Enterprise Bill

Public Bill Committee, 16 April 2002.

Standing Committee B

Enterprise Bill

Derek Conway (Conservative, Old Bexley and Sidcup)

Before I call the Minister, I remind hon. Members and anyone else of interest that the mobile phone is not yet part of our proceedings, even if it has a Verdi ring tone. I ask everyone to check so that we are not interrupted by technology.

Melanie Johnson (Labour, Welwyn Hatfield)

I beg to move

That—

(1) during proceedings on the Enterprise Bill the Standing Committee do meet on Tuesdays at 10.30 am and at 4.30 pm, on Thursdays at 9.30 am and between 2.30 pm and 5 pm and on Wednesday 1st May at 10.30 am and between 4.30 pm and 7 pm, except that on Tuesday 30th April the Committee shall not meet at 10.30 am and on Thursday 2nd May the Committee shall not meet;

(2) the proceedings shall be taken in the following order, namely Clause 1, Schedule 1, Clauses 2 to 11, Clause 196, Clauses 16 to 18, Clauses 179 to 195, Clause 198, Clauses 200 and 201, Schedule 13, Clauses 202 to 226, Clauses 20 to 66, Schedule 5, Clauses 67 to 81, Schedule 6, Clause 82, Schedule 7, Clauses 83 to 86, Schedule 9, Clauses 87 to 160, Schedule 8, Clauses 161 to 174, Clause 197, Clause 199, Clause 175, Schedule 10, Clauses 176 to 177, Schedule 11, Clause 178, Schedule 12, Clause 12, Schedule 2, Clauses 13 and 14, Schedule 3, Clause 15, Clause 19, Schedule 4, Clauses 227 and 228, Schedule 14, Clauses 229 to 231, Schedule 15, Clauses 232 to 239, Schedules 16 and 17, Clauses 240 and 241, Schedule 18, Clauses 242 to 245, Schedule 19, Clause 246, Schedules 20 and 21, Clauses 247 to 252, Schedule 22, Clauses 253 to 257, Schedule 23, Clauses 258 to 264, Schedule 24, Clauses 265 and 266, Schedules 25 and 26, Clauses 267 to 269, New Clauses and New Schedules;

(3) the proceedings on Clause 1, Schedule 1, Clauses 2 to 11, Clause 196, Clauses 16 to 18, Clauses 179 to 195, Clause 198, Clauses 200 and 201, Schedule 13 and Clauses 202 to 226 shall (so far as not previously concluded) be brought to a conclusion at 9.55 pm on Tuesday 23rd April.

(4) the proceedings on Clauses 20 to 66, Schedule 5, Clauses 67 to 81, Schedule 6, Clause 82, Schedule 7, Clauses 83 to 86, Schedule 9, Clauses 87 to 160, Schedule 8, Clauses 161 to 174, Clause 197, Clause 199, Clause 175, Schedule 10, Clauses 176 and 177, Schedule 11, Clause 178, Schedule 12, Clause 12, Schedule 2, Clauses 13 and 14, Schedule 3, Clause 15, Clause 19 and Schedule 4 shall (so far as not previously concluded) be brought to a conclusion at 1 pm on Wednesday 1st May;

(5) the proceedings on Clauses 227 and 228, Schedule 14, Clauses 229 to 231, Schedule 15 and Clauses 232 to 238 shall (so far as not previously concluded) be brought to a conclusion at 7 pm on Wednesday 1st May;

(6) the proceedings on Clause 239, Schedules 16 and 17, Clauses 240 and 241, Schedule 18, Clauses 242 to 245, Schedule 19, Clause 246, Schedules 20 and 21, Clauses 247 to 252, Schedule 22, Clauses 253 to 257, Schedule 23 and Clauses 258 to 260 shall (so far as not previously concluded) be brought to a conclusion at 5 pm on Thursday 9th May;

(7) the remaining proceedings on the Bill shall (so far as not previously concluded) be brought to a conclusion at 7 pm on Tuesday 14th May.

I welcome you, Mr. Conway, and your co-Chairman, Mr. Beard, to the Chair of the Committee. I have spent many happy hours in Committee Room 10, not Committee Room 11, so this venue is a change of scene for us all. I am grateful

for the opportunity to debate the Bill with Committee Members. I hope that it will be useful, and I am sure that Members will make constructive progress. However, if they do not, I know from previous experience that it is the Chairman's role to ensure that the proceedings are conducted in a businesslike way. I know your qualities, Mr. Conway, and I am sure that you will carry out that role.

I recall a Chairman in one Committee, who shall remain relatively anonymous. At the first sitting, he removed his jacket and advised other Members that they could do the same if they so wished because of the temperature. He revealed what looked remarkably like a gun holster arrangement, although there was no weapon in it. He later informed us that the holster was for his mobile phone. However, there was a strong resonance, as we suspected that it might have something to do with his other activities and be a new approach to enforcement.

The usual good will of Committee Chairmen will be sufficient to conduct business in this Committee. As you say, Mr. Conway, carrying around mobile phones can be dangerous in its own right.

I have a background in business, local authorities and many other aspects of life outside the House, and I am delighted to share the Committee with Opposition Members with their own backgrounds. It is an honour to face an Opposition Bench of former special advisers and civil servants that is laden with such talents. The hon. Member for South Cambridgeshire (Mr. Lansley) protested on Second Reading that he was definitely a civil servant and not a special adviser. We must acknowledge those distinctions in this Committee.

It usually falls to the senior Minister to provide a strategic overview of the Bill in Committee. In my experience, he or she then disappears for the rest of the proceedings. I will provide the strategic overview, but I will not disappear. It is important that we consider the Bill in as timely a way as possible.

The proposed programme resolution was discussed at the Programming Sub-Committee yesterday, and I am pleased that there was a general agreement on it at that meeting. The end date of 14 May will allow us 17 sittings to consider the Bill and any new clauses or schedules that may be proposed by amendment. The Government will table several amendments, but aim to give the Committee good notice of them. We will provide a written explanation of the nature and effect of each amendment when it is tabled.

The 17 sittings should provide enough time for proper scrutiny of the Bill. I say that in full recognition of the size of the Bill and the concerns that Opposition Members have expressed. However, as we heard on Second Reading, there is a good measure of support on both sides for many, if not most, of our proposals. We will, of course, work hard in the Committee to examine the Bill thoroughly and carefully. I hope that we will be focused and consensual in our work, and I am sure that we will be extremely constructive and make your job easy, Mr. Conway.

The resolution proposes that the provisions of the Bill be considered in order, with two main exceptions. We propose to give Committee members additional

time to prepare for debating the lengthy competition provisions in parts 3, 4 and 5, which together amount to more than 150 clauses. We propose to consider those parts after the consumer provisions of part 8 but before the information disclosure provisions of part 9, which are closely related and highly relevant to them. Consideration of part 2 most sensibly belongs after the competition provisions, because it relates to appeals against the various decisions that will be discussed in those proceeding parts. The Programming Sub-Committee also agreed that we could bring forward consideration of clauses 16, 17 and 18, which will be examined immediately before part 6.

I hope that Committee members will agree that the proposals constitute a sensible and reasonable way in which to proceed, and I ask them to support the resolution.

Derek Conway (Conservative, Old Bexley and Sidcup)

Before we develop the debate further, it might help Members to know that the programme resolution is at the back of the amendment paper, which is unusual. It is perhaps the system's way of ensuring that the Chairman is awake for at least this part of the sitting.

Nigel Waterson (Conservative, Eastbourne)

I begin by saying what an enormous pleasure it is to serve under your chairmanship, Mr. Conway, and that of your co-Chairman Mr. Beard, on what I am sure will be an enjoyable Committee stage. I echo the Under-Secretary's remarks, particularly her kind comments about my colleagues and me. Flattery will get her nowhere, but it was nice given our slightly rocky start.

I congratulate the Government Members, who were lucky enough to have their name picked out of a hat to serve on the Committee. I know that they are looking forward to it immensely. The only downside about serving on a long Committee—not as long as it should be, of course—at this time of year is that Government Back Benchers will not have the option of doing their Christmas cards, unless they are particularly well organised.

I pay a particular welcome to the hon. Member for South Ribble (Mr. Borrow), who spoke on Second Reading. At that stage, he seemed to be labouring under the misapprehension that this was a 120-clause Bill, when of course it has 269 clauses. That may reveal one of two things; either a deficiency in his research in not getting beyond the first page of the Bill's contents, or perhaps that the Government Whips told him that there were only 120 clauses in order to get him to agree to serve on the Committee. I know that you are a former Whip, Mr. Conway, and I am sure that that would never have happened in your day, but it is possibly why the hon. Gentleman was arithmetically challenged about the Bill.

As the official Opposition, our job is to scrutinise the Bill carefully. As the Under-Secretary said, there are broad areas of welcome and agreement. They were apparent on Second Reading—we did not vote against the Bill or table a reasoned amendment—and we agree with much in the Bill. As I will describe later, much of it will build on the landmark consumer legislation of the Conservative Government of the early 1970s, which we agree that it is time to revisit. We will be

trying to improve the Bill and make it more effective and relevant to the people who will have to enforce it and those who will be governed by it. I hope that we can disagree on issues without being disagreeable.

However, we have got off to a rocky start. It is difficult to divine the Government's motives because, as I said on Second Reading, many clauses in the Bill are free from any party-political content. They are simply highly complex and technical measures that require careful scrutiny. Although we understand the pressures, we were a little surprised that the Bill was continually delayed. We were even more surprised when the Bill was published on the day the House rose for the Easter recess with Second Reading planned for the day after that recess. The Government made a concession to move it by one day, which was rendered of nil effect because of the sad death of the Queen Mother, so we actually debated Second Reading when we came back after Easter.

All that presented problems, which we have wrestled with in a spirit of good will—we appreciate the pressure on parliamentary draftsmen and hope that we shall have to wrestle with it again in the not too distant future—but we did our best. If we are to produce a good Bill, we need the right people to comment and brief us on it. That means organisations, bodies, companies and individuals, ranging from the CBI, the Law Society, the Trading Standards Institute and consumer bodies; the list is almost endless. Such organisations were caught on the hop, as we were. The Easter holiday is not the best time to expect people to produce their suggestions for amendments or their briefings on a complex Bill. As I said, we wrestled with that; if I still owe Mrs. Waterson a large bunch of flowers for the disruption to the Easter holiday, so be it.

At the end of last week, however, without any hint to us or to the Liberal Democrats, the Government tabled a motion that significantly changed the order of consideration. We had expected that the Committee would consider the Bill in the printed order. Unlike in some other Bills, this one had an element of logic in its arrangement; we could have started at clause 1 and worked our way through—for the benefit of the hon. Member for South Ribble—to clause 269. But that was not to be and the result has been a scramble over the past 24 hours to procure briefings and suggested amendments from the various organisations.

If I seem to be labouring the point, or if the Minister thinks that I am being churlish, it is because these matters were debated last night in the Programming Sub-Committee under your chairmanship, Mr. Conway. It is a feature of the procedures introduced by the Government that no record is kept of that debate; it is an entirely closed meeting with no access provided to the public or anyone else. It is important to place these matters on the record.

One result is that we shall be dealing much earlier with the part of the Bill dealing with cartels, yet not a single amendment on that subject had been tabled by the Conservatives when the change was announced. Not unreasonably, we had focused on the earlier parts of the Bill, as had our advisers and others with whom

we were in contact for briefings and potential amendments.

I know that the hon. Member for Twickenham (Dr. Cable) had a similar experience over the last 24 hours. The change has caused considerable irritation and disruption to the people on whom we rely to ensure that we make good law; let us be clear that, in the modern world, Standing Committees largely have to rely on outside bodies with their resources, concerns and knowledge of the issues. Those organisations have had enormous problems and are doing their best to overcome them.

In fairness, as I acknowledged, the Government have made modest concessions, for which we are grateful, in respect of where the so-called knives fall to terminate debate. The order of consideration has also been tweaked. One cheer for the Government on that, but it was a problem of their own making, so neither the Under-Secretary nor anyone else should try to draw much comfort.

We still believe that the Bill should be considered in its right order. I have yet to hear any good reason for changing it. If there were one, it could have been discussed through the usual channels. As I said earlier, I see little scope for party-political wrangling in the Bill, though we may find some as we move along, if only to keep some members of the Committee awake. Therefore, it is all the more surprising that the Government seem unable to consult on these ideas.

I am always a great believer in the slip-up theory—I would not want to use unparliamentary language—rather than the conspiracy theory, so another explanation may be that the Government are taking the Bill at a tremendous gallop. I can perhaps understand why, because it has clearly been a large Bill to draft and lick into shape. We know the pressures on the parliamentary draftsmen. The Government want to ensure that the Bill leaves this House and goes to the Lords quickly, after which it will return here for any further consideration.

I can understand that, but this is a very large Bill by any view; it contains 269 clauses and 26 schedules. A sprinkling of new clauses have already been tabled, and the Under-Secretary has indicated—it would be difficult not to—that there will be Government amendments. I predict that there will be quite a lot of Government amendments as errors or oversights in the drafting become apparent during our debates. Indeed, I think that, according to the programme, a whole day has been set aside at the end of the Committee stage for new clauses and Government amendments, so we shall see.

The reality is that, however one views the resolution, we are looking at 17 sittings to consider a Bill of this magnitude. We shall not vote against the programming motion, because we want to get on to the meat of the Bill and do our best to scrutinise it. However, I want to state firmly on the record, as I did on Second Reading, that with the best will in the world, at least parts of the Bill will not receive proper

scrutiny in Committee, which is a great shame. We would have been happier with a longer Committee stage, and we will be willing to sit later where that is appropriate and will make a difference. To expect the entire Bill to be considered properly and in depth in 17 sittings is wholly unrealistic.

I say that more in sorrow than anger, because from a political point of view it may make little difference. However, it will make a great difference out there in the real world. We are talking about highly complex provisions on competition, mergers and insolvency. Indeed, the insolvency provisions are in the last part of the Bill; the part that often does not receive the close scrutiny that the earlier parts do. The insolvency part is highly complex and detailed, and I am receiving shoals of proposed amendments and briefings from people and organisations that are supposed to have been consulted in depth before the Bill was published.

The consumer provisions are novel, interesting and deserve lengthy debate. In some respects, they do not go far enough, but they certainly require close examination to ensure that they will work and deliver what the Government are promising. There are also other measures to consider, including those that set up the Office of Fair Trading, so this Bill is something of a Christmas tree. Bits of Bills, or even potentially separate Bills, are being dealt with now. Again, I do not complain about the Government taking their opportunity. One sees a slot in the legislative programme and goes for it, trying to cram into it as much as possible. It may be many years before any Government has time to revisit in depth the fair trading legislation, for example, and other complex issues, so I understand the situation. However, for all those reasons, and perhaps others of which we are unaware, the Government are trying to take the Bill at a gallop. That may be a real problem with regard to producing good law on complex matters.

As I said, we shall not vote against the resolution. We accept that the Government would push it through in any event and that they wish the Bill to be out of Committee by 14 May. We cannot argue with that; all we can do is say, ''We told you so'', as and when the new law begins to cause problems in practice.

Vincent Cable (Liberal Democrat, Twickenham)

I echo the hon. Member for Eastbourne (Mr. Waterson) in welcoming you, Mr. Conway, other hon. Members and the Minister to the Committee. She cut her ministerial teeth on the Financial Services and Markets Act 2000, which was even longer and more complicated than this Bill, so she is well prepared for what may come.

My approach, and that of my colleagues, will, I hope, be constructive and businesslike as well as critical. There is quite a lot to criticise, not in a doctrinaire or party-political way, but simply in order to get the legislation right. I am struck by the fact that this is a big Bill. The financial services legislation went through a great deal of pre-legislative scrutiny. Indeed, a Standing Committee of both Houses looked at it in detail, providing a platform for the legislation. This Bill is coming into the House in a much less digested state, despite being very big and complicated. It is likely that it will contain all kinds of flaws that will

need to be corrected through the scrutiny process. I hope that the Government will approach the Bill in a humble spirit, recognising that there is probably quite a lot of scope for legislative improvement.

I echo what the hon. Member for Eastbourne said about the programming meeting yesterday. All parties have agreed to the process, and we shall not try to claw that back. However, considerable unhappiness was expressed. The basic problem is that by inverting the order of the Bill, the Government have left themselves, their Members and us relatively unprepared to deal with some quite tricky pieces of legislative work.

I shall give two examples, although I do not want to prejudge the discussion on them. One item that now comes quite early in the proceedings is the criminalisation of cartels. We recognise that that is not necessarily a very intricate piece of legislation, but it is important. Business lobbies, whose members may go to jail as a result of the Bill, will understandably want to ensure that it is right. They need time to reflect on it and to talk to their lawyers. They will now be bounced into the debate rather early. We share their concern that that is not the right way to proceed.

Equally, the consumer part of the Bill, which was to have come at the end, now comes much earlier in the proceedings. That worries me particularly. I have been in this post on the Liberal Democrat side for over two years, so I probably have a rather greater institutional memory than the Under-Secretary. A couple of years ago, when the Bill was first mooted, it was seen as a consumer Bill. That was its genesis. The Government view at that time was that if re-elected, they would ''do'' consumer protection, as they had ''done'' competition policy and insolvency. There were ambitious ideas for consumer protection, which I fully shared. In practice, the consumer protection aspects have been put in the lower part of the Bill, but they are none the less very important and raise important issues of principle and implementation, such as how the stop now laws will be applied.

It was clear on Second Reading that we have got into a new situation. Many of the consumer groups, such as the National Consumer Council, the Consumers Association, the National Association of Citizens Advice Bureaux and others, expected that that part of the Bill would offer wide-ranging powers to enable them to tackle abuses that are not currently illegal, yet present serious problems. It became clear from the Ministerial response that this would not now happen.

Within a week—probably less under the new timetable—those groups will have to consult with each other, with us and with their lawyers to provide a completely new approach to the problem. That is very unsatisfactory. The Committee may not get it right because of the pace with which the matter is being dealt. That particular inversion of order is very unhelpful to proper legislative scrutiny.

Nigel Waterson (Conservative, Eastbourne)

On that point, we have tabled several amendments on clause 202, which have been prepared at quite short notice for us by consumer organisations. I hope that when we come to debate them, the Under-Secretary will not read from a brief to

say that they are poorly drafted or do not have the required effect, because there simply has not been the time to sit down and consider them.

Vincent Cable (Liberal Democrat, Twickenham)

The hon. Gentleman is right. Indeed, a set of clauses deals with that point. Over the last few days it has occurred to me that if the Government cannot create an all-purpose clause to deal with the consumer protection problem, it may be necessary to introduce into the Bill separate clauses—probably separate chapters—for some of the worst abuses, which continue. That will be a tricky exercise. I am not sure how we or the Government will handle it. Our key point—and that of the hon. Member for Eastbourne—is that we all, including the Government, need time to talk to the groups concerned with the issues to get the legislation right.

That is the essence of what I wish to say. I do not wish to prolong the debate on the resolution; we are keen to get on with the substance of the Bill. Our discussion has been amicable but has sown worries in our minds that the Government are not being as sensitive as they should be to some of the concerns about the Bill.

Jonathan Djanogly (Conservative, Huntingdon)

Although I do not have a direct interest to declare, I am a partner in a firm of solicitors and therefore have an indirect interest.

I add my concerns to those expressed by my hon. Friend the Member for Eastbourne. The Government spent some time in consultation on the Bill; the two years of consultation is highly disproportionate to the four or five weeks, and 17 sittings, that we have been given. I have been a member of the Committee—which has just finished—discussing the Adoption and Children Bill. It was much shorter and less complex than the Enterprise Bill, but at the end of our allocated 24 sittings, and after bipartisan and non-contentious discussions, we had not covered a third. I do not know what will remain of the Enterprise Bill at the end of the allocated sittings. The programming has serious implications.

Mark Field (Conservative, Cities of London and Westminster)

Like my hon. Friend the member for Huntingdon (Mr. Djanogly), I shall speak briefly as the more time we spend discussing the programming motion, the less time we have to look at the substantive issues. I entirely endorse what my hon. Friend the Member for Eastbourne said. My main concern is that the Bill is a mish-mash—perhaps to be in keeping with the Government's proposed joined-up thinking—that introduces important but separate issues. As I know from my limited experience, the Bill is unlike many other Bills, which have a theme running through them. As my hon. Friend the Member for Eastbourne said, the insolvency provisions themselves will lead to many representations from professional and other bodies in the City of London, which is part of my constituency. There is great concern that the issues will be rushed through. The risk is that by the end of the 17th sitting in mid-May, very many clauses will not have been touched and others will have been looked at only discursively. The die is cast for the Committee stage but the Opposition will want increased scrutiny on

Report if we have not had the opportunity of expressing our concerns.

As several hon. Members have said, the Bill has much to commend it. The concerns about it will contribute to ensuring that it works, which is a vitally important part of any Standing Committee. There will also be issues of principle, perhaps with a party-political element; I hope not in a knockabout spirit, but a constructive one.

As we are approaching the 11 am guillotine, I will give the Under-Secretary the last word on the subject and then battle can commence.

Melanie Johnson (Labour, Welwyn Hatfield)

I will have a brief last word, in the spirit of the contribution of the hon. Member for Cities of London and Westminster (Mr. Field). First, I am glad that he and other hon. Members said that there is much to commend in the Bill. We all agree about that, although there is a little disagreement among the Opposition about whether the Bill hangs together well; the hon. Member for Eastbourne said that it did and other Opposition Members said that it did not. I obviously agree with the hon. Member for Eastbourne that the Bill comprises a coherent package of measures that belong naturally together.

On the matter of the longer Committee stage, there was extensive consultation on the White Paper last summer and earlier consultations on the mergers element, which, as I said, is an extensive part of the Bill. As the hon. Member for Twickenham remarked, we had previously published papers on the consumer side of things and on some insolvency matters. Much of the Bill has been discussed before. In relation to the remarks of the hon. Member for Huntingdon, there is a balance to be struck, but, as he acknowledged, there were two years of consultation on the Bill and that is why we do not need to spend so much time on it in Committee. We have had extensive consultations recently with many of the interested parties; as the hon. Member for Twickenham said, it is worth remembering that the Government and, I am sure, all members of the Committee, want to get the Bill right—

It being half an hour after the commencement of proceedings on the motion, The Chairman put the Question, pursuant to paragraph (9) of the Order of the House of 28 June 2001 relating to Programming Sub-Committees.

Question put and agreed to.

Derek Conway (Conservative, Old Bexley and Sidcup)

I remind the Committee that copies of the financial resolutions connected with the Bill are on the Table. I remind hon. Members, too, that adequate notice should be given of amendments; as a general rule, my co-Chairman and I do not intend to call starred amendments, including any that may be reached during an afternoon sitting of the Committee.

Clause 1 - The Office of Fair Trading

Melanie Johnson (Labour, Welwyn Hatfield)

The clause will create a new body corporate to be known as the Office of Fair Trading, or the OFT. The organisation currently known as the OFT is not a statutory body, but simply the administrative support that has grown around the Director General of Fair Trading—the DGFT—to support him in the exercise of his statutory functions. The office of DGFT is abolished in clause 2.

The OFT name has traditionally been used when publicising and explaining the work of the DGFT. However, references in the Bill to the OFT are purely to the new corporate authority proposed in the clause. The new OFT will consist of a board, headed by a chairman. The board will include non-executive members and people with a range of skills, expertise and abilities relevant to competition or consumer protection. It will widen the expertise involved in decision making and will strengthen the link between competition and consumer protection. It will also depersonalise regulation in this important area.

The DGFT currently has a wide range of functions in the areas of competition and consumer protection, many of which are being reformed in the Bill. The Government believe that in the light of the reforms, it is no longer appropriate for all those powers to be vested in one individual. John Vickers, the current DGFT, supports the proposals. He has worked closely with me on taking this forward and I value his support.

The new OFT will be independent, encompass a broad mix of interests and skills in the decision-making process, will be fully accountable through working arrangements that are open and clear, and will be able to act swiftly and effectively.

Nigel Waterson (Conservative, Eastbourne)

Like my hon. Friend the Member for Huntingdon, I, too, declare an interest, although I am not convinced that it needs to be declared. I refer the Committee to my entry in the Register of Members' Interests. I am a solicitor practising in commercial law in the City, now and again.

The debate on clause 1, although it is relatively uncontroversial, will be useful because it sets the tone for the consumer protection aspects of the Bill and it is worth a nod at its historical context. As the Under-Secretary said, the Office of Fair Trading already has a virtual existence, although it is not formally established, and we welcome the fact that it is to be set up. The hon. Lady stated that it is the trend, rather than having one individual, that there should be a corporate approach to regulation. She said, too, that a range of skills was needed and we will have a short debate on the board later. It is important that there should be a wide range of skills, if possible.

Understandably, most Governments never seem to make consumer protection legislation a high political priority. Like Halley's comet, it comes around about once every 30 years. I can testify to that, as at the time of the fair trading legislation in the early 1970s I was a

research assistant to Sally Oppenheim-Barnes, who was the hon. Member for Gloucester and is now in another place. We did a great deal of work on consumer protection issues. The first section of the Fair Trading Act 1973 relates to setting up the office of the Director General of Fair Trading.

In 1972, a Conservative political centre published a pamphlet called ''Square Deal for Consumers'', which makes interesting reading. The noble Lady Oppenheim-Barnes was a contributor and a luminary, as was the late Nicholas Ridley. The pamphlet also mentions an obscure young researcher called Nigel Waterson, who turned into an obscure middle-aged Front-Bench spokesman. Such is life. Thirty years have passed, and here we are, revisiting the same issues. The pamphlet is actually rather interesting and I am prepared to lend it, as I have a whole box of them at home in the attic. It is amazing what one writes when one is young.

The pamphlet echoes some of the issues that are covered in the Bill: consumer advice and its availability to ordinary consumers; local authority responsibilities and their organisation; proposals for a national structure for consumer protection and for legislation in the aftermath of the 1971 Crowther report on consumer credit; the Sale of Goods Act 1979 and exclusion clauses, which were also matters for legislation; unit pricing; metrication, which was a novel concept at the time; shop hours; servicing of products; product safety; and—surprise, surprise—package tours, although timeshare probably takes their place as the more modern equivalent of an ever popular rip-off on consumers. The date-stamping of food is also featured. Nowadays, one can barely see what food one is buying because of the date stamps and ''best before'' dates. At the time, however, the proposal was new. The pamphlet also refers grandly to,

''The implications of common market entry.''

That golden age of consumerism followed on from the successes of people such as Ralph Nader in the United States. I am sure that the Under-Secretary will give due credit to the fact that the Government were Conservative and that they faced many other more major issues in their relatively short life. They took it upon themselves to propose and take through the fair trading legislation. As I said, the first section dealt with the Director General of Fair Trading, as does the first clause of the Bill.

On Second Reading of the legislation on 13 December 1972, the then Sir Geoffrey Howe said:

''The Bill has two principal purposes—first, the promotion of increased economic efficiency and, secondly, the protection of the consumer against unfair trading practices.''

He went on to make a point that has been a philosophical strand in the approach of successive Governments ever since:

''these two purposes are complementary to each other.

They are both founded on the Government's firm belief that competition provides a means of diffusing power and responsibility throughout the community and of continually widening the area of freedom and opportunity. Competition provides spurs to efficiency and incentives to seek out and supply the varied wants of the consumer''.

He also talked about the role played by

''the army of traders, entrepreneurs and retailers . . . By serving themselves, all these people serve the wider community as well'',

We should remember that during the passage of this Bill.

It is also interesting to note that Sir Geoffrey said

''competition is not an automatic panacea''.—[Official Report, 13 December 1972; Vol. 337, c. 453–454.]

That was during the era of Selsdon man, an early version of what became Thatcherism, but even then there was no concept of unbridled competition red in tooth and claw. There was then a firm commitment by the Conservative Government, as there is by the current Conservative Opposition, to introduce regulation where appropriate, encourage competition and remove bars to proper consumer protection. Sir Geoffrey went on to talk about the sovereignty of the consumer, which he said should not be taken for granted, and about the need for consumers to be adequately informed and protected against unfair or misleading marketing techniques.

Sir Geoffrey said that fair trading is good business and I would echo that now. He noted that the first institutional innovation proposed in the legislation was the appointment of a Director General of Fair Trading and went on to draw parallels with other countries. In part, the proposals were based on the federal cartel office in West Germany. At the time, most people would have agreed that the model chosen was probably the most appropriate. Broadly speaking, the office of Director General of Fair Trading has served us well during the years. There is no political argument about that in Committee, but we, the Government and consumer organisations share the view that that legislation needs revisiting. We must take the opportunity and I am pleased that we are doing so now.

The new Office of Fair Trading should be properly established in a corporate sense, with properly set out responsibilities and duties. It should be accountable and its board should cover a wide range of skills, interests and backgrounds.

There are three broad themes to which we shall keep returning. The first is effectiveness: to what extent the Government proposals are not mere rhetoric but will make a real difference to people's lives. Secondly, we will consider closely whether there are unjustifiable burdens on business. Thirdly, we will ask whether resources are available to back up some of the new powers. That applies as much to the Office of Fair Trading—as it will continue to be called—as to the trading standards departments of individual local councils.

We welcome the clause. It is eminently sensibly and seems to be supported by all sections of opinion in the consumer world.

Vincent Cable (Liberal Democrat, Twickenham)

As the hon. Member for Eastbourne suggested, this is an appropriate time to raise some broad themes about the Bill and I will pick up a couple of phrases that the Under-Secretary used in emphasising what she saw as important: the depersonalisation of decisions and the independence

of the OFT. That independence in day-to-day decisions is probably the most important change that the Bill will bring about. I will comment on that, particularly on how independence can and should be entrenched through political accountability. We could have that debate now or on schedule 1 stand part, but this time seems as appropriate as any.

As I said on Second Reading, the Government are right to move in the direction of independence. Otherwise, there would always be a conflict between a Minister's party role and role as a member of the Government, in which he or she must consider the broader interest. There have been several cases in which such a conflict has occurred. None the less, we should not be too modest or humble when debating whether politically sensitive decisions should always be handed over to quangos that are politically independent. There are dangers in that route too. We must strike exactly the right balance.

The system that has operated until now has a lot to commend it. No one would ever suggest that there is anything remotely corrupt in the British system under this Government, or their predecessor. It is a very honest system. Ministers have no personal interests in the decisions that they make. Equally, Government intervention in merger decisions in recent years has been minimal. Ministers have used their powers sparingly, such as the Under-Secretary's predecessor but two in the case of the takeover of regional electricity companies. Important political issues needed to be addressed and Ministers were right to use their political role in that capacity.

We need something in the Bill that retains political accountability, even though it makes the OFT independent of political direction on a day-to-day basis. We must be careful not to throw out the baby of accountability with the bathwater of unnecessary interference. Achieving that balance will be difficult. We could produce a situation that is worse than the present one if the OFT simply becomes a politically unaccountable quango in which people are appointed by Ministers and feel that they have little accountability to Parliament.

Those of us who have been in Whitehall know how the system operates. The permanent secretary has a draw, which may not be specifically labelled, containing a list of the great and good. When a big public appointment needs to be made, it is got out and dusted. The familiar suspects appear and the usual compliments, such as ''safe pair of hands'', ''doesn't ruffle feathers'', ''is well liked in the City'' are available. Assuming those qualifications are met, the suitable appointment is made. There was a wonderful example yesterday, with the appointment to look at corporate governance, which was a typical quango appointment.

Nigel Waterson (Conservative, Eastbourne)

The hon. Gentleman will be able to confirm that the Government offered that bed of nails to several people with substantial corporate backgrounds before the final appointment was made.

Vincent Cable (Liberal Democrat, Twickenham)

Indeed. It was a somewhat embarrassing episode. They may have ended up with someone who satisfies no one, certainly not the small investors. That example demonstrates the difficulty of appointments to quangos. One can satisfy the Nolan conditions—they may be people of total probity—but it is hard to get people who are technically competent, with experience of the real world, yet also politically sensitive enough, although not in a party way, to understand the impact of their decisions on real people. That is why we need to have measures in parallel with the Bill that build in political accountability.

I should like to take the Under-Secretary back to the question that I asked on Second Reading. She did not answer it then but she was pressed to answer many questions in her summing up. Do the Government have it in mind to introduce in parallel with this legislation, measures to strengthen political accountability, comparable to those that applied in the Bank of England Act 1998. I sat on the Standing Committee that considered that measure when I first came into the House. The Act reflected great credit on the Government, particularly on the Chancellor. It is one of their big success stories. It said nothing about political independence or accountability. During its passage, the Chancellor made a statement in the House to the effect that he would try to ensure, by writing to the chairman of the Treasury Select Committee, that appointments to the Bank of England Monetary Policy Committee would be interviewed after he had nominated them and that they would regularly appear before the Select Committee to give an account of their work. He subsequently wrote a letter to Lord Radice explaining what he wanted to secure. There was all-party agreement that it was a good way to proceed and that system was highly successful. Will the Under-Secretary confirm whether she and the Secretary of State envisage something comparable, which I would find enormously reassuring? It is not a party point; as I said earlier, it is one of the Government's success stories from the previous Parliament, on which they should try to build.

Reflecting on that successful experience, it is clear that having members of the Monetary Policy Committee—in this case, members of the OFT—subject to confirmatory hearings in the House has many advantages. Responding to Members rather than just Ministers entrenches their sense of independence. Sir Edward George is perceived very differently from Mr. Bridgeman, who was fired in dubious circumstances by the Secretary of State's predecessor. The fact that Sir Edward is accountable to the House has strengthened his position, conferred credibility and made his independence much more real.

The fact that members of the Monetary Policy Committee—and, I hope, of the OFT—are subject to that scrutiny toughens them up. Hon. Members gave some members of the MPC a real going over. I recall Sushil Wadhwani being roundly criticised for plagiarising his statement to the Select Committee. Probably in response, he subsequently proved himself to be an exceptionally independent and hardworking member of the MPC who has cut swathes through the

policy debate. Having people on the OFT publicly exposed, identified and criticised in that way would add greatly to its status. I hope that the Government does not view the OFT as a quango that can be packed with people whom Ministers regard as safe and comfortable rather than with people of real standing who can stand up in public and be accountable to this House. The latter approach would do wonders for the Government's credibility.

John Pugh (Liberal Democrat, Southport)

My hon. Friend tabled an amendment that was not selected. Does he agree that, as the OFT will take difficult and controversial decisions in future, the Under-Secretary should explain why she is not interested in having the protection that prior scrutiny will give to her or any future Minister's name?

Vincent Cable (Liberal Democrat, Twickenham)

Yes, my hon. Friend makes a helpful point in highlighting one of two ways of resolving the problem. The first—the amendment that I tabled on the subject was late, so I am not criticising the selection process—could be brought up again later. It is to entrench in the Bill a provision that mandates the prior scrutiny of OFT members. The Treasury Select Committee argues that its own powers should be entrenched in legislation. The other way would be for the Under-Secretary to state, today or later, that the Government want to learn from good experiences with the Bank of England legislation and try to introduce something comparable to that model—on a voluntary basis as negotiated with the Chairman of the Select Committee. I view that as a less satisfactory solution, but it would still be a big step forward. I hope that the hon. Lady will provide us with some hope that the Government are thinking along those lines.

Harry Barnes (Labour, North East Derbyshire)

My main and major contact with the Director General of Fair Trading in the current OFT came about because of a merger that led to a loss of 700 jobs in my constituency. I was trying to encourage the director general and the Secretary of State to refer the matter to the Competition Commission. It was a major issue, so I had relatively easy access to the Secretary of State, the Government Office for the East Midlands, the Office of Fair Trading and its director. It was difficult because the merger took place during the summer recess, but eventually it could be pursued through the avenues of the House.

My interest is in a Back Bencher's avenues of access to the board proposed in the Bill. The issues of accountability raised by the hon. Member for Twickenham are also relevant and important.

Clause 2 transfers the functions of the director general to the new OFT. Clauses 5 onwards deal with ''General functions of OFT''. Several points are presented, but they do not connect with the mergers rule because we have not yet reached the mergers section of the Bill. Presumably, those matters are also transferred in accordance with clause 2. I am trying to find my way around this highly complex Bill. Later on, it becomes clear that one section can be understood only with reference to another, which then refers us to yet another. It would be helpful to have some clarity from the start.

Jonathan Djanogly (Conservative, Huntingdon)

I welcome the board and the new balance of power that it represents for decision taking. Hopefully, a wider range of expertise will be brought into play. It is certainly an improvement on the position whereby power rests in the hands of one individual, the director general.

Legitimate questions arise. The hon. Member for Twickenham anticipated my approach, although I look at it from a slightly different angle. It boils down to questions of accountability. I shall not deal with the specifics of schedule 1 until later, but I want to speak about the nature of the board. The Bill does not mention—I will be corrected if I am wrong—the concept of a board. I do not know why and look forward to hearing the Under-Secretary's explanation. It might be because the provisions refer to the investigations that the full board or committees of the board can undertake, so the term ''OFT'' is used. On the other hand, it could be due to the Government's approach to corporate governance and accountability.

The Bill presents standard quango-type arrangements rather than a board with more corporate-governance-type arrangements. I wonder whether we might be missing an opportunity to merge the best in the fast-moving field of corporate governance and best practice with modern governmental practice. The Government have clearly opted for the old quango approach, as will become clear in various ways as we proceed through the Bill. I shall go through the specifics later, but we are missing an opportunity. I shall argue for greater transparency through better and more effective corporate governance. The bottom line is that the OFT is not a company, but a statutory corporation, so it will be a non-ministerial department staffed by civil servants.

To that extent, there will, I believe, be a requirement for parliamentary political accountability. That point was picked up by the CBI, which has called for parliamentary approval by the Trade and Industry Committee of appointments to the board. I know that this issue relates to starred amendments and will not be debated specifically, but I should be interested to hear where the Government stand on that power being attributed to that Select Committee. I believe that other Committees are discussing this sort of issue.

There could be an opportunity for a company-type corporate governance system, with the Trade and Industry Committee or, indeed, the Government being able to call in specific issues. That would turn the way in which the system works on its head. The current position is that the Government will make the appointments, and the Chairman, I think, can have a say in some cases, or there is a need to refer to him. However, the OFT could be allowed to run itself, with others—whether they be the Trade and Industry Committee or the Government—having the right to call in decisions or decisions on appointments. Those are a few thoughts on the wider issues, and I should be interested to hear the Government's opinion.

John Pugh (Liberal Democrat, Southport)

Four ministerial appointments are certainly better than one, but the whole character of the Bill will necessarily lead to more decisions and more activity by the OFT, and more controversy, on which will hinge appreciable amounts of finance.

It has been suggested that prior scrutiny by the Trade and Industry Committee would be a good thing, and everyone can see that that would have merits. If such scrutiny were included in the legislation, what would be the downside? As far as I can see, there would only be an upside. When controversial decisions that gave rise to public disquiet or allegations of financial impropriety were made, any future Minister could always answer that the appointment was made not by them, but by a House of Commons Select Committee, or at any rate was confirmed by the Committee. That would be a defence for any Minister at any time in future. I simply repeat my question; what would be the downside?

Mark Field (Conservative, Cities of London and Westminster)

Like the hon. Member for Southport (Dr. Pugh), I have concerns about the controversy that is likely to arise, and I should like to have a general assurance from the Under-Secretary. The Government have made a big song and dance about the Bill and the idea that it is somehow out of the realms of party politics. My concern is that, although that is the aim, there is a real risk that by appointing figures who are controversial or who have had links with particular political parties, businesses or interest groups, there will be even more controversy, even though there will not be as strong a direct link. In fact, issues may come into play that show that there are strong links.

It has been said that the current system works fairly well. I should like to have some guidance as to why the Government believe it so important to move away from that system—which places more direct accountability on the shoulders of particular DTI Ministers—and why it is desirable to move away from the political input that the DTI has had in this area.

Melanie Johnson (Labour, Welwyn Hatfield)

I welcome the contributions that hon. Members have made to the debate, and the support that has been expressed for various aspects of the provision, including the establishment on new terms of the Office of Fair Trading and the institution of a board. It was suggested that the OFT board should have four or five members. It might be helpful if I specify that we are looking at five to seven members.

Several hon. Members raised the issue of accountability; we agree that it is probably the most important issue. Accountability is necessary, not least from the point of view of the House. The OFT will be accountable to the Secretary of State, Parliament and the public. The chairman of the OFT could be summoned by Select Committees. Indeed, I am delighted that the Trade and Industry Committee already takes an active role in scrutinising the work of the OFT and the Competition Commission. Its report on the OFT's consumer work in 2000 influenced the OFT's consequent work on consumer credit, for example. I understand that the Trade and Industry Committee will talk to the OFT and the Competition Commission on 23 April.

On the wider points about accountability, we believe that the OFT should follow the general principles of good governance of all bodies corporate. The working arrangements are for the OFT board to agree but we expect them to fit into the general thrust of transparency, openness and accountability set out in the Bill. We will talk a lot about transparency, openness and accountability because those qualities are vital. Indeed, we believe that making the changes will enhance rather than detract from them.

Clauses 3 and 4 require the publication of an annual plan for the year ahead, as well as an annual report. The OFT must consult when preparing its annual plan which, with the annual report, are to be laid in Parliament. The OFT's performance will be monitored against objectives, both by Parliament and the public. The OFT needs to keep the public informed of its work and, under clause 4, to publish other reports of its work.

Vincent Cable (Liberal Democrat, Twickenham)

Will the Minister clarify her definition of accountability? She has acknowledged the role of the Trade and Industry Committee. Why should not the Committee have the same scrutiny role on appointments that the Treasury Committee and the Monetary Policy Committee have, as requested by the Chancellor?

Melanie Johnson (Labour, Welwyn Hatfield)

Unlike the Monetary Policy Committee, the OFT is and will remain a Department; indeed, it is part of the Executive. It is not normal practice for members of the Executive branch to be appointed or approved by Parliament. I cannot think of precedents for that and it would be an unusual step for us to take. However, as I said, we welcome the interest taken by the Trade and Industry Committee. The chairman of the OFT will be called to give an account of its work and to discuss regularly such matters as the annual plan and the annual report with the Trade and Industry Committee. Those are vital elements in the process. I understand the point of the hon. Member for Twickenham on possible parallels with the Monetary Policy Committee, but I hope that he appreciates that there are also significant differences with that Committee.

Jonathan Djanogly (Conservative, Huntingdon)

On the OFT being part of the Executive, surely the Minister appreciates that we are talking about individuals who are pulled out of business and various walks of life. We are talking about calling to account not Ministers, but a very different kettle of fish.

Melanie Johnson (Labour, Welwyn Hatfield)

The hon. Gentleman is right; we hope to draw board members from business and to bring with them a range of valuable outside experience and perspective. The board will be an important part of the function of the OFT. However, there are not parallels between members of an organisation or board acting in that capacity in relation, in an executive function, to other parallel parts of Government, effectively Government Departments; there is no read-across where Select Committees vet, have hearings on or appoint members of other parallel board arrangements—

John Pugh (Liberal Democrat, Southport)

Will the Minister give way?

Derek Conway (Conservative, Old Bexley and Sidcup)

Before I call the hon. Gentleman, I remind the Committee that schedule 1 deals in considerable detail with the waters we are now getting into. It would be helpful if hon. Members did not stray into the next matter for consideration.

John Pugh (Liberal Democrat, Southport)

Is not there a paradox, in that the Bill sets up a board that is intended to be independent of the Secretary of State, but cannot be scrutinised because it is part of the Executive? Surely it cannot be both a truly substantial body, by itself independent of the Secretary of State, and not subject to scrutiny because it is under the Secretary of State.

Melanie Johnson (Labour, Welwyn Hatfield)

I am grateful to the hon. Gentleman for making that point. The board's independence is very important so that the OFT can regulate its own procedures—quorum, voting, committees and so on—and have flexible arrangements enabling it to take quick decisions when necessary. It is important, too, that there is no question of political interference. I am grateful for the remarks made by the hon. Member for Twickenham about the standing of the OFT and the fact that there is no question of it being interfered with. As the hon. Gentleman said, it is an honest system that has been sparingly used. None the less, there are risks in having a political dimension.

Taking the step of distancing politicians from the decisions that need to be made about competition on competition grounds is important; we would lose a lot were we to argue our way out of it. I appreciate that there is a desire in the House, and the Committee, to maintain accountability, which is why I stressed that the measures that deliver enhance accountability over the existing arrangements. I hope that what I have said will reassure my hon. Friend the Member for North-East Derbyshire (Mr. Barnes) about the avenues of access, many of which will remain. There will be discussions with the Department on such issues and greater scope for parliamentary engagement. As in the past, there will be the usual scope for Members of Parliament to contact the Office of Fair Trading to raise issues and take matters forward on behalf of their constituents.

On the body corporate and the statutory board, it is a matter of terminology; there will be a board and it will be a legal entity. The OFT and the board are one and the same entity, so the reference to a board is unnecessary in the Bill.

I welcome the focus of the hon. Member for Eastbourne on important issues such as effectiveness, the burdens on business and the resources available. I look forward to further opportunities to debate those matters in the Bill.

Question put and agreed to.

Clause 1 ordered to stand part of the Bill.

Schedule 1 - The Office of Fair Trading

Nigel Waterson (Conservative, Eastbourne)

I beg to move amendment No. 1, in page 182, line 6, at end insert

'of which at least 50 per cent. will be currently active in industry or commerce at the time of their appointment'.

I hope that what we have in mind in amendment No. 1 is clear; it leads directly from our previous debate. I am sure that all members of the Committee are as keen as we are that the new board should have considerable standing. I mention in passing that we broadly share the concerns of the hon. Member for Twickenham, who has tabled a starred amendment on parliamentary scrutiny. He has had his bite of that cherry and made his points well. I will move on rapidly, before I am ruled out of order.

The point of my amendment is that we do not want as appointees to those important positions armchair warriors, retired civil servants, long-retired business men, those with narrow experience or those who are no longer involved in the daily cut and thrust. That is why the amendment states that at least 50 per cent. of appointees should be active in industry or commerce at the time of their appointment. If the Under-Secretary suggests that there may be up to seven such appointees, I will leave it to those who are cleverer than me to work out how the 50 per cent. would work.

The OFT, as it is newly constituted, will have some sweeping powers and responsibilities and is in a position to have a dramatic effect on individual businesses and business sectors throughout the economy. People should therefore be appointed who are, in some measure, engaged in hands-on industrial or commercial activity at the time of their appointment. The other 50 per cent. could be appointed from the categories that I mentioned, or could have competition experience, as the hon. Lady suggested.

The OFT should not be made up wholly of people who represent some narrow consumer or competition interest. There may be some role for one or more academics, but people with hands-on, real world experience are important in this context. Although I hesitate to pray in aid regularly, I do so with the stated views of the former Secretary of State who is now the Secretary of State for Transport, Local Government and the Regions. In May 2000, he stated in a Department of Trade and Industry press release:

''The new Authority will give greater transparency and accountability to the OFT. More board members will give a wider range of expertise to the organisation, rather than executive power resting with one person. This will give businesses and consumers a stronger voice at the heart of the OFT.''

Our amendment merely seeks to put into effect the stated intention of the previous Secretary of State to give businesses—in this instance—

''a stronger voice at the heart of the OFT.''

The Under-Secretary may be about to tell us that the policy has changed in the meantime. If so, I can certainly understand the desire of any Minister to distance themselves from the record of the right hon. Gentleman in any of his previous incarnations. However, his sentiment seems eminently sensible. I understand that Mr. Bridgeman's successor has set up a four-member advisory panel that meets monthly to discuss policy, strategy, research and communication. It includes a former editor of the Financial Times and a leading competition academic and author. The OFT has been at pains to make it clear that the body is strictly advisory. It issued a press release that stated:

''it is not a shadow board or precursor to the statutory board''.

I assume that one can surmise from that that the composition of the board would be different from that of the advisory panel. It would help to have the Under-Secretary's more detailed thinking on that, which is why we tabled the amendment. However, at the end of the day, the amendment should present no difficulties if the hon. Lady still agrees with the views of the previous Secretary of State.

Vincent Cable (Liberal Democrat, Twickenham)

I agree with the spirit of the amendment, but I am not sure whether 50 per cent. is necessarily the correct proportion or whether we should define industry and commerce in a narrow sense. I agree with the spirit for two reasons, which have already been given by the hon. Member for Eastbourne. First, the people who sit on the board of the OFT will be powerful people. They will make major decisions that directly affect the lives of tens or hundreds of thousands of people who are affected by merger decisions, as well as millions of consumers. Secondly, it is important that the OFT does not become just a parking place for ex-civil servants. I do not mean any disrespect to ex-civil servants, as they are undoubtedly admirable people, but such a situation would be wrong. I was slightly worried by the tone of the Under-Secretary's reply on clause 1, in which she seemed to emphasise the closeness of the OFT to the spirit and structure of the civil service. If the OFT develops in that way, it will not be right.

Following the line of argument of the hon. Member for Eastbourne, OFT members will need to be wide in their capabilities and several qualifications strike me as necessary. They must have some understanding of the real world, and I hope that when the hon. Gentleman specified including 50 per cent. from industry, he was not talking only about those from the employers' side. Ex-trades unionists with experience of industry may have something to contribute and if he meant to include them, I would be much closer to his point of view. People who have an understanding of industrial and commercial issues from direct experience would be desirable. One should not be unduly prescriptive about that, and financial and economic journalists are often some of the best-qualified people to make such judgments. Therefore, a first requirement should be an understanding of the world of commerce and industry.

However, that is not all. Members of the OFT will have to have a good understanding of industrial economics, which is a highly technical subject. It is important to follow what has happened in the United States Department of Justice and the European Commission. Some thinking has become very sophisticated, in terms of both legal and economic principles. I shall not bore the Committee with an hour-long dissertation on the Hirschman index and other hot topics in the competition policy world, but members of the OFT will have to be familiar with demanding literature on such subjects. They must be familiar with business and understand industrial economics.

OFT members must also have a political feel—they must be not politicians, but people who understand that when a merger decision is taken it affects many people down the supply chain. Even though the terms of reference will be narrowly drawn to encompass the competitive effects rather than the wider national interest, OFT members must be sensitive to the problem. They also need to understand the way in which decisions will affect financial markets, so we are talking about people who are qualified in a wide variety of subjects.

The amendment is useful because it flags up the fact that the OFT members are important and must be able to understand both the academic and practical aspects of complex business decisions. They are unlikely to be found in great numbers in the civil service machinery, although some extremely able civil servants may well come forward. I support the amendment in principle, but I am open to suggestions about how it could be couched in slightly different language if that helps.

Ken Purchase (Labour/Co-operative, Wolverhampton North East)

The hon. Member for Twickenham rehearsed the arguments as to why we should not put off the amendment. This is the age-old problem of seeking people to serve on such bodies who have a sufficiently wide experience and knowledge to make a significant contribution. I have long given up the notion that there is a body of independent people who can express a value-free opinion without let or hindrance and put aside all other interests to arrive at a fair and proper decision. My experience is that such people are in exceedingly short supply and it is chasing an illusion to believe that we could people a body with such super-beings, who do not exist.

The hon. Gentleman also gave us reason to recognise that his own amendment, which would mean that such a person would be interrogated by the Trade and Industry Committee, would also be a bad idea. You wisely did not select the amendment, Mr. Conway. The hon. Gentleman has told us from his wide experience and knowledge of the matter exactly what would happen. It would be worse than an interrogation. People would be put off being on the committee if they had to face the barrage of questions that the hon. Gentleman would ask as a member of the Select Committee.

There is no ready formula by which to appoint people to these important bodies. When the chairman or chairwoman is chosen, after a quite exhaustive procedure, not just a dusting down of the great and the good names that might appear from time to time, that person must be given some credit. He or she must be able to choose and to liaise with the Secretary of State to get a balanced and proper set of people to serve on the committee. The idea that 50 per cent. should represent one interest seems perfectly reasonable on the surface. Of course, we need people who understand what they are doing and have a background in the areas in which they are expected to make important decisions. They will not come with an independence of mind, however. Like most of us in this Room, they will come with bags and baggage that will preoccupy them and affect their decisions.

It is best left to the Secretary of State and the chairman or chairwoman of this committee to decide who may serve, recognising that we all have our own interests to serve, that we can call upon expert opinion, that we can ask for written submissions and that the body involved can take evidence from as wide a range of people as it wishes in examining any issue that is referred to it. We should therefore reject the amendment on the grounds that we could never satisfy all the different sectors that would want to be represented at this level, but should leave it to the common sense and good judgment of whoever is appointed as chair, in liaison with the Secretary of State.

Jonathan Djanogly (Conservative, Huntingdon)

I certainly support the amendment, although I should like to turn it around and ask, if the Government are minded to turn this down—I know that this will not happen—what would their policy be for appointing candidates to the board? It is worth speaking frankly. The concern is that this will become another way of appointing cronies. The Labour Government have packed the other place with cronies and they have packed quangos with cronies, so why should they not pack this board with them? It is a straightforward suggestion, but we deserve an indication from the Under-Secretary of the basis on which appointments will be made.

Harry Barnes (Labour, North East Derbyshire)

Perhaps the hon. Member for Eastbourne and the Under-Secretary could explain this to me. The amendment refers to those

''currently active in industry or commerce''.

The hon. Member for Twickenham assumed that that would include trade unionists and people on the shop floor. While it might cover those who are working and employed in industry and commerce, would it cover trade union officials who were negotiating on behalf of those people and might have some expertise in those areas but were not on the payroll?

Mark Field (Conservative, Cities of London and Westminster)

Does the hon. Gentleman regard a full-time shop steward who has spent the past 15 years as a political agitator as someone who is currently and actively involved in industry and commerce?

Harry Barnes (Labour, North East Derbyshire)

That is a question for the hon. Member for Eastbourne. He should clarify exactly who is covered.

Nigel Waterson (Conservative, Eastbourne)

When I drafted the provision I was not thinking directly of trade unionists. As my hon. Friend the Member for Cities of London and Westminster suggests, one may stretch the phrase

''currently active in industry and commerce''

a little too far. We do not want a quota system under which different groups have a certain number of positions. I am merely trying to underline the fact that the people involved should have real experience of the burdens on business that legislation can bring about, sometimes unintentionally.

Harry Barnes (Labour, North East Derbyshire)

An active shop steward working in a firm who represents people well is likely to have considerable useful experience to draw on. I do not know whether the Minister believes that that example

is covered by the definition in the Bill. I was worried that the provision might be an effort to turn the appointments procedure into a gaffer's charter.

Melanie Johnson (Labour, Welwyn Hatfield)

Of course, I greatly hope that strong business candidates will apply to the OFT board because their experience and insight could be valuable. We shall run a fair and open competition to appoint members through Nolan procedures. We are hoping to recruit people with a range of skills, expertise and abilities that are relevant to competition or consumer protection. I do not want to be drawn into the debate among hon. Members on both sides of the Committee about the exact backgrounds from which people will be drawn. I accept all the arguments about the wide skills that are necessary for this important job. A relevant set of skills and abilities will need to be deployed on behalf of the OFT—not least common sense and good judgment, the rarest of qualities in my experience and often difficult to obtain.

At this stage, it cannot be right to appoint half from one background and half from another, thereby imposing a quota. Opposition Members, particularly the hon. Member for Eastbourne, are opposed to the imposition of quotas. We shall appoint the best people through the recruitment process, and I assure the Committee that we want to secure people with business experience. I share the overall thrust of the amendment—though not the 50 per cent.—but, for precisely the reasons mentioned by the hon. Member for Twickenham when he listed all the potentially relevant skills, it is not the best way to achieve the objective. We shall leave it to those appointed to secure the right balance and appoint people of high quality.

Vincent Cable (Liberal Democrat, Twickenham)

May I clarify one point that is not clear from the debate so far? Does the Minister agree that the role of the board is to provide a strategic overview, which will then guide the director general, or will individual board members vote on specific executive decisions on mergers? Can she better define the nature of the job so that we can better judge what sort of representative would be most appropriate?

Melanie Johnson (Labour, Welwyn Hatfield)

We certainly envisage the board looking at strategic functions—a key element of the way in which the board should operate. I can confirm that the advisory panel arrangements are a precursor and that members remain no more than advisory at present. They will contribute to the OFT role through the new arrangements. Some members may join the new board, but the panel will conclude its arrangements when the board comes into being.

Nigel Waterson (Conservative, Eastbourne)

I want to be clear about this matter. The Minister described the advisory panel, perhaps not wholly accurately, as a precursor. The quotation that I read out seemed to suggest that the director general was making a clear distinction between the role of the advisory panel and the likely future role of the board. Perhaps I was reading too much into it, but that suggests to me that a different sort of person from those currently on the advisory panel would be considered to sit on the board. Will the Minister please clarify the matter?

Melanie Johnson (Labour, Welwyn Hatfield)

It depends in what sense I mean the word ''precursor''. We can disagree about what that word means, but the panel is an advisory panel that acts in an advisory capacity on policy matters. It might help if I run through the sort of decisions that we envisage the board will take. We are talking not about day-to-day decisions but about high-level decisions, market studies and cases of strategic significance; about approving the annual plan, the annual report, financial statements, the budget, negotiating strategy, matters such as the service delivery agreement and major or unusual capital projects; about considering the OFT's communications strategy and approving the OFT pay and human resources issues, all at a high strategic level. The board will not be involved in operational, day-to-day matters.

Nigel Waterson (Conservative, Eastbourne)

I am grateful to the Minister for that explanation. As she guessed, this is a probing amendment. I am still not wholly clear about whether the advisory panel will continue in parallel with the board or be subsumed in it.

Melanie Johnson (Labour, Welwyn Hatfield)

Neither will occur. The panel will cease to exist on the institution of the board arrangements, or possibly prior to that. The advisory panel will not continue when the board is established.

Nigel Waterson (Conservative, Eastbourne)

I am grateful to the Minister for that clarification and for the clear indication that business will have a voice on the board. As I said in response to the hon. Member for North-East Derbyshire, I do not want a quota system. I merely wanted to flag up the fact that business wants to be represented and to know that people on the board have a good business track record and have had to wrestle with some of the issues from the other side of the equation. If the OFT is to work, it must carry out its complex new tasks and duties effectively and successfully. It must be sensitive to the needs of business and earn its respect and support, or it will not be as successful as it should be.

Whether or not the provision is part of a gaffer's charter in the eyes of the hon. Member for North-East Derbyshire—he is irredeemably and lovably old Labour on these occasions—we shall keep returning to the major theme that we are eager that the Bill should not heap extra burdens on business, even if that is unintentional.

I am happy that business is to be represented. I read in my newspaper today that Mr. Bernie Ecclestone is considering making further contributions to the Labour party. Given the roaring success of his last contribution, which got him everything he wanted and the contribution returned, I do not entirely blame him. He might be the sort of business man with a major track record who could be considered for a shortlist.

I beg to ask to leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That this schedule be the First schedule to the Bill.

Jonathan Djanogly (Conservative, Huntingdon)

I want to speak in this debate as there are questions relating to specific provisions to which I want the Minister to reply.

First, the Bill refers to there being

''no fewer than four . . . members''

of the board. Where did that number come from? Why not have a higher number—10, for example? That may seem a strange request, but as members of the board are to be political appointments, the fewer the members, the greater the possibility of political influence. That is why I was surprised by the low number. The chairman is to be consulted only on appointments, which means that, depending on the nature of the chairman chosen, there is room for political input. We should completely remove the Government from the appointment process.

In his starred amendment, to which we shall come, the hon. Member for Twickenham proposes prior scrutiny by the Trade and Industry Committee. I disagree with that approach. Why should anyone get involved in the first place? There should instead be a right of recall. In other words, if the Government or the Trade and Industry Committee disagreed with a proposal from the board, they could call it in. With that exception, why not let the OFT rule itself, free from maximum political interference? I suggest a system like that of corporate governance, with an executive and a non-executive board, where the non-executives have the right to nominate suggestions but not to make appointments, which would be considered and voted on by the whole board, subject perhaps to veto by the Government or Select Committee.

There is talk of a maximum five-year term but no minimum term. I understand the practicalities of that, although I would be interested to know the minimum period that the Government are considering. Again, there is concern that many short-term appointments would increase the Government's leverage on members' replacement, re-adoption and terms of employment. Although I would not speak against a term of five years, I would want to be reassured that short-term appointments to the board would not habitually be made.

The committees in the schedule also need to be considered. For example, can they be given the authority to make decisions or only recommendations to the main board? Would decision making by the board require consultation with the Secretary of State? Paragraph 11 would, effectively, enable the OFT to allow a committee to do anything that the main board can do, so clarification is required on how much power the committees will have. How important does an issue have to be before it needs to be considered by the whole board rather than a committee of the board? If committees can make decisions rather than recommendations to the main board, how will the main board supervise the operations of the committee? That is particularly important because the schedule provides for non-members of the main board to be appointed to committees, which leads to questions such as how appointments to committees are to be made. The issue of committees having the same power as the main board is surely just as important as how appointments to the main board are made—yet the schedule does not address it. I would be grateful for the Minister's consideration of those points.

Melanie Johnson (Labour, Welwyn Hatfield)

Perhaps it would be helpful, in answer to some of the points made by the hon.

Member for Huntingdon, if I set out how we see the schedule. I will also pick up some of the other points that were made.

The schedule sets out fundamental terms by which the OFT must operate in order to ensure the accountability and transparency of this public body. The schedule stipulates that the OFT shall consist of a chairman and, as the hon. Gentleman said, a board of at least four other members. As I said earlier, our thinking is in the order of five to seven members. My right hon. Friend the Secretary of State will appoint the chairman and, in consultation with the chairman, the board members. That process will be conducted according to the principles of open competition and the Nolan procedures.

John Vickers, the current Director General of Fair Trading, will be the first OFT chairman for the remainder of his term, in line with what was agreed when he was appointed. The terms of appointment will be for a maximum of five years, as the hon. Gentleman said, and are renewable. I do not think that we should stipulate a minimum term in legislation. That would provide too little flexibility, and judging by the hon. Gentleman's remarks, I think that he understands the need for flexibility. Indeed, it is sometimes attractive—especially initially, when one is making a number of appointments—not to appoint everyone for the same time frame, simply to ensure that not all future appointments are made at the same time and that there is continuity in the organisation. It would be unfortunate if we stated a minimum time in legislation.

Mark Field (Conservative, Cities of London and Westminster)

We have talked about a minimum term, and paragraph 3(1) of the schedule sets out the maximum term of five years. Has the Minister thought about reappointment for second or subsequent terms?

Melanie Johnson (Labour, Welwyn Hatfield)

The terms of appointment are certainly renewable. We have not put a limit on appointment, although various guidelines about the operation of Nolan appointments may put a ceiling on it. At the moment, however, nothing in the Bill does that, and we envisage that the terms of appointment will be renewable.

It is fair to say that the presumption will be for people to serve a full term. With initial appointments, however, there may be different reasons for considering the terms of appointment. For example, if a brilliant candidate were prepared to accept only a term of three years, which might well be the case, we might want to have flexibility built in. That would ensure that we could harness the skills of someone who was entirely appropriate and had much to offer the organisation and operations of the OFT, but who would not necessarily want to commit to a full five-year term and would be uncomfortable if that were the only possibility.

John Pugh (Liberal Democrat, Southport)

My question is on a small matter of detail that has not been covered in the Minister's remarks. Is it expected that board members, as opposed to the chairman, will be involved in executive decisions on major mergers, or is their job purely strategic?

Melanie Johnson (Labour, Welwyn Hatfield)

Their job is strategic, but all the powers exist formally at board level and will be delegated for operational purposes to the committees and the rest of the structure, to which the hon. Member for Huntingdon referred. Safeguarding OFT independence has also been raised, and it is important to note that, once appointed, members can be removed only by the Secretary of State on specific grounds of incapacity or misbehaviour. There would be no other reason for which board members could be removed, once appointed.

The staff will be civil servants working in a non-ministerial Government Department that is a Crown body. The number of civil servants, and their terms and conditions of service, will need to be approved by my right hon. Friend the Prime Minister, the Minister for the Civil Service. The schedule allows for the OFT to establish committees and advisory bodies, and to regulate its own ways of working. It must, however, consult the Secretary of State on its procedures for dealing with conflicts of interest—clearly a difficult and important area—so that Ministers can ensure that proper procedures are in place. Indeed, a general problem as a result of potential conflicts of interest concerns the ability to appoint people who will be able to operate in key areas.

In line with the independence principle, the schedule gives the OFT a general power to do anything that will facilitate or assist the performance of its functions. Obviously, that is constrained elsewhere in the Bill.

Jonathan Djanogly (Conservative, Huntingdon)

We have not touched on decision making. Would decisions be taken on the basis of a majority vote by the full board?

Melanie Johnson (Labour, Welwyn Hatfield)

As I said, it is for the OFT to regulate its own procedures, such as quorum voting arrangements and committees, in line with its independence. We do not want to interfere in those matters, and it would not be appropriate for the House or the Committee to do so for the reason that I gave; it is important that those arrangements reflect what the OFT needs in order to function effectively. I know that hon. Members are concerned about that.

Jonathan Djanogly (Conservative, Huntingdon)

When the OFT publicises its decision, will dissenting opinions be laid out specifically, with reasons given as to why the dissenter is dissenting, as in a court judgment?

Melanie Johnson (Labour, Welwyn Hatfield)

That also is a matter for the OFT. I will take the hon. Gentleman's question away and consider whether I want to comment on it further. However, I believe at this stage that that is a matter for the OFT to consider under the arrangements that I have outlined this morning. As I said, the OFT will be constrained by other Acts and laws. Within the restrictions, however, the OFT is allowed to act as it needs to in order to fulfil its functions.

Finally, the schedule lays down that the OFT, as an authority, may be subject to investigation under the Parliamentary Commissioner Act 1967, which specifies that its members are barred from sitting in this House or the Northern Ireland Assembly. Hon. Members therefore need not apply. The schedule sets out the framework within which the OFT will operate. It also sets important boundaries and confers equally

important powers and freedoms on the new organisation. That is in line with an authority that is an independent, but still accountable, transparent public body.

Question put and agreed to.

Schedule 1 agreed to.

Clause 2 - The director general of fair trading

Melanie Johnson (Labour, Welwyn Hatfield)

The clause will abolish the office of the Director General of Fair Trading and transfer his rights, property liabilities and functions to the new OFT that clause 1 creates. The Fair Trading Act 1973 established the statutory office of the DGFT, as the hon. Member for Eastbourne said. The office holds a wide range of consumer protection and competition powers, many of which are being reformed. In the light of those reforms, the Government believe that an individual should no longer hold the powers. We propose under clauses 1 and 2 to transfer the powers to a new statutory body with a board and a chairman. We already discussed the nature of the board and the expertise and knowledge that will inform its decisions.

As I said, the current DGFT agrees with the decision. He was appointed in the full knowledge that that was the Government's intention. As was set out in Mr. Vickers' letter of appointment, we intend to appoint him as the first chairman of the OFT for the remainder of his existing term. He has stated publicly that he wants to serve only one term, which covers his time as DGFT and chairman. Mr. Vickers has appointed an advisory panel to act as a shadow board that will provide him with advice on the OFT strategy, new policy developments, areas of research and debate, market analysis and communication. The panel is strictly advisory and lacks the executive powers that the new OFT board will have under the Bill. Nevertheless, it has provided useful experience prior to the move to a full board.

The abolition of the office of DGFT and the move to a statutory authority will benefit business and consumers. The new authority will be independent and have a wide decision-making base. It will be fully accountable to Parliament and the public, and will be able to act swiftly and effectively.

Question put and agreed to.

Clause 2 ordered to stand part of the Bill.

Clause 3 - Annual plan

Melanie Johnson (Labour, Welwyn Hatfield)

The clause will oblige the OFT to publish an annual plan before each financial year. The plan will include a statement of the OFT's main objectives and priorities for the year ahead. The OFT must consult as it prepares the plan, and it must lay the

published document before Parliament. As I said, this is an important means by which Parliament and the public can hold the OFT to account. It will have published objectives and priorities, which people will be expected to meet. Through the annual report provision in clause 4, the OFT will have to report on its progress against those objectives and priorities.

Nigel Waterson (Conservative, Eastbourne)

We welcome the requirement to produce an annual plan. It will be beneficial for the OFT and help it to get its thoughts and priorities in order if it has to set broadly in context its plans and activities for the ensuing year and tell people what to expect, within and without the organisation. It will also help outside bodies, individuals and companies. We shall have more to say on annual reports.

I hope that the Minister will comment on a small practical point. In the clause, as in other provisions in this part of the Bill, there is a requirement to consult before publishing the annual plan. The clause states that

''the OFT shall consult such persons as it considers appropriate.''

That is a bit loose; is it really sensible to leave it to a body like the OFT to decide who it thinks appropriate to consult? We have not got our heads round a suitable amendment listing those who would be appropriate and there is always the worry of disappointing those who are not on such a list. The Government should look at that matter again as it must be in everyone's interest, including that of the OFT, if there is as wide a consultation as possible on the annual plan and on its general activities. Too often, bodies regard consultation as a tiresome formality, and I hope that the OFT will not take that view. However, if the Minister had some thoughts on how the provision could be tightened up, they would be welcome.

Melanie Johnson (Labour, Welwyn Hatfield)

We deliberately left the matter open to reflect the fact that things enshrined in primary legislation are remarkably difficult to change. As the hon. Gentleman said, it might be a while before there is another Bill that allows the flexibility to change something that is already on the statute book. Were we to specify people whom the OFT should consult, we might rapidly find ourselves with an exhaustive list, which would be dangerous. Such lists are seldom exhaustive, although they are frequently exhausting in Committee. On the grounds of future flexibility and because there may be unforeseeable developments, we would not want any further specification.

I entirely accept the hon. Gentleman's point that there may be an interest in who the OFT plans to consult, but it is part of its accountability that it will have to explain who it is consulting and why. I am sure that representations will be made by bodies or persons who are not involved in the process but think they should be, and by the House and its Committees in deciding whether consultation has been appropriate.

Question accordingly agreed to.

Clause 3 ordered to stand part of the Bill.

Clause 4 - Annual and other reports

Nigel Waterson (Conservative, Eastbourne)

I beg to move amendment No. 3, in page 2, line 24, at end insert—

'(c) a detailed summary of OFT decisions and investigations over the preceding year'.

Derek Conway (Conservative, Old Bexley and Sidcup)

With this we may take the following amendments: No. 4, in page 2, line 24, at end insert—

'(d) an assessment of the additional costs to business of the exercise of its functions.'.

No. 2, in page 2, line 26, at end insert—

'(3A) The Government will arrange a debate in each House of Parliament on the annual report within three months of its publication'.

Nigel Waterson (Conservative, Eastbourne)

We are really steaming through the Bill, Mr. Conway. I hope that the amendments' intent is obvious, but for the avoidance of doubt I shall go through them in a little more detail.

We welcome the production of annual reports by the OFT, including the annual report, but there should be more prescription of what it should contain. Amendment No. 3 specifies that it should include a summary of OFT decisions and investigations in the preceding year; that, for all I know, is the intention, anyway. As the OFT builds up a catalogue of past decisions and investigations, it helps to have such a record, as it tells people in the outside world how it approaches certain situations and about its powers and functions. I hope that such matters will be part of the report.

Amendment No. 4 makes the point, wholly unexceptionally, that the report should contain an assessment of any additional burdens on business because of the exercise of the functions. Again, I shall come back to that in a moment.

I said on Second Reading—I have not changed my mind since—that it stretches credulity that the regulatory impact assessment report on the competition and consumer protection measures in the Bill suggests that there will be no extra cost to business. In any event, the Bill should oblige the OFT in its ongoing work to apply its mind, at least annually—I would hope that it would do so every day or week—to the effect, burden and cost on business that its activities, particularly investigations, will cause. Again, we will return to that theme.

Amendment No. 2 concerns the theme of transparency. The Under-Secretary has said that the Government's aim is to have transparency and openness and we welcome those aspirations. Indeed, we welcome them so much that we intend to do our best to ensure that they are cemented into the final version of the Bill. It is right that there should be an annual report and that, as detailed in subsection (3), a copy should be laid before Parliament and arrangements made for it to be published. Amendment No. 2 asks only why, having had the report produced, laid before Parliament and then published, the Government should not also be under an obligation to arrange a debate. It seems sensible for the House to make time for a debate once a year on

the work of the OFT, particularly in its early life, and I hope that the Government will readily accede to that.

I return now in slightly more detail to amendments Nos. 3 and 4. It is important for there to be an annual survey of the decisions and investigations of the OFT, first of all by way of precedent. As it goes along, the OFT will be setting precedents and we all know that in the field in which it will be engaged precedents can be important in saving time and legal costs.

Tony McWalter (Labour/Co-operative, Hemel Hempstead)

Does the hon. Gentleman envisage the report containing details of the investigations that have occurred even if no decisions have been made—in other words, incomplete investigations? That would be volatile and could put a company in the embarrassing situation of being reported as being investigated when no one has decided whether the grounds for the investigation are substantial.

Nigel Waterson (Conservative, Eastbourne)

In the real world, the fact that a company or section of industry was being investigated would come out anyway. It is difficult to keep such matters quiet. I promise the hon. Gentleman that we will come to that matter later, and the potential effect that it would have on share prices will also have to be examined.

There may be scope for movement and we are not in the business of prescribing every last detail. We hope that the people involved will be serious, well qualified and able to sort out their own procedures to a large extent. It may not be necessary to name individual companies, but it is important that people who have dealings or fear that they may have dealings with the OFT can look at how it has approached matters. As the OFT goes on, a growing body of precedent will grow up. The report should also show how the OFT is approaching the slightly dry tasks that we are assigning to them in this legislation. Perhaps above all, the report should show, I hope, a thread of consistency throughout its approach to different situations.

Those are all concerns that have been raised, in particular by the Confederation of British Industry in a briefing. The briefing starts by saying that it warmly welcomes clause 4 but thinks that the Government should go a step further in requiring a detailed summary of the decisions and investigations, as I have suggested. It makes the point that the European Commission's annual competition reports provide useful summaries of recent cases and that that model should be adopted here. It thinks that there is potential for the OFT's reports to be too broad and general in form and therefore not much help to businesses and their advisers. I would rely on the example of the European Commission's competition reports for that purpose. I have never practised in that area of law, but the issue is clearly one that people will study in advising companies about the situations already covered by the Director General of Fair Trading or by the European arrangements.

I envisage the reports being of similar benefit. They should not be the dry, glossy reports that Members of Parliament often receive, which are immediately consigned to the wastepaper bin or to a corner of the

office, never to be seen again. They should be real, living documents that companies, individuals and their legal and other advisers thumb through regularly. The CBI takes the view in its briefing document that a calculation of the costs should be imposed on business by OFT investigations over the preceding year. It states that such investigations

''often impose huge costs and other burdens on business, both in terms of professional fees and also distraction of senior management from their core activities.''

It goes on to point out that that is why the Government are now obliged to produce regulatory impact assessments to look into the likely extra burdens of proposed legislation on business. I fail to see why the OFT should be treated any differently.

In a nutshell, we are saying that the OFT should do its own annual regulatory impact assessment because in the long run that is healthy for its relationship with business and commerce. If the OFT starts out with an antagonistic attitude towards companies or some of the consumer situations in which it will be involved, that will not benefit the consumer, business or the OFT itself.

Tony McWalter (Labour/Co-operative, Hemel Hempstead)

Does not the hon. Gentleman agree that while companies might sometimes have to incur expenditure to comply with the legislation, they may also gain immensely from the existence of fair trading, as unfair traders will be forced to amend their nefarious ways? To comply with the spirit of the hon. Gentleman's amendment would require not only an indication of the costs of compliance but of the benefits that accrue to companies as a result of fair competition.

Nigel Waterson (Conservative, Eastbourne)

Human nature being what it is, it would be surprising if the OFT's annual report did not trumpet its achievements—or perceived achievements. I am sure that that will happen. As has happened recently, we will embark on investigations that do not come to anything. Business ultimately has to carry the can and to pick up the costs. It is an issue that worries the CBI and its members; as it says in its briefing, it is a question of not just the direct costs of hiring lawyers or accountants but of the indirect costs of management time being spent on something not related to the company's core business. All that should be considered.

I do not know of it, but there may be some vast body of guidance that could be made available to the Committee on the rules for preparing regulatory impact assessments. I have expressed my scepticism about the guidance prepared for the Bill. It stretches credulity to say that it will place no extra burden on business. I would love to know how the Government reached that conclusion.

John Pugh (Liberal Democrat, Southport)

No one doubts that the clause is laudable, but I have a residual doubt about how practical and realistic the amendment is. Much of what the hon. Gentleman has spoken about touches on the opportunity cost to business, which is notoriously difficult to assess. Part of that cost would involve answering questions from the OFT about how much it

had cost it in the first place, which would be another complication. Will the hon. Gentleman explain what method of assessment he favours? There is no point in tabling an amendment if it is not practical and realistic.

Nigel Waterson (Conservative, Eastbourne)

That has put me on the spot. The short answer is no. The long answer is that it is not my task to produce criteria. I threw the Minister a lifeline: there must be a vast amount of guidance on how the regulatory impact assessments are produced for Bills such as this. It still amazes me that such a conclusion has been reached with regard to the Bill, but that is another issue. Something similar could be used as a guideline for the OFT. I hope and expect that the amendment will be accepted. If it is, I expect the OFT to set out its own guidelines. Rather than reinventing the wheel, however, it would be well advised to reach for that large tome, which must exist for the purposes of legislation. I suspect that even now it is working its way down Victoria street towards us.

I reinforce what the Department of Trade and Industry says about the extra costs at all levels of the proposed legislation. Burdens on business have risen almost exponentially under the Government. It is estimated that an extra £15 billion of costs has been placed on business. In January, the Ernst and Young survey concluded that the UK economy does not aid entrepreneurial endeavour. Few of us have the findings of the 2001 UK Global Entrepreneurship Monitor far from our bedside table. It concludes that the UK continues to lag behind countries such as the United States, Australia and Mexico in overall entrepreneurial activity.

The British Chambers of Commerce produced the figure of £15 billion of red tape. I suspect that that is already out of date, as was reported in the Financial Times on 25 March. Even that figure does not include the financial cost of the national minimum wage, which I notice went up yesterday or today. The Institute of Directors has attacked the Government's promise to cut red tape and, in a survey, 93 per cent. of its members believed that the problem of excess bureaucracy had got worse.

The British Chambers of Commerce have produced their own burdens barometer, which contains a long and detailed list of all the legislation and regulation introduced by the Government that they say cause extra burdens on businesses. There is not only red tape, but extra taxes. The CBI has just come up with its latest figure on business tax under the Labour Government, which it says has risen by £5.8 billion a year. That is a considerable increase on the CBI's previous figure of £5 billion. The list of red tape measures goes on and on: trade union recognition; maternity leave; additional maternity leave; parental leave; time off for domestic grievance; the right to be accompanied in such matters; the part-time workers' directive; the minimum wage; stakeholder pensions; the Welfare Reform and Pensions Act 1999; and the working time directive.

Melanie Johnson (Labour, Welwyn Hatfield)

Is the hon. Gentleman saying that he would end all those provisions?

Nigel Waterson (Conservative, Eastbourne)

That is a game that two can play: in this case, one Government Minister and one Opposition spokesman. We always get such a reply from as elevated a figure as the Prime Minister downwards. However, that is not the point. It is not for us to pick out individual provisions that we do not want or that we want to reverse. Ministers must accept the cumulative effect of all those measures. I regularly talk to the CBI and the Institute of Directors and they often have no quibbles with individual measures, such as those contained in the recent Employment Bill.

The problem occurs when one adds them all up. If a company employs more than a handful of people, it quickly arrives at the position where it must employ an extra person simply to keep abreast of all the forms, red tape and regulation. That is the cry of British business, both large and small, and it is why we must be careful not to allow the Bill to heap more burdens on business. We have to navigate between the proverbial American rock and the hard place—between the good of improving competition and helping consumers and the bad of harming business and indirectly harming consumers who, after all, are either employed by them or consume their products at a particular price. We must be careful and it is no good Ministers pooh-poohing over-regulation. All they need to do is talk to business organisations up and down the country.

I make no apology for again quoting The Independent—hardly an organ of the Conservative party—on the Bill:

''these are largely candy floss measures which fail to address the main problem facing Britain's enterprise economy—namely the growing burden of regulation, especially as it concerns the labour force . . . the Government's pro-business agenda is at odds with its social objectives, for business will always do best if the Government simply gets out of its way.''

David Borrow (Labour, South Ribble)

I am puzzled and would be grateful for clarification. I understand the hon. Gentleman's argument that a provision should be inserted into the Bill to make details of costs incurred by businesses available in the annual report. That may be useful information to have in the public arena, but I am unclear about the policy objectives of publishing it. Is it to add to the burdens of business in having to produce the information in the first place, or to discourage the OFT from being thorough and rigorous in its work on fair trading in the UK? I would be grateful for the hon. Gentleman's clarification.

Nigel Waterson (Conservative, Eastbourne)

The hon. Gentleman offers me a choice, which I happily decline. The purpose is certainly not putting information into the public domain merely for the sake of it, nor is it to stop the OFT being ''thorough and rigorous''. Rather, it is intended to tell the outside world—perhaps more importantly the OFT—the effects of its actions in the real world. OFT people will operate not in a vacuum, but in the world of business and industry. They must appreciate the sheer cost—dramatic examples exist from recent years—of major investigations either into a particular sector or into a specific company. They must be made to realise those costs. They may be wholly unaffected and unimpressed, believing that it is a matter that they do not need to take into account.

We say that they should take it into account. As legislators we cannot wave goodbye to an Act and forget about it. It is our job—and the Government of the day's job—to ensure that it does not work to people's detriment. We hope that this Government and their successor Conservative Government will examine the annual reports closely. If the OFT is causing massive costs to business with no particular benefit to consumers, I hope that Governments will look again and perhaps amend the legislation. The Opposition inevitably have limited ambitions in this context. We simply want to make it a requirement to put the information into annual reports. If the OFT, Ministers and everyone else, including the hon. Member for South Ribble, ignores it, we can do little about it. We should focus on the issue and it should be built into the Bill.

Jonathan Djanogly (Conservative, Huntingdon)

I certainly support amendment No. 3 and others grouped with it. The annual plan is an excellent idea that should improve accountability and transparency. As always, questions surround these matters. Will the report include figures for the costs of running the OFT as well as the costs of individual investigations?

It is important that individual taxpayers appreciate the cost of regulation. To spend £50 million of taxpayers' money on an investigation that uncovers business irregularities that deprive consumers of £1 million or £2 million may technically be in the public interest, but I am sure that the vast majority of taxpayers—depending on the circumstances and every circumstance will be different—will say that it would be best to save the £50 million. I do not give a specific example, but clearly matters must be judged on a case-by-case basis. The report should be transparent so that it gives the public the opportunity to take a view on whether the position is right or wrong.

Tony McWalter (Labour/Co-operative, Hemel Hempstead)

I am not sure that I quite follow the hon. Gentleman's argument. If such an investigation extirpated a practice so that it was no longer carried out by other companies and rendered companies that were performing fairly financially stable, the benefits would go well beyond the particular action that he describes. Sometimes, actions have beneficial consequences that go well beyond the particular cases that are being dealt with.

Jonathan Djanogly (Conservative, Huntingdon)

I do not disagree with the hon. Gentleman. In certain circumstances he may be absolutely right, but in others, on a straight cost-benefit analysis, it would not be appropriate to spend the amount of money involved in the investigation.

We have an opportunity to provide people with the information on which to take a decision. The information should be presented in the report in such a format that people can take that decision about particular investigations, especially major investigations where the costs will be more significant. The question of the independence of the OFT is important here. It leads on to what is an inappropriate use of taxpayers' money.

On amendment No. 4, it is important at every stage of the Bill that we consider how its provisions will affect enterprise. That was discussed at some length on

Second Reading, but a balance must always be struck between the good that it does enterprise and the possible bad that certain provisions will do, because of extra regulations for business and so on. Amendment No. 3 deals with the costs to the taxpayer, but to encourage enterprise it is vital also to have regard to the costs of regulation on companies, with which amendment No. 4 deals. As much as the costs themselves, companies may fear that unnecessary meddling and investigation by Government can hurt them or in some cases destroy them. It could be argued that the notion that companies are fearful of DTI or OFT investigations or heavy-handedness is mere bluff on the part of companies. But that concern is very relevant for many of them. It is sometimes hard for people to understand how bureaucracy can affect a company, unless they have been there at the sharp end. I shall recount two examples that I have heard from companies of their dealings with the Department of Trade and Industry.

The first example is from a few years ago and concerns a company listed on the London stock exchange. It operated a technology support business of a type that had existed for at least 20 years. One day a letter from the DTI arrived at the company and with all its market competitors, stating that although the multi-national and multi-billion pound sector had always described itself in a certain way, it was the preliminary view of the DTI that it was another sort of business altogether. That different business required regulatory approval, the costs of which would have destroyed the sector overnight.

Some 18 months later, after an enormous sum of money had been spent on lawyers, and directors and shareholders had had an enormous amount of worry, the companies in the sector finally received notice from the DTI that, to use a colloquial expression, it looked like an elephant and was actually an elephant even though the DTI had being saying that it was not.

The fact that the companies nearly lost their business and that the country would have been worse off because of that, was presumably not high in the minds of the people responsible at the DTI. Neither were the facts that it cost the businesses tens of thousands of pounds in fees to prove their point, that their market reputations were hurt and that they had to disclose the investigation in their public accounts.

Nigel Waterson (Conservative, Eastbourne)

To return to a point made by the hon. Member for Hemel Hempstead (Mr. McWalter), does my hon. Friend, as an expert on such matters, believe that a company would have to disclose in its annual accounts if it was the subject of an OFT investigation?

Jonathan Djanogly (Conservative, Huntingdon)

It would depend on the circumstances, but an OFT investigation would probably be a public issue anyway, so the company would want to consider its response. If a leak of information from the investigation affected the company's share price, it might have to make an announcement on the back of that. There are many different ways in which confidential information coming out of the company could lead to it being damaged, although that is the subject of later amendments.

Nigel Waterson (Conservative, Eastbourne)

Did my hon. Friend notice, as I did, the widespread and detailed media coverage of some recent dawn raids by the Serious Fraud Office on pharmaceutical companies and others that were alleged to be involved in a cartel? Does he share my puzzlement about how so much detail about the investigation and its immediate aftermath found its way into the media?

Jonathan Djanogly (Conservative, Huntingdon)

I agree absolutely with my hon. Friend, and we will have to discuss the subject carefully later. At the moment, the investigatory powers lie with the DTI, so the only examples that we can give relate to DTI powers. However, the OFT powers will be increased by the Bill.

I explained how an investigation's atmosphere caused dramatic problems for all the companies in one particular sector. At least the companies had the funds with which to defend themselves against the deep pockets of the state. Unfortunately, 85 per cent. of companies in this country are not listed, have fewer than 10 employees and have shallow pockets. The problem is that even if they were in the right, they could not survive the cost of the investigations.

My second example comes from a few years ago. In this case, the company, together with a handful of other companies, hit on a new idea and effectively created a new market. The letter came in—

Standing Committee B

Clause 4 - Annual and other reports

Nigel Beard (Labour, Bexleyheath and Crayford)

I remind the Committee that with this we may take the following amendments: No. 4, in page 2, line 24, at end insert–

'(d) an assessment of the additional costs to business of the exercise of its functions.'.

No. 2, in page 2, line 26, at end insert–

'(3A) The Government will arrange a debate in each House of Parliament on the annual report within three months of its publication'.

Nigel Waterson (Conservative, Eastbourne)

On a point of order, Mr. Beard. I welcome you to the Chair. It would be appropriate at this early stage to ask the Under-Secretary for some guidance. As with many such Bills, there are provisions under which significant regulations will be made. It was helpful to have the stop now orders guidance from the Office of Fair Trading on Second Reading. Can the Under Secretary say now, or let us know later, when draft regulations may be available for the different stages of the Bill? There is little point in receiving them on the day of the debate.

Nigel Beard (Labour, Bexleyheath and Crayford)

Would the Under-Secretary like to reply?

Melanie Johnson (Labour, Welwyn Hatfield)

Thank you, Mr. Beard. I join the hon. Gentleman in welcoming you to the Chair. I appeared before you more often when you were a member of the Treasury Committee, so it is pleasant to see you in the Chair of this Standing Committee.

I shall reflect on the answer to the hon. Gentleman's question, as many things might be affected by it. There are matters that need to go to Committees in the other place and we shall consider what the time scales might be. I am minded to help the Committee as far as I can to get information to hon. Members in advance of the debate, rather than on the day that it takes places, as that is next to useless to members of the Committee. It would be useful to know if there was anything that hon. Members wanted to see in advance, although I cannot promise that I shall be able to respond to their requests. However, I will at least know what hon. Members think would be useful to have in advance of our discussions.

Nigel Waterson (Conservative, Eastbourne)

Further to that point of order, I am grateful for the Under-Secretary's invitation. An obvious, and major, example is clause 202, which, under the new programme, we will reach quite quickly. There is much speculation by consumer organisations about the regulations that will be made in that clause, which we will probably debate at our next sitting on Thursday or on the following Tuesday. We need to have the information in good time for the debate but it would be useful if it could be circulated to the bodies that are intimately involved in the Bill.

Nigel Beard (Labour, Bexleyheath and Crayford)

The Minister has taken note of the hon. Gentleman's request.

Melanie Johnson (Labour, Welwyn Hatfield)

Further to your remarks, Mr. Beard, and those of the hon. Member for Eastbourne, work in relation to clause 202 is in preparation and it might be possible to lay that before the Committee by the end of the week. I hope that that will help hon. Members, and not prejudice the speed with which the Committee moves.

Nigel Beard (Labour, Bexleyheath and Crayford)

When the Committee adjourned this morning, Mr. Djanogly had the floor.

Jonathan Djanogly (Conservative, Huntingdon)

As I was saying this morning, concern for costs is imperative; sometimes it is a life-and-death issue for small companies. In the example that I gave, a small company, together with a couple of larger companies, started trading in a new market. A letter was received from the Department of Trade and Industry maintaining that the trade was against the public interest and, effectively, threatening to wind up the company and prosecute the directors. The directors naturally went to a solicitor who took them to a leading counsel, whose opinion was that the company was not trading against the public interest and that if they took the matter through the judicial process, the directors would have a very good chance of trading on.

There was a problem, however. The director concerned could not afford to go through the process that would have been required to clear the company. The matter never went to court because the director settled with the DTI, the company was wound up and various other measures were taken.

If there had been a judicial process, the director might have lost his case. No one can say for sure what the outcome would have been, but what is sure is that any rational business man in his situation would have followed the same course. He had the choice of going through a judicial process that would have taken years and probably bankrupted him as well as the company, or of taking the easy option of agreeing with the DTI, initiating a settlement, getting out of the business and starting a new one.

Let us be frank; that is how most business men think. They do not have time to spend years instructing lawyers. They do not want, or have time, to argue against Government; they want to get on and earn a living. In this debate, we are often talking about the rights of consumers, but it is important to realise that tens, if not hundreds, of thousands of small business men are daily trying to make a living as best they can, free from regulation. When the Government

are oppressive, that can kill their business without the matter ever going to court, because of the cost. That is why I have used this example.

Of course, such examples directly concern the DTI, but what is there in the Bill to show that a new, further empowered OFT will be any better than the DTI can be? I shall return to that theme in various ways as we go through the Bill, because all too often in its provisions we see regulation at a cost to the public purse and without adequate accountability. We see regulation adding to the cost of companies, but that cost is not revealed and they are not allowed to have redress against what an overbearing Government might do in certain circumstances.

We must also realise that in this modern age, the age of the media, newspapers are often looking for stories, and there is always the threat that stories or, worse, bits of information will get out to the press, particularly with regard to consumer issues. We will increasingly face the syndrome of trial by media, and the costs to companies may be even more stratospheric. For all those reasons, the amendment is worthy.

Mark Field (Conservative, Cities of London and Westminster)

I entirely agree with my hon. Friend the Member for Huntingdon (Mr. Djanogly) about trial by media. Such issues will no doubt play an important part in later discussions, particularly on clause 11.

Before entering this place, I had a brief, meteoric career as a corporate lawyer. I am certainly nowhere near as accomplished as my hon. Friends the Members for Eastbourne and for Huntingdon. In fact, for the last eight years before I became a Member of Parliament, I ran my own small business; I am thankful that at no stage did the OFT investigate us.

I have an important point to make, as someone who has experience of the paralysing effect on business of investigations by the OFT and other regulators. Such investigations are unlikely to affect companies with a dozen or so employees. My concern is that a large investigation may have a paralysing effect especially in specialist sectors that may be subject to an OFT type of inquiry. Such companies will not be much larger; they may have 30 or 40 employees, but will not have the massive infrastructure of many of the international companies who doubtless will have been in direct touch with the Ministry and who will have the protection of that infrastructure, with large regulatory and personnel departments and an enormous number of internal auditors.

The amendment deals with the costs involved in such investigations. Not only is such an investigation costly, it has an affect on the recruitment of new staff across the board. The company cannot take advantage of potential opportunities in its own marketplace for several months. There is increasing step-by-step regulation under this Government, and I ask them to step back occasionally to consider the amount of regulation that they are imposing on companies.

There are often invisible costs, in addition to the large-scale visible ones. Specialist lawyers and financial PR companies are often needed to minimise financial or economic losses because of the increasing trial by media to which my hon. Friend the Member for Huntingdon referred. How can those costs be assuaged? Does the Under-Secretary also recognise that the sheer inconvenience to businesses of OFT or other regulatory inquiries should be minimised as far as possible?

John Pugh (Liberal Democrat, Southport)

I want to make a negative point about the amendments, although no one can object to amendment No. 3 and the concept of OFT decisions and investigations being paraded for all to see. If that were done correctly, it might make amendment No. 4 unnecessary. A good and accurate list of the work of the OFT will be one of two things; a list of successful remedies applied and rights wronged, or a list that shows several futile and time-consuming investigations. If it is the latter, it is a waste of Government as well as business funds and demands urgent remedy. If it is the former, the cost to business is not a convincing argument.

As I said, it will be difficult to assess true business costs where the OFT is investigating businesses with rigour or is investigating consumer affairs on behalf of the consumer. It is acknowledged that many of the costs are opportunity costs. It is not like the minimum wage, where one can say fairly, accurately and briefly what the cost to business will be. Although there are mechanisms for regulatory assessment, I am not convinced that the mechanism will be uncontestable and easily agreed between the OFT and the businesses concerned. Neither am I convinced that there is an easy way of assessing the costs.

Any method that will accurately establish the cost to business of being correctly observed and investigated by the OFT will be time-consuming. Some of that time will be spent by firms answering questions put to them by the OFT about the investigations that the OFT has conducted. There can be nothing more irritating for a firm that has been investigated with some rigour than to have to fill in another form asking, ''How was it for you?'' and requesting evidence over many pages about how the arrangement went and what it cost. There is no argument in principle against assessing what the business costs will be, but there is a caution about the practice. It would be nice in general, and a good thing in principle, to have some idea of the business costs.

Nigel Waterson (Conservative, Eastbourne)

Is it not all rather simple? One goes to a company and simply asks what the costs o he investigation were for it. The company can send in its lawyers' fees and the costs can be re-submitted. I do not think that it is that complicated.

John Pugh (Liberal Democrat, Southport)

If the hon. Gentleman had listened to me earlier, he would realise that I said that much of the costs were opportunity costs. If it was just a question of lawyers' bills, it would be extremely straightforward, but we will hear about management time taken up in dealing with the issue. In the case of

big firms with highly paid managements, that is an appreciable cost. It is a lost opportunity cost to them and establishing and quantifying that will never be easy. Although I am in favour of the principle of amendment No. 4, it may achieve less than one thinks and cost more than one imagines.

Vincent Cable (Liberal Democrat, Twickenham)

I welcome you to the Chair, Mr. Beard. I apologise for missing the last section of the discussion. I certainly do not want to waste the Committee's time by duplicating comments that have already been made. Since amendment No. 3 stands in my name, I feel that I should say a little about the rationale behind it. I should also like to say a few words about all the amendments in the group.

It is extremely important to have specific reporting on each of the major decisions that is made by the OFT and that the annual report does not contain just a general statement in the annual report of what it did, but a specific analysis of why particular decisions were reached. There are two reasons for that. First, part of the spirit of the legislation should be about transparency. As Members of Parliament, we can inject two elements into the debate; accountability and transparency. We should always insist on transparency and make it clear why decisions have been reached. That is important partly for people who are out in the markets and in companies who are trying to anticipate what will happen if they go into a merger or takeover. They need to understand the thinking of the board and the Director General of the OFT. The only way of assessing how that thinking is evolving is by understanding, case by case, how decisions are reached.

The Bill sets out some general principles such as competition, which is fine, but there are tough choices to make in determining competition. How does one balance competition against monopoly in cases where there are innovations? How does one deal with a takeover case involving a natural monopoly such as a regional electricity company? The thinking of the OFT will be clear only case by case. It is important that it reports in detail, publicly, on the rationale behind its decisions.

The second reason why reporting is important is because we need some performance measure of the board and the director general. We should have some basis for assessing how well they are doing their jobs. I was not entirely clear from some of the answers that the Minister gave this morning about what the executive board would do. I got a sense that it would be involved in individual decisions. There may be split votes on some of those key merger and takeover decisions. If that were the case, as with the Monetary Policy Committee, it would be important for transparency, clarity and understanding that the outside world, particularly the business that is involved in takeovers, understood where the different members of the OFT were coming from. That can be done only through transparency and by setting out, case by case, how decisions have been reached.

I take a slightly different tack on amendment No. 4 from my hon. Friend the Member for Southport (Dr. Pugh). I do not want to open up splits in the Liberal Democrats over clause 4, but I am rather more

sympathetic to some of the Conservative suggestions on the need for being very upfront about the costs of compliance. It can be approached in several ways.

The Government, rightly, have been bullied into accepting a regime of regulatory impact assessment; trying to assess, wherever possible, the cost of regulation. I am unsure what sort of regulatory impact assessment was carried out before the Bill was published, but it is surely right to assess costs imposed on companies being investigated or, more generally, the costs of compliance. That is consistent with the principle of transparency and keeping a check on regulation. I put my name to the starred amendment on this subject on those grounds.

The final amendment relates to parliamentary reporting. It would strengthen the legislation if the requirement to report to Parliament were beefed up and made much more explicit. The period of time appropriate for that has been debated. I would go further and prefer the Select Committee to have the power to call the Director General of the OFT and its members to quiz them on the annual report and the decisions that they have taken. It is for the Under-Secretary to face that issue, as she did membership approvals. Some explicit measures should be built into the Bill to give parliamentary reporting and debate a much clearer focus. I support the spirit of all three amendments.

Melanie Johnson (Labour, Welwyn Hatfield)

First, I agree with Opposition Members that the OFT's annual report should include information about its decisions and investigations. However, the level of specific detail proposed in amendment No. 3 is inappropriate for primary legislation. We intentionally included just the broad minimum criteria that the annual report must fulfil for a reason; to allow flexibility and ensure that the primary legislation stands the test of time. I do not disagree with many of the general remarks of Opposition Members.

In reporting on developments in respect of matters relating to its functions, and on the extent to which it has met its objectives and priorities, the OFT will doubtless need and wish to include the sort of information specified by Opposition

Members. Indeed, the DGFT already includes such information in his current annual reports, and I fully expect the new OFT to continue to do so. As I have explained, it is unnecessary to spell it out in the Bill in such detail.

The hon. Member for Huntingdon mentioned this morning that the annual report presently covers the overall costs of OFT activities and, where possible, breaks them down into consumer enforcement, competition activities and so forth. He asked how much detail on expenditure could be expected.

Jonathan Djanogly (Conservative, Huntingdon)

My point was rather more specific; that, particularly for larger investigations, there should be a breakdown by investigation.

Melanie Johnson (Labour, Welwyn Hatfield)

I was going to come on to that in a few minutes and shall do so after I have dealt with the amendments.

Amendment No. 4 would add a further requirement to the OFT's annual report; that it include in its assessment, along the lines suggested by Opposition Members, the costs to business of its activities. While it is right that OFT considers the effects on business of its action, it is inappropriate and unnecessary to include the sort of assessment within its annual report. As several Opposition Members noted this morning and as was argued in the recent debate between the hon. Members for Huntingdon and for Southport, the act of the OFT collecting information required to make such an assessment might well prove an additional cost to business. I agree with the hon. Member for Southport that an element of opportunity cost is relevant; it is not simply a question of adding up the formal bills that are submitted, as the hon. Member for Huntingdon said.

Nigel Waterson (Conservative, Eastbourne)

I am sorry to interrupt the Under-Secretary, but it might be even more difficult if I tried to intervene after she had moved on to another issue. Does a regulatory impact assessment of a Bill such as this take account of opportunity costs? If so, is a formula readily available?

Melanie Johnson (Labour, Welwyn Hatfield)

I am in danger of losing the thread of my argument, so hon. Members may not receive the answers that they require. I shall come back to regulatory impact assessments in a moment. Let me finish the point that I was making. The decision to investigate markets is taken on the basis of whether the OFT believes that there is a problem. As my hon. Friend the Member for Hemel Hempstead (Mr. McWalter) remarked this morning, such costs are partly determined by the relevant businesses. It is their decision, not the OFT's, whether to employ expensive lawyers and consultants.

Mark Field (Conservative, Cities of London and Westminster)

That simply does not face the reality of the position. If a business is going to be hit by an expensive and damaging OFT inquiry, it is perfectly understandable for it to employ the very best lawyers to ward off the potentially catastrophic results of a negative finding. Large companies have grave concerns regarding the broadest base of support. The Monopolies and Mergers Commission, for example–

Nigel Beard (Labour, Bexleyheath and Crayford)

Order. Will the hon. Gentleman curtail his intervention?

Mark Field (Conservative, Cities of London and Westminster)

I am sorry, Mr. Beard. The Monopolies and Mergers Commission has had repeated investigations of particular sectors. What assurance can the Under-Secretary give that the same will not happen with the OFT?

Melanie Johnson (Labour, Welwyn Hatfield)

I do not accept the hon. Gentleman's intervention. Those who run both competition authorities–the OFT and the commission–say that legal resources are being deployed increasingly on the other side of investigations. It is a trend, but it is not under their control. It is not a fixed cost that can be quantified. Different elements will apply according to the particular investigation. The businesses will choose which lawyers and how many consultants will be employed. It is not the OFT's choice; that is my main point.

The OFT is given powers for a purpose; to benefit consumers and other businesses where problems with the market are uncovered and remedies are made. As my hon. Friend the Member for Hemel Hempstead argued this morning, where the OFT uncovers a problem with a market and remedies that problem, the benefit goes to other businesses as well as consumers. It is well-nigh impossible to quantify such benefits. It is not simply a matter of sticking a figure into an annual report to provide such information.

As the hon. Member for Eastbourne acknowledged this morning, amendment No. 4 effectively would require the OFT to produce a regulatory impact assessment every year, covering the cost to business of its activities. The OFT will exercise only the powers granted by Parliament; it does not have powers to make regulations as such. As Opposition Members know, all legislation passed by this House is accompanied by a regulatory impact assessment. That is the appropriate time to consider the additional likely costs that new measures will impose.

This morning I was asked about guidance–

Jonathan Djanogly (Conservative, Huntingdon)

Will the Minister give way?

Melanie Johnson (Labour, Welwyn Hatfield)

I am still trying to deal with issues raised this morning and I want to finish them. I was asked about the nature of regulatory impact assessments. Guidance has been produced by the Cabinet Office, in accordance with which all Government Departments work. It is regularly updated and specifically contains advice about how to produce RIAs. That guidance was used in the construction of assessments for this Bill.

Jonathan Djanogly (Conservative, Huntingdon)

With respect, having heard the past few interventions, I feel that we are talking increasingly at cross-purposes. How can a regulatory impact assessment conducted at the start of a Bill's progress possibly consider the likely costs involved in what is a transactional-based series of costs? If we were in a recession and there happened to be three takeovers in a particular year, the costs may be very low. If we were in a boom and there were suddenly 20 takeovers, the costs would be massive. I do not see how the costs can be assessed today for what will happen in the future.

Melanie Johnson (Labour, Welwyn Hatfield)

The hon. Gentleman is making a point about the difficulty of varying costs from year to year.

Jonathan Djanogly (Conservative, Huntingdon)

I am.

Melanie Johnson (Labour, Welwyn Hatfield)

Indeed, but stating the costs will not give any useful comparative data and, as I outlined, there are many reasons why it is difficult to bring those costs together. On the regulatory impact assessment, hon. Members asked whether we examined the opportunity costs. Yes, we do, as well as the one-off costs and recurring costs. However, we also assess the benefits to business, consumers and the economy as a whole. The figures have been produced on that basis in the regulatory impact assessments of the Bill.

Mark Field (Conservative, Cities of London and Westminster)

It seems from the Under-Secretary's last comments that she is suggesting that where some individual businesses lose out as a result of an OFT

inquiry, others gain. Are those costs being quantified and is she suggesting that gaining companies should look to compensate those who lose out because of a draconian OFT inquiry?

Melanie Johnson (Labour, Welwyn Hatfield)

The hon. Gentleman is missing my point, which is that it is impossible to quantify. We make our best efforts at quantifying the costs and benefits in such situations, but it is well nigh impossible to come up with formulae. In my experience, benefits are more difficult to quantify than costs, which is true in most regulatory impact assessments. I agree with the comments of my hon. Friend the Member for Hemel Hempstead, who said this morning that many other businesses benefit. An economist would have to spend a lot of time quantifying the benefits of specific OFT inquiries or investigations to other businesses that, from a better operation of competition in the market, may gain substantially.

Jonathan Djanogly (Conservative, Huntingdon)

We are talking not about assessing benefits, but about an amendment that concerns assessing costs. I sympathise with the Under-Secretary's comments, but they do not relate to the proposal. Another point is that we are debating an annual report, so the issue will have to be reassessed annually. She seems to be talking about the position today, but this will recur.

Melanie Johnson (Labour, Welwyn Hatfield)

Regulatory impact assessments are conducted when Bills are produced. The hon. Gentleman is not arguing for other regulatory impact assessments of the Bill at intervals. As I understand it, he is arguing for the costs to business to be quantified and specifically laid out, and I have given several reasons why I believe it is impossible to quantify the costs to business. The point about benefits is that they must also be taken off the bottom line to work out the net costs. Some benefits are to businesses themselves, and if we were to accept a cost assessment–which I would not–we would need to assess the benefits in some cases. They are benefits not only to others, but to business.

David Borrow (Labour, South Ribble)

Does the Under-Secretary share my concern that many of the comments made by Opposition Members seem to imply that the information in an annual report about the costs to business of the investigations will be used to discourage the OFT from conducting thorough investigations and that should expensive investigations not produce results, those costs will be used to berate the OFT for undergoing the investigation in the first place? The basis of any effective regulation system is to be prepared for thorough investigations while recognising that some will find nothing wrong.

Melanie Johnson (Labour, Welwyn Hatfield)

Indeed. There is a danger that the costs, rather than the operation of the competition authorities, become the direct issue in all cases. Obviously, the authorities will have to maintain their credibility, including producing outcomes that one would expect from worthily undertaken investigations. None the less, there will be occasions when the points made by my hon. Friend the Member for South Ribble (Mr. Borrow) will come into play and the costs could act as a disincentive.

As I said, the Bill has been the subject of a comprehensive and considered regulatory impact assessment. It took into account the responses to the White Paper consultations and concluded that no significant costs will be directly imposed on business from the consumer and competition measures in the Bill. Of course, there will be some additional costs but, as the assessment noted, there will also be benefits for business. That overall picture is the accurate one.

Amendment No. 2 would require a debate in each House of Parliament each year on the OFT's annual report. Again, I agree with Opposition Members that the OFT should be fully accountable, but I am not convinced that the amendment is necessary to achieve that. At present, the Director General of Fair Trading publishes an annual report, which is laid before Parliament. The Bill will strengthen that by requiring the new OFT to publish and lay before Parliament an annual plan as well. As with the current DGFT, the chairman of the board will be the accounting officer and, therefore, accountable to Parliament for how the OFT's resources are used. He may be summoned by parliamentary Committees, and the OFT will have to agree a service delivery agreement with the Treasury for it to obtain resources in the first place. That SDA is also a public document.

All that means that both Parliament and the wider public will be able to hold the OFT to account, and if at any point in the future hon. Members decide that they wish to hold a debate on the OFT's annual report, that can be considered in the normal way at that time. It is unnecessary to decide that now and commit parliamentary time for every future year. Furthermore, there are processes by which Select Committee investigations form the subject of debate, so issues can be brought up in that way.

The amendments are unnecessary, and I trust that having heard my arguments, Opposition Members will feel able to withdraw them. If not, I regret that I shall ask the Committee to oppose them.

Nigel Waterson (Conservative, Eastbourne)

I confidently predicted to someone recently that I thought that there would be few, if any, votes in this Committee, but I might be proved wrong. The Under-Secretary is being wholly intransigent.

Let us first consider amendments Nos. 2 and 3, which from any view are less controversial. Amendment No. 3 calls for a summary of OFT decisions, which would help people to see a pattern emerging on how it approaches matters, and amendment No. 2 would require a debate on what the OFT has been up to. I find it inexplicable that the Government would not want to see both those things happen to help their purported agenda for transparency.

The meat of this particular sandwich comes in amendment No. 4.

Melanie Johnson (Labour, Welwyn Hatfield)

Before the hon. Gentleman moves away from amendment No. 3, does he accept that I agree entirely with the thinking behind it but do not think that it is appropriate to put the measure into the primary legislation? That is the only difference between us.

Nigel Waterson (Conservative, Eastbourne)

I am grateful for that point, but the difference is crucial. The OFT could conceivably take a different view and consider that the details of its investigations should not be reported, in which case the body of precedent would not be available to the outside world, which would be an enormous shame.

Moving on briefly, and finally, to the more controversial amendment, amendment No. 4, I was interested to see that in a group of only two Liberal Democrats, we seem to have two different views. There is a split, as it were, but Liberal Democrats are not unknown for working both sides of the street on any number of issues.

Our debate on the regulatory impact assessment seems to have got rather fraught. As I have said more than once, I do not understand how the Bill can fail to have a significant impact on business. Even if I am wrong about that, it must surely be easier for the OFT in effect to produce its own annual regulatory impact assessment based on real facts rather than on what might happen when the Bill becomes law. The assessment will be based on real investigations, costs and companies.

It is all very well for the Under-Secretary to go on about the slightly airy-fairy notion of there being benefits to ''business'', or the gaffers, as the hon. Member for North-East Derbyshire (Mr. Barnes) might put it. However, if she is making the point that some businesses might benefit from a specific investigation, it is equally unarguable that the business investigated successfully–and even more so in the case of the business investigated to no purpose–will have costs to bear. The hon. Member for South Ribble made an interesting intervention. We seek simply to put information in the public domain. It is entirely neutral of itself what use is made of it. It is not some Tory plot to batter the OFT into not doing any investigations. It is information that should be available and people can make of it what they will.

Tony McWalter (Labour/Co-operative, Hemel Hempstead)

I wish to take issue with the hon. Gentleman's definition of the benefits here as ''airy-fairy''. For example, it would be enormously beneficial to the person who produces genuine organic milk organically to have the person who produces milk that he calls organic that is not produced organically taken to task. It cannot be an airy-fairy benefit, but a real benefit, that proper businesses competing fairly are retained and those that are not competing fairly and are using all sorts of duplicitous means to undermine others are brought to book.

Nigel Waterson (Conservative, Eastbourne)

I thought that the hon. Gentleman was about to say that it should be put out of business rather than brought to book.

Tony McWalter (Labour/Co-operative, Hemel Hempstead)

Yes.

Nigel Waterson (Conservative, Eastbourne)

Ah well, if necessary. I do not think that the OFT regards one of its powers as putting people out of business. As my hon. Friends the Members for Huntingdon and for Cities of London and Westminster (Mr. Field) have both graphically explained, that can be the effect of an investigation, or of repeated investigations. The records industry is a good example of an industry that has been subject to a

series of investigations over a number of years at enormous expense. We might have some data on that for a debate later in our proceedings.

One must look at the worst case, which is a company or a sector that is subject to an OFT investigations at vast expense with nothing at the end of it. Merely being given a clean bill of health may not be enough. It may be enough to sound the death knell of the company or companies and it is impossible for hon. Members on either side to argue convincingly that this information should not be available. It has emerged that we now have this wonderful document that sets it all out. Some boffins in the Cabinet Office have produced a set of rules. Those rules have been applied to the Bill, albeit with a slightly incredible result, but it should be a great deal easier to produce an assessment of the impact of investigations by an actual OFT, rather than the more nebulous investigation of the potential effect of a Bill.

Andy Burnham (Labour/Co-operative, Leigh)

Rather than compelling companies to disclose information, should it not be a matter of individual choice for the directors of each company concerned whether to make public the costs that it has incurred as part of an OFT investigation?

Nigel Waterson (Conservative, Eastbourne)

The hon. Gentleman has a firm grip of the wrong end of the stick. We are talking only about what the OFT must disclose. It is a matter for the OFT and we are not going to micro-manage it to that extent. However, I would have thought that the OFT would produce a figure rather than specific details about individual companies. We will come on to that; it is a good point that should perhaps be made later. There is some discussion to be had about the disclosure of information and the safeguards, which we believe are inadequate.

Melanie Johnson (Labour, Welwyn Hatfield)

Does not the hon. Gentleman accept that the OFT has no information about the costs to individual businesses of being involved in investigations or cases with which the OFT is dealing?

Nigel Waterson (Conservative, Eastbourne)

I presume that whoever produced the assessment for the Bill had no idea of specific costs, so how on earth did they arrive at it? Perhaps we can chat about it later over a drink as it is fascinating in an anorak sort of way. By any account, the impact assessment has been prepared in a total vacuum. No one is complaining, except about the result, which seems a little weird. The Under-Secretary was brandishing a nice, thick document that sets out how to approach it. I presume that a slimmer document could be prepared for, and by, the OFT.

Melanie Johnson (Labour, Welwyn Hatfield)

I briefly remind the hon. Gentleman of two points that I made. I ask him to take them into consideration in his remarks, as he does not seem to be doing so. Of course, the existing regime has costs for business. My first point was about additional extra costs. The second is that the OFT does not make regulations. The regulatory impact assessment is for authorities, which make regulations and are therefore in control of the degree of regulation and the costs of the regulatory process, to consider the costs and the benefits. The OFT does not make those regulations.

Nigel Waterson (Conservative, Eastbourne)

I take the Under-Secretary's point. I do not suggest that the OFT makes the regulations. However, the amendment could not be clearer: it is

''an assessment of the additional cost to business of the exercise of its functions.''

There is a cost to be assessed if the OFT decides to exercise its function by having yet another investigation into, say, the record industry, and has a result or no result–end of story. This is not rocket science–I did not think that it was when I tabled the amendment–but information that should legitimately be in the public domain. The CBI is concerned about that. It is not something that I dreamed up on the beach in Eastbourne; it is a concern of business people. I am amazed that the Government are not prepared to accept the amendment, let alone the two less controversial amendments. I urge hon. Members to support the amendments.

Question put, That the amendment be made:–

The Committee divided: Ayes 5, Noes 11.

Nigel Waterson (Conservative, Eastbourne)

I beg to move amendment No. 5, in page 2, line 31, leave out

'shall have regard to the need for excluding'

and insert 'shall exclude'.

Nigel Beard (Labour, Bexleyheath and Crayford)

With this we may discuss the following amendments: No. 6, in page 2, line 32, leave out

'so far as is practicable'.

No. 7, in page 2, line 34, leave out 'in its opinion'.

No. 8, in page 2, line 34, leave out

'seriously and prejudicially affect the'

and insert

'significantly harm the legitimate business'.

No. 9, in clause 6, page 3, line 17, leave out

'shall have regard to the need for excluding'

and insert 'shall exclude'.

No. 10, in clause 6, page 3, line 18, leave out

'so far as is practicable'.

No. 11, in clause 6, page 3, line 20, leave out 'in its opinion'.

No. 12, in clause 6, page 3, line 20, leave out

'seriously and prejudicially affect the'

and insert

'significantly harm the legitimate business'.

Nigel Waterson (Conservative, Eastbourne)

I hope that we are moving on to less controversial territory, but let us see. This series of amendments is designed to tighten up the provisions of clause 4. They are all supported and sponsored by the Confederation of British Industry, which is again expressing through us its legitimate concerns about the clause.

Amendment No. 5 would remove from subsection (5) the rather woolly phrase

''shall have regard to the need for excluding'',

because that places too subjective a discretion in the hands of the OFT when it comes to disclosing sensitive information. We agree with the CBI that there should instead be a clear requirement, hence our wish to insert the words ''shall exclude''.

The disclosure of sensitive information arises at several points in the Bill. Indeed, the hon. Member for Leigh (Andy Burnham) touched on that issue in an intervention a moment ago. It is desperately important to business that sensitive information that could make or break a commercial organisation is not spread around as my hon. Friend the Member for Huntingdon described, but is kept confidential as far as is necessary or possible.

Amendment No. 6 would remove the words

''so far as is practicable''.

Again, we are trying to tighten the obligation on the OFT in respect of how it treats sensitive business information.

Clause 4(5)(b) allows the OFT to exclude information from its annual report if, in its opinion, publishing that information might seriously and prejudicially affect the interests of a particular person. That is welcome, as the CBI agrees, but again the discretion on the part of the OFT is too subjective. Amendment No. 7 would remove the words ''in its opinion''.

Under amendments Nos. 8 and 12, the words

''seriously and prejudicially affect the'',

which are also in clause 4(5)(b) and clause 6(3)(b), would be removed and replaced with

''significantly harm the legitimate business''.

The reason for the change is that that phrase is in clause 235 and it makes enormous sense for the same wording to be replicated here. That would provide clarity and consistency. Frankly, it seems odd to use two different standards for disclosure in the same Bill. In other words, parts 1 and 9 should be harmonised. That makes excellent sense.

The OFT has a function to make the public aware of the ways in which competition may benefit consumers and the United Kingdom economy. Again, we propose a series of amendments that would tighten the obligation on the OFT. These constitute sensible precautions. In today's debates, we have touched on the harm that can be done to companies if information is spread around where it should not be. I am sure that that will not happen, but one must consider all possibilities. One would not want a newly reconstituted OFT, flush with its new powers and functions, to impress the legislators and

public at large with its effectiveness and usefulness by conducting dawn raids with massive publicity and tipping off chosen journalists, resulting in large spreads in the media about a particular investigation. I referred a few days ago to dawn raids on pharmaceutical companies. Clearly, some of the media were briefed.

Melanie Johnson (Labour, Welwyn Hatfield)

I trust that the hon. Gentleman will make it clear that the Serious Fraud Office, not the OFT, was involved in those raids.

Nigel Waterson (Conservative, Eastbourne)

It was certainly not the OFT. When I mentioned the case earlier, I referred to the Serious Fraud Office. I am simply reflecting that one public body might behave like another in the same circumstances. An investigative body with wide powers and a large budget and staff might be tempted to behave in that fashion. I concede that I was talking about a different body–we have not even set up the OFT yet–but in the case to which I referred a great deal of information seemed to be in the public domain early on without any criminal charges being levelled. I hope that the Under-Secretary and other members of the Committee agree that that was an unhelpful way to proceed. In any event, we are adamant in pressing for tight restrictions on disclosure of information to people who have no business receiving it.

Jonathan Djanogly (Conservative, Huntingdon)

Clearly, the fact that the Serious Fraud Office was involved is relevant because it is highly likely that it will be used again in future when an OFT investigation is under way. It would not be the first time that an investigation had been botched. The arrest of the Maxwells springs to mind–an appalling release leaked to the press prejudiced the trial in that case.

Nigel Waterson (Conservative, Eastbourne)

My hon. Friend provides a good example from the recent past. I have no doubt that the Serious Fraud Office will become involved in some of the same matters as the OFT. If the Under-Secretary believes that I am wrong, she will no doubt intervene to say so. The concern is legitimate: it is not just ours, but that of the CBI and other business organisations that appreciate the need not only for annual reports, but for making information about the OFT available in the public domain. I shall not labour the point, but as I explained earlier, that would be helpful. We need to see what pattern emerges as the OFT discharges its functions. No one disagrees about that, but we must ensure that sensitive information does not leak out and unfairly cause commercial harm to any of the bodies or companies involved. That is the rationale behind the amendments. I hope that they will fare better than the last group.

Vincent Cable (Liberal Democrat, Twickenham)

I want to ask some questions–not loaded questions–because I do not entirely understand the purpose of the amendment or, indeed, the clause that precipitated it. The hon. Member for Eastbourne made sensible remarks about the disclosure of confidential information, but the part of the Bill to which he and the CBI have taken exception does not relate to confidential information. It refers us to subsequent clauses and the exclusion of

''the affairs of the particular person''.

It then goes on to talk of disclosure of information affecting

''the interests of that person''.

Why is it a problem to relate to particular individuals in this context? Let me take one or two provocative examples. Let us imagine hypothetically that Mr. Berlusconi decided to diversify out of Italy–he is doing so in any case–and bought into British commercial radio or local newspapers. A competition reference would, as I understand it, have to take place in terms of the companies that are vehicles for him as an individual. Why would there be a problem about talking about that individual? He is the issue.

Let me take another case. Enron has effectively departed this world, but if it were still a going concern and making bids for British energy companies, why would there be a problem in the OFT publicly discussing the behaviour of Mr. Skilling? He was not the owner but the chief executive, with many interests and options; it was his operations in the company that presented the problem. Why should reference to a particular individual be highly sensitive? I do not understand.

Melanie Johnson (Labour, Welwyn Hatfield)

Perhaps I may help the hon. Gentleman and save him from listing many examples. Under the Interpretation Act 1978, ''a person'' includes companies, so the word ''person'' does not relate only to individuals.

Vincent Cable (Liberal Democrat, Twickenham)

I thank the Under-Secretary.

Ken Purchase (Labour/Co-operative, Wolverhampton North East)

May I make a general point? There is a case for saying that newspapers should not publish the name of anyone who has been charged or is on trial until they have been proved guilty. It is not a strong case and would be part of a slippery slope towards the public never knowing the details. In cases in which there is a general rule of non-disclosure to the press, public or any written report, we may find that the nature of the offence being investigated and the previous record of the person involved are both so serious that a disclosure should be made in the public interest. I will not quote particular cases, but the world of business has not been without rogues and confidence tricksters operating and proving a considerable danger to the general public.

Nigel Waterson (Conservative, Eastbourne)

I am listening intently to the hon. Gentleman's thoughtful contribution. There are two arguments. First, it may be right to prevent the disclosure of people's names when there has been no charge, let alone a conviction. Secondly, as my hon. Friend the Member for Huntingdon mentioned, it may be sensible to prevent such disclosure because the publicity may prejudice an investigation or, more seriously, a subsequent prosecution.

Ken Purchase (Labour/Co-operative, Wolverhampton North East)

That is absolutely correct, but the Bill includes a discretion, which the hon. Gentleman argued against. I am arguing in favour of the discretion because it is important for a judgment to be used at the time on whether to publish. We must look for responsible decision making on that, but on

the point of principle, to close off any possibility of protecting the public by disclosure would be wrong and would weaken the purpose of the Bill, which is essentially about consumer protection. In debating the first measure this morning, the hon. Gentleman referred to the importance that his party placed on consumer protection and so I assume that we are as one on this matter.

Nigel Waterson (Conservative, Eastbourne)

The clause deals with the annual report of the OFT, so it does not touch on the outcome of any individual case or investigation. If a major investigation concluded that there had been breaches, I assume that there would be any amount of reference to the facts of the case and the people involved. We are debating merely what should be contained in the annual report, which by definition is produced at a fixed point each year, and not at the end of an investigation into one particular company.

Jonathan Djanogly (Conservative, Huntingdon)

Of course, the vast majority of cases will be civil, not criminal. A civil penalty may be involved where a company, or part of its business, has been deemed on balance to be anti-competitive. In such a case, the company will have good reason to want to protect the rest of its business.

Ken Purchase (Labour/Co-operative, Wolverhampton North East)

I agree. My experience of long-term ownership of businesses is that, by and large, people are honest and try to conduct their business according to the rules of the game. However, we are talking about the discretion or the right for a business to be named if the need arises. That discretion will be exercised properly and it need not hold any horrors for us at this stage. I urge the Under-Secretary to reject the amendments.

Jonathan Djanogly (Conservative, Huntingdon)

I want to deal with a particular point before I go on to other issues. Amendments Nos. 11 and 7 relate to the key issue of the word ''opinion''. The test should be as objective as possible, rather than subjective. There are many ways of looking at that. It seems to be assumed that the OFT will know everything about a company while it conducts its investigation. However, in the vast majority of cases it will not. The OFT will find out about only a small part of the company–a product that it is selling, for example–which it is investigating. The OFT may not know that by releasing certain information, it will damage another part of that company's business. The release of a particular piece of information may have a negative impact on a different product that the company is preparing.

Ken Purchase (Labour/Co-operative, Wolverhampton North East)

We all agree that a disclosure is a serious matter. Does not the hon. Gentleman accept that in the event of a disclosure, extensive inquiries would have been made and the company or individual consulted beforehand about the need to publicise their name? We should give credit to those who conduct the investigation.

Jonathan Djanogly (Conservative, Huntingdon)

The hon. Gentleman makes a good point that I was about to deal with. That is what should happen, but the legislation does not provide for that. The opinion of the OFT may become irrelevant to the damaging effect of the release of the information. As the hon. Gentleman mentioned, there should be a mechanism whereby the proposed

release of the information to the public is notified to the company in advance, so that it has the opportunity to appeal. There may be circumstances in which a decision against the commercial interests of the company and the public must be debated, and there should be a forum to do that.

The wider issues also relate to the release of information.

Tony McWalter (Labour/Co-operative, Hemel Hempstead)

Before the hon. Gentleman leaves that point, does he not agree that it is most unlikely that that sort of information would be released where a company co-operated fully with an OFT investigation? It should be necessary to protect consumers and other businesses from a company's actions only where it is clearly obstructing the investigation or being unco-operative.

Jonathan Djanogly (Conservative, Huntingdon)

I should like to think that the hon. Gentleman is right, but we have to consider where trials by media often emanate from, for instance. Leaks happen and companies are right to be concerned about their possible implications. It would be helpful if the Under-Secretary could clarify what rights other people or other companies have to request company information held by the OFT in either published or unpublished form. I appreciate that several other pieces of legislation are probably involved, but I should be grateful if she could help me on that issue.

Clause 7 provides for the release of information to Ministers. Once the information has crossed over from the OFT to the relevant Minister, does the status of the information change so that people have a different right of access to it? One concern is whether the Human Rights Act 1998 could be used to obtain information.

We are talking mainly about companies being regulated and breaking the law, but it is also important to talk about protecting companies, because in modern life, access to information is vital. It must be appreciated that, in other jurisdictions, particularly ones with more liberal access-to-information laws, the law is increasingly being used as a sword as much as a shield. In other words, companies are getting confidential information–

Nigel Beard (Labour, Bexleyheath and Crayford)

Order. I remind the hon. Gentleman that the clause is specifically about publication of the annual report, not a general release of information.

Jonathan Djanogly (Conservative, Huntingdon)

Thank you, Mr. Beard.

Melanie Johnson (Labour, Welwyn Hatfield)

I seek clarification, Mr. Beard. Should I respond to amendments Nos. 5 to 12? I understand that we have been debating all of them.

Nigel Beard (Labour, Bexleyheath and Crayford)

That is correct.

Melanie Johnson (Labour, Welwyn Hatfield)

Thank you. We agree on the importance of ensuring adequate protection of individual and business interests. However, there is a need to strike a balance between excluding information that seriously prejudices the interests of individuals and businesses and enabling the OFT to carry out its functions, such as explaining a decision fully and in context in the annual report. Clauses 4(5)(b) and 6(3)(b) in particular have been drawn to our attention. Those clauses achieve a balance,

providing adequate protection of individual and business interests without unduly impeding the OFT's provision of information and advice to the public, or its publication of reports.

On amendments Nos. 7 and 11, and the words ''in its opinion'', I may have to seek your advice about voting, Mr. Beard, because those are part of one group. The OFT is in any case bound by a duty to act reasonably. The amendment would make no difference to that duty, so I would be happy to accept amendments Nos. 7 and 11. I shall deal separately with amendments Nos. 8 and 12, which are different. For the reasons that I have given, amendments Nos. 5, 6, 9 and 10 do not add anything and I ask the Committee to oppose them.

I will try to be as helpful as I can on amendments Nos. 8 and 12. We agree that the legitimate business interests should be protected. The current provisions achieve that in many ways. They are in line with clause 235(3) and (4) although the wording and context differ slightly. We agree, however, that there may be some benefit in consistency across the clauses if the amendments are accepted.

As we said this morning, we should be constructive and aim to work together to make this a better Bill. Achieving consistency across the clauses would indeed make it better. Amendments Nos. 8 and 12 would restrict the provision only to business interests. To align the provisions fully we would want protection for non-business interests too and therefore I would be happy to consider amendments Nos. 8 and 12 further and to come back on Report with something that takes on board both the points that Opposition Members made and our need to ensure that consistency works across both business and non-business interests.

Nigel Waterson (Conservative, Eastbourne)

I am delighted that we are making progress on this. Of course, it would be churlish not to withdraw the amendment. I look forward to seeing the improvements that the Minister and her officials make to amendments Nos. 8 and 12. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment made: No. 7, in page 2, line 34, leave out 'in its opinion'.–[Mr. Waterson.]

Clause 4, as amended, ordered to stand part of the Bill.

Clause 5 ordered to stand part of the Bill.

Clause 6 - Provision of information etc. to the public

Melanie Johnson (Labour, Welwyn Hatfield)

I am happy to say what I can on the clause. We have covered much of the ground already. Clause 6 will give the OFT the function of promoting to the public the benefits that competition has for

consumers and the economy and providing the public with information or advice on matters relating to its functions. It enables the OFT to publish educational literature or take part in educational activities and to provide support to others producing such literature or carrying out such activities. It enables the OFT to continue to provide a wide range of information and advice helpful to consumers and business. In publishing any literature, the OFT is obliged to have regard to the need to exclude information that is seriously prejudicial to a person or business.

Nigel Waterson (Conservative, Eastbourne)

I have only a fairly narrow point to make on the clause. I want to elicit information from the Under-Secretary. The matter also relates to clause 5, but it seemed inappropriate to make the same point twice. It is raised in a briefing from the National Association of Citizens Advice Bureaux, which says:

''we are disappointed by the absence of any duties prescribed to the OFT. Duties are so often the guiding lights for regulatory bodies.''

It also points out that there should be a general duty to protect consumers, a duty to educate consumers and a specific duty to investigate complaints made. I am not wholly clear what the difference is between a function and a duty. If the Under-Secretary wants to intervene now she may be able to put me out of my misery.

I can see the difference between a power and a duty: a duty presumably means that one is under an obligation to exercise a power, but I am not sure how a function differs. It may be a distinction without a difference, but it seems to exercise NACAB and if it is good enough for that organisation, it is certainly good enough for me. NACAB makes a related point, which I throw in now for what it is worth, when it says:

''We would also urge the Government to ensure that the new powers for the OFT are accompanied by sufficient resources to enable the new OFT to fulfil all of its functions satisfactorily.''

We will deal with that issue in more detail later. Could the Under-Secretary help me on functions?

Melanie Johnson (Labour, Welwyn Hatfield)

I am advised that function covers both powers and duty. I hope that that helps the hon. Gentleman and NACAB.

Jonathan Djanogly (Conservative, Huntingdon)

Clearly, the mirroring of the amendments in the different clauses with different implications has caused some confusion. We are talking about the provision of information to the public. Clause 6(1)(b) refers to

''giving information or advice in respect of matters relating to any of its functions to the public.''

Companies could try to use such provisions for fishing expeditions on their competitors. I should be grateful if the Minister could clarify to what extent the Bill, in conjunction with other relevant pieces of legislation could be used by competitor companies. We are dealing with competition and aiding consumers and it would be unfortunate if the legislation could be used to gain an unfair advantage over a competitor. That is of great concern and is relevant in countries such as the United States that have greater freedom of information than we do. The clauses talk about publishing information. What about unpublished information? How long would the OFT keep the information after the investigation cleared the

company concerned, and when would it have to disclose it to the public? Would the OFT have to destroy the information that it holds at some point?

Melanie Johnson (Labour, Welwyn Hatfield)

I hope that I can help the hon. Gentleman. Specific merger market information and consumer investigations are restricted under part 9. The main function of the clause is the provision of information to the public, as it says. That is unlikely to give rise to the hon. Gentleman's anxieties. The OFT would not publish anything confidential to a company without first consulting it. As we discussed, clause 6(3) aims to give companies the protection that they need and Opposition Members share that aim.

Question put and agreed to.

Clause 6, as amended, ordered to stand part of the Bill.

Clause 7 - Provision of information and

Nigel Waterson (Conservative, Eastbourne)

I beg to move amendment No. 13, in page 3, line 23, after '(1)', insert:

'Subject to the overriding requirement to keep sensitive business information confidential,'.

We move to another clause, but at least some of the arguments are the same. I will therefore keep my comments brief. The point cannot be repeated too often in the relevant parts of the legislation and the arguments have been revisited many times. The CBI speaks for business when it supports the amendment. We hope that it may find favour with the Under-Secretary.

Melanie Johnson (Labour, Welwyn Hatfield)

The amendment would make the OFT's provision of information and advice to Ministers or public authorities subject to an overriding requirement to keep sensitive business information confidential. It may hinder the OFT's capacity to advise Government and public authorities and it is also unnecessary. I reassure the hon. Gentleman that the clause is aimed at the OFT commenting on general trends and specific legislation, not at specific companies. As I mentioned in my remarks to his hon. Friend the Member for Huntingdon, specific protection is offered for consumer and competition information as defined under part 9. I therefore regret that although the hon. Gentleman suggested that the amendment was parallel to the others, it is not in the same category. I hope that he will withdraw it in the light of my remarks. If not, I will oppose it.

Nigel Waterson (Conservative, Eastbourne)

I am happy to accept the Under-Secretary's explanation. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Nigel Waterson (Conservative, Eastbourne)

I beg to move amendment No. 14, in page 3, line 32, at end insert:

'(3) It shall also be a function of the OFT to issue guidance to trading standards departments about the use of their powers to obtain Stop Now orders and to ensure that such powers are used consistently.'

Despite our puzzlement about the meaning of the word ''function'', we were still keen to impose another

function on the OFT, and that is it. That is a serious, practical point. One benefit of super complaints–we are not dealing with them now–is that they should prevent different levels of interest in pursuing an abuse being expressed in different parts of the country. The matter can then be dealt with globally as a global concern, if that is not too simplistic a view of the meaning and import.

Some 200 trading standards departments around the country have varying amounts of resources to devote to particular abuses. They have different priorities, which is, in a sense, right. Later in the Bill we will hear the views–about resources and other matters–of the Trading Standards Institute and the Local Government Association, among others. Some attempt has been made to ring-fence some resources for trading standards departments. According to my information, it has not been particularly successful. Resources always have a tendency to be siphoned away into other local government activities even though, with the best will in the world, they are destined for trading standards in other departments. On any view, therefore, we have a big problem of inconsistency between different trading standards departments in different local councils throughout the country.

The OFT should have some overview of how stop now orders are carried out in practice. I do not want to oversell the amendment, but the OFT should have some say in bringing consistency of policy. We shall debate stop now orders in more detail shortly, but it would be worrying for business if some trading standards departments went off like a rocket and handed out stop now orders like bus tickets while others hardly issued them at all. Bringing some consistency is therefore a sensible extra function to heap on the OFT and we hope that it will find favour with the Government.

Melanie Johnson (Labour, Welwyn Hatfield)

I support the intention behind the amendment–to improve the consistency of approach in the use of stop now orders. The amendment is designed, as the hon. Gentleman explained, to achieve two objectives. The first is to give the OFT a duty to issue guidance, but it is unnecessary because it already has a duty to issue guidance on stop now orders under the Stop Now Orders Regulations 2001–I appreciate that they are not before us today–and under clause 220, which places it under a duty to issue guidance on the corresponding provisions in part 8. The OFT issued interim draft guidance on stop now orders last year and, after extensive consultation, the final version was published last week. Copies have been made available to members of the Committee.

Secondly, the amendment is designed to place a duty on the OFT to ensure that stop now orders are used consistently. We want enforcers to use the powers in the regulations and part 8 of the Bill consistently. The OFT guidance has the aim of promoting consistency and, to prevent duplicate proceedings, it can direct that enforcers other than community enforcers may not take a case to court if another enforcer is already doing so.

The OFT does not, however, have a general power to direct the activities of trading standards departments, which are, as the hon. Gentleman would accept, obviously part of local authorities. We do not believe it appropriate for the OFT to have such a power in that regard. We expect the OFT to do all it can to support and encourage the consistent use of these powers, but it is not right to place it under a duty to ensure that. For the reasons I explained, it does not have the power to do so.

I hope that the hon. Gentleman will accept that we support his intention and that much of what he wants the amendment to achieve will be achieved by the Bill and existing regulations. I am hoping to persuade him to withdraw the amendment. If not, I encourage the Committee to oppose it.

Nigel Waterson (Conservative, Eastbourne)

I am grateful for the Under-Secretary's explanation. I am delighted to hear that the Government have broadly the same intention, so I accept that a formal amendment is unnecessary. We have now received the stop now orders guidance, which helpfully came out on the day of Second Reading. We are continuing to get our heads round it, but it seems likely that the OFT will pursue some attempts to achieve consistency, whether by holding seminars, issuing press releases or generally keeping in touch with trading standards departments or the Trading Standards Institute, which would also have a role.

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Nigel Waterson (Conservative, Eastbourne)

I beg to move amendment No. 15, in page 3, line 32, at end insert–

'(3) Any such proposals, information and/or advice made or given to a Minister of the Crown or other public authority shall be published.'.

Nigel Beard (Labour, Bexleyheath and Crayford)

With this it will be convenient to consider amendment No. 16, in page 3, line 32, at end insert–

'(4) A Minister of the Crown who receives any such proposals or advice shall deliver (and publish) a reasoned response to such proposals or advice within 6 weeks of receipt thereof.'.

Nigel Waterson (Conservative, Eastbourne)

These amendments have a little more meat to them. Clause 7 contains important provisions that empower the OFT to make proposals and give information or advice to Ministers of the Crown or other public authorities. It is difficult to argue against there being a formal interface between the OFT and other bodies. We have heard already about its potential relationship with the Serious Fraud Office, but I hope that there will be slightly less colourful relationships. In the interests of transparency, about which the Under-Secretary has spoken several times, we believed that there should be an attempt to make the process as open as possible, which is why any such advice or information should be published. The hon. Lady may say that there are subjects that are too confidential to be published, in which case I would be more than happy to withdraw the amendment if the Government come back with a more suitable one of their own.

Furthermore, it seemed to us that a Minister who receives a proposal or some advice from the OFT should be obliged to respond within a reasonable amount of time. We would not want a one-way street in which, after careful consideration that is possibly based on a lengthy and extensive investigation, the OFT could come out with proposals or advice that were simply filed away and not pursued. It is important that, as far as possible, such matters are in the public domain and amendment No. 16 would ensure that a response was made to such advice or proposals within six weeks.

I am not dogmatic about the time period. It may seem a short time in some reaches of the civil service and we could make it longer, or perhaps shorter. However, a requirement on the Minister to produce a reasoned response is important, and although it may not be clear from the amendments, it is implicit that any such response to a proposal, advice or information should also be published. I imagine that such proposals, advice or information would be few and far between, but for that reason, they would probably be important to matters of more general significance to the OFT in the carrying out of its various functions.

On that basis, I commend both amendments to the Committee. They are eminently practical, but I will be happy if the Under-Secretary can improve on them in the way that I have suggested.

Melanie Johnson (Labour, Welwyn Hatfield)

The amendments would ensure that all the proposals, information and/or advice to Ministers from the OFT are published and that any Minister of the Crown who receives proposals or advice from the OFT should deliver and publish a reasoned response within, as the hon. Gentleman said, six weeks of receipt. I fear that I am not on the same wavelength as the hon. Gentleman on this, because publication of such material would not always be appropriate and, in fact, could harm individual and business interests in some circumstances. It would also not always be appropriate or necessary for the Government to publish a response to each piece of advice or proposal from the OFT. Our intention is that the OFT should advise where laws and regulations create barriers to entry to markets and competition, or channel markets in a particular direction, thereby holding back innovation and progress.

The Government have made a commitment in the competition White Paper to publish a response within 90 days of receiving a report. However, the amendment goes beyond that. It is inflexible and unnecessary; it might harm individual and business interests if we were committed to such wholesale publication. I therefore urge the hon. Gentleman to withdraw the amendment.

Nigel Waterson (Conservative, Eastbourne)

I am sorry that the amendments have not found more favour with the Minister. However, we have bigger fish to fry, so I am happy to beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 7 ordered to stand part of the Bill.

Clause 8 - Promoting good consumer practice

Melanie Johnson (Labour, Welwyn Hatfield)

The clause sets out the OFT's function to encourage and approve codes of practice produced by a variety of bodies. It sets out the OFT's powers to implement the new codes of practice regime to make it easier for consumers to identify reliable traders, give formal approval to good business-to-consumer codes and encourage such codes. The OFT will be able to oversee the operation of approved codes, withdraw approval from codes that are not operating satisfactorily, and signify approval of codes in any manner that it sees fit, including the creation of a logo and authorisation of sponsors and their members to use it. That will help consumers to recognise approved codes.

It is intended that adherence to a code of practice should ensure good practice by business when dealing with consumers. Only codes that regulate the conduct of members will be approved. For example, a code may contain a redress mechanism or a complaints procedure. A code might also include sector-specific criteria. The OFT will be able to encourage the making and use of such codes of practice that it considers will safeguard and promote the interests of consumers.

The clause clarifies the OFT's powers. It was uncertain whether such powers existed under the Fair Trading Act 1973, which is to be repealed by schedule 26, because that legislation was stated in very general terms. The new regime attempts to build on it and will benefit consumers and business alike. It will make it easier for consumers to find reliable businesses. Good codes of practice are sometimes more effective at solving consumers' problems than recourse to law. Businesses will gain a marketing advantage from OFT approval. It will also help good businesses to distinguish themselves from rogues.

Self-regulation can be a viable alternative to statutory regulation. It is sometimes better for protecting consumers, as legislation can be inflexible and difficult to change. Codes, however, can be changed quickly in response to new unfair business practices that are detrimental to consumers. Regulation can impose unnecessary bureaucracy and additional costs upon business, with the knock-on effect for consumers of increased prices.

With an effective marketing campaign on the value of codes, we believe that businesses in most sectors will want to sign up to approved codes, or to set up codes where they do not exist. We want to enable the widest possible range of businesses to join, including small local firms. The provision will, therefore, allow a range of organisations to be code sponsors, such as local authorities, chambers of commerce, registered charities and the promoters or landlords of shopping centres. Businesses will not have to belong to a trade association to gain the right to use a logo. That will make it easier for small businesses to find a suitable point of entry.

It is time for a new, effective codes of practice

regime that benefits both consumers and business. I therefore commend the clause to the Committee.

Nigel Waterson (Conservative, Eastbourne)

I do not want to detain the Committee for long because we think that the clause is a thoroughly good idea–that is why we have not tabled any amendments to it. The Minister referred to the Fair Trading Act 1973. She slightly understated its relevance because in that provision the director general had a general duty to encourage the preparation and dissemination of codes of practice.

I often think that one can go through an entire Committee stage with no one referring to the explanatory notes to a Bill. That must be frustrating for the officials who prepare them, so I thought that I ought to make at least one foray into them. The notes make the point that the existing power, function or duty–or whatever it might have been in 1973–supported the development of codes by 42 trade associations in 24 sectors.

As the Minister said–it bears repetition–codes are attractive to the good companies and businesses who want to do only the best for and by their consumers. The motive is to help consumers identify reliable suppliers. Indeed, the booklet ''Empowering Consumers in the Enterprise Economy'' published in January, states:

''codes are more flexible than regulation, as they can be changed more quickly in response to the development of new business practices.''

The Minister makes the same point. This is a good illustration of how a simple provision will probably have a more practical effect for the average consumer than any panoply of powers and duties that may be imposed under the Bill . It will have a limited cost to business, and the good businesses will sign up in any event. Indeed, some are already signed up; it has already made a difference.

Unsurprisingly, codes are welcomed by the various consumer bodies. The CAB Service says that it welcomes the proposed functions to enable the OFT to approve and withdraw approval for consumer codes of practice, but, with a sting in the tail, it then says that the OFT should be able to monitor the effect of the codes of practice. I hope that that is inherent in clause 8. The OFT says that the provision should result in much more consumer confidence in trade associations' codes of practice. A similar point is made by the Consumers Association, which particularly welcomes the powers given to the OFT in respect of industry codes of practice. Consumers often rely on logos and their codes as a reassurance that they are selecting a reputable firm. Unfortunately, some codes of practice are purely cosmetic and offer little consumer protection. We all know from our duties as constituency Members how elderly folk can be taken in by the flamboyant logo on the side of a van that purports to say that the firm is a member of an organisation–an organisation probably set up by the company. In fact, such practice carries no guarantee of competence or honesty.

The CBI, too, welcomes the new powers in principle. It said that self-regulatory codes can play a key part in giving consumers confidence when purchasing goods and services. It looks for further discussion with the OFT on the framework and the principles by which the codes will be judged, and says that it is essential that the scheme is well resourced and promoted.

On a final note, and expressing slight caution, given that the OFT also has the power to withdraw support for the codes, I assume that a practical system will need to be worked out–it is not a matter for the Bill–whereby due notice is given and due discussion will take place before it happens. Nevertheless, the provision is thoroughly useful and helpful, and it has our full support.

John Pugh (Liberal Democrat, Southport)

I want to make a technical point that I am sure my hon. Friend the Member for Twickenham (Dr. Cable) would have made. We are in favour of having good codes and of having the Ministerial imprimatur on them. They are extremely sensible and decent suggestions. I listened carefully to what the Minister said about which codes would be approved. I wrote down that she said that only codes that regulate members of organisations will be approved. I am sure that she is right, because a code used for guidance only, or one that will not be adhered to or implemented, is not the sort of code that Ministers would wish to authorise.

However, subsection (4) states:

''A consumer code of practice is a code of practice . . . which is intended to–

(a) give guidance to persons engaged in production or supply of goods or the supply of services''–

then there is the word ''or''–

''(b) regulate the conduct of persons so engaged''.

I suggest to the Minister that that is a technical error. Following the thrust of her remarks, ''or'' should be replaced with ''and'', because there is clearly no ministerial intention to approve codes that do not regulate the people to whom they apply. That sort of technical change would make the measure more worthy of support.

Mark Field (Conservative, Cities of London and Westminster)

I, too, shall speak briefly. Like my hon. Friend the Member for Eastbourne, I am in principle supportive of the clause. I certainly support the idea that we should use codes of practice instead of ham-fisted regulation, but I offer one word of warning. If the codes of practice are to be self-regulatory and in the hands of some trade-related body, it is important that there is sufficient will to enforce them.

That concern arises from my own experience. If trade associations require some sort of subscription income from their associate bodies, they may prove reluctant to come down hard on offenders against codes of practice. I accept that the Government should not necessarily take a hard regulatory stance, but consumers may find themselves disappointed if certain codes of practice are not properly enforced. The biggest offenders may happily sign up to the code of practice, knowing that it will not be enforced at all,

and the protection given to consumers would be at best illusory.

Jonathan Djanogly (Conservative, Huntingdon)

I fully support the clause, as everybody else does, on the ground of identifying reliable suppliers. I also support the provisions on fee monitoring. It is all good news. I have not studied any of the 42 codes and 24 sectors, as mentioned by my hon. Friend the Member for Eastbourne. I am sure that they are all highly reasonable and were worked out in close co-operation with the relevant trade bodies. If I were to have a concern, it would relate to the potential for the introduction of unreasonable codes.

An unreasonable code might be introduced if a large company, perhaps one with strong lobbying powers, persuaded the powers that be at the OFT that the code should be made more stringent–perhaps more than was necessary. Small businesses would lose out because of the additional costs of complying with new regulations or dealing with code-compliance issues arising from that. In what sense will there be an ongoing review of the codes from the point of view of small businesses and the consumer, who would pay the costs of any extra regulation?

Melanie Johnson (Labour, Welwyn Hatfield)

I shall first respond to the hon. Member for Southport on the use of the word ''or'' between subsections (4)(a) and (b). We will consider that point and perhaps come back to it on Report.

Having listened to the hon. Gentleman's remarks and those of the hon. Member for Eastbourne and other Opposition Members, I welcome the Committee's strong support for the codes regime and its valuable role in protecting consumers. I agree strongly with many of the remarks made. It will be part of the compliance mechanism and the OFT core criteria to ensure that the codes are properly enforced. Perhaps I could briefly explain some of the changes that are taking place.

The OFT has a new approach to codes, which takes the form of a two-stage process. The first stage requires code sponsors to satisfy the OFT that their codes meet the criteria. That relates to the point about individual businesses, because it is for sponsors of codes, which are likely to be representative bodies of one kind or another, to satisfy the OFT. Once sponsors have demonstrated that their codes meet the criteria, the OFT will publish a list. At that level, there will be no independent check on how well the codes work, so the OFT will not be approving the codes, but, at the second level of consideration, the OFT will publicly endorse codes where sponsors can prove that they have delivered on their initial promise. That endorsement is comparable to the proposals in the consumer White Paper and will probably include a mark or logo signifying OFT approval. The OFT will need to promote the regime and its core criteria, and to publicise vigorously the benefits of the scheme in order to persuade businesses to sign up. I hope that I can assure hon. Members that the codes are important, that the role of enforcement is adequately recognised and that we will not accept unreasonable codes.

Question put and agreed to.

Clause 8 ordered to stand part of the Bill.

Clause 9 ordered to stand part of the Bill.

Clause 10 - Part 2 of the 1973 Act

Melanie Johnson (Labour, Welwyn Hatfield)

The clause repeals most of the provisions of part 2 of the Fair Trading Act 1973. Part 2 of the FTA was designed to deal with novel unfair trading practices as they emerged. It allowed the Secretary of State, by way of secondary legislation, to prohibit or modify unfair, but not illegal, trade practices that harmed the economic interests of consumers. The Secretary of State would make those orders on the advice of the Director General of Fair Trading and a then newly created consumer protection advisory committee.

Part 2 has barely been used. Only three orders have been made under it. The consumer protection advisory committee, on whose report the order-making power is dependent, has not existed in practice since 1983. Two of the orders made under part 2 are still in force and in everyday use by trading standards officers. The clause ensures that they are retained, together with the enforcement provisions for them. The rest of part 2 is repealed by the clause.

The order-making power under part 2 was found to be rigid and the process took too long. Specifically, it proved difficult to satisfy the legal tests in part 2, particularly the test of attributing specific consumer economic detriment to practices that were clearly undesirable. The possibility of reforming part 2 to make it easier to use has been considered at length. However, it has proved extremely difficult to identify the circumstances in which a revived part 2 might be used in the future. In any case, the Bill significantly strengthens consumer protection, and we therefore see no need to keep the provisions in part 2–other than those that I have mentioned–on the statute book.

Nigel Waterson (Conservative, Eastbourne)

We agree with the wisdom of repealing part 2 of the 1973 Act. The issue, which we shall consider in more detail later, is what to replace it with. We appreciate that some of the powers have fallen into disuse and that the committee seems to have fallen off its perch, as no one has seen hide nor hair of it since 1983. Clearly, something had to be put in its place, but there is a great debate to be had–perhaps not now–about where clause 202 takes us.

As the Minister will be aware, a campaign has recently been started by the National Consumer Council and various other leading consumer bodies, pushing for the duty not to trade unfairly. I appreciate that there are many arguments to be had about the scope of that, its practicality and its impact on other areas of English law. I do not want to open up such a debate today; we shall say more in due course. However, it is important to put down a marker about the fact that there is significant disappointment among consumer bodies that, although we are getting rid of part 2 of the Fair Trading Act, its proposed replacement is not man enough to do the job–if that is not a politically incorrect way of putting it.

As I said at the start of our proceedings in

Committee–it feels like a long time ago although it was only this morning–the opportunity to reform consumer legislation seems to come round on a 30-year cycle. Let us do our best to grab the opportunity in both hands. We shall not vote against clause 10 for the reasons that I have mentioned. However, I should not like the Minister to take that as approval–there is a great deal of debate to be had.

Harry Barnes (Labour, North East Derbyshire)

I am also interested in the question of where powers go. I raise it now because of the points that have been made by the hon. Member for Eastbourne. It would be helpful to discover whether the measures have fallen off their perch altogether, whether they are covered by a complex clause later in the Bill, or whether they have been hived off to the new Office of Fair Trading. That is a further marker for the future.

Melanie Johnson (Labour, Welwyn Hatfield)

I acknowledge the interest in the issues raised by the repeal of part 2 of the Fair Trading Act. We shall have a fuller debate later in the Committee's proceedings.

Question put and agreed to.

Clause 10 ordered to stand part of the Bill.

Clause 11 - Super-complaints to the OFT

Nigel Waterson (Conservative, Eastbourne)

I beg to move amendment No. 17, in page 5, line 3, leave out ''feature, or combination of features, of'' and insert

''agreements between undertakings, decisions by associations of undertakings, or concerted practices in''.

Nigel Beard (Labour, Bexleyheath and Crayford)

With this we may discuss the following amendments: No. 18, in page 5, line 4, leave out from ''services'' to end of line 5 and insert ''prevents, restricts or distorts competition''.

No. 24, in page 5, leave out lines 31 and 32.

Nigel Waterson (Conservative, Eastbourne)

We have reached one of the more exciting parts of the Bill. [Interruption.] I notice a ripple of excitement among Labour Members, particularly from the hon. Member for South Ribble. I am sure that we shall have a lively debate.

The arrival of the super complaint must have seemed like the arrival of gunpowder and cannons to the proprietor of a medieval castle–alarming and impressive at the same time. It is, on paper, an extremely powerful weapon, which could change the balance of power–I do not want to get too carried away or I shall sound like David Starkey–between consumers and business. Like all powerful weapons, it must be handled with care. That is why we have tabled a number of amendments; they express our concerns, queries and probing ideas and those of business about how it will work in practice.

I should like to make a point that might be of help. Our general approach will be to seek fairly wide debates on groups of amendments, but to dispense with a stand part debate unless no amendments to the clause have been tabled. Even then, we might not have a stand part debate if the clause does not warrant it.

However, because this clause is such an important part of the Bill, we might want to say something about the stand part aspect of it even after we have dealt with the amendments.

When the Department is preparing its press releases about how wonderful the Bill is, the provision for super complaints will be one bit that ends up in the first paragraph. The concept of super complaints is widely welcomed by the consumer organisations. We are keen for it to work in a way that delivers for consumers but does not cause massive problems and disruption for legitimate business.

The wording of amendments Nos. 17 and 24 replicates the wording in article 81 of the EU treaty and the chapter 1 prohibition in the Competition Act 1998. Without such replication, it seems to us and to organisations such as the CBI that there is a risk of inconsistency and uncertainty. There is also the possibility that a new and unnecessary additional standard could be introduced into the UK competition regime. I do not know whether that was what the Department had in mind when it drafted this part of the Bill, but we want to find out through these probing amendments.

Amendment No. 18 would delete the wording

''is or appears to be significantly harming the interests of consumers''

and replace it with the phrase

''prevents, restricts or distorts competition''.

That would again replicate wording in article 81of the EU treaty and the chapter 1 prohibition in the 1998 Act. It is again a question of consistency and certainty and the concern is again that a new and additional standard is being introduced into the regime. Anti-competitive behaviour almost by definition harms consumers, so is there any real need to refer to them explicitly?

That is the reasoning behind the group of amendments. They are more probing amendments than anything else, but I would be interested to hear the Minister's response to them.

Melanie Johnson (Labour, Welwyn Hatfield)

The amendments would narrow the definition of a super complaint by placing the emphasis on conduct connected to breaches of chapter 1 of the Competition Act or article 81 of the EU treaty rather than broader problems in the market that may harm the interests of consumers. Our intention is to ensure that consumers receive better protection by enabling consumer bodies to complain about any market failure that causes significant harm to consumers. In order to do that, we need a broad definition of the circumstances in which a super complaint can be made.

Using the language of the Competition Act, as suggested in the amendments, would narrow the focus of the procedure to the potential investigation of anti-competitive agreements. The new super complaints procedure is intended to ensure that the OFT is made aware of as wide a range of markets that are not working well for consumers as possible–not just those markets where competition concerns arise. Taken by

itself, without amendment No. 17, amendment No. 18 would mark super complaints out as a preliminary to OFT action under its competition law powers, such as those under the Competition Act, or through a market investigation. It would not be allowed to act under its consumer protection powers.

Consumer bodies and anyone else who wants to complain about basic infringements of the Competition Act can already do so. Super complaints should not be limited to a preliminary to a particular type of competition investigation. They should be an open-ended vehicle for the OFT to launch investigations under any of its consumer and competition powers. By, effectively, excluding the possibility of a consumer-side action as a follow-up to a super complaint, the amendment perpetuates the division between the OFT's competition and consumer sides, which the Bill is trying to break down. The amendment would make it very difficult for consumer bodies to submit super complaints. As third parties, they are unlikely to know much about the agreements that firms have entered into between themselves.

The hon. Gentleman said that these were probing amendments. I hope that with that explanation I have encouraged him not to press them to a Division.

Jonathan Djanogly (Conservative, Huntingdon)

I support this group of amendments. The question arises whether a clause that is, on the face of it, well meaning will give companies comfort that they will not be subject to witch-hunting by consumers or pressure groups. There is a balance to be struck here, as with other parts of the Bill.

I was slightly concerned by the Under-Secretary's statement that the measure was to be left as ''an open-ended vehicle'', as that seems a dangerous way of proceeding in what could be a litigious area. I accept the suggestion that we need a clearer definition of what can and cannot be investigated. Amendment No. 18 ties that down by referring back to article 81.

As the Bill stands, a super complaints procedure applies when the interests of consumers appear to be harmed, but what does that mean in practice? Who decides, and on what basis, what is best for consumers? Would it be consumer groups, for example? The CBI pointed out that that gives much too narrow a base; anyway, what would represent a consumer group for the purposes of the Bill? The new standard will lead to an awful lot of litigation, with costs being passed on to the public; to consumers, in other words.

There was a recent example of such a procedure in action. In October 2001, the OFT agreed to a Consumers Association referral to undertake a super complaints procedure, although at the time that would have been done only on a trial basis because the legislation did not exist. The case was brought against the dentistry profession.

In January 2002, the OFT announced that it would undertake a full investigation, which it expected to finish by the end of the year. It would have been helpful to the Committee if the investigation had been finished by now, because we would have had a better opportunity to analyse how it worked in practice. Unfortunately, that opportunity is unavailable.

Several questions surround that investigation, however. One might ask if the expected date was fair, but I shall not discuss dates as that subject arises in a later batch of amendments.

I mention the case now because it has an interesting aspect in relation to the Bill. When one reads the Consumers Association briefing on the state of the process so far, two basic reasons are given for the referral, as identified by the excellent magazine, Which? The first relates to transparency in charging, which certainly makes sense as the basis for an investigation. The second was more interesting, as it related to huge disparities in tariffs between dentists. That is an interesting concept, which seemed strange to me when I first read it.

I understand why the Consumers Association might want to point out why high-charging dentists should be avoided and to say who is a high-charging dentist, so that consumers know whom to avoid. However, when one considers competition issues, one normally looks for competition abuse, a convergence of price, people organising cartels or undermining consumers by maintaining a close series of prices. In this case, however, the Consumers Association is complaining about a massive divergence of prices, which is the exact opposite of the competition test. That brings us back to the essence of super complaints and the new rationale.

The Consumers Association is obviously looking forward to the time when the legislation is in place and it can run clear of the competition rule and start creating a new area of law. I do not know what the Consumers Association wants–perhaps some sort of 1970s price-capping policy–but it has nothing to do with competition.

Nigel Waterson (Conservative, Eastbourne)

My hon. Friend is developing a fascinating line of argument, which we might reconsider during the stand part debate. If one expects the same standard of product, there might be an argument also for expecting the same price, although there is always the question of regional variations. Is a dentist or a plumber expected to give a standard service? Presumably, some dentists, like some plumbers, are better than others and may warrant a higher fee. I am sure that my hon. Friend was coming to the issue of consumers being able to shop around and ask more than one dentist what he or she charges, but many people would be in the dentist's chair, anticipating the pain, and would not think about the price until afterwards. That is their prerogative. This is a fascinating discussion.

Jonathan Djanogly (Conservative, Huntingdon)

It is indeed. When Which? looks at prices, especially of services–such as those provided by dentists or lawyers–there are often more considerations relating to price, such as the service that the consumer receives. Of course, I congratulate the Consumers Association on advising consumers of the various prices and telling them where they can get a cheap deal, if that is what they want, but that is a different issue.

I am not trying to pre-empt the OFT inquiry into dentistry. I am taking my information from the

Consumers Association briefing paper, as I have not seen the OFT report, but that information is backed up by a recent briefing from the National Association of Citizens Advice Bureaux. To return to the issue of what are legitimate grounds for a claim, the Consumers Association seems to be starting a new industry, in which it, rather than the law, tells us what is right and wrong for consumers. The briefing paper says

''As we understand it, it would be possible for a designated body to make a complaint on the grounds that a particular trader is conducting his business in a manner which is unfair and detrimental to consumers. This could encompass engaging in practices and sales techniques which are not presently illegal but are nevertheless unfair and harmful to consumers. Our concern is whether in these types of case the OFT would have any powers to act, if the complaint was found to be unjustified.''

In other words, even though a practice may not be illegal, NACAB wants it to be possible for the practice to be referred to the super complaints process. I wonder how many hon. Members appreciate that that is what we are talking about, because it is a dangerous proposition that consumer associations should take the lead in dictating what is illegal. We heard earlier that we should, perhaps, be considering what other bad trading practices should be made illegal. That is a valid argument, but I have significant concerns that, even before they get the powers, consumer associations are saying that they, not Parliament, should decide what is illegal. That is something that the Committee should consider carefully.

The size of the offence is relevant to mergers. There is a de minimis provision; in other words, if a complaint is below a certain level, it will not be dealt with under the Bill. However, I believe that that does not apply to clause 11. I ask the Under-Secretary for clarification, but if I am right, no complaint would be too small for the OFT to consider. It would have been sensible, as with the merger regulations, to have a level below which it was considered that the regulations should not apply.

Harry Barnes (Labour, North East Derbyshire)

The Oxford philosopher and great socialist thinker G.D.H. Cole wanted to transform Parliament into two Houses, one of which would be a House of consumers and the other of which would be a House of producers. They would have equal and co-ordinate powers. I wonder whether the provision on the super complaints procedure for consumers should not be mirrored by a super complaints procedure for producers, or workers.

Mark Field (Conservative, Cities of London and Westminster)

I shall not comment on the contribution of the hon. Member for North-East Derbyshire, not least because it would take me a long time to get my head around the idea.

The clause is extremely important. It is at the core of many of the concerns that we shall discuss on other amendments; if not this evening, at some time on Thursday. My hon. Friend the Member for Huntingdon pointed out to me one of the great fallacies in connection with price in competition or monopolistic power. It is that if we have perfect competition or a monopoly, logic and economic theory dictates that the price will be exactly the same. It is therefore difficult to make a coherent case

that price should be the determining factor for competition ills.

The CBI suggests equality of treatment and that the Government should hear all complaints equally. The concept of a super complainant procedure is cause for great concern, because people will assume that complaints have substance if they are put forward by a consumer group on that elevated scale. It seems that complaints will automatically get over the first hurdle if they are made by a super complainant. If legislation is to work properly, it is essential that it should treat all people in the same way. A complaint from a super complainant should be made as if it had come from an individual or another company.

Melanie Johnson (Labour, Welwyn Hatfield)

I shall endeavour to sum up this diverse debate and answer all the points raised on the subject. First, it is important to reflect on why we are going along this path. It is rather difficult for individual consumers to identify market failure, market abuse and bad market practices of one kind or another. It is important to bear that in mind when considering the issues raised today.

Mark Field (Conservative, Cities of London and Westminster)

Surely that is counter-intuitive with regard to events of the past 20 or 30 years. Those who have been Members of Parliament for any length of time–and Ministers, too–must have dealt with an enormous number of individual complaints. In a sense, the consumer has become liberated and is able to make complaints. The worry is that consumers may not know the most appropriate way to make those complaints, but the idea that they are powerless and require a super complainant body surely runs in the face of experience.

Melanie Johnson (Labour, Welwyn Hatfield)

I take it that the hon. Gentleman is referring to our experience as Members of Parliament. Obviously, in representing people, we see many difficulties in various aspects of their lives. I accept that we have a wider view from that perspective, but the individual consumer has their own experience of engaging in the market and buying goods and services. However, although they may have access to the informal experience of others, they do not have that wider view. We are considering super complaints in that context.

A concern is floating around that people may make frivolous super complaints and that organisations that are authorised to act in this capacity–that will be a careful process in itself–will come forward with something that is not sensible. I can assure the Committee that organisations will be expected to base their complaint on a reasoned case. If they do not, the OFT will take no action beyond initial consideration. Equally, the OFT must publish its reasons for what, if any, action it proposes to take. The process cuts both ways; the OFT is held to account, and groups will submit reasonable super complaints because they will not want to end up with

bad publicity and damage to their reputation. That is a crucial part of their credibility with consumers and the wider public.

Jonathan Djanogly (Conservative, Huntingdon)

The Under-Secretary says that consumer groups will not want to lose their good image. It would be helpful if she could explain what she means by ''consumer groups''.

Melanie Johnson (Labour, Welwyn Hatfield)

I am talking about any group that is authorised to act as a super complainant and is recognised as a potential super complainant. There will be criteria for that. We do not expect any group to act in that way; the groups will be designated. That designation will involve their demonstrating responsibility and certain other capacities for making such complaints.

I should now like to wrap up the debate, and I will take no further interventions if possible. The OFT will issue guidance on the substance of the complaint. That is about markets, not individual businesses, so we are not covering trivial complaints. On the competition side and the question of complaints where practices are not yet illegal, the result could be market investigations to order by the Competition Commission to stop anti-competitive practices in a particular industry. On the consumer side, there could be codes of practice to enshrine best practice. However, the OFT is not a law maker. Significant harm must be done to consumers before the OFT will decide what, if any, action to take, and that action must be based on that complaint.

The OFT can determine which of its competition or consumer points it should use if necessary. The complaint must be reasoned, and as I said the OFT must publicise its response. The whole process is open, reasoned and founded on OFT duties on behalf of consumers and business. I can reassure hon. Members who have contributed to the debate that the issues will be taken forward on those terms by super complainants and the OFT.

I find it hard to answer the point made by my hon. Friend the Member for North-East Derbyshire, because it requires a great deal more thought than I can give it at the moment.

Nigel Waterson (Conservative, Eastbourne)

I am thoroughly looking forward to the amendments that the hon. Member for North-East Derbyshire will no doubt table on this novel idea. We will doubtless have some interesting debates on them in due course. The amendments were probing. We tabled other amendments to clause 11, which is an important clause for consumers and business as it seeks to ensure that everyone understands how the new mechanism will work. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Further consideration adjourned.–[Mr. Pearson.]

Adjourned accordingly at Seven o'clock till Thursday 18 April at half-past Nine o'clock.