Clause
90
Duties
of non-authorised
persons
Amendment made:
No. 114, in clause 90, page 51,line 10, leave out
‘or has an interest in shares’ and insert
‘or has an interest or an indirect
interest’.—[Bridget
Prentice.]
Clause
90, as amended, ordered to stand part of the
Bill.
Clause
91
Duties
of Head of Legal
Practice
Question
proposed, That the clause stand part of the
Bill.
Simon
Hughes:
The clause sets up one of two new posts in
licensed bodies—head of legal practice—and sets out the
duties of the post holder. Clause 92 sets up the other new post, head
of finance and administration. Both posts are self-explanatory, and it
is clearly important that those responsibilities are divided. I can see
the argument for that.
Schedule 11
is the other side of the coin. Part 2 of the schedule sets out
“structural requirements” for the management of the
organisations, including requirements for general management and for
the heads of legal practice and of finance and administration. The
schedule gives criteria for who is a “fit and proper
person” to be head of legal practice, and I should like to ask
the Minister a question about that from a lay
perspective.
Each
organisation will have a head of legal practice, who must be a lawyer
in one of the authorised activities, so they could not be a lay person.
They will take responsibility for all legal activity. Is it
envisaged—this is not clear in the Bill—that the decision
on the appropriateness of the organisation will be taken on the basis
of the organisation as a whole, without considering who is its head of
legal practice, or will it be a bit like the application for a licence
currently made to a local authority and traditionally to a magistrates
court whereby it is the prospective licensee whose fitness and
propriety are considered? It is not sufficient to say that the
Whitbread brewery owns a pub; it must ensure that the pub’s
tenant is fit and proper. Both are material considerations. To give an
example, there are some rogue business people with an extremely bad
reputation for ripping people off and not having the public interest at
heart. A Mr. van Hoogstraten comes to mind in that
category.
Mr.
Henry Bellingham (North-West Norfolk) (Con): He is a Lib
Dem.
Simon
Hughes:
He is certainly not. I sincerely hope for
everyone’s sake that he is not a member of any party represented
in this room. He has a terrible
business reputation for being an exploitative landlord, but there is
nothing to prevent him or one of his companies from applying to join a
licensed body. The head of legal services might have worked for
somebody like that for one, 10 or 20 years, passed their exams and
qualified as a lawyer. I am keen to know what the test will be when the
licensing authority decides whether to grant the
licence.
Will
there effectively be two tests—is the organisation considered
legally and financially competent, and are the two people put up as
heads of legal practice and finance and administration regarded as fit
and proper? Finally, when the time comes and the procedures in the Bill
are established for those tests, if the head of legal practice is
replaced and someone else is nominated, is it expected that the
licensing process should start in good time, so that, if someone else
is nominated, there would be an opportunity for the licensing authority
to say, “No, they are absolutely not satisfactory, and they are
not a fit and proper person. We do not think that they have the
experience, and we do not know enough about them, so unless and until
you produce some different people, we will not continue to license you
as an organisation”? It is in the consumer’s interest
that both tests should be passed, and that both organisations and
individuals are passed as being fit for purpose. I am keen to know that
both tests should be passed in advance, before any green light is given
by the licensing authority to the organisation, so that the licensing
authority can do its job under the
legislation.
Bridget
Prentice:
The hon. Gentleman is absolutely right about the
importance of those two posts under the new structure. As he points
out, the head of legal practice must, of course, be a lawyer, so one
would assume that they would follow the rules and the code of conduct
established by the Law Society.
As for the licence application,
it must set out the ABS’s structural arrangements, including the
services that it intends to supply. However, it must also set out and
identify the nominated holders of both of posts—the head of
legal practice and the head of finance and administration. The whole
application would then be considered. However, the nominated
individuals will remain under consideration and will also be looked at.
There are two tests, but they will invariably be made at one sitting,
so to speak. Finally, in answer to the hon. Gentleman’s final
question, any change in the holder of either of those positions would
also have to receive approval.
Simon
Hughes:
May I ask a supplementary question? Is it
envisaged that the licensing authority would regularly expect to see
the people proposed for the posts of head of legal services and head of
finance and administration, to satisfy itself, face to face as it were,
that they were suitable? There is all the difference in the world
between having a bit of paper that may or may not be true when it comes
to people’s degrees or qualifications and seeing the people
themselves. Furthermore, will there always be checks to ensure that
claims that applicants make about qualifications, degrees and
competence are accurate, so that we do not have the old story of the
bogus degree, or the degree from the non-existent institution, or the
qualification from an accountancy school that does not exist or that
was closed down because it was fraudulent? Are we absolutely certain
that those checks will be really rigorous and that people will not slip
through the net on the basis of claims that are not
true?
Bridget
Prentice:
That would be entirely a matter for the
licensing authority, acting within its rules. I would expect it to be
fairly rigorous in making those checks. Of course, as the authority
works through its system of checks, there would be nothing at all to
stop it from making inspections, or from rechecking organisations to
which it had given a licence. Certainly, that is very much the theme of
the Bill. However, regarding the specificity of the checks, any checks
would have to come within the rules of each licensing
authority.
Question put and agreed
to.
Clause 91
ordered to stand part of the
Bill.
Clauses
92 to 94 ordered to stand part of the
Bill.
Clause
95
Financial
penalties
Question
proposed, That the clause stand part of the
Bill.
1.30
pm
Simon
Hughes:
It would be helpful if I may make points that
significantly and substantially belong here and, although they touch on
the information provision that we dealt with, I did not want, as it
were, to make overlapping points on two separate provisions.
The financial penalties
provision is really important. It allows a licensing authority
to
“impose on a licensed
body, or a manager or employee of a licensed body, a penalty of such
amount as it considers
appropriate.”
It then,
quite reasonably, says that there will be
“rules prescribing the maximum of
a penalty which may be imposed under this section”,
and that those rules will need the
consent of the relevant Minister, the Lord Chancellor. That is entirely
proper, in so far as it is set out as a structure for action, and the
money would go to the licensing authority. What nobody has yet said as
far as I can see, and notes on clauses do not say it, is how much we
are talking about in terms of the maximum penalties that are in the
minds of Ministers. I appreciate that we must have further debate, but
want to know that we are talking about a maximum that is pretty high,
and that the fines, from the beginning, will be sufficiently stiff to
be a real deterrent and threat to people who do not do their job
properly and competently—whether as a firm or as an
individual—and to ensure that they are going to bear a
relationship to the turnover and profit of the company in
question.
I represent
in my constituency the headquarters of the Health and Safety Executive,
which has been given powers in legislation by Parliament to police
health and safety. If there are breaches of health and safety
regulations——something with which the hon. Member for
Beaconsfield (Mr. Grieve) is familiar because he has done
much work in this area——there is a power to fine a
company for breaching them. I am absolutely not somebody who argues for
overly regulated businesses, but I am very clear that if we are
regulating building in Canary Wharf or the City, or in my own borough
around London bridge, we need very tough penalties for people who
breach the health and safety regulations and put lives at risk. We know
how dangerous those jobs can be, and how people are still killed and
injured. There has been a long debate, but health and safety powers are
not sufficient. We are debating corporate manslaughter elsewhere in
this building. Why are we having that debate? Because there was not
thought to be sufficient liability in respect of companies running
cross-channel ferries or, potentially, boats on the Thames, when they
were negligent, and insufficient penalty if they were in
breach.
My question
here is again a consumerist point. If the public are to be
really protected, the people going into that market must know
that they will only breach the regulations, or fail in that respect, at
their peril. I want some clear indication of the top-level thoughts in
the minds of Ministers for individuals and for companies. In relation
to those issues, the one thing that most frequently comes up
as an area where things can go wrong and people can fiddle the
system, is in finances. There is always concern about
the accounts of firms, and law firms, and many of the firms
complained about, have been complained about because they put their
money in the wrong account, and then moved money around to the wrong
places in the solicitors’ firm.
Are the
systems are intended to make life as easy and transparent for people,
both the firms and the customer, as possible? For example, at the
moment, a company would need to have an annual audit. Rather than
having two different processes for providing the financial information
to show that the company is behaving itself—which would be
absolutely necessary if there were no threat of an investigation with a
view to saying something that something improper had happened—is
there a way of ensuring that one bit of work is done rather than two?
In other words, the money would be collected for the audit and, at the
same time, for the purpose of satisfying the licensing authority, so
that the company had to produce only one set of figures every year,
with one lot of people overseeing it and one occasion on when it was
inspected. It would all be done in a way that gave a clean bill of
health both in accountancy terms and in licensing terms.
It is no good
having a licensing regime or a regulatory regime unless it has teeth,
and the teeth are the financial penalties, which need to be large
enough. As far as I know, the figures have not been made public, and I
should therefore be grateful if the Minister would tell the Committee
what the Government envisage will be their advice when the Legal
Services Board is set
up.
Bridget
Prentice:
There is no actual figure in my mind at present
that would be appropriate. I agree with the hon. Gentleman that there
must be appropriate fines. However, fining is only one of the available
tools; punishments such as suspending, revoking the licence, referring
people to other regulators and disqualification from holding specific
positions are also available. It will be for the authority to consider
which of those is most appropriate in the circumstances of the
case.
As
the hon. Gentleman said, some organisations are far bigger than others,
so the fines need to be appropriate in that respect, too. It brings to
mind that to fine premiership footballers £5,000 a week is a
drop in the ocean for most of them and does not make a great deal of
difference to their subsequent behaviour. I therefore have some
sympathy with the hon. Gentleman’s view that the fine must
reflect the ability to pay.
This part of
the Bill will not come into force until 2011 and between now and then
we will look at benchmarks elsewhere and consult stakeholders, who
include consumers, so I will not give a figure at the moment. I simply
say that the hon. Gentleman is right: from the consumer’s point
of view, justice has to be seen to be done, as well as being done. The
perception that a person is being fined appropriately is crucial to the
consumer’s
confidence.
Stephen
Hesford:
Subsections (3) and (4) of clause 95 state that
the board will make rules, which will be agreed by the Government. It
will be appropriate at that time. That is the method by which this will
all be worked out.
Simon
Hughes:
That was what I
said.
Stephen
Hesford:
I do not understand what it is that the hon.
Gentleman does not
understand.
Bridget
Prentice:
It is not for me to explain to my hon. Friend
how the mind of the hon. Member for North Southwark and Bermondsey
works. All I can say is that I do not have a figure in mind, for the
very reason that my hon. Friend gave: the matter will be looked at over
the next few years in consultation with stakeholders, which will, as I
said, include consumers. We will consider the benchmarks set in other
situations. The board will come to a conclusion, and, as my hon. Friend
rightly points out, that will go through the Lord Chancellor. I cannot
be more explicit than that.
It is sensible to check
financial propriety but, again, there are detailed arrangements that
the board and the licensing authorities will want to consider. The
decision will be for
them.
Simon
Hughes:
If the hon. Member for Wirral, West had been
listening earlier, he would know that I particularly cited the two
subsections to which he referred. I am fully aware of the process, but
it is none the less important to flag up the importance of the issue
now to make the point, which the Minister picked up, about fines
needing to be proportionate to ability to pay, in terms of turnover,
capital and other financial considerations and to see whether the
Government have addressed the issue. Ministers said that they had not
done so yet, which is a half-reasonable answer. The sooner the
Government start to share their thoughts on this issue, the sooner
people will understand the real implications of the Bill and whether
the legislation will have teeth.
I end where I began: these are
important issues, and unless the fines can be made big enough, this
sanction will not be the sanction that the Bill potentially allows it
to be.
Question put
and agreed
to.
Clause 95
ordered to stand part of the
Bill.
Clauses
96 and 97 ordered to stand part of the
Bill.
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