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The Lord Chancellor has occupied an important place in the English legal system, for better or worse, for nearly a thousand years. In the middle ages, the Chancellor was a sort of chief administrator to the King. Eventually he came to occupy a judicial role, hearing cases on behalf of the King. These days the Lord Chancellor has three distinct governmental roles, much to the annoyance of those who favour a strict separation of powers. He (on, in principle, she) is a member of the Cabinet, is a judge and a selector of judges, and sits in the legislature in the House of lords. The fact that such an arrangement has not caused a constitutional upset before now is probably the result of good luck, rather than good planning.
At the time of writing (Jan 2004) the Lord Chancellor's position is looking shaky. The recently-appointed Minister for Constitutional Affairs has been asked to make plans for the abolition of the office altogether, and to replace the Chancellor's role in selecting judges with a committee.