Legal Services Bill [HL]

My Lords, I am grateful for all contributions. This is an important issue of principle about the relationship between the frontline regulators and the Legal Services Board. The noble Lord, Lord Hunt, is right to raise the issue of cost, and I shall say a little bit about that. Let me be clear: there is no hidden agenda. The purpose we have set out for this regulatory framework is exactly the purpose that is replicated in the legislation. Our ambition is to have an overview regulator working with frontline regulators. I am resisting the amendment. We talked a lot in Committee about partnership and about how appropriately to define the relationship, which meant a number of things to noble Lords and to those organisations that were most concerned. First, it was important to ensure that the overview was not substituting itself for the work of the frontline regulator. Secondly, we had to ensure that the Legal Services Board operated appropriately against the regulatory objectives but used its ability to use the law to define what it wants to do only when it was necessary—we have talked a lot about that in the context of Clause 1—and to ensure that the dialogue between the frontline regulator and the Legal Services Board was appropriate and proper. We have described it in different terminology, but ““partnership”” is certainly a word that we have used from time to time to describe it, and I would endorse that. My difficulty was how that works when you put it in legislation and the problem of trying to restrain or constrain what the Legal Services Board is enabled to do, in terms of the work it must inevitably take on. We have also talked about our ambition that the frontline regulators operate properly, that the Legal Services Board does not use its powers and so forth, but let us assume for the moment that it must. It is about trying to ensure that it can operate effectively. The difficulty, when we looked at it from a legal perspective, was that, as noble Lords will know from their vast experience, both as Ministers and as legislators, there are problems with how words translate when you try to use them in a legal context, and ““in partnership”” created some difficulty. In my view the B-Plus model of regulation, which was David Clementi’s recommendation, is the right one. It accepts that the oversight regulator and those it regulates need to work together in concert, as far as possible, in the work they do. My problem with the amendment is the restriction it could impose on the ability to take action when it is considered necessary to correct failure in an approved regulator. That is my difficulty with accepting the proposition. We have to ensure that in the legislation we have the flexibility for the oversight regulator to operate effectively. I completely agree that we do not want the micro-management about which noble Lords are concerned that second-guesses the decisions of approved regulators. I say that for two reasons; first, that is not its job; secondly, there is the cost, as the noble Lord, Lord Hunt, has rightly mentioned and to which I shall come shortly. We do not want the Legal Services Board to use its power in a completely unrestrained way. There are clearly defined procedures in the legislation that it must follow, such as requirements for notification and consultation. As we stressed throughout the Committee stage, there is a need to follow best regulatory practice, and it must be proportionate and targeted. It can operate only where there is a clear need for it to do so and it can demonstrate that it must do so. As we discussed at length in Committee, Clause 48 requires the board—the word used is ““must””—to issue policy statements about how it will use its powers, publish a draft of statements and consider any subsequent representations to be made to it. We believe that that gives approved regulators the opportunity to influence the policy of the board and the framework within which it will operate. I think that the policy statements provide the most appropriate and flexible way for the board to discharge its duties. They will enable the arrangements, in a sense, to be the best practice we can have. It is a requirement—it is not left to chance but is in Clause 48. We all recognise that constructive dialogue is essential. I see no reason to suggest in the legislation that that would not happen. I believe that the legal professional bodies will embrace the spirit of co-operation but in the end, the board must be free to act if it feels that it needs to. It may need to take difficult decisions and to take action which, it could be argued—