Clarke and Djanogly to consider ban on referral fees

Justice secretary Ken Clarke and minister Jonathan Djanogly are to consider a ban on referral fees, it emerged during the second reading of the Legal Aid, Sentencing and Punishment of Offenders Bill in the House of Commons this afternoon.

Clarke said the MoJ had been waiting for the Legal Service Board's report on the issue, which appeared earlier this month and recommended that frontline regulators could impose their own bans if they could provide sufficient evidence to explain their actions.

The failure to back an outright ban was strongly criticised by the Bar Council, the Law Society and this week by former justice secretary Jack Straw, who accused the insurance industry of making huge profits from referrals.

Straw said a senior insurance company executive told him that referral fees were the industry's 'dirty secret' (see solicitorsjournal.com, June 29).

In the Commons this afternoon, Sir Alan Beith, chairman of the justice select committee, said he did not know anybody who agreed with the LSB in the conclusions it came to on the issue.

Sir Alan said that, along with a ban on referral fees, the system of qualified one-way costs shifting recommended by Lord Justice Jackson was also missing from the bill.

He noted the government's decision to retain recoverability of ATE insurance premiums in medical negligence actions, but said it was 'not clear there would be a viable market in ATE insurance in so narrow an area'.

Earlier in the debate, Clarke had promised additional funding for advice agencies struggling to cope with the legal aid cuts of up to £20m this financial year.

He highlighted two further measures to be added to the bill '“ removing legal aid from squatters and for 'repeat judicial reviews'.

Clarke said the current system of legal aid and the way that no win, no fee operated left many people and small businesses living in fear.

'In any circumstances, legal aid would need reform. In the current economic crisis, it is imperative.'

Clarke said he was surprised by criticisms of the legal aid cuts made by Lady Hale, who said they would have a 'disproportionate impact upon the poorest and most vulnerable in society' (see solicitorsjournal.com, 28 June 2011).

'I have a very high regard for Lady Hale,' the justice secretary said. 'I might have a meeting with her.'

Sadiq Khan, shadow justice secretary, said the government's decision to abandon increased discounts on sentences had left Clarke with a £140m 'black hole' in his finances, and the progress of the bill depended on knowing where this would come from.

He described it as 'bitterly disappointing' that the bill made only minor changes to the package of cuts in the green paper.

'The weight of opposition to the changes remains huge,' he said. 'If we're not careful the whole of the country will become an advice desert as a consequence of the policies of this government.