Clause 71
Legal Services Bill [Lords]
8:10 pm
Simon Hughes (Party President, Cross-Portfolio and Non-Portfolio Responsibilities; North Southwark and Bermondsey, Liberal Democrat)
I might have to revise my tacticsand sign up to more amendments in the name of the hon. Member for Bassetlaw, who did not move his amendment No. 282. I shall treat them with more interest for fear that we get such surprising timidity in proposing yet more good ideas. The idea in the amendment was a good one, but, if I remember the rules correctly, the fact that it has gone will not prevent me from discussing the wider issue to which it referred.
We now move to part 5, of which clause 71 is the first clause. It is fair to say that part 5 was the most controversial part in the House of Lords. Right up to the very end, up to the debate on Third Reading, when amendments can be considered in the Lords, there were amendments concerning the issues before us. Clause 71 is the first clause of a significant part, which goes up to clause 111 and deals with the alternative business structures—a substantially new concept.
Every member of the Committee and many people following our proceedings will know about the alternative business structures, so I shall not extend the explanation at length. However, in lay terms, the basic proposition is that, in addition to the simple and traditional legal organisations, such as solicitors firms, it will be possible in England and Wales to create bodies that have the rather mundane title of alternative business structures. They will either be multidisciplinary or involve different groups in the legal profession coming together to offer services.
Alternative business structures were described in a clichÃ(c)d way as the sort of business that might be promoted by one of our larger high street supermarkets. It is certainly true that large high street supermarkets sell not just food and drink, as they originally did. Indeed, they sell not just food, drink and clothes; not just food, drink, clothes and children’s toys; not just food, drink, clothes, children’s toys and electrics—the list could go on. If one queues for any length of time at a checkout, one will see various leaflets offering all sorts of other services, such as travel insurance and holiday insurance.
The concerns are that, if part 5 is enacted andit becomes possible to licence ABSs, which is what clause 71, the introductory clause that permits the
“Carrying on of activities by licensed bodies”,
is about, the new species of bodies—multidisciplinary bodies—might be sufficiently well resourced and supplied in capital and financial terms to go into the traditional legal providers’ market and, because of the macro-economic cost-benefits, offer their services at a lower price, thus undercutting existing services, not just competing on price but causing difficulties, and forcing some of them out of business. It is a bit like the debate about the supermarket and the corner shop.
Adrian Bailey (PPS (Rt Hon Adam Ingram, Minister of State), Ministry of Defence; West Bromwich West, Labour)
Does the hon. Gentleman not agree that, in a competitive market environment, organisations that can compete on price often expand the market for their product? At the end of the day, if we are putting consumers at the heart of the Bill, will not the provision be a logical extension of that principle?
Simon Hughes (Party President, Cross-Portfolio and Non-Portfolio Responsibilities; North Southwark and Bermondsey, Liberal Democrat)
I have not yet expressed a judgment about the issue. I have so far expressed the argument, which is why the issue is controversial, why it was controversial in the House of Lords and why there is a great deal of interest in it. The answer to the hon. Gentleman’s question, which is also the next logical issue to deal with, is that the arguments are pro-competition, an idea to which I am sympathetic.
The question is whether we allow entirely deregulated competition, which the Bill does not propose, or a form of regulated competition. With the Competition Commission and the Office of Fair Trading, we have a balanced position. Competition is permitted, but there is control, so that people do not acquire too much market share and exercise undue influence.
The issues that arise are how we go from the present position to that which the Bill would allow without threatening the destruction of the sort of services that many hon. Members on both sides of the House regularly complain about in a different context. Downstairs and in Committee, hon. Members bemoan the fact that there are not nearly as many sub-post offices or post offices as there were. In a competitive world, other people are coming in and providing alternatives, such as firms from the Netherlandsand elsewhere providing business deliveries, and organisations such as banks dealing with pensions.
There is competition, but that has not stopped people saying that there is a significant reduction in service for local communities, and it has resulted in many communities losing services. Post offices have gone and an alternative service that people might have liked has not replaced it. That is the debate. In this context, the debate is about how to manage transition, if that is the right way to go, so that good, high-quality outlets—in this case for legal services—are not destroyed in a way that allows a predator in the market not just to be competitive, but to be competitive in a way that destroys alternative valued local providers. That is the issue. The hon. Member for Bassetlaw’s amendment No. 22 addressed how we get from here to there, and that is a proper issue to address.
Adrian Bailey (PPS (Rt Hon Adam Ingram, Minister of State), Ministry of Defence; West Bromwich West, Labour)
With the greatest respect, I do not feel that the hon. Gentleman’s comparison is valid in terms of the perception that elderly and deprived peopleare queuing outside their lawyers as a result of competition. To suggest that those facilities are being removed is far from the truth. The irony is that although competition is causing difficulties for post offices, for law firms and solicitors it provides the opportunity to open up new markets.
Simon Hughes (Party President, Cross-Portfolio and Non-Portfolio Responsibilities; North Southwark and Bermondsey, Liberal Democrat)
The hon. Gentleman is entitled to take an absolutist view and may be entirely supportive of the Government’s proposals, but that was not the view of the pre-legislative scrutiny Committee, which was concerned about the move from A to B, as he knows. It is not the view of many other people, not all of them lawyers, as he also knows.
I accept that the situation for post offices and lawyers may not be parallel, but in small towns there may be only one legal firm of general competence that has been there for a long time, or a couple of firms that have a good reputation and are well regarded by the community. Of course there will not be queues as there are outside post offices, but there will be a regular procession of clients, who are local people and often without much money, going to see their lawyer if there is a dispute with a neighbour, or a commercial dispute concerning conveyancing, wills, contracts, complaints about holidays that went wrong, and so on. The question is: what is the risk to those firms?
Bob Neill (Bromley and Chislehurst, Conservative)
I do not want to prolong our proceedings, but does the hon. Gentleman accept that his concern is reinforced by the Government’s proposals elsewhere to restructure legal aid contracts, which will have the effect of creating monopoly contracts in some areas? If the Government choose to create monopoly suppliers in geographic or sector-specific areas, it is all the more important to provide some protection.
Nicholas Winterton (Macclesfield, Conservative)
Order. I allowed the hon. Gentleman to make his point, but I trust that the debate will not expand into legal aid.
Simon Hughes (Party President, Cross-Portfolio and Non-Portfolio Responsibilities; North Southwark and Bermondsey, Liberal Democrat)
I shall try not to be led far down that road, Sir Nicholas.
The competition issue, which is central toclause 71—I was rebuked for not having an exact parallel when I talked about post offices—has a better comparison, as the hon. Member for Bromley and Chislehurst reminded us, in the context of legal aid. I will leave it at that, but there are parallels and there is an interlinking between the two.
As we go through the following clauses and look at the licensed bodies that will be defined in clause 72, and when we consider the Minister’s amendments—her largest batch so far—I hope that all members of the Committee, no matter what their starting point is, will remember the wisdom of the pre-legislative scrutiny Committee’s advice. We say that we like that part of the process and that it is important. In that case, we should listen to what it recommends. It was very cautious about going helter-skelter down this road. It was not happy with the speed and the pace which the Government propose.
There will be other amendments such as the one originally tabled in this context for a graduated, gentle, considered, cautious, delayed implementation. I hope that the Committee will be sympathetic to them. Obviously, in Committee one cannot and should not seek to take out a whole part of a Bill. We deal with it clause by clause. I will not seek to remove one of the clauses in the next group of 40, or 10 of the clauses as we come to each of them. That would be an unjustified use of the processes open to me. If the Government are to have their way, it is far better to ask whether the clauses are the right ones and are well written. However, I reserve the right, as do my colleagues, to say either that this part of the Bill is inappropriate, or that it is inappropriate if it is amended as the Government wish and is put back into the position it was in before the amendments were passed by the Lords.
Jonathan Djanogly (Shadow Solicitor General (Also Shadow Minister for Trade and Industry), Law Officers (Assist the Home Affairs Team); Huntingdon, Conservative)
It would be fair to say that in the other place the Liberal Democrats and the Conservatives supported each other on most aspects of the Bill. It was perhaps on part 5 where we to some extent parted company. Having heard the hon. Gentleman just say what he said, I think that it is likely to be the case here. As he said, part 5 is about alternative business structures. Our debates over the following clauses will be slightly complicated by the fact that many of the concepts at the lower end of the risk scale—LDPs and Legal Practice Plus—have already been reviewed at clause 18. Therefore, it will be quite difficult not to repeat arguments, but I will try my absolute best.
The problem is that it is easy in many ways to lump all ABS structures together. Our position is that both LDPs and Legal Practice Plus—that is, partnerships with non-client-facing professions—should not be treated as ABSs. There is then the question of the timing of expanding the concept to include non-legal support professionals who act for clients. That would leave the ABS rules finally to cater for involvement by non-professionals in the provision of legal services. That is clearly where the greatest risk lies and where caution and therefore delay is most required and justified.
We shall come on to the safeguards, which we shall be defending against the Government amendments. I suspect that we shall tread together with the Liberal Democrats on that one. However, by building in delay for the simplest low-risk structures between well-regulated professionals, we are missing a unique opportunity to realise early benefits for consumers and business in certain markets. One example is the market for advice to small business.
In 2006, the Institute of Chartered Accountants found that 58 per cent. of small businesses went separately to both lawyers and accountants for general business advice. It is important to appreciate that we are not just talking about very large law and accountancy firms. We are talking about smaller firms as well. There will certainly be smaller firms that could benefit, such as the high street solicitor that is struggling now, but that could become more efficient, customer-friendly and stable, by joining up with a small accounting practice.
Allowing such professionals to come together more easily could cut costs, increase choice and competition and reduce the time needed to forge relationships with different advisers. To the extent that it offers new business opportunities for small or rural legal practices, it will support rather than undermine access to justice. Another example in the individual consumer market is allowing chartered surveyor and legal practices to come together to reduce delays and transaction costs. I have said all that I want to say at this stage, but I hope that the tone that I have set reflects where my party is coming from on this part.
Bridget Prentice (Parliamentary Under-Secretary, Ministry of Justice; Lewisham East, Labour)
I promise my hon. Friends that I shall not speak for very long on this part. The alternative business structure is an important part of the Bill. It offers innovation, creativity and greater choice for the consumer. I hope that the Committee will welcome it. It is the part that the consumer panel in my Department and consumer organisations are keen to see implemented, although that will not happen until 2010-11. We had a bit of a debate earlier about possible opportunities between now and then for other professionals to work with lawyers, and I am looking into whether there is any scope for that to happen without undermining part 5 of the Bill.
I understand what the hon. Member for North Southwark and Bermondsey says about ensuring that people do not cherry-pick activities. That will be part of the board’s remit when it decides who will be licensed under this part of the Bill. There will be opportunities throughout the debate on this section for us to consider some of the issues in more detail. Suffice it to say that clause 71 provides for the licensing of bodies as alternative business structures.
I hope that the debate will cover some of the details and reassure hon. Members who are concerned about whether certain organisations will come in and distort the market. We certainly do not want the market to be distorted; that will not allow for the sort of consumer choice that is at the heart of this part of the Bill.
Nicholas Winterton (Macclesfield, Conservative)
Before we move on to the debate on clause 72, which will involve a large number of Government amendments, I can tell the Committee that I understand that the usual channels have indicated that they wish to get to the end of clause 82 this evening. I am advised that there might be a Division at about 9 o’clock. I merely provide that information for the benefit of the Committee. I am prepared to stay here all night; I take my job seriously, and I believe that the Committee has done, is doing and will do throughout its remaining sittings onthe Bill.