HL Deb 04 July 1977 vol 385 cc80-90

6.7 p.m.

Report received.

Clause 10 [Code of conduct]:

Lord DRUMALBYN moved Amendment No. 1: Page 7, line 44, after ("and") insert ("may").

The noble Lord said: My Lords, the Amendment which I am now moving is very simple. It is designed to amend an Amendment which was made during the Committee stage. The words: The Council shall draw up … a statement of the acts and omissions which, if done or made by registered insurance brokers or enrolled bodies corporate, or by registered insurance brokers or enrolled bodies corporate in particular circumstances, constitute in the opinion of the Council unprofessional conduct were amended to read: The Council shall draw up and from time to time revise a statement of the acts and omissions …". It seems very curious to oblige the Council from time to time to revise the statement, whether or not it requires revision. Therefore, what was probably intended was that the Amendment made during the Committee stage should make subsection (1) read: The Council shall draw up and may from time to time revise a statement … rather than that it should state that the Council must revise it. I beg to move.

Lord ORAM

My Lords, on behalf of the Government, may I indicate briefly that the Government are happy to accept this Amendment. It is useful for it to be made perfectly clear that the Council is not compelled to revise the code of conduct at frequent intervals and regardless of whether it requires revision. I think that the noble Lord, Lord Drumalbyn, has made a perfectly fair point and hope that the House will agree with him.

On Question, Amendment agreed to.

Clause 27 [Rules etc. made by Council]:

6.9 p.m.

Lord DRUMALBYN moved Amendment No. 2: Page 19, line 35, leave out from ("Act") to end of line 36.

The noble Lord said: My Lords, I beg to move Amendment No. 2. This is a much more substantial Amendment, and I am afraid that I shall have to take up a little of your Lordships' time in order to explain its background. We are dealing here still with the question of the statement which is to form the basis, at any rate, of the code of professional conduct. This subsection of Clause 27 empowers the Secretary of State not only to vary or revoke any rules made under Clauses 8, 11 or 12 of the Bill, but also to revise the statement in Clause 10. This is the statement dealing with the code, and I will refer to it as "the code" for the sake of simplicity. The earlier part of Clause 27, with which I shall be mainly dealing, provides that the code can come into operation only if it is approved by the Secretary of State by order—and in passing may I say that is an order which the Secretary of State may revoke under Clause 28, as he can revoke any order that he makes.

I should also like to ask this question in passing: As one reads the clause literally all he has to do is to make an order indicating his approval, but am I right in assuming that the approval will cover the actual code and that the code itself will also be presented to Parliament? The Bill does not say that, but I imagine that is the intention. I have not sought to make any amendment to that because I think it is perfectly proper. What will happen is that the Council will draw up this code, will submit it to the Secretary of State for approval and, when it is approved, it will come into operation.

It is also provided that the Secretary of State may make any modifications in the code as submitted to him. No doubt this is not unreasonable, especially as he has first at least to notify the Council, and secondly he has to consider any observations that the Council may make. Then we have the code. What I am seeking to leave out by this Amendment is the power of the Secretary of State on his own initiative to revise the code which is made under Clause 10 of the Bill. Again he has to consult the Council, and again, if he exercises that power the order falls to be approved under the Affirmative Resolution procedure, whereas an order approving the code in the first instance, or approving amendments subsequently made to the code at the instance of the Council, would be subject to the Negative Resolution procedure.

I raise this in order to raise the whole question whether it is really appropriate for the Secretary of State on his own initiative to alter the code of a professional body as to what conduct is to he adjudged unprofessional. I noted that my noble friend Lord Mansfield congratulated both the insurance brokers and my noble friend Lord Orr-Ewing on introducing the Bill into this House and on the degree of self-regulation, and approved of self-regulation in principle. However I am doubting whether it is really appropriate for the Secretary of State on his own initiative to alter that code of professional conduct.

I agree that, since the interests of the clients and the brokers are involved, the approval of the Secretary of State to the code should be obtained and that the Secretary of State should signify his approval by order in the first place. But as noble Lords will have noted in Clause 10, the code itself is to include provisions which constitute "in the opinion of the Council" unprofessional conduct. Admittedly, the Secretary of State could revise and amend that and, if necessary—and certainly in practice—would consult with the Council before making any amendment. But it seems to me there is a difference. The words "amend" and "revise" have a rather different connotation. If we give the Secretary of State power to revise the code he can look through it, make one amendment in it or he may strike out some of those acts or omissions which are proposed to be regarded as unprofessional; he may add other acts or omissions which are proposed to be regarded as unprofessional. He may amend the terms of any such item, and the power to revise may enable him on his own initiative to change the whole character of the professional code. I am not saying that will necessarily be done, but that is the power which is given to him.

It is evident that some approval of the code is needed, as I have said, but it is difficult to see why, in a self-regulating profession, the Secretary of State should be able to dictate what should or should not be unprofessional conduct. Let us consider how this might arise. No doubt the Secretary of State's Department will be in close touch with the Council; it would be very unfortunate if they were not. And the Department, as also their predecessors, have had close relationships with various bodies of this description and have managed to retain the confidence of those various bodies. I myself have the greatest respect for the way in which this is done.

Let me say in passing that one of the things they are very good at is resisting pressures for changes which superficially seem sensible and indeed from time to time obtain considerable popular support, but which are not adjudged, after consideration, to be in the real interests of the public or of the profession itself. What would happen? Supposing there is some abuse, or something which some complainant thinks is an abuse, which is brought to the attention of the Secretary of State. Unless it is trivial, he will bring it to the attention of the Council. He may even suggest that the code of conduct should be amended, and there would be a discussion about that. In many cases no doubt, as has happened in my experience, the Council will be able to convince the Secretary of State that such an amendment would not be an improvement. But there may remain a difference of opinion; there may be considerable pressure and then the Secretary of State can overrule the Council, can produce his own order on his own initiative, and has to go through what would then really be a farce of again consulting the Council whose views he already knew, and then would present the order to Parliament.

I really do not think that this is the best way of running a self-regulating system of this kind because the Secretary of State will always be talking and negotiating with the self-regulatory bodies, but having behind him the power to override them at any time. That is not the best way to get sensible discussion on important matters affecting a profession and the profession's clients. I should much prefer to see these words omitted altogether.

What I am saying is that if the words I desire to leave out remained in the Bill they would in effect be a bludgeon in the hands of the Secretary of State, so that his will would without question prevail. It seems to me that that is the antithesis of self-regulation. It would make discussion very difficult and it would make impossible any normal relationship between the Secretary of State and the Council. It is for that reason that I raised the matter at what I quite admit is a late stage. I am afraid I myself came into the discussion of the Bill at a fairly late stage. My claim to detain the House on this is that I have had some experience in this field. I beg to move.

6.21 p.m.

Lord ORR-EWING

My Lords, I have been looking at this Amendment very carefully since my noble friend tabled it. I think if we were starting this Bill afresh there might be some merit in having a longer discussion on it. I am sure my noble friend does well to put it down so that we can probe it, and I very much hope that we can have some assurances on the issue. On balance, I have come to feel that there are sufficient reasons not to divide the House and amend the Bill at this stage. After all, the Secretary of State—any Secretary of State—would feel obligated to consult the Council most carefully before he did anything against their wishes. After all, 12 members of the insurance profession will be members of that Council, and another five will be appointed by the Secretary of State himself. So he would not wish to override the professional considerations and the knowledge and experience of such a Council without their agreement.

Moreover, if he did wish to do it he would have to get an Affirmative Resolution through both Houses in accordance with that wish. That gives people every opportunity to lobby, people who are earning their daily bread in this profession and who have great knowledge and experience; they will have an opportunity of seeing their Members of Parliament and seeing others who know about these technicalities and putting their views forward. So I cannot feel that the knowledge will go unheard and the experience will go unsung. There is a Parliamentary opportunity, in both Houses, to hear the case put by the Secretary of State, and most people would probably side with the Council because they have first-hand knowledge and professional experience.

I also rather hope that my noble friend will not feel it necessary to divide the House because one of the merits of this Bill is that we have had in this House, where I had the honour to introduce the Bill, Labour, Liberal and Tory support for this measure. I do not think one should lightly cast this aside, because I can imagine giving all sorts of good reasons, when these Amendments go back to another place, for prolonging the discussion to those who wish to slow it down and filibuster. So I hope the Minister will be able to find some form of words and some assurances which will allay my noble friend's very real anxieties on this point.

Lord ORAM

My Lords, I shall try to respond to the suggestion contained in the last few sentences of the speech of the noble Lord, Lord Orr-Ewing, in meeting the real point that the noble Lord, Lord Drumalbyn, has raised. As he quite rightly said, this is a matter of more substance than the one to which I was glad to agree on behalf of the Government earlier. I am afraid this is an Amendment which is not acceptable, because it would remove from the Bill an important safeguard of the public interest.

Before I go on to explain why we take that attitude, the noble Lord, Lord Drumalbyn, asked me a question and perhaps I can seek to deal with that first. As I understand it, he was asking whether the code itself would be subject to Parliamentary approval. The Secretary of State must lay before Parliament his Instrument giving approval to the code, and presumably the code itself would be annexed as a Schedule. This Instrument would be subject to Negative Resolution procedure.

If I may now return to the main argument about the noble Lord's Amendment, let me first reassure the House over the extent of the Secretary of State's power under Clause 27(3), because it is subject to important limitations. He may revise the code of conduct only after consulting the Council, as the noble Lord, Lord Orr-Ewing, pointed out. I would remind noble Lords also that any order revising the code in this way would be subject to Affirmative Resolution in each House. There would, therefore, be no question of the Secretary of State using this power in any ill-considered or irresponsible manner. He could not make any changes in the code of conduct until they had been considered and approved by both Houses. The power in Clause 27(3) is not something that the Government inserted in the Bill against the wishes of its sponsors; it was in the Bill from its introduction in another place. None the less the Government were very glad that the safeguard was included. It was a material factor in the Government's decision to support the Bill.

Lord DRUMALBYN

My Lords, I wonder whether I may interrupt for one moment because the noble Lord is making a rather important point. Of course, I am well aware that what he has said is true; I am sure everyone would accept it. But that surely does not mean that the Department did not see the Bill until it was brought before Parliament. It seems to me highly improbable that the insurance brokers themselves would have suggested this power. Surely it must have come from the Department in the first place?

Lord ORAM

My Lords, during the Second Reading we spelt out the degree of collaboration between the sponsors and the Department. It is a Bill which we welcome, and clearly what the noble Lord says is right—the Government did see it. We were glad to see this particular point included, and it had the approval both of the Government and of the sponsors.

I would suggest that it is important to remember that the Bill confers considerable privileges on insurance brokers. It provides them with machinery for effective self-regulation under Statute, including the right to give or withhold use of the reserve title "insurance broker", a sanction that I am sure will become still more important as time goes on. We have every confidence in the present leadership of the broking community. Otherwise, we would not have supported their proposals for self-regulation.

However—and I would urge the noble Lord to consider this—when enacting measures that are intended to last for many years, perhaps many decades, it would be irresponsible not to include some safeguards against (shall we say?) lethargy or poor judgment on the part of future generations. It is true that when it is first drawn up the code of conduct is subject to the approval of the Secretary of State, but I suggest that that is not enough. Circumstances change; new abuses can creep into insurance selling, as they can into other areas. If insurance brokers are to enjoy continuing statutory privileges, it is important for the Government to be able to make sure that the brokers continue to be responsive to the public's needs for protection against new abuses and, therefore, that they keep their code of conduct up to date.

If all goes well—and we fully hope and expect that it will—this is a power that will be seldom, if ever, used. But I suggest that it is an essential long-stop in case things do not go well. I hope that the noble Lord will accept the points I have raised. We fully understand why he raised the question but I believe that when he gives further consideration to what I have said and to what the noble Lord, Lord Orr-Ewing, has said he will appreciate that there is sufficient reason to keep the present wording in the Bill. If he reaches that conclusion, I hope that he will agree to withdraw the Amendment.

Lord DRUMALBYN

My Lords, I am grateful for the way in which the noble Lord, Lord Oram, has responded to my Amendment. Perhaps he has not given the House quite as clear a picture of the way in which the relationship between the brokers and the public will be controlled and is likely to operate. In addition to the code there are, of course, the rules that must be made by the brokers—rules as to eligibility for admission to make certain that the brokers really are brokers; rules to indemnify those members of the public who may be defrauded or suffer from dishonesty in some way; rules for the setting up of a compensation fund to meet such payments and also compensation for the civil liabilities of brokers themselves; and rules as to disciplinary procedures.

Of course, any person who goes before the disciplinary committee that is to be set up and is found guilty—if that is the right expression—would have the right of appeal to the courts. It is for that reason —and I would think for that reason alone —that the approval of the Secretary of State is required for the strictly professional part of the code. This is quite different from the rules. Otherwise, there would be no means of appeal to the courts —there would be nothing for the courts to go on. So that, essentially, is why the code would need the approval of the Secretary of State and would need to be sanctioned by Parliament. That is fine, but I still think that the relationship between the public, the Council and the brokers themselves would be sufficiently controlled by the rules. Of course, the public would always have access to the courts direct where fraud or dishonesty of any kind was involved.

However, though I should be really reluctant to see an extension of this principle of control over professional codes by the Secretary of State on his own initiative, it would not be right for me in any way to attempt to make an Amendment at this stage. However, I would ask the Minister what precedents there are for Secretaries of State—that is, for the Government—to approve codes of conduct of this kind. This is entirely different from the Highway Code and from the code under which employers give information to trade unionists, and that sort of thing. Therefore, this may well set a pattern and create a precedent. In earlier days, professional bodies tended to be chartered and then it was the Privy Council that controlled them, not a Minister. Therefore, I have misgivings about this. I recognise that it is too late to do anything about it now.

I welcome the assurance of the noble Lord, Lord Oram, that if all goes well the power will seldom, if ever, be used. That is probably true but, in fact, it slants a self-regulatory system in a way which I believe detracts very much from self-regulation. If the noble Lord is unable to tell me now what precedents there are, I should be grateful if he could write and tell me. Having said that and made the position clear, I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Schedule [Constitution, etc. of Insurance Brokers' Registration Council]:

6.37 p.m.

Lord DRUMALBYN moved Amendment No. 3:

Page 22, line 12, at end insert— ("(2) Before nominating the persons mentioned in sub-paragraph (b) of paragraph 1 above the Secretary of State shall consult in the first instance the British Insurance Brokers' Association and thereafter the Council".)

The noble Lord said: My Lords, this is a point with which I can deal very quickly. The Schedule provides for the composition of the Council and states how it is to be set up. In addition to the 12 persons chosen to represent registered insurance brokers, one of whom is to be chairman, there are to be five persons nominated by the Secretary of State. I tried to table a briefer Amendment—one similar to my first Amendment—but it was not possible because there have to be two stages. To begin with, the first Council has to be set up and thereafter the independent members will be replaced and the professional members will be elected.

It seems obvious to me that the Secretary of State will, in fact, consult the Council once it has been set up. I think it desirable that, in the early stages, the British Insurance Brokers' Association should also be consulted on the type of independence that the Association would be likely to find appropriate and easy to work with, because it is very important in setting up a Council to have a team working together. I should be grateful for an assurance that such consultation will take place. If the noble Lord is prepared to give such an assurance, I need say no more about this Amendment, which would merely spell out that assurance in the Bill.

Lord ORAM

My Lords, I can straight away give the noble Lord, Lord Drumalbyn, the assurance that informal liaison with the British Insurance Brokers' Association would certainly take place about the Secretary of State's first round of nominations. That is bound to be so in view of the history of the preparation of the Bill so far and of what we have said in this House. Indeed, whenever the Secretary of State makes nominations he will, where possible, obviously wish to avoid nominating people who would be unacceptable to the broker members of the Council. However, I am afraid that I see no need for such consultations to be enshrined in the Bill. An undertaking to consult the British Insurance Brokers' Association could only lead to other interests, such as, for example, the Law Society, accountancy bodies, or bodies claiming to represent consumers, asking why they were not given a statutory right to be consulted.

I here again urge the noble Lord to think again as to whether this Amendment is necessary. I feel that it is not. I can assure him that the Government fully accept the need to work in close liaison with the British Insurance Brokers' Association and with the Council, when it comes to be established, in this matter. With that assurance, which I hope he will feel is adequate, I hope he will withdraw this Amendment.

Lord DRUMALBYN

My Lords, I am grateful for the assurance the noble Lord has given. Without further delay, I gladly ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.