course. I think that my noble and learned friend said, “We will have a think about it”, when I asked him about it; we will certainly do so. We think that we have positioned the matter correctly but, as you know, I am always open to discussions about what we might do.

No doubt we will spend a huge amount of our glorious days in Committee on independence, and I want to make a few basic points about it. The first is that the appointment of the chairman of the Legal Services Board is important, and it is important that it be done appropriately. I have five and a half years’ experience as a Minister in the way in which the Commissioner for Public Appointments and the code have been established and developed. The noble Lord, Lord Hunt of Wirral, was involved in such issues in earlier days, in his life in government. He was kind enough to have a preliminary conversation with me about that this morning, and I am sure that we will have more. I think that we have the best practice available in making appointments. To be frank, I do not understand why we should move away from that. The basis on which the Lord Chancellor and Secretary of State will operate is a well trodden road and has served us well so far.

Noble Lords asked about putting more detail in the Bill. The difficulty and danger with that is that best practice is inevitably a moving feast; what is best practice today may develop over time. I would not wish us to run the risk of being inconsistent with current best practice. The Bill gives specific instances in the limited number of circumstances where the Secretary of State could remove the chairman or a board member, which demonstrates that the provision would be used appropriately. No doubt we will discuss that in greater detail, but I wanted to set out clearly the position from which we start.

I cannot resist the Secretary of State’s 288 powers. The noble Lord, Lord Hunt of Wirral, was kind enough to mention them to me earlier, so we have had a look at them. I hope that he will not mind me saying so, but there is no doubt that we are not equating the 288 references to 288 separate powers. Clause 61 is one power with six references. Clause 136 has eight references but one power. I am not sure whether we examined whether the powers had changed—perhaps we will—but one of the arguments put to us is about making sure that we clarify where the Secretary of State will do things, and we have sought to do that. I know that the noble Lord would not wish your Lordships to go away with the assumption that everything had increased; the references have increased, which is a positive move because it gives greater clarity.

I shall turn to the consultation and the role of the Lord Chief Justice, an important and sometimes recurring theme when we look at the relationships between our most senior holder of a judicial office and government and Parliament. My noble friend Lady Henig talked about consultation being an important part of what anyone should do when making appointments. No doubt my noble and learned friend will wish to consult a number of people when doing so, depending on the appointment and candidate. That is appropriate. However, I agree with my noble friend that we should not put that in the Bill. The reason is twofold; again, I am sure that we will debate it at great length. First, however eminent and important the Lord Chief Justice is—I agree that he is both—the provision is about trying to develop consumer confidence and make people believe that we have tackled the issue effectively. To simply have a consultation with the head, if you like, of the judiciary and legal professions does not feel right to me. The argument could be—I have certainly debated it in the past few days—that you balance that with consultation of consumer groups. Then you quickly get into the area that I find deeply difficult. Noble Lords who remember me from my days—

My Lords, I am a little unhappy with the expression about the Lord Chief Justice being the head of the legal professions. I understood that it had been written instead by the Lord Chancellor that he was a highly distinguished lawyer, which indeed he is. I do not think that it is quite accurate. Perhaps the noble Baroness will reflect on that.

My Lords, as I said it I knew that someone was about to leap up and correct me, because the noble and learned Lord is entirely right. I apologise to the Lord Chief Justice for giving him an additional burden to the one that he already carries.

I was trying to make the point that we quickly get into the realms of making lists about which organisations should be consulted in particular circumstances. I am always deeply reluctant to do that. It is appropriate that my noble and learned friend consult where he feels appropriate, no doubt with good advice. That may or may not include a variety of people. We should hesitate to put that into the Bill.

My noble friend Lord Brennan and others raised international concerns that have come forward. I know from discussions over the past couple of days that issues are being raised, particularly in Germany and possibly in France. It is important to think about the role of our legal professions internationally; I raise the matter partly because I have just come back from the Justice and Home Affairs Council in Brussels, where I spent some time talking with the Competition Commissioner, Neelie Kroes, who is a huge fan of what we have done in Britain and is keen to see how the Bill is implemented. I hope that she will visit us and talk to us about that. Also last night, I entertained a delegation of parliamentarians from South Africa including the Deputy Justice Minister, who expressed in clear terms their delight to see increasingly how the UK operates in such circumstances. International concerns are important, but I wanted to temper the concerns raised. People are worried out there—some feel passionately about what we are doing—but we will be mindful of the concerns raised.

The noble Lords, Lord Hunt of Wirral and Lord Borrie, raised issues about the powers of direction and whether the chair should be a lay person. It is a requirement that the majority of board members be lay; there is no reason why eminent lawyers should not be appointed on merit to the board as well. We have set out in paragraph 3 of Schedule 1 the experience that the board must have for us to make sure that it is representative, in the best sense of the word. It must have a broad range of experience that allows it to carry out its functions effectively, including the power to direct. As a lay person, I have no difficulty with the chair being a lay person. From my perspective, it feels that too often you have to have a legal qualification to do things, so at last there is a job that I can go for when I finish being a Minister. It is an important issue of confidence as well, concerning the messages that we send out. We will be fortunate when we find the right person to take on that role.

The noble Baroness, Lady Butler-Sloss, and the noble Lord, Lord Kingsland, raised the question of whether we ought to have a threshold condition in terms of the adverse impact on the objectives. She used “substantial”; others have talked to me about using “significant”. As noble Lords who have dealt with legislation before know, the trouble is that there are issues about the definition of “substantial” or “significant” in terms of being clear what we are trying to do. “Substantial” would also be difficult because it might mean that the board could not take action where it was required. If you have a regulator regulating a small number of people, the impact may not be substantial even where they are not meeting the regulatory standards. So by requiring the board to act in accordance with the principles of proportionality and accountability, we will get to the same point that noble Lords seek. No doubt we will discuss that in Committee.

The noble Lord, Lord Thomas of Gresford, asked about government solicitors. We do not think that we need to consider them within these provisions; they can still be disciplined if necessary. The cost of including them would be £800,000, which would have to come out of general taxation. We do not think that that is appropriate, but we do think that we have the right framework for them.

My noble friend Lord Whitty and other noble Lords were concerned whether the compensation levels for the OLC were too low. Ultimately, that can be varied by order. We think, recognising the current situation, that we have the balance right, but I know that my noble friend and consumer groups have raised the issue with us. I am sure that we will debate it during the Bill’s passage. I say to my noble friend Lord Brennan that it is not just a re-badged consumer complaints service. It will be located in the West Midlands, but it will be outside Leamington Spa, as I understand it. It will take advantage of a good existing skills base but will be very different—which I think is what my noble friend was looking for .

We had some work on costs done by PricewaterhouseCoopers and the assumptions in the report were its, not ours. We are broadly content with the projections but will of course continue to work with stakeholders to refine them as we implement the new arrangements. As noble Lords will know, PwC believes that there is a saving to be had within the projected costs for the new body.

I am grateful for the work that my noble friend Lord Bach did on the committee and for his support of the Bill. He was concerned about the contribution which the Government might make particularly in starting up the new body. We believe that the cost should be covered by those who are being regulated. One could do a cost-benefit analysis about what might happen to those organisations when the provisions come into force. They will have increased confidence and it is very possible that the new system could reduce vexatious complaints—which I will return to in a moment. We recognise the importance of having the flexibility to differentiate, and the Bill has the capacity to do precisely that—to waive fees in certain circumstances and to differentiate the fees in others. We hope that that power will enable those issues to be dealt with appropriately.

Perhaps I may interject on a point here for the benefit of the right reverend Prelate the Bishop of Chelmsford lest he should think that I had forgotten him. He mentioned the year 1533—which I think proves that we do not rush into change. But we agree entirely with his reading of the situation. I am grateful that he described the situation so succinctly, as it saves me having to repeat anything, and for his support for the Bill.

I shall begin with the role of the Bar on complaints and the questions raised by noble Lords on delegation. It is right that the number of complaints against the Bar is 560, compared with 18,299 for solicitors, which is perhaps largely explained in terms of numbers. A third of the complaints against the Bar were forwarded to the Legal Services Ombudsman compared with 10 per cent of complaints against solicitors being forwarded to the Law Society. So, factually, without putting any spin on this, one-third of complainants were not happy with the way that the Bar dealt with their complaints. That issue is worthy of consideration. However, the issue on which I wish to focus is the importance of consistency and clarity for the public.

Providing for different levels of service and different assumptions would send completely the wrong signal. We should regulate very clearly and very precisely, and that is not a reflection on the Bar. In Schedule 15 we allow expertise to be brought in, which would include the expertise of the Bar. There is no desire to do anything other than that, but it is important to make the system clear, straightforward and consistent.

A number of noble Lords including the noble and learned Lord, Lord Lyell, my noble friend Lord Brennan, the noble Lord, Lord Kingsland, and the noble Baroness, Lady Butler-Sloss, were concerned that if we do not delegate complaints, we might end up with unnecessary delays and concerns about what kind of complaint would be dealt with. When an ombudsman receives a complaint that he considers to contain service and conduct issues, he will send a copy of the complaint to the relevant professional body. So such complaints can be considered in parallel and there should not be a delay for consumers. I would argue that that is a much better outcome than having to wait until a finding of misconduct is made before any redress can be considered.

The noble Baroness also suggested that different conclusions might be arrived at. It is technically possible that someone not in breach of what was required by a regulator might be considered to have provided a bad service. In a sense, so be it. That will be for them to define very clearly.

My Lords, forgive me for interrupting. I am much more concerned about situations where the facts are seen one way by one board but differently by another. So they come to two different conclusions, like two referees on a football pitch.

My Lords, the noble Baroness makes a point. We do not believe that that is likely but we will certainly look at it and consider how the noble Baroness might suggest we should tackle it without moving away from all the principles that we have established.

Noble Lords have raised the issue of vexatious complaints and the question of what we have described as the “polluter pays” mechanism. We have clearly stated the principle of who pays both in the Clementi proposals and again in the White Paper. We expect that a substantial proportion of the complaints that reach the OLC will be of some merit because otherwise they would have been dealt with at an in-house level. We hope that that will be an incentive to deal effectively with complaints in-house. There will of course be a handling fee if they end up with the OLC. It is right that those against whom complaints have been made, rather than the profession as a whole, should contribute to the cost of processing. But noble Lords are right to say that there are circumstances where it would be unfair to charge those who are subject to complaints, especially if they are frivolous or vexatious complaints. That is precisely why we have provided flexibility in the Bill to set different charges—or to waive them altogether.

The noble Lord, Lord Kingsland, asked about Clause 38 and judicial review. The grounds in Clause 38 are similar, as the noble Lord said, to traditional review grounds. So we think that we have covered that, but we will discuss it with the noble Lord. The noble Lord, Lord Maclennan, asked whether we had considered Article 6. Indeed we have. We believe that the system that we have set out in the role of the ombudsmen and the role of judicial review fits with Article 6.

Finally, and briefly, I turn to alternative business structures. I am a huge fan of what has happened over the last while in financial and banking services; I have undoubtedly benefited from it as a consumer. I hear what noble Lords say about ensuring that we do this properly and appropriately. Indeed, the noble Lord, Lord Hunt of Wirral, supported by the noble Lord, Lord Maclennan of Rogart, has thought very carefully about how that would come into practice. The legal disciplinary practices will be allowed before Part 5 takes effect and, as noble Lords know, the bodies will be composed only of lawyers. Other practices will be permitted the “mixture of practice” only when the LSB is satisfied that there is a suitable regulator in place.

Noble Lords have occasionally asked me, and have asked today, whether there should be a difference in terms of geography or sector. It is difficult to think about that while bearing in mind how business is now done not least through the internet and advertising. We believe that we have achieved the step-by-step approach that has been looked for. It will be for the licensing authorities to decide who can be part of an alternative business structure. I think that that is the appropriate way forward.

Finally, noble Lords asked about commercial interests conflicting with consumer protection. These firms will be subject to robust safeguards to protect the consumer and will be accountable to the licensing authority. They will also have specific duties to maintain ethical and financial standards and have monitored compliance. We think that in the Bill and the regulations which will follow we have the ability to ensure that consumer protection is taken forward and that commercial interests and conflicts of interest are dealt with appropriately.

I apologise that I have not had a chance to respond on a number of points. I very much look forward to our Committee deliberations. I commend the Bill to the House and I am grateful for the warm welcome that it has already received.

On Question, Bill read a second time, and committed to a Committee of the Whole House.