House of Lords
Tuesday, 23 January 2007.
The House met at half-past two: the LORD SPEAKER on the Woolsack.
Prayers—Read by the Lord Bishop of Manchester.
Introduction: Lord Walker of Aldringham
asked Her Majesty’s Government:
What will be the total cost of establishing the new Supreme Court in the Middlesex Guildhall, including costs already incurred, and the eventual cost of creating seven new courtrooms elsewhere in central London to replace those currently in the guildhall.
My Lords, the capital construction costs for Middlesex Guildhall remain within the estimate of £30 million, at 2004 prices. The capital construction costs for the redevelopment of the Crown Courts at Isleworth remain in the region of £18.2 million, at 2006 prices. In addition to the capital construction costs, further costs will be incurred, such as DCA professional adviser fees, the project team costs and the non-capital element of the fit-out costs, including loose furniture, IT services and library books, as identified in my Written Ministerial Statement on 17 October 2006. Spend to date on both projects has been £5.9 million capital and £1.8 million resource. I will provide further information on reaching closure with the preferred bidders, which are Kier Group plc for the Middlesex Guildhall and Geoffrey Osborne Building Limited for Isleworth. I apologise for the length of that Answer.
My Lords, I thank the noble and learned Lord for that Answer. Will he recognise, even at this late stage, that the removal of the Law Lords to the Middlesex Guildhall to do exactly the same job as they are doing at the moment is a complete waste of public money? What useful purpose will it serve? Will he confirm that the bulk of the money will come not from his own department or the Treasury, as it should, but from a levy on members of the public seeking justice in the lower courts? How can he defend that decision?
My Lords, Parliament debated the question whether we should have a Supreme Court and the matter was passed by both Houses. Instead of seeking to redebate an issue on which Parliament has made a firm decision, we should work together to get the best possible Supreme Court. Civil litigation incurs fees, and some of those fees will contribute to the costs.
My Lords, in estimating the cost of converting the Middlesex Guildhall, has my noble and learned friend taken fully into account the fact that the building by James Gibson is listed Grade 2 starred and that English Heritage considers its interiors to be unsurpassed by any courtroom of its period in the quality and completeness of their fittings? While I have no doubt that Feilden and Mawson will handle the brief with appropriate sensitivity if the project goes ahead, what assurance can my noble and learned friend give that the quality of what is installed will be as fine as the quality of what is removed?
My Lords, we are very conscious of the importance of the interiors of the Middlesex Guildhall and, in particular, the court furniture, which my noble friend rightly identifies as being among the best of its kind. Before the local authority gave planning permission it was extremely concerned that appropriate homes should be found for the exquisite court furniture. That has been done—and only once it had been done was final planning permission given.
As to what the building will look like after it has been completed and the interiors have been done, I very much recommend that noble Lords look at the work done by Feilden and Mawson and see its extremely high quality. Although there is exquisite court furniture in Middlesex Guildhall, it might be said not to be looking at its best on the inside if noble Lords were to visit it now.
My Lords, is the noble and learned Lord aware that in the most recent accounts of the House, the costs recorded of the judicial activities in the House, excluding Law Lords’ salaries, were less than £200,000 for the year and that the interest costs, let alone the capital costs, for the Middlesex Guildhall will be 12 or 15 times higher than that? Are not the costs of this House, as the report of accounts states,
“outside HM Treasury’s administration costs control regime”,
whereas the costs that will be incurred in the new premises will be much more closely supervised by the Treasury? Therefore, apart from being higher, are they not likely to generate even higher charges for litigants who go to the court?
My Lords, once again, this is going back over issues that were fully debated at the time. Parliament, having heard all of these issues, concluded that we should have a Supreme Court. The reason why it is worth having a Supreme Court is that there should be a separate and identifiable court at the apex of the judicial system and that we should separate the legislature from the courts.
My Lords, does the noble and learned Lord agree that judges should not be legislators and legislators should not be judges? Having taken the decision in 2005 to get rid of the archaic anomaly of the highest court in this land being technically a committee of your Lordships’ House, would it not be ludicrous now to revoke that decision?
My Lords, is it correct, as reported in today’s Times, that magistrates are faced with a 3.5 per cent annual cut in their court costs, year on year, over the next three years? Is it not grotesque to be spending these moneys on this unnecessary court building and its consequent replacement court buildings rather than providing a proper court service for everyday users?
My Lords, no, I disagree with that entirely. Since 1997, expenditure on the Crown Courts, according to an independent survey, has increased by 116 per cent. In order to accommodate the fact that there will no longer be seven courts at Middlesex Guildhall, additional courts are to be built at Isleworth. The one group that will not suffer is the Crown Courts.
My Lords, the noble and learned Lord has some experience of rising costs, as he will remember from his time as Minister in charge of the Dome. He has just quoted a figure of £30 million at 2004 prices. In an answer given to my noble friend Lord Campbell of Alloway last year, he quoted a figure of £35 million, which strikes me as being considerably above the rate of inflation that his right honourable friend the Chancellor of the Exchequer quotes. Is the noble and learned Lord right or is the Chancellor of the Exchequer right in terms of the rate of inflation between 2004 and 2006?
Energy: Clean Coal Technology
My Lords, since the publication of the energy review in June last year we have made considerable progress in developing our thinking on a number of fronts regarding the development of clean coal and carbon capture and storage technologies. We are developing a regulatory regime for carbon capture and storage in the UK. In the Pre-Budget Report, the Government undertook to consider the cost-effectiveness of CCS demonstration. We are therefore undertaking a consulting engineer’s study. This should be completed by the end of March.
My Lords, I thank the noble Lord for that reasonably encouraging reply. Is he aware that presently, in global terms, no less than 40 per cent of electricity is generated from coal; that it is growing very rapidly, especially in China and India; and that according to the recently published Stern report on climate change, by 2030 one-third of all emissions will come from coal? Does it not therefore follow that measures to bring about the collection and storage of carbon should be introduced urgently? Furthermore, is the noble Lord aware that a number of firms have expressed an interest in building commercial plants using this system—which has been fully developed at the experimental stage? Can he give us an assurance that the Government will give them every possible support in so doing?
My Lords, the House will be aware of the long period over which the noble Lord has campaigned on these issues. He must therefore be very pleased by the progress that is being made and was reflected in my Answer. On his general position, the noble Lord is absolutely right: coal will play a very important part in electricity generation worldwide, particularly in China and India. There are opportunities which we are looking at closely. If we are successful in developing clean coal and carbon storage in this country, we may be able to make progress on behalf of both the Chinese and the Indians to mutual advantage. On the overall issue of climate change, clean coal and carbon storage are of the greatest importance.
My Lords, is the noble Lord aware that there is considerable advantage to be gained by combining the underground gasification of coal with carbon sequestration and storage? Can he tell us anything about the project which has been proposed as a feasibility study, costing around €3.5 million, by a consortium of European universities and commercial interests to investigate that possibility? Is he aware that no fewer than three universities in this country—Newcastle, Keele and Nottingham—are showing great interest in this feasibility study? Can he tell us what is happening to this proposal?
My Lords, it is certainly a welcome development. However, as the noble Lord will recognise from the contribution of the noble Lord, Lord Ezra, a number of very large and well resourced private companies also are interested in this whole development, and particularly in carbon storage. The Government are committing themselves to this consultation, which will cost £35 million. Should satisfactory progress be made, we would then foresee very significant commercial developments to which the research work being done by universities across Europe would make an important contribution.
My Lords, first, I congratulate the Minister on becoming such an expert in clean coal technology in 24 hours. Do the Government have a view on how important it is for coal produced in England, mostly by open-cast mining, to have a role in clean coal technology in the future?
My Lords, coal burning in power stations in the UK will continue for a considerable time and contribute to our energy needs for the foreseeable future. The greater part of that coal will be imported. However, my noble friend is right that there are coal resources in this country which are still to be exploited. Very little is now available in deep mines, but some is available through surface mining.
My Lords, in supporting the concern of the noble Lord, Lord Ezra, and in line with the church’s enthusiasm for reducing CO2 emissions, I press the question which the noble Lord opposite asked about the progress that has been made on the gasification plants that were promised as long ago as 2003. Will the Minister comment in more detail on the prospect of underground gasification, which many in County Durham believe would offer a cleaner and more efficient long-term—albeit expensive in the short term—energy alternative? Does he agree that this would reduce the proverbial silliness of importing coal to Newcastle—nearly 50 million tonnes per year—and also give new hope to communities that are still suffering the effects of the 1980s? I declare a second-hand interest in that the mineral rights in County Durham used to belong to my predecessors, the Bishops of Durham. After the demise of nationalisation, those rights have now reverted to the Church Commissioners.
My Lords, the right reverend Prelate makes an important contribution. As he will recognise, however, we have a great deal of work to do before we are able to establish a commercially viable technology. As I indicated, at least nine major, well resourced companies are pursuing various potential strategies on this work. The Government are investing their own £35 million for effective development to demonstrate and establish confidence in private industry that the huge investment necessary will produce the required results. What that would do for British coalfields, whether deep mine or open-cast, is bound to be marginal in comparison with future coal burning in our power stations.
Economy: Outdoor Recreation
My Lords, outdoor recreation forms a significant part of the UK tourism industry, generating £3.5 billion a year from walking, cycling and related activities, including overnight stays. Since 2003, the Government have invested £750,000 in promoting activity tourism through VisitBritain’s outdoor England marketing campaigns.
My Lords, I thank the Minister for that Answer. I am glad that his figure is more or less the same as mine. We are talking about activities such as walking in the mountains, swimming in the sea, rambles in local country parks, cycling along lanes, bird-watching and many related activities. They might be classed as informal countryside recreation, which, by and large, people undertake with friends or family or on their own, and not in an organised way. The Minister suggested that the Government regard such activity as high priority. Should it not be a higher priority, given the potential for growth that it offers through its impact both on the economy and on the health of the people of this country?
My Lords, the Government are encouraged by the response to VisitBritain’s campaigns. The noble Lord is right that there are benefits. Visitors from abroad bring resources in, and areas also see economic growth from internal tourism from the rest of the UK. There is also benefit from improving the health of the nation in the healthy activities involved in this tourism, as the noble Lord identified.
My Lords, in light of the Chancellor’s comments in the Daily Mail last October, do Her Majesty’s Government intend to allow informal recreational activities such as those described to count towards the target that school children should have at least four hours per week of sport by 2010?
My Lords, the increase in the hours that school children should spend on physical activities is greatly to be welcomed. We all recognise that it is part of an important campaign to reduce obesity in children, and so improve the health of the nation. Aspects of these activities certainly fit into that pattern, but we should recognise that mountain climbing and so on are much more accessible to certain school children than to others.
My Lords, the Minister has recognised the health benefits from this. How much are the Government prepared to spend on, for instance, making sure that footpaths are signposted and that many of them are available throughout the year, perhaps by building better surfaces? How can that be offset against higher spending in the Department of Health? If this calculation has not been done, is it not about time that it was?
My Lords, my impression is that it is not Governments who keep footpaths open. Governments can commit the countryside to be available to the nation, as we did with the right to roam in the Act that we passed a few years ago. It is the voluntary activity and insistence of meritorious organisations such as the Ramblers’ Association that keeps footpaths open and available to the public.
My Lords, the Government have put the legislation in place, but are they aware that the last England Leisure Visits Survey found that since 1998 there has been a continuous downward trend in the number of leisure visits made in England?
My Lords, there have been difficulties in recent years. We all recognise the blight upon activity during the foot and mouth period, which closed down great parts of rural England, but there is recovery. The amount of money being spent in the countryside—the number of overnight stays in village hotels and so on, which the tourist industry reflects—shows growth.
My Lords, have the Government done any research into the number of new people visiting the countryside following the CROW Act, as they were going to? Secondly, will the Minister ensure that all departments get behind the initiative to get school children on to farms in the countryside, which runs from September 2007 to July 2008? At the moment Defra, the Department of Health and the Department for Education and Skills are sponsoring this, but it should go across all government departments.
My Lords, I agree with the noble Baroness that we should seek the widest possible co-operation across government for that worthy aim. She will recognise that those three departments are bound to be the lead departments for this activity. We have no doubt that this campaign will bring great benefits.
My Lords, bed taxes are a thorny issue, which is part of a general review that will emerge in the not-too-distant future. I have no comment to make about that at present, except to say that it is purely a proposal. On the other point identified by my noble friend, it will be recognised that the Government have been concerned that unrestrained vehicle traffic, particularly traffic that can get off-road, can destroy the very beauty and amenities which people go to the countryside to enjoy, and we support the national parks in this matter.
My Lords, we must move on; we are in the 23rd minute now.
My Lords, the UN statement reflects the acute security situation in Darfur. I utterly condemn the rising violence in recent weeks against aid workers by all sides. Humanitarian agencies are struggling to deliver vital assistance to nearly 4 million people in Darfur in increasingly difficult circumstances and at great personal risk. The United Kingdom calls on all sides to provide safe and unhindered access throughout Darfur.
My Lords, I thank the noble Baroness for that reply and for the work of the United Kingdom in this area. Does she agree with the United Nations agencies when they warn that they are having difficulty holding the line? That was not clear from her Answer. I note that the Government are supporting moves to increase the number of African Union troops in Sudan. Therefore, what is the Government’s view about the Sudanese President becoming the president of the AU, and what effect might that have on the situation in Darfur?
My Lords, we are extremely worried about the humanitarian situation. Of course, we have to use political mechanisms to try to bring about a ceasefire, and that is what we are seeking to do. In addition, the talks last year in Addis Ababa resulted in the international community mapping out a way forward, including the need not only for a ceasefire but for a renewed political process and a hybrid AU/UN peacekeeping force. That is now being put in place but movement on it is slow. The issue of President Bashir and the African Union is a matter for the African Union. However, we have drawn to the AU’s attention—we went through the same debate last year—the importance of ensuring that whoever leads the African Union can command the respect of the international community.
My Lords, I welcome what the Leader of the House has just told us, but can I draw her back to the statement of the UN aid agencies? They say that, without decisive intervention, the humanitarian situation will be irreversibly jeopardised. They point out that access has already been compromised and is worse than at any time since April 2004, and that in the past six months 400 aid workers have been forced to relocate 31 times. Does the Leader of the House not agree that, along with the 4 million people who are now being denied access and the 400,000 who have died in Darfur, a principal casualty has been the Security Council, as its credibility and authority have been eroded by our failure to take decisive action?
My Lords, the noble Lord’s last point demonstrates the difficulty experienced by the international community, including the Security Council, in implementing the whole Responsibility to Protect agenda, which was such an important part of the UN decision-making process. I think that we all recognise that.
Access is difficult. In July last year, half a million people did not have access to humanitarian supplies because of the difficult situation, whereas the number of people affected in January this year has so far been some 70,000, although we think that that figure will rise. I can say to the House that nutrition and health indicators have remained relatively stable so far, but we have to watch this situation because it will become critical if the inaccessibility continues.
My Lords, on that last point, has the Lord President noted that some of the thousands of refugees being pushed into Chad are reported to have hideous diseases, including leprosy and many other appalling conditions? Does she accept, when she talks about calling on all sides, that the roots of the constant murdering by Arab nomads of the people of the Darfur region lie in quarrels over resources, particularly over oil and the Chinese investment in and development of oil, which it is taking out of Sudan? Will she be sure that “all sides” includes a sensible and close discussion with the Chinese so that they take some responsibility for the impact and consequences of their moves right over Africa, particularly in Sudan, in developing oil and local resources? Those actions are having repercussions, which are leading to murder on a massive scale.
My Lords, I agree that many of the conflicts, in particular the conflict in Darfur and more widely in Sudan, are to do with access to resources, but they are also to do with inter-ethnic fighting and other issues. The noble Lord will know that we are talking to the Chinese not only in the context of their role on the Security Council but more generally on the role that they are playing across the African continent as a whole. We are aiming to work with the Chinese to ensure that there is sustainable development on the continent, and they have a responsibility in ensuring that that happens.
My Lords, considering the gross obstruction of the UN humanitarian agencies as well as the resumption of bombing attacks on civilians and the refusal of Khartoum to co-operate in the delivery of the life support package, does the noble Baroness agree that it is time to refer the matter again to the United Nations so that it can revisit Resolution 1706 and ensure that we do not face an overwhelming humanitarian disaster in Darfur?
My Lords, the noble Lord, Lord Avebury, will know that the new UN Special Representative for Darfur is visiting the region at the moment. Once that report has been received, that will be the opportunity for the Security Council to look at the issue again.
My Lords, we give enormous sums of money through the British Government and the United Nations to relieve suffering such as that in Darfur, yet we are never aware of the danger that faces the humanitarian workers themselves. I take this as an appeal from those workers as much as from the people who are suffering. The Government could pay more attention to our own humanitarian workers.
My Lords, I agree that the situation facing humanitarian workers in Darfur is extraordinarily difficult. The only reason why the health and nutrition indicators that I mentioned are not much worse is precisely that those humanitarian workers have been doing such a good job in incredibly difficult circumstances. Where I take issue with the noble Earl is about the fact that the safety and security of our humanitarian workers, including those in NGOs, is extremely important to us. DfID funds some of those who give training with respect to their security and we will continue to put this at the top of our agenda.
Parliament (Joint Departments) Bill [HL]
My Lords, I beg to introduce a Bill to provide for joint departments of the Houses of Parliament; and for connected purposes. I beg to move that this Bill be now read a first time.
Moved accordingly, and, on Question, Bill read a first time, and ordered to be printed.
Legal Services Bill [HL]
My Lords, on behalf of my noble and learned friend, I beg to move that the House do now again resolve itself into Committee on this Bill.
Moved accordingly, and, on Question, Motion agreed to.
House in Committee accordingly.
[The LORD SPEAKER in the Chair.]
Clause 32 [Directions: procedure]:
52: Clause 32 , page 16, line 30, at end insert “; and a direction given shall be subject to judicial review on which proportionality, compliance with the European Convention on Human Rights, the independence of the legal profession and the quality of legal advice, may receive consideration”
The noble Lord said: I shall also speak to Amendment No. 139F and, by leave, refer to Amendment No. 65. I thank my noble friend Lord Hunt of Wirral, with whom I had the privilege to serve on the Joint Committee, for his support. In every sense of the word, these are probing amendments.
Yes, but I have to refer to it as relevant. I have had a word with the noble Lord. Thank you very much. Amendment No. 139F would subsume Amendment No. 52 because it is applicable only to directions from the LSB under Clause 31. The situation has changed overnight. My noble friend Lord Kingsland raised the issue of judicial review at Second Reading but there was no response to his question. Yesterday, at about three o'clock, I said:
“as matters stand, it”—
“appears to have … absolute discretion, without means of ultimate judicial resolution”.—[Official Report, 22/1/07; col. 898.]
At 10 o'clock it was accepted that the LSB was subject to judicial review, a concession for which I am indeed grateful, so I scrapped my speaking notes. Today, therefore, the question that arises is whether that concession should be in the Bill. Should it be in Amendment No. 139F or Amendment No. 65 or in neither? I am not speaking to the amendment, but merely referring to the dilemma. We now have to address that issue. If that is so, in what form should that amendment be?
This is not just a situation in which we can sit back and rely on Pepper v Hart, which is a source of last relief. As appears from yesterday’s debate on the framework within which the LSB operates, it is not at all clear, and clarity is highly relevant to judicial review. We must therefore consider, in summary, what we are dealing with. Today, we are in effect dealing with a continuation of what happened yesterday. It was proposed that the structure of the Bill should define the parameter within which the LSB should exercise its discretion; that the integrity of the approved regulators be acknowledged in the Bill; and that the quality and standards of legal services be maintained, as set by self-regulation, and recognised in the Bill. It was also proposed that a fair balance between the interests of the consumer and the approved regulator be assured; that the LSB should only intervene on the complaint of the consumer after notice has been given to the approved regulator to enable representation; that some acceptable means to that end should be devised; and that the conflict between the regulatory objectives was to be resolved proportionately, taking into account all such obligations of like importance on a balance, if fine, to be tipped in favour of public interest, as spoken to on Clause 1.
That could be achieved by a series of piecemeal amendments, or by a trigger clause in primary legislation, requiring the Secretary of State to introduce regulations enabling him to issue and require a code of practice, having full legal efficacy in the civil field, as spoken to by Lord Denning, Lord Elwyn-Jones and Lord Henderson of Brompton, the noble and learned Lord, Lord Cameron of Lochbroom, and other noble Lords in a short debate on 15 January 1986, cols. 1075 to 1104. Such a code could assimilate merely procedural provisions without eroding or overloading the structure of the primary legislation.
I do not know how this is to be resolved. It could be a “multi-approach”: some of the procedural provisions could be dealt with in the code, having legal effect; some provisions would essentially have to remain in the Bill. I cannot entertain how that should be done; in fact, I do not know. It is a difficult matter to resolve, but I do know that it must be done.
If the Government were to accept Amendment No. 65, then, subject to the advice of my noble friends Lord Kingsland and Lord Hunt of Wirral, one would have to consider whether these judicial review amendments would be required in the amended Bill, or whether they would be otiose, as the principle would have been accepted.
I do not wish to take much more time, but I shall conclude with a word to seek to alleviate the concern of the noble Lord, Lord Whitty, who I am glad to see in his place. I have the greatest possible respect for him, and I have disagreed with him on too many occasions. With respect, the noble Lord seems to be unaware that consumer interests can be contrary to public interests and that if they are, as was explained by the noble and learned Baroness, Lady Butler-Sloss, they must be subservient to the public interest. That is the first concept that I ask the noble Lord to consider. The noble Lord does not seem to be aware that it is in the interests of the consumer that the quality and independence of legal services set up and maintained by self-regulation should remain as proposed in yesterday’s debate. I hope that, as chairman of the National Consumer Council, the noble Lord will accept that what he said about limiting the potential for intervention cannot and does not affect judgment on the gravity of a complaint from the council about the conduct of the Law Society, which is only one of the approved regulators. I say nothing about the Bar Council because I have too close an interest to declare. The noble Lord, Lord Whitty, entertains a serious misconception. As chairman of the organisation, I respectfully ask him to reconsider his position. I beg to move.
I am very grateful to my noble friend Lord Campbell of Alloway not only for his tremendously hard work on the Joint Committee, but also for giving us an opportunity to look at what rights of appeal exist about decisions of the Legal Services Board. The amendment, to which I readily put my name, provides for one means of challenge, but the Joint Committee was greatly exercised by the fact that the Bill provides restricted rights of statutory appeal. Paragraph 186 of the Joint Committee’s report states:
“Other than in one case, the draft Bill provides no right of appeal against the decisions of the LSB ... In short, an approved regulator has a statutory route of appeal against the imposition of financial penalties, but no access to judicial review. If any other sanction is imposed, there is no statutory right of appeal, but the decision of the LSB may be subject to judicial review”.
I find this very confusing.
Many of the witnesses who gave evidence were concerned about the restricted rights of statutory appeal. The Government, in their response, rejected the recommendation at paragraph 191 of the report where the Joint Committee stated:
“We support the recommendation of the House of Lords Select Committee on the Constitution on this issue and we recommend that the draft Bill be amended to include a right of appeal to the High Court against regulatory decisions by the Legal Services Board. In line with existing practice, this right to appeal to the High Court should require the permission of a judge”.
We will, of course, be debating this issue in other groups of amendments.
Turning to judicial review, there have been a number of interesting cases—I see some very wise judicial minds present in the Chamber who have much more knowledge than I—and in the case of R v Ministry of Defence ex p Smith  the then Master of the Rolls, Sir Thomas Bingham, referred to the courts seeking to fill a vacuum. He said:
“To avoid a vacuum in which the citizen would be left without protection against a misuse of executive powers the courts have had no option but to occupy the dead ground in a manner, and in areas of public life, which could not have been foreseen 30 years ago. For myself, I am quite satisfied that this unprecedented judicial role has been greatly to the public benefit”.
I find that fascinating.
A little later in the same case he said:
“Absent a written constitution much sensitivity is required of the parliamentarian, administrator and judge if the delicate balance of the unwritten rules evolved (I believe successfully) in recent years is not to be disturbed, and all the recent advances undone … But the boundaries remain; they are of crucial significance to our private and public lives; and the courts should I believe make sure that they are not overstepped”.
Do we believe that it is right to leave this “dead ground” dead? I think the Minister owes the Committee an explanation of the Government’s view of judicial review.
The Government’s consultation paper Access to Justice with Conditional Fees, published in March 1998, was a disaster if ever there was one because no proper research was carried out into conditional fees; there were no pilot schemes or anything of that kind. However, it stated:
“The Government believes that the ability to challenge the acts or omissions of public authorities is a necessary check on the use of the power of the State and a positive encouragement to maintain high standards in public administration or by public bodies”.
So, in a way, judicial review is where the judiciary has had to assume the constitutional responsibility of curbing power. Speaking on behalf of the Joint Committee and its unanimous recommendation, I would far prefer that the Bill clearly set out exactly what rights the approved regulator has so far as appeal is concerned. That is why I await with great interest what I hope will be a positive response to the amendment from the Minister.
I welcome the probing amendment of the noble Lord, Lord Campbell of Alloway. I acknowledge, as he did, that it is related to Amendment No. 65.
Broadly, the Bill spells out three powers for the Legal Services Board: to give directions, to issue censures and to impose financial penalties. It is perhaps slightly remarkable that such detailed attention is given to the issue of how there may be an appeal against financial penalties but not to appeals against public censure or directions, which may be challengeable in the public interest. The question is very simple: why the distinction?
This is an important point, whether one looks at Amendment No. 52, which we are currently discussing, or Amendment No. 139F, which is grouped with it. We shall come to it in a different guise when we come to Amendment No. 56 and the amendment in the name of the noble Lord, Lord Maclennan of Rogart. It is all about the question of appeal, whether in the form of a straightforward appeal to the High Court, as we find in Amendment No. 56, or of judicial review. It comes down to a principle that I think the Government would readily accept, that no body that exercises power ought to exercise it in the absence of review to the courts or some superior appellate body. That is a very important constitutional principle; otherwise the power is potentially unfettered.
There should be no worry on that account among those whom the noble Lord, Lord Whitty, represents. If the Legal Services Board exercised power in a way which was seriously not in the interests of consumer bodies, those bodies themselves would be entitled to apply for judicial review. Whether they would be entitled to appeal if the directions were not against them is a more difficult question.
In this probing amendment, as my noble friend Lord Campbell of Alloway—to whom I am greatly indebted for raising the matter—said at the outset, one is interested to hear how the Government and the Minister approach the matter. I would hope, as I say, that their approach fully recognised the principle of some form of effective appeal, and gave us some guidance on how they think that can best be dealt with, not just in the comparatively focused—and, to that extent, comparatively narrow—way that which to be covered by the Bill as presently drafted, but in terms of how we should end up.
I say to the noble Lord, Lord Campbell of Alloway, that I was not going to oppose this amendment, at least in its substance—although it may be in the wrong place and need redrafting. I recognise the importance of having a judicial review safeguard which can take wider issues into account, including different interpretations of the public interest in these matters. I will, however, be opposing Amendment No. 56. The Government need to make it clear that judicial review would, in certain circumstances at least, be available in this area, as they attempted to do earlier, but that detailed appeal structures, particularly in areas of relatively minor sanctions, would not be appropriate.
With respect, I quite understand what the noble Lord, Lord Whitty, is saying. This issue arose with the use of the phrase “raising the threshold” on the Liberal Democrat Benches regarding when the LSB could intervene. That was in the context of the concept that the LSB’s function was to respond to a complaint, particularly from the institution of which the noble Lord is chairman, but not, so to speak, to intervene otherwise within the general province of the regulators. I think that the noble Lord objected to that limitation on the grounds he gave, which I hope he now understands were perhaps not well conceived.
I am not sure whether I should continue this dialogue for much longer, but I did object to the threshold being lowered. I object to a series of amendments that seem to be proposed in this Committee which would somehow hobble the Legal Services Board, leaving it a toothless tiger, if I can mix my minor veterinary operation metaphors.
I accept, however—I think that I made this clear last night—that the ideal position is that the Legal Services Board would be a light-touch regulator, intervening very rarely. But it is a supervisory board, and in any supervisory situation, whether in the workplace or in structures of institutions, the secret of being a good supervisor is to tread softly and carry a big stick which you occasionally show but, if possible, never use. It seems that the same relationship exists between the LSB and the front-line regulators. It has to have theoretically strong powers to enable the Law Society, in particular, to raise its game in fear of those deterrents; but the objective of the whole structure is that it would not have to use it very often, if at all, once the Law Society had raised its game.
It will be even more interesting.
I join all noble Lords who have congratulated my noble friend Lord Campbell of Alloway on introducing this intriguing probing amendment. In a way, the debate that my noble friend has engendered has anticipated about seven or eight detailed amendments which deal individually with Clauses 31 to 40. But I have concluded that it is helpful to try and grapple with the central issue that lies behind these amendments at this juncture.
Ideally, what the Government ought to have done for Clauses 31 to 40 and perhaps beyond, too, would have been to provide a general right of appeal to the High Court, making it clear that all the remedies available in a judicial review action would be available to a litigant seeking to exercise that right of appeal. What we have instead, as the noble Lord, Lord Maclennan of Rogart, said, is a limited number of clauses against which a right of appeal can be exercised. In addition, the right of appeal is qualified by what is traditionally described as an ouster clause. There is no mention whatever of judicial review in the Bill.
Naturally, that has led many of your Lordships to ask three questions. First, are all the remedies which would be available to somebody utilising judicial review available under the current rights of appeal? That is the first line of questioning. The second is: what is the intended reach of the ouster clause? The third is: in circumstances where there is no right of appeal, can judicial review be used?
This is perhaps a little unfair, because I know that the noble Baroness was going to deal with these issues incrementally, but it would be helpful to have some general guidance at this point.
Before I failed to realise that the noble Lord, Lord Kingsland, had not spoken, I was about to say what an interesting start to our debate this has been. I, too, am grateful to the noble Lord, Lord Campbell of Alloway, for not only moving his amendment but reminding us of the range of issues that we debated yesterday. I was reflecting on those with my officials this morning and how important I felt our discussions had been. I was able to consider a number of matters, as I had agreed to do, and look forward to discussing those away from your Lordships' House as well as on the Floor of the House at Report.
I intend to try and be the sensitive parliamentarian to whom the noble Lord referred. This fits in with the jigsaw he described to us yesterday that he wants us to put together. I will wait until the final day of Committee to ask whether he thinks that we have completed the jigsaw puzzle in taking forward all these issues.
The noble Lord, Lord Kingsland, is right that we have before us a number of amendments that deal with the specifics on appeal. Let me answer the specific amendments, as I would find it helpful to put that on the record, and deal as well with the particular questions that were so succinctly put by the noble Lord.
I agree with the noble Lord, Lord Campbell of Alloway, and other noble Lords that judicial review will be the appropriate remedy in instances where approved regulators want to challenge the lawfulness of the board’s regulatory decisions. As it is a public body, the board’s decisions are already subject to judicial review. We have drafted the Bill to allow for this; we do not think that it has to be stated in the Bill because that is the way that it will work.
We do not want to set out in the Bill what the judiciary may consider when reviewing the legality of the board’s regulatory decisions. For example, compliance with the European Convention on Human Rights is already a matter for consideration on judicial review. The noble Lord, Lord Campbell of Alloway, knows that well, not least from his distinguished work on the Joint Committee on Human Rights, before which, as Minister responsible for human rights, I have had the privilege to appear. We do not see the need to remind the judiciary of what should be considered in the exercise of their supervisory jurisdiction. We are concerned that putting things in the Bill might inadvertently restrict the ambit of any such review or suggest that other grounds are less valid or are to be accorded less weight. We would not wish to do that accidentally, so we are not drawn to putting such provisions in the Bill.
The noble Lord has drawn to our attention a number of important points which he believes may require consideration in judicial review proceedings. I should like to speak briefly about each of those. On proportionality and independence, the board is already under a duty to be proportionate—we discussed this at great length yesterday under Clause 3(3)—and to act in a way that is compatible with the regulatory objectives, which includes encouraging an independent profession. If the board has not complied with these requirements, that would of course form part of a review.
I have already dealt with the point about the European Court of Human Rights. Suffice to say, this has already been taken into account and does not need a specific mention in the Bill.
I agree with the noble Lord’s sentiment that the quality of legal advice should be kept at the highest standard. When taken together, my view is that the regulatory objectives ensure that the quality of the legal profession and its services, including advice to consumers, is maintained. But we do not think it should be given special consideration over and above other issues.
In Amendment No. 139F, the same concerns apply, but to a greater extent, given that it sets out the grounds on which judicial review can be applied for rather than considerations that may be considered. Again, I am not drawn to putting the conditions in the Bill because I do not want to narrow or limit the breadth of judicial review. That would not be beneficial for consumers or for the approved regulators.
I do not want to reopen the debate on public interest—we have already debated that at length. Suffice to say, the board has a duty in this regard, and its failure to comply with it could be a ground for judicial review. Similarly, an approved regulator could and should apply to the court for judicial review if the board’s decision fails to comply with the European Court of Human Rights or the tenets of natural justice, however inconceivable that is.
I hope that when the noble Lord reflects on the detailed response I have given to the points in his amendments, he will feel that I have covered them.
I am fascinated by some of the Minister’s comments. The procedure of judicial review has arisen—this was borne out by the quotations that I utilised—out of the fact that the Government left no other course. As Michael Fordham put it very well in his Judicial Review Handbook,
“By judicial review, the judiciary assumes the constitutional responsibility of curbing executive power”.
For the Government now to encourage judicial review, when it was only spawned as the sole real method of curbing executive power, is fascinating.
I believe the Minister said that she did not want to limit the extent of judicial review. I well remember the words of former Home Secretary David Blunkett about the result of one or two such reviews, but it is strange for the Government to be contemplating that it is the right remedy. We will come to that matter later, but surely it is better to include in the Bill clear appeal procedures rather than leave it to a procedure that has evolved as the only means of curbing executive power.
I take the view that public bodies operate in a way that means that there is a right of judicial review. I was seeking to deal with the detail of the points made by the noble Lord, Lord Campbell of Alloway, by going through them line by line and addressing where judicial review would apply. The noble Lord, Lord Hunt, is a lawyer and I am not, but one thing I know for sure about legislation is that it is always difficult to set out all the circumstances that might apply when one makes application to the court. Indeed, in other parts of our legislative duty, the noble Lord and I would probably argue in opposite directions because it is important that we do not curb the rights of those who are entitled to judicial review. I have sought to explain that, in our view, that would be inappropriate. The right of judicial review is there because the board is a public body. It is an appropriate remedy if people believe that there has been unreasonable behaviour or seek judicial review for other reasons. But to say that it is available on these or other grounds would curb something inappropriately.
The noble Lord, Lord Kingsland, very reasonably said that you can lodge an appeal later. Although we will come to the detail of that, it is reasonable for him to ask a general question. We have established that judicial review is available. However, the fining power within the Bill is, we believe, a stronger power. Noble Lords and those who are being regulated may also feel that it is stronger, more definitive and has potentially greater and far-reaching consequences. We therefore wanted to add the ability to go to appeal specifically around that power. So we did so, by saying that there would be leave to go to the High Court to appeal on that power.
In order to ensure that we did not end up in a situation where someone could appeal on that and have a judicial review, the ouster clause simply says, “If you're doing that, you can't have the judicial review as well because you already have the right to appeal”. That is what it is for. The purpose of the measure is to provide a judicial review in general and an appeal specifically around fining, but if there is an appeal around fining there is no need for a judicial review as well. The ouster clause therefore says that you cannot do both. That is what this part of the Bill seeks to do.
I sincerely thank all noble Lords who have spoken. One has to accept that it is inevitable that some decisions of the LSB are bound to be flawed for the reasons given as grounds in the two amendments to which I have spoken. Perhaps I should accept, having reread the Official Report after I tore up my notes, that I got it wrong when I referred to assembling pieces in a jigsaw to make a pattern. I had it in mind that perhaps—and I think that my noble and learned friend Lord Lyell of Markyate got near the point—there should be one or two amendments to the Bill to cover matters of principle. But so much of a change in structure, to which my noble friend Lord Hunt of Wirral referred, really should not be like pieces of a jigsaw. These are procedural provisions that should really be introduced by secondary legislation or a code of practice, to which Lord Denning and Lord Elwyn-Jones spoke, to relieve the structure of the Bill from erosion and being over-burdened with detail.
We have reached the stage when nothing more can be said of any constructive value until consultation has ensued with the Minister and my noble friends, to whom I defer—although I do not necessarily defer to the Minister. I should be most interested to hear about the consultations—and perhaps I shall be allowed to attend them—and what the noble Lord, Lord Thomas of Gresford, who has made a great contribution, and the noble Lord, Lord Maclennan of Rogart, have to say. We need to have a constructive meeting to get this Bill into shape. It is idle for the Minister to say—and I quote her very words—that the “framework is very clear”. It is not clear at all; it is in a most frightful mess and must be put right. This is the object of the consultation which, I am sure, can be undertaken with considerable constructive purpose.
I hope that the noble Lord, Lord Whitty, will have time—although he will disagree—at least to attend the consultation, so that he knows what is going on and realises that it is certainly not my purpose to put hurdles in the way of the LSB to prevent it fulfilling its proper function. On that basis, thanking all noble Lords, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 32 agreed to.
Schedule 7 agreed to.
Clause 33 agreed to.
Clause 34 [Public censure]:
[Amendments Nos. 53 to 55 not moved.]
Clause 34 agreed to.
moved Amendment No. 56:
56: After Clause 34 , insert the following new Clause—
“Appeal against public censure
(1) An approved regulator in respect of whom the Board decides to publish a statement under section 34 may appeal to the court on one or more of the appeal grounds.
(2) The appeal grounds are—
(a) that the decision was not within the power of the Board under section 34; (b) that any of the requirements of section 35 have not been complied with in relation to the imposition of the penalty and the interests of the approved regulator have been substantially prejudiced by the non-compliance; (c) that in all circumstances, the publication of a statement under section 34 is, or the terms of the statement published or to be published are (or would be), manifestly unreasonable or manifestly inappropriate; (d) that the decision is unlawful on any ground that would give rise to a claim for judicial review. (3) An appeal under subsection (1) must be made within the period of 42 days beginning with the day on which the notice under section 35(4A) was given to the approved regulator.
(4) Where an appeal is made before expiry of the 7-day period mentioned in section 35(4A), the Board must not (unless the court otherwise orders) publish the statement until the appeal has been withdrawn or dismissed.
(5) On an appeal under subsection (1), where the court considers it appropriate to do so in all the circumstances of the case and is satisfied of one or more of the appeal grounds, the court may—
(a) quash the decision to publish a statement, or (b) vary the terms of the statement (and, where the statement has been published, direct the Board to publish to the same extent the statement as varied). (6) In this section “the court” means the High Court.”
The noble Lord said: In moving the amendment, I shall speak also to Amendment No. 57 in the same group.
These amendments allow for an approved regulator to have a right of appeal against public censure under Clause 34. Your Lordships may recall that, at Second Reading, the noble and learned Lord the Lord Chancellor recognised that the powers of intervention against the approved regulators by the Legal Services Board were significant, but he believed that the board needed to have as effective a range of powers against the approved regulators as possible. He accepted, however, that there needed to be safeguards in the exercise of those powers, but claimed that the Bill provided for them.
In evidence to the Joint Committee, several witnesses complained about the limited rights of statutory appeal against regulatory decisions by the board. In contrast, the Government considered that the rights were adequate. It is especially striking to the Opposition that the Bill provides no opportunity for an approved regulator to appeal against public censure by the Legal Services Board under Clause 34. It is that lacuna that Amendment No. 56 seeks to address. It is plain to us that the safeguards under the Bill—notification and consultation—provide insufficient protection and, therefore, we seek to incorporate a new clause that will provide an approved regulator with a right of appeal to the High Court against censure.
Amendment No. 57 ensures that that new appeal mechanism will operate effectively by providing a short suspensory period between notification of the final terms in which a statement censuring an approved regulator is to be published and actual publication. That will give time for the approved regulator to launch an appeal before the board’s censure is made public. The Government surely could not argue that seven days was an unreasonable period. I beg to move.
We support the amendment in principle, but it is encapsulated in my Amendment No. 65, which we shall reach later, where I seek an assurance from the Minister that judicial review is available, not just for the question of public censure, but for the imposition of directions, performance targets and financial penalties. This amendment only restates what is available by way of judicial review, because the grounds of appeal are that the decision was either unlawful, ultra vires, or manifestly unreasonable. Any of those grounds would give rise to a successful application for judicial review.
The amendment suggests that the first remedy available on judicial review should be the quashing of the decision, or varying the terms of the statement; perhaps the High Court may not dictate what a statement should be, but it can indicate in its judgment what is or is not acceptable. Although I support the principle of this amendment, I hope that, in the event, the Minister will accept Amendment No. 65, which would make this unnecessary. It would have wider implications, and I shall address it in due course.
I agree with the point of my noble friend Lord Kingsland. I do not want to repeat the comments that I have already made about how preferable it is to have the appeal procedure set out in the Bill, as my noble friend suggests. That is why I so warmly approve of what he has just said.
On a matter of principle, I draw the attention of the noble Lord, Lord Kingsland, to Amendment No. 79. I know that it has to do with licensing, but it could have to do with anything else:
“The Secretary of State may, by order … establish a body to hear and determine appeals from decisions, made by a person specified in the order in the person’s capacity as a licensing authority”.
Does my noble friend really think that for the Secretary of State to appoint a body of persons, unspecified and at his discretion, to deal with and determine appeal, is at all appropriate machinery? I would just like to know whether my noble friend has any ideas about it.
My noble friend Lord Campbell of Alloway has drawn my attention to Amendment No. 79, which I have withdrawn.
After a cursory glance at the clause, I am inclined to agree with my noble friend about the defects of Clause 79.
I indicated earlier that I would oppose Amendment No. 56; what has been said has not changed my mind. I completely accept the role of judicial review in the decisions of the LSB, as do—I think—the Government. We are setting out, in the Bill grounds of appeal to relatively minor sanctions. We have an appellate procedure as regards fines, but when it comes to public censure and variation, we are dealing with relatively minor interventions by the LSB. Normally, appellate bodies are confined to points of law; these are essentially points of judgment. Unless we seriously restrict the LSB in such a way that every one of its relatively minor interventions, or threats of intervention, could lead to the High Court, we are in danger of reducing the influence of the LSB over the behaviour of the Law Society. People will tell me that such appeals will not happen frequently, but we are dealing with lawyers and the legal system. The more we put in the Bill to restrict or second-guess the LSB, the less effective it will become in changing the behaviour of the frontline regulators, which is the objective of this Bill.
Lying behind a lot of concerns expressed about the lack of appeal procedures in the Legal Services Bill is the fact that the Legal Services Board is being given such wide powers that it can introduce sanctions against an approved regulator for actions by individuals or organisations over which the approved regulator can have no control. It is in the context of the lack of appeal procedures that most of the concerns arise. Everyone wants this new system to succeed. Perhaps we have already made clear to this Committee our concerns that the powers may be too wide, in particular those to impose sanctions on approved regulators in respect of actions over which they had no influence or control. That lies behind a lot of the points that are being made.
I shall try to deal with the points that have been raised. My noble friend Lord Whitty raised a fundamental question about the effect of providing for appeal structures. When I was taking legislation on education through your Lordships' House, I remember that we often debated whether the opportunity to have every possible decision reviewed by an appeals body had a detrimental effect on the regulatory body. We agreed that it was therefore important to be clear about the processes involved, as we have sought to be in this legislation. I have already indicated the appropriate role for judicial review in the context of public bodies. I shall also explain financial penalties when we come to the next group of amendments. For the purposes of addressing this amendment, I shall restate our position on public censure.
We have been very clear in saying that there should not be a general need for appeals from decisions of the board, subject to the exception that I have made for financial penalties, and I shall spell out three reasons why. First, the board will be independent in its composition and decision-making, which is of great importance. Secondly, there are statutory safeguards in the Bill to ensure that fair and transparent procedures must at all times be followed if the board sees fit to sanction an approved regulator. Clause 35 provides that the board may not publish a statement to censure an approved regulator unless it has first given notice to the regulator and considered representations. The clause also provides that where the board proposes to publish a statement, it must allow a period of 28 days or more to allow the approved regulator to make representations. That deals with the understandable concern raised through Amendment No. 57 to ensure that there is time for representations to be made in response. We have allowed for 28 days, which is considerably longer than seven days. Thirdly, for the reasons that I have already indicated, recourse to judicial review will be available in appropriate cases, ensuring that the board may be held to account without the need for a separate appeals procedure. A statement of public censure will be made only where the board considers it appropriate to do so and has followed the prescribed procedure set out in Clause 35. If it publishes a statement where it is unreasonable to do so, or without due regard for the procedural rights of approved regulators, it may be held liable in the courts. To provide for a statutory right of appeal would be unnecessary for those reasons. I hope that noble Lords will reflect on the way in which I have set out my response.
Clause 79 is about alternative business structures. It enables those bodies that wish to be designated as a licensing authority to comply, because they will need to have an appeals body in place. Its aims are quite different and distinct, and it will be extremely helpful. We shall debate it in due course. I mention it now because it is important to make the distinction. Reading the provisions out of its context might give rise to concerns that can be allayed when we get to that part.
That is right: it is to do with ABS. You cannot totally isolate this. By the time you have an obligatory regulatory objective to safeguard the independence and quality of advice, across the board you will get conflicts with the ABS situation, where you have the promotion of competition. I dealt with this briefly before and the noble Baroness said that it was another part of the Bill. I know that, but in a sense it is this part too, because a balance has to be struck. In principle, I merely suggest that this machinery is wholly unsatisfactory.
I am most grateful to the noble Baroness for her response to these two amendments. The noble Lord, Lord Thomas of Gresford, said that he supported them in principle but drew your Lordships’ attention to his own Amendment No. 65, which provides a generalised right for judicial review. That is his solution, which is good in the absence of any other remedy.
There is, though, an important distinction between a statutory right of appeal and judicial review. To obtain judicial review you must first persuade a court to give you permission. That obstacle would not be present if there were a statutory right of appeal. That is why I prefer a generalised system of statutory rights of appeal to a generalised system of judicial review. A statutory right of appeal is especially important under Clause 34 because the public censuring of a statutory body—as an approved regulator would be—is a serious matter.
Can the noble Baroness give us some illustrations of when she believes that the Legal Services Board is likely to exercise the power under Clause 34? In the Government’s view, what acts by an approved regulator are likely to attract public censure under the clause? That might make it easier for your Lordships to take a view on the merits of our amendment.
My ambition would be that it never need use that power. It would be foolish for me to try to determine what would require that use, as I am not the LSB.
We need to make sure that the LSB has available a range of ways to deal with different degrees of problems, concerns and omissions that may arise. We have spent a lot of time in useful conversation looking at the regulatory objectives and what the LSB would seek to do. We are describing the things it can do, and putting safeguards within that, like the 28 days, to ensure that it must behave openly, transparently, independently and so on—the three grounds I laid out for why I do not want to accept the amendment. I do not want to try to give examples. I know why the noble Lord might feel that to be important but I think that it would be wrong to do so. It is much more a question of what power would be available, should there be a severe problem. However, I hope that the power is never used.
In some respects, I understand the noble Baroness’s hesitations, but we are left with a situation where the Government are not prepared to give any indication whatever to the Legal Services Board about the circumstances in which it might use the powers that it has under Clause 34 to issue a public censure. Different compositions of boards at the Legal Services Board may take a very different view about what should attract public censure. This is a very unsatisfactory situation.
With respect, the question should be how the board would arrive at its decisions. In other words, we are trying to determine not the way in which a regulatory body might have behaved that would lead to the board’s decisions but the way in which the board would decide how to use its powers. There is a need to be transparent, accountable, proportionate, consistent and targeted only at cases where action is needed. Noble Lords have questioned whether we need to strengthen the Bill in part, and, as they know, I am looking at that. We have tried to litter this Bill with references to make it clear that the board has to operate transparently, appropriately and proportionately.
For me, designing a board by saying, “This is how you must behave” is a better way of achieving what I think the noble Lord is seeking—that is, it ensures that the board does not exercise its power inappropriately or heavy-handedly and so on. There is unanimity in the Committee about light-touch supervisory regulation. No one has argued against that and the Government do not either. Therefore, how the board uses its powers is about saying, “You must behave in this way”, rather than trying to develop criteria for when it would use them.
I shall try to approach the problem from a slightly different angle. Publicly censuring a statutory body such as an approved regulator would, in effect, destroy the credibility of its own board. In my view, it would be impossible for the chairman to carry on, or at least to carry on beyond a few months. In those circumstances, does the noble Baroness not think that he or she and his or her colleagues ought to have a right of appeal? They ought not to have to go to the administrative court and ask for leave for judicial review, which might or might not be given. They should have a statutory right of appeal against such a condemnatory direction by the Legal Services Board.
I suppose that one could begin with the definition of “public censure”. If one took the extreme view, which the noble Lord has put very well, and said, “In these circumstances, this would happen”, then the board, within its 28 days, would make representations to the LSB and would consider whether it wished to apply for judicial review if it felt that the circumstances warranted it. But we have to start from the principle that the LSB would only ever use that power when it was clearly a proportionate and appropriate measure to take and where it was doing so because it felt that the circumstances warranted it. In such a situation, that option would have to be available to the board.
I understand what the noble Lord says but I would argue that there could be gradations of public censure. Noble Lords will recognise that there are circumstances in which organisations are rapped across the knuckles in different ways. It is not always necessary for the organisation’s chairman to resign; public censure is used in all sorts of circumstances. It is not a clear-cut issue, but we have identified the one area of penalty where we think that it is right and proper for such censure to be automatic. However, the public body would be treated appropriately, and we are ensuring that the powers are used appropriately. If the regulator could demonstrate, by leave to the court, that there were grounds that warranted review it would be available. We think that that is the right balance. To open up a statutory right of appeal is to change the nature of the regulator and in a sense to enable a supra-regulator to be on top.
I am totally lost. I am sure that it is my fault. I have been trying to understand. We are not going to have judicial review where one seeks leave: why should one seek leave? My noble friend is putting, as I understood it, a form of general entitlement to appeal. I want to understand the noble Baroness’s answer, which was not a direct no or a direct yes. It was a mixture, which was wholly incomprehensible to me. It was, “Well, yes, but it depends on the circumstances”.
How can one deal with such an answer? I am trying to get to grips with the matter and I am prepared to give up the plea for judicial review if my noble friends want a generic appeal. I am not trying to stick to the ground that I have, but I want to understand what ground I am going to enter if I have to give up judicial review. If the noble Baroness cannot do it today, perhaps it can be done in consultation and we could have a written explanation of the circumstances in which the noble Baroness agrees with my noble friend. Then we could start.
It is never my intention to confuse the noble Lord, Lord Campbell of Alloway, and I apologise unreservedly if I did so by being unclear. As the noble Lord will know, I am always available to write to him or to sit down and discuss with him in greater detail. That is always unquestionably available as an option and it might be of some benefit in clarifying the point.
I was seeking to argue why we feel that a general right of appeal would be inappropriate. In the context of the financial penalties we believe that it is appropriate to enable people to go directly to appeal. On the specific point that the noble Lord, Lord Kingsland, raised, I feel that public censure is best left out. I apologise if I did not make that clear, but that is what I was seeking to do and it was probably by my reference back to the financial penalties appeal process that I failed to achieve it.
In some ways I wish that we had had one big discussion on all the groups because we might have been able to explore the issues more fully, but that is where we are. We think that we have got the balance right. As ever, I will reflect on everything that has been said, but noble Lords will know that as a general position we want to ensure that judicial review is available as it would be for a public body and not to constrain that. We think that there are difficulties and issues with creating a general right of appeal, but we have recognised it in the financial circumstances.
When the Minister is writing to my noble friend will she reflect on the underlying concern behind many of the contributions we have had in Committee? She has also introduced the wonderful phrase “littering the Bill”, which I want to consider, and a new concept of light-touch public censure.
What really lies behind the concern of many of your Lordships is the fact that we are dealing here with a regulator publicly censuring another regulator. That does not sound like the positive partnership structure which the Joint Committee recommended. We all want the regulators to work in partnership and to regulate the sector effectively, but the idea of the General Council of the Bar or the Master of the Faculties or the Chartered Institute of Patent Attorneys being censured publicly by the Legal Services Board for activities that it is carrying out as an approved regulator on a non-commercial basis leads me to ask the Minister to give some examples of where this formula is successful. I speak for all Members of the Joint Committee in saying that we cannot see that as part of a positive partnership, which, as we heard from Bridget Prentice, she wanted to promote.
I am happy to deal with the phrases that I use in trying to express myself—perhaps not as a lawyer. I spoke about a light touch and I think I also used the expression “a rap across the knuckles”. I was trying to point out that, even within a concept such as public censure, I could imagine circumstances where that would not lead to the kind of catastrophic consequences that the noble Lord, Lord Kingsland, raised in his example. I stand by that and I consider it to be appropriate. As regards littering the Bill, that is an expression I use. I am from Lancashire, so what do you expect? I was trying to indicate that if one looks across this legislation one can see examples of that.
I turn to the nub of what the noble Lord has said about the partnership between the two. My honourable friend Bridget Prentice, who is the Minister with responsibility for this Bill, rightly indicated, as I hope I have done, that the nature of the relationship between the supervisory regulator and the approved regulator is very important. They should work in concert; we expect them to develop this regulatory framework together. We have tried to set out the framework—whether I have been successful or not in doing so—to enable that to happen.
At the end of the day, the supervisory role is real. The body must be able to act if things have gone wrong. It is about regulation. Inevitably, through legislation we focus on the negative side of the equation because we are looking at what might go wrong and the circumstances that might arise. We do not know what they will be; as I have indicated, I trust that they might never happen, but they might. It is quite important that we are clear, for the benefit of the approved regulators and for the supervisory body, so that if those circumstances arise, powers are available to the supervisory regulator. I hope they work closely together and I hope the supervisory body never needs to use these powers. The purpose of the exercise is to set good regulation that will be acclaimed by the public, by the consumer and, I trust, by the profession.
The noble Baroness is so charming with her metaphors but it is interesting that she picks up the metaphor of the noble Lord, Lord Whitty, who wants the big stick to be available, although he hopes that it will never be used and the noble Baroness is using it in public to give people light raps across the knuckles.
If censure is proposed, will there be a right of appeal? The discussion has concerned whether the right of appeal should be the right of appeal that exists, without it being put into the Bill, to seek leave of the High Court to bring a judicial review, or whether there should be an express right of appeal on the face of the Bill. I know that that is a later amendment, but it must be discussed in this context.
My noble friend Lord Kingsland enlightened me when he pointed out that the right of appeal he has in mind is to the High Court, which would exercise it on judicial review principles. It has always been at the back of my mind—and probably at the front of the Minister’s—that the High Court will not want to substitute its view for that of the Legal Services Board; it will simply wish to steer the Legal Services Board back on to the right course in considering the right matters and being proportionate. I was looking for a light touch in the Bill, and the closest thing to it is in Clause 3(3)(a), which refers to:
“the principles under which regulatory activities should be transparent, accountable, proportionate, consistent and targeted only”—
the word “only” is important—
“at cases in which action is needed”.
It is exactly when one of the regulatory bodies feels that it is being unnecessarily or disproportionately targeted that a right of appeal will be healthy. I am inclined to think that it would be wise simply to build that right of appeal into the structure of the Bill, rather than this slightly difficult “dong-dong” position of knowing when one should apply for judicial review. I throw those out as thoughts, and hope that they are of assistance in leading us to the right answer.
I read out exactly what the noble and learned Lord read out in Clause 3(3). I agree with him that the board should operate on those principles. I have made the Government’s position clear: the Legal Services Board should make its decisions based on those principles of proportionality, transparency and so on, and there are opportunities for bodies to come forward with their views within the framework we have identified. On the amendment of the noble Lord, Lord Thomas of Gresford, 28 days would be available to make those representations on public censure. If the body felt that it had been treated in an unreasonable manner, or processes were not appropriately followed, they would have the remedy of judicial review available to them because the board is a public body.
To create a situation where every attempt by the Legal Services Board to use its powers would be open to an automatic right to go to the High Court is not the right way forward. It is more appropriate for bodies who feel that the board has genuinely treated them badly to apply to the courts for leave for judicial review. The courts would look at the circumstances and, I have no doubt, if appropriate, allow it. Financial penalties must be looked at in a distinctly separate way.
There is a straightforward difference between us. We have covered this appropriately. I am happy to talk about it further outside the committee, and to the noble Lord, Lord Campbell of Alloway, to explain that. To enable bodies to be treated properly and appropriately, however, is the right course of action. The safeguards are exactly as the noble and learned Lord, Lord Lyell, has said: the way in which the board is required to act ensures that it does so appropriately. I go back to my point in answer to the noble Lord, Lord Hunt, who is no longer in his place: it is ultimately a supervisory body that is able to take decisions, acting appropriately, in circumstances where it must.
I was not thinking of the big stick when I thought of the rap on the knuckles. I was trying to say that I hope that they do not use these powers. Ultimately, however, the function this regulator has been created to perform includes being able to act on our behalf if it needs to. That must be a part of the legislation.
The Minister has been absolutely clear about these amendments: she is against them for a variety of reasons, and has been patient in responding to extremely well targeted questions from a number of your Lordships. It will be for the Opposition to take a view about whether to bring this matter back on Report and, if we do, whether to vote on it. We regard this issue as being of considerable importance, and it is highly likely that this will not be the last time that the Minister has to respond to these amendments across the Dispatch Box. Meanwhile, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 35 [Public censure: procedure]:
[Amendment No. 57 not moved.]
Clause 35 agreed to.
Clause 36 [Financial penalties]:
[Amendments Nos. 58 to 60 not moved.]
moved Amendment No. 61:
61: Clause 36, page 17, line 38, at end insert—
“( ) that the approved regulator has failed to comply with a direction made under section 31, and”
The noble Lord said: I shall speak also to Amendment No. 62. These amendments relate to the board’s power to issue financial penalties to the approved regulators. Our preferred option is to remove the power to issue financial penalties from the Bill altogether. We believe that financial penalties are inappropriate mechanisms for dealing with public interest bodies. It is usual for direct regulators of services, particularly services provided on a commercial basis, to have the power to fine those who fail to comply with regulatory requirements; but it is extremely unusual for there to be a power to fine a body that is carrying out regulatory activities on a non-commercial basis. The Council for Healthcare Regulatory Excellence has no power to fine any professional body in the medical field, nor does the Financial Reporting Council have power to fine any accountancy body. Given that the Legal Services Board has extensive power to make directions and that those directions are enforceable, it is far from clear that any power to fine approved regulators is necessary. The Joint Committee drew attention to this point in its report and the Government, as I understand it, promised to reconsider the issue. Nevertheless, the power to fine remains in the Bill.
In the circumstances of legal services regulation, day-to-day responsibility for regulatory action will rest with the professional body’s regulatory arm. The representative side will not be able to control the way in which the regulatory arm operates; indeed, it would be a serious breach of the principle of independence if it were to seek to do so. But any fine would not, in reality, impact on the regulatory arm. Unless the fine were charged against the regulation side budget—which would presumably defeat the whole purpose of the fine since it would make it more difficult for the regulatory arm to put right whatever failing had led to the fine—it would, effectively, be borne by the professional body itself, and thus by its members. Members of the regulatory arm will not even be subject to any sanction from an electorate for having incurred the fine since they are all appointed under Nolan principles, rather than being elected. The consequence must be that the representative side, and hence its members, would bear the whole burden of the fine without being able to exert any effective influence over the failings that led to the fine. That simply cannot be right.
If the Government are not prepared to think again about the principle, which was so well aired in the course of the proceedings of the Joint Committee, we ask them to look as an alternative at the amendments we have tabled. The purpose of Amendment No. 61, on the assumption that these financial provisions remain in the Bill, is to provide some protection for professional bodies against the situation I have described. If the Legal Services Board could fine approved regulators only after they had failed to comply with a direction, the professional body would at least be put on notice of the risk of a fine. The professional bodies could ensure that the contracts with their regulatory arms required each member to do all that he or she could to ensure that any directions from the Legal Services Board were complied with. This would substantially reduce the risk of a professional body being fined for failings it could do absolutely nothing whatever about.
Amendment No. 62 is an attempt at a further safeguard by ensuring that the board would not impose financial penalties where lesser sanctions would suffice. It is designed to prevent what I would describe as a “capricious use” of the power to fine. There would inevitably be media pressure on regulators to flex their muscles by exercising their powers to fine at every opportunity, which is, in our view, poor regulatory practice. Good regulatory practice requires regulators to use the least heavy-handed sanction that will meet the regulatory need. Plainly it would be unacceptable to fine an approved regulator simply because the thresholds for doing so have been met. The power to fine should be properly exercised only when the Legal Services Board is satisfied that no lesser sanction would suffice.
The Government have accepted this principle in relation to the board’s power to intervene in the functions of approved regulators. If the board is to have the power to fine, then there is no apparent reason why it should not also be subject to that test. I beg to move.
I support the amendment. Although I shall listen with great interest to the views of the Minister, this power is undoubtedly draconian. It could be invoked if there is objective evidence of harm flowing from what is described in Clause 36(1)(a) as an “adverse impact” on the regulatory objectives of the approved regulator. It is very much an objective test whether or not there is harm. Nothing is imported into the clause to suggest that that harm might have been reasonably foreseeable, that the action taken was deliberate and reckless, or that there was any kind of mens rea involved; the only test is whether or not there was harm. If harm is considered in all the circumstances to have flowed from the approved regulator’s action then, at the discretion of the LSB, a fine may be imposed.
There has to be some sort of consideration of the morality of the clause. This is a powerful discretion to give in the absence of deliberation or awareness of the consequences. It may be argued by the Government that it is the duty of the approved regulator to give such consideration that adverse out-turns would not happen. I am bound to say, however, that it seems possible that with the very best of intentions the approved regulator could take a decision that had an effect that had not been anticipated. It would be wholly inappropriate to allow a discretion to fine the regulator in those circumstances. An altogether more gentle approach would be appropriate in second-guessing the sometimes difficult judgments that have to be made by approved regulators.
I hope the Minister will reflect on where we are. The Joint Select Committee, as my noble friend has mentioned, felt strongly that the Government should look again at the relationship between the supervising regulator and the approved regulator and look at the criteria for the use of each of the powers of the LSB. I thank my noble friend for tabling this particular amendment. I agree very much with what he and the noble Lord, Lord Maclennan of Rogart, have just said.
My colleagues and I on the Joint Select Committee were worried that this will be a recipe for conflict. The Government’s stated intention is that the Legal Services Board should act in partnership with the approved regulators, seeking to resolve differences by agreement. I hope that very few differences will ever arise. But all this structure, particularly the power of fining, is a bit over the top. I hope the Minister will respond to my noble friend in giving us some examples. I was struck by my noble friend’s examples of the Council for Healthcare Regulatory Excellence, the Financial Reporting Council and other bodies that have a supervisory role over other regulators, but do not have these sorts of draconian powers.
We in the Joint Select Committee said that of course the LSB should be allowed to intervene to take over the functions of an approved regulator if, and only if, there is clear evidence that serious damage might otherwise be caused to the regulatory objectives. We agreed with that. However, the exercise of all these powers by one regulator over another has no real precedent, and is, as I have said, a recipe for conflict. I hope that we might return to the notion of positive partnership and try to lead the Minister to make a few concessions here. The Government promised to look again at the whole question in response to the Joint Select Committee report. They have not moved yet, but I detect that they are beginning to second-guess themselves on whether or not they have yet got it right. I hope they will move.
The longer I stay in this Chamber, the more my anxiety mounts about where the opposition parties and others are attempting to take us. I am particularly amazed at the Liberal Democrats, who usually have a pretty good record on defending the rights of the consumer—sometimes better than the Government. I do not understand why those who agreed that they accepted the principle of the establishment of the Legal Services Board are now attempting to reduce it to being a complete paper tiger. Of course we want to get these things resolved by agreement and partnership. That is the ultimate aim. But—
It is wrong for the noble Lord, Lord Whitty, to seek to make this a party political matter. I am not here to defend the Liberal Democrats or the Conservatives. I am here to express the unanimous view of the Joint Select Committee, which included several members of the noble Lord’s own party. I urge him not to go down that route.
I was simply reflecting on the fact that consumers can usually expect some degree of support within this House and within the political process but that it seems lamentably absent today on the Liberal Democrat Benches. However, I will withdraw that statement if they can prove me wrong.
The issue here is whether we are to establish and reach a partnership—that is a partnership in a sense by negotiation. To negotiate you have to have some powers, otherwise nobody will take you seriously. The Legal Services Board must have substantial powers. As I understood the noble Lord, Lord Hunt, just now, he seemed to say that in terms of sanctions you should move straight from a situation where there is some sort of relatively mild public censure to one where there is takeover, with no intervening sanction. Surely that cannot be what he is advocating—either in terms of this amendment, in relation to restricting the ability to fine to where there is a direction being breached, or in terms of the next group of amendments, which would seek to delete the power to fine entirely, which seems to be where the noble Lord was a few minutes ago. The noble Lord, Lord Kingsland, said explicitly that that was his ultimate and preferred aim.
Even under the present circumstances there is an ability to fine—circumstances which are well short of directions. The Legal Services Complaints Commissioner has relatively recently fined the Law Society for a persistent failure to deal with complaints handling sensibly. In other words, those that will be front-line approved regulators have some form in this respect. The fine needs to be available when there is a failure to conduct themselves effectively. A range of sanctions is provided within this legislation, as it is in respect of many regulators. Moving from a relatively mild public admonishment—a tap on the wrist—to a complete takeover of the role of the front-line regulator if the breach was persisted in, does not seem to be sensible regulation and would be in breach of many of the principles of better regulation that we have seen in other fields in recent years.
This idea that we should remove, or seriously restrict, the ability to fine a priori would be almost to ride a coach and horses through the intent of the Bill.
I am grateful to the noble Lord for giving way and I will certainly not rise to his fly by seeking to offer him a party political answer. But I must insist that the suggestion that what is an approved regulator, which in many cases is operating in a quasi-judicial role, should be fined in order to carry out that role according to the views of the court of appeal—in this case the Legal Services Board—seems to be preposterous. It is not acting in the interests of the consumer to suggest that a fine will strengthen the consumer’s interest. It is something that is foreign to our system of appeal on these matters. The continuing attempt on the part of the noble Lord, Lord Whitty, to suggest that there is an inevitable opposition between lawyers and consumers is beside the point. It is a knee-jerk reaction which seems to be far removed from the experience of those who have sought to look after consumers’ interests. I remind the noble Lord that I served for more than five years in defence of the consumer interest as a Minister in the Government of the party to which he belongs.
I think I am reflecting the views of consumers of legal services—not all of them, not necessarily the majority, but a significant proportion of people who have some complaints about the legal services that are available to them. If the noble Lord has different statistics and research, no doubt he will share them with us.
My objective in intervening in these debates is to ensure that the voice of the consumer is heard and that the structure that we put in place acts in the best interests of the legal profession as well. Ultimately, the legal profession depends on the confidence, trust and good experience of its clients and of society as a whole. At the moment, I am afraid that it does not have that confidence and trust to the degree that any of us would like. I hope that the Bill will help to achieve that. I believe that if the LSB has theoretical strong powers, it will reach an accommodation with the front-line regulators that will improve the profession’s performance, which its recent history suggests it needs. That, surely, is the objective of the Bill.
The role of potential fines, as with any regulator, is important. All regulators use very sparingly the power to fine. Ultimately, it is not the Law Society, the front-line regulators or even the members of the profession who bear the cost of that fine but the consumer. That applies whether we are talking about the gas, electricity or any other market. Fines feed their way through to the consumer. I do not want the prospect of anybody in the system operating a policy of imposing reckless fines on anything that moves. That is the last thing we want. But we want a strong Legal Services Board which can inculcate in the front-line regulators greater respect for the position of consumers and greater concern for their interests. I hope that nobody in the Committee disagrees with those objectives.
I was not going to speak, but I find it very difficult not to say something. The noble Lord, Lord Whitty, does not like lawyers, the Bar or the Bar Council. He has no use for approved regulators—he thinks they are all no use. He wants to destroy the authority of self-regulation in our profession because he does not like it. You have only to listen to him. One way he thinks he will do it is by imposing fines. He wants a strong board. He has given no justification yet for imposing a fine because there is no board and nobody has given a direction.
This approach is so destructive that the amendment has to be supported and, if necessary, we have to leave it that we are in total disagreement. Self-regulation is in the interests of consumers and has been for years. The ombudsman has given the Bar Council a clean bill of health. There is absolutely no need for the noble Lord’s suggestions and approach. I support the amendment. It would be quite wrong to try to improve the situation and qualify a power to impose any fine at all. There is no justification for it whatever.
I feel compelled to join this conversation. It is important to describe the power and the approach we have taken. I completely accept that it is important for the front-line regulators and the supervisory regulator to have a strong relationship of mutual respect through working closely together. But I would not go as far as the noble Lord, Lord Hunt of Wirral, in describing them as one regulator to another, putting them on the same pegging. There is a difference between the supervisor and those being supervised.
I agree that differences should be resolved by agreement where possible. My noble friend Lord Whitty, the noble Lords, Lord Campbell of Alloway, Lord Maclennan of Rogart, Lord Kingsland, and all Members of the Committee who have spoken in this debate would agree with that. We also know that that may happen in most circumstances but not in all. Whereas the noble Lord, Lord Hunt of Wirral, was concerned that we have put a lot of structure in the Bill, in my view, the clearer we are about what is available to the Legal Services Board, the better for all concerned. Clarity about the powers is important; then everyone knows what is available and what could happen. That is fair and proper.
Committee Members were concerned that this was an unusual power, but they will know that the Financial Services Authority and Ofgem also have that power and, as my noble friend Lord Whitty said, the Legal Services Complaints Commissioner currently has the power. Much was made of the Council for Healthcare Regulatory Excellence, so I took the opportunity to look up the functions of CHRE, which are very different from the type of body that we are describing, so the comparison does not work effectively. The CHRE promotes the interests of patients and best practice, reports annually to Parliament, promotes co-operation and consistency, develops principles of good regulation and advises Ministers. They are very important objectives, but different from the case before us. Therefore, my first proposition is that the power to fine is available in a regulatory framework and should be clearly available in these particular circumstances.
Having said that, I understand to a degree the concerns raised about how that power is exercised. We have talked a lot already today and yesterday about Clause 3(3) and both the noble and learned Lord, Lord Lyell, and I recorded that subsection in Hansard so I will desist from repeating it. But the noble Lord, Lord Kingsland, seeks to go further by constraining the circumstances in which that power could be exercised, specifically in Amendment No. 61. To remind ourselves of that, the noble Lord proposes that the power should be restricted to where the LSB has first issued a direction to an approved regulator under Clause 31 and,
“the approved regulator has failed to comply with”,
I understand the intention to ensure that there is a clear indication of what the Legal Services Board sees as a failure. I also understand that the need for assurance is particularly relevant where the approved regulator may, as the noble Lord said in his opening remarks, have separated the regulatory and representative functions we require under Clause 29, and as such, does not have direct control over the exercise of regulatory functions by its regulatory arm. I have some sympathy with the Committee about that.
However, I remain concerned that where the regulators do have control over matters it might be appropriate for the LSB to be able to fine without first issuing directions. I am making a distinction in my mind between those matters over which the regulator has direct control and those over which it does not. In particular, one might say that, as in Clause 29, the proper separation of the functions of regulatory and representative functions and the proper resourcing of regulatory arms are clearly a direct responsibility of the approved regulator. That is where it might be appropriate to move to a fine if that is the right thing to do.
In Amendment No. 62 the noble Lord, Lord Kingsland, is trying to further restrict the use of the power to fine to situations in which the LSB is satisfied that the matter cannot be adequately addressed by use of any of the other powers available to it—such as the setting of performance targets, issuing a direction or a statement of public censure, if I dare mention that last point. I understand what the noble Lord seeks to achieve. Indeed, it is best practice for a regulator to be satisfied that any sanction that it seeks to apply is appropriate. Again, Clause 3 provides for that and I would expect the board to take full account of it. But I am not persuaded to go as far as the noble Lord wishes me to go under Amendment No. 62, by putting such a responsibility in the Bill, as I do not want to fetter the LSB to exercise effective oversight regulation as completely as the amendment would do. While I accept that it is a condition in respect of an intervention direction and deauthorisation, these are more serious and intrusive powers. Therefore, we do not consider the same threshold should apply to the power to fine.
But I should like to look at these points again and, in particular, the points that the noble Lord, Lord Kingsland, raised under Amendment No. 61 in the manner that I described—which is about the ability of the regulator to have direct control over particular issues and whether, when that is not available, those circumstances dictate that a direction might be appropriate first. So if the noble Lord agrees I shall take away Amendments Nos. 61 and 62. I have made it clear that I do not want to go as far as Amendment No. 62 at this point, but I am interested in what the noble Lord seeks to do, at least in part, under Amendment No. 61, without taking away the power to fine which is important and already available in other forms of regulatory regime. We want to have that capacity available but we may need to think a little further to be clear about situations in which there is no direct control. I hope that noble Lords will accept my willingness to do that and to come back with my further thoughts on that.
That is an encouraging response from the Minister, but would she not agree that the power to impose financial penalties—which, as the noble Lord, Lord Whitty, said, will ultimately fall on the consumer—should be the last resort? The amendment proposed by the noble Lord, Lord Kingsland, would make it the last resort, only to be used if the other remedies that the Government have proposed for powers for the LSB have failed. I encourage the Minister to develop her thinking along those lines.
I always like to be encouraged to develop my thinking. The point that comes to my mind is that “last resort” is difficult to define and that there may be circumstances in which, because of how the regulator has behaved in other areas in which directions have been issued, and so on, the supervisory regulator decides that a fine is actually the most appropriate thing to give. I cannot think of what those circumstances might be and I am not going to give false examples, because it might suggest that I expect that to happen when I hope that it will not. But there could be such circumstances—and I am mindful of not wanting to prevent the LSB having a range of powers, bearing in mind how we would expect the board to use them under Clause 3.
I think that I said that the Legal Services Commissioners have the power to fine—I did not say that they had used that power. I was describing the fact that the Financial Services Authority, Ofgem and the Legal Service Commissioners have the power to fine. One issue that arose at the beginning of our deliberations on this group was whether this was an appropriate thing to have at all. The noble Lord, Lord Maclennan of Rogart, raised a general query about whether it was immoral to have something of this nature. I wanted to respond to him by demonstrating that it exists in this area and other areas of regulatory work. That is what I sought to do—I did not say that it had been used, because I do not know. I can find out, but I do not know. That is a different point.
I am grateful to the noble Lord and I am sure that he is right. I had hoped that I had finished the point I was making to him about my willingness to look at the issue of when the approved regulator does not have direct control. I will, of course, ponder on the other points that have been raised. I have talked about good practice in the way that regulators work and linked that again to Clause 3 in terms of the way that we would expect them to operate. I am not at this stage prepared to go that step further and say that a fine cannot be imposed unless all other measures have been tried—not least because the question arises as to whether all those other measures would be taken in the context of a particular complaint, or whether a series of issues had arisen for a regulator and a series of other methods had been tried on those different issues. Might the regulator not say at that point, “Actually, yet another thing has occurred. We wish to move directly to a fine”? That would be my difficulty with the use of last resort, because there could be a question of last resort on one issue or last resort on a series of failures.
In terms of general good practice, Clause 3(3) moves us in the right direction without setting that in stone, given that other circumstances might occur. However, I have said that I will look at Amendment No. 61 again and I hope that that is of some help to the Committee.
The noble Lord is right. I now recall that it did relate to complaints procedures. We have recognised in the Bill that the complaints system is difficult for solicitors. Perhaps they did not get the matter right, but it would be a major improvement to have that responsibility lifted from their shoulders and for it to be carried out more publicly. I am very grateful that the noble Baroness said that she will think again about this matter. We all need again to think carefully about it. Publicly fining and publicly censuring are very strong powers. To fine a regulatory body would be a very tough step. Although the noble Baroness is right that one can see oblique references to light-touch regulation in Clause 3(3), that is the only place where they are made; it does not actually state “light touch”, but simply defines circumstances in which the board may do things, which if it did not do, it would be unable to take action at all. The board would be outwith its powers—so it is not necessarily light touch.
I am grateful to the Minister, because she is thinking carefully. I would make one more general point to the noble Lord, Lord Whitty. We are all consumers. I have already declared an interest as a practising member of the Bar. We are also users of legal services and we fully support the desire that our profession should provide the most excellent service possible and should be carefully and properly regulated. I do not think that there is any difference here. There is not a battle. We just have to get it right.
Although I am disappointed at the noble Baroness’s unwillingness to expunge the fine provisions from the Bill, I am heartened by her initial response to our Amendments Nos. 61 and 62. As she is to consider these amendments between now and Report stage, I remind her most respectfully that we are not talking here about the regulation of a private body, but the regulation by one statutory body of another statutory body. The power to fine is normally used against a person in the private sector who has either made a large sum of money in inappropriate circumstances or whose standards of operation fall well below those standards required by the legal framework in which that person operates. Here we have a number of statutory bodies, called approved regulators, all of which are acting in the public interest on a non-profit basis. The concept of fines, if not inappropriate, should at least be dealt with on a very different basis from those normally used by statutory regulators regulating the private sector.
I am most grateful to the noble Baroness for her response. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 62 not moved.]
On Question, Whether Clause 36 shall stand part of the Bill?
I, too, am grateful to the Minister for her response to the last amendment. However, I return to Clause 36 itself, on financial penalties. Although the Minister has moved, one further small step needs to be taken to meet, I believe, with the approval of the All-Party Select Committee. The step involves trying to visualise the circumstances in which these financial penalties will be levied by one regulator against another. The noble Lord, Lord Whitty, prompts me to put the record straight. He gave the example of the Law Society being fined by the Legal Services Complaints Commissioner because she was dissatisfied with the plan that the Law Society had prepared for handling complaints. Once again, I declare my interest as a member of the Law Society and a practising solicitor.
The Law Society had delegated responsibility for the plan to its independent consumer complaints board. Indeed, on some of the issues between the Legal Services Complaints Commissioner and the consumer complaints board, the Law Society agreed with the commissioner. Nevertheless, because the society had delegated control of complaints-handling to the independent body, it was unable to ensure that the plan met the Legal Services Complaints Commissioner’s requirements. Thus, the Law Society was fined for matters it could not control. I had to put the record straight in light of what the noble Lord said.
The approach of the Joint Select Committee keeps returning to the point about partnership. We have to ask ourselves, as my noble friend Lord Kingsland did in the debate on the last amendment: who will pay this fine? Undoubtedly, as my noble and learned friend has just pointed out, it will be consumers of legal services who pay the fine. All those who are regulated are also consumers of those legal services. One has to ask: where are the precedents for good, smooth working between regulators which allow a supervisory regulator to impose a financial penalty on an approved regulator in the circumstances set out in the Bill? I hope that the noble Baroness will not only read again the joint select committee report—which I know she takes home with her every night in order to consider all these amendments—but reflect further. Are we setting up the right structure? We want to get away from this confrontation to reach unanimity on the context in which we are going to put the public and consumer interest right at the heart of this Bill.
The regulator and the supervisory regulator may both believe that they are acting in the public interest and come to contrary views. The problem arises when one body fines another body such a substantial amount that it eventually falls on the consumer, as the noble Lord, Lord Whitty, said. That may not be a very happy situation, which is why I suggested when we were discussing the previous amendment that the fining power—I agree that the regulatory body must have some teeth—should be seen as a matter of last resort. I shall not develop the matter further. I shall wait to hear what the Minister thinks after reading, bi-nightly, the report.
I thank the noble Lord. I was saying sotto voce that I was reading the report every other night. I think that I am taking three Bills through your Lordships' House, so it is probably every third night that I get round to reading it.
I understand and completely accept the principle behind wanting the supervisory regulator and the approved regulator to work as closely together as possible. I have perhaps greater faith than noble Lords in their ability to develop an appropriate working relationship to provide the right kind of regulatory approach that will help support the objectives behind the legislation. I hope that we will be able to achieve that; I am confident that we will. I am also hopeful that the powers invested in the Legal Services Board will not be used. However, those powers need to exist because we are talking about regulation in the interests of the consumer, the public or the profession—one can argue which one. Parliament’s purpose in looking at this matter is to agree that regulation is appropriate. I was pleased to hear the noble Lord, Lord Thomas of Gresford, say that the body needs to have teeth. Teeth are important, but they should be understood and used appropriately. I gave an example to illustrate why I do not want to constrain the body in the way that the noble Lord has just mentioned, but I have also volunteered to take away for consideration Amendment No. 61. We will have further opportunities in your Lordships' House and beyond to discuss it.
Clause 36 agreed to.
Clause 37 agreed to.
Clause 38 [Appeals against financial penalties]:
moved Amendment No. 63:
63: Clause 38 , page 19, line 24, at end insert—
“( ) that the imposition of the penalty is unlawful on any ground that would give rise to a claim for judicial review.”
The noble Lord said: As I indicated at an earlier stage of our discussions, the lack of a statutory right of appeal against the board’s interventions in this part of the Bill is a major problem. Here, in respect of the power to fine, and exceptionally, a right of statutory review is granted in the Bill; but it appears to have been given rather grudgingly. As drafted, the right of appeal available to an approved regulator against a penalty under Clause 38 remains very limited. Provision is made by Clause 38(2) for an approved regulator to appeal to the High Court within 42 days to quash a penalty or otherwise on the grounds that its imposition,
“was not within the power of the Board under section 36”.
This statutory review is combined with Clause 38(7), which provides:
“Except as provided by this section, the validity of a penalty is not to be questioned by any legal proceedings whatever”.
Apart from any other defect, this ouster clause is of questionable compatibility with the human rights convention. Is it really the case that an approved regulator or licensed body that sought judicial review of a penalty after the expiry of 42 days, but within three months, would be held to be excluded from doing so? And would the grounds for statutory review of the penalty include any grounds on which judicial review could otherwise be sought?
We have sought in Amendment No. 63 to include grounds for judicial review as one of the grounds for appeal under Clause 38(2), making it absolutely clear that all the remedies that would have been available under judicial review will be available under statutory review. Amendment No. 64, which relates to Clause 38(7), seeks to remove from the face of the Bill the ouster clause—that is, the clause which says,
“Except as provided by this section, the validity of a penalty is not to be questioned by any legal proceedings whatever”.
I beg to move.
We support these amendments. It is clear that Clause 38(7) is an ouster clause. I agree with the noble Lord, Lord Kingsland, that it is of doubtful validity in the light of the Human Rights Act. I hope that the Minister will look at that.
The statutory right of appeal is, moreover, limited. You can appeal on the basis that the decision was ultra vires; that the requirements of Section 37 have not been complied with; and that it is unreasonable—but only in the amount of fine or the time in which it is payable. What is left out is a right of appeal on the grounds that it was unreasonable to impose the penalty in the first place. It is an extremely important omission. It is not covered. I am sorry if the Minister missed what I was saying—I think she did. The unreasonableness of the financial penalty is confined to amount or time to pay, not its imposition in the first place. It seems to be a gap. It ought to be open to a regulatory body to go to the court and say, “We do not care about the amount or how long there is to pay it; it should never have been imposed at all. It should never have been imposed at all. It is an unreasonable decision”. That is something that must be addressed.
We have already had some discussion about the rationale behind the approach we have taken, so I will resist the temptation to go over it extensively. Suffice to say, we consider that the financial penalty warranted a specific reference and ability for statutory right of appeal in the Bill. We believe that that is also consistent with precedents in other regulatory areas.
We are sure that, with this provision, the court will be in no doubt that the amount of the penalty may be questioned. That could apply even in cases where, although the amount is not so manifestly disproportionate that it could not be the act of a reasonable regulator, it may none the less be too high. The alternative would be to leave approved regulators to a remedy in judicial review. In that case it would still be possible to challenge the imposition of a penalty, and potentially even the amount. Yet, as noble Lords will know, for a challenge on the latter to succeed, it is likely that the amount would have to be more conspicuously unreasonable. And, of course, all challenges would be subject to permission. It is important to lay out those differences on the face of the Bill.
Apart from those differences, the grounds on which an appeal against a fine may be brought are already akin to the grounds for judicial review. If the board exceeds its powers, fails to follow proper procedure or acts unreasonably in imposing a penalty, it may be challenged under Clause 38. I think that goes some way to answering the point raised by the noble Lord, Lord Thomas of Gresford.
The noble Lord, Lord Kingsland, seeks to add a further ground incorporating any ground that would find a claim in judicial review. I would argue that that is not necessary because it duplicates grounds that already exist as part of the existing appeals process which has been set out.
I turn to the second element of the amendment. In this clause we are seeking to avoid any duplication or confusion of procedures. Subsection (7), the ouster clause, sensibly pre-empts the possibility of a parallel challenge being brought by way of judicial review proceedings. It would not do to create a situation where two challenges could be brought on the same decision on substantially the same grounds. I note that Clause 38(7) does not prevent the case proceeding to the Court of Appeal in the event that that is appropriate. The provision exists not to deny rights but to ensure that we are clear about certainty and expediency and to ensure that there is one route through and not two parallel routes. There is case law in the European Court of Human Rights on which I am happy to write to noble Lords, to explain it. But that is the purpose of the provision. It is intended not to deny rights but to say that there is one way through. I hope that the noble Lord will reflect on that explanation.
I am most grateful to the noble Baroness for her reply. I am, of course, aware that, where there is a statutory appeal system which gives the appellant all the opportunities that he would have had had he alternatively applied for judicial review, in many circumstances the effect would be to oust judicial review; but that is quite different from the use of an ouster clause, itself. Although judicial review is often denied in those circumstances, the administrative court would still wish to have the option to ensure that the remedies provided by the statutory system adequately covered the remedies available in judicial review.
That is why the importance of Amendment No. 64 to some degree hinges on the Government’s response to Amendment No. 63. As long as the noble Baroness can confidently assure me that all the remedies that would have been available to somebody who had applied for judicial review as an alternative would be available under the statutory review scheme in Clause 38, I can feel more relaxed about Amendment No. 64. I think that that is what the noble Baroness said to me in response. I think she said that, because that is the case, it is not necessary to put it on the face of the Bill.
I was saying that because this is about financial penalties, we have ensured that the procedure covers situations where the amount being challenged may not be considered extremely high or very disproportionate. It can still be challenged, which would be an additional ground; but all other grounds remain.
All I really want to know is that, in the system under Clause 38 which is constrained by a 42-day limitation period, the approved regulator can rely on all the remedies that he would have been able to rely on had he made an application for judicial review. That is the question.
My notes say that the answer to that question is yes. If I discover in the next minute that that is not accurate, then my notes will have been wrong and I shall apologise to the Committee. However, I understand it to mean that the noble Lord does not need his amendment because judicial review applies; we have simply inserted additional areas because of the nature of the situation.
I am most grateful to the noble Baroness. I understand that, if what she has just told the Committee turns out not to be as accurate as she would have wished, she will come back to your Lordships. In those circumstances, I happily beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 64 not moved.]
Clause 38 agreed to.
65: After Clause 38, insert the following new Clause—
“Approved regulators: judicial review
Nothing shall restrict the right of an approved regulator to bring judicial review proceedings in respect of any order, direction or statement of public censure made by the Board under sections 30 to 35.”
The noble Lord said: I hope that the Minister will be able to say that this clause is completely unnecessary. It should be possible for her to say that. I simply included the amendment to extract that admission, so there should be no quibbling about it.
My motivation for placing the proposed new clause after Clause 38 was that I, too, was very concerned about the ouster provision in Clause 38(7). I suppose that I should amend the wording in my amendment to read “sections 30 to 38” rather than “sections 30 to 35” but, with the amendment as it stands, I just want to make the following point.
In this part of the Bill, powers of discipline are given to the LSB. It can impose performance targets and monitoring, but the Bill requires only that the board must consider any representations that are duly made before taking action. When it comes to the section concerning directions, there is a safeguard in Clause 33, but it is a very poor one: the board has to make an application to the High Court when an approved regulator is said to have complied with the direction that is made, but nothing there gives the approved regulator any chance of challenging that direction in court.
We have already had a debate about censure and, as I understood it, the Minister conceded that judicial review was fully available.
We then come to the subject of penalties, which I should like to put into some context. These penalties, or methods of discipline, will be used in highly controversial situations. It was highly controversial of the ombudsman to impose a large fine on the Law Society in the way that we recently discussed, and it will be highly controversial for the LSB to start giving directions and censuring the Law Society, the Bar Council and any other approved regulatory body, and even more controversial to fine them. We are not dealing with situations where everyone gets along well and is happy but those where recourse to the courts becomes necessary. No one wants that to happen; everyone hopes that things can be sorted out by agreement.
As I said, I shall be content if the Minister says that the amendment is completely unnecessary. The noble Lord, Lord Whitty, is not in his place, which is a pity. I shall reserve what I have to say about his stance until he is here. In the mean time, I look for the ranks of lay consumers behind the Government eagerly pressing this Bill on the public. The noble Lord, Lord Whitty, is a lone voice, as no one else seems to be bothered to turn up. I beg to move.
I hope that the noble Lord will say what he intended to say about my noble friend Lord Whitty when he is here so that my noble friend can respond. Over the years, I have always seen those on the Liberal Democrat Benches as arguing vociferously for the consumer interest. Indeed, many leading Liberal Democrat figures have been involved in the consumer movement.
That is the case. When we get to the section on alternative structures, we will be arguing from the point of view of the high-street lawyer, who provides a very necessary service to the consumer but whose interests the Government seem to ignore. As the Minister pointed out, there is absolutely no way that we on these Benches lack a concern for the consumer.
I was not suggesting that the noble Lord was anything other than concerned. I merely pointed out that my noble friend was surely not a lone voice, because we are all interested in the voice of the consumer. The tradition of the noble Lord’s party on this matter should be well remembered as we go through the Bill.
I shall deal with the amendment briefly in exactly the way that the noble Lord asked me to do. As I said when I spoke to Amendments Nos. 52 and 56, the board’s actions under Clauses 30 to 35 will be subject to judicial review, and there is no need to prescribe further statutory assurances to that effect.
In the light of that response, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 39 agreed to.
Clause 40 [Intervention directions]:
[Amendments Nos. 66 to 68 not moved.]
[Amendment No. 68A had been withdrawn from the Marshalled List.]
Clause 40 agreed to.
Clauses 41 to 43 agreed to.
Schedule 8 agreed to.
Clause 44 [Cancellation of designation as approved regulator]:
[Amendments Nos. 69 to 74 had been withdrawn from the Marshalled List.]
[Amendments Nos. 75 to 77 not moved.]
[Amendments Nos. 78 to 105 had been withdrawn from the Marshalled List.]
Clause 44 agreed to.
Schedule 9 agreed to.
Clause 45 agreed to.
Clause 46 [The Board’s power to recommend orders made under section 45]:
[Amendment No. 105A not moved.]
Clause 46 agreed to.
Clause 47 agreed to.
Clause 48 [The Board’s policy statements]:
moved Amendment No. 105B:
105B: Clause 48, page 26, line 23, at end insert—
“( ) Any statement of policy issued by the Board must—
(a) respect the principle that primary responsibility for regulation rests with the approved regulators; (b) ensure that the Board exercises its powers only where it considers that the action or inaction of an approved regulator is not an approach which the approved regulator could reasonably have taken; (c) provide that, save where there is an imminent risk of significant damage to the regulatory objectives, the Board will seek to resolve matters informally with the approved regulator before seeking its powers.”
The noble Lord said: The purpose of this amendment is to reinforce Amendment No. 33A, which was proposed yesterday. It is intended to make it clear that the Legal Services Board should act only as the supervisor of the approved regulators, rather than itself carrying out the primary role in the regulation of legal services. The amendment repeats many of the arguments from that lengthy discussion, and they do not all need to be repeated today. It was encouraging to hear the Minister confirm yesterday that she agrees with the principle behind these amendments.
This particular amendment relates to statements of policy issued by the board. It would require any statements of policy to accept that primary regulatory responsibility lies with the approved regulators and not with the board. As well as the primacy of the approved regulators, the amendment again reinforces our wish for the supervisory approach, ensuring that the board uses its powers only when absolutely necessary and that its first action must be to seek an informal resolution of the problem before exercising its statutory powers. These are important principles to establish and we were heartened to hear that the Government were pleased with them; but they must be stated explicitly so that it is clear from the Bill that that is the Government’s intention. I beg to move.
I agree with my noble friend because although the Minister has given us a great deal of comfortable and comforting words it is still a fact that there is nothing in the Bill to indicate that the Legal Services Board is intended to act as a supervisory regulator, leaving the day-to-day responsibility for regulation with the approved regulators and exercising its powers only where they are clearly failing. I must explain our concerns to the Minister in these terms: that the Bill is cast in a way that would enable the Legal Services Board to set out detailed templates for the way in which it considers approved regulators should discharge their functions, in effect to micromanage them; exactly the opposite of what the Minister says she would like.
It is perfectly possible under the Bill as presently set out for the Legal Services Board to substitute the board’s view for the approved regulators even where the approved regulator’s approach is plainly within the range of reasonable decisions. We are all agreed that it would be damaging if the Legal Services Board acted in that way and as we noted in the Joint Committee the cost estimates are based on the assumption that the Legal Services Board will act as a light touch regulator, so there we are.
Why does not the Bill reflect the Minister’s words and in particular the policy of the lead Minister, Bridget Prentice? That is why I believe my noble friend’s amendment is so important and I hope that the Minister will continue that movement, accepting the premise on which we are all agreed and trying to make sure that it is reflected in the Bill’s terms.
Perhaps I may explain that it is the sunset uplands we are seeking the Minister to move gently along. In many ways, if the Minister does not change the Bill, I do not see how any approved regulator will be able to attract staff and carry out the services as the noble Baroness would like if it is going to be subjected to such a detailed review. There is no cliff: I reassure the Minister.
That presupposes that the noble Lord is in charge of whether there is a cliff for me. I am not sure that reading that I have continued to move is necessarily the way to enhance my career, sunny uplands or not, from the noble Lord’s point of view. I should begin by saying that of course I have committed to look at all the issues again, but I wanted to place on the record—it is important that we reflect on the matter—why we think we have captured this but with the proviso that I already mentioned.
When we discussed Amendment No. 33, as the noble Lords, Lord Kingsland and Lord Hunt, mentioned, we said that the board needs to work in partnership with those it regulates. The Government’s stated policy is that the responsibility for day-to-day regulation should rest with the approved regulators. It is one of the key benefits of what has been described as a B+ model—that the experience and knowledge of approved regulators will be preserved within the new framework—and one of the reasons we agreed was Sir David’s recommendation that that was the best way to reform the legal service.
For that model to work, we need a strong and independent oversight regulator that does not second guess and micromanage those approved regulators that are performing their functions well. We believe that the Bill as drafted does establish the Legal Services Board as a proportionate regulator. We have talked a number of times today, and indeed yesterday, about the statutory duty in Clause 3 to ensure that the board has regard to better-regulation principles, including that the activities should be proportionate and targeted only at cases where action is needed, and be accountable to Parliament for how it exercises its functions. Through Clause 48 the board must issue policy statements about how it will use its powers; for example, the power to issue directions. Any policy statement made under the provision can be brought into force only after a draft has been published and the board has considered representations made to it about that draft.
We think that that provision is important as a way of ensuring clarity and transparency about how the board will exercise its functions and to give approved regulators—I return to the point about working collaboratively—the opportunity to inform any policy. Paragraph (b) of the amendment limits the circumstances in which the board can take action where the approved regulator is acting or refusing to act unreasonably. It is a high hurdle, which would make it difficult for the board to function as effectively as we would like and to exercise its powers in circumstances where the regulator is failing. There may be circumstances where a regulator is acting in a way that cannot be said to be a way in which a reasonable regulator would act, but there is an adverse effect on the objectives that should be addressed.
In this case, it is right for the board to take action, so I would argue that the existing thresholds are the right ones and we do not need to duplicate them in Clause 48. It is to be expected that the board will be in regular communication with the approved regulators in its role as oversight regulator; indeed, it is likely that policy statements under Clause 48 will be the appropriate medium where the board sets out its approach and that relationship more formally, similar to the way in which the Financial Services Authority operates. It uses those statements to clarify its role in relation to the firms that it regulates.
I hope that that gives a greater sense and supports what the noble Lords, Lord Kingsland and Lord Hunt, said about not micromanaging and the relationship that needs to exist. I have already indicated that I will reflect whether we have that right in the Bill as it stands but it is our intention to have got it right in the way that the noble Lords would wish.
I thank the Minister for her words. However, I am slightly concerned by her analogy with the Financial Services Authority because Sir David Clementi said that the Legal Services Board should not in any way reflect the structure of that body. Perhaps I can encapsulate my argument in this way. It is all well and good for the Minister to say what she has just said and for the Government to say what they said in their response to the Joint Committee report, but when the Legal Services Board is established it will not look to those words. It will not look to the Government’s response or to the speech that the Minister has just made; it will look to the words of the statute, as of course it must. Accordingly, if we want the Legal Services Board to act as a supervisory regulator rather than as the lead regulator, it is so important to introduce language to the Bill that makes that intention clear.
I welcome the fact that the Minister has said she is going to look at all this. If she does that and does not come forward with the words proposed by my noble friend—I leave him to respond to the amendment—I hope she comes forward with some words that would put into the Bill exactly what she has just said.
I was not seeking to require the Legal Services Board to look at my words for how it should operate and act, but to interpret the statute in plain English for how we believe the board should operate. That is the critical distinction. In moving his amendment, the noble Lord, Lord Kingsland, is saying to me, “You have explained what you wish to achieve”—there is nothing between any of us on that—“but will you please look again at whether that is what you achieve in the Bill?”. My view is that we may have done that, but the noble Lord’s view is that we may not have done that. We need to consider that. I am not asking anyone to rely on my words to interpret the function; people should go to the statute.
I am grateful to the noble Baroness for her reply to the debate, in which I did not participate. Some of what I wanted to raise might have been better raised on the Question whether the clause stand part. The provisions of Clause 48 impose a mandatory duty on the board to issue statements of policy in seven particular respects. That could create a whole apparatus of guidance that goes far beyond the exercise of discretion to intervene where there is a perceived weakness in the existing regulatory provision. It appears that the board is being invited to do what the noble Baroness herself is clearly and sensibly reluctant to do, which is to spell out the circumstances in which these various powers may be exercised. If that happens, arguments will be made by the regulator about whether the supervision by the Legal Services Board gave no indication about the circumstances that arose in the policy statement.
In itself, that is suggestive of a very wide-ranging and detailed role, which I suspect is not necessary. Clearly, it is sensible for the supervisory board to have an interchange of ideas and considerations with the appointed regulators, but this is much more. This is almost the statute book being issued by the supervisory board—by the Legal Services Board. The power to issue not just simple guidance when the Legal Services Board considers it necessary, but a duty to issue statements of policy right across the board in this way, is a very heavy burden indeed. I hesitate to reuse the word that I used, which caused some eyebrows to be raised in an earlier debate—incubus—but that is how it strikes me.
The motivation behind the amendment seems to me quite a helpful indication that these policy statements should not have that encyclopaedic nature; they should not necessarily be regarded as all-encompassing. They are there as an aid to the Legal Services Board and are not intended to be used, save in the very limited way that it thinks is appropriate.
Not for a long time. I have been too busy reading the Select Committee reports to have time to read Edgar Allan Poe at the moment, but now that the noble Lord has reminded me, that is what I shall do.
The policy statements set out in the clause relate back to the powers of the board. We laid them out because we believe it is right and proper that the regulators should know the policy of the supervisory board for the areas where it has clear powers. They are not meant to be detailed, over dramatic policy statements, but it is important that people know the direction and the way in which we propose to tackle and to handle these issues. That is how I see them.
It is worth reminding the Committee that although, mutatis mutandis, I accepted things in principle yesterday, I have been very clear about the nature of the representations of the professional bodies. It is worth referring back to that as well. That is why those are laid out in that way; it is not an attempt to be heavy-handed but to make it clear that the board has responsibilities to the regulators.
Amendment No. 105B has three arms. The first requires the board to respect the principle that primary responsibility for regulation rests with the approved regulators; the second requires the board to intervene only when an approved regulator acts unreasonably; and the third exhorts the board to seek to resolve matters informally with the approved regulators before seeking to use its more draconian powers under Clauses 31 to 40. If I have understood the noble Baroness correctly, she agrees with all three arms of the amendment but she believes that it is unnecessary to put them in the Bill.
I am sorry to interrupt the noble Lord, but I am not sure about the imminent risk of significant damage. I have already agreed to ensure that we set out the principles in the right way. I would have some difficulty with the wording, in particular, of paragraph (c) because I am not quite sure how to define it.
If we returned with an amendment that exactly reflected what the Minister thought underlies policy statements, would she be prepared to accept it? Is that the position of the noble Baroness?
My position is that, yesterday and today, I agreed to look at whether we have a correct explanation, a correct approach to setting out the role of the supervisory regulator, the model B+. If, on reflection, having reread our debates and having discussed the matter with noble Lords, more needs to be done, I feel comfortable in saying that I shall see whether I need to bring something forward. I hesitate to say that I will bring something forward now, partly because I do not have policy responsibility and partly because I need to reflect on all these discussions, as a number of issues have been raised that I need to think about.
My question was by no means idle. In the course of the Minister’s response—I think to my noble friend Lord Hunt, but possibly to the noble Lord, Lord Maclennan—she said that the Legal Services Board must not rely on her words to interpret its function. If the Minister stands by that, something must clearly be said in the Bill about the supervisory role of the Legal Services Board and the primary regulatory role of the approved regulators if the Legal Services Board is to reflect the philosophy that she has expounded in Committee on more than one occasion. Otherwise, the Legal Services Board will be free to read what it will into this Bill and will be in no way obliged to take note of the Minister’s many statements in these debates about what the proper relationship between these two statutory authorities ought to be. In the light of the Minister’s reply, the importance of something in the Bill reflecting her underlying philosophy becomes extremely important to the Opposition.
I am not disputing that I will see whether that is reflected. I was, however, making a particular point to the noble Lord, Lord Hunt of Wirral. He was concerned that the Legal Services Board would discover the detail of its role through my words in these debates. I would not expect that. However, I do not rule out other mechanisms whereby the Government explain precisely what we are looking for in bodies being established. Many statements have been made by the Government in the course of the Joint Committee’s work on what we seek to achieve. I was making a particular point about my words in this context. The noble Lord, Lord Kingsland, is perfectly at liberty to interpret that as suggesting to the Opposition that there needs to be more in the Bill. I have already undertaken to see whether that is reflected in the Bill, but that is not the only mechanism whereby we have set out, in many circumstances, how we expect particular operations to be conducted by bodies set up by the Government.
My recollection is that I had made the point that when the Legal Services Board is established it will look neither to the Minister’s words nor to the Government’s response to the Joint Committee report: it will look to the statute. I totally agree with my noble friend about how crucial and critical it is to ensure that we get the words of the statute absolutely right.
The noble Lord quite reasonably says that my words become irrelevant in the context of the setting up of the board. My point is that it is not the only way in which the Government are able to talk about what is expected. I was simply saying that the statute must set out the framework, but Governments have on many occasions issued statements, had discussions with bodies and so on. I was trying not to rule any of that out.
I have explained my position on the principle behind what your Lordships seek and set out what I believe is covered in the proposed legislation. Noble Lords have queried whether what I say, with which they concur, is adequately reflected within the statute. I have undertaken to see whether that needs to be looked at again, and I will.
I am most grateful to the Minister for patiently responding to the many interventions made in the course of this debate. I am sure she does not underestimate the importance of the issues that lie behind the amendment. The Government, after all, set up the Clementi investigation. Sir David ultimately made a clear choice between two models, and consciously rejected the financial services model in favour of one in which the Legal Services Board was a supervisor only.
There was a long debate in the Joint Committee, chaired by my noble friend Lord Hunt. The Government’s response to the principle of the supervisory role was clearly favourable. It is therefore only natural that your Lordships’ House should be looking to the Government to reflect in the Bill that course of events. The Minister has said that she will reflect on these things. Under those circumstances, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
On Question, Whether Clause 48 shall stand part of the Bill?
I take this opportunity to acknowledge with gratitude the reply to the earlier amendment dealing with some points which might have been better raised in this debate. The obligation on the board to prepare and issue statements of policy with respect to the exercise of its functions under Sections 30, 31, 34, 36, 40, 45 and 75 does not suggest a light touch. Furthermore, it is exceedingly difficult to engage with what must be included in some of these policy statements—such as, in subsection (3)(a), the extent to which a penalty is being imposed with regard to the deliberation or recklessness of the action of the front-line regulator—in the hypothetical circumstances which might arise.
This clause militates against the Government’s argument that it is intended that the role be exercised with a light touch. The board is being given almost legislative functions. They are described as policy statements, but they are clearly intended to guide and be relied on by others in the front line. I cannot see this being accomplished without a massive bureaucracy in support. What goes into and is left out of those statements will require very careful consideration. What goes in will be more than an indication; it will be taken as a rule. What is left out will be regarded as secondary. If there is an issue between the two bodies—the front-line regulator and the Legal Services Board—the absence of a reference to it in the policy statement will militate in favour of it being regarded as something that was not of such importance. That may therefore diminish the effectiveness of the Legal Services Board.
The clause is quite troubling. I hope that, in reviewing the matters raised under the previous amendment, the Minister will give some thought to perhaps articulating how these statements of policy are to be prepared and what their role might be and what they are anticipated to encompass.
I see the noble Lord, Lord Kingsland, nodding in support; I save him getting up to do so.
The purpose of setting that out is no more than to ensure that we enhance the transparency of what the board must do. It is meant to reflect that fact that, if the board is given powers, it is reasonable for those over whom it could exercise those powers to know what its policies are. It is not meant to be bureaucratic or heavy touch. It is simply meant to ensure that they get the right information.
There is always a balance in legislation. I suspect that had I not put this in, it would have appeared as an amendment—not from the noble Lord, Lord Maclennan, of course. People, especially those who will be regulated, are reasonably concerned to know what the board is up to. I take the point that the noble Lord thinks that one might end up with something quite heavy. If I may, I shall take this to my honourable friend Bridget Prentice and ask her to write to the noble Lord—copying her letter to other noble Lords—about what she has in mind, what it might look like and what it might encompass in order to allay the noble Lord’s fears, or at least give him the opportunity to come back.
moved Amendment No. 106:
106: Clause 50, page 27, line 18, at end insert—
“( ) Practising fee income shall be kept separate from the other assets of a Regulator.”
The noble Lord said: Amendments Nos. 106 and 148 derive from concerns raised with the Opposition by the trademark and patent attorneys. These amendments seek to keep practising fees separate from a regulator’s other assets. As I understand it, the logic is that, while there are severe restrictions on the positive use of fee income or enjoyment of profit, the liability for the levy to the Legal Services Board appears to extend to all a regulator’s assets, including its non-regulatory business. The view of the trademark and patent attorneys is that it is inequitable that a regulator and its owners should bear the burden, but not the benefit, of regulatory activity. Thus, Amendment No. 106 proposes that a regulator’s income should be ring-fenced, while Amendment No. 148 suggests that recovery of the board’s levy as a debt should be limited to the regulatory income of the regulator.
The Institute of Trade Mark Attorneys provides an illustration of the problems that could arise in recovering the levy. It is a private body limited by guarantee that performs regulatory and non-regulatory functions. If the levy can be recovered against all its assets, that would mean that the assets of the business, including income and capital assets derived from non-regulatory and representative sources, are vulnerable, even though, as a regulator, the institute and its members are precluded by Clause 50(2) from realising any financial benefit from any regulatory activity. The result is that private persons or businesses are expected to guarantee a levy to the state with no possibility of a corresponding benefit in return. Therefore, it is argued that it is only reasonable that the recovery of the levy should be limited to funds ring-fenced by the proposed subsection in Amendment No. 148. I beg to move.
The noble Lord was succinct in speaking to Amendment No. 106. I understand that setting out a financial separation could, among other things, help with the perception of a separation of regulatory and representative functions. However, I hope that he will agree that the precise nature of how that separation happens and the accompanying financial arrangements that might apply are likely to vary between different approved regulators. It should be for the board to determine how the arrangements apply in each case, and, in accordance with its duties under the Bill, to act in accordance with best regulatory practice, including proportionality. I believe that that is best worked out between the supervisory regulator and the regulators themselves.
The board is already under a duty to make detailed rules on a number of matters, including the purposes for which practising fees may be raised. It must also set out internal governance rules under Clause 29 to ensure that the representative and regulatory functions are properly separated. However, it may not always be appropriate to set out a separate requirement that practising fees are separated from other assets in every case.
It is important to recognise that although practising fees are raised mainly for purely regulatory purposes, some functions are more of a public interest nature than a purely regulatory nature where it might be appropriate for both the regulatory and the representative arms to be involved. Functions could include the promotion of relations between the approved regulator and other national—or even international—bodies, Governments or the legal professions of other jurisdictions; or participation in law reform. It would not be appropriate to set out a requirement that could restrict or prevent an appropriate and efficient distribution of resources. I am sure that that is not what the noble Lord had in mind.
There may be smaller approved regulators that carry out only a regulatory function for which a financial separation on the lines of this amendment would not be appropriate. We consider that maximum financial flexibility is needed to ensure that the different types and sizes of regulators can operate effectively and efficiently and to recognise the different roles they play—an example of which I hope I have given the noble Lord, on which he can reflect.
On Amendment No. 148, although I would expect money owed on the levy to be paid from practising fee income, and Clause 50(4)(b) already provides that the levy is one of the purposes for which practising fees may be charged, I do not want to set that out in the Bill. We do not want to set out a statutory requirement that restricts the flexibility of the approved regulators to meet a debt in the way best suited to their financial arrangements—and it would be a debt. The requirement might also mean that an approved regulator could be forced to divert funds raised from practising fees away from essential regulatory functions when other assets or sources of income would be the least damaging way to meet the costs of regulation.
It is unusual for legislation to restrict the way in which moneys owed may be recovered, and we do not think that we should make an exception in this case. I start again from the principle that we hope that these powers are not used; but if they are, we would perhaps be failing the regulators if we restricted the ways in which they could use their assets to those in the amendments. I ask the noble Lord to reflect on that reason and withdraw the amendment.
Nevertheless, I hope that the Minister can understand the natural sense of unfairness experienced by these two organisations, which are in a very different position from, say, solicitors and the Law Society, whose resources and ability to meet the financial demands of the Legal Services Board put them in a different position. The Bill requires approved regulators to strictly separate two activities—the regulatory activity and the representative activity—yet, when it comes to financial levies by the Legal Services Board, all the assets of the institution that provides the approved regulator, whether committed to regulation or not, are vulnerable to levy by the Legal Services Board. There is real inequity here, and it is not readily understood, at least by these two organisations.
The Minister said that that is a matter for the Legal Services Board to sort out. Once again, I hope she will be able to find some way of indicating to it that it should respond to this situation sympathetically because, in principle, the board ought to address levies only to the regulatory arm of the approved regulator. I can understand why it is very attractive for a creditor to try to seize all the available assets, but if a proportion of those assets has nothing to do with regulation, there is a certain logic in not allowing those assets to become vulnerable.
The noble Lord has raised an interesting point. The difficulty with the amendments is that, in a sense, they are another way up from the point the noble Lord is making; they would prevent the regulators being fined using their assets as they think best. They may have assets in another part of their operation that could more easily be brought forward and used to pay a fine.
The noble Lord’s point goes back to the relationship between those who are regulated by the supervisory regulator and those by the Legal Services Board. Two matters strike me as important. First, the partnership approach to which the noble Lord, Lord Hunt of Wirral, referred, should be looked at properly. Secondly, proportionality has a role to play as well. When looking at these matters, the Legal Services Board should be expected to behave proportionately. It should not look at all the assets and think, “Those can be taken”, for precisely the reasons that the noble Lord gave. So the matter revolves around the relationship between the Legal Services Board, the regulator and the regulated, and the requirement on the Legal Services Board to behave in a proportionate way.
I am cautiously encouraged by what the Minister said. She might be disappointed to hear that, because she may have thought that she had nailed me. She has encouraged me to go away and look at the text of my amendment to see whether I can produce something that accords with the last of the noble Baroness’s interventions. Perhaps she, too, would like to go away and reflect on the text of my amendment in the context of what she has said. In the mean time, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 106A had been withdrawn from the Marshalled List.]
Clause 50 agreed to.
Clauses 51 and 52 agreed to.
Clause 53 [Regulatory conflict with other regulatory regimes]:
moved Amendment No. 106B:
106B: Clause 53 , page 30, line 2, at end insert—
“(2A) An external regulatory body may make an application to an approved regulator under this section if it considers that the arrangements of the approved regulator—
(a) frustrate the exercise of the external regulatory body’s regulatory requirements, or (b) conflict with the external regulatory body’s regulatory requirements, or (c) give rise to unnecessary duplication of regulatory requirements for the subjects of the external regulatory body. (2B) For the purposes of subsection (2A)(c) below, “subjects” means any individuals or entities subject to the regulatory powers and jurisdiction of the external regulator.
(2C) Where an application is made to an approved regulator under this section, the approved regulator must—
(a) determine whether such regulatory conflict exists with the external regulatory body’s requirements and, where it so determines, take such steps as are reasonably practicable to address the regulatory conflict outlined by the external regulatory body, or, (b) in the absence of satisfactory resolution and where provisions for the resolution of external regulatory conflict provide, make an application to the Board under subsection (4).”
The noble Lord said: The previous amendment was inspired by the trademark and patent attorneys; this amendment has been brought to my attention by the Institute of Chartered Accountants.
The motivation for the amendment comes from the interests of regulators who operate outside the legal services area. The issue is, as I understand it, that there is no mechanism for dialogue between approved regulators and external regulators such as, for example, the Financial Services Authority or the Institute of Chartered Accountants. This is already an important point in a situation, for example, where an accountant is employed by a law firm. Following this legislation it will become doubly so because of the creation of the new alternative business structure regime, where there will inevitably be more interaction between the various professions.
The problem, as I understand it, is that the Bill as currently drafted allows an affected person—in other words, a licensed individual or a firm—to make an application to the board in the case of regulatory conflict. There is a similar capability between the various approved regulators on the same ground. But the Bill does not allow any mechanism whatever for an external regulatory body as defined in the Bill to address the problem of conflicting regulation. We believe there should be the means for such a dialogue to take place. That is the background to the amendments.
Amendment No. 106B would allow an external regulatory body to approach other approved regulators, while the amendments to Clause 67 address the same issue with respect to the Legal Services Board. The Bill as it stands puts licensed bodies at a disadvantage when they happen also to come under the jurisdiction of a regulator not covered under the Bill, as will be the case for many of the new alternative business structures. This could have the consequence of increased cost and potentially reduced competition for consumers—the noble Lord, Lord Whitty, please note—which we know well by now the Government are eager to avoid. In short, what makes the amendments desirable is that it is less costly and more appropriate if conflicts can be resolved between the regulators themselves. I beg to move.
Under Clause 53 we have provisions to ensure that approved regulators can take steps to prevent conflicts of this type, to avoid duplication of rules and to resolve any problems that may arise. The amendments proposed by the noble Lord are in keeping with the spirit of these existing duties. He is seeking, as we are, to ensure that legal and non-legal regulators are encouraged to co-operate and to work together towards better regulation. The amendments seek to take this duty a stage further in that they require approved regulators not only to take steps at a general level to pre-empt conflicts, but also to consider, on a case-by-case basis, any specific problems that external regulators might bring to their attention.
The changes would also highlight further the fact that the board can play a role in resolving external conflicts where all parties consent to this arrangement and it is within their power to do so. The principle behind the amendments is absolutely sound. It creates the potential for professional services to become more integrated. If the benefits of this integration are to be realised, regulators have to be able to co-operate with one another. Indeed, the Joint Committee recognised the importance of guarding against regulatory conflict, particularly in ABS firms, and this is what we have sought to achieve in this part of the Bill.
I am perfectly happy to take the matter away and consider whether the provisions can be made clearer. I shall consider what formulation might be appropriate, particularly in relation to the functions of the board. I am happy to consider the principle behind the noble Lord’s amendments and return to these clauses on Report.
I do not know off the top of my head. Perhaps I may write to the noble Duke and explain it. Because I expect the noble Baroness, Lady Carnegy of Lour, to appear at any moment, I usually have a section in my briefing called “Scotland”. However, as the noble Baroness is not here this week, I failed to do what I should have done. I hasten to add that we have looked at the matter, but I do not have that particular briefing with me. I shall write to the noble Duke and place a copy in the Library.
The Minister could not have been more helpful in her response. In those circumstances, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 53 agreed to.
Clauses 54 to 61 agreed to.
Clause 62 [The Board's designation under section 61(1)(a)]:
moved Amendment No. 107:
107: Clause 62 , page 34, line 24, at end insert—
“and, in either case, no other approved regulator is suitable and willing to regulate the activity in question.”
The noble Lord said: The purpose of this amendment is to ensure that if the Legal Services Board becomes an approved regulator, which it may do under Clause 61 with regard to certain reserved legal activities, it does so absolutely and explicitly as a matter of last resort. We recognise that the powers given to the board in Clause 61 must be part of the Bill as a safety net; but it is essential that they are restricted to that. It must be the case that this power is only used when there is no other approved regulator that could regulate the activity in question. That approach is consistent with the policy of minimum intervention by the board and with the professional bodies taking lead responsibility in regulating wherever possible. I am confident that the Government will be sympathetic to this aim, but nevertheless would like an assurance to that effect; and of course, if possible, would like it expressly stated in the Bill that this is a last resort power. I beg to move.
The noble Lord will not be surprised that I do not seek to disagree with the principle here at all. We want the board to remain an oversight regulator, except in those really exceptional cases where it has no choice other than to regulate itself. I agree with him that, before seeking designation, the board should be expected to explore any viable alternatives. We have always anticipated that where an alternative approved regulator exists, that should be the board’s primary and preferred course of action. We think the Bill takes account of that. Any order under Clause 61 would have to be approved by your Lordships’ House and the other place as an extra stopgap.
It does not say so in my notes, but if there is a strength of feeling that this ought to be effective, I am happy to take it away and think again. I agree with the principle. We think we have captured it, and that the order-making power guarantees that Parliament would have a say in that process. Because I agree with it, if the noble Lord feels strongly about it, I will ask if we can put it in the Bill.
I would of course prefer to have it in the Bill, as I indicated in my opening remarks, but I am delighted to hear that the Minister is going to take this away and reflect on the wording, with a real possibility that she will consider placing it in the Bill. In those circumstances, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 62 agreed to.
Clauses 63 to 66 agreed to.
Clause 67 [Regulatory conflict and the Board as approved regulator]:
[Amendments Nos. 107A to 107E not moved.]
Clause 67 agreed to.
Clause 68 [Modification of the functions of approved regulators etc]:
On Question, Whether Clause 68 shall stand part of the Bill?
The Minister will not be surprised to hear me speak on Clause 68. I pointed out at Second Reading that I was a little concerned about the provisions of this clause. Subsection (1) gives a power to the Secretary of State—and I am never quite sure whether we should be referring to the Lord Chancellor, but no doubt that is another issue—to,
“by order modify, or make other provision relating to, the functions of an approved regulator”,
and then includes the words, “or any other body”. The title of the clause is,
“Modification of the functions of approved regulators etc”,
and I am not sure what that “etc” refers to. What other bodies are contemplated? Subsection (6) contains provision for an order under the section to,
“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”.
When I raised this question at Second Reading, the noble and learned Lord the Lord Chancellor said, “Ah, please be reassured that subsection (6) is governed by subsection (1), and therefore we can only amend Acts of Parliament by order if they relate to the functions of an approved regulator”. That may or may not be right, although I do not like the idea of this Chamber passing a clause that allows the Government by order to amend any Act of Parliament. My concern is increased by the words, “or any other body”. It may well be that the Minister could assist me in understanding what that means. It is accompanied by the words, “other than the Board”, but what is “any other body”?
I am very grateful to noble Lords for allowing me to speak on Clause 68 stand part. I wanted to raise two questions. First, why is this power in at all? Surely it usurps the role of Parliament in seeking to enable the Government by order to amend any Act of Parliament. Secondly, what is the phrase “any other body” intended to refer to?
I am happy to try to address those two points. It is always a joy to respond to the noble Lord. I sometimes wish he would tell me he was going to make a clause stand part intervention—then I could make sure I had everything ready for him. That would assist me enormously. I just make that small plea. I will do my very best.
As the noble Lord says, Clause 68 allows the Secretary of State to modify any of the functions of an approved regulator or, in that great phrase,
“any other body (other than the Board)”.
The purpose of empowering the Secretary of State, the Lord Chancellor, in that way is to ensure that approved regulators, including those who are “creatures of statute”, as the term has it, can easily adapt to the changing legal sector, and that their regulatory powers are efficient and effective. Indeed, the noble Lord addressed the scope of that at Second Reading.
The Delegated Powers and Regulatory Reform Committee has reviewed this, as you would expect it to do, in the light of the supplementary memorandum we sent on 7 December. The noble Lord should have a copy of that, but if he does not, I will ensure that he does; it may cast more light on this clause. The committee’s report found the delegation’s prospective power to the Secretary of State and the power to amend prerogative instruments to be appropriate. The finding was reached because the committee was persuaded that we need this to create a level playing field for all approved regulators, allowing the functions of a statutory body such as the Law Society to be altered as easily as the functions of a non-statutory body. “Any other body” applies to bodies that are applying to be approved regulators but are not yet, and which need statutory changes to allow them to become approved regulators, or indeed licensing authorities, under the Bill. That is the purpose. If that is not a complete answer, I will supplement it in any way the noble Lord likes.
I am very grateful to the Minister. I apologise for failing to give her specific notice. I thought that the warning at Second Reading that I was going to raise this issue was enough, but it was not. I apologise wholeheartedly.
I am still worried, though, about what she calls the statutory creature. If indeed the clause is limited in the way she has described, the wording should read, “or any other body that has applied to become an approved regulator”. The phrase “or any other body” is very wide and open. I have read that the Government have persuaded the committee, which I am slightly surprised about, given the phraseology. But the Minister has answered my point and promised to reflect on the questions I have asked. In that spirit, I accept what she has said and look forward to hearing further from her.
Clause 68 agreed to.
Clause 69 agreed to.
Clause 70 [Carrying on of activities by licensed bodies]:
moved Amendment No. 108:
108: Clause 70 , page 40, line 32, at end insert—
“( ) Without prejudice to the powers vested in the Board by this Part of this Act, the Board must seek to ensure that, as far as is practicable, licenses to permit alternative business structures for the provision of legal services are issued on an incremental basis in order to reduce the risk of a disruption of the market for legal services.”
The noble Lord said: We now—and at last, some of your Lordships might say—reach Part 5 of the Bill, which deals with alternative business structures. Amendment No. 108 is the first amendment to that part of the Bill. It is a probing amendment. The approach of the amendment is motivated by timing, the key words in the amendment being, “on an incremental basis”. This follows from the recommendation of the Joint Committee, chaired by my noble friend Lord Hunt, that there should not be a sudden explosion of ABSs on to the market. They should be introduced gradually. At this stage we therefore urge the Minister to address the concerns that we, and many of those who have taken an interest in this matter, have over-perceived potential problems.
There is a general uncertainty about what effect these new structures will have on the market. In particular, there is widespread concern about their impact on access to justice. This concern is expressed, most generally, by a fear that the new ABS organisations will cherry pick the most financially attractive areas of law, leaving those that are often subsidised by more attractive work to be either abandoned by high street solicitors or simply dealt with in a perfunctory manner.
There is also worry about the headline that one has seen more than once in the past few months of one-stop shops or Tesco law. These are portrayed as providing significant benefits to consumers; but we have no idea how that might affect the quality of legal advice given in the one-stop shop. What views do the Government have about that?
Then there is the international dimension. We are one of the most successful countries in the world at exporting legal services. I have no statistical evidence which would prove the case, but I suspect that we are probably the most successful country in the world at exporting legal services. What effect are the new ABSs going to have on our international reputation? It is very important that whatever we do, it does not damage our ability to sell our services abroad.
There is another distinct issue about our international outreach. Certain ABS structures might be regarded in other countries as being unethical or indeed be illegal in other territories or jurisdictions. How will we grapple with that problem? There are a range of issues, about which it is still unclear as to the effect that ABSs might have.
This is a probing amendment. We are probing to ascertain whether the Government have any plans for assessing or monitoring the impact of ABSs once they begin to be licensed and whether they will have any safeguards in place against any of these potential concerns. The amendment is not in itself the answer. We have put forward two or three amendments of our own—more detailed amendments which we hope your Lordships will discuss later. They are different ways of achieving the same objective but our philosophy towards ABSs is an incremental one. We believe that the Government and the Legal Services Board should begin slowly and deliberately and, as a result of accumulating experience should then, if that experience is positive, become more ambitious. But we would be wholly opposed to any immediate licensing system which did not take account of the experience of the first few ABSs that were launched.
We believe that the Joint Committee said some very wise things about the ABSs and I want to conclude my remarks with a quotation from its report:
“The true impact of ABS is not clear to us. Evidence has suggested that there may be an impact on both vulnerable consumers and those in particular geographical locations (for example, rural or isolated areas). Indeed, it may be that there are different impacts on those two areas. We have received no concrete evidence that access to justice will either be improved or reduced under ABS arrangements, but we are persuaded by some of the evidence suggesting that the reforms may reduce geographical availability. We consider that ABSs may reduce the number of access points for legal services and we see this as a potential problem. There is clearly an issue here and the only conclusion we are able to draw is that no-one can be sure how it will work out. We recognise that there may be a trade-off between the quality and accessibility of advice—for example a small, high-street solicitor in a rural area may not be able to provide the specialist advice a client requires. We recommend that the Government amends the draft Bill to ensure that the impact of ABSs on access to justice, particularly in rural areas, informs the decision-making process that licensing an ABS firm”.
On one particular, issue the Joint Committee has gone rather further than the incremental approach that I was outlining and has said, in terms, that it has real concerns about the impact of ABSs on the geographical disposition of legal services in England and Wales. I beg to move.
At Second Reading, my noble friend Lord Thomas of Gresford indicated the deep concerns which we on the these Benches have about the proposals to establish alternative business structures.
We have indicated our view that if the Government insist on proceeding with this, they should do so on the basis of the evidence as to the impact. We would associate ourselves with the reasoning of the noble Lord, Lord Kingsland, in advancing this amendment. My noble friend will no doubt expatiate on these arguments in the clause-stand-part debate.
I have listened with fascination to the Committee’s deliberations today. I thought that I knew everything about the difference between an appeal and an application for judicial review, but I have realised that I do not and that there is more to this than academics appreciate. I believe that Part 5 of the Bill raises issues of a different order; it could have a very significant effect on access to justice. As I understand the purpose of the Bill, it is intended to increase access to justice and to improve the position of the consumer of legal services. In so far as that is the Bill’s intention, I am sure that no noble Lord would want to do other than support it.
For the reasons given by the noble Lord, Lord Kingsland, which were indicated by the Joint Committee, this is an untried situation. Anyone who has in recent years had the responsibility of travelling around the country in the interests of the administration of justice and access to justice knows that there are real problems with the availability of legal services in the country as a whole. That is particularly true in parts of Wales, where I have heard much from high-street solicitors.
There is no doubt that large businesses could provide legal services in a novel and interesting way. But that could—unintentionally, perhaps—have a devastating effect on those who have traditionally provided services in rural areas in particular. Great care has to be exercised to see that damage does not occur.
In his amendment, the noble Lord, Lord Kingsland, indicated one way of providing some protection—one way in which to square the circle. But I urge the Minister to accept that that is not the only way of achieving that objective. The licensing authority could be given guidance and direction in the Bill requiring it to pay appropriate respect to the importance of the issue the noble Lord, Lord Kingsland, raised and which I seek to underline. I hope that the Minister will feel that she can take the clause away with a view to giving further consideration to this issue, particularly taking into account the concerns that have been expressed today as well as those of the Joint Committee.
The noble and learned Lord, Lord Woolf, has made such an important contribution to this debate. He has been sitting through these proceedings, listening carefully to every word. We, too, have listened very carefully to what he has just said. His description of what may happen to access to justice was one of the issues that deeply troubled the Joint Committee. Indeed, my noble friend Lord Kingsland read out paragraph 324, which encapsulates much of our concern. We were told by the Government that they, too, were concerned, but no amendment to signify any breakthrough in persuading the Government that the Bill as drafted could result in these dangers has yet been proposed.
It is important to remind the Minister that in his report, Sir David Clementi was much more cautious about the right way forward. I thank my noble friend for tabling a wide amendment that has allowed us to have a very important debate about alternative business structures. It gives us a chance to reflect on whether we are proceeding in the right direction.
In his 2004 report, Sir David Clementi recommended the facilitation of what he described as “legal disciplinary practices”, known as LDPs, allowing different kinds of lawyers to work together, with or without external ownership or management. He drew a clear distinction between LDPs and MDPs—multi-disciplinary practices—which bring together lawyers and other professionals to provide legal and other services to third parties. He concluded that the creation of LDPs would represent a major step towards MDPs if, at a subsequent juncture, the regulatory authorities considered that sufficient safeguards could be put in place. Those are such important words. I think I speak for most noble Lords when I say that we are not yet persuaded that sufficient safeguards have been put in place.
In another paragraph, the Joint Committee was unanimous in saying:
“Given the level of uncertainty about the impact of ABS provisions we urge the Government to use ‘less haste and more care’ and follow the Clementi Report in their approach. We recommend that the draft Bill be amended to ensure that the LSB takes a ‘step-by-step’ approach to licensing ABSs”.
We set out four stages which could represent the right way forward, and continued:
“If necessary, this gradual approach could be adopted by bringing the necessary provisions into force by order at different times”.
I hope that the Minister will respond positively to the points made by my noble friend, the noble Lord, Lord Maclennan of Rogart, and the noble and learned Lord, Lord Woolf. It is so important that we get this right. In moving Amendment No. 108, my noble friend has given the noble Baroness an opportunity at this early stage, as we are debating alternative business structures, to put our fears at rest.
I will make clear later my strong support in principle for alternative business structures. Some of the concerns expressed by the noble Lord, Lord Kingsland, and others need to be addressed. I do not want to alarm the noble Lord, but I might actually support his Amendment No. 108C, which would require the licensing authority to look at some assessment of the impact of ABSs. I am particularly concerned about rural areas. Part of the procedure for approving alternative business structures might be to assess their impact more broadly. I do not particularly agree with the wording of the amendment because if matters have been validated through that procedure, there is no point in rationing the licences. But when individual applications are being considered, it is important that the wider impact is taken into account. This needs to be part of the Government’s thinking and, on principle, I strongly support the provisions on ABSs.
An interesting debate has brought together noble Lords across the Committee. It is important that I address the issues as fully as I can.
The principle behind the amendment, with which everyone who has spoken agrees, is that we need to take a very careful approach to alternative business structures. I do not think it is necessary to impose specific constraints in the Bill, but I want to explain why. That will enable Members of the Committee to think about what we are doing and how it will work in practice so that they can decide what they wish to do beyond this point in the Bill.
The first thing to remember is that we will be licensing alternative business structures only when the rules are in place. These rules must be compatible with the regulatory objectives and must meet the safeguards in the Bill, but we do not want to rule out allowing them to go ahead if they are ready. If they are ready we can licence them safely—I use that word in the context of the regulatory objectives and safeguards in the Bill.
I have talked to some Committee Members about whether this could be done slowly or incrementally, but there are real difficulties in how one might physically achieve that without being completely anti-competition, either by going for various sectors or by being unrealistic about constraining geographically the way in which firms, companies and organisations now work, not least because of the internet. It is difficult to see a gradual approach in the sense of trying to limit it geographically, numerically and so forth in that way. However, I agree that we need to do this step by step. The Legal Services Board and the licensing authorities are bound by the regulatory objectives and the firms are bound by the duties in Clauses 88 and 169. The duty is to comply with professional conduct obligations and ensure that non-lawyers do not cause breaches of them.
The Legal Services Board must judge whether the licensing authority rules are appropriate for regulating the risks raised by firms it intends to license. Those alternative business structures will emerge only when the regulatory framework exists. We do not think that we can control it artificially, while recognising the points behind what the noble Lord, Lord Kingsland, seeks to achieve.
The Bill was designed to improve access to justice. The noble Lord, Lord Kingsland, asked about overseas and I mentioned to the Committee before that I have had the privilege of having some meetings with Neelie Kroes who is the Competition Commissioner for the European Union. As I was listening to the Committee, I was reading two of her recent speeches about the importance that competition can play in ensuring access to justice. I will circulate to Members of the Committee her speech to the jury committee of the European Parliament in November because it is interesting in the context of Europe. She is very supportive of many of the ways in which we have sought in this country to develop our services, not just legal services but others as well. She has used us as a model for other countries throughout the European Union. She is an important person in the context of what happens in Europe.
It will be a requirement on those looking for alternative business structures to think about the rules and regulations that apply in other countries— whether or not they are members of the European Union. We have already mentioned the German BRAK and the way in which we want to ensure that we are not being anti-competitive from the UK perspective. We recognise that businesses that are setting up and wishing to work internationally will find ways of developing their structures appropriately and will make their own decisions about whether to go down this route accordingly. We recognise that that approach will need to be thought about and the Competition Commissioner of the European Union will be keen to see us develop it. If there are issues to do with the European Union, I know that she will be glad for me to raise them with her next time we meet.
On the specific points made by the noble and learned Lord, Lord Woolf, about access to justice, all of the regulatory objectives must be considered in the licensing of alternative business structure firms, including access to justice. It is possible for conditions to be placed on the alternative business structure firm to ensure that it meets those objectives, provided that that is consistent with those objectives. For example, there may be circumstances where in order to be able to create an alternative business structure a condition might be set that you must continue to do as you do now working in this particular field—legal aid in family cases or whatever. It is possible to do that. Therefore, by putting conditions, one is able to get access to justice. Part and parcel of the way in which the alternative business structures will be put together and allowed is that they must have access to justice as one of the principles under which they will be licensed. It is the regulatory objective full stop.
The combination of the development of the alternative business structures through the legislation—getting ready with the rules, moving towards the structures, allowing the licences, allowing for conditions and being clear about the regulatory objectives—deals with the concerns that the Committee has about how this measure will operate in practice.
The noble Lord, Lord Thomas of Gresford, is quite right to ask again about the regulatory objectives. In previous debates, we have had advice from the Minister that the regulatory objectives under Clause 1 are very much for the board itself to determine. It is perfectly possible for the board to determine that regulatory objective (d) in Clause 1(1),
“promoting competition in the provision of services”,
should in particular circumstances override regulatory objective (b) “improving access to justice”.
It is a very good question when the Minister refers to the regulatory objectives, accepting that she has already said that the Government have no intention of putting access to justice as number one—or indeed number two or three—but will leave the priority to the board to decide. There is a concern that access to justice may come lower down the scale compared with one of two of the other objectives. That would undermine the whole question of the alternative business structures. The noble and learned Lord, Lord Woolf, is able to speak for himself, but I think that that is what led him to say a few moments ago that there could be a devastating effect on access to justice, despite the fact that it is one of the regulatory objectives.
There would not be a devastating effect on access to justice. That is the point. I will use my words rather than the noble Lord’s. I said that when looking at the objectives in the round, the board would determine the weight to be given. I will try to think of an example, although it is always dangerous because I get run over immediately I try to do that. If an alternative business structure planned to offer high-quality accessible legal services in a particular area, but the firm with which it was working already had one lawyer doing a particular piece of work and the new alternative business structure was not sure whether it wished to incorporate it, the board could do two things. It could say, “No, we will direct you to continue doing that work”, or it could say, “Well, two miles down the road someone else of good quality is doing that work, so we won't direct you”, because the access to justice has not been adversely affected overall. If you look at it purely from a hierarchical point of view you could argue that you could never allow that one lawyer to cease that work because, in theory, the access to justice from that firm would have been altered. I deliberately chose a hypothetical situation because I wanted to try to explore it. But the idea that there could be any kind of devastating effect would completely run against everything that we have said about the Bill and that we are seeking to achieve. It is really important that the board is able to look at business structures and regulatory objectives in the round, for exactly the reasons that I have given.
When I send noble Lords Neelie Kroes’s speeches they will see that she consistently makes the point that improving competition and access to justice can have a really positive effect. Those objectives can be interrelated in many circumstances—and that is very important, too.
It is right and proper for noble Lords to be concerned that when alternative business structures are set up something does not get lost. For the noble and learned Lord, the idea that people would lose out in getting justice is horrendous. I agree with him completely; that would be absolutely detrimental. But in the example I have just given, you would have to look at it in the context of what is happening in that area and where else people would be able to get those services. If for 99.9 per cent of the population in a particular area there were better and broader services, of higher quality and with better investment, and it could be demonstrated that for the 0.1 per cent an alternative way had been found—either by direction or in another way—everyone would be perfectly comfortable with that.
Noble Lords are absolutely right to say that in designing the rules, building up to the licensing authorities and enabling people to be licensed, we must ensure that these objectives operate properly and are not overridden completely in a way that noble Lords are worried about. I am treating this debate as my chance to explore these issues, as noble Lords would expect, and to ensure that we have got this completely right. I am beginning to think, too, that we must make sure that we see what happens and how the board does what it does, and I shall be giving feedback to my honourable friend Bridget Prentice and my noble and learned friend the Lord Chancellor in that regard. These are not necessarily issues to put in the Bill, but they are ones to explore properly and make sure that we get right.
The principle is to ensure that people do not just cherry pick and that if services start to deteriorate or become non-existent in particular areas either there can be direction or it will be agreed not to give the alternative business structure approval. We want to ensure that firms are operating in the right and appropriate way to meet all the objectives while recognising that they are to be taken in the round and weighed for their advantages and disadvantages before making a decision. We need to be crystal clear that there could not be circumstances in which there was a devastating effect on access to justice.
After what the Minister has just told the Committee, would she expect that every person applying for an alternative business structure should produce some sort of impact assessment to show what might happen in the area in which they are operating—or would she expect the LSB to have to keep track of every practising lawyer, including not only his name but his geographical locality? It would be quite difficult for someone sitting in an office in London to say what the impact would be in a particular rural area.
If we look at how the Bill is constructed, we can see how the Law Society, for example, would become a licensing authority and work with the possibility of an alternative business structure with company X. I should just say that although people have used Tesco as an example it is my understanding that Tesco has no desire to be involved in this, so we will not pick on it any more—and I apologise to Tesco, through this Committee. Let us say that company X was involved in the provision of lots of different services relevant to the retail sector and wished to invest in and join up with a local legal firm to develop its business, creating an alternative business structure—something new. In so doing, the company would apply to the licensing authority to be allowed to do so, and the authority would look at what was being proposed, the services that were currently offered and about to be offered and the way in which it would affect the locality. I agree with my noble friend Lord Whitty and others that it is of crucial importance in rural communities to ensure that this works effectively and well. The authority would ensure that the principles of the regulatory objectives were adhered to and then would or would not grant the licence with or without conditions on top of it. In so doing, it would be mindful, too, of what else was available in that locality.
That is how I see the process working—and that is an appropriate relationship between the two parties. Not everyone will be offered the opportunity but, when they are, because it is clearly going to be a good opportunity for everyone, they should be allowed to go ahead.
I hope the Minister will forgive me if I press her on one additional aspect that I am not sure has been dealt with in her extended and helpful remarks. I refer to the impact on those who provide the service in a locality prior to the arrival of the new entity. Some of those are struggling to survive at present and, unless they are protected, they will disappear—and if they disappear they will not reappear.