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Legal Services Bill [HL]

moved Amendment No. 139H: 139H: 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 section 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.”” The noble Lord said: Clause 166 provides for the apportionment of the start-up and running costs of the Legal Services Board and the Office for Legal Complaints. In particular, it gives the Legal Services Board the power to make rules for the imposition of a levy on approved regulators in accordance with ““fair principles””. As I understand it, the Government intend that the start-up and the full running costs of the new regulatory arrangements should be borne entirely by the legal profession. At paragraph 455 of its report, the Joint Committee on the Bill said: "““We recommend that the Government give further consideration to funding the start up costs of the new regulatory system. We understand that such assurances have been given in respect of Part 2 of the Compensation Bill which introduces a new regulatory regime for claims management””." It went on to say in paragraph 467 that, "““if the start-up costs of the new system are to be met through levies and charges on front line regulators, initial costs to the profession will be high and will be met both by practitioners and consumers. This adds weight to the argument that the start up costs of the LSB and OLC should be borne by Government””." In response, the Government have confined themselves to the solitary assertion that, "““those being regulated should bear the cost of regulation””." They have not, for example, sought to explain why different approaches are taken with respect to other regulatory regimes—for example, that pertaining to chartered accountants. Further weight is given to this argument by recent estimates of the scale of start-up costs. They are now estimated at £23.6 million, which is substantially up from the £9 million initially estimated by Ernst & Young in the regulatory impact assessment. As far as running costs are concerned, in its so-called simplification plans, which were published in December 2006, the Department for Constitutional Affairs predicted that, after short-term transition costs, there would be long-term annual savings of £9.6 million, of which £6.5 million would accrue to the approved regulators. However, even the department described the figures as, "““indicative rather than statistically robust””." They appear to be founded on the rather flimsy assumption that savings will flow from the fact that the cost of complaints handling will no longer be spread over several organisations but, "““will solely be incurred by a single, independent body””." The regulatory impact assessment carried out by PricewaterhouseCoopers and published with the draft Bill estimated that there would be only a modest increase in the overall annual regulatory cost. However, that conclusion depends upon assumptions— about efficiency improvements and the absence of increases in the number of complaints assumptions that are plainly open to question. The consequences of the Bill’s approach will be especially severe for junior members of the Bar, in particular recent entrants. This is of special concern to the Bar Council, which regards the proposed financial arrangements as exceedingly damaging to the future of the profession. There is a particularly powerful argument for modifying the proposed regime where the start-up and running costs cover activities that were formerly those of public bodies—for example, the Lord Chancellor’s functions under the Courts and Legal Services Act 1990 and the functions of the Legal Services Ombudsman. In our submission, there should continue to be, at the very least, a taxpayer contribution to start-up and running costs to reflect the costs that would have fallen on the public purse had the present regulatory arrangements been retained. Moreover, the Legal Services Board has a wider public interest role than just overseeing the conduct of practitioners; for example, it has a role with respect to access to justice and its responsibilities under Part 5 of the Bill. Why should these costs be borne by the professions? I shall further pursue the points that I have just made under Amendment No. 142. The proposed new clause provides for the start-up costs of the new system to be funded by the Secretary of State. The amendments to subsection (1) and subsections (6) to (9) of Clause 166 prevent those costs from being included in the leviable expenditure of the Legal Services Board, the Office for Legal Complaints or the Secretary of State. They also exclude from the net levy a sum representing an estimate of year-on-year costs of the existing public sector machinery. Those amendments would leave ongoing costs incurred by the Legal Services Board, the Office for Legal Complaints and the Secretary of State included in the net leviable expenditure. Clause 166(3) requires the apportionment of the levy to be in accordance with ““fair principles””. The levy should be not only fair but also proportionate to the regulatory burden that any particular approved regulator places on the system. The Joint Committee proposed in recommendation 56 that, "““levy rules must be fair and proportionate””." Proportionality is an express principle of other parts of the Bill. There are extremely good reasons for applying it here. The insertion of new subsection (3)(a) into Clause 166 seeks to achieve that. I beg to move.