Discussion - in progress
News update October 2005
||The government wants to reform
the regulatory framework for legal services to put the consumer first. We
want a framework that promotes competition, innovation and protects the
Download the White Paper from the DCA web site
"...in 2004, Sir David Clementi completed a report to me on
reforming the regulatory framework. His report confirmed that the case for
reform is clear, and reform is overdue."
||Press Release - Legal services: our key concerns
We believe that any new regulator must deliver a healthy market for legal
services with a high level of consumer protection.
||Nick Stace, Campaigns Director
speech at the Department for Constitutional Affairs Conference.
They Work For You - Law Society (Complaints):21 Mar 2005: House of
(Bexleyheath & Crayford, Lab)
I welcome Sir David Clementi's final report on legal services in England and
Wales and I was pleased to hear of the Lord Chancellor's speech today at the
legal services reform conference where he announced the future establishment
of a legal services board and an office for legal complaints."
"I am grateful to my hon. Friend the Member for Bexleyheath and Crayford
(Mr. Beard) for raising this issue, and I express my sympathy for his
constituents, who have clearly had a distressing experience. Since I joined
the Department for Constitutional Affairs when it was formed in June 2003,
my overriding aim has been to promote better public services, including
legal services, that are designed to meet the needs of the people who use
Lord Falconer of Thoroton
Constitutional Affairs Secretary and Lord Chancellor
Legal Services Reform Conference
21 March 2005
Check against delivery - This is the prepared text of the speech, and may differ
from the delivered version
Itís a great pleasure to address you today, at this important conference on
legal services reform.
I am especially pleased that todayís conference is being hosted by the DCA in
association with Citizens Advice, the National Consumer Council and Which. I
thank them all for their help and support.
Just looking at the video, the range of people and organisations that use legal
services, is almost as wide as the law itself.
And their experiences are pretty varied too - some get a good, timely,
effective, fairly-priced service. And, put bluntly, some donít.
And you heard in the video the sorts of things people say about legal services -
they donít understand the language and the terminology. They are not sure about
how much they will be charged. They feel that they donít get the attention they
want. They feel the profession is old-fashioned and, in some cases, canít be
Thatís the aim of todayís conference - to respond to these issue, improve legal
services in this country and to really put the consumer first.
What I want to do today is look at:
Firstly, the reasons why we urgently need to reform legal services;
Secondly, I want to set out my vision for what legal services should look like -
what the consumer needs, and deserves;
And, finally, I want to set out the Governmentís proposed reforms and the steps
we will be taking.
So - firstly, why do we need these reforms? Before we fix something, letís be
clear about whatís broken.
What is not in dispute is that the calibre of many of our lawyers is undoubtedly
among the best in the world - many of the best legal minds of our generation are
to be found here in this country.
But, despite the undoubted excellence of our best lawyers, the consumer wasnít
always getting a good deal.
In 2001, the Office of Fair Trading said that many of the rules of the legal
professions were unduly restrictive. The result of this, according to the OFT,
was that consumers were receiving poorer value for money than they would have
done under more competitive conditions.
To follow this up, my Department carried out a wide-ranging public consultation
exercise. We asked the public and a range of stakeholders for their views - we
asked them about the complaints system, about competition and about regulation.
The views we got back were clear that the framework we had in place was failing
to meet the demands of the market place and the needs of consumers.
Too many people felt legal services were letting them down. Being charged far
more than they expected. Not fully understanding the processes in which they are
involved. Having to continually chase up responses to queries and letters.
Feeling that they are powerless - obliged to turn to a lawyer to help them with
often-difficult problems, stressful problems - yet feeling that they are unable
to control whatís happening.
Through the consultation, consumers told us loud and clear that their needs were
not being met.
The system for complaints handling was ineffective. In many cases people didnít
know who to complain too. And when they did, people told us it was too slow and
too complex. It was clear people lacked confidence in a complaints regime was
too closley tied to the providers. There was a lack of transparency and
People told us they werenít confident in a system that was self-regulated, and
they felt that enforcement of rules was poor. Respondents felt that the primary
accountability for the regulator was to the members of the trade association and
not, necessarily, to the public - the views of consumers were not in-built as
part of the system. The standards being set lacked any real measure or target
for consumer-orientated services.
There was a strong view that existing structures were inflexible, and didnít
allow existing, or new providers to respond to the markets demands.
And the view from respondents was that consumers in some areas were receiving a
low quality service - the Ďcustomer serviceí that modern consumers expect was
absent all too often.
These are strong arguments for reform - itís important we respond to peopleís
Let me give you examples of how the system is structured in a way that hindered,
rather than helped, the consumer.
Barristers and solicitors cannot go into partnership with each other. So the
requirement, which applies in most cases, preventing direct access to barristers
means people are often required to pay 2 sets of professional fees.
Lawyers cannot provide their services through an entity that is not wholly owned
by lawyers - therefore outside organisations such as Tesco or the RAC, cannot
employ lawyers to provide advice to their external customers.
Imagine a lone parent, recently separated, raising a young child. The sort of
support they need could range from legal advice to handle the separation quickly
and fairly, financial or debt advice, housing advice, information on employment
or training opportunities or childcare, even counselling or other such services.
Again, wouldnít it suit the consumer in this case to be able access these
services more easily - if the market demands such a service, I donít see why we
should not allow it.
Consumers want a diversity of providers - providing the sector is properly
regulated, choice is a good thing.
So we have a system that, at itís best, is the finest in the world. A system
based on a long and proud history.
But we also have a system that is unsuited for the 21st century.
In all service industries, legal services included, the consumerís needs are
But what is it that consumers want?
They want to be able to trust their lawyer - and be sure about their integrity.
They want good value for money. And they want a quality service that helps them
with the problem theyíve got. This means an efficient service, an effective
service and an economic service.
They want to be confident that the service will be delivered in a way that meets
their expectations, and at a reasonable cost. Confident that, if there is a
problem, it will be dealt with properly. Confident that the trade bodies have
their interests in mind, not just those of their members.
And they want choice. Consumers are now familiar with making informed choices -
whether thatís changing a gas or electricity supplier or booking a flight with a
budget airline. The internet and broadband technology has started a revolution
in the way people make decisions and purchase services. People want to look at
the options and feel empowered to choose the service thatís delivered in the
right way at the right time and at the right price.
So, confidence and choice - this is where we need to head towards, thatís our
vision for the way legal services are delivered.
And, by any measure, we are currently falling short.
You can see it in the number of complaints - one complaint for every six
And, even where people receive a good service for a single transaction - a house
purchase for example - how can they have confidence in a system that is
self-regulating, where one lawyer regulates another? Where a body is expected to
represent itís members and regulate them.
The two donít go. It lacks transparency and gives the impression of
Reform is long overdue.
This is why I asked Sir David Clementi to make recommendations about reform of
the regulatory framework. Looking at how we can shape the sector so it remains
independent, is comprehensive, accountable, consistent, flexible, transparent,
and no more restrictive or burdensome than is clearly justified.
His report has been welcomed, not just by Government, but by many of the
professional legal bodies too.
I want to move on now to what we are going to do in response to the report and
in response to the challenges Iíve outlined.
There are four key areas:
First, the regulatory model.
Second, complaints and discipline.
Thirdly, new business structures.
Finally, I will touch on some regulatory gaps where there are concerns.
Let me take each of these areas in turn:
In terms of the regulatory model, let me start at first principles. What do we
want the framework to achieve?
We want it to:
Maintain the rule of law.
Ensure people have access to justice.
Protect consumer interests.
Develop a strong and effective legal profession.
And promote public understanding of legal rights.
All those things are the mark of a modern, effective regulator. And how will we
get there from where we are now?
Firstly, we will create a Legal Services Board to oversee the legal services
sector. Day-to-day regulation will remain the task of the professional bodies -
but the Legal Services Board will set the standards and check that they are met.
The Board will have a lay chair, and a lay majority. Appointments will be made
on merit, by the Secretary of State for Constitutional Affairs.
It will have powers to apply a range of sanctions where it considers that
regulation has failed. People must be confident that it can act - and will - if
self-regulation fails. I envisage a sliding scale of powers - for example, these
could be setting targets, issuing guidance and imposing fines. It could have the
power to direct a professional body. Or it could have the power to take over one
or more regulatory function, for example monitoring and compliance, carrying out
visits to firms itself.
De-recognising a professional body if that body fails in its duties is the
nuclear option. But it will be there, to be used if needed.
There are other issues that need to be resolved.
I consider it is central to the new framework that regulatory powers be formally
vested in the Board by statute, with the Board delegating powers to front-line
regulatory bodies as it sees fit. I am aware that others, including the Law
Society and Bar Council, feel differently and propose that powers be principally
vested in the front-line bodies. But I know from my discussions that consumer
groups are most concerned about this proposal.
I would also welcome views on what we need to do to ensure the Board routinely
engages with both practitioner and consumer representatives - do we need to
create formal groups in statute for this purpose? Or should we require the Board
to make arrangements but leave it flexibility to work out the details?
Our second proposals, alongside the establishment of the Legal Services Board is
to clearly separate regulation from representation.
Under the new system, all front-line regulatory bodies will be required to
separate clearly their regulatory and representative functions.
It is for each body to decide what form its governance arrangements take, but
they will need to demonstrate clear lines of accountability, and openness about
how resources will be allocated to the two discrete functions of representation
Ultimately, they will need to convince the Legal Services Board that they meet
the standards that the Board sets. The Board will judge whether the arrangements
for each body are proportionate, and whether, crucially, they meet the needs of
I welcome the steps the existing bodies have already taken - the Law Societyís
decision to press ahead now with separating clearly their representative and
regulatory functions and I welcome the Barís consultation paper on the matter.
All bodies who wish to be front-line regulators under the new system should
start to prepare now the arrangements which they will put to the Legal Services
Board for approval.
Turning now to the second key area - complaints and discipline.
The impact of poor legal service is considerable. The length of time to get a
response. The difficulty in getting answers. The actual hardship caused when,
for example, directions to pay compensation payments are contested or ignored,
meaning further delays.
Mistakes do happen. The informed consumer understands this - but they expect
problems to be rectified and complaints dealt with seriously and quickly. Good
complaints handling is vital to building confidence in the sector.
I have already appointed Zahida Manzoor as the Legal Services Ombudsman and
Complaints Commissioner. She has swiftly engaged with the Law Society, set
challenging targets, identified problems and required the Society to produce a
plan. The Law Society has responded constructively and I look forward to the
improvements this will make for the consumer.
But I want to go further. The sector and, vitally, the consumer would benefit
from a single complaints body - simpler for the consumer, easier to understand
and able to provide quick and fair redress.
To achieve this, I will create an Office for Legal Complaints. I reject the view
that centralisation will lead to a slower service for consumers. The experience
of the Financial Ombudsman Service shows that this is not necessarily so. A
single complaints body means consistent, fair and professional handling of cases
for all complainants.
As with the Legal Services Board, the Office for Legal Complaints will be led by
a board with a lay Chair and lay majority, and appointments will be made on
merit, by the Legal Services Board. The different responsibilities of the Legal
Services Board, the Office for Legal Complaints and the various professional
bodies will be clearly defined.
It is for debate whether the Board or the Office for Legal Complaints should
publicise how well each practitioner handles complaints. This debate reflects
the fact that, as the ways of providing services change, so will the way that
consumers choose their service provider.
Removing complaints handling from the professional bodies will in no way reduce
their responsibility to ensure that their members operate to the highest
professional and ethical standards at all times. I acknowledge the serious and
constant efforts the professional bodies make in this regard. The Office for
Legal Complaints will help, not hinder.
We cannot let a few bad apples spoil the barrel. But where a bad apple is
identified, the current disciplinary arrangements are working well. So the Legal
Services Board will require an annual report from each disciplinary tribunal,
but the professional bodies will remain responsible for dealing with members and
We need one complaints body so there is clarity for the consumer about how and
where to complain. Often it will not be clear to the client where the fault
lies. To leave in place many overlapping complaints bodies, whilst convenient
for the profession, would not be helpful for the consumer.
I want to turn now to the third key area, the structure of legal services firms
and the legal services market.
I support progressive moves towards new business structures. These could see
non-lawyers for the first time not only as managers of legal practices but also
as owners and investors in them.
These are permissive steps, not requirements. We believe that new ways of
working and new capital could encourage innovations in delivery - innovations of
benefit to consumers.
But there must also be robust safeguards.
We have had a number of informative discussions on new business structures with
consumers and practitioners. We need to ensure we get the balance of regulation
right or this will not be attractive either to consumers, the profession, or
What is needed is a strong licensing arrangement for new business entities, to
provide the assurance that all involved will rightly demand, that those who run
these businesses and own them are fit to do so.
Firms operating within the new business structures will need approval from the
Legal Services Board to provide their services. If these extend significantly
into areas beyond the Boardís competence, approval and oversight by other
regulators will be required before the services can be offered.
Increased liberalisation, supported by stringent regulation, will provide the
opportunity for people to get the whole range of services they want, in the form
they want and at the time that they want. Putting the consumer first. This may
be 24 hours a day, 7 days a week. I do not know what form these services may
take and itís not for me to decide. Demands will continue to change and
providers will need to continuously adapt to meet these demands.
The reforms which we put in place must allow further developments, not constrain
them. Foster innovation, not breed stagnation.
Turning finally to omissions, gaps, in the regulatory system. It will be for the
Legal Services Board to advise the Government on new areas where it identifies
problems, but a couple of areas stand out.
There has been a lot of concern recently about claims management companies. My
distaste for the practices of some claims management companies is well-known.
Hard-sell and direct marketing, encouraging people to ďhave a goĒ. We hear
stories of people being talked into signing agreements they do not understand,
and taking out loans to cover the cost of premiums. I welcome the steps the
Claims Standards Council has been taking to try and respond to these issues. But
I will be looking carefully to see how the protection of consumersí interests
can be improved.
Some people have raised concerns with me about will-writing and estate
administration. These are some of the most commonly used legal services. If
there is a serious problem I will tackle it. I will not let it fester until the
Legal Services Board is in place. I have therefore commissioned research on the
impact of regulation on the will-writing market. What would the benefits be?
What would it cost? If regulation is in the public interest, it will happen.
In addition, I can also announce today that I am considering further
liberalisation in the provision of probate and conveyancing services. My
intention is to allow - with appropriate consumer safeguards - new providers,
such as financial institutions, to enter the market.
Also, ahead of the creation of the Legal Services Board, we will be looking
closely at any rules of the legal professional bodies that we believe may not be
operating fully in the consumers' interest.
Much of this package will require legislation. Today I will commit to you that
we will publish a White Paper on the reforms this year and I can also commit
today to bringing forward legislation to put in place the reforms we need.
As I said earlier, I welcome your views on this package of reforms. Todayís
conference is about constructive dialogue and debate.
And, indeed, this package of reforms is large. It is far-reaching. It represents
a wholesale change in the way consumers can interact with legal service
As we take this programme forward, the voice of the consumer will continue to be
heard loud and clear. I am pleased to announce that I have set up a Consumer
Panel to advise the government on these reforms, with representatives from the
Federation of Small Businesses, the National Consumer Council and the Welsh
Consumer Council, from Which? and from Citizens Advice.
The Panel will meet for the first time next month. I am delighted they have
agreed to take part and I look forward to working with them.
The creation of this advisory panel is my clear commitment to continue listening
to the public - individuals, families, small and large businesses.
So, to sum up - consumers have told us what they donít want.
They donít want to be let down. They donít want delays. They donít want quotes
for work which turn out to be only a fraction of the final cost. They donít want
to receive letters which they donít understand. They donít want the same groups
representing and regulating members.
They do want legal services overseen by an independent board. They want a single
body dealing with complaints. They want regulatory gaps closed where necessary.
And they want our legal services to continue to flourish, with competition and
innovation encouraged, so that they receive the best possible product.
Reform of legal services is overdue. Where the system is not working as well as
it needs to, we must put it right.
And, most importantly, all the changes we make must pass the simple test that
they put the consumer first.
Thank you very much.
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