Clause 51

Legal Services Bill [Lords] – in a Public Bill Committee at 6:30 pm on 19th June 2007.

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Control of practising fees charged by approved regulators

Photo of Henry Bellingham Henry Bellingham Shadow Minister (Justice)

I beg to move amendment No. 251, in clause 51, page 28, line 4, at end insert—

‘(2A) Practising fee income shall be kept separate from the other assets of a regulator.’.

This is a very simple amendment. As lawyers would say, “Res ipsa loquitur”; it speaks for itself. There are arguments for different types of income to be kept separate. The Institute of Trade Mark Attorneys provides an illustration of the problems that could arise in any recovery of the levy. It is a private body, limited by guarantee, which performs regulatory and non-regulatory functions. If a levy can be recovered against all their assets, it would mean that the assets of the business, including income and capital assets derived from non-regulatory and represented sources could be vulnerable, even though as a regulator, the institute and its members are precluded from realising any financial benefit from any other regulatory activity.

The result could be private persons or businesses who are expected to guarantee a levy to the state with no possibility of a corresponding benefit. Therefore, I would argue strongly that it is only reasonable thatthe recovery of a levy should be limited to funds ring-fenced as provided in the amendment.

Photo of John Hemming John Hemming Liberal Democrat, Birmingham, Yardley

The facts may speak for themselves in a legalistic sense, but I am not sure that they do in an accounting sense. I cannot understand why it is trust money and requires to be accounted for separately. I do not see how that can be, as under insolvency law, for example, one cannot merely keep that which has been received unless trust status is created for it, which cannot be done just by keeping it separately in a bank account. At the end of the day, the objective is to say that if the levy is £1 million and the income is only £900,000, the £900,000 does not get paid. The reality is that that amount would be secured against the organisation’s other assets, so I cannot see how it is of any advantage to anyone, or that it achieves the stated objectives.

Photo of Bridget Prentice Bridget Prentice Parliamentary Under-Secretary, Ministry of Justice

The hon. Gentleman makes a very good point. It would be wrong in any legislation to restrict how moneys owed may be recovered. In that sense, we are being consistent with general legislative practice.

I understand why hon. Gentlemen might want assurances that the funds raised for representative functions are not used for regulatory ones. However, I cannot agree that the statute is the place to put an absolute requirement on approved regulators to ring- fence income derived from practising fees.

There are also a number of problems in putting an absolute duty on approved regulators in this way. There are also a number of problems in putting an absolute duty on approved regulators in this way. First, some flexibility is necessary in the way in which they set out their financial arrangements, and what might be right for one regulator might not be appropriate for another. For example, the amendment does not take accountof approved regulators who exercise only a regulatory function and do not operate in a representative capacity, such as the Council for Licensed Conveyancers. It would be unnecessarily restrictive to limit their financial arrangements in this way.

Some aspects of the practising fee income could be relevant to both regulatory and representative sides of an approved regulator. Clause 51 states that fees can be raised for the purpose of

“the promotion of the protection by law of human rights and fundamental freedoms” and for

“the promotion of relations between the approved regulator and relevant national or international bodies, governments or the legal professions of other jurisdictions.”

Obviously, those activities benefit the approved regulator as a whole, and any distinction between regulatory and representative income becomes rather arbitrary. For that reason, I hope that the hon. Gentleman will withdraw his amendment.

The amendments are not appropriate, and it will be for the board to consider the internal governance rules as outlined under clause 30. Any concerns that the hon. Gentleman may have will be dealt with under that clause.

Photo of Henry Bellingham Henry Bellingham Shadow Minister (Justice)

I am grateful to the Minister, because we do not want to do anything that she deems to be inappropriate to her Bill. She has given a good explanation, and on that basis I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clauses 51 ordered to stand part of the Bill.

Clauses 52 and 53 ordered to stand part of the Bill.