Previous Section Back to Table of Contents Lords Hansard Home Page

Let me be clear: there is no hidden agenda. The purpose we have set out for this regulatory framework is exactly the purpose that is replicated in the legislation. Our ambition is to have an overview regulator working with front-line regulators. I am resisting the amendment. We talked a lot in Committee about partnership and about how appropriately to define the relationship, which meant a number of things to noble Lords and to those organisations that were most concerned. First, it was important to ensure that the overview was not

16 Apr 2007 : Column 95

substituting itself for the work of the front-line regulator. Secondly, we had to ensure that the Legal Services Board operated appropriately against the regulatory objectives but used its ability to use the law to define what it wants to do only when it was necessary—we have talked a lot about that in the context of Clause 1—and to ensure that the dialogue between the front-line regulator and the Legal Services Board was appropriate and proper. We have described it in different terminology, but “partnership” is certainly a word that we have used from time to time to describe it, and I would endorse that.

My difficulty was how that works when you put it in legislation and the problem of trying to restrain or constrain what the Legal Services Board is enabled to do, in terms of the work it must inevitably take on. We have also talked about our ambition that the front-line regulators operate properly, that the Legal Services Board does not use its powers and so forth, but let us assume for the moment that it must. It is about trying to ensure that it can operate effectively. The difficulty, when we looked at it from a legal perspective, was that, as noble Lords will know from their vast experience, both as Ministers and as legislators, there are problems with how words translate when you try to use them in a legal context, and “in partnership” created some difficulty.

In my view the B-Plus model of regulation, which was David Clementi’s recommendation, is the right one. It accepts that the oversight regulator and those it regulates need to work together in concert as far as possible. My problem with the amendment is the restriction it could impose on the ability to take action when it is considered necessary to correct failure in an approved regulator. That is my difficulty with accepting the proposition. We have to ensure that in the legislation we have the flexibility for the oversight regulator to operate effectively. I completely agree that we do not want the micro-management about which noble Lords are concerned that second-guesses the decisions of approved regulators. I say that for two reasons: first, that is not its job; secondly, there is the cost, as the noble Lord, Lord Hunt, has rightly mentioned and to which I shall come shortly.

We do not want the Legal Services Board to use its power in a completely unrestrained way. There are clearly defined procedures in the legislation that it must follow, such as requirements for notification and consultation. As we stressed throughout the Committee stage, there is a need to follow best regulatory practice, and it must be proportionate and targeted. It can operate only where there is a clear need for it to do so and it can demonstrate that it must do so.

As we discussed at length in Committee, Clause 48 requires the board—the word used is “must”—to issue policy statements about how it will use its powers, publish a draft of statements and consider any subsequent representations to be made to it. We believe that that gives approved regulators the opportunity to influence the policy of the board and the framework within which it will operate. I think that the policy statements provide the most appropriate and flexible way for the

16 Apr 2007 : Column 96

board to discharge its duties. They will enable the arrangements, in a sense, to be the best practice we can have. It is a requirement—it is not left to chance but is in Clause 48.

We all recognise that constructive dialogue is essential. I see no reason to suggest in the legislation that that would not happen. I believe that the legal professional bodies will embrace the spirit of co-operation but in the end, the board must be free to act if it feels that it needs to. It may need to take difficult decisions and to take action which, it could be argued—

Lord Campbell of Alloway: My Lords, I am obliged to the Minister for giving way. I have one simple question. There seems to be nothing much between us about the principle at stake as it has been expressed by all noble Lords. Can the noble Baroness conceive of a better way of implementing it than that proposed by the amendment?

Baroness Ashton of Upholland: My Lords, my proposition is that we already do that in the Bill. We have addressed the question in the way in which the board has been set up, the requirement for the way it has to operate, its relationship with the front-line regulators and the requirement for it to issue statements on what it proposes to do to enable the regulators to have discussions with it. We believe that the ambition in the amendment is achieved. Noble Lords who are legal experts, which I am clearly not, will know better than I do that the difficulty in putting in legislation a requirement for how people must behave, in this context in partnership, is the potential for difficulty if the overarching regulator—the supervisory regulator—has to operate in a way that is not in partnership but unfortunately has to take action against a front-line regulator. Discussions with our legal advisers showed that that could be a difficulty. When we reflected on the Bill, we felt that we had captured the essence of what noble Lords were seeking. I hope that my words, in the context of how I have described this, will bring some comfort to the organisations concerned.

On costs—

Lord Maclennan of Rogart: My Lords, before the Minister speaks about costs, I again draw attention to Clause 48. It is not self-limiting; it sets out what must be done with regard to policy and how the board should exercise its functions. It does not say how they will be exercised in relation to the other front-line regulators. It is encyclopaedic in its potential and does not import into the Bill the kind of balance that has been so clearly expressed by the Minister as desirable. If she were to introduce some form of words that made it clear that that was what she had in mind, it would be much more convincing than resting on Clause 48.

Baroness Ashton of Upholland: My Lords, I was not seeking to rest on Clause 48. The factors in the way that we set up the Legal Services Board—to be proportionate and to act only where necessary—are

16 Apr 2007 : Column 97

combined with other issues. The noble Lord, Lord Campbell of Alloway, described this as being threaded through the Bill. The noble Lord sees that in a negative way: perhaps I can be more positive. If you add all of these things together you end up with a relationship between the supervisory regulatory body and the front-line regulators that I believe represents, in large part, what noble Lords are seeking. My difficulty is that there is no way of expressing that in terms that would not constrain the supervisory regulator in an inappropriate way. That is the problem. We think that we have captured it elsewhere with the combination of objectives, the way in which the board has to operate in a proportionate manner and the fact that Clause 48 states that policy statements have to be produced. The combination is what makes that effective. The noble Lord may disagree, but that is what I am trying to achieve. I am not seeking to rest purely on Clause 48.

9 pm

I will deal with the costs, as they are an important issue. In earlier stages, we talked about the £26.8 million, if I remember my figures correctly, in the PricewaterhouseCoopers analysis. Noble Lords will know, because I have briefed those on the Front Benches, that we have been doing some additional work. We discussed this with the Law Society and the Bar Council to describe how we thought that the figures would need to change in an upward fashion. Our analysis is that something like £38 million or £39 million is required, with a built-in contingency. Noble Lords will also know that the Law Society and Bar Council raised particular concerns about VAT. With the absolute support of my noble and learned friend the Lord Chancellor, I have undertaken to take those figures away and look again. Before we get to the point of discussing costs on day 3 of Report, my ambition is to come forward with definitive figures for your Lordships to discuss properly. I did not want anyone to be in any doubt about that.

Lord Carlile of Berriew: My Lords, what the Minister has said is welcome. When she comes forward with those figures, will she be in a position to make comparisons between the cost of complaints today and the cost of complaints under the new system? She will be aware that the Bar Council is concerned that what is currently a cheap procedure, and is perceived as giving satisfaction to consumers as well as to the Bar may be replaced by something far more expensive in which the barrister who is complained about ends up paying some costs even though he is entirely innocent of any wrongdoing, which seems totally unjust to the Bar Council and to those practising. Will she be in a position to make the necessary comparisons so that, if the House decides to divide on these matters, we can compare what we have now with what the Government propose?

Baroness Ashton of Upholland: My Lords, I will commit to do that. I completely accept that from the noble Lord’s perspective it would be difficult to make that distinction without those comparisons, so I am more than happy to do what he asks. I am sorry that I cannot give the figures now, but quite reasonable

16 Apr 2007 : Column 98

issues have been raised. I saw a story in the Times this morning—it may have been in other press as well—and although the figures were not inaccurate, the assumptions about transitional costs were not right. We want to look at them again because we do not believe that they are completely accurate, not least because some genuine issues have been raised. My noble and learned friend has led this in the past two or three weeks and has made it clear that he wants to be certain of the figures before your Lordships debate these questions, for the obvious reason that noble Lords will divide or not depending on whether they think that this is a reasonable issue. Of course, comparisons are important.

I just want to say a word about the Legal Complaints Service, because the Bar Council has been commended in your Lordships’ House for the work that it has done and the Legal Complaints Service sometimes receives a less good press. The Legal Complaints Service wrote to me to say what it had achieved from April 2006 to May 2007. Fifty-nine per cent of its files were closed within three months with a target of 57 per cent and 94 per cent of its files were closed within 12 months with a target of 94 per cent. The Legal Complaints Service wanted me to say that and I think that we should recognise that success in trying to sort out the underlying issues. The regulatory framework that we are putting in place in the OLC is important, but it is worth putting that on the record.

Of course we will deal with this effectively. My difficulty with including the partnership concept in the Bill is that it changes the relationship too much. We believe that, threaded through the Bill in the different ways that we have expressed the relationship, we have captured what is needed. Noble Lords will make their own minds up on that, but we think that we have achieved what is required. As ever, there is nothing much between us.

Lord Kingsland: My Lords, I am most grateful to the Minister for her reply, although I am of course disappointed by it. In concluding, I shall go back to the text of the Government’s response to the Joint Committee. At the risk of irritating your Lordships unduly, I shall read out the relevant paragraph again. The Government said that they agree,

Two important statements stand out here. First, day-to-day regulation of the professions should be in the hands of the approved regulators. That is principle number one; the Minister helpfully nods. Secondly, the Legal Services Board should exercise its powers only when approved regulators are clearly failing. Will the Minister kindly nod again? She has, and I am most grateful. In her response to my amendment, she said that, although it would be desirable for these two principles to be in the Bill, that would not be possible, as it would overconstrain the regulatory activities of the Legal Services Board. That is my understanding of what the Minister—



16 Apr 2007 : Column 99

Baroness Ashton of Upholland: My Lords, I thank the noble Lord for allowing me to interrupt. The point that I was making—though clearly badly—was that, if you included the words “in partnership”, I am fearful that it would mean that everything that the board did would have to be in partnership, which would be a constraint. We agree completely on the fundamental principle of the link between the oversight regulator and the front-line regulators. The Bill says that they must act only when it is necessary to act, but if you say that everything has to be done in partnership, the difficulty is, as I understand it, that you then cannot act in a way that might be regarded as not in partnership. Quite the opposite, it is saying to the front-line regulator, “You have done something wrong and we have to change it”.

Lord Kingsland: My Lords, I am most grateful. If, rather than tabling the first line and a half of the statement, we tabled as an amendment the whole of the Government’s statement and response to the Joint Committee, can I assume that the Government would accept that at Third Reading?

Baroness Ashton of Upholland: My Lords, I would certainly have a look at it. We think that within the different aspects of the legislation that I have described we have captured it anyway. There is an issue whether I can, first of all, convince the noble Lord that the combination of the way in which the oversight regulator has to operate—that is, to be proportionate and so on, as we have discussed—and the fact that he has to issue policy statements under Clause 48 represents a relationship that is threaded through the legislation in a way that makes it clear what that relationship must be. I understand the concerns very well, but I do not know whether there is a form of words saying that the Legal Services Board had to act in partnership that if put in legislation would not in the end constrain the board if it had to do something that was in a sense contrary to the wishes, desires and so on of the front-line regulator—if it had to act in a quite drastic way, although I do not expect it to—and prevent it from doing so.

Lord Kingsland: My Lords, I completely appreciate that. However, I must confess that in Committee, when we discussed this amendment, that matter did not emerge from the Minister’s response.

Baroness Ashton of Upholland: My Lords, I have thought about it since.

Lord Kingsland: My Lords, the Minister says with characteristic generosity that since Committee she has thought about it. I am most grateful for her response because, as things stand, apart from statements that she has made from the Dispatch Box, the system of control contained in the Legal Services Bill does not differ in principle from the system in the FSA Act. The philosophy behind it may have been expressed differently by the Government, but if you look at the black letter law, it looks in the Bill as if the LSB is a direct regulator.



16 Apr 2007 : Column 100

This should be of concern to the noble Baroness not only because it appears not to reflect what the Government want, but because if an amendment of the sort that I suggest is not made to the Bill and the Legal Services Board turns out to act as a direct regulator, the costs of this system will be absolutely astronomical. That would rebound very much against the Government’s political interest. It is in the Government’s political interest that this legislation is delivered at the minimum cost. It will be delivered at the minimum cost only if the Legal Services Board is a restrained supervisor of other regulators. If the board gets into the business of direct regulation, it is very hard to see where the spending will end. This measure is very much in the interests of the Government, as well as those of us in opposition who believe that the position that the Government seem to have adopted in their response to the joint approach is correct.

I will consider tabling this statement as a full amendment at Third Reading. I am encouraged by what the noble Baroness said. Meanwhile, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Kingsland moved Amendment No. 30:

The noble Lord said: My Lords, this is a shorter point. Clause 3(2) states:

In my submission, the expression,

would allow the board to act in certain circumstances of its own choosing that were not compatible with the regulatory objectives; therefore, I have sought to expunge that expression from the Bill.

In responding to this amendment in Committee, the noble Baroness was worried that flanking damage might be done if the expression,

were removed, and that it would constrain the board in how it could act because it would take away its discretion to add variable weights to the eight objectives. If that continues to be the noble Baroness’s hesitation, I respectfully disagree with her. Although the board must act compatibly with the regulatory objectives, it can attach weight from a very small quantity up to a very large quantity to each of the eight objectives depending on the circumstances of the decision. I beg to move.

Lord Maclennan of Rogart: My Lords, like the noble Baroness, I reflected on our exchanges on this amendment in Committee, particularly on what the noble Baroness said about the circumstances in which it might be necessary to have this qualifying phrase, which on the face of it appears to cut down the duty of the Legal Services Board to have regard to and to comply with the various considerations set out in the regulatory objectives.



16 Apr 2007 : Column 101

9.15 pm

In Committee, the noble Baroness spoke of potential tensions between the different objectives and appeared to seek to address the possible conflict between them in particular cases. That was a perfectly reasonable point. In addressing that reasonable concern, she has introduced into the Bill language that goes much beyond the reconciliation of conflicting objectives in particular cases. She has made it possible for the Legal Services Board to disregard objectives for reasons that are unconnected with the objectives themselves but may be connected with the circumstances that have given rise to the complaints.

For that reason, it is incumbent on the noble Baroness either to explain why it is necessary in general terms or to come up with language that confines the exclusion clause to the particular circumstances of reconciling different, conflicting objectives. I hope that she will regard that as a constructive suggestion and not as one intended to strike down her arguments, which seem very reasonable; but the response is dangerous.

Lord Hunt of Wirral: My Lords, this debate may be completely unnecessary. In response to the points that my noble friend and the noble Lord have just made, the noble Baroness clearly stated:

Therefore, we await the result of her researches.

I agree with my noble friend and with the noble Lord, Lord Maclennan of Rogart, in particular when in Committee he referred to this clause as an “escape clause”. Surely, as my noble friend pointed out in Committee, Clause 3(2)(b), which states,

clarifies the situation. I reread the comments of the noble Baroness in Committee, but that provision already gives the board the flexibility of ensuring that it acts in a way that is compatible with the regulatory objectives. Where there is some tension or conflict between those objectives, Clause 3(2)(b) gives the board the power to consider the most appropriate way of meeting those objectives.

As I have said, this debate may be completely unnecessary, because the Minister assured us that she was taking legal advice, which is always a slightly worrying comment. We await with anticipation what, having now taken legal advice, she will say.

Baroness Ashton of Upholland: My Lords, I have taken legal advice, as the noble Lord would expect me to, and I have consulted parliamentary counsel on the implications of all the amendments, particularly this one. I wrote to the noble Lord, Lord Kingsland, setting out the difficulties that we felt would be created by the removal of—

Lord Kingsland: My Lords, I apologise, but I have not seen the letter. If the noble Baroness had written to me, it would have been very helpful.


Next Section Back to Table of Contents Lords Hansard Home Page