Legal Profession
The next item of business is a statement by Kenny MacAskill, on an alternative business structure for the legal profession.
I am pleased to present to Parliament an update on the measures that the Government plans to bring forward to reform the way in which the legal profession conducts its business. The Scottish legal profession serves Scotland well and I was proud to be a member of it for 20 years. Our distinctive legal system forms one of the fundamental pillars of Scottish society and has helped to sustain our national identity for 300 years. Rightly, the Government will continue to support the strength and independence of the Scottish legal profession. I feel honoured and privileged to be in a position to help and to shape its future.
Lawyers perform a vital role in society by helping people at times of crisis and when necessity arises. In an ever-changing world—one that is changing at a rapid pace—lawyers face greater challenges in protecting the vulnerable, upholding the criminal justice system and responding to economic growth. I firmly believe that we must give the Scottish legal profession the full credit that it deserves for the influence that it has had on other legal systems throughout the world; for its quality and reputation; and for the values and principles that continue to stand the profession in good stead—a reputation that it has had and still possesses.
Now our major law firms compete internationally and want to think bigger and aim higher. For a small country, we have big ambitions—and rightly so.
Alongside the exciting opportunities that introducing alternative business structures will bring, the profession faces many challenges. The big commercial firms face competition within the global market; the high street firms are finding it difficult to recruit and retain trainees; those who offer a broad range of legal services are in competition with those who specialise in high-value or high-volume work; and alternative providers and English firms are entering the market. Scottish solicitors are under increasing pressure to deliver a quality, competitive service.
Scottish firms will continue to serve the communities in which they are based, both large and small, but some firms can compete internationally and globally. That is demonstrated by the success of our accounting and financial services sector. There is no reason why legal services cannot do likewise. Our legal services must change to achieve that, and this Government is committed to helping them. The profession faces major technological changes in the next few years that will influence the business structures of the future. We may see access to the courts via videolinks, and the use of electronic pleading and customised online legal advice will increase. That will offer real benefits to the public, outweighing the challenge to the regulatory structure of the profession.
A series of reforms is already under way in our criminal courts, and the review that is being undertaken by Lord Gill will herald fundamental changes in the civil courts. Together with the review of administrative justice that is being carried out by Lord Philip, those represent a co-ordinated review of the entire Scottish justice system.
I am hugely encouraged that the profession has already begun to respond to the challenges that it faces. Following the Which? super-complaint last year, the Government's response to the Office of Fair Trading made it clear that change had to happen and was inevitable. The OFT's report argued that many of the current restrictions on business structures affecting the legal profession should be lifted.
During the parliamentary debate in November, the Government made it clear that maintaining the status quo was not an option, and we asked the profession to take the lead in considering the way forward. I am delighted that the profession has risen to that challenge and I commend the leadership that the Law Society of Scotland and Faculty of Advocates have given to their respective members. The society and the faculty have consulted their members and produced policy papers outlining their vision for the future.
The society's policy paper is a positive and forward-looking document and I am greatly encouraged by its commitment to reform. I completely agree that, rather than focusing on which business models are most appropriate, the way forward is to develop a robust system of regulation. I recently addressed the society's annual conference, which focused on the legal profession in the next five years. I am confident that when we look back in five years' time, the profession will have gone a long way towards meeting the challenges that it faces today.
Likewise, the Faculty of Advocates has been focusing on the way forward. I very much welcome the fact that the faculty's strategic direction is broadly in line with what the Government said in responding to the OFT. The faculty set out a strong case for maintaining an independent referral bar but would remove restrictions such as the mixed-doubles rule. I am fully aware that members expressed concerns during the debate in November that effective regulation was key to safeguarding consumers and the profession alike. This is not about Tesco law—a nomenclature that some have given it. It is about allowing the profession to grow and compete, while maintaining quality of service to the public and the core values of the profession that have served Scotland so well throughout the centuries. Access to justice will, similarly, remain a key focus.
We have yet to iron out the detail of how we will tackle some of those thorny issues but we will continue to work together in the weeks and months ahead to devise solutions that are appropriate to the Scottish legal marketplace, Scotland as a nation and Scottish communities.
I am delighted that, although there are differences of approach between the Law Society and the Faculty of Advocates, we have taken the first steps towards reform. The next step will be legislation. Although I cannot pre-empt any formal statement on the legislative programme, we will begin work to develop detailed proposals as soon as the parliamentary timetable allows.
Although the profession may understandably be daunted by the challenges to come over the next few years—indeed, I acknowledge the concerns that many legal professionals have—reform will have huge benefits for it and the public that it serves in Scotland. There may be difficulties for some but, as we have said in previous debates, maintaining the status quo is not possible and was never an option. The profession must evolve as Scotland has evolved; we, as a Parliament and Government, have a duty to support it in that evolution.
Change is necessary to allow the legal profession to continue to thrive and advance. We must ensure that it continues to serve us well and to offer a high level of service to the public. I give my personal commitment to supporting the profession now and in the future. This is not about Tesco law; it is about bringing the legal profession into the 21st century to allow it to continue to serve our people as it has done down the centuries.
The cabinet secretary will now take questions on the issues that were raised in his statement. We have about 20 minutes for questions, after which we move to the next item of business. I remind members that contributions should, as always, be made through the chair. That means that members should refer to other members by their preferred name or title.
At first glance, the statement does not appear to say much at all, except that we have heard that there will be legislation at some point. However, at second glance, it becomes apparent that the point of the exercise is to demonstrate to the OFT that progress has been made, with the Law Society and the Faculty of Advocates indicating that they will embrace some change, for which we applaud them.
The Labour Party is broadly supportive of the Government's approach but looks for several assurances. Competition will require careful regulation. Labour accepts that the status quo is not an option, but change should not fundamentally alter the Scottish system, which we hope the OFT recognises is different from the English system in relation to, for example, the independent nature of the Scottish bar.
We seek assurances that competition will be fair for all legal practitioners. Close consideration will be required to ensure that that happens. We want assurances that, in any legislation that introduces competition and removes restrictive practices, we will not end up endorsing other types of restrictive or anticompetitive practice. For example, if legal disciplinary firms were created and only ever instructed their own employees, that would create monopoly, which would not be in consumers' interest.
Labour asks for assurances that choice for the customer will be paramount. Careful assessment will be needed to determine how removing restrictive practices can provide choice. What assurances can the cabinet secretary give that legislation will benefit the consumer not only on price but on quality of service? Has he examined the reforms in England and Wales? They will provide important information to advise us whether some of the things that we are considering will really benefit the consumer.
We will examine the issue of third-party ownership carefully. Will the pitfalls as well as the advantages be examined, recognising that most law firms are small-to-medium-sized businesses, with just a small number of larger businesses?
Will the cabinet secretary assure me that in any proposed legislation we will choose a model that is right for our distinctly Scottish legal system? Will he ensure that Scotland's customers get the best legal services available?
I can give Pauline McNeill that assurance. To an extent, we are building on what the previous Administration and Executive set in train. I cannot predict what the previous Administration would have done, but I tend to think that matters have been progressed according to what is best for the Scottish legal profession and Scottish society, rather than according to party-political dogma. That is as it should be.
I am grateful for the spirit in which Pauline McNeill asked her questions. I give her the assurance that change will be based on what is good for the Scottish legal profession, good for the Scottish consumer and good for Scotland as a community, on which I will expand.
We will consider what is happening in England and Wales, but we are not prepared to await outcomes there. We think that change has to occur. There is possibly some advantage for Scotland if we can move quicker, turn faster and allow those of our firms that wish to compete on pan-UK, pan-European and global levels the opportunity to do so. We will therefore press ahead.
We accepted that the OFT had made its decision. We were never going to act like King Canute—we recognised that change had to come. We accept Pauline McNeill's stricture that any changes must be good for our consumers, our lawyers and our society. We are proceeding on that basis.
A balance must be struck between choice and regulation. It is clear that unrestricted choice can sometimes undermine the consumer's interests and rights. It is a matter of balancing where we must regulate and what we must do. We are extremely grateful for the progress that has been made by the Law Society of Scotland in particular and by the Faculty of Advocates. The legal profession must evolve. It is difficult to predict what the profession will be like in 10 years, as opposed to five years. We need a framework that will allow the Law Society to evolve, subject to changes in our society, in a way that ensures that the profession is an integral part of our society, that regulation is in place to protect the consumer and that choices are available to the consumer. The Government recognises the importance both of the consumer and of our communities. There might be instances when the rights of the consumer could undermine the importance of communities, and we must deal with them.
Pauline McNeill understandably highlights the potential pitfalls. We wish to create a framework that will allow us to initiate change but which will let the profession move at a pace that will allow it to implement that change in due course. It is difficult to know what the world will be like for legal services in 10 or 15 years, given the nature of the internet and a whole variety of factors.
That brings me back to the beginning: the status quo is not an option. We have to change in a manner that suits the Scottish legal profession and serves the interests of Scottish consumers and Scottish communities. We need a framework that will allow us to implement change over the coming years as things develop. As Pauline McNeill correctly indicated, we should keep an eye out for pitfalls on the horizon and seek to avoid them.
I am grateful to the cabinet secretary for early sight of the statement, in which I found little to disagree with. Indeed, I was commenting earlier to Mr Lamont that I could well have written it myself—but perhaps in somewhat more eloquent language.
I am particularly pleased to endorse the views that the cabinet secretary expressed about the way in which the Law Society of Scotland and Faculty of Advocates have readily accepted the challenge of change and about how they will implement changes on a largely voluntary basis. We would all agree that that progress speaks volumes for the way in which the legal profession in Scotland is prepared to adapt to changing times.
The cabinet secretary talked about the international dimension of law and about the opportunity for Scottish firms to involve themselves in procedures and types of action in which they have previously been unable to involve themselves. He stated quite correctly that legal services must change to achieve that and committed his Government to doing everything possible to help them. What specific measures does he have in mind?
As I said to Pauline McNeill, we hope to proceed on a non-partisan and non-party-political basis. We are talking about what is good for the legal profession and for our communities. I was a member of the legal profession, as were some Labour members and some Conservative members—indeed, some members are still practising lawyers—and I want us to proceed together, which is the best basis for change.
Bill Aitken is right that change is to be made on a voluntary basis. Given what the OFT said and the situation that our country faces, we as a Government made it clear that we thought that change was inevitable. We wanted the professions to reach that conclusion and we made it clear that we would allow them to proceed at a pace and in a manner that they thought was appropriate. Accordingly, the stricture that we laid down was that the status quo was not a tenable option. We said that there would have to be change, but that we were happy to have discussions within that framework.
We will discuss with the profession where we go from here. As I said to Ms McNeill, I do not think that we can be too prescriptive at the moment. We have acknowledged that the status quo is not tenable. We have made it clear that Tesco law is not on the agenda, given the nature of Scottish demographics and society. However, we want to flesh out with the Faculty of Advocates and the legal profession as a whole a framework that will allow them to begin to make the necessary changes.
As Pauline McNeill said, we have to proceed with caution. Although there are advantages ahead, there are also dangerous pitfalls that we have to avoid. Therefore, we have to allow the legal profession to intimate its view of the alternative business structures, so that we as a Government can flesh out proposals to provide a framework that we hope the Parliament will support. It is not for the Government to be too prescriptive. It is for everyone—the legal professions in particular—to say where they want to go. It is for us to ensure that, within that range, we not only provide protection for the profession—as a lawyer, I know that there is always a danger of special pleading—but balance the interests of the profession with the interests of our communities.
I say to Mr Aitken, who is convener of the Justice Committee, that we will be more than delighted to discuss those matters with the committee fully and frankly and to ensure that we take all sections of our society with us.
I thank the minister for giving us prior sight of his statement and I welcome his comments. I also thank the Law Society of Scotland and the Faculty of Advocates for their work in progress on the issue. The Liberal Democrats wish to ensure that the best possible framework is put in place—one that responds to the needs of the individual as well as to the global market. That brings challenges as well as opportunities to the Scottish legal business team—solicitors, advocates or whoever. There are challenges and opportunities, of which we want Scottish legal companies to take advantage.
We do not object in principle to any of the proposed alternative business structures, as long as an appropriate system of regulation is applied to all business structures that deliver legal services and the key principle of access to justice is maintained. I look forward to working on that in a cross-party manner, as the minister suggested.
I am particularly pleased that the cabinet secretary agrees that appropriate regulations must be put in place. I associate myself with the comments that Pauline McNeill made about the concern that restriction would be replaced by monopoly. We need to have the appropriate regulations to safeguard solicitors' duty to give the client independent advice, so that they do not simply suggest to the client that they should always deal with someone in their own firm, for example.
Will the cabinet secretary give us an assurance about the future of the master policy and the guarantee fund under a deregulated system? Does he believe that if they do not continue to exist in their present form, they will have to exist in some other form? Does he think that that would necessitate their being open to provide cover for non-solicitors? If not, how would consumers continue to be protected in the way that they have been protected through the master policy and, in particular, through the guarantee fund in the past?
I thank Margaret Smith for her contribution and the tenor of it. We are more than happy to work with all parties in the chamber. She raises two valid points: one on the question of regulation; and the other on the guarantee fund.
It is clear that there has to be regulation. However, we have to try to reach a balance. We will discuss with the legal profession and other professional bodies the best form of regulation if alternative business structures that involve more than one professional body operate. We in the Government are prepared to be fairly pragmatic about those matters and to discuss them with professional bodies to ensure that we do not have a superfluity of bodies and unnecessary regulation and to deal with regulation in the best way. We will have to discuss such issues with the Law Society and the Institute of Chartered Accountants of Scotland. Equally, chartered accountants will have to discuss those matters with lawyers. However, at the end of the day, we will get there.
We must discuss the guarantee fund with professional bodies. That is the subject of debate and difficulties as it is, so members can rest assured that the status quo is untenable. I return to the point that Ms McNeill made: we must take account of the fact that the guarantee fund protects the consumer—that is something that we, too, must always do. Such matters are difficult and technical. They must be discussed not just with the Law Society and the faculty, but with other professional bodies.
Once we put our heads together and recognise where we want to go, what we need to do and what we need to preserve, we will get there. On regulation and the guarantee fund, I return to what we said to the profession at the outset. We will ask the profession to work out the system, but if it cannot, we will not hesitate to legislate to enforce a solution. As the Law Society and the faculty have done, I hope that ICAS, the Law Society and other professional bodies can reach an agreement, but if they cannot, I have no doubt that we will sort something out in committee or on the floor of the chamber.
We come to questions from back-bench members. If I am to fit everybody in, questions will have to be short, sharp and to the point. I ask for brief questions, and I hope that the answers will reflect that brevity.
As the cabinet secretary knows, the statement was partly prompted by the Office of Fair Trading report that resulted from the supercomplaint by the Consumers Association. What organisations will the Government consult on protecting consumers' interest in Scotland? We have responses from the Law Society and the Faculty of Advocates, but given that the aim was to protect consumers' rights and interests, what consumer organisations will the cabinet secretary consult?
I assure Mr Wilson that we will consult as widely as possible. It is clear that the Consumers Association has an interest. A cause of angst to others is that a consumer representative is part of Lord Gill's review of the civil courts but, as I frequently point out, my predecessor initiated that review.
As soon as I start naming bodies, I will by implication leave somebody out. However, I give the assurance that we will involve not simply those who have an interest in the legal profession and who are lawyers, but consumer representatives. As I have said, we are concerned not only about consumers, but about communities, so we will discuss the proposals with all parties and with local government—Cabinet members and I were emphasising the concordat's benefits this morning.
I do not think that the minister answered John Wilson's question. Since our legal services debate in November last year, a clear question has been what consultation has taken place with Which? One reason for today's statement is that organisation's supercomplaint, so I would have expected the minister, Which? and other consumer organisations with an interest to have had discussions since November.
I have been to numerous meetings, including those with the Law Society, that Which? representatives have attended. Which? made the supercomplaint, the OFT said what had to be done and the change will be made. As I have said, we are at the stage when the involvement of consumer and community organisations has growing relevance, because we are coming to specifics.
Between November and now, we have dealt with whether change had to occur. As we said in November, the status quo is untenable and change must happen. The Law Society now supports what the consumer organisations asked for. We now require to sort out what that change means. That involves the tricky details, which I have no doubt that Mr Martin and others will pore over in the papers, in documents that are provided or at committee meetings at which I appear.
I am sure that the cabinet secretary agrees that changing business structures will undoubtedly greatly benefit large businesses and those that aspire to be large. However, does he agree that there is a risk that small businesses, which are crucial to some of our smaller communities, might lose out in the process?
That is a possibility, but an alternative view is put forward by some in the legal profession who support alternative business structures. I do not know. There are difficulties that relate to small shops and legal and other professional bodies in small communities in Scotland, because of changing demographics and technology.
It has been suggested in some communities that if a professional firm—a lawyer's firm or a surveyor's firm—is in danger of going to the wall, it could share back-office functions, amalgamate and do whatever is necessary, using whatever new structures are created, which might allow it to remain in business. Time will tell whether such things will happen, but there is an argument that some such firms could be maintained by taking the opportunity to share back-office functions and work together. That is why we have to say that there must be change to allow the big firms to progress.
It will be up to individual legal firms whether they wish to co-operate with surveyors or accountants. The Law Society used to refuse to allow legal firms to operate with estate agencies, which precluded some sensible co-operation on back-office arrangements. Frankly, that stricture did neither legal firms nor estate agencies any public good.
I thank the cabinet secretary for his statement. I expected to be informed about the Government's position in more detail, but other than the cabinet secretary's announcement that the Government will begin work as soon as it gets the parliamentary time, the rest of the statement was already in the public domain.
Balance is important. The practice of legal firms and lawyers going into partnership with other professionals such as accountants, surveyors and perhaps even people who have an interest in housing development to offer a one-stop multidisciplinary service is open to question. I am sure that parliamentary committees will question that over time.
Have the cabinet secretary's early discussions on alternative structures taken account of possible conflicts of interest? How will he ensure that the consumer is protected and that they will get a good deal from any changes that occur?
It seems that Cathie Craigie is arguing the opposite to Mr Martin. He wanted me to consult Which? and she wants me to provide specifics. It has become clear that the Law Society and the faculty have accepted that there has to be—and will be—change. With regard to regulation, matters are extremely complex, and they will be worked out with the professions. We have the caveat—it was in place many months ago—that if they do not come to a conclusion that is acceptable to us and to other bodies, we will implement change.
However, I hope that we can get all parties to come to the table and recognise that there are advantages not simply for the Faculty of Advocates and the Law Society, but for other parties such as ICAS and surveyors. The regulatory system, which Mr Aitken, I think, touched on, is a significant matter and we have to ensure that we get the balance right. For example, are there ways in which matters can be dealt with through joint arrangements? Those things have to be sorted out.
We must acknowledge that there needs to be change, and we are grateful to the profession, including the faculty, for acknowledging that. We can now go forward and we will examine what comes out. As a Government, we would much prefer that the bodies involved work out what they think is suitable. If the outcome is acceptable to others, such as consumers and others who are lobbying us, it will be, in all likelihood, acceptable to us. If they cannot work that out, we reserve the right to legislate. However, they have got to this stage, and we should pay tribute to them for delivering and help them to drive forward.
During the debate in November, I discussed existing barriers to the legal profession. Unless we have a legal profession that can be accessed by the most able lawyers from Scotland and from around the world, we will not fulfil our ambition of allowing our legal profession to compete on the international stage. What does the Government propose to do to break down those barriers to entry?
Minister, please be as brief as possible.
I have to say that I have difficulty in understanding what the member perceives to be barriers. If he is thinking of membership by those who are not lawyers, we have one application pending but few others are arising. We are looking to create a legal system that is good for Scotland in the 21st century. If there are barriers, we will seek to work within the system to change it.
I am more than happy to speak to Mr Lamont outside the chamber to try to clarify the matter. I have some difficulty in understanding his point, but we can discuss it elsewhere.
During the debate in November, I highlighted the use of funds to defend big-time crooks. Today, the cabinet secretary highlighted the fact that the focus is not business models but the development of a robust system of regulation. Can he guarantee that the big-time crooks will not be the beneficiaries of any new regulations or other changes that are introduced?
Absolutely. Tangential to what we are discussing, it has been made clear through the serious organised crime task force that I set up that aspects of our civil society are interfered with by those who are involved in serious and organised crime. Lawyers and accountants have a role in tackling that, and we must ensure that we have the regulations and the civil and criminal laws that we need to target such crime and take appropriate action when required.