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Legal Services Bill [HL]

I feel compelled to join this conversation. It is important to describe the power and the approach we have taken. I completely accept that it is important for the front-line regulators and the supervisory regulator to have a strong relationship of mutual respect through working closely together. But I would not go as far as the noble Lord, Lord Hunt of Wirral, in describing them as one regulator to another, putting them on the same pegging. There is a difference between the supervisor and those being supervised. I agree that differences should be resolved by agreement where possible. My noble friend Lord Whitty, the noble Lords, Lord Campbell of Alloway, Lord Maclennan of Rogart, Lord Kingsland, and all Members of the Committee who have spoken in this debate would agree with that. We also know that that may happen in most circumstances but not in all. Whereas the noble Lord, Lord Hunt of Wirral, was concerned that we have put a lot of structure in the Bill, in my view, the clearer we are about what is available to the Legal Services Board, the better for all concerned. Clarity about the powers is important; then everyone knows what is available and what could happen. That is fair and proper. Committee Members were concerned that this was an unusual power, but they will know that the Financial Services Authority and Ofgem also have that power and, as my noble friend Lord Whitty said, the Legal Services Complaints Commissioner currently has the power. Much was made of the Council for Healthcare Regulatory Excellence, so I took the opportunity to look up the functions of CHRE, which are very different from the type of body that we are describing, so the comparison does not work effectively. The CHRE promotes the interests of patients and best practice, reports annually to Parliament, promotes co-operation and consistency, develops principles of good regulation and advises Ministers. They are very important objectives, but different from the case before us. Therefore, my first proposition is that the power to fine is available in a regulatory framework and should be clearly available in these particular circumstances. Having said that, I understand to a degree the concerns raised about how that power is exercised. We have talked a lot already today and yesterday about Clause 3(3) and both the noble and learned Lord, Lord Lyell, and I recorded that subsection in Hansard so I will desist from repeating it. But the noble Lord, Lord Kingsland, seeks to go further by constraining the circumstances in which that power could be exercised, specifically in Amendment No. 61. To remind ourselves of that, the noble Lord proposes that the power should be restricted to where the LSB has first issued a direction to an approved regulator under Clause 31 and, "““the approved regulator has failed to comply with””," that direction. I understand the intention to ensure that there is a clear indication of what the Legal Services Board sees as a failure. I also understand that the need for assurance is particularly relevant where the approved regulator may, as the noble Lord said in his opening remarks, have separated the regulatory and representative functions we require under Clause 29, and as such, does not have direct control over the exercise of regulatory functions by its regulatory arm. I have some sympathy with the Committee about that. However, I remain concerned that where the regulators do have control over matters it might be appropriate for the LSB to be able to fine without first issuing directions. I am making a distinction in my mind between those matters over which the regulator has direct control and those over which it does not. In particular, one might say that, as in Clause 29, the proper separation of the functions of regulatory and representative functions and the proper resourcing of regulatory arms are clearly a direct responsibility of the approved regulator. That is where it might be appropriate to move to a fine if that is the right thing to do. In Amendment No. 62 the noble Lord, Lord Kingsland, is trying to further restrict the use of the power to fine to situations in which the LSB is satisfied that the matter cannot be adequately addressed by use of any of the other powers available to it—such as the setting of performance targets, issuing a direction or a statement of public censure, if I dare mention that last point. I understand what the noble Lord seeks to achieve. Indeed, it is best practice for a regulator to be satisfied that any sanction that it seeks to apply is appropriate. Again, Clause 3 provides for that and I would expect the board to take full account of it. But I am not persuaded to go as far as the noble Lord wishes me to go under Amendment No. 62, by putting such a responsibility in the Bill, as I do not want to fetter the LSB to exercise effective oversight regulation as completely as the amendment would do. While I accept that it is a condition in respect of an intervention directions and deauthorisation, these are more serious and intrusive powers. Therefore, we do not consider the same threshold should apply to the power to fine. But I should like to look at these points again and, in particular, the points that the noble Lord, Lord Kingsland, raised under Amendment No. 61 in the manner that I described—which is about the ability of the regulator to have direct control over particular issues and whether, when that is not available, those circumstances dictate that a direction might be appropriate first. So if the noble Lord agrees I shall take away Amendments Nos. 61 and 62. I have made it clear that I do not want to go as far as Amendment No. 62 at this point, but I am interested in what the noble Lord seeks to do, at least in part, under Amendment No. 61, without taking away the power to fine which is important and already available in other forms of regulatory regime. We want to have that capacity available but we may need to think a little further to be clear about situations in which there is no direct control. I hope that noble Lords will accept my willingness to do that and to come back with my further thoughts on that.