MR RICHARD SCHOFIELD AND MR EBEN BLACK

6 MARCH 2008

  Q520  David Heyes: Where would the rules and regulations surrounding that derive from?

  Mr Black: I assume they would derive from the House of Commons.

  Q521  David Heyes: Perhaps ultimately from a recommendation from this Committee.

  Mr Black: Yes.

  Q522  David Heyes: You mentioned your preference for membership of the CIPR.

  Mr Black: Yes, we are members of the CIPR, my colleagues and I.

  Q523  David Heyes: You also talked about the need for stringently applied standards. The evidence we have had from the CIPR is that they are not in a position to require stringent standards because they are a multi-member organisation and operate on light touch self-assessment monitoring.

  Mr Black: The point I must make in that case is that we are regulated, as I have said several times, by the Solicitors Regulation Authority, which is an extremely stringent organisation as Richard will no doubt tell you. We are regulated by them so whatever criticisms you have with the CIPR quite frankly do not really resonate as far as we are concerned.

  Mr Schofield: Can I add something to what has been said? Taking Eben's suggestion of a statutory register and your question about how that would actually work, whatever regulatory rules you put in place are only as good as the monitoring and enforcement regime you put around them. That is the problem of just having a register or the Association of Professional Political Consultants' code or the other codes; they simply do not have the resources to monitor and enforce them to the same standard of efficacy of the SRA which is required by statute to provide the resources to ensure that can be done. That is a weakness of all these voluntary schemes and potentially a statutory code unless it is backed by that kind of regime.

  Q524  David Heyes: That was my question to you. Where does that happen in relation to a register that might be held by the House of Commons? The names would be registered but where would the monitoring and enforcement take place?

  Mr Black: That is a very interesting question. You may wish to put something in place to work with that. That is not a matter for me but I think there should be very stringent monitoring and enforcement and we are subject to that.

  Q525  Jenny Willott: Does that mean from what you were saying you believe that regulation of PR firms and public affairs should be on a statutory basis?

  Mr Schofield: I do not think I am making that case. What I am saying is if it were on a statutory basis then there would have to be a decision to commit the resources to ensure the regulation was effective.

  Q526  Jenny Willott: DLA Piper operates in the States as well. A question that I asked the others is, is there any evidence that the very tight enforcement of regulations in the US as regards lobbying has made any difference to the clients' attitude of purchasing services or being prepared to put their names on a register. Has it made any difference to the lobbying market in the States?

  Mr Black: As far as I am aware, no.

  Q527  Jenny Willott: Companies generally are not afraid of having their names made public or having it much more tightly regulated than it is at the moment.

  Mr Black: It does not seem that way from the evidence I have seen. I am not an expert on the American market.

  Mr Schofield: If I can make a point about the American model, my understanding of the Lobbying Disclosure Act is that there are a couple of provisions in there which specifically address some of the issues of the law firms. It is very explicit within the Act that anything which constitutes legal advice, and there is a statutory definition of that, is excluded from the definition of lobbying and is therefore not disclosable to ensure there is client confidentiality guaranteed around pure legal advice. There is a de minimis rule so that if the lobbying advice you give to clients is incidental to the broader legal advice, and I think the current number is about 20% of time in any reportable period, if it is incidental to the legal advice that you are giving, given that it can be in complex commercial transactions, that would be excluded from disclosure. There are just a couple of points there. Any statutory code, in most of the jurisdictions that have any kind of statutory provisions, do address the issues that affect law firms as indeed do some of the recommendations coming out of the European Commission through their European Transparency Initiative.

  Q528  Jenny Willott: The distinction in the States is between the activity you are carrying out rather than the original basis of your firm. For example, with DLA Piper and GGR[14] it would not be what the individual was actually doing which meant which set of regulations they were controlled by rather than who they worked for.

  Mr Schofield: Not really. This goes back to the point I was making about the Solicitors' Code here which says you can only disclose the name of your client if it is required by law. The Lobbying Disclosure Act means that in the States it is required by law that when you engage in this kind of activity you have to disclose. If you introduced a statutory provision here then you would have to disclose clients for whom you engage in that activity.

  Chairman: Disclosure does happen in America and life goes on, yet our people earlier did not know anything about what was happening in the United States. That is just an observation.

  Q529  Mr Walker: Am I right that DLA is based in the Midlands? Was it a Midlands law firm?

  Mr Black: It is a northern law firm.

  Q530  Mr Walker: It has grown quite quickly over the last decade and has a reputation for being hard-nosed and aggressive, moving into new markets and making its name.

  Mr Black: If you say so.

  Q531  Mr Walker: That is nothing to be ashamed of; that is the nature of the private sector. You claim that anecdotal evidence of non-compliance with the APPC code is abundant. I have not read in detail what you have submitted but the Committee staff have so if I am misquoting I apologise. Can you share some of those examples?

  Mr Black: I cannot give you any named examples, no. It would be improper for me to recount rumour but within the industry it is very well known that if you happen to not want to register somebody then perhaps they might not be registered. It is quite obvious and you had an example earlier on of firms who are members of the APPC clearly pitching for work which they should be excluded from by their membership. The thing with the register is that it is un-policed. You really do not know what is going on, it is entirely voluntary and it can be used the other way as well: to put a client on who you have done £300 worth of work for and you might have had a conversation with. If it is actually a very big name and you put that on the register, then it is marketing. It does not work, in both ways, if you see what I mean. That is the important thing about it.

  Q532  Mr Walker: In reality you want to increase the regulatory burden on small agencies to make it harder for them to operate so you can hoover up their market share.

  Mr Black: Not at all. We think that if there is concern then we are suggesting one way forward. We have no intention of it making us more competitive or able to squeeze out smaller agencies. If you want to go to a smaller agency, you are probably not thinking of going to us anyway. That is not in our interests.

  Q533  Mr Walker: It must really annoy you as an organisation when you have this big blue chip client and they are using a PR agency, a public affairs agency, like the Communications Group, Westminster Strategy, and you think: why are we missing out on that fee income; we must get that in-house; we must make it as difficult as possible for them to operate.

  Mr Black: Why would it make it more difficult for them to operate under this suggestion than us?

  Q534  Mr Walker: Because the regulatory burden would be higher for them than it would be on you. You have more financial resources to meet that regulatory burden than they would.

  Mr Black: What financial resources would we actually need to put our names on a register and say who our clients were?

  Q535  Mr Walker: When I was in recruitment I worked for a very large company and we loved the regulation that this Government was producing at the time because it knocked so many smaller agencies out of the market-place which meant more for us. Perhaps I am applying my past business experience.

  Mr Black: You are suggesting that we are suggesting regulation as a way of squeezing other people out. What we are actually doing is reacting to the concerns that have been expressed and offering a possible way forward.

  Q536  Chairman: I have just a few final questions to tie things up. We spoke earlier about the revolving door: politicians and very senior civil servants going into lobbying firms. Can I ask you, Mr Black, how many senior civil servants and how many politicians work for you?

  Mr Black: Senior civil servants, none. As you may know, our co-chairman of Global Government Relations is Lord Tim Clement-Jones, a Member of the Upper House, and that is it.

  Q537  Chairman: That surprises me. What about Norman Warner?

  Mr Black: He is a consultant to DLA Piper but not directly to GGR.

  Q538  Chairman: He is not involved in your business at all?

  Mr Black: He will give us advice as asked for but he is not actually employed by GGR but by DLA Piper.

  Q539  Chairman: He is still a Member of Parliament, is he not?

  Mr Black: Yes.