Legal Services Bill [Lords]

Understandably, the potentially huge change to the structure of the UK legal practice heralded by the creation of alternative business structures in part 5 of the Bill has been the subject of fevered debate. As a former solicitor who has an ongoing interest in a company that provides professional services to the legal profession, I applaud the sensible way in which the Government have taken on board some of our suggestions during the passage of the Bill. In dealing with the determination of licensing authority rules, I hope that the Minister will also be persuaded that new clause 6, tabled by my hon. Friend the Member for Huntingdon (Mr. Djanogly), is similarly important. Much of the debate on this matter has focused on access to justice. I accept the concerns that were expressed by the right hon. Member for Berwick-upon-Tweed (Mr. Beith) and the hon. Member for Somerton and Frome (Mr. Heath). Although the provision of legal services should never be considered quite as straightforward as picking up a can of beans from the local supermarket, I appreciate what the Minister was trying to get at when she made her now notorious statement in The Daily Telegraph some months ago. Perhaps too little parliamentary attention has been given to the effect of part 5 on the largest commercial law firms in the City of London, which I represent and which have an increasingly strong international reach. One of the great success stories of recent years has been the dramatic growth in UK law firms both since the ending of partnership restrictions by the legislation on the issue passed in 1967 and over the past 15 or so years. Many envisage that the changes brought about by this Bill will bring towards law firms the idea of a big bang similar to that which happened in the City of London in 1986. Perhaps it is inevitable that much of the press speculation on this matter has been on the financial implications of law firms trading their independence by going to the financial markets. The events of 1986 in the City ensured that it was no longer a club. There is already a big distinction, among the larger commercial firms, in legal services, which have already evolved in an international way; I doubt whether many partners in law firms see the alternative business structure route simply as a means of cashing out. Given that most of the UK's top 20 law firms are already £100 million a year turnover businesses, a recognition exists of their need to attract the top talent in respect of lawyers and of the running of the business, as my hon. Friend the Member for Huntingdon mentioned in relation to new clause 6. That need applies to finance directors, marketing directors and human resources professionals—a range of different areas. Inevitably, these law firms are on a different scale to the firms that have been discussed by other hon. Members, none the less they are an important part of the invisible exports of this country. We need to have those individuals—the finance directors and so on—as full equity participants on a par with the lawyers who make up those practices. There is also little doubt that we are seeing great international expansion among the legal fraternity. We need only consider what is going on in Beijing, Shanghai, Bombay and Delhi to see that. In the future, as the Indian profession begins to open up, there will be tremendous opportunities for British professional services companies, law firms and accountants to make an impact. Increasingly, the middle east, in places such as Dubai, Abu Dhabi, Doha and Qatar, will be an enormous growth market for internationally minded British law firms. It is therefore crucially important that the role of the LSB is given full attention at this stage. It needs to be an enabler rather than a restrictor. We need to consider how it can enable such services to be provided, rather than simply being an old-fashioned regulator. I hope that new clause 6 recognises the potential conflict that can arise between shareholders, professionals and their traditional professional bodies, and seeks to define more fully what amounts to low risk in the eyes of the licensing authority. My hon. Friend the Member for Huntingdon gave a sensible example that would not apply only to large city firms—he mentioned a three-partner firm that fell foul of the current rules. I hope that the Minister will give careful thought to the flexibility that we have requested. I could say much more on this issue, but I appreciate that time is tight. It is difficult to foresee exactly the effect that the Bill will have on the structure of the UK's legal profession. We can speculate, but no one foresaw that in the immediate aftermath of the big bang in 1986 no stockbrokers or merchant banks would remain in British hands. I do not think that we face that risk, although foreign money on the stock exchange may play a part for one or two of the more innovative law firms that wish to become fully listed. However, we want the flexibility for the reasons that I have set out. Alongside the importance of protecting the public interest and of access to justice, the licensing authority needs to ensure that our world class reputation for international legal services is similarly maintained.