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Clause 59 [Duties of the Competition Commission]:

Baroness Ashton of Upholland moved Amendments Nos. 181 and 182:

On Question, amendments agreed to.

Clause 60 [Secretary of State's power to give directions]:

Baroness Ashton of Upholland moved Amendments Nos. 183 to 186:

On Question, amendments agreed to.

Clause 61 [The Board as an approved regulator]:

Baroness Ashton of Upholland moved Amendments Nos. 187 to 192:

On Question, amendments agreed to.

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Clause 65 [The Board's power to recommend orders made under section 61]:

Baroness Ashton of Upholland moved Amendments Nos. 193 and 194:

On Question, amendments agreed to.

Clause 67 [Regulatory conflict and the Board as approved regulator]:

[Amendments Nos. 195 to 199 not moved.]

Clause 68 [Modification of the functions of approved regulators etc]:

Baroness Ashton of Upholland moved Amendments Nos. 200 and 201:

On Question, amendments agreed to.

Clause 70 [Carrying on of activities by licensed bodies]:

Lord Carlile of Berriew moved Amendment No. 202:

The noble Lord said: My Lords, Amendment No. 202 stands in my name and that of my noble friend Lord Maclennan of Rogart. I shall also speak to the other amendments in this group. Once again, I shall not rehearse everything that was said at an earlier stage; there was a robust debate between my noble friend Lord Thomas of Gresford and the government Front Bench on that occasion. However, as we have decided to move these amendments again, I shall explain why.

These clauses will introduce the so-called alternative business structure, but they achieve two aims that are adverse to the Government’s intention in the Bill. First, they will stifle competition where those who espouse competition very strongly—such as ourselves and the noble Lord, Lord Whitty, who I am pleased to see in his place—believe the need for competitive services is greater than anywhere; that is, for people of poorer means and people who live in areas where the provision of legal services is not substantial, such as rural areas.

Secondly, the introduction of alternative business structures will directly contradict regulatory objective (e) in Clause 1(1); namely the encouragement of,

I urge the noble Baroness to reread every word of that objective, including “independent”, “diverse” and “legal profession”. The danger of these structures is that for those who may need them most, who sometimes have the greatest difficulty in enforcing their legal rights or in interpreting their legal obligations, there will be much less of a legal profession available.

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Alternative business structures have considerable attractions. It would be foolish to ignore them. But for whom do they have those attractions? They certainly have attractions for large corporate vehicles, which will wish to invest in using legal disputes as a way of bringing customers into their businesses for other purposes. Supermarket businesses, insurance companies—for example, the car insurance sector—banks and others can readily be foreseen as participants in this market. It is not that they even have to regard legal practice as a profit centre; all they will wish to do is to regard it as a customer centre from which they can earn profits, possibly in connection with legal disputes but certainly in connection with other services they can provide.

For those living in rural areas it raises the spectre of the destruction of a system that, though not perfect in all its features, has worked pretty well for an extremely long time. In the sort of area in mid-Wales that I used to represent in another place there are, and always have been, small firms of solicitors in market towns, some of them combining together but always providing a choice. One of the things they are able to do with more complex disputes is to say to their clients, “Well, if we do not have the expertise, we will go to someone who does”. Those like me and my noble friend Lord Thomas of Gresford, who by coincidence was in the same barristers’ chambers in Chester as myself for a number of years, were of course the beneficiaries of that system. That system provides competition at all levels and an expert service which is surprisingly economical when the fees are examined, as they rarely are by some of the greatest cynics. The Bar and, indeed, solicitors are the original consultancy professions. They were there long before this Government and their predecessor turned to consultancy for almost everything.

What will happen in rural areas is exactly what has happened to the retail sector—the evidence is there. When I first become the Member of Parliament for Montgomeryshire, in the market town of Newtown there were butchers, greengrocers, an excellent cheese shop and an old, established ironmonger. Within a few years a large supermarket chain moved in. The cheese shop closed down 14 days after the supermarket opened. It lost both its custom and its staff to the supermarket. The ironmonger closed not much later, and the best of the greengrocers survived for not much longer. That is what happens when you allow the corporate sector to take over the kind of local services that have served the public well for a long time.

6.45 pm

Alternative business structures are attractive to barristers and solicitors because they know they can move into a large corporate vehicle where they will be cushioned from that often most unwelcome of creatures, the lay client. In normal everyday practice the lay client who comes through the door often has a rankling feeling of injustice; they complain, and they harangue sometimes. The small practitioner puts up with it, deals with them and usually finds a way of satisfying them, even if it is to say, as honest practitioners often do, “I am sorry, there is absolutely nothing I can do for you”. They will be replaced with

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call centres. The lawyers will be attracted by the idea that they will deal only with the most important issues placed before them. They will be able to make policy decisions which will brush aside small housing cases, cheap divorces, small crime, small personal injury claims and so on. The public will be driven to ringing up call centres, which will offer unqualified persons giving poor advice. There is the clearest evidence that that is what the market will produce because it has already done so in many other sectors.

The experiment with alternative business structures, unless it is extremely carefully piloted and market-tested, is therefore unlikely to do anything but damage. It may be said, “Oh, well of course in rural areas there are the citizens advice bureaux”, but citizens advice bureaux, although they are very good organisations, depend almost entirely on the voluntarily given expertise of those very lawyers who will disappear from local communities if alternative business structures are allowed to take hold.

Alternative business structures are attractive to lawyers for other reasons. If you take the analogy of another fee-earning industry, the advertising industry, decades ago advertising agents ran, rather like barristers and firms of solicitors, small collegiate structures with a few people earning fees. Then they got the idea of going to the market, and, suddenly, we have multi-billion-pound companies that produce capital advantages for their senior partners and players. Exactly the same would happen to the legal profession. I can see enormous advantages for those of us in the profession in turning our barristers’ chambers or firms into corporate vehicles. We might even take over the supermarkets in due course as a result of the capital we would raise in the market. Rather like undertakers, we are certain to have business as the years pass because legal disputes always occur. I cannot see how that would aid the competition, much as many lawyers would like to turn their modest share in their office or their barristers’ chambers into a few million pounds’ worth of shares. It cannot be in the public interest to do so.

Along with, for example, the Legal Action Group, which certainly has legal consumers’ interests at heart, the Legal Aid Practitioners Group and the Solicitor Sole Practitioners Group, we have taken the view that these provisions are anti-competitive and likely to destroy a significant part of the profession if not extremely carefully controlled, hence our opposition to them. I beg to move.

Lord Whitty: My Lords, I recognise some of the anxieties that the noble Lord, Lord Carlile, points to. However, it is certainly the view of most consumer organisations that there should be some flexibility in the provision of service and in combining different services that are related in terms of the consumer experience, particularly those that involve buying and selling property and other transactions that require not only a lawyer but a lot of other areas of expertise, which could be brought together.

The noble Lord seems to think that the movement would all be one way. Apart from what he said in his last remarks, he sees Tesco taking over legal practices.

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But actually many of these solicitors in small towns will be able to expand into providing multiple services to consumers in a one-stop shop. They will be in a far better place than the supermarkets or even the estate agents in so doing. In his earlier remarks, the noble Lord failed to recognise that we are not plunging into a completely free market. This is a regulated, licensed introduction of an alternative business structure, which still has legal standards and professionalism at its heart, but which brings those services to the consumer together with other related services that the consumer may well want.

I do not regard the Bill as allowing completely free rein to establishing an alternative structure to the present ring-fenced legal professions. However, I recognise that the entrepreneurship of legal professionals could well be stimulated by that possibility, as well as by other businesses and services combining and enhancing the services that they offer to the public by bringing legal professionals into their role. From the consumer point of view, with a one-stop shop and the ability to cross-refer between the various professions with which you have to deal, especially in relation to property transactions, which, are, after all, the biggest financial decisions that people make in their lives and the largest use that most people make of lawyers, there is obvious synergy in providing through the alternative business structure.

There are safeguards in the regulatory structure; indeed, there are more safeguards in the responsibilities on the licensing authorities, which are to be debated in later government amendments. So the dire picture that the noble Lord presents is wrong. We certainly should not dive into this without safeguards but, on the other hand, I can see enormous benefits for consumers in introducing this degree of competition and stimulus to innovation in providing such services.

Lord Kingsland: My Lords, I have a great deal of sympathy with what the noble Lord, Lord Carlile of Berriew, said about Part 5. We have serious concerns about the impact that the licensing provisions may have on the provision of legal services in rural areas and in many large industrial towns. That is why we place great weight on Amendment No. 252, which would ensure that when the approved regulators—and, where appropriate, the LSB—address the issue of licensing, they give significant weight, as the planning legislation sometimes says, to the access to justice objective.

In all other respects, I am aware that the noble Baroness has sought to emphasise that the question of weighting is entirely a matter for the Legal Services Board, but I believe this to be a vital exception. That is particularly true in the provision of external capital to legal services. It would not be surprising if, at the end of the operational year, the investor had a careful look at the profitability of the various types of legal activity in which the firm in which it had invested engages. If it finds that some activities are more profitable than others, it will inevitably require the firm to put more resources into those areas in future. The kind of services vital to rural areas and large industrial towns are often those provided to the less well-off consumer.

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If a large number of legal firms attract outside capital, the predictions made by the noble Lord, Lord Carlile, are likely to come true. I recall that, in Committee, the noble Lord, Lord Whitty, who has not always been on my side in our debates, expressed some hesitation about the absence of special access to justice provision in this part. I do not know whether that will mean that he will go as far as supporting Amendment No. 252, but he is clearly thinking very hard about what is the appropriate government approach.

Although the noble Lord, Lord Neill of Bladen, has not intervened at this juncture, the noble Baroness will doubtless be aware that he has tabled, at the end of the Bill, what might be described in effect as a sunrise clause. In that context, the noble Baroness will recall the long debate that we had about the importance of monitoring ABSs in their early phases to see whether their effect is as beneficial as the Government predict. She will not be surprised to hear that we believe that some sort of legislative cocktail involving our Amendment No. 252 and the sunrise clause amendment tabled by the noble Lord, Lord Neill of Bladen, is the right approach to Part 5. The uncertainties are great. I hope that the noble Baroness will not underestimate some of the graphic illustration in the predictions of the noble Lord, Lord Carlile of Berriew; if only some of those predictions come true, the government experiment will prove a disastrous failure.

In principle, after careful consideration, we are not inclined to expunge Part 5, provided that either some combination of our amendment and that of the noble Lord, Lord Neill, is accepted or the Government come up with an equivalent solution.

Lord Campbell of Alloway: My Lords, in the questions to those who gave evidence to the Joint Committee, I raised a series of problems from my experience when I was, in a sense, part of a similar set-up in Brussels. I will not go into details, but it related to the retention of one’s independence as a member of the Bar when in a business relationship of sorts with accountants.

I am very worried about this, for the reasons recorded, which I shall not express again, concerning the independence of legal advice and, hence, its quality. Therefore, I go along with my noble friend Lord Kingsland. I do not feel that I am in a position to expunge the clause, but I am worried. I would like an effective monitoring system—not a licensing arrangement at large, but one that is controlled by statute—and, perhaps, a pilot scheme. I entirely recognise the terrors expressed by the noble Lord, Lord Carlile of Berriew, but that is the world in which, somehow or other, we must live.

Lord Neill of Bladen: My Lords, reference has been made to an amendment that I tabled, with the subsequent backing of other Members of the House, which is a long way down the batting list at No. 637A. Those who followed our debate in Committee may recall that I spoke about Part 5. I do not think that the noble Lord, Lord Whitty, was there, but I picked up from what he had said earlier a worry, from a consumer point of view, about access to justice. I certainly

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quoted the views of the noble Lord, Lord Carlile of Berriew, and of his colleague, the noble Lord, Lord Thomas of Gresford. The noble and learned Baroness, Lady Butler-Sloss, who is no longer in her seat, expressed fears about access to justice in the West Country. Suffice it to say today that I am looking forward to the opportunity to present that amendment.

Naturally, I sympathise with many of the statements of fact and projections that have been made by the noble Lord, Lord Carlile. In essence, we are rushing into this on an inadequate basis of fact, testing and research. As a House of this calibre, we have no right to be doing this without trying to inform ourselves very much better than we are informed today. I know that the Minister will say, “Ah, but I have sent you a lot of books since then”. It is certainly true: there is a stack of papers starting with papers from Sydney, New South Wales, from the Commission in Brussels and—a little nearer to home—from learned professors and so on. It is very good for me to read all this, or part of it, but the projections made by the noble Lord, Lord Carlile, about what may go wrong are very telling, and I shall return to the theme later.

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Baroness Ashton of Upholland: My Lords, I am grateful to noble Lords who have spoken. In Committee, we had useful and important debates on issues that were clearly of great importance to your Lordships. I share the concern. We talked a lot about rural communities in the context of previous experiences, and mentioned the corner shop and the post office. My noble friend alluded to the fact that Part 5 might provide opportunities for small practices to expand to enable them to survive more effectively in rural communities. That is certainly our ambition. We have also talked a lot about access to justice. We will, I hope, consider that more fully when we discuss later amendments. Monitoring is also very important. As the noble Lord, Lord Neill of Bladen, said, he has tabled an important amendment relating to monitoring.

I shall focus entirely on the effect of removing Part 5, which the amendment would do. I shall not pretend that I am not disappointed to see that the amendment has returned, because one of the important aspects of our deliberations in Committee was, I felt, that noble Lords were trying to improve, rather than remove, Part 5. We talked at enormous length about the opportunities that Part 5 could give to providers and consumers and I thought that some noble Lords felt that we should encourage that as long as—this is critical—the appropriate safeguards were in place. The noble Lord, Lord Kingsland, is entirely right that my noble friend Lord Whitty shared his concerns about ensuring that those safeguards were in place.

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