Legal Services Bill [HL]

moved Amendment No. 34: 34: Clause 3, page 2, line 36, at end insert— ““(4) In assessing what is proportionate in the regulation of approved regulators the Board shall have regard, inter alia, to: (a) the regulator’s resources (including voluntary resources); (b) the effect on regulatory fees; (c) the extent to which the Board’s acts might discourage entry to or retention in the regulated sector; (d) the extent to which the number of persons regulated by a regulator might be reduced in consequence of the Board’s acts; (e) the extent to which the regulator might be disadvantaged and another regulator might derive an advantage, in particular through the movement between regulators of regulated persons as a consequence of the Board’s acts.”” The noble Lord said: My Lords, this amendment deals with proportionality. Your Lordships will recall that this was a central theme in the Committee stage debate and, indeed, it is a constant thread running through the Bill. In our submission—I believe that the Government concur with this view—regulation should be both risk-based and proportionate. I have heard the Minister emphasise that on more than one occasion. The question is how to ensure that the drafting of the Bill guarantees that the Legal Services Board acts proportionately. As things stand, the Legal Services Board appears to be more or less free to make its own determination of what is or is not proportionate. I accept that proportionality depends on the circumstances of the case but we believe that the Bill would benefit from the inclusion of at least a non-exhaustive list of key factors that the Legal Services Board should take into account when exercising its regulatory function. In other words, our amendment does not define proportionality but it sets out particular factors which the board should have regard to when assessing what is proportionate in the regulation of approved regulators. I know that the noble Baroness is well seized of the anxieties of the regulators that are responsible for the world of patent and trade marks. I believe she understands that these small approved regulators fear that, because the LSB is likely to spend a great deal more of its time dealing with the larger approved regulators, it may overlook their limited resources, their low-risk status and their strong track record for good conduct. There is a perceived risk—at least by them—that regulation may encourage practitioners to operate, as they can in those two areas, outside the regulated sector. That would have the knock-on effect of driving up costs for remaining members and potentially making the regulators’ position untenable. I understand that in recent correspondence with the two institutes, the Minister stated that the Government were, "““entirely in agreement that ‘one size does not fit all’””," and that a proportionate approach should be taken by the Legal Services Board. I understand that the Minister also stated in correspondence that, "““the Legal Services Board will need to recognise the position of smaller regulators … when exercising functions under the Bill. In doing so, the Board will need to have regard to a number of ""factors which may include entry and retention of regulated persons to the sector and the effect on fees””." Yet, there is no obligation in the Bill that the Legal Services Board must have regard to such vital issues as entry and retention of regulated persons, and the effect on fees, not to mention the resources of the regulator. We have been told that the Minister, "““will look carefully at whether guidance is a more appropriate way to define what is meant by proportionality in the context of legal services””." We hope that the Minister will accept this amendment as it stands. We would be reassured to some degree by an undertaking that there will be guidance and an indication in general terms of what that might cover. That at least would set out some of those key factors in assessing proportionality. I also suggest that a commitment to guidance on proportionality at this stage might address some of the plainly abundant fears and concerns regarding the levy—a subject, to which as the noble Baroness knows we shall be arriving, at some stage in the next few weeks. I beg to move.