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Legal Services Bill [HL]

moved Amendment No. 174: 174: Clause 48 , page 26, line 29, at end insert— ““( ) Any statement of policy issued by the Board must— (a) respect the principle that primary responsibility for regulation rests with the approved regulators; (b) ensure that the Board exercises its powers only where it considers that the action or inaction of an approved regulator is not an approach which the approved regulator could reasonably have taken; (c) provide that, save where there is an imminent risk of significant damage to the regulatory objectives, the Board will seek to resolve matters informally with the approved regulator before seeking its powers.? The noble Lord said: My Lords, when Sir David Clementi issued his consultation paper on the appropriate structure for the regulation of legal services, he canvassed two main options. The first was for a unitary system of regulation with a body on the same lines as the Financial Services Authority, taking over responsibility from the professional bodies and other front-line regulators in the legal field. The second is the continuation of regulation based on the professional bodies but with a new board with supervisory powers to ensure that the approved regulators carry out their tasks effectively and in the public interest. Sir David’s final report, reflecting the great preponderance of responses to the consultation, favoured the second option. The Government appeared to accept this approach. In their response to the Joint Committee report by both Houses, they said: "““The government agrees that the intention of the Legal Services Board should be to work in partnership with the authorised regulators, leaving them with the responsibility for day to day regulation. The Legal Services Board should exercise its powers only where approved regulators are clearly failing?." However, the Bill does not, as we have seen on so many occasions, make it clear that the lead responsibility for regulation is intended to rest with the professional bodies, with the Legal Services Board exercising its powers only in the event of significant regulatory failure. Consequently, there is nothing in the Bill to indicate that the Legal Services Board is intended to act as a supervisory regulator, leaving the day-to-day responsibility for regulation with the approved regulators and exercising its powers only where they are clearly failing. The Bill is cast in terms that would enable the Legal Services Board to set out detailed templates for the way in which it considers that approved regulators should discharge their functions, to micromanage them and to substitute the board’s view for that of an approved regulator, even where the approved regulator’s approach is plainly within the range of reasonable decisions. When we discussed this amendment in Committee, the noble Baroness indicated sympathy for the principle behind the amendment, although she said that she would have some reservations about the drafting. However, she felt that it was unnecessary to include any provision on the face of the Bill. The noble Baroness said: "““I do not rule out other mechanisms whereby the Government explain precisely what we are looking for in bodies being established … Governments have on many occasions issued statements, had discussions with bodies and so on. I was trying not to rule any of that out.?—[Official Report, 23/1/07; col. 1045.]" The prospect of the Government’s supplementing the statute through subsequent guidance to the Legal Services Board is, frankly, disturbing. Such guidance may be appropriate with bodies that undertake what are essentially government functions but it is a matter of constitutional importance that the Legal Services Board—the supervisory regulator for the legal profession—should be wholly independent of government. The board should operate in accordance with the statutory provisions and any regulations made under them. It should not be subject to informal guidance from government. The Minister’s comments reinforce the need for Parliament to set out clearly, through mechanisms such as this proposed amendment, what the relationship between the Legal Services Board and the approved regulators should be. It would be very damaging were the Legal Services Board to act in an over-intrusive way. As the Joint Committee noted, the estimates for the cost of the Legal Services Board are credible only on the assumption that it acts as a light-touch regulator. We have already seen that the establishment costs of this institution are likely to be in the area of £40 million and the running costs, £30 million. If it is operated in the more intrusive way made possible by the Bill as presently drafted, the cost of this tier of regulation will rise substantially, as will the costs of the approved regulators in dealing with the Legal Services Board. Furthermore, if the Legal Services Board acts as the primary regulator, treating the approved regulators as its administrative outposts rather than as the lead regulators that they are intended to be, it will become impossible for the approved regulators to attract and retain the calibre of staff that they need to discharge their responsibilities effectively. The result would be a gradual drift towards an FSA style of regulation, in substance if not in name. The proposed amendments to Clause 48 are designed to ensure that the Legal Services Board, in its relationship with the approved regulators, acts as the Government say they intend it to do. I beg to move.