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Committee (7th Day)

Part of Legal Aid, Sentencing and Punishment of Offenders Bill – in the House of Lords at 7:45 pm on 1st February 2012.

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Photo of Lord McNally Lord McNally Deputy Leader of the House of Lords, The Minister of State, Ministry of Justice, Liberal Democrat Leader in the House of Lords 7:45 pm, 1st February 2012

My Lords, if I am wrong I will write to the noble Lord, but I do not think it is our intention to move that Bill on Report.

On the noble Lord's final remarks about whiplash, my advisers' hearts will sink but they knew this was coming at some point in this debate. I had personal experience of a minor bump, which at the time was settled by my saying, "Send me the bill and I'll pay for it". This somehow escalated over the next few weeks into a case handled by a solicitor's firm 200 miles from where the accident happened, with a doctor's verification of whiplash made in Manchester, 180 miles from where the accident happened. Worst of all, when I wrote to the insurance company and said, "This is a scam and a fraud, and we're willing to give all kinds of evidence that it is", I got a letter back saying that they would settle for £5,000. Presumably the doctor, the solicitor and the injured party with his whiplash all got a cut, but who paid for it? Not the insurance company but the payers of insurance-the customers.

A number of similar stories have been told around the House; there have been two or three today. To my mind this is rampant corruption, not just an abuse. Whether or not there actually is a compensation culture, the behaviour of these companies feeds the perception that there is because so many of our citizens have experience of this. That is reinforced by these companies' adverts, which I asked Questions about over 10 years ago when I first came into the House. I had been off with a dose of flu and that was the first time I had been exposed to daytime television and advert after advert that looked almost like a lottery win, showing someone with a big cheque that they had won for some minor injury. That is where the idea of the compensation culture came from.

This has been a good debate. I say to my noble friend Lord Clement-Jones that the Government have sympathy with the intention behind Amendment 165. Unsolicited calls about personal injury are a nuisance at best, and at worst create precisely the impression of a compensation culture to which he referred. However, there is existing legislation on unsolicited calls. We will need to consider whether further legislation is needed and, if so, whether this is the right way forward, but the Government will consider the amendment further.

The intention behind Amendments 166A and 166B seems to be to make the ban more effective and harder to evade. The Government believe that the referral fee clauses as drafted should cover the concerns that the amendments seek to address, although of course we wish to ensure that the ban is as effective as possible. I therefore thank my noble friend Lord Hunt of Wirral for raising these two issues. We are sympathetic to the intention behind them and would like to consider them further. I am afraid that I cannot give him a more specific timeline about those considerations, but we take due note of the points that he made.

In response to Amendments 167 and 168 to Clause 55, I assure noble Lords that Clause 55 requires regulators to have arrangements in place to monitor and enforce the prohibition on the payment or receipt of referral fees. Under this clause, any payment can be treated as a referral fee unless the solicitor or other party can show that the payment was for the provision of a particular service. However, I noted my noble friend's points on that. It will be up to the regulators to define that issue in a way that does not prohibit legitimate activity. However, the amendments tabled by my noble friends would alter the way in which legitimate payments for services are defined. Amendment 167 to Clause 55 would ensure that pooled marketing would be a service exempted from the ban. Amendment 168 would remove the Lord Chancellor's powers to make regulations specifying the maximum amount that can be paid for those services.

Under our provisions, it will be for the relevant regulators to enforce the ban on referral fees and impose appropriate sanctions. The regulator will also have the power to require the regulated persons to show that payments for "marketing" do not include a referral fee-that is, that any marketing costs are reasonable and appropriate. The pooling of marketing resources-my noble friend Lord Clement-Jones referred to this-in our view does not in itself breach the prohibition on referral fees. However, it is important to understand that any potential breach will depend on how the information provided by the claimant is passed on by the organisation that holds it to the solicitor who takes on the claimant's case.

The Government believe that the appropriate regulators are best placed to monitor and assess payments made in these circumstances, particularly in taking a view as to whether a breach has occurred. That said, the Lord Chancellor's powers to make regulations are essential if the prohibition on referral fees is to be effective. The Government need to be able to respond to situations as they arise. I believe that these amendments are unnecessary and would serve only to hinder the Government and the appropriate regulators in enforcing the referral fee ban. In addition, the likely effect would be to encourage inflated marketing costs in order to get around the ban on referral fees. I therefore invite my noble friends not to press their amendments.

I am sorry to have delayed noble Lords who are due to speak in the pensions debate, which is the next business. If they can get the Chamber warmed up while we are away, we will be eternally grateful.