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The noble Lord said: My Lords, the amendment would omit sub-paragraph (1)(b) and thus,

We hear a great deal about good corporate governance, and in governance terms it is surely unacceptable that the chief executive of the Legal Services Board should be a member. The LSB should, of course, be independent and free to act in the context of its statutory duties, and ensuring that the chief executive officer is not a member contributes to that objective. The amendment would not prevent the chief executive providing advice and guidance to the Legal Services Board, but would reinforce his or her independence and his or her position as the accounting officer for the board. I am very grateful to the Law Society of Scotland for having brought this to my attention, and I have much pleasure in moving the amendment. I beg to move.

Baroness Ashton of Upholland: My Lords, it is always nice to have a new issue to consider in the course of our deliberations. I have looked at what other regulatory bodies have been doing. Like the noble Lord, Lord Hunt of Wirral, I can think of boards—I have sat on some of them—in which the chief executive plays one role and others play a different role. The best comparisons that I could think of were other bodies involved in regulation. Again, I am not trying to suggest that this is not a different, even unique, set of circumstances. None the less, comparisons can be drawn.

We looked particularly at the examples of Ofcom and the FSA, which have identical arrangements to those proposed for the boards in this legislation. Indeed, we looked again at Sir David Clementi’s original work, and this was his favoured approach. It brings together the executive and non-executive functions and allows the chief executive, who has an incredibly important role, as the noble Lord will agree, to help to drive the strategic direction of the board. In some organisations that I can think of, the finance director may well be a full member of the board too, because of his responsibilities for finance. Again, that is not necessarily the case, but the Bill allows for someone involved in that way to be part of the board. This is simply the choice that we have made. We think that it is better, in this context, to follow the example of Ofcom and the FSA and bring together the executive and non-executive functions to get that strategic direction. Again, this refers back to Sir David Clementi. I, too, am grateful to the Law Society of Scotland for raising this issue with us, because it gives us a chance to consider it. Having considered the matter, however, I am pretty content that our approach will be a good one and that it will give the chief executive a proper footing on the board to enable it to have appropriate direction.

Lord Hunt of Wirral: My Lords, it is fascinating that the Minister should give the example of the Financial Services Authority. If I recall correctly, the

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original proposal for the FSA was that the chairman and chief executive should be the same person. Indeed, I moved an amendment to the then Financial Services and Markets Bill suggesting that it was wrong for the person who was chairman and chief executive to sit on the board because they were very different roles. As I recall, the Government initially resisted that amendment. However, this House insisted on its view, and the Government eventually conceded and split the role, but not until Howard Davies had moved on. It was a wonderful compromise. It is therefore quite remarkable that the Minister should choose that example. In many ways, it was not what the Government wanted; they wanted the chairman and chief executive to be the same person. They used the same arguments for Ofcom and a number of other regulators by saying that there was no place for corporate governance; namely, that there should be a separate chairman and chief executive.

I do not want to embark on a great battle of the boards, but I could start reciting a whole list of boards on which the chief executive does not sit, particularly when he is the accounting officer and offers advice and guidance to the board. I therefore hope that the Minister will think again about this in the light of my comments and that she might find some better examples that would persuade us. In the mean time, however, I will carefully reflect on what she has said. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Ashton of Upholland moved Amendment No. 9:

On Question, amendment agreed to.

Lord Hunt of Wirral moved Amendment No. 10:

On Question, amendment agreed to.

[Amendment No. 11 not moved.]

Lord Kingsland moved Amendment No. 12:

The noble Lord said: My Lords, Amendment No. 12 deals with the powers of the Lord Chancellor in paragraph 1(3) to determine the size of the Legal Services Board. In particular, the paragraph states:

Some of your Lordships may recall that this matter was raised on the first day of Committee. I raised it to express my concern about the scope that the wording of the provision might give to the Secretary of State, now the Lord Chancellor, for manipulating the size of the board, perhaps for malign purposes. In response, the Minister was exceedingly anxious to reassure me that the purpose of the provision was entirely benign;

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that there might be occasions in the future when it would be necessary to grant the Legal Services Board a wider range of functions. In that context the board would need to be supplemented by one or more individuals.

I apologise to the House for quoting the noble Baroness at some length, but it is germane to the point that I wish to tease out. She said:

The power to expand the board in Schedule 1 is by negative resolution. She continued:

So, at the suggestion of the noble Baroness, I have tabled my amendment for an affirmative resolution, which I invite her to support. I beg to move.

Baroness Ashton of Upholland: My Lords, the noble Lord, Lord Kingsland, of course quoted me accurately. I took away this amendment and looked to see whether we should remove the negative and put in the affirmative procedure for the reasons I outlined in Committee. When we looked at it, I was struck by two problems. I should say that I stand by my remarks about the purpose to which it should be put. The first difficulty was making sure that we would be able to find parliamentary time for debate and, secondly, whether the tradition of always going along with the Delegated Powers Committee was something that I wished to move away from. These may not seem like very good reasons to your Lordships. Indeed, if this were a matter of great importance, that would be completely reasonable.

However, the purpose of this clause is exactly as I said in Committee. It makes sure that if gaps need to be addressed, not least because the Legal Services Board takes on new functions, that could be done properly and speedily. Secondly, it would also enable us to reduce the size of the board if that were appropriate, which is something we did not touch on, but on which I have had many conversations since Committee stage. I know that we will come to the bureaucracy and cost of the board, and the way in which it functions and so on, particularly its relationship with frontline regulators. None the less, those are important issues.

I apologise to the noble Lord, Lord Kingsland, because I have not done what I said I would do. Before we got to this stage of debates, I indicated that there were some issues on which I have had to reflect again. This is one of them. The negative procedure will still give your Lordships the comfort needed to make sure that this process works well and is in line with what the

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Delegated Powers Committee recommended; namely, that it saw no need for this to change. That is my preferred option at this point.

Lord Kingsland: My Lords, I am most grateful to the noble Baroness for her reply; but I will not disguise from your Lordships’ House my dismay at hearing it. I will not press the noble Baroness about the status of her statement at col. 163 of the Official Report on 9 January 2007. However, if it is not a commitment, it is as close to a commitment that one could possibly get. The decision by the noble Baroness not to support an affirmative resolution undermines her earlier statement about the motives of the Government in including this provision in the first place. The noble Baroness said that the proof that the Government have honourable intentions will be through the ability of your Lordships’ House to have a debate when the affirmative resolution is tabled.

6.45 pm

The noble Baroness gave one or two other reasons for the fact that she thought again about an affirmative resolution, but I must say that I found them exceedingly unconvincing. The idea that the Government have now decided to move away, as a constitutional practice, from tabling affirmative resolutions is risible. Bills nowadays are characteristically skeleton Bills and one sees no change in Government legislative policy.

I do not accept that a negative order is the same as an affirmative resolution. There are strong constitutional conventions about praying against negative orders, which the House—I hope the noble Baroness will agree with me—respects. I shall not press this to a vote, but I will seriously consider bringing forward this matter at Third Reading. In the mean time, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Hunt of Wirral moved Amendment No. 13:

On Question, amendment agreed to.

Lord Kingsland moved Amendment No. 14:

The noble Lord said: My Lords, I can make this point exceedingly telegraphically. This amendment is about the definition of a lay member. Your Lordships may recall that the first chairman of the Legal Services Board is required by the schedule to be a lay member. The schedule goes on to define what characteristics a lay member should have, one of which is that he should never have been an authorised person as defined under the Bill. In Committee, I suggested that where someone had very early in their career acquired a legal qualification—perhaps a law degree and had gone on to qualify professionally—but thereafter had practised for only a very short time and then had 10, 15, 20 or even more years doing something else, it would be undesirable to exclude that person from being a candidate for the chairmanship of the Legal Services Board. The noble Baroness said that she would think about it. She has now had time to think about it and I should be most interested to hear her response. I beg to move.

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Lord Lyell of Markyate: My Lords, I rise almost as telegraphically as my noble friend to support this amendment, which I hope will find favour with the noble Baroness. It seems to me to be moving against the spirit of the age to rule out someone who many years ago had obtained a qualification from being able to play a very useful part as a lay member of the board if in all other respects he would seem to be a good member. In saying against the spirit of age, one can consider the position of juries. Members of the Bar and solicitors can now sit on juries whereas they could not in the past and it has turned out to be a good thing. I hope that that same spirit will apply here and the noble Baroness will see the good sense of this amendment.

Lord Maclennan of Rogart: My Lords, I supported this amendment in Committee. I gave my reasons on that occasion. We want to cast the net as widely as possible to those who would be suitable to discharge this important role. If we introduce the exclusionary principle to the extent that it is in the Bill without the qualification proposed in the amendment, we would limit our capacity to do so in a more unacceptable way.

Baroness Ashton of Upholland: My Lords, I observe for the noble and learned Lord, Lord Lyell, that Peers are now allowed to serve on juries, which is the other change that has taken place. I cannot wait to do jury service.

I have thought carefully about this issue; more importantly, we have consulted widely on it. We do not say that members of the legal profession cannot serve on the board at all because we expect a mixed membership constituted of appropriately qualified professionals and lay people appointed by the Secretary of State, the Lord Chancellor, after consultation with the chairman of the board. We will look for the best possible mix of skills. Consumer confidence is important in this context, as are effective regulation and professional expertise. For those reasons, we have provided that the board must be comprised of such a mix, with the majority given to lay members.

We have talked about the case of someone who has been qualified in the legal profession for many years but who had not practised for some time. None the less, they would have experience and an understanding of legal matters. The difficulty lies in trying to define where such knowledge begins and ends: when is someone a lay person or not a lay person? I am a lay person because I do not have any legal qualifications. That is simple and straightforward. There are people who are qualified and legally practising, and they too can serve on the board. Questions arise with those who have not practised for five years, 10 years, 20 years and so on. The noble Lord, Lord Kingsland, has put down a 10-year marker on it, and I understand that from his point of view the period is quite reasonable. However, when my officials talked to representatives from consumer organisations, they were very clear about this, and I too want to make the position clear. They felt it was important for “lay” to mean “lay” in this context. While those with legal training and experience are perfectly able to serve on the board, they should not take the places of lay members. They have argued that

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we could end up with the whole board being made up of those who at some point had been practising lawyers or were technically qualified as legal professionals. They felt that that would go against the spirit of what we are trying to do here. I shall quote the National Consumer Council in this regard:

In the council’s view it is particularly important that the first chair should be lay so that the new organisation can get off to the best possible start in terms of the consumer focus. The council goes on to say:

I do not say that that is my view, but I give this as an example of the strength of feeling among other interest groups.

On the basis that members of the legal profession can serve on the board, that beyond the first chair they can become chairmen of the organisation and that they will be able to contribute positively, we think that there is a good pool of talent of those with experience in other fields to bring to the board and that we are not discriminating in any way against those who are legally qualified. Rather, the board should comprise a broad mix, and to change the definition would mean that it would be possible to end up with no mixture, but a board comprised only of members who are legally qualified. Therefore I am going to resist the amendment, but on the basis that I have consulted widely on it and thought about it with care. On reflection, the balance is about right.

Lord Kingsland: My Lords, again I have to say that I am extremely disappointed with the reply of the noble Baroness. It is not as if there are not plenty of lay persons on the regulatory bodies. A great deal has been made about the desirability of having a high percentage of lay representatives on the Legal Services Board; but is the noble Baroness aware that a large number of non-legal lay representatives serve on the boards of the authorised regulators? Listening to the Government promoting their Bill during the Committee stage, one might be forgiven for assuming that the Bar Standards Board and its equivalent in the solicitors’ profession consist solely of lawyers, thus generating the myth that lawyers are regulating themselves. Here I repeat myself, in my view with good reason, in saying that a high percentage of individuals within the authorised regulators themselves are not qualified lawyers.

Given that, why do we need to be so demanding about the definition of lay members generally? If the Government do not like my amendment, which provides for a period of 10 years not practising, why do they not go for a more demanding period, such as 20 or 25 years? That would at least include a large number of people who happen to have taken a degree in law or who practised as solicitors or barristers at the beginning of their career and therefore might be extremely good candidates. The Government are excluding all that talent.

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Baroness Ashton of Upholland: My Lords, they are authorised persons.

Lord Kingsland: My Lords, they are not authorised persons any more.

While I do not think the Government’s argument carries any weight, I am not going to press the amendment because, quite frankly, I intend to press other amendments. If I seek to divide the House on this amendment as well, we will be voting every 20 minutes. However, I must say that I think the Government are being somewhat churlish about this. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Hunt of Wirral moved Amendment No. 15:

On Question, amendment agreed to.

Lord Hunt of Wirral moved Amendment No. 16:

The noble Lord said: My Lords, the Joint Committee felt strongly that adherence to the Nolan principles should underpin all government appointments, and indeed went further by saying that the Bill should be amended to reflect this. Amendment No. 16 would add to the end of line 17 in Schedule 1(3) a provision that the Lord Chancellor and the Lord Chief Justice must,

The remainder of the text of the paragraph and the sub-paragraphs then continue as presently worded. Amendment No. 42 is linked with this amendment, providing in Clause 8(6) that paragraph (a) should read,

Very strong views were held in the Joint Committee that whatever the rules are at any particular moment, they should be followed in making these appointments.

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