Legal Services Bill [HL]

My Lords, I declare an interest as the chair of the National Consumer Council, but make it clear that I am not making a bid for the job my noble friend just suggested. It is quite a significant interest, however, since the National Consumer Council is one of the bodies that initiated the process of convincing the Government of the need to regulate legal services some years ago. After the lengthy period of Clementi and its consultation, and then an intense period of Joint Committee consideration, the Bill is close to being fit for purpose. I am not saying that it cannot be improved, or that some noble Lords’ points should not be addressed. The overall direction and structure, however, are right. The lawyers among us must recognise that the system of self-regulation—certainly that of the Law Society and, to some extent, the Bar—is not held in high regard by the general public. My noble friend Lady Henig has just gone through some of the background figures and I will not repeat them, but the fact is that lawyers are up there with estate agents, builders and garage owners—and possibly politicians—as one of the service providers they are least impressed with. They are also unimpressed with the complaints system that has operated hitherto. As my noble friend just said, very few of them think it more than a waste of time to put in a complaint. The record shows that there was a need for action. By setting up the Legal Services Board and the Office for Legal Complaints, the Bill reflects the need for independent scrutiny of the provision of legal services. However, the Bill also recognises that the existing bodies should be incorporated within this structure as approved regulators, as a sort of franchising operation, as long as they do their job effectively. This is a typical British compromise and a robust one at that. Some of the reactions to the Bill seem hugely exaggerated. As almost my first re-entry to public life, about nine months after retiring as a Minister, in my present job, I went along to a discussion arranged by the International Bar Association on the very day that my noble and learned friend the Lord Chancellor announced his intention to proceed with these proposals. I thought it would be a fairly quiet affair, nothing like the meetings with farmers and hunters that I was used to. In fact, it was far worse. I was accused by the assembled luminaries of supporting a proposal that was close to those of Hitler, Stalin and Idi Amin. Given the international context in which people were talking, I can understand where they were coming from, and I am glad that the noble Lord, Lord Thomas, did not express his views about the noble and learned Lord the Lord Chancellor in quite the same way. However, the reaction from the British legal profession is a bit over the top and hysterical. It may be true that the Bill could say a bit more about independence and could establish a few mechanisms to ensure that independence, but the reaction, including that in this debate, has been an overreaction. Most other industries and services are subject to some form of regulation, and where there is no formal statutory regulation, we rely on general trading standards enforcement or have forms of self-regulation that are more effective than those that appear to operate in the legal field. In others areas, we rely on effective competition to deliver consumer benefits and avoid consumer detriment. However, none of those applies in the legal profession. When self-regulation does not work for the consumer, the consumer has the right to demand that the Government intervene to impose independent scrutiny of the delivery of the service. In that sense, legal services are no different from any other service. In this system of partial self-regulation, it is important that the role of the regulator is completely separate from the trade union function of the Law Society and the Bar Council. To achieve that, the approved regulators—the Law Society and the Bar Council—should have a majority of lay members on their governance boards. It is important that the consumer voice is effectively heard on the Legal Services Board, which is why I welcome the inclusion of a consumer panel. Indeed, its role could be strengthened to make it closer to that of Ofcom or the Financial Services Authority. However, I do not accept the argument that that panel should be balanced by an additional panel for practitioners. The analogy with the FSA in that respect is flawed. In legal services, the front-line regulator would continue to be professionally based. To mix my food metaphors, it would be having your cake and eating it to have a second bite of the cherry by having a separate practitioners’ professional panel in the LSB. Often the most important strand of consumer pressure in any industry is to allow competition to flourish. The ABS proposals in the Bill would allow limited competition in the provision of some legal services. That has also been greeted by an overreaction bordering on hysteria. I am not a complete freemarketeer, and I recognise that some inhibitions have to be put on the labour market and, in particular, on the market for professional services. I recognise that some legal services might be provided effectively only by enterprises consisting solely of legally qualified practitioners. However, there is a range of other services in which lawyers are involved that require the skills and expertise of other professions. The concept of alternative business structures of lawyers and non-lawyers is a sensible way to provide a flexible one-stop-shop service to consumers with greater convenience and, potentially, lower costs. I have no objection if people find it easier to seek their legal services in Tesco or, preferably, the Co-op than with a high street solicitor, but it is important that there is some quality control on the licensing system introduced by the Bill. My noble friend Lord Borrie suggested that the provision might be over-onerous, but nevertheless we need a serious licensing system. The licensing system need not extend to some areas—for example, will writing is not subject to huge consumer detriment, so the mandatory licensing system need not apply. There are other areas—and I was glad to welcome the Lord Chancellor’s remarks about trade union provision of services in employment cases—where again the full provision does not apply, but for services that have hitherto been provided by lawyers we need a robust licensing system. The licensing system must, as I think my noble friend Lord Borrie hinted, allow for innovation in order for alternative businesses to develop and to deliver services that might be quite mundane for lawyers but which can frequently be traumatic for the people seeking legal services. It is also true thatthe conditions of licensing will meet some of the objections raised that the system could end up in cherry-picking and drive out services to the most vulnerable potential clients and consumers. I notice that our former colleague, now styling himself Andrew Phillips, had an article in the Guardian today arguing this case. That is hugely exaggerated, but we would rely on a licensing system to minimise it. It would help if the Government felt inclined to improve the provision of legal aid in this context as well—but perhaps that is another point. I welcome the proposals on the complaints system—the OLC—but I think that they could be strengthened a bit. A compensation limit of £20,000 seems unnecessarily low. The financial services equivalent provision stands at £100,000. I do not think that compensation will frequently reach those levels, but when dealing, for example, with very important property transactions, and sometimes probate, such sums of compensation will need to be paid. To facilitate full protection redress all lawyers should be required, as a condition of practice, to carry professional indemnity insurance. Although many do so, it is not a requirement. Again, that would put lawyers closer to other businesses and professions. I disagree with my noble friend Lord Borrie on the point about delegation back to the Bar Council. Even though I recognise that its past performance has been somewhat better than that of the Law Society, I think that we are then back into the judge and jury territory. I also disagree with him in relation to the requirement that the chair of the OLC should be a non-lawyer. Lawyers are brilliant at analysing other people’s professions, but for public trust we need a non-lawyer to head this institution. My final point on the effective implementation of the OLC’s role regards transparency. We should know the names of those who are found wanting, and such names should be made publicly available. The fact is that one-third of all complaints under the present Law Society system are accounted for by only 7 per cent of solicitors. Potential clients should know that. It is also a serious protection for the good practitioners within the profession. Therefore, I think that the Bill can be improved in some ways, but it is a good Bill. It moves us in the right direction and it will restore consumer trust to the legal profession in a way that present arrangements do not. I do not think that the general provisions of the Bill should be undermined and nor should we be convinced by the rather specious protestations about state control and lack of independence.