18 Jan 2016 : Column GC1

Grand Committee

Monday, 18 January 2016.

Arrangement of Business


3.30 pm

The Deputy Chairman of Committees (Baroness Henig) (Lab): My Lords, if there is a Division in the House, the Committee will adjourn for 10 minutes.

General Dental Council (Fitness to Practise etc.) Order 2015

General Dental Council (Fitness to Practise etc.) Order 2015

Motion to Consider

3.30 pm

Moved by Lord Prior of Brampton

That the Grand Committee do consider the General Dental Council (Fitness to Practise etc.) Order 2015.

Relevant document: 11th Report from the Joint Committee on Statutory Instruments

The Parliamentary Under-Secretary of State, Department of Health (Lord Prior of Brampton) (Con): My Lords, the Dentists Act 1984 established the General Dental Council and sets out its functions and processes. The GDC is responsible for regulating the dental workforce in all parts of the UK. It has powers and duties which include setting the standards of conduct, performance and behaviour that dentists and dental care professionals are expected to adhere to. In addition, it is responsible for investigating any complaints or concerns which suggest that a dental professional may have failed to meet those standards.

The Government are keen to ensure that the GDC has the appropriate framework in place so that it can carry out its statutory responsibilities effectively. At present, the legislation governing the early stages of an investigation into a dental professional’s fitness to practise does not provide sufficient flexibility to enable the GDC to carry out this function in the most effective and efficient way. Legislative change is needed to address this.

This order, made under Section 60 of the Health Act 1999, amends the Dentists Act 1984 to reform the investigation stages of the GDC’s fitness-to-practise procedures. The Department of Health has publicly consulted on the proposals contained in the order and the vast majority of respondents agreed that the measures should be introduced and would have a positive effect on the GDC’s fitness-to-practise procedures. Through this Section 60 order I propose to provide the GDC with the powers to make five key amendments to its processes.

First, the GDC will be provided with a rule-making power that will allow it to delegate the decision-making functions currently exercised by its investigating committee to case examiners. The GDC’s current framework requires that following the triage of a fitness-to-practise complaint about a dental professional, if that complaint

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falls within the GDC’s remit it must be considered by an investigating committee. This means a panel must be convened for every case that reaches this stage. By introducing case examiners, it is anticipated that there will be a swifter resolution of fitness-to-practise cases, as a full investigating committee will not need to be convened for every case and instead allegations will be considered by two case examiners. The faster resolution of cases will enhance public protection. It will also remove some of the stress from the procedure for all parties involved. In addition, greater consistency in decision-making should be achieved, because case examiners will deal with a higher volume of allegations than the investigating committee, as the committee is convened from a large pool of individuals.

I realise that the fact that case examiners will be employees of the GDC may be a cause of anxiety for some. It is important to remember that they will not be making findings of fact in respect of whether a registrant’s fitness to practise is impaired. They will make the decision as to whether a case needs to proceed to the adjudication stage and be considered by a practice committee.

Additionally, the GDC, in its rules and guidance, will provide that the case examiners must make decisions based on documentary evidence which will be supplied to them in the same manner as is currently the case for the investigating committee. The case examiners will not be involved in evidence-gathering. There will also be one lay and one registrant case examiner, from the same part of the register as the individual whose case is being considered, considering an allegation, which will provide another safeguard in the process ensuring fairness.

I am also aware that interested parties will be keen that case examiners are recruited, trained and supported in the right way. I have been assured by the GDC that case examiners will receive comprehensive and robust training. The GDC is developing a robust system of review and appraisal that will monitor and support performance and ensure appropriate decision-making. The quality of the case examiners’ decisions will be underpinned by ongoing training and detailed guidance. The GDC will also introduce mechanisms for auditing decisions on a routine basis and will apply the lessons learnt from the audits to the guidance material.

Secondly, provision will be made to allow both the case examiners and the investigating committee, in certain cases, to address concerns about a registrant’s practice by agreeing appropriate undertakings with that registrant. This will be instead of referring them to a practice committee.

Undertakings will be applied, where appropriate, at the end of the investigation stage of the fitness-to-practise process. The introduction of this change will mean that some cases that are currently referred to a practice committee may not need to be. This would be in instances where it is determined that the agreement of undertakings would lead to the resolution of a case in a way that is sufficient to protect patients and the public. For example, if a case involved an allegation that a registrant’s health was affecting their fitness to practise, it may be possible to agree undertakings that would address any risks posed to the public and to the registrant themselves as a result of this health condition.

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This would also avoid the anxiety, time and cost incurred by referring the case for a full hearing. Rules will provide that a registrant must not be invited to comply with undertakings if there is a realistic prospect that if the allegation were referred to a practice committee, the registrant’s name would be erased from the register.

Thirdly, the GDC will be provided with the power to make rules to provide, first, for a review of a decision that an allegation should not be referred to the case examiners or to the investigating committee, and, secondly, for a review of a decision that an allegation should not be referred to a practice committee. However, this will not be an unfettered power. Through rules, the GDC will provide that a review can be undertaken by the registrar if it is considered that the original decision was materially flawed or if new information has come to light which may have altered that decision and a review is in the public interest. Such a review can occur only within two years of the original decision to close the case. Allowing the review in these circumstances adds a further safeguard to the system. Providing the GDC with the power to take suitable action will improve public protection and maintain public confidence in dental regulation.

This order will also introduce a power to enable the investigating committee and the case examiners to review their determination to issue a warning. A registrant will be able to request such a review within two years of the original decision to issue the warning. At present, there is no mechanism through which a registrant who is issued with a warning can appeal this decision with the GDC. Instead, the only route of appeal open to them is to apply for judicial review. This can be costly for both the registrant and the GDC and stressful for the registrant. Warnings can remain on an individual’s record for a number of years, for as long as the warning has been issued, and accessed by patients and employers. Providing individuals with a route of appeal that does not require application for a judicial review is a fairer and more proportionate approach.

Finally, provision will be made to ensure registrants can be referred to an interim orders committee at any time during the fitness-to-practise process. Currently, the legislation is ambiguous around when a case can be referred to an interim orders committee at certain points in the process. This amendment will remove any ambiguity and maintain public protection and confidence throughout the entire fitness-to-practise process. It will provide a higher level of patient protection, ensuring that those who are potentially unsafe to practise can have their registration suitably restricted while inquiries and investigations are made. In addition to enhancing patient safety and improving the fitness-to-practise processes for a registrant and all parties concerned, it has been identified that making these amendments will create approximately £2.5 million of efficiency savings per annum over the next 10 years.

In summary, these proposals to reform and modernise the GDC’s fitness-to-practise processes will make the system more efficient and effective, benefiting patients, practitioners and the health service. They will result in improved public protection and an increase in public confidence in the GDC. I commend the order to the Committee.

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Lord Colwyn (Con): My Lords, I thank my noble friend for his explanation of the order, and I look forward to reading in Hansard what exactly it is. It is complicated. I declare my interest as listed on the register.

I am sure all noble Lords will agree with me that the measures included in the order are a welcome and very long overdue step in the right direction toward speeding up the overall process of complaints handled by the GDC. The current legal framework hinders improvements to the effectiveness and efficiency of this process—improvements which, with a major case backlog and cases costing an average of £78,000 to process, the GDC badly needs. However, I will make some brief comments about some conditions that must be met for the implementation of these changes to make a meaningful difference.

First, the case examiners this order introduces must be properly independent from the GDC, as well as appropriately trained and supported in carrying out their new duties. The success of the new system will lie with the calibre and qualifications of the individuals carrying it out. Case examiners might be exposed to significant internal and external pressure when carrying out their functions, and their credibility will ultimately rest on their independence from the GDC. It is also crucial that the clinical case examiner should always be a professional from the same profession as the individual whose case is being examined. That is very important.

However, it is equally important for the new system to bring the expected time and cost savings we need to see a proper culture change in the regulator’s management of fitness-to-practise cases. The BDA has raised with me the hard-line approach of the GDC in its fitness-to-practise investigations. Dentists say that the GDC tends to treat even the most vexatious or minor complaints as potential cases, which leads to heightened and often undeserved stress for the dentists concerned. I share their fear that if this culture prevails, the new case examiners might simply become an additional layer in the fitness-to-practise process, without any meaningful reduction of case loads and costs.

I hope that the GDC will take these points into consideration when implementing the order, so that these changes achieve a decrease in the cost and increase in the speed of decision-making in fitness-to-practise cases—which we all want to see.

3.45 pm

Lord Hunt of Kings Heath (Lab): My Lords, I, too, thank the Minister for his careful explanation of the order. I welcome the opportunity to debate it as well as the performance of the General Dental Council.

This is one of a number of Section 60 orders that the Minister has brought before your Lordships’ House in the absence of a Bill following up the Law Commission’s work. Will the Minister be able to update the Committee on exactly where we stand with the Government’s intention with regard to whether they see that any part of the Law Commission’s work will lead to legislation in the future? On the order itself, its terms seem unexceptional, although I would like to raise a few points with the noble Lord. The real question before us is whether the General Dental Council is a fit and proper organisation, capable of implementing the changes.

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I shall start, however, with the order and will come on to the issues with the GDC and the various reports that have been published about its poor performance over the past four years. On the order, first, I refer to paragraph 8.4 of the Explanatory Memorandum, which refers to a number of organisations which have commented. The British Dental Association is not listed there. I have received a briefing from the British Dental Association, and I wondered whether it had submitted a response to the department. If it has, I am surprised that it is not listed in paragraph 8.4.

The other point I want to make about the order concerns the question raised by the noble Lord, Lord Colwyn, which is about the performance of the GDC. The BDA briefing that I have received states that while the GDC is,

“Britain’s most expensive healthcare regulator”,


“is also the least efficient, most troubled and enjoys little confidence among”,

either dentists or the Professional Standards Authority. It states that the GDC failed to meet eight out of 24 of the PSA standards of good regulation in its 2014-15 performance review and, crucially, fully met only one of the 10 standards relating to fitness-to-practise processes, representing what the PSA describes as,

“a significant decline in its performance compared to the assessment of the year before”.

The BDA points out that, in comparison, last year, the GMC met every one of the 24 standards while charging its members less than half of the annual retention fee that the GDC charges.

I also pick up the point raised by the noble Lord, Lord Colwyn, about the importance of the independence of case examiners. This is a point that we have raised before on some of these Section 60 orders. It is crucial because of the problems that have arisen from the way the GDC has conducted cases in the past, as identified by the various inquiries. I very much support the noble Lord in emphasising that case examiners must be, and be seen to be, independent.

We then come to the real issue for me, which is GDC governance. The Minister will be aware that in February 2013, the Professional Standards Authority published a report following the resignation of the GDC’s chair, Alison Lockyer, in May 2011. The Department of Health had asked the PSA to investigate several concerns which the then chairman had raised in a letter she had written to the Secretary of State on her resignation.

The PSA’s findings were complex. It did not find that the GDC was failing, but it identified some general learning which could be gained from the experiences of the GDC. Following the PSA’s report into the allegations made by Lockyer, it wrote that new evidence had come to light about poor practice in the support and operation of the GDC’s investigation committee. In July 2013, a member of the investigation committee raised concerns under the GDC’s whistleblower policy that certain processes were compromising the independence of the investigating committee’s decision-making. The GDC also commissioned an independent review into the concerns of the whistleblower, which was published in 2014, but in April 2014 the PSA started its own investigation. This was published on 21 December 2015.

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The PSA came to a number of conclusions and found several areas of improvement for the GDC. I will come to the main recommendation but I read this report with considerable disquiet. I do not think I have ever seen a report relating to a statutory regulator quite like it. It was published only a few weeks ago, before Christmas. Paragraph 2.1 of the summary states:

“The approach taken by the GDC to recruiting, training and supervising the Investigating Committee Secretaries is likely to have contributed to the development/continuance of objectionable practices”.

These are objectionable practices by the statutory professional body concerned with dentistry. It is a very long report of more than 300 pages but, to get the flavour of it, here are some of the objectionable practices listed that the PSA looked into. First, there are:

“Discussions about cases between Investigating Committee Secretaries and Investigating Committee Chairs prior to Investigating Committee meetings”.

Then, quite remarkably, there is,

“advance drafting of Investigating Committee decision documents/reasons by Investigating Committee Secretaries”.

There are irregularities around the,

“provision of legal advice by Investigating Committee Secretaries to the Investigating Committee during Investigating Committee meetings … Inappropriate interventions/undue influence by Investigating Committee Secretaries during Investigating Committee meetings”,


“amendment of Investigating Committee decision documents after Investigating Committee meetings by Investigating Committee Secretaries without appropriate authorisation”.

There are other identified irregularities but I do not need to go into them; I have made the point. The PSA report goes through this in great detail and its overall recommendation is:

“The GDC’s Council, executive management team and the relevant committees should consider this report in full, both individually and collectively, in order to identify all the lessons that should be learnt in particular in relation to governance, accountability and management oversight, as well as the actions the GDC should take to address our recommendations”.

The point I want to make about this is that these matters now go back some years. It was 2011 when the then chairman first raised those issues. This report was started in 2014 and finished only a few weeks ago. It clearly found continuing improper practices—or at least those that would not accord with good practice. Reading between the lines, I see here a culture of utter complacency within the GDC. It looks as though the GDC has simply not accepted the core conclusions of the various reports written about its conduct and carried on with that complacent culture. It is also clear from reading between the lines of the report and the careful way it has been put together that the PSA lacks confidence in the performance of the GDC. Frankly, I would have expected the entire board of the GDC to resign in the light of that report just before Christmas. I understand that the chief executive has resigned but no one else on the board seems prepared to take responsibility for a culture that has clearly lasted over a good many years. That is not acceptable. Can there be any confidence that this organisation is fit for purpose?

I now understand the concerns that the profession has about the GDC. I had not realised until I went

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through this information just why there was so much angst within the profession. It is absolutely justified. I would be doubtful of putting any order through in relation to the GDC unless we were absolutely certain that it is able to carry out its job properly.

Lord Prior of Brampton: My Lords, a number of points have been raised. I will start with those raised by my noble friend Lord Colwyn. He said that independence is critical for the case examiners; I will address that issue first. It is important to remember that case examiners will not be making findings of fact in respect of whether a registrant’s fitness to practise is impaired. They will make the decision about whether a case needs to proceed to the adjudication stage and be considered by a practice committee.

Additionally, in its rules and guidance, the GDC will provide that the case examiners must make decisions based on documentary evidence, which will be supplied to them in the same manner as is currently the case for the investigating committee. The case examiners will not be involved in evidence-gathering. There will be one lay and one registrant case examiner considering an allegation. I accept, however, that they will be employees of the GDC. Nevertheless, our feeling is that sufficient safeguards are built into the way that case examiners will work.

The issue raised by my noble friend and expanded on by the noble Lord, Lord Hunt, is fundamental. If the GDC is not a fit organisation—if its governance and performance are not right—that is a much more profound worry than the details of the order before us today. Before I address this, I will deal with one other point that the noble Lord raised. He asked whether the BDA had submitted anything. It has; it was omitted in error and is now being attached.

Clearly, we are concerned about the performance of the GDC. The report from the PSA is indeed extremely worrying. As the noble Lord said, this has not happened just recently; it goes back many years. It is very important that the council takes responsibility for the proper running of its organisation. My colleague Ben Gummer is the Minister with direct responsibility for the GDC and he has a meeting coming up in the very near future to discuss the GDC’s performance in the light of the PSA report. It is not all bad news in that report. There are some signs that the GDC is working hard to improve. Nevertheless, as my noble friend and the noble Lord have both said, there is a lack of confidence in the GDC among the profession and that confidence must be rebuilt.

Perhaps I might bring to Ben Gummer’s attention the comments that have been made by my noble friend and the noble Lord and ask him to draw them to the attention of the GDC when he meets it in the near future. Clearly, he will wish to keep a very close eye on the performance of the GDC as we go forward. I do not think I can say much more today about that. I do not have the information with which to comprehensively address the issues that the noble Lord has raised. Is he content on that basis? If he would like to meet my honourable friend Ben Gummer, I can arrange for him to do that.

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4 pm

Lord Hunt of Kings Heath: My Lords, I am very grateful. One of the problems is that this was scheduled very late and therefore I was able to look at the information only over the weekend. I suspect that I would have put a Motion down for a debate in the Chamber if I had had time to do that.

Secondly, I realise that this is quite a difficult situation. Clearly, the independence of the regulators of the health profession is very important and I have always been keen to protect it. The PSA has a crucial role and I think it does a great job. I pay tribute to the chairmanship of my noble friend Lady Pitkeathley, and Mr Harry Cayton, the chief executive. I think they have done a fantastic job, but it seems to me that there is a gap.

It is patently obvious when you look at it from the outside that the board should have read those reports, accepted its ultimate responsibility and stood down. I accept the invitation; I would be very glad to meet Mr Gummer. Of course, this will be debated tomorrow in the other place, and other Members may come back on that. This message clearly needs to go to the GDC council: that it is not good enough and the members should consider their position. I wonder whether it is right that the board carries on willy-nilly simply because the chief executive has stood down.

I am not someone who rushes to say that this, that or the other board should resign because something has gone wrong, but this has been a continuing problem. I accept that improvements have been made, but only a few weeks ago the PSA had to publish a report that continues to draw attention to what is, essentially, the culture of the organisation. Therefore, I very much hope that Ministers will take the appropriate action; that is all that they can do. Ultimately, I am surprised that the board of the GDC feels that it is able to carry on and I think there needs to be a change.

I am grateful to the Minister for the way that he has responded; clearly, he understands the issues that are being faced.

Lord Prior of Brampton: My Lords, perhaps we can leave it on the basis that I will organise for the noble Lord to meet Ben Gummer and perhaps ask Harry Cayton to come along, too, as he fundamentally authored the report, so that the noble Lord can express his concerns directly to them. On that basis, I beg to move.

Motion agreed.

Legal Services Act 2007 (Claims Management Complaints) (Fees) (Amendment) Regulations 2016

Legal Services Act 2007 (Claims Management Complaints) (Fees) (Amendment) Regulations 2016

Motion to Consider

4.02 pm

Moved by Lord Faulks

That the Grand Committee do consider the Legal Services Act 2007 (Claims Management Complaints) (Fees) (Amendment) Regulations 2016.

Relevant document: 10th Report from the Joint Committee on Statutory Instruments

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The Minister of State, Ministry of Justice (Lord Faulks) (Con): The Legal Services Act 2007 (Claims Management Complaints) (Fees) Regulations 2014 enable the Lord Chancellor to charge fees to regulated claims management companies to recoup the costs of the Legal Ombudsman’s work in handling complaints about these companies. Since January last year, the Legal Ombudsman has been able to consider consumer complaints against claims management companies. It is funded for this work by grant-in-aid from the Lord Chancellor, and the 2014 fees regulations enable the Lord Chancellor to recoup the costs from the companies themselves. It is right that the costs of handling such complaints fall on the claims management sector and not on the taxpayer.

The draft regulations before us amend the level of fees set out in the existing 2014 fees regulations for the financial year beginning 1 April 2016 and for subsequent years. This will ensure that the Lord Chancellor can recover the full costs of the Legal Ombudsman in dealing with complaints about the claims management industry in the 2016-17 financial year.

The Legal Ombudsman has one year’s experience of operation of the complaints scheme. During this time, the Legal Ombudsman has dealt with fewer cases requiring an ombudsman decision than expected, although the number of complaints is increasing. The number of initial consumer contacts and inquiries to the scheme has been substantially more than envisaged.

In the light of its experience so far, the Legal Ombudsman has revised downwards its estimate for the number of cases that will require ombudsman resolution during the next financial year and therefore the expected costs. However, in addition to the Legal Ombudsman’s expected costs for 2016-17 we also need to recover a shortfall in the amount invoiced for 2014-15 and 2015-16. This was the result of a greater number of market exits than was estimated in the fee model. This means that the total cost to be recovered from the market for 2016-17—around £2.3 million—remains broadly similar to that for 2015-16. Due to the contraction in the market, however, fees have had to be increased. Effectively, it is a smaller cake.

Noble Lords will be aware that a fundamental review of the regulation of claims management companies is currently taking place. The review is considering what powers and resources are required for a strengthened regulatory regime and what other reforms may be necessary, and is due to be completed in early 2016. As such, I cannot say any more about it at the present time.

The claims management sector has undoubtedly acquired a poor reputation as a result of a small number of companies engaging in poor business practices. The Legal Ombudsman provides redress for consumers of regulated claims management companies, including the potential for awards of compensation, and will continue to assist the claims management regulator in driving out poor standards and practices in the market.

I know that noble Lords welcome the fact that the Legal Ombudsman is now able to deal with complaints about claims management companies. It is therefore

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right that the Legal Ombudsman’s costs relating to regulated claims management complaints continue to be met by the claims management sector, in the same way that the costs relating to complaints about the legal services sector are met by that sector. I commend the draft regulations to the Committee.

Lord Beecham (Lab): My Lords, the Government are right to take action in this matter, and I certainly endorse the new arrangements that have been laid out, but it has a rather curious history. Looking at paragraph 4.2 of the Explanatory Note, I can see that it was some seven years after the passage of the 2007 Act before steps were taken to deal with this issue. The paragraph contains this rather curious sentence:

“This provision treats the designated Claims Management Regulator as an approved regulator to be levied in the same way as other approved regulators for the costs of the Legal Ombudsman”.

It goes on to say:

“However, there is currently no designated Claims Management Regulator and the function is fulfilled by the Secretary of State”.

One might have thought that he had more important things to do. Obviously, Mr Gove and his predecessor will not have been involved in this personally, but it is a curious situation that for some years there apparently was no functioning regulator in post.

The position appears to be, as the Minister has indicated, that a £500,000 shortfall has occurred in a very short period. I do not know whether he is able to indicate how many cases there were. He said that there were not many, but £500,000 is a reasonably large amount of money. It will be interesting to know how many cases there were and how many of those were from small companies, which appear to be leaving the market. But the very fact that after all these years there are clear deficiencies in how some of those providing this service are operating raises questions about the degree to which their activities are regulated in advance of the unfortunate outcome, which sometimes leads them to be subject to charges for maladministration or their conduct. Does the review to which the Minister referred encompass looking at the qualitative regulation of the industry? Should there not be a floor above which the resources of these companies should be fixed? If not, we will continue to have a situation in which, quite apart from the financial implications for the Government, people who have consulted these companies presumably are being short-changed. One wonders what has happened to valid claims that have gone astray as a result of maladministration. That side of it does not seem to be touched on at all in relation to this order, but it may be encompassed within the review. I certainly hope that that is the case, but if it is not, perhaps the Minister could undertake to look into the nature and quality of the supervision that ought to be exercised and, if necessary, what improvements should be made to what has gone on recently.

Lord Beith (LD): My Lords, I very much agree with the noble Lord, Lord Beecham, about the rather curious nature of the regulatory arrangements for claims management companies. The Lord Chancellor left himself holding the baby when the original legislation was taken through. I never thought that this arrangement

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would last as long as it has. It is quite right that it should be subject to review. It is obviously right that the costs of dealing with what the noble Lord called the maladministration in the industry is visited upon the industry and not the taxpayer. Therefore, I support the order and the principle behind it.

The history of claims management companies has been one of things that go beyond individual complaints. There have been systemic changes to the way the legal system operates and attempts to turn it into an ambulance-chasing activity. We all have some worries about whether, in another area, the necessary referral fee bands have actually brought some of the claims management activities in-house, into some solicitors’ practices, where once they were precluded. This is a very difficult area and the regulatory problems that it generates are not just individual cases being badly dealt with but systemic weaknesses. I hope that when we dispatch this order successfully as an appropriate means of dealing with the costs arising from individual claims, we will not neglect some of the wider issues that this industry has generated.

Lord Faulks: My Lords, I am grateful for that short debate and for the contributions of the noble Lord, Lord Beecham, and the noble Lord, Lord Beith, who, I know, when he was chair of the Justice Select Committee had considerable concern, possibly in relation to the Compensation Act going back to 2006. At that time the question of claims regulations was certainly raised, with the emergence of claims management companies and the possibility that they were and would be engaging in unacceptable practices. That is a matter of concern generally to the Government.

The claims management regulation unit in Burton-on-Trent has been doing a good job but the Government are by no means complacent about this activity. The review being conducted by Carol Brady is wide-ranging and I do not want in any way to pre-empt its conclusions, but the Government are not going to lose sight of the potential dangers that this claims management activity can present. I take the noble Lord’s point about referral fees and the possibility that they might have the unintended consequence of driving claims away from lawyers towards claims management companies.

On the plus side, I think that the increased powers to fine companies have been a positive step, together with the fact that a number of the less reputable companies have left the market. There is something like half the number of claims management companies in existence than there were. This is at least some indication that the better ones are still active rather than the less reputable ones.

The wider point that both noble Lords make about claims management is valid. I hope that the review will assist; the Government are very much aware of the field and whether it is desirable in the long term that these companies should exist, as well as the need for regulation.

4.15 pm

I am glad that there is acceptance that there is a need to recoup the costs of the Legal Ombudsman in dealing with complaints against claims management

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companies. The noble Lord, Lord Beecham, referred to the slightly strange hiatus evident from the Explanatory Notes. Unfortunately, I understand that there was an issue with the original legislation, whereby the existing levy in the Legal Services Act 2007 could not be used as the Secretary of State fulfilled the role of claims management regulator. This meant that additional primary legislation was needed and a suitable vehicle for this needed to be found; this was done in the Financial Services (Banking Reform) Act 2013. Following the passage of that new legislation, the Government had to consult affected parties and work to ensure that the necessary operational and financial regulations were in place. That is the explanation; it is simply an omission, effectively, which had to be regulated by the appropriate vehicle.

The noble Lord was concerned about why there was a shortfall in fees collected this year. That was a result of more companies having left the market than was estimated, as I think I indicated, with a difference between the fees calculated and the fees being charged and a higher number of exits than expected prior to the beginning of the 2015 financial year than predicted. It was not because the companies failed to pay the fees. They left for a variety of reasons but, certainly, the overall aim is to ensure that the right companies remain and there is effective regulation of those companies.

I hope that, notwithstanding the reservations that have been expressed about the length of time it took to set up this system, and notwithstanding the general concern that the Committee has about claims management companies, noble Lords will accept that there is an importance in providing the route for redress for consumers of regulated claims management companies that is provided, and that it is right that the companies should pay for the costs of complaints handling rather than the taxpayer.

Lord Beecham: I entirely endorse what the Minister has said, but the danger is that the process of finding companies works only if the companies are in existence and have resources. Therefore, it seems to me that the regulation needs to be at an earlier stage to ensure that they do not carry on business unless they can demonstrate that they have the financial capacity to meet their liabilities. I assume—but it would be good to have the confirmation, if not today than perhaps subsequently—that that element is being considered as part of the review to which the Minister referred.

Lord Faulks: I am grateful for that, and I understand the noble Lord’s concern about having prior approval rather than waiting for things to go wrong; I think that is effectively what he is saying. I do not want to pre-empt what is in the wide-ranging report. Of course, there are a number of ways of ensuring that, including the possibility of professional indemnity insurance, or something of that sort. But I accept his point that it is important that there is protection before, rather than after, the event. I do not undertake that the review will cover that point, but it is none the less a valid concern.

Motion agreed.

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Legislative Reform (Exempt Lotteries) Order 2016

Legislative Reform (Exempt Lotteries) Order 2016

Motion to Consider

4.19 pm

Moved by The Earl of Courtown

That the Grand Committee do consider the Legislative Reform (Exempt Lotteries) Order 2016.

Relevant Document: 15th Report from the Regulatory Reform Committee

The Earl of Courtown (Con): My Lords, this order removes unnecessary regulation on certain types of small lotteries to enable greater opportunities for fundraising for charities and good causes. These are small-scale, locally run lotteries such as a raffle held at a school fair or a workplace sweepstake. They are known in the Gambling Act as “exempt lotteries”, being lotteries that are so small they are exempt from the licensing system.

The first change is to lotteries held incidental to an event. Currently, if an organisation holds a lottery alongside a commercial event, the organiser cannot retain the proceeds of the event, such as entrance fees, food or drink sales. The proceeds of the event, as well as the proceeds of the lottery, must be donated to charity. The end result is that organisers of commercial events are discouraged from holding lotteries at their events and charities are deprived of vital opportunities to raise funds.

Article 2 of the order therefore removes the requirement that the connected event be non-commercial. We think that allowing pubs, clubs, event and concert organisers, and other businesses to keep money from entrance fees, sponsorship deals, food and drink sales or commissions from traders will see an increase in the amount of money raised for charity. Most importantly, this will not affect the profits of the lottery. All profits of the lottery held in connection with an event will still be required to be donated to charitable causes.

At present, the results of a lottery must also be made during the event itself. Article 2 also removes this requirement. This now means lotteries that do not produce a result on the day—for example, a balloon race—can benefit charities.

Another way in which charities miss out on opportunities to maximise their fundraising efforts is through the restrictions placed on private society lotteries. At the moment, these lotteries are allowed to be held only where they benefit that particular society. The impact of these restrictions was made very plain in the responses to the consultation. Several charities said they had been approached by members of clubs wishing to support the charity through small private society lotteries, often as a thank you for support of a family member. However, under the current framework these lotteries cannot take place. Article 3 removes this restriction. Private societies will now be able to promote lotteries within their societies for the purposes of donating the proceeds to charity.

Article 3 also lifts restrictions on work and residents’ lotteries raising money for charity. Take for instance a sweepstake on the Grand National. Currently, the

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proceeds of lotteries such as this in workplaces or by groups of residents, for example in a university’s halls of residence, may not be used for anything other than prizes and the expenses of the lottery. This is an unnecessary restriction. Work and residents’ lotteries will now be able to make a profit and that profit will be able to be donated to charity. However, it is not the Government’s intention to make it mandatory for all work and residents’ lotteries to give their profits to charities; these lotteries are often played for fun and this element will be retained. Where a work or residents’ lottery is held for a non-charitable purpose, the “no profit” prohibition remains.

Article 3 also removes certain ticketing requirements for these lotteries. Tickets will no longer be required to display the name and address of the organiser and other information about the arrangements for the lottery. Given that tickets in these lotteries are restricted to a single site or premises, it is unnecessarily bureaucratic to require this level of information. We are allowing the organisers of such lotteries to ticket their event as they deem appropriate.

Article 4 amends Section 261 of the Gambling Act 2005 to extend the offence of misusing the profits of an exempt lottery to apply to these new, profit-allowed work and residents’ lotteries, ensuring them the same level of protection against fraud. Article 4(2) makes minor consequential amendments to the 2005 Act and the Licensing Act 2003 upon the removal of the requirement for incidental lotteries to be held in connection with a non-commercial event.

This order also creates common sense changes that remove unnecessary regulation of the very smallest lotteries. The order will allow many more people to hold fun and innovative events to raise money for charity. I commend the order to the Committee.

Lord Clement-Jones (LD): My Lords, I thank the Minister for his very succinct introduction, and I thank all those who put the papers together, so to speak. Even though this is a relatively small piece of law reform, having a Keeling schedule is an enormously helpful thing—the sort of thing we cry out for on more complex legislation. My goodness, it certainly makes a huge difference when you are looking at something with this level of detail.

After something like eight hours’ debate last Wednesday on the subject of inappropriate statutory instruments, it seems rather strange to be welcoming a statutory instrument that amends primary legislation. However, it is a good thing that one is able to make amendments of this kind by an LRO because it would otherwise take years for the wheels to grind and come round to something of this kind, which, although relatively small, could have a significant effect on the objects of its reform and for the benefit of some of the smaller charities. Therefore it is heartening that the Red Tape Challenge extends in this way and that it can be implemented in this way.

We have all been brought up with raffles, and I like the way the impact assessment is quite blunt about the fact that we are talking about raffles here. However, I suspect that an awful lot of people who conduct raffles have no idea of the legal context in which they happen.

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I suspect that an awful lot of raffles are strictly illegal as regards what goes on. That applies to many workplaces, and—dare I say it?—may even apply to events organised by some political parties. Therefore, it is interesting that we can now look forward to raffles being conducted with a rather higher degree of legality.

In response to the paperwork—the impact assessment and what the Minister has had to say—there is a slightly apologetic tone to the impact assessment as regards the amount of evidence available on the possible benefits of this reform, which is quite interesting. It says:

“Reviewing the available literature, it is clear that there is an absence of basic facts, as well as detailed information on raffles as a form of giving”.

You do not often see that in an impact assessment. In a sense, we are being asked to make a leap of faith that this will benefit smaller charities. In this case perhaps we will not be so rigorous about demanding evidence-based policy, and let us hope that we see a positive impact on some of those smaller charity events, which will now be able to take place—dare I say it?—down our local. That would be extremely welcome.

I hope, however, given that there is very little evidence about what could happen, that the Government will at a certain point review how the operation of this reform has taken place—I do not know whether that will be after a year or two years—to see whether it is working out in a proper fashion or whether these changes have had unintended consequences. That would be beneficial for all of us.

4.30 pm

Lord Stevenson of Balmacara (Lab): My Lords, I, too, thank the noble Earl for his easily absorbed comments on the reasons for doing the LRO in this way. It was good to capture it in the way he did. I agree with the noble Lord who has just spoken that the benefits of using the LRO system also have spin-offs in terms of the clarity of the documentation, which again I commend to your Lordships. It is very good to have it. Of course, the Keeling schedule is a delight. Oh, for Keeling schedules for everything we did!

I have only a couple of questions about the wording of the document, which I am sure will not take the noble Earl long to respond to. The Explanatory Note says, with reference to Article 3:

“A work lottery or a residents’ lottery is now exempt in two circumstances, where the lottery … is promoted wholly for a purpose other than that of private gain”—

that is clear. Then there is a double negative which caught me up and perhaps the Minister could read into the record what it is meant to mean. It says that a lottery is now exempt if it,

“is not organised in such a way as to ensure that no profits are made”.

Is that the same as saying, “is organised in such a way as to ensure that it is not profit-making”? One gets caught by these things sometimes and I just wanted to be clear. I would be grateful if, once he has had the advice, he could clarify this.

The Explanatory Note makes a possibly interesting point about Article 4, which is that,

“the maximum imprisonment for an offence committed under section 261(1)(ba) is six months”,

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but then goes on to say:

“When section 281(5) of the Criminal Justice Act 2003 comes into force, this will increase to 51 weeks”.

Whatever happened to inflation? I know this is not the Minister’s department but does he have any idea when we are likely to see that change? Clearly, a change from 26 weeks to 51 weeks is quite a big one and, even then, given that this was 2003, perhaps it ought to be higher than that, given the way in which people are behaving. But I do not really want to hold up the Committee with that light-hearted point.

The noble Earl will recall that he responded to a debate in the Chamber about the National Lottery just before Christmas. A number of points were made in that debate, most importantly about the balance to be struck in public policy between the National Lottery, which is of course a monopoly aimed at making the maximum amount of funds available from the gambling intentions of the public to good causes as defined in the legislation, and the impact that is being made on the National Lottery, it is alleged, by a number of society lotteries that are now growing up across the country. The debate, which attracted contributions from all round the House, was broadly characterised by saying that there were growing but not yet serious concerns that the so-called society lotteries—there is one called the Health Lottery; and there is one that is a postcode lottery, which is organised in a slightly different way—are trying to wear the clothes of a national lottery because obviously it serves their purposes better if they can be seen to be competing with the National Lottery.

However, as the noble Earl will recall, the point about this is that the society lotteries have different rules applying to them in terms of where their proceeds may go—and I am not saying in any sense that they do not support good causes, but they are different from those specified in the National Lottery—yet they are benefiting from being seen as a sort of national lottery, to which perhaps those rules should apply. Secondly, the cost framework for the society lotteries is different from that of the National Lottery, which is specified in regulation and limits the extent to which the company operating the National Lottery on behalf of the good causes can charge costs and expenses, which of course does not apply to the society lotteries.

This is familiar territory for the noble Earl. I am sure he is well briefed to respond to it. His response to the comments from around the House in the previous debate was that there was to be a review, which would deal with a number of these points, building on some work done, I think, three years ago now, which seemed to suggest that the National Lottery was not being affected by society lotteries. The volume of responses that I have received—and I think other noble Lords have had the same correspondence since that debate—prompts me to ask whether or not there is any progress on the review of the National Lottery versus the society lotteries and, if there is any news on that, when we might expect to see some output from that review. These things are part of this overall package.

Having said that, we have no specific objection to what has been proposed. I take the point made by the noble Lord, Lord Clement-Jones, that this brings a

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number of people who are probably operating outside the law back into the law but does so in a way that I think will benefit good causes, and we have no objection to that.

The Earl of Courtown: My Lords, I thank both noble Lords for their contributions to this short debate. I thank the noble Lord, Lord Clement-Jones, for his support of the order and his comments on the success of the Red Tape Challenge. He made a number of comments, in particular about what happened in the Chamber last week. Of course, he would not expect me to comment on that. One should also look at the responses given to the consultation by the various stakeholders, which answer one of the points that the noble Lord made. The Lotteries Council, Cancer Research UK, the British Red Cross, Sue Ryder and Marie Curie cancer care all consider that this will help to increase the amount of money raised for these very important and valuable charities.

The noble Lord, Lord Stevenson, mentioned a number of matters and I will do my best to answer them all. As ever, if I do not answer them in enough detail I will write to him. He started by talking about a review of the performance of this order. We will take the noble Lord’s words into account and speak to the Gambling Commission on this issue. The noble Lord also mentioned the House of Commons Select Committee report on society lotteries, published in March 2015. He basically asked if the Government will adopt the recommendations set out in that report. The department is taking action on this. The committee said that the Government should seek advice from the Gambling Commission in relation to those recommendations. We have done so and await that advice. Any proposals will need to receive the approval of Ministers, which will happen in due course.

Lord Clement-Jones: Can I just check that the Minister is specifically saying that there will be a review by the Gambling Commission of this set of reforms? After how long will that take place?

The Earl of Courtown: It is probably best if I write to the noble Lord and give him the exact details of what is planned. Obviously, as I said from this position, there are some points that we will take back to the Gambling Commission. Once I have checked with the department, I will write to the noble Lord with exact details of any review. I will ensure that the noble Lord, Lord Stevenson, is also included in that.

Lord Stevenson of Balmacara: My Lords, I think we are slightly mixing up two issues here. The point made by the noble Lord, Lord Clement-Jones, was about this order and the effect it will have on those small lotteries and events run for residents. The question was whether there would be a review of that and I think the Minister will write to him about it. My point was about society lotteries and I did not refer to the House of Commons Select Committee. I could have done but chose not to because I wished to let the Minister know that the outcome of the debate we had in the House just before Christmas was a number of letters, including ones from those responsible for operating

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society lotteries. I wondered whether there was any progress there. I think the Minister was in the process of explaining that that is also being progressed.

Lord Clement-Jones: My Lords, that is precisely why I asked the question: there seems to have been a conflation of the two points.

The Earl of Courtown: I thank both noble Lords for explaining that position. The noble Lord, Lord Stevenson, made an important point relating to the Explanatory Notes. There is a mistake there, for which we apologise. The new text, which I am sure it is very important to have on the record, is that a work lottery or a residents’ lottery is now exempt in two circumstances: where the lottery is promoted wholly for a purpose other than of private gain; or where it is organised in such a way as to ensure that no profits are made. I hope that clarifies the position to the noble Lord. I will let him know what action needs to take place on that issue.

The noble Lord, Lord Stevenson, also referred to Article 4 and the changes to penalty. I should write on that in greater detail than I have available at present. As I understand it, this would bring the penalty into line with other offences under Section 261 of the Gambling Act 2005, but it is best if I write to him with greater detail on that issue.

The noble Lord also mentioned the debate that took place in the Chamber before Christmas last year. Yes, there was much mention around the House of this issue, and I know that the department is considering carefully what was said in that debate. If anything has arisen since then, I will write to the noble Lord on that.

I thank both noble Lords who have contributed to the debate and very much commend the order to the Committee.

Motion agreed.

Agricultural Holdings Act 1986 (Variation of Schedule 8) (England) Order 2015

Agricultural Holdings Act 1986 (Variation of Schedule 8) (England) Order 2015

Motion to Consider

4.41 pm

Moved by Lord Gardiner of Kimble

That the Grand Committee do consider the Agricultural Holdings Act 1986 (Variation of Schedule 8) (England) Order 2015

Relevant document: 13th Report from the Joint Committee on Statutory Instruments

Lord Gardiner of Kimble (Con): My Lords, I am pleased to introduce this instrument, which updates agricultural tenancy compensation provisions set out in Schedule 8 to the Agricultural Holdings Act 1986. This relates to compensating outgoing tenant farmers for short-term improvements that they have made to the holding during their tenancy which have value to incoming tenants—for example, the application of manure to land to improve soil condition.

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This instrument applies to all landlords and tenants in England who have agricultural tenancy agreements governed by the 1986 Act. There are approximately 21,500 of these tenancies in England, accounting for approximately 17% of agricultural land. These agricultural tenancies tend to be traditional lifetime tenancies with succession rights of up to two generations.

The relationship between landlord and agricultural tenant is governed partly by the terms of their individual tenancy agreements and partly by agricultural tenancy legislation. The 1986 Act sets out detailed provisions for the terms and conditions of agricultural tenancies covered by the Act.

The instrument before your Lordships today will deliver the final reform in a package of proposals that the Government consulted on in 2014 to update and modernise the 1986 Act. The changes have the support of industry representatives for both landlords and tenants.

Why are we proposing this instrument? Schedule 8 to the 1986 Act is now out of date with current farming practices in the following way. First, compensation can currently be claimed only for improvements derived from purchased manure and fertiliser applied to the land. This excludes improvements resulting from applied manure that has been made on the farm and other beneficial material such as digestate—the by-product of anaerobic digestion—and soil improvers such as compost, which are now commonly used on farms to improve soil condition.

Secondly, manure is currently compensated for only if it comes from horses, cattle, sheep, pigs or poultry, thereby excluding other species now found on farms, such as deer, alpaca and llama.

What changes are we making? To bring Schedule 8 to the 1986 Act in line with current farming practices the instrument does the following. For improvements from inputs applied to the land, we have broadened the list to include digestate and soil improvers; for example, compost. In addition, we have removed the restriction of compensating only for purchased manure and fertiliser applied to the land. This is because how the manure or fertiliser was acquired, whether paid for or not, has no bearing on the resulting soil improvements delivered. For manure on the holding held in storage, we are broadening the scope of the schedule to allow compensation for manure derived from a wider range of livestock and equidae. This means that any animal now kept on the holding for agricultural purposes will be included. Equidae includes horses and related species such as donkeys and asses.

In conclusion, this instrument will update and modernise Schedule 8 to the 1986 Act to provide a more effective incentive to outgoing tenants to leave the soil in good condition for incoming tenants. The changes are supported by the Tenancy Reform Industry Group, which includes representatives of tenant farmers, landlords and professions such as agricultural valuers, surveyors and solicitors. For these reasons, I commend the instrument.

4.45 pm

Baroness Jones of Whitchurch (Lab): My Lords, I am very grateful to the noble Lord for introducing the instrument. It makes very good sense in both the extended definition of the animals that can contribute

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to farmyard manure and the added inclusion of digestate and other soil improvers such as compost to the estimate of land value.

As I was until recently a member of the board of WRAP, I would not dare to challenge its estimates of the value of usage of these new soil enhancers to the overall value of the land. Clearly, anything which encourages consistent improvement of soil quality leading up to the end of tenancies makes sense, and these proposals seem to have been very well thought through.

I have only one question. The variations to the schedule became necessary because farm practices and the science of effective soil enrichment have moved on since 1986. It would be regrettable if we found ourselves behind the curve again with new additives for improving soil and yields. That is particularly the case as the pressures to recycle and reuse organic materials increase to avoid landfill. Can the Minister reassure me that other materials are not currently being developed which would be excluded from the revised regulations but are destined to be adopted as soil enhancers by the farming community in the near future? It would be a shame if we had to wait another 30 years before tenanted farmers could be compensated for their use.

I am aware that there is also a wider discussion to be had about how we can encourage longer-term tenancies for tenant farmers so that these calculations for compensation become less crucial, but I realise that that goes wide of the subject of the revised order before us, so perhaps I shall reserve my comments on that for a future date. In the mean time, I look forward to the noble Lord’s response and confirm that we support the changes.

Lord Gardiner of Kimble: My Lords, I am most grateful to the noble Baroness for her support for the order. It is one of these occasions when a lot of very good work has been done by all parties and we have come forward with something which will assist the agricultural sector.

I am conscious of the experience that the noble Baroness brings to these matters, and she was absolutely right to seek reassurance that materials adopted in future as soil enhancers will not be excluded from the revised schedule. I can assure her that our proposal to include “soil improvers” is deemed sufficiently broad to cover future developments in soil enhancers where those new inputs could be shown to improve the soil. I am very pleased to say that on this occasion, we will not have to wait another 30 years; this point has deliberately been covered so that that can be taken forward.

I also noted the noble Baroness’s other point. This is probably for another day but it is very important that we ensure that we have a thriving agricultural sector and that all the plans we have in Defra for the next 25 years for the food and farming sector include new people coming into the industry and the enhancement of agri-technology so that we produce food for the nation and also export a great deal of our wonderful products. We want to ensure that there are people coming into the sector and that they bring skills with them which will be so valuable to us.

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This order will update and modernise Schedule 8 to the 1986 Act to bring it in line with current farming practices which will ensure tenant farmers can claim compensation for the short-term improvements they have made which have value to the incoming tenant. This ensures end-of-tenancy compensation provisions set out in Schedule 8 provide an effective incentive to

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outgoing tenants to leave the soil in good productive condition for incoming tenants. I think this is something that we would all commend. I therefore commend this order to your Lordships.

Motion agreed.

Committee adjourned at 4.51 pm.