Legal Aid, Sentencing and Punishment of Offenders Bill

Jack Straw Excerpts

Tuesday 1st November 2011 Commons Chamber

My new clauses make no changes to discretionary life. Both I and those who advise me anticipate that once IPP sentences are no longer available, much more use will again be made of discretionary life sentences. The worst people will go back to having life sentences, which we know works perfectly effectively and well. They will be under licence for life if they are ever released, before which there will be a Parole Board process.

[Mr Jack Straw (Blackburn) (Lab)]

Will the right hon. and learned Gentleman explain the practical difference between an offender who is given an IPP for, say, a minimum tariff of five years, who will then be released by the Parole Board on proof of meeting certain conditions, and someone who is given a discretionary life sentence with a tariff of five years who is released by the Parole Board on exactly the same conditions? What is the difference?

[Mr Clarke]

Well, there are differences in the regime, the sentence planning and so on, but not very many. I will go back to the point about the regime that we want to introduce for people with extended determinate sentences, but the right hon. Gentleman makes my point. What is wrong with saying that the courts should use the ordinary life sentence? They will use a life sentence when they judge that a case is so serious, and when future risk is so high, that it is the only proper sentence.

For other offenders, we are introducing a new extended determinate sentence. The offender will receive a custodial sentence plus a further long extended period of licence set by the court. Those will be quite long determinate sentences, and the offenders who receive them will serve at least two thirds of them. In serious cases, offenders must apply to the Parole Board for release, and the board may keep them inside until the end of the determinate sentence.

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[Mr Clarke]

I shall come to the Parole Board before I conclude my remarks, but we are not taking away its power: nobody who previously had an IPP will be released, even at the two-thirds point, unless they have first satisfied the board.

The most obvious difference between life sentences, which will now be used more widely, and IPP sentences is that, in the case of life imprisonment, licences are for life and subject always to recall, whereas IPP sentences are not. However, as I said, criminals who complete an extended determinate sentence must then serve extended licence periods, during which time they will be closely monitored and returned to prison if necessary. The courts have the power to give up to an extra five years of licence for violent offenders and eight years for sexual offenders on top of their prison licence.

There are further protections. Some people believe—the Labour Front Bench team certainly affect to believe—that we are exposing people to risk by making this much overdue change. We are also introducing—not in the legislation, but I undertake to introduce them—compulsory intervention plans for dangerous offenders while they are in prison, so that they are supported to change their ways and not commit more crimes when they are eventually released. By the end of sentence, offenders should therefore have undergone interventions—made in a more certain and organised way than at present—to address their offending behaviour.

There is rightly concern that those currently serving IPP sentences should be supported in progressing through their sentences and achieving release on licence. However, we will be using our best efforts to improve the progression of these prisoners through sentence, including with improvements to assessment, sentence planning and delivery, and parole review processes. We continue to monitor outcomes to ensure further improvements in this area.

There are yet further protections available to the court. We do not believe that our proposed changes put the public at risk or weaken our risk-management regime. Most sexual or violent offenders sentenced to 12 months or more in custody will fall under the multi-agency public protection arrangements framework, which means that the relevant authorities will work together to co-ordinate assessments of risk and risk-management plans for the offender once they have been released on licence. Robust risk-management systems are now in place for a range of offenders. Court orders are also available to manage the risk of serious sexual and violent offenders who appear to present a risk at the end of their sentence. Violent offender orders and sex offending prevention orders place restrictions on these offenders, and if they breach those orders, they can be sent back to prison.

In the sentencing Green Paper, we raise the question of whether the Parole Board’s test for release in these cases is the right one, because only a tiny number of people ever emerge from prison at the moment—the rate is less than 5% a year—and we are acquiring people who are still in prison years after they finished the tariff that the judge imposed on them. This is a question that we will explore further. The amendments give the Secretary of State a power to change the release test used by the Parole Board, which is set in statute for IPP prisoners and for prisoners serving the new extended sentence. The power will be subject to the affirmative procedure. We will consult carefully and see what happens to the Parole Board and the courts once we have made the present form of sentence extinct for former prisoners.

The trouble now is that someone who has finished his tariff has to stay in prison unless he can persuade the Parole Board that it is safe to let him out. [Interruption.] That is it; that can be difficult, sitting in a prison cell, although we are going to produce some management plans. On the other hand, if we are keeping someone in beyond their tariff, it is certainly arguable that we should have some positive reason for fearing that there is a risk that he is going to offend when he leaves. We have to reflect—we will consult on this—on whether we have been giving the Parole Board an almost impossible task. It is no good pretending that it can come to a scientifically certain conclusion in each case. None of us would like to say, if we met a range of prisoners, which were now reformed and which would offend again. The Parole Board gets it wrong now: some of those it releases offend again, while some of those in prison are never going to offend again, if we can actually get them out. We will consult on whether the current release tests for IPP sentences and the new extended indeterminate sentence ensure effective public protection while allowing everyone to be satisfied—as far as they can ever be satisfied in this world—that the offenders can now be safely managed in the community.

[Mr Straw]

rose—

[Mr Clarke]

I shall give way one last time, because I am trying to be brief so that we can have a debate.

[Mr Straw]

Some 40% of discretionary and mandatory lifers are post-tariff. They have to prove that it is safe to release them. Can the Secretary of State please explain what the difference is in substance between someone on a life sentence who has to satisfy the Parole Board that it is safe to release them and someone on an IPP?

[Mr Clarke]

Because the judge, in full knowledge of the circumstances of the offence and the offender, has decided that such a serious offender should get life imprisonment, it is—

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[Mr Straw]

I endorse the remarks of my right hon. Friend the Member for Tooting (Sadiq Khan) and the hon. Member for Shipley (Philip Davies). The hon. Member for Shipley, addressing the Lord Chancellor and his hon. Friends, said that the measure would lead to a number of dangerous offenders coming out of prison before it was correct to let them out. That, of course, is one of the key drivers of this policy. It is not about prison reform. The whole purpose of the measures put before the House last December was to cut the prison population by 6,500. The Lord Chancellor then ran into huge difficulties because he could not get his own side, our side or the judges to accept the 50% tariff for an early guilty plea and many other changes. I do not know the number exactly, but I do know that The Times quoted a Ministry of Justice spokesperson last Friday as saying that the changes would lead to a cut in the prison population of 2,500.

The Secretary of State seemed to want to have it both ways. He damned the concept of the indeterminate sentence for public protection and suggested that it was a stain on the system. He also tried to reassure the House and the public by saying, “Don’t worry, we are going to do exactly the same thing, but it is going to be called a mandatory life sentence.”

[Mr Kenneth Clarke]

May I correct the right hon. Gentleman? The impact statement will show the Bill as amended. Other things being equal, with no changes in the crime level—which depends far more on how long a recession we have, the levels of youth unemployment, how successful we are in dealing with drugs and how far we get with prison reform—the Bill will reduce the prison population by 2,300. The measure we are now debating will have no effect on the prison population in the period to 2015. The reduction in the prison population is achieved by measures already discussed and approved in the Public Bill Committee.

[Mr Straw]

It would have been helpful to have the impact statement before the House today rather than tomorrow. If the right hon. and learned Gentleman is saying—picking up the point made by the hon. Member for Shipley—that no prisoner who cannot be released until he has proved that he is not a danger to the public will not be released in the future, what on earth are these convoluted changes for?

The original design of the legislation in 2003 was unsatisfactory because it led in some cases to tariffs that were ludicrously short—in one case, 27 days. That was never the intention of my right hon. Friend the Member for Sheffield, Brightside and Hillsborough (Mr Blunkett) and it was causing a major problem. I, with the approval of the House, sought to change the law. It is worth Government Members remembering, as my right hon. Friend the Member for Tooting pointed out, that we got no assistance whatever from the Conservative Opposition at the time. Their complaint was that we were going soft by introducing this change. It was absolutely extraordinary. I do not remember the right hon. and learned Member for Rushcliffe (Mr Clarke), now the Lord Chancellor, standing up either in the House or outside suggesting that there was an alternative. We made that change and, interestingly and wholly contrary to what was said, it has led to a stabilisation of the numbers on indeterminate public protection sentences. According to the Lord Chancellor’s statistical bulletin, in the most recent year the number of such sentences rose by only 3% over the previous year and the number of those receiving IPP sentences was 958 for the year ending March 2011, compared to one short of 1,000 for the year ending March 2010. The changes that were introduced are working.

Yes, it is right that we should look in more detail at the Northern Ireland experience to see what other changes can be made, but it is entirely wrong for the Secretary of State to try to set up a new system that will lead either to the release of dangerous people who are serious and persistent offenders, thousands of whom are in prison for violent offences and sexual offences—in the main—or make no difference at all.

[Mr Geoffrey Cox (Torridge and West Devon) (Con)]

Will the right hon. Gentleman give way?

[Mr Straw]

If the hon. and learned Gentleman will excuse me, I will not.

The Lord Chancellor has been anxious to please the whole prison reform lobby—people who, bluntly, do not speak for the public, and rarely speak for the victims either in my experience, but even they will not be satisfied. Meanwhile, the public and innocent victims will be put at risk.

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[Mr Djanogly]

My right hon. Friend makes a good point. It is not one that is covered by the Bill, but it is something that the Government are looking into, and I hope that there will be further developments on that in due course.

[Mr Straw]

I thank the Minister for the generous compliment he paid me, for which I am most grateful. There are plenty of situations relating to financial institutions in the widest sense when conduct might be the subject of a regulatory breach enforced by the regulators, but in more severe cases it could also be a criminal offence. It is a matter of belt and braces. Frankly, I do not understand why he is suggesting that those are alternatives when one complements the other.

[Mr Djanogly]

The reason is that criminalisation would be too blunt an instrument. If we take the example of the straight payment of a fee for a referral, I can see how straight criminalisation would work, but we should appreciate that when that was last banned in 2004 it was a weak provision through which a coach and horses could be driven. What if an insurance company provides insurance to a solicitor in payment for referrals, rather than a straight fee? What if a trade union gives its cheap work to a firm of solicitors in consideration for the solicitors getting its better work? What if a claims management company provides a variety of services to a solicitor in payment for a referral? The point I am making is that the circumstances could be very varied and complex and the straight criminal option would not be appropriate. It would be the principle that counts and it would have to be a regulator that looks to the principle.

We are primarily concerned with removing incentives under the current system with regard to personal injury claims, which is why we are banning referral fees in that area. However, the Lord Chancellor may in future extend by regulation the prohibition on referral fees to other types of claim and legal services and other providers of legal services should the need arise and if the case is made for such an extension.

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[Tom Brake (Carshalton and Wallington) (LD)]

I shall be brief. I welcome the Government’s action to address referral fees. There is no doubt that consumers have paid a significant price. I hope that we can clamp down heavily on other things, such as unsolicited text messages and spam, which we have all experienced, through other measures such as those on data protection.

I would like the Minister to deal with just one point. The industry has been pressing for these changes, and consumers in particular want to understand what guarantees, if any, they will have that when the changes have taken effect they will see a difference in the prices they pay for services.

[Mr Straw]

As a preliminary, I wish to draw the House’s attention to the fact that against my name on the amendments relating to referral fees there is an R, which indicates that I have a declarable interest. It arises from three engagements that I undertook for fees on matters relating to referral fees and the motor insurance industry generally. They were on 28 September, 12 October, and earlier today. In respect of the first two, I have made a declaration to the Registrar of Members’ Financial Interests, who told me that because I have not yet received payment, the time for these is not yet running. The declaration for my engagement this morning will be made tomorrow.

I tabled amendments to new clauses 18 and 19 and, as my hon. Friend the Member for Hammersmith (Mr Slaughter) indicated, in the absence of a sudden Pauline conversion from the Government Front Bench between now and when the question is put, I shall press amendment (e) to new clause 18 to a vote.

According to the AA, over the year to March 2011, there has been a 40% increase in motor insurance premiums. In many areas of the country, mine included, although it is by no means the worst, the increase has been even higher. As a number of colleagues of all parties have pointed out, that has very severe social consequences.

May I say that I am extremely grateful for the wide support that my Motor Insurance Regulation Bill has had throughout the Chamber? Motor insurance is the only insurance affecting an individual that is compulsory, and in certain areas and for certain categories, particularly younger drivers, premiums are now so high as to place motor insurance out of reach altogether. A driving licence is often a necessary qualification for taking a job. In any case, people in areas that are not blessed with a high level of public transport, which means most places outside inner urban areas, need a motor vehicle to go about their business. The increase in premiums, and the fact that they are much higher in some areas than others, is leading to some people not being able to work or move around.

The increase is also unquestionably leading to an increase in criminality, both through people going around uninsured and, increasingly, through people deciding to borrow a friend’s address with a lower-premium postcode. People also fail to disclose relevant information about themselves, to enable them to become insured. It cannot serve any public purpose that we have ended up with such a dysfunctional system.

I readily concede that that has happened because of a nexus of factors going back a number of years. The operation of the conditional fee system was introduced in the Access to Justice Act 1999 for good a reason: it was thought that it would improve access to justice. To some extent that has certainly been true, but as we all know, it has had the unintended consequence of generally —I am not talking the Trafigura case or one or two others—creating an imbalance in the equality of arms between parties on either side of a legal action. It has gratuitously encouraged the so-called compensation culture.

That, in turn, has been compounded by the costs of the road traffic accident electronic portal being too high. In a recent statement, the Minister said that the figure that was introduced when I was Secretary of State had been agreed in the Civil Justice Council. It was agreed to by both sides, which was why I did not interfere with it. I believe there is now widespread agreement that the current fee, of at least £1,200 for claims under £10,000, is at least twice as high as it should be. It is leading to lawyers advertising as two firms at the end of my street in Blackburn do: they have great banners across their windows saying, “Bring your claim in here, we’ll pay you up to £650 in cash for it.” They can do that and still make a profit out of the £1,200, because the actual costs of running the portal are about £100.

Claims for whiplash, which I have described as an invention of the human imagination, undiagnosable except by dodgy doctors employed by claims management companies, have got completely out of control. The level of whiplash claims is not related to the level of accidents or physical injuries. Accidents are reducing, as is the possibility of being injured in an accident, because cars and road engineering are much safer. It is related principally to the density of claims management companies operating in a particular area. The evidence of that is incontrovertible.

I concede to my hon. Friend the Member for North Durham (Mr Jones) that the regulators have acted properly on claims management companies in some ways, but the regulatory system established under the Compensation Act 2006, during our Administration, has not had sufficient resources to control the trebling in the number of claims management companies that has taken place in recent years.

Another change that took place was in the 2004 solicitors conduct rules, which allowed solicitors to pay referral fees that were previously banned. I will come back to that point when we deal with the enforcement of a ban on referral fees.

[Sir Alan Beith]

I very much welcome all the effort that the right hon. Gentleman has put into this matter. I hope that in talking about referral fees, he will recognise that although he has devoted a lot of his effort to motor insurance, the same problems affect the cost to consumers in numerous other areas, such as employment law, conveyancing and divorce—all areas in which quite large sums change hands.

[Mr Straw]

I absolutely agree. I began this journey because of constituents’ concerns about motor insurance, and my private Member’s Bill specifically concentrates on that, but I accept entirely what the right hon. Gentleman has been saying for such a long time and what his Justice Committee said in the report that it published two weeks ago—that the ban on referral fees must be extended beyond personal injury cases.

[Jonathan Evans (Cardiff North) (Con)]

I am anxious for the right hon. Gentleman to reflect on his point about the change in the solicitors rules in 2004. It is important that the House considers the fact that up until that time, referral fees were banned by the Law Society. It was the intervention of the Office of Fair Trading that resulted in the Law Society changing that rule and recommending the creation of a marketplace, which he has rightly described as later becoming a full-scale scam.

[Mr Straw]

I said earlier today outside the House that I believe the reason why the OFT has decided rather late in the day to hold an investigation into market conditions in the motor insurance industry is that it is deeply embarrassed by the position that it took in 2004. In no sense could it be said that referral fees encourage fair trading. They are essentially a fraud on the consumer. Lord Justice Jackson, in his magisterial report, completely demolished the OFT’s case in favour of referral fees.

The other body that should examine its processes is the Legal Services Board. I accept readily the reason why the Secretary of State felt obliged to wait for its consideration of referral fees, but its consumer panel released the most extraordinary report stating that referral fees worked in the public interest. If we examine the basis of its research, we find that a third of the people whom it surveyed had received compensation for things like whiplash.

On any objective consumer evidence, and there is plenty of it, it is perfectly plain that the public collectively do not like what they are learning about how the wider insurance industry operates. They reckon they are being defrauded, and that is absolutely true. In motor insurance, for example, a conservative estimate is that at least £2 billion of the total premium income of £9 billion is additional costs caused by the merry-go-round of referral fees.

[Mr Kevan Jones]

My right hon. Friend is correct that in 2004, referral fees were put on a legal footing. However, many years before that it was quite clear that referral fees were being paid in various guises. My hon. Friend the Member for Bassetlaw (John Mann) and I raised the scandal that was going on in the miners’ compensation scheme. When we were arguing for that practice to be banned, the Government of the time did not do a great deal about it.

[Mr Straw]

The Government should have done, and as I have sometimes said in respect of that period, my alibi is that I was abroad. I am the last to suggest that the problem has been created by the current Government. I accept that although the Labour Government did many wonderful things, the consequence of a number of things, some of which we introduced and some of which, such as the OFT report, were forced on us, has been the creation of a dysfunctional system.

[Mr Jones]

Will my right hon. Friend give way again on that point?

[Mr Straw]

Very briefly, but others wish to speak.

[Mr Jones]

The fact that this has become an issue for middle England is quite ironic, but I am angry that when my hon. Friend the Member for Bassetlaw and I raised it in respect of poor mining communities, people did not think it was a great priority. Does my right hon. Friend agree that it is ironic that if we had tackled the problem at that time, the scandals in the motor industry that he has outlined would have been put to bed years ago?

[Mr Straw]

That might be so—it is good to know that my constituency is representative of middle England.

Similarly unacceptable practices take place in motor repairs. In bottom-line referrals, accident management companies require repairers to give them a discount of up to 25%. The repairers then increase their prices to take account of that bottom-line referral fee. Royal and Sun Alliance outrageously practised a type of subrogation whereby it set up an internal subsidiary, which contracted repairers for, say, £1,000 for a repair, and then added 25%, which was charged to the main company—RSA Ltd—which then charged the at-fault insurer. Product mandating is another unacceptable practice. Deals are struck with, for example, paint manufacturers, and repair companies are required to use specific brands of paint. That has led to a 67% increase in the cost of paint since 2003.

We must act on all those matters, and I hope the Minister will say briefly what will happen on the RTA portal if he gets the chance. I know that he has indicated that he hopes to take action, but is he sympathetic to what I suggest in respect of whiplash and many other matters?

I come now to the issue between the Minister and me. I welcome new clause 18, and I am grateful to the Secretary of State and the Minister for introducing it. However, for my hon. Friend the Member for North Durham (Mr Jones), the right hon. Member for Berwick-upon-Tweed (Sir Alan Beith) and I, there are two issues. First, in my judgment, the breadth of the ban must go wider than personal injury claims. It could be excluded in one or two discrete areas, but in the generality of cases, as the right hon. Gentleman said—he has a great deal of experience—abuse also happens elsewhere.

Secondly, on the question of whether there should be a criminal offence, I noted what the hon. Member for Cardiff North (Jonathan Evans) and my hon. Friend the Member for North Durham said about what happened before 2004, and in a sense, they have made my point. My understanding is that the prohibition on solicitors charging referral fees was in the solicitors conduct rules and that it was not a criminal offence. Those rules changed; it was not that a criminal offence was abolished. I am glad that the Secretary of State proposes to make greater use of the regulatory authorities, and I would not for a moment suggest that that is unnecessary, because it is very necessary. However—this is where, with respect, I found his argument least convincing—there are many other areas of regulation, including, for example, of financial institutions, when conduct that is in clear breach of regulations leads to both a fine or penalty by civil regulatory authorities and a criminal offence. That is particularly true given the vicarious liability requirements imposed by section 7 and others of the Bribery Act 2011.

I applaud what the Secretary of State is doing as far as it goes, but for the life of me, I simply do not understand why, given that he recognises the inadequacy of the 2004 regulatory system and many other things, he does not back that with the criminal law.

[Stephen Phillips (Sleaford and North Hykeham) (Con)]

I refer the House to my entry in the Register of Members’ Financial Interests.

Given the right hon. Gentleman’s wide experience, can he detect any pattern in relation to those matters where an action by a regulated body constitutes something that could lead both to regulatory action by the regulator and to criminal sanction under the statutes? If so, it would be interesting to know which side of the line the new clause and the matters to which it refers lie.

[Mr Straw]

The hon. and learned Gentlemen may have noticed that I need to research that point, but I have in the back of my mind a number of cases where breaches of regulations are dealt with both by the regulator and in criminal proceedings. He is experienced in the law and will know that plenty of criminal offences are also civil wrongs of some kind in common law or by regulations.

[Sir Alan Beith]

The right hon. Gentleman has an arguable case on the merits of a back-up criminal offence, but will he concede that the system proposed by the Government can be made to work, because it combines the regulatory framework with the criminal offence behind it, particularly if there is a custodial sentence? The data protection offence, which lies behind the Government’s proposal, is already a criminal offence.

[Mr Straw]

Christopher Graham, the distinguished Information Commissioner, made the point that one reason why the penalty for breach of section 55 of the Data Protection Act needs to be increased—as it is by sections 77 and 78 of the Criminal Justice and Immigration Act 2008 to a maximum of two years imprisonment or an unlimited fine—is to send a message to people in those industries that they could end up in prison if they go in for an egregious breach. Of course, other breaches of data protection rules could mean that an organisation loses its licence, but in extremis, we need criminal proceedings for a criminal offence.

My view is that the same must apply in respect of breaches of the law banning referral fees. My amendment (e) would produce exactly the same penalty—it is entirely proportionate—as applies under sections 77 and 78 of the 2008 Act, which I hope the Government bring into force quickly given that they are already on the statute book. With that, and because I know that many others wish to speak, I thank Members on both sides of the House for the support that they have given to my campaign, and commend the amendment to the House.

[Damian Hinds (East Hampshire) (Con)]

It is a great pleasure to follow the right hon. Member for Blackburn (Mr Straw), who put his case so comprehensively and convincingly.

I should like to speak briefly in support of the Government’s position and to ask a question of clarification. Clearly, referral fees and how they work have contributed enormously to the insurance costs of people in Blackburn, East Hampshire, middle England—wherever that is—and everywhere else, and change is needed. We had a strange mini-debate in the Public Bill Committee evidence-taking session on whether there was a compensation culture in this country. Some Opposition Members suggested that there was not and cited the noble Lord Young of Graffham in defence of their case, which is rather a tricky one to argue. Anyone who has received those annoying automated phone calls and text messages, or who has even a glancing familiarity with daytime television, can say that it is intuitive and self-evident that there is a compensation culture.

I understand that one of the original reasons for introducing referral fees was to allow an online market to develop—it was said that that would be a good thing because it might increase competition and access to justice. I shall come back to the online market element in a moment, but the claim that referral fees improve access to justice is at best grossly exaggerated. It might well be that approaching a solicitor with such a case was foreboding 20 years ago, but it is not now, following the development of no win, no fee cases and so on.

It is difficult to say exactly how big the claims management company sector is, but it might be of the order of £0.5 billion, which is enormous. There is nothing wrong with making money, but from a public policy perspective, we must draw a distinction between activities that add value to the individual and those that just take a share of the value chain and ultimately push up costs for everybody else. That is combined with the natural distaste that we have for selling people’s cases as some kind of commodity. The hon. Member for Stretford and Urmston (Kate Green) referred to the ability of industry players to shape-shift. I think that the new clause would effectively prohibit subcontracting, but not, of course, mergers and acquisitions, which would simply create a new form.

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[Bob Blackman (Harrow East) (Con)]

I, fortunately, have not been the victim of a car crash or accident at work, although, judging from the volume of texts, e-mail messages and voice calls to my mobile and home phone one might believe that I was confined to a hospital bed or wheelchair. This is one of the aspects that have to be combated in legislation. I therefore support what the Government are doing in trying to prevent this type of activity, although I would like clarification from the Minister on three issues.

My hon. Friend the Member for East Hampshire (Damian Hinds) alluded to the first matter: the definition of “referral fee” and the potential for people to get around it. That is rather important, particularly given that it has been suggested that we make it a criminal offence. While the definition lacks clarity, it will be difficult to make it a criminal offence.

The second important issue is fairness for the individual. If a victim of an accident—for example, someone who has suffered a spinal injury—goes along to their high street solicitor for advice and help, the firm might decide to give that help and advice and start the case, but somewhere along the line it might determine that it does not have the expertise necessary and refer it to an expert solicitor who deals with nothing but such claims. How will the first solicitor be recompensed for their work, if they cannot claim a referral fee? I would like clarification on that point, because, quite clearly, that would require a great deal of professional work for which the solicitor might not receive any recompense. That needs to be clarified.

[Mr Straw]

Surely, the firm would get paid for the costs it had incurred. Indeed, it would not pass on the file until its costs had been paid. Does the hon. Gentleman accept that a further defect of referral fees is that they might skew the judgment of the first solicitor advising the client on the best firm to go to? The solicitor might make a decision on the basis not of which is the best firm, but of which is likely to pay the biggest referral fee.

[Bob Blackman]

The other problem is that if solicitors did not believe that they would get paid for the work, they might hang on to the case and take it to conclusion, despite not being an expert. That presents a huge risk to the individual, who possibly has a case.

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[Mr Djanogly]

We have had a good, far-ranging debate this afternoon. Given that another important debate needs to be completed by 8 o’clock, I am sorry to say that I shall have to make my way quickly through the points that have been raised. I am pleased to hear at least a grudging agreement in principle with our ban on referral fees from the hon. Member for Hammersmith (Mr Slaughter). I thank my right hon. Friend the Member for Carshalton and Wallington (Tom Brake) and all the other right hon. and hon. Members for their support for our desire to implement the ban. I am pleased that the debate today has been about how that should be done, not about whether it should be done.

The hon. Member for Hammersmith asked why we had not consulted on banning referral fees, and I can tell him that Lord Justice Jackson made 109 recommendations, and it would not have been practical to consult on them all at once. It also made good sense to await the outcome of the Legal Services Board’s work in this area. Many respondents to our consultation on implementing Lord Justice Jackson’s recommendations included their views on referral fees. Those views, along with the work undertaken by the LSB and the Transport Committee, have been carefully considered. The hon. Gentleman clearly raised some serious issues relating to the regulation of claims management companies, but they were not directly relevant to the Bill. I must point out that, in the past year, the Ministry of Justice has cancelled 349 authorisations of CMCs, whereas in the last year of the Labour Government, it cancelled only 35.

The hon. Member for North Durham (Mr Jones) asked a number of important questions. If he does not mind, I will write to him about those issues. I can say, however, that under the Compensation Act 2006, it is an offence to provide regulated claims management services unless authorised or exempt. The hon. Gentleman will not be surprised to learn that the exemption applies to trade unions, and that is part of the problem that he rightly highlighted. I was present at the debate that he held on that subject several years ago.

The hon. Member for Hammersmith covered several other matters, but he essentially spoke to tomorrow’s debate, and we will deal with those issues then. My right hon. Friend the Member for Carshalton and Wallington asked about some important aspects relating to the consumer. The Chairman of the Transport Select Committee, the hon. Member for Liverpool, Riverside (Mrs Ellman), rightly mentioned that share premiums had risen by 40% in the last year alone. This is of course a matter of concern, and we have discussed it with the Association of British Insurers. It has said that if the proposals are effected with the other changes to recoverability of success fees in after-the-event insurance, it would hope to see a fall in insurance premiums. I certainly hope that that is a credible position.

As I said at the outset, there is broad support across the House for a ban on referral fees, although there is some disagreement on how best to implement the ban. The right hon. Member for Blackburn (Mr Straw) spoke to his amendments with typical passion, but I would like to set out briefly why the Government cannot support them. Amendments (a) to (c) to new clause 18 seek to capture within the prohibition all arrangements to pay or receive referral fees, even when a payment has not yet been made. These amendments might have been tabled in support of his amendment to make the payment and receipt of referral fees a criminal offence. However, I am concerned that capturing an agreement to pay referral fees when payment might not have occurred would be very difficult to enforce. A solicitor’s accounts, for example, might well show that a particular payment had been made that could, on the face of it, be a referral fee. However, it is unlikely that agreements, which in some cases might be no more than verbal agreements, could be so readily identified without time-consuming investigation. In any event, we do not think that it is necessary to provide for this eventuality, first because such agreements would be unenforceable under subsection (6) of new clause 19 and, secondly, because whatever might be agreed, the payment of the referral fee would still be prohibited. So, in practice, it is unlikely that a party would enter into an agreement to pay a referral fee when payment would be a breach of the prohibition and the agreement would not be enforceable.

I have already dealt, in moving the new clause, with the arguments against amendment (e), which seeks to create a new criminal offence. I should just reiterate that the Government are fully committed to ensuring that the ban will work effectively.

[Mr Straw]

When I made my point about the banning of referral fees being backed by the criminal law, the Lord Chancellor did not say that he agreed with me, but he did say, on 13 September:

“We are now considering the way in which to put this into practice, but it is likely to be in the form recommended”—[Official Report, 13 September 2011; Vol. 532, c. 879.]

—that is, a criminal prohibition as well as a regulatory one. He appeared to have an open mind about that, so what has changed since then?

[Mr Djanogly]

I have just confirmed with my right hon. Friend the Lord Chancellor that, in the next sentence of that quote, he said that he had not committed to creating a criminal offence.

I can assure the right hon. Member for Blackburn that we have thought long and hard about how to achieve this, and I am aware of the concerns raised in the Justice Committee’s recent report on referral fees and the theft of personal data. The Committee’s Chairman made the point again today that the penalties for breaching section 55 of the Data Protection Act were not sufficient. The Government are keeping the question of whether to introduce custodial penalties for section 55 offences under review, and we will respond to the Justice Committee’s report in due course. However, the issue of how to deal with people such as rogue motor garage workers or nurses who are breaking the law by breaching the Data Protection Act is separate from that of how to introduce a new ban on regulated bodies to prevent them from paying referral fees, which they are currently permitted to do. I strongly believe that our ban, which will stop lawyers, claims management companies and insurance companies from paying and receiving referral fees, will remove the incentives for selling personal data from the whole system. That is because there will be no one for the rogue garage, for instance, to sell the data to, as all the people in the system who can make any profit out of handling claims will be prevented from paying referral fees. My hon. Friend the Member for East Hampshire (Damian Hinds) well set out the complexity involved in this instance.