Clause 49
Legal Services Bill [Lords]
6:00 pm
Bridget Prentice (Parliamentary Under-Secretary, Ministry of Justice; Lewisham East, Labour)
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.