Compensation Bill [HL]

My Lords, I agree with much of what the noble Viscount has said, especially in relation to the flexibility that this legislation gives us. Indeed, we have constructed it in such a way as to enable us to regulate and to move people out of regulation where appropriate. In a sense, he underlines my point about the longer term. As he rightly said, we should not rush to do things that are better catered for in other ways. That is true of the current situation, but it will also be true of an evolving situation in relation to regulation. Some of the things that I was talking about, such as unfair practices, will be relevant as we look at how this legislation will be used in the future. I agree wholeheartedly about the need for us to think about how best to approach the problems and to capture those whom we wish to capture within a regulatory framework that is not deeply burdensome to anyone. I believe that the framework will give a kitemark that says to consumers, ““These organisations and companies are regulated, so you can have confidence in them””. Therefore, I think that in some ways the legislation could be extremely helpful for the market itself. I absolutely take the points made by the noble Viscount about our thinking carefully and flexibly and keeping this under our watch so that we can change what we are doing when other things are better placed to do it or when the need goes away. I hope that he will agree—indeed, I think that he was agreeing—that the legislation provides us with that. Let me deal with the specific points that the amendments raise about the Secretary of State. As the noble Viscount knows, the power to issue directions is common in statutes. The provision in the Bill to issue directions is in line with the powers that will be given to the Legal Services Board. The board will have the power to step in and issue directions to front-line regulators, such as the Law Society, if there was any concern about its regulatory function. It is important in this context that the Secretary of State should have this power in his oversight role. It is unlikely that the Secretary of State would want to issue directions in the first instance, as Clause 3(4) also gives him the power to issue guidance and a code of practice, which he must lay before Parliament, and to require reports or information. He would want to use these powers initially and resort to issuing directions only if the designated body was not efficiently and effectively regulating the sector. He might want to use the provision to issue directions before taking the step of transferring a function from the regulator, which he can do under Clause 3(10). This would always be a last resort, as the Secretary of State would want to do everything possible to assist the body if there was any concern that it was failing. The noble Viscount has indicated his concern about transparency. We want to be as open as possible about any steps that the Secretary of State takes in his oversight role as regulator. If a decision is taken to issue directions, we see no reason why they should not be placed on the public record. I hope that that will reassure the noble Viscount. I have already discussed the current position of the regulator, to which the noble Viscount referred. We think it important to retain this provision in the Bill so that the Secretary of State has the power to regulate directly if we do not discover that the situation is better regulated by an existing regulator. For the reasons that I have already given—and in particular in the context of wanting to retain that flexibility and that longer-term vision of where this may go in the future—we want to retain the power to transfer functions of the regulator to the Secretary of State if for some reason the body fails in carrying out its function. We do not want that to go into a vacuum. The power in Clause 3(10) to transfer a function by order is subject to parliamentary scrutiny and I have already indicated can only be taken if other steps had failed to remedy the failings of the organisation. Even if the Secretary of State regulates directly, we want to retain the flexibility for him to designate a person in the future if a suitable person was identified. Taking on board what the noble Lord has said, if we are going to establish the right framework for regulation it is important that we are perfectly at ease both with transferability in this and about directions being in the public domain. I am happy to discuss how we may achieve that with the noble Viscount. In order to get both the short-term and longer-term established, within that transparent approach we need to retain the opportunity within the Bill to designate the Secretary of State and for him to issue direction under the circumstances that I have indicated if needs be. I hope that that has reassured the noble Lord about the approach that we will be taking and gives full recognition of the valuable points that he has made.