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Incidentally, I—and, I suspect, a number of other noble Lords—question paragraph 2 of Schedule 15, which states that the chairman of the OLC,

Many of the most successful ombudsmen in recent years in this country happen to have been lawyers. The Financial Ombudsman Service, which is one of the biggest ombudsmen schemes in the country, has had a lawyer as its chairman for some time. The parliamentary and local government ombudsmen have not always been lawyers. I make the simple point that banning lawyers from holding the post is an extreme measure. A legal qualification may not be the only qualification that may be useful in this field but banning lawyers from holding the office is to carry too far the view that lawyers must give way to lay men in this modern age.

I also want to say a few words about alternative business structures. Even in the 1980s, when I was head of the Office of Fair Trading, we began to be concerned, on behalf of the consumer, with restrictions on competition and innovation. That was usually constituted by the professional rules of barristers, solicitors and a number of other professions. Some of those restrictions, such as those on advertising, have been long gone or radically modified. However, there are long-established rules preventing different types of lawyers working together on an equal basis and other rules preventing them working in partnership with others, such as accountants and businessmen, to provide for the customer under one roof a range of legal, financial and commercial advice and assistance.

In more recent years, the Office of Fair Trading has published various reports proposing that alternative business structures, under suitable safeguards, should, to preserve professional integrity, be permitted. Clauses 70 to 105—noble Lords will see in a moment why I refer to the clause numbers—provide for a licensing scheme so that firms offering clients a number of different skills in collaboration may be set up. The positive case for the client being able to purchase under one roof legal, financial and other services and facilitating the injection of capital into such firms has somewhat been lost sight of in recent years in the clamour for safeguards and reassurances. Of course we need safeguards and reassurances but I am worried that in this Bill one has 35 relevant clauses. There may be many potentially useful enterprises of a mixed disciplinary nature that could usefully be set up for the benefit of clients but this mass—I hope that I do not exaggerate too much—provision of 35 clauses on safeguards and so on may

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be so off-putting that some of the desirable objectives and multidisciplinary firms, which would be for the benefit of clients, will not be obtained.

5.19 pm

Baroness Henig: My Lords, as one of the Members of the House of Lords who sat on the pre-legislative scrutiny committee that considered this Bill in draft form, I would like to contribute to this debate. I do so rather apprehensively as one of the few non-lawyers speaking this afternoon. At the outset, I point out that this is a very important Bill that will improve the quality of legal services available to ordinary people. I agree wholeheartedly with the noble Lord, Lord Hunt, about the fundamental significance of the quality of service offered; that is why I so strongly support its major provisions.

First, I emphasise how effective the pre-legislative process was. It was a short and rather intensive process with a lot of work crammed into June and July, but the committee was able to take the views on the draft legislation of a wide range of legal experts and organisations, and of bodies representing consumers. It did indeed, as the noble Lord, Lord Hunt, said, try hard to embed the essence of the Clementi proposals into the Bill's provisions.

We put forward 58 recommendations, of which 32 were agreed to in principle, and only 14 were rejected by the Government. I think that that is why this Bill now commands wide support in principle, although inevitably there are some important details still to be debated and satisfactorily resolved. The scrutiny certainly improved the quality of the proposed legislation, and I offer my congratulations to the chairman, Lord Hunt of Wirral, for all his hard work and, particularly, his consummate skill in maximising consensus, and to the Clerk, advisers and support team who gave us so much help.

It should come as no surprise that the strongest supporters of this Bill are consumer groups because, as they rightly point out, a sizeable minority of the general public are not well served at the moment by the legal services they receive—mainly from solicitors. There are far too many complaints, not at the highest level of seriousness of gross negligence, but of poor service, incompetence, excessive delays or costs not being clearly spelt out at the outset. Going to a local solicitor is clearly not always a happy experience for people who are often under pressure already, which is why they are seeking legal help.

As Which? has pointed out, in 2005-06 the Law Society received more than one complaint for every six solicitors practising in England and Wales. However, it is not just consumer champions who support the Bill. I am pleased that the Law Society supports the main proposals in principle, albeit with some important qualifications.

Like the previous speaker, I shall focus on two aspects of the Bill—alternative business structures and the proposed Office for Legal Complaints. I particularly welcome the proposals for ABSs, which not only will give existing law firms more flexibility in how they operate, but will bring about significant change for the customer. As a result of the provisions,

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we can expect to see improved services for consumers and greater convenience, with the establishment, for example, of one-stop shops for related services. Alternative business structures will open the door to the provision of legal services by supermarket chains or high street banks. Your Lordships may refer dismissively to Tesco law, but Tesco has proved itself extremely adept at providing services in a way and at a cost that the consumer values. These proposals will lead to more choice for consumers; they will stimulate competition; and I believe that they will drive up standards.

The Law Society gives alternative business structures a cautious welcome, but is worried that the outcome might be to create legal deserts, especially in rural areas, and rightly emphasises that it is important to preserve access to justice on people's doorsteps. I agree with that view, but I would argue that under the new proposals, access to legal services will be enhanced for the vast majority of people. We will see a greater variety and diversity of legal services being provided, probably at a lower price, and no doubt including the use of the internet. This could indeed lead to a significant shift in the way legal services are provided, and will certainly have implications for many firms of high street solicitors. In future, they will neglect the needs of their clients at their peril, because providing a high quality of service and satisfaction will be the only way to make sure that clients do not vote with their feet for a perhaps more impersonal but certainly more accessible service provided by Tesco or the Co-op.

The establishment of the Office for Legal Complaints is a welcome step forward—not before time—from self-regulation of the legal profession to an independent body that will deal with all consumer complaints, and which will have a majority of members who are non-lawyers and experts in consumer affairs, complaints handling and customer service. I have already indicated how necessary this change is, with levels of dissatisfaction with how the Law Society handles complaints remaining very high. In her most recent report, for 2005-06, the Legal Services Complaints Commissioner pointed out that four of every 10 people remained dissatisfied with how the Law Society handled their complaint. As we know from the work of consumer organisations, large numbers of people do not submit formal complaints about their treatment because they doubt that anything positive will result.

The introduction of the alternative business structures framework and the Office for Legal Complaints are major changes which will bring about a significant improvement in the quality and accessibility of legal services, and in levels of consumer satisfaction in an area of provision which, as noble Lords have pointed out, is crucial to individuals at particular times of need. That is why the Bill is so important.

I realise that I probably address the independence of the Legal Services Board at my peril, but some points must be made. I accept that the board should not just be independent of government, but must be perceived as such. The independence of our legal

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system is an essential element of its strength, not just in this country but worldwide, and must be cherished and preserved. However, in my experience, the way that current Secretary of State appointments are handled—according to Nolan rules and in strict accordance with the Office of the Commissioner for Public Appointments code of practice—should remove any apprehensions about the suitability, qualifications or independence of the chair and members of the new board. A selection panel, including an independent assessor, will conduct the key stages of the appointments process and recommend specific individuals to the Secretary of State.

I have recently been through such a process myself and can vouch for both how stringent and how independent of government it is. However, if it is felt that, exceptionally, at the end of this process, the Secretary of State should submit the final couple of names for each position to significant individuals—such as the Lord Chief Justice or the chair of the National Consumer Council—in a sort of final vetting stage, I would have no objection. I certainly do not believe that it should be spelt out in the Bill, however. Finally, I share the hope and expectation of the Law Society that the Legal Services Board will operate with a light touch and in a proportionate manner.

5.27 pm

Lord Whitty: My Lords, I declare an interest as the chair of the National Consumer Council, but make it clear that I am not making a bid for the job my noble friend just suggested. It is quite a significant interest, however, since the National Consumer Council is one of the bodies that initiated the process of convincing the Government of the need to regulate legal services some years ago. After the lengthy period of Clementi and its consultation, and then an intense period of Joint Committee consideration, the Bill is close to being fit for purpose. I am not saying that it cannot be improved, or that some noble Lords’ points should not be addressed. The overall direction and structure, however, are right.

The lawyers among us must recognise that the system of self-regulation—certainly that of the Law Society and, to some extent, the Bar—is not held in high regard by the general public. My noble friend Lady Henig has just gone through some of the background figures and I will not repeat them, but the fact is that lawyers are up there with estate agents, builders and garage owners—and possibly politicians—as one of the service providers they are least impressed with. They are also unimpressed with the complaints system that has operated hitherto. As my noble friend just said, very few of them think it more than a waste of time to put in a complaint.

The record shows that there was a need for action. By setting up the Legal Services Board and the Office for Legal Complaints, the Bill reflects the need for independent scrutiny of the provision of legal services. However, the Bill also recognises that the existing bodies should be incorporated within this structure as approved regulators, as a sort of

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franchising operation, as long as they do their job effectively. This is a typical British compromise and a robust one at that.

Some of the reactions to the Bill seem hugely exaggerated. As almost my first re-entry to public life, about nine months after retiring as a Minister, in my present job, I went along to a discussion arranged by the International Bar Association on the very day that my noble and learned friend the Lord Chancellor announced his intention to proceed with these proposals. I thought it would be a fairly quiet affair, nothing like the meetings with farmers and hunters that I was used to. In fact, it was far worse. I was accused by the assembled luminaries of supporting a proposal that was close to those of Hitler, Stalin and Idi Amin. Given the international context in which people were talking, I can understand where they were coming from, and I am glad that the noble Lord, Lord Thomas, did not express his views about the noble and learned Lord the Lord Chancellor in quite the same way. However, the reaction from the British legal profession is a bit over the top and hysterical.

It may be true that the Bill could say a bit more about independence and could establish a few mechanisms to ensure that independence, but the reaction, including that in this debate, has been an overreaction. Most other industries and services are subject to some form of regulation, and where there is no formal statutory regulation, we rely on general trading standards enforcement or have forms of self-regulation that are more effective than those that appear to operate in the legal field. In others areas, we rely on effective competition to deliver consumer benefits and avoid consumer detriment. However, none of those applies in the legal profession. When self-regulation does not work for the consumer, the consumer has the right to demand that the Government intervene to impose independent scrutiny of the delivery of the service. In that sense, legal services are no different from any other service.

In this system of partial self-regulation, it is important that the role of the regulator is completely separate from the trade union function of the Law Society and the Bar Council. To achieve that, the approved regulators—the Law Society and the Bar Council—should have a majority of lay members on their governance boards. It is important that the consumer voice is effectively heard on the Legal Services Board, which is why I welcome the inclusion of a consumer panel. Indeed, its role could be strengthened to make it closer to that of Ofcom or the Financial Services Authority. However, I do not accept the argument that that panel should be balanced by an additional panel for practitioners. The analogy with the FSA in that respect is flawed. In legal services, the front-line regulator would continue to be professionally based. To mix my food metaphors, it would be having your cake and eating it to have a second bite of the cherry by having a separate practitioners’ professional panel in the LSB.

Often the most important strand of consumer pressure in any industry is to allow competition to flourish. The ABS proposals in the Bill would allow limited competition in the provision of some legal

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services. That has also been greeted by an overreaction bordering on hysteria. I am not a complete freemarketeer, and I recognise that some inhibitions have to be put on the labour market and, in particular, on the market for professional services. I recognise that some legal services might be provided effectively only by enterprises consisting solely of legally qualified practitioners. However, there is a range of other services in which lawyers are involved that require the skills and expertise of other professions. The concept of alternative business structures of lawyers and non-lawyers is a sensible way to provide a flexible one-stop-shop service to consumers with greater convenience and, potentially, lower costs. I have no objection if people find it easier to seek their legal services in Tesco or, preferably, the Co-op than with a high street solicitor, but it is important that there is some quality control on the licensing system introduced by the Bill. My noble friend Lord Borrie suggested that the provision might be over-onerous, but nevertheless we need a serious licensing system.

The licensing system need not extend to some areas—for example, will writing is not subject to huge consumer detriment, so the mandatory licensing system need not apply. There are other areas—and I was glad to welcome the Lord Chancellor’s remarks about trade union provision of services in employment cases—where again the full provision does not apply, but for services that have hitherto been provided by lawyers we need a robust licensing system.

The licensing system must, as I think my noble friend Lord Borrie hinted, allow for innovation in order for alternative businesses to develop and to deliver services that might be quite mundane for lawyers but which can frequently be traumatic for the people seeking legal services. It is also true that the conditions of licensing will meet some of the objections raised that the system could end up in cherry-picking and drive out services to the most vulnerable potential clients and consumers. I notice that our former colleague, now styling himself Andrew Phillips, had an article in the Guardian today arguing this case. That is hugely exaggerated, but we would rely on a licensing system to minimise it. It would help if the Government felt inclined to improve the provision of legal aid in this context as well—but perhaps that is another point.

I welcome the proposals on the complaints system—the OLC—but I think that they could be strengthened a bit. A compensation limit of £20,000 seems unnecessarily low. The financial services equivalent provision stands at £100,000. I do not think that compensation will frequently reach those levels, but when dealing, for example, with very important property transactions, and sometimes probate, such sums of compensation will need to be paid. To facilitate full protection redress all lawyers should be required, as a condition of practice, to carry professional indemnity insurance. Although many do so, it is not a requirement. Again, that would put lawyers closer to other businesses and professions.

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I disagree with my noble friend Lord Borrie on the point about delegation back to the Bar Council. Even though I recognise that its past performance has been somewhat better than that of the Law Society, I think that we are then back into the judge and jury territory. I also disagree with him in relation to the requirement that the chair of the OLC should be a non-lawyer. Lawyers are brilliant at analysing other people’s professions, but for public trust we need a non-lawyer to head this institution.

My final point on the effective implementation of the OLC’s role regards transparency. We should know the names of those who are found wanting, and such names should be made publicly available. The fact is that one-third of all complaints under the present Law Society system are accounted for by only 7 per cent of solicitors. Potential clients should know that. It is also a serious protection for the good practitioners within the profession.

Therefore, I think that the Bill can be improved in some ways, but it is a good Bill. It moves us in the right direction and it will restore consumer trust to the legal profession in a way that present arrangements do not. I do not think that the general provisions of the Bill should be undermined and nor should we be convinced by the rather specious protestations about state control and lack of independence.

5.39 pm

Baroness Butler-Sloss: My Lords, I declare an interest, in that I was at one time a barrister, then a judge and am now a deputy coroner and assistant deputy coroner. I support the Bill in general, and I am reminded of what Shakespeare put into the mouth of one of the characters in Henry VI, Part II:

Clearly, the public have not changed today.

I am concerned about several matters in this Bill but I shall confine my comments to four. I hope that I shall not be accused either of exaggeration or of hysteria in making these points. What I am about to say has already been said by several noble Lords, but, since there is disagreement on some of them, they bear repetition, even from me.

First, there is Clause 1(1)(c), which refers to the objective of,

The joint report of the two Houses pointed out that there had been a shift from public interest to consumer interest. The government consultation paper issued in 2002 was entitled In the Public Interest? and placed an emphasis on the wider public interest. The terms of reference set by the Government for the Clementi report included consideration of the “public and consumer interest”. The protection and promotion of the interests of those who use legal services is enormously important, but it is not always identical with the public interest. It is possible for narrow consumer interests to be contrary to the wider public interest. At present, there is no provision for promotion or protection

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of the public interest and there appears to be no explanation for its omission from the Bill. I support the recommendation of the Joint Committee at paragraph 78 that subsection (1)(c) should be redrafted to read “protecting and promoting the public interest and the interests of consumers”.

My second concern arises from a possible threat to the independence of the legal profession—although that has, to some extent, been politely rubbished in this House. I should also like to comment on the perception of a threat to that independence by the impression that the Government have been seeking to exert day-to-day control over the Bar and solicitors. I am, of course, referring to the level of involvement of the Lord Chancellor in the regulation of the legal profession, particularly in his appointment of the chairman and members of the board. A clear and open commitment to the Nolan principles in appointments would go a long way to dispelling that concern—together, despite the view of the noble and learned Lord the Lord Chancellor, with a requirement for full consultation with the Lord Chief Justice in the appointment or removal of the chairman.

I share the view of the noble Lord, Lord Neill of Bladen, that the public do not see the Lord Chief Justice as just another lawyer—certainly not ordinary members of the public whom I meet from time to time, who see him as the head of our profession and as a great man. That was below what might have been said about the Lord Chief Justice.

I am told that at least one European Union country has already expressed concern about the perceived control by the Government over the legal profession. If that were to be the view of countries across the world, it would have a seriously adverse effect upon the high reputation of the English and Welsh legal system held overseas. That is not just a matter for lawyers; it would be to the public detriment. I entirely agree with the recommendations of the Joint Committee on appointments.

My third point is the proposed control by the Legal Services Board (LSB) of the regulators who have been put in place by the Bar and by the solicitors. I support the noble and learned Lord, Lord Lyell of Markyate, on this point. As the other noble Lords have said, the Clementi report recommended a light touch, which is not reflected in the powers of the board contained in the Bill. There is a low threshold for intervention by the board, particularly in Clause 31(1)(a), which entitles the board to intervene if,

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