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It is important that a balancing exercise is carried out so that the board does not intervene where an act or omission constrains competition, but there are sound reasons in the other objectives for the approach which the approved regulator has taken. I support my noble friend’s amendment because he is establishing that principle.
Lord Brennan: The first four parts of the Bill deal with two important features relating to the independence of the legal profession. The first is appointment to the Legal Services Board and its structure, and the second is the board’s enforcement powers to intervene. We are concerned with the second of those features. I sympathise with the intent of this group of amendments, but I doubt their effectiveness. The phrase “taken as a whole” does not raise a threshold; it fudges it. It introduces a legal state of affairs in which seven objectives, one of which has a subset of four principles, can all be looked at as a whole. That is an extremely difficult intellectual task and one which, rather than creating a sensible threshold, in my view works to the opposite effect. The next amendments, referring to “one or more of” and inserting an adjective before “adverse”, could be far more effective.
Lord Thomas of Gresford: I disagree with the noble Lord, Lord Brennan. It is important to take the balanced approach that has been earlier contended for. There are times, when I read literature that I receive from the National Consumer Council and when I listen to the noble Lord, Lord Whitty—for whom I have the greatest respect and indeed for whom I had the greatest admiration when he was on the Front Bench—that I think that they see the Legal Services Board as the consumer council writ large. If the suspicions expressed by the noble Lord, Lord Whitty, were to form a part of the ethos of a Legal Services Board with a lay chairman and a majority of lay members, it would be asking for trouble; it would be a bad day for the legal profession as a whole. When the board considers how to use its powers, it should not take a single contravention, as it sees it, of one of the objectives as a trigger. It should look at whatever objectives may be involved—it will not be seven; it may be two or three—and decide whether there is a sufficient case for it to intervene. That is not fudging; it is sensible.
9.30 pm
Baroness Ashton of Upholland: I apologise to my noble friend Lord Brennan for not seeing him seeking to speak; I did not know he was behind me.
It is a delight to see my noble friend Lord Whitty. I say that because, as noble Lords will be aware, there are a lot of lawyers in the Committee, and there have been two or three references to the lay chair and lay members. I wanted specifically to note the presence of my noble friend because it is a good reminder to us of the strength of feeling of consumer organisations and individuals over this legislation. Whether noble Lords agree with what my noble friend said or not, it is right and proper that we should hear those voices. In discussing this legislation outside your Lordships’ House, I have heard these voices on several occasions. They have been far more concerned than anything that my noble friend has said might suggest.
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I hope that I can allay some of the concerns raised. I do not dispute the need for the Legal Services Board to think about the regulatory objectives as a whole when it carries out its regulatory functions and considers exercising its powers. Indeed, the Government have consistently set out the policy that the board should be able to judge the relative importance of each regulatory objective. This would allow the board to balance the impact that actions or omissions may have on the objectives and to consider the overall effect. That is consistent with the approach taken by Sir David Clementi in his review of the regulatory framework in England and Wales.
However, it is important that the board is not restricted in acting where only one of the regulatory objectives has been adversely impacted, if it is appropriate for it to do so. To put it another way, the Legal Services Board will have to consider to what extent there has been an impact on each one of the regulatory objectives and then take its final decision on whether to take regulatory action in the round. In such a case, it must be free to act where, after careful consideration, it judges that there has been an impact on only one of the regulatory objectives but that that impact is sufficient to warrant some form of regulatory action.
I am therefore concerned that the amendments would prevent the board from being able to take appropriate action where there has been a detrimental effect on only one of the regulatory objectives. An example might be where a regulator has not put in place arrangements to increase public understanding of citizens’ legal rights and duties, even where the board has sought to achieve that through dialogue. It would be appropriate for the Legal Services Board to act if dialogue had failed to resolve the issue. Currently, the board can exercise a power if there has been an adverse effect on one or more regulatory objectives, provided that a number of safeguards have been satisfied. Those safeguards include the requirement for the board to be satisfied that, in all the circumstances of the case, it is appropriate to take that course of action, and a right of approved regulators to make representations.
It is worth repeating that, under Clause 3, the board must have regard to the principles under which regulatory activities should be transparent, accountable, proportionate, consistent and targeted only at cases where action is necessary. Those are important safeguards, and I hope that noble Lords will reflect on them. So there is, of course, the principle of looking in the round, but that is not to say that there will never be circumstances where the impact of failure to deal with one regulatory objective is such that the Legal Services Board should take action. That is the right way to pursue this, and I hope that the noble Lord will feel able to withdraw his amendment.
Lord Lyell of Markyate: Before my noble friend replies, I should like to draw attention to the clause’s heading: “Performance targets and monitoring”. When I was in government, they tended to be called “performance indicators”. There was a notion that
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The noble Baroness has wisely said that the matter should be looked at as a whole and in the round. The noble Lord, Lord Brennan, commented on the exact wording of the amendments. I simply urge the noble Baroness to say that she will reflect on this. Her words may be valuable in Pepper v Hart terms, if it ever came to that, but it is much better to have good phraseology in the Bill.
Lord Kingsland: I am of course extremely grateful to the noble Baroness for her response, but surprised to hear her approach to the interpretation of Clause 1. As I understand it, the Government have not sought to differentiate in weight between any of the considerations set out in Clause 1(1); they all have equal weight. That is the Government’s position, and there is nothing in Clause 1 to indicate that any differentiation applies.
If that is so, I suggest that simply focusing on one of those objectives would be tantamount to acting in an arbitrary fashion. Under Clause 30, since an adverse impact on just one of these objectives is sufficient to have a triggering effect, what is to prevent the LSB simply extracting one of those seven and, without looking at any of the other six, deciding that an adverse impact is justified and intervening? In my submission, that would be a wholly improper way for the LSB to act, simply by virtue of the way in which Clause 1(1) is drafted, yet that is what Clause 29 entitles it to do.
When considering action under Clause 29, the proper approach of the board has to be to analyse each one of the seven objectives before it acts. If that is the obligation on the LSB, it must, as a consequence of analysing each one, then engage in a balancing exercise—it must ineluctably follow—and, as a result of that exercise, come to a conclusion.
In the light of the structure of Clause 1(1) and the way in which the Government have told the Committee that they interpret it, there is a conflict in the Bill between Clauses 1(1) and 29. In my submission, the Legal Services Board has no choice; it has to go through the procedure that is laid down in our amendment.
The noble Baroness is looking uncharacteristically perplexed. She may or may not want to intervene again. I see that she does.
Baroness Ashton of Upholland: I am interested in what the noble Lord is saying. I hope that he accepts the premise that even when looking in the round, there are circumstances where the failure in one of the regulatory objectives is such that the Legal Services Board should act. I think that he does. If so, there is little between us, as the noble and learned Lord, Lord Lyell, said. I think that we have done that and Members of the Committee think that we have not, so I am happy to try and ensure that we have done what we set out to do.
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To return to what my noble friend Lord Whitty said, it is important that we do not water down by accident—which I know is not what the noble Lord, Lord Kingsland, is seeking—what is arguably the most important aspect of the Legal Services Board. If you fail to provide proper access to justice, that can, on its own, trigger action—if you fail to do something and that is quite clear even when it is looked at in the round. We must not lose that. However, the Government’s position is that we want to ensure that we look in the round. We think that we have achieved that. If Committee Members feel that we have not, I am happy to look at it again. However, it will be in the context of thinking that we are already there, so I am not promising to do anything other than explain things more effectively.
Baroness Butler-Sloss: I want to pick up on what the noble Lord, Lord Brennan, said because it is not part of the amendment, but refers to a later group—the word “significant”. I totally take on board what the Minister said—that an individual regulatory objective may have been so clearly breached that action must be taken. But one clearly has to take into account the general functions of the board under Clause 3, as the Minister has pointed out, and look at that in order to come to a conclusion under Clause 30(2)(a) and (b). To make it clear to the Legal Services Board, if the board is to take one individual objective as having been breached, it must be significant, otherwise it may be at odds with what the board is supposed to be doing under Clause 3. “Significant” might be helpful.
Baroness Ashton of Upholland: That issue is not included in this group of amendments, which is why I am not responding to it.
Baroness Butler-Sloss: I just wondered whether it should come into this group.
Baroness Ashton of Upholland: We could not agree groupings, so I cannot discuss that now without the noble Lord moving that amendment.
Lord Hunt of Wirral: I have a question arising out of what the Minister just said. In looking at the regulatory objectives, we have been at pains to say that the Bill must not rank them in any particular order. Is she now saying that the board can? The board could single out one of the regulatory objectives and say, “That one is the most important”.
Baroness Ashton of Upholland: I have not for one second implied that. I said that we believe that, when looking at what is occurring, the board will look at the regulatory objectives. It will look at the impact of what has happened and make a judgment. That is what it is for. That is what we have set it up to do. It can say, “In the circumstances, we believe that action is required around this particular objective having been breached”, having failed, there having been an omission or whatever. I have already indicated that one would hope that many of these issues are dealt
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I accept the way in which the noble Lord, Lord Kingsland, began. Of course, the regulatory objectives as a whole are important. But it is quite clear that there could be a failure in one area that the board deems important. I will come to “significant”, which I will not accept on the face of the Bill, but I do accept the principle behind the board looking to see what has occurred in each case. We think that that is completely reasonable. To tie the hands of the board any further would be wrong. I have made it clear that I will look and make sure that that is how the Bill currently stands, and if it is not, I will be in touch with the Committee to discuss the matter.
9.45 pm
Lord Hunt of Wirral: So the board could well decide in a particular instance that one objective is the most important.
Baroness Ashton of Upholland: By using the words “most important” I am nervous that the noble Lord is trying to lead me down a path down which I do not wish to go.
Lord Hunt of Wirral: May I quickly just point to the Explanatory Notes, rather than mislead the Minister? They say:
“The Board... will be best placed to consider which objectives and/or principles are the most important in a particular instance”.
I think that that is what the Minister is saying.
Baroness Ashton of Upholland: I was resisting using the words “most important” because of the earlier conversation, which was about trying to suggest that a weight was given to the different objectives by the board before it began. In a particular set of circumstances the board may consider that there has been a failure in one of the regulatory objectives, even looked at as a whole, that warrants action. In that context, that will be more important—but it is in those circumstances, taking into account all the factors. A key part of that is looking at the regulatory objectives as a whole.
Lord Kingsland: That is something, as I think that I indicated when introducing the amendment, with which we respectfully agree. It would be possible in our view, in the context of the amendment, for the board to act in relation to a breach of only one of the regulatory objectives as long as the breach was sufficiently serious to have an impact on the objectives taken together. That is the point—and it is a crucial point because it flows from the clear obligation on the board under Clause 1(1) to consider all the objectives. If it then decides that the breach of one of those objectives is so serious that there is an adverse effect on the objectives collectively, it may act.
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The Opposition would be extremely grateful if the Minister would reflect on this issue between now and Report. As I have in relation to one or two other amendments this afternoon, I think it only proper that I indicate to the Minister that this is one that we take very seriously. We hope that some accommodation can be reached between the Government and the House leading up to Report. Meanwhile, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Kingsland moved Amendment No. 49:
The noble Lord said: These amendments again raise the issue of trigger conditions for regulatory action by the LSB, this time by ensuring that the board can exercise its powers only following a significant rather than a merely marginal adverse impact on the regulatory objectives. Under the new regulatory regime established by the Bill we again emphasise that lead responsibility is intended to rest with the approved regulators.
Under the new regime for approved regulators, with the splitting of the regulatory and representative arms, the regulatory bodies will be appointed on known principles and there will be substantial lay involvement. In those circumstances the approved regulators are entitled to expect considerable discretion to act on their own analysis of what is appropriate. The board should not exercise its powers simply because it would have reached a different decision. As long as the board is satisfied that the approved regulator has taken into consideration all the factors that it should have done, the fact that the board might disagree with the decision of an approved regulator should not be grounds for intervention. If it were, then in effect the board would become a front-line regulator, which is precisely what the noble Baroness says that the Bill does not intend.
Again, as the Government themselves said in their response to the Joint Committee, the Legal Services Board should exercise its powers only when an approved regulator is “clearly failing”. Those are the Government’s own words. In our submission the Bill as it stands does not reflect this philosophy as it allows intervention whenever there is evidence of adverse impact, whether significant or not. To bring to life the Government’s own vision of a light-touch regulator that intrudes only when one of the professional bodies is “clearly failing”, there must be some qualifying adjective. We have suggested “significant”, but “serious” is another possibility. Any sort of impact or qualification would be better than simply an adverse impact. I beg to move.
Baroness Ashton of Upholland: We have in a sense partly had this debate. I apologise that I cut off the noble and learned Baroness in her prime, but I was trying not to deal with amendments out of synchronisation, as it were.
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I have thought about this. I am sure that the noble Lord, Lord Hunt of Wirral, will not mind my saying that the Joint Committee raised this question in its report on the Bill. We said in response that the LSB should exercise its powers only where approved regulators are clearly failing. While we made it clear that the LSB would need to establish detailed rules providing for the use of each of its powers, we confirmed that it was considering whether the Bill needed to include thresholds. We have looked very carefully at the proposals for the words “serious” or “significant”, and discussed these with both our own lawyers and parliamentary counsel. The difficulty we have is that these are tests that would have to be tested in a sense. One can think of circumstances where a very small number of people might be badly affected by a measure. The matter of whether that was significant or serious would be called into question. I am concerned that we should not put ourselves in the position of having to test what we mean by the provision.
As the Bill is drafted, the board will be able to exercise a power provided it is appropriate to do so, as it is possible to prove with the test that there has been an adverse impact on one or more of the functions. In doing that the board must have regard to the principles that regulatory activities should be transparent, accountable, proportionate, consistent and targeted only at cases where action is needed. These ensure that the board will exercise its powers only where it is appropriate to do so and will further ensure that when it does so the board will be fully and publicly accountable. Judicial review will also be available. The safeguards lie in the powers themselves. For example, I refer to the requirement that the board has to be satisfied that in all the circumstances of the case it is appropriate to take a course of action. I refer also to the right of approved regulators to make representations.
The legislation contains clear safeguards. It has clearly established rules on the use of powers that will enable us to get this matter right. Including the words “significant” or “serious” would impose difficulties in how one interprets that and whether eventually one would need to interpret it through the court.
Baroness Butler-Sloss: I am not entirely sure how appropriate it is to put forward ideas which do not come within the existing amendments. However, I hope that the Minister might consider a possible alternative under Clause 31, headed “Directions”. I suggest that subsection (1)(a) should read,
If one could ask the board to take that into account and be satisfied, having taken into account the duties under Clause 3, which refers back to its general duties, it may be that that would meet what was needed. I do not know; I have not consulted anyone else. I am concerned that this does not necessarily remind the board of its Clause 3 duties.
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