HL Deb 20 October 2004 vol 665 cc847-51

7.34 p.m.

Lord Evans of Temple Guiting rose to move, That the draft order laid before the House on 8 July be approved [26th Report from the Joint Committee].

The noble Lord said: My Lords, I will give the House a little explanation on the background to why the order is necessary. In September last year, we announced our intention to appoint a Legal Services Complaints Commissioner to ensure that the Law Society of England and Wales improved its complaint-handling services for members of the public. We took the decision that we could no longer stand by and do nothing while consumers were let down, after the society had been asked repeatedly since 1999 to deliver substantive improvements in its handling of complaints. We wrote to the society 13 times between July 1999 and March 2003 asking for improvements in the handling of complaints. Each year, the society agreed that it had failed to meet the targets set. Despite those numerous requests and, it must be said, the efforts of the Law Society, the handling of complaints failed to improve sufficiently.

Getting the handling of complaints right is of critical importance, as the solicitor's role as the conduit between the public and the legal system is vital, but it will continue to work effectively only if the society can ensure that its services are carried out to a high standard. Despite all the society's efforts, by last September it still had not met the required standards. Therefore, we appointed the LSCC to ensure that, in future, it does.

The Government and the Law Society agree that customer service must come first. The LSCC's role is to ensure that the society is as good as its word and actually delivers good customer service. The role was provided for in the Access to Justice Act 1999 and has been taken on by Ms Zahida Manzoor, the Legal Services Ombudsman. In her role as ombudsman, Ms Manzoor has unique knowledge of the handling of complaints in the area and has been able to engage speedily with the society on how it intends to improve its services. The LSCC's role is a challenging one. She has to drive the society to improve its performance at handling complaints, while not undermining its role as the independent regulator.

To ensure that the LSCC has the right tools to assist her in her task, we have granted her a range of suitable powers, to be directed at the society. She can require the society to provide information about the handling of complaints; conduct investigations; make recommendations; set targets; and require the society to submit a plan showing how it is going to handle complaints, for her approval. It is the society's intention, with the LSCC's help, to secure the necessary improvements in its handling of complaints, so that the public get the high standards that they are entitled to expect.

We want to ensure that the society will not let down its customers again. A customer complaint unresolved is bad publicity for all solicitors, and we cannot stand by and let poor performance in one area bring down the standing of the whole profession. Therefore, if the society fails to submit to the LSCC a plan which she considers adequate, and/or submits an adequate plan but fails to handle complaints in accordance with it, the legislation provides for the LSCC to levy a penalty fine on the society. However, before the LSCC can levy a fine of any amount, Parliament has to specify the maximum amount of the fine.

The purpose of the debate is, therefore, to seek the House's approval that the maximum penalty should be the lesser of 1 per cent of a body's annual income and £1 million. We arrived at that arrangement by taking into account the key points—first, sending the message that failure to handle complaints properly is a serious matter warranting a significant penalty, and, secondly, identifying a formula that would be applicable to all the professional bodies that could come under the remit of the LSCC if they also fail to handle complaints properly.

To ensure that the proposal was reasonable, we researched fining practices in other regulatory regimes. We asked the LSCC for her views, and then consulted all the legal services professional bodies. The professional bodies and the LSCC all agree that the arrangement is reasonable.

Let me be absolutely clear: the LSCC does not expect to fine the Law Society the maximum amount unless it completely fails to make appropriate efforts to handle complaints properly. Indeed, we hope that the LSCC will not find it necessary to fine the Law Society at all, but she has the power to levy a fine of a suitable amount if appropriate. That will act as an incentive to the society to improve its performance, and act as a deterrent should the society consider further reducing its efforts. We believe that the consumers have a right to expect an effective and efficient service from their legal professionals and this is why we are doing everything we can to help achieve this.

To ensure success, however, the LSCC needs all of the relevant tools at her disposal. As I have explained, the power to fine the Law Society is a key among these tools. I ask noble Lords, therefore, to approve the regulations and I beg to move.

Moved, That the draft regulations laid before the House on 8 July be approved [26th Report from the Joint Committee].—(Lord Evans of Temple Guiting.)

Lord Henley

My Lords, I congratulate the noble Lord on moving these orders in the absence of his noble and learned friend the Lord Chancellor. He did so with admirable brevity; almost quicker than his colleague, Mr David Lammy, in another place. These matters have been through another place and there are few extra points I want to put to the Minister that were not dealt with there. It would be unwise to waste too much time in this House.

Will the noble Lord say a little more about how the Government arrived at the figure of £1 million or 1 per cent, whichever is the lesser? How long has the Legal Services Complaints Commissioner been without a penalty? In other words, when was she appointed? I assume that she will have the power to issue a penalty as soon as this legislation comes into effect. What appeal process is there for the Law Society, for example, if it feels it has been fined too much?

I want to make one point on the parent Act, the Access to Justice Act 1999, in relation to our discussions on the Constitutional Reform Bill last Monday. I made the point to the noble Baroness, Lady Ashton, that I was worried about the way in which the ombudsman was dealt with in that Bill. The ombudsman was announced at Clause 53. Clause 53 indicated that Clause 13 would deal with him. Clause 13 contained nothing about his functions, and one had to go to Clauses 82 to 86.

I want to make a point which the noble Lord can take back to the noble Baroness, Lady Ashton, who can take it back to the noble and learned Lord the Lord Chancellor. The drafting used back in 1999—we simply had Sections 51 and 52 plus a schedule—was a much more felicitous way of dealing with the matter. Perhaps that can be taken on board when the Government are drafting further pieces of legislation creating such commissioners or ombudsmen.

Lord Thomas of Gresford

My Lords, I declare an interest as a former solicitor and a member of the Law Society.

We support these regulations for purely practical reasons. There seems to be an attitude that there are two species of humanity; lawyers and everyone else. The determination seems to be to introduce lay people to control the profession in every possible way. It is sad that the Government are adopting such a negative view of the Law Society and its works at this time and that the commissioner feels that a big stick has to be waved over it.

The Minister gave us an idea of the situation in 2003 when it was decided to introduce the penalty. However, as the response of the Law Society to the consultation paper on the review of the regulation of legal services in England and Wales, dated June 2004, points out in paragraphs C.6 to C.8, there has been a significant improvement in what was an unsatisfactory situation. The number of complaints since June 2003 has been less than the number of cases closed. The overall number of cases in progress as at June 2004 had fallen by 1,000 and the number of cases closed was 40 per cent higher than in the corresponding period in 2003.

Again, the average proportion of cases referred to the Legal Services Ombudsman by dissatisfied complainants was 8 per cent and that has fallen to 6 per cent. The society's compliance board, which oversees complaints handling, contains 50 per cent lay membership.

I hope that that is accepted by the Government and that the Minister will acknowledge that the Law Society is still required to act as an independent regulator of private practice. It is a strange paradox that the Government appear to want the widening of the provision of legal services from a highly regulated professional body, the Law Society, to less self-regulating bodies which are guided by a different ethos. Surely, monitoring of these lesser bodies will be more difficult.

One therefore wonders whether this is a genuine attempt to protect the customer, or the consumer, or an attempt to apply pressure on the profession to justify the widening process, which goes on all the time, of extending the provision of legal services to more bodies.

The profession is burdened by the control of non-lawyers who are supposed to represent the public, as if lawyers themselves were not members of the public; as if they were removed to a different planet from the public whom they serve. We support the introduction of these regulations, but it is a sad day that they are being brought forward in this way.

7.45 p.m.

Lord Evans of Temple Guiting

My Lords, I am grateful to both noble Lords who have contributed to this short debate. I thank the noble Lord, Lord Henley, for his kind remarks. In reply to his questions, when we set the figure of £1 million or 1 per cent of turnover we wanted to arrive at an amount that would send out a clear message to the society that failing to handle complaints properly was serious. We looked at other regulatory regimes and took into account that the Law Society and other professional bodies that may come under the LSCC's remit are not the profit-making organisations. We took on board the views of the professional bodies and the LSCC itself. The formula I have outlined was agreed by all those bodies.

The Secretary of State announced in a press release dated 26 September 2003 his intention to appoint an LSCC. The LSCC was appointed on 26 February 2004. The noble Lord, Lord Henley, asked whether there is an appeals mechanism if the Law Society wants to appeal against fines at any level. The LSCC has been asked to introduce an appeals mechanism in accordance with the Better Regulation Task Force recommendation to independent regulators made to government in February 2004. There is obviously available the option of judicial review.

I agree with a point made by the noble Lord, Lord Thomas of Gresford. I have sat in this Chamber listening to many debates thinking that there are lawyers and the rest of us. I was concerned that in speaking to the order I would receive the response that the Government are being unfair to the Law Society. When looking at the facts, we see that we are not being unfair. We are genuinely trying to protect the consumer. The Government have been put in a position in which they have had to take this action.

The noble Lord read out some encouraging statistics, but let me give him some that are not so encouraging. From June 1999 to December 2000, the Law Society met only two of the five targets set in agreement with it. They failed therefore on three. In 2001, it met 10 out of 15 targets, and between January and December 2002 it met five out of 12 targets. In the most recent example that I have for January to December 2003—let us not forget that these were set in agreement with the Law Society—it achieved only two out of the 14 targets.

There is a great deal of evidence that the Government have done all that they can to obtain compliance from the Law Society but, in the face of this rather dismal record of problems, they have had to take this action and that is why this order is before your Lordships. I commend it to the House.

On Question, Motion agreed to.