Orders of the Day — Enterprise Bill

House of Commons, 30 October 2002.

Sylvia Heal (Deputy Speaker, Halesowen and Rowley Regis)

I draw the House's attention to the fact that privilege is involved in Lords amendments Nos. 54, 77, 279, 281, 282, 286, 294, 296, 297, 299 to 301, 305, 306 and 308, which are to be considered today. If the House agrees to any of these Lords amendments, I shall ensure that the appropriate entry is made in the Journal.

Clause 1 — Office of Fair Trading

Melanie Johnson (Labour, Welwyn Hatfield)

I beg to move, That this House disagrees with the Lords in the said amendment.

Sylvia Heal (Deputy Speaker, Halesowen and Rowley Regis)

With this we may discuss Lords amendment No. 2 and Government amendment (a) thereto, Lords amendments Nos. 3 to 6, Lords amendment No. 176 and Government motion to disagree thereto, Lords amendments Nos. 177 to 186 and Government motions to disagree thereto, and Lords amendments Nos. 187 and 188.\

Melanie Johnson (Labour, Welwyn Hatfield)

Lords amendments Nos. 1 and 176 to 186 provide for a statutory post of chief executive to the Office of Fair Trading. The Bill provides that the OFT consist of a chairman and no fewer than four other members appointed by the Secretary of State, who would consult the chairman before appointing any other member. That is a depersonalisation of consumer and competition regulation. We expect the OFT to have a majority of non-executive members and are giving it significant independence from Ministers.

We have taken account of the OFT's particular circumstances in deciding not to separate the roles of chairman and chief executive at this time. The Secretary of State will appoint John Vickers as chairman for the remainder of his current term as Director General of Fair Trading, honouring the commitment that was made to him when he was appointed to that post. John Vickers will work with other members of the OFT. Given his position and the need to provide some continuity in this period of great change, I do not think that the OFT should necessarily separate the roles of chairman and chief executive. Although the Bill does not provide for a separate post of chief executive, it does not preclude it either. If the OFT wishes at any time to take that route, it can create a separate post of chief executive and select the appointee.

The amendments would create a post of chief executive appointed by the Secretary of State. By contrast, our approach ensures that the OFT could appoint a separate chief executive if it wished to do so and gives it much more independence and discretion. It is also consistent with the approach taken throughout the Bill and with other regulators. The chief executive of Postcomm is appointed by the chairman, who is appointed by the Secretary of State, and the chief executive of Ofcom will be appointed by the board. That is why I urge the House to accept the Government motions to disagree.

On Government amendment (a) to Lords amendment No. 2, I am very happy to accept the principle of the proposal that the OFT should have regard to generally accepted principles of good corporate governance in its affairs, but after much consideration, we consider it necessary to amend the Lords amendment to ensure that the OFT must have regard only to the principles of good corporate governance that may reasonably be regarded as relevant to it and that it must also have regard

Xto such general guidance concerning the management of the affairs of public bodies as the OFT considers appropriate."

The OFT will be a non-ministerial Department and not a public limited company, and many of the principles of corporate governance are aimed at business practices that do not have obvious equivalents in government. I believe that the changes that I recommend reflect the will of the Lords to ensure that the OFT has regard to the principles of good corporate governance, but achieve that in a way that is appropriate to it as a public body.

Finally, Lords amendments Nos. 3 to 6, 187 and 188 were tabled in response to points made in Committee. They improve the accountability and transparency of the OFT and require the Secretary of State to publish criteria for designating bodies as super-complainants. I am happy to speak in more detail about those amendments if hon. Members wish me to do so.

Andrew Robathan (Conservative, Blaby)

I come to the Bill rather late in the day after it has undergone a marathon. I pay tribute to my predecessor, my hon. Friend the Member for Eastbourne (Mr. Waterson), who represented the Opposition in earlier proceedings, and my colleagues in the House of Lords who have done sterling work.

The Bill tackles many issues; enterprise is only an incidental part of it. It deals with consumer protection, insolvency and competition. The question of how to stimulate enterprise has taxed Governments and others throughout the ages. Not many have succeeded in answering it. The Bill returns to the Commons in a much better state than when it went to the Lords. However, it should be a grave embarrassment to the Government that it left the House of Commons with 420 amendments and nine new clauses. In the House of Lords, 326 amendments were made, the majority being Government so-called technical amendments.

The Bill is highly complex and deals with people's livelihoods. Like so much legislation, it may have serious unintended consequences. It is a gross understatement to describe it as ill prepared and badly drafted. The Government should be ashamed of themselves. However, it was examined in detail in the House of Lords and we broadly agree with the Government about some of the amendments that were forced upon them in the other place.

The amendments that we are considering deal with good corporate governance. The Government should be particularly interested in that, especially in view of the Enron scandal and others which have occurred since the Bill was first drafted. Those scandals have brought corporate governance into not only the public eye but that of Governments everywhere.

Let us consider the two amendments with which the Government disagree. First, on what basis do the Government believe that the chief executive officer and the chairman should be the same person? We believe that it is important to emphasise the chairman's independence because the heart of the Bill involves the creation of a body that is free from political interference.

I appreciate that the Office of Fair Trading will not be a public limited company, but apart from the Financial Services Authority, where else does no separation of power exist between chairman and chief executive officer?

Melanie Johnson (Labour, Welwyn Hatfield)

The hon. Gentleman appears not to have been listening. I provided two further examples in my remarks only a moment ago.

Andrew Robathan (Conservative, Blaby)

I was listening, but the examples did not appear relevant.

I want to consider important sources that were cited in the House of Lords, including the Cadbury report. The Minister will claim that the report referred to public limited companies, but it is nevertheless relevant. It stated:

XThe chairman's role in securing good corporate governance is crucial. Chairmen are primarily responsible for the working of the board, for its balance of membership subject to board and shareholders'—

they will not exist, of course—

Xapproval, for ensuring that all relevant issues are on the agenda, and for ensuring that all directors, executive and non-executive alike, are enabled and encouraged to play their full part in its activities . . . Given the importance and particular nature of the chairman's role, it should in principle be separate from that of the chief executive."

The principle is vital. The report continues:

XIf the two roles are combined in one person, it represents a considerable concentration of power".

After that report, the Hampel report was published in 1995. It was established to review the Cadbury code. It states:

XThe chief executive officer's task is to run the business and to implement the policies and strategies adopted by the board. There are thus two distinct roles".

The report continues:

XCadbury recommended that the roles of the chairman and chief executive officer should in principle be separate . . . We agree with Cadbury's recommendation and reasoning, and we also note that in the largest companies there may be two full-time jobs . . . Our view is that, other things being equal, the roles of chairman and chief executive officer are better kept separate, in reality as well as in name. Where the roles are combined, the onus should be on the board to explain and justify the fact."

In the case that we are considering, the onus is on the Government to explain and justify the fact"

We know from the advertisements in the Sunday newspapers that the Government will appoint a strategic board. As the Minister said, it has already been decided that Sir John Vickers will take the post of chairman and chief executive, if the Government have their way. I am sure that Sir John Vickers is an excellent man. I do not know him, but he attended my college in Oxford, and that must be a recommendation, although he is younger than me. However, the question remains: should all the powers be vested in one person?

If I could call on one person to pray in aid the idea that the powers should not be vested in one person, that person would be the Minister. There is certainly a great deal of confusion in the mind of the Government on this matter. In Committee, she said that the Director General of Fair Trading

Xcurrently 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."—[Official Report, Standing Committee B, 16 April 2002; c. 12.]

Perhaps the Minister will explain how it is that she seems to have changed her mind.

Melanie Johnson (Labour, Welwyn Hatfield)

I am happy to reiterate something else that I remarked on earlier. The Director General is to be backed up by a strategic board of four or five members who will oversee the work of the Office of Fair Trading under the new arrangements proposed in the Enterprise Bill.

Andrew Robathan (Conservative, Blaby)

The Minister did indeed say that earlier, but she has not quite explained how the powers currently vested in the Director General of Fair Trading will not be vested in the same person, although there will be non-executive directors, as she said. We believe that it is a good principle in corporate governance that there should be two people for two posts. That is true of public limited companies, and I suggest that it should also be true here, especially in a body that is required to oversee so many plcs and to consider fair trading. The Government have certainly not convinced me or my hon. Friends, or, I suggest, the Lords, otherwise.

The second amendment under discussion is like unto the first. It talks about Xgood corporate governance", and I find it strange that the Government should want to change it at all. It states:

XIn managing its affairs the OFT must have regard to the generally accepted principles of good corporate governance."

I sat in this Chamber only the week before last and listened to the introduction of a ten-minute Bill that lauded the merits of good corporate governance and stated how important it was that we all adhered to them. I do not understand why the Government want to change this proposal. Their amendment is woolly, it dilutes the purpose of having such a statement in the Bill, and it is rather meaningless. It follows the same basic idea but dilutes the principle. I do not think that it is worth opposing, but I would like the Government to explain why they intend to change the wording because the Minister has not explained, whatever she may say.

Vincent Cable (Liberal Democrat, Twickenham)

I support the previous contribution and the Lords amendments generally. This is an important issue. We are talking not about a technical change but a fundamental issue of principle involving the question, XWho regulates the regulators?" The Bill has implications for others—the way that we shall deal with Ofcom in due course, for example.

We are considering an extraordinarily powerful post that has very little public accountability and mechanisms to address that problem. I suggest that there are two fundamentally different ways of doing that, involving two models. It does not really matter which we adopt, and I think that we should be open-minded. The first model is the one that the Conservatives have been promoting. I would not necessarily adopt it, but it has merits and it certainly improves the Bill. It uses the model based on corporate governance. We are clearly not dealing with a plc here—there is no direct read-across—but there are lessons to be learned from the way in which good business practice operates, and if this is the amendment on offer, I will happily support it.

The alternative approach, for which I have argued right from the beginning of this legislation, is to strengthen public accountability. That is partly captured, rather weakly, in Lords amendments Nos. 3 and 4, but the principle of involving Parliament more directly in scrutinising the appointment of the Director General is a matter to which I shall return.

Why is the issue of who regulates the regulators so important here? The appointment of John Vickers has already been mentioned. He is an admirable individual, whose work I have encountered professionally. As an economist, he is a very clever guy, and I have no doubt that he has complete integrity. That is not the issue here. This post is very important in different ways. It inherits the discretionary powers that used to be held by Ministers. It has substantial enforcement powers—we debated at some length the power to initiate criminal action against cartels.

The Government seem to believe that this new approach to competition will radically raise the productivity of the United Kingdom economy. If that is to happen, this post must have enormous powers. The underlying trend in growth of productivity has remained pretty much unchanged since the Napoleonic wars. We are talking about revolutionary changes in the way in which the British economy functions. The person who drives that must have a great deal of power.

There are analogies with other appointments. Reference has been made to the Financial Services Authority. When the FSA legislation went through, the Opposition had legitimate concerns that Howard Davies would have unfettered powers. He is also an admirable public servant, but he has a great deal of power. There is some qualification in his case, because he is working alongside managing directors, so there is divided responsibility. Some heavy hints have been dropped that, when he moves on, a chairman will be appointed alongside the head of the FSA, so that problem is perhaps on the way to being resolved. The Office of Communications presents many of the same problems as this legislation.

The approach that I have advocated is to follow in the footsteps of the Chancellor of the Exchequer when he introduced the Monetary Policy Committee. It would be possible for the Minister to deal with this problem at any point through a statement, so no provision would have to be built into legislation. As we know, the Chancellor has boundless intellectual and political self-confidence. He obviously felt able to submit his appointments to the scrutiny of Parliament, and has done so. The process of confirmatory hearings has done an enormous amount to strengthen the credibility of the Bank of England's Monetary Policy Committee and the Chancellor. It has been a great success story. I do not understand why other Ministers have not had the self-confidence to do the same.

As regards the approach taken in this legislation, which I think is weaker but none the less a positive step and an improvement, the argument for using the corporate governance approach is partly based on the analogy with what has happened in industry. Post-Maxwell, there has been a considerable improvement in corporate governance. The system of split responsibility prevents megalomaniacs from dominating institutions. That lesson has been widely learned.

It is not merely a question of using a business model. One of my more illustrious constituents is Mr. Greg Dyke. I suspect that, whatever people think about him, there would be considerable apprehension if he were to have unfettered executive authority over the BBC. The BBC is not a plc, and has a chairman as well as a chief executive. Split responsibility provides a balance of power: there are checks and balances in the BBC. That public agency is in some ways analogous to the Office of Fair Trading.

We are not arguing that we should adopt this approach because it works well in plcs in the private sector, although that is a useful source of inspiration. Split responsibility is a sensible way of dealing with over-powerful, public officials who are not sufficiently accountable. I commend the Lords amendments, and will support them.

Jonathan Djanogly (Conservative, Huntingdon)

At the start of the Bill, the Office of Fair Trading is described, separately from its current constitution, as a body corporate. As such, I fully support hon. Members' suggestion that it should be subject to, and have regard for, the principles of good corporate governance.

For a listed company, it is accepted practice, as set out clearly in the combined codes of corporate governance, that the role of chief executive and chairman should be separated. The chief executive is at the coalface and the chairman has a detached role. The chairman can stand back, whereas the chief executive may not be able to do so. The chairman can review the wider picture, resolve conflicts within the board, act as a public interface and ensure a good balance of representation on the board.

Having heard hon. Members' comments, I have a sneaking suspicion that the Government wish to keep the chairman's role for themselves. As the Minister would doubtless be the first to say, that is not the intention behind the Bill, but it appears to be the implication of, for example, the Governments retaining the role of selecting the chairman. The principle of separation would certainly be enhanced by separating the roles of chairman and chief executive.

Yesterday, the Trade and Industry Committee held an inquiry into corporate governance in relation to the White Paper on the new companies legislation. We looked carefully at corporate governance and the way in which this rapidly advancing area of regulation has moved forward. In the context of that discussion, today's debate sounds very regressive. If institutional shareholders are to make a recommendation to shareholders in circumstances in which there is no split between a company's chief executive and chairman, they will almost automatically vote against, or recommend that shareholders abstain. If that is good enough for companies, why is it not good enough for public bodies?

The Government's amendment (a) contains certain irregularities. According to subsection (a), the OFT can make up whatever guidance it wants, but despite that fact, subsection (b) implies that some note should be taken of corporate governance best practice. However, the Government are not saying that corporate governance best practice should apply in the private sector. They use the phrase Xapplicable . . . generally", which presumably could imply the same level of best practice that applies in the Post Office, for instance. Furthermore, we know that that principle will not extend to the splitting of the roles of chairman and chief executive, because the Government oppose that.

This is not an esoteric element of corporate governance; in fact, it is one of the primary elements that institutions would consider, and which the combined code deals with in the private sector. It would therefore be appropriate to head for best practice by, for instance, splitting the roles of chairman and chief executive. Moreover, if it is the Government's intention that what constitutes best practice be decided on the hoof by the OFT, they should instead adopt a more open approach and set out what constitutes best practice.

The combined code itself is not a compulsory document; it is a very fluid document, and if companies do not wish to adhere to any aspects of it, they need not do so. What they must do is to say how they derogate from best practice. Such items need to be set out in their annual accounts—a perfectly proper approach, which should be followed by the OFT. In other words, its principles of best practice and good governance should be set out, and if it derogates from them, that derogation should be explained in its annual report. In that way, people could tell whether it had moved away from best practice in a perhaps appropriate context at a given time.

If the Government are going to let the OFT go its own way and pick and choose particular elements of best practice and corporate governance, will the Minister please explain what such practice is likely to consist of? We have heard precious little about it so far, and the Government's amendment looks like a reaction to the Lords proposal rather than a clearly thought-out provision.

In considering the future of corporate governance, we should take note of Lords amendment No. 188, which states that the OFT should

Xfrom time to time publish . . . its rules and procedures for dealing with conflicts of interest."

That is loosely worded and is—I should have thought—an acceptable way in which to proceed. If it is not acceptable, it would be appropriate for the Minister to comment on the procedure that the OFT is likely to follow when dealing with conflicts of interest for its members or those of its committees. That does not appear to have been dealt with previously.

Mark Field (Conservative, Cities of London and Westminster)

I, too, wish to endorse the words of my hon. Friend the Member for Blaby (Mr. Robathan). We should seek to divide the role of chairman from that of chief executive as an integral part of good corporate governance. My concerns include the potential power of the regulator, which could be immense, especially given the criminal sanctions against individuals for cartel offences. That point was discussed at great length in Committee.

I also endorse the words of Lord Hunt of Wirral, who did splendid work in the other place on this issue, and of the hon. Member for Twickenham (Dr. Cable), who said that the crux of the matter was who regulates the regulator. More importantly, how will that regulation operate? We have discussed that issue on several occasions, and the Cadbury code recommends separation. That is especially important for the OFT, given the sensitive and political nature of what it will do. It is staggering that Lord Sainsbury was complacent enough to say, in the other place:

XThe OFT is a government department, not a public limited company, and many of the principles of good corporate governance are aimed at business practices which do not have an obvious equivalent in government."—[Official Report, House of Lords, 15 October 2002; Vol. 639, c. 714–15.]

We have similar grounds of dispute on Lords amendment No. 2, and I wished to tease out of the Minister what the Government amendment means when it says:

Xthey may reasonably be regarded as applicable in relation to a statutory corporation, to generally accepted principles of good corporate governance."

The Government appear to be saying that what is good for the Government is not so good for business. That appears to be breathtakingly complacent, in the aftermath of the disgraceful behaviour over the Penrose inquiry into Equitable Life. The inquiry's delay has meant that tens of thousands of our constituents have not had an opportunity to take their cases to the ombudsman. Because it is a Government inquiry, it is also taking place under a veil of secrecy.

We see parallels with the distinction between the requirements for the OFT and those for bodies in the private sector, in respect of the divide between the roles of chief executive and chairman. Given the recent scandals in both the public and the private sectors, the Minister will understand why the OFT and all other public bodies must be beyond reproach. How can the Government exhort business to get its act together if they are not willing to do so themselves?

Andrew Lansley (Conservative, South Cambridgeshire)

I apologise to the Minister and to you, Madam Deputy Speaker, for not being here for the opening speech on this group of amendments. I hope that the Minister will forgive me if I reiterate a point that she has already made.

I had thought that I understood what the Government were trying to do when we discussed in Committee the issues related to Lords amendment No. 1. The Government had previously vested the powers in one person—the Director General of Fair Trading—but had resolved that it would be better in future for powers to be vested in a board, or body corporate, rather than a single individual. It is therefore suggested in the schedule that there be a chairman and not fewer than four other members.

The other place helpfully explored the underlying intention of that change. The intention is, of course, to try to ensure corporate responsibility—a division of powers that does not allow their arbitrary exercise by an individual. No one is accusing the Director General of Fair Trading of acting in such a way, but there is a tendency in the media, if not in the business community, to personalise matters and to suggest that the exercise of powers by a single regulator relies excessively on that person. That is especially true when a regulator might be replaced.

Corporate responsibility makes possible a sense of continuity and consistency on the part of a body corporate over a period of time, regardless of changes of personnel. That is a positive move, but it is curious that the Minister, in her response to my hon. Friend the Member for Blaby (Mr. Robathan), seemed to be reinventing the idea that the OFT chairman would be its director general. However, although the chairman may act as chief executive, under the Bill it is possible for the chairman to be appointed and for another OFT member to be the chief executive.

Melanie Johnson (Labour, Welwyn Hatfield)

I hope that I can help the hon. Gentleman. I pointed out earlier that the Bill allows the OFT to have a separate post of chief executive.

Andrew Lansley (Conservative, South Cambridgeshire)

I thank the Minister, whose intervention reinforces my point. That possibility—of the OFT having both a chairman and a chief executive—is entirely consistent with the structure of schedule 1. I presume that the chief executive would be one of the other board members.

However, the Government seem to be contemplating that their objective will be frustrated, initially at least. The fact that the chairman of the OFT will be its chief executive reinforces the sense that the office is governed by an individual more than by a set of corporate responsibilities. That is a pity. Business people say that experience tells them that it is desirable to separate the roles of chairman and chief executive, and they believe that that separation should be evident in a body with so much power over them.

There is no notion that it is best practice among regulators to separate the roles of chairman and chief executive. There are good examples of people combining those roles in a satisfactory manner, but we are moving away from that structure and towards having a board in which the roles are separated.

Andrew Robathan (Conservative, Blaby)

This issue is so complex that it is beyond the grasp of some very clever accountants and lawyers, but does my hon. Friend agree that the checks and balances governing the relationship between a chairman and a chief executive are especially desirable in respect of the OFT?

Andrew Lansley (Conservative, South Cambridgeshire)

It is not just a question of complexity. Indeed, that complexity suggests that the technical nature of a problem might be understood better by an extremely able person such as John Vickers than by a board comprising some part-time members. The point of separating the roles of chief executive and chairman is to allow the chairman not to become immersed in detail. The chief executive needs competence when it comes to technical factors, but the chairman should be able to see the strategic wood rather than the trees. That is not to say that the chief executive should not have a role in strategy, but that can happen more satisfactorily if the chairman is distanced a little from the chief executive's responsibilities.

I had understood that that was the direction in which the Government wanted to go. Lords amendment No. 1 seems merely to reinforce that intention on the Government's part and is consistent with the structure of clause 1 and schedule 1. I am surprised, therefore, that the Government are resisting something that is in line with their intentions.

John Redwood (Conservative, Wokingham)

I have declared my interest in the register. I was a fellow of an Oxford college that received an application from Mr. John Vickers for a fellowship by examination. As one of those who voted when he became a fellow of that college, I have the greatest regard for his intellectual ability and the high standard of his written work. I have since got to know him rather better and I also have a high regard for his fairness of mind and his independence, so my remarks are in no way an aspersion upon the present personality in the role. When legislating on such a powerful position, however, it is incumbent on the House to think about what might be needed were a less suitable candidate to be in the position at some future date, or were some unexpected events to transpire that, by definition, we cannot—and would not—forecast today given the personalities involved. To have good and fair law, it is important to think about what would happen should there be problems with the personality and decisions of the director general. I do not think that that has been adequately covered so far by the legislation or by ministerial statements.

The most obvious way in which power is sensibly limited in a pluralistic democracy is through competition. The irony of this post is that we are creating a monopoly to enforce competition on the commercial world. It is a paradox rather than a contradiction. Much as I admire competition, I would not want to advocate two or three offices of fair trading. That might be taking a good thing a little too far. However, that means that the most obvious way to control power, which we are rightly recommending to the private sector, cannot apply in this case.

The Minister may say that legal action could be taken if individual companies or industries do not like the way in which verdicts and judgments are going. There are legal remedies, but often it is not good practice, even for a powerful company, to take a regulator to court— it prejudices the relationship considerably. Many businesses and industries understand that they have to live with these regulators for the foreseeable future and are naturally reluctant to go to court.

There are appeals procedures against the judgments of the competition authorities, which are welcome and very necessary, but which are not sufficient for all the circumstances that might arise if a director general has gone wrong and the concentration of power is being abused. That is the situation that my hon. Friends the Members for Blaby (Mr. Robathan), for Cities of London and Westminster (Mr. Field) and for Huntingdon (Mr. Djanogly) rightly said requires special attention.

Splitting the roles could be of some assistance. There would be another senior figure to whom Ministers, the public and others could turn if it were felt that a director general had become unreasonable or unfair and was pushing the power too far. That provision would provide a balance or check in addition to the court and appeal system, which applies in some cases but not others. I want the Minister to reconsider all those factors because the Government have removed one of the most obvious ways in which this used to be done. They have decided that Ministers and politicians are particularly dangerous beings—I can understand why, given some of the Ministers that we have, although I am not commenting particularly on the present Minister. As a democrat before anything else, I believe that the correct way to control the power of powerful regulators is through democratic accountability to Ministers and this House, but the Government have made a series of legislative manoeuvres that will limit the power of politicians to intervene and, therefore, the power of the House to hold the regulator to account. That is a pity. In that context, I urge the Minister to think again about the Opposition's reasonable suggestion that a countervailing power should perhaps be introduced by having another senior person in the regulatory system who could be a court of appeal—a second place where one could go for informal redress and someone who could ultimately take action if the director general went over the top, became systematically unreasonable or became too powerful a figure.

I can understand why the Minister might not want to retrace steps by increasing the accountability of the regulator to this House and to Ministers, although that is a pity, so the second best answer is the one that my colleagues recommended so strongly and I urge the hon. Lady to think again.

Melanie Johnson (Labour, Welwyn Hatfield)

First, the vast majority of the Lords amendments are minor drafting amendments. About 40 or 50 amendments were accepted in the other place in direct response to arguments put forward by the Opposition—indeed, some were Opposition amendments. I hope, therefore, that this Chamber will agree that the passage and consideration of the Bill has improved it as appropriate and that the Lords have played a useful role in that.

The hon. Member for South Cambridgeshire (Mr. Lansley) mentioned the strategic board, which is to be a minimum of four plus the Director General of Fair Trading, and the hon. Member for Twickenham (Dr. Cable) mentioned accountability. First, it is not necessarily the case that it is easier to hold to account a chairman whose role is separate to that of the chief executive. Whether there is one person occupying two roles or two people with two different roles, they will still have to answer in the role in which accountability has to be exercised. We have improved that accountability in many ways, not least through the provision for public consultation on an annual plan and a report. Although it is obviously a matter for this House and its Committees, we expect that an appropriate Select Committee, or Select Committees, will exercise scrutiny powers. A whole range of provisions have improved accountability rather than weakened it.

Vincent Cable (Liberal Democrat, Twickenham)

According to the press, the subjects of the Lords amendments were referred to the Cabinet for discussion. Can the Minister confirm that? Can she also explain why the amendments were thought so threatening to the Government that they had to involve senior Ministers and the Prime Minister?

Melanie Johnson (Labour, Welwyn Hatfield)

I can neither confirm nor disconfirm that. I am not a member of the Cabinet as the hon. Gentleman is aware.

This is not a question of accountability—

Andrew Lansley (Conservative, South Cambridgeshire)

Perhaps the Minister will clarify something. She referred once again to the Director General of Fair Trading, which is confusing. I understood that we were to have a chairman at the Office of Fair Trading and that the post of director general was to be abolished under clause 2, so I do not understand why she referred to the director general.

Melanie Johnson (Labour, Welwyn Hatfield)

It is current speak. If the hon. Gentleman will forgive me for doing so, I am referring to the individual. It may be more helpful if I simply refer to Professor John Vickers, the current occupant of the role, and we would expect him to occupy both new roles, as I explained in my opening remarks, which the hon. Gentleman missed—

Andrew Robathan (Conservative, Blaby)

Was it just a slip of the tongue when the Minister referred to both new roles? Does she see them as separate roles, as we do? If so, why not have two separate people to carry them out?

Melanie Johnson (Labour, Welwyn Hatfield)

I have already explained that there is a possibility of splitting the roles. It is easy to argue whether there are two roles or one, but arguing how the role is divided is largely academic. It has strategic and operational aspects. The point is whether there is a separate strategic post. I could argue in different terms, but I am using those that have been put to me in the debate.

The concerns expressed by several hon. Members, including the right hon. Member for Wokingham (Mr. Redwood), were mainly about individual decisions taken by the office. We see the role of any chairman, whether or not it is separate from that of the chief executive, exercised as part of a strategic board arrangement and providing strategic oversight. There would not be a decision-by-decision oversight of matters to do with the operation of the office.

John Redwood (Conservative, Wokingham)

I was interested in the abuse of power by the office-holder. That could take many forms. It might be a run of unfair decisions, unfair treatment in a particular case or pursuit of a line that did not tally with the normal policy. All those things are theoretically possible and the Minister needs to tell us how they would be handled.

Melanie Johnson (Labour, Welwyn Hatfield)

I have already explained that there will be an annual plan, an annual report, and mechanisms for accountability. Those were discussed at considerable length during the Bill's proceedings. If serious problems arose or if a future chairman acted inappropriately and abused their power, the Secretary of State has the power under paragraph 3 of schedule 1 to remove from office the chairman or any other board member

Xon the ground of incapacity or misbehaviour".

We thus have provisions to deal with the Xmad and bad" under the proposed arrangements.

The other main issue raised by hon. Members relates to aspects of corporate governance. We propose to amend those provisions because not all the principles of corporate governance are relevant to a public body or a Department. For example, the principles refer to remuneration practices and relations with shareholders, which are obviously not relevant to the Office of Fair Trading. The amendment simply ensures that the OFT has regard only to what can reasonably be considered relevant to it.

To respond to the remarks made by the hon. Member for Huntingdon (Mr. Djanogly), the amendment is intended to ensure that the guidance, which was originally aimed at private companies, does not override for the OFT any guidance specifically for public bodies. The OFT is a public body, not a private company. Indeed, all the Hampel provisions were designed for public, listed companies. Clearly, the OFT is not a public, listed company.

To reassure hon. Members, I stress that we expect the OFT to have regard to the combined code principles in so far as they relate to it. However, it will also have to act in accordance with rules and guidance: for example, that on public accounting, which is a different area. As I explained in response to the questions of the right hon. Member for Wokingham, if there is abuse we can deal with it.

Under the present arrangements, it is possible for the OFT to appoint a separate chief executive officer. Currently, that is true. We envisage that we shall reconsider those arrangements in 2005 when John Vickers retires from his post to assess whether they will be appropriate after that time. They are entirely appropriate at present, however, and I hope that the House will support the motion.

New Clause

Melanie Johnson (Labour, Welwyn Hatfield)

I beg to move, That this House disagrees with the Lords in the said amendment.

Sylvia Heal (Deputy Speaker, Halesowen and Rowley Regis)

With this it will be convenient to take Government amendment (a) in lieu, Lords amendments Nos. 8 to 17, 74, 124, 189 to 209 and the Government motion to disagree thereto and Government amendment (a) in lieu, and Lords amendment No. 210.

Melanie Johnson (Labour, Welwyn Hatfield)

Lords amendment No. 7 would give the Secretary of State and the Lord Chancellor the power to make regulations allowing the courts to transfer to the Competition Appeal Tribunal issues arising in civil proceedings that require a determination of whether there has been an infringement of competition law.

The main argument made for the amendment in another place was that, following the implementation of the so-called modernisation project, which is likely during 2004, the ordinary courts will be given the power to apply article 81 of the EC treaty in full. They may therefore have to deal with significantly more civil cases raising complex competition law issues. The argument was that the courts were not equipped to deal effectively with competition law points, which often involve complex economic evidence.

Article 81(3) issues are thought to be particularly difficult, requiring an assessment of whether countervailing benefits arising from an anti-competitive agreement are sufficient to legitimise it. The Competition Appeal Tribunal, an expert body set up to hear appeals against decisions of the OFT on such matters, was perceived as better qualified to determine these matters.

The Government argued in another place that it was the role of the courts to build up the expertise in competition issues needed to handle competition matters arising in civil proceedings. There are practical ways in which the expertise of judges can be enhanced and, if necessary, certain judges could be nominated as specialists in competition law. The courts will also be assisted when necessary by the Office of Fair Trading and the European Commission. Under the modernisation regulation, the Commission will be empowered to submit written observations to the national courts on issues relating to the application of articles 81 and 82, and, when we implement modernisation, we intend to provide a similar power for the OFT. Both bodies, with the permission of the court in question, will also be able to submit oral observations as expert witnesses.

Our current belief, therefore, is that the courts will be able to cope with the consequences of modernisation without the need for powers to transfer issues arising in civil proceedings to the Competition Appeal Tribunal. However, we recognise the strength of feeling in another place that an explicit power should be provided in the Bill to allow regulations to be made allowing the courts to transfer competition law matters to the Competition Appeal Tribunal for determination by that body. If the proponents of the amendment are right, and the courts are not able to handle competition issues effectively, there will be specific powers to allow matters to be transferred. If the Government are right, the powers need never be used. On reflection, we now agree that an amendment along the lines of Lords amendment No. 7 would be a prudent piece of future proofing, and should be made.

However, there are some technical difficulties with Lords amendment No. 7 as it is currently drafted, which is why we propose to replace it and Lords amendment No. 209 with our amendments in lieu. I would like to highlight the main changes. First, the redraft provides that the Lord Chancellor alone, rather than jointly with the Secretary of State, would exercise the power to make regulations. There is no particular significance to that change—it is simply customary for the Lord Chancellor to have sole responsibility for such matters. Secondly, the amendment in lieu not only refers to the regulation-making power but makes it clear that the rules of court may be made in connection with a transfer. Thirdly, the amendment removes the power for the Lord Chancellor to appoint judges directly to the key positions on the Competition Appeal Tribunal. In another place, it was accepted that this power was not needed. The power exists already, but it would cut across the policy of the Lord Chancellor's Department that all appointments to tribunals should be made through open competition.

The second amendment in lieu, to Lords amendment No. 209, makes a corresponding adjustment to the scope of the tribunal rules so that they may make provision in connection with the transfer of proceedings from a court. Lords amendment No. 209, which was a Government amendment, is superseded by the amendment in lieu.

I would now like to turn to the remaining amendments in this group: amendments Nos. 8 to 17, 74, 124, 189 to 208 and 210. That group of Government amendments reflects work that was done in the other place to improve the drafting of part 2 of the Bill and related provisions. Part 2 is concerned with the establishment of the Competition Appeal Tribunal and the allocation to it of new powers such as the ability to hear damages claims arising from infringements of competition law. It also provides for such claims to be brought on behalf of named consumers.

The most important changes here are the technical improvements to clauses 17 and 18 of the Bill. Amendment No. 8, for example, makes it clear that the scope of a damages claim made before the tribunal is to be the same as that made before a court. It also makes it clear that the damages or other sums that may be awarded include all monetary awards that could be awarded by a court in respect of the relevant infringement. Amendment No. 9 ensures, among other things, that an infringement of competition law has to be established before a group claim can be brought, and that the right to bring a group claim does not affect the right to bring a claim before the court.

Amendment No. 11, too, is worth highlighting. It enables the Competition Appeals Tribunal to order the defendant to pay any monetary remedies to the body bringing the claim for onward distribution to the relevant individuals, as long as all of them consent. The damages will still be awarded to the individuals rather than the representative body, which will be acting on their behalf in receiving the amounts due.

Clause 19 adds a new section 58A to the Competition Act 1998 to provide that infringement findings—for example an OFT decision that a chapter 1 prohibition has been breached—will be binding in the courts when the courts are considering monetary claims. Amendment No. 17, however, clarifies that the new section does not apply in relation to infringement decisions made before the commencement of the section. It is important, for business certainty reasons, that there should be no retrospective application of the new provisions.

Amendments Nos. 74, 124 and 205 remove the reference to the period for bringing an appeal to the Competition Appeal Tribunal following a decision in a merger or market investigation. It is still our intention to have firm, fixed time limits, but these timings will now be set by the tribunal's rules, on which we are currently consulting. Part of that consultation seeks views on whether those periods should be one month for a merger and six weeks for a market. We have not yet come to a view on the appropriate length of either period. However, as we may end up changing these periods in the tribunal's rules, we decided that it would be better to remove the reference to three months from the Bill.

The remaining amendments in this group are consequential on the changes to clauses 17 or 18 or are minor and technical improvements to this part of the Bill. I do not propose to go through them in detail, but I invite the House to agree that they should be made, and I am happy to address them should hon. Members so wish.

Andrew Robathan (Conservative, Blaby)

We are, of course, delighted that the Government have listened to the sensible arguments put forward in another place by my noble Friends Lord Kingsland, Lord Hunt of Wirral and others. The Government are rather foolish to say that their current belief is that the provision will not be necessary. Experienced lawyers have concluded that it will be necessary, and I am therefore delighted that the Government have accepted our views. That merely begs the question why such a contingency plan was not included in the Bill in the first place. With 750-odd amendments to the Bill, however, we are not that surprised.

We have taken unofficial legal advice on the matter, which was that amendment (a) to Lords amendment 7 is somewhat better than the one that we produced, so we are happy to accept it—one would expect a parliamentary draftsman to do better than an amateur parliamentary draftsman. Nevertheless, I would like to thank Sir Jeremy Lever, an eminent Queen's counsel, for his sensible and public spirited assistance.

I want to raise some concerns relating to Scotland and Northern Ireland. I am not a lawyer, so I hope that the Minister will be able to put me right—as she knows, I have come to the Bill somewhat late, so perhaps she will be able to do so straight away. Will the Government clarify whether separate measures will be necessary for Scotland and Northern Ireland? Although the Lord Chancellor is given particular mention, I had understood that the Lord President had jurisdiction in Scotland. I certainly understand that the joint working party of the Bars and Law Societies of the United Kingdom says that, in this case, the Lord Chancellor would not have the relevant jurisdiction. Could the Minister scurry around to get some legal advice on that point before we finish our consideration of this clause?

John Redwood (Conservative, Wokingham)

I welcome the Government's change of heart in one important respect. I think that they will find that they need to make use of the provision. As for the principal arguments, it will expedite proceedings, as the general court system is very congested, and some of these cases need to be dealt with in a timely way. Furthermore, the technical complexity of this extremely voluminous Bill, which is very much in evidence this evening, will require specialists to argue the case and to adjudicate the complex issues involved. It will therefore often be necessary to send such cases to a tribunal to be dealt with by people who are well versed in this complicated area, and to ensure that they are dealt with in an expeditious manner. I hope that the Minister will enter fully into the spirit of the Government's welcome change of heart and recognise that it is not just a belt-and-braces provision. It was strongly recommended by independent lawyers of no political persuasion who have worked in this area for many years and have a firm view of how such matters should be handled.

Melanie Johnson (Labour, Welwyn Hatfield)

I am grateful to the right hon. Member for Wokingham (Mr. Redwood) for his remarks. Of course, I enter into the spirit as well as into the letter of the suggestion. I reassure him of that.

The Government have not acted in the way that the hon. Member for Blaby (Mr. Robathan) suggested. We have not been foolish. We believe that the provision will not, in general, be necessary and that the courts will equip themselves with the necessary expertise. Views obviously differ, so we have accepted the wisdom of the suggestion that the Bill should contain the provision. Accordingly, we have tabled amendments that are as effective and as appropriate as possible.

I am not a lawyer, but I have taken legal advice about the issue of separate measures in Scotland and Northern Ireland. The court rules for Northern Ireland are made by the Lord Chancellor and are not a reserved matter. In fact, Northern Ireland will be covered exactly as specified in the Bill. The hon. Member for Blaby is correct about the position in Scotland, but the law will be consistent. The Lord President will make the rules in Scotland in the way that the hon. Gentleman suggested. There will be a separate arrangement for Scotland, but not for Northern Ireland.

Lords amendment disagreed to.

Government amendment (a) in lieu of Lords amendment No. 7 agreed to.

Lords amendments Nos. 8 to 17 agreed to.

Clause 21 — Duty To Make References In Relation To Completed Mergers

Melanie Johnson (Labour, Welwyn Hatfield)

I beg to move, That this House agrees with the Lords in the said amendment.

Alan Haselhurst (Deputy Speaker, Saffron Walden)

With this we may discuss Lords amendments Nos. 21, 22, 24, 28, 34, 53, amendments (a) and (b) thereto, 54, amendments (a) to (c) thereto, 65, 66, 78, 81, 82, 84, 88 to 90, 116, 117, 136 to 142 and 211.

Melanie Johnson (Labour, Welwyn Hatfield)

This group of amendments covers issues relating to the interaction between domestic regimes and European competition law. In particular, we have introduced amendments to clarify and improve the relationship in four areas. We have sought, first, to highlight the primacy of EC competition law where it applies and, secondly, to clarify the domestic duty to reflect that. The third point is the need to ensure that the Secretary of State can act to protect legitimate interests in cases that fall to the EC merger regime for assessment of the competition aspects. The fourth and final area is the minor changes to the power to take account of modernisation. They are sensible amendments to ensure that the new domestic regime is a good fit with EC competition law.

The Government intend to resist the amendments to Lords amendment No. 53, and I shall take your advice, Mr. Deputy Speaker, on whether I can do that. However, my hon. Friend the Member for North-East Derbyshire (Mr. Barnes) will no doubt wish to speak to his amendments.

Harry Barnes (Labour, North East Derbyshire)

I wish to speak to amendments (a) and (b) to Lords amendment No. 53, and to amendments (a), (b) and (c) to Lords amendment No. 54.

This is the fourth attempt that has been made in the two Houses to try to insert into the Bill serious provisions relating to the public interest that are in line with those in section 84 of the Fair Trading Act 1973. Under the current legislation, it is possible in theory for the Secretary of State or the Director General of the Office of Fair Trading to refer to the Competition Commission a merger that might seriously affect the public interest. In the 1973 Act, the public interest is described as relating to the balance of industry and employment throughout the United Kingdom and to a consideration of the ability of UK producers to compete in export markets. If those markets are harmed or damaged, the Competition Commission can consider a merger.

Unfortunately, since the time that Lord Tebbit was a Member of the House, the policy of Governments of both persuasions has been not to make great use of that power. It is not true to say that it has never been used, but it has been difficult to persuade Governments to act. Ideally, I would like moves to be made so that action is obligatory while retaining as much as possible of the 1973 provision. I have pursued that aim on several occasions in the House.There is much concern in the trade union movement about this matter, and the general secretary of the Trades Union Congress and most of the major trade unions have made representations to the Secretary of State. I elaborated on that in our earlier debates on this issue.

The Bill restricts public interest considerations to defence matters and contains a longstop provision, which means that the public interest can be referred to. However, the Government have never defined what that means or clarified the circumstances in which the provision could be used. The Conservatives tend to fear the Government's provision, believing that a horse and cart could be driven through it. However, I see the Government's approach as something of which we know not what. It is unlikely to be used in any feasible circumstances, so it is likely to be a fairly insignificant power. We therefore need a much stronger provision for the public interest to be introduced.

We first discussed the matter in Standing Committee. The probing amendments that I tabled were based on the experience in my constituency of the takeover of Biwaters by Saint-Gobain, which resulted in the immediate loss of 700 jobs. In terms of employment, the distribution of industry, export markets and viability, Biwaters was in a good position. What happened was a disgrace. We should have activated and made use of the 1973 measure.

I forced a vote on the issue on Report, as reflected at columns 1094–95 of Hansard on 13 June, when I managed to muster 39 in support of the measure. Some 245 hon. Members voted against it. I do not imagine that the Government are going to have a change of heart and make a concession, so I intend to divide the House on my amendments. The vote on 13 June was the only hostile vote by Labour Members because the Bill contains many acceptable provisions. Indeed, there has been little hassle throughout its proceedings. The Bill is lengthy. It has been greatly debated and many amendments have been tabled, but there has not been a raft of votes or heated discussions. Opposition Members have in general been happy with the Bill. They view it as a way to produce a dynamic economy, and that part of new Labour ideology appeals to some of them.

A third attempt was made to introduce public interest measures. When the Lords discussed the Bill in Committee, probing amendments were tabled by Baroness Turner, supported by Lord Hoyle. My amendments have a different framework and context.

Andrew Robathan (Conservative, Blaby)

I just want to clarify one thing. Although we may not object to everything, we are not entirely happy with the Bill. However, much of it is sensible.

Harry Barnes (Labour, North East Derbyshire)

I realise that many people in the City and elsewhere will be happy with many of the measures. However, other people are attracted to different aspects of it, such as consumer rights, which we wanted to extend to worker rights, and bankruptcy. Had things been different, the 11 Clay Cross councillors, some of whom still represent people in my constituency, might have faced a different system.

The scope of our debate is reduced to matters associated with the European Union and clawing back powers. In addition, the definition of public interest is a bit restrictive because it refers to the distribution of employment and industry. It is drafted in that way because of the possibility that it would be debated and can be discussed only in the context of amendments Nos. 53 and 54.

We are restricted to European merger laws. They relate to mergers of a certain scale and to a community dimension, which in turn relates to a complex threshold provision. They are handled exclusively by the European Commission rather than national competition authorities. However, European law allows national competition authorities to request the Commission to consider a merger on a number of grounds including defence interests, mergers that primarily affect the member state and cases in which a member state needs to take action to protect its legitimate interests. The amendments would instigate and extend public interest concerns.

The subject was elaborated on and discussed in the Lords. Lord Sainsbury explained that the intention of the amendments tabled there was

Xto preserve the current position, which is that, where necessary, the UK can use the domestic merger control regime to take action on matters other than competition, such as defence, in relation to cases that fall to"

the economic community merger regulations. He went on:

XIt is important to note, however, that the power to protect legitimate interests will not range any wider than the public interest considerations that may be taken into account under the new UK merger regime."—[Official Report, House of Lords, 15 October 2002; Vol. 639, c. 789.]

My intention is not in line with that. I want to widen the scope, even though the extent to which I can do that under the procedures of the House is limited.

I feel strongly about the matter, especially in light of the Biwaters experience and ensuing developments. It seemed that the Government were ready to get rid of the public interest concern as it related to mergers. The House needs another chance to express its views on that so that a residual part of the public interest remains.

Vincent Cable (Liberal Democrat, Twickenham)

I admire the hon. Gentleman's persistence and stamina. I have supported him because he has a case, although my point of departure is different from his. The existing system, which allows Ministers to make final decisions on mergers, has considerable disadvantages. That is why the Bill gets rid of it. The problem with the system is that it leads to capricious political intervention, but it does have some advantages. Ministers are ultimately accountable and can act in a wider public interest. There will be times, such as the impact of a merger on a geographical area, when that would be useful. The hon. Gentleman is right that it is desirable to have the principle of a backstop provision.

Harry Barnes (Labour, North East Derbyshire)

There is no arrangement by which the Director General of the Office of Fair Trading can use the public interest argument when referring a case to the Competition Commission. We should consider whether that power should fall to the Secretary of State or the director, or a combination of the two.

Vincent Cable (Liberal Democrat, Twickenham)

The hon. Gentleman suggests options, but we are arguing about the principle.

John Redwood (Conservative, Wokingham)

The hon. Gentleman said that ministerial decisions can be capricious. As a Minister who was involved in making competition decisions, I hasten to put it on the record that they were never capricious. Had they been capricious, they would have been subject to judicial review and legal proceedings. There are rightly strict controls on how Ministers make such decisions and on how they have to be promulgated and explained. The hon. Gentleman should reflect again. There can never be a capricious ministerial decision unless it is one that is overturned.

Vincent Cable (Liberal Democrat, Twickenham)

The right hon. Gentleman may be playing with words. He is describing the procedure correctly, but Ministers have in the past made decisions on mergers policy that do not appear to have been inspired by competition policy or the public interest. That is why the Bill was introduced and why it has the support of all parties.

The hon. Member for North-East Derbyshire (Mr. Barnes) has made his presentation on several occasions. I am not sure that we would be well served by having another Division on the matter, but if the hon. Gentleman wants to press it to a vote, I will support him.

John McDonnell (Labour, Hayes and Harlington)

The debate on public interest and public security, as defined by the European merger regulations, has been extensive but not particularly clear. It would be helpful for future interpretation of the law if the Minister stated on record whether, under those regulations, the definitions of public interest and public security take any account of the distribution of industry and employment. Are rates of employment and unemployment in an area a consideration in determining public interest or public security? Can the Minister give examples in which those factors would be taken into account?

John Redwood (Conservative, Wokingham)

I hope, Mr. Deputy Speaker, that if the Minister catches your eye, she will comment a little more on the main purpose of these amendments and on the relation between UK and European Union law.

When the Bill that became the Competition Act 1998 was before the House, we were assured that it would be the final statement on the necessary division between EU law and UK law. We were told that it would implement a new system that would ensure that we were not at variance with Brussels and that we had separated powers correctly. We are now told by Ministers that the Act is far from perfect and that we must pass voluminous legislation to get it right, even though EU competition law has not changed very much. The main definitions for that law were set out in the merger regulations and other important texts that have not changed in the intervening period.

Will the Minister explain why errors were made and why she feels that the Government have now got it right? Is she prepared to say that this is a definitive version of the relative powers of the EU and the UK in this field, barring, of course, further change because of a development in the superior law of the EU? I was pleased to hear the Minister admit that EU law in this field is superior—and that that is reflected in the Bill—because I have long believed and argued that, and I have encountered resistance from those who want to pretend that the EU is less powerful than it is. That was an important statement by the Minister.

Jonathan Djanogly (Conservative, Huntingdon)

I point out, in support of my right hon. Friend, that it was repeatedly said in Committee that the previous legislation is so recent that we have not had time to assess its implications and how it works in practice.

John Redwood (Conservative, Wokingham)

My hon. Friend has made the powerful point that such complicated legislation, with many regulations, takes a long time to bed down. It takes time to establish the case law by which we see how legislation is working, so the Government, figuratively speaking, have pulled up the plant to see whether it is growing, which is not a good way of practising horticulture. I am worried that they may do that again because of the enormous complexity of this Bill. They lack a sureness of touch because they are trying to marry their political wish to tell the British people that Europe has very little power and is not taking strong legal powers beyond those of the nation states in their desire to align themselves with the obviously strong powers held by the Brussels regime in this and many other areas.

Will the Minister reassure the House that she is aware of the current negotiations for a constitution for Europe? That is important work, and drafts have been in circulation. Can she assure the House that nothing in those drafts clarifying the relative powers of the Union and the member states will mean that she, or her successor, has to return to the House within a couple of years to legislate yet again? One worries that, as the Government fumble for a solution, this will become a perpetual round of legislating, revising and amending. That would mean that all those in the business community who are desperate for certainty about the law, about who applies it and about who has power would constantly have to go to expensive lawyers for interpretations of lengthy new legislation.

I have declared my interest in the register, and I do not speak on behalf of business, but that community is increasingly befuddled by the length and complexity of legislation and the constant changes to it. It is beginning to feel that the Government change the law rather more often than does the EU, although they claim that in some way the EU requires those frequent changes.

Will the Minister reassure us that she has taken account of all the best legal advice about the current position, and that it is now definitive? Secondly, will she reassure us that nothing doing the rounds in Brussels or elsewhere in the EU is likely to make a material change? Thirdly, will she confirm that there is nothing in the preliminary drafts for the European constitution that will require us to revise the Bill? Fourthly, does she think that there can now be a period of greater certainty and clarity to allow our competition regime to bed down for years and give us a good chance to see how it works?

Mark Field (Conservative, Cities of London and Westminster)

I support the words of my right hon. Friend the Member for Wokingham (Mr. Redwood), and I think that the issue of certainty is central to the debate about the relationship between the EU legal regime on competition and that in the UK. My right hon. Friend rightly addressed the demand from business for more certainty. It is certainly odd that legislation passed as recently as 1998 is now being updated when it has not had an opportunity to bed down.

My concern, however, goes further, and I am interested to hear the Minister's response. There seems to be confused thinking about the role of competition policy. Indeed, it has to be said that, whatever one thinks of EU competition policy, it is fairly certain, and it has a test—the dominant position test. One of the concerns addressed in Committee and in the Lords is that the theory underlying the Government's introduction of the Bill, which will presumably be an Act before long, is that it will bring in a Xsubstantial lessening of competition" test. It strikes me that, notwithstanding the Minister's reassurance a few moments ago, there is a risk that if we are not careful we will fall foul of EU legislation and, as a result, our businesses will fall foul of the European court. I reiterate the point that we must have give the situation proper consideration and take full legal advice. The Minister reassured us that the Bill will be part and parcel of the EU process, but I can imagine that changing, particularly as we now seem to be diverging from the dominant position test.

I turn briefly to the contribution of the hon. Member for North-East Derbyshire (Mr. Barnes) and that of my old sparring partner, the hon. Member for Hayes and Harlington (John McDonnell). I am sure that he is aware that only yesterday the Lords finally gave the City of London (Ward Elections) Bill its Third Reading. However, I am concerned that in his desire to get a balanced distribution of industry and employment in his amendment, the hon. Member for North-East Derbyshire presumes that the trade unions are acting in the public interest. I do not believe that that is the case. The trade unions act, rightly, in their members' interests, but the idea that those interests and the public interest are one and the same is naive. I do not favour more Government control.

Harry Barnes (Labour, North East Derbyshire)

Of course, a substantial part of the Enterprise Bill covers consumers, who have their own individual concerns and legitimate interests. The hon. Gentleman may remember that I attempted to table another batch of amendments arguing that workers organisations should have such representation, which is not to say that they do not have sectional and selfish interests as well. However, they also have legitimate interests, which sometimes produce a fruitful result.

Mark Field (Conservative, Cities of London and Westminster)

The hon. Gentleman will forgive me if I cannot remember all his contributions. I am sure that, like me, he is befuddled by a number of matters that have come before the House. The Bill has not only completed its Report stage but has come back before the House today. However, I accept his point that collective interests are at stake, including consumer matters which, no doubt, we will discuss later, even if only in outline.

Opposition Members are concerned that large consumer bodies will play a more important role in the Bill's operation than their status necessarily dictates. They are not unaccountable, but should be regarded as a party with particular interests that do not necessarily amount to the public interest. I shall be interested in the Minister's response, but I am concerned that the amendments are proposing more Government control. It would be unwise to second-guess markets, as that served the country badly in the 1960s and 70s. If that were introduced in the Bill, there would be no great advantages, either for enterprise or the business community as a whole.

Melanie Johnson (Labour, Welwyn Hatfield)

May I respond first to the amendments tabled by my hon. Friend the Member for North-East Derbyshire (Mr. Barnes)? I recognise that he has spent a considerable time trying to convince the Government of the wisdom of his case. Like the hon. Member for Twickenham (Dr. Cable), I admire his stamina and efforts.

The amendments to Lords amendments Nos. 53 and 54 seek to enable the Secretary of State to intervene and act to protect matters relating to

Xthe legitimate interests of the balanced distribution of industry and employment"

in cases that fall to the European Community merger regulation—the ECMR. I am not sure that the line numbers are accurate, but I think that that is the sense of my hon. Friend's proposals. We have previously debated in the House amendments that sought to introduce the consideration of matters such as employment in cases handled under the domestic regime. I shall not repeat in detail why the Government believe such changes are undesirable, although I agree with my hon. Friend that those matters are important. The Government believe that vigorous competition is the key to ensuring that United Kingdom businesses are better able to provide long-term and sustainable employment. Our record of creating more than 1.5 million new jobs since 1997 is proof of the success of our strategy.

The domestic regime that we have proposed ensures that competition is the key consideration—we have made it clear that that should be the focus of future merger inquiries. The European regime already operates along those lines. Under the ECMR, the European Commission looks solely at the competition aspects of the merger. Only in a very few cases is it necessary for member states to act in parallel to address non-competition concerns. We have proposed that the grounds on which the Secretary of State acts in ECMR cases should be no wider than those in which she may act in domestic cases. It seems sensible, therefore, to link the European intervention power to the considerations specified in clause 57. However, we also need to be aware of the impact of European law in ECMR cases. The ECMR provides that the grounds on which member states can act is limited to those specified as legitimate interests or recognised as such by a decision of the Commission. The grounds suggested by my hon. Friend are neither specified nor the subject of a Commission decision, so the amendments would have no effect in law. For those reasons, I urge him to withdraw his amendments, although I respect the fact that he has said that he may wish to press them to a vote.

Turning to the remarks of the right hon. Member for Wokingham (Mr. Redwood), the Competition Act 1998 and the Bill deal with different matters. The Competition Act deals with the introduction of prohibitions on anti-competitive agreements and abuses of the dominant position. The Bill is mainly about the reform of the merger and monopoly regimes, which were not touched by the Competition Act. The Bill completes the process of reform. We have also taken sensible steps to provide for future changes in Europe by providing for a power to deal with EC modernisation issues, although I emphasise the fact that the amendments are minor in relation to such matters. I hope that that clarifies my point that the Bill is a complementary exercise which completes the process begun by the Competition Act. Indeed, it also completes the reform of competition legislation and the competition regime in the UK, which lay untouched for several decades before the Government came to power in 1997.

John Redwood (Conservative, Wokingham)

Is the Minister assuring the House that the Bill completes the reform process so that we are completely compatible with European Union law? We would therefore need only to make changes in future if there were a big upheaval in EU law. Will she also confirm that no such upheaval is planned in the current discussions on the constitution and other matters?

Melanie Johnson (Labour, Welwyn Hatfield)

The right hon. Gentleman knows full well that it would be foolish of me to respond to his quest for assurances. We are doing our best to ensure that we do not have to make significant changes in future. I doubt whether he had a crystal ball when he was in government, and I do not have one either. The provisions are as future-proof as possible in relation, for example, to the changes mentioned by the hon. Member for Cities of London and Westminster (Mr. Field). We are discussing the future of the dominance test with the Commission and have moved towards a substantial lessening of competition. We would like the European authorities to do the same, but if they do not, that does not pose any difficulties for us. However, that is one of the main areas of discussion on competition law. I therefore hope that the right hon. Member for Wokingham accepts my assurances.

Lords amendment agreed to.

Lords amendment: No. 19, page 11, line 43, after Xof" insert

Xa notice or possible notice under section 41(2) or 58(2) or"

Melanie Johnson (Labour, Welwyn Hatfield)

I beg to move, That this House agrees with the Lords in the said amendment.

Alan Haselhurst (Deputy Speaker, Saffron Walden)

With this we may discuss Lords amendment No. 20 and Government amendment (a) thereto, and Lords amendments Nos. 23, 25 to 27, 29 to 33, 35 to 52, 55 to 64, 67 to 73, 75 to 77, 79, 80, 83, 85 to 87, 91 to 115, 118 to 123, 125 to 131 and 212 to 225.

Melanie Johnson (Labour, Welwyn Hatfield)

I shall speak to this group of merger and market amendments in two parts. First, I shall deal with the turnover threshold, and then I shall speak to themany technical amendments that constitute the remainder of the group.

On the turnover threshold, we agree with the Lords that clause 22 should be amended. We believe that Lords amendment No. 20, which replaced the #45 million threshold for mergers with one of #100 million, should itself be amended by amendment (a), which inserts one of #70 million.

The turnover threshold is one of two jurisdictional tests that make a merger eligible for investigation by the Office of Fair Trading. The other test is whether a merger would create or enhance a 25 per cent. share of supply. It is important to emphasise at the outset that these are eligibility thresholds only. If a merger involves the acquisition of a business with a UK turnover above the relevant threshold, the OFT is entitled to inquire into it. It does not mean that the merger will be referred or blocked but simply that the OFT can consider whether the merger raises sufficient competition concerns to justify a reference. The great majority of qualifying mergers are not subject to any further action by the competition authorities, but it is important that they can be assessed.

The purpose of thresholds is to strike a balance between excessive and necessary regulation. They should be aimed at ensuring that mergers of real concern can be examined, but avoid interference with cases of no material competition concern. Getting the level right is necessarily a matter of judgment.

The Bill replaces the current assets-based jurisdictional threshold with a turnover threshold. It is widely agreed that turnover is a better indication of the economic significance of a merger. The issue is at what level the new threshold should be set. Our goal in selecting the level of the turnover test has always been to bring within the scope of the merger regime broadly the same number of companies as currently qualify under the assets test. To get this right will inevitably take experience.

Our research indicated that a #45 million level would represent neither a tightening nor a loosening of the domestic merger control regime. In the context of a Bill that has as one of its primary aims the safeguarding of competition, we think that it would be odd to be thinking in terms of any significant relaxation of the scope of the regime. Anti-competitive mergers can do serious harm to the interests of consumers and to the economy at large. Avoiding that is the whole point of merger control and it should not be overlooked.

Amending the threshold to #100 million, as the Lords propose, runs a serious risk of allowing anti-competitive mergers to proceed without any form of scrutiny by the competition authorities. The OFT has estimated that about 50 per cent. of the mergers that can currently be scrutinised would no longer be eligible for any form of investigation. Far greater reliance would have to be placed on the alternative share of supply test. That would go against the grain of experience to date. At present a big majority of mergers that qualify for investigation qualify under the assets test. It also goes against the grain of international notification regimes, which are invariably based on turnover thresholds.

The share of supply test can be useful in the context of horizontal mergers, but it is more complex and cannot be used to bring vertical mergers within the scope of the regime. For example, a merger that was scrutinised last year, the Dynergy/BG Storage merger, would not have qualified under a #100 million turnover threshold, or under the share of supply test. The merger could have affected domestic gas prices and is therefore the sort of case that we would want investigated.

With a very high turnover threshold, we risk missing mergers of small but potentially significant companies with lower market shares, such as IT or biotech companies, which none the less represent a significant threat to established firms. It is because of such examples that the Competition Commission has expressed serious concerns about the impact that a turnover threshold of #100 million might have.

We recognise, however, that the threshold figure is an issue around which there are strong feelings. We have no desire to increase unnecessary regulation in this area, or in any other. We have also noted that the assets threshold of #70 million has not been adjusted since 1994. A review of that figure might have been appropriate before long. We recognise that estimating the practical impact of the new turnover threshold is necessarily an imperfect science, and that it would be unfortunate if we had unintentionally caught too many cases. In the light of pressures for a higher figure, we therefore propose amending the Lords amendment so that the turnover threshold is initially set at #70 million.

We offer this raised threshold amendment with some unease. If it proved subsequently that a significant number of harmful anti-competitive mergers were escaping scrutiny altogether, the Government would have no choice but to reduce the threshold to an appropriate level. We will need to keep the matter under review. I hope that the #70 million threshold will be acceptable to the House.

Jonathan Djanogly (Conservative, Huntingdon)

In the same way as the Government intend to keep the matter under review with a view to moving the figure downwards, does the Minister accept that it may be more appropriate to move the figure upwards? Will the Government keep an open mind about what the appropriate figure should be after the Bill is enacted?

Melanie Johnson (Labour, Welwyn Hatfield)

Yes, indeed. We will keep an open mind. The entire discussion is about the methodology of achieving in turnover terms the same effect as the asset threshold had before. We want neither to relax the regime nor to tighten it. We need to achieve equivalence; the question is which figure would achieve that. All our research suggested #45 million, but we have not managed to convince others of that, so we are suggesting moving to #70 million. There is a clear indication that were we to move to #100 million, there would be a significant relaxation of the merger control regime, which would be highly undesirable, as I am sure the hon. Gentleman would agree. That is why we have arrived at the #70 million figure.

Jonathan Djanogly (Conservative, Huntingdon)

indicated dissent.

Melanie Johnson (Labour, Welwyn Hatfield)

The hon. Gentleman shakes his head in a worrying way, but does not wish to elaborate.

The remaining amendments in the group are all primarily technical changes to the Bill to improve its functioning. They reflect work that has been done in the other place to respond to points raised by noble Lords and to check the Bill for accuracy. Unless hon. Members wish me to go through any of the amendments in detail, I do not propose to do so at this point.

Andrew Robathan (Conservative, Blaby)

It is unfortunate that on such an extraordinarily important and complex issue, which has taken up a great deal of the time of both Houses, with the exception of the hon. Member for North-East Derbyshire (Mr. Barnes) and his supporter, the hon. Member for Hayes and Harlington (John McDonnell), no hon. Member has been willing to speak in support of the Government.

John McDonnell (Labour, Hayes and Harlington)

I was not supporting the Government.

Andrew Robathan (Conservative, Blaby)

I apologise to the hon. Gentleman for suggesting that he was supporting his Front-Bench colleagues. [Interruption.] I know that he has a reputation to protect. I meant that it is a pity that no Government Back Benchers who served on the Committee or others wished to take part in the debate.

On Lords amendment No. 20, the Government have been pragmatic and sensible, and we shall not oppose the change. Of course, we would prefer to stick with a #100 million threshold. None the less, I think that that is a moot point and a matter of judgment, so perhaps the compromise is a happy one. It is possible that the Government's acceptance of a #70 million threshold represents a recognition that turnovers are currently falling, so fewer people might be caught in that threshold as well.

In the House of Lords, the Government committed themselves to reviewing the level within three years of implementation. The Minister has mentioned reviewing. Will there be a rolling review? Does she believe that she could raise the threshold if the provision proves not to work, as my hon. Friend the Member for Huntingdon (Mr. Djanogly) suggested?

Apart from that, I think that we are happy to accept the amendments.

Vincent Cable (Liberal Democrat, Twickenham)

I shall speak very much in the same spirit as the hon. Member for Blaby (Mr. Robathan).

I accept that the Minister has moved a considerable way towards acknowledging the criticisms about size levelled by the business sector. The worrying aspect of the original discussion was a sense that a number had merely been written on the back of an envelope and that it did not satisfy any scientific tests. I do not know whether the figure is right or wrong, as I am going by the information that I have been given. None the less, I gather that the CBI conducted an extensive survey of UK companies that might come within the Bill's scope in which it cited a ratio of the order of 1.2:1 in describing the relationship between turnover and assets. If that had been applied as an average, the appropriate turnover figure would have been about #85 million. I do not know whether those figures are right or wrong. Clearly, market capitalisation is very volatile and big changes have occurred in the past two years, but that seems a plausible order of magnitude to people in the industry, and I am inclined to accept their judgment.

The key point is that the Government are keeping the matter under review and are committed to the principle of maintaining after the Bill is enacted a number of merger investigations that is roughly equivalent to the number that were conducted previously. I am not entirely clear about when the review will take place. My understanding had been that the Government would reconsider the issue after a year, rather than three years. Perhaps the Minister could clarify that point.

In general, however, I think that the compromise that is being offered is helpful and is a move in the right direction. I am sure that most people in the business sector will accept that the provision is a useful move towards meeting their concerns about over-regulation.

Jonathan Djanogly (Conservative, Huntingdon)

In supporting the comments of my hon. Friend the Member for Blaby (Mr. Robathan), and having examined the debate on these matters that occurred in the other place, I should like to say that there seemed to be some justification for the #100 million figure. However, I was happy to hear the Minister say that an open mind would be kept on the matter and that it would be reviewed.

In introducing the Bill, the Government's clear intention was to help enterprise by inducing a competitive environment and a level playing field. That has been accepted in all parts of the House. On the other hand, at various stages in the Bill's passage, Opposition Members have stated our concern that, rather than helping competition, the Bill borders on restricting the ability of companies to trade and is unnecessarily onerous for directors.

The turnover benchmark key in that context is obviously a very important issue. The merger rules are very complicated. Companies and directors that become involved in any sort of investigation must contend with enormously significant costs and a massive amount of time will be taken from them in running their businesses. There is always a fear in respect of such legislation that the OFT and the Serious Fraud Office, which will now get the same powers, will embark on fishing expeditions.

After the Committee proceedings, the Minister should know that, having spoken to a competition legal practitioner, my understanding is that the OFT has recently changed its procedure. The OFT is not only investigating companies, but putting in place a new procedure in which it asks companies to conduct its investigations on its behalf. It will basically send the companies lists of matters for investigation and ask them to come up with the goods. That is a serious development. Instead of having a certain amount of costs carried by the OFT, companies will now have to cover those costs themselves. In other words, they will have to employ professionals to do the OFT's work. Such concerns are very serious and are becoming more so.

The turnover threshold is extremely important in that context. The concern is that, if we do not get the level right, it could stunt the growth of some of our fastest growing companies. We should want to encourage those companies, instead of restricting them with unnecessary regulation and cost. Obviously, stopping their growth will be bad for the economy overall.

While I certainly appreciate that the #70 million figure is better than the original one, companies and practitioners have communicated genuine concerns to me. I therefore hope that the Minister and the Government will keep to what they have said about reviewing the figure carefully and seeing how it works in practice.

John Redwood (Conservative, Wokingham)

I usually speak as a hawkish person on competition matters. I think that it is most important that the regulator and the Government are vigilant in ensuring that no market is damaged by any company having unreasonable market power. That is especially important when mergers or acquisitions are being planned.

I accept that it is possible for a company to seek dominance in a local area or region in the United Kingdom and that that might give the authorities reason to investigate mergers with relatively small turnovers. However, we should remember the context of the United Kingdom economy, which is the fourth largest economy in the world and is exposed to an enormous amount of overseas trading and huge competition from the five continents of the world. We are now talking about an economy with more than #1 trillion in national turnover. Therefore, even a business concern with a turnover of #100 million would represent 0.01 per cent. of total national income. If such a business were a national one, it would be unlikely to have a strong position unless it operated in a tiny marketplace, as in most of the larger marketplaces such turnover figures would be unlikely to attract the attention of the authorities.

Jonathan Djanogly (Conservative, Huntingdon)

I thank my right hon. Friend for giving way. In that context, I think that it is worth mentioning—

Alan Haselhurst (Deputy Speaker, Saffron Walden)

Order. May I tell the hon. Gentleman that it is a good custom to address the Chair?

Jonathan Djanogly (Conservative, Huntingdon)

Thank you, Mr. Deputy Speaker.

It may be worth pointing out to my right hon. Friend that he might want to take into account in his speech the size of the public sector. For instance, it was disclosed to the Trade and Industry Committee only the other day that the public sector now accounts for 40 per cent.—

Alan Haselhurst (Deputy Speaker, Saffron Walden)

Order. I am sorry to have to interrupt the hon. Gentleman a second time, but as I understand it, he is supposed to be making an intervention on his right hon. Friend and not a second speech.

John Redwood (Conservative, Wokingham)

I get the drift of the comments of my hon. Friend the Member for Huntingdon (Mr. Djanogly) that it is important to understand the public sector context as well as the overall national income figures to which I have referred so far.

The Minister was right to point out that there are two tests. The lower the turnover threshold in the Bill, the more the reliance on the test of 25 per cent. or more of the market. The essence of good judgment will rest on the competition authorities and those contemplating the reference in defining the marketplace. That is always the crucial, difficult issue: is the marketplace all chocolate, specific chocolate bars, or a brand that is so well known that, sui generis, it has 100 per cent. of the market? How do we handle such issues? There have been famous cases over the years, with companies wanting as generous a definition as possible, and consumer groups and others preferring a narrow definition.

Mark Hoban (Conservative, Fareham)

My right hon. Friend makes an important point. Does he know how much time lawyers, accountants and other consultants spend on defining a market? From my experience, even in apparently straightforward matters, such as the supply of paper, the market can be fragmented in many different ways. Definition of the market is therefore so important that the turnover test may not be appropriate.

John Redwood (Conservative, Wokingham)

I am glad that my hon. Friend agrees that defining the market is crucial. We must examine the turnover threshold in the light of that difficult judgment.

Narrowly defined markets in which dominance is a problem can exist, and one could gain a dominant position in parts of the national market because the services or goods are not easily transported beyond the boundaries of a specific area. In such circumstances, a lowish turnover threshold might be desirable. Therefore I do not approach the figure of #45 million from the position that it is definitely wrong because it is low and that, as a deregulator, I should like it to be higher.

I ask myself the question that the Minister rightly asked: will a turnover threshold of #45 million provide approximately the same as the 1994 #70 million asset threshold, with which I am happy? It has worked well, and the Government must also believe that, because they have not amended it since coming to office and the Minister said that she was trying to reach equivalence when shifting to turnover. I agree with her reasoning. It is right to move to turnover because it is more meaningful than assets when defining a market. After all, turnover affects consumers, whereas the size of the asset base makes little difference to consumers except through the mediation of price. The consumer wants to know how much turnover is being transacted, so turnover is the appropriate test.

I believed that it was implausible for #70 million of assets to correspond with #45 million of turnover. I was therefore interested to hear the remarks of the hon. Member for Twickenham (Dr. Cable), who said that CBI research suggested a ratio of 1.2:1. I understand how such a figure could be derived. Earlier, I did some calculations on the back of an envelope and got a figure of at least #70 million for equivalence. If we take #45 million as the figure for turnover, we assume exceedingly profitable businesses to achieve an asset value of #70 million. The current state of most British industry and service sector activities shows that we are nowhere near the profitability that we would need on average to sustain translating #70 million of assets into only #45 million of turnover. A ratio of 1:1 would be required as a minimum; at least #70 million of turnover would be needed to achieve #70 million of assets. Even in that case, one assumes approximately 10 per cent. of turnover. That is an exceedingly good return for all but successful, well protected businesses such as pharmaceutical companies.

The judgment is difficult to make. My first reaction on reading the amendments and the debate in another place was that #100 million was a better round number and closer to what one might calculate to achieve equivalence to the old assets test. However, the Minister and my hon. Friend the Member for Blaby (Mr. Robathan) have persuaded me that perhaps we should start with the figure of #70 million and a 1:1 ratio of assets to turnover in the hope that one day, activities will be more profitable and the figure will prove more realistic.

Andrew Robathan (Conservative, Blaby)

I want my right hon. Friend to understand that I should prefer a threshold of #100 million. That was the CBI's broad assessment. However, the decision is subjective and perhaps we should not be too dogmatic in resisting the Government's amendment.

John Redwood (Conservative, Wokingham)

Logic and knowledge of business tell me that #100 million is more sensible from the business point of view.

Mark Field (Conservative, Cities of London and Westminster)

Perhaps there is some wisdom and method in the Government's madness. Given the state of the economy, a company with a turnover of #100 million this year is likely to have a turnover of #70 million next year.

John Redwood (Conservative, Wokingham)

That introduces an irreverent political point into a hitherto elegant, non-partisan debate. However, I take my hon. Friend's point: business is not as profitable or successful in the round as one would like.

Although I understand the logic for the figure of #100 million, as a competition hawk, I appreciate the case for starting at #70 million. However, I want to probe the Minister a little more on her interesting point that the Government had been considering that the #70 million asset threshold that was set in 1994 might no longer be appropriate. There were clearly good years in the economy in the mid-1990s, and not all have been overwhelmed or eroded by events since 2000. It would therefore be interesting to know the extent of the Government's thinking about updating the assets test. If they conclude that #70 million is low for the assets test, they must also determine that #70 million is far too low for the turnover test. I cannot be persuaded that anything less than a ratio of 1:1 produces equivalence. I should be intrigued to learn the Minister's view on that important topic.

Mark Hoban (Conservative, Fareham)

We are considering an important issue and I am grateful to my noble Friend Lord Hunt for pressing it in another place. In considering the competition law reform that the Government set in train in their first Parliament and the Minister's earlier comment that she believed that we had reached the end of the process, it is important to examine the threshold for the turnover test and ensure its fitness for today's business environment. The Government have chosen a turnover limit that is the equivalent of the gross asset test under the previous regime. That leads me to question the amount of research that the Government undertook before selecting #70 million as an appropriate turnover threshold.

Lord Hunt's amendment was based on the considerable research that the CBI carried out. It examined 500 companies in different sectors to determine the appropriate threshold for the turnover test. I wonder whether the figure of #70 million was arbitrary and based on the previous test. The Government should consider properly the right amount of turnover in today's business environment. The competition process will be greatly enhanced by a sensible threshold. Although, as the Minister said, many references are not made when a merger is called in under the turnover test, businesses are anxious about a deal being called in.

As I said in an intervention, consultants and others have spent much time examining the structure of a deal to ensure that it does not rise above the threshold. I should hate to believe that the Government are setting a low threshold for the turnover test without considering the costs that businesses will bear by reducing it from #100 million to #70 million.

Jonathan Djanogly (Conservative, Huntingdon)

My hon. Friend makes a very good point, and reminds me of the old adage that turnover is for vanity and profit is for sanity. That has the important implication that, in a tough economic environment such as the one that we have now, the turnover might mean that companies will have less profit and that it would be more important to have a higher turnover figure because of that.

Mark Hoban (Conservative, Fareham)

I am aware of my hon. Friend's commercial background and his understanding of these issues, and he makes an important point. A company could have relatively low profitability, which might suggest that it had a weak market position and low market share, and that it perhaps did not have the opportunity to impact on the competitive environment in which it operates. Simply because its turnover was more than #70 million, however, that application would be called in and looked at by the OFT. It is, therefore, important to ensure that the turnover level is set fairly and appropriately. The Minister referred earlier to the way in which that level could be reviewed. She intimated that it could be reviewed downwards, and my hon. Friend the Member for Huntingdon (Mr. Djanogly) referred to an upwards review.

It would benefit both practitioners and Members of the House if the Minister could comment on the basis on which such an adjustment could take place, and on when she expects that review to happen. What method of consultation would she use to ensure that we set the right level of turnover? How long a period would elapse between the Bill becoming an Act and the review taking place? Clearly, we want to ensure that we have the right answer to this, and we do not want to see too much uncertainty in the market.

Mark Field (Conservative, Cities of London and Westminster)

Does my hon. Friend agree that, following the CBI's research to which several hon. Members have referred in this small debate, one of the best ways forward might be for the Government to look at the number of companies likely to be encompassed within the confines of such a turnover test? They could then adjust the test on the basis of, for example, the 20,000 or 30,000 companies that would be subject to the provision. In other words, the measure would have an eye to a much more broadly based market, rather than being overly hamstrung by the purely financial terms of turnover.

Mark Hoban (Conservative, Fareham)

I am grateful to my hon. Friend for raising that important point about the number of companies being brought into the provisions of the Bill. My understanding from reading the debates in the other place is that the #45 million level was set with a view to bringing the same number of companies into the net as the #70 million gross asset test would have brought in. I think I see the Minister nodding assent to that explanation, and I am grateful for that. We should not make decisions about thresholds simply on the basis of getting an equivalent number of companies into the net. That would be an inappropriate way of monitoring competition, because we should be looking at the impact of transactions on competition and the market, rather than focusing on the level of turnover.

Andrew Robathan (Conservative, Blaby)

Does my hon. Friend share my suspicion that there has been no well-justified or empirical analysis of this threshold? We thought that the original figure of #45 million was plucked out of the air. Let us take a median point and pluck the figure of #70 million out of the air, because that seems better and might satisfy us. To a certain extent it has done so. There has not been sufficient analysis of why we should have the figure of #70 million.

Mark Hoban (Conservative, Fareham)

I am grateful to my hon. Friend for raising that point, because this is one of my principal concerns. I would not say that the #70 million figure has been plucked out of the air, because that would be unfair to the Government. It is, however, a number with which we are familiar from the gross asset test applied under the previous regime. It is important that we use a sensible figure that is based on empirical evidence. That is the basis of the #100 million that the CBI suggested, which was proposed in amendments in the other place and accepted into the Bill there.

I am concerned that the amendment that the Government have tabled is arbitrary in the way in which it sets a threshold for applications to be investigated by the OFT. The Government should be clear that this is only a holding figure. They should reconsider it in the light of experience and empirical evidence, and I hope that the CBI survey that was used to set the figure of #100 million can be used as a basis for the research involved. Will the Minister outline in more detail the mechanisms that the Government expect to have in place when looking at the applicability and appropriateness of the #70 million limit?

Melanie Johnson (Labour, Welwyn Hatfield)

I shall endeavour to be brief. Conservative Members have raised broadly the same issues in different guises, and I think that I can be fairly brief in my response.

I shall deal first with the figure set for the turnover threshold. The Competition Commission's estimate of the operation of the #100 million turnover threshold is that there would be 50 per cent. fewer mergers under consideration. It is worth reiterating that figure. In fact, the analysis that the Government carried out was based on the Fame database, which gives details of 1,699,137 companies that filed in 2000–01. That showed that there were 9,966 live companies with assets of #70 million or more. It also showed 7,806 companies with a United Kingdom turnover of #45 million. So, the turnover figure was as close as we could get to that. Only 5,350 companies on the database have a UK turnover of #70 million or more. The figure for companies with a turnover of #100 million was 2,258, compared with the original number of 9,966, based on the assets figure.

John Redwood (Conservative, Wokingham)

We are talking about a merger, so we have to add one turnover to another. Has the Minister any information on how many of the mergers that have been referred and blocked under the present regime would not have been blocked under either the #70 million or the #100 million turnover figure? That is the more interesting figure for us to know.

Melanie Johnson (Labour, Welwyn Hatfield)

The right hon. Gentleman will appreciate that I do not have the whole analysis file here, but very detailed work went on. I hope that I have explained one approach that was made by the Government, and why the figure was picked out as being the best stab that we could make. We shared our findings with the CBI, which undertook further analysis using the different methodology to which other hon. Members have referred. That suggested that it thought that the #100 million figure would be more appropriate, but its approach is based on measuring the average turnover of the companies that happen to meet the assets test, establishing a ratio of that turnover to assets and applying the ratio to the #70 million assets threshold to establish an equivalent turnover threshold. We think that that is an unreliable way of doing it.

Changing the test means that we will inevitably cover a slightly different range of companies. We certainly think that new technology companies whose turnover might significantly exceed their asset base might be covered by the new test for the first time. I return to my original point, with which I am sure all hon. Members agree, that we are seeking to find an equivalent—by moving from the assets test to the turnover test—that captures those companies within the regime for consideration. As I have said, many of the cases are just cleared mergers or investigations that are not taken further. It is important that we look at the same segment in relation to competition issues.

It is also important to note that the turnover threshold relates to the turnover of the target company, to which the right hon. Member for Wokingham (Mr. Redwood) referred. A large company may acquire any company with a turnover up to the threshold without qualifying under this test.

I hope that I have explained why we have got to where we are. We have all agreed that we need to compromise. Clause 27(4) contains a requirement for the Office of Fair Trading to report to the Secretary of State on the appropriateness of the level. I believe that we need to reconsider this matter as time goes on.

Assurances that the Government gave in the other place about the three-year review need to be seen in the light of the original #45 million figure. We have the same interests as Opposition Members and will want to consider how the #70 million figure is emerging to see that it is broadly producing the same playing field for competition merger concerns to be considered as the present regime does, with the improvement of the turnover test. I hope that Opposition Members will support these amendments.

Lords amendment agreed to.

Government amendment to Lords amendment No. 20 agreed to.

Lords amendment No. 20, as amended, agreed to.

Lords amendments Nos. 21 to 52 agreed to.

After Clause 65

Lords amendment: No. 53, insert the following new Clause —

XIntervention to protect legitimate interests

(1) Subsection (2) applies where—

(a) the Secretary of State has reasonable grounds for suspecting that it is or may be the case that—

(i) a relevant merger situation has been created or that arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a relevant merger situation; and

(ii) a concentration with a Community dimension (within the meaning of the European Merger Regulations), or a part of such a concentration, has thereby arisen or will thereby arise;

(b) a reference which would otherwise be possible under section 21 or 32 is prevented from being made under that section in relation to the relevant merger situation concerned by virtue of Community law or anything done under or in accordance with it; and

(c) the Secretary of State is considering whether to take appropriate measures to protect legitimate interests as permitted by article 21(3) of the European Merger Regulations.

(2) The Secretary of State may give a notice to the OFT (in this section Xa European intervention notice") if he believes that it is or may be the case that one or more than one public interest consideration is relevant to a consideration of the relevant merger situation concerned.

(3) A European intervention notice shall state—

(a) the relevant merger situation concerned;

(b) the public interest consideration or considerations which are, or may be, relevant to a consideration of the relevant merger situation concerned; and

(c) where any public interest consideration concerned is not finalised, the proposed timetable for finalising it.

(4) Where the Secretary of State believes that it is or may be the case that two or more public interest considerations are relevant to a consideration of the relevant merger situation concerned, he may decide not to mention in the intervention notice such of those considerations as he considers appropriate.

(5) No more than one European intervention notice shall be given under subsection (2) in relation to the same relevant merger situation.

(6) Where the Secretary of State has given a European intervention notice mentioning a public interest consideration which, at that time, is not finalised, he shall, as soon as practicable, take such action as is within his power to ensure that it is finalised.

(7) For the purposes of deciding whether a relevant merger situation has been created or whether arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a relevant merger situation, sections 22 to 31 (read together with section 33) shall apply for the purposes of this section as they do for the purposes of Chapter 1 but subject to subsection (8).

(8) In their application by virtue of subsection (7) sections 22 to 31 shall have effect as if—

(a) references in those sections to the decision-making authority were references to the Secretary of State;

(b) for paragraphs (a) and (b) of section 22(9) there were substituted X, in relation to the giving of a European intervention notice, the time when the notice is given";

(c) the references to the OFT in section 23(2)(a) and (b) included references to the Secretary of State;

(d) sections 24, 30 and 31 were omitted; and

(e) the references in sections 22 to 28 to the making of a reference or a reference were, so far as necessary, references to the giving of a European intervention notice or a European intervention notice.

(9) Section 41(3) shall, in its application to this section and section (Scheme for protecting legitimate interests), have effect as if for the words Xintervention notice" there were substituted XEuropean intervention notice"."

Amendment proposed to the Lords amendment: (a), after Xconsideration", insert—

X, or a matter relating to the legitimate interests of the balanced distribution of industry and employment,".—[Mr. Barnes.]

Clause 182 — Cartel Offence: Supplementary

Melanie Johnson (Labour, Welwyn Hatfield)

I beg to move That this House agrees with the Lords in the said amendment.

Alan Haselhurst (Deputy Speaker, Saffron Walden)

With this we may discuss Lords amendments Nos. 133 to 135 and 226 to 228.

Melanie Johnson (Labour, Welwyn Hatfield)

These are a few minor and improving amendments to parts 5, 6 and 7 of the Bill. Clause 191 provides for professional privilege in respect of legal and banking material in the context of investigations of a cartel offence. Amendment No. 133 provides a different way of accounting for the equivalent in Scotland of legal professional privilege. This was a response to a point initially raised by the Opposition in the other place. The amendment means that the current Scottish custom and practice is properly reflected in the Bill. It follows the more recent precedent of the Proceeds of Crime Act 2002, and provides a definition that corresponds more closely with Scottish practice.

Amendments Nos. 134 and 135 correct a technical defect in the provisions relating to competition disqualification undertakings. They make it clear that the OFT or a specified regulator can rely on its own judgment when considering whether a person is unfit to be involved in the management of a company. That requirement applies before it can accept a competition disqualification undertaking from an individual. In making its assessment, the OFT or the regulator will take into account the same considerations in relation to a director's conduct that a court would have to do.

Amendments Nos. 226 and 227 allow for the appointment of independent members to the Competition Commission's governing council. The addition of these independent members will strengthen the leadership of the Competition Commission, and reflects best practice in corporate governance. The council will now consist of a chairman, the deputy-chairman, the chief executive and one or more independent members.

Andrew Robathan (Conservative, Blaby)

We are discussing very important issues that perhaps require more airing than they have received in the past, especially since many of them were not even discussed in the Lords. Is it true that, because of the programming of discussion in Committee on the Floor of the House, cartels were not even discussed? If so, does the Minister consider that helpful?

Melanie Johnson (Labour, Welwyn Hatfield)

We are here to discuss Lords amendments, and I am unable to comment in detail on previous consideration of the Bill. The question of what was discussed when is a matter of record in this House and in Standing Committee. The answer to the hon. Gentleman's question rests to a considerable extent on the way in which the Opposition used the time available to them.

Lords amendment agreed to.

Clause 208 — Applications

Melanie Johnson (Labour, Welwyn Hatfield)

I beg to move That this House agrees with the Lords in the said amendment.

Alan Haselhurst (Deputy Speaker, Saffron Walden)

with this we may discuss Lords amendments Nos. 144 to 147.

Melanie Johnson (Labour, Welwyn Hatfield)

The amendments all relate to part 8 of the Bill. Amendment No. 144 is intended to meet the concerns expressed by the Joint Committee on Human Rights about the provisions in clause 213 concerning applications for interim enforcement orders. The Committee's 21st report stated that it would be beneficial for the Bill to draw attention to the need for the courts to take account of the whole picture, rather than simply accepting the facts presented by the applicant. When an application for an interim enforcement order is made without notice being given to the person named in the application, the whole picture is necessarily limited to the evidence put before the court by the applicant. It is our view that, on an application without notice, the applicant will be obliged to put before the court all material facts, and that the court will consider them in deciding whether to make an interim enforcement order. The Committee agrees that that is likely to be the case, but for clarity amendment No. 144 includes that obligation in the Bill. The amendment—which applies to all applications for interim injunctions, and not simply to those made without notice—corresponds to a similar provision in practice direction 25, in England and Wales, on interim injunctions.

Jonathan Djanogly (Conservative, Huntingdon)

Would not the rights in the amendments exist in any event? If so, can the Minister justify the need for the amendments?

Melanie Johnson (Labour, Welwyn Hatfield)

I had hoped that I was doing that. The Joint Committee has agreed that the presentation of the material facts before the court is important and that is likely to be the case whatever it says in the Bill. The Joint Committee was concerned about the expression of that in the Bill, in terms of the responsibility for human rights. We have taken that guidance and expertise into consideration when tabling Lords amendment No. 144 which makes that explicit.

Mark Hoban (Conservative, Fareham)

I appreciate the reasons that the Minister has given for tabling the amendment, and we all agree with them. However, would the provisions increase the time it takes to obtain interim enforcement orders? What impact would it have on the process?

Melanie Johnson (Labour, Welwyn Hatfield)

It is a matter of making the obligations clear and not of altering the time scale. If anything, the process would be speeded up, not hindered.

Lords amendments Nos. 145 and 146 were made in response to an amendment tabled in the Lords Committee which the Government agreed to consider. When clause 224(5) left this House, it read:

XIf the OFT is preparing advice or information".

The amendment recognised that those words were inconsistent, given that the section in fact requires the OFT to produce such advice and information.

Lords amendment No. 147 is a technical amendment to clause 227, which concerns the supply of goods and services. The definition of the arrangements for supply when the Bill left this House mirrored that currently in section 138(3) of the Fair Trading Act 1973. That section refers to Xdocuments" and Xcorrespondence", which do not take account of today's world of internet transactions and other forms of electronic communications and commerce. Lords amendment No. 147 updates those provisions to include arrangements made by electronic means. Lords amendment No. 143 makes a minor drafting change in the title of the Department of Enterprise, Trade and Investment in Northern Ireland.

Lords amendment agreed to.

Lords amendments Nos. 144 to 147 agreed to.

Clause 233 — Statutory Functions

Melanie Johnson (Labour, Welwyn Hatfield)

I beg to move, That this House agrees with the Lords in the said amendment.

Alan Haselhurst (Deputy Speaker, Saffron Walden)

With this we may discuss Lords amendments Nos. 149 to 155.

Melanie Johnson (Labour, Welwyn Hatfield)

The amendments all relate to the information exchange provisions in part 9 of the Bill. Lords Amendments Nos. 148, 149 and 150 are minor technical amendments to clause 233. Lords amendments Nos. 148 and 149 ensure that the definition of Xenactment" in clause 233 can include Scottish and Northern Ireland legislation, and subordinate legislation. That is to ensure that the Scottish and Northern Ireland legislation can be added to schedule 14 by order after Royal Assent, and so brought within part 9.

Lords Amendment No. 150 ensures that the order-making powers in both subsections (l)(c) and (4) of clause 233 are subject to negative resolution procedure. Subsection (5) of clause 233 of the Bill as it left this House referred only to the power to amend schedule 14 in subsection (4).

Greg Knight (Conservative, East Yorkshire)

Why does Lords amendment No. 148 not include a reference to a resolution of the Welsh Assembly?

Melanie Johnson (Labour, Welwyn Hatfield)

I may have to undertake to write to the right hon. Gentleman on the point that he has raised. I cannot answer that point now, but I am grateful to him for raising it.

Lords Amendments Nos. 151 and 152 bring the disclosure gateway for criminal proceedings in part 9 into line with the equivalent gateway in the Anti- Terrorism, Crime and Security Act 2001. Amendment No. 151 amends the gateway to allow disclosure to Xany person" for the purposes of criminal proceedings. We made that change after listening to concerns expressed by the Local Authorities Co-ordinating body on Regulatory Services—LACORS—and the Alliance Against Counterfeiting and Piracy that part 9 would have prevented trading standards from disclosing information to consumers and private bodies to assist them in bringing private prosecutions. Industry bodies in particular have used such information to assist with successful private prosecutions for copyright theft. We do not wish to prevent such cases being taken in future, and saw no reason why the gateway for criminal proceedings in this Bill should be any narrower than that in the Anti-Terrorism, Crime and Security Act 2001.

To accompany the widening of the gateway for criminal proceedings, we have introduced an additional safeguard which must be taken into consideration by a public authority before information is disclosed under the gateway. Lords Amendment No. 152 therefore adds a requirement that, before disclosing information for the purposes of UK criminal proceedings, the disclosing authority must have satisfied itself that the disclosure is proportionate to what is sought to be achieved by it. This amendment responds to one tabled in the Lords Committee and, together with amendment No. 186, brings clause 237 into line with the Anti-Terrorism, Crime and Security Act 2001.

Lords Amendment No. 153 responds to two important recommendations made by the Joint Committee on Human Rights to ensure that the provisions on overseas disclosure are subject to tighter safeguards. First, the Committee recommended that the considerations that will be used by UK public authorities when making decisions on whether to disclose information to overseas authorities should be placed on the face of the Bill. Secondly, the Committee recommended that the criteria should include a consideration on whether the disclosure being contemplated would be proportionate to a pressing social need which the disclosure would address, and whether the matter for which disclosure is sought is sufficiently serious to justify disclosure. Amendment No. 153 therefore adds to clause 238 a set of considerations to which an authority must have regard before disclosing information to an overseas authority.

Henry Bellingham (Conservative, North West Norfolk)

In the other place, there was some discussion about the different rules pertaining to British overseas territories. Can the Minister elaborate on whether they will be treated any differently from other countries?

Melanie Johnson (Labour, Welwyn Hatfield)

I would be grateful for a reference to the report of the debate in the other place in which those matters were considered, because I am not familiar with the point that the hon. Gentleman makes.

On disclosure to overseas authorities, amendment No. 154 will ensure that legislation which is to be specified for the purposes of Community or domestic infringements in part 8 will fall within the definition of Xrelevant legislation". That will enable public authorities in the UK to disclose information to overseas authorities where those authorities wish to carry out investigations or bring civil proceedings under their equivalent legislation.

If the hon. Member for North-West Norfolk (Mr. Bellingham) could supply me with the details of the point that he has just made, I hope to be able to reply to it.

Lords amendment agreed to.

Lords amendments Nos. 149 to 155 agreed to.

Clause 246 — Prohibition of Appointment of Administrative Receiver

Melanie Johnson (Labour, Welwyn Hatfield)

I beg to move, That this House agrees with the Lords in the said amendment.

Alan Haselhurst (Deputy Speaker, Saffron Walden)

With this we may discuss Lords amendments Nos. 157 to 160 and amendment No.165.

Melanie Johnson (Labour, Welwyn Hatfield)

During the passage of the Bill concerns were expressed about the potential impact that the prohibition of the appointment of an administrative receiver would have on the social housing sector. Following constructive dialogues between officials and representatives from all parts of the sector, I am pleased to say that we were able to take on board and act upon their concerns. It was recognised that both the Housing Act 1996— which covers England and Wales—and the Housing (Scotland) Act 2001 provide for a moratorium period which provides an alternative means to facilitate rescues and provide a stay on unilateral action by lenders when registered social landlords are in financial difficulty. The provisions apply to housing associations that are registered social landlords.

Lords amendments Nos. 157 and 156 and Nos. 158 to 160 are consequential amendments. They exclude organisations that are companies from the prohibition on the appointment of an administrative receiver.

Lords amendment No. 165 ensures that the enabling power extending administration and company voluntary arrangements to industrial and provident societies does not apply to industrial and provident societies that are registered social landlords.

Lords amendments agreed to.

Lords amendments Nos. 157 to 160 agreed to.

Clause 247 — Liquidator's Powers

Melanie Johnson (Labour, Welwyn Hatfield)

I beg to move, That this House agrees with the Lords in the said amendment.

Alan Haselhurst (Deputy Speaker, Saffron Walden)

With this it will be convenient to take Lords amendments Nos. 162 to 164, 174, 175 and 229 to 264.

Melanie Johnson (Labour, Welwyn Hatfield)

Before detailing the amendments and the thinking behind them, I wish to thank the Opposition parties for their keen interest in the fine details of this legislation. I am extremely grateful for the various amendments that have been tabled in both Houses relating to the corporate insolvency provisions of this Bill.

I am grateful because those amendments have provided us with an opportunity to revisit the drafting of the provisions and to refine it so that our policy aims are clarified in the Bill. Indeed, this process was started way back in the summer, during the debates in this House. It was at that time that our attention was drawn to the potential pitfalls that we faced in seeking to make the administration procedure practicable and workable while ensuring that it remained both fair and focused. I believe that we now have a Bill that is exactly that, and it is for that reason that I am grateful to hon. Members and to those in another place. I shall now turn to the details of the amendments in question.

The need for Lords amendment No. 161 was recognised following an amendment tabled, but not moved, by the Opposition in the Lords Committee. It gives the office holder the ability to apply to the court in order that he does not have to implement the ring fence in instances where, despite the net property exceeding the prescribed minimum, he or she feels that the costs of distributing the prescribed part would outweigh the benefits.

Jonathan Djanogly (Conservative, Huntingdon)

In what circumstances is the provision likely to apply? I agree with the thinking behind the amendment, but its application is quite general.

Melanie Johnson (Labour, Welwyn Hatfield)

I believe the provision could apply in cases where there is a huge number of unsecured creditors. In such cases, the costs of distributing the prescribed part may be disproportionate to the benefit gained from the distribution and the office holder should be able to take action to disapply this new section.

In order to obtain an order under this subsection, the office holder will have to satisfy the court that the costs of distribution would be disproportionate to the benefits.

We are grateful to the City of London Law Society for bringing the need for Lords amendments Nos. 162 and 163 to our attention. Our policy has always been that the calculation of the prescribed part will not apply to charges created before the section's commencement, but that it is to apply to any floating charge created after the section's commencement. An existing floating charge granted prior to commencement will not be subject to the new section.

Where a company has granted both pre- and post-commencement floating charges, an insolvency office holder would pay out to fixed security holders, then pay the expenses of the winding up, then pay any remaining preferential claims, then pay out to the pre-commencement floating charge holders, and then he would apply the prescribed part to the net property available to the post-commencement floating charge holders.

It is not anticipated that there will be a problem with pre-commencement charges that have subordinated their claim to a post-commencement charge. They will have done so in the knowledge that they will be waiving their right not to be subject to the new section 176A.

Lords amendments Nos. 164, 174 and 175 are consequential and technical amendments necessary to ensure that the appropriate insolvency provisions extend to Scotland in addition to England and Wales, to align the Bill with the Insolvency Act 2000 and facilitate the drafting of insolvency rules. They are consequential on other amendments to the Bill.

Lords amendment No. 164 applies to clause 249. It will ensure that the powers that a Scottish liquidator has to take antecedent recovery actions against a company are also included in part I of schedule 4 to the Insolvency Act 1986 and will, as a result of clause 249, need the sanction of the court or the liquidation committee, or a meeting of creditors where there is no committee, before taking any such action. The reason for the amendment is to ensure that the benefit flowing to unsecured creditors from the abolition of the Crown's preferential status cannot be used for such actions without creditors' approval.

Lords amendments Nos. 174 and 175 ensure that provisions in clauses 249 to 251 will extend to Scotland.

Lords amendments Nos. 229 to 234 deal with purposes of administration. Lords amendments Nos. 235 to 240 and 242 to 245 deal with time scales, while amendments Nos. 241 and 246 to 258 are technical and relate to schedule 16, which deals with the detailed processes of administration.

Lords amendment No. 241 applies to the types of payments to be made to an administrator, and Lords amendments Nos. 246 and 252 deal with various matters which would normally be required in accordance with the Insolvency Act 1986 when a company goes into creditors' voluntary liquidation but which, where that liquidation follows immediately after administration, are not necessary or appropriate.

I should be happy to give the House further details of the amendments in this group if hon. Members wish.

Greg Knight (Conservative, East Yorkshire)

I am grateful to the Minister for her lucid explanation of the amendments, but I am suspicious by nature and I seek clarification and reassurance in respect of Lords amendment No. 161, which states that the subsection shall not apply to a company if

X(a) the liquidator, administrator or receiver applies to the court for an order under this subsection on the ground that the cost of making a distribution to unsecured creditors would be disproportionate to the benefits". 8.30 pm

Can the Minister tell us the precise scope of that provision? My concern is that if a liquidator has inflated his or her fees, or has a large fee built in, inflated or not, could that be an argument for the liquidator saying that a distribution to unsecured creditors would be Xdisproportionate to the benefits". I am concerned that a fat-cat liquidator could use that provision to deny a payout to a small, unsecured creditor solely on the grounds that he or she wished to be well paid for the work undertaken. I hope that the amendment would not lead to that situation.

Eric Forth (Conservative, Bromley and Chislehurst)

I am interested in the concept of proportionality in that context. Has my right hon. Friend given any thought to, or is he concerned about, the validity of the mechanisms that are available to judge proportionality in that case? While I follow his argument and share his concern, I am interested to know whether the judgment of proportionality will be appropriate in such cases.

Greg Knight (Conservative, East Yorkshire)

Perhaps I have not given that matter the depth of thought that I should have done. I will no doubt want to reflect upon it later.

What I find slightly sinister about the provision is the requirement for the court to have a role. We all know that a liquidator can make all sorts of applications to a court—after all, he is not paying and the costs will come out of the general funds. What about the poor unsecured creditor? How does the creditor have a voice to tell the court that it should not go down that road, as the liquidator is using the provision as an excuse for not paying him when he should be paid—the liquidator is merely ensuring that he gets his own fees? I hope that the Minister will be able to reassure the House that the Government are not introducing a loophole that would allow fat-cat liquidators to ride roughshod over the poor unsecured creditor.

Mark Field (Conservative, Cities of London and Westminster)

It is a great pleasure to join in debate with my right hon. Friends the Members for Bromley and Chislehurst (Mr. Forth) and for East Yorkshire (Mr. Knight). I suspect that they are already having withdrawal symptoms at the prospect of not being able to speak at such a late hour on Wednesday evenings. I was intrigued to see a long-lost interest in insolvency matters coming to the fore.

I am glad that the Minister has agreed with many of the Lords amendments. We discussed this matter at length in Committee and there were clearly some technical concerns. On a personal level, I am grateful to the Minister for thanking those hon. Members who contributed to the Standing Committee. I confess that on my website, which I have got up and running recently—I am sure that the hon. Lady is a regular and has logged on to it to find out what is going on in the Cities of London and Westminster, and I only wish that many other people were similarly minded—I made it clear that one of the least glamorous aspects of parliamentary life is being involved in a Standing Committee, going through legislation line by line. When I say that it is the least glamorous, it is not a reflection on the Minister, of course; it is because one has to grind through the technical amendments.

I hope that we were able to make some positive contributions to the insolvency provisions in the Bill. I pay tribute to a number of law societies, in particular the City of London Law Society, to which the Minister referred. Its contribution on the technical aspects of floating charges will, I hope, ensure, that the insolvency provisions will remain intact for some time.

Andrew Robathan (Conservative, Blaby)

I wish to put right an earlier omission. I paid tribute to my hon. Friend the Member for Eastbourne (Mr. Waterson), who took this Bill through the Standing Committee for the Opposition, but I did not mention those who sat with him on the Benches in Committee and did very valuable work, in particular my hon. Friends the Members for Cities of London and Westminster (Mr. Field) and for Huntingdon (Mr. Djanogly).

Mark Field (Conservative, Cities of London and Westminster)

My hon. Friend the Member for Huntingdon (Mr. Djanogly) and I are in a nice position—we find that we are positive experts on this legislation since the Opposition Front-Bench trade and industry team has changed entirely.

Crown preference is one area that we discussed at some length in Committee that has not been mentioned—apart from a tangential reference by the Minister earlier. I appreciate that some of the amendments would protect the position of unsecured creditors to a certain extent in the event that Crown preference was done away with. When we first considered the provision, the Minister was keen to make it clear that there would be a windfall of about #70 million to #100 million a year on which the Crown would no longer be looking for first preference.

One of the potential problems with Crown preference is that a number of smaller companies—indeed, they need not be particularly small—have a good arrangement with the local Customs and Excise and Inland Revenue and thus have an arrangement by which they do not have to pay all their outstanding debt to the Government up front.

The football sector has been depressed recently and constant concern has been expressed about it. The Minister may have read in the financial press of the worry about some football clubs, which had come to positive agreements with their local Inland Revenue office about large sums of money that were due at a particular time. The imposition of Crown preference will mean that if a football club looks as though it is about to go into administration or even to go bankrupt, the Inland Revenue or Customs and Excise may decide to pull the plug earlier. That will be the result—no doubt unintentional—of the imposition of Crown preference. One of the underlying intentions of the measure, rightly, is to stop failing companies going to the wall either unnecessarily or too soon.

Mark Hoban (Conservative, Fareham)

Before I became a Member of the House, I had personal experience of working with companies that did not have a high asset base—their principal assets were people. I am concerned that not only football clubs but IT companies, architects and design companies will be affected. A slight pause in their income flow and in the collection of their debts might give rise to the situation to which my hon. Friend refers—triggering bankruptcy by the Inland Revenue or Customs and Excise, to get the money immediately rather than letting the business trade through.

Mark Field (Conservative, Cities of London and Westminster)

I thank my hon. Friend, who has articulated my point rather more clearly than I could. I hope the Minister will be able to draw something from what has been said and that she will be able to deal with the genuine concerns that have been expressed about Crown preference.

The subject is extremely technical and I applaud the Government for holding large-scale consultations during the past few months and especially over the past two or three years. I have already referred to the local law society in my constituency, but several professional bodies, in particular the Association of Business Recovery Professionals has also made constructive comments that will ensure that our amendments make the law much more workable.

Jonathan Djanogly (Conservative, Huntingdon)

The Minister kindly offered to give us further explanations if required. I should appreciate her further comments on the provisions on administrators in amendment No. 241, as those provisions have been developed since we last discussed them. Will the Minister also explain why, in amendment No. 244, a decision was taken to insert the words Xone year", while amendment No. 245 specifies six months?

I concur with my hon. Friend and the Minister as regards the comments about the input to the Bill.

Greg Knight (Conservative, East Yorkshire)

As regards amendment No. 241, I am troubled by paragraph 65, which states:

XThe administrator of a company may make a payment otherwise than in accordance with paragraph 64 or paragraph 13 of Schedule 1 if he thinks it likely to assist achievement of the purpose of administration."

What does that mean? If an unsecured creditor becomes an irritant and is becoming belligerent with the administrator, could the administrator pay them off to get them off his back? That could happen if my interpretation is right. I think that it was an American politician who said that his concern about democracy was that

Xthe wheel that does the squeaking is the one that gets the grease".

My concern is that the provision might mean that the belligerent unsecured creditor always got his money, while the reasonable person who tried to obtain a payout by moderate dealings with the liquidator was left out in the cold.

Jonathan Djanogly (Conservative, Huntingdon)

I thank my right hon. Friend for that intervention, and he makes a very good point. I note that the administrator could make such a payment if he thought that it would be likely to help to achieve the purposes of administration. Again, I reiterate my original request: I would appreciate it if the Minister would explain that issue.

Mark Hoban (Conservative, Fareham)

My right hon. Friend the Member for East Yorkshire (Mr. Knight) suggested that, under Lords amendment No. 241, a belligerent creditor could put pressure on an administrator to settle his debt early. However, would not Lords amendment No. 242 provide a means by which a creditor could become an irritant to a liquidator? Could not a creditor start to make noises about making claims to the court, saying that the administrator was not performing his functions as quickly or as efficiently as reasonably practicable? So there could be opportunities for the creditor and the administrator to play off against each other to reach a good deal.

Jonathan Djanogly (Conservative, Huntingdon)

I thank my hon. Friend for his worthwhile comments. The instances could vary, and it would be most helpful if the Minister could provide an explanation. Other hon. Members and I raised concerns in Committee relating to the ability to question the administration costs that could be involved.

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

It is as though we are back in Committee talking about all the problems that might arise with lousy administrators. Does the hon. Gentleman agree that the whole object is to try to ensure that other companies are not pulled down when a company goes bust? That should not happen unnecessarily if the administrator has the power to make such judgments.

Jonathan Djanogly (Conservative, Huntingdon)

The point of administration is that the company has the best possible chance of survival. The administrator will come in, and he has powers to let staff go and to run the company in place of the directors. However, when he has been appointed, the company is very often at his mercy in cost terms.

It is interesting that most administrations end in liquidation. The Bill may change that—that was one of the purposes of the Government's changing the administration process—but one of the main reasons why companies are finally forced into liquidation is often that, once administrators are involved, they are very expensive and that the money ends up in their pockets instead of going to the creditors.

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

I obviously did not make myself clear. I was talking not about companies in administration but about other companies that want administrators to carry out their jobs in such a way as to rescue them from the difficulties that they may face if the first company goes under completely. That was the point that I was trying to make.

Jonathan Djanogly (Conservative, Huntingdon)

The hon. Gentleman makes a fair point in so far as the implications of an administration may be that the company continues to trade, so its creditors will benefit to the extent that they will not be pushed under by the fact that the first company does not survive, although that is not always the case in practice.

Greg Knight (Conservative, East Yorkshire)

The hon. Member for Hemel Hempstead (Mr. McWalter) has made a telling point. We should have concerns not only for other companies that may be pulled down but for other small businesses that are not incorporated, such as the sole trader or the man who runs a corner shop and who may lose his livelihood as a result of these provisions. Lords amendment No. 242, for example, states:

XA creditor or member of a company in administration may apply".

Is there not a case for saying that anyone aggrieved in this process may apply—for example, someone who is not a creditor or a member of a company but an unsecured creditor who may lose his business? Those are serious matters.

Jonathan Djanogly (Conservative, Huntingdon)

Indeed they are, and I thank my right hon. Friend for making that point. The situation is serious, and, to that extent, I would be most appreciative if the Minister could reply to our points.

Melanie Johnson (Labour, Welwyn Hatfield)

I am enormously grateful to Opposition Members for their questions on these matters.

First, I want to respond to the question asked by the right hon. Member for East Yorkshire (Mr. Knight). Lords amendment No. 161, to which he referred, was brought forward by his noble Friends in another place in response to the debate. I am not sure how his paranoia is progressing—I think he described himself as paranoid, or used words to that effect—and I do not know whether telling him that his noble Friends were responsible for the amendment will help or hinder his condition, but I offer that as a reassuring titbit.

Greg Knight (Conservative, East Yorkshire)

I am grateful to the Minister. I have never described myself as paranoiac—I think that I said that I was suspicious by nature, which is slightly different. My party colleagues in another place have made several improvements to the Bill. The context of my question to the Minister was whether those changes went far enough. Is she satisfied that Lords amendment No. 161 contains sufficient safeguards to prevent the sort of harm that I fear?

Melanie Johnson (Labour, Welwyn Hatfield)

I think I entirely understood the right hon. Gentleman's remarks, and I note that I should have described him as suspicious by nature. To reassure him, only the court can disapply the prescribed part. In response to his point about so-called fat-cat liquidators, the court will be able to consider whether the office holder fees are fair and reasonable. The office holder will have to make the case to the court that it should make the order sought. It will therefore be for the court to consider the reasonableness of what is being laid before it. I hope that that reassures even a right hon. Gentleman of suspicious mind.

On the points made by the hon. Member for Cities of London and Westminster (Mr. Field), I reiterate our thanks to the City of London Law Society, particularly in relation to Lords amendments Nos. 162 and 163, and, no doubt, in relation to other work that it did on improving various aspects of the Bill. I hope that our thanks will be passed on. On Crown preference and the issues that he raised in relation to the football sector and related difficulties, the revenue departments have assured us that, in pursuing outstanding debts after abolition of preference, they will continue to offer help and support to vulnerable businesses facing genuine temporary difficulties. That includes support for business rescues via voluntary arrangements and for companies in administration. It must be remembered that the Crown Departments will not lose out altogether, because they will benefit from money becoming available to all other creditors. The provision covers the issues that the hon. Gentleman raised.

Mark Hoban (Conservative, Fareham)

The Minister has partly reassured Conservative Members who expressed concerns about early triggering. She referred to formal voluntary liquidation and administration, but I am particularly concerned about the informal arrangements that the Crown Departments might reach with a football club or an IT company. What guidance have they issued to show that they will continue to be as sympathetic to businesses as they were before the abolition of Crown preference?

Melanie Johnson (Labour, Welwyn Hatfield)

I do not have any guidance in front of me, but I have placed on record the fact that we have been assured about the way in which the Crown Departments will deal with such matters. I hope that the House will accept that assurance.

The hon. Member for Huntingdon (Mr. Djanogly) asked about time scales and the six-month extension. This part of the Bill was subject to consultation following the Lords Committee, and the amendments were tabled to reflect the outcome of those discussions.

Jonathan Djanogly (Conservative, Huntingdon)

Will the Minister give the House an explanation of the outcome of those consultations?

Melanie Johnson (Labour, Welwyn Hatfield)

I cannot respond in detail to that point, but I shall see what I can do to deal with the matter.

On the point about belligerent creditors, simple belligerence will not allow the administrator to pay. The payment must assist the purpose of administration. For example, it could be used to pay the supplier of something that the administrator could not obtain from any other supplier. The administrator must believe that payments will achieve the purposes of administration.

Greg Knight (Conservative, East Yorkshire)

The Minister has been generous in giving way, and I appreciate that. I am heartened by what she has just said. Is she arguing that an administrator or liquidator could not say that time taken up corresponding with a vexatious unsecured creditor was not assisting the administration and that to pay that person off would assist the process? Does she confirm unequivocally that the administrator or liquidator could not use that as a reason?

Melanie Johnson (Labour, Welwyn Hatfield)

It is difficult to comment without knowledge of individual cases. The right hon. Gentleman seeks an assurance in relation not to the Bill but to the judgments taken on individual cases by those qualified to interpret or discharge the provisions in the Bill.

To return to the point made by the hon. Member for Huntingdon, the outcome of the consultation is reflected in the time scales as amended. I hope that that point meets his concerns, and that the House will agree to the amendments.

Lords amendment agreed to.

Lords amendments Nos. 162 to 165 agreed to.

Clause 256 — Repeal of Certain Bankruptcy Offences

Melanie Johnson (Labour, Welwyn Hatfield)

I beg to move, That this House agrees with the Lords in the said amendment.

Michael Lord (Deputy Speaker, Central Suffolk and North Ipswich)

With this we may discuss Lords amendments Nos. 167 to 173.

Melanie Johnson (Labour, Welwyn Hatfield)

Although not all the amendments are related, they are all technical amendments to the provisions on individual insolvency. I thank the Opposition in the other place. With the exception of amendments Nos. 168, 169 and 173, the amendments were inspired by helpful amendments tabled by them, for which we are most grateful.

I could comment in detail on the amendments if hon. Members wish, but I do not propose to do so. Amendment No. 166 ensures that any variation of an income payments agreement must be in writing. Given that an income payments agreement itself must be in writing, it is a sensible clarifying amendment. Amendments Nos. 167, 170 and 171 apply to clause 257 on the bankrupt's home and provide protection to what the noble Lord Freeman referred to as the deserted spouse.

Greg Knight (Conservative, East Yorkshire)

I may depart company with my noble Friends in the other place on this matter. Amendment No. 166 is, on the face of it, the most reasonable amendment tabled to the Bill. However, it is a long-established facet of English law that contracts do not have to be written. I await to be corrected by a lawyer, but I recall from the days when I practised law that the only aspect of law for which one had to produce a written contract was for the sale or purchase of property—land. That was introduced in the Law of Property Act 1925 by one of my political heroes, F. E. Smith, the First Earl of Birkenhead.

Since then, lawyers have accepted that it is reasonable that if someone is selling property, there has to be evidence of a written contract because of the risk of gazumping—but that is all that the Act has to say on the matter. It does not say that the contract has to be written, just that it has to be evidenced in writing. Why is it deemed that an agreement between the parties has to go further than the Law of Property Act and be contained in a written agreement?

Eric Forth (Conservative, Bromley and Chislehurst)

I hesitate to intervene because I am not a lawyer and my right hon. Friend is a distinguished member of that profession.

In the context of the stipulation that a contract is to be determined by agreement between the parties, does there have to be a witness to it if it is simply verbal? One of the dangers is that we might get into the difficulty—I speak as a layman—of one person's word against another. Given the importance of the matters under consideration, it strikes me that there is a fragility or vulnerability in that context. Does my right hon. Friend believe that a simple verbal agreement without witnesses is sufficiently robust? Perhaps there should be a provision for a written agreement in such cases.

Greg Knight (Conservative, East Yorkshire)

As I understand it, amendment No. 166 requires a written agreement—a document in writing between two or more parties. Ten or more people might witness a verbal agreement. They are honest citizens who are not going to perjure themselves. They would have heard the agreement made, but if this amendment were accepted, the agreement would be outwith the scope of the Bill, and that seems rather odd.

The Minister dismissed this amendment as being technical, but we are seeking to make this a unique area of law. [Interruption.] I hear the Minister for Employment Relations, Industry and the Regions, the hon. Member for Hull, West and Hessle (Alan Johnson), muttering incoherently on the Front Bench, but I have to say to him that I am aware of only one case in English law where one needs evidence of a contract, and that is in the sale or purchase of land. We are now taking that a stage further and saying that written evidence is not enough; a written contract is necessary. Why should such a draconian provision be introduced?

My right hon. Friend the Member for Bromley and Chislehurst (Mr. Forth) touched on what many see as the danger here. If an oral contract is sufficient, someone who is less than honest may be willing to persuade his wife or another person to perjure themselves at a court or tribunal, and we have seen that happen in a number of court cases recently. We do not want to encourage that, but where a court can be satisfied that there is an agreement, even if it is not in writing, surely that should be sufficient.

Eric Forth (Conservative, Bromley and Chislehurst)

I want to press the Minister to give further clarification on amendment No. 167. It strikes me—I confess that I speak as a layman, but such is the role that we have in these circumstances—that we are making some rather radical alterations to the sense and thrust of the existing provision. The wording that the amendment seeks to change is clear: it says that the provision applies where the property comprising the bankrupt's estate consists of an interest in a dwelling house that, at the date of the bankruptcy, was the bankrupt's sole or principal residence.

The amendment seeks radically to alter that sense. Instead of referring to the

Xbankrupt's sole or principal residence",

it would refer to the

Xsole or principal residence of—

(a) the bankrupt,

(b) the bankrupt's spouse, or

(c) a former spouse of the bankrupt".

By any definition, that considerably widens the scope of the provision. We need clarification from the Minister to establish whether the amendment seeks to broaden the definition so as to include more principal or sole residences, or whether it seeks to narrow the definition.

I thought that I heard some reference to divorced spouses a moment ago, and after simply reading the wording I am not entirely clear whether we are trying to include or exclude them. On the face of it, the amendment means that the measure will now apply to one of a range of properties in the bankrupt's estate, and that range will extend beyond the property of the bankrupt himself.

That seems radically to alter the meaning of the provision, and it could have a considerable effect on a number of people, who may be innocent parties. I am not saying that any guilt should be attached to someone who is bankrupt. In fact, as the House will know, our cultural attitude to bankruptcy, which tends, wrongly in my view, to regard bankruptcy as a wicked act, is very different from that of our American cousins, who regard it as something benign that one must go through if one is to achieve something in future. I wonder whether we are trying to spread the blame and bring in others beyond the bankrupt himself or whether we are trying to protect those others.

We seek from the Minister clarification about the thrust of the amendment and its likely effect. It would be helpful if she could give us some idea of the numbers involved. I do not know whether we are talking about a few unusual cases or a larger number. If we start to include spouses or exes, the numbers could rise considerably.

Greg Knight (Conservative, East Yorkshire)

Lords amendment No. 167 is highly discriminatory or defective because proposed paragraph (b) refers to the bankrupt's spouse in the singular. What about polygamous marriages and the Mormon faith?

Eric Forth (Conservative, Bromley and Chislehurst)

My right hon. Friend is trying to draw me into territory that I am reluctant to enter. In turn, however, will he clarify something for me as a distinguished lawyer? Is he suggesting that polygamous marriages are sufficiently legal in our culture to be encompassed by the amendment? My lay interpretation is that in our Judaeo-Christian tradition the amendment can apply only to one spouse, not multiple spouses as he suggests. I should be grateful if my right hon. Friend would consider something. It is possible that under proposed paragraph (c) there would be multiple ex-spouses—that possibility does arise in the Judaeo-Christian tradition and our legal framework. My right hon. Friend was therefore half-right, but was looking at the wrong paragraph—he concentrated on proposed paragraph (b) instead of (c). I shall allow him to think about that while giving way to my hon. Friend the Member for Cities of London and Westminster (Mr. Field).

Mark Field (Conservative, Cities of London and Westminster)

I may be able to assist. Polygamous marriages are not recognised in English law, but my right hon. Friend is a polygamous politician. Not only has he represented Bromley and Chislehurst but a Worcestershire seat and another seat in the European Parliament. Our right hon. Friend the Member for East Yorkshire (Mr. Knight) is also polygamous, having previously represented Derby, North.

Michael Lord (Deputy Speaker, Central Suffolk and North Ipswich)

Order. Before the right hon. Gentleman responds to that intervention, I remind him that he should stay tightly on track.

Eric Forth (Conservative, Bromley and Chislehurst)

Of course I shall, Mr. Deputy Speaker. Uncharacteristically, however, my hon. Friend underestimated me, as he forgot that I was a local councillor in Brentwood in Essex back in the 1960s. My multiplicity is almost unlimited, but it would be immodest of me to dwell on it—the House knows that that would be uncharacteristic.

However, I wish to return to the remarks of my right hon. Friend the Member for East Yorkshire, which applied strictly to the amendment. The Minister, as happens from time to time when we are deliberating on such matters, tried to give the impression that we were considering a technicality—we were talking about a few words that would have little effect, and that we would have a quick glance at the provision and nod it through. I suspect that we are only scratching the surface and have an inkling that the provision could be problematic, as we do not know what its scope is. We need the Minister's guidance as to whether the provision is restrictive or permissive.

Jonathan Djanogly (Conservative, Huntingdon)

In his interesting speech, my right hon. Friend mentioned the cultural differences between America and the United Kingdom on the question of bankruptcy, an issue that was discussed at some length during deliberations on the Bill. One implication of the personal insolvency provision is that the insolvency period will be cut from three years to a maximum of 12 months, which has caused great concern to many of my hon. Friends and practitioners in the insolvency world. People are saying that we may move towards an American system—if you cannot pay your bills, why not just go bust and do the same thing afterwards? It would be interesting to hear my right hon. Friend's comments.

Eric Forth (Conservative, Bromley and Chislehurst)

My hon. Friend puts his finger on an important matter, which I intended to deal with later in my remarks, but I shall do so now. Of course the time scale is relevant, in both a general sense and a specific sense. The word Xformer" is important. We could get into some difficulty—I refer to my hon. Friend's remarks about time scales—about the exact point at which the spouse becomes Xformer." My right hon. Friend the Member for East Yorkshire may be able to help us.

When we get into the territory of nisis and absolutes, it is possible that considerable confusion could arise from the amendment as regards the exact impact of the timing of the divorce and the point at which it takes effect within the time scale that is envisaged. In one sense, it does not matter whether we are speaking of one year or three, but in another sense it does. If we are talking about longer time scales, the impact of the divorce and the legal impact of nisis and absolutes must be taken into account.

Greg Knight (Conservative, East Yorkshire)

My interest is rather in the scope of the Lords amendment. My hon. Friend the Member for Huntingdon (Mr. Djanogly) touched on the widening provision of amendment No. 167. The question that the House must ask, and which I hope my right hon. Friend the Member for Bromley and Chislehurst (Mr. Forth) will address, is whether the widening goes far enough or too far. The problem that we have had for too long under English law is the stigma associated with bankruptcy, which, as my hon. Friend the Member for Huntingdon properly said, does not apply in America. Not many people know that early in his career, the very successful and popular worldwide entertainer, Dean Martin, was made a bankrupt.

Michael Lord (Deputy Speaker, Central Suffolk and North Ipswich)

Order. Not many people may know that, and I am not sure that at this stage the House wants to hear it.

Eric Forth (Conservative, Bromley and Chislehurst)

I shall not break into song, although I am a bit of a fan of Dean Martin myself. The serious point is that the more we probe the amendment, the more troublesome it begins to appear.

Alan Johnson (Labour, Kingston upon Hull West and Hessle)

You call that probing?

Eric Forth (Conservative, Bromley and Chislehurst)

I have probed gently so far; wait till I really get going. The difficulty that we are getting into, which I hope the Under-Secretary will deal with in detail and at some length, is the subtle interplay between the mechanisms of the divorce in the case of the former spouse referred to in the amendment, and the bankruptcy proceedings.

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

Will the right hon. Gentleman note that the reference is to a dwelling house, which must be comprised in the bankrupt's estate? We are discussing one way in which people can be protected from the seizure of their home. That is all.

Eric Forth (Conservative, Bromley and Chislehurst)

I am grateful to the hon. Gentleman for seeking to simplify matters for me. I am a simple man, as he knows. I can see that he is trying to come down to my level, to help me to understand the provisions, but I am still struggling with the interplay, which I am sure exists, between the estate, the period of bankruptcy and the legal moment of bankruptcy. We are attempting to relate that to another variable, the concept of the former spouse. I am sure that even the hon. Gentleman would agree that there are circumstances in which those factors could come into conflict. The legalities involved in the bankruptcy process, the estate and the process of divorce could come into conflict. That might not make the provision unworkable—that would be going too far—but could complicate it.

In my view, as the original wording was straightforward and easily understandable, it was also easily implementable. My fear about the amendment is that it would introduce considerable additional complications. I therefore wonder whether their lordships gave sufficient thought to it. After all, we are here to ask such questions. Indeed, they demonstrate the great value of the two-Chamber parliamentary system. Their lordships, to whom we defer in so many ways, have, in their wisdom, proposed the amendment. Our humble role as laymen—I exclude my right hon. Friend the Member for East Yorkshire, who is an expert—is to cast our eye over each provision and say, XHold on a minute: is this too clever, does it go too far and would it work in practice?" In this case, we must consider whether the provision would simply be—if my right hon. Friend will forgive me—a lawyers' charter.

John Redwood (Conservative, Wokingham)

I usually agree with my right hon. Friend, but I wonder whether he has misread the situation. There could be a hard case that is not covered in the original words, which deal merely with the bankrupt's home. We should remember that these issues are governed by the beginning of new section 283A to the Insolvency Act 1986, which deals with the bankrupt's home ceasing to form part of the estate. I read the amendment as a helpful one that tries to explain that there could be hard cases if properties relating to the bankrupt's spouse or a former spouse are not excluded. I understand his asking where that should stop, how far back it would be possible to go and what would happen if one had several former Xspice" or spouses, or whatever the plural might be. It is reasonable to ask whether such provision could become unnecessarily complicated or lax, but I hope that he will consider the possibility that a hard case might arise that the amendment would take care of, but the rather odd alternative drafting might not.

Eric Forth (Conservative, Bromley and Chislehurst)

I am grateful to my right hon. Friend, who is of course right. Will he not concede, however, that when we are trying to deal with one hard case, we often introduce at least as many difficulties, problems or even harder cases?

We touched earlier on the possibility of serial ex-spouses. I am not sure whether the amendment deals satisfactorily with that possibility. It refers to

Xa former spouse of the bankrupt",

but what about the plural? With which former spouse does the provision deal? Is it the most recent spouse, the first one or all of them? The amendment allows reference to only one former spouse. Again, I accept that I am treading on delicate legal territory, but I wonder whether such provision is sufficient and whether the scope is adequate to deal with those issues, quite apart from problems of timing.

Greg Knight (Conservative, East Yorkshire)

My concerns are different from those of my right hon. Friend. He seems to be anxious that the amendment is too loosely drafted and could encourage too many claimants. My concern is that, if there is any criticism to be made, it is that the amendment is too tightly drawn. What about the dependent relative of the bankrupt? The amendment contains no provision in that regard.

May I say en passant that, in view of your earlier ruling, Mr. Deputy Speaker, I doubt whether you will be receiving a Christmas card from the Dean Martin Appreciation Society?

Eric Forth (Conservative, Bromley and Chislehurst)

May I suggest that the society might like to send a card to you, Mr. Deputy Speaker, in order to bring you round? A CD might help as well, perhaps including XMemories are Made of This" or something similar. I shall not pursue the matter any further.

I recognise that my right hon. Friend is trying to be helpful, but we need to focus and should not be drawn into seeking ways of over-complicating a matter that is already somewhat over-complicated. I am beginning to wonder whether the amendment is entirely appropriate. It strikes me that, even though it is a well-meaning attempt—their lordships could not have a motive that was anything other than well meaning—to solve one set of problems, we might be in danger of creating even more.

Jonathan Djanogly (Conservative, Huntingdon)

I appreciate that my right hon. Friend has already opined on polygamy, but I wonder whether he has considered legitimacy, which is often a problem in wills?

Eric Forth (Conservative, Bromley and Chislehurst)

I do not know whether that is a problem with the provision that we are considering. It would be if we incorporated the suggestions that my right hon. Friend the Member for East Yorkshire made a moment ago. However, I suspect that the wording is sufficiently tight to obviate the problem because we are considering Xthe spouse" or Xformer spouse".

There is a problem with the former spouse; the serial ex presents a difficulty. However, the problem of definition is not that suggested by my hon. Friend the Member for Huntingdon (Mr. Djanogly) because a spouse is a spouse is a spouse.

I hope that we shall not unearth another problem; that would be too much. However, would a marriage conducted in another legal jurisdiction cause difficulties in the definition of Xspouse"? I am happy to say that I was married in New Mexico, and it was a wonderful experience. I do not know whether there would be any difficulty in recognising the marriage in our United Kingdom jurisdiction. Perhaps my right hon. Friend the Member for East Yorkshire can help me.

The simple use of the word Xspouse" is either legally sufficiently watertight to obviate any definition problems or in danger of introducing further difficulties.

John Redwood (Conservative, Wokingham)

I cannot help with that point, but I am worried about an ambiguity on which my right hon. Friend may like to comment. It appears that we have to choose between Xthe bankrupt's spouse" and Xa former spouse". That could be invidious, but whether paragraphs (a) and (b) or (a) and (c) of Lords amendment No. 167 can apply simultaneously is left ambiguous because Xand" or Xor" are not included after paragraph (a). Is the amendment therefore defective?

Eric Forth (Conservative, Bromley and Chislehurst)

I believe that I can help my right hon. Friend. The potential conflict between paragraphs (b) and (c) or the existing spouse and the former spouse is obviated by the word Xor" in paragraph (b). However, that introduces another problem. I presume that there is an order of priority, and one spouse must pre-empt the other. The existing spouse will probably take precedence over the former, or any number of former spouses, but perhaps the Minister will explain whether she is satisfied that the amendment is sufficiently clear and therefore immune from challenge.

Greg Knight (Conservative, East Yorkshire)

I hope that my right hon. Friend will forgive me, but I believe that, uncharacteristically, he is making heavy weather of the matter. I appreciate that his friends will not recognise that description of his contribution, but he is labouring the issue. We are considering the provision that applies when

Xproperty comprised in the bankrupt's estate consists of an interest in a dwelling-house".

If we are dealing with a former spouse of several years, surely the court, in the divorce proceedings, will have settled the property on the former spouse. It is therefore no longer in the amendment's ambit.

Eric Forth (Conservative, Bromley and Chislehurst)

I am grateful to my right hon. Friend for helping us. I was about to consider the definition of the estate and whether there was potential difficulty in the probate stage that existed at the time of the bankruptcy. There are potential problems throughout the process in the time scales for various legal matters. Anyone who has experienced probate, divorce or any combination of those understands that they are inevitably lengthy and complex matters that must interplay in the circumstances that we are discussing. Even something as apparently simple as the concept of the bankrupt's estate must be open to doubt, because it would depend on any number of interrelationships, perhaps involving the bankrupt being the potential beneficiary of probate, on the one hand, or the other way round, if I can put it that way.

David Winnick (Labour, Walsall North)

Can the right hon. Gentleman satisfy my curiosity by telling me whether he has resigned from the Front Bench as shadow Leader of the House? If he has not, is his sitting on the Back Benches a new feature—and why not? It could all be part of modernisation—in which he doubles up, appearing on the Front Bench as a senior Member one day, and on the Back Benches the next? The other rumour is that all this is simply a ruse to keep the House going until 10 o'clock.

Eric Forth (Conservative, Bromley and Chislehurst)

The hon. Gentleman is being uncharacteristically unfair.

Greg Knight (Conservative, East Yorkshire)

Characteristically.

Eric Forth (Conservative, Bromley and Chislehurst)

Well, I am going to be fair to the hon. Gentleman and I would not accuse him of being anything other than fair and a man of great integrity. It saddens me, therefore, that he seems to suggest that my motive is anything other than to seek the truth—after all, that is why we are all here—and examine the legislation, which I thought was also our job. As for his questioning my role, the modern Conservative party is flexible and progressive, and it allows a number of different roles to be played by right hon. and hon. Members.

I have taken an interest in this matter, and the view that I took, having listened to the Minister's brief introduction to the amendment, was that it was perhaps slightly inadequate. So I am simply playing my role as a seeker of truth and a legislator, and I shall give way to the hon. Member for Hemel Hempstead (Mr. McWalter), who, I suspect, comes into the same category.

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

In my desire to get this matter curtailed, may I ask the right hon. Gentleman to bear it in mind that, if someone had loads of houses and loads of spouses, subsection (3) would come into play? The interests would be realised, people would get a share of the action, and out of that mess everything would eventually be settled. This provision involves a right that people would have in extremis. It is not designed to be—it could not be, because of subsection (3)—a way of liquidating all one's assets to try to ensure that one's creditors could not get at them.

Eric Forth (Conservative, Bromley and Chislehurst)

I am grateful to the hon. Gentleman. This amendment will henceforward be known as the Xhouses and spouses amendment", which will help to fix it in our memories. As for Xin extremis", I am rarely accused of being in extremis in any context.

Greg Knight (Conservative, East Yorkshire)

Will my right hon. Friend give way?

Eric Forth (Conservative, Bromley and Chislehurst)

I will give way, but then I really must draw my remarks to a conclusion, because I want to give the Minister the maximum possible time. She might need all the time that is left to us to answer the questions that have been posed.

Greg Knight (Conservative, East Yorkshire)

I am not sure that that last intervention was particularly helpful. What would happen in the case of a bankrupt who had three houses that formed part of his estate, if he lived in one of them, his spouse lived in another, and a former spouse lived in the third?

Eric Forth (Conservative, Bromley and Chislehurst)

My right hon. Friend has made a valuable contribution in pointing out the difficulties that could arise from this no doubt well-meaning amendment.

Mark Hoban (Conservative, Fareham)

Will my right hon. Friend give way?

Eric Forth (Conservative, Bromley and Chislehurst)

I will give way, but this really must be the last time.

Mark Hoban (Conservative, Fareham)

This has been an interesting debate on the terminology used in the amendment. The debate has confined itself to talking about legally recognised relationships. In our modern society, it is remarkable that there is no reference in the provisions to the position of cohabitees or former cohabitees. Does my right hon. Friend not agree that they, too, should be covered by the Bill?

Eric Forth (Conservative, Bromley and Chislehurst)

I almost hesitate to get into that territory. My hon. Friend tempts me, but I shall resist the temptation except to say that he has illustrated that, if we look at this matter in a modern way—after all, we look at things in a modern way in the House, do we not?—it may seem to be taking an overly restrictive approach. We hear all sorts of talk these days about partners, and we ought perhaps to give some thought to whether unmarried people come into this. I have not even touched on the matter of gender, either. After all, we talk of people of this or that gender having this or that relationship. I wonder whether the amendment is sufficiently broadly drawn to satisfy those with a modern and progressive attitude on these matters, and whether the issue of gender should be dealt with in the legislation.

I am grateful to my hon. Friend the Member for Fareham (Mr. Hoban), because he has added yet another dimension to the considerations that are raised by the amendment, which at first blush seemed to be perfectly straightforward. It now seems that there are worrying complications, and I hope that the Minister, when she concludes this little debate, will satisfy the House that she has the answers to all these questions, so that we can decide whether to give the amendments our approval. I hope that that will be the case, and that my modest contribution has helped the House to focus on some of these questions.

John Redwood (Conservative, Wokingham)

I shall not detain the House long, but I think that my right hon. Friend has put his finger on some difficult issues raised by the amendment. The context is clear. The Bill provides for a new section 283A in the Insolvency Act 1986 when the bankrupt's home ceases to form part of the estate. It says:

XThis section applies where property comprised in the bankrupt's estate consists of an interest in a dwelling-house which at the date of the bankruptcy was the bankrupt's sole or principal residence."

The aim of amendment No. 167 is to amend and broaden that proposal.

In the light of my right hon. Friend's remarks and the study that I have made of this matter as he was speaking and before, I have worries that the amendment, while generous in intention by including spouse or former spouse, leaves ambiguities and difficulties that may make the legislation even less perfect than the original version. The thrust of the amendment may be sensible, but the drafting is not as felicitous as it might be.

My first worry is that it is by no means clear whether we are talking about the principal residence of the bankrupt and the bankrupt's spouse if they happen to have different residences, or whether we have to make a choice. Secondly, the draft clause is silent on how people in positions of responsibility should determine a case if they have to choose between the residence of the bankrupt's spouse or a former spouse. My right hon. Friend has made some reflections on that, but I think that the legislation, if it is to widen the provision in that way, should give more guidance on how these invidious choices may fall to be made.

The drafting is not as inclusive or modern as some Labour Members and others may like. I have no objection to the use of the word Xspouse", but these days people often prefer the word Xpartner" because they want to cover a variety of relationships that could be important to the individual concerned. It is strange that the legislation should look backwards, especially under this Administration. My right hon. Friend the Member for East Yorkshire (Mr. Knight) asked whether it is right to single out a former spouse rather than some other dependent relative, because there could be more deserving cases. There could be difficult cases of people with important responsibilities who have become bankrupt. That has not been included in the amendment to this part of the revised bankruptcy legislation.

I hope that the Minister will deal with the detail when she replies to this vignette of a debate. It shows that the House has an important role to play in examining the words in detail, and that, when and if they are let loose in a court, there could be scope for intelligent, well-briefed and expensive lawyers to go round and round in the interests of the person they are defending and show that we the legislators have been sloppy or negligent by allowing these ambiguities and imprecisions to remain in the legislation.

Jonathan Djanogly (Conservative, Huntingdon)

rose—

John Redwood (Conservative, Wokingham)

I shall give way to my hon. Friend, but we are running out of time.

Jonathan Djanogly (Conservative, Huntingdon)

I note with interest the thought processes of my right hon. Friend in respect of changing the word Xspouse" to Xpartner". I should like to hear more of his views on that subject, because I am not sure that Xpartner" has the same meaning in law as Xspouse", or, indeed, any meaning.

John Redwood (Conservative, Wokingham)

I ought not to be drawn too far down this interesting byway, as there are others better qualified to comment. My hon. Friend may well be right to say that the word Xpartner" has a legal imprecision. I simply raise the issue for the Minister because it is one of concern for a Government who pride themselves on being modern and inclusive. I am particularly worried about the issue of substance that I raised: are there other people in relationships with the bankrupt apart from a spouse or a former spouse—in the latter case, the relationship might be far from close or friendly—who should be included in, or excluded from, this very important provision?

The legislation is complicated and leaves considerable discretion in the hands of those dealing with the bankruptcy issue. In certain cases, the clause that we seek to amend leaves the timing imprecise. A three-year period is mentioned, but the trigger time varies, depending on what information has been revealed, and on the circumstances of the individual bankruptcy. Of course, those called to adjudicate these matters have considerable powers of discretion as to how the bankruptcy estate should be handled and added up, and what element should cease to form part of it.

Greg Knight (Conservative, East Yorkshire)

Does my right hon. Friend accept that the discretion to which he refers does not extend to allowing any adjudicator to substitute words that are not included in the amendment? That is its weakness: it does not refer to partners or to a dependent relative. There would be no discretion whatsoever, therefore, in terms of taking care of a dependent relative or a long-term partner, because the drafting does not include that description or category of person.

John Redwood (Conservative, Wokingham)

That is right—that is part of the twin criticism that I am making. People are excluded who might be more deserving than those who are included, but there is also a fundamental ambiguity in the phrases Xspouse" and Xformer spouse". Moreover, there are other complications to which reference has been made at some length, and which I will not repeat. If the provision were to go through, it would not be good legislation. To be good legislation, it needs amending to make the intention absolutely clear. I join my right hon. Friend the Member for Bromley and Chislehurst (Mr. Forth) in asking the Minister to think again about those who should be included.

This legislation is about people who have been through a miserable time. They may also have created misery for others—their creditors—who may not be satisfied. It is the job of good legislation to try to come up with a fair and judicious balance. Of course, we wish to be as generous as possible to the creditors, because they have been wronged. If we do not look after their interests, they, in turn, could get into financial difficulties, or their businesses could struggle. However, we also have a duty—as I hope my right hon. Friends the Members for Bromley and Chislehurst and for East Yorkshire agree—to think about the condition of the bankrupt. Some bankrupts have been through extremely difficult times; for example, they may have made a misjudgment, or simply been swallowed up by bad luck and unpredictable changes in the marketplace. They need to live and survive, and to have some reasonable basis on which to proceed with their own lives. I understand that this legislation is trying to strike some form of balance—

Michael Lord (Deputy Speaker, Central Suffolk and North Ipswich)

Order. The right hon. Gentleman's remarks are becoming rather general. He ought to be a bit more precise.

John Redwood (Conservative, Wokingham)

I quite agree, and I stand corrected, Mr. Deputy Speaker. I was trying to describe the context, but my crucial point is that the amendment has to get the right balance between the bankrupt and those dependent on him, and the creditors. My worry is that it does not. It does not answer the big issue as to why this limited group of people is included, but not others who may be in need. It is unclear whether subsection (a) applies with, or instead of, subsection (b), and it is also unclear how one would judge between subsections (b) and (c). A lot is therefore left to the courts, and it leaves open the question of how, ultimately, the balance is to be struck between the bankrupt's needs of his estate, and the creditor's obviously pressing needs. It is those points that I hope the Minister will clarify.

Melanie Johnson (Labour, Welwyn Hatfield)

I am grateful to Opposition Members for their enormously discursive interest in this subject. I shall respond briefly to the points that have been made, because despite speaking at considerable length the right hon. and hon. Members have failed to convince me that the aspects that worried them are sufficiently worrying to require a detailed response. Indeed, it is not clear what some of those anxieties were, but I shall not take any interventions from Opposition Members during my remarks.

In relation to the comments by the right hon. Member for East Yorkshire (Mr. Knight), the Bill provides that the income payments agreements must be in writing and, therefore, we felt that it was appropriate to provide that a variation of that agreement should be in writing. The incomes payments agreement has the force of a court order and is not merely a contract, as he suggested; his points might have been relevant to a contract.

Lords amendment No. 167 attracted much heat but not much light. It provides valuable protection for a spouse or former spouse. The right hon. Member for Wokingham (Mr. Redwood) was right that it deals with a particular situation—if a bankrupt still has an interest in the property in which a spouse or former spouse resides, it provides protection against the threat of losing the home. Trustees will still be able to deal with the property. On unmarried partners, the amendment is consistent with the protection provided for parties other than the bankrupt in the individual insolvency provisions of the Insolvency Act 1986.

John Redwood (Conservative, Wokingham)

Will the Minister give way?

Melanie Johnson (Labour, Welwyn Hatfield)

No, I regret that I will not give way.

The rest of the debate is in Hansard.