Lord Ahmad of Wimbledon
Main Page: Lord Ahmad of Wimbledon (Conservative - Life peer)Legal Profession: Regulation
Lord Ahmad of Wimbledon Excerpts
Lord Ahmad of Wimbledon
My Lords, I begin by thanking the noble Baroness, Lady Deech, for securing this debate. The excellence of the UK’s legal profession is well recognised worldwide, and rightly so. The regulatory framework is a key factor in ensuring that these high standards are maintained. I would add—looking towards the noble and learned Lord, Lord Goldsmith—that we meet once again at a late hour. However, the quality rather than the quantity of speakers is an important issue when it comes to the legal profession.
Before addressing many of the interesting points made by the noble Baroness and other noble Lords, I would like to talk briefly about the regulatory framework for lawyers in England and Wales and the reforms introduced in the Legal Services Act 2007. I would simply highlight, as the noble Lord, Lord Hunt, so rightly said, some of the positive elements that we have seen, accepting the challenges that we have faced since the introduction of the Legal Services Act. When we talk about regulation, let me assure you that, as someone who spent 20 years in the City of London and in financial services, the word “regulation” resonates quite loudly in my ears.
The Legal Services Act 2007 had three key aims: a more effective and simplified regulatory framework; a more effective and independent complaints-handling system; and more effective competition within legal services. I turn to the first of those. In January 2010 we saw the new regulatory framework become operational, with the Legal Services Board—which several noble Lords have mentioned this evening—getting up and running. The role of the Legal Services Board is set out in statute. It is an independent body providing—this is the crucial word—oversight regulation of the frontline approved regulators. The approved regulators remain responsible for the day-to-day regulation of their members unless, of course, they are found to be failing in their regulatory duties, in which case the Legal Services Board has a number of powers to intervene to ensure that effective regulation is maintained.
The second key reform is the creation of the Office for Legal Complaints which administers the Legal Ombudsman scheme. Last year it dealt with over 80,000 inquiries, and of those some 7,455, close to 10%, were directly resolved. It acts as the single point of contact for consumers unhappy with the service they have been provided by a lawyer. I would add that there is an informal resolution procedure which sees around 35% of cases handled in this way.
The third and final key reform is the new alternative business structures regime which allows different types of lawyers to work together with other professionals and to accept external investment and ownership. This should allow them to explore new ways of structuring their businesses to be more cost-effective, efficient and innovative. We hope that it will lead to more choice, improved standards and more competitive costs for consumers. While we are happy to see a diverse range of alternative business structures emerging, we are not saying that you need to be an alternative business structure; we are saying that we have given you the flexibility to practise as a sole practitioner, traditional law firm or alternative business structure. So far, over 40 firms have taken the opportunity to become alternative business structures, and it is particularly encouraging to see the diversity of firms involved, ranging from a simple husband and wife partnership to the Co-op.
So much change in such a short space of time means that this has been a steep learning curve for all involved, and this has inevitably led to challenges which several noble Lords have talked about in the debate. Let me address first the issue of proportionate regulation. My noble friends Lord Gold, Lord Faulks and Lord Phillips all alluded to it in their contributions. What is important is that the Legal Services Board and the approved regulators work together constructively to ensure that regulation is proportionate, ensures that consumers receive excellent standards of service, and that the opportunities provided by the Act in terms of competition and innovation are realised. Indeed, the issue of being proportionate to the role of the Legal Services Board was a point well made by the noble Baroness, Lady Deech. The Legal Services Board has been one of the key drivers of the reforms, partly driven by its statutory duties. I appreciate that the pace over the past two years has meant that, as with most new frameworks, there has been a lot of consultation and change, and while the benefits of all of these changes have yet to be realised, we are well on our way to seeing the more competitive and innovative sector that the Legal Services Act first envisaged.
My noble friend Lord Phillips talked about the eight objectives and said that he was not sure whether his contribution was going to be coherent and clear. I can assure my noble friend that he certainly was both coherent and clear. Perhaps I may draw his attention to one of the objectives, which is,
“to promote and maintain adherence to professional principles”,
which are defined in subsection (3)(a) as,
“that authorised persons should act with independence and integrity”.
The complexity of regulation is always an issue, and a key part of the new framework has been the separation of representative and regulatory functions as required by the Act. This led to the introduction of new bodies in addition to the Legal Services Board, the Solicitors Regulation Authority and the Bar Standards Board, which in turn has led to a comment made by several noble Lords that the new framework, rather than simplifying things, has actually added to the complexity. It is vital that consumers have confidence in the legal profession. To that end, regulation of the profession should be effective and not unduly influenced by its representative role. Without that, there is the risk of accusations of lawyers protecting their own. So while we have seen new regulatory arms emerging, that has been an important step in maintaining—that word again—the integrity of the profession. Also, before the new regime was established, a number of different organisations were involved in the regulation of the profession. While I take the point made by the noble Baroness, Lady Deech, about self-regulation, there was still some oversight. My noble friend Lord Phillips of Sudbury also mentioned this point. The Lord Chancellor used to approve rule changes, and in some cases rule changes had to be approved not only by the Lord Chancellor, but by other bodies, leading to the criticism that the length of time taken to process such changes was unduly long.
The new regime streamlines this system by making all rule changes the responsibility of the Legal Services Board. Rule change applications must be dealt with in a timely manner and the Legal Services Board has the power to exempt certain rule changes, fast track rule changes and in more complex changes seek additional views. The latter is not aimed at redoing the work of the approved regulator, but rather at looking at the changes objectively and providing helpful and constructive feedback.
Baroness Deech
I appreciate what the Minister says, but he must accept that there is need to investigate this. Rule changes now go through an even more tortuous process than was the case before. If the front-line regulators have responsibility, then their rule changes ought to be accepted without the imposition of ideology and various approaches which are not necessarily seen as the right way forward for a branch of the profession. Examining the way that rule changes are approved or held up is really important and I am not sure we can wait three years for that.
Lord Ahmad of Wimbledon
I thank the noble Baroness for her question and I agree with her. It is important that those in the profession contribute to the effectiveness of how these rule changes are implemented. I take on board what she says and I hope that some of the proposals we are putting forward will address the issues. I note the concerns expressed by my noble friend Lord Faulks and the noble Lord, Lord Hunt, about mission creep on the part of the Legal Services Board. As I said at the outset, the important issue is about the terms of reference: what was the Legal Services Board set up to do? Earlier this year, the Ministry of Justice conducted a triennial review of the Legal Services Board and the Office for Legal Complaints. Based on this, let me assure your Lordships that, on the responses received—including those from the approved regulators—the review concluded that, while it is still relatively early to assess the full impact of the Legal Services Board, its functions are still needed and should continue to be delivered in their current form.
This was a view supported by the Bar Standards Board and the Bar Council. We must remember that the Legal Services Board is independent of government and it is not for us to dictate how it operates. Its functions are clearly set out in the 2007 Act. However, it is clear that there has been a real need for an oversight regulator to drive the reforms set out in the Act. In doing so, it has fulfilled the important role that only an oversight regulator could have. Those who responded to the triennial review recognised the value it has brought. Following the feedback we have received, the chairman of the Legal Services Board wrote to the Ministry of Justice confirming that his board is also considering the responses made so far.
I am conscious of time, but turning to specific questions, my noble friend Lord Gold raised the issue of micromanagement and corporate governance. The Legal Services Board recognises that important challenges are emerging from the triennial review and accepts that there are things it needs to address. These will include more detail on its draft business plan for 2013-14, and proposals will include reviewing the approach to requests for changes to regulatory arrangements and designation processing, and refining the approach to research funding. Priorities will be included in the draft business plan. Increased understanding of the cost of regulation, not just the cost of the LSB but the full cost of practitioners, will also be looked at. A further issue was raised regarding the value for money of the Legal Services Board. Since the board became operational, it has recognised the need to keep its costs proportionate, and we have seen its running costs reduced year on year, from just over £5 million in 2009-10 to £4.5 million in 2011-12. The combined running costs of the Legal Services Board and the Office for Legal Complaints were approximately £22 million, somewhat less than the cost of the complaint handling regime that was previously in place.
Various issues and questions have been raised in terms of accountability and the post-legislative review. We are confident that for the here and now, the regulation of legal services is appropriate, but that does not mean it will remain so indefinitely. Given that the new regulatory framework was implemented only in 2010, we still believe that it is in its infancy. The next triennial review is due in 2015 and will provide another opportunity to assess how the regulatory framework is performing and whether the LSB’s functions are still needed in an evolved legal services market.
In conclusion, it is important to remember that the new regulatory regime and governance arrangements are still in their early stages, a point acknowledged by respondents to the triennial review. I assure the noble Baroness, Lady Deech, my noble friend Lord Faulks and other noble Lords that the Government are fully engaged with the legal profession and other interested parties in carrying out that triennial review. During that process, we not only conducted a call for evidence but held round-table events and one-to-one meetings. We will continue to engage openly with interested parties as part of that. I also assure noble Lords, including my noble and learned friend Lord Mackay, the noble and learned Lord, Lord Goldsmith, and my noble friend Lord Faulks, as well as the noble Baroness, that we will carry out post-legislative assessment of the Legal Services Act. That will look at the original aims of the reforms and how far we have come in implementing them, and we will be seeking further stakeholder views. Finally—
Lord Faulks
Before the noble Lord concludes his remarks, can he help the House by saying whether one possible outcome of the review will be that the Ministry recommends that the LSB does not have any further function at all?
Lord Ahmad of Wimbledon
I thank my noble friend for the question. That is a matter that will come up. As I have already alluded to, this organisation is in its infancy and came about only in 2010. It is right that we look at this again at the time of the review in 2015.
Finally, I also assure my noble and learned friend Lord Mackay, who talked of his Green Papers—and being green in your Lordships’ House, he was my very own personal parliamentary Companion—that I heard what he said about the importance of education and his particular question about universities and the College of Law. I shall certainly refer that to my right honourable friend the Universities Minister.
The reforms enabled by the Legal Services Act have provided a proportionate and effective regulatory regime that remains, currently, fit for purpose. All those with an interest in the legal services market have an interest in ensuring that this continues. I thank the noble Baroness—and indeed all noble Lords—for their contributions this evening, with the assurance that we will continue to look at this particular function and its effective regulation, with all interested parties contributing to future reviews.