Consideration of amendments on Report resumed on Schedule 1.
Amendments 17 to 22 agreed to.
[Amendments Nos. 23 to 27 not moved.]
28: Schedule 1 , page 116, line 40, leave out paragraph (b) and insert—
“(b) give a copy of the Comptroller and Auditor General’s report to the Lord Chancellor. (4A) In respect of each financial year, the Lord Chancellor must lay before Parliament a document consisting of—
(a) a copy of the statement of accounts for that year, and (b) a copy of the Comptroller and Auditor General’s report on that statement.”
On Question, amendment agreed to.
Clause 3 [The Board's duty to promote the regulatory objectives etc]:
moved Amendment No. 29:
29: Clause 3 , page 2, line 25, at end insert—
“( ) The Board must, so far as is reasonably practicable, act in partnership with the approved regulators.”
The noble Lord said: My Lords, as I am sure that the noble Baroness is well aware, the amendment is identical in terms to Amendment No. 31, tabled in Committee. It generated a short debate which is to be found in Hansard of 9 January 2007 at cols. 173 to 176. The background to the amendment—I do not intend to go into as much detail as I did in Committee—is the reaction of the Government to one of the recommendations of the Joint Committee. That recommendation essentially endorsed Sir David Clementi’s recommendation that the manner of regulation for the Legal Services Board should be not direct but supervisory.
In their response to the Joint Committee, the Government said:
“The Government agrees that the intention of the Legal Services Board should be to work in partnership with the authorised regulators, leaving them with the responsibility for day to day regulation. The Legal Services Board should exercise its powers only where approved regulators are clearly failing”.
The amendment seeks to incorporate this notion into the Bill at this point. However, later amendments express precisely the same principle in rather different terms. I refer the Minister in particular to Amendment No. 174, which I anticipate we will come to at some stage on Wednesday afternoon.
The theme will be familiar to the Minister: the existing professional bodies should be the front-line regulators, and the Legal Services Board should have a supervisory role, intervening only if it believes that a front-line regulator is failing in its duty in some way or another. The Minister seemed to endorse this approach at various points in Committee. However, she was reluctant to have it reflected in the Bill.
With the greatest possible respect to her, this is not satisfactory. Once the Legal Services Board is up and running, it will inform itself on the basis of the words of the statute itself, and there will undoubtedly be a temptation for it to over-regulate. An amendment such as this would make it absolutely clear to the board what the limits of its regulatory powers are. The Government are on record as fully supporting the approach that is reflected in the amendment. Will the Minister therefore reflect what the Government’s response is by agreeing to the amendment? I beg to move.
My Lords, I support the amendment. There was considerable discussion of this subject in Committee. I had thought that it was more or less agreed that the principle at stake was that the board should have a supervisory role. However, the problem is that the complex structure of the Bill seems to demand that we must deal with the application of the principle in a piecemeal way. This is the first piece of that piecemeal way. I shall not say much more about it, other than that it does not seem possible to translate the pencil to cover the Bill, as I suggested in relation to Amendment No. 5, because it is of specific, not generic, application to the structure of the Bill. I merely mention that, but it is an essential matter on which there was considerable discussion in Committee.
My Lords, no part of this Bill better exemplifies the gap which has opened up between the assertions of Ministers about their purposes and the language of the legislation we are considering. It is fair to say that there is genuine anxiety on the part of front-line regulators about what is likely to develop. If steps are not taken by the Government to express in the Bill the purposes which have been eloquently expressed by the Minister, the Legal Services Board could become a behemoth. It will be required to supervise, but it has been given roles and powers which are ample and sufficient to enable it to grow far beyond the conception expressed by the Minister in debate. Without some clear curtailment of that possibility, it must be apprehended. The intentions of the Lord Chancellor and the purposes of Sir David Clementi will be deflected. It cannot be in the interests of the public that that should be so.
Some parts of the regulation of legal services as they stand have not been seriously criticised; notably, the work of the Bar Council has been acknowledged to be efficient, effective and reasonably inexpensive. The defects addressed in this Bill are primarily those of the solicitors’ professional response to complaints. No one on these Benches is unaware of the necessity of tackling this problem. We have been broadly at one with what the Government have said, but the gap is growing and the anxieties are increasing about what has been said and what is encompassed in the Bill.
In Committee, my noble friend Lord Thomas of Gresford spoke in support of this amendment. It seemed almost inconceivable that some step would not be taken by the Government between Committee and Report to reflect what were perceived generally to be legitimate concerns, but that has not so far been forthcoming. Consequently, we must be left with the conclusion that there is to some extent a hidden agenda and that the Government look without concern at the probable consequence of failing to constrain the growth potential of the Legal Services Board.
If this were being funded by the Treasury, the probability is that these concerns would have been acted on. But, as is well known and understood, it is being funded by the profession, which of course means that it will effectively be paid for in due course by the very consumers this supposedly seeks to protect. There is no division of interest between consumers and lawyers about this; rather there is an identity of concern that the regulation of the legal professions should be economical, effective and efficient, and should not comprise layer on layer. I hope that the Government will undertake yet again to reconsider the position which has been taken up to now. I am very concerned that the lead regulators may see their positions being progressively eroded by a Legal Services Board with imperial ambitions. The Government and the noble Baroness have spoken about the lead responsibility resting with the approved regulators, but that is not provided for. Nothing in the Bill will ensure that that will happen. If the Minister cannot reassure the House, I do not doubt that we shall return to this, as will Members of another place.
There has been an expression of view that to some extent lawyers are the enemies of consumers, one made with great force but, I have to say, not much conviction by the noble Lord, Lord Whitty, whose presence of course we greatly welcome. However, it is not one that is necessarily shared by other protectors of the consumer. Erecting an elaborate and expensive system of regulation is not in the consumer interest. This argument needs to be rehearsed and repeated, and I hope that the Government will acknowledge it and take steps to allay the justifiable concerns which are increasingly being expressed.
My Lords, I strongly support this amendment and I was pleased to add my name to those of my noble friends Lord Kingsland and Lord Campbell of Alloway, as well as that of the noble Lord, Lord Maclennan of Rogart. Partnership was very much a theme of the Joint Committee. We would like to see the Legal Services Board acting in partnership. The noble Lord, Lord Maclennan, has just raised the important issue of cost, about which one or two rumours are going around. Perhaps we could take the opportunity either in this debate or in a later one to try to put some credible figures to the stories which are running in the press.
When the Government first looked at the whole issue in the light of Sir David Clementi’s recommendations, most of those involved in the process and independent commentators were considering a new, streamlined regulatory system to be put together reasonably quickly which, provided Sir David Clementi’s proposals were accepted, would be comparatively economical and thus welcomed by the professions. Indeed, it was Sir David Clementi who could see how a partnership would work. We have had debates about this partnership that have already been referred to, but we are still waiting for the Minister to confirm how the new Legal Services Board will work. Will it rely on the front-line regulators to be in the front-line and not be subject to day-to-day administrative interference? Obviously the Legal Services Board, in complying with the regulatory objectives, has an attitude in principle towards the way that regulation will evolve, but there is still a suspicion that unless we write something into the Bill along the lines of this amendment—and we are going to debate a number of subsequent amendments as well—we may well end up with something that duplicates, indeed triplicates, the existing system, which seems to be working reasonably well at present. The separation of the regulatory and representative functions has worked well, and some of the key individuals involved inspire confidence in the way the whole process is now evolving.
If one’s suspicions about costs—transitional costs in particular—become a reality, one has to question whether it is all in fact worth it. In order to reach a conclusion about that, we need to hear much more from the Minister.
My Lords, I am grateful for all contributions. This is an important issue of principle about the relationship between the front-line regulators and the Legal Services Board. The noble Lord, Lord Hunt, is right to raise the issue of cost, and I shall say a little bit about that.
Let me be clear: there is no hidden agenda. The purpose we have set out for this regulatory framework is exactly the purpose that is replicated in the legislation. Our ambition is to have an overview regulator working with front-line regulators. I am resisting the amendment. We talked a lot in Committee about partnership and about how appropriately to define the relationship, which meant a number of things to noble Lords and to those organisations that were most concerned. First, it was important to ensure that the overview was not substituting itself for the work of the front-line regulator. Secondly, we had to ensure that the Legal Services Board operated appropriately against the regulatory objectives but used its ability to use the law to define what it wants to do only when it was necessary—we have talked a lot about that in the context of Clause 1—and to ensure that the dialogue between the front-line regulator and the Legal Services Board was appropriate and proper. We have described it in different terminology, but “partnership” is certainly a word that we have used from time to time to describe it, and I would endorse that.
My difficulty was how that works when you put it in legislation and the problem of trying to restrain or constrain what the Legal Services Board is enabled to do, in terms of the work it must inevitably take on. We have also talked about our ambition that the front-line regulators operate properly, that the Legal Services Board does not use its powers and so forth, but let us assume for the moment that it must. It is about trying to ensure that it can operate effectively. The difficulty, when we looked at it from a legal perspective, was that, as noble Lords will know from their vast experience, both as Ministers and as legislators, there are problems with how words translate when you try to use them in a legal context, and “in partnership” created some difficulty.
In my view the B-Plus model of regulation, which was David Clementi’s recommendation, is the right one. It accepts that the oversight regulator and those it regulates need to work together in concert as far as possible. My problem with the amendment is the restriction it could impose on the ability to take action when it is considered necessary to correct failure in an approved regulator. That is my difficulty with accepting the proposition. We have to ensure that in the legislation we have the flexibility for the oversight regulator to operate effectively. I completely agree that we do not want the micro-management about which noble Lords are concerned that second-guesses the decisions of approved regulators. I say that for two reasons: first, that is not its job; secondly, there is the cost, as the noble Lord, Lord Hunt, has rightly mentioned and to which I shall come shortly.
We do not want the Legal Services Board to use its power in a completely unrestrained way. There are clearly defined procedures in the legislation that it must follow, such as requirements for notification and consultation. As we stressed throughout the Committee stage, there is a need to follow best regulatory practice, and it must be proportionate and targeted. It can operate only where there is a clear need for it to do so and it can demonstrate that it must do so.
As we discussed at length in Committee, Clause 48 requires the board—the word used is “must”—to issue policy statements about how it will use its powers, publish a draft of statements and consider any subsequent representations to be made to it. We believe that that gives approved regulators the opportunity to influence the policy of the board and the framework within which it will operate. I think that the policy statements provide the most appropriate and flexible way for the board to discharge its duties. They will enable the arrangements, in a sense, to be the best practice we can have. It is a requirement—it is not left to chance but is in Clause 48.
We all recognise that constructive dialogue is essential. I see no reason to suggest in the legislation that that would not happen. I believe that the legal professional bodies will embrace the spirit of co-operation but in the end, the board must be free to act if it feels that it needs to. It may need to take difficult decisions and to take action which, it could be argued—
My Lords, I am obliged to the Minister for giving way. I have one simple question. There seems to be nothing much between us about the principle at stake as it has been expressed by all noble Lords. Can the noble Baroness conceive of a better way of implementing it than that proposed by the amendment?
My Lords, my proposition is that we already do that in the Bill. We have addressed the question in the way in which the board has been set up, the requirement for the way it has to operate, its relationship with the front-line regulators and the requirement for it to issue statements on what it proposes to do to enable the regulators to have discussions with it. We believe that the ambition in the amendment is achieved. Noble Lords who are legal experts, which I am clearly not, will know better than I do that the difficulty in putting in legislation a requirement for how people must behave, in this context in partnership, is the potential for difficulty if the overarching regulator—the supervisory regulator—has to operate in a way that is not in partnership but unfortunately has to take action against a front-line regulator. Discussions with our legal advisers showed that that could be a difficulty. When we reflected on the Bill, we felt that we had captured the essence of what noble Lords were seeking. I hope that my words, in the context of how I have described this, will bring some comfort to the organisations concerned.
My Lords, before the Minister speaks about costs, I again draw attention to Clause 48. It is not self-limiting; it sets out what must be done with regard to policy and how the board should exercise its functions. It does not say how they will be exercised in relation to the other front-line regulators. It is encyclopaedic in its potential and does not import into the Bill the kind of balance that has been so clearly expressed by the Minister as desirable. If she were to introduce some form of words that made it clear that that was what she had in mind, it would be much more convincing than resting on Clause 48.
My Lords, I was not seeking to rest on Clause 48. The factors in the way that we set up the Legal Services Board—to be proportionate and to act only where necessary—are combined with other issues. The noble Lord, Lord Campbell of Alloway, described this as being threaded through the Bill. The noble Lord sees that in a negative way: perhaps I can be more positive. If you add all of these things together you end up with a relationship between the supervisory regulatory body and the front-line regulators that I believe represents, in large part, what noble Lords are seeking. My difficulty is that there is no way of expressing that in terms that would not constrain the supervisory regulator in an inappropriate way. That is the problem. We think that we have captured it elsewhere with the combination of objectives, the way in which the board has to operate in a proportionate manner and the fact that Clause 48 states that policy statements have to be produced. The combination is what makes that effective. The noble Lord may disagree, but that is what I am trying to achieve. I am not seeking to rest purely on Clause 48.
I will deal with the costs, as they are an important issue. In earlier stages, we talked about the £26.8 million, if I remember my figures correctly, in the PricewaterhouseCoopers analysis. Noble Lords will know, because I have briefed those on the Front Benches, that we have been doing some additional work. We discussed this with the Law Society and the Bar Council to describe how we thought that the figures would need to change in an upward fashion. Our analysis is that something like £38 million or £39 million is required, with a built-in contingency. Noble Lords will also know that the Law Society and Bar Council raised particular concerns about VAT. With the absolute support of my noble and learned friend the Lord Chancellor, I have undertaken to take those figures away and look again. Before we get to the point of discussing costs on day 3 of Report, my ambition is to come forward with definitive figures for your Lordships to discuss properly. I did not want anyone to be in any doubt about that.
My Lords, what the Minister has said is welcome. When she comes forward with those figures, will she be in a position to make comparisons between the cost of complaints today and the cost of complaints under the new system? She will be aware that the Bar Council is concerned that what is currently a cheap procedure, and is perceived as giving satisfaction to consumers as well as to the Bar may be replaced by something far more expensive in which the barrister who is complained about ends up paying some costs even though he is entirely innocent of any wrongdoing, which seems totally unjust to the Bar Council and to those practising. Will she be in a position to make the necessary comparisons so that, if the House decides to divide on these matters, we can compare what we have now with what the Government propose?
My Lords, I will commit to do that. I completely accept that from the noble Lord’s perspective it would be difficult to make that distinction without those comparisons, so I am more than happy to do what he asks. I am sorry that I cannot give the figures now, but quite reasonable issues have been raised. I saw a story in the Times this morning—it may have been in other press as well—and although the figures were not inaccurate, the assumptions about transitional costs were not right. We want to look at them again because we do not believe that they are completely accurate, not least because some genuine issues have been raised. My noble and learned friend has led this in the past two or three weeks and has made it clear that he wants to be certain of the figures before your Lordships debate these questions, for the obvious reason that noble Lords will divide or not depending on whether they think that this is a reasonable issue. Of course, comparisons are important.
I just want to say a word about the Legal Complaints Service, because the Bar Council has been commended in your Lordships’ House for the work that it has done and the Legal Complaints Service sometimes receives a less good press. The Legal Complaints Service wrote to me to say what it had achieved from April 2006 to May 2007. Fifty-nine per cent of its files were closed within three months with a target of 57 per cent and 94 per cent of its files were closed within 12 months with a target of 94 per cent. The Legal Complaints Service wanted me to say that and I think that we should recognise that success in trying to sort out the underlying issues. The regulatory framework that we are putting in place in the OLC is important, but it is worth putting that on the record.
Of course we will deal with this effectively. My difficulty with including the partnership concept in the Bill is that it changes the relationship too much. We believe that, threaded through the Bill in the different ways that we have expressed the relationship, we have captured what is needed. Noble Lords will make their own minds up on that, but we think that we have achieved what is required. As ever, there is nothing much between us.
My Lords, I am most grateful to the Minister for her reply, although I am of course disappointed by it. In concluding, I shall go back to the text of the Government’s response to the Joint Committee. At the risk of irritating your Lordships unduly, I shall read out the relevant paragraph again. The Government said that they agree,
“that the intention of the Legal Services Board should be to work in partnership with the authorised regulators, leaving them with the responsibility for day to day regulation. The Legal Services Board should exercise its powers only where approved regulators are clearly failing”.
Two important statements stand out here. First, day-to-day regulation of the professions should be in the hands of the approved regulators. That is principle number one; the Minister helpfully nods. Secondly, the Legal Services Board should exercise its powers only when approved regulators are clearly failing. Will the Minister kindly nod again? She has, and I am most grateful. In her response to my amendment, she said that, although it would be desirable for these two principles to be in the Bill, that would not be possible, as it would overconstrain the regulatory activities of the Legal Services Board. That is my understanding of what the Minister—
My Lords, I thank the noble Lord for allowing me to interrupt. The point that I was making—though clearly badly—was that, if you included the words “in partnership”, I am fearful that it would mean that everything that the board did would have to be in partnership, which would be a constraint. We agree completely on the fundamental principle of the link between the oversight regulator and the front-line regulators. The Bill says that they must act only when it is necessary to act, but if you say that everything has to be done in partnership, the difficulty is, as I understand it, that you then cannot act in a way that might be regarded as not in partnership. Quite the opposite, it is saying to the front-line regulator, “You have done something wrong and we have to change it”.
My Lords, I am most grateful. If, rather than tabling the first line and a half of the statement, we tabled as an amendment the whole of the Government’s statement and response to the Joint Committee, can I assume that the Government would accept that at Third Reading?
My Lords, I would certainly have a look at it. We think that within the different aspects of the legislation that I have described we have captured it anyway. There is an issue whether I can, first of all, convince the noble Lord that the combination of the way in which the oversight regulator has to operate—that is, to be proportionate and so on, as we have discussed—and the fact that he has to issue policy statements under Clause 48 represents a relationship that is threaded through the legislation in a way that makes it clear what that relationship must be. I understand the concerns very well, but I do not know whether there is a form of words saying that the Legal Services Board had to act in partnership that if put in legislation would not in the end constrain the board if it had to do something that was in a sense contrary to the wishes, desires and so on of the front-line regulator—if it had to act in a quite drastic way, although I do not expect it to—and prevent it from doing so.
My Lords, I completely appreciate that. However, I must confess that in Committee, when we discussed this amendment, that matter did not emerge from the Minister’s response.
My Lords, the Minister says with characteristic generosity that since Committee she has thought about it. I am most grateful for her response because, as things stand, apart from statements that she has made from the Dispatch Box, the system of control contained in the Legal Services Bill does not differ in principle from the system in the FSA Act. The philosophy behind it may have been expressed differently by the Government, but if you look at the black letter law, it looks in the Bill as if the LSB is a direct regulator.
This should be of concern to the noble Baroness not only because it appears not to reflect what the Government want, but because if an amendment of the sort that I suggest is not made to the Bill and the Legal Services Board turns out to act as a direct regulator, the costs of this system will be absolutely astronomical. That would rebound very much against the Government’s political interest. It is in the Government’s political interest that this legislation is delivered at the minimum cost. It will be delivered at the minimum cost only if the Legal Services Board is a restrained supervisor of other regulators. If the board gets into the business of direct regulation, it is very hard to see where the spending will end. This measure is very much in the interests of the Government, as well as those of us in opposition who believe that the position that the Government seem to have adopted in their response to the joint approach is correct.
I will consider tabling this statement as a full amendment at Third Reading. I am encouraged by what the noble Baroness said. Meanwhile, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
moved Amendment No. 30:
30: Clause 3 , page 2, line 26, leave out “, as far as is reasonably practicable,”
The noble Lord said: My Lords, this is a shorter point. Clause 3(2) states:
“The Board must, so far as is reasonably practicable, act in a way—
(a) which is compatible with the regulatory objectives, and
(b) which the Board considers most appropriate for the purpose of meeting those objectives”.
In my submission, the expression,
“so far as is reasonably practicable”
would allow the board to act in certain circumstances of its own choosing that were not compatible with the regulatory objectives; therefore, I have sought to expunge that expression from the Bill.
In responding to this amendment in Committee, the noble Baroness was worried that flanking damage might be done if the expression,
“so far as is reasonably practicable”
were removed, and that it would constrain the board in how it could act because it would take away its discretion to add variable weights to the eight objectives. If that continues to be the noble Baroness’s hesitation, I respectfully disagree with her. Although the board must act compatibly with the regulatory objectives, it can attach weight from a very small quantity up to a very large quantity to each of the eight objectives depending on the circumstances of the decision. I beg to move.
My Lords, like the noble Baroness, I reflected on our exchanges on this amendment in Committee, particularly on what the noble Baroness said about the circumstances in which it might be necessary to have this qualifying phrase, which on the face of it appears to cut down the duty of the Legal Services Board to have regard to and to comply with the various considerations set out in the regulatory objectives.
In Committee, the noble Baroness spoke of potential tensions between the different objectives and appeared to seek to address the possible conflict between them in particular cases. That was a perfectly reasonable point. In addressing that reasonable concern, she has introduced into the Bill language that goes much beyond the reconciliation of conflicting objectives in particular cases. She has made it possible for the Legal Services Board to disregard objectives for reasons that are unconnected with the objectives themselves but may be connected with the circumstances that have given rise to the complaints.
For that reason, it is incumbent on the noble Baroness either to explain why it is necessary in general terms or to come up with language that confines the exclusion clause to the particular circumstances of reconciling different, conflicting objectives. I hope that she will regard that as a constructive suggestion and not as one intended to strike down her arguments, which seem very reasonable; but the response is dangerous.
My Lords, this debate may be completely unnecessary. In response to the points that my noble friend and the noble Lord have just made, the noble Baroness clearly stated:
“We will look at this again”.—[Official Report, 9/1/07; col. 179.]
Therefore, we await the result of her researches.
I agree with my noble friend and with the noble Lord, Lord Maclennan of Rogart, in particular when in Committee he referred to this clause as an “escape clause”. Surely, as my noble friend pointed out in Committee, Clause 3(2)(b), which states,
“which the board considers most appropriate for the purpose of meeting those objectives”,
clarifies the situation. I reread the comments of the noble Baroness in Committee, but that provision already gives the board the flexibility of ensuring that it acts in a way that is compatible with the regulatory objectives. Where there is some tension or conflict between those objectives, Clause 3(2)(b) gives the board the power to consider the most appropriate way of meeting those objectives.
As I have said, this debate may be completely unnecessary, because the Minister assured us that she was taking legal advice, which is always a slightly worrying comment. We await with anticipation what, having now taken legal advice, she will say.
My Lords, I have taken legal advice, as the noble Lord would expect me to, and I have consulted parliamentary counsel on the implications of all the amendments, particularly this one. I wrote to the noble Lord, Lord Kingsland, setting out the difficulties that we felt would be created by the removal of—
My Lords, I apologise, but I have not seen the letter. If the noble Baroness had written to me, it would have been very helpful.
My Lords, of course it would. I wrote on 22 March and I have a copy of the letter here. I apologise to the noble Lord if he has not seen it and I shall investigate why that is so. As a result, he cannot possibly anticipate what I am going to say. I will make sure that the noble Lord sees the letter by tomorrow. I remember signing the letter, so it certainly left me, even if it did not arrive with the noble Lord.
Our legal advice is that the difficulty with removing the “reasonably practicable” qualification is that the first limb, paragraph (a), would impose an absolute requirement on the board to act in a way that is compatible with all the regulatory objectives in respect of every regulatory decision that it took. The second limb, paragraph (b), would impose an absolute requirement on the board to act in a way that it considered was most appropriate for meeting all those objectives in respect of all of its decisions. From noble Lords’ comments on the purpose of the amendment, I do not believe that that is what they seek; however, parliamentary counsel tells me that that would be the effect of the amendment.
I think that we are all agreed on the ability of the board to look at the objectives, to weigh them up and to use the “reasonably practicable” qualification in that context. The clause is not saying what I think the noble Lord, Lord Kingsland, fears it says—that if you cannot make the regulative objectives work in this context you can do something else; in other words, if they are not reasonably practicable you can behave in a manner outside their scope. I am reliably informed that the clause as constructed would not enable that.
The clause says that you have to operate within regulatory objectives but you can weigh up what you are doing; you have to look at the context of the objectives and consider what the board does to ensure that they are met. As we have discussed in the context of Clause 1, that will mean that you can balance the objectives depending on the decision you are making and act accordingly. That was, in a sense, the alternative proposal to creating a hierarchy by attaching a different weight to different objectives when making particular decisions.
That was the advice that I received. I had sought it at length, because I made a commitment to do so. It suggests that the noble Lord need not worry about enabling the board to operate outside the objectives. Those fears are unfounded; it cannot do that. The board, while operating within the objectives, must balance those objectives appropriately, as noble Lords seek.
I reject the amendment because it does not work in practice; it prevents the board from balancing the objectives effectively. We all agree that we want the board to be able to balance the objectives on a case-by-case basis, depending on the decision. According to parliamentary counsel and the legal advice I have received, the clause does not achieve what the noble Lord fears—enabling the Legal Services Board to operate outside the objectives.
My Lords, I am most grateful to the noble Baroness. I look forward to reading her letter. Until I do, I cannot respond to the arguments of parliamentary counsel; but I can still say that the words of Clause 3(2) seem to say to me, quite clearly, as they do to the noble Lord, Lord Maclennan, that if, in the subjective judgment of the Legal Services Board, it considers that it is not “reasonably practicable” to act in a way that is compatible with the regulatory objectives, then it can act in a way that is not. Without having received the learned opinion of parliamentary council, that seems to me the position. If it is, I am sure that the noble Baroness would be very unhappy about it.
My Lords, perhaps I may ask the noble Baroness one question. Would she be prepared, with the assistance of her advisers, to give us one or two examples of where this would be impossible? I suspect that it would be perfectly possible and that the words that my noble friend is seeking to remove are otiose.
My Lords, in the light of the fact that the noble Lord, Lord Kingsland, has not had my letter, I am concerned that other letters may not have been received, despite the fact that I signed them before I went away. Therefore, I shall seek to write again to noble Lords setting out this matter clearly.
There is nothing between us on this. The clause is intended to enable balancing of the objectives but it is not intended to enable the Legal Services Board to operate outside the objectives. I take very seriously the fact that noble Lords with great legal experience have looked at this issue, but I have gone as far as I can in seeking legal advice to ensure that the clause does not enable the board to operate in that way. Perhaps it would be better if I set out again why we are clear about this, and noble Lords can come back at Third Reading if they think that I have not achieved that.
My Lords, I am most grateful for the noble Baroness’s response. In those circumstances, I think that we can only wait for her letter and consider the matter again. If we remain as unconvinced as we are at the moment, no doubt we can come back to it at Third Reading. Meanwhile, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
31: Clause 3, page 2, line 33, at end insert “and”
32: Clause 3, page 2, line 35, leave out from “practice,” to end of line 36
On Question, amendments agreed to.
[Amendment No. 33 not moved.]
moved Amendment No. 34:
34: Clause 3, page 2, line 36, at end insert—
“(4) In assessing what is proportionate in the regulation of approved regulators the Board shall have regard, inter alia, to:
(a) the regulator’s resources (including voluntary resources); (b) the effect on regulatory fees; (c) the extent to which the Board’s acts might discourage entry to or retention in the regulated sector; (d) the extent to which the number of persons regulated by a regulator might be reduced in consequence of the Board’s acts; (e) the extent to which the regulator might be disadvantaged and another regulator might derive an advantage, in particular through the movement between regulators of regulated persons as a consequence of the Board’s acts.”
The noble Lord said: My Lords, this amendment deals with proportionality. Your Lordships will recall that this was a central theme in the Committee stage debate and, indeed, it is a constant thread running through the Bill.
In our submission—I believe that the Government concur with this view—regulation should be both risk-based and proportionate. I have heard the Minister emphasise that on more than one occasion. The question is how to ensure that the drafting of the Bill guarantees that the Legal Services Board acts proportionately.
As things stand, the Legal Services Board appears to be more or less free to make its own determination of what is or is not proportionate. I accept that proportionality depends on the circumstances of the case but we believe that the Bill would benefit from the inclusion of at least a non-exhaustive list of key factors that the Legal Services Board should take into account when exercising its regulatory function. In other words, our amendment does not define proportionality but it sets out particular factors which the board should have regard to when assessing what is proportionate in the regulation of approved regulators.
I know that the noble Baroness is well seized of the anxieties of the regulators that are responsible for the world of patent and trade marks. I believe she understands that these small approved regulators fear that, because the LSB is likely to spend a great deal more of its time dealing with the larger approved regulators, it may overlook their limited resources, their low-risk status and their strong track record for good conduct.
There is a perceived risk—at least by them—that regulation may encourage practitioners to operate, as they can in those two areas, outside the regulated sector. That would have the knock-on effect of driving up costs for remaining members and potentially making the regulators’ position untenable.
I understand that in recent correspondence with the two institutes, the Minister stated that the Government were,
“entirely in agreement that ‘one size does not fit all’”,
and that a proportionate approach should be taken by the Legal Services Board.
I understand that the Minister also stated in correspondence that,
“the Legal Services Board will need to recognise the position of smaller regulators … when exercising functions under the Bill. In doing so, the Board will need to have regard to a number of factors which may include entry and retention of regulated persons to the sector and the effect on fees”.
Yet, there is no obligation in the Bill that the Legal Services Board must have regard to such vital issues as entry and retention of regulated persons, and the effect on fees, not to mention the resources of the regulator. We have been told that the Minister,
“will look carefully at whether guidance is a more appropriate way to define what is meant by proportionality in the context of legal services”.
We hope that the Minister will accept this amendment as it stands. We would be reassured to some degree by an undertaking that there will be guidance and an indication in general terms of what that might cover. That at least would set out some of those key factors in assessing proportionality. I also suggest that a commitment to guidance on proportionality at this stage might address some of the plainly abundant fears and concerns regarding the levy—a subject to which, as the noble Baroness knows, we shall be arriving, at some stage in the next few weeks. I beg to move.
My Lords, I support the amendment. As my noble friend says, there is no guarantee. Nothing in the Bill requires a proportionate decision, but in a sense there does not have to be because the decisions of any of the regulatory bodies, as I mentioned on Amendment No. 5, are subject to judicial review. As part of the discretionary judicial process today, judicial review includes proportionality. The amendment is helpful in indicating to what, in particular, regard should be had. I support it in principle on the basis that it would be subject to judicial review if it were disproportionate in any event.
My Lords, in the earlier debate in Committee, the Minister indicated that she thought that proportionality might best be dealt with in Clause 48, with a statement of principle on what was meant by “proportional”. She indicated that it was not possible to treat comprehensively within the legislation itself the circumstances in which the board would be required to act with proportionality. That has some attraction, in so far as it would no doubt spell out the circumstances, and could take particular account of some of the concerns expressed to us by, for example, the Chartered Institute of Patent Attorneys. It is not wholly reassuring, however, because such a statement of principle would not have the force of law. The Minister’s point that it would be neither appropriate nor possible to be comprehensive has been taken on board by the noble Lord, Lord Kingsland, in importing into the amendment the indication that the principle should have regard, inter alia, to particular circumstances. It is not intended to be comprehensive, but addresses some of the major concerns. It is therefore a worthwhile amendment.
The concerns of the small regulatory bodies which have approached us—that their work may be taken over by other bodies less equipped to deal with the regulation of the specialist services that they provide—seem fairly made. Indeed, the Minister indicated that she had not at that stage heard directly from them and that she hoped and expected to do so. Perhaps she has had time to reflect on the arguments made by those bodies whose interests this amendment particularly deals with.
My Lords, briefly, I support the amendment. It deals with the important question of cost and how it might be possible that ill advised regulation drove those regulated away from one body and into the arms of another which might do a less good job. It would be comforting if the Minister could satisfy us that other parts of the Bill ensure that the board and regulators do not feel obliged to act in that way. My noble friend Lord Kingsland expressed this as a probing amendment to some extent. It is a sensible probe and I look forward to the Minister’s answer.
My Lords, I am grateful for this further discussion. I have met with the smaller regulators, and we had what I thought was a useful and helpful discussion—not least, perhaps, in exploding a few myths which they held about this legislation.
The critical aspect of proportionality is in Clause 3(3), which says that the board,
“must have regard to … the principles under which regulatory activities should be transparent, accountable, proportionate, consistent and targeted only at cases in which action is needed”.
Proportionality is a critical theme of this legislation. It is essential to ensure that proportionality is a key factor in everything that the board does. We have made it perfectly clear to the smaller regulators, trade mark attorneys, patent attorneys and so on that this is essential. We would absolutely expect the board to behave appropriately and take into account the size of the body, the nature of its work and so on. That factor is captured within Clause 3(3).
The difficulty with trying to define proportionality is that you come upon that magic word “list”. Noble Lords will know that I have a particular aversion to lists, which I acquired early in my ministerial life. The minute you put a list down, you lose out because you forget to put something in, or you define or constrain issues far too closely for the purposes of legislation. So I do not want to try to define “proportionality”. I spoke to legal advisers, parliamentary counsel and so on. It is clear that behaving in a proportionate manner is very well defined. It can be challenged in law. It is very clear what people are expected to do. It is essential for sworn regulators to feel confident about that.
It is absolutely appropriate that if the Legal Services Board wishes, it can issue guidance. Having read our debates—I am sure that those involved will do so—and having heard from Ministers and officials about the issues of concern, it will be very keen to make sure that it is demonstrating it is behaving in a proportionate way. The Government can issue guidance but they do not in any way prevent the board from ignoring it. I would rather the board looked at this issue in the context of Clause 3 and said: “We have to be proportionate. What does that mean? How does that affect the decision?”. Noble Lords will know that although it is a very obvious concept, it is different depending on the decision made, the circumstances and what was happening at the particular time. But it is challengeable, and that is the critical and important part of it.
Therefore, I resist the amendment because I think that we have the provision within the legislation. The body can indeed issue policy statements on it if it so wishes. I cannot define that for it. It would be wrong to try to do so because I am sure that any definition, however good it is, will fail to address the circumstances that may arise for the Legal Services Board. On that basis, I resist the amendment, but not because I disagree with the spirit behind it.
My Lords, I thank the noble Baroness for her response. I know that she has been in correspondence with the smaller regulators. It struck me from that correspondence that she has given them some encouragement to believe that the Government are sympathetic to what they are asking for.
I accept that the noble Baroness is reluctant to put in the Bill examples or particular factors to which the board should have regard. At the end of my opening, I suggested an alternative approach. I suggested that the noble Baroness might like to consider guidance as to how the Legal Services Board might approach the question of proportionality. The Government must know what they mean when they insert the word “proportionality” in the Bill. If the Government are saying that they do not know how the concept should be applied, the concept should not be in the Bill at all. If the Government do know how it should be applied, aside from the fact that plainly nobody can anticipate exactly the specific circumstances, they must have an idea how they expect the Legal Services Board to approach the issue. For the Government to say that they know how it should be applied and then to say, “We are not going to tell you. Let us wait and see what the Legal Services Board is going to do”— if that is the Government’s position—is deeply irresponsible.
My Lords, I am not attempting to be at all irresponsible. We are setting up a professional Legal Services Board. It will be a body of the highest possible calibre, charged with the responsibilities that it must undertake. One of those responsibilities will be that it must behave in a proportionate manner. I would expect an institution of high calibre to be able to work out what that means in individual sets of circumstances. The Government can come up with a list of things. They can offer guidance and whatever if they so wish. The Legal Services Board can ignore that if it so wishes, too. It is an independent body; it has been charged with being proportionate in its activities.
I met the smaller regulators on 5 February to discuss these issues. The Legal Services Board will have to take into account in all it does that it must behave proportionately, consistently and so on. So I have greater faith in its ability to operate as an organisation in that way. That does not mean that there would be any distinction between the noble Lord, Lord Kingsland, and me if we were faced with decisions about how we would regard the concept of “proportionate”. I just think that it is a word that has very clear meaning in the way that we approach decisions, and one with which noble Lords will be very familiar in all their activities. The noble Lord himself always operates in a very proportionate way.
I do not believe that we can gain very much by doing more. I may consider guidance, but I am trying to be realistic and honest. If we are setting up a professional board and giving it clear ways in which it must operate, I am not sure that I would add much to that. That is my difficulty.
My Lords, I am most grateful to the noble Baroness. She said that if the Government issued guidance, they would have no control over whether the Legal Services Board responded to it. I am greatly surprised to hear her say that. Clearly she could issue guidance requiring the Legal Services Board to have regard to that guidance. There is no reason why she could not do that. Will she consider that approach?
My Lords, I would be delighted to consider that approach. The noble Lord knows that I am always reasonable. I was making the point that if we set up an independent body and give it, in legislation, the context in which it operates, the noble Lord must be able to think of instances in which he would not want the Government to come in to give guidance about what the body should do and how it should interpret aspects of legislation, because of the problem of independence that might arise for the organisation. That was the point that I was trying to make. We must be clear that if we set up a body to be independent, independent it must be. There is the fear that if the Government give it lots of guidance, independence is eroded.
I think that it will be very clear to a professional body what that means. If it does not act in that manner, it can be challenged, but of course I am prepared to consider guidance where there is any merit in doing so and I will do so.
My Lords, I am most grateful to the noble Baroness. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
moved Amendment No. 35:
35: After Clause 4 , insert the following new Clause—
(1) The Board must assist in the maintenance and development of standards in relation to—
(a) the training of paralegals employed by authorised or exempt persons, and (b) the proper supervision and monitoring of paralegals employed by authorised or exempt persons. (2) For the purposes of this section a “paralegal” is a person who, whilst not a lawyer as defined by this Act, provides legal advice, support, assistance or representation.”
The noble Lord said: My Lords, I can be extremely brief in introducing this amendment. It raises the status of paralegals. We talked about this at some length in Committee. I simply want to know whether the Government intend, by amendment, to include paralegals as authorised persons under the Bill. I need no more than a yes or no answer. I beg to move.
My Lords, I am most grateful to the noble Lord. In those circumstances, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 6 [Annual report]:
36: Clause 6 , page 3, line 19, leave out “Secretary of State” and insert “Lord Chancellor”
37: Clause 6 , page 3, line 21, leave out “Secretary of State” and insert “Lord Chancellor”
On Question, amendments agreed to.
38: After Clause 6 , insert the following new Clause—
Administrative decisions made in implementation of this Act shall be subject to judicial review under the jurisdiction of the High Court.”
The noble Lord said: My Lords, I shall be very brief. I have spoken to judicial review in relation to an authority on which the noble Baroness will obviously wish to receive advice from her advisers. They will have to read 40 pages or more of the transcript. At this stage, I will say only that I am moving the amendment for two reasons. One is because the decision of the Court of Appeal makes it clear that judicial review is available under the aegis of the High Court. That ought to be written into the Bill. The other reason that I am moving the amendment is to give an opportunity for the noble Baroness to give advice on what I have said. I beg to move.
My Lords, although it is essential, as the noble Lord will recognise, that the board can discharge its regulatory duties effectively, it is equally important that there is an opportunity to contest the board’s decision where it has acted illegally, improperly or otherwise irrationally. Other than in the case of the board’s power to fine, for which separate provision is made in the Bill as noble Lords will know, I believe that judicial review is the correct remedy in these instances. I have consistently made it clear to the noble Lord, Lord Campbell of Alloway, and to your Lordships’ House that, the decisions of the board and those of the OLC and the approved regulators as public bodies will be subject to judicial review.
My concern with the noble Lord’s amendment is that by setting out in the Bill that judicial review is available on,
“Administrative decisions made in implementation of this Act”,
we could create uncertainty—I have taken good legal advice on this—as it is unclear where the boundaries lie that separate administrative decisions that are taken in implementing the Act and other administrative decisions taken by the board and the approved regulators. This may run the risk of inadvertently narrowing the court’s discretion. It is therefore very important that judicial review is available but is not constrained, as unfortunately it would be if the amendment were accepted.
Clause 7 is an important clause that allows the board to carry out functions that are in effect ancillary to the conduct of its principal regulatory functions. It is about contractual arrangements for staffing, IT, procurement and so on, and if we took it out, we could reduce the board’s ability to discharge its duties. It is a standard provision. I could cite a number of Acts in which noble Lords will find it: the Access to Justice Act 1999, the Communications Act 2003, the Energy Act 2004, the Enterprise Act 2002 and the Companies (Audit, Investigations and Community Enterprise) Act 2004. It does not mean that the board can do anything that it feels like; it is about ancillary functions of the kind that I have identified which it may wish to carry out. I hope that the noble Lord will feel reassured that judicial review is available in the way I suggested, and that his amendment would constrain the ability to use it in a way that I am sure he would not wish.
My Lords, I am obliged to the Minister. I would like the opportunity to consider with care everything that she has said. The words,
“in implementation of this Act”,
are essential qualifying words to include an administrative decision that is the subject of judicial review. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.