LSB and laying down the rules

The Legal Services Board has recently been consulting on the independence of approved regulators and whether to push further on the need for independence.  Their preference would be for a change of rules to require that the chair of a regulatory board should be a lay person (in the same way that the Legal Services Act requires that the chair of the LSB must be a lay person).

I have broadly welcomed the policy of the Legal Services Act’s reforms of the regulation of legal services, and largely supported the LSB in its implementation of those reforms.  That is one reason why I have been surprised by the strength of my fundamental opposition to the LSB’s preference for this rule-change.

Make no mistake: I am not arguing against independent regulation or even a perception of independence.  Indeed, in my recent response (para 4.3.2) to the Ministry of Justice review of the regulatory framework of legal services, I argued for greater separation of the representative and regulatory functions than we have so far achieved.

The LSB has (rightly) placed great emphasis on regulation being a last resort, and for it to be risk-based and evidence-based.  It has also (again rightly) sought to remove discrimination in the legal services marketplace.  These touchstones therefore make the proposal for lay chairs all the more extraordinary.

It strikes me that the real risks in issue here are either ‘regulatory capture’ of the regulator by the representative bodies or the perception of favour by the regulator towards the regulated.  The premise seems to be that either or both of these outcomes is more likely – that is, that there is an unacceptable risk – if the chair of the regulatory body is a current or former member of the regulated community (or a related one).  Of course, there is a risk.  But the mere fact of professional qualification (in some cases, a fact of history rather than present or recent practising status) does not substantiate that risk.  Only the actual behaviour of the chairs or their boards can do that.  Equally, there is no guarantee that the actions of a lay chair (or their board) would never in reality or perception demonstrate regulatory capture or favouritism.  The status of the chair as a qualified individual does not create the risk – or, more importantly for present purposes, the absence of professional qualification does not remove the risk: only their actions will, and these cannot be determined at the time of appointment.

I cannot see how the fact of prior qualification creates an unacceptable risk – or at least one that is so comparatively greater, relative to another individual who is not legally qualified.  To my mind, introducing a rule requiring chairs of regulatory boards to be lay people is not founded on risk, and would therefore represent a disproportionate response (thus itself offending one of the principles of the Legislative and Regulatory Reform Act 2006).  This would then be further exacerbated by not applying the proposed change to all approved regulators (by excluding the Master of the Faculties): if the proposal were sound, exclusions based on pragmatic difficulties or historical anachronism would not feature.

As for being an evidence-based proposal, that is quickly dismissed by the LSB’s own hand, since they acknowledge in their consultation paper that the preferred rule-change is not based on empirical evidence.

Which brings me to discrimination.  I cannot avoid the conclusion that for internal governance rules to require that the chairs of regulatory bodies be lay persons would be to discriminate against those who are legally qualified (or who have ever been qualified, since the definition in the Act does not allow one ever to shake this off).  Declaring my own interest as someone who is not a lay person within the terms of the Act, I find this forced conclusion and discrimination disappointing and offensive – just as I do other forms of discrimination.  I am not swayed by the argument that the Legal Services Act requires such a conclusion in relation to the chair of the LSB, since I find that provision equally offensive!

In the absence of evidence (admitted by the LSB), the proposal for lay chairs is not risk-based; it is, at best, a policy objective not supported by much substance at all.  Unfortunately, at worst, the proposal might also be interpreted as a personal slight against current ‘non-lay’ chairs.  Either way, the LSB seems to me to be in a vulnerable position.

There is undoubtedly a debate to be had about regulatory independence and whether the current framework does all it can to achieve it, both in structure and execution.  Had the consultation paper been framed in those terms, it might have attracted more widespread support.  To focus on the background and qualification of the chairs of regulatory boards is to choose the wrong target and offer a misguided solution.

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