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Given that fines are a significantly stronger power, we think it essential that they should be used only where no lesser sanction would suffice. Providing for appeals against fines is not enough. It is important to ensure that the basis on which fines may be imposed is properly defined in the first place. Indeed, the Minister appeared to accept that proposition in the discussion on my amendment concerning appeals against public censure. The Minister said:

The Minister sought to justify the power to fine by references to the position of other regulators, including the Financial Services Authority and Ofgem; but both of those directly regulate service providers. They do

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not supervise other regulators and they do not supervise supervisors, as in this case. The only example that supports the Minister’s case is the existing power of the Legal Services Complaints Commissioner. Power for a supervisory regulator to fine another regulator is very unusual and needs to be confined to circumstances where no other sanction is appropriate. Nevertheless, we have sought, in the circumstances, to limit the power to fine in the ways set out in the amendment. I beg to move.

Baroness Ashton of Upholland: My Lords, I am grateful for the explanation that the noble Lord has given, but I am not persuaded that I want to go further. The noble Lord was gracious in seeing that I had responded to the comments made in Committee and in our conversations with the Law Society and the Bar Council. We do not want to see the fining power in the same category as the powers to intervene directly with approved regulators or to cancel an approved regulator’s designation. Those are very different, but that would be the effect of Amendment No. 135. We do not believe that the fining power is of the same order of magnitude.

On a more practical level, the amendment would reduce the board’s ability to make a flexible response to a regulatory failure. The argument in the Macrory review, as noble Lords will know, is that the move is towards greater flexibility where sanctions are used. We have already said many times in the passage of this legislation that we hope that these sanctions will not be used. However, where they are used, the argument is to enable those using them to have the greatest possible flexibility to use the most appropriate sanction at any given time.

I indicated that, in our discussions with consumer groups, they expressed great concern that we should not constrain the fining power because they saw it as an important part of a regulator’s toolkit, which, if it were to be used, would send the clear and important message that the regulator was willing to act on their behalf.

We believe that we again have the right balance. We have made a move to accept in part what the noble Lord, Lord Kingsland, said in Committee about my previous amendments following discussions with the regulatory bodies, but it is important to retain flexibility and, therefore, we must ask the noble Lord to withdraw his amendment.

Lord Kingsland: My Lords, I am most grateful for the noble Baroness’s response and I am aware that she has already given some ground in this area by the amendments to which she spoke in the previous group on the list. I am disappointed at her reply; but, bearing in mind that there has been some movement by the Government, I shall hope for some more movement between now and Third Reading. Meanwhile, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Ashton of Upholland moved Amendments Nos. 136 and 137:



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(a) by rules under section 29 (internal governance rules), (b) by a direction given under section 31 (Board directions), or (c) by section 50 (control of practising fees charged by approved regulators) or by rules under that section.”

On Question, amendments agreed to.

[Amendment No. 138 not moved.]

Baroness Ashton of Upholland moved Amendments Nos. 139 and 140:

On Question, amendments agreed to.

Clause 37 [Financial penalties: procedure]:

Baroness Ashton of Upholland moved Amendments Nos. 141 to 143:

On Question, amendments agreed to.

Clause 38 [Appeals against financial penalties]:

Baroness Ashton of Upholland moved Amendments Nos. 144 and 145:

On Question, amendments agreed to.

Clause 40 [Intervention directions]:

Lord Kingsland moved Amendments Nos. 146 to 148:

On Question, amendments agreed to.

Clause 41 [Intervention directions: further provision]:

Baroness Ashton of Upholland moved Amendments Nos. 149 to 151:

On Question, amendments agreed to.



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Schedule 8 [Intervention directions: procedure]:

Baroness Ashton of Upholland moved Amendments Nos. 152 to 155:

On Question, amendments agreed to.

Clause 44 [Cancellation of designation as approved regulator]:

Baroness Ashton of Upholland moved Amendments Nos. 156 to 158:

On Question, amendments agreed to.

Lord Kingsland moved Amendments Nos. 159 to 161:

On Question, amendments agreed to.

Baroness Ashton of Upholland moved Amendments Nos. 162 to 164:

On Question, amendments agreed to.

Schedule 9 [Cancellation of designation as approved regulator]:

Baroness Ashton of Upholland moved Amendment No. 165:

On Question, amendment agreed to.

Clause 45 [Cancellation of designation: further provision]:

Baroness Ashton of Upholland moved Amendments Nos. 166 to 169:



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On Question, amendments agreed to.

Clause 46 [The Board's power to recommend orders made under section 45]:

Baroness Ashton of Upholland moved Amendments Nos. 170 to 173:

On Question, amendments agreed to.

Clause 48 [The Board's policy statements]:

Lord Kingsland moved Amendment No. 174:

(a) respect the principle that primary responsibility for regulation rests with the approved regulators; (b) ensure that the Board exercises its powers only where it considers that the action or inaction of an approved regulator is not an approach which the approved regulator could reasonably have taken; (c) provide that, save where there is an imminent risk of significant damage to the regulatory objectives, the Board will seek to resolve matters informally with the approved regulator before seeking its powers.”

The noble Lord said: My Lords, when Sir David Clementi issued his consultation paper on the appropriate structure for the regulation of legal services, he canvassed two main options. The first was for a unitary system of regulation with a body on the same lines as the Financial Services Authority taking over responsibility from the professional bodies and other front-line regulators in the legal field. The second is the continuation of regulation based on the professional bodies but with a new board with supervisory powers to ensure that the approved regulators carry out their tasks effectively and in the public interest. Sir David’s final report, reflecting the great preponderance of responses to the consultation, favoured the second option.

The Government appeared to accept this approach. In their response to the Joint Committee report by both Houses, they said:

However, the Bill does not, as we have seen on so many occasions, make it clear that the lead responsibility for regulation is intended to rest with the professional bodies, with the Legal Services Board exercising its powers only in the event of significant regulatory failure. Consequently, there is nothing in the Bill to indicate that the Legal Services Board is intended to act as a supervisory regulator, leaving the day-to-day responsibility for regulation with the approved regulators and exercising its powers only where they are clearly failing.



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The Bill is cast in terms that would enable the Legal Services Board to set out detailed templates for the way in which it considers that approved regulators should discharge their functions, to micromanage them and to substitute the board’s view for that of an approved regulator, even where the approved regulator’s approach is plainly within the range of reasonable decisions.

When we discussed this amendment in Committee, the noble Baroness indicated sympathy for the principle behind the amendment, although she said that she would have some reservations about the drafting. However, she felt that it was unnecessary to include any provision on the face of the Bill. The noble Baroness said:

The prospect of the Government’s supplementing the statute through subsequent guidance to the Legal Services Board is, frankly, disturbing. Such guidance may be appropriate with bodies that undertake what are essentially government functions but it is a matter of constitutional importance that the Legal Services Board—the supervisory regulator for the legal profession—should be wholly independent of government. The board should operate in accordance with the statutory provisions and any regulations made under them. It should not be subject to informal guidance from government.

The Minister’s comments reinforce the need for Parliament to set out clearly, through mechanisms such as this proposed amendment, what the relationship between the Legal Services Board and the approved regulators should be. It would be very damaging were the Legal Services Board to act in an over-intrusive way. As the Joint Committee noted, the estimates for the cost of the Legal Services Board are credible only on the assumption that it acts as a light-touch regulator.

We have already seen that the establishment costs of this institution are likely to be in the area of £40 million and the running costs, £30 million. If it is operated in the more intrusive way made possible by the Bill as presently drafted, the cost of this tier of regulation will rise substantially, as will the costs of the approved regulators in dealing with the Legal Services Board. Furthermore, if the Legal Services Board acts as the primary regulator, treating the approved regulators as its administrative outposts rather than as the lead regulators that they are intended to be, it will become impossible for the approved regulators to attract and retain the calibre of staff that they need to discharge their responsibilities effectively. The result would be a gradual drift towards an FSA style of regulation, in substance if not in name.

The proposed amendments to Clause 48 are designed to ensure that the Legal Services Board, in its relationship with the approved regulators, acts as the Government say they intend it to do. I beg to move.



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Lord Carlile of Berriew: My Lords, I do not want to repeat what was said by others at the previous stage of this Bill, particularly as my noble friend Lord Maclennan is inclined to use colourful language from time to time. He described Clause 48 as an “incubus”, prompting an exchange about the writings of Edgar Allan Poe, which the Minister, understandably, told us she had no time to read at present. I also think that my noble friend Lord Maclennan described the Legal Services Board as a “behemoth” the other day. Whatever colourful language one uses, it is very important for approved regulators to know what it is.


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