The justice minister, Jonathan Djanogly, has been stripped of his responsibility to regulate claims management companies after a Guardian investigation that revealed how his family could profit from the legal aid reforms.

The Ministry of Justice is considering banning the payment of referral fees by lawyers to claims companies who identify cases. The former home secretary Jack Straw recently called the practice of referral fees ‘a lucrative and self-serving merry-go-round’ and shortly after Djanogoly revealed that ministers were planning on banning the referral fees – as reported here.

Sir Gus O’Donnell, the cabinet secretary, has said that whilst there was ‘no suggestion of any impropriety in relation’ however confirmed that that Ken Clarke, the justice secretary, would now be in charge of the industry,

Djanogly, the heir to a £300m family business, had failed to declare that his teenage children were minority shareholders in his brother-in-law’s businesses – two firms that advertise claims and are part of an industry that Djanogly regulated in government (Going Legal and Legal Link Introductory Services). The Guardian reports today that Djanogly failed to declare a third company owned by his brother-in-law run by his brother-in-law.