Clause 63

Legal Services Bill [Lords] – in a Public Bill Committee at 8:10 pm on 19th June 2007.

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The Board’s designation under section 62(1)(a)

Photo of Simon Hughes Simon Hughes Shadow Attorney General, Party Chair, Liberal Democrats

I beg to move amendment No. 226, in clause 63, page 35, line 4, at end insert

‘and, in either case, no other approved regulator is suitable and willing to regulate the activity in question.’.

The amendment deals with whether the Legal Services Board should regulate legal services and, if so, in what circumstances. The proposal is that it should do that only as a last resort and if there is no other regulator that could do the job. This is all to do with the back-up provision in the Bill that says, in effect, that there should be regulators for the different legal activities but that, in exceptional circumstances, the big regulator—the LSB—can do the regulating.

When the Minister and I were serving on the Compensation Bill, we discussed what sort of regulator there would be. In that context, the decision was taken that a civil servant would be the regulator on behalf of the Department, so that the Department became the regulator for the time being. I stand to be corrected, but I believe that that is what was agreed.

As an interim arrangement, knowing that coming down the track was the Legal Services Bill, the Government gave an express undertaking that, after that Bill became an Act and the regulatory systems were set up, a further transfer of regulatory responsibilities to the authorities would occur under this Bill. In essence, that was a provision for the Big Brother regulator of last resort to do the job for the time being, and the amendment relates to it.

The amendment is to subsection (4) on page 35, which is about the designation order and states:

“The order must ensure that the Board, acting as an approved regulator, may make regulatory arrangements or modify its regulatory arrangements only with the approval of the Board”.

To it would be added the words:

‘and, in either case, no other approved regulator is suitable and willing to regulate the activity in question.’.

In effect, the amendment states that, if somebody is there, give them the job; if not, the provision would come into force. I shall say just a few words about the logic of that position.

Throughout the discussion of the Bill, the Government have made it clear that they intend the lead role in regulation to rest with the existing professional bodies. There will be an interim handover phase, and the LSB will therefore be the supervisory body—the safety net. The logic behind the Bill is that the board would intervene only when necessary. That is the view being subscribed to, and there is a discussion about the theology of the words. The board will be the regulator of last resort.

The Government have provided, however, that they may occasionally move the board from being a back-row regulator to being a front-line regulator of temporary resort. That is fine. I can completely understand and subscribe to that idea. It would be unacceptable for professionals out there in the field to be unable to do their jobs because no regulator was in place, and the measure is intended to fill that gap. It is conceivable that a regulator might regulate badly and must therefore be prevented or suspended from regulating, and it would then be entirely reasonable for the Government to step in. So, yes, it is acceptable, reasonable and inevitable that they should have that power.

However—I hope that the Minister will come with me down my next line of argument—the logic ofthe amendment is that it is important to keep clear the distinction between the approved regulators andthe LSB, which is the regulator of last resort, so that the board should adopt that intervening regulatory role only when there is no alternative. When a regulator loses its approval or when a new service becomes regulated, theoretically—for example, will writing, which we discussed the other day, might become regulated—it is important that the board should first consider whether an existing regulator should dothe job.

We discussed this issue in our debates on the Compensation Bill, and I remember, almost verbatim, the Minister saying then that it was right to consider whether an existing regulator should do the job. By and large, we have far too many regulators in society, and there is far too much regulation, so we do not want to create more unnecessarily. If we are to have regulation, it is far better that a body that already exists and has a structure, support staff, an office and systems in place should take on the job. That is what the amendmentis about.

My final point is that the board should intervene only when it has looked around the field, seen who is there and concluded that nobody else can do it. Only then should it say, “We are going to look after this for the time being.” That is right in principle, and I hope that it will happen either never or extremely rarely. The idea is that another regulator should always be used. Of course, Ministers will not want a super-regulator,or obergruppen regulator, to force regulation on regulators that do not want those responsibilities. It is no good simply saying, “You will do it.” We also discussed this issue in our Compensation Bill debates, and I remember that the Financial Services Authority was thought to be one option, but it was not keen to do it and said no.

Clearly, it would be inappropriate to make a regulator take on responsibilities if, after discussion and negotiation, a regulator said, “We’re really sorry, but we don’t think that this is up our street; we don’t think that we should do it.” Of course, in theory, someone would have the power to make it, but that would not be a very happy arrangement.

We propose that it should be made absolutely clear that the LSB must look around to see which regulatory bodies in the field could do the job. Only if there is none should it seek designation from the Lord  Chancellor to do the job. I hope that that is clear,and that the Minister will be sympathetic to our amendment.

Photo of Henry Bellingham Henry Bellingham Shadow Minister (Justice)

I rise to support the amendment, which my hon. Friends and I have signed. The hon. Member for North Southwark and Bermondsey has explained it extremely effectively, and I shall not addto his comments, except to say that we support it100 per cent.

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

I assure the hon. Gentlemen that I fully endorse the objectives behind the amendment, but the Bill already takes account of those principles; they are already included. We certainly do not intend that the board should compete with approved regulators.

The procedures and criteria in clauses 62 and 63 will enable and encourage the board and the Lord Chancellor to evaluate viable alternatives, offeredby existing approved regulators, when considering whether an order under clause 62 is appropriate. The hon. Member for North Southwark and Bermondsey rightly raised the possibility of a new reserved activity—will writing is an obvious example of one that might be considered. Clause 63(2) makes clear the limited circumstances in which the order can be made: where a body has been de-authorised or there is a new reserved legal activity. I think that that makes it clear that the board can regulate directly only to prevent a regulatory vacuum. He is right to make a comparison with what we did in the Compensation Act.

Finally, I am confident that clauses 62 and 63, when taken with all of the other provisions in the Bill, will ensure that the board’s ability to act effectively as an approved regulator is constrained sufficiently, none of which can happen unless an order has been approved by both Houses. That militates against the board thinking that it can jump in and regulate new activities willy-nilly; it must look at what is available already. That makes good economic sense, as well, as the hon. Gentleman said. We have already a regulator up and running that has all of the attributes needed to carry out the regulation, so it is unnecessary to do anything other than that. On that basis, I ask him to consider withdrawing his amendment.

Photo of Simon Hughes Simon Hughes Shadow Attorney General, Party Chair, Liberal Democrats

I am grateful to colleagues for their support and to the Minister for her courteous reply. She reminded us of the backdrop provision, which is that any such change would require the authority, by order, of both Houses. That is an important backdrop and might give the protection and the cover needed.I am happy to think about that and perhaps be persuaded. On that basis, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 63 ordered to stand part of the Bill.

Clauses 64 to 70 ordered to stand part of the Bill.