Further consideration of amendments on Report resumed.

Clause 141 [Duties to share information]:

moved Amendment No. 384:

Clause 141, page 74, line 2, leave out from "to" to "approved" in line 5 and insert "the need to ensure that, so far as reasonably practicable—

( ) duplication of investigations is avoided;( ) the OLC assists"

My Lords, I shall speak also to Amendments Nos. 385 and 386. These amendments relate to the important provisions in Clause 141 on information sharing. Similar amendments were raised in Committee by the noble Lord, Lord Kingsland, and my noble friend Lady Henig on behalf of the Law Society. Although I felt at the time that the wording of the amendment raised at that stage was not appropriate for the Bill, I was persuaded by the importance of the intended effect. As a result, we have worked closely with the Law Society to return with these amendments.

I am happy to report that they represent a solution that both the Law Society and the Government are satisfied with. I hope that noble Lords too will be satisfied. It is of vital importance to the regulatory and complaints-handling framework that approved regulators and the OLC work in co-operation. I am confident that these amendments will facilitate that.

Amendments Nos. 384 and 385 will strengthen the LSB's duties when specifying the requirements which the OLC and approved regulators must meet when drawing up their rules on information sharing. The LSB will now have to have regard to the need to ensure, as far as reasonably practicable, that the OLC and approved regulators, in sharing information, assist one another to perform their function. This elevation of "desirability" to "need" seems more appropriately to reflect the importance of the consideration that the LSB should give to these arrangements.

Amendment No. 386 will require the OLC and approved regulators to consult each other prior to submission of rules or arrangements for LSB approval and to require that if there are unresolved disagreements, these are reported to LSB when the rules or regulatory arrangements are submitted for approval. This reflects the particular relevance of these matters to the relationship between the OLC and approved regulators and will encourage the OLC and approved regulators to reach a consensus on what information should be shared and how, and will therefore further facilitate a co-operative relationship.

Amendment No. 386 covers much the same ground as Amendment No. 387, tabled in the name of the noble Lord, Lord Kingsland. Given the Law Society's agreement on Amendment No. 386, the noble Lord may want to reflect on that when we get to his group of amendments. I beg to move.

My Lords, I am most grateful to the noble Baroness for bringing forward these amendments to Clause 141 and for her explanation for doing so. We accept the superior drafting of the government Amendment No. 386 to our own Amendment No. 387 and are delighted to see that the obligation for the OLC to consult approved regulators before publishing its scheme rules will be put on a statutory basis. It is right that both sides should co-operate as far as possible and identify to the board any part of the proposed rules where they have disagreed. We welcome these amendments.

On Question, amendment agreed to.

moved Amendments Nos. 385 and 386:

Clause 141, page 74, line 6, leave out "of approved regulators assisting" and insert "approved regulators assist"

Clause 141, page 74, line 9, at end insert—

"( ) The OLC must—

(a) before publishing under section 195(2) a draft of rules it proposes to make under subsection (1), consult each approved regulator to which the proposed rules apply, and(b) when seeking the Board's consent to such rules under section 152, identify any objections made by an approved regulator to the rules and not withdrawn.

( ) An approved regulator must—

(a) consult the OLC before making provisions in its regulatory arrangements of the kind mentioned in subsection (2), and(b) where an application is made for the Board's approval of such provisions, identify any objections made by the OLC to the provisions and not withdrawn."

On Question, amendments agreed to.

[Amendment No. 387 not moved.]

Clause 146 [Enforcement of requirements to provide information or produce documents]:

[Amendment No. 388 not moved.]

Clause 149 [Disclosure of restricted information]:

moved Amendments Nos. 389 and 390:

Clause 149, page 78, line 29, leave out "Secretary of State" and insert "Lord Chancellor"

Clause 149, page 78, line 31, leave out "Secretary of State" and insert "Lord Chancellor"

On Question, amendments agreed to.

Clause 152 [Consent requirements for rules]:

moved Amendment No. 391:

Clause 152, page 79, line 14, leave out "Secretary of State" and insert "Lord Chancellor"

On Question, amendment agreed to.

Clause 154 [Interpretation of Part 6]:

moved Amendments Nos. 392 and 393:

Clause 154, page 79, line 38, at end insert "unless in relation to a complaint which is determined by an approved regulator pursuant to a direction made under section (Handling of complaints by approved regulator)"

Clause 154, page 80, line 4, at end insert "and except as permitted by subsection (1)"

On Question, amendments agreed to.

moved Amendment No. 394:

Clause 154, page 80, line 19, at end insert ", or

(c) provision which by virtue of section (Regulatory arrangements not prohibited by section 154) is not prohibited by this section."

On Question, amendment agreed to.

moved Amendment No. 395:

After Clause 154, insert the following new Clause—

"Regulatory arrangements not prohibited by section 154

(1) Section 154 does not prohibit the regulatory arrangements of an approved regulator from making provision requiring, or authorising the approved regulator to require, a relevant authorised person—

(a) to investigate whether there are any persons who may have a claim against the relevant authorised person in relation to a matter specified by the approved regulator;(b) to provide the approved regulator with a report on the outcome of the investigation;(c) to identify persons ("affected persons") who may have such a claim;(d) to notify affected persons that they may have such a claim;(e) to provide affected persons with information about the relevant authorised person's complaints procedures and the ombudsman scheme;(f) to ensure that the relevant authorised person's complaints procedures operate as if an affected person had made a complaint against the relevant authorised person in respect of the act or omission to which the claim relates.

(2) For the purposes of subsection (1) "claim", in relation to a relevant authorised person, means a claim for redress resulting from an act or omission of that person.

(3) For the purposes of this section—

(a) "relevant authorised person", in relation to an approved regulator, means a person authorised by that approved regulator to carry on an activity which is a reserved legal activity, and(b) a relevant authorised person's complaints procedures are the procedures established by that person, or which that person participates in or is subject to, in accordance with regulatory arrangements made in accordance with section 109.

(4) This section applies in relation to the Board in its capacity as a licensing authority as it applies in relation to an approved regulator, and in relation to the Board references to regulatory arrangements are to be read as references to the Board's licensing rules."

On Question, amendment agreed to.

Clause 155 [Legal Services Complaints Commissioner and Legal Services Ombudsman]:

moved Amendment No. 396:

Clause 155, page 80, line 26, leave out "offices" and insert "office"

My Lords, there is a weakness in the Bill in respect of the power of the claimant or respondent to review decisions made by either the OLC or the approved regulator. The Bill allows only for judicial review. That is costly and, in many cases, would prohibit or prevent any review taking place.

In addition, because complaints can contain elements relating to the service or misconduct or negligence, a complaint will have a determination of all matters by the OLC ombudsman. At the same time, before or after that decision, a further decision may be made by the approved regulator of the elements of misconduct and/or negligence.

Those decisions could be at odds with each other and result in two judgments being made against the respondent which would bring about a double jeopardy. There is a further problem: the ombudsman could award redress of up to £20,000 for misconduct or negligence and the approved regulator may not find that there has been a breach of its rules. As such, the respondent ought to have the power to have the ombudsman's decision reviewed other than by means of a judicial review. The amendment was therefore tabled to provide an independent avenue for review of decisions taken by either the ombudsman or the approved regulator. I hope that the amendment is self-evidently sensible and that the Government will accept it. I beg to move.

My Lords, by virtue of Clause 137(4), an ombudsman's determination becomes final and binding if accepted by a complainant. This is one of the cornerstones of the new scheme that we are putting in place. It provides complainants and respondents with the certainty that they are entitled to—a clear end to the complaints process. If the amendments to allow for an independent review were accepted, an ombudsman's determination would no longer be final, and neither complainants nor respondents would have the necessary certainty. This is not only our view, but the view of the British and Irish Ombudsman Association. As we, and it, have said, complainants do not have to accept the determination of the ombudsman. They are always free to reject that decision and to institute court proceedings. It would therefore be wrong to have an independent reviewer able to second-guess the ombudsman.

As explained in Committee, we envisage that there will be several internal reviews of a complaint before it is passed to an ombudsman for a final determination. In Committee, the noble Lord, Lord Thomas of Gresford, said that the amendments arose because the Government had,

"failed to replace the position of the Legal Services Complaints Commissioner and of the Legal Services Ombudsman".—[Hansard, 21/2/07; col. 1164.]

However, although of course the Legal Services Complaints Commissioner and the Legal Services Ombudsman fulfil a valuable role under the present system, there is no need to create these roles under the new system that we are putting in place. At present, consumers need there to be some independent oversight of the way in which the professional bodies handle complaints. This is because those consuming the services do not necessarily have confidence in a profession that is seen to be judging itself. That is not, however, the system that we are creating.

The amendments assume that the ombudsman scheme will work in the same way as the current complaints handling system, and so would require an appeals mechanism to an independent person. I hope it is clear, however, that the Office for Legal Complaints and the ombudsman are independent. The chairman of the OLC is a lay person, as is the chief ombudsman. Other ombudsmen cannot be practising lawyers, and every ombudsman is explicitly required to be appointed under terms that will guarantee independence. Ombudsmen's decisions should be final. If there were appeals, the certainty that we are seeking to create would be lost. That would not be good for consumers or the professions. We are creating a system that we hope is quick and fair and that, crucially, has a certain conclusion to the process. It is a new system, and so does not work like the current one. There is therefore no need to recreate the roles that we had before. I ask that the amendment is withdrawn.

My Lords, I have heard the words of the Minister, and I thank her for considering further a matter that was considered at some length in Committee. I remain concerned that she has not fully answered my point about the possibility of there being a conflict between the redress awarded by the ombudsman and the regulator finding no breach of the rules. However, in the light of what she has said, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 397 to 399 not moved.]

moved Amendment No. 400:

Before Clause 158, insert the following new Clause—

"Board's general duty to consult

The Board must make and maintain effective arrangements for consulting representatives of practitioners and consumers on the extent to which its general policies and practices are consistent with its duty under section 3."

My Lords, Amendments Nos. 400 and 401 have been brought back from Committee. They would impose a general duty on the Legal Services Board to consult—a duty that, as your Lordships are aware, is otherwise absent from the Bill. In our brief exchange on this matter in March, the Minister agreed that,

"it is essential that the board consults on important points of policy and the framework under which it operates".—[Hansard, 6/3/07; cols. 148-49.]

She concluded that it was an unnecessary amendment as the Bill already imposed enough specific duties to consult. At least part of her justification for her approach was that Clauses 8 to 11 already require the board to consult consumers, while her affirmation that she had accepted in principle what was then Amendment No. 38 meant that there would be a similar requirement to consider representations from approved regulators.

Her acceptance in principle has unfortunately not translated into acceptance on paper, so the Bill imposes no general obligation on the board to consider representations from the professional bodies. This is just one of the reasons why the overarching duty to consult proposed by Amendment No. 400 would be so desirable.

Nevertheless, the other important arguments still remain. Accepting the amendments would add to some of the changes that noble Lords have already made to the Bill by reaffirming the board's role as a light-touch regulator by ensuring that the regulators would still have as much of a say as possible and by listening to the recommendations of Sir David Clementi. The Minister was reasonably receptive to these arguments in Committee. As what was Amendment No. 38 now looks unlikely to find its way into the Bill, perhaps she might consider these amendments more warmly. I beg to move.

My Lords, I strongly agree with my noble friend. It might be helpful if the Minister gave us a more detailed explanation of what has been going on behind the scenes. She gave us such a clear commitment in Committee, particularly with regard to Amendment No. 38, but that commitment seemed to disappear somewhere. Either she has been got at in some way that has not yet penetrated the consciousness of the Chamber, or she has changed her mind. In either case, we need an explanation. Amendment No. 400 seems to accord so much with the argument that the Minister previously accepted that it is surely right that there should be a general duty to consult practitioners and consumers on the extent to which the Legal Services Board ensures that its general policies and practices are consistent with its duties in Section 3. Amendment No. 401 lays down a reasonable structure within which the board's general duty to consult would be exercised, and it is very difficult to understand why this is no longer as acceptable as it was. Perhaps the Minister has a convincing explanation, but we have not heard it yet. We await her response with eagerness and anticipation.

My Lords, I am delighted that the noble Lord awaits my response with eagerness and anticipation, but I am not entirely convinced that I will convince him of my argument. Let me describe the general context of Amendment No. 38, which we have discussed. It is absolutely right to say that I took the amendment away and considered the principle behind it, although I did not accept the amendment on the day on which we discussed it because it would have ensured that the Bill afforded consumers and the professions equal treatment. I think that noble Lords broadly accepted that putting in a consumer panel recognised that there was no coherent body representing consumers that would have the necessary force in the legislation but that there were organisations in the professions that had that coherent voice.

I took it away to consult officials and we went through the Bill. Having done so, I contend that the Bill affords, in equal weight, opportunities for the professions to have their voices heard, either because they are, as noble Lords know, well organised, well funded and very well established bodies, conversant in the art of putting forward their views; or, indeed, because the legislation itself requires that they are consulted at various points. It is not that I do not accept the principle behind what I said, but we believe that the Bill already does it. Noble Lords may disagree with that; that is for noble Lords to determine. There is nothing behind the scenes, as such. On examination, it was our view that we had achieved what was wanted. That is why I have not brought forward another amendment.

My Lords, it might be of great assistance to the House if the Minister could indicate where in the Bill she found this general duty to consult. I have not yet found any such provision. This is now such a huge Bill, with so many government amendments, that there may well be hidden away something that would satisfy us, but I have not yet found it.

My Lords, I think the noble Lord knows that there are specific requirements in different parts of the Bill which mean that consultation is necessary on particular issues. I cannot win on this. The Government bring forward amendments in order to respond; indeed, a number of amendments are specifically designed to support issues raised by the Law Society. A lot of them are very small, technical changes, but none the less important. That is why there appear to be many more amendments than usual.

Noble Lords will, I have no doubt, return to this issue at Third Reading, but that is my explanation. I shall deal with one particular point raised in the amendments. I have indicated that there are sufficient opportunities. Clause 3 specifically requires the board to have regard to key principles, including any other principle that appears to represent the best regulatory practice. In line with best regulatory practice—for example, the Better Regulation Executive's code of practice on consultation—the board should consider representations made, especially if they come from those affected by its function. The code of practice does not require us to set out consultation provisions in legislation, but it sets out a number of principles of best practice. They include: identifying the relevant interested parties and those likely to be affected by the policy; providing feedback on responses and how they have influenced the policy; and paying particular attention to representative bodies, such as business associations and trade unions.

Given the requirement that the board follows best practice in respect of consultation, we should not have to set out in legislation practice which could become outdated and irrelevant as we move forward and become more detailed about the kind of consultation we wish to see. I do not want to narrow the focus of the board's consultation, which I fear the amendment might if we were to limit the board's consultation to the extent that its general policies and practice are consistent with its duty under Section 3, or the degree to which the board's proposed activities are appropriately targeted, and whether or not the proposed programme of work is proportionate.

Instead, I submit that the combination of Clause 3 and the provisions that must be followed in respect of representation is the best approach. This would include the requirement for the board to have regard to any representations made to it in respect of policy statements, covered by Clause 49, rules made under the Bill, covered by Clause 195, and ensure that consumers and the profession have the opportunity to influence decisions by the board. The principles that I have outlined would also apply to any work plan, but it is not necessary to put a duty in the Bill.

The board is also under a duty, in Clause 3, to ensure that its activities are targeted and used only where appropriate and necessary. This, along with the duty for the board's accounts to be laid before Parliament, provides sufficient financial accountability. I hope this explanation suffices and that the noble Lord is able to withdraw his amendment.

My Lords, I am most grateful to the noble Baroness for her response, though, as she might imagine, somewhat disappointed. I refer first to Amendment No. 38. In our discussion on that earlier in the Report stage, I asserted that the noble Baroness had given an unequivocal undertaking to incorporate Amendment No. 38 into the Bill. The noble Baroness begged to differ and was going to look at the matter and come back to the House at Third Reading. Of course, we still await her explanation of what she has decided to do about the amendment.

The purpose behind Amendment No. 38 has some influence over the amendment that we are discussing now. From what the noble Baroness says, I understand that she is reluctant to place Amendment No. 400 in the Bill. Nevertheless, her explanation for not wishing to do so appears to be that, in effect, the Bill already says what Amendment No. 400 states. Can I therefore take it that the Minister's interpretation of the Bill is that the board is obliged to make and maintain effective arrangements for consulting representatives of practitioners and consumers, on the extent to which its general policies and practices are consistent with its duty under Clause 53?

My Lords, yes.

My Lords, I am much obliged. In those circumstances, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 401 not moved.]

moved Amendments Nos. 402 to 404:

After Clause 159, insert the following new Clause—

"Power to establish voluntary scheme for resolving complaints

(1) This section and section (Operation of voluntary scheme) provide for a scheme under which legal services complaints may be resolved quickly and with minimum formality by an independent person.

(2) The OLC may make rules ("voluntary scheme rules") establishing such a scheme ("the voluntary scheme"), but only in relation to such kinds of legal services complaints as may be specified by order made by the Lord Chancellor for the purposes of this section.

(3) An order under subsection (2) may in particular specify a kind of legal services complaint by reference to the description of the complainant, of the respondent, or of the legal services to which the complaint relates.

(3) "Legal services complaint" means a complaint which relates to an act or omission of an eligible person ("the respondent") in the course of that person providing legal services.

(4) For that purpose a person is eligible if at the time the act or omission took place there was no activity in relation to which the person—

(a) was an authorised person, or(b) is to be regarded as having been such a person by virtue of section 126.

(5) Under the voluntary scheme—

(a) redress may be provided to the complainant, but(b) no disciplinary action may be taken against the respondent.

(6) Voluntary scheme rules may confer functions on ombudsmen for the purposes of the voluntary scheme.

(7) Section 128 applies for the purposes of the voluntary scheme as it applies for the purposes of the ombudsman scheme.

(8) Sections 152 and 153 apply in relation to voluntary scheme rules as they apply in relation to scheme rules.

(9) In this section—

"legal services" means services provided by a person which consist of or include legal activities carried on by, or on behalf of, that person;

"the voluntary scheme" and "voluntary scheme rules" have the meaning given by subsection (2)."

After Clause 159, insert the following new Clause—

"Procedure for making orders under section (Power to establish voluntary scheme for resolving complaints)

(1) The Lord Chancellor may make an order under section (Power to establish voluntary scheme for resolving complaints)(2) only on the recommendation of an interested body.

(2) An interested body must, if requested to do so by the Lord Chancellor, consider whether or not it is appropriate to make a recommendation for such an order.

(3) An interested body must, before making a recommendation for such an order—

(a) publish a draft of the proposed recommendation,(b) invite representations regarding the proposed recommendation, and(c) consider any such representations which are made.

(4) Where the Lord Chancellor receives a recommendation from an interested body for an order under section (Power to establish voluntary scheme for resolving complaints)(2), the Lord Chancellor must consider whether to follow the recommendation.

(5) If the Lord Chancellor decides not to follow the recommendation, the Lord Chancellor must publish a notice to that effect which includes the Lord Chancellor's reasons for the decision.

(6) In this section "interested body" means—

(a) the OLC,(b) the Board, or(c) the Consumer Panel."

After Clause 159, insert the following new Clause—

"Operation of voluntary scheme

(1) A complaint may be determined under the voluntary scheme only if—

(a) the complainant falls within a class of persons specified in voluntary scheme rules as qualified to make a complaint,(b) the complainant wishes to have the complaint dealt with under the scheme,(c) at the time of the act or omission to which the complaint relates, the respondent was participating in the scheme and voluntary scheme rules were in force in relation to the legal services in question, and(d) at the time the complaint is made under the scheme the respondent has not withdrawn from the scheme in accordance with its provisions.

(2) A person qualifies for participation in the voluntary scheme if the person falls within a class of persons specified as qualified in voluntary scheme rules.

(3) In such circumstances as may be specified in voluntary scheme rules, a complaint may be dealt with under the voluntary scheme even though subsection (1)(c) would otherwise prevent that.

(4) Subsection (3) applies only if the respondent participates in the voluntary scheme on the basis that complaints of that kind are to be dealt with under the scheme.

(5) Complaints are to be dealt with and determined under the voluntary scheme on standard terms fixed by the OLC with the consent of the Board.

(6) The OLC may modify standard terms only with the consent of the Board.

(7) Section 194(3) applies to standard terms as it applies to rules made by the OLC.

(8) The standard terms may in particular make provision—

(a) requiring the making of payments to the OLC by persons participating in the scheme of such amounts, at such times and in such circumstances, as may be determined by the OLC;(b) as to the award of costs on the determination of a complaint (including provision for an award of costs in favour of the OLC for the purpose of providing a contribution to resources deployed in dealing with the complaint).

(9) In this section "legal services", "the voluntary scheme" and "voluntary scheme rules" have the same meaning as in section (Power to establish voluntary scheme for resolving complaints.)"

On Question, amendments agreed to.

Clause 161 [Disclosure of restricted information]:

moved Amendments Nos. 405 and 406:

Clause 161, page 84, line 9, leave out "Secretary of State" and insert "Lord Chancellor"

Clause 161, page 84, line 11, leave out "Secretary of State" and insert "Lord Chancellor"

On Question, amendments agreed to.

Clause 162 [Disclosure of information to the Board]:

moved Amendments Nos. 407 and 408:

Clause 162, page 84, line 35, leave out "Secretary of State" and insert "Lord Chancellor"

Clause 162, page 84, line 36, leave out "Secretary of State" and insert "Lord Chancellor"

On Question, amendments agreed to.

Clause 165 [Funding]:

moved Amendments Nos. 409 to 412:

Clause 165, page 85, line 16, leave out "Secretary of State" and insert "Lord Chancellor"

Clause 165, page 85, line 17, leave out "Secretary of State" and insert "Lord Chancellor"

Clause 165, page 85, line 22, leave out "Secretary of State" and insert "Lord Chancellor"

Clause 165, page 85, line 25, leave out "Secretary of State" and insert "Lord Chancellor"

On Question, amendments agreed to.

moved Amendment No. 413:

After Clause 165, insert the following new Clause—

"Establishment costs

(1) The Secretary of State shall pay to the Board, and to the OLC, such sums as the Secretary of State may determine to be the costs falling within subsection (2) incurred by each of them in connection with the establishment of the Board and of the OLC respectively.

(2) Costs fall within this subsection if they are incurred—

(a) before the passing of this Act, or (b) after the passing of this Act but before the last day appointed under section 201(2) in respect of any of sections 2, 111 and 119.

(3) There shall be met out of monies provided by Parliament any expenditure incurred by the Secretary of State in connection with the establishment of the Board or of the OLC."

My Lords, this amendment and those associated with it are designed to ensure that the Government meet the start-up costs of the Legal Services Board and a proportion of its running costs. As noble Lords are only too well aware, the Legal Services Bill is currently drafted on the basis that the whole cost of the regulatory structure, including the supervisory tier—the Legal Services Board—should be borne by the legal profession.

We accept that the profession should meet the full cost of the first tier of regulation; that is to say, the work of the approved regulators and the Office for Legal Complaints. However, the costs of the supervisory tier are another matter. The supervisory tier serves a purpose distinct from that of the front-line bodies. The regulatory structure could work perfectly well without a Legal Services Board. The approved regulators, having separated their representative arms from their regulatory arms, could simply be left to get on with the task. The Government have decided, following Sir David Clementi's advice, to create a supervisory tier, the Legal Services Board, to provide a check on front-line regulators, to promote consistency and to resolve disagreements where necessary.

The board, provided it operates as a "light-touch" supervisor, may well discharge a useful function; but the Government's decision to require the legal profession to meet the whole cost of the Legal Services Board is unreasonable.

Sir David Clementi said:

"The issue arises as to how the LSB should be paid for. At present a substantial part of the oversight function is paid for by the State: judicial oversight falls to the taxpayer, as does the cost of the oversight function carried out by Government departments. The arguments in favour of the Government contributing to the cost of oversight functions beyond the fact that it does already are ... that the LSB, in pursuit of its objectives ... such as 'access to justice' has a wider role in the public interest than the oversight of practitioners in the legal sector; and that an element of payment by other than the bodies being regulated confirms that the regulator is independent of the regulatee".

He adds:

"There is an interesting precedent in the proposed funding of the Financial Reporting Council. Its funding is to be split, two thirds falling to the private sector and one third to Government. How the split should be made between the private sector and Government for the LSB would need to be covered in statute and would, therefore, be the subject of Parliamentary scrutiny".

As Sir David Clementi points out, the Government meet one-third of the cost of the Financial Reporting Council. The Government also meet the full cost of the supervisory tier of healthcare regulation, the Council for Healthcare Regulatory Excellence. The Government have given no adequate explanation of why they consider it appropriate to meet part of the supervisory tier of regulation in the accountancy field, but not in respect of legal services. So far as the Council for Healthcare Regulatory Excellence is concerned, the Government have suggested that it is appropriate to pay because it is important to demonstrate that the CHRE is independent of the medical profession. But that argument applies at least as strongly to the Legal Services Board, which needs to be demonstrably independent of the Government and of the legal profession.

One function of the Legal Services Board will be to consider whether additional legal services should come within the regulatory net. This function is currently carried out within government. It does not form part of the regulation of legal services and is carried out entirely in the public interest, rather than in the interest of providers of legal services. It is particularly unreasonable for the Government to expect those costs to be borne by the legal profession. The Joint Committee considered this issue and concluded that the legal profession should not be expected to finance public policy considerations currently funded by the Government.

The Government's proposals would, in effect, transfer cost from the Government to the legal profession. The Government currently meet the costs of the Legal Services Ombudsman, whose functions will be absorbed in the Office for Legal Complaints, which will be funded exclusively by the legal profession, and part of the costs of the Legal Services Complaints Commissioner, whose post is also abolished by the Bill. The Government also meet the costs associated with the Legal Services Consultancy Panel, and the costs of the work in relation to legal services regulation of the Lord Chancellor and the senior judiciary. Continuing to contribute towards the cost of regulation would thus maintain the existing position, rather than represent a new spending commitment from the Government. The examples that the Government gave for regulators funded entirely by regulatees—the FSA, the FOS and the Pensions Regulator—are entirely beside the point. They are frontline regulators. We have no quarrel about that.

Ensuring a continuing contribution from the Government might also act as a brake on any tendency of the Legal Services Board to expand its activities unjustifiably. There is an obvious risk that if the board can simply re-charge the cost to the approved regulators it will grow substantially beyond what the Government say that they envisage. It is important for the Government to have a financial incentive to ensure that the board operates as the light-touch supervisory body that they have so often said they wish to establish.

It should also be recalled that this issue has to be seen in the light of the steadily increased estimate of the start-up and running costs of the board. The noble Baroness very generously did not need any probing to let us know that, yet again, last month's cost estimates for the establishment of the board have gone up. We are now talking of a sum of no less than £46 million, with annual running costs approaching £30 million. These figures are a far cry from the context in which Sir David Clementi was operating. At the time he reached his conclusions, the estimated start-up costs of the Legal Services Board were less than £10 million. So the changing financial picture ought to be a very convincing new component for the Government in changing their view about how this new system is to be financed. I beg to move.

My Lords, I strongly support the amendments tabled in the name of the noble Lord, Lord Kingsland, and adopt the reasoning that he has advanced. I supported the line of reasoning expressed in Committee and have few additional points to make. However, the public interest in the Legal Services Board's operating economically and effectively will be best discharged by the Government's direct interest being continued through the financial mechanism. If the body is established and passes its costs on to the consumers of legal services, the Government's continuing interest in maintaining the body in the form in which it has been described from the beginning will be put at grave risk.

The Government have clearly departed from the advice of the Clementi report, particularly on start-up costs. It is not surprising that the estimates for these costs have risen since Sir David Clementi reported. The duties which the Bill imposes on the Legal Services Board are far reaching and are by no means consonant with the concept that the board would intervene only when something had gone wrong. It is creating a huge framework of supervision by the indicative policies that the Bill requires it to embark on. These changes may or may not be necessary; although I am persuadable that the Government are right in thinking that they are required, there are downside cost consequences.

The second major point of principle, to which I think the amendments are addressed, is that the public have an interest in the delivery of justice in our society, which goes far beyond the ability of individuals to have access to justice. They have an interest in justice being done, being seen to be done and being available to all. The more expensive that this process of regulation becomes, the more inaccessible justice will be. If the professions have to bear the full costs, there will be no way of recouping them other than by increasing the cost of their services. I simply cannot understand why there is this belief that the proposal is in the consumer's interest. The danger is that ever more people will find that legal assistance and access to the courts and advice are beyond their means. The Bill could contribute to that if it does not share out the costs between the taxpayer and the professions.

This is so much a point of principle that it does not seem capable of being dealt with other than by a direct rebuttal by the Government. I would find it difficult if the Government did not take the point. Costs are predicted to escalate although it may not be possible now to determine the precise amount. I cannot believe that the Minister has any expectation other than that the figures which have been produced are more than a base from which the costs will rise.

I hope to get this Bill off to a proper flying start. As the Minister knows, I have been a supporter of the Bill and, like noble Lords on all sides of the House, believe that it is necessary. She will recognise that citizens—citizens, as opposed to petitioners to courts for redress regarding the non-delivery of services—have an interest in this being done appropriately. Citizens will be prepared to pay the price.

My Lords, during the 20th century the legal profession, particularly the solicitors, came more and more into direct contact with the masses of the population as distinct from merely the better off, the commercial enterprises and so on. That was encouraged by the Legal Aid and Advice Act which the Labour Government brought in soon after World War 2. The legal profession, and I mean both parts of it, has always professed that it must have in mind the interests of the public—citizens in general—and not just their clients. Its behaviour, codes of practice and professional conduct require that that should be so. As we know, however, the legal profession has not always in practice come up to the high standards professed in the codes of professional conduct and the codes that, at annual meetings and so on, it maintains that it has.

I know that opposition parties do not agree fully with every aspect of the Bill but, bearing in mind the professions' deficiencies in dealing with complaints, it is difficult for them to suggest that the Bill's surveillance elements regarding the Legal Services Board are not required. The noble Lord, Lord Kingsland, distinguishes between the front-line regulators—which, as he would say, are properly paid for by the professions—and the Legal Services Board, which, on behalf of the public, ensures that it does a good job, or at least that is what it is meant to do. That is not a strong distinction. They are all needed. The surveillance of the Legal Services Board is needed because of the professions' recent history. It is in the public interest to ensure that the professional standards which the professions have maintained and stated they believe in over so many years are in fact and in practice maintained.

It is rather difficult to argue that the people who use the services of lawyers should not pay for the work of the Legal Services Board as well as for the front-line regulators. I certainly do not see as a matter of principle the distinction drawn by noble Lords opposite on this matter. I recall certain connections with the regulation of the accountancy profession. I do not see any objection in principle to the fact that it does it by means of the Financial Reporting Council, as mentioned by the noble Lord, Lord Kingsland. There is a split, and some sort of split is desirable. I know that Sir David Clementi thought that that might be suitable in the legal profession.

I stress that the Government's proposals are not out of the question or unprincipled in suggesting that those who need and have to pay for the services of lawyers should also pay, rather than the general taxpayer, for the provision of the surveillance of the Legal Services Board as well as for the front-line regulators.

My Lords, the noble Lord, Lord Borrie, has missed one of the key points in this debate: the whole issue of access to justice. That was why Sir David Clementi said that the Legal Services Board should have a wider remit in the public interest than just the oversight of the practitioners in the legal services sector. He also said—I felt persuasively—that to have a contribution from other than just the regulated would enable the regulator to demonstrate its independence from those it was regulating. If all its money came from the professions over which it had oversight, then issues such as access to justice and independence would not be seen as having the wider remit that the public would want.

In demonstrating my support for the words of my noble friend Lord Kingsland, and also finding myself in complete agreement with the noble Lord, Lord Maclennan of Rogart, I should also add that I am becoming increasingly concerned about the cost. When we last debated the Bill, on the second day of Report, we had just seen an extract from a report by Frances Gibb in the Times that the costs were escalating to a degree that none of us had really contemplated. In the Joint Select Committee, the estimate of costs was said to be, if I recall correctly, "at best speculative". But I do not think that any of us on the Joint Select Committee contemplated that they would double before the final figures were known. It might be helpful if the Minister could bring us up to date in particular on the start-up costs but also on the running costs. It is a little while since we saw that report.

The Minister at least indicated that she shared our concerns about the costs suddenly running away from us in a way that would impinge on access to justice if the professions had to bear all those costs. Who is going to pay? The answer is that the consumer of legal services ultimately will pay through increased charges. I am very worried indeed about whether we have yet seen the final picture. When we last debated these issues, the noble Baroness said that she was taking a close look not only at the start-up costs but at the running costs as well. Now that we have this debate and a number like it this evening, it might be helpful if she could bring us up to date with where we are on the issue of costs so far as the Government are concerned.

Finally, experience tells me that written in bold capital letters on the Minister's brief from the Treasury will be the word, "Resist". I have come to have considerable respect for the Minister and I know that she would ignore any such mandate if she felt that there was a case to be argued. I do not know whether she will let us in on what arguments may be going on with the Treasury behind the scenes, but my noble friend Lord Kingsland has made a very strong point in moving this amendment. I hope, therefore, that the Minister will not reject it out of hand.

My Lords, I have not had any conversations with the Treasury. I do have the word "Resist" written on my brief, but it is not from the Treasury. Indeed, we have been in consultation with the Treasury to do precisely what the noble Lord has invited me to do, which is to give an update on the costs. Noble Lords will recall that when we considered this issue on 16 April, I said that I was concerned to look at the figures reported by Frances Gibb in the Times, as well as to consider the further analysis undertaken with the Law Society and the Bar Council. Rather helpfully, those with whom we shared the figures raised different points that they wished us to reconsider, which I duly asked officials to do. I also asked my officials to give me figures that I could use this evening in order to set out for noble Lords the position as it currently stands.

We have been looking to refine the implementation plans and to consider the amendments that have been made to the Bill, so it is absolutely right to reflect the current position by updating the costs. Noble Lords will recall that the original forecast by PricewaterhouseCoopers was £26.8 million. Following our further analysis, the figure now stands at £32 million, which takes into account inflation—that is, the costs are restated at 2007-08 prices—and includes VAT. It also reflects other adjustments which have led to decreases in costs in some areas and increases in others. In addition, in relation to the Office for Legal Complaints, we have assumed a year-on-year increase in the volume of complaints. That is based on an analysis of the compound annual growth rate of Law Society complaints, which account for approximately 96 per cent of the total annual volume of complaints. Building in this annual growth rate has impacted on both implementation and running costs, with the result that it is predicted that in 2007-08 the running costs are now predicted to be £19.9 million compared with the PricewaterhouseCoopers estimate of £16.8 million. The noble Lord, Lord Hunt of Wirral, specifically asked me for that figure. However, the revised figure still represents a saving on the current complaints-handling arrangements, costed by PricewaterhouseCoopers at £32.5 million in 2005.

While the analysis we have carried out is robust and based on sound assumptions, any operation of this size involves risks, no matter how carefully planned and managed it may be, so we have put together a risk register. It is therefore prudent to build in a margin for unforeseen costs, and I have suggested that we build in a margin of 15 per cent, which is approximately £5 million. That is based on an analysis of the risks associated with the reform process and the costs that may accompany those risks. It is right and proper to cite a figure that takes into account all the risks of change. Although I do not anticipate the risks, they could include problems such as not being able to find appropriate premises. These are risks that we do not believe will be realised, but none the less have to be taken into account.

We have also looked at the possibility of a spike in complaints volumes occurring two to three years after the introduction of the new scheme. We have analysed what has happened in comparable sectors and the evidence suggests a tendency towards a spike two to three years in. However, I emphasise that our forecasts already take into account a year-on-year increase, and of course the experience of different sectors does not necessarily read across. In addition, in practice we would expect to see economies of scale and a decrease in cost per complaint.

It is obviously crucial that noble Lords and the legal professions have confidence in these figures, so I should like to emphasise that the adjustments which have been made are based on a robust analysis. What is more, I can confirm that the revised figure will now form the basis of the implementation budget for the new organisations when responsibility is handed to the new boards; that is, it will be the budget that they are given.

My Lords, these are important figures, and they are higher than those given in the regulatory impact assessment. Is the Minister planning to issue an updated regulatory impact assessment? If she were able to give us that assurance, it would go some way to meeting our concerns.

Yes, my Lords, I can give the noble Lord that assurance.

Noble Lords will also want to know the detail of the adjustments that have been made. It may be helpful if I set out the position in writing as well as producing a revised RIA. I indicated previously that I would write, but noble Lords will know from our discussions on 16 April that I did not want to do so until I was convinced that the figures were robust. Indeed, I am grateful to our officials who have worked tirelessly during the past two weeks in order to drill down and make sure that the figures are right. Before Third Reading I shall write to noble Lords setting out the position in full, and that will include responses to questions raised by the professions about the position of VAT and double counting. We have been in contact with Her Majesty's Revenue & Customs and received the best advice on the VAT position. I shall set all this out in detail, which I hope will be useful. I am grateful to noble Lords for their patience in allowing me to get to this point, one where the figures are now more robust. Noble Lords will see that the estimate is a decrease from the figure I was talking about for the professions, and I hope that that is welcome. However, I appreciate that they will want to see the detail before agreeing that the figures are indeed robust. Finally, noble Lords should feel free to put any questions to me before we return to these issues at Third Reading.

I turn now to the principle underlying the debates. The noble Lord, Lord Maclennan, put very well the concerns that have been raised on the issue of funding, but we remain convinced that it is entirely appropriate for the legal service providers to bear the costs of these reforms. Here I want to reiterate the basis of that conviction. I am glad to say that we have a thriving legal market with a turnover in 2005 of £22 billion. The legal professions have a privileged position as the providers of reserved legal services. I believe that confidence in the system will increase as a result of the demonstrably independent regulation and complaints handling procedures, and I believe that the legal professions will benefit from that. I also think that the opportunity created in the Bill for alternative business structures will be to their benefit. They will be significant beneficiaries, and on that basis the Government think it entirely right for the significant beneficiaries to pay for the reforms.

I acknowledge that the Government will make some savings as a result of these reforms, but the job of government is to consider where to invest and what are the priorities. We believe that investment is most needed in other priority areas, particularly those where other sources of funding are not available. While I agree with the noble Lords, Lord Maclennan and Lord Kingsland, that the Legal Services Board plays a public interest role, I do not accept that that provides an argument in favour of a government contribution to costs. At present the legal professional bodies raise fees from their members not solely to pay for the cost of regulation. They also fund important public interest activities performed by those bodies. I cite, for example, participation in human rights and law reform work. The same approach should apply to all the functions which will support the new framework provided for in the Bill.

In Committee, the noble Lord, Lord Kingsland, and others discussed a number of comparisons, including the role of the Financial Reporting Council. I undertook to look at the funding arrangements for that organisation in more detail. The Financial Reporting Council's accounting, auditing and corporate governance activities are funded by a tripartite arrangement, funding received in equal proportions from the accountancy professions, the business community and the Government. Other costs, audit inspection, investigation and disciplining of accounts are funded entirely by the accountancy professions. However, the Government provide no funding in relation to actuaries. The FRC's funding arrangements in relation to its responsibilities for actuarial standards and regulation are as follows: 10 per cent from the profession, 45 per cent from the insurance companies and 45 per cent from the pension funds. As noble Lords would expect, I have also looked at the funding arrangements of a number of other regulatory bodies: the Financial Services Authority, the financial services ombudsman, the Council for Healthcare Regulatory Excellence, the pensions regulator, the office of communication and the claims management regulator.

That analysis highlights that there is no rigid approach in terms of government funding. There are cases where the Government fund establishment or running costs and cases where they do not. The decision in effect is taken on a case-by-case basis, but the Government's starting principle is that there should be no increase in public expenditure unless there is a compelling case for public funding. In this instance we do not believe that there is any such compelling argument. It is not inconsistent in terms of government policy to require the professions to pay. I know that the legal professions have argued that if the Government were making a contribution they would be incentivised to reduce costs. We are committed to ensuring value for money in these reforms and that is why we have built in the safeguards to ensure that. The levy rules are subject to the extensive consultation requirements, to the consent of the Lord Chancellor and to parliamentary scrutiny through the negative resolution procedure. Together these measures will ensure that the spending of the new bodies is properly contained.

For the reasons that I have set out, I hope that the noble Lord, Lord Kingsland, will withdraw his amendment.

My Lords, before my noble friend sits down, the Bar Council and the Law Society have made certain observations about start-up and running costs. They say that new entrants to the profession will be adversely affected. Is she able to deal with that argument now?

My Lords, I have never heard the argument that new entrants will be affected in that way. Perhaps my noble friend and I might discuss that issue separately. Certainly I have set out the issues to do with the costs and I will do so in greater detail.

My Lords, the quality of the debate on the amendment has been high even by the standards of the debates we have had on previous amendments throughout the course of the Bill. I was particularly thankful to the noble Lord, Lord Maclennan of Rogart, who made an exceptionally fine and demanding—from the Minister's point of view—intervention on behalf of our amendments. Although the noble Lord, Lord Borrie, sought to disagree with me he was at his most eloquent and my noble friend Lord Hunt has always found a certain amount of liquid in even the driest of water courses. I am most grateful to all of them.

The noble Lord, Lord Borrie, rightly said that we should look at the role of the Legal Services Board in a context wider than that of the regulation of complaints. We on these Benches accept the establishment of the Legal Services Board but at no stage in the Bill's course have we sought to amend it so as to remove the board. We also accept that there are certain functions of the board in supervising the complaints system that should legitimately be financed by the professions. But the functions of the Legal Services Board go way beyond the complaints arena. My noble friend Lord Hunt dealt particularly vividly with the wider public interest. A number of other public regulatory organisations have both their start-up and their running costs supported by the Government. I can think of no public regulator of the sort that the Legal Services Board purports to be that is not in some form or other supported by the Government. Moreover, the authorised persons will have no control whatever over the number of additional functions that might be heaped on the board for which they will have to pay. There is nothing in the Bill that controls that process on their behalf.

Moreover, a range of existing functions currently financed by the taxpayer will now be transferred and become a financial burden on the authorised users. The Government are a net beneficiary of that process. The legal profession will carry burdens in future that were formerly carried by the taxpayer. Given the scale of the costs that the profession is about to meet, that is, in my respectful submission, entirely unacceptable. Despite the noble Baroness's attempt at calming words, I find the situation entirely unacceptable. At this late hour we would probably be imprudent on both sides of the House to vote, but nevertheless I will give the noble Baroness a week longer to consider the position. Meanwhile, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 166 [The levy]:

[Amendment No. 414 not moved.]

moved Amendment No. 415:

Clause 166, page 85, line 36, leave out "Secretary of State" and insert "Lord Chancellor"

On Question, amendment agreed to.

[Amendment No. 416 not moved.]

moved Amendment No. 417:

Clause 166, page 85, line 40, at end insert—

"( ) In apportioning or imposing a levy the Board shall have regard, inter alia, to—

(a) the extent to which any resulting increase in the regulatory fees of a regulator will be reasonable and proportionate in comparison to the fees already levied on relevant regulated persons;(b) the extent to which the levy might discourage entry to or retention in the regulated sector;(c) the extent to which the number of persons regulated by a regulator might be reduced in consequence of the amount of the levy;(d) the extent to which the regulator might be disadvantaged and another regulator might derive an advantage, in particular through the movement between the regulators of regulated persons as a consequence of any differences in the levy imposed;(e) the likely ability of the regulator to raise the levy from regulated persons;(f) the impact of the levy on the regulator's viability."

My Lords, I can deal with this amendment telegraphically. The noble Baroness will recall that the two regulators concerned with patents and trademarks were especially concerned about the considerable financial burden of the levy and start-up costs. They believe that further safeguards should be put into the Bill and have proposed in the amendment the same wording that appeared in our previous Amendment No. 142A in Committee. I know that the noble Baroness has set her heart against a definition of proportionality in the Bill but nevertheless I hope that she will accept that the concerns expressed by the authorities, and the fears that flow from them, genuine. Even if she is not prepared to accept the amendment I hope that she will be prepared to provide powerful words of comfort instead.

Amendment No. 433 concerns the issue that debt may be recovered only from the practising fees held by a regulator. Those were particular concerns of the patent and trademark regulators and although I do not hold out a great deal of hope that the noble Baroness might find a way of putting the amendment in the Bill I hope nevertheless that she can give me some reassurance. I beg to move.

My Lords, I agree with my noble friend's comments, particularly on Amendment No. 417. Proportionality is an important principle—it is an express principle in other parts of the Bill—and there are good reasons for applying it here. I hope the Minister will be able to give a positive response.

My Lords, I support this. Proportionality, yes, but in what context and in what sense? This truly gives guidance with legal efficacy, but there is no harm in that in this particular situation. Without that guidance, what is proportionality going to mean? I will not go on about this—it is getting late—but there is a good and important point in the amendment, which I support.

My Lords, I appreciate that the noble Lord, Lord Kingsland, has brought this issue back again. I have already indicated that we have talked to the smaller regulators, because I understand their concerns. I said as well that I would look at what else we might be able to do on this issue to give them clarity and comfort about the situation.

I said during the debate in Committee that the board must be satisfied that the apportionment of the levy would be in accordance with fair principles before making the rules, and I still firmly believe that that, rather than a list in the Bill of what would inevitably be a prescriptive list of factors, is the appropriate provision. Noble Lords will know that I have a general aversion to lists as they can never be exhaustive, and often they could preclude a factor that we do not think of at the time but could subsequently become important—perhaps more important than other factors. I do not wish to do that because it is important to enable the philosophy of proportionality to be interpreted with the factors at the time, depending on the circumstances.

I recognise that the list sets out what the board should consider inter alia, so other matters should be considered too, but any list puts pressure on the board to consider those matters before anything else for fear of being reviewed, and that would restrict the flexibility of the board, something the Institute of Trade Mark Attorneys and the Chartered Institute of Patent Attorneys have said they do not want. They do not want a one-size-fits-all approach. I agree, and we would argue that flexibility is exactly what is needed to prevent that. Reducing that flexibility through a predetermined list could ultimately be to their detriment, and none of us wishes to see that happen.

I do not want to set out the principles. In our thinking we have followed the approach in Section 2(3) of the Legislative and Regulatory Reform Act, which establishes that regulatory activities should be carried out in a way that is transparent, accountable, proportionate and consistent, and that regulatory activities should be targeted only at cases in which action is needed. We believe that the terminology set out in the Bill in respect of proportionality and fair principles has a natural meaning that is widely accepted and widely understood, but it gives the flexibility to provide for the smaller regulatory bodies, which I know are concerned about this. I hope, as we continue to discuss this with them—we will certainly do so—that they will feel increasingly reassured that there is no question that one-size-fits-all would be highly inappropriate in the context of ensuring the smaller regulatory bodies are well catered for. We are all in agreement on what we are seeking to do; our contention is that we have achieved it within the Bill.

On Amendment No. 433, we would generally expect money owed in respect of the levy to be paid from practising fee income, and Clause 50(4)(b) provides that it can be. I do not want to set out in the Bill that that is the only source of funds that could be used to meet a debt to the board, simply because we do not want to restrict the flexibility of the regulators to meet debt in the way best suited to their own financial arrangements. To do so could force an approved regulator to divert practising fee income away from essential regulatory functions in order to pay the board, when it might judge that it was less damaging to use some other asset or source of income. It is unusual for legislation to restrict the way in which money owed may be recovered and to fetter the court's ability to enforce payment of debts. We consider that the standard procedures that apply to the recovery of debt should apply in this case. It is a question of allowing flexibility for the regulatory bodies for circumstances we cannot foresee, where it might be in their best interests to provide for that money in other ways than simply using the practising fee. I hope that on that basis the noble Lord will feel he has some shreds of comfort, and will withdraw the amendment.

My Lords, before the Minister sits down, I understand her reply but, as there is some useful material in the amendment, could some form of undertaking be given that it could be used as guidance? It would be for a constructive purpose.

My Lords, I am not willing to commit to saying that we will make this into formal guidance. I am sure, however, that, in the discussions I have mentioned with the smaller regulatory bodies, their concerns, which are reflected in some of the issues raised by the noble Lord, Lord Kingsland, need to be properly dealt with. I am prepared to commit that we will continue the dialogue with them. It is our shared objective to ensure that they are treated properly and fairly. In legislative terms we have achieved that; in practical terms, it will be for the bodies concerned to make sure it happens.

My Lords, I am most grateful to the Minister for her response. What she said about Amendment No. 417 will have gone some way to appeasing the concerns of the two small regulators who were really behind the promotion of the amendment. I recognise that she is against an amendment that specifies the component parts of proportionality; indeed, having heard the cogent way she has argued the point, I have some sympathy for her.

On Amendment No. 433, as the Minister will be aware, there is a specific difficulty for the patent and trademark regulators because of their relationship with their own members. There would be nothing to prevent the patent and trademark attorneys leaving their societies but, unlike the case of barristers and solicitors, continuing to practise as patent and trademark attorneys. That is likely to happen unless the terms of the amendment are what happens in practice. I accept entirely that the Minister hopes that the practice by the Legal Services Board will be as set out in Amendment No. 433. Nevertheless, there is no compulsion, and, were it to be the case that the board went beyond the stipulations she has laid down, that could have an extremely adverse effect on those two small regulators. Still, I am aware that the Minister has strained to provide me with the answers I hoped to get, and in those circumstances I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

moved Amendments Nos. 418 and 419:

Clause 166, page 86, line 2, leave out "Secretary of State" and insert "Lord Chancellor"

Clause 166, page 86, line 7, leave out "Secretary of State" and insert "Lord Chancellor"

On Question, amendments agreed to.

[Amendments Nos. 420 to 426 not moved.]

moved Amendment No. 427:

Clause 166, page 86, line 23, at end insert—

"( ) But subsection (7)(a) does not include such proportion of the expenditure of the OLC incurred under or for the purposes of this Act as may reasonably be attributed to the exercise of its functions under sections (Power to establish voluntary scheme for resolving complaints), (Procedure for making orders under section (Power to establish voluntary scheme for resolving complaints)) and (Operation of voluntary scheme)."

On Question, amendment agreed to.

[Amendment No. 428 not moved.]

moved Amendments Nos. 429 to 431:

Clause 166, page 86, line 24, leave out "Secretary of State" and insert "Lord Chancellor"

Clause 166, page 86, line 25, leave out "Secretary of State" and insert "Lord Chancellor"

Clause 166, page 86, line 28, leave out "Secretary of State" and insert "Lord Chancellor"

On Question, amendments agreed to.

Clause 167 [The levy: supplementary provisions]:

moved Amendment No. 432:

Clause 167, page 86, line 43, leave out "Secretary of State's" and insert "Lord Chancellor's"

On Question, amendment agreed to.

[Amendment No. 433 not moved.]

Clause 168 [Amounts payable into the Consolidated Fund]:

moved Amendment No. 434:

Clause 168, page 87, line 39, at end insert—

"( ) any amount payable to the OLC by virtue of standard terms within section (Operation of voluntary scheme)(8);"

On Question, amendment agreed to.

Clause 169 [Duties of regulated persons]:

moved Amendment No. 435:

Clause 169, page 88, line 20, at end insert—

"( ) The duty to comply with regulatory arrangements overrides any obligations which a person may have, including to shareholders (otherwise than under criminal law), if those obligations are inconsistent with the duty to comply with the regulatory arrangements."

My Lords, the amendment attempts to make explicit the relationship between regulatory obligations and other responsibilities, such as commercial concerns and the wishes of shareholders. As I recall, the Minister had considerable sympathy with this principle in Committee. She seemed satisfied that as long as a statutory duty to comply with the professional conduct rules exists, there would be no need for an override provision. But there would be no harm in including this in principle in the Bill; indeed, it would be desirable.

It is almost inevitable that there could at some point be a conflict between the professional conduct rules and the duty to shareholders. An explicit override provision would then become highly desirable, if not entirely necessary. Making this relationship clear from the outset to potential investors in legal service providers would also ease the tension between the effective provision of legal services and pure commercial considerations. I beg to move.

My Lords, I add my support to what the noble Lord, Lord Kingsland, said. The amendment has particular relevance; indeed, even cogency, in the context of the proposed alternative business structures where direct conflicts might arise between duty to the regulator and duty to shareholders, which is one of the reasons we are so concerned about this development.

My Lords, I am grateful to the noble Lord. Since we discussed this previously, I have consulted the Department of Trade and Industry. My officials have had discussions about the implications of the measure. It is true that ABS companies and the directors will already have a number of statutory duties under company law. Noble Lords could argue that these could potentially conflict but it is our contention that it is for the director concerned to ensure that any action which they take does not breach any of the statutory duties. While the same position applies in respect of directors of ABS firms, the Bill provides further safeguards. Lawyers and ABS firms have a statutory duty at Clause 169 to comply with their professional conduct obligations. In addition, at Clause 88 the Bill prevents any non-lawyers who are shareholders, managers or employees of an alternative business structure firm from acting in a way that causes lawyers to breach their professional conduct rules.

My contention is very simple—that a new override provision is not necessary. Having consulted, we know that there is a genuine concern that this would create uncertainty, in particular for company law and for other legislation. Noble Lords will not be surprised to hear that we believe that the Bill sets out that statutory duties must be respected and that an override clause could potentially have a detrimental effect on company law. Therefore, we believe that we do not need to accept this amendment and we hope that the noble Lord will withdraw it.

My Lords, I am most grateful to the noble Baroness but does she not agree with me that there is an inconsistency in what she has just said to your Lordships' House? In my contention the override clause would provide clarity but in her opinion it would provide inconsistency. If that is the case, surely the current provisions in the Bill are in consistent. How is it that an override clause, which in the noble Baroness's submission exactly reflects the balance that is in the Bill, can do something different from the balance that is in the Bill?

My Lords, as I understand it from our discussions with the Department of Trade and Industry, the provision that the noble Lord proposes could create difficulties for other applicable duties that may overlap with those of directors but for which there is no such statutory provision in the Bill. The contention is that it would create an uncertainty in the process, which I am sure is not what the noble Lord wishes, rather than what I think he seeks, which is to create greater certainty.

My Lords, I entirely appreciate that the noble Baroness is acting on advice from the department but, with the greatest possible respect to her, would it not be a good idea for her to come back with a clear legal analysis of the concerns of the Department of Trade and Industry so that at Third Reading we can measure that against our own concern about the vital importance of shareholders' interests never overriding regulatory objectives?

My Lords, I am more than happy to set out in writing the concerns of the Department of Trade and Industry. It is always difficult to interpret other departments' words appropriately, particularly when cross-examined so ably by the noble Lord, Lord Kingsland. If I set that out in writing, there will be plenty of time before Third Reading for the noble Lord to look at it.

My Lords, I shall not comment somewhat ironically on that intervention. I am most grateful. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 170 [The Law Society, solicitors, recognised bodies and foreign lawyers]:

moved Amendment No. 436:

Clause 170, page 88, line 36, after "(c)" insert "section 89 of and"

I shall speak also to Amendments Nos. 436A to 497, 499 and 500, 502 to 504, 506 to 517A and 519 to 563.

During the final day of Committee, the noble Lord, Lord Kingsland, tabled a number of amendments which my noble friend Lady Ashton agreed to take away and consider properly before returning to the issue, as suggested by the noble Lord, Lord Thomas of Gresford.

Having now had that opportunity to consider those amendments further, including discussing in considerable detail with the Law Society, we now bring forward these amendments which we believe address the issues raised during Committee.

As the noble Lord, Lord Kingsland, noted during Committee, these amendments are both numerous and technical in nature, and I shall therefore resist addressing each one in detail. Their intention is to amend Schedule 16 of the Bill, in turn amending the Solicitors Act 1974, the Administration of Justice Act 1985 and the Courts and Legal Services Act 1990, which relate to solicitors, recognised bodies and foreign lawyers.

We agree there is a need to update those provisions further to ensure that they are consistent with practice among other legal professions—we seek to make the Solicitors Act 1974 more flexible in order to do so—to remove any anomalous provisions, to facilitate more competitive working practices between business and solicitors and to update legislation so that it reflects advances in current practice.

This is one of a number of large groups of government amendments which make changes to existing legislation under which the legal professional bodies, and principally the Law Society, regulate their members. The amendments are largely inspired by the Law Society, and are intended to enable the society to more effectively regulate the profession. We believe that they achieve what is sought.

In Committee my noble friend Lady Ashton confirmed to the noble Lord, Lord Kingsland, that the Government intended to bring forward these amendments. However, I should draw to the attention of noble Lords that amendments in the next group relating to the Law Society's powers to rebuke and reprimand, and enhanced regulatory powers in relation to sole practices as well as the power to require information have not, as yet, been tabled by the Government.

We want to make it plain that this is not because the Government do not support the principle, nor that there is anything between the Government and the Law Society in this regard. The reason for not bringing forward these amendments at this stage is simply because the issues are complex, and we need to do further work with the Law Society to ensure that the amendments we bring forward properly deliver the outcome both the Government and the Law Society want.

I know that noble Lords will understand the amount of work that has been involved in bringing forward such a large number of amendments, which for the most part relate to the existing regulatory regime. But I hope that they will agree the value of these amendments and will indulge me in seeking a little more time to ensure that we get the remaining few amendments right.

We will be able bring forward amendments to the Law Society's power to require information at Third Reading, and I am confident that the Government will be in a position to bring forward amendments in the other two areas at a later stage in the Bill's passage. However, I hope that noble Lords may take further reassurance from the fact that it would be possible to make these amendments under an order that could be made under the proposed amendment to Schedule 22—Amendment No. 648.

The amendment, which responds to one made in Committee by the noble Lord, Lord Kingsland, provides a transitory power to modify the functions of bodies. Should it not prove possible to bring forward amendments during the passage of the Bill, I confirm that the Government would make these amendments a high priority for any Schedule 22 order.

Although this group deals with amendments to Schedule 16, there is a matter under Schedule 17, tabled under a later group, which I would also like to address. We have endeavoured to table an amendment giving the Council for Licensed Conveyancers a power to charge in specific circumstances for carrying out an investigation into allegations made against a licensed conveyancer. That is the only outstanding issue for the council, and one with which we entirely agree. However, there are still some unresolved issues surrounding exactly how that power should be drafted to give effect to such an amendment, but we recognise the desirability of giving the council that power.

As I said earlier in relation to the Law Society's requested powers, we are trying to see whether it is possible to bring forward an amendment that is mutually agreeable at a later stage in the Bill. However, if that is not possible, such an amendment would again be given a high priority under the list of modifications sought under a Schedule 22 order. I beg to move.

My Lords, the Minister rightly recalled the long series of amendments that we tabled in Committee to Schedule 16. I am most grateful that in respect of almost every one of those amendments the noble Lord has been able to give a positive response. There are two outstanding matters that refer to rebukes and fines in the context of the Law Society regulator. We have tabled amendments with regard to both those matters. I did not glean sufficient encouragement from what the Minister said to lead me to withdrawn those amendments but if, during the dinner break, which I anticipate is about to happen, the Government can assure me that all the concerns of the Law Society have been covered, I might well be inclined not to move those amendments.

My Lords, to save a little time during the dinner break, I can give the noble Lord, Lord Kingsland, the assurance that he requires.

My Lords, then I shall look forward not only to three but four courses.

On Question, amendment agreed to.

Schedule 16 [The Law Society, solicitors, recognised bodies and foreign lawyers]:

moved Amendments Nos. 436A to 446:

Schedule 16, page 218, line 37, leave out paragraph 2 and insert—

"2 In section 1A (practising certificates: employed solicitors)—

(a) omit "or" at the end of paragraph (b), (b) in paragraph (c) omit "by the Council of the Law Society", and(c) at the end of that paragraph insert "or(d) by any other person who, for the purposes of the Legal Services Act 2007, is an authorised person in relation to an activity which is a reserved legal activity (within the meaning of that Act).""

Schedule 16, page 219, line 26, after "(4A)" insert—

"In relation to an appeal under subsection (4) the High Court may make such order as it thinks fit as to payment of costs.

(4B) "

Schedule 16, page 219, line 40, leave out "(2)" and insert "(4)"

Schedule 16, page 221, line 4, leave out from "required" to "and" in line 5 and insert "by rules under section 34(1) by such time or in such circumstances as may be prescribed by those rules,"

Schedule 16, page 221, line 6, leave out "free of conditions"

Schedule 16, page 222, line 37, at end insert—

"( ) The decision of the High Court on an appeal under subsection (9) shall be final."

Schedule 16, page 223, line 5, after "(9)" insert—

"In relation to an appeal under subsection (7) the High Court may make such order as it thinks fit as to payment of costs.

(10) "

Schedule 16, page 223, line 9, after "(1A)" insert "—

(a) after "6(1)" insert ", 6A(1)",(b) after "1(1)(a)(i)," insert "(aa),", and(c) "

Schedule 16, page 223, line 22, leave out "this section" and insert "subsection (5)"

Schedule 16, page 225, line 40, leave out from beginning to "Regulations" in line 42 and insert—

"(3E) In relation to an appeal under regulations made by virtue of subsection (3D), the High Court may make such order as it thinks fit as to payment of costs.

(3F) The decision of the High Court on such an appeal shall be final.

(3G) "

Schedule 16, page 226, line 9, at end insert—

"( ) After that subsection insert—

"(1A) The powers conferred on the Society by subsection (1) include power to make, in relation to solicitors, provision of a kind which the Society would be prohibited from making but for section 154(5)(c) of the Legal Services Act 2007 (exception from prohibition on approved regulators making provision for redress).""

On Question, amendments agreed to.

My Lords, I beg to move that further consideration on Report be now adjourned. In moving the Motion, I suggest that Report stage begin again not before 8.25 pm.

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