Alternative Business Structures

Lord Hodgson of Astley Abbotts Excerpts

Wednesday 19th June 2013 Lords Chamber

Asked by

[Lord Hodgson of Astley Abbotts]

To ask Her Majesty’s Government whether they propose to take action to prevent the re-emergence of the payment of referral fees through the use of alternative business structures.

[The Minister of State, Ministry of Justice (Lord McNally)]

My Lords, alternative business structures allow for increased competition and the provision of more cutting-edge services, helping to lower costs while maintaining high standards. However, they are required to comply with the rules of their licensing authority and the law in respect of the ban on referral fees.

[Lord Hodgson of Astley Abbotts]

My Lords, I am grateful to my noble friend for that Answer. In doing so, I congratulate the Government on the progress made in banning referral fees, which has led to a 5% reduction in motor insurance costs with a planned reduction of as much as 15%—an achievement in no way to be sniffed at. Is the Minister aware of the extent of the current challenge to this new plan of the Government, which may undermine all the good work so far? For example, is he aware that Tesco, through its insurance company Fortis, has set up a new joint venture with a company called New Law, a personal injury claims specialist based in Cardiff? Will my noble friend accept that it is not doing this for its health? Will he have a word with the Legal Services Board and the Solicitors Regulation Authority, the body that authorises new firms, to see what their view is of new firms being established, apparently with the sole purpose of frustrating the will of Parliament?

[Lord McNally]

My Lords, if they are established with the sole purpose of frustrating the will of Parliament, they will break the law. I will certainly take up my noble friend’s suggestion and talk to the Legal Services Board and the Solicitors Regulation Authority. We have had experience before of putting a law in place and some clever person trying to get around it, but we will take a close look and if they are trying to get around it, we will stop it.