Restrictions on Conflicts of Interest in Conveyancing

New Clause 2 – in the House of Commons at 5:30 pm on 17 July 1985.

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`No person or body corporate shall engage in the conveyancing of any property if they have a financial interest (other than their fee for conveyancing) in that transaction or any related transaction, including, but without prejudice to the generality of the foregoing, the provision of loans for the purchase of that or of any related property or the earnings of fees or commissions from estate agency, mortgage or insurance broking; and any person in breach of the provisions of this Clause shall if he is a licensed conveyancer be guilty of an offence punishable by the Council in accordance with Schedule 4 of this Act and liable on summary conviction to a fine not exceeding the third level on the standard scale or, in the case of a solicitor, shall be regarded as in breach of the rules as to professional conduct under section 31 of the Solicitors Act 1974'.—[Mr. Butterfill.]

Brought up, and read the First time.

Photo of John Butterfill John Butterfill , Bournemouth West

I beg to move, That the clause be read a Second time.

I rise this afternoon to provoke, I hope, a discussion on the considerable conflicts of interest that could arise from the conveyancing provisions of the Bill. Many hon. Members who are in the Chamber today were members of the Standing Committee and they will be aware of the reservations that I expressed in Committee. I shall itemise some of the principal areas where I see conflicts arising, in the hope that I shall receive assurances from my right hon. and learned Friend the Attorney-General.

The Bill proposes to take away the solicitors' monopoly on conveyancing and to permit a new class of licensed conveyancers. Those who are now engaged in all aspects of property transactions and property exchange may seek either to become licensed conveyancers or to employ licensed conveyancers. It is that aspect that gives rise to considerable concern.

It is possible that many estate agents will be sufficiently qualified by the examination that they have taken to apply to be licensed conveyancers. Others may meet those criteria or may employ licensed conveyancers. I perceive great difficulties if estate agents were to be involved in both estate agency and conveyancing. Many property transactions form part of a chain. A long transaction may involve three, four or possibly five properties. An estate agent who is selling a property at the top of the chain for £150,000 and earning a commission of £3,000 or £4,000 might also be selling a property at the bottom of the chain for £30,000 and earning a commission of only £600 or £700.

Photo of Mr Alex Carlile Mr Alex Carlile , Montgomery

Does the hon. Gentleman agree that the problem he is discussing has already arisen over the two solicitors' property centres which have now been opened? One solicitor with an interest in the property centre is acting for the vendor, another solicitor with an interest in the property centre is acting for the purchaser, and both have an interest in the house being sold by the property centre. Already we can see the conflict of which we are afraid arising in something which has the support of the hon. Member for Great Grimsby (Mr. Mitchell).

Photo of John Butterfill John Butterfill , Bournemouth West

I am grateful to the hon. and learned Member for Montgomery (Mr. Carlile), and I agree entirely with everything that he has said. Later in my speech, I propose to deal in detail with that aspect. An estate agent might have two commissions from property sales in a transaction. He might also be involved in conveyancing one or more of the properties in a chain of transactions. An estate agent who was due to earn many thousands of pounds from a chain of transactions, and who was also acting as a conveyancer, might be faced with a problem of title of one of the properties. There could be an irresistible temptation for him to fail to point out the problem or at least to gloss over it, in the hope that the chain would not collapse and cause him considerable financial loss. That risk should rule out the possibility of estate agents carrying out conveyancing.

If solicitors are involved in conveyancing and the sale of properties, the same conflicts of interest will arise. Solicitors are already involved in the sale of houses and the Master of the Rolls, Sir John Donaldson, says that there is nothing in the solicitors' practice rules to prevent them from carrying out what he calls "property sales work", which, apparently, has always been part of the work of a solicitor.

Sir John uses the phrase "property sales work" to differentiate the work done by solicitors from that done by estate agents. That is a spurious interpretation, and I am sure that all hon. Members agree that if a solicitor advertises that he will sell a house, in addition to doing the conveyancing, he is, by any logical definition, involved in estate agency and, therefore, should be subject to the Estate Agents Act 1979 and any other regulations applying to conveyancing.

It has been claimed that solicitors do not need to be subject to that Act because their practice rules and the Solicitors Act 1974 impose on them obligations which are much greater than those imposed by the Estate Agents Act. However, that is not so. Solicitors are not subject to the mandatory disclosure of interests of relatives, staff and relatives of staff that is imposed on estate agents under section 21 of the Estate Agents Act.

Solicitors are not subject to the jurisdiction of the Director General of Fair Trading, as are estate agents. Solicitors are not subject to the powers of entry and inspection under section 11 of the Estate Agents Act, and they do not have to give details of their remuneration and expenses before a transaction takes place, as is required under section 18 of the Act.

Perhaps most important, although estate agents are required to account to their clients for interest on deposit moneys held for those clients, solicitors are not so required and may keep for themselves any interest earned. That is an important difference.

Whatever comes out of the Bill, solicitors involved in estate agency or "property sales work" should be subject to the same rules as everybody else.

Mortgage and insurance brokers may apply to become licensed conveyancers or may employ licensed conveyancers. They have an acute interest in property transactions.

They arrange mortgages for substantial commissions and life assurance endowment policies for substantial and continuing commissions on annual premiums.

If those brokers are also involved in conveyancing, there will be a grave danger that the large commissions which they earn from their brokering work, which will be much larger than the fees earned from conveyancing, could impose an unacceptable conflict of interest on them. Like estate agents, they could be involved in chains and they could build up a bigger interest in completing the deal than in looking after the interests of their clients.

5.45 pm

Probably the greatest problem is posed by banks and building societies. If in-house conveyancers are permitted to act for both sides, all sorts of conflicts may arise for the banks and building societies. Many borrowers are required to place their building insurance with a company nominated by the bank or building society. Until recently, that insurance had to be placed with the one company nominated by the bank or building society.

When I moved my mortgage from a bank to a building society, I was required to change my insurer, although he was a reputable underwriter at Lloyd's, and I had to accept one of the society's choosing. As a result, my premium almost doubled, and a substantial commission went to the building society.

We have taken action in the House to require banks and building societies to give borrowers a choice of insurance companies. However, only three companies are nominated by banks and building societies, and those are chosen because they give the biggest commissions and not because they give borrowers the best bargain.

If we are to allow banks and building societies to do conveyancing, will an in-house conveyancer be likely to tell a borrower that he could get a better rate of interest or a better deal by going somewhere else? It would be difficult for such a conveyancer to take a noble view that was contrary to his employer's interests.

Photo of Mr Anthony Grant Mr Anthony Grant , Cambridge South West

I declare an interest as an adviser to one of the major clearing banks. It may help my hon. Friend to know that the banks are not interested in going into the conveyancing business. They do not think that it is part of their business and they are not particularly interested.

Photo of John Butterfill John Butterfill , Bournemouth West

I am grateful for that assurance, but I strongly suspect that although that may apply to the clearing banks—though I doubt it, because they have gone into estate agency in other areas—I wonder whether it will apply to some of the secondary and tertiary banks and the loan sharks who inhabit this world. I have grave doubts about that.

Photo of Mr Nicholas Budgen Mr Nicholas Budgen , Wolverhampton South West

My hon. Friend will know that Lloyds bank owns the very large Black Horse estate agency. The bank might not wish to engage in conveyancing direct, but there is no reason why it should not do so through the estate agency.

Photo of John Butterfill John Butterfill , Bournemouth West

My hon. Friend has anticipated something that I intended to say later, but I am grateful to him for reinforcing that point.

Many banks earn substantial commissions by requiring borrowers to take out with a company nominated by the bank expensive life assurance to cover loans. The commission earned from that sort of business is very large and is bound to create conflicts.

Even more important is the mortgage deed—the terms of the loan—and how a borrower can be protected from the one-sided approach and lack of independent advice that would arise if the bank or building society were the sole arbiter for both parties. How would an in-house conveyancer advise a borrower if that borrower were made redundant or lost his job in some other way, and could no longer meet the payments? Under what circumstances could a lender evict a borrower, and what would be the rights of the borrower's wife and children regarding their occupation of the property? A court may grant an eviction order, and the bank or building society may be given the power of sale. What then happens if the lender controls an estate agency, such as the Black Horse agency or some of the estate agency chains set up by major building societies? Will the lender be able to sell the house through his in-house estate agency, raise the money, and get yet another commission from the entire transaction? If so, on what terms?

Photo of Austin Mitchell Austin Mitchell Chair, Treasury & Civil Service Sub-Committee

That depends on which estate agent conducts the sale. How does having the advice of an independent conveyancer at the start of the procedure safeguard against all those problems arising, such as a person losing his or her job?

Photo of John Butterfill John Butterfill , Bournemouth West

I am sorry that the hon. Gentleman has missed the point. All those matters are contained in the mortgage deed—the terms of the loan—and are normally negotiated between the borrower and the lender through their solicitors or other advisers. I am sorry that the hon. Gentleman shakes his head. I have been in professional practice in this field for 25 years, and I have acted in innumerable disputes between lenders and borrowers of the type that I am now describing. I have also been involved in negotiating with all sorts of institutions on the terms of their mortgage deeds. I accept that many people do not take up these points, but they should. Perhaps some of them have not been properly advised in the past. The debate may bring to people's attention the fact that they should be properly advised, and if we do no more than that we shall have achieved something for the public good.

If a borrower finds himself in financial difficulties, will he be permitted to take in lodgers to supplement his income? If he goes abroad, will he be allowed to let his house while he is away? Many mortgage deeds do not allow that, but after negotiations the lender often concedes that under certain circumstances that can be permitted. However, the concession is granted only be negotiation, and if the borrower asks. If one is not independently advised, will one ask? In the event of a dispute between the borrower and lender which may go to court, what provisions will be made for arbitration, and who will bear its cost? All such conditions are set out in the mortgage deed and need to be negotiated between two independent advisers, not imposed by one particular adviser.

Those are only a few of the problems arising with banks and building societies. We may argue that those problems will not arise with our highly respectable building societies, such as the Halifax, the Woolwich, the Abbey National and others, but they will arise with other building societies. There have been considerable problems with the Grays building society, the management of which has not been all that it should be.

Photo of Austin Mitchell Austin Mitchell Chair, Treasury & Civil Service Sub-Committee

Does the hon. Gentleman realise, on the basis of the Which? survey and our knowledge of the world, that two thirds of house buyers approach a building society first? The same survey showed that only 11 per cent. sought advice from a solicitor about their mortgage. The hon. Gentleman is telling us that solicitors are qualified to give independent financial advice, which they are not, and that people are receiving that advice now, which they are not.

Photo of John Butterfill John Butterfill , Bournemouth West

I am grateful to the hon. Gentleman for mentioning the Which? survey, but it was conducted among Which? readers, who tend to be better informed and who think that they can decide on these matters for themselves. The problem is that the general public, especially the young and inexperienced house-buyer, cannot so decide, and do not. The hon. Gentleman should study the Marplan survey, which, contrary to the Which? survey, showed that second-time buyers, as opposed to first-time buyers, recognise the grave need to have independent advice. That is precisely the point. People with experience of the system realise where they needed to be independently advised. Therefore, Marplan produced the opposite result to Which?

Photo of Mr Nicholas Budgen Mr Nicholas Budgen , Wolverhampton South West

I wish to take up the point of the hon. Member for Great Grimsby (Mr. Mitchell). The fact that only 11 per cent. of people want financial advice and that conflicts of interest may occur in only 1 per cent. of cases, is like saying that only 1 per cent. of those convicted before the courts are wrongly convicted. Are we not trying to deal with a grave injustice which may occur at the margin?

Photo of John Butterfill John Butterfill , Bournemouth West

I agree with my hon. Friend.

Photo of Greg Knight Greg Knight , Derby North

Does my hon. Friend agree that the argument of the hon. Member for Great Grimsby (Mr. Mitchell) is bogus? The hon. Gentleman referred to the percentage of people who approach building societies first, but is not the crucial point the fact that they then see a solicitor before they are committed to taking out the loan with the building society?

Photo of John Butterfill John Butterfill , Bournemouth West

I agree with my hon. Friend. Most people, before they think about entering into a transaction, go to a bank or a building society to see whether they can borrow the money. After establishing that and finding the property, they go to their solicitor.

Photo of Mr Anthony Favell Mr Anthony Favell , Stockport

I wish to make the same point. Does my hon. Friend agree that, after going to a bank or a building society people have the benefit of independent advice from a solicitor before signing on the dotted line?

Photo of John Butterfill John Butterfill , Bournemouth West

Again, I agree with my hon. Friend. We may argue that conflicts will not arise with the highly respectable banks which we know and love, such as Barclays, Lloyds and the National Westminster, or even with financiers of undoubted probity, such as Julian Hodge and Bernie Cornfeld. However, we are also dealing with the denizens of the nether regions of the financial market—the loan sharks and tertiary banks, which impose conditions which many hon. Members would not even believe. We are legislating for those areas, in addition to the household names, whose conduct is not entirely beyond reproach.

We are told that the Government will deal with all these problems by regulation; that the regulations, which are to be published, but which, regrettably, we have not yet seen, will overcome all the difficulties which may or could arise. I am grateful to my right hon. and learned Friend for showing me a copy of a letter which the Lord Chancellor sent to the hon. Member for Great Grimsby (Mr. Mitchell), and one which the Prime Minister sent to the hon. Gentleman, confirming that the Government are resolute in their view that banks and building societies should not be allowed to act for both sides in the same transaction because of the problems that have arisen. I am reassured by my right hon. and learned Friend on that issue at least.

I am less reassured on the prospective regulations, which cannot and will not apply to solicitors who are involved in estate agency. I hope that my right hon. and learned Friend will be able to reassure me, that he will explain how he proposes to deal with the anomaly that may well arise if solicitors are permitted to continue to practice both conveyancing and estate agency, and that the Government will deal with all the problems that I have described. If they legislate for any extension of a conflict of interest which they may regard as being in the public interest—otherwise, it would be a restriction on trade—I hope that a warning will be issued similar to that which appears on cigarette packets. There should be a Government warning which states, "Entering into this transaction without taking independent advice could seriously damage your financial health".

6 pm

I see no difficulty in providing one-stop shopping, which is so dear to the heart of the hon. Member for Great Grimsby and others. It can be provided by grouping businesses together under one roof. Why not have in one building a solicitor, an estate agent, a mortgage broker and even a building society? Perhaps they could all agree to charge a composite fee which would be lower than the sum of the parts. There could be agreed divisions of the fee of individual responsibility for those with whom they deal. If there is no individual responsibility, there will be temptations and conflicts of the sort that I have described.

For example, if a building society conveyancer, in acting for both sides, were to behave inappropriately or negligently, that would give rise to an action for negligence on the part of his client. If he were an independent solicitor, how could the borrower sue? How could he sue the building society's own solicitor, when that solicitor or conveyancer could say, "I was acting for my principal client, my employer. I have no duty to you."? Where would the remedy be for the borrower in those circumstances?

I hope that the Government will deal with all these matters when they come to address the regulations. I hope also that my right hon. and learned Friend will give an assurance that the regulations, when they are available, will be brought before the House for an affirmative resolution. The House must have the right to scrutinise. The matter cannot be left to the Lord Chancellor's discretion.

If we do not get the protection for which I and many others are looking—we shall not know until we are able to study the regulations—I hope that the professions that are involved in property transactions will take the initiative themselves. I trust that the professions will come forward with a self-denying ordinance whereby they will say to their members—I include the Law Society, the new Council for Licensed Conveyancers, which we are about to establish, the Royal Institution of Chartered Surveyors, the National Association of Estate Agents and all the other bodies involved—"None of you should be involved in conveyancing if you have any other fee or commission arising out of the property transaction." Perhaps we can persuade the professions to produce a self-denying ordinance, instead of pursuing their own self-enrichment, and to act in the public interest for the protection of the public.

Photo of Mr Kenneth Weetch Mr Kenneth Weetch , Ipswich

The new clause should be opposed and defeated. The presence of a profusion of lawyers in the Chamber makes me certain that we are hearing the last gasp of the old restrictive practices system. The lawyers are making a last-ditch attempt on behalf of their entrenched professions to retain the old system by opposing radical and structural change.

Photo of Mr Kenneth Weetch Mr Kenneth Weetch , Ipswich

No. I shall not give way at this stage.

Photo of John Butterfill John Butterfill , Bournemouth West

I wish to intervene on the very point that the hon. Gentleman is making.

Photo of Mr Kenneth Weetch Mr Kenneth Weetch , Ipswich

I shall not give way at this stage.

The professions are attempting to oppose changes in conveyancing. They wish to keep conveyancing in the dark ages, where it has been for 150 years, to the disadvantage of the consumer.

When we talk about an issue in the House we are frequently, in reality, talking about something else. In this instance we are not really talking about conflicts of interest or anything similar. It is convenient for lawyers to advance the conflict of interest argument and to avoid other issues. It is a bogus argument and that can be said for much of the other stuff that we hear from the legal profession.

The reality is that we are discussing economic matters. Who is to gain the major slice of the lucrative conveyancing market that arises from a society that is becoming more than ever a property-owning democracy? The Building Societies Association calculates that by the end of the century over 70 per cent. of the population will be owner-occupiers. These people will be more mobile and, therefore, the conveyancing market will be worth thousands of millions of pounds. It is not surprising that the legal profession is defending restrictive practices to the last ditch. It clearly considers it crucial that it should have the largest slice of the action. The argument over the new clause sets the scene.

It is important to bear in mind the main objective of the conveyancing exercise. Our aim is to give the consumer as many options as possible. If someone wishes to buy a house, to buy and sell, to trade up or to buy for the first time, I want him to have the maximum number of options. If a firm of estate agents has an in-house department of licensed conveyancers, I do not see why the consumer should be prevented from using the agency. I should like him to have the option of a licensed conveyancer working for someone else or on his own account. The consumer should have access to a solicitor if that is what he wants. He should have access to the conveyancing department of a major bank if that is his wish. In other words, he should have all the options before him.

The choice should extend beyond outlet to structure. The consumer should have the choice of a small firm, a medium-sized firm with corporate status or a large-scale approach. He should be able to choose between a number of individual specialists working on their own and an in-house conveyancing service. The pattern of consumer demand to emerge will be for the market place to decide. Perhaps the right hon. Member for South Down (Mr. Powell) will take that comment in the spirit in which it was intended. The structure should emerge according to the shape of supply and demand in the market place. I hope that that point goes home to the right hon. Gentleman.

Although I initially had some reservations about conveyancing with respect to building societies—I have criticised the building societies in the House—I now believe, on balance, that the proposition should be supported. The Bill is a poor attempt to bring about more competition. In principle, it has widened the category of persons who can practise conveyancing but has loaded it down with such a lot of paraphernalia that the widening will not be great. In return, the monopoly has been tightened but extended to the contract for sale—previously untouched by the monopoly under section 22 of the Solicitors Act 1974. In a fundamental sense the "monopoly" is more vicious and tightly functional than it has been for 150 years. If this is an exercise in more competition, it is a straightforward confidence trick. If building societies and banks are allowed to carry out conveyancing which is regulated properly by appropriate codes of practice, the scope of consumer choice will be widened.

The burden of one argument is that there is a great potential for abuse if building societies and banks perform the conveyancing on a property. That possibility exists, but it does not logically follow that abuse is inevitable. It is possible to legislate against abuse. If it is argued that we cannot choose an option because of potential abuse, we shall never move forward. The right action is to take the advantages from a line of options, legislate against the abuses and ensure that they do not occur.

Photo of John Butterfill John Butterfill , Bournemouth West

Would the hon. Gentleman care to comment on a recent case involving a Lincolnshire solicitor whose wife runs an estate agency from adjoining premises? The Law Society has ruled that there is no conflict because the two businesses are in no way related.

Photo of Mr Kenneth Weetch Mr Kenneth Weetch , Ipswich

I shall not comment on that case. An intervention in which an hon. Member puts a case to another hon. Member without giving supporting detail is not even a good beginning for consideration. If the hon. Member for Bournemouth, West (Mr. Butterfill) will send me all the supporting correspondence, I shall consider the matter. At this stage I cannot give a snap judgment on my feet about what is probably a complicated matter. I think that that is the consensus of the House. If that is the type of legal advice that comes forward in a snap judgment, I hope that it is the advice that would be used when I am being prosecuted and not when I am being defended.

Building societies can offer substantial structural advantages in conveyancing. As large organisations, they can offer certain industrial-type advantages. Make no mistake—conveyancing is organised in the same way as the putting-out system was organised in the 18th century, and it has not altered since. It is still a matter of small workshops, which the managerial and technical revolutions have passed by. Conveyancing has been impeded by the monopoly that has been enshrined in legislation.

As large organisations, building societies can offer certain advantages. A large in-house department in, say, the Halifax building society can offer a large throughput of conveyancing transactions which can be backed by substantial financial resources and streamlined procedures. That is a natural extension of the building societies' activities, and they have a critical interest in the title. We are talking about a large throughput of work at low unit cost.

Photo of Mr Alex Carlile Mr Alex Carlile , Montgomery 6:15, 17 July 1985

Does the hon. Gentleman believe that, in his Shangri-la of building societies with large conveyancing departments, the scrutiny of a conveyancing transaction for a client living in Llanidloes by the Halifax building society some 200 miles away in Yorkshire would be as good as the scrutiny given by a Llanidloes solicitor who has no interest in the transaction other than the fee that he will obtain for the conveyancing?

Photo of Mr Kenneth Weetch Mr Kenneth Weetch , Ipswich

It may, or it may not be as good. These days when conveyancing transactions take place the last thing that a solicitor does is look at a property. I would go one stage further and say that I have seen bigger mistakes in my constituency by local solicitors than by solicitors who operate from London. Whether one lives in a particular locality or has a professional business in that locality frequently has nothing to do with it.

Photo of Frank Field Frank Field , Birkenhead

One of my hon. Friend's assumptions concerns falling unit costs. Is it not true that building societies might push up unit costs? They might say, "The loan is here for you if you use our lawyer, although our lawyer happens to be more expensive than one outside the building society."

Photo of Mr Kenneth Weetch Mr Kenneth Weetch , Ipswich

I was going to bring up that point later in my speech when dealing with the shortcomings that we should guard against in allowing building societies to engage in conveyancing. I believe that the unit costs of the building societies will be lower because they will operate under economies of larger scale. If they do not, as long as the consumer has the option to go elsewhere for his conveyancing, he can decide what to accept and what to avoid. There should be a code of practice in which abuses and potential abuses are outlawed.

The real point is not about conflicts of interest. The Law Society has only relatively recently stipulated that a solicitor cannot act for the buyer and seller at the same time. Until a few years ago it was the usual practice for a solicitor to act for the buyer, the seller and the building society. There are a good many cases in which that still happens. I have a constituency case where the solicitor is acting for the seller, the buyer and the building society. I wrote to the Law Society asking this simple question: is this professionally right? Unfortunately, the answer went to my constituency office in Ipswich. I said to my secretary, "Read the letter for me and simply tell me 'yes' or `no' whether it is right for a solicitor to act for the buyer and the seller." She said, "The answer appears to be a little evasive." I thought to myself, "I bet it is." This is not the first time I have come across this sort of thing. For all the arguments about conflicts of interest and who should do what in conveyancing, most solicitors do not care if Joe Soap does the conveyancing, provided they collect the profit from him.

We are not talking about ethics; we are talking about economics. Many people believe that large building societies will drive out small firms, that small solicitors' offices will be unable to compete with large building societies with in-house departments. They have genuine fears that some building societies might use conveyancing as a loss leader. Small firms would therefore tend to go out of business.

If we applied that principle elsewhere and prevented large firms emerging we should still be in the world of the small workshop and the small grocery shop. If the conveyancing market demands that large firms emerge, they will emerge. If that is the structure that the consumer and the market place want, that is what will happen. Passing this new clause will not stop it because it will be an organic function.

Over the years, building societies have indulged in a multiplicity of restrictive practices. They have restricted insurance cover opportunity and taken the commission. Until relatively recently, they never allowed the purchaser to have sight of the valuation survey. Building societies have been the centrepiece of the conveyancing monopoly. They have also organised a cartel on interest rates. No one was ever protected from those abuses by solicitors or any of the chartered surveyors because the major professions connived with the building societies in some of those abuses.

Solicitors have always been able to place money in building societies, sometimes with and sometimes without the consent of their clients, in return for mortgage queue jumping, and at times of scarcity of funds, in return for building societies underpinning their monopoly and for favourable conditions for doing the mortgage work. Solicitors have often connived with the building societies in providing life policies which did not suit the consumer.

If the legal profession criticises building societies for collecting commission, it is the pot calling the kettle black, because I know of no group of people which collects commission faster from a variety of directions than do practising solicitors. Much of that argument is therefore bogus.

We are approaching the problem in the wrong way. Building societies can do the job, provided the potential for abuse is eliminated. We should eliminate the abuse by statutory codes of practice, not eliminate the option.

A number of things must be done. The consumer must be given the freedom to go elsewhere. Any practice which involves pressure to take conveyancing services because a loan is being provided should be outlawed. Any contract which loads the conveyancing charge on to the mortgage, at many times the original price, should be forbidden. Loss leading should be outlawed when it is aimed at eliminating competitors.

The Office of Fair Trading supports the idea of building societies doing conveyancing. I am confident that it can protect the consumer in all these matters. With the proper safeguards, the consumer should be given the option of having his conveyancing done by a building society, and I believe that it is not for the House to stop him.

Photo of Mr Alex Carlile Mr Alex Carlile , Montgomery

We have heard from the hon. Member for Ipswich (Mr. Weetch) a speech of almost religious fervour, in which he indulged in all the cheap rhetoric of lawyer bashing. I confess with some pride to being a lawyer, but I should tell the House, before the hon. Gentleman berates me for my self-interest, that I have rarely seen a conveyance, apart from those which from time to time I have signed to accommodate myself and my family, I have never passed an examination in conveyancing, or tried to, I have never read a book on conveyancing, and I have little interest in conveyancing as a legal subject.

I fear that one word used repeatedly by the hon. Gentleman has revealed the weakness of his argument—the word "consumer". The hon. Gentleman, and some of those who are of like mind on this issue, seem to envisage a world in which an attractive young couple will be out doing their shopping on a Saturday morning and will suddenly turn to each other and say, "Let's go and buy a house." They pop into the estate agent's and pick out a house. Then, rather as if buying a can of beans, they pop into the building society and everything is arranged for them by the smiling manager, and all goes through smoothly and without a hitch. That is seen as the world of the consumer.

Unfortunately, we do not consume our houses as we consume a can of beans. We must live in our houses. We must live, not just with their attractions, but with their imperfections. The greatest imperfection that there can ever be in a house is a defect in the owner's title. I speak in favour of the new clause because I believe that everything possible must be done to ensure that the householder's title is protected and assured to the greatest possible extent. There is no protection for purchasers of houses comparable to that provided under the Sale of Goods Act 1979. It is not possible for a householder, who has purchased his house in circumstances which go wrong, to go to the local trading standards department and have the building society—if it be a building society—prosecuted for defective conveyancing under the Trade Descriptions Acts.

The purchase of a house is usually the most serious, expensive, enduring and, in some cases, dramatic commitment that many people make, apart perhaps from the commitment to marriage. We should consider house purchase within that context of its importance in people's lives. It is expensive to buy a house, whether one buys it in the ritzy arbours of the south-east or on the pleasant mountains of Wales. A great deal of money must be found by the person who wishes to buy a house. It is a fact—it may be uncomfortable for those who oppose the new clause—that building society A may offer interest rates slightly lower than those offered by building society B, and the interest rates of building society C may be slightly higher than both. It is not simply a matter of a quarter or a half per cent., because it is likely that the person buying the house will be committing himself or herself for about 25 years, and a quarter per cent. means a great deal of money over those 25 years. The commitment may involve not just the mortgage repayments, but the payment of insurance premiums.

6.30 pm

The hon. Member for Ipswich suggested that, in his perfect world of fair and regulated building society conveyancing, there would be some kind of free choice as to which building society one would go to. More important, he said that there would be a free choice, if one went to a building society, of deciding not to use that society for one's conveyancing. He said that one could still go to the solicitor down the road for the conveyancing.

It is a custom of the hon. Member for Ipswich to listen to only one side of the argument on these issues, and he is not listening now. If he can bring himself to have the courtesy to listen, I say to him that we are in a mortgage glut at present, and it may be that people can walk out of a building society saying, "I am going to the solicitor down the road for my conveyancing," but if there were a mortgage famine, as there has often been in the past, is the hon. Gentleman really saying that one could enforce a provision whereby the building society would have to say to the prospective purchaser, "We are awfully sorry to lose your conveyancing, but of course we will give you the mortgage in any event."? One would have no such luck. A building society would not provide the mortgage for people who did not have the society doing the conveyancing.

If the hon. Member for Ipswich honestly thinks chat building societies will not use conveyancers to ensure that they get the mortgage business on the terms that they want, it shows that he has not examined the issues properly and does not understand the meaning of the phrase "conflict of interest".

Photo of Mr Anthony Favell Mr Anthony Favell , Stockport

Is that not what happens now in many states of the United States of America? If one goes to a loan company and does not use its legal services, one simply does not get the loan. The use of the legal services of the loan company is very expensive, and people in many parts of America are trying to get out of the clutches of a loan company for that reason.

Photo of Mr Alex Carlile Mr Alex Carlile , Montgomery

I am grateful to the hon. Member for Stockport (Mr. Favell) for drawing attention to the American experience. His point reinforces my argument.

Photo of John Butterfill John Butterfill , Bournemouth West

Does the hon. and learned Gentleman agree that his fears are reinforced by the behaviour of building societies with regard to insurance for the property?

Photo of Mr Alex Carlile Mr Alex Carlile , Montgomery

I entirely agree with the hon. Gentleman, who has referred to his own experience. I have had similar personal experience on two occasions. On one occasion I had to insist upon using the insurance company in which I had confidence and from which I expected to get satisfaction.

There are, of course, mutual life offices, which do not pay commission to anybody. Many of us have taken out our own insurance policies of all types with those mutual life offices. One can hardly imagine the building societies giving anything but discouragement to purchasers of homes who wish to go to those mutual life offices, which do such a good job—and have for hundreds of years—in the insurance market.

The hon. Member for Ipswich says—and I heard the hon. Member for Great Grimsby (Mr. Mitchell) muttering something to the same effect from a sedentary position—that solicitors are qualified to give financial advice. One of the basic qualifications which a solicitor must have is some financial understanding. I would be the first to question whether the present training of solicitors and barristers is either adequate or covers the fields that it should. Nevertheless, solicitors, in order to practise in conveyancing, are trained and must have a basic understanding of the transactions. In addition, they learn a great deal through their experience.

I am sure that the hon. Member for Ipswich will be aware that, under the solicitors accounts rules, a person cannot come straight out of law school and set up in practice as a solicitor. There has first to be supervision by a senior qualified solicitor for a period of years.

Photo of Greg Knight Greg Knight , Derby North

Does the hon. and learned Gentleman agree that often the solicitor will get the client to question the transaction? The solicitor will say to the client, "Are you sure you want to go ahead with this? Are you sure you want to take out a loan of this size?"

Photo of Mr Alex Carlile Mr Alex Carlile , Montgomery

The hon. Gentleman is correct, and I shall be coming to that point, but before doing so may I postulate a rhetorical question? How often do we hear of building society managers saying, "Yes, Mr. and Mrs. Jones. Thank you for your interest, but the house is pre-1919, so you will be better off down the road at another building society which gives greater percentage loans or loans at a lower rate for such properties."? How many times can we expect to hear building society managers saying—[Interruption.] Does the hon. Member for Great Grimsby wish to intervene?

Photo of Austin Mitchell Austin Mitchell Chair, Treasury & Civil Service Sub-Committee

I hope the hon. and learned member realises that, in regard to the duties of solicitors, Cordery's book, "The Law relating to Solicitors", specifies: A solicitor is under no duty to advise his client whether a sale is a prudent one or whether an independent valuation is desirable". In other words, the financial side of the transaction is not the solicitor's responsibility.

Photo of Mr Alex Carlile Mr Alex Carlile , Montgomery

The hon. Gentleman's corduroy is as threadbare as his argument. The fact is that a solicitor who does not give that kind of advice to his client has very little prospect of continuing in practice as a solicitor. If the hon. Gentleman will open his eyes and look at the advice given by solicitors, he will find that day by day they are saying to their clients, "The terms of building society A are better than those of building society B, so although you have been to building society B to make inquiries, I suggest that you take your mortgage from building society A. How many building societies will say to Mr. and Mrs. Jones, coming in off the street, "Our terms are worse than those available down the road."?

I received a letter yesterday from a solicitor in Hull—not a million miles from the seat of the hon. Member for Great Grimsby—making precisely the point that was made in an intervention. That solicitor told me of a specific recent case in which a client of his had come into the office, having made the decision to purchase a particular property, and given him instructions to deal with the conveyance. By the end of the week the client had decided not to buy that property because the solicitor had pointed out to him that, from the resale point of view, it was not in a particularly good area, that he probably could not afford it in any event, and that he would be just as well off in his existing house with an extension, which would cost him far less money, and for which finance by way of mortgage was available. That is the sort of service that is given every day by solicitors, whose only interest in the transaction is the fee that they will have, either for the conveyancing or for the advice they give not to go ahead with the transaction.

We heard from the hon. Member for Bournemouth, West (Mr. Butterfill) about the need for scrutiny of the mortgage deeds. I will not repeat it; I will simply say how right he was. The House is grateful to him for making that point so forcefully.

I have heard it suggested that the local solicitor would provide no better service than the solicitor in the great in-house office in Halifax. It was suggested by the hon. Member for Great Grimsby from a sedentary position that the country solicitor who does the conveyancing for the client never goes to look at the property. Perhaps I am lucky in the solicitors that I know. My own solicitor has never conveyed a house on my behalf, on the many occasions when we have moved, without walking round every inch of the boundaries of the property. At least the solicitor is there in the area, so the client can ask him to walk round and check the boundaries. In country areas the first thing that any solicitor looks at is the boundaries, either on a plan or by walking round them. If any difficulty arises as a result of the inquiries before contract, will the in-house conveyancer get into his company Rover and drive from Halifax to Llanidloes? If he does, who will pay the 30 or 40p a mile for him to do it? It will be the client. All this brings into question not just the arguments against our conflict of interest point as put forward by the building societies, but the cost-effectiveness argument that we have just heard.

I do not expect certain Labour Members behind me to agree, but the solicitor acting independently is not in anybody's pocket except the pocket of his client. If he renders an unsatisfactory service, his client has a number of forms of redress. He can go to the Law Society, though I would rather see him going to an independent complaints body. That is a matter which we may discuss later. He can also sue his solicitor. During the Committee stage of the Bill the hon. Member for Great Grimsby asked whether it was sensibly possible for a client to sue his solicitor.

Photo of Mr Alex Carlile Mr Alex Carlile , Montgomery

The hon. Gentleman has just asked from a sedentary position: how common is it for a solicitor to accept instructions to sue another solicitor? There are hundreds, if not thousands, of cases every year in which solicitors are sued by their clients. I hear laughter on the Opposition Front Bench, but those of us who practise the law have acted on innumerable occasions in actions against solicitors for breach of contract and negligence. I ask the hon. Member for Great Grimsby to produce to the House a catalogue of cases in which the negligent actions of solicitors have not been taken up but should have succeeded. I should be surprised if he is able to do so.

Photo of John Butterfill John Butterfill , Bournemouth West

I should like to reinforce the hon. and learned Gentleman's view on that point. I am a chartered surveyor, and my firm frequently acts for the insurers appointed by the Law Society on actions between solicitors, where one solicitor is suing another. It is a substantial proportion of the work of the firm in which I am a partner. It certainly happens very often.

Photo of Mr Alex Carlile Mr Alex Carlile , Montgomery

I am grateful to the hon. Gentleman for his comments. If one sues a building society, as many people have had to do, one runs up against all the institutional stonewalling to which one is all too accustomed in litigation. The underwriters who deal with solicitors' negligence claims are frequently under pressure to settle, and they frequently do. Although some solicitors' negligence actions are unfortunately and needlessly protracted, a great number of the claims are settled. Actions for solicitors' negligence generally avoid the institutional harshness of a suit against a building society.

I turn now to the matter of solicitors' property centres. I received a letter this morning from a senior and respected solicitor who practices in the Wrexham area. He is personally known to me and I have considerable regard for his ability and his objectivity. The solicitors' property centre in Wrexham has run into professional difficulties. As I mentioned in an intervention, there are instances where one firm which makes money from the centre is acting for the vendor, and another firm which also makes money from the centre is acting for the purchaser. That raises a clear conflict of interest. I am afraid the Law Society has taken a weak line on it and says that it does not know the answer. That does not help my correspondent very much. That conflict of interest ought to be instructive to those who wish to extend conveyancing to the institutions.

6.45 pm

The county of Powys includes, I am delighted to say, the constituency of Brecon and Radnor. I wanted somehow to get that into the debate. In a rural area like Powys, which is but an example, there are many excellent and old-established firms of solicitors. Those firms provide an all-round service. They deal with many problems similar to those with which we deal at our constituency surgeries. They deal with matrimonial matters, crime, probate and conveyancing. Some of the things with which they deal are not within their immediate expertise, but they are able to obtain specialist advice elsewhere. To a great extent, their bread and butter is conveyancing. By and large, they are not expensive conveyancers, because they cannot be. The price of a freehold cottage in Powys may be between £15,000 and £20,000, and one cannot charge a lot of money for the conveyance of a £15,000 cottage. While conveyancing no longer subsidises other work, for litigation is nowadays apparently worth while for solicitors, without the conveyancing the prospects for many of those firms would be poor.

I hope that the hon. Members for Ipswich and for Great Grimsby, whose party last night, in the debates on the rate support grant, was espousing the need for local services, do not wish to nationalise the legal advice service. I hope they share my view that it is desirable for a reasonable standard of legal advice to be available in all areas, including the small market towns of Montgomeryshire. I hope the hon. Gentlemen will accept that there is a risk that firms of solicitors in areas like that will be forced either to amalgamate or to cut the range of services.

There is great competition, even hostile rivalry, between firms in small towns, which makes it as sure as anything that negligence by a firm of solicitors will be rooted out. I hope that the hon. Gentlemen agree that the level of competition and service should be maintained. I hope that they will take it from me that the profession knows best how much it depends upon conveyancing for its bread and butter.

Amalgamations may take place. Many of them would be against the public interest, but there is an even greater danger. It is that these highly respected, independent, and in many cases exceedingly skilful firms of country solicitors, may be forced into takeovers by slick city firms. It would not be in the interests of people in the shire counties and rural areas to have only the limited legal advice services provided by small branch offices of big city firms. Hon. Members who are tempted by institutional conveyancing should bear in mind the legal service needs of the community before they pitch in with the lobby we have heard ventilating its views this afternoon.

Photo of Greg Knight Greg Knight , Derby North

In view of the propensity of the hon. Member for Great Grimsby (Mr. Austin Mitchell) to keep commenting on the number of lawyers who have taken part in this debate, perhaps I should start by saying I have no interest to declare. Although. I am a qualified lawyer, I currently receive no fees or remuneration from that profession. However, I have a deep unease about the prospect of building societies being allowed to carry out domestic conveyancing.

I should draw the attention of the House to two articles that appeared in last Sunday's newspapers. The first article, from the Sunday Telegraph, was headed, "Conveyancing—the great debate." It stated something that we all accept and know: Building societies argue that they would—if legally permitted to employ their own solicitors—give customers a cheaper, quicker service … Some insurance brokers voice the suspicion that building societies are invading their patch a little too greedily and are becoming intensely preoccupied with earning commission on endowment mortgages, house insurance and house contents insurance. Further down the same page, the paragraph headed, "The Savings Scene", referred to the proposal by the Leicester building society to merge with the Alliance. It also stated: If the proposed merger of the Woolwich and Nationwide Building Societies goes ahead our three biggest societies—the Halifax, Abbey National and Woolwich-Nationwide—will outweigh all the others put together. There is something sinister about that. The building societies are developing their muscle in the expectation that they will be allowed soon to carry out conveyancing.

The Sunday Times carried an article entitled, "Farewell 1874, roll on 1987: It's all go for new business." The article stated: While there is little contention over services such as money transmission and insurance sales … certain other proposals raise fundamental questions about conflict of interest and about the building societies' ability to move from doing a simple job, which they are generally considered to do well, to providing some more complex financial services. On the question of ability, the portents from across the Atlantic are not good. A few years ago, the American equivalent of building societies, the savings and loan associations, were given the freedom to broaden their services. In the best-run associations, big staff changes were needed to operate the broader range of services. And at the worst run there have been multi-million dollar disasters as a result of irresponsible lending and over-ambitious investment. The building societies claim that it will not happen here. They would, wouldn't they? The House should note that danger.

Photo of John Butterfill John Butterfill , Bournemouth West

Does my hon. Friend agree that another danger is that building societies are not democratically accountable? In theory, their members—the depositors and borrowers—may attend their general meetings, but, in practice, hardly anyone turns up. Therefore, they are self-perpetuating oligarchies, effectively accountable to no one. In contrast, large institutional shareholders of public companies can attend their annual general meetings and influence board policies. No such thing happens with building societies.

Photo of Greg Knight Greg Knight , Derby North

My hon. Friend makes a valid and telling point, and the House will have noted his comments.

The hon. Member for Ipswich (Mr. Weetch) appeared to say that we are right to have fears, but that those fears can be regulated by legislation. He said that those who have spoken against allowing building societies to carry out conveyancing are overstating the case. However, building societies are already regulated, and I do not believe that they serve their customers as best they could. One need only walk down the high street of any town to see the offers that building societies can make, within the scope of the regulations to which they must adhere, to try to attract custom. I have noted a few of the inducements that are currently on offer. One building society offers money boxes to children who open accounts; another offers trips to a zoo; and another suggests an "adopt a duck" account, which allows its new customers to do that, and gives them free admission to a wildfowl trust centre. However, none of those accounts offers high rates of interest. In addition, the children who are induced to open such accounts cannot claim back the tax that they will pay through their savings. Under the present restrictions on building societies, the customer is not getting the best possible service. Therefore, one should be worried about what might happen if banks and building societies are allowed to carry out conveyancing.

No Conservative Member would disagree with increased competition in conveyancing. Indeed, that is what the Bill seeks to do in a modest way. But the House must ensure that it does not allow building societies so much power in the marketplace that anti-competitive practices result. We are on thin ice, and we must tread warily.

Photo of Austin Mitchell Austin Mitchell Chair, Treasury & Civil Service Sub-Committee

It is fascinating to see so many professionals gathered here today to defend their vested interests and earnings from the consumer. It was especially interesting to hear the hon. and learned Member for Montgomery (Mr. Carlile) appealing for the country solicitor vote in his constituency. I do not know whether he was unveiling Liberal party policy on competition, but, if he was, we welcome it. The real spectacle today has been Labour Members urging competition and Conservative Members, as usual, defending vested interests.

We must be clear about the effect of the new clause. It is designed to stop competition and the development of comprehensive services to the consumer. It does so on behalf of the vested interests—especially solicitors and some other professions—which have been doing too well for too long at the expense of the consumer. That is the essence of the argument.

There have been different approaches to the fear of competition. The Law Society, which failed to retain the conveyancing monopoly, has suddenly decided that it had better start to steal the building societies' clothes. Therefore, it has dressed itself up as the protector of the house buyer and started to attack the building societies as though they are ogres and have not been serving the house buyer for about 100 years by providing mortgages.

The Lord Chancellor, acting here as the political arm of the Law Society—[HON. MEMBERS: "Oh!"] In that case, the provisional wing of the Law Society—has produced a mythical conflict of interest which he says is sufficiently important to obviate the principle of more competition. He has not published details of the conflict of interest, or given us any idea about the nature of the replies that he has received to his inquiries. He has not told us the number of cases to which that conflict of interest applies. We have no published evidence to support the Lord Chancellor's assertion that the conflict of interest is so overwhelming as to prevent banks and building societies from carrying out conveyancing.

Photo of John Butterfill John Butterfill , Bournemouth West

I should take up the hon. Gentleman's point about the new clause being a defence of vested interests. Of the hon. Members whose names are attached to the new clause, only two are solicitors. My profession is completely unregulated. Anyone—even the dustman—could set up tomorrow as an estate agent. Indeed, the dustman could set himself up tomorrow as a surveyor, which I would regret. Perhaps the House will discuss that matter later. I cannot understand what vested interest the hon. Gentleman believes I am protecting.

Photo of Austin Mitchell Austin Mitchell Chair, Treasury & Civil Service Sub-Committee

The effect is to defend the vested interest of solicitors in maintaining an effective conveyancing monopoly. That is how it works out. The way in which the hon. Member of Bournemouth, West (Mr. Butterfill) has approached it is to explode the doomsday weapon. His approach drives everything apart. We want services to come together to help the consumer. I want to pose a few questions about how this will work.

7 pm

If a solicitor serves on the building societies panel and does the conveyancing for somebody, he gets a separate fee for acting on that panel. That would be stopped by the new clause. He would not be able to advise the building society on title, so that practice would go. If he has an agency for a building society, that also would be stopped. If solicitors combine, as they do in Scotland and in some parts of this country to run a property centre—it is an increasing practice which I commend and which we should encourage—that, too, would be stopped by the new clause. If a solicitor is taking a commission from a building society in respect of money invested in that building society, that would stop his advising people to take out a mortgage with that building society.

Photo of John Butterfill John Butterfill , Bournemouth West

I am delighted that the hon. Gentleman confirms the effect which I envisage. The intention of the clause is to stop people having their snouts in the same trough more than once.

Photo of Austin Mitchell Austin Mitchell Chair, Treasury & Civil Service Sub-Committee

I agree that there is a noble spirit of self-sacrifice, but I think that the professions which are backing it do not realise exactly what is implied. They back it from a very different motive—to keep their snouts in a particularly rich trough.

Photo of Mr Anthony Favell Mr Anthony Favell , Stockport

I am a practising solicitor and an agent of the Halifax Building Society. The hon. Gentleman is absolutely right. Solicitors will suffer from the new clause if it is agreed to, and they should, because I have always believed that a dog cannot have two masters. That is why solicitors do not act for vendor and purchaser. I should like to ask one question of the hon. Gentleman. On this of all days. Would he be happy if Johnson Matthey acted for the customer and for itself in the matter of a loan, because it is a bank?

Photo of Austin Mitchell Austin Mitchell Chair, Treasury & Civil Service Sub-Committee

I should be happy if the Treasury and the Bank of England acted on Johnson Matthey in a sensible fashion. I shall ignore that question, because it is irrelevant.

There is a spirit of self-sacrifice if a solicitor is rushing forward to give up a privilege in this fashion—it is done to stop the banks and building societies acting in competition.

This forces us back into an old situation, but we are now discussing a new class of house buyer in today's society—people who have not bought houses in the past and who do not have the middle class skills and tradition of contact with a solicitor. The house buyer is forced to build up his own orchestra piece by piece instead of having a comprehensive service—one-stop shopping—whether it is provided by estate agents, banks, building societies or solicitors running property centres. All can compete to provide a comprehensive service. That is what we want for the house buyer, rather than the professional segregation which this measure would enforce.

What should we do about the new clause? My view is that we should leave the Bill as it is. I have therefore tabled no amendments of the kind that we dealt with at such length in Committee to allow banks and building societies to do conveyancing, whether through licensed conveyancers or solicitors. The amendments tabled in Committee were intended to air the principle. The principle is reasonably straightforward and secure. Therefore, it would be better to leave the Bill open rather than include this unnecessary restriction. In essence, we are committed to allowing banks and building societies to do conveyancing.

I and the sponsors of the Bill which I brought in in 1983 have firm promises from the Solicitor-General that the Government are committed to allowing banks and building societies to do conveyancing through employed solicitors. The building societies have firm promises from the Government that they will be able to provide an integrated service to the house buyer, part of which must be conveyancing.

The Chancellor is pirouetting and wriggling, trying to find ways to fulfil the principle without conceding the practice, and he has come up with two proposals. The first is that the building societies should be allowed to do conveyancing for other people's customers. In other words, people will get killed crossing the road from the Bradford to the Halifax. Perhaps we shall have a twinning arrangement or something similarly ludicrous.

Secondly, there is the letter of 8 July from the Lord Chancellor's Department, which states that lending institutions might offer the service through subsidiary companies in which they have only a minority shareholding. It wants to know what conflict of interest is provoked by the size of the minority shareholding. It continues: In particular, how small should an institution's holding be before it need no longer constitute a bar to the company undertaking conveyancing for borrowers? There are ways to attempt to concede the principle which the Government have promised honourably to fulfil without making it so attractive that the building societies will do what is intended, but in fact they do not fulfil the promise. The promise was that banks and building societies would be allowed to do this for their customers. The alternatives are so silly that they will not work and they will be laughed out of court. Therefore, it is sensible to say what will happen.

The Bill will allow for the possibility of licensed conveyancers being employed by banks and building societies. It is for the council to decide at its own discretion in the interest of the profession. The building society legislation next year will allow building societies to do conveyancing, the details of which will be defined by regulations. The regulations will have to provide what we want—full freedom to do conveyancing, employing their own solicitors or conveyancers, under certain restrictions defined by the regulations. Those restrictions would be to ban loss leading, to require the supervision of the Office of Fair Trading, to ensure that there is no compulsion on the borrower to have the conveyancing done by the same building society, and to ensure that in that small minority of cases in which a conflict of interest arises—and who better than solicitors to recognise a conflict of interest when they see one?—the solicitor representing the building society shall be required to advise the customer to get his own independent advice.

Photo of Mr Alex Carlile Mr Alex Carlile , Montgomery

The lion. Gentleman suggests the supervision of the Office of Fair Trading. How does he suggest that that supervision should be carried out when one is dealing with the local branch of a building society? If he is suggesting that it should be carried out by trading standards officers, does he realise that they already have insufficient money to carry out their statutory duty and that they have no training in this or any similar sphere?

Photo of Austin Mitchell Austin Mitchell Chair, Treasury & Civil Service Sub-Committee

If that is the extent of the petty debating points which can be raised against the proposal, the case is unanswerable. There will be supervision by the Office of Fair Trading, to which people will be able to make complaints.

Photo of Austin Mitchell Austin Mitchell Chair, Treasury & Civil Service Sub-Committee

Experience shows that building societies are far more sensitive to their public image, to public pressure and to complaints, and they are far more vulnerable than solicitors. Indeed, solicitors have been able to maintain a monopoly of conveyancing for many years, despite the protests of the public. As soon as the pressure develops that building societies should offer a range of choice and insurance policies, they do so. As a result, we now have three insurance companies recommended by building societies. The details can be worked out later. [Interruption.] That is the way in which legislation is normally passed, is it not? We define the principle, and we set out the procedures in regulations.

To conjure up such hypothetical fears is the feeblest of possible defences against the proposal. Let us be clear about what the solicitors are pleading against banks and building societies. The solicitors say, "We have perfect practice. Everything we do is perfect and efficient. We always inspect the property and supervise the conveyancing"—when it is done mainly by secretaries and clerks—"and we always advise the customer." That, in the main, is rubbish. Some solicitors work in that fashion while others do not. Probably most do not.

Against what is proposed, they are conjuring up the spectre of hypothetical fears and extreme cases. For example, in all the cases produced today, even by the hon. and learned Member for Montgomery, the building society would not have given a mortgage in the first place. After all, it is in the interest of the building society to ensure that it has good title, that the person should be able to repay the mortgage, and that it has a good relationship with its customers. The building society is, therefore, as well qualified to deal with these matters as solicitors.

Photo of Mr Alex Carlile Mr Alex Carlile , Montgomery

Will the hon. Gentleman accept from me that he is wrong in his assumption that the building society would not give a mortgage in the cases that I cited? In the Hull case, the building society was prepared to give a mortgage, but the solicitor advised the client not to proceed, and eventually the client accepted the solicitor's advice.

Photo of Austin Mitchell Austin Mitchell Chair, Treasury & Civil Service Sub-Committee

Will the hon. and learned Gentleman accept from me that the experience of the Halifax building society, with all its branches, is that it could find no cases in which solicitors had recommended against the mortgage offered by that society? That adequately covers the point that the hon. and learned Gentleman made about building societies being huge organisations thrusting piles of money at every borrower. That is a myth. Everybody knows how difficult it is to obtain a mortgage and how much scrutiny takes place by building societies into individual cases. As I say, it is in the interest of the society that the borrower is able to carry the mortgage and that the title is good.

Photo of John Butterfill John Butterfill , Bournemouth West

My experience as a practising chartered surveyor is that most building societies—my firm acts for 32 banks and building societies—are interested only in the security of the loan. When banks and building societies lend small sums of money, secured against valuable property, they do not care whether there are serious defects in the property, which may be of great concern to the purchaser, so long as there is enough security in the property to guarantee the loan. Therefore, there is not always identity of interest between the purchaser and the building society.

Photo of Austin Mitchell Austin Mitchell Chair, Treasury & Civil Service Sub-Committee

Hon. Members are raising extreme cases. In every case that has been brought to my attention there have been strict inquiries. It must be agreed that, as a general proposition, the building society wants good title because it might need to realise the asset. Nor does it want the odium of turning people out of house and home if they cannot pay the premiums.

The hon. Member for Bournemouth, West posited an extreme and unlikely case, and that is true of all the arguments that have been adduced against this change. The conflict of interest argument is fallacious. People turn, in the first instance, to the building society. They go to a solicitor only after they have been to the building society. The two procedures—the conveyancing and the arranging of the mortgage—proceed concurrently but independently. That is what happens in the real world.

Nor are solicitors qualified to give the independent financial advice that is being raised now as a strong argument.

Photo of Mr Kenneth Weetch Mr Kenneth Weetch , Ipswich 7:15, 17 July 1985

I was told recently by the general manager—a highly qualified solicitor—of a major building society, one of the top six, that in 50 per cent. of cases the mortgage deed was prepared wrongly—it is a question only of filling in blanks—and that in many cases the wrong mortgage deed was returned. In other words, if the mortgage was being given by the Halifax, the deed sent back was, say, from the Alliance.

Photo of Austin Mitchell Austin Mitchell Chair, Treasury & Civil Service Sub-Committee

That corresponds with my experience in doing my own conveyancing in London. At one stage I received a communication from the solicitor representing the other side asking why the house was registered as two separate properties. I discovered that he had sent me details of somebody else's house. That is the efficient care that is taken in these cases. I accept the evidence of the building societies about the inadequacy of work done by the solicitors.

The need for independent advice has been raised as a kind of bogey man to frighten us away from giving conveyancing to banks and building societies. Plainly, solicitors are not qualified to give that independent advice. If they are now putting themselves forward as providing financial advice, I welcome that because it is another area in which they want to compete. Nevertheless, most solicitors do not know the range of mortgages and building societies, and, more important, most solicitors have a vested interest in channelling customers to the building society in which they invest their funds, from which they get commission and with which they have a close working relationship. How can that be described as independent advice?

For the benefit of, among others, the hon. and learned Member for Montgomery, with his legal expertise, I shall quote a case to show that the legal evidence goes against the idea of the provision of independent financial advice by solicitors. The most important case was in 1962. In Bowdage v. Harold Mitchelmore and Company, the plaintiff, a games mistress, wanted to sell a piece of land. I need not go into the details. Mr. Justice Melford Stevenson said that a solicitor who acted for a client in relation to the sale of land could not be said, in the absence of special instructions, to undertake the duty of advising the client whether the transaction was, from the client's point of view, prudent.

In other words, it is not part of a solicitor's duty to give the sort of advice that is now put forward as an argument for stopping solicitors employed by banks and building societies from doing conveyancing. One cannot argue in favour of a practice which does not exist on a legal basis which is fictitious.

Sir Gordon Borrie, the Director General of Fair Trading, himself a barrister, said that if building societies were allowed to develop conveyancing, it would provide for 'one-stop shopping' for housing … and will lead to greater competition with others who provide such services, and this should benefit housebuyers whether they opt for 'one-stop shopping' or not because competition from building societies will keep everyone on their toes. That is obviously true. The costs of conveyancing have come down by 20 to 30 per cent. We must keep up the pressure to keep those prices coming down. That means extending the competition to banks and building societies and not allowing solicitors to sit back, cosily saying, "There is no greater threat from licensing conveyancers. We can start upping the charges once again and milk the customer."

Sir Gordon Borne added: Contrary to the views of the Law Society, I do not see any inherent or insurmountable conflict of interest if a building society were to provide conveyancing services to a purchaser who is also a borrower from that society. Both have a common interest in ensuring that good title passes from vendor to purchaser. The Law Society has stressed the value to the client of independent advice, for example, as to which building society to go to or as to whether a repayment mortgage or endowment mortgage would suit him best. Those matters seem to me more a 'selling point' for the independent solicitor's services than grounds for disallowing building society employed solicitors from providing basic conveyancing services. What would be the position if banks and building societies were not allowed to carry out conveyancing, which would be the effect of the new clause? The proposal at present comes really only from the Lord Chancellor, who is effectively out on a limb on this matter. I receive plaintive letters from him—some of them increasingly abusive, but they are mainly plaintive—telling me that I must realise that he is the embodiment not only of the law, but of the Government.

That cannot be true. If it is, it means that the Government are not fulfilling the honourable promises that were made to me and to the other sponsors of my Bill. If it were true, the Government would not be following their policy on competition and dealing with professional as well as public and financial monopolies. If it were true, the Government would not be following the wishes of the Department of Trade and Industry in this matter. They would be putting themselves in the ludicrous position of bowing to the vested interest of the Law Society—the new Scargill—which brings the Government, or at least the Lord Chancellor, quaking to their knees. The Government are saying to the Law Society, "Yes, you are right, we must betray our policies and act against competition. You, the Law Society, are such a powerful vested interest that we shall give way to you." The Government cannot afford to be involved in such a spectacle.

We are seeing Rumpole's last stand—the last stages of an ongoing, long-running comedy programme—but Rumpole in this instance cannot stop the tide of progress. Of course banks and building societies should be allowed to do conveyancing, and it is an essential part of competition.

There is a rapidly expanding market with new generations of house buyers. Some 70 per cent. of houses will be privately owned by the end of the century. People will sell and buy houses much more frequently. The turnover is growing all the time. This is a rich market in which there is room for everyone, but there must be competition to stop the vested interest developing. One does not create monopolies by widening competition. We must bring down prices and get people to compete to serve the customer.

We are seeing new methods and competition, prices falling, and new entrants to the market. All that is good for the public and for house buying because it makes house buying wider and more freely available. That is what we want to encourage and that is why the new clause is wrong. Neither the hon. Member for Bournemouth, West nor the Chancellor can stand in the way of this tidal wave of progress, which will engulf them both.

Photo of Mr Roger Freeman Mr Roger Freeman , Kettering

I cannot agree with the analysis by the hon. Member for Great Grimsby (Mr. Mitchell), because I do not believe that greater competition, which I agree is needed in this sector, is inconsistent with the importance of separating what may be in some cases a conflict of interest. He argued that the only way in which we can achieve greater competition in the legal profession's provision of conveyancing services is to ignore, or break down and throw away, the separation of interests that my hon. Friend the Member for Bournemouth, West (Mr. Butterfill) outlined. I apologise for the fact that I was not here when the new clause was moved, and therefore did not hear all of my hon. Friend's speech.

The hon. Member for Great Grimsby said that he thought that most Conservative Members had a vested interest in this matter. I have no vested interest in the conveyancing of houses. I am a chartered accountant, and therefore in an allied profession, but I am not involved in any way in the conveyance of property or the lending of money to those who purchase and sell property. Therefore, I do not fall into the category outlined by the hon. Member for Great Grimsby.

However, I have talked to the solicitors in my constituency. We have half a dozen firms in my provincial town, and I have discussed the Bill with them over the year and a half since the hon. Member for Great Grimsby first advanced his views. I have kept in touch with the local legal profession and sought its views and comments.

The solicitors in my constituency accept the principle of licensed conveyancing, if not with open arms. However, there are problems, on which I have some questions for my hon. and learned Friend the Solicitor-General. The problems arise out of one-stop shopping—permitting the bank to provide not only the money and the financial facility to exchange the property, but also a survey and the conveyancing. That concerns solicitors in my constituency and I shall advance some of their worries. I apologise to my hon. Friend the Member for Bournemouth, West if I repeat any of the points that he has made, but it is important that they are rehearsed clearly.

The new clause does not prohibit banks from offering conveyancing services to third parties. I do not agree with the hon. Member for Great Grimsby that banks and building societies that have licensed conveyancers on their staff would not be providing conveyancing services to others. It is obvious that they would provide those services to customers. Therefore, some of the economies of scale and of modern technology and greater competition would clearly apply in those cases. The new clause only stops banks from offering conveyancing services to customers with whom they are involved in providing finance.

It is important to emphasise that in my constituency the service of conveyancing is competitive. There is great competition between the firms of lawyers in the principal town. I know that, because I have checked it. I have looked at the way in which conveyancing fees have moved over the past five years and particularly in the past 12 months. There is no question but that that service is provided competitively.

I have another point to raise with my hon. and learned Friend the Solicitor-General. I am concerned that there are certain instances where the independent advice to the potential property owner is important. For example, in the two years in which I have represented my constituency I have come across many instances of the problem of rights of access. This has nothing to do with the value of the property; they are problems that the solicitor would point out to his clients. I wonder whether a licensed conveyancer working for a bank would not be tempted to cut corners by not exaggerating, or even not pointing out in clear language, the potential problems of rights of access.

Another example would be responsibility for upkeep on either a property shared in common or common party walls to property. Again, this does not necessarily affect the value of properties on which the loan transaction is based but it affects the rights of the property owner and his enjoyment of that property. There is also the problem of the rights of foreclosure on the mortgage loan, on which important and independent advice should be offered. A licensed conveyancer might be influenced by his employer, the bank, in not drawing the attention of the customer with great clarity to what some of those rights and commitments are.

Impartial advice is also needed on finance. I have come across several instances in which the solicitor has asked whether his client is aware that alternative finance might be available at a cheaper rate than the rate quoted by the building society or whatever, a rate that appears to be a little on the high side. He might tell the client that it might be beneficial to shop around. Such impartial advice would not be available at a one-stop shop.

These are all examples of issues on which the solicitor or the licensed conveyancer should be providing advice for his clients. If he is employed by a bank with one-stop shopping I wonder whether this advice will be brought out as clearly as it should be. I agree that new clause 2 prevents solicitors from enjoying the benefits of commissions when arranging finance. My hon. Friend the Member for Bournemouth, West is being consistent—he is saying that banks should not be involved in the conveyance and that the licensed conveyancer for a firm of solicitors should not receive any other financial reward from the transaction.

7.30 pm

What sanctions will be available in regard to a group or bank which does not conform to the high standards adopted by most firms of solicitors? There are sanctions for solicitors and there will be sanctions for licensed conveyancers, but whence will the pressure come to ensure that high standards in banks are preserved?

The hon. Member for Great Grimsby said that some solicitors are inefficient, that some members of the great British public want one-stop shopping and that, because we want greater competition, we should permit banks to convey property through licensed conveyancers. He cares little for the so-called conflict of interest argument. I pay tribute to the hon. Gentleman's initiative during the past two years, but he will get competitive pressures in the profession through the introduction of licensed conveyancers offering a conveyancing service to customers with whom they are not involved financially.

Such competitive pressures will arise naturally. The benefits of those pressures are already obvious in my constituency. The customer is getting a good deal. We should consider whether it is wise to throw out, as the hon. Member for Great Grimsby has in a cavalier fashion, the benefits that must be worth serious consideration. Insufficient consideration has been given to the importance of independent advice. A solicitor or licensed conveyancer with no financial interest has a responsibility to ensure that the client is properly advised. I look forward to my hon. and learned Friend's comments. I have raised these issues because they have been raised with me.

Photo of Frank Field Frank Field , Birkenhead

I am not a lawyer, so, as I am not accustomed to being paid by the length of time that I am on my feet, I can be mercifully brief.

My hon. Friends have advanced two reasons why we should oppose new clause 2. The first is that we should oppose restrictive practices. I must declare a vested interest as a member of a political party that was brought into existence by the trade union movement and which understands the value of restrictive practices or, as we like to call them when talking about our own territory, checks and balances. Before I am enticed into attacking restrictive practices, I should like to spend a little more time establishing where such an argument might lead me.

The second reason that has been adduced for opposing the new clause is that the market should decide the shape and size of firms servicing customers. My hon. Friend the Member for Ipswich (Mr. Weetch) said that those comments would thrill the right hon. Member for South Down (Mr. Powell). That might be the case, but they do not thrill me.

Photo of Mr Enoch Powell Mr Enoch Powell , South Down

I have my name on the new clause anyway.

Photo of Frank Field Frank Field , Birkenhead

That is indeed true. The market might well decide the shape of firms, or so the theory tells us, but the fact remains that we all favour competition if we are doing the competing but we never favour it if it operates against us. One of the natural laws of the market, therefore, is that people try to do deals to limit competition. I therefore do not find the two reasons for opposing the new clause persuasive.

The hon. Member for Bournemouth, West (Mr. Butterfill) painted a large canvas with a broad brush. Mine will be small. I should like to consider building societies and what I consider to be the growth of the new Leviathan. Building societies have recently taken over some of the functions of banks. People have asked what harm that has done. We are beginning to hear that the building societies believe that they should take over some of the functions of post offices and sub-post offices, such as the payment of pensions. If they get that deal, there will be wholesale closures of post offices, although building societies will not take on the full ranee of functions offered by post offices.

Photo of Austin Mitchell Austin Mitchell Chair, Treasury & Civil Service Sub-Committee

It is no use conjuring up bogey men. My hon. Friend asked what harm it had done for building societies to go into competition with banks. What harm has it done?

Photo of Frank Field Frank Field , Birkenhead

That development did no harm, but it does not follow logically that, because that did no harm, all following changes will do no harm. My hon. Friend and I will, as always, oppose the closure of sub-post offices if building societies get the job of paying pensions.

We have been asked to whom building societies are responsible. The answer is, very few except those who run them. Building societies already provide loans, are in league with house agents, undertake surveys, arrange insurance deals for property and try to persuade customers to take out indemnity policies for mortgages. The House has a right to draw a line and say that building societies already have enough power and influence without our adding yet another and important twist.

My hon. Friend the Member for Great Grimsby (Mr. Mitchell) has argued powerfully several times that Labour should use every opportunity to attack the extraordinary fees that some lawyers earn. I am in sympathy with that argument, but my hon. Friend's proposed solution is worse than the evil. If we want to limit the amount of money that lawyers can earn from conveyancing, there is a simple method—lay down a scale of fees for conveyancing. It would be more effective for the House to debate that proposal than to give building societies even more power as an indirect means of limiting the power of lawyers.

The two main arguments against the new clause do not persuade me. We have allowed building societies to assume an extraordinary range of powers. So far, those powers have usually been exercised with considerable responsibility, but that does not necessarily mean that this will continue, and at this stage we say that building societies are big enough.

Photo of Nick Brown Nick Brown Shadow Solicitor General

I shall also try to be brief, and not just because I, too, am not a lawyer.

New clause 2, which the hon. Member for Bournemouth, West (Mr. Butterfill) and other hon. Members seek to add to the Bill, is designed to deal with conflicts of interest over conveyancing. The hon. Member for Bournernouth, West properly identified three separate areas of professional concern where the debate about conflict of interest is important. He made a strong point about solicitors acting as estate agents, particularly when a chain of sales is being handled by one firm. His point about insurance brokers also had merit. I shall deal later with whether or not it can be covered by regulation.

His third category occupied more time in Committee than any other item. New Clause 2 overstates its case in relation to this third category. All hon. Members agree that unfair practices should be prevented. The division between us relates to how it should be prevented and what constitutes a conflict of interest. Hon. Members also agree that we are living through a period of change. For that reason, if for no other, we should approach the problem in a measured way.

The view of the Opposition is that it would be possible, by regulation, for banks and building societies to provide an in-house conveyancing service. We object to new clause 2 because, whether intentionally or not, it completely closes the door to that possibility. The Opposition's view is that the interests of the consumer are best protected by a plurality of provision. We do not want building societies to establish, because of their power to make loans, a monopoly over conveyancing services. One of the tests of the regulations should be the maintenance of a plurality of provision, thus preventing unfair practices by building societies because of their control over the provision of finance.

There is a range of objections to banks and building societies providing an in-house service. The first objection falls into the category of special pleading. The case for rural solicitors was put very persuasively in Committee by the hon. Member for Nottingham, North (Mr. Ottoway) but his case did not persuade me. It was that the funding of rural solicitors was to be underpinned by those who seek to transfer their houses in rural areas. I am not sure that that is fair. People who live in rural areas should have the choice of a cheaper conveyancing service, if it is available.

Photo of Mr Alex Carlile Mr Alex Carlile , Montgomery

What steps would a Labour Government take, bearing in mind what the hon. Gentleman has just said, to ensure that legal services continued to be made available on a broad front in rural areas?

Photo of Nick Brown Nick Brown Shadow Solicitor General 7:45, 17 July 1985

Had the hon. and learned Member for Montgomery (Mr. Carlile) diligently attended the Committee proceedings, as did Conservative Members and my colleagues, he would have known that that matter was dealt with during our discussions on legal aid and law centres. But of course he did not diligently attend the Committee proceedings. I do not intend to travel again over that ground, because that is not the issue with which we are dealing.

Photo of Mr Alex Carlile Mr Alex Carlile , Montgomery

Answer the question.

Photo of Nick Brown Nick Brown Shadow Solicitor General

I shall deal next with my second point, on conflicts of interest. Genuine and perfectly proper objections can be made to building societies providing an in-house conveyancing service, but my view is that those objections can be met. There is no conflict of interest between the organisation providing the finance and the individual who, according to the title deeds, will eventually be the owner of the property. Both the individual and the organisation providing the money have a clear interest in achieving a secure title. However, a conflict of interest arises on financial advice.

It is wrong to expect an in-house conveyancer who is employed by a building society impartially to advise the purchaser of the property. The point was well made in Committee by the hon. Member for Great Grimsby (Mr. Mitchell) that many solicitors do not provide advice on these matters. House purchasers have already secured their mortgages before they ask somebody to handle the conveyancing side of the transaction, so it ought to be possible to make regulations to deal with this point. I understand that the Lord Chancellor does not intend to do this, but on this point the Bill is permissive and it would be possible for a future Government to make regulations to meet it. If the new clause is successful, that will not be possible.

At this stage, therefore, the Bill ought to be permissive so that we can return later to this matter. We should explore further the possibility of making regulations and be able to discuss this matter again. I have no doubt that we shall discuss it again, together with many other points that are contained in the Bill.

Photo of Sir Patrick Mayhew Sir Patrick Mayhew , Tunbridge Wells

I, too, shall be brief but because I am a lawyer! I congratulate my hon. Friend the Member for Bournemouth, West (Mr. Butterfill) on moving this new clause, thereby giving an opportunity to the House to discuss further the vexed question of how best to protect the public from advice tainted by interest while at the same time protecting the public from unnecessary restraints on competition. Although it has been a longer debate than many hon. Members expected, it has been of a very high quality.

The balance of the argument has been against the proposition of the hon. Member for Ipswich (Mr. Weetch) that the concern expressed by Conservative Members about conflict of interest is bogus. Many impressive speeches pointed to the real danger that a conflict of interest can arise.

Photo of Sir Patrick Mayhew Sir Patrick Mayhew , Tunbridge Wells

No, that is not right. My hon. Friend the Member for Kettering (Mr. Freeman) asked whether or not it was important that there should be independent advice on a number of matters—for example, about alternative means of financing loans and the responsibility for the upkeep of party walls. The question at issue is whether one should legislate to protect the public in all circumstances against such a risk or whether one should legislate on a less extensive scale and rely, as my hon. Friend the Member for Ipswich said, on the ability of the public to choose advice elsewhere. It is far from easy to solve that problem.

As my right hon. and learned Friend the Attorney-General mentioned on Second Reading, the Farrand committee said: The risks to the consumer are too great to permit market forces alone to control entrance to…the conveyancing market. Our approach in considering the safeguards needed for non-solicitors to undertake conveyancing has thus been to propose certain essential restrictions on competition, although these are intended to go no wider than is necessary to ensure adequate consumer protection. That approach can be validly applied to the wider subject with which the new clause is concerned.

I wish to make clear the Government's position on conveyancing by employees of building societies and other financial institutions. We are committed to introducing legislation to permit banks and building societies to offer financial services and we are committed to doing so in a way that does not prejudice the consumer through conflicts of interest or anti-competitive practices. Both limbs of that commitment are important and both will be honoured.

The problem is that arrangements for a loan are an integral part of most conveyancing transactions and the lender's employee is inhibited in advising the borrower about the loan, because he owes his primary duty and his livelihood to his employer. That has meant that the difficulties in the way of lending institutions providing conveyancing services have proved more intractable than had been expected.

Since the consultation exercise on which we embarked, we have been examining ways of carrying forward our commitments. We have decided to amend the legislation that prevents all corporate bodies, including building societies, from offering conveyancing services. The Lord Chancellor will be empowered to exempt individual corporate bodies from the restrictions and to impose general conditions on the way in which the services are provided, to ensure that the consumers' interests are not prejudiced. The legislative mechanism will have to be flexible enough to enable new ideas to be implemented quickly and without the need for further primary legislation. We intend to take those powers in the next Session.

The new clause would prohibit any persons or bodies from providing conveyancing services if they also provided a loan, estate agency or brokerage services in the same or a related transaction. I hope that I have demonstrated that we share the anxieties behind the new clause. There would be a clear danger of conflicts of interest if mortgage brokers or insurance brokers formed partnerships or corporate bodies with licensed conveyancers. My hon. Friend the Member for Bournemouth, West drew attention to the significant sums that can be earned in commission. They are a plain source of temptation to temper the advice that might otherwise be given.

I do not need to take time over matters that have been extensively explored in the debate. However, we believe that the new clause is too sweeping in its exclusions. For example, it would rule out the present practice of the purchaser's solicitor drawing up the mortgage deed on behalf of the building society after the contract has been agreed and he has advised his client. That is a harmless, indeed beneficial, practice.

The Government's aim is to increase competition in conveyancing as much as possible, provided that proper consumer protection is maintained. We welcome measures to reduce the number of agencies that a purchaser has to deal with when moving house, subject to the overriding need adequately to protect the public from conflicts of interest. We see no difficulties arising if lending institutions offer services in transactions where they are not also providing a loan—my hon. Friend the Member for Kettering rightly pointed out that the new clause would not prevent that—but we have not yet found a way in which those institutions could provide a combined package of loans and conveyancing without risking unacceptable conflicts of interest. Lending institutions are commercial organisations and their interest is in the arrangements for the loan, as distinct from ensuring good title, and is not the same as that of the borrower.

Although we have not overcome the problem, we are continuing to work on it and one possibility under examination is that lending institutions might provide the services through subsidiary companies in which they hold only a minority 'stake. The Lord Chancellor recently met the chairman of the Building Societies Association and made it clear that the Government would welcome a solution that dealt with the problem of conflicts of interest. There is a genuine welcome for all constructive suggestions, but it would be irresponsible for us to pretend that problems do not exist.

We remain committed to increasing competition, we are determined to ensure that the interests of the consumer will be adequately protected when we introduce reforms, and we shall continue to build on the progress already made. Increased competition means that conveyancing services can readily be obtained at prices that are about one third lower than those prevailing a year or two ago, as was confirmed by my hon. Friend the Member for Bournemouth, West.

Licensed conveyancers will inject a further element of competition and such developments are enormously in the interests of all our constituents. Therefore, after what I have said about the Government's approach to this important matter, I hope that my hon. Friend the Member for Bournemouth, West will agree that, on balance, it would be better for him not to press his new clause, but rather to allow the Government to bring forward their proposals in due course.

Photo of John Butterfill John Butterfill , Bournemouth West

Perhaps inadvertently, my hon. and learned Friend did not refer to my reservations about estate agents being involved in conveyancing and solicitors being involved in estate agency work. Will he comment on that matter and on whether it would be possible for the regulations that are to be drafted by the Lord Chancellor to be subject to the affirmative resolution procedure?

Photo of Sir Patrick Mayhew Sir Patrick Mayhew , Tunbridge Wells

I carried my enthusiasm for brevity too far. I shall deal with both those points. I shall report to the Lord Chancellor that my hon. Friend wishes the regulations to be subject to the affirmative resolution procedure. My noble Friend will consider that request, but I cannot give my hon. Friend any assurances.

8 pm

We have to face the fact that solicitors at present provide a combined estate agency and conveyancing package. I know that some hon. Members have reservations about that, and we understand the strength of those reservations. Nevertheless, that is the position. We did not feel that the provision of a combined package of sale and conveyancing to vendors raised such overwhelming difficulties that we needed to urge the Law Society to prohibit it. At present estate agents cannot provide conveyancing services. Obviously, a solicitor could not provide conveyancing services to a purchaser if that solicitor was acting for the vendor. That is not permitted.

On the face of it, the present position puts estate agents at an unfair competitive disadvantage compared with solicitors, and therefore we are considering whether estate agents should be free to provide similar packages to vendors. Certain requirements would need to be met before those packages could be permitted, if they were to be permitted. We would need to ensure that the conveyancing work was properly supervised by a qualified person. Similar rules governing conflicts of interest would have to apply to estate agents offering conveyancing, as they do to solicitors in private practice. We shall need to consider whether special arrangements should be made to protect against conflicts of interest where an estate agent is selling more than one house in a chain. Comprehensive financial arrangements would have to be made to secure adequate consumer protection.

Subject to those essential requirements, we are considering whether estate agents should be permitted to provide the service so that they can compete on equal terms.

Photo of Bill Cash Bill Cash , Stafford

My right hon. and learned Friend mentioned consumer protection, but he did not mention competence. In the context of estate agents providing conveyancing services at present practised by solicitors, does he agree that competence is extremely important, and that it is difficult to ensure that an estate agent will be competent to provide such legal services?

Photo of Sir Patrick Mayhew Sir Patrick Mayhew , Tunbridge Wells

That is right, but we are talking about employed solicitors or employed licensed conveyancers.

Incidentally, in a debate which has given rise to the figure of Lord Chancellor Rumpole, I agree that competence is of great importance in all these matters.

Photo of John Butterfill John Butterfill , Bournemouth West

I am grateful to my right hon. and learned Friend for his many assurances. I must confess that I am a little disappointed with what he said about estate agents because I had hoped that the Government could find it preferable if neither lawyers nor estate agents were involved in a position where there could be a conflict. Nevertheless, I accept my right hon. and learned Friend's point that I may have gone further than advisable, and under the circumstances, I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.