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Mr. Mitchell: I am grateful to my hon. Friend the Minister and I shall try to save what is left of my career by gibbering that gratitude to him for a little while. He has

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given us some substantial assurances. First, I particularly like the assurance that the Kelda Group--formerly Yorkshire Water--will not be able to get away with what I thought was a possible subterfuge by registering as an LLP. I am grateful for that assurance, although it was not made in relation to this group of amendments.

Secondly, I am grateful for my hon. Friend's substantial assurance that the Bill will not come into effect until the tax review is completed. That is important as it will enable people thinking of setting limited liability partnerships to know from the recommendations of that review what the tax regime will be. That is a substantial advance in our argument.

My hon. Friend the Member for Newcastle upon Tyne, Central (Mr. Cousins) and I have been entertaining the House with our nice guy, nasty guy double act--

Mr. Cousins: On a point of order, Mr. Deputy Speaker. I think that my hon. Friend meant to imply that I was the nice guy.

Mr. Deputy Speaker: That is not a matter for the Chair.

Mr. Mitchell: Of course my hon. Friend is the nice guy.

Thirdly, my hon. Friend the Minister's assurances on disclosure and bringing partnership law and safeguards into line with those that apply to limited companies through the company law review has given us the incentive to make submissions along the lines of the arguments that we have put before the House. We shall consider doing that in respect of both sets of provisions. That is another substantial point.

Fourthly, my hon. Friend assured us that the Office of Fair Trading review will be looking at these matters and I am sure that it will take into account fair competition considerations in respect of the sale of other services.

We are grateful to my hon. Friend the Minister for those substantial advances and we feel that we have achieved something in very difficult circumstances. Although Opposition Members tried to heckle us--in particular, they tried to heckle me rather than my statesmanlike hon. Friend--we were only doing the job of scrutiny that the Opposition singularly failed to do. Instead, they simply pressed for further concessions for the vested interests.

We have been doing a job of scrutiny under a handicap. As the Bill originated in the House of Lords, it will not be returning there for further amendment. I am grateful for the four substantial concessions that my hon. Friend has given us and I realise they are all that we shall get at this stage. I do not think that it should have been done in this way, but as it has we are grateful to my hon. Friend for the concessions that he has made. As I am a realist, I shall withdraw the motion and give notice that my hon. Friend and I shall not be moving any of the other amendments in our names. I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

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Mr. Deputy Speaker: As the hon. Member for Great Grimsby has said that he does not intend to move his later amendments, we now move on to amendment No. 1, in the name of the official Opposition.

Clause 5

Relationship of members etc.

Mr. Nick Gibb (Bognor Regis and Littlehampton): I beg to move amendment No. 1, in page 3, leave out lines 22 and 23 and insert--

(b) subject to paragraph (a), by the rules and principles which would apply if the law relating to partnerships applied to them.'.

Neither of these are relevant interests, but I remind the House that I am a chartered accountant, so I ask hon. Members to go easy on the language that they use against chartered accountants and others. Also, I do not currently practice, but I contribute six or seven articles a year to Accountancy Age.

Having sat through the debate on the new clauses tabled by the hon. Members for Great Grimsby (Mr. Mitchell) and for Newcastle upon Tyne, Central (Mr. Cousins), I feel as though I am intruding on private grief. If the Labour party can tear itself apart on a relatively technical measure like this one, one can only wonder what machinations, discussions and divisions are taking place behind the scenes on issues of wider concern, such as Labour's failure to deliver on the national health service, education and crime.

Mr. Cousins: I assure the hon. Gentleman that we have had a most comradely exchange with the most comradely outcome. I should like to put that on record.

Mr. Gibb: I am grateful to the hon. Gentleman for that intervention. I am sure that it was comradely, but none the less Labour Members were split.

This is an important Bill which has had several layers of scrutiny. As the Minister said, it began life under the Conservative Government, but when it eventually began its passage through the other place, despite scrutiny and a report by the Select Committee on Trade and Industry, it still contained a number of problems.

The hon. Member for Great Grimsby was wrong to say that the Opposition did not give the Bill considerable scrutiny. My noble Friend Baroness Buscombe and I discussed our concerns in great detail with the Minister, Lord McIntosh, and owing to pressure in the other place by my noble Friend and a reasonable approach taken by the Minister, many of our concerns were dealt with by Government amendments. Indeed, had the Government taken such an approach on some of their more controversial legislation, they would not be in their current position in regard to credibility with the public.

There are nevertheless some remaining concerns which we raised in Committee and which the Government have not dealt with adequately. Our first concern is that of the so-called default provisions. Clause 1(5) of the Bill states:

except as far as otherwise provided by this Act or any other enactment, the law relating to partnership does not apply to a limited liability partnership.

The reason for that provision is, according to the Government, that as an LLP is a legal person in its own right and is therefore a body corporate; in general,

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partnership law should not apply; and company law should apply instead. However, the very essence of an LLP remains that of a partnership.

It was in order to retain the partnership ethos that professional firms have sought this form of incorporation rather than becoming companies proper. An LLP will still have what is in effect a partnership agreement regulating all the internal relations of a partnership; but particularly for smaller, less well advised partnerships which seek to become LLPs, it could well be that the internal partnership agreement will not have clauses that deal with every eventuality to be faced by a partnership in business.

In the past, this would not have mattered. The Partnership Act 1890--and the century of case law since--have filled in the gaps regarding almost every conceivable eventuality. Future case law, based on precedent and the principles established in earlier cases, would deal with future eventualities. Those matters may include the right of partners to examine the books and records, the right to take part in the management of the partnership, and questions regarding the expulsion of members.

Those issues may be dealt with adequately in the partnership agreement, but they may not be. Short agreements for smaller partnerships drafted when it was understood that general partnership law would apply may well not include many important provisions.

The amendment would provide that the law with regard to the internal arrangements of an LLP should default to general partnership law. Its wording has simply been lifted from an earlier draft of the Bill. The removal of the provision from the final Bill has aroused widespread concern.

That concern was such that the Government entered into a separate consultation exercise on the specific question of the default provisions. The views of many consultees were summed up in the Government's response document. One paragraph voiced the general concern, stating that

in the absence of an adequate agreement between the members of a Limited Liability Partnership, the relationship between members would be uncertain; there was a strong desire that partnership law should govern the rights and duties of the members of the Limited Liability Partnership . . . partnership law is well understood by partnerships and practitioners, with the principles established over many years.

That was also the view of the Law Society, which stated:

The Society was concerned with clause 1(5) which disapplies partnership law from limited liability partnerships unless otherwise provided in the Bill. The Society has always considered there to be the need for some default provisions that would operate in the absence of agreement to the contrary within an LLP and which would cover certain basic matters relating to the mutual rights and duties of the members of an LLP.

The Law Society accepted that the Government had amended the Bill to insert one or two of the partnership law provisions in the regulations. However, it is inevitable that some areas will not be covered by the exhaustive and specific list that the Government have included in the regulations and, as always with this Government, it is small business that will suffer. Big, well advised partnerships will be fine, but yet again the Government are creating a complex regulatory regime that puts a premium on being well advised.

The hon. Member for Great Grimsby complained about advisers' incomes, but the pressure for greater regulation is created by him and those who share his philosophy.

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Someone has to read, understand and remember the regulations for which the hon. Gentleman continually presses. That will lead to greater demand for expert advice, and therefore higher salaries for those prepared to do that work.

The amendment would reduce the premium for expert advice by making the regime simpler.

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