Legal Services Bill [Lords]

Public Bill Committee, 19 June 2007.

Frank Cook (Labour, Stockton North)

I shall try to recapture the scene from Thursday afternoon. An hon. Member was in the process of thinking that he was permitting an intervention, but then changed his mind and decided that he had shut up for good. That allowed the Whip to move the motion for Adjournment. I appeal to Members to bear in mind that, when they are permitting an intervention, they must make it plain that they intend to come back and that they are not relinquishing the floor.

Clause 15

Frank Cook (Labour, Stockton North)

I remind the Committee that with this we are taking Government amendment Nos. 109, 110, 138, 115 to 117, 126 to 128, 202 and 205.

Jonathan Djanogly (Conservative, Huntingdon)

Reading through the Hansard reports of the debate on the amendments, I felt that the debate has raised more questions than it has answered. That is not surprising considering the lateness with which the amendments were tabled and the way in which the Government have done a U-turn at the behest of their union puppet masters. The White Paper stated:

“The Not for Profit (NFP) sector will be brought within the regulatory scope of the LSB and the ABS licensing scheme. This will ensure the same level of protection for consumers no matter where they obtain their legal services.”

The Government response to the Joint Committee on the Draft Legal Services Bill showed a slight shift in that position. It stated:

“We are currently working with the TUC to ensure that exemptions under the Legal Services Bill take account of the position reached with respect to trades union exemptions under the Compensation Act, and considering whether any further provision is needed in relation to the Bill regime.”

The Compensation Act 2006 is different from the Bill in that it introduced regulation to a formerly unregulated sector, whereas the Bill will reform an existing regulatory regime. The key feature of the former approach is that the trade union exemption is not enshrined in statute; it is a matter for subsequent statutory instruments.

The Conservatives’ basic position is that we oppose these unfair, illogical and rushed amendments, and I shall ask my hon. Friends to vote against them. However, if the Government wish to continue on such a course, they should make it clear that the Solicitors Regulation Authority may, if the Legal Services Board approves the necessary rules, require that lawyers provide services for trade union members only through a regulated entity. The Minister has a lot of thinking and explaining to do on what are, frankly, shabby proposals before Report, and certainly before they are dissected in the other place.

I would be grateful if the Minister came back on that point. It should be made clear that the SRA and other regulators may require that lawyers provide services for trade union members only through a regulated entity.

John Hemming (Liberal Democrat, Birmingham, Yardley)

In a sense, the interruption of the intervention was quite helpful because it allowed someone to explain to me the reasons why the trade unions might be concerned about regulation. The vast majority of trade union activity, such as advising people and so on, will not be affected by the Bill. However, if a trade union became an alternative business structure, the legal advice activities of a trade union would be regulated. We could end up with a situation in which a whole organisation has a problem because a part of it is regulated. Obviously, we are not looking for that. The logical solution is to have a subsidiary ABS of some form or other rather than have the whole organisation as an ABS.

We take an agnostic approach to the amendments. We accept the objective. We do not want a situation in which a trade union convenor who is offering advice to union members on employment law ends up being regulated to the same extent as someone who sets themselves up in business to offer legal services in the widest sense, who carries out regulated legal services and who, as part of that, does unregulated legal services, which are caught in the same process of regulation.

Whether the amendments are drafted in the best possible way is an interesting question. There is probably a better way to draft them. However, we are relatively agnostic on the amendments themselves.

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

I want to make a different set of points and will not refer only to the trade union position. Will the Minister explain why she has not considered other organisations that have a similar relationship with their members? I represent the Hospital Saturday Fund, into which people pay money in order to help them at the time of their prospective medical or caring needs. It is a mutual organisation.

Henry Bellingham (Conservative, North West Norfolk)

On a Saturday.

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

No. Such activity can take place on any day of the week, in any week of the year. There are many mutual organisations into which people pay. In another context, the Minister referred to the Royal Automobile Club and the Automobile Association. Many organisations have in-house lawyers who give legal advice. They are not trade unions, but potentially they have the same provision whereby two sorts of people give legal advice. There are in-house people from whom the organisation receives the service for which it signs up. They may commission a law firm if the issue is difficult or not run of the mill. I do not understand why the Government have come to the Committee—they have been reasonably criticised for so doing late in the day—with proposals that relate only to the trade unions, not to other organisations that have a similar relationship with their members.

Jonathan Djanogly (Conservative, Huntingdon)

The hon. Gentleman makes an important point and, if we push it a little further, we come to not-for-profit organisations such as the citizens advice bureaux.

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

There are other organisations, but they are slightly different.

We are debating who we are regulating, who will be governed by the umbrella of new arrangements and the dividing line. The Government have picked the one group of people with whom they have an affinity. Given the history of the Labour party, I absolutely understand that. I am not making a criticism. However, they are not applying the same principles across the board.

Stephen Hesford (Labour, Wirral West)

Will the hon. Gentleman give way?

David Burrowes (Conservative, Enfield, Southgate)

Will the hon. Gentleman give way?

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

I shall give way to the hon. Member for Enfield, Southgate first because I saw him first.

David Burrowes (Conservative, Enfield, Southgate)

I am glad to hear the hon. Gentleman make those remarks. Does not his concern about the matter raise suspicion that a special case has been made because there is interest in and influence with trade unions, given that the Labour party apparently receives donations of more than £12 million from the unions? That has inevitably led to the accusation that that is one of the primary reasons why the Government are particularly supportive of the amendment.

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

It is the case that the Labour party was formed out of the trade union movement. It is still very much linked to the trade union movement, and it receives a lot of its funding from it. Debates may even be continuing today about party funding and the link. The Labour party is entitled to argue its case, but even a Labour Government have a duty to rise above it and to treat people fairly. I am not arguing that there may not be a perfectly reasonable set of circumstances, as my hon. Friend the Member for Birmingham, Yardley described, in which we can have an arrangement whereby the in-house people, giving the service that is expected, are exempt, while others are not exempt. However, I do not find it justifiable that provision is made for one set of organisations—those with which the Government party has a particular affinity—but not other organisations.

Stephen Hesford (Labour, Wirral West)

Will the hon. Gentleman give way?

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

I will give way in a second. It is too early in the day to be excitable.

Will the Minister tell us what consideration she has given to other organisations; what advice she has sought; what advice she has been given publicly; whether the matter has been considered by external advisers; whether she has been advised by Committees of either House and what the Government’s conclusions have been across the board? If she does not, it will look like she is pulling the one favoured friend off the shelf and not giving other people in a similar position the same sort of status.

Stephen Hesford (Labour, Wirral West)

The hon. Gentleman has been listening to the Tories on the Front Bench, who recognise U-turns as well as anybody; their leader has made three in as many weeks. Leaving that aside, if there are millions of reasons why the Government have tabled these amendments, it is because there are about eight million people in trade unions, and this is important legislation to secure their rights and to improve the representation on their behalf. However, the Hospital Saturday Fund that the hon. Gentleman talked about could have made a representation to the Minister on any day of the week, in the same way that the trade unions did. That may be why there has not been a different consideration.

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

I will ignore the general political knock-about at the beginning and turn to the substantive point. I am not aware whether the Hospital Saturday Fund or other such mutual organisations—I do not have in my head the list of respondents—considered the matter. If the amendments were tabled the week before last, by definition, people would not have had notice that the issue was on the agenda. That is my question: who have the Government talked to?

Stephen Hesford (Labour, Wirral West)

Will the hon. Gentleman give way?

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

I will in a second. I understand that the trade unions have an interest and that they may well have made representations about the issue. We went around such a course not many weeks ago in the debate on the Compensation Bill. We debated how much the trade unions should be regulated, how to structure the Compensation Bill and how, once we had general legal regulations, to bring that into the structure of this Bill. I anticipated that. However, it is not an answer to say, “We are only legislating for this group to have a particular status because we have been lobbied a lot by it.” That is a very bad answer. The job of legislation is to treat fairly people in similar circumstances. People join other organisations in the same way that they join trade unions—for mutual aid and assistance and support when they need it.

Stephen Hesford (Labour, Wirral West)

If the hon. Gentleman does not mind me saying, the bad point is his. Many months ago, I sat on the Joint Committee, in which the matter was raised on behalf of the trade unions. It is not a new point at all. All those other organisations that might have been affected were on notice many months ago.

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

I am aware that it is not a new point and I have conceded that. I said that the matter was debated not just in the pre-legislative scrutiny Committee, on which my hon. Friend and others sat, but in the context of another Bill brought forward not many months ago by the same Department—the Department for Constitutional Affairs. What was debated then was that, when the Legal Services Bill became law, the regulatory system would be expected to cover other organisations dealing with compensation. Therefore, the matter has been debated before. That is not an argument for having different treatment for organisations which effectively do the same job though under different names. There are many organisations that are not as big or take in as many people as the trade union movement, but that is no reason for them not to be considered. That is why I am asking the Minister to tell us what discussions there have been and why, if the organisations are different, they are sufficiently different not to be considered here.

I should be grateful if the Minister elaborated on where exactly the line is drawn in her mind and her proposals between the sorts of activity that will be outside and inside regulation. As she knows, traditionally, trade unions have sometimes used in-house advisers, sometimes well-known trade union solicitors—I have put on record that I have been instructed by them, so clearly they act—and sometimes a combination of the two. There is no clear difference between the jobs done by one sort and by the other. In her winding-up speech, she needs to make it clear where she sees that line when it comes to trade unions.

To return to my main point, I am keen that the Minister should speak about other organisations that are similar, effectively. If people pay for a service, those organisations should have the same dispensation—if there is to be one—as trade unions and be included.

Frank Cook (Labour, Stockton North)

Order. I address the following remarks to the whole Committee rather than to any individual. The common means of catching the Chair’s eye is to stand. The Chair has no means of realising that a speech is imminent if the hon. Member, or right hon. Member for that matter, does not stand. I simply remind the Committee of that, adding that comments to the Committee should be addressed through the Chair.

Henry Bellingham (Conservative, North West Norfolk)

I apologise, Mr. Cook, for not standing quite as swiftly as I should have done, and welcome you to the Chair of this Committee. I endorse what my hon. Friend the Member for Huntingdon said in his speech during the previous sitting. He spent much of the weekend mulling over what he would say this morning; he was interrupted by the best part of 90 hours.

Why were the amendments tabled so late? I find it quite extraordinary that they were not tabled in another place. After all, there was quite a delay. Second Reading in the other place occurred on 6 December, the Bill’s first day in Committee occurred on 9 January and it finally completed its passage through the other place on Tuesday 15 May. The Bill had a long passage.

The Minister pointed out that Lord Falconer mentioned on Second Reading that the Government were minded to table amendments respecting trade unions. Indeed he did, although it took me a little while to find the reference in his speech—it was thanks only to the diligence of the Minister’s private office that I was referred to the right paragraph. That long delay seems quite extraordinary. I ask her to put our minds at rest, because we are naturally curious. Certain representations have been made behind the scenes and discussions have taken place.

I take on board the point made by the hon. Member for North Southwark and Bermondsey—there are many other mutual bodies. I should declare an interest. When I was at the Bar, I did some work for various mutual societies and other bodies. Many of them had in-house lawyers who dealt daily with routine matters, but when the need arose, they sought outside solicitors to instruct counsel. Sometimes the in-house solicitors would instruct counsel, but there was a good working relationship between the two different types of lawyers.

The hon. Member for Wirral, West says that trade unions are different, because they have so many members. That is not a convincing argument, particularly when we know that the trade union movement is close to the governing party. The Conservatives want to work with the trade unions. I met fairly recently with Derek Simpson, and I have met with Brendan Barber. My party, in its new, invigorated modernising mode, is trying to reach out to all types of groups. We want to work with trade unions. As it happens, I am campaigning on different issues with a number of trade unions in my constituency. We have great respect for them. However, what I want to hear from the Minister is her justification for the apparent lack of consistency and for the timing. If she can provide that justification, the Opposition would feel a great deal more comfortable about this issue. Otherwise, I support my hon. Friend the Member for Huntingdon’s suggestion that we should vote against the amendments.

John Hemming (Liberal Democrat, Birmingham, Yardley)

I would like to go back to the point raised in our previous sitting by the hon. Member for Bassetlaw, which was about industrial relations. He said that, where he is negotiating arrangements for members of his trade union, that is industrial relations and not a legal service.

Regarding the amendments, there is a certain amount of unanimity here, inasmuch as everyone here believes that industrial relations should not be regulated; we are not saying that they should be regulated. I think that everyone here, including the Conservatives, agrees that industrial relations, where one is negotiating on behalf of one’s members, should not be a regulated legal service. By definition in the Bill, it is not a regulated legal service. If everything just continued and the Bill were passed without the amendments, industrial relations would not be a regulated legal service.

If matters reach a certain point, the hon. Member for Bassetlaw and his colleagues in the trade unions put a test case through the courts. They do that by bringing in a firm of solicitors, who then contract barristers. The regulation of those lawyers is through the SRA, the Bar Council, or whatever body it may be, and that is not, in itself, a problem.

A question then arises, and this is where the Minister should clarify the situation: what is the reasoning behind the trade unions’ concern that the whole of a union would become a regulated body? Those are the circumstances that the hon. Member for Bassetlaw would find a problem. If the whole of the trade union becomes a regulated body because it wants to be an ABS, the problem is that the Bill will bring all the negotiations and informal advice by a union convener, wherever it is given, under the remit of the Bill. That is because, although such negotiations or advice are not regulated legal services, the union becomes a regulated legal entity and therefore everything is trapped.

Of course, one solution to that problem is for the trade union to have a subsidiary ABS, if it needs an ABS, so that a clear line is drawn around the regulated entity. That seems to be a tidier solution than this measure, but again it comes down to the details of drafting. One would be concerned, if the union is conducting case handling, such as claims management or whatever it may be, that it be done properly. Obviously, it is possible in those circumstances for the conduct of litigation to be managed within an ABS.

John Mann (Labour, Bassetlaw)

The hon. Gentleman misses the fundamental point, which is that the consumer will lose out, because the decision made on advice is made by a lay representative. Is that not the case? That advice could be to go down the negotiating route, or it could be, at some stage, to bring in a solicitor. It is that advice that will be caught in a crossover, which would leave the consumer facing two directions simultaneously on the same piece of advice. It would be the consumer who loses out, whether these amendments or other amendments are made; we will hear from the Minister about whether other amendments will be tabled. That means that there is an absolute prima facie case for having one set of regulations and not two on behalf of the consumer.

John Hemming (Liberal Democrat, Birmingham, Yardley)

I agree with the hon. Gentleman that there is a good case for having one set of regulations, with the certification officer regulating the activities of the trade unions, and industrial relations should not fall within the remit of the Bill. The question is this: what is the best way to achieve one set of regulations? Also, what is the best way of dealing with other mutual organisations? That was the point raised by my hon. Friend the Member for North Southwark and Bermondsey. We wait for the jewels of wisdom to come from the Minister on that matter. However, it is that clarity that is needed.

There is a reasonable chance, whatever happens today regarding these amendments, that future amendments from the Government may be necessary to clarify these issues. I would be interested to hear what the Minister has to say about that.

Bob Neill (Conservative, Bromley and Chislehurst)

I shall be brief. I support the concerns that have been raised, and I wish to make two points.

First, the hon. Member for Wirral, West said that the trade unions are important, and that they have some8 million members. I accept that. I accept also that some difficulties may need to be considered. That makes Conservative Members all the more suspicious about the timing of the amendments. The fact that the trade unions represent such a substantial constituency of interest and that they have links with the Government makes it all the more likely that such issues would have been flagged up very early in the gestation period of the Bill. Against that background, it is all the more surprising that such significant amendments should come so late in the day and at such short notice. It is a rhetorical question, but what on earth has been going on between then and now?

Secondly, we have already asked the Minister for details of the discussions and the lobbying that took place that gave rise to the amendments. In answer to my hon. Friend the Member for North-East Hertfordshire (Mr. Heald), the Minister of State conceded in the House that there had been discussions with the trade unions. For exactly the reasons given by the hon. Member for North Southwark and Bermondsey and others, will the Minister tell us what other voluntary or mutual organisations made representations to the Department about potential difficulties? Why is it that the representations of one set of organisations seem to have been accepted, yet the representations of others have been ignored?

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

That is one question, but even if there were no representations from certain bodies or groups of organisations, a good Government and good officials should think about how the provision might apply across the board. I assume that the hon. Gentleman agrees that it is the Government’s duty to reflect upon the general interest and not to rely on lobbying to achieve exemptions.

Bob Neill (Conservative, Bromley and Chislehurst)

The hon. Gentleman is right. The two points are not mutually contradictory.

We would like to know the totality of lobbying or representations, so that we can work out why one group appears to have been favoured. For the reason that I advanced earlier—that a great number of people might be affected—it surely should have been anticipated at the beginning. Why was it not flagged up and brought forward much earlier? As yet, we have heard nothing convincing.

Bridget Prentice (Labour, Lewisham East)

There we have it. One part of the Conservative party says that it wants to cuddle the unions, and another part says, “It is favouritism. They are all getting special favours.” There is no change in the Conservative party.

I remind the Committee of the reason for the provisions. The amendments are designed to maintain the status quo for trade unions. The idea is that the trade unions should continue to provide services to their members, through their staff and representatives, without having to be regulated as an entity. In addition, there is existing trade union legislation.

Jonathan Djanogly (Conservative, Huntingdon)

I intervene after the Minister’s first sentences because the point needs to be made that the status quo for many people is not good enough, particularly with regard to the miners compensation case. That is why change is being demanded.

Bridget Prentice (Labour, Lewisham East)

The hon. Gentleman is not right, but I understand why: as a member of the Conservative party, his knowledge and understanding of trade unions is obviously severely limited.

David Burrowes (Conservative, Enfield, Southgate)

I concede that the Minister has far greater knowledge and understanding of the unions, and a direct interest in them. She doubtless had that knowledge almost a year ago, when the Joint Committee raised concerns about regulating the role of the unions. Why, at this late stage, has there been a change of heart—why the urgency to amend the Bill, as the Minister says, in order to maintain the status quo? Surely, the Minister’s information on unions cannot have suddenly and dramatically increased.

Bridget Prentice (Labour, Lewisham East)

I am pleased that the hon. Gentleman mentioned the Joint Committee. I refer Opposition Members to paragraph 232 of the Joint Committee on the Draft Legal Services Bill report, which states:

“Trade unions are distinctive from other organisations and governed by their own legislation”.

That might be one of the answers as to the difference between trade unions and other mutual organisations. The report continues:

“We are concerned that the Bill restricts the ability of trade unions to act in their members’ interests, especially by placing on a legal footing the means by which trade unions provide advice and representation...we recommend that the Government also takes note of concerns expressed during the Committee Stage debate on the Compensation Bill in the House of Commons about the provision of legal services by subsidiary companies wholly-owned by trade unions”,

which is a salient issue. The TUC also recommended that

“the Government gives further consideration to any necessary exemptions from the draft Bill for trade unions”.

The Joint Committee made a clear recommendation that we give further consideration to the matter, and we have done so.

Stephen Hesford (Labour, Wirral West)

I encourage my hon. Friend to pursue that line. The hon. Member for Enfield, Southgate, who just intervened, was a member of that Committee. Its recommendations were agreed unanimously, so I am surprised by the interventions that he and his hon. Friends have made this morning.

Bridget Prentice (Labour, Lewisham East)

I am grateful to my hon. Friend for reminding me of that. Perhaps the hon. Member for Enfield, Southgate is part of the cuddly side of the Conservative party, which wants to embrace trade unions, so we should forgive him.

I will come on to other organisations in a moment, but I first want to go through some of the issues that were raised in Thursday’s debate. We never intended that trade unions should be caught by the full ABS framework—they fell within it because of their ownership structure—but the regulatory issues that they raise are different from those raised by commercial bodies offering services to the public. In that sense, there is a difference between trade unions and some of the other organisations that have been mentioned today.

We have been asked why we did not propose the amendments earlier. My right hon. and learned friend the Lord Chancellor set out our intentions on Second Reading in December. Although the provisions in the Bill at that time went some way towards achieving the intended result, the TUC did not think that we would achieve it and the Law Society had some reservations. We held discussions at length with both parties. Sadly, that took longer than we might have hoped. The time that it takes to get to where we want to get to is one of the most dispiriting things about Government. I apologise to hon. Members if they have not had as long to peruse the amendments as they might have liked.

Jonathan Djanogly (Conservative, Huntingdon)

Will the Minister give way?

Bridget Prentice (Labour, Lewisham East)

Let me finish the apology, then I shall give way. We were right to take the additional time to ensure that we got things right.

Jonathan Djanogly (Conservative, Huntingdon)

Let us accept that the Government needed additional time; why could not members of the Committee and, indeed, hon. Members generally have been advised of what was going on? Will the Minister also explain why she did not publish any details of the consultation to give us some idea of where the Government were coming from before the Committee started? Has she discussed the matter with consumer bodies?

Bridget Prentice (Labour, Lewisham East)

On reflection, perhaps it would not have been unreasonable to inform the Front Benchers of our position on some of the issues. I could not inform every member of the Committee, because I did not know who would serve on it. Brilliant as I might be, even I could not see whom the Committee of Selection was going to put on this Committee. There was not a lot of scope for me to move forward on that matter.

The hon. Members for Enfield, Southgate and for North Southwark and Bermondsey asked why the exception did not apply to other bodies. Other bodies might well be able to take advantage of a similar exception; it could happen, for example, in the case of the Police Federation that we discussed.

Tobias Ellwood (Conservative, Bournemouth East)

The Minister has glossed over an important point. She rightly said that she was not aware of who would serve on the Committee, but she is certainly aware of who sits on the Opposition Front Bench. It would have been appropriate for her to share the information when she had it. In addition, will she say whether she spoke to consumer bodies as well as to the TUC once the recommendations had been made?

Bridget Prentice (Labour, Lewisham East)

I have just said that it might have been appropriate to discuss the recommendationswith the Opposition Front-Bench spokespeople. The Department is good at involving Front-Bench spokespeople from the main Opposition parties in its thinking, as far as possible. The hon. Gentleman might have a point when he says that we could have had more discussions; but, frankly, the Department is not bad at those things.

Jonathan Djanogly (Conservative, Huntingdon)

And consumer bodies?

Bridget Prentice (Labour, Lewisham East)

I should like to make my speech in my own way, if I may. I shall come to other consumer bodies. I have prepared a long speech about the issues that have been raised in the two sittings at which we have discussed the clause, and I shall come to consumer bodies in a moment.

Tobias Ellwood (Conservative, Bournemouth East)

I am grateful to the Minister for allowing me to intervene, and I apologise that we are interrupting her when she is trying to consolidate all the points that have been made. However, the very fact that she has a strong reputation of working so closely with the Opposition Front-Bench team has exposed the fact that the discussions with the TUC were not shared. The episode illustrates the good conduct with which the Minister normally carries out her duties and approaches such matters, but that has been absent this time.

Bridget Prentice (Labour, Lewisham East)

The hon. Gentleman can try to scratch at this to see whether he can draw blood; but, frankly, I do not think that he can. The Department had discussions with the TUC and the Law Society on the matter. In recent weeks, I had discussions with Opposition Front Benchers and talked through the measures proposed in the House of Lords that I wanted to change. My noble Friend Baroness Ashton also kept the Opposition up to date when she was taking the Bill through the House of Lords. We are where we are on such matters.

Other bodies will be able to take advantage of a similar exemption. If a body provides reserved legal activities only to its members, it will be exempt under clause 15. Clause 15(4) exempts bodies when the

“provision of...services to the public”

is not part of their business.

To answer the point made by the hon. Member for North Southwark and Bermondsey, we had to make specific reference to trade unions to address the specific issues that relate to them. For example, the legislation must make it clear that only independent trade unions may benefit from the changes. Independent trade unions had to be mentioned because of their specific legislative position, but it is possible for other membership organisations to be exempted. On the other hand, bodies such as the Co-op are much more likely to want to make their services available to the general public, in which case they will must go through the full regulatory system. Subsection (4) makes it clear that as long as

“services to the public”

are not part of an organisation’s “business”, it will not have to be authorised.

I shall come shortly to the points made by my hon. Friends the Members for Bassetlaw and for North Durham.

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

I want to be as clear as the Minister about the matter. Is she saying that she believes that the Bill will introduce a strict rule for members’ organisations—mutuals, co-ops or any of that family of organisations—by which they will not need to be regulated if they supply services only to their members, but if the organisations cross the line to put their services in the public domain, they will be regulated? I just want to be clear, so that we can all understand. I think that I understand, but I should be grateful to know that that is the clear line.

Bridget Prentice (Labour, Lewisham East)

That is exactly the position, which is why I fear that people have made more of the issue than necessary, but I must also make it absolutely clear that the individual lawyers employed in any such organisation must be regulated by their regulatory authority. In such cases, the Law Society would almost certainly be involved, but there may be others.

I shall move in a moment to the points made by my hon. Friends the Members for Bassetlaw and for North Durham. Did we consult anyone else? Yes. As I have said, we consulted TUC and the Law Society. We also held discussions with consumer groups, which understand the need to ensure that trade unions can provide member services with proper protections. We held discussions with Which?,the National Consumer Council, the Federation of Small Businesses, Citizens Advice and the Office of Fair Trading.

Jonathan Djanogly (Conservative, Huntingdon)

Can the Minister make it clear whether those consultations were on the original Bill examined by the Committee, which had limited exemptions, or on the exemptions on which we will now be asked to vote?

Bridget Prentice (Labour, Lewisham East)

We discussed the principles behind the exemptions for trade unions—I have explained why trade unions are different from the other organisations mentioned—and the consumer panel, whose membership I have listed, was satisfied that they were appropriate. [ Interruption. ]

Frank Cook (Labour, Stockton North)

Order. I have tolerated this for far too long, and now I must interrupt. There has been a constant chuntering between the number two on the Opposition Bench and the Opposition Whip. It is very audible, very annoying and very disturbing, and while it is going on, interventions are taking place. If the exchange must continue, please do it out of this room and out of my hearing.

Bridget Prentice (Labour, Lewisham East)

Thank you, Mr. Cook.

My hon. Friends the Members for Bassetlaw and for North Durham and, indeed, the hon. Member for Bromley and Chislehurst asked about control over membership following the miners’ compensation debacle. That is not really a matter for the Bill, but the Government’s amendments will create an exemption for services provided by virtue of membership. It will be primarily up to the trade unions themselves to decide who is a member and to whom they will make those services available. If they want to include associate members, they can, based on the decision whether they can afford to offer to more people services funded from union dues.

Bob Neill (Conservative, Bromley and Chislehurst)

Can the Minister help me with the point that I raised earlier? How will an associate member be defined? If it is to be left to the organisation to decide, surely associate membership must be defined for the regulatory framework to have any meaning. Concerns have been raised that the concept could be abused in certain circumstances. If we are to protect the consumer, there must be some protection by means of a definition.

Bridget Prentice (Labour, Lewisham East)

The definition will be in each trade union’s rulebook—it will be their definition of membership. I do not think that there will be a problem with associate members, because I do not think that trade unions will want to extend their union funds to cover a much wider group of people. Of course, they must also be careful not to put themselves into a position where they are seen to be offering services to the general public. Once they do that, they will lose exemption under clause 15.

Jonathan Djanogly (Conservative, Huntingdon)

The Minister seems to overlook the fact that such things have happened. Unions have created associate members; the hon. Member for North Durham secured an adjournment debate on that exact issue. The Minister is burying her head in the sand.

Bridget Prentice (Labour, Lewisham East)

Let me remind the hon. Gentleman that we are talking about the services provided by the union, not by associated firms, as in the Vendside model.

John Mann (Labour, Bassetlaw)

The Minister is digging a big hole for herself and the Government. The cases brought by Vendside were equally brought by the Union of Democratic Mineworkers in its own name. Is the Minister suggesting that the UDM will be able to have an exemption from regulation, using itself as the entity through which to do so? If she is, that will cause grave concern in all parts of the House.

Bridget Prentice (Labour, Lewisham East)

No. My hon. Friend makes an important point, and I am pleased to have the opportunity to clarify. No, the UDM will not be able to do that as an entity. The point about the exemptions is that the trade unions are not to be dealt with as entities, but are to be dealt with purely in the way that they deal with their own members. It is important to make that distinction.

I should also make it clear that if the Legal Services Board thinks that a union is abusing its exemption by making somebody a member—it can look at the definition of associate member in that respect—it will be able to take action. It will be able to work with the certification officer to find out who is on the union register, and if it thinks that the client is greater than that, it will be able to say that the union is working outside its exemption and will require it to be authorised. The way in which we have developed the measure should take care of my hon. Friend’s concerns.

Jonathan Djanogly (Conservative, Huntingdon)

Is it fair to say that after thousands of associate members of unions have been ripped off, and after parliamentary debates and representations froma variety of groups and people on the matter, the Government are going to maintain that we should keep the status quo and that there should be no reaction whatever to the events that have taken place, let alone a move to our position?

Bridget Prentice (Labour, Lewisham East)

The hon. Gentleman is pushing his luck if he thinks that the Government do not take the same view as my hon. Friend the Member for Bassetlaw about the behaviour of one or two trade unions, which have behaved appallingly, as have some of the solicitors who have worked with them. We have always taken the view that my hon. Friend has expressed and we do not need to take lessons from the hon. Gentleman on the matter.

John Mann (Labour, Bassetlaw)

I am afraid the Minister has been badly let down by her civil servants, who have given her the most appalling briefing. What she has said is not what the amendments say. The amendments do not categorise associate membership, so that is not what we are discussing. I invite her to reconsider her comments on associate membership, because the situation of both the Durham miners and the UDM is crystal clear. According to the Minister’s statement, the UDM would be allowed to have a category of associate member that would not be covered by the certification officer or by the Bill. That would be an appalling state of affairs. It is not the amendments that are the problem; it is the briefing that civil servants have written for the Minister.

Frank Cook (Labour, Stockton North)

Order. It is not in order to make any reference to the civil servants attending the Minister in Public Bill Committee. It might therefore be desirable for the hon. Member to adjust his terms of reference in that regard.

John Mann (Labour, Bassetlaw)

Thank you, Mr. Cook. I hold the Minister entirely and personally accountable and responsible. I offer her the opportunity to reflect on whether she should reconsider the issue of associate membership.

Bridget Prentice (Labour, Lewisham East)

I take full and absolute responsibility for what I say, which was that, if the Legal Services Board thought that a union was using the exemption by making people members who should not be members of that union, it could take action. It is up to the certification officer to decide whether to include associate members in a trade union, and the board would work closely with the certification officer on that.

I will reflect on what my hon. Friend says in specific examples. I know of his campaign in his constituency to deal with the Durham National Union of Mineworkers, and I shall consider whether the provisions need to be tightened up further. At the moment, the amendments would give the board the authority to work in conjunction with the certification officer who regulates the trade unions, which is partly why the exemptions were in the Bill in the first place.

John Mann (Labour, Bassetlaw)

My battle is not with the Durham NUM, but the UDM—a rather different entity. In that context, the certification officer has stated expressly in writing that he has no powers in relation to consumer complaints for associate members because he does not regard them as full members. The Minister is therefore in danger of creating inadvertently a category of associate members who are beyond the law.

Bridget Prentice (Labour, Lewisham East)

In that case, if the certification officer says that he has no way in which to define associate members in that context, I shall certainly look again at the issue.

I want to be clear. The vast majority of trade unions work properly and do an excellent job for their members. The exemption would give them the opportunity to continue to do that. In the case of rogues, we need to be able to deal with them. If we need to add a further measure to ensure that that is the case, I will be more than happy to do so. Like my hon. Friend, I do not believe that it is in our interests as the Government acting on behalf of the consumers, whether trade union members or others, to give leeway to anyone who will undermine the consumer interest in the Bill.

The hon. Member for Birmingham, Yardley asked the reasonable question whether we were dealing with a problem that does not exist. He was asking about the provision of legal services by trade unions. Generally speaking, that is a rare occurrence within union membership, but it happens from time to time. My hon. Friend the Member for North Durham cited the example of industrial injury cases. Work on those is reserved if they go to court.

John Hemming (Liberal Democrat, Birmingham, Yardley)

I thank the Minister for answering the question in one respect, but what reserved legal services are provided under the status quo by trade unions? The example given by the hon. Member for Bassetlaw did not involve trade unions providing reserved legal services.

Bridget Prentice (Labour, Lewisham East)

Industrial injury cases are one example. Another might be the Musicians Union acting on issues such as copyright. Such services need to be carried out by a lawyer. It is in those instances that they are reserved legal services.

John Hemming (Liberal Democrat, Birmingham, Yardley)

The Minister knows better than me which clause identifies all the reserved legal services. I accept that the conduct of litigation is a reserved legal service, but the offering of legal advice, and even the preparation of contracts, is not a reserved legal service.

Bridget Prentice (Labour, Lewisham East)

I have already given a couple of examples to the hon. Gentleman. I do not know how to make it any clearer what reserved legal services are. The point is that if a trade union attempts to provide a reserved legal service, the person doing that must be a lawyer who is regulated.

John Hemming (Liberal Democrat, Birmingham, Yardley)

Where the Minister could make it clearer to me is by reference to clause 12(1). Under which letter from (a) to (f) do the unions offer reserved legal services?

Bridget Prentice (Labour, Lewisham East)

I have given a couple of examples, including the conduct of litigation, which are under 12(1) paragraphs (a) to (f). That ought to be sufficient for the moment.

I want to move on to the point raised by my hon. Friend the Member for North Durham, who mentioned that many union lawyers do representation work at employment tribunals. Let me make it clear that that is not reserved legal work. Employment tribunals are not under the classification of a reserved activity. Also, it might be worth reminding the Committee that claims management is not going to be a reserved service, even though it has been regulated under the Compensation Act 2006.

My hon. Friend also asked me to confirm whether the lawyers and trade unions would be exempt under the amendments. Let me make it absolutely clear that they will not. Clause 15 covers the carrying out of reserved activities which always, in every instance, have to be carried out by entitled persons—that is, lawyers or people who are exempt as set out under schedule 3. Any lawyer providing services under this exemption will still need to be authorised and regulated by one of the approved regulators. The exception that we are discussing only takes the unions themselves as an entity out of the need to be authorised. That means that complaints about reserved services can be taken to the Office for Legal Complaints. To complete the point, if a union sends its members to outside firms, those firms and their lawyers will be regulated.

There may have been some confusion about what an “employed lawyer” is. In clause 15 it means someone who is an employee of the union. If the union has an arrangement with an outside firm, which most of them tend to do, it may be said to be employing the firm’s services. However, that is not a contract of employment, as the hon. Member for Birmingham, Yardley pointed out. The firm’s client is the member, not the union. Perhaps it would be better to describe the firm as being engaged rather than employed.

The hon. Member for Huntingdon made a number of points. He suggested that there were alternatives to the amendments. One was the creation by a union of a separate body to provide legal services with only lawyers working in it. That is perfectly possible. I wonder, however, whether it is really practicable. If we insisted on that, I suspect that some unions, particularly the smaller ones, might not be able to provide services and that would reduce their availability and the choice available to members.

Jonathan Djanogly (Conservative, Huntingdon)

At the start of Second Reading and consistently throughout the Bill, the Minister has maintained that her primary objective is to act in the interests of consumers. Will she explain how her position in this regard is in the best interests of consumers?

Bridget Prentice (Labour, Lewisham East)

I said that although the hon. Gentleman’s suggestion may be possible, it is not practicable, partly because it may well reduce the choice available to consumers who happen to be trade union members if their union is not able to provide that separate service.

The hon. Gentleman’s alternative idea was to create an exemption for officials within unions. To be fair to him, we examined that possibility and originally we thought that that might be the solution. However, we concluded that it would not work, because the union would still need to be regulated as an entity. To exempt the union from having to comply with the applicable rules through the use of non-lawyers would probably open up loopholes and make regulation of the unions less effective. So the idea of an exemption was one that was worth looking at, but we decided that, on balance, it was not the best way forward.

John Hemming (Liberal Democrat, Birmingham, Yardley)

The Minister cites the difficulty for smaller trade unions in setting up an ABS subsidiary. She believes that trade unions conduct litigation—that is, they sign documents on behalf of their clients—but the hon. Member for Bassetlaw has only cited examples where, even for the larger unions, the litigation is conducted by firms of solicitors. I would be quite surprised if the smaller unions conduct litigation in the strict sense of the word. I would be interested in hearing some examples of where smaller unions conduct litigation; not examples of where they pay for it to be done by lawyers, but examples of where they conduct litigation themselves by signing the court documents themselves.

Bridget Prentice (Labour, Lewisham East)

I cannot give the hon. Gentleman an example off the top of my head, but I will write to him, if that is acceptable.

I would like to return to the suggestions made by the hon. Member for Huntingdon. I think that his next point was that the certification officer was not a proper substitute for regulation through an approved regulator. I agree with him on that point; that is true. We have never pretended that a certification officer was a substitute for an approved regulator.

The certification office has a limited role. It cannot always take action in the way that an approved regulator could. None the less, if problems over the provision of services amount to a breach of the union’s rule book, that breach can be dealt with and taken to the certification office if necessary. Also, as hon. Members on both sides of the Committee have pointed out, union members obviously retain the option to go to court themselves.

John Mann (Labour, Bassetlaw)

It would be helpful if the Minister could clarify and put on the record whether it is her expectation and that of the Government that the certification officer, in dealing with such issues, will act as robustly as she presumes that the regulatory bodies of the legal profession will act.

Bridget Prentice (Labour, Lewisham East)

I cannot speak for the certification officer; I would hope that they would deal with these issues robustly. I think that that is a debate that my hon. Friend needs to have with others, to determine whether the certification officer will act as robustly as he would like.

I would like to return to the suggestions made by the hon. Member for Huntingdon. He gave us a hypothetical example of a union that behaves unscrupulously in providing litigation services to its members. It is true, in the hypothetical example that he gave, that the lawyers’ regulatory body would be able to take direct action only against the lawyers themselves, assuming that the lawyers had done something wrong. However, that regulatory body could also have an influence on the union. It could change its rules, so that lawyers are in effect prevented from working in that union, or it could even go so far as preventing them from working in unions in general. However, I must add a rider to that observation, which is that those new rules would have to be acceptable to the Legal Services Board.

Tobias Ellwood (Conservative, Bournemouth East)

Forgive me, Mr. Cook, but I am just coming to terms with this rather complex issue and I have a very simple question that I would like the Minister to answer on the record. Why is it that the unions have requested to be exempt from this Bill?

Bridget Prentice (Labour, Lewisham East)

I got up rather slowly to answer that question, because I thought that the whole thrust of the debate this morning was about why the unions needed to be exempt from this Bill. Fairly early on in my remarks, I said in response to the hon. Member for North Southwark and Bermondsey that we needed to address the issues that related specifically to trade unions. I also said that we needed to specify that the provisions apply only to independent trade unions. Hon. Members and trade unions themselves are concerned about trade unions that are not independent. That is why this part of the Bill has to legislate specifically for trade unions that have their own regulatory system. Other bodies that could equally apply for the exemption are covered under clause 15(4).

Tobias Ellwood (Conservative, Bournemouth East)

Why?

Bridget Prentice (Labour, Lewisham East)

I have just answered that. Trade unions need that exemption. We need to address the specific issues that apply to them. They are legislated for and regulated in another way, so we need to make it clear that we are referring specifically to independent trade unions in this part of the Bill. I do not think that I can make it much clearer than that.

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

Am I right in thinking that the only effect of the amendments tabled by the Minister willbe to change every reference to “trade union” to “independent trade union”? Will there be just that one category, as defined elsewhere?

Bridget Prentice (Labour, Lewisham East)

The Bill will refer to independent trade unions as defined in the trade union legislation.

Tobias Ellwood (Conservative, Bournemouth East)

I am testing the Minister’s patience. If I were to cut and paste her answer and show someone her reasons for the union exemption, which is the reason why individual union members are not able to receive the same protection from the operation of their union or with regard to legal support, they would find it highly questionable. We have not had a proper answer to why the unions are exempt from the clause.

I shall probe further and say that the vague area of associate membership has been highlighted by the hon. Member for Bassetlaw, a Labour Member. How do associate members receive the legal support that we are trying to provide in the Bill? They seem to be omitted from it; they do not receive the same protection. I am astonished that the Government, who are supposed to look after the interests of the unions, are bowing to the might of the union barons.

Bridget Prentice (Labour, Lewisham East)

If the hon. Gentleman were to cut and paste anything that suggested for one moment that trade union members will get a lesser service than other consumers under the Bill, he would be very wrong indeed. As the hon. Member for Huntingdon constantly reminds me, because I constantly say it, the Bill is about putting the consumer at the heart of the legal system. That applies to trade union members as much as to consumers in any other forums.

I am talking about trade unions as an entity. Their members will be protected as much as anyone else. Lawyers working within trade unions will be as regulated as any others. I assure the hon. Member for Bournemouth, East that trade union members will get a standard of service that is as good as the standard that I want for every consumer. The TUC has made it clear that it wants to ensure that the services that it provides for its members are of the highest standard. We will ensure that that is the case, and he need not cut and paste anything other than that.

Henry Bellingham (Conservative, North West Norfolk)

The Minister says that the trade union movement is keen for members to get the best possible protection. Furthermore, it is obviously anxious to be seen to offer the highest possible standards. Why, then, did the trade unions not lobby to keep the Bill as it is rather than pushing for exemption?

Bridget Prentice (Labour, Lewisham East)

For the umpteenth time, we need to make a clear exemption for trade unions because of the specific issues that apply to them. In all other respects, the exemption under subsection (4) will be the same, but because of the particular position of trade unions, and because we need to define their independence, we need to make an exemption.

The hon. Member for Huntingdon said that, if the rules were changed, it should be proportionate and consistent. The regulator could complain to the certification office, which, as my hon. Friend the Member for Bassetlaw said, could take limited action. A related question was whether the Office for Legal Complaints would be able to get information out of the trade union in order to deal with a complaint. Formally, the OLC will have powers of compulsion only over the parties to the complaint; in the example given by the hon. Gentleman it would be the member and the lawyer.

The lawyer might claim that the information was in the union’s hands, but if the OLC considered it to be a ploy to get out of providing the information it could take action against the lawyer. However, if the claim were genuine, the OLC would have to ask the union to co-operate. If the union refused to co-operate, the OLC would not be able to enforce its request, but it would be able to tell the relevant approved regulator, which could decide to make the rule change that I have described.

I hope that the hon. Gentleman accepts that I agree with the Solicitors Regulation Authority. If the regulators conclude that union lawyers should work only through regulated entities, and if the board agrees that that is proportionate, that is what will happen. The unions will then be able to use the provisions of part 5. I hope that it will not be necessary, but the provisions are in the Bill should they be required.

On the question of coal health claims, it was clearly a disgraceful episode for the trade union movement. However, it does not mean that all unions are not to be trusted in all circumstances. The Government must ensure a good balance, dealing with those that behave badly but without condemning the majority in the process. The amendments allow the majority of decent unions to continue to work in the interests of their members, but retain the protection of being able to take action if problems arise.

After a full debate on the amendments, I hope that the Committee will agree to them.

Clause 16

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

I have chosen to make the point now, rather than on the previous clause. Clause 16, like clause 15, is drafted, as has increasingly frequently been the case in recent years, using letters for a category, once it has been defined. That is fine; among other things it makes the text shorter. It reminds me of questions in law exams that are put in terms such as, “If A does this, then B does that, describe the relationship between A and B in law.” Has the Minister’s Department taken the innovative approach to this Bill that it has taken to some of its draft legislation, including the draft coroners bill, which it has proof-read for readability by common women and common men? I am keen—it is a recurrent theme with me—that we should take that approach, because the more complex the subject, the more important it is to ensure that the Bill is readable. I ask the question now, because this is the obvious point at which to ask it. Has this Bill been subjected to that sort of process?

Bridget Prentice (Labour, Lewisham East)

No, not yet. I will take the matter forward. Like the hon. Gentleman, I am keen that wording should be as close to plain English as is humanly possible. The measure has not yet been subjected to that particular scrutiny.

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

I thought that that was probably the answer. Can I make a plea that, as soon as we can, we make a point of having regular plain English readability checks? During the passage of the Bill, we are going to go on to talk about consumer panels. Logically, somebody other than us should look at draft legislation, because we see measures like this all the time and might become immune to them. My plea is that the Ministry of Justice, in its present life and its life after next Wednesday, view that as a high priority.

Bridget Prentice (Labour, Lewisham East)

I will certainly put that forward.

Clause 17

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

I beg to move amendment No. 269, in clause 17, page 8, line 22, at end insert—

‘(4) All persons claiming to be entitled to carry on any activity which is a reserved legal activity shall have a duty to make clearly known to each client, at the beginning of their dealings with each other—

(a) their professional title and qualifications; and

(b) the most senior member of the firm to whom they are accountable.’.

As the Minister knows, I have trailed this amendment; it complements the clause that we are about to debate. It is a good clause in that it makes it clear that somebody who holds himself out as being entitled to act as a solicitor, even though he is not, is committing a criminal offence. If we are to have a reputable set of professions, it is important that we do not let people get away with pretending to be something that they are not. Although such cases might not be as publicly odious as those of the people whom we occasionally discover practising as doctors, gynaecologists and others when they are not, this is an important matter. People could be badly misled and lose a huge amount of money if they took legal advice from somebody who was incompetent and unqualified to give it.

The amendment is designed to make it a bit clearer to consumers who they will be dealing with when they go into the world of dealing with lawyers, who are the people regulated by the clause. It is therefore self-explanatory, although I do not pretend that it is perfectly drafted. I am keen that the Minister should be sympathetic to it and, in her usual considered way, take it away and think about how we might achieve that objective. I say that not because I have a theoretical obsession about the issue, but because I know that it is a matter of practical concern.

I know that some, if not many, people will have come to you, Mr. Cook, in your surgery or elsewhere, saying that they have been to see a solicitor or similar, yet when you have looked at their papers you have discovered that they have had no dealings or communication with anybody who is legally qualified. All the people with whom they have dealt have had lesser, or even no, qualifications; some might have been students or new trainees. I do not disparage the work that such people do, but I am keen that people should know with whom they are dealing.

There are examples of good practice and good conduct, and of solicitors who give good advice. However, we are not considering good solicitors. A reputable, long-standing south London firm with which I have dealt, as have my constituents and those who represent them, is Anthony Gold. It is committed to good legal work and community support. It has taken on new areas of work such as housing law and the cases of people who want to take their local authority to court, as well as personal injury and such things. It has a very good reputation. If one goes to see it, one is contacted in writing when one’s engagement with it is confirmed. The person writing explains his role within the firm, names the principal to whom he is accountable and says what to do if one has a complaint. That is good practice and it is done by most firms. It should be done by all firms.

However, I can think of an immigration case that went badly wrong when one of my constituents went to a small firm and dealt with somebody whom he believed to be a qualified lawyer with competence in immigration and asylum matters. The person was not a qualified lawyer and, as I discovered when I inherited the case, had no competence. The Government rightly introduced a new system for regulating people who give immigration advice, which was welcome. An agency was set up to deal with it. I am sure the Minister understands my general point—we are trying to ensure that there is some onus.

It may be that the matter would be better governed by requiring the professional bodies, to which we will come in a minute, to place a duty on all the people who work for them. However, some people slip through the net by not belonging to any of those professional bodies. To take a ridiculous example, somebody who works for a very reputable firm—or a less reputable one—without being legally qualified in any way is the cleaner. It is ridiculous but it is not impossible that one day, a rush of blood might go to the head, somebody might come through the door and the cleaner, the last one left in the office, might decide to try their hand in giving legal advice. If they are creditable, who knows? The person might well leave thinking that they have been given good advice.

I can think of one example of somebody—I defended him many years ago—who was wonderful at persuading people that he was who he said he was. He went around to lots of establishments in London pretending that he came from the environmental health department. He was very good at lying. He would go to inspect a kebab shop or a Chinese takeaway, and on every occasion he would find a dead mouse or rat. That was not surprising, as he had just it put it there. Then, of course, he charged rather a large sum not to report it. He lived comfortably for a long time, commuting regularly every week from his family in Scotland to his job in London. [Interruption.]He was English; let me not malign the Scots. He had a girlfriend and a child in Scotland, so he would fly up on a Friday, fly down on a Monday and do the job.

Henry Bellingham (Conservative, North West Norfolk)

And he was a Liberal Democrat.

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

Not to my knowledge, although one hopes that everybody is capable of redemption, including in their voting habits. Eventually he got caught when he went to the same kebab shop twice and they recognised him coming around for the second time.

I exaggerate. It is a funny story, but it is a true story; it happened. There are serious concerns. I am keen that the Minister should tell us how she envisages that they will be addressed. They must be addressed, because some are still misled in the world of legal advice by people who they think are qualified and competent professionals when they are not.

David Burrowes (Conservative, Enfield, Southgate)

I welcome the intention behind the amendment. A couple of weeks ago, a constituent was in my surgery who had been the victim of a gentleman who presented himself as offering a legal service, when the advice in his letter was not worth the paper that it was written on. The constituent was frustrated in trying to seek some redress for her undermined claims. When she went to the police, they did not know what to do. Other clauses and regulations will hopefully deal with the matter in more detail, and we support that.

I welcome the general concern for client care. Client care and the code of conduct are a natural part of the day for every solicitor who gives advice. It is a natural part of the first letter to the client—those who are cynical might say as natural as asking for money on account. It is always there, without people thinking twice about it. It is also the case—it is particularly important when considering the clause’s merits—that such matters are explicit in the solicitors’ code of conduct. The code of conduct provides strict regulation in rule 2 about taking on clients. It is ingrained in the lives of every solicitor and designed to help both solicitors and clients to understand properly each other’s expectations and responsibilities, and explicitly to ensure that clients are given the information necessary to make appropriate decisions about whether and how they might wish to proceed.

Rule 2.02 of the code of conduct—it is worth putting it on record to see whether the situation merits such a clause—says explicitly:

“You must, both at the outset and, as necessary, during the course of the matter:

(a) agree an appropriate level of service;

(b) explain your responsibilities;

(c) explain the client’s responsibilities;

(d) ensure that the client is given, in writing, the name and status of the person dealing with the matter and the name of the person responsible for its overall supervision; and

(e) explain any limitations or conditions resulting from your relationship with a third party (for example a funder, fee sharer or introducer) which affect the steps you can take on the client’s behalf.”

The question is whether that needs to be explicit in the Bill. Given that the Bill seeks to extend the provision of legal services and to widen ownership, there is merit in careful consideration. My view, and that of my hon. Friends, is that we should avoid over-legislating and that such matters should be left to the regulators. However, if one were to include that in the Bill, one would have to question whether it should be limited to the two aspects contained within the clause and not incorporate all the elements within rule 2.02 on client care, which has served many solicitors well.

John Mann (Labour, Bassetlaw)

I am not sure whether the amendment does what it intends to do. It is a probing amendment. If someone claims to be entitled to carry on a reserved legal activity, they could be claiming something which, in some of the examples, they should not be able to claim at all. There are two angles on which I would be interested to hear the Minister’s comments. The first concerns a solicitor who pretends to be the authorised solicitor of a trade union but is not. In the case of AMS Law and the miners compensation scheme, AMS Law added a UDM claims handling unit logo to the solicitor’s headed paper. In other words, it falsely gave the impression that it was a trade union’s in-house claims handling unit. Is such an example covered by the clause? If so, who should regulate against that kind of pretence, which misleads the consumer? AMS Law misled a lot of people in my area and elsewhere.

My second angle uses another example of the miners compensation scheme. My constituents believed that a number of people were solicitors when they were not. I cite the example of Mr. Stuart Bell of Stuart Bell Associates of Worksop. Mr. Bell was not a solicitor and never had been a solicitor. He was allowed to represent individual miners and present cases to the Department of Trade and Industry, because he was acting under a High Court ruling which stated that everyone had the legal right to the equivalent of their day in court. Who should be responsible for dealing with that abuse? People could not seek a remedy from the Law Society because Mr. Bell is not a solicitor—they had to go to the civil courts. I suggest that Mr. Stuart Bell of Worksop is not the only example of someone who has taken on a claim as if they were a solicitor. Certainly all my constituents assumed that Mr. Bell was a solicitor. Should the responsibility of investigating, both under present measures and under the Bill, go to the legal profession and its regulatory bodies? I think that that would be a good opportunity for the legal profession to defend itself against those who purport, by illusion if not explicitly, to be part of that profession and leave the consumer with the invidious proposition of having to go to a solicitor in order to take legal action against a non-solicitor whom they presumed was a solicitor.

John Hemming (Liberal Democrat, Birmingham, Yardley)

The hon. Member for Bassetlaw raises another interesting point. If someone is not conducting litigation but merely advising somebody and acting in their own person, that is not a reserved legal activity, so it would not fall under the Bill. Although this is a probing amendment, it is important because the client needs to know at the start of the process whom they are dealing with and under what circumstances. I urge the Minister to consider whether we should confirm more precisely that somebody is regulated by the Legal Services Board, whether they are part of an alternative business structure or of a different organisation, and that they fall inside a particular regulated line.

Another relevant issue is the factors that need to be considered on engagement. I accept that a client engagement letter refers to the rates, how much things might cost and so on. That is important, but should not certain things be included in the Bill? Obviously, I concur with my hon. Friend the Member for North Southwark and Bermondsey on such matters. In public family law, in particular, it is common practice for a firm of solicitors to work for both the local authority and the parents. It is not working on the same case, but one day, it works for the parents; the next day, it works for the local authority, and, the day after that, it works for the parents. I am not sure whether that is proper practice, although the Law Society says that it is.

Let us suppose, however, that the clients go to a firm of solicitors expecting it to fight their corner. Having lost their new-born baby, they find out in retrospect that the firm also works for the local authority. The clients should have been told before they started using the firm that it had two masters: themselves and the local authority. Whether that provision should be put into statute is an interesting question. We have referred to conflicts of interest. We cannot ignore them, however inconvenient they are. The Law Society’s argument is that it would be difficult to find people without conflicts of interest to undertake such work. That is probably not the way in which we should approach matters, so I urge the Minister to consider the problem.

Bridget Prentice (Labour, Lewisham East)

I agree absolutely that transparency is the key to maintaining consumer confidence. When consumers engage a firm of solicitors, they should expect the best advice that the firm can provide for the price that it charges. If they then find that the advice comes from someone else—hopefully, not the cleaner—that might undermine their confidence in it, and not surprisingly so. That does not necessarily mean that the advice is wrong; some firms of solicitors are staffed by a variety of qualified lawyers, some of whom will be “authorised persons”, using the Bill’s language, while some will not be solicitors, but will be authorised for other reasons, and will include legal executives, barristers and conveyancers. I do not want anyone to be under the impression that a particular authorised person is somehow second best; it is just who is appropriate in the circumstances.

It is possible, too, that non-authorised persons may provide reserved legal services direct to clients, but only under the supervision of authorised persons who still remain responsible for the provision of the service. Having said that, there is a lot of merit in the amendment tabled by the hon. Member for North Southwark and Bermondsey. I take on board what was said by the hon. Member for Enfield, Southgate and I want to explain why I shall take the amendment away and consider it. It is clearly in the consumer’s interest to be informed of the way in which their case is handled. Not only is that helpful to them, but it lets them know where they stand and what their rights are, all of which the Bill is supposed to be about. It is important, too, that the Bill makes it clear to the consumer what that particular solicitor or legal adviser can or cannot do so that there is less scope for misunderstanding.

However, there are a couple of small gaps in the amendment, the first of which concerns enforcement. It would be best to provide for that subject as part of the duty in the regulatory arrangements. As the hon. Member for Enfield, Southgate said, the codes of conduct already include something along those lines. We may want to consider redrafting the amendment so that the primary duty lies with the regulator rather than the individual adviser. In that way, the regulated people would have to comply with the duty and action could be taken if they did not do so. Secondly—although a minor point—the duty might not arise in full in all circumstances. Barristers in independent practice, for example, all have the same level of qualification. They are also practitioners, and not accountable to anyone in that sense, so we would have to consider how their code of conduct would apply in that situation.

Finally, an important feature is missing. Although the consumer could know the body to whom the adviser is accountable, the amendment does not go far enough because it does not say to whom the consumer can complain or what the complaints process is. Many codes of conduct contain a complaints procedure, so we need to take that into account, too. I am happy to consider the amendment, but I urge the hon. Member for North Southwark and Bermondsey to withdraw it so that we can consider how we will incorporate it, taking into account all the points that have been raised.

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

I am grateful for the contributions of my hon. Friend the Member for Birmingham, Yardley and of the hon. Members for Enfield, Southgate and for Bassetlaw, and for the Minister’s response. There is a problem, and the amendment was a first stab at trying to address it. I do not want to be over-prescriptive or over-regulatory—that was never my intention—but I am happy to seek to withdraw the amendment and work with the Minister and her officials to get it to fit comfortably in the Bill, the codes and other things. Some people never get beyond the first encounter, and the amendment is intended to deal with circumstances in which the outcome of someone’s relationship with a firm is decided by the person with whom they deal. The position of that person, their authority and their confidence entirely determine that relationship.

If people do not know whom they are dealing with and do not understand their background or skill, or if they understand it wrongly or are misled, that will entirely influence how they decide to proceed. For example, let us take the case cited by my hon. Friend the Member for Birmingham, Yardley. In family law cases that deal with difficult issues, a person might eventually summon the courage to take legal advice on how to take action to protect the interests of their child in a disputed case in which there are allegations of abuse or something similar. They see someone and come away thinking that they have received authoritative advice, when in fact the advice was provided by someone who had been there a week. That is the sort of thing that we need to ensure that people are clear about, and that is the nature of my concern. I am grateful for the Minister’s response, and I beg to ask leave to withdraw the amendment.

Clause 18

Jonathan Djanogly (Conservative, Huntingdon)

I beg to move amendment No. 256, in clause 18, page 8, line 32, at end insert—

‘(c) A body, which is not a licensable body, but which carries on a relevant activity by virtue of Section [Registration of non-authorised managers]’.

Frank Cook (Labour, Stockton North)

With this it will be convenient to discuss the following amendments:

No. 257, in clause 72, page 41, line 10, leave out subsection (1) and insert—

‘(1) For the purposes of this Act, a body is a “licensable body” if—

(a) at least one manager of the body is an individual who is a non-authorised person who provides services directly or indirectly to clients; or

(b) more than 25 per cent. of the managers of the bodyare individuals who are not authorised persons regardless of whether they provide services directly or indirectly to clients; or

(c) at least one person who has an interest in shares in the body is a non-authorised person and is not a manager of that body.’.

No. 268, in clause 71, page 41, line 8, at end insert—

‘, provided that a body is not a “licensable body” if the only managers who are non-authorised persons are individuals who do not directly provide any services to consumers.’.

No. 259, in clause 72, page 41, line 13, at end insert—

‘(1A) A body is not a licensable body if it is regulated under section 9(A) of the Administration of Justice Act 1985.’.

No. 260, in schedule 16, page 264, line 35, leave out paragraphs (a) and (b) and insert—

‘at least three-quarters of the partners are authorised persons or are registered foreign lawyers, and any other partners do not directly provide services to clients.’.

No. 261, in schedule 16, page 264, line 43, leave out paragraphs (a) and (b) and insert—

‘at least three-quarters of the members of the body are authorised persons or are registered foreign lawyers, and any other members do not directly provide services to clients.’.

No. 262, in schedule 16, page 265, line 6, leave out paragraphs (a) and (b) and insert—

‘at least three-quarters of the persons within subsection (5) are authorised persons or are registered foreign lawyers, and any other members do not directly provide services to clients.’.

New clause 14—Registration of non-authorised managers—

‘(1) Any body “B” which carries on an activity underSection 13 of this Act, which is not a “licensable body” as defined in Section [71(1)] but which has at least one manager who is not an authorised person, must register any non-authorised manager with an approved regulator.

(2) It is an offence for B to carry on an activity underSection 13 of this Act if B does not comply with the conditions of this section.

(3) For the purposes of this section an approved regulator may refuse to register any non-authorised manager (M) of B if its is not satisfied that:

(a) M does not provide services to clients, directly or indirectly, or

(b) M will act in a manner consistent with the “professional principles” set out in Section 1(3).

(4) No manager of B may be a person who has been disqualified from acting under Section 99.

(5) B will cease to be entitled to carry on an activity under Section 13 of this Act if B knowingly carries on reserved activities whilst a person, disqualified under Section 99, continues to be a manager of B.’.

Jonathan Djanogly (Conservative, Huntingdon)

Certain amendments in this group have been proposed by the Institute of Chartered Accountants in England and Wales and, because we are dealing with business organisations, I want to declare that I am a member of the corporate finance faculty of the ICAEW as a qualified corporate financier, although I am neither an accountant nor a member of the full institute. The amendments cover legal disciplinary partnerships and legal practice plus, and tie in closely with part 5, which deals with alternative business structures. I should say at the outset that amendment No. 256 should refer to “individuals who are authorised persons” rather than “authorised persons” and I apologise for any resulting confusion.

The amendments have been tabled on a probing basis, not least because many of them cover the same point in a slightly different way, although the principle is the same. Amendment No. 256 is required as a consequence of new clause 14, which was suggested to us by the ICAEW. The new clause enables

“practices to have 25 per cent. or less on a head count of managers who are not lawyers and who are not providing services to clients (so called Legal Practice Plus.)”

It would become operational on enactment alongside other forms of legal disciplinary partnerships, which are partnerships between different types of lawyers.

I have received a lot of feedback on the issue from the commercial law and accounting practitioners, and I am aware of a huge gap in expectations that needs to be filled. We need to address the issue of non-executive directors and other employees such as accountants, economists and tax advisers and those who deal with administration and back-up in servicing clients. For those people, the current system is unrealistic. They may come from merchant banks in the City, where they are among some of the highest earners, yet they are effectively second-class citizens in law practices because they cannot take part in the ownership of the firm.

Today, law firms realise the benefits of bringing skilled outsiders into their organisations. There was an interesting account earlier this month in an edition of the Law SocietyGazette. A non-lawyer, William Arthur, former director of professional practices at Barclays bank, was recruited as a non-executive director by a Kent firm, Cripps Harries Hall. His brief was comprehensive and demanding—to use his 30 years of top-end commercial experience to steer his firm through the challenges facing the legal profession today. Mr. Arthur observed:

“Law firms are getting bigger and bigger and are not small businesses anymore. The market place is changing rapidly and they need to apply the best business principles to everything they do. Many firms are acknowledging that while they have exceptional professional skills, they don’t always have the full suite of business skills and experience to bring them to the front of the field”.

Law firms have employed non-lawyers in senior roles, such as directors of IT or human resources, for many years. The appointment of non-executive directors is a relatively new phenomenon, but one that should be encouraged. We should assist that process, and ensure that people in senior positions within law firms are not stigmatised or penalised merely because they are not qualified lawyers. As I have shown, they are often people of great experience with good skill sets, and are an asset to law firms. The question is how those good intentions are to be translated into the Bill. I accept that it is not a straightforward issue.

Amendment No. 268, which deals with the licensing of alternative business structures, was suggested by the City of London Law Society. The amendment would ensure that a law firm, or a limited liability partnership, would not become an alternative business structure solely because it wished to appoint as managers non-lawyer professionals. It is already clear that that is no longer a rare phenomenon, but an increasing occurrence. The amendment would apply if those appointees provided only internal services to their firms and did not directly provide services to clients of the firm.

Amendment No. 257, which was suggested by the Institute of Chartered Accountants, would have a similar effect to that of amendment No. 268, from which it is clear that accountants and lawyers are moving in the same direction.

On Report in the other place, Lord Hunt returned to concerns expressed in Committee and tabled a similar amendment designed to enable legal disciplinary practices to exist without having to be licensed if three quarters of the partners were lawyers and there was no external ownership. He envisaged that the Law Society would need a power to establish a register of permitted non-lawyer partner-managers of firms and to set requirements for eligibility to register.

Baroness Ashton resisted the amendment, saying that the Government wished, as far as possible, to create a level playing field between regulators, offering all the potential to become licensing authorities. She would not want to give one regulator a potential competitive advantage, first, by virtue of reaching part of the alternative business structure market before other regulators and, secondly, by avoiding the additional statutory requirements that would otherwise apply to such practices. She went on to say that if a body had non-lawyers in positions of control it would be a licensable body. The framework is already provided for low-risk bodies but the Government have set the maximum limit for non-lawyer ownership at 10 per cent., and anything above that would need full scrutiny. The amendment was withdrawn.

Looking at the matter now, I have to say that Baroness Ashton’s position was somewhat regressive, and failed to understand how legal firms work now, let alone how we should enable them to adapt and continue to compete and excel in a competitive national and international marketplace. That is the view of most people, including the Law Society and the Conservative party.

Yesterday, I received a joint statement on the Bill from the Institute of Chartered Accountants, the Chartered Institute of Patent Attorneys, the Institute of Trade Mark Attorneys and the Royal Institution of Chartered Surveyors. I will not quote it all, but in particular it states:

“There should be immediate introduction of Clementi’s definition of Legal Disciplinary Practices with minority non-client facing, non-lawyer managers, helping enhance the service to consumers. This would enable earlier, effective regulatory oversight of arrangements already in place in all but name.”

The fact that non-legally qualified people who play a significant part in the running of a legal practice cannot be a partner without invoking the licensing provisions is a problem.

Stephen Hesford (Labour, Wirral West)

With respect to that point and that made by Lord Hunt of Wirral in the other place, I find myself agreeing with Baroness Ashton. The measures in new clause 14 and amendment No. 256 would be bureaucratic; they would set up a new system—the so-called register. It would lack transparency, which would drive a coach and horses through one of the aims of the Bill—to bring in new competition and promote consumer understanding of the legal services and entities with which they deal.

Jonathan Djanogly (Conservative, Huntingdon)

I disagree. I would say that the proposed measures would recognise and put into the regulatory structure a system that, in effect, already exists. That is important.

We feel that it is wrong to lump non-legally qualified people with other entities by putting them on the slow-track ABS timetable. The hon. Member for Wirral, West mentioned that confusing issue. In some ways, the proposed measures would make matters more straightforward, because they would put such entities in the same position as lawyers who join together, which is recognised in the Bill. They would differentiate low and high-risk entities, as it were, which should then be considered in relation to the slower-track provisions in part 5. The proposals would remove the cumbersomeness that attaches to this part of the Bill and unnecessary red tape.

The key protection issue is that people’s access to justice is not attacked, and that ABSs are not able to cherry-pick services to the detriment of the overall position of consumer legal services. We should debate that when we come to part 5. At the moment, we are concerned about lawyers not losing out, compared with other professions, with regard to their ability to run their practices better for the benefit of consumers.

There is a fundamental issue, which has suddenly been given more prominence in relation to ABSs and LDPs. The issue is whether legal disciplinary partnerships that do not have external ownership will be enabled to operate sooner than 2011, which is the likely date if they are allowed to operate only under the ABS regime. The Government’s planning indicates that it is unlikely that the LSB will be fully functioning before 2010. Other regulators, including the Council for Licensed Conveyancers, may already regulate LDPs that include non-lawyers. The Law Society strongly supports permitting solicitor-led LDPs to operate under its mainstream regulatory regime before that time. Some minor enhancements may be needed to the Law Society’s regime to ensure that the SRA will have the necessary powers to regulate non-lawyer partners, but there should be no great difficulty. Indeed, the provisions of schedule 16 may already be sufficient.

The Law Society has pressed the Government for additions to its regulatory powers for some years. The council decided some years ago that in principle solicitors should be able to provide services to the public through any regulated entity, subject to ensuring the necessary consumer protection. The board worked up the issues further and concluded that it would be sensible to create what the Law Society subsequently called “Legal practice plus”, under which non-lawyers would be enabled to become partners in a solicitors firm, as long as it did not provide services normally forbidden to solicitors firms, such as audit services, nor would they be able to have external ownership.

That proposal foundered on the Law Society’s inability to regulate non-solicitor partners. It had hoped to do so on a contractual basis, but leading counsel advised that that was impermissible. Accordingly, the society asked the Government for additional regulatory powers to enable it to establish a register of permitted non-solicitor partners and to exercise all of the regulatory powers that apply to solicitors. The Department for Constitutional Affairs was sympathetic to that, but no suitable legislative opportunity arose until the Bill.

When the Bill was introduced, many people were therefore disappointed to discover that the Government intended that the only LDPs that could be regulated outside the ABS regime were those consisting solely of partnerships between different types of lawyers. That seemed to many, including the Law Society and the ICA, to provide an unnecessary barrier to establishing what Sir David Clementi called LDPs and the Law Society called Legal Practice Plus.

It would seem that the Government’s cautious attitude arose in part from the belief that a more liberal approach would encounter substantial difficulties in the House of Lords. The Conservatives thought that that concern was misplaced. We knew that the other place would be concerned about external ownership of law firms, and we and our noble Friends were and are concerned with ABS implications for access to justice, to which we shall come in part 5, but we did not think that the House of Lords would have such major concerns about the proposition that a minority of non-lawyers should be partners in a firm in order more effectively to provide a range of services to clients. Lord Kingsland and Lord Hunt both spoke in support of amendments to that effect, but the Government—surprisingly, given their pro-consumer stance—resisted them.

It is important to emphasise that such firms providing reserved legal services will continue to need regulation by a legal regulator. Indeed, the Council for Licensed Conveyancers can already regulate firms with non-lawyer partners, as can some smaller bodies such as the Institute of Trademark Attorneys and the Chartered Institute of Patent Agents. But significant public and consumer benefit would arise from the Law Society having such powers so that the SRA could regulate them.

The amendments suggested by the Law Society for Commons Committee, which we tabled as amendments Nos. 259 and 262, were weaker than it would have liked. They would enable the Law Society to regulate partnerships and other incorporated bodies under its ordinary regulatory regime and corporate bodies under its existing regulatory regime—that is, not as ABSs, and thus much sooner—where they have a minority of non-lawyer partners. Amendment No. 259 would exclude such bodies from the ABS regime. It is needed because of the Government’s approach whereby anything that could be an ABS must be.

The amendments would enable non-lawyers to become partners only so long as they are not client-facing. That would meet the main concern of City firms that wish to be able to make senior support professionals partners, but it would not enable a high street firm, for example, to go into partnership with an accountant and to provide tax advice primarily through that accountant.

The Law Society suggested a more limited approach because it had got nowhere with broader amendments in the House of Lords and wanted to see whether it could make at least some progress, albeit more limited than it would have liked. It would much prefer non-lawyers to be allowed as partners even if they provide services directly to clients, and that view reflects the Conservative party’s position. The Law Society would be happy if there were a simple majority of lawyers, but the ICA would go even further. We can discuss its point of view later in part 5, when we come to multidisciplinary practice.

I shall comment on the other amendments grouped with those suggested by the Law Society. We simply want to enable the SRA to regulate LDPs that are not externally owned as soon as possible after Royal Assent rather than in three or four years, and to ensure that the full range of public and consumer protections are available in respect of all practices providing reserved legal services.

The ICA-inspired amendments Nos. 256 to 258 and new clause 14 are supplementary to amendments Nos. 259 to 262. They have the benefit of generalising the provision rather than making it applicable only to the Law Society. We still need amendments Nos. 260 to 262 as well, because without them the Law Society would have no power to regulate such a body.

Commenting on ICA new clause 14, the Law Society said that it would also be concerned if it thought that the only bases on which non-lawyer managers could be refused registration were those set out in paragraphs 3 and 4. It would expect the SRA or any other regulator to wish to ensure that any non-lawyer managers were fit and proper persons, and particularly that they did not have any convictions for dishonesty. In the case of non-lawyers from some other professions, such as accountancy, that could be done fairly readily, since the other professional body has requirements similar to those of the SRA. The non-law regulator would need only to certify that the member concerned was of good standing. That would not necessarily apply to all possible non-lawyer partners, however; it is important that legal regulators would be able to impose the appropriate requirements.

It might also be appropriate for the legal regulators to require any non-lawyer partners or managers to demonstrate understanding of the rules concerning the way in which legal services must be provided—what would be described as the conduct of business rules in other contexts. The Law Society would be anxious to ensure that new clause 14 did not inadvertently limit a proof-regulated entitlement and duty, to ensure that people holding senior positions in law firms were personally suitable to do so.

This is a complex matter, but I hope that, through my explanation of the amendments, the Minister can see where we are coming from, as we do not feel that the Bill addresses the issue correctly. I hope that the Minister will take a positive approach.

John Hemming (Liberal Democrat, Birmingham, Yardley)

We generally support the principle of the amendments. Most legal firms of any size have one or two senior managers to do the accounts and manage the staff, infrastructure, computers and so on. Under the amendments, those managers would be regulated by the Law Society, so that they could be made a partner and have a cut of the profits, which would be entirely reasonable. That would not undermine the interests of the consumer, and it would achieve the sort of balance that exists in many other organisations. From that point of view, the Government should accept the general principle of the amendments, if not their detailed nuances, given that they are probing amendments.

Bridget Prentice (Labour, Lewisham East)

The amendments are designed to take certain practices outside the scope of the ABS regime in part 5 of the Bill. They are familiar, because they are similar to those that were debated in another place. To the hon. Members for Birmingham, Yardley and for Huntingdon, I must say that I sympathise with some of the objectives of the amendments, but I think that they would create some difficulties.

Amendments Nos. 259 to 262 would exclude from part 5 any practice regulated by the Law Society in which at least three quarters of the owners and managers are authorised persons. I am a wee bit disappointed that the Law Society is still unconvinced by the arguments that were made in the other place, because our objections remain the same.

There are problems with an amendment that seeks to depart, in various respects, from the stated objective with regard to ABS. It would allow firms with significant non-lawyer management and ownership to operate without the oversight of the board or any of the guaranteed safeguards provided by part 5. It would allow firms to be partially managed and owned by non-lawyers, with no provision for a head of legal practice or a head of finance and administration, or for fitness-to-own tests, disqualification lists or enforcement powers over non-lawyers. That would not be in line with Sir David Clementi’s recommendations; nor would it be in the consumer interest. It would give no guarantee of consumer protection, and it would not provide for a mechanism to ensure that professional principles prevail.

Some changes could be made to the Law Society’s rules to create further safeguards, but they would have to be pretty complex and extensive—along the lines of schedules 11 and 13, for example—to ensure fully effective regulation of non-lawyer managers and owners. I am not sure that such changes could be achieved through secondary legislation or that it would be appropriate proceed in that way.

A key principle of part 5 is that the regulatory bodies must demonstrate to the board that they are competent to enforce a complex, potentially interventionist, regime. If they cannot do so, they will not be designated as licensing authorities, and clearly, that must apply to the Law Society as it would apply to any other regulatory body.

That brings me to another key principle that has been constant throughout our development of policy on ABS, which is that there should be new opportunities based on increasing competition and creating a level playing field between regulators. The amendment would do the opposite. It would allow the Law Society to regulate certain types of ABS firms in advance of other regulators, without having to demonstrate to the board that it is fit to do so.

I turn now to amendment No. 268, which was again proposed on behalf of the Law Society. I suppose that it offers a less extreme alternative to amendmentsNos. 259 to 262. This amendment also seeks to exclude bodies with non-lawyer management from the ABS licensing regime, but this time on the condition that those managers do not provide services to clients. Therefore, the practice would also not be bound by any of the safeguards in part 5, and it could develop in advance of part 5 being implemented. Once again, I am not convinced that that is an appropriate way forward at this stage.

I shall now consider amendments Nos. 256 and 257, as well as new clause 14, which were inspired by the Institute of Chartered Accountants. Again, the ICA has proposed a more detailed amendment, also with the provision for 25 per cent. of non-lawyer managers. In this case, certain additional requirements would apply to such practices, by virtue of new clause 14.

Both the Law Society and the ICA cite Sir David Clementi’s report, arguing that the Government are not being sufficiently proactive in facilitating all the different forms of legal disciplinary practices identified by Sir David. We are, of course, facilitating those types of practice, but I am not persuaded that we should seek to do so outside the boundaries, safeguards and protections that part 5 will give.

I am aware that one incentive for proposing to facilitate the different forms of LDPs is to avoid delaying the possibility of practices with non-lawyer managers until part 5 is fully implemented. I have a lot of sympathy with that view. I want to allow providers and consumers to take full advantage, sooner rather than later, of the benefits that might be delivered by those types of practice—indeed, by all types of ABS firms.

I also understand that the ICA has applied to become an authorised body for probate services under schedule 9 to the Courts and Legal Services Act 1990. Obviously, I cannot comment on that application, as it is currently being considered. However, I can say that, although I agree that that development may happen some time after Royal Assent, if it were to happen, that would be one means by which the ICA and its members could become part of a more integrated practice ahead of the formal commencement of part 5.

Apart from that, however, in general terms, the management of law firms by non-lawyers is a territory that is, in many respects, unfamiliar and complex. Therefore, I am very keen to ensure that the implementation and the safeguards are right. I believe that the presence of the board is absolutely vital to ensuring that that happens, as are the regulatory objectives; even more important is the need for effective regulatory powers over non-lawyers.

Of course I recognise that the amendments proposed by the ICA make a concerted effort to give effect to some of the safeguards that Sir David’s report concluded should apply to LDPs, particularly in seeking to ensure that those managers who are non-lawyers are fit and proper persons. Even so, I must say to the hon. Member for Huntingdon that there is a risk that these amendments would leave us without some of the vital elements that part 5 will provide, which Sir David identified as being essential for the effective regulation of firms with non-lawyer managers.

It is not clear in the amendments where the boundaries of the new clause would be or how it would be monitored or enforced. It leaves scope for some pretty big discrepancies in terms of the way different approved regulators might apply it. I do not think that the restriction of the proposed exemptions to bodies in which non-lawyers do not provide services to clients is practical or effective. It still leaves some scope for uncertainty, regulatory gaps and potentially even the emergence of multidisciplinary practices by the back door.

If a body’s business is the provision of legal services to the public, it is difficult to see where the line would be drawn. I understand that the proposal would be intended to cover non-lawyers in finance and IT functions, but an IT partner might be responsible for using IT strategy to improve client service and business development. They might even oversee the provision of IT services to clients in conjunction with legal services. Unless we have a clear and fully developed statutory framework, it is difficult to see how the boundaries would be interpreted and enforced.

We might create a grey area of regulated practice that could lead to regulatory gaps in places where the part 5 safeguards ought rightly to apply. There is no provision for a head of legal practice or a head of finance and administration, which I believe are key to ensuring that the professional principles really do apply on a practical day-to-day basis.

Jonathan Djanogly (Conservative, Huntingdon)

Presumably, if the outside professionals were in a minority in the firm, they would be regulated as part of the firm.

Bridget Prentice (Labour, Lewisham East)

No. Under part 5, once non-legal professionals are involved, there must be a head of legal practice and a head of finance and administration. I understand where the hon. Gentleman is going, but the proposal is sufficiently far away from that provision to make me doubt whether it would be satisfactory.

Jonathan Djanogly (Conservative, Huntingdon)

The Minister will not find a law firm that does not have a head of practice. She will hardly find one that does not have a head of finance. She seems to be detached from the reality of what is happening out there.

Bridget Prentice (Labour, Lewisham East)

I like to think, given all our discussions with all the legal professionals as well as the consumer groups, that I have a pretty fair idea of what is going on out there in terms of the provision of legal services. The safeguards in part 5 are an essential part of the Bill. To move so far away from them would undermine that. I am therefore reluctant to accept the amendments.

I recognise that that there is an attempt to ensure that non-lawyer managers are fit and proper, but the only way to enforce that is to apply sanctions against the body itself. In my view, robust enforcement powers over the non-lawyer managers themselves are essential, particularly as such managers may be not only individuals, but companies.

Jonathan Djanogly (Conservative, Huntingdon)

What about the differentiation between an individual who is regulated under another regulator—for instance, an accountant going into the law firm—and a non-regulated individual?

Bridget Prentice (Labour, Lewisham East)

That is the key point. Let me finish on part 5. In contrast to the proposed new clause, it creates statutory powers to fine and discipline non-lawyer managers and to refer them to the board for inclusion on a public disqualification register. Where managers are also owners, as in partnerships and limited liability partnerships, all the powers in schedule 13 will also apply. Schedule 13 is quite a detailed and complicated part of the Bill.

Part 5 will ensure that all those powers apply in a way that the proposed new clause would not. Part 5 is more facilitative than restrictive. ABS firms often have a complex structure, and strong powers will sometimes be required properly to regulate such practices. It is therefore appropriate that the approved regulators should be able to satisfy the board that they are competent to apply the requirements of part 5.

Although I have some sympathy with the institute’s position, I want the licensing framework to ensure that practices with non-lawyer managers or owners, and the bodies that regulate them, will be fully accountable and subject to effective safeguards. Sympathetic as I am to concerns about the desirability of encouraging ABS sooner rather than later, I want to ensure that we get it right. Even with the amendments, I see no obvious way to meet those concerns without creating other drawbacks that will be just as problematic, if not more so. None the less, I want to consider whether thereare alternative solutions. I therefore ask the hon. Gentleman to withdraw the amendment.

Jonathan Djanogly (Conservative, Huntingdon)

I find the Minister’s response rather disappointing and, in some ways, frustrating. She started by saying that she had some sympathy with the basic concept. She went on to say that it would require complex and extensive changes. She went through each of them, throwing in all the problems one could care to mention.

They are probing amendments. I am not saying that there are no problems with the clauses. The Minister then sighed rather dutifully and told us why none of it would work and why she was not totally convinced. Unlike the union provisions, these provisions have been in place for a long time. They were raised in the other place, there has been extensive consultation on them, and they were discussed by Clementi. No one is saying that they have a problem with the idea in principle. I might be wrong, but no Members have said today that they have a problem of principle with the concept.

Frankly, the Government have had plenty of time to develop a framework, and I find the Minister’s response rather weak. She now says that she wants to consider the matter again. I am pleased to hear her say at least that much, but here we are in Committee and we are no further forward. I hear what she says, and we will follow it up. I beg to ask leave to withdraw the amendment.

Schedule 3

Bridget Prentice (Labour, Lewisham East)

I beg to move amendment No. 129, in schedule 3, page 130, line 14, leave out from ‘individual’ to ‘in’ in line 15 and insert ‘whose work includes assisting’.

Frank Cook (Labour, Stockton North)

With this it will be convenient to discuss Government amendments Nos. 130 to 133.

Bridget Prentice (Labour, Lewisham East)

These are technical amendments—I know that some people get a little worried when they hear that—that correct anomalies in the current exemption provisions in schedule 3. They relate specifically to exemptions for persons working under the supervision of authorised persons in relation to rights of audience, reserved instrument activities and probate activities.

Although all the applicable exemptions are currently effective to cover employees working under supervision of authorised persons, they do not always effectively cover partners or other managers in the same way.For some bodies—for example, licensed bodies under part 5—the exemptions cover both mangers and employees, while in other cases, such as solicitors’ partnerships, they do not. In other cases, the application of the exemption is not as clear as it might be.

The Law Society tells me that there are practical as well as legal reasons for achieving greater consistency. For example, under the current provisions, if a legal executive is employed by a firm of solicitors, he or she will not be authorised to conduct reserved instrument activities, but may nevertheless do so under supervision of a solicitor, by virtue of the exemption in schedule 3. If that legal executive became a partner, that would no longer be possible, because the exemption would cease to apply, which is clearly an inconsistency. I see no reason why partners or other managers should notin principle benefit from the same exemptions as employees. The amendment is therefore intended to make the position clearer and more consistent. On that basis, I commend it to the Committee.

Jonathan Djanogly (Conservative, Huntingdon)

We agree to the amendment.

Schedule 4

Bob Neill (Conservative, Bromley and Chislehurst)

I beg to move amendment No. 255, in schedule 4, page 142, line 14, leave out sub-paragraph (3) and insert—

‘(3) Alterations are exempt unless the Board has directed that they are not to be treated as exempt for the purposes of this paragraph.’.

By way of work sharing on the Opposition Benches, I have been asked to move the amendment, the effect of which would be to change the wording of paragraph 19(3) of the schedule, on page 142, and insert fresh wording. We seek to reverse the presumption that the advance approval of the Legal Services Board should be required to changes to approved regulators’ regulatory arrangements. That has been suggested to us by—and it is supported by—the Law Society, which is particularly involved in that type of work.

We have taken on board the logic of the Government’s own position. They have repeatedly made it clear that the primary responsibility for regulation should rest with the approved regulators and that the Legal Services Board should have a supervisory role over them. If that structure is to work in a meaningful way, it is important that we should start from the presumption that the approved regulators can be trusted, as they are the people in whose hands we place the bulk of the day-to-day operation.

Under the Bill, regulatory functions will have to be separated from any representative function that the approved regulator already holds. As some of us mentioned earlier, that has already been done by the Law Society and the Bar Council, under existing regulation. For example, all the members of the Law Society’s regulatory arm, the Solicitors Regulation Authority, are appointed on merit rather than elected, as members of the Law Society’s council are. Members of the Law Society’s representative council—people who are, in effect, elected by solicitors—are ineligible to serve upon the Solicitors Regulation Authority, so there is a separation. The Bar Council has achieved the same result as far its part of the profession is concerned.

Furthermore, the approved regulators will, I hope as a matter of ordinary good practice, consult on proposed changes to their regulatory arrangements before they are made. That consultation will include representatives of consumers and of the regulated sector. It would be perfectly possible to ensure that the Legal Services Board was included by the approved regulators in those consultations if they intended to make any such changes.

Under those circumstances, the schedule’s requirement to secure approval by the LSB before changes to regulatory arrangements come into effect seems unnecessarily burdensome and regulatory. Every time one wants to change one’s internal regulations, one will have to secure advance approval from the LSB—not just consult it. We are concerned that that requirement may significantly clog decision making, which will make it harder for approved regulators to respond appropriately to changing circumstances.

It is important to bear in mind that the legal profession is a dynamic profession, and that the market for legal services is dynamic. Circumstances change rapidly, and as we have already discussed, we are responding to an intensely competitive international market. It is important that the approved regulatory bodies can respond swiftly and flexibly to their circumstances within the consumer protection framework, on which we are all agreed.

Past experience gives us some concern. The legal services consultative panel was established in the Access to Justice Act 1999, and that procedure for making changes was found to be complicated, convoluted and lengthy. It was even worse than its predecessor body, the Advisory Committee on Legal Education and Conduct, which I remember from when I still practised at the Bar. For example, it took several years for the ACLEC process to deal with the Law Society’s rules on rights of audience, and a similar length of time for the society’s recent revisions to its rule book to go through the legal services consultative panel. I am sure that Ministers do not intend to introduce a process for making sensible changes to the operation of the rule book which could take that amount of time.

The Bill already permits the LSB to designate particular categories of changes to regulatory arrangements as exempt from prior approval. The precedent is already in the Bill, but it is inevitable that as a new body, fresh on the turf, the LSB will be cautious in the exercise of its power. Few categories of rule are likely to be exempted to start with, and the process of securing LSB approval is likely to become a significant obstacle to desirable change. It will be a regrettable unintended consequence of the legislation, which does not fit with its overall intention.

There are also considerable potential resource implications for the requirement to seek advance approval for those changes. There is a process for considering the merits of proposed changes throughout the range of regulatory arrangements. The schedule already sets out a large number of approved regulators, so a number of bodies will be caught by the legislation, which is likely to be time-consuming and expensive. If we return to our proposition that the approved regulators are people who we are satisfied can be trusted, are properly constituted and have robust internal systems, how much added value will we receive for such expense and potential delay?

We can tackle that practical issue by reversing the presumption that changes require the approval of the board in advance. Instead, under our amendment, changes would be exempt unless the LSB designated them as requiring advance approval. The last point is important for balance. If it became apparent that the category of rule change might be controversial and raise new and difficult issues, the Law Society would still be able to designate—

Frank Cook (Labour, Stockton North)

Order. This afternoon, the Chair will pass to Sir Nicholas Winterton. Confident, of course, that the Committee will treat Sir Nicholas with the same respect and good humour that you have displayed towards me, I wish you well in the continuation of your deliberations.

Nicholas Winterton (Conservative, Macclesfield)

I first come to one or two little domestic matters. I am delighted to be back from the Falkland Islands, where I was in the company of other Members of Parliament, not least the Minister of State responsible for the armed services, as well as Lord Parkinson and his wife, representing Baroness Thatcher, my wife and the shadow Defence Secretary. We attended ceremonies, with hundreds of veterans and the families of those who lost their lives in that conflict 25 years ago. It was a wonderful experience, and the ceremonies in various parts of the islands where memorials were dedicated by the Earl of Wessex, Prince Edward, were very moving occasions. They were much appreciated by all present: service personnel, islanders and politicians who were down there as guests of the Falkland Islands Government and the Ministry of Defence.

I am back here, however, to ensure that we make a little more progress than I understand we have been making, and I am pretty tough. However, it is warm and humid, and although I am not normally known for taking off my jacket—I may be forced to do so later on—I am happy that those who wish to may do so.

I would also like to ask colleagues—at some stage, perhaps towards the end of this Committee stage—to indicate to myself and to Mr. Cook their satisfaction with the new process of the explanatory statements. Are they helping to ensure more informed debate? It would be helpful to the Chairmen’s Panel—to myself and to my co-Chairmen—to hear from hon. Members to hear how efficiently and effectively they believe that the new process is. It puts our Clerks Department under quite a lot of extra pressure, but if the new system helps the Committee and the House, I believe that we should stick with it. I hope that it is helpful.

When the Committee rose, I understand that the hon. Member for Bromley and Chislehurst was on his feet moving the amendment. I ask him to resume his speech.

Bob Neill (Conservative, Bromley and Chislehurst)

I welcome you, Sir Nicholas, back from the Falklands. I am sure that the Argentine Government will not regard your return from the Falklands as their having dropped their guard, or reduced our level of deterrence in any way. I welcome you to the Committee. We are delighted to be serving under your chairmanship.

You will be glad to know, Sir Nicholas, that I have effectively concluded the essence of my speech. I hope that the proposals, which are supported by the Law Society, will commend themselves to the Government, because we think that there is a constructive way forward here to improve the Bill. Without more ado, I move amendment No. 255.

John Hemming (Liberal Democrat, Birmingham, Yardley)

It is a pleasure to serve under your chairmanship, Sir Nicholas, and I welcome you back from the Falklands.

There is an interesting point about schedule 4, and particularly this amendment. The amendment would make things far more efficient. Rather than trapping everything in a bureaucratic muddle, it would allow the Legal Services Board to identify those things with which the board must get involved. To that extent, if we are looking for an efficient and effective way of regulating the legal profession, this would be a good starting point. It would be worth making the same point on schedule 4 itself given that it is interesting how the Lord Chief Justice is important here, but not important in terms of appointing the Legal Services Board. However, the amendment would provide a more effective approach; it is very good.

Bridget Prentice (Labour, Lewisham East)

May I also express my delight that you, Sir Nicholas, you have returned well and full of enthusiasm from the Falklands? We all know how firm and fair you will be throughout our proceedings and look forward to continuing our debates under your wise chairmanship.

I understand that there is anxiety over the need to ensure that the board operates in a proportionate fashion. I agree that it should operate that way and that it would go against that principle if we were to create a system that encourages micromanagement by the board. Equally, we do not want to add unnecessary delay or inefficiency to the day-to-day operation of the regulatory regime, but I do not consider that the current arrangements under schedule 4 will have either of those effects.

I come to what has been slightly lost in the amendment. First, the hon. Member for Bromley and Chislehurst touched on the fact that, under schedule 4, the board will have wide discretion to exempt certain classes of rules. It is appropriate that it should be possible to exempt minor alterations to regulatory arrangements or those alterations that are not particularly relevant. Secondly, the proposed change would not necessarily make the board’s relationship with the approved regulators more efficient, despite what the hon. Member for Birmingham, Yardley said. In fact, I would go so far as to say that it might have the opposite effect.

Even if the presumption were that the regulatory arrangements are to be exempt unless otherwise directed, the board would not be doing its job properly if it did not know what it was exempting. It could not be expected to relinquish oversight unless it was confident that in each case the regulatory arrangements in question required no input from the board in order to achieve the regulatory objectives. The outcome would be increased regulatory burdens on both the board and the approved regulators. The board would have to monitor regularly and assiduously all regulatory arrangements, and approach constantly each of the eight—so far—approved regulators to assess the ever-changing scope of the exemption and evaluate whether it needed to create further exceptions.

The frequent and unpredictable demands created by that system would increase rather than reduce the burden on approved regulators. A system whereby approved regulators are free to submit proposals for exemptions seems to be more straightforward rather than less. Apart from my reservations about the procedure and inefficiency, I believe that the change would compromise our primary objective of accountability and consumer protection through the regulatory framework.

If the board is to be strong and effective as an oversight regulator, acting in the interests of the consumer, it is vital that it is aware of the regulatory environment. That does not mean that it has to take an interventionist approach. Indeed, I hope that it does not. However, to avoid doing so, it needs to have full information in order to make its judgment.

The hon. Member for Bromley and Chislehurst referred to the present position and what the Bill will, in effect, achieve in terms of streamlining the system. At the moment, under the procedure set out in part II of schedule 4 to the Courts and Legal Services Act 1990, any alteration to the rules relating to the conduct of persons exercising a right of audience or a right to conduct litigation, any alteration to the qualification regulations of the authorised body or the alteration of any rights granted by those bodies must be approved by the Secretary of State. Before doing so, the Secretaryof State must follow the procedures set out under schedule 4 to the Act, which usually involves obtaining the advice of the legal services consultative panel and the Office of Fair Trading, each of which gives its advice separately.

The Secretary of State then sends the advice to the authorised body for its observation and consults the designated judges for their views before making a final decision. There is no limit to how long the process can take and, as the hon. Member for Bromley and Chislehurst rightly pointed out, at times it has taken many months, if not years. It can take even longer if the rule is complicated or if the authorised body is unwilling to amend the rule to take into account the worries of the legal services consultative panel. That was the position with the Law Society’s conflict and confidentiality rules.

Under the Bill, the board will have sole responsibility for approving the rules. Under the procedures setout in part 3 of schedule 4, alterations to regulatory arrangements will be approved either automatically, if the board considers them to be exempt, or after an initial determination. They will also be subject to the warning notice procedures in paragraphs 21 to 35, under which the board might consider advice from appropriate persons and representations made bythe approved regulator making the application. The process is subject to a time limit to ensure that applications do not become drawn out. For example, the approved regulator must make representations within 28 days, and alterations will be approved automatically after 12 months unless the board refuses the application or applies to extend the consideration period.

The three-stage process will ensure that the regulatory arrangements for different levels of risk are given appropriate consideration. It will certainly streamline the current situation. On that basis, although I understand the concerns about complication and length of time, I think that the hon. Member for Bromley and Chislehurst might find that the situation outlined in schedule 4 makes for a better system. I hope that he will therefore withdraw his amendment.

Bob Neill (Conservative, Bromley and Chislehurst)

I am grateful for the Minister’s response. I take on board a number of her points, and I am grateful for movement and a degree of reassurance on time limits. We are still concerned, as are a number of professional bodies. In practice, regulatory bodies of this kind have a tendency towards mission creep. It is important that we are vigilant to ensure that that does not become the case, because it is then, however good the intentions, that the administrative burden and expense can grow. We hope that the Government will continue to keep an open mind in the light of experience. We shall see how the rest of these matters develop, but for the time being, I beg to ask leave to withdraw the amendment.

Clause 23

Nicholas Winterton (Conservative, Macclesfield)

Do you wish to debate it? If anybody rises, I shall not proceed with the Division, but I must say that it is a little late for the Opposition to wish to debate it. I did say that I would move through the amendments fairly speedily. If any Opposition Member wishes to speak in a stand part debate, they must rise immediately to catch my eye.

Clause 28

Henry Bellingham (Conservative, North West Norfolk)

A warm welcome to you this afternoon, Sir Nicholas.

We debated amendment No. 244, which, if the Committee recalls, was grouped with amendmentNo. 206 in the debate about clause 3. The Minister will recall the discussion about the phrase

“so far as is reasonably practicable”.

She charmingly said that she would consider my wording to see whether she could accept it. I was wondering whether, at this stage, she could fill us in and say whether she had been able to take the matter further.

John Mann (Labour, Bassetlaw)

The word “transparent” comes up in clause 28(3)(a). Will the Minister clarify that “transparent” includes transparent to consumers and complainants, as well as to regulators and the board?

Bridget Prentice (Labour, Lewisham East)

I can absolutely assure my hon. Friend and guarantee that “transparent” applies so that the consumers as well as the regulators are clear about what is going on.

On the issue of “reasonably practicable”, I must tell the hon. Member for North-West Norfolk that I have not had time to consider his wording in detail, but I shall most certainly come back to him on it shortly.

Clause 29

Henry Bellingham (Conservative, North West Norfolk)

I beg to move amendment No. 245, in clause 29, page 14, line 26, leave out ‘prejudiced’ and insert ‘improperly constrained or influenced’.

It is vital that the representative functions of the approved regulators operate smoothly. The regulators must be proactive and imaginative, and we supportthe Clementi recommendations that the professional bodies separate their regulatory responsibilities from their representational role; that makes manifest sense. We support also the requirements in clause 30 that the board make rules on internal governance.

The amendment would ensure that the Legal Services Board interfered only with the regulatory functions of the approved regulators, not with the representative arms of those bodies. I am sure that that is Her Majesty’s Government’s intention, but I am concerned about the use of “prejudiced” in clause 29. For example, if a professional body properly provides a service to its members such as defending them in the event of disciplinary action, along similar lines to the work of the Medical Defence Union, one would hope that the regulatory arm would regard it as a perfectly proper exercise of the representative body’s role and that it would recognise the importance of properly representing people who face serious disciplinary charges.

However, the regulatory arm may take a different view, particularly if the defence service’s actions led to a number of people being cleared of disciplinary charges. In those circumstances, the regulatory board might argue that its effectiveness was being prejudiced by the representational side’s activities. For that reason, we are suggesting a better wording. The use of the word “prejudiced” in this context is too wide. It is an altogether stronger term than the phrase that we are recommending should be substituted for it: “improperly constrained or influenced”. That substitution would make a great deal of sense. We are putting in wording that more neatly and succinctly meets HMG’s requirements.

John Hemming (Liberal Democrat, Birmingham, Yardley)

We will support the amendment—that is, I will support the amendment for the moment, and “we” will support it if my hon. Friend the Member for North Southwark and Bermondsey turns up later.

Henry Bellingham (Conservative, North West Norfolk)

Where is the “we”?

John Hemming (Liberal Democrat, Birmingham, Yardley)

He will be here soon. It is not a game; I think going into the “we” is out of order.

The point in English law is that it is the perception of external influence—the perception of bias—which is the key driver. Although it has been argued that “prejudiced” is a stronger word and it may have more emotive value than other words, it is actually much easier to prove improper influence than it is to prove prejudice, which presumes that a matter has been prejudged. To that extent, the amendment would tighten up the legislation and, although it may be a probing amendment, the Minister should look on it favourably.

Bridget Prentice (Labour, Lewisham East)

A lot of consideration has gone into the use of the word “prejudiced” in the clause. It has been argued that it would not be unusual for representative bodies to seek to influence regulatory decisions, if it is in the interests of their members to do so. As the approved regulator is the body recognised in the Bill as responsible for both representative and regulatory functions, I would argue that it should accept certain responsibilities as part of that role. It might be reasonable for the representative arm to try to influence regulatory decisions, but it is important that the board is able to take appropriate action where it considers that the approved regulator is allowing representational interests to prejudice the exercise of regulatory functions.

It is important to ensure that the board is able to act where, for example, the actions of the representative side discredit the regulatory arm, resulting in damage to consumer confidence. Clause 29(2) is necessarily and deliberately wide in definition to ensure that the board is not prevented from taking such appropriate action. Therefore the use of the word “prejudiced” is correct in the context.

The hon. Member for North-West Norfolk has raised specific concerns. To suggest that the board may use its powers only where exercising the representative functions has “improperly constrained or influenced” the regulatory functions implies that there may be circumstances where it is “proper” for representative interests to constrain or influence regulatory functions. I do not think that that is appropriate. Furthermore, the proposed formulation suggests that there must be an element of wilfulness, but again that might notbe the case. There might be no intent whatsoever on the part of the regulator, but that does not mean that the board should be prevented from acting if necessary.

I understand that these are often are very fine definitions, but “prejudiced” is more appropriate than “improperly constrained or influenced”, because the latter wording would narrow the definition just a little bit too much.

Henry Bellingham (Conservative, North West Norfolk)

I am grateful to the Minister. In her inimitable charming way, she has persuaded me that the use of the word “prejudiced” will not have some of the unintended consequences that I had envisaged. On that basis, therefore, I beg to ask leave to withdraw the amendment.

Nicholas Winterton (Conservative, Macclesfield)

The hon. Member for Bassetlaw was a little late rising—perhaps it is to do with the heat.

John Mann (Labour, Bassetlaw)

It was my left leg—the old war wound, Sir Nicholas. I beg to move amendment No. 278, in clause 29, page 14, line 30, at end add—

‘(3) When acting under subsections (1) and (2) of this section the Board must satisfy itself that approved regulators have established organisational structures and procedural practices which distinguish sufficiently clearly between their regulatory and representative functions.’.

Nicholas Winterton (Conservative, Macclesfield)

With this it will be convenient to discuss amendment No. 246, in clause 30, page 15, line 16, at end insert—

‘(3A) When making rules under subsections (1) to (3), the Board must satisfy itself that approved regulators have established organisational structures and procedural practices which distinguish sufficiently clearly between their regulatory and representative functions.’.

John Mann (Labour, Bassetlaw)

By tabling the amendment I wished to highlight one of the major consequences of the Bill and to offer the Minister an opportunity to strengthen it mildly in the Government’s own direction of travel, with the backing of the Opposition parties and following Clementi’s recommendation that regulatory and representative functions need to be clearly distinct and separate. I wish to ask a question or two of the Minister, and to throw a wider challenge out to the Committee and to readers of Hansard.

When a complaint is made to the Law Society and is passed to its regulatory arm to examine, it may well—individually or generically—also be a complaint to the Bar Standards Board. For example, there was the case of Hobson and others v. AMS and others, which was adjudicated by the Law Society. In that case, counsel’s opinion was fundamental. The complaint was made against the solicitor, but it could have been made against the barrister had the complainants had known counsel’s opinion and who the barrister involved was.

Similarly, the myriad complaints concerning hearing loss cases that are beginning to arrive at the Law Society could also go to the Bar Standards Board, as happened last week. There is a suggestion that there is unhealthy collusion between firms of solicitors and barristers on how counsel’s opinion affects consumers. In a lot of cases involving industrial deafness, a solicitor might tell someone, “You have a case,” and the case goes all the way, but the employer defends the case and resists the claim. Before the case goes to court, the firm might get counsel’s opinion at the request of the solicitor, which is usually a requirement built into a small clause of the insurance policy. The solicitor then says, “Oh no, there’s no case—absolutely no case whatsoever.” On that basis, insurance funding is withdrawn and the case does not go to court.

If there were many such cases and a pattern emerged, the matter might be deemed worthy of investigation, but by whom? The regulatory arms covering solicitors and barristers should look at such issues together and work through both policy and remedy, but my experience suggests that that does not happen. Although solicitors’ regulatory and representative arms are close, as are those of barristers, there is a distance in the relationship between the two regulatory arms and they do not come together as regulators. That coming together is essential if the consumer is to be protected, particularly in the more complex and insidious cases in which patterns of potential consumer disquiet emerge. Mildly strengthening such measures in the Bill might well be within the ambit of the Government’s intent, so I politely invite the Minister to consider the amendment.

Henry Bellingham (Conservative, North West Norfolk)

Amendment No. 246, which stands in my name and that of my hon. Friends, including the shadow Secretary of State, as well as the name of the shadow Minister in the Liberal Democrats, is very similar to the lead amendment. The amendment moved by the hon. Member for Bassetlaw would insert anew subsection (3) in clause 29, which is headed, “Prohibition on the Board interfering with representative functions” Our amendment would insert a new subsection (3A) in clause 30, which is headed, “Rules relating to the exercise of regulatory functions”.

Our aim is very straightforward: to reinforce the point that there must be a separation between representative and regulatory roles. We are requesting that proper separation be included in the Bill. Obviously, some approved regulators will have a separate building and be a separate team of people—there will be a manifest separation from the representative function. However, some of the smaller organisations, such as the Chartered Institute of Patent Attorneys and the Institute of Trade Mark Attorneys, will find it quite difficult to have a separate building or arm to the operation, and they will be looking at something more like a Chinese wall, which operates very effectively in many City organisations.

What we are proposing is common sense. I will not elaborate further because the hon. Member for Bassetlaw has put a very strong case. I am delighted that we are on the same side of the argument.

David Burrowes (Conservative, Enfield, Southgate)

Is not the argument strengthened by Sir David Clementi, not only in his intention but in his comments and evidence to the Joint Committee, and by the Joint Committee’s own response and recommendations? The separation between the representative and regulatory bodies should be more explicit in the Bill, notwithstanding the fact that existing bodies, such as the Law Society and Bar Council, have already put their own house in order.

Henry Bellingham (Conservative, North West Norfolk)

Indeed. It is quite interesting that the Baroness Ashton of Upholland noted that very point in the debate in the other place. Unfortunately, she did not accept a very similar amendment in the House of Lords that was proposed by our noble and learned Friend Lord Kingsland. We are trying to make progress. The Minister is in a good mood this afternoon. I hope that she will accept our amendment.

John Hemming (Liberal Democrat, Birmingham, Yardley)

My name is on one of the amendments. Watching how the General Medical Council regulates the medical profession, it is very obvious to me that it does not investigate certain things that it finds too embarrassing. That illustrates the importance of separating regulatory and representative roles. We need procedures that create something more substantial than a Chinese wall.

Bridget Prentice (Labour, Lewisham East)

If I am in a good mood this afternoon, it is because we are all on the same side on the issue of separation between regulatory and representative functions. It is absolutely fundamental to the B+ model of regulation proposed by Sir David Clementi. Since the draft Bill was published, we have strengthened the legislation in this area. I am very persuaded by the arguments put forward by all sides, but clause 30 ensures that there is separation between regulatory and representative functions. Among other things, the rules require that the approved regulators adequately resource their regulatory arms and that the people exercising the regulatory functions can make representations to the board, the consumer panel, the Office for Legal Complaints and other regulators.

The clause takes into account the recommendations of the Joint Committee, and makes it clear that once the board is established, it will need to set out more detailed criteria for the separation of regulatory and representative functions of approved regulators.

My small “but” relates to the point made by the hon. Member for North-West Norfolk. The small regulators would need Chinese walls because their functions would not quite be separated. I want to consider whether the additions suggested by the h G and my hon. Friend the Member for Bassetlaw would make life easier for the small regulators yet still ensure that the regulatory and representative functions of the bigger boys in the playground were clearly separated.

I ask my hon. Friend to withdraw the amendment, but I am happy to consider the matter further.

John Mann (Labour, Bassetlaw)

I hear a strong echo of my suggestion that the regulatory arms, particularly of barristers and solicitors, should indeed work closely together, and not hide away in their new and distinct buildings. On that basis, I trust the Minister—on this and all matters, future as well as past. I beg to ask leave to withdraw the amendment.

Clause 30

Nicholas Winterton (Conservative, Macclesfield)

With this it will be convenient to discuss new clause 12—Separation of funds proportionality

‘(1) In exercising its functions under sections 29 and 30, the Board shall pay particular regard to what is proportionate.

(2) Without prejudice to subsection (1), nothing in sections 29 or 30 shall exclude—

(a) the exercise of or involvement in regulatory and representative functions by the same persons or bodies within an approved regulator;

(b) the exercise of regulatory and representative functions from common premises.’.

Henry Bellingham (Conservative, North West Norfolk)

New clause 12 should be judged in the light of the previous debate, as it, too, is about the separation of functions and proportionality. Some might argue that I am backtracking slightly on what was said in our debate on the previous amendment, which was moved by the hon. Member for Bassetlaw.

The new clause was inspired by the Chartered Institute of Patent Attorneys and the Institute of Trade Mark Attorneys. It provides that when exercising its functions under clauses 29 and 30, the board should pay regard to what is proportionate. It makes it clear that the small organisations—a number of approved regulators are small, highly specialist and technical bodies—simply cannot be expected to separate completely their representative and regulatory roles. That point was made by the Minister only a moment ago.

The professions represented by the institutes are not closed; one does not have to be a member of either institute to practice as an attorney. If they started charging their members excessive sums—if their cost base increased too much—they would lose members and thus lose critical mass. That is why they should be treated with proportionality. I urge the Minister to consider accepting new clause 12. She was sympathetic to the previous group of amendments, tabled by myself and the hon. Member for Bassetlaw, and she could combine that with the acceptance of new clause 12. It should protect the small specialist regulators who form an important part of the legal services system.

John Hemming (Liberal Democrat, Birmingham, Yardley)

In a sense, we return to the trade union question by discussing the extent to which patent agents and the like provide regulated rather than non-regulated services.

I am nervous about the new clause. In some circumstances, one would want those who makes regulatory decisions to be unbiased, which is to say that they should not also have a representative role. However, that would not necessarily mean that the two sides should not have any involvement at any point; they might have the same receptionist or something like that. Even in smaller organisations, I would be nervous about a situation in which the body’s elected president took regulatory decisions. I am therefore not in favour of a statutory prevention—of rules that insist on some separation of personnel.

I accept that in a smaller organisation, if people need to be regulated, there are constraints, because people might have to work out of the same premises. The approach has to be proportionate, but there will be circumstances in which one would want to distinguish between the personnel, so that those who make the regulatory decisions are not democratically accountable to the people about whom they make those decisions.

Bridget Prentice (Labour, Lewisham East)

Given the remarks that I made in relation to clause 29, it is only logical that I go away and reconsider the matter. My immediate reaction to new clause 12 is that it is a duplication of what we already have. I accept the points made by the hon. Member for Birmingham, Yardley about the clarity that is needed. I assure the Committee that the Bill will not prevent people from exercising regulatory functions and carrying out representative functions if necessary. However, given that the new clause and the existing provisions sit together, it will be appropriate for me to consider the new clause.

Clause 31

John Mann (Labour, Bassetlaw)

I beg to move amendment No. 279, in clause 31, page 15, line 22, after (a) insert—

‘(za) investigate the performance by an approved regulator of any of its regulatory functions.’.

The amendment is helpful to the Government’s objectives and I am keen to offer it to the Minister. As do the Government, I regard light-touch self-regulation as the way forward. To demonstrate that, we need to ensure that the lightest of touches is highly effective. I make an analogy with a surgeon: the legal profession does not require an 18th century surgeon removing arms and legs in traditional ways to get to the root of the problem; it requires small amounts of microsurgery, involving the latest laser technology, to ensure accuracy and precision. That is the point of the amendment.

If the regulators use too blunt or too heavy an instrument, the result will be vague and will cast aspersions on the profession overall. They will fail properly to identify the precise problems and to rectify them through effective regulation. In that respect, intervention from on high, to ensure that performance is of the highest standards, has proved most useful. I cite as an example the legal services ombudsman’s special report on miners’ compensation, which highlighted a number of minor inconsistencies. They were grabbed by the regulator, which totally outpaced the ombudsman in delivering an effective, consistent system and moved in a tiny period of time from agreat variety of responses—some of them absolutely superbly detailed and legally precise, some rather waffly, vague and inaccurate—to a consistency of approach that meant that those who were complaining could begin to see consistency in judgments, and gain confidence in the system.

The regulator needs to be able to examine performance as it is happening, not merely retrospectively. Then, if there is a swathe of problems in a certain area, the regulator can improve the consistency and quality of performance in actual time, rather than retrospectively. Such strengthening of the ability to intervene on a light-touch, microsurgical basis would be entirely in the spirit of the Government’s successful attempts to introduce self-regulation.

John Hemming (Liberal Democrat, Birmingham, Yardley)

This amendment seems so helpful that I am surprised that the provision is not already in the Bill. We support it.

Nicholas Winterton (Conservative, Macclesfield)

I commend the hon. Gentleman’s brevity.

Bridget Prentice (Labour, Lewisham East)

On amendment No. 279, I very much agree with my hon. Friend the Member for Bassetlaw: the board must be able to investigate approved regulators’ performance of their regulatory functions before setting targets. It would not be properly carrying out its oversight function if it did not do that. We have drafted the Bill so that it provides for the board to conduct an appropriate level of investigation of the discharge of the functions of the regulators—and not just in clause 31. My hon. Friend knows that I do not approve of the phrase “light touch”, so he tempts me down the wrong path when he uses it and other such phrases.

Let me give further examples of ways in which the board has powers. Under clause 7, it may do

“anything calculated to facilitate, or incidental or conducive to the carrying out of any of its functions.”

and it also has the power to obtain information and documents from approved regulators under clause 55. Across the Bill as a whole, we have given the boardthe appropriate tools with which to examine the effectiveness of approved regulators in exercising their regulatory functions. I anticipate that in most circumstances the board will be able to take appropriate, proportionate action, and will try to set appropriate targets through dialogue with the approved regulators. However, if a situation should arise in which that cannot or does not happen, it will be open to the board to require relevant information more formally, as under clause 55. That power is enforceable through the High Court.

I would be a wee bit concerned about inserting another power for the board to investigate in case that should muddy the waters. Given that it is already able to require information to aid its regulatory decisions,a more explicit power to investigate might need tobe supplemented by powers of search and seizure. Without there being a proper procedure in place to govern such use, that could be seen as disproportionate.

Given the ability of the board to carry out an appropriate level of investigation, and the desire of all of us to avoid disproportionate action, I would ask my hon. Friend to withdraw his amendment. Across the Bill as a whole, the board has sufficient powers to carry out the functions that he so much wants it to have.

John Mann (Labour, Bassetlaw)

I hear what the Minister says. I am happy to leave the matter for her to contemplate, because there is a danger that the board could end up being too general. It will depend, of course, on whom the members are. If she is looking for suggestions to give the board proper teeth, my hon. Friend the Member for North Durham would be a suitable independent chair, but the position might be filled by someone who is over-disposed to favour the legal profession. The variation could be enormous. I leave it for the Minister to contemplate further, as later amendments might supplement the point more effectively. On that basis, I beg to ask leave to withdraw the amendment.

Bridget Prentice (Labour, Lewisham East)

I beg to move amendment No. 1, in clause 31, page 15, line 30, leave out from ‘on’ to ‘and’ in line 31 and insert

‘one or more of the regulatory objectives,’.

Nicholas Winterton (Conservative, Macclesfield)

With this it will be convenient to discuss Government amendments Nos. 2 to 5.

Bridget Prentice (Labour, Lewisham East)

This group of amendments seeks to reverse the changes made in another place to the thresholds of the board’s regulatory powers. Those amendments sought to limit the exercise of the powers to circumstances involving significant adverse impact on the regulatory objectives as a whole. The Government amendments will restore the formulation enabling the board to act where there is an adverse impact on one or more of the regulatory objectives.

The Government have not been persuaded that it is necessary or desirable to strengthen the thresholds as the other place proposed. The board needs flexibility to act quickly and decisively where there is a failure. To wait until that failure has a significant adverse impact on the objectives as a whole is likely to be damaging to consumers and, I suggest, to the legal profession.

In particular, the amendments are needed to remove the requirement that the adverse impact be significant. We have serious concerns that such qualification of the thresholds will fetter the board’s ability to regulate effectively. Retaining the word “significant” could cast doubt on whether the board can take steps to rectify certain regulatory failings. In the case of smaller regulators, who may regulate fewer reserved activities or authorised persons, the impact on the objectives may not meet the significant threshold even where there is clear evidence of consumer detriment in the failing regulator’s field. The Government want to make it clear in the Bill that the board will be able to act in relation to a regulator regardless of that regulator’s size. The simple reference to adverse impact will achieve that without leaving damaging room for argument.

We also seek to reverse amendments restricting the board’s ability to take action where the adverse impact is on the regulatory objectives as a whole. In making regulatory decisions, the board will of course need to balance the impact on one objective against the other objectives and to assess them together. That might even be the intention behind the amendments made in the other place, but we do not believe that it will be their effect. We consider that those amendments could limit recourse to the regulatory powers to circumstances impacting on all the objectives, which is clearly far too restrictive. Our amendments in this group will make it plain that the board can act where there has been an adverse impact on one or more of the regulatory objectives.

The Committee need not look further than the Bill to see that there are clear safeguards preventing the misuse of the board’s powers. The board is already under a duty to have regard to best regulatory principles, including transparency, accountability and proportionality, when carrying out all its functions. Before taking action, it must publish policy statements. As we will discuss later, the Government have tabled a refined amendment to clause 49 that will ensure that when publishing policy statements, the board must have regard to the principle that its principal role is the oversight of approved regulators. In addition, when the board considers it appropriate to use its powers, it must comply with procedural safeguards, such as the requirement for it to consider representations from the approved regulators, and the obligation for it to consult the consumer panel, the senior judiciary, the Lord Chancellor and the Office of Fair Trading.

Finally, I highlight the point that the board will not operate its regulatory powers in a vacuum. The way in which it exercises those powers will be subject to public scrutiny, it will be obliged to publish an annual report, and when appropriate, its decisions could be judicially reviewed. The combined effect of those provisions will ensure that the board can and will act only when it is right and proper that it does so. For those reasons, I move the amendment.

Henry Bellingham (Conservative, North West Norfolk)

I am grateful to the Minister for explaining both the situation and why Her Majesty’s Government want to remove from the Bill the wording that was inserted in the Lords. She has made her case, but the Opposition do not agree with it. There was a lengthy debate in the other place in Committee, and on Report when there was a vote on the provision. It was won not by a whisker, but by 52 votes, which in the other place is a reasonable-sized majority. I have just had a look at the voting list, and a significant number of Labour and Cross-Bench peers voted for the wording that was inserted. The argument was won and the vote was won, and I am disappointed that the Minister has come to the Committee with these amendments.

The reason that the Bill was amended in the Lords is simple. The amendment was designed to ensure that the various powers of intervention by the board in the regulatory work of the approved regulators would be triggered only by an adverse impact on the regulatory objectives as a whole. The original Bill stated clearly that the board’s disciplinary measures could be enforced on the basis of an adverse impact on only one of the regulatory objectives. The Opposition accept the board’s need to have formal powers, but as the Joint Committee, on which my hon. Friend the Member for Enfield, Southgate sat, made clear, those powers should be used only when necessary—when, for example, the approved regulators are clearly failing. We do not want an over-intrusive board trying to micro-manage the approved regulators.

Stephen Hesford (Labour, Wirral West)

If one looksat the regulatory objectives in clause 1, it seems astounding that if there is a clear breach of

“protecting and promoting the public interest”,

the hon. Gentleman does not want the board to act; that if there is a clear breach of

“supporting the constitutional principle of the rule of law”,

the hon. Gentleman does not want the board to act; that if there is a clear breach of

“improving access to justice”,

the hon. Gentleman does not want the board to act; that if there is a clear breach of

“protecting and promoting the interests of consumers”,

the hon. Gentleman does not want the board to act; that if there is a clear breach of

“promoting competition in the provision of services within subsection”,

again, the hon. Gentleman does not want the board to act.

Nicholas Winterton (Conservative, Macclesfield)

The hon. Gentleman is making a very good point by way of intervention, but it is an intervention, not a speech. If he wishes to continue but bring it to a conclusion briefly, I am happy that he should do so.

Stephen Hesford (Labour, Wirral West)

You are very kind, if I may say so, Sir Nicholas. I think the hon. Gentleman takes my point.

Henry Bellingham (Conservative, North West Norfolk)

I am grateful to the hon. Gentleman, who sat on the Joint Committee. As I understand it, the Joint Committee recommended that the amendment, which won on a vote in the Lords,be made to the Bill, so he made that point clear at the time.

Stephen Hesford (Labour, Wirral West)

Was there a vote in the Joint Committee?

Henry Bellingham (Conservative, North West Norfolk)

Well, the Joint Committee made that recommendation and it went through. Presumably, the hon. Gentleman could have demanded a vote and a minority report could have been published. It is still open under the Bill for the board to punish the approved regulator for breaching only one of the regulatory objectives as long as it was sufficiently serious to have an adverse impact on the objectives taken together. To some extent, his concerns have been met in the Bill, as it stands now.

The Government have said several times that the lead responsibility should rest with the approved regulator. There will be a need for agreement and partnership, and it is important that the board does not adopt an excessively heavy-handed approach. It is also worth pointing out that the regulatory objectives are to some extent bound to be in contention with each other. For example, let us consider the requirement to undertake prescribed training prior to admission as a solicitor. It would clearly have an adverse effect on competition in legal services if everyone with a law degree could be admitted immediately as a solicitor. The potential supply of solicitors would be that much greater.

However, failing to require appropriate pre-admission training would have a detrimental effect on the interests of consumers and probably on one or two of the other regulatory objectives. Under the original formulation of the Bill, the LSB would be entitled to take action against an approved regulator whatever approach it took to pre-admission training. That is just one example of why the Lords made such a change.

We ought to consider the overall position. We want a balanced approach and, as they stand, the clauses offer that. After all, the Government have said time and again that they want full co-operation between the board and the approved regulators, and that they want a spirit of good will and understanding. We must remember that they have not sought to differentiate in weight between the regulatory objectives to which the hon. Member for Wirral, West referred. They are all of equal weight.

Stephen Hesford rose—

Henry Bellingham (Conservative, North West Norfolk)

I shall not give way as I intend to come to a conclusion quite soon. The Whip is keen for us to make progress. Let us focus on one objective. It could be tantamount to acting in a arbitrary fashion, so the proper approach is for the board to analyse each of the regulatory objectives before deciding to act. It is a balancing exercise. There is no need for the board to become another front-line regulator. The third-party endorsement for such an approach is widespread. There is no question about it. The Chartered Institute of Patent Attorneys and the Institute of Trade Mark Attorneys made it clear that all of the different procedures should be in line with the Hampton risk-based regulation recommendations.

In its latest report, the Bar Standards Board made it clear that there should be the sensible, delicate-touch regulation that was envisaged by Sir David Clementi. It pointed out that the danger with any other approach was that unnecessary costs and delay would be built into the regulatory process. I have not once mentioned “light” touch. The Minister has prohibited the use of that phrase. I would instead use the words “delicate”, “de minimis”, “sensitive” or “pragmatic” to describe the sort of touch that should be used. Alternatively, perhaps we should intervene only in extremis or on a common-sense basis.

Let us consider the organisations that endorsed the Lords amendments, which were won by a substantial majority. We must bear in mind not only those that I am sure the hon. Member for Bassetlaw would describe as the usual suspects, but the many others that supported the amendments and considered that they would improve the Bill substantially. While I take on board entirely the points made by the Minister about other elements of protection under the Bill and the provisions on proportionality and checks and balances, it would be a retrograde step to support the Government’s amendments. They are not necessary. If they had been, the Lords—after substantial debate that involved a lot of very experienced people—would not have wanted to amend the Bill in such a way. That is why Conservative Members will work extremely hard, but in a constructive and pragmatic way, to keep the Bill as it is.

John Hemming (Liberal Democrat, Birmingham, Yardley)

I am sure that my party unanimously took the same view in the House of Lords. Light touch is not necessarily the best way of describing the measure. It is, rather, a rational approach to the attitude that if improving one regulatory objective has a worsening effect on another, intervention is required. I like to take practical examples. Let us consider the balance between improving access to justice, which must be a priority in terms of the rule of law, and increasing public understanding of the citizen’s legal rights and duties. Both of those are regulatory objectives under clause 1. My example concerns a firm of solicitors that is particularly good at ensuring that people have access to justice. It gets information out of the clients, takes it to the courts and litigates effectively in, say, a hearing damage case, so that compensation is paid. However, it does not explain every step of what it is doing. Because of that, it is deemed to be contravening clause 1(1)(g) on increasing public understanding.

The initial regulator might say, “Well, it is all right that it has acted in a mechanical manner, because it is improving access to justice, and people who would not otherwise have got justice have done so.” However, the LSB would say, “Ah, but we are losing out on clause 1(1)(g), so we need to intervene, even though we are benefiting on subsection (1)(c).” The point about taking the objectives as a whole is that we can take into account whether we are winning on one and losing on another. Clearly, if we are losing out on one objective, and it is not making any difference to any of the others, we are losing out as a whole. The issue is not necessarily to do with lightness of touch, it is moreto do with proportionality. This is just a rational approach to the fact that LSB intervention should be based on a net loss, not on a situation in which there is a loss on one regulatory objective and a gain on another.

David Burrowes (Conservative, Enfield, Southgate)

It is a pleasure to make a few remarks under your chairmanship, Sir Nicholas.

I support my hon. Friend the Member for North-West Norfolk in wanting to assert the importance of the work undertaken in the other place, and to highlight all the good work that would be undone by the Minister. I should like to draw attention to her undue emphasis on the wording—no doubt she will rebut this—in suggesting that the fact that one cannot easily define “substantial” will lead to a lack of clarity. We should draw back from details of definition and consider the important point of principle. Our concern is not so much the strength of intervention of the LSB, but the way in which the Government wish to implement and apply the Bill.

I return to the opening debate on the regulatory objectives. When we debated whether there was a hierarchy of, or competition between, regulatory objectives and sought assurance that there was not,the Minister argued that it was made clear in the explanatory notes that there was no hierarchy. Throughout her remarks, she has made particular reference to certain objectives and not to others. We are concerned that when we address the issue of how the strength of intervention of the LSB will apply, she is not balancing the objectives. That is of the essence in this Bill. Right at the start, in clause 1, all the objectives have equal value. They need to be properly balanced; that was the purpose of the Lords amendment, which is now part of the Bill. Its aim was to considerthe impact of the objectives, rather than have one competing with another. To respond to the intervention of the hon. Member for Wirral, West, one particular objective might be infringed, but that infringement needs to be considered against the whole balance of the objectives.

The Minister’s concern is that the amendment would undermine the clause by allowing intervention when one or more of the regulatory objectives is adversely affected. It undermines the case that was made atthe beginning and raises concerns not just about intervention. Indeed, given the passage of the Government amendment relating to appointmentsto the Legal Services Board, the Government’s involvement without proper checks and balances and the concurrence of the Lord Chief Justice, there is a concern that independence is being undermined systematically in terms of the Legal Services Board’s potential to intervene on any of the objectives.

I ask the Minister at this eleventh hour to take careful note whether Baroness Ashton indeed said in the other place when the amendment passed that, in her opinion, all their Lordships were making the same point—whether in fact we are all united in the point that we are seeking to make. Can she assure me that a balanced approach will still be taken to regulatory objectives, and not the pick-and-mix approach that causes so much concern about over-intervention in the regulatory bodies?

John Mann (Labour, Bassetlaw)

There is a unity in the Lords—a unity of judges, barristers and lawyers, the vested interests who raise the spectre of loss of independence but somehow feel it appropriate for the judiciary to participate and vote in the very Parliament from which they claim they want independence. The term “cake and eat it” comes to mind, but unfortunately we have not had the opportunity to make constitutional changes to put them out of their misery in that respect.

Perhaps I am the only one pursuing a light touch following the debate, but light-touch self-regulation is very dear to my heart. As for the idea that there should be no effective Legal Services Board—that its powers should be watered down by the House of Lords and the vested interests in the House of Commons so that it becomes a meaningless talking shop unempowered in any specifics—there are two good retorts to that. The first is that no investigation has yet been made by the regulatory arm or anyone else in the legal profession into the situation with barristers and legal expense insurance. I called for such an investigation. The current system is a scandal. It is a national scandal, and not just individuals but the whole system should be investigated, because it brings barristers’ profession into disrepute.

Secondly—it was more publicised previously—there has still been no investigation into why large numbers of solicitors dealing with industrial deafness claims are allowed to do so, giving specific and crucial advice, over the telephone. That is a national scandal, and the legal profession should be embarrassed and humiliated by it. Any suggestion that this House and this Committee should water down light-touch powers to allow self-regulation with proper teeth is, frankly, nonsense. While the Minister resists my attempts to beef up parts of the Bill, I trust that she will be equally robust in resisting the House of Lords and others trying to water it down.

Bridget Prentice (Labour, Lewisham East)

My hon. Friend has made the case for me in many ways. There are a number of important and effective regulatory powers in the Bill, and they are absolutely necessary to ensure that failure by an approved regulator can be properly addressed. It is crucial that those thresholds should be set at the right level and that the board should not be restricted from exercising its powers when appropriate. It is clearly in the interests of the consumer for the board to be able to take steps quickly without having to wait until there is a significant adverse effect

“on the...objectives taken as a whole”.

As I have already set out, the Bill provides strong safeguards that will prevent the arbitrary use of the regulatory powers. To that end, I am absolutely of the belief that the amendments made in another place are unnecessary and, as my hon. Friend the Member for Bassetlaw said, they will undermine the board’s role of being a strong, oversight regulator that is able to react decisively to problems in the legal sector, a number of which he raised.

I shall finish by talking about the view of the National Consumer Council. It said that it was

“concerned that this will leave the LSB impotent to act, since this word”

—the word “significant”—

“can be interpreted differently and is difficult to prove. Further, the Board should not have to wait until a significant event before taking action to protect consumer interests.”

As much as anything else, that is the purpose ofthe Bill, and I commend the NCC’s views andthose of my hon. Friend. For that reason, I hopethat the Committee will endorse the Government’s amendments and reverse the decisions made in another place.

David Burrowes (Conservative, Enfield, Southgate)

Is the Government’s main concern about the upping of the threshold because of the word “significant”, or is it that under the Bill one must apply the

“objectives taken as a whole”,

whereas the amendment mentions

“‘one or more of the...objectives’”?

Bridget Prentice (Labour, Lewisham East)

It is both.

Henry Bellingham (Conservative, North West Norfolk)

I am not satisfied with what the Minister said, so we shall be voting against the amendments.

Henry Bellingham (Conservative, North West Norfolk)

On a point of order, Sir Nicholas. It is a request for information. Is there any possibility of Government amendments Nos. 2 to 5 being taken together? I know that they amend different clauses, but are we to vote on them only when we reach those clauses?

Nicholas Winterton (Conservative, Macclesfield)

I have to tell the hon. Gentleman, who I understand has considerable legal training and expertise, that they have to be taken in accordance with the Bill—as and when appropriate, and not together.

Clause 32

Clause 35

Clause 36

Henry Bellingham (Conservative, North West Norfolk)

I beg to move amendment No. 247, in clause 36, page 18, line 15, at end add—

‘(4A) As soon as practicable after deciding to publish a statement, the Board must give notice to the approved regulator stating that it has reached that decision and setting out the terms in which the statement is to be published; and the Board must not publish the statement until after the expiry of 7 days beginning with the day on which notice is given under this subsection.’.

Nicholas Winterton (Conservative, Macclesfield)

With this it will be convenient to discuss the following:

Clause stand part.

New clause 13—Appeal against public censure

‘(1) An approved regulator in respect of whom the Board decides to publish a statement under section 35 may appeal to the court on one or more of the appeal grounds.

(2) The appeal grounds are —

(a) that the decision was not within the power of the Board under section 35;

(b) that any of the requirements of section 36 have not been complied with in relation to the imposition of the penalty and the interests of the approved regulator have been substantially prejudiced by the non-compliance;

(c) that in all circumstances, the publication of a statement under section 35 is, or the terms of the statement published or to be published are (or would be), manifestly unreasonable or inappropriate;

(d) that the decision is unlawful on any ground that would give rise to a claim for judicial review.

(e) that the decsion is unlawful on any ground that would give rise to a claim for judicial review.

(3) An appeal under subsection (1) must be made within the period of 42 days beginning with the day on which the notice was given to the approved regulator.

(4) Where an appeal is made before the expiry of the 7-day period the Board must not (unless the court otherwise orders) publish the statement until the appeal has been withdrawn or dismissed.

(5) On an appeal under subsection (1), where the court considers it appropriate to do so in all the circumstances of the case and is satisfied of one or more of the appeal grounds, the court may—

(a) quash the decision to publish a statement, or

(b) vary the terms of the statement (and, where the statement has been published, direct the Board to publish to the same extent the statement as varied).

(6) In this section “the court” means the High Court.’.

Amendment No. 248, in clause 39, page 20, line 3, at end insert—

‘(da) that the imposition of the penalty on any ground that would give rise to a claim for judicial review.’.

Amendment No. 249, in clause 39, page 20, line 27, leave out subsection (7).

Henry Bellingham (Conservative, North West Norfolk)

I have papers that could allow me to prolong the debate for as much as an hour and a half, but the Labour Whip keeps making rude faces at me, so I shall do my level best to curtail the debate; I shall try to be succinct and to get the point across cogently yet effectively.

Amendment No. 247 makes it clear that the board should give notice to the approved regulator, saying that it has reached a decision and setting out how the statement should be published. Again, that is perhaps stating the obvious, but the amendment would also allow the approved regulator time to consider its response. In the interests of fairness, the amendment says that the Legal Services Board should not

“publish the statement until after the expiry of 7 days”.

That is what amendment No. 247 says and I very much hope that the Minister will see the logic and good sense of the amendment.

New clause 13 would give the right of appeal against public censure; very simply, the new clause makes it quite clear that there should be that right of appeal. It is plain to the Opposition that the Government intended that there should be measures in the Bill to provide for such an appeal. On the other hand, we have examined the Bill carefully and we have not seen that it offers that necessary level of protection to the public, or to anyone who might be censured, including any approved regulator. Therefore, having this new clause makes a great deal of sense.

I shall briefly address amendments Nos. 248 and 249. Very simply, amendment No. 248 inserts onpage 20, line 3:

“that the imposition of the penalty”

is unlawful

“on any ground that would give rise to a claim for judicial review.’.

Amendment No. 249 is consequential on that amendment. It would take out clause 39(7), which is basically an ouster clause. Subsection (7) says:

“Except as provided by this section, the validity of a penalty is not to be questioned by any legal proceedings whatever.”

To my mind, that is a straightforward ouster clause. There is a strong argument for judicial review. I will not repeat all the arguments that were made in the other place, but it seems to me that the amendment makes sense, is logical and is very much in line with what the Government are trying to do, which is to ensure that there is fair treatment for all concerned. I do not see how one could have that fair treatment unless we accept this amendment, which would allow the claim for judicial review.

Therefore I hope that the Minister will look carefully at what we have proposed. I have gone through these amendments as succinctly and as quickly as I can. On that basis, I beg to move the amendments.

Nicholas Winterton (Conservative, Macclesfield)

May I say to the hon. Member for North-West Norfolk that he need not be intimidatedby the Government Whip, the hon. Member for Worcester? However, if he is determined to remain very much in order and succinct, I know that members of the Committee will be very grateful indeed.

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

I would first like to welcome you, Sir Nicholas, to the Chair; it is very good to serve under your chairmanship again.

I shall be extremely brief, to say that this amendment, those selected with it and the new clause appear to have much to commend them. They appear to clarify matters and to make everything much more transparent, and therefore they would add to the justice of the procedures. We are minded to support these measures. I will obviously wait to hear what the Minister says in reply, but I hope that she will be sympathetic to them.

Bridget Prentice (Labour, Lewisham East)

All these amendments seek to create additional provisions for enabling decisions to be challenged. I would argue that they are all unnecessary, because the Bill already achieves essentially the same outcome and these amendments would just create duplication and add to bureaucracy.

New clause 13 and amendment No. 247 would insert a new right of appeal from decisions on public censure and therefore they duplicate the judicial review grounds that already exist. Amendments Nos. 248 and 249 would allow challenges to be brought in judicial reviews for decisions to impose financial penalties. Again, that duplicates the grounds that already exist as part of the appeal process.

I am minded to consider amendment No. 247, which states that seven days’ notice must be given. I may want to look at that further. I should say though that I am not convinced that it is entirely necessary. Clause 36 already provides that the board publishes a statement, and it must allow a period of 28 days or more to allow the regulator to make representations. I understand the idea of the seven days, but I think that it is probably covered already. However, I will look at the matter again.

I will speak briefly about financial penalties and the circumstances in which they are involved. There is a qualitative difference in financial penalties. We need to guarantee the applicant’s right to challenge not only the imposition of that penalty, but also the amount of it. That is not to say that it would not be possible to challenge the amount of the penalty, or the timescale for payment, via judicial review, but it is not necessarily automatic. It is more likely that the amount would have to be manifestly unreasonable.

It is for those reasons, therefore, that I feel thereis a lot of duplication in the amendments. The amendments are not necessary because we have covered in an appropriate fashion the way in which approved regulators can challenge decisions of the board. The hon. Member for Bassetlaw would say that nobody knows how to go to judicial review better than the lawyers. I am quite confident that the proposed system will establish a fairness without further duplication.

Henry Bellingham (Conservative, North West Norfolk)

I am grateful to the Minister for that explanation. I take on board her last point. It was more of a probing amendment on judicial review. I was encouraged by what she said on the matter of the seven days. On reflection, she may agree more with what I was saying. The seven days gives the organisation that is being censured time to respond. That is important in the interests of fairness all round. Perhaps the Minister could come back to me on that on Report. I am grateful to her for her remarks. On that basis, I beg leave to withdraw the amendments.

Clause 37

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

I beg to move amendment No. 225, in clause 37, page 18, line 30, at end insert—

‘( ) The Board may not determine that it is appropriate to impose a penalty unless it is satisfied that the matter cannot be adequately addressed by the Board exercising the powers available to it under sections 31 to 36.’.

The amendment is supported by the hon. Member for North-West Norfolk and some of his hon. friends. I will read the proposal that was put to me and others by the Law Society which explains why the amendment is both sensible and justified. In the clauses so far, we have looked at various ways in which there can intervention. We have considered censure in clauses 35 and 36, directions that can be given by the board in clauses 32, 33 and 34. We considered the setting of performance targets in clause 31. Before that, we examined the rules that require the separation of regulatory and representative functions.

We are now discussing a clause on financial penalties. The amendment is designed to restrict the powers of the board by prohibiting it from imposing a financial penalty unless it is satisfied that it cannot adequately address the matter by exercising its other powers. It would put penalties on a gradated scale and would force the board to consider other types of intervention, such as direction or censure, before imposing a financial penalty. That position would be consistent with that of other regulatory regimes that have been established by Parliament in recent years. The amendment would ensure that the Legal Services Board could not impose fines unreasonably. It would also ensure that any action that is taken does not hit the wrong target.

It is commonplace for direct regulators of services, particularly those provided commercially, to havethe power to fine those who fail to comply with requirements. That is unarguable. The recent McCrory report emphasised the importance of the availability to regulators of a wide range of sanctions, including the power to fine, to ensure that the sanction for the breach of regulatory requirements is sufficient to removeany financial incentive to fail to comply with responsibilities. It is sensible to have a financial penalty to deal with wrongful activity for financial gain. That is entirely logical. The Law Society is seeking powers to fine solicitors for regulatory breaches in appropriate circumstances so that, as a regulator, it has an effective range of available sanctions, rather than having to refer all such cases to the Solicitors Disciplinary Tribunal. That is entirely sensible, too.

I have been told—I have thought about it and I cannot dispute it—that it is unusual for there to be a power to fine a body that carries out regulatory, non-commercial activities. I have been given the examples of the Council for Healthcare Regulatory Excellence, which has no power to fine any professional medical bodies, and the Financial Reporting Council, which has no power to fine the accountancy bodies.

Given that the Legal Services Board has extensive powers to make directions, which are by definition enforceable, it is far from clear that a power to fine approved regulators is necessary. The Joint Committee picked that up in its report during pre-legislative scrutiny and the Government said that they would reconsider the issue, but they have not come back with an answer to the concerns expressed in the Joint Committee or elsewhere. In the Lords, the issue was debated in part. Baroness Ashton, the Minister, sought to justify the power to fine with reference to the position of other regulators, including the Financial Services Authority and Ofgem. Both of those directly regulate service providers, however; there is no intervening tier, so they do not supervise other regulators. The Legal Services Board is, by definition, the umbrella. Other regulators, of which the Law Society is one, have been approved to set up in anticipation of the legislation. It is not a parallel situation. We are talking about a three-tier structure; the other organisations that have such a power to fine are part of a two-tier structure.

I have been told that the only example that supports the Minister’s case is the power of the Legal Services Complaints Commissioner, which was created under an addition to the Access to Justice Act 1999. It was intended to cover a specific problem with the Law Society’s handling of consumer complaints. I remember the debate on the subject, and there was thought to be a need to give the commissioner more teeth in that context. It is unusual for a supervisory regulator to have the power fine another regulator, so that power needs to be confined to circumstances in which no other sanction is appropriate. The first argument against the provision is therefore that it is not based on precedent and it appears wrong in principle.

The second argument is that, with legal services regulation, day-to-day responsibility for regulatory action will, by definition, rest with the regulatory arm of the relevant professional body. The representative side will not be able to control the way in which the regulatory arm operates; indeed, it would be a serious breach of the principle of independence if it sought to do so. One of our great debates was about ensuring that we separate regulation and representation absolutely and rightfully.

Any fine would not impact on the regulatory arm unless it were charged against the regulation side’s own budget, which would defeat the whole purpose of having a fine, because that would mean fining the fund that is there to put things right and to deal with problems. Any such fine would effectively be borne by the professional body, and thus its members and the representative arm. Members of the regulatory arm would not even be subject to any sanction from an electorate for having incurred the fine, as they are all appointed under Nolan principles rather than elected, so they could not be ousted. It would not be the equivalent of a vote of no confidence that would result in them leaving their office.

There is a risk that lawyers who are regulated by the approved regulator will bear the whole burden of any such fine without being able to exercise any effective influence over the people whose failings led to the imposition of the fine. That seems wrong to me, as a matter of principle. I believe that the Joint Committee also thought it wrong, but the answers given in the Lords did not address the issue. That is my second reason for asking the Minister to be sympathetic.

In the debates in the other place, the Government tabled an amendment to ensure that approved regulators cannot be fined for the failings of their regulatory arm unless a direction has already been made under clause 31. That provides some welcome protection for approved regulators. By placing appropriate requirements on their regulatory arms, they will be able to ensure that they can intervene where necessary to ensure that directions are complied with, but there is still a significant risk of fines being used inappropriately, because the current drafting does not prevent that. It does not seem to guarantee that other options have to be considered before that power is used.

My last point is that there is frequent media pressure on professional bodies across the board, not just legal bodies, and on regulators to flex their muscles and exercise their powers to intervene. That is rightful and understandable in certain cases; you and many others, Sir Nicholas, have been keen, in our talks on rail services in this place, that the regulator should be able to intervene when railway companies do not do their jobs properly and services are not what constituents of yours, mine and our colleagues would wish. It is absolutely right that there should be calls for that to happen, but that alone is not a good justification for it to be the common practice if other remedies are appropriate and available.

Good regulatory practice requires regulators to use the least draconian sanction that will meet the regulatory need. It would be quite wrong to fine an approved regulator simply because circumstances have arisen in which there is, in theory at least, a power to do so. The power to fine should properly be exercised only when the Legal Services Board is satisfied, under the provisions in the Bill, that no lesser sanction, such as direction or censure, will suffice. I believe that the Government have accepted that principle as far as the board’s power to intervene in the functions of approved regulators is concerned. I think that that was said to be generally the case by Ministers elsewhere, and I suggest that the same principles should apply to fines as it does elsewhere. On that basis, I hope that the Minister will accept our arguments, or at least take them away to consider, and will be sympathetic.

Henry Bellingham (Conservative, North West Norfolk)

My name and those of my colleagues have, indeed, been added to the amendment. It is a simple and straightforward, but nevertheless important, safeguard to ensure that the LSB does not impose financial penalties where lesser sanctions would suffice. The hon. Member for North Southwark and Bermondsey made a very powerful case. It is designed to prevent capricious, over-the-top fining. It is to ensure that the fining option is the last option available. I take on point his point: there will be quite a lot of pressure on the Legal Services Board to make examples and to flex its muscles. If it is to do that, an extra constraint needs to be built in. That is why we support the amendment and I hope that the Minister will accept it.

John Mann (Labour, Bassetlaw)

You missed, I suspect, Sir Nicholas, the floods and downpours across the north of England over the weekend. Hon. Members are more than making up for it with their attempts to water down the Bill. Indeed, one wonders whether one is living in a parallel universe. I expect the Tardis to appear at any moment. I know which Time Lord will be backing the people and which will be backing the solicitors, barristers and judges.

It is absolutely extraordinary in the context of the Bill and what is happening in the real world that we are seeing attempt after attempt after attempt by the vested interests of the legal profession to look after their own. If this was trade union legislation 15 years ago, if this was the immediate fining of trade unions for technical flaws in the holding of industrial action ballots,would the hon. Member for North-West Norfolk(Mr Bellingham) argue that it was capricious and over the top? I think not.

Let me balance the argument and cite the case of four of my constituents who three years ago madea consumer complaint against Rayleys Solicitors. Rayleys Solicitors disputed it. They disputed the fact that these four, elderly, ill miners had a complaint. All four went with me to visit Rayleys unexpectedly, with a little bit of publicity, and we went inside and met the senior partners. We explained their case for justice in no uncertain terms. Still Rayleys refused to pay out. They still do today. There have been no fines on Rayleys. They are allowed to prevaricate. Why? Because every time one thing happens, the legal profession comes up with a legal excuse for challenging it.

My constituents were required to go through70 pages of technical legal arguments as the defence to a very straightforward complaint that they had been diddled and double charged over meagre compensation for emphysema, money they needed to give them a better quality of life. They had 70 pages of legal argument thrown at them as the defence that they are required to make a judgment on. It is only because of the common sense of the Law Society in allowing representation from people like me that these claims have ever seen the light of day.

Is it a coincidence that no miner or textile worker put in complaints before tiny numbers of MPs started to do so on their behalf? Is it just a coincidence that none of them did so, that they did not realise that they could challenge the solicitor who had, in some cases, stolen the money from them? That was done quite openly and quite deliberately and from large numbers of them. The solicitors then threw the legal book at them, wriggling every way, challenging the Law Society, challenging the regulation. They issued writs, bullied, threatened and intimidated.

There are solicitors who visited complainants at home. There are solicitors who sent third parties to visit complainants at home. For example, my constituent, after his third heart attack, is no longer in the statistics of the Law Society because he withdrew his complaint, fearing that the pressures being put on him by the solicitors who had done him over would kill him. Some of my constituents who, in the process of attempting to get justice, died—

Henry Bellingham (Conservative, North West Norfolk)

Is this relevant?

John Mann (Labour, Bassetlaw)

It is relevant. The hon. Gentleman, who spoke about capriciousness and being over the top, says that it is not relevant. What is relevant in the context of this debate and these attempts to water down the Bill is nowhere to be found in the hon. Gentleman’s and the Liberal Democrats’ amendment.

Nicholas Winterton (Conservative, Macclesfield)

Order. May I say to the Committee that what the hon. Gentleman is saying is relevant? When it is not, I will tell him.

John Mann (Labour, Bassetlaw)

I implicitly trust your sound judgment, Sir Nicholas. As ever, I shall stick entirely to the relevant facts brought from my experience of my constituents, who were unable to be heard in the Joint Committee—I was unfortunately unable to be chosen to serve on that Committee—whose voices shouldbe heard in the case of these amendments and, if necessary, others. Any watering down of the powers in the Bill will be resisted. If the point was put to the people outside, the 60 million who are not part of the cosy legal profession, I know which way they would go. They would say that the Bill is a modest attempt at self-regulation. It is a generous attempt at allowing self-regulation—I applaud that light touch and think that it is what is appropriate for Government, and therefore I am out of touch with most of my constituents, who would like me to be far more robust. I call on the Minister strongly to reject these representations and others to water down the Bill because those with vested interests, not least in the House of Lords, wish to protect them.

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

The hon. Gentleman speaks with absolute justification, as far as I know, about solicitors’ abuse of their professional responsibility when acting in the sorts of cases that he has brought regularly to the attention of the House and dealt with locally. Nobody, and certainly nobody in my party, defends that activity. Nobody is suggesting that solicitors who behave inappropriately should not be dealt with.

If the hon. Gentleman is good enough to reconsider by re-reading the amendment, he will see that it does not say that there should not be fines or punishment for solicitors. It does not say that solicitors’ firms should not be punished or brought to book for breaking the rules and behaving in the disgraceful way that he described. It does not say that there should not be a fine on the Law Society, if appropriate. All that it says is that if the second tier of punishment, which involves punishment of the regulator—the Law Society in the case of solicitors—is a financial penalty, it has to come after consideration of the appropriateness of other matters. I do not think that that is contradictory to anything that the hon. Gentleman argues for. I certainly did not intend it to be, and on reflection, if he is fair-minded about it, I do not think that he will think that the amendment has that effect.

Bridget Prentice (Labour, Lewisham East)

I am a wee bit surprised to see these amendments. They were debated for some time in the other place, and we made a number of concessions at that time. I know that my hon. Friend the Member for Bassetlaw will not be happy to hear me say that, but we made some concessions and as a result the exercise of the board’s powers to fine is possible only where there has been a failure to meet the requirements imposed by clauses 30, 32 and 51. I am not persuaded that we should go any further than the scope of the amendments that we have already made. To do so would put the board’s powers to impose a financial penalty in the same category as its powers, for example, to cancel the approved regulator’s designation. That is what the amendment seems to seek to do, and so it does not recognise the regulatory chasm between the power to impose a financial penalty and the power to take away completely a body’s ability to authorise and regulate the provisions of reserved legal activities.

The amendment, therefore, would reduce the board’s ability to exercise what I believe is a key regulatory function to make appointments if it were no longer able to respond with the flexibility that it needs to address failing regulators. That is inconsistent with the current approach to regulatory sanctioning regimes, which argue for greater flexibility and the use of the widest range of sanctions possible.

The hon. Member for North Southwark and Bermondsey said that he could not find many examples of one regulator fining another. Almost certainly he is right. The model of oversight regulation that we are proposing is unusual, but Sir David Clementi thought it preferable to the establishment of a single body along the lines of the Securities and Futures Authority because it will retain the best parts of the existing arrangements. He argued also that the LSB should have the maximum regulatory flexibility, which is consistent with the findings of the Macrory review, which argued that regulators should have the widest range of sanctions possible.

We have modified the fining power to meet some of the concerns of the Law Society. I have to say to Opposition Members that the consumer bodies would not support the amendment if it meant that we were watering down the powers any further. There might be times when it is necessary to impose a financial penalty—for example, where there were repeated failings that could be addressed by censure each time, but where, accumulatively, the situation was out of control and firm action was clearly necessary. If the regulator expects a lesser power to be exercised each time it fails in the same way, and if that power has no real impact on the regulator in preventing future failings, clearly that regulator has far less incentive to correct those failings. The board would be stuck then with issuing the same censure over and again and the problem would never be resolved.

Stephen Hesford (Labour, Wirral West)

Is not the point a little shorter? I know that the Minister is trying to do justice to what has been said, but is the point not that the amendment is completely unnecessary because, under clause 39(2)(c), one of the grounds for an appeal against financial penalties is that the penalty is unreasonable? If it were unreasonable, and there should have been a lesser penalty, the appeals procedure would find that to be the case.

Bridget Prentice (Labour, Lewisham East)

My hon. Friend is absolutely right. I raised clause 39 for that very reason in an earlier debate. The approved regulators would have that opportunity if they thought that the fine was unreasonable. I said specifically that almost certainly they would appeal on the basis of the amount, rather than anything else. He is right to point that out.

Consumers, who are at the heart of the Bill, consider that the power to impose a financial penalty is essential to the regulator’s remit. I think that they are right. It sends a clear message to the regulated body that it must improve its standards, and acts as a reminder to other bodies that failings will not go unnoticed or unattended. That is vital for the consumer. Unnecessary restraints would deal a blow to the very heart of the principles in the Bill. If I need to convince the Opposition of that, Which? did a survey and found that nearly four out of five people—78 per cent.—agreed that the independent regulator should be able to fine the legal profession if it did not do its job properly. More than 53 per cent. agreed with that strongly.

I urge the Committee to reject the amendment for the reasons given by me and by my hon. Friends. I cannot accept any further constraints on the power. Its purpose is clear, its necessity is verifiable and its scope is balanced. I hope that Opposition Members will reflect on what has been said and reconsider whether they are helping the legal profession by giving consumers the belief that this is another opportunity for it to look after its own interests rather than theirs.

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

The Minister knows that I am a reflective individual. I shall make three short points. The first is that Which?, a good organisation that produces a good magazine—I have often consulted it, as have other Committee members—does not surprise the world by finding that a majority of the public at large would like solicitors who do not do their job properly to be fined. I do not think that that quite wins the argument of itself. It is a simple question to which the likely answer is yes.

To answer the contribution of the hon. Member for Wirral, West, of course there is a power of appeal on the basis that a fine is unreasonable. That is as it should be. The argument was not that there should be no power to fine; it was simply that the power to fine should be the end of the options available. However, despite what arguments may still exist for the amendment and for others like it, the Minister has asked me to withdraw it and to reflect. I am happy to reflect. I shall go back and read what she said earlier when the debate is printed. On that basis, and on the basis that I shall return to the matter if necessary, I beg to ask leave to withdraw the amendment.

Clause 41

Clause 42

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

I rise because I was wound up to speak to an amendment that was tabled by the hon. Member for Bassetlaw, but it was not moved.

I wish to ask a question, which of course is not directly related to the amendment but was promptedby it. The clause is about further provision for intervention directions and, therefore, gives options for interventions. The hon. Gentleman obviously thought about ways in which powers of entry and other things could provide opportunities for intervention.

I would be grateful if the Minister gave some examples of the sort of further provision that she envisages will result from the Bill. What would be an extreme example of a regulation under the Bill? Thisis an enabling clause to allow secondary regulation. Clause 42(6) states that regulations will be made by the Lord Chancellor, but will all regulations be made by him? Will the Minister say what kinds of measures she envisages will be introduced under the clause?

Bridget Prentice (Labour, Lewisham East)

As the hon. Gentleman said, this is an enabling clause, behind which lies the idea that, if an approved regulator failed or refused to provide the information that the board required, it could apply to the court for a warrant to search premises and to seize materials.

The clause gives the Lord Chancellor a power to make regulations about what the judge or justice of the peace should consider before granting a warrant, and how such a warrant might be executed. The Lord Chancellor must consult with or, indeed, receive the recommendation of the board before he makes regulations. I do not quite know whether that answers the hon. Gentleman’s question.

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

I expected the Minister to say what she said, but I would like to ask some further questions. Elsewhere in the Ministry of Justice portfolio, there is a Tribunals, Courts and Enforcement Bill, which I anticipate will be discussed on the Floor of the House on Report and Third Reading in the relatively near future. One of the issues with that Bill is powers of entry, to which the clause also relates. We should not legislate to give powers of entry without people knowing clearly who will come to enter and what powers they will have. Such people should be clearly identifiable as people with authority.

What protection will the Bill provide for a citizen or organisation—by definition, it could be an individual or a company? What does the Bill provide to ensure that people know that a person coming to enter comes with authority? I am troubled because a recent review of current powers of entry under law showed that there are hundreds and that they relate to different people and organisations. The ordinary woman or man should know that people who come to enter do so with authority, and how to check that. How would a person know that another was authorised and what would they have to do to find out? I appreciate that that might be a secondary legislation point, but giving more powers willy-nilly to people to knock on doors and to enter is dangerous, unless we protect citizens against it, except for in the most extreme circumstances. People should know exactly what the score is and have the ability to avoid such action.

Bridget Prentice (Labour, Lewisham East)

The hon. Gentleman makes a point that is important for two reasons. First, as he says, if someone comes knocking at one’s door, one ought to be able to know why and under what power they are there. Secondly, we should ensure that the Bill does not contradict the Tribunals, Courts and Enforcement Bill. The Lord Chancellor’s consideration of the judge or the justice of the peace is one aspect of the issue, but by way of reassurance to the hon. Gentleman, I shall consider the way in which the provision fits in with the Tribunals, Courts and Enforcement Bill, so that there is consistency. I shall write to the Committee about that at a later stage.

Clause 45

Clause 49

Bridget Prentice (Labour, Lewisham East)

I beg to move amendment No. 6, in clause 49, page 27, line 1, leave out subsection (3) and insert—

‘( ) In preparing a statement of policy, the Board must have regard to the principle that its principal role is the oversight of approved regulators.

( ) The statement of policy prepared under subsection (1) must—

(a) take account of the desirability of resolving informally matters which arise between the Board and an approved regulator, and

(b) specify how, in exercising the functions mentioned in that subsection, the Board will comply with the requirements of section 3(3) (regulatory activities to be proportionate, consistent and targeted only at cases in which action is needed, etc).’.

I hope that the amendment will not be controversial. It tries to clarify the drafting of an amendment, which was made in the other place, about the board’s policy statements. I hope that the revision sets out more accurately the relationship between the board and the approved regulators. As I have said on many occasions, we have accepted Sir David Clementi’s recommendation of the B+ model for oversight regulation, which should be the basis of the new regulatory framework. That principle allows existing regulators to continue to authorise people in respect of certain legal activities and to regulate those persons. Overseeing that front-line regulation is the Legal Services Board, which will take over many of the functions currently undertaken by a number of the existing oversight regulators, including the Secretary of State, the Master of the Rolls, the immigration services commissioner and the Archbishop of Canterbury. The board may move to regulate authorised persons directly only where there is no other suitable or willing regulator to carry out that role.

It is my understanding that the amendment introduced in the other place in many respects sought to achieve the kind of thing that I have just described. In trying to get the B+ model in the Bill, it is vital that we should not inadvertently compromise the existing provisions. For example, the Lords amendment provided that policy statements must

“respect the principle that primary responsibility for regulation rests with the approved regulators”.

Except in those extreme cases where the board may have to regulate directly, it will have quite different responsibilities from those of the approved regulators.

However, different as those functions may be, I do not want to give the Committee the impression that they are not as important, or that the board should not have any primary responsibility for regulation. A strong and independent oversight regulator is what consumers have long been calling for. We owe it to them to deliver just that. I do not want to be part of anything that relegates the board to being a regulatory also ran. I want to ensure that the role of the approved regulators is concerned with direct regulation of authorised persons, whereas the role of the board is principally one of oversight. I hope that the amendment makes that clear.

The other aspect of the Lords amendment was the reasonableness test. I felt that that had the potential to restrict the board from taking the appropriate regulatory action in some circumstances. For example, an approved regulator may make a number of decisions that in themselves all appear to be reasonable, but the overall effect of those decisions may have an adverse impact on the regulatory objectives. That may mean that the board would have to take action. In such a case, the reasonableness test might not be satisfied, which would then leave the board unable to take appropriate action.

Finally, we have always maintained that issues should be resolved informally before resorting to more formal statutory powers, in line with best regulatory practice. The Bill already provides for that by requiring the board to have regard to the principles in clause 3, including proportionality and targeting activities only where action is needed. However, I understand the desire of regulators to ensure that the board should highlight how those principles are achieved when setting out its policy statements. I have tabled the amendment to set that out, albeit without affecting the thresholds already set out in clauses 31 to 45 and in clause 76.

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

The amendment is a Government amendment to a Lords amendment. Can the Minister say whether she, colleagues or civil servants have had an opportunity to talk to those who argued for the amendment that the Lords made? Can she report back on the view of stakeholders or interested parties on whether the amendment has the benefits that she has argued for, without the disbenefits that they might say exist?

The rest of the debate is in Hansard.