My Lords, on behalf of my noble and learned friend Lord Falconer of Thoroton, I beg to move that the Bill be now further considered on Report.

Moved accordingly, and, on Question, Motion agreed to.

Clause 7 [Supplementary powers]:

moved Amendment No. 39:

Clause 7, leave out Clause 7

My Lords, I am reported as having moved this amendment at the end of the first day on Report, but I did not do so. For clarification, I would like to put the record straight. It is reported at col. 109 that the noble Baroness, Lady Ashton, moved one of my amendments, on judicial review, but she did not. It was reported that the amendment that she moved, which was my amendment, was approved. It was not. It is important that I should clarify the situation. I opened on the judicial review amendment and not on the amendment to leave out Clause 7.

It was getting late and I am not sure what happened, but the Minister spoke to both amendments. I am very glad that she did, because it will save a lot of time today. I accept much of what she said. What she said on the judicial review amendment, which I totally accept, was that she had taken good legal advice and that there was a risk of,

"inadvertently narrowing the court's discretion".

The problem was with the inclusion of the word "administrative" in relation to decisions. If the noble Baroness is prepared at Third Reading to move the amendment without the word "administrative", I will be delighted. If she does not wish to do so, I shall do so myself.

The noble Baroness said that Clause 7 was,

"an important clause that allows the board to carry out functions that are in effect ancillary to the conduct of its principal regulatory functions", and that leaving it out,

"could reduce the board's ability to discharge its duties".

Then she said:

"It is a standard provision".—[Hansard, 16/4/07; col. 110.]

In view of what she said, I should be content to propose at Third Reading merely to add a qualification to Clause 7. As drafted, it states:

"The Board may do anything calculated to facilitate, or incidental or conductive to, the carrying out of any of its functions".

I would add the qualification, "which are in effect ancillary to the performance of its principal regulatory functions". That disposes of that.

I have one last point. It is said that the clause is in standard form. However, it is far too widely drafted. If it has been picked out of the pigeonhole of the draftsman's formal amendments, it should not be carried into this Bill without qualification. I beg to move.

My Lords, it might assist the House if I report that I understand that, in relation to the amendments to which the noble Lord referred at the beginning of his speech, Hansard incorrectly reported that Amendment No. 38 had been agreed to. In fact, Amendment No. 39 was not moved and a correction to that effect appeared yesterday. I hope that that is helpful.

My Lords, I am very grateful to the noble Baroness the Lord Speaker for indicating the correction that has been made in Hansard. The noble Lord, having moved Amendment No. 38, withdrew it. On the issue of judicial review, as the noble Lord will remember from Monday, he was keen to look at my words to consider carefully whether I had done enough in his view to deal with the matter by indicating that of course judicial review would be available, as it would be with other public bodies of this kind. He is of course at liberty to then decide what he wishes to do.

The noble Lord is also correct to say that the amendment to leave out Clause 7, Amendment No. 39, was grouped with Amendment No. 38, and I indeed replied to it. As he rightly says, it was late in the evening. I am afraid that I assumed that, in speaking to Amendment No. 38, he wished me to respond to both Amendments Nos. 38 and 39, as he did not degroup the amendment but left it where it was.

Clause 7 is essential. As I said, it is a "standard" clause—that is the word that I used. I cited a number of instances where it appears and I hope that the noble Lord will accept that it in no way enables the board to act beyond the parameters of its powers but, rather, gives it within those powers the flexibility that it will need to decide on things such as information technology and staffing. For the benefit of today's debate, I hope that the noble Lord will be able to withdraw his amendment and to reflect on the matter further.

My Lords, I am very much obliged to the noble Baroness. Of course I will withdraw the amendment, but I do not accept that the clause can stand without qualification, as I suggested, taking the words from the speech of the noble Baroness. I merely say that to avoid misunderstanding. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 8 [The Consumer Panel]:

moved Amendment No. 40:

Clause 8, page 4, line 7, at end insert ", and

(c) qualified but non-practising solicitors who, in their professional capacity, use or purchase services provided by persons who are authorised persons in relation to activities which are reserved legal activities."

My Lords, Clause 8 establishes the Consumer Panel. It is vital that on the Consumer Panel, to be established and maintained by the Legal Services Board, there should be a fair degree of representation. Paragraphs (a) and (b) of subsection (4) mention a number of interests and persons. Amendments Nos. 40 and 41 are intended to ensure that representatives of corporate consumers are included on the Consumer Panel. I move Amendment No. 40—I am very grateful to my noble friends Lord Campbell of Alloway and Lord Kingsland for their support—to ensure that regulation is targeted at the specific needs of different situations, rather than operated through a "one size fits all" approach. The regulatory arrangements in respect of the provision of services to lay persons and small businesses may well differ substantially and fundamentally from those that are appropriate for corporate consumers of legal services, where there is less likely to be an inequality of knowledge between the client and the lawyer.

To achieve its aim, the amendment would guarantee that the Consumer Panel included the full range of consumers of legal services. The prohibition elsewhere in the Bill on any authorised person being a member of the Consumer Panel would undermine efforts to ensure that corporate consumers are represented. In practice, the vast majority of corporate users of legal services instruct law firms through their in-house legal departments. The expertise and knowledge of what corporate consumers require from the law firms that they instruct rests primarily with those in-house legal teams. We in the Joint Select Committee heard evidence from sizeable sections of those in-house legal departments. One lawyer who spoke to us was in charge of an in-house legal team of 500 lawyers, who regularly purchased legal services from outside law firms.

It is therefore desirable to ensure that the prohibition on authorised persons serving as members of the Consumer Panel is not applied to representatives of corporate consumers. The amendments, particularly Amendment No. 40, are designed to bring that about. I thank the City of London Law Society for the representations that it has made. I particularly thank the group legal director of Emap, Nick Folland, who came to see me with the City of London Law Society and explained this in much greater detail. I hope that the Minister will agree to the amendment.

My Lords, I want to clarify the phrase "non-practising solicitor". Does the solicitor concerned hold a practising certificate? That is vital, but there is no mention of it here. In other words, should the holding of a practising certificate be the criterion?

My Lords, I am very grateful to the noble Lord for having given me notice of his question. I have particularly in mind people who have qualified as lawyers but, say, have pursued a more corporate career and have become a company secretary or some equivalent. That company secretary will often also head up the in-house legal department. In many ways, I am trying to tempt the Minister to see that the amendments do not seek to create a huge opening in the requirements that she has laid down, but instead deal with people who are qualified but non-practising solicitors; that is, they do not hold themselves out to act on behalf of clients. Often they will not have a practising certificate, as such, but they consume legal services. Under the Bill, they would be barred from serving on the Consumer Panel. I beg to move.

My Lords, all I am asking is that the noble Lord considers my point further. It may be possible to rebut it, but I think that it is relevant, so will he consider it again?

Yes, of course, my Lords.

My Lords, my noble friend should really save his remarks for a speech rather than intervening on Report in the way in which he has.

My Lords, we on these Benches broadly support the amendment that the noble Lord, Lord Hunt of Wirral, has moved so eloquently. On the point made by the noble Lord, Lord Clinton-Davis, which is plainly important, will the Minister confirm in her reply that nothing in the clause excludes the appointment to the Consumer Panel of a qualified lawyer who does not hold a practising certificate? My understanding of the clause is that the many lawyers who no longer hold practising certificates may be on the panel. Indeed, those of us who have served as chairmen or members of various tribunals and panels around the country at various times know the immense value that that cohort of people, who are often volunteers, give to the decision-making process at various levels.

Secondly, we have heard from the Minister and ministerial colleagues during the debates on this Bill that it is for the board to make decisions, wherever possible, on how its functions are carried out. Surely it is right for the board that selects members of consumer panels to be able to make decisions on whether non-practising lawyers who hold practising certificates should be members of the Consumer Panel. I understand the direct answer to the question asked by the noble Lord, Lord Clinton-Davis, to be, "Yes, this is intended to cover people who hold practising certificates as solicitors, albeit not in fact practising themselves".

A large body of business does huge amounts of what one might loosely call block litigation—for example, in relation to debt collecting on a very large scale for credit card companies or councils that have not received payments of council tax. The lawyers who manage that kind of work are non-practising, but they are about as large consumers of legal services as one can imagine. I would suggest, in common with the noble Lord, Lord Hunt of Wirral, that that group ought to be regarded as important consumers. In that context, would it not be right for the board, when it sets criteria and decides who should be appointed to the Consumer Panel, to be able, although not obliged, to select applicants from that cohort to become members of the panel?

My Lords, my name is on this amendment. I shall be very short. I declare an interest as a qualified but non-practising member of the Bar. I hope that, having listened to the reasons given in support of this amendment, your Lordships will accept that the amendment is appropriate, indeed requisite, as a matter of practical reality.

My Lords, I rise simply in response to a matter raised by the noble Lord, Lord Carlile of Berriew, when he referred to certain categories of non-practising lawyers as being important consumers of legal services. Throughout the debates on this Bill, the Government have talked about the importance of consumer interests, which no one would deny are very important. But we have not gone as far as looking at the composition of that consumer interest.

I have been told—I do not know whether it is true—that around 40 per cent of consumers of legal services are either government or local government agencies, or other public authorities that are indirectly related to government agencies. That may or may not be true, but it would be extremely interesting for your Lordships' House if the Government were to do an analysis of the nature of the consumers of legal services. Often the Government refer to consumer interest; but it must be equally true that sometimes one consumer's interest is not the same as another's. Indeed, there may be occasions when consumer interests conflict.

My Lords, I am extremely grateful for this interesting debate. I agree with a large amount of what has been said, but there is a problem with these amendments because they technically do not work. It is very interesting to think about what we mean by the consumer in this context. I do not know whether the figure of 40 per cent is correct. It would not surprise me. If we have any statistics on that, I shall try to dig them out today and circulate them around your Lordships' House.

In Committee, we talked a lot about the rationale for setting up the Consumer Panel in the Bill and the opportunity to bring consumers together in order to have that input in a very particular way. There were issues, but I am sure that noble Lords were broadly content with what we are seeking to do. Consumers encompass a wide range of different people. Individuals and small businesses consume legal services, as indeed do government departments, big business, voluntary organisations and others. Under the clause, the Consumer Panel is designed to represent those interests and, indeed, is required to think about its representation.

I accept the point made by the noble Lords, Lord Carlile and Lord Kingsland, that we should think about the role of the board, but we want to make it clear in legislation who we want to ensure is included. It is also true that non-practising but legally qualified professionals could serve on the panel. Where we differ slightly is on the important issue of who should sit as a representative of that corporate body. The noble Lord, Lord Hunt of Wirral, answered that by saying that, through their legal departments, many large corporate bodies instruct outside legal professionals, and I maintain that the consumer in that context is the person asking the legal department to instruct the external legal professionals. Just as I, as a Minister, have legal advisers who will instruct parliamentary counsel or indeed external legal professionals to support and advise me, so, too, noble Lords who are not themselves legally qualified in particular areas will instruct as individuals. We are seeking to ensure that the consumers on this panel are not those practising in the legal profession, wonderful though they may be.

My Lords, I apologise for interrupting the noble Baroness, but I wonder whether she would reflect on what she has just said. The voluntary sector, particularly citizens advice bureaux, already instructs lawyers and will remain in a position to do so, perhaps increasingly so, but its representatives will not be excluded from being on the Consumer Panel. There is an inequality between those who happen to be qualified and hold practising certificates and who instruct lawyers formally, and voluntary organisations doing exactly the same. It does not bear logical analysis.

My Lords, I take the noble Lord's point, but let me try again. The point that I am making is that this is a Consumer Panel that, under the terms of the Bill, does not have on it people who are qualified practising lawyers. Those who are not practising but might be legally qualified will, in our view, be appropriate to sit on the panel, because they would be representing their corporate body or organisation in a different way. That is the fundamental principle behind what we are seeking to do with the Consumer Panel. We want a range of people who, as the noble Lord, Lord Hunt of Wirral, was absolutely right to say, are representative of the different kinds of organisations and individuals who consume legal services, but we want to look specifically for people who are not themselves practising legal professionals. They may be qualified, but they will be acting as a corporate consumer, a small business consumer or an individual consumer in this context. It is an important point, but it does not take away from ensuring that a range of voices is heard on the Consumer Panel. This is deliberately designed to be about the role of the consumer, not the consumer as a lawyer talking about legal services.

My Lords, I am grateful to the Minister for giving way. Just to clarify the point, is she saying that the person within a large corporate consumer of legal services who asks the company secretary or the in-house legal department to instruct an outside firm could well sit on the Consumer Panel? Would it be the individual running that part of the business? Is the noble Baroness saying that that person could represent adequately the views of the huge area of corporate consumers of legal services?

My Lords, if the person is not a practising lawyer—they may be legally qualified but not practising—that is what I am saying. To return to the original point made by the noble Lord, within the Consumer Panel it is important that the breadth of consumer interests is represented. The question is how one best achieves that. We would argue that it is best achieved by taking people from large and small organisations, and perhaps individuals, who are consumers but not practising lawyers—they may be legally qualified, but not practising. How a business chooses to do that is up to the business itself. For example, one would ask a large business in the retail sector to consider who best would represent it. What we would not be looking for is the practising head of that business's legal department. It might choose an individual who is legally qualified but not practising. That is all there is between us here.

My Lords, before the Minister sits down, I have a question about procedure. Does she know why any objection was made to the noble Lord, Lord Clinton-Davis, asking my noble friend a relevant question?

My Lords, the only concern on the government Benches is that we are on Report. We have had six full days in Committee, which were extremely interesting. There are practices, which noble Lords developed long before I came to your Lordships' House, to enable us to engage with the business on Report and complete it satisfactorily. There are 24 groups for this evening, and another for the third day; I would like to be able to consider them all. Some of the debates we have had before—although, I agree, not this one—and we are trying in our own way to ensure that noble Lords have the time to consider what I know are the important issues ahead.

My Lords, the most important point that the Minister has just made is that she has no criticism at all of her noble friend Lord Clinton-Davis, and I thank him for making a very important point. I have looked through the Companion and cannot see any prohibition. Although we are on Report and we should not have too much toing and froing, the noble Lord had an important point to make, and I am grateful to him for making it. I am also grateful to the Minister for clarifying exactly where we stand on this. We have tried a few times to get it right. I must go back and see whether we can find a way through this, and perhaps return to it at Third Reading. I am grateful to my noble friends for their support. In the mean time, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 41 and 42 not moved.]

moved Amendment No. 43:

After Clause 11, insert the following new Clause—

"Representations by approved regulators and other representatives of practitioners

The Board must make and maintain effective arrangements for consulting practitioners on—

(a) the extent to which its general policies and practices are consistent with its duty under section 3; and (b) any policy statements on which it proposes to issue under section 48."

My Lords, I shall also speak to Amendments Nos. 44 and 45. The amendments would require the Legal Services Board, in addition to the existing requirement on it to consult the Consumer Panel, to consult appropriately with approved regulators and representatives of the regulated sector.

The Bill already provides for the Legal Services Board to establish a Consumer Panel and to consult it extensively but it does not contain equivalent arrangements for consulting representatives of the regulated sector. In Committee the Minister resisted the suggestion that a practitioner panel should be established alongside the Consumer Panel. She argued that such a panel was unnecessary, given that, unlike in the financial services sector, where a practitioner panel has been established, there are already well established representative bodies for the legal profession. We accepted her approach. It is surprising, therefore, that the Government have not brought forward an amendment concerning consultation with the regulated sector. In Committee the Minister made it clear that, while the Government were opposed to the creation of a practitioner panel, on the grounds that there were already effective arrangements for representation, she accepted in principle my amendment, which would have required the Legal Services Board to give the same consideration to representations from approved regulators as it gave to those from the Consumer Panel. I refer her to col. 937 of Hansard of 22 January.

The noble Baroness said at col. 942 that she would come back to the issue on Report. She repeated her support for this in later discussions in Committee. On 21 February, in discussing an amendment concerning the "polluter pays" principle in the Office for Legal Complaints, she said:

"I remind noble Lords that we have already accepted Amendment No. 38 in the name of the noble Lord, Lord Kingsland, which required that Clause 10 will apply mutatis mutandis to representations by proposed regulators, whether in the regulatory or representative capacities. That consultation will have more force as a consequence of my acceptance of that principle".—[Hansard, 21/2/07; col. 1117.]

The noble Baroness repeated the point on the last day of Committee when discussing an amendment to require the board to consult on the extent to which its policies are consistent with its duty under Clause 3 to act in accordance with best regulatory practice. She said:

"In accepting Amendment No. 38, we have accepted in principle that this requirement— to consult—

"should apply also to representations from the approved regulators".—[Hansard, 6/3/07; col. 149.]

I recognise that the Bill already requires the Legal Services Board to consult before exercising a number of specific functions. For example, Clause 49 requires the board to consult before issuing policy statements. Clause 52 requires some consultation before the board exercises its powers in relation to regulatory conflict. Clauses 30 to 36, which provide powers about setting performance targets, making directions, issuing public censures and imposing financial penalties, require the board to consult the approved regulator concerned before exercising those powers. But there is no overall requirement to consult on the board's overall approach to the discharge of its functions and, in particular, on whether the scale and scope of its proposed activities are appropriate and proportionate.

These amendments would fill that gap. The general duty to consult suggested in Amendment No. 43 would require the board to consult about its general policies and practices. That is supplemented by the duty in Amendment No. 44 to establish effective arrangements for consultation with approved regulators and other representatives of authorised persons. I beg to move.

My Lords, the Minister certainly has a case to answer. My noble friend has set out the background very well. It was my amendment in Committee to establish a practitioner panel. I listened carefully to the Minister and, in view of what she said, decided to dispense with the amendment and not seek to bring it before the House again; but that was on the basis that I had been comforted by her assurances, set out so clearly by my noble friend. I look forward to hearing why we do not have a government amendment and exactly how the noble Baroness intends to proceed.

My Lords, I oppose the cumulative effect of the amendments but not because I do not think that the views of front-line regulators have to be taken into account and that consultation should be protected for them, but because Amendment No. 45 refers to treating front-line regulators in the representative as well as the regulatory capacity in the same way that Clause 10 covers the Consumer Panel.

The procedures in Clause 10 are there for the Consumer Panel because there is an asymmetry of information and expertise, which needs to be taken into consideration in the Bill so that consumers have some right of representation. Were we to give the same representation rights to the Law Society and the Bar Council, for example, they would have the right to object to any decision of the board and would have the same degree of attention that the Consumer Panel is given in order to redress the imbalance in the normal relationship between the legal services and consumers. I do not fundamentally object to those bodies having a consultative relationship, but I object to the view that they should have the same protection that Clause 10 gives the Consumer Panel. That would unbalance what Clause 10 is intended to provide for the Consumer Panel.

My Lords, the noble Lord, Lord Whitty, returns to the question of intervention, on which there have been many discussions. Amendments Nos. 43 and 44 are wholly consistent with Sir David Clementi's original recommendations and the Government's earlier proposed intention to ensure that the LSB powers of intervention were exercised only in cases where there is a serious impact on regulatory objectives taken as a whole, rather than a merely adverse impact on one or more of those objectives. Consultation, as proposed by these amendments, is an essential means to implement the powers of intervention in a manner originally intended by the Government to maintain the supervisory role and an effective, efficient front-line regulation by the approved bodies.

Your Lordships may think that this matter of principle, to which we return again and again, ought to be recognised as such in the Bill. One might group together certain clauses, such as Clauses 3 to 5 and 40 to 43, for such an exercise. On doing that, one has to distinguish between this statement of principle, which applies only to the LSB and would serve, if expressed, as an amendment to Clause 3, and Amendment No. 5, however redrafted, which would be of generic application to all regulatory bodies and continue to serve as an amendment to Clause 1. I am grateful for the opportunity to contribute.

My Lords, I will make a very brief intervention about a question of confidence between the Legal Services Board and the profession. The Bar Council, for example, or individual barristers can make whatever representations they like to the Legal Services Board and the Consumer Panel. I have no doubt that such representations will be taken into account, but I am sure that the Bar Council, the Law Society and other representative bodies will want to work in partnership with the Legal Services Board. In doing so, they will want to take their members with them. They need to persuade their members that they are taking them with them. A requirement to consult would give practitioners, particularly in the larger parts of the legal profession, confidence that the Legal Services Board will really listen to representations. I do not myself believe that the amendments would make any real difference to the process that will be carried out but they might make a very significant difference to the level of confidence that exists between, for example, the Bar—my own profession—and the Legal Services Board.

My Lords, another voice from a non-lawyer might not be inappropriate. I listened carefully to what the noble Lord, Lord Whitty, said, and I see his point. The idea of the panel is to ensure that consumers have a proper voice. To have a provision in the Bill that counteracts that strongly is not a good plan. What the noble Lord, Lord Carlile, has just said is also important. The least that lawyers can expect is to be able under the Bill to make representations of a kind mentioned in these amendments, but that must not in any way act against the provision of the panel. I cannot follow the legal theology of all this, but it seems common sense that lawyers must know that they can make representations, because that is very important to the profession, which has regulated itself up to now—in my view, very adequately.

The Government should pay attention to this, but I have no idea whether these amendments are the right approach.

My Lords, I am grateful to noble Lords. The noble Lord, Lord Carlile, and the noble Baroness, Lady Carnegy of Lour, are absolutely right to raise the issue of confidence. I seek to ensure in the legislation that the level of confidence among consumers, the public and the legal profession is at the right level.

The noble Lord, Lord Kingsland, who read out my words, is completely right. I agreed that I would take away the principle of mutatis mutandis—which I did not understood until noble Lords explained it to me. I was only making a vague joke when I said that I did not understand it because my Latin was too rusty. I said that we would ensure that we had equality of provision of opportunity for consultation in the legislation. I stand by that. I took the amendment away—

My Lords, if I may respectfully suggest to the Minister, she went further than that. She said in terms, on two occasions, that she accepted the amendment.

My Lords, the amendment was about mutatis mutandis. I think that I was very clear to noble Lords that I sought to ensure that whatever I brought forward in the Bill—

No.

My Lords, if the noble Lord disagrees, he can divide the House; that is fine. It is up to him. I want to be clear about what I understood that I did, and the noble Lord can perfectly legitimately challenge that. I accepted the principle of the amendment; I did not accept the wording, or I would have accepted it on the Floor of the House.

I said that there was an issue about enabling the professions to talk to and be consulted by the Legal Services Board on a level with that of the Consumer Panel. My noble friend Lord Whitty indicated, and noble Lords are in broad agreement, that there is an understanding that we need to set up the Consumer Panel to enable it to be formally consulted because it exists in a different way and will come into being only by being brought together by the Legal Services Board with the current regulators.

I absolutely agree that I took the amendment away. I talked with my ministerial colleagues and took advice on it; we talked to a variety of people, and my honourable friend Bridget Prentice, the Minister responsible for the policy, looked at the issue very carefully. The advice that I got back was that the Bill provides a variety of means whereby consultation is available, both specifically as the noble Lord, Lord Kingsland indicated—

My Lords, I have only one quick question: what is the objection to this amendment? What goes on with colleagues is one thing, but what is the objection to this amendment in the way in which it is put before the House today?

My Lords, one of the disadvantages of the noble Lord interrupting is that I cannot complete my speech. If he will wait until I have finished he may well need to ask me that question if he feels that I have not explained the matter properly. I was trying to explain the process that I had gone through and to give reasons. The noble Lord may disagree with them and feel that I have not explained them properly; that is completely reasonable, but at this stage in our proceedings I cannot always necessarily answer questions with the speed and brevity that he would like because other noble Lords need to hear the rationale.

I accept the principle that there should be equality of representation on behalf of consumers and professionals, but I do not accept that the amendments before us achieve that. We need to have a Consumer Panel for the reasons that I have given, but giving general rights to approved regulators to have their representations heard in addition to their rights to make representations on the large number of provisions in the Bill and their ability to set out regulatory arrangements that are in the interests of authorised persons would unbalance the system again. As I say, noble Lords can disagree with my conclusions. I accept the principle of making sure that we have equality and consultation. When I looked at how to produce an amendment that might achieve that, I was strongly advised that we had already achieved it. Therefore, I did not table any further amendments. Noble Lords may agree or disagree with that but I did it in good faith.

We have well established, well organised and possibly well funded bodies that represent the interests of authorised persons. They will be unshackled from their regulatory responsibilities so that their representative arms can lobby the board more effectively and freely than they do at present. The board will want to ensure that it takes on board all sides of the argument before coming to a decision or taking action; indeed, it is in its interests to do so as it can be judicially reviewed if it comes to an unreasonable conclusion.

If the board fails to consult a body that could be directly affected by its action, that would be inconsistent with the principles of best regulatory practice which Clause 3 requires the board to have regard to. The board must listen to and consult the bodies under good regulatory practice. It also knows that it can be judicially reviewed if its decisions are arrived at unreasonably.

In addition, throughout the Bill there are specific ways in which the board must consult. Added together and weighed against the formation of a Consumer Panel, it is our view that we have achieved what your Lordships desired and the principle, which I completely accept, of equality of representation. Although the noble Lord, Lord Kingsland, may feel that I have not fulfilled my obligations, I took away the principle in good faith and believe that we have achieved it. Noble Lords will reach their own decisions on that accordingly.

My Lords, as always, I am most grateful to the noble Baroness for her response. However, she will have heard from my noble friend Lord Hunt that he decided not to retable his amendment establishing a practitioner panel precisely because of the clear statements that he believed she made on Amendment No. 38 and its effect on Clause 10.

In my submission the noble Baroness gave an undertaking in Committee that she accepted, in terms, Amendment No. 38 and went on to explain exactly what impact it had on Clause 10. I shall not press the matter further today except to say that, in the light of this debate, I am sure she will now look again at what she said. I submit to the noble Baroness that if she were not to come back at Third Reading with an amendment that accepted what was Amendment No. 38 in Committee, that would be an extremely serious matter for your Lordships' House. I do not want her to be in any doubt about that.

The noble Baroness raised one other matter in responding, which was almost a lament and which we have heard from her before—that policy decisions are not taken in this House but by a Minister in another place. I could understand that as being an explanation for many of the dilemmas in which she has found herself had this Bill started in another place. But the Bill started in your Lordships' House; and although the Minister to whom the noble Baroness referred is a Minister in the Department for Constitutional Affairs, she is a Parliamentary Under-Secretary. The person in charge of the Bill is the noble and learned Lord the Lord Chancellor, who is a Member of this House. So, with great respect, it cannot be true to say that the policy with respect to this Bill is made in another place. The policy is in your Lordships' House; and the person who is ultimately responsible for it is the noble and learned Lord the Lord Chancellor. I understand the dilemma of the noble Baroness; but I do not accept the consequences of her argument.

My Lords, let me be clear. I accept full responsibility for my role in relation to this Bill. When this Bill is in your Lordships' House—whether it begins here or comes here after another place—and while I am responsible for it, I take responsibility for the policy. My references to my honourable friend are to make sure that noble Lords know that I consulted the person who is responsible for developing the policy; otherwise noble Lords might feel that I had made an arbitrary decision without consulting my colleagues. I refer noble Lords to the Tribunals, Courts and Enforcement Bill, for which I hold policy responsibility. Members of another place may refer to that fact during the passage of the Bill through that House. In a sense, it is a sign of respect and recognition of that role. That is what I seek to do. Of course, my noble and learned friend, whom I have consulted on all these issues, takes absolute and overall responsibility for the Bill, but I take responsibility for my commitments, my words and the work that I do.

My Lords, I am most grateful to the noble Baroness, and by saying what she said about the noble and learned Lord the Lord Chancellor she teased the point out for me. While I am grateful to the noble Baroness, at the same time I would not like her to be in any doubt about the seriousness with which we regard this matter. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 44 and 45 not moved.]

Clause 12 [Meaning of "reserved legal activity" and "legal activity" ]:

moved Amendment No. 46:

Clause 12 , page 5, line 28, at end insert—

"( ) will-writing for fee, gain or reward;"

My Lords, I do not want to rehearse the arguments that we heard in Committee, or the recommendation of the Joint Committee in its report at paragraph 216 on page 65, but I want to raise an issue again in moving Amendment No. 46, in the light of the submission that I have just received from the Institute of Professional Willwriters. Apparently, the institute was formed in 1991 to set voluntary standards in the unregulated will writing market. On page 79 of the White Paper, the noble and learned Lord the Lord Chancellor made a very specific pledge:

"The Government will continue to work closely with consumer bodies, the providers of will writing services and bodies that represent them to help raise quality, standards and consumer awareness".

I was therefore very surprised indeed to hear from the Institute of Professional Willwriters that it had submitted a detailed report to the Department for Constitutional Affairs in September 2005 outlining in detail its belief that,

"a voluntary regulatory regime is unlikely to be effective in dealing with the issues that face the will writing profession".

Despite the words of the noble and learned Lord, that organisation has advised me that there has been no consultation at all with the DCA since September 2005. In fact, the institute has received no contact from the noble and learned Lord's department since a meeting in July in 2005 that ended with a commitment on the part of the department that a further meeting would be scheduled for later in 2005. The institute has asked me how that is "working closely" with the people who represent professional will writers. In the light of that, although I know that the noble Baroness gave me a convincing response on the issue, I am sure that she cannot have been aware that that commitment by the noble and learned Lord in the White Paper to work closely with this body had been disregarded by the department in the way that I have described. I felt that I had to raise the issue again. I beg to move.

My Lords, I confess that I am amazed by the provision that seeks to exclude wills from the provisions of the Bill. Schedule 2(5), part of which the noble Lord's Amendment No. 48 seeks to leave out, states that:

"'Reserved instrument activities' means ... preparing any instrument of transfer or charge for the purposes of the Land Registration Act ... or preparing any other instrument relating to real or personal estate for the purposes of the law of England and Wales".

Sub-paragraph (3) states that "instrument" includes any contract for the disposition of land,

"except a contract to grant a short lease".

So, reserved activities are covered if I want to let a house or some land other than on a short lease, or if I want to give away a bit of my real estate to someone during my lifetime. However, for some extraordinary reason, on my death, when I dispose of all I own and set up some trusts, or something for that purpose, that is not covered. I do not understand how a small transaction inter vivos is caught, but this total disposal of my property on my death is excluded, can be done by anyone and is not an activity governed by the Bill. I look forward to some enlightenment.

My Lords, there has been full discussion on this matter at previous stages of the Bill and the question as to whether will writing should become a reserved legal activity has, as my noble friend has said before, been under consideration for some time—most recently since the announcement in March 2005 by my noble and learned friend the Lord Chancellor and Secretary of State that his department would consider the case for the regulation of will-writing and estate administration services.

If I may, I will read out the next paragraph of my speaking note and then return to the point made by the noble Lord, Lord Hunt. Since that time we have worked closely with consumer bodies, the legal profession, those outside that profession who currently provide will-writing services, and the Office of Fair Trading, and have asked them to provide us with any evidence that might suggest that there is a systemic failure in the current will-writing market and that consumers are being put at risk as a result. The DCA has met the Institute of Professional Willwriters, the Office of Fair Trading and others to discuss voluntary jurisdiction. The DCA has asked the institute to provide the OFT with a draft set of rules for consideration under the code. Our view is that if there is any evidence of systemic failure, the LSB may make a recommendation to the Lord Chancellor under Clause 23 for will-writing services to be added to the list of reserved legal services.

We acknowledge that there may be a problem. We want evidence, which has not been forthcoming, although one or two points have been made at earlier stages of this Bill. But we are not set against this; we just wish it to be discussed. As I have said, we need evidence that there is a problem that needs to be solved.

My Lords, I am grateful to the noble Viscount, Lord Bledisloe, for his compelling and persuasive intervention. I am slightly confused by the Minister's reply because the chairman of the Institute of Professional Willwriters, Mr Paul Sharpe, contacted me on Monday to say that the institute had submitted a report—and he has sent me a copy of the report—demonstrating that voluntary regulation is not working and containing some of the points that I raised at the Committee stage. He said that there has been no further contact with the DCA since July 2005, following which it submitted the report in September 2005. As I understand it from the Minister, he is under the impression that there has been continuing contact. The only way forward here is to get an assurance from the Minister that a further meeting will take place so that we can at least regularise this position. I see that the noble Lord and the noble Baroness are nodding and, as far as I am concerned, if there is to be a further—

My Lords, the institute has been in regular e-mail correspondence with the department. The department has not seen the report that the noble Lord, Lord Hunt, has in his hand. I think that the way through this is for there to be meetings between now and the next stage of the Bill so that we can sort this out. I do not think that there is any real disagreement here; there is obviously a procedural problem that needs to be sorted.

My Lords, in response to the noble Lord's points, I beg leave to withdrawn the amendment.

Amendment, by leave, withdrawn.

Schedule 2 [The reserved legal activities]:

moved Amendment No. 47:

Schedule 2 , page 119, line 6, leave out "paragraph (a) or" and insert "paragraph (a) to"

On Question, amendment agreed to.

[Amendment No. 48 not moved.]

Clause 13 [Entitlement to carry on a reserved legal activity]:

moved Amendment No. 49:

Clause 13 , page 6, line 21, at end insert—

"( ) Nothing in this section or section 22 affects section 84 of the Immigration and Asylum Act 1999 (c. 33) (which prohibits the provision of immigration advice and immigration services except by certain persons)."

On Question, amendment agreed to.

Clause 15 [Carrying on of a reserved legal activity: employers and employees etc]:

moved Amendment No. 50:

Clause 15 , page 7, line 8, leave out "body or other person ("B")" and insert "person ("P")"

My Lords, this set of amendments contains various technical changes designed to ensure that the authorisation and other requirements in the Bill for different types of bodies and individuals apply effectively and consistently. This includes changes in relation to employees, employers and foreign lawyers; changes to ensure that the threshold provisions of the Part 5 licensing regime take account of current practice structures; and further provision for bodies formed under foreign law.

Amendments Nos. 50, 51, 52, 54, 55, 57, 59, 61, 62, 622 and 623 do two things. First, they ensure that where an employer who is entitled to carry out reserved activities carries out a reserved legal activity through an individual who is not entitled, the employer will commit an offence. This would apply, for example, where the employer allows non-lawyers to conduct reserved activities without being supervised by lawyers. The employer would have a defence of reasonable precautions and due diligence, and the penalty for the offence and other related provisions, such as contempt of court, will be the same as presently set out in the Bill for the offence of carrying out reserved activities if not entitled.

The amendments are being made to take account of the fact that that there could be instances where a company or firm could be active or complicit in the carrying on of reserved legal activities by an employee who is not individually entitled. The change therefore closes a potential loophole, which could be exacerbated with the increasing regulation of companies or firms as well as individuals, and ensures that sanctions in the Bill are targeted according to regulatory default. Secondly, these amendments ensure that both this offence and the other offence circumstances set out in Clauses 14 and 15 apply to employers whether they are bodies such as companies and partnerships or sole practitioners.

Amendments Nos. 53, 56 and 68 are technical, ensuring that the Bill's treatment of employed lawyers is consistent and does not disrupt the status quo. To clarify, Amendments Nos. 53 and 56 amend Clause 15 to ensure that a body or individual whose business includes the provision of certain reserved activities to the public will still be able to use its own employed lawyers to carry out other reserved activities on its own behalf. It makes clear that a separate authorisation for further reserved activities will be necessary only where it is intended to provide reserved legal services to the public. Amendment No. 68 amends Schedule 3 to ensure that, where certain individuals are exempt from the requirement to be authorised to conduct reserved activities, employers on whose behalf the activities are conducted may also benefit from the exemption in appropriate circumstances.

Amendments Nos. 86, 87, 312, 318 and 319 ensure that references to registered European lawyers, non-registered European lawyers and other foreign lawyers and practices are consistent with current statutory provisions, and do not disrupt the status quo. In particular, Amendments Nos. 318 and 319 amend Clause 108 to ensure that the definitions in Part 5 do not cause a large number of multinational firms to become alternative business structures purely by virtue of being partially owned by foreign lawyers.

A further function of the amendments in this group is to make certain alterations to the detail of the Part 5 licensing regime to ensure that the requirements take account of current practice structures and regulatory practice. More specifically, Amendments Nos. 203 and 261 propose technical changes necessary to take account of the fact that members of firms such as limited liability partnerships are often other firms or bodies and not just individual lawyers, and to ensure that any bodies to which this applies are regulated appropriately.

Amendments Nos. 256, 258, 259, 260 and 274 amend the licensing regime in Schedule 11 to make it clear that licensing authorities will have the flexibility to waive fees in appropriate cases. Amendments Nos. 262 to 273 amend Schedule 11 to provide that licensing rules must make provision for review by the licensing authority of a decision not to approve a person as head of legal practice or head of finance and administration, or to remove a person's designation in relation to one of those roles. This is consistent with the Government's policy; for example, provisions elsewhere in Schedule 11 stipulate that licensing rules must make provision for review of certain decisions that could affect the rights of licensed bodies or individuals within them.

Amendment No. 305 makes it clear that the obligation which licensing authorities have to trace the beneficiaries of sums recovered following intervention in a licensed body's practice is an obligation to take such steps as are reasonable in all the circumstances of the case. This follows a similar amendment made to the intervention powers of the Law Society in Schedule 16 to the Bill, following an amendment tabled in Committee by the noble Lord, Lord Kingsland, which the Government agreed to consider. We are replicating that amendment in Schedule 14 because it is desirable for statutory intervention powers to be consistent where appropriate.

Amendments Nos. 304, 627, 632 and 633 make technical changes to ensure that certain provisions in the Bill can be amended as necessary by secondary legislation in cases where it is necessary to take account of bodies formed under foreign law. I thank the noble Lord, Lord Kingsland, and the Law Society of Scotland for the point raised in Committee in relation to Clause 107, which my noble friend agreed to consider.

Clause 107 enables the Lord Chancellor to modify the provisions of Part 5 in relation to bodies formed outside the law of the UK. The noble Lord queried whether this power should also apply in relation to bodies formed under the law of Scotland or Northern Ireland. The Government have considered this and agree that it would be desirable to extend the power, as the noble Lord suggested. Amendment No. 314 has therefore been tabled to achieve this. I note that the noble Lords, Lord Kingsland and Lord Hunt of Wirral, have added their names in support of this amendment, which reassures me that the Government have adequately accomplished the noble Lord's objectives in this regard.

Amendments Nos. 627, 632 and 633 create a similar power for the Lord Chancellor to modify the current definition of manager, as set out in Clause 197 of the Bill, to ensure that it remains effective for bodies formed under law outside England and Wales. That is similar to the existing power in Clause 107 to modify the provisions of Part 5 that a new clause is required as the definition of manager applies to other parts of the Bill. The power will be subject to the affirmative resolution procedure.

The amendments are technical, and essentially tighten up the existing provisions relating to the authorisation requirements for different types of bodies and individuals, and ensure, in particular, that the arrangements in Part 5 of the Bill provide for effective regulation and control of any firm's licence. Failure to make these changes would leave a number of uncertainties, inconsistencies and potential loopholes in the legislation, putting at risk both consumers and providers of legal services. The purpose of the amendments is to ensure that the detail of the regulatory framework can operate effectively and consistently. I beg to move.

My Lords, in so far as these amendments, so eloquently introduced by the noble Lord, Lord Evans of Temple Guiting, reflect suggestions that we have made, we are most grateful.

On Question, amendment agreed to.

moved Amendments Nos. 51 to 62:

Clause 15, page 7, line 10, leave out "B" and insert "P"

Clause 15, page 7, line 12, leave out "B" and insert "P"

Clause 15, page 7, line 12, after first "activity" insert "("the relevant activity")"

Clause 15, page 7, line 13, leave out "B" and insert "P"

Clause 15, page 7, line 15, leave out "B's" and insert "P's"

Clause 15, page 7, line 16, leave out "reserved legal activities carried on" and insert "the carrying on of the relevant activity"

Clause 15, page 7, line 17, leave out "B in their capacity as employees of B" and insert "P in their capacity as employees of P"

Clause 15, page 7, line 18, leave out "Secretary of State" and insert "Lord Chancellor"

Clause 15, page 7, line 21, leave out "B's" and insert "P's"

Clause 15, page 7, line 23, leave out "Secretary of State" and insert "Lord Chancellor"

Clause 15, page 7, line 25, leave out subsection (8) and insert—

"(8) If P is a body, references to an employee of P include references to a manager of P."

After Clause 15, insert the following new Clause—

"Offence to carry on reserved legal activity through person not entitled

(1) Where subsection (2) applies it is an offence for a person ("P") to carry on an activity ("the relevant activity") which is a reserved legal activity, despite P being entitled to carry on the relevant activity.

(2) This subsection applies if—

(a) P carries on the relevant activity by virtue of an employee of P ("E") carrying it on in E's capacity as such an employee, and (b) in carrying on the relevant activity, E commits an offence under section 14.

(3) If P is a body, references in subsection (2) to an employee of P include references to a manager of P.

(4) In proceedings for an offence under subsection (1), it is a defence for the accused to show that the accused took all reasonable precautions and exercised all due diligence to avoid committing the offence.

(5) A person who is guilty of an offence under subsection (1) is liable—

(a) on summary conviction, to imprisonment for a term not exceeding 12 months or a fine not exceeding the statutory maximum (or both), and (b) on conviction on indictment, to imprisonment for a term not exceeding 2 years or a fine (or both).

(6) A person who is guilty of an offence under subsection (1) by reason of an act done in the purported exercise of a right of audience, or a right to conduct litigation, in relation to any proceedings or contemplated proceedings is also guilty of contempt of the court concerned and may be punished accordingly.

(7) In relation to an offence under subsection (1) committed before the commencement of section 154(1) of the Criminal Justice Act 2003 (c. 44), the reference in subsection (5)(a) to 12 months is to be read as a reference to 6 months."

On Question, amendments agreed to.

Schedule 3 [Exempt persons]:

moved Amendments Nos. 63 to 70:

Schedule 3, page 121, line 19, leave out sub-paragraph (9)

Schedule 3, page 121, line 39, leave out "Secretary of State" and insert "Lord Chancellor"

Schedule 3, page 122, line 17, leave out sub-paragraph (5)

Schedule 3, page 123, line 40, leave out sub-paragraph (9)

Schedule 3, page 124, line 43, at end insert—

"( ) The person is exempt if section 14 of the Public Notaries Act 1801 (c. 79) applies to the person, and—

(a) where that section applies by virtue of the person holding or exercising an office or appointment, the person carries on the activity for ecclesiastical purposes; (b) where that section applies by virtue of the person performing a public duty or service under government, the person carries on the activity in the course of performing that duty or service."

Schedule 3, page 125, line 17, at end insert—

"Employers etc acting through exempt person

(1) This paragraph applies where—

(a) a person ("P") carries on an activity ("the relevant activity") which is a reserved legal activity, (b) P carries on the relevant activity by virtue of an employee of P ("E") carrying it on in E's capacity as such an employee, and (c) E is an exempt person in relation to the relevant activity.

(2) P is an exempt person in relation to the relevant activity to the extent that P carries on that activity by virtue of E so carrying it on.

(3) This paragraph does not apply where E—

(a) carries on the relevant activity at the direction and under the supervision of an authorised person in relation to that activity, and (b) is exempt in relation to that activity by virtue of paragraph 1(7), 3(3) or 4(2).

(4) If P is a body, in this paragraph references to an employee of P include references to a manager of P."

Schedule 3, page 125, line 19, leave out "Secretary of State" and insert "Lord Chancellor"

Schedule 3, page 125, line 27, leave out "Secretary of State" and insert "Lord Chancellor"

On Question, amendments agreed to.

Schedule 4 [Approved regulators]:

moved Amendments Nos. 71 to 82:

Schedule 4, page 126, line 28, at end insert—

Schedule 4, page 127, line 8, leave out "Secretary of State" and insert "Lord Chancellor"

Schedule 4, page 127, line 23, leave out "Secretary of State" and insert "Lord Chancellor"

Schedule 4, page 131, line 20, leave out "Secretary of State" and insert "Lord Chancellor"

Schedule 4, page 131, line 25, leave out "Secretary of State" and insert "Lord Chancellor"

Schedule 4, page 131, line 32, leave out "Secretary of State" and insert "Lord Chancellor"

Schedule 4, page 131, line 33, leave out "Secretary of State" and insert "Lord Chancellor"

Schedule 4, page 131, line 37, leave out "Secretary of State" and insert "Lord Chancellor"

Schedule 4, page 131, line 39, leave out "Secretary of State" and insert "Lord Chancellor"

Schedule 4, page 132, line 3, leave out "Secretary of State" and insert "Lord Chancellor"

Schedule 4, page 132, line 6, leave out "Secretary of State" and insert "Lord Chancellor"

Schedule 4, page 132, line 8, leave out "Secretary of State" and insert "Lord Chancellor"

On Question, amendments agreed to.

moved Amendment No. 83:

Schedule 4, page 132, line 40, leave out sub-paragraph (3) and insert—

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

My Lords, The noble Baroness resisted this amendment in Committee. Her reasons for doing so, I fear, furnish further evidence that the Government are unwilling to reflect the principle to which they say they adhere—trust the approved regulator—on the face of the Bill.

Our amendment reverses the presumption that the approval of the Legal Services Board should be needed before rule changes can come into effect. I do not believe that it would be helpful if I were to rehearse in detail a debate that stretched over seven columns—cols. 952 to 960—of Hansard on 22 January. In its course, apposite contributions were made by the noble and learned Baroness, Lady Butler-Sloss, the noble Viscount, Lord Bledisloe, the noble Lord, Lord Thomas of Gresford, and my noble friends Lord Campbell of Alloway and Lord Hunt of Wirral. The Minister made no fewer than 11 interventions in a courageous, but vain, attempt to vitiate their collective wisdom.

I must confess that I remain at a complete loss to understand why the solution we propose would prove, as the noble Baroness asserted, considerably more bureaucratic and costly than that in the Bill. I believe that my view is shared by all noble Lords who participated in the debate. Under our scheme, the approved regulators will consult on all the changes they propose. The Legal Services Board will know what is intended well in advance of implementation. If it wishes to object, our amendment entitles it to do so. It is our amendment that reflects the underlying philosophy that the Government claim to espouse, not the draft provision in the Bill.

It is worth recalling the Government's words in response to the report of the Joint Committee, which were that the Legal Services Board should exercise its powers only where the approved regulators were "clearly failing". The Legal Services Board is not there constantly to second-guess the judgment of the approved regulators. It is not its task to comb around looking for trouble. Moreover, it is not as if the approved regulators are composed exclusively of lawyers. Both the Bar and the Law Society regulatory institutions will have a substantial lay component. Of course, if cogent evidence is already available to the Legal Services Board that a particular rule change is likely to give rise to a net negative impact on the eight objectives, it is a different matter.

The philosophy for the Government should be, as I said in Committee, "Trust the approved regulators". I beg to move.

My Lords, I think that I am happy to say that I did not participate in the debate in Committee on this topic and that I was not present. However, I have enjoyed reading, with loving attention, every word of that debate. We on these Benches entirely agree with what has just been said by the noble Lord, Lord Kingsland.

However, a practical problem occurs to me. During the debate on Monday, I declared my interest as head of a fairly large set of barristers' chambers in London. The way the system operates at the moment is that, from time to time, the General Council of the Bar—which was accurately described a few moments ago by the noble Lord, Lord Kingsland—has to react to problems that have arisen. On the whole, it reacts to them quickly. From time to time, I, as a head of chambers, receive an email telling me that there has been a change to the Bar Council's code of conduct, which is an important document that is frequently cited in court when issues of ethics arise during cases. If a head of chambers is responsible, he or she ensures that the communication from the Bar Council is instantly circulated to all barristers and clerks so that it is known to all the barristers within the collegiate atmosphere that still exists in many sets of chambers. Therefore, within a very short time of a critical incident arising, a change in the code of conduct can be communicated and put into practice. If necessary, it can be done in a couple of days. Without the amendment, the legislation would seek the inevitable introduction of a cumbersome, bureaucratic procedure, which will mean that an approved regulator—whose code of conduct so far as I am aware has rarely been criticised—will not be able to sustain that very useful and active discipline. I cannot believe that that is the Government's purpose, but it is the result of the legislation as it stands.

I ask the Minister to respond to that point as it is causing some perplexity among those of us who practice at the Bar—led, as we have been from time to time with great practical effect, by people such as the noble Lord, Lord Brennan, who, when chairman of the Bar Council, took a leading part in ensuring that the code of conduct was kept up to date in the way I have described.

My Lords, I am not sure that my twelfth intervention will make a huge amount of difference. For the benefit of noble Lords who have not had the joy of participating in debates or reading Hansard, let me say that we were looking at two things: first, whether you had a situation where the board gets all the changes and then makes a decision on whether it wishes to have certain changes exempt from the process or with minimal review by the board; and, secondly, whether the board at the beginning says, "We don't want to see the following things" and that only those it wished to see should come forward.

We looked at the matter in great detail. We considered how it would look if we redrafted it, and we had a good think about it. It is a choice we had to make, which I still think is the right one. We sought to say that our principle in setting up this new framework would be that changes should be sent to the board and that the board can say, either in the course of receiving those changes or, indeed, in advance, that it does not wish to receive certain ones, that some can be exempt and that some require merely minimal approval.

The noble Lord, Lord Carlile, made a point about wanting to have the code of practice changes. I note his tribute to my noble friend Lord Brennan, which I share. We would want those done in the same way. We do not want this process to be bureaucratic. The question really came down to whether it is right that the board in advance says, "We don't need to see any of the following aspects", or should it receive them and then make a decision later about which it wishes to have exempt. So the question was: did the decision on that rest with the board or the regulator? It is not a question of trust. We hope that this will be one of the ways they will work closely together in partnership.

However, we felt that it was important to leave the matter with the board. It was a choice we made. We do not think that the outcome will be hugely different because we believe that the board will swiftly move to say, "It is quite clear there are areas where we do not need to see the changes that are being made, or where we can deal with them very quickly".

What I do know is—not in this area but in other areas of life—that small changes sometimes have big effects. Therefore, it is important for the new regime to enable the board to see the kind of changes being made and to be able to consider the effects being made. That was a decision we took.

My Lords, I am most grateful to the noble Baroness for setting out the position that she previously set out at greater length, and perhaps with less continuity, than she has done this afternoon. She has not changed her position, but of course I always respect her for courageously sticking to her guns. However, her answer is not satisfactory to us. Although I shall not be seeking the opinion of the House on the matter today, I shall nevertheless consider whether it would be appropriate to return to the issue at Third Reading. Meanwhile, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 5 [Authorised persons]:

moved Amendments Nos. 84 to 91:

Schedule 5, page 137, line 7, after "Attorneys," insert—

"( ) The Association of Law Costs Draftsmen,"

Schedule 5, page 137, line 29, leave out "Secretary of State" and insert "Lord Chancellor"

Schedule 5, page 139, line 12, leave out "has the same meaning as in" and insert "means a registered European lawyer within the meaning of"

Schedule 5, page 139, line 13, at end insert "who is registered with the Law Society."

Schedule 5, page 141, line 2, at end insert—

"(1) During the transitional period, a person ("P") is an exempt person in relation to the carrying on of an activity ("the relevant activity") which is a notarial activity if—

(a) P carries on the relevant activity by virtue of an employee of P ("E") carrying it on in E's capacity as such an employee, and (b) E is an authorised person in relation to the relevant activity.

(2) If P is a body, in this paragraph references to an employee of P include references to a manager of P."

Schedule 5, page 142, line 14, after "mark" insert "attorney"

Schedule 5, page 142, line 37, after "mark" insert "attorney"

Schedule 5, page 143, line 2, at end insert—

"Law costs draftsmen

15A (1) During the transitional period, every authorised member of the Association of Law Costs Draftsmen is deemed to be authorised by that Association to administer oaths.

(2) In this paragraph, "authorised member of the Association of Law Costs Draftsmen" means a member of that Association who has been authorised by that Association to carry on one or both of the following activities—

(a) the exercise of a right of audience; (b) the conduct of litigation.

(3) The authority conferred by sub-paragraph (1) is exercisable in accordance with and subject to the regulatory arrangements of the Association of Law Costs Draftsmen."

On Question, amendments agreed to.

Clause 22 [Transitional protection for non-commercial bodies]:

moved Amendment No. 92:

Clause 22, page 11, line 23, leave out "Secretary of State" and insert "Lord Chancellor"

On Question, amendment agreed to.

Clause 23 [Extension of the reserved legal activities]:

moved Amendments Nos. 93 to 97:

Clause 23, page 11, line 31, leave out "Secretary of State" and insert "Lord Chancellor"

Clause 23, page 11, line 38, leave out "Secretary of State" and insert "Lord Chancellor"

Clause 23, page 12, line 2, leave out "Secretary of State" and insert "Lord Chancellor"

Clause 23, page 12, line 7, leave out "Secretary of State" and insert "Lord Chancellor"

Clause 23, page 12, line 8, leave out "Secretary of State" and insert "Lord Chancellor"

On Question, amendments agreed to.

Clause 24 [Provisional designation as approved regulators and licensing authorities]:

moved Amendments Nos. 98 to 102:

Clause 24, page 12, line 12, leave out "Secretary of State" and insert "Lord Chancellor"

Clause 24, page 12, line 16, leave out "Secretary of State" and insert "Lord Chancellor"

Clause 24, page 12, line 22, leave out "Secretary of State" and insert "Lord Chancellor"

Clause 24, page 12, line 38, leave out "Secretary of State" and insert "Lord Chancellor"

Clause 24, page 12, line 40, leave out "Secretary of State" and insert "Lord Chancellor"

On Question, amendments agreed to.

Clause 25 [Recommendations that activities should cease to be reserved legal activities]:

moved Amendments Nos. 103 to 107:

Clause 25, page 13, line 6, leave out "Secretary of State" and insert "Lord Chancellor"

Clause 25, page 13, line 8, leave out "Secretary of State" and insert "Lord Chancellor"

Clause 25, page 13, line 10, leave out "Secretary of State" and insert "Lord Chancellor"

Clause 25, page 13, line 11, leave out "Secretary of State" and insert "Lord Chancellor"

Clause 25, page 13, line 12, leave out "Secretary of State's" and insert "Lord Chancellor's"

On Question, amendments agreed to.

Schedule 6 [Alteration of reserved legal activities]:

moved Amendments Nos. 108 to 113:

Schedule 6, page 143, line 36, leave out "Secretary of State" and insert "Lord Chancellor"

Schedule 6, page 145, line 34, leave out "Secretary of State" and insert "Lord Chancellor"

Schedule 6, page 146, line 1, leave out "Secretary of State" and insert "Lord Chancellor"

Schedule 6, page 146, line 3, leave out "Secretary of State" and insert "Lord Chancellor"

Schedule 6, page 146, line 11, leave out "Secretary of State" and insert "Lord Chancellor"

Schedule 6, page 148, line 41, leave out "Secretary of State" and insert "Lord Chancellor"

On Question, amendments agreed to.

Clause 27 [Approved regulator's duty to promote the regulatory objectives etc]:

[Amendment No. 114 not moved.]

moved Amendments Nos. 115 and 116:

Clause 27, page 13, line 36, at end insert "and"

Clause 27, page 13, line 38, leave out from "practice," to end of line 39

On Question, amendments agreed to.

Clause 28 [Prohibition on the Board interfering with representative functions]:

[Amendment No. 117 not moved.]

Clause 29 [Rules relating to the exercise of regulatory functions]:

moved Amendment No. 118:

Clause 29, page 14, line 41, leave out "Secretary of State" and insert "Lord Chancellor"

On Question, amendment agreed to.

Clause 30 [Performance targets and monitoring]:

moved Amendment No. 119:

Clause 30, page 15, line 13, leave out "one or more of"

My Lords, I shall also speak to all the other amendments in the group. At the risk of being accused of constant repetition, we believe it essential that the Bill reflects the Government's declared policy that the Legal Services Board should take action against the approved regulators only where they are, to use the Government's words, "clearly failing".

At present, it does not. The thresholds for intervention are far too low; at their present level, the Legal Services Board becomes simply a front-line regulator, like the Financial Services Authority. The potential for constant interference by the board would go completely against Sir David Clementi's vision of the Legal Services Board as a small oversight body. Sir David Clementi said in his review of the legal services framework for England and Wales, published in 2004, at page 44:

"The LSB should be a small oversight body, so delegation should be expected, subject to the Legal Services Board's satisfaction about competence and governance arrangements".

Direct regulation by the Legal Services Board would also make the operation of the legislation inordinately costly.

The amendments would incorporate that policy in the Bill by raising the threshold for intervention in two respects. The first is that the power of the board to intervene is triggered by an assessment of adverse impact on the eight regulatory objectives considered as a whole rather than individually. For example, it would not be reasonable for the Legal Services Board to take action that had an adverse impact on competition if the approved regulator's approach was necessary to improve access to justice and maintain adherence to the professional principles. However, it should be possible for the Legal Services Board to exercise power to act where the only adverse impact on the regulatory objectives was that it restricted competition, if that action could not be justified by reference to a benefit to the other regulatory objectives.

Amendments Nos. 119 and 120 would bring Clause 30 into line with Clause 3(2) and Clause 27(2), which require the board and approved regulators respectively, in discharging their duty, to promote the regulatory objectives so far as it is reasonably practical; to act in a way,

"which is compatible with the regulatory objectives".

That form of words recognises that the regulatory objectives may pull in different directions. The approved regulator may have to balance the objectives, and, in the words of the noble and learned Baroness, Lady Butler-Sloss, on Second Reading,

"to decide that one objective takes precedence over another, in which case there is likely to be an adverse effect on one of the objectives. Consumer protection or the rule of law may, for example, need to take precedence over competition".—[Hansard, 6/12/06; cols. 1194-95.]

Yet the Bill entitles the board to intervene to penalise a regulator who had exercised legitimate discretion in a balancing exercise.

In making its analysis, the Legal Services Board should trust the judgment of the approved regulator, unless it has good reason not to do so. This is especially so now that the regulatory and representative functions of the Law Society and the Bar Council have been clearly separated. The new approved regulators will have substantial lay representation, and all members will have to be selected on the basis of Nolan principles. In other words, the composition of these bodies will look very like the composition of the Legal Services Board. It must follow that the board should not exercise its powers simply because it would have reached a different decision on the same matter. The board should intervene only if it is clear that the conduct of an approved regulator in some way fell short of reasonableness.

I can deal much more telegraphically with the second line of issues to which the amendments give rise. There should be some qualifying adjective about the degree of adverse impact before the Legal Services Board invokes its powers. We have chosen the word "significant", but "serious" or "substantial" would be equally acceptable. Almost any exercise of its function by an approved regulator will have at least some adverse effect on at least one of the regulatory objectives. I beg to move.

My Lords, we on these Benches agree with the noble Lord, Lord Kingsland, that Clause 30 imposes too light a trigger on the exercise of what, on the face of it, are draconian powers that could lead to an approved regulator ceasing to be so approved. The concept of compatibility with the regulatory objectives as a whole is recognised as an holistic, inclusive concept in Clause 3. We believe that that concept should be in Clause 30. Indeed, it is plain common sense that there should be this inclusive view of what Clause 3 calls,

"compatible with the regulatory objectives".

One can think of many examples in which there could be conflict between some of the regulatory objectives set out in Clause 1(1) but not with the regulatory objectives as a whole. A simple example of this is,

"protecting and promoting the interests of consumers", in Clause 1(1)(c). There may be very good reasons for a professional body saying that no lawyer should conduct a clinical negligence case unless that lawyer has some training and experience in conducting those cases. However, part of the regulatory objectives in Clause 1(1)(d) is to promote,

"competition in the provision of services within subsection (2)".

My understanding is that in north Wales, for example, only one solicitor—there may be more now, but certainly a few months ago there was only one—had the approval to carry out clinical negligence cases and so receive funding from the Legal Services Commission. There is plainly a conflict between competition and a decision that only people who are really competent to do certain types of cases should do them. The provisions we are considering could be triggered not by the consideration of those two regulatory objectives together but by one of them alone without considering the other. It seems a matter of practical common sense that the approach taken in Clause 3(2)(a) should be consistently applied throughout the Bill.

My Lords, I retain the concerns that I expressed earlier. This ought to be looked at. To have a single adverse impact is inadequate to achieve the light touch that is needed.

My Lords, I agree. At paragraph 178 of the Joint Committee report on the draft Legal Services Bill we unanimously agreed that amendments of this type should be brought forward. We regret that the Minister has not yet done that and await her words with great interest.

My Lords, I support this amendment, but I have to do so having moved Amendment No. 5, which is related to this amendment. There, I deal with the balance of the relevant regulatory objectives as the basis for a reasoned decision. This amendment rides totally in relation to that. It is very interesting that this balance was approved by the Minister on the first day of Report. She said:

"The board, while operating within the objectives, must balance those objectives appropriately, as noble Lords seek".—[Hansard, 16/4/07; col. 102.]

There is not much between us on the fundamental principle. If there is, I do not know what it is. On that basis, I support the amendment.

My Lords, this group of amendments deserves serious consideration by the Government. Here is a Bill to introduce a super-regulator, the Legal Services Board. They have said that it can be clothed and armed with heavyweight powers but that it will operate with a light touch. Such confidence in regulatory self-denial suggests inconsistency with ordinary human experience. I therefore invite the Minister to consider this state of affairs. If you have a series of separate objectives which can be separately considered, and any one of them will allow the trigger of intervention, the legal services world, to be so regulated, would reasonably expect the board at the very least to have a statement of policy on how it will implement these single objectives at any one time or in combination. These amendments suggest, by the introduction of the words "one or more" or "significant", that you create a state of affairs where there is a policy base for the Legal Services Board to act on.

"Significant" is a pretty poor adjective, but if it is there to achieve compromise then it is better than nothing. It might be said that it is the kind of word which is so vague as to be incapable of challenge legally or intellectually, but I remind the House that in the Corporate Manslaughter and Corporate Homicide Bill we enacted the use of the word "substantial" as a core ingredient in the creation of a new criminal offence, confident that any jury would understand how it was to be understood and applied. I hope that in dealing with the amendments it will be accepted that this is a desire not to control power exercisable by the Legal Services Board but rather to seek a framework in which the legal services world can operate more efficiently.

My Lords, my ambition is that the Legal Services Board will never have to use its powers. The difficulty is that when one sets up in legislation a system that enables action to be taken when things go wrong, the implication or assumption is that the relationship will be a negative one. Our ambitions are more positive. We have talked about partnership, a light touch and how we expect the regulator to operate in an overarching and not an overbearing way. On that I think we are all agreed. Where the board might find itself having to use these powers, we are also all agreed that they should be used appropriately, expediently and efficiently. They should not be used in any inappropriate way, and that is why we have laid out in Clauses 30 to 34 what the powers are, how they are to be used and so forth, and why in Clause 48 we have enabled the board to produce policy statements about its powers and other matters. It is also why in Clause 3 we have said that the board must act within the best regulatory practice. We believe that the objective sought by noble Lords, particularly in the example given by the noble Lord, Lord Carlile, of medical negligence cases, would be covered by the combination of regulatory objectives and the way in which the board will operate. The noble Lord gave a good example of where I would not expect the board to use its power.

The question is whether there could be circumstances where problems had arisen with one of the objectives and it was felt that action should be taken. The difficulty with the amendment is that it would mean, in effect, that the board would have to look at all the objectives to see whether they, too, were being—I use the word advisedly—flouted. I cite as an example access to justice, an extremely important issue that we have debated and will continue to debate on Report. There could be an issue on which the board felt it had to act but, on the basis of this amendment, it could not act because the other regulatory objectives were not being damaged. That would hinder the operation of the board in a way that I do not think noble Lords want.

The adjective "significant" was proposed, although the noble Lord, Lord Kingsland, said that other adjectives could be used. Again, the difficulty for the board is that "significant" when considered from the legal perspective—noble Lords know that I am not a lawyer but I do take legal advice—could hinder the board from operating. For example, if the board were working with a small regulator, could a case where only very few people were affected, albeit extremely adversely, be considered significant? Ultimately it would be for the courts to decide, but from the perspective of this legislation, we do not want to put the board in a position where it feels disempowered to act because of the word "significant". However, we believe that the objectives sought by the noble Lord, Lord Kingsland, in this amendment are already achieved in the Bill.

Noble Lords are right to want to ensure that the board operates properly, that it considers carefully what is happening and why, that it does not take inappropriate action, is light touch in its operations and conforms to good regulatory practice. All that is already set out in the Bill; therefore there is nothing between us in terms of what is required.

My Lords, I should like to understand what the Minister was saying a little earlier. Is she saying that the condition proposed by the amendment, "an adverse impact on the regulatory objectives taken as a whole", would only be met if all the objectives were adversely affected? I do not understand it that way. As I understand it, you look at the totality of the objectives and ask whether some of them are adversely affected and whether that consideration is not outweighed by improvement to the other objectives. Surely that is what one is meant to be doing. If the Minister is really saying that the provision can only be triggered if all the objectives are adversely affected, I see great force in her argument, but I do not think that that is what the amendment begins to say.

My Lords, the noble Viscount—for me, anyway—makes my point. "Taken as a whole" means taken as a whole; if a regulatory objective that said "supports the constitutional principle of the rule of law" were being damaged in some way, but every other objective was being met in a way that we would applaud, the board, according to what I believe the noble Viscount said, could not act. I am saying that the board must be able to act. Of course—I have been explicit about this, and I think I have been quoted on it—the balance with what is happening, which is where the example of the noble Lord, Lord Carlile, comes in, is critical. That is what good regulatory practice says under Clause 3, and it is what the board is required to do. Under the amendment, the board simply could not act if there was a serious problem on the rule of law, access to justice or other aspects of the regulatory objectives that noble Lords might feel are more important than others but the other objectives were not affected. That is not what we would wish to see.

With respect, my Lords, the Minister misunderstood the intent of the amendment, as I understand it, and its wording. "Taken as a whole" is very different from "all the objectives". If the Bill said, "had an adverse impact on all the regulatory objectives", I would see her point, but it does not. I think she seriously needs to think again about the effect of the amendment.

My Lords, I am grateful to the noble Viscount—

My Lords, I have a simple question. Does the Minister really understand what is being said, and said particularly well by the noble Lord, Lord Brennan: what we are creating is, so to speak, a structure for a judicial approach? That is the basis; we are not saying any more than that.

My Lords, I understand my noble friend Lord Brennan—he has given me some of his time to discuss this—and the noble Viscount. But I wish to explain how the reasons for which noble Lords seek this provision in the legislation are already dealt with in the Bill therefore they need not move their amendments. The amendments as framed would not have beneficial implications for the regulatory framework that we seek to set out. That is the fundamental difference between us. I am arguing that the amendments are unnecessary to achieve what is required and can therefore safely be withdrawn without fear that there will be a problem in the running of the Legal Services Board.

My Lords, I understand the Minister—

My Lords, we are on Report, and the Minister has now sat down.

My Lords, am I in order or not?

Noble Lords:

No.

My Lords, the noble Viscount has already deployed his immense gifts for oratory to very considerable effect. He has helped to sharpen and define exactly what the issue is between us and the Government.

In my opening remarks, I drew your Lordships' attention to some observations made by the noble and learned Baroness, Lady Butler-Sloss, at Second Reading, when she pointed out that almost inevitably, where you have eight objectives, there will be some conflict between them: some will pull in one direction, some will pull in another. At the end of the day, a balanced view has to be taken about whether the importance of one regulatory objective outweighs the other. That is essentially the point the noble Viscount, Lord Bledisloe, has made and is exactly the intention behind the amendment.

We have had a number of exchanges with the Government about these issues; the time has come to test the opinion of the House.

On Question, Whether the said amendment (No. 119) shall be agreed to?

Their Lordships divided: Contents, 184; Not-Contents, 132.

Resolved in the affirmative, and amendment agreed to accordingly.

moved Amendment No. 120:

Clause 30, page 15, line 13, after "objectives" insert "taken as a whole"

On Question, amendment agreed to.

Clause 31 [Directions]:

moved Amendments Nos. 121 to 123:

Clause 31, page 16, line 2, leave out "an" and insert "a significant"

Clause 31, page 16, line 2, leave out "one or more of"

Clause 31, page 16, line 3, after "objectives" insert "taken as a whole"

On Question, amendments agreed to.

Schedule 7 [Directions: procedure]:

moved Amendments Nos. 124 and 125:

Schedule 7, page 150, line 27, leave out "Secretary of State" and insert "Lord Chancellor"

Schedule 7, page 150, line 36, leave out from "The" to "thinks" in line 37 and insert "Lord Chancellor must give the Board such advice as the Lord Chancellor"

On Question, amendments agreed to.

Clause 34 [Public censure]:

moved Amendments Nos. 126 to 128:

Clause 34, page 17, line 15, leave out "an" and insert "a significant"

Clause 34, page 17, line 15, leave out "one or more of"

Clause 34, page 17, line 16, after "objectives" insert "taken as a whole"

On Question, amendments agreed to.

[Amendment No. 129 not moved.]

Clause 35 [Public censure: procedure]:

[Amendment No. 130 not moved.]

Clause 36 [Financial penalties]:

moved Amendment No. 131:

Clause 36, page 18, line 4, leave out paragraph (a) and insert—

"(a) that an approved regulator has failed to comply with a requirement to which this section applies, and"

My Lords, I wish to speak also to Amendments Nos. 136, 137, 140 to 145 and 175. In Committee, noble Lords presented a number of characteristically persuasive arguments questioning the way in which the board's fining power is intended to operate. Having had the opportunity to reflect on those arguments, I am persuaded of the case for change. I am therefore bringing forward amendments to limit the circumstances in which the board may exercise its power to fine to those instances where an approved regulator has failed to separate its regulatory and representative functions in accordance with rules made under Clause 29, failed to comply with a direction made under Clause 31, or failed to comply with Clause 50 or rules made under that clause relating to practising certificate fees. These are all issues over which the approved regulator has both the responsibility for the issue and the ability to control outcomes. In these instances, it is clearly right that the board should be able to issue a penalty if it considers that that is the most effective course of action.

Consumer groups have argued strongly against constraining the fining power; they see the board's power to impose a financial penalty as an important part of a regulator's toolkit and one that, when used, will send a clear and public message to consumers that regulators have the ability and willingness to act on their behalf. To an extent we accept that view, but noble Lords will see that I have tabled amendments to determine the circumstances.

We have also lengthened the time within which an approved regulator can appeal a financial penalty from 42 days to three months. We accept the view of the noble Lord, Lord Kingsland, that the timeframe within which to appeal should reflect the timeframe for judicial review.

I hope that noble Lords will recognise that the Government have listened to their concerns and that we have moved to constrain the fining power and to extend the arrangements to challenge the use of that power. I believe that, in doing that, we have gone as far as is reasonable. I hope that noble Lords will accept these amendments. I beg to move.

My Lords, we thank the Government for tabling amendments to restrict the power to fine to circumstances where an approved regulator fails to comply with a direction, or breaches the provisions concerning separation of regulatory from representative functions or the use of the practising certificate fee. This largely takes care of the concerns that we expressed about being fined for matters that are outside the control of the representative bodies. I am most grateful.

On Question, amendment agreed to.

moved Amendments Nos. 132 to 134:

Clause 36, page 18, line 5, leave out "an" and insert "a significant"

Clause 36, page 18, line 5, leave out "one or more of"

Clause 36, page 18, line 6, after "objectives" insert "taken as a whole"

On Question, amendments agreed to.

moved Amendment No. 135:

Clause 36, page 18, line 6, after "objectives," insert—

"( ) that the approved regulator has failed to comply with a direction made under section 31,"

My Lords, we are extremely grateful to the Government for the amendments that they have just brought forward. However, they have not yet accepted the general principle that fines should be imposed only where no lesser sanction is appropriate. They have, of course, included that principle in Clauses 40 and 44, which deal with intervention and the cancelling of approved regulators' designations; and in other contexts, they have accepted that the power to fine is significantly different from the powers to give directions, to set targets and to censure. For example, the Bill provides for appeals against fines. In dealing with an amendment moved by my noble friend Lord Campbell of Alloway concerning judicial review, in respect of Legal Services Board directions, the Minister said that,

"the fining power within the Bill is, we believe, a stronger power. Noble Lords and those who are being regulated may also feel that it is stronger, more definitive and has potentially greater and far-reaching consequences. We therefore wanted to add the ability to go to appeal specifically around that power. So we did so, by saying that there would be leave to go to the High Court to appeal on that power".—[Hansard, 23/01/07; col. 1013.]

Given that fines are a significantly stronger power, we think it essential that they should be used only where no lesser sanction would suffice. Providing for appeals against fines is not enough. It is important to ensure that the basis on which fines may be imposed is properly defined in the first place. Indeed, the Minister appeared to accept that proposition in the discussion on my amendment concerning appeals against public censure. The Minister said:

"For me, designing a board by saying, 'This is how you must behave' is a better way of achieving what I think the noble Lord is seeking—that is, it ensures that the board does not exercise its power inappropriately or heavy-handedly and so on. There is unanimity in the Committee about light-touch supervisory regulation. No one has argued against that and the Government do not either. Therefore, how the board uses its powers is about saying, 'You must behave in this way', rather than trying to develop criteria for when it would use them".—[Hansard, 23/01/07; col. 1019.]

The Minister sought to justify the power to fine by references to the position of other regulators, including the Financial Services Authority and Ofgem; but both of those directly regulate service providers. They do not supervise other regulators and they do not supervise supervisors, as in this case. The only example that supports the Minister's case is the existing power of the Legal Services Complaints Commissioner. Power for a supervisory regulator to fine another regulator is very unusual and needs to be confined to circumstances where no other sanction is appropriate. Nevertheless, we have sought, in the circumstances, to limit the power to fine in the ways set out in the amendment. I beg to move.

My Lords, I am grateful for the explanation that the noble Lord has given, but I am not persuaded that I want to go further. The noble Lord was gracious in seeing that I had responded to the comments made in Committee and in our conversations with the Law Society and the Bar Council. We do not want to see the fining power in the same category as the powers to intervene directly with approved regulators or to cancel an approved regulator's designation. Those are very different, but that would be the effect of Amendment No. 135. We do not believe that the fining power is of the same order of magnitude.

On a more practical level, the amendment would reduce the board's ability to make a flexible response to a regulatory failure. The argument in the Macrory review, as noble Lords will know, is that the move is towards greater flexibility where sanctions are used. We have already said many times in the passage of this legislation that we hope that these sanctions will not be used. However, where they are used, the argument is to enable those using them to have the greatest possible flexibility to use the most appropriate sanction at any given time.

I indicated that, in our discussions with consumer groups, they expressed great concern that we should not constrain the fining power because they saw it as an important part of a regulator's toolkit, which, if it were to be used, would send the clear and important message that the regulator was willing to act on their behalf.

We believe that we again have the right balance. We have made a move to accept in part what the noble Lord, Lord Kingsland, said in Committee about my previous amendments following discussions with the regulatory bodies, but it is important to retain flexibility and, therefore, we must ask the noble Lord to withdraw his amendment.

My Lords, I am most grateful for the noble Baroness's response and I am aware that she has already given some ground in this area by the amendments to which she spoke in the previous group on the list. I am disappointed at her reply; but, bearing in mind that there has been some movement by the Government, I shall hope for some more movement between now and Third Reading. Meanwhile, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

moved Amendments Nos. 136 and 137:

Clause 36, page 18, line 8, at end insert—

"( ) This section applies to any requirement imposed on the approved regulator—

(a) by rules under section 29 (internal governance rules), (b) by a direction given under section 31 (Board directions), or (c) by section 50 (control of practising fees charged by approved regulators) or by rules under that section."

Clause 36, page 18, line 9, leave out from "the" to ", of" in line 10 and insert "failure"

On Question, amendments agreed to.

[Amendment No. 138 not moved.]

moved Amendments Nos. 139 and 140:

Clause 36, page 18, line 14, leave out "Secretary of State" and insert "Lord Chancellor"

Clause 36, page 18, line 17, leave out subsection (6)

On Question, amendments agreed to.

Clause 37 [Financial penalties: procedure]:

moved Amendments Nos. 141 to 143:

Clause 37, page 18, line 27, leave out "acts or omissions" and insert "failure"

Clause 37, page 19, line 7, leave out "acts or omissions" and insert "failure"

Clause 37, page 19, line 10, leave out "42 days" and insert "3 months"

On Question, amendments agreed to.

Clause 38 [Appeals against financial penalties]:

moved Amendments Nos. 144 and 145:

Clause 38, page 19, line 35, leave out "42 days" and insert "3 months"

Clause 38, page 19, line 39, leave out "42 days" and insert "3 months"

On Question, amendments agreed to.

Clause 40 [Intervention directions]:

moved Amendments Nos. 146 to 148:

Clause 40, page 20, line 40, leave out "an" and insert "a significant"

Clause 40, page 20, line 40, leave out "one or more of"

Clause 40, page 20, line 41, after "objectives" insert "taken as a whole"

On Question, amendments agreed to.

Clause 41 [Intervention directions: further provision]:

moved Amendments Nos. 149 to 151:

Clause 41, page 21, line 34, leave out "Secretary of State" and insert "Lord Chancellor"

Clause 41, page 22, line 1, leave out "Secretary of State" and insert "Lord Chancellor"

Clause 41, page 22, line 5, leave out "Secretary of State" and insert "Lord Chancellor"

On Question, amendments agreed to.

Schedule 8 [Intervention directions: procedure]:

moved Amendments Nos. 152 to 155:

Schedule 8, page 154, line 10, leave out "Secretary of State" and insert "Lord Chancellor"

Schedule 8, page 154, line 19, leave out from "The" to "thinks" in line 20 and insert "Lord Chancellor must give the Board such advice as the Lord Chancellor"

Schedule 8, page 157, line 27, leave out "Secretary of State" and insert "Lord Chancellor"

Schedule 8, page 157, line 36, leave out from "The" to "thinks" in line 37 and insert "Lord Chancellor must give the Board such advice as the Lord Chancellor"

On Question, amendments agreed to.

Clause 44 [Cancellation of designation as approved regulator]:

moved Amendments Nos. 156 to 158:

Clause 44, page 22, line 30, leave out "Secretary of State" and insert "Lord Chancellor"

Clause 44, page 22, line 36, leave out "Secretary of State" and insert "Lord Chancellor"

Clause 44, page 23, line 10, leave out "Secretary of State" and insert "Lord Chancellor"

On Question, amendments agreed to.

moved Amendments Nos. 159 to 161:

Clause 44, page 23, line 15, leave out "an" and insert "a significant"

Clause 44, page 23, line 15, leave out "one or more of"

Clause 44, page 23, line 16, after "objectives" insert "taken as a whole"

On Question, amendments agreed to.

moved Amendments Nos. 162 to 164:

Clause 44, page 23, line 25, leave out "Secretary of State" and insert "Lord Chancellor"

Clause 44, page 23, line 26, leave out "Secretary of State" and insert "Lord Chancellor"

Clause 44, page 23, line 28, leave out "Secretary of State" and insert "Lord Chancellor"

On Question, amendments agreed to.

Schedule 9 [Cancellation of designation as approved regulator]:

moved Amendment No. 165:

Schedule 9, page 163, line 24, leave out "Secretary of State" and insert "Lord Chancellor"

On Question, amendment agreed to.

Clause 45 [Cancellation of designation: further provision]:

moved Amendments Nos. 166 to 169:

Clause 45, page 23, line 38, leave out "Secretary of State" and insert "Lord Chancellor"

Clause 45, page 23, line 43, leave out "Secretary of State" and insert "Lord Chancellor"

Clause 45, page 23, line 45, leave out "Secretary of State" and insert "Lord Chancellor"

Clause 45, page 24, line 25, leave out "Secretary of State" and insert "Lord Chancellor"

On Question, amendments agreed to.

Clause 46 [The Board's power to recommend orders made under section 45]:

moved Amendments Nos. 170 to 173:

Clause 46, page 25, line 2, leave out "Secretary of State that the Secretary of State" and insert "Lord Chancellor that the Lord Chancellor"

Clause 47, page 25, line 35, leave out "Secretary of State" and insert "Lord Chancellor"

Clause 47, page 26, line 3, leave out "Secretary of State" and insert "Lord Chancellor"

Clause 47, page 26, line 7, leave out "Secretary of State" and insert "Lord Chancellor"

On Question, amendments agreed to.

Clause 48 [The Board's policy statements]:

moved Amendment No. 174:

Clause 48 , page 26, line 29, at end insert—

"( ) Any statement of policy issued by the Board must—

(a) respect the principle that primary responsibility for regulation rests with the approved regulators; (b) ensure that the Board exercises its powers only where it considers that the action or inaction of an approved regulator is not an approach which the approved regulator could reasonably have taken; (c) provide that, save where there is an imminent risk of significant damage to the regulatory objectives, the Board will seek to resolve matters informally with the approved regulator before seeking its powers."

My Lords, when Sir David Clementi issued his consultation paper on the appropriate structure for the regulation of legal services, he canvassed two main options. The first was for a unitary system of regulation with a body on the same lines as the Financial Services Authority taking over responsibility from the professional bodies and other front-line regulators in the legal field. The second is the continuation of regulation based on the professional bodies but with a new board with supervisory powers to ensure that the approved regulators carry out their tasks effectively and in the public interest. Sir David's final report, reflecting the great preponderance of responses to the consultation, favoured the second option.

The Government appeared to accept this approach. In their response to the Joint Committee report by both Houses, they said:

"The government agrees that the intention of the Legal Services Board should be to work in partnership with the authorised regulators, leaving them with the responsibility for day to day regulation. The Legal Services Board should exercise its powers only where approved regulators are clearly failing".

However, the Bill does not, as we have seen on so many occasions, make it clear that the lead responsibility for regulation is intended to rest with the professional bodies, with the Legal Services Board exercising its powers only in the event of significant regulatory failure. Consequently, there is nothing in the Bill to indicate that the Legal Services Board is intended to act as a supervisory regulator, leaving the day-to-day responsibility for regulation with the approved regulators and exercising its powers only where they are clearly failing.

The Bill is cast in terms that would enable the Legal Services Board to set out detailed templates for the way in which it considers that approved regulators should discharge their functions, to micromanage them and to substitute the board's view for that of an approved regulator, even where the approved regulator's approach is plainly within the range of reasonable decisions.

When we discussed this amendment in Committee, the noble Baroness indicated sympathy for the principle behind the amendment, although she said that she would have some reservations about the drafting. However, she felt that it was unnecessary to include any provision on the face of the Bill. The noble Baroness said:

"I do not rule out other mechanisms whereby the Government explain precisely what we are looking for in bodies being established ... Governments have on many occasions issued statements, had discussions with bodies and so on. I was trying not to rule any of that out."—[Hansard, 23/1/07; col. 1045.]

The prospect of the Government's supplementing the statute through subsequent guidance to the Legal Services Board is, frankly, disturbing. Such guidance may be appropriate with bodies that undertake what are essentially government functions but it is a matter of constitutional importance that the Legal Services Board—the supervisory regulator for the legal profession—should be wholly independent of government. The board should operate in accordance with the statutory provisions and any regulations made under them. It should not be subject to informal guidance from government.

The Minister's comments reinforce the need for Parliament to set out clearly, through mechanisms such as this proposed amendment, what the relationship between the Legal Services Board and the approved regulators should be. It would be very damaging were the Legal Services Board to act in an over-intrusive way. As the Joint Committee noted, the estimates for the cost of the Legal Services Board are credible only on the assumption that it acts as a light-touch regulator.

We have already seen that the establishment costs of this institution are likely to be in the area of £40 million and the running costs, £30 million. If it is operated in the more intrusive way made possible by the Bill as presently drafted, the cost of this tier of regulation will rise substantially, as will the costs of the approved regulators in dealing with the Legal Services Board. Furthermore, if the Legal Services Board acts as the primary regulator, treating the approved regulators as its administrative outposts rather than as the lead regulators that they are intended to be, it will become impossible for the approved regulators to attract and retain the calibre of staff that they need to discharge their responsibilities effectively. The result would be a gradual drift towards an FSA style of regulation, in substance if not in name.

The proposed amendments to Clause 48 are designed to ensure that the Legal Services Board, in its relationship with the approved regulators, acts as the Government say they intend it to do. I beg to move.

My Lords, I do not want to repeat what was said by others at the previous stage of this Bill, particularly as my noble friend Lord Maclennan is inclined to use colourful language from time to time. He described Clause 48 as an "incubus", prompting an exchange about the writings of Edgar Allan Poe, which the Minister, understandably, told us she had no time to read at present. I also think that my noble friend Lord Maclennan described the Legal Services Board as a "behemoth" the other day. Whatever colourful language one uses, it is very important for approved regulators to know what it is.

We have heard repeated statements of policy, which of course we take at face value, stating that this is intended to be light-touch regulation. In Clause 48, we have a single clause that deals with the way in which policy statements are to be issued, and the approved regulators will look to this clause and what goes with it to understand their relationship with the Legal Services Board. If ever there was a place where the policy should be expressed and where it should be made clear that the policy is that there should be light-touch regulation, this is it. I hope that the Minister will accept that these amendments, whether or not the wording is perfect, are intended to ensure that, in this crucial policy section of the Bill, the approved regulators will see a demonstration of that light-touch approach. It is not anywhere in the Bill at present, and this surely is the place in which to position it.

My Lords, I strongly agree with my noble friend Lord Kingsland who put this amendment and those linked with it in context. This is probably one of the most important debates that we are going to have. During the Joint Select Committee meetings, we spent considerable time seeking reassurance from the Minister that the regulator would administer a light-touch system of regulation. I recall that the Minister's colleague, Bridget Prentice, emphatically told us just that,

"Where the approved bodies are operating effectively, the LSB will leave them to get on with that job properly".

That has been the whole basis on which we have proceeded. I await the Minister's words with great anticipation, as I sensed, during that important debate in Committee, that she was exceedingly sympathetic to the approach that we are now taking. I look forward to her accepting this important amendment.

My Lords, I had understood that the noble Baroness clearly embraced the principle of light touch—or however one cares to express it. So far, I have not found in the Bill anything that expresses that. I do not think that I would expect to find the expression "light touch" in the Bill but I would expect to find words that convey that impression to me. Up until now, I have not seen them. Maybe the Minister's reply will demonstrate that for the first time.

My Lords, I am always trying to address concerns raised by the noble and learned Lord, Lord Mackay of Clashfern, with great trepidation. I hope that I will succeed, but I do not pretend that I have great confidence. As the noble and learned Lord said, this is about light-touch regulation. As for the language of the noble Lord, Lord Maclennan of Rogart, I blame his education at Balliol; I hope he reads this.

I was and have been sympathetic to many of the issues raised because there is nothing between us in wanting to establish the right relationship with the supervisory regulator, one which is light-touch but with powers to act if necessary. The question is always how to translate that into legislation, as noble Lords who have stood at this Dispatch Box in more eminent positions than mine will know. It is also important that, in trying to further define legislation, one ends up changing, altering, constraining and restricting how a body may operate.

The Bill sets the board as an oversight regulator, and makes it supervisory in nature. We recognise the significant benefits in this model. It is entirely right that approved regulators have the freedom to make the right regulatory decisions, in keeping with their duties under Clause 27 and in line with best regulatory practice, but should the board need to—and I hope it does not—it must be able to take effective action. Trying to further define what is called the B+ model, with which noble Lords will be familiar, in statute may be potentially restrictive.

In Committee, I expressed concerns about the amendment to Clause 48, in particular about the formulation of limbs (b) and (c), which set new thresholds over and above those already in the Bill. For each of the regulatory powers, the board must already meet statutory criteria and we have set out clear procedures that must be followed before a power is used. Let us not forget that Clause 48 already obliges the board to make policy statements in respect of how it will exercise its powers under the Bill, and these will need to be consistent with the principles of transparency, proportionality and the other better regulatory principles in Clause 3, which apply to the exercise of all the board's functions, including the making of policy statements.

Within the legislation, we have already met the objectives that the amendments seek to meet, through the role of the regulatory bodies in Clause 27 and how Clause 3 operates. My difficulty is that the amendments move us beyond that, to constrain and change in a way we would not be able to accept. I have enormous warmth towards the objectives behind these amendments, but they do not take us any further forward. Rather, they constrain.

My Lords, I apologise for interrupting the Minister. She referred to Clause 27, which is a good example of the complaint that those of us who have spoken to the amendments are making. Where in Clause 27—or anywhere else in the Bill, for that matter—do we find any concession to the discretion, judgment and competence of approved regulators? They have been much praised in debate, but are barely recognised or praised in the Bill. The Minister speaks of a light touch, but Clause 27 has a heavy hand. Should not something in the Bill be seen to be statutory light touch?

My Lords, my interpretation of Clause 27 may differ from that of the noble Lord. It says, of the approved regulator's duty:

"In discharging its regulatory functions ... an approved regulator must comply with the requirements of this section"— and that it,

"must, so far as is reasonably practicable, act in a way ... compatible with the regulatory objectives, and which the ... regulator considers most appropriate for the purpose of meeting those objectives" .

It then says that the regulator,

"must have regard to ... the principles under which regulatory activities should be transparent, accountable, proportionate, consistent and targeted only at cases in which action is needed [and] any other principle appearing to it to represent the best regulatory practice, and ... the public interest".

Within that context, that reflects the approved regulator's duty and enables it to act within the principles set out in the Bill. The noble Lord may disagree with me—I realise he does from his expression and head movements—but we have achieved that, and I hope that the noble Lord, Lord Kingsland, will withdraw his amendment. We are on Report, I am sitting down.

My Lords, I am grateful to the Minister. We know from what she said in Committee that she supports the principle behind the amendment. However, we have also heard today that she is reluctant to see that principle expressed in the Bill. She said that she was against any attempt to further define the relationship between the Legal Services Board and the approved regulator. However, my complaint and that of my noble and learned friend Lord Mackay is that there is no definition at all in the Bill of the relationship between the Legal Services Board and the approved regulator, reflecting the principle of lightness of touch, which all government Ministers have said ought to be the prevailing principle.

We have debated this matter at great length for many months. It is time to test the opinion of your Lordships' House.

On Question, Whether the said amendment (No. 174) shall be agreed to?

Their Lordships divided: Contents, 169; Not-Contents, 130.

Resolved in the affirmative, and amendment agreed to accordingly.

moved Amendment No. 175:

Clause 48 , page 26, line 32, leave out from second "the" to "in" and insert "failure"

On Question, amendment agreed to.

Clause 53 [Regulatory conflict with other regulatory regimes]:

[Amendment No. 176 not moved.]

moved Amendment No. 176A:

Clause 53 , page 30, line 6, at end insert—

"(2A) The Board may agree to exercise functions under regulatory arrangements made for the purposes of subsection (1)(b).

(2B) Any resolution of an external regulatory conflict in accordance with the regulatory arrangements of an approved regulator (whether by the Board or any other person)—

(a) binds an external regulatory body only if, or to the extent that, the body agrees with the approved regulator to be so bound, and (b) is subject to any provision made by or by virtue of this Act or any other enactment.

(2C) An approved regulator must consider any request made by an external regulatory body for the approved regulator to reconsider any provision made by its regulatory arrangements on the ground that the provision—

(a) conflicts with a requirement of a regulatory provision made by the external regulatory body, or (b) unnecessarily duplicates any regulatory provision made by that body."

My Lords, I shall also speak to Amendments Nos. 176B and 176C, which are substitutes for Amendment No. 176.

During the debate of 23 January, the noble Baroness agreed to consider the principle behind the line of amendments preceding the ones now tabled. They centred on the obligations on approved regulators to co-operate with non-legal regulators over issues of regulatory conflict. In consultation with the Institute of Chartered Accountants, the Government indicated that the wording of Amendments Nos. 176A to 176C might be acceptable. While promoting consumer interests everywhere else, the Bill will put at a disadvantage consumers, providers of services from alternative business structures and indeed legal practices employing individuals with other regulatory obligations by not giving them the same rights to raise issues of conflict.

The Government's justification for rejecting these amendments is apparently that the general duty is sufficient, but if it is sufficient for conflict between an approved regulator and an external regulator, why not for conflicts between two approved regulators? That distinction appears artificial. The Government, after a degree of prevarication have given the institute an explanation of their decision not to table an amendment to Clause 53. As I have just hinted, that is based on the assertion that the general duty for approved regulators to avoid regulatory conflict is sufficient.

The provision of legal services is already integrated with many other regulatory regimes. If the Bill is to have the right effect, providing for more flexible and innovative provision, such regimes will become even more integrated. I beg to move.

My Lords, I am grateful to the noble Lord for raising this issue. He is right that we have had a detailed conversation with the ICAEW and shared with it our thinking about what we might seek to do and our decision in the end. In all the areas that I have looked at further, I have thought through the policy implications, discussed them with the appropriate people and, where necessary, brought together ideas to see what an amendment might look like. On that basis, we have tried to see whether we would add anything to the Bill or whether, without meaning to, we could create confusion or add burdens.

Clause 53 places a duty on approved regulators to take account of other regulatory regimes. They are required not only to take steps to prevent regulatory conflict and avoid unnecessary duplication of regulatory requirements but also to provide for the resolution of regulatory conflicts. These duties apply to any approved regulator whose regulated practices include non-lawyer professionals, such as accountants or chartered surveyors. The Bill allows the board to play a role in resolving disputes between approved regulators and external regulatory bodies, provided that the board and the regulators consent and applicable statutory and other provisions allow it. Amendment No. 176A makes that more explicit, but it does not change the policy.

The amendments do little to help prevent regulatory conflict; Clauses 51 to 54 already provide for that. However, they would place a further burden on approved regulators, who would have an obligation not only to address regulatory conflict with external regulators but also to consider formally and act upon any applications about specific instances. They would increase the pressure on approved regulators, who might be concerned about the possibility of a legal challenge because they had failed fully to address approaches from external regulators. They would apply a potential further statutory burden on the board by requiring it to consider such additional references as may be generated as a result of these amendments.

One of the key reasons that bodies enjoy the status of approved regulator is that they are judged responsible; that is, as bodies of experience and substance which the Government, in taking forward Sir David Clementi's B+ model, have clearly entrusted with the day-to-day regulation of members of the legal profession. Noble Lords will know that that background is an important aspect of what the Government seek to do. They are responsible bodies, and we expect them to behave as such—they do. We expect that approved regulators would not only want to deal with any cases of regulatory conflict—I think that most, if not all, already maintain comprehensive rules on dealing with conflicts of interest—but they would actively want to avoid or resolve any such conflicts.

We believe that the duties set out in the Bill are sufficient to encourage approved regulators and ensure that they take a proactive approach to dealing with external regulatory conflict. Having looked very carefully at what this amendment would do, I see no justification for change here. Within the framework that we have set up and with the rules that they will have, these responsible bodies are perfectly capable of resolving these issues. I hope the noble Lord will withdraw his amendment.

My Lords, I am grateful for the Minister's reply. She is reposing great confidence in the general duties, and she may prove to be right. However, she is well aware of the institute's strength of feeling that, if special provisions are not in the Bill, co-operation and avoidance of conflict will not occur. I shall not press this amendment to a vote. We shall simply have to wait and see whether the facts bear out the Government's confidence. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 176B and 176C not moved.]

Clause 58 [Referral of report by the Secretary of State to the Competition Commission]:

moved Amendments Nos. 177 to 180:

Clause 58, page 32, line 12, leave out "Secretary of State" and insert "Lord Chancellor"

Clause 58, page 32, line 14, leave out "Secretary of State" and insert "Lord Chancellor"

Clause 58, page 32, line 15, leave out "Secretary of State" and insert "Lord Chancellor"

Clause 58, page 32, line 17, leave out "Secretary of State" and insert "Lord Chancellor"

On Question, amendments agreed to.

Clause 59 [Duties of the Competition Commission]:

moved Amendments Nos. 181 and 182:

Clause 59, page 32, line 20, leave out "Secretary of State" and insert "Lord Chancellor"

Clause 59, page 33, line 18, leave out "Secretary of State" and insert "Lord Chancellor"

On Question, amendments agreed to.

Clause 60 [Secretary of State's power to give directions]:

moved Amendments Nos. 183 to 186:

Clause 60, page 33, line 22, leave out from "The" to "considers" in line 23 and insert "Lord Chancellor may direct the Board to take such action as the Lord Chancellor"

Clause 60, page 33, line 25, leave out "Secretary of State" and insert "Lord Chancellor"

Clause 60, page 33, line 29, leave out "Secretary of State" and insert "Lord Chancellor"

Clause 60, page 33, line 34, leave out "Secretary of State" and insert "Lord Chancellor"

On Question, amendments agreed to.

Clause 61 [The Board as an approved regulator]:

moved Amendments Nos. 187 to 192:

Clause 61, page 33, line 37, leave out "Secretary of State" and insert "Lord Chancellor"

Clause 61, page 33, line 41, leave out "Secretary of State" and insert "Lord Chancellor"

Clause 61, page 34, line 3, leave out "Secretary of State" and insert "Lord Chancellor"

Clause 61, page 34, line 8, leave out "Secretary of State" and insert "Lord Chancellor"

Clause 61, page 34, line 9, leave out "Secretary of State" and insert "Lord Chancellor"

: Clause 61, page 34, line 18, leave out "Secretary of State" and insert "Lord Chancellor"

On Question, amendments agreed to.

Clause 65 [The Board's power to recommend orders made under section 61]:

moved Amendments Nos. 193 and 194:

Clause 65 , page 36, line 38, leave out "Secretary of State that the Secretary of State" and insert "Lord Chancellor that the Lord Chancellor"

Clause 65 , page 37, line 2, leave out "Secretary of State" and insert "Lord Chancellor"

On Question, amendments agreed to.

Clause 67 [Regulatory conflict and the Board as approved regulator]:

[Amendments Nos. 195 to 199 not moved.]

Clause 68 [Modification of the functions of approved regulators etc]:

moved Amendments Nos. 200 and 201:

Clause 68, page 39, line 3, leave out "Secretary of State" and insert "Lord Chancellor"

Clause 68, page 39, line 6, leave out "Secretary of State" and insert "Lord Chancellor"

On Question, amendments agreed to.

Clause 70 [Carrying on of activities by licensed bodies]:

moved Amendment No. 202:

Clause 70, leave out Clause 70

My Lords, Amendment No. 202 stands in my name and that of my noble friend Lord Maclennan of Rogart. I shall also speak to the other amendments in this group. Once again, I shall not rehearse everything that was said at an earlier stage; there was a robust debate between my noble friend Lord Thomas of Gresford and the government Front Bench on that occasion. However, as we have decided to move these amendments again, I shall explain why.

These clauses will introduce the so-called alternative business structure, but they achieve two aims that are adverse to the Government's intention in the Bill. First, they will stifle competition where those who espouse competition very strongly—such as ourselves and the noble Lord, Lord Whitty, who I am pleased to see in his place—believe the need for competitive services is greater than anywhere; that is, for people of poorer means and people who live in areas where the provision of legal services is not substantial, such as rural areas.

Secondly, the introduction of alternative business structures will directly contradict regulatory objective (e) in Clause 1(1); namely the encouragement of,

"an independent, strong, diverse and effective legal profession".

I urge the noble Baroness to reread every word of that objective, including "independent", "diverse" and "legal profession". The danger of these structures is that for those who may need them most, who sometimes have the greatest difficulty in enforcing their legal rights or in interpreting their legal obligations, there will be much less of a legal profession available.

Alternative business structures have considerable attractions. It would be foolish to ignore them. But for whom do they have those attractions? They certainly have attractions for large corporate vehicles, which will wish to invest in using legal disputes as a way of bringing customers into their businesses for other purposes. Supermarket businesses, insurance companies—for example, the car insurance sector—banks and others can readily be foreseen as participants in this market. It is not that they even have to regard legal practice as a profit centre; all they will wish to do is to regard it as a customer centre from which they can earn profits, possibly in connection with legal disputes but certainly in connection with other services they can provide.

For those living in rural areas it raises the spectre of the destruction of a system that, though not perfect in all its features, has worked pretty well for an extremely long time. In the sort of area in mid-Wales that I used to represent in another place there are, and always have been, small firms of solicitors in market towns, some of them combining together but always providing a choice. One of the things they are able to do with more complex disputes is to say to their clients, "Well, if we do not have the expertise, we will go to someone who does". Those like me and my noble friend Lord Thomas of Gresford, who by coincidence was in the same barristers' chambers in Chester as myself for a number of years, were of course the beneficiaries of that system. That system provides competition at all levels and an expert service which is surprisingly economical when the fees are examined, as they rarely are by some of the greatest cynics. The Bar and, indeed, solicitors are the original consultancy professions. They were there long before this Government and their predecessor turned to consultancy for almost everything.

What will happen in rural areas is exactly what has happened to the retail sector—the evidence is there. When I first become the Member of Parliament for Montgomeryshire, in the market town of Newtown there were butchers, greengrocers, an excellent cheese shop and an old, established ironmonger. Within a few years a large supermarket chain moved in. The cheese shop closed down 14 days after the supermarket opened. It lost both its custom and its staff to the supermarket. The ironmonger closed not much later, and the best of the greengrocers survived for not much longer. That is what happens when you allow the corporate sector to take over the kind of local services that have served the public well for a long time.

Alternative business structures are attractive to barristers and solicitors because they know they can move into a large corporate vehicle where they will be cushioned from that often most unwelcome of creatures, the lay client. In normal everyday practice the lay client who comes through the door often has a rankling feeling of injustice; they complain, and they harangue sometimes. The small practitioner puts up with it, deals with them and usually finds a way of satisfying them, even if it is to say, as honest practitioners often do, "I am sorry, there is absolutely nothing I can do for you". They will be replaced with call centres. The lawyers will be attracted by the idea that they will deal only with the most important issues placed before them. They will be able to make policy decisions which will brush aside small housing cases, cheap divorces, small crime, small personal injury claims and so on. The public will be driven to ringing up call centres, which will offer unqualified persons giving poor advice. There is the clearest evidence that that is what the market will produce because it has already done so in many other sectors.

The experiment with alternative business structures, unless it is extremely carefully piloted and market-tested, is therefore unlikely to do anything but damage. It may be said, "Oh, well of course in rural areas there are the citizens advice bureaux", but citizens advice bureaux, although they are very good organisations, depend almost entirely on the voluntarily given expertise of those very lawyers who will disappear from local communities if alternative business structures are allowed to take hold.

Alternative business structures are attractive to lawyers for other reasons. If you take the analogy of another fee-earning industry, the advertising industry, decades ago advertising agents ran, rather like barristers and firms of solicitors, small collegiate structures with a few people earning fees. Then they got the idea of going to the market, and, suddenly, we have multi-billion-pound companies that produce capital advantages for their senior partners and players. Exactly the same would happen to the legal profession. I can see enormous advantages for those of us in the profession in turning our barristers' chambers or firms into corporate vehicles. We might even take over the supermarkets in due course as a result of the capital we would raise in the market. Rather like undertakers, we are certain to have business as the years pass because legal disputes always occur. I cannot see how that would aid the competition, much as many lawyers would like to turn their modest share in their office or their barristers' chambers into a few million pounds' worth of shares. It cannot be in the public interest to do so.

Along with, for example, the Legal Action Group, which certainly has legal consumers' interests at heart, the Legal Aid Practitioners Group and the Solicitor Sole Practitioners Group, we have taken the view that these provisions are anti-competitive and likely to destroy a significant part of the profession if not extremely carefully controlled, hence our opposition to them. I beg to move.

My Lords, I recognise some of the anxieties that the noble Lord, Lord Carlile, points to. However, it is certainly the view of most consumer organisations that there should be some flexibility in the provision of service and in combining different services that are related in terms of the consumer experience, particularly those that involve buying and selling property and other transactions that require not only a lawyer but a lot of other areas of expertise, which could be brought together.

The noble Lord seems to think that the movement would all be one way. Apart from what he said in his last remarks, he sees Tesco taking over legal practices. But actually many of these solicitors in small towns will be able to expand into providing multiple services to consumers in a one-stop shop. They will be in a far better place than the supermarkets or even the estate agents in so doing. In his earlier remarks, the noble Lord failed to recognise that we are not plunging into a completely free market. This is a regulated, licensed introduction of an alternative business structure, which still has legal standards and professionalism at its heart, but which brings those services to the consumer together with other related services that the consumer may well want.

I do not regard the Bill as allowing completely free rein to establishing an alternative structure to the present ring-fenced legal professions. However, I recognise that the entrepreneurship of legal professionals could well be stimulated by that possibility, as well as by other businesses and services combining and enhancing the services that they offer to the public by bringing legal professionals into their role. From the consumer point of view, with a one-stop shop and the ability to cross-refer between the various professions with which you have to deal, especially in relation to property transactions, which, are, after all, the biggest financial decisions that people make in their lives and the largest use that most people make of lawyers, there is obvious synergy in providing through the alternative business structure.

There are safeguards in the regulatory structure; indeed, there are more safeguards in the responsibilities on the licensing authorities, which are to be debated in later government amendments. So the dire picture that the noble Lord presents is wrong. We certainly should not dive into this without safeguards but, on the other hand, I can see enormous benefits for consumers in introducing this degree of competition and stimulus to innovation in providing such services.

My Lords, I have a great deal of sympathy with what the noble Lord, Lord Carlile of Berriew, said about Part 5. We have serious concerns about the impact that the licensing provisions may have on the provision of legal services in rural areas and in many large industrial towns. That is why we place great weight on Amendment No. 252, which would ensure that when the approved regulators—and, where appropriate, the LSB—address the issue of licensing, they give significant weight, as the planning legislation sometimes says, to the access to justice objective.

In all other respects, I am aware that the noble Baroness has sought to emphasise that the question of weighting is entirely a matter for the Legal Services Board, but I believe this to be a vital exception. That is particularly true in the provision of external capital to legal services. It would not be surprising if, at the end of the operational year, the investor had a careful look at the profitability of the various types of legal activity in which the firm in which it had invested engages. If it finds that some activities are more profitable than others, it will inevitably require the firm to put more resources into those areas in future. The kind of services vital to rural areas and large industrial towns are often those provided to the less well-off consumer.

If a large number of legal firms attract outside capital, the predictions made by the noble Lord, Lord Carlile, are likely to come true. I recall that, in Committee, the noble Lord, Lord Whitty, who has not always been on my side in our debates, expressed some hesitation about the absence of special access to justice provision in this part. I do not know whether that will mean that he will go as far as supporting Amendment No. 252, but he is clearly thinking very hard about what is the appropriate government approach.

Although the noble Lord, Lord Neill of Bladen, has not intervened at this juncture, the noble Baroness will doubtless be aware that he has tabled, at the end of the Bill, what might be described in effect as a sunrise clause. In that context, the noble Baroness will recall the long debate that we had about the importance of monitoring ABSs in their early phases to see whether their effect is as beneficial as the Government predict. She will not be surprised to hear that we believe that some sort of legislative cocktail involving our Amendment No. 252 and the sunrise clause amendment tabled by the noble Lord, Lord Neill of Bladen, is the right approach to Part 5. The uncertainties are great. I hope that the noble Baroness will not underestimate some of the graphic illustration in the predictions of the noble Lord, Lord Carlile of Berriew; if only some of those predictions come true, the government experiment will prove a disastrous failure.

In principle, after careful consideration, we are not inclined to expunge Part 5, provided that either some combination of our amendment and that of the noble Lord, Lord Neill, is accepted or the Government come up with an equivalent solution.

My Lords, in the questions to those who gave evidence to the Joint Committee, I raised a series of problems from my experience when I was, in a sense, part of a similar set-up in Brussels. I will not go into details, but it related to the retention of one's independence as a member of the Bar when in a business relationship of sorts with accountants.

I am very worried about this, for the reasons recorded, which I shall not express again, concerning the independence of legal advice and, hence, its quality. Therefore, I go along with my noble friend Lord Kingsland. I do not feel that I am in a position to expunge the clause, but I am worried. I would like an effective monitoring system—not a licensing arrangement at large, but one that is controlled by statute—and, perhaps, a pilot scheme. I entirely recognise the terrors expressed by the noble Lord, Lord Carlile of Berriew, but that is the world in which, somehow or other, we must live.

My Lords, reference has been made to an amendment that I tabled, with the subsequent backing of other Members of the House, which is a long way down the batting list at No. 637A. Those who followed our debate in Committee may recall that I spoke about Part 5. I do not think that the noble Lord, Lord Whitty, was there, but I picked up from what he had said earlier a worry, from a consumer point of view, about access to justice. I certainly quoted the views of the noble Lord, Lord Carlile of Berriew, and of his colleague, the noble Lord, Lord Thomas of Gresford. The noble and learned Baroness, Lady Butler-Sloss, who is no longer in her seat, expressed fears about access to justice in the West Country. Suffice it to say today that I am looking forward to the opportunity to present that amendment.

Naturally, I sympathise with many of the statements of fact and projections that have been made by the noble Lord, Lord Carlile. In essence, we are rushing into this on an inadequate basis of fact, testing and research. As a House of this calibre, we have no right to be doing this without trying to inform ourselves very much better than we are informed today. I know that the Minister will say, "Ah, but I have sent you a lot of books since then". It is certainly true: there is a stack of papers starting with papers from Sydney, New South Wales, from the Commission in Brussels and—a little nearer to home—from learned professors and so on. It is very good for me to read all this, or part of it, but the projections made by the noble Lord, Lord Carlile, about what may go wrong are very telling, and I shall return to the theme later.

My Lords, I am grateful to noble Lords who have spoken. In Committee, we had useful and important debates on issues that were clearly of great importance to your Lordships. I share the concern. We talked a lot about rural communities in the context of previous experiences, and mentioned the corner shop and the post office. My noble friend alluded to the fact that Part 5 might provide opportunities for small practices to expand to enable them to survive more effectively in rural communities. That is certainly our ambition. We have also talked a lot about access to justice. We will, I hope, consider that more fully when we discuss later amendments. Monitoring is also very important. As the noble Lord, Lord Neill of Bladen, said, he has tabled an important amendment relating to monitoring.

I shall focus entirely on the effect of removing Part 5, which the amendment would do. I shall not pretend that I am not disappointed to see that the amendment has returned, because one of the important aspects of our deliberations in Committee was, I felt, that noble Lords were trying to improve, rather than remove, Part 5. We talked at enormous length about the opportunities that Part 5 could give to providers and consumers and I thought that some noble Lords felt that we should encourage that as long as—this is critical—the appropriate safeguards were in place. The noble Lord, Lord Kingsland, is entirely right that my noble friend Lord Whitty shared his concerns about ensuring that those safeguards were in place.

My ambition is therefore that we should discuss those safeguards and take note of the way in which the Government have sought to address them. That will enable me to explain what we have sought to do and noble Lords to move their amendments and to have that very important debate. If we remove Part 5, we do not prohibit alternative business structures. We inhibit their development, for sure, but we do so without establishing the important system of regulatory safeguards in the legislation to ensure that this develops properly. Noble Lords know that limited forms of alternative business structure practice will be able to continue to develop under the existing framework. Section 66 of the Courts and Legal Services Act makes it clear that nothing in the Solicitors Acts, the notaries Acts or common law prevented solicitors, notaries or barristers from entering into unincorporated associations with other people or restricted the circumstances in which they might do so.

Current protections are not enough. It is right and proper to develop alternative business structures, but it must be done within a proper regulatory framework to ensure that we have competition and greater innovation to the benefit not only of the consumer but of the legal services sector. We want to do that in a structured way that enables us to protect the consumer and the legal profession. We know that a healthy supplier base is absolutely essential to the provision of legal services and to achieving the objective of improving access to justice.

We also know that many legal professionals do not fear competition: quite the opposite. There are tools in Part 5 that will enable them to respond to changes in legal services and the business environment and to competition from new entrants into the market. They can use them to provide even better services to clients, which is at the heart of what the noble Lord, Lord Carlile, said he wished to achieve. I know that he wants to ensure that the quality of service provided to clients is of the highest order and the right calibre, hence the rather gloomy picture that he paints. I understand why he does not want the legal profession to lose face-to-face contact and the ability to talk to the client to give the best advice and to have that replaced by some remote structure, which he described by alluding to the call centre experience that he has had.

We want to achieve nothing other than better legal service. We do not want to do anything that will prevent rural communities from getting the best possible services. I do not think that the noble Lord intends this, but removing Part 5 could stifle innovation and prevent change. We believe that there is quite a lot of welcome, cautious though it may well be in part, for what might be achieved through alternative business structures to ensure a higher quality of services, a strong and vibrant legal profession, and good advice and support to consumers.

I therefore hope that the noble Lord will allow Part 5 to remain on the basis that noble Lords have quite reasonably wished to ensure that we have the right safeguards in place. I very much look forward to debating those later in our consideration of the Bill.

My Lords, the Minister has replied helpfully in her customarily persuasive and courteous way, but I am afraid that we feel totally unpersuaded by what she has said. There is already a competitive market. We fear that the competition in that market will be removed. There is nothing that good lawyers like less than seeing legal work done badly. We believe that, despite the safeguards that are set out in the Bill and in the schedules, and indeed in the amendments that have been so helpfully tabled by some of those who have spoken eloquently in this short debate, we will be left with a situation in which the quality of legal services will diminish.

The Minister spoke of the existing possibilities of lawyers entering into unincorporated associations with one another. That is certainly possible now, but it is a very different professional picture from one in which there are very large incorporated organisations with a very large profit element to them. I say to the noble Lord, Lord Whitty, who spoke constructively to this amendment, that flexibility already exists, but the evidence is that what has been produced is not that good.

In the very large-scale market in personal injury cases, for example, we have seen more litigation with less merit. We have seen significant corporate fraud in the way in which cases have been obtained by corporate vehicles that have placed themselves in that market. Those of us who have been in the profession for a long time have also seen the unseemly picture of commercial organisations persuading people who have been injured in accidents to go to them, but then selling the cases, at a fee per case, to solicitors who then conduct them. I do not understand how that improves the competitive environment for consumers.

We on these Benches therefore feel intense disappointment that Part 5 remains so unmitigated in the Bill. Accordingly, we wish to test the opinion of the House.

On Question, Whether the said amendment (No. 202) shall be agreed to?

Their Lordships divided: Contents, 48; Not-Contents, 116.

Resolved in the negative, and amendment disagreed to accordingly.

My Lords, I beg to move that further consideration on Report be now adjourned. In moving the Motion, I suggest that the Report stage begin again not before 8.20 pm.

Moved accordingly, and, on Question, Motion agreed to.