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4.30 pm
If the provisions are accepted, the House will delegate the power to tax to the FSA. We must be cautious about that because an authorised individual--for example, an independent financial adviser--will be subject to a levy. That money will be used not necessarily for legal help for that adviser if he is accused of market abuse, but for his clients--members of the public who will pay nothing. That will happen because the scheme is not funded through general taxation but through the levy. People and firms will have to pay a form of taxation into a fund, which will be used in unspecified ways.
We do not know the details of the scheme. It is another item that will be delegated to secondary legislation through our old friend the negative resolution procedure. This debate is our last opportunity to hear and agree the details, or at least to be told more about them. The way in which a legal aid scheme works, the sources of the funds, their application, and the criteria for eligibility for assistance are important matters of justice. The scheme will never come before the House because the order will be made under the negative resolution procedure.
If anyone objects, the Government can say, "That's very interesting, but we won't debate it," and the scheme will become law.
The Minister's comments have been light on substance. We knew that the scheme would be included on Report, but the details remain sketchy. As I said earlier, they involve the redistribution of money, compulsorily levied from people in the financial services industry. The Government owe us a slightly longer explanation.
Mr. Loughton:
I am sorry that I was not present for the earlier discussions on the new clause--I was called away. I want to add a few comments to those of my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory).
As I said when we started the debate, the details of the legal aid scheme were not available to the Committee that considered the Bill. As my right hon. Friend said, although great chunks of new clauses are being added at a late stage, an enormous amount of detail about the workings of the scheme is simply unavailable. I am especially worried about new clause 10, which outlines a large part of the new scheme. It establishes a strange, cumbersome structure whereby the FSA will raise a levy from members to pay the Lord Chancellor the relevant sum, which will then go into the consolidated fund. The Lord Chancellor will then fund the cost of legal aid from money provided by Parliament. That necessitates an equalisation fund for the refund to the FSA, and a complicated redistribution to its members. By the time everyone has had a pound of flesh, and taken a cut for the administration of the scheme, one wonders whether any money will be left for the scheme, or to refund the people who paid in the first place.
There is a basic anomaly and injustice in the provision. It is unfair that authorised people alone will pay the levy for the misdemeanours of unauthorised people. There is also confusion about the period in which the Lord Chancellor decides how the equalisation repayments to the FSA and member firms will be made. Much can change in a year, and manipulation can occur.
New clause 10(7)(a)(ii) poses a question about the equality of the redistribution to authorised persons because it refers to:
Decisions about refunds that are paid on account before the amounts are calculated also seem arbitrary. The excess receipts could be calculated against a firm's potential fines. Contrary to the rule that one is innocent until proven guilty, a firm is considered a potential member of the sin-bin pool before being identified as possibly having committed some misdemeanour that may be investigated
by the FSA. That turns the code of natural justice on its head and will be open to challenge under the convention on human rights.
Mr. Timms:
Who, in the hon. Gentleman's opinion, should pay for the legal assistance scheme, if not the authorised persons?
Mr. Loughton:
It is not my job to specify that. I have not objected to a levy for a legal aid scheme. I have not said whether I believe that the scheme is right or wrong. Throughout our proceedings in Committee, I did not say whether it was right or wrong in principle. I simply questioned how it would work. I do not say that we should not have such a scheme. It has great merit, and, if run properly, is probably fair. However, the scant proposals that we have been given do not provide for equality.
In the old days of the stock exchange, there was a mechanism called the PTM levy--I must be careful to get the initials in the right order. It stood for the panel of takeovers and mergers. A levy would be added to everyone's contract. That was considered a fair way of raising money for a group that operated in part of the City's structure. People did not object to it. Could the levy that new clause 10 proposes function in the same way? How will firms pay for it? Is there a mechanism to prevent firms that have to pay an indeterminate levy from adding a legal aid fund levy to contract charges for their clients? If that happened, the clients would pay, quite transparently, for the legal aid process. Is that permissible? It is an obvious way of proceeding. As with so much of the measure, the clients, who apparently need extra regulation, will end up paying for it. How does the Minister envisage companies funding payment of that levy, and could they issue a contract surcharge on their business, whatever sort of business, equity transactions or insurance business they carry on? Is the cost of the levy completely open ended? Will it be capped or could it double one year and treble the next? An awful lot of money could be involved, depending on the amount of legal activity that is to be financed. Smaller firms could have to find a considerable sum, which would affect their ability to carry on their business.
I wanted to raise those questions, but the fundamental point is that we still lack an awful lot of detail. It is all very well for the Minister to say, "What would you do?", but I am not criticising the basic structure or the basic approach that the Government appear to be adopting. I want to be convinced that the proposal will work properly and fairly and that its extent can be properly defined, but I fear that nothing I have heard suggests that I can be assured on any of those questions.
Mr. Timms:
I am still listening eagerly for a welcome from Conservative Members for the changes that we have made in response to points raised with us. Their welcome still sounds rather grudging, although the hon. Member for East Worthing and Shoreham (Mr. Loughton) said that the arrangement could be fairly fair so perhaps we are making progress. He asked about the details, and the hon. Member for Buckingham (Mr. Bercow), who was present earlier, was absolutely right about them: it is important that there should be consultation. That is a matter for the Lord Chancellor, who will consult in due course.
I do not want to go back over old ground, but I shall respond to some of the points made by the right hon. Member for Wells (Mr. Heathcoat-Amory) and the hon.
Member for East Worthing and Shoreham. The arguments pushed in two conflicting directions: we were being urged to give the scheme a wider embrace and criticised for the way in which it will be paid for, but no alternative was suggested.
I think we have the balance right, but I want to address the serious charge that there is risk in what the Government are doing. I do not believe that that is the case. The right hon. Gentleman fairly and accurately described our position, which is that the disciplinary regime does not deal with criminal conduct, but suggested that we were treating it like club. The right analogy is with the regulation of professions, on which the jurisprudence is absolutely clear: such regimes are civil. That is the basis on which we are proceeding.
Question put and agreed to.
Clause read a Second time, and added to the Bill.
Brought up, read the First and Second time, and added to the Bill.
"such of those persons as it may determine".
On what will such a decision be based? Will it be based on someone having the head of the FSA round for a rather nice lunch and his then deciding that that person should get a slice of the cake for which they paid in the first place? That is iniquitous and leaves the provision open to challenge concerning the equality of the treatment of member firms that have to stump up money. The method of redistribution could be entirely arbitrary. We need far more details.
".--(1) The legal assistance scheme may, in particular, make provision as to--
(a) the kinds of legal assistance that may be provided;
(b) the persons by whom legal assistance may be provided;
(c) the manner in which applications for legal assistance are to be made;
(d) the criteria on which eligibility for legal assistance is to be determined;
(e) the persons or bodies by whom applications are to be determined;
(f) appeals against refusals of applications;
(g) the revocation or variation of decisions;
(h) its administration and the enforcement of its provisions.
(2) Legal assistance under the legal assistance scheme may be provided subject to conditions or restrictions, including conditions as to the making of contributions by the person to whom it is provided.".--[Mr. Betts.]
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