Enterprise and Regulatory Reform Bill

Public Bill Committee, 5 July 2012.

Hugh Bayley (Labour, York Central)

Colleagues, we start a new day with a new part of the Bill—so now for something completely different.

Clause 18 - The Competition and Markets Authority

Chi Onwurah (Labour, Newcastle upon Tyne Central)

I beg to move amendment 70, in clause 18, page 12, line 38, after ‘the’, insert ‘long-term’.

May I say what a pleasure it is to serve under your chairmanship, Mr Bayley?

Hugh Bayley (Labour, York Central)

They always say that.

Chi Onwurah (Labour, Newcastle upon Tyne Central)

All may say it; some of us mean it. I rise to speak for as a shadow Minister in a Public Bill Committee the first time—it is also my first such Committee—so I hope, Mr Bayley, that as I find my way, you will forgive any faults I make. I shall certainly rely on your guidance. I already know that I must stick to the subject of the Bill and not be tempted by unrelated concerns. You and the members of the Committee will be pleased to hear that I am absolutely certain that competition and market reform are of such great interest as to furnish material for many long speeches and debates—I am sure you will appreciate them all.

So far, we have had lively and informative debates, and I hope that that does not change now that we are in the territory of competition and market reform. As my hon. Friend the Member for Hartlepool said in his excellent opening speech, we aim to challenge and scrutinise the Bill as thoroughly but as reasonably as possible. I have tabled several amendments with the aim of improving the Bill or of probing the Government’s objectives. As I shall show, the current competition environment in the UK is very much the last Government’s legacy, and we have no intention of allowing it to be undermined without a fight.

I should declare my own interest in this subject. One of the many interesting aspects of this Committee is what we have learned about the past lives and relevant experience of so many of its members. Mention has been made of the Minister’s well-known book on employment law. I do not have his book—I have a competition law book—but we are all looking forward to the new edition that the Bill will make necessary. The hon. Member for Solihull and my hon. Friend the Member for East Lothian have significant experience in human resources, and my hon. Friend the Member for Swansea West is an expert in market research. Whatever the other experience of Government Members, Opposition Members have significant and varied business experience. Before I became an MP, I worked as an engineer, mainly in the private sector, but for the six years before I entered Parliament, I was head of telecoms technology at Ofcom.

As I am sure we are all aware, Ofcom has concurrent competition powers with the Office of Fair Trading in the existing competition environment, and it is therefore touched by this part of the Bill. Ofcom has been a very light-touch regulator. It is fair to say that it has had considerably more success than the light-touch regulation of the banking system about which the Prime Minister was so insistent. Whether that is a function of the type of people who go into telecoms or the effectiveness of the regulator is not for me to say.

Andrew Bridgen (Conservative, North West Leicestershire)

When the hon. Lady mentioned the Prime Minister, she was talking about the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), was she not?

Chi Onwurah (Labour, Newcastle upon Tyne Central)

The hon. Gentleman is very much in error. I was speaking about the current Prime Minister, who, as we know, toured Europe citing his free market credentials. The problem with banking was that there had not been enough regulation. [ Interruption. ] I am not sure we can be held responsible for what the current Prime Minister said under the previous Government.

David Mowat (Conservative, Warrington South)

On a point of fact, the veto in Europe was to permit tougher banking regulation in respect of capital requirements in this country. It potentially would have been allowed by the European banking authority. The purpose of the regulation was for tougher sanctions.

Chi Onwurah (Labour, Newcastle upon Tyne Central)

I thank the hon. Gentleman for his intervention, but my point related to the current Prime Minister’s views on the problems of banking, as described by him in 2008 when considering the banking regime at that point.

Hugh Bayley (Labour, York Central)

Order. Before we progress, we should all remember that the clause is about the Competition and Markets Authority, not about banking regulation particularly.

Chi Onwurah (Labour, Newcastle upon Tyne Central)

Thank you for that welcome guidance, Mr Bayley.

In Ofcom, I worked side by side with competition lawyers and economists. I hope that their expertise has rubbed off on me, increasing my understanding not only of the complex workings of markets, but the importance of competition for the long-term interests of consumers. Amendment 70 gets to the heart of what the purpose of the new competition authority is to be. Who will it work for and who will be the boss?

As the clause stands, the purpose of the Competition and Markets Authority is to promote competition both within and outside the United Kingdom for the benefit of customers. The Competition Commission’s current mission statement states that it is an independent public body that helps to ensure healthy competition between companies in the UK for the ultimate benefit of consumers and the economy. In neither organisation does one really get the impression that consumers are at the forefront of their minds. In contrast, the principal duty of Ofcom is to further the interests of citizens in relation to communications matters and to further the interests of consumers in relevant markets, where appropriate, by promoting competition.

Ofcom’s duties make citizens’ and consumers’ interests the most important purpose of the organisation. By contrast, the Competition Commission and the new proposed body, the CMA, seem rather less consumer-focused. Regulators look to their duties for general and specific guidance, I can vouch for that from personal experience. I kept a copy of the Communications Act 2003 on my desk at Ofcom and regularly looked to it for guidance and to determine what the general duties were.

In Ofcom, we often discussed exactly what was meant by the interests of the consumer. Is it just about the lowest possible price at a given moment? If that is the case, large, efficient companies may be best able to deliver the lowest price, so it may be in the interest of the consumer to have a small number of large companies. However, in practice we find that if there are a small number of large companies, we do not get the best results for consumers. In many cases, we end up with an oligarchy in which a small number of large companies act together to keep prices high and customers locked in. Some might argue that the current energy market displays the characteristics of an oligarchy.

How can we determine where consumer interests really lie? The amendment proposes we do that by considering consumers’ long-term interests. For example, encouraging new entrants into a market might not reduce prices or improve productivity immediately, but in the long term the customer will be better off. That is why the Government are trying to attract new banks into the retail banking market. It is also to increase competition that the European Commission is obliging Lloyds TSB to divest itself of many of its customers.

As a Lloyds TSB customer, I should declare an interest. I am not happy that in the short term I am having my account moved without my agreement. I recognise that in the long term I should benefit from a more competitive market. Obliging the Competition and Markets Authority to focus on the long term will send a strong message to companies of the importance of long-termism. We know they need that message. Currently, we have a system where businesses with long-term models struggle to access capital from banks that pay out bonuses to executives who have presided over huge and often nationalised losses.

This is not just about greed; it is not even about the politics of envy. It is about a structural problem with our economy. We need an economy based on long-termism, investment and training. We do not need the short-term, fast-buck, “take what you can” culture that caused the financial crisis in the first place and is very much in evidence in the current LIBOR fixing scandal at Barclays and other banks. I feel that as a Committee we can all agree on that.

At this difficult time in our economy, we should be working together as far as possible, allowing for political differences, to build an economy that is competitive, resilient and fair, where we see businesses encouraged to pursue long-term, inclusive and socially responsible strategies, because it is good for them and their customers.

Some might be asking what we mean by the long term. Some might be thinking of the famous quote from Keynes:

“In the long run we are all dead.”

I am sure that those on the Government Benches are always thinking of Keynes. However, I do not think we need to be more prescriptive than the amendment would allow. The CMA can, and should be, staffed by people with intelligence and experience; intelligent enough to know what a long-term perspective is. At Ofcom, for example, market reviews generally look three to five years ahead. The Competition Commission has been reluctant to look more than two years ahead. Adding “long-term” to the remit and duty of the CMA would encourage a more long-term approach without being prescriptive about the time frame.

I would be surprised if anybody on the Committee did not agree that we need to take a long-term view. While some politicians may not be very good at taking a long-term view—at least, not longer than the electoral cycle—I believe it is a skill that we can and should acquire. We can start by amending the Bill to encourage a long-term view in our competitive environment, and the amendment would do just that.

Norman Lamb (Liberal Democrat, North Norfolk)

It is good to have you back again, Mr Bayley. I also welcome the shadow Minister who is taking responsibility for this part of the Bill. I know what it is like doing it for the first time, so I welcome her to the role.

She talked about the legacy effect on the current arrangements for competition organisations. It is fair to say that we share the view that the Competition Commission and the Office of Fair Trading have a very high standing internationally, of which the UK should be proud. However, there are concerns, particularly about the slow pace at which some of the work is undertaken. The decision of the Global Competition Review to downgrade its rating of the OFT reflects some of the responses to our consultation, which revealed considerable concern, as I have said, about the speed and efficiency— and the quality—of decision making in antitrust cases.

I have visited the OFT and hold in high regard the people there and the work that they do, but sometimes that work is constrained by the framework within which they work and the powers available to them. The OFT has also suffered recent reverses in the Competition Appeal Tribunal, and all that took place under the regime that we inherited, so when the hon. Lady discusses the legacy, there are issues that must be addressed. We are not in a state of perfection. If we were, we would not seek reforms to address those concerns.

Chi Onwurah (Labour, Newcastle upon Tyne Central)

I thank the Minister for giving way and for his acknowledgement of the high quality of the competition environment left by the previous Government. On his comments about the OFT, the downgrading was in response to slowness in particular antitrust cases, as he mentioned, and that needs to be improved, but does he acknowledge that bringing the competition and markets authority and the OFT together will not necessarily improve the situation?

Norman Lamb (Liberal Democrat, North Norfolk)

The package of reforms that is being introduced will absolutely address the concerns raised. I understood that the principle of what we are trying to achieve had been broadly accepted by the Opposition, but if that is not the case, I stand to be corrected.

Chi Onwurah (Labour, Newcastle upon Tyne Central)

The principle of improving our competition environment is absolutely accepted by the Opposition. Indeed, as we are responsible for the high standing of that environment, it is our obligation to do all that we can to improve it, but not all the measures in the Bill will have that effect.

Norman Lamb (Liberal Democrat, North Norfolk)

I of course recognise that there will be a debate on many such issues, but we are acting to remedy the identified weaknesses, which the hon. Lady acknowledges. New powers in the Bill will make antitrust investigations more efficient. The power to ask questions, for example, will assist the CMA in establishing the facts of a case, and I experienced that when I visited the OFT and the limitations of what it can do because of its limited ability to ask questions and get answers were explained to me. New arrangements in the Bill will provide that those responsible for final decisions on a case are independent of those responsible for the initial investigation, ensuring that there is that separation. Collective, rather than individual, judgments will be introduced in antitrust decisions, ensuring that the parties have full access to decision makers and that a better dialogue is provided between the CMA and the parties. Those are all things that I hope the hon. Lady will accept can improve the framework within which highly skilled people operate and can improve their capacity to get good outcomes in a timely way.

I assure you that I will not detain the Committee, Mr Bayley, but I should say that I was completely gobsmacked —is that allowed?—by the assertion that the Labour party had nothing to do with the light-touch regulation that caused such horrific chaos in the financial services and allowed so much bad behaviour. I had thought that there was an acceptance, including from the shadow Chancellor, that with the benefit of hindsight the light-touch regulatory regime was a big mistake and allowed some appalling behaviour to take place in financial services, which has damaged the interests of consumers and the economy.

Geraint Davies (Labour, Swansea West)

Will the Minister give way?

Chi Onwurah (Labour, Newcastle upon Tyne Central)

Will the Minister give way?

Hugh Bayley (Labour, York Central)

Order. With great respect to the Committee, I must give the Minister the same licence that I gave the shadow Minister, but we will not have a series of interventions on a slightly extraneous matter. So, I am no longer gobsmacked, and the Minister has the floor.

Norman Lamb (Liberal Democrat, North Norfolk)

I am happy to quit while I think we are ahead.

Geraint Davies (Labour, Swansea West)

Will the Minister give way?

Norman Lamb (Liberal Democrat, North Norfolk)

I am conscious of your concern that the hon. Gentleman may be tempted to stray beyond the clause, Mr Bayley, and I am keen to save the hon. Gentleman from himself. If he wants to intervene on the clause, I am happy to give way.

Geraint Davies (Labour, Swansea West)

We are talking about the long term. The previous Government introduced the FSA, which was resisted by the Conservative party because it wanted less regulation rather than more regulation. The Minister should withdraw his ridiculous point.

Hugh Bayley (Labour, York Central)

Order. We are fortunate to have a long opportunity this afternoon to discuss such matters on the Floor of the House. As time is so short in this sitting before the start of the day’s proceedings in the House, I suggest we stick to the question of the Competition and Markets Authority’s establishment and purpose.

Norman Lamb (Liberal Democrat, North Norfolk)

Under the guidance of our robust Chair, I will resist the temptation to respond to the hon. Member for Swansea West.

I was slightly surprised to hear the shadow Minister’s suggestion that the interests of consumers are not highlighted, because, for the first time, the clause contains this specific duty:

“The CMA must seek to promote competition, both within and outside the United Kingdom”—

this is the crucial bit—

“for the benefit of consumers.”

Clearly, the CMA’s role is to act for the benefit of consumers, which we feel is absolutely right.

Andrew Bridgen (Conservative, North West Leicestershire)

Does my hon. Friend agree that

“for the benefit of consumers”

means in the short term, the medium term and, indeed, the long term?

Norman Lamb (Liberal Democrat, North Norfolk)

A good point well made. I thank my hon. Friend for that incisive intervention. [ Interruption. ] Mr Bayley, can you deal with the abuse that is being thrown?

Hugh Bayley (Labour, York Central)

Order. The Minister has the floor.

Norman Lamb (Liberal Democrat, North Norfolk)

Thank you, Mr Bayley.

I agree with the sentiment underpinning the suggestion that the role of the new Competition and Markets Authority should be to ensure that competition across markets works well for the benefit of consumers, not only in the short term but in the long term. Consumers suffer if markets are not competitive, whether because of barriers to entry, barriers to switching—as we have seen in the energy sector, for example—anticompetitive practices adopted by firms or consumers’ having imperfect knowledge of prices or product features. That is why the Government have given the CMA an overarching duty, as I have described, to seek to promote competition across markets for the benefit of consumers and have equipped it with a strengthened and streamlined toolkit to do so. For example, the new CMA will operate the combined OFT and Competition Commission markets regime to ensure that markets work well for consumers. As such, the CMA will have powers to investigate markets such as payment protection insurance, which is a good example of where there was anticompetitive behaviour and behaviour that adversely affected consumers. That market was found by the Competition Commission to be overcharging consumers by as much as £1.5 billion per annum, collectively not individually. The OFT secured voluntary agreements from the airline industry on the online airline market to improve price transparency for consumers to the value of £131 million a year.

Ian Murray (Labour, Edinburgh South)

Will the Minister publicly welcome the announcement made late yesterday or this morning that the main airlines that have been criticised for drip pricing, such as adding on credit card charges, have decided to stop by putting the prices up front on their websites to increase transparency on the total costs?

Norman Lamb (Liberal Democrat, North Norfolk)

I totally welcome the announcement, which is an important advance in achieving greater transparency for consumers. We have all experienced it: the consumer starts with a seductive price and ends up paying far more because they encounter extra charges later on. I entirely agree with the hon. Gentleman that we have secured a good advance today through the OFT.

We are providing more speed and rigour in market studies and market investigations and in antitrust cases to give consumers faster and more robust decisions. We are strengthening merger controls to enable the CMA to more effectively address anticompetitive mergers, which can lead to high prices and poor quality.

John Cryer (Labour, Leyton and Wanstead)

An example occurs to me which we probably all remember. Three or four years ago when Kraft took over Cadbury, which at the time was very controversial, nothing could be done because the legislation was not there. I am not saying that under the new legislation a Government could intervene directly, but could the CMA at least investigate such a takeover if it were repeated today?

Norman Lamb (Liberal Democrat, North Norfolk)

It is always very dangerous to look at individual cases, but the new body will have the power to investigate mergers of any size that might have anticompetitive outcomes and in that way act in the interests of the consumer. That is the duty that we are talking about in the clause today. The hon. Gentleman makes a valid point there.

Alongside this the CMA will have powers to enforce unfair contract terms legislation and additional consumer enforcement powers to tackle business practices that distort competition or affect consumer choice even when in other respects markets are competitive. These can come in the form of tricking consumers into tie-in contracts, which it is hard to escape from and which might inhibit them from switching suppliers; and subjecting consumers to excessive surcharges or using misleading reference pricing. The CMA will therefore have the power to carry out investigations similar to those currently undertaken by the OFT such as its investigation into the use of online payment surcharges by airlines, the point that the hon. Member for Edinburgh South referred to in his intervention, which the OFT estimates cost consumers £300 million across 10 airlines in 2009 alone.

We will also transfer the OFT’s super-complaint mechanism to the new authority so that designated consumer bodies such as Consumer Focus, Which? and Citizens Advice can continue to expect fast tracking of super-complaints that significantly harm the interests of consumers. To date the super-complaint mechanism has resulted in big wins for consumers in investigations such as those into payment protection insurance and cash ISAs, which resulted in industry guidelines to ensure consumers receive personalised interest rate information on cash ISA statements. Those two examples are both the result of super-complaints.

We have also created a new strategic intelligence prevention and enforcement partnership involving the CMA, the new National Trading Standards Board, the new Financial Conduct Authority, Citizens Advice, and representatives from Scotland and Northern Ireland, to collectively identify issues causing consumer detriment and agree priorities for enforcement information and education. We do not, however, consider that the CMA’s duty needs to specify long-term benefits to consumers as the clause delivers that effect. As I have indicated, and as my hon. Friend the Member for North West Leicestershire indicated in his intervention, both short and long-term benefits are important. There could easily be a circumstance where consumers taking action through the new body to address an immediate detriment will bring about a short-term benefit. So just to define it as long-term benefits would seem inappropriate.

As with the OFT and the Competition Commission, the total impact and intention of the CMA’s work will be to deliver benefits to consumers. Even those cases with an immediate impact, such as cartel enforcement action and merger control, deliver enduring benefits for consumers through making the rules of business behaviour and through deterrence to others to indulge in that sort of behaviour. OFT figures show that for every cartel case pursued, 28 breaches are deterred, while for every anticompetitive agreement case not involving a cartel, 40 are deterred, and 12 are deterred for every abuse of dominance case. Therefore, there is a much broader deterrent effect acting in the long-term interest of consumers. We would also be concerned if the CMA’s flexibility to choose to deal with a high-impact, immediate short-term issue appeared to be constrained by an overly restrictive institutional objective, focusing only on the long term.

I hope that hon. Members will withdraw the amendment, but we agree with the sentiment of the proposal and what it seeks to achieve, as I hope I have indicated.

Fiona O'Donnell (Labour, East Lothian)

It is a delight to be back with you, Mr Bayley, on such a beautiful morning. The Minister referred to quitting while he is ahead, but I do not think that is an accurate health check on the state of the coalition.

I want to raise a couple of issues on the amendment. My concern is that no provisions in the Bill further competitiveness within the financial services sector, and for many small and medium-sized enterprises that is a worrying trait. I notice that analysis of Labour’s statistics showed an increasing number of people seeking to set themselves up in business, which is very welcome, but access to finance for the long-term health of those individuals and their enterprises is of concern. I am also concerned about community groups that are perhaps seeking to raise a wind turbine for the community’s benefit, or social enterprises, which often find it so difficult to access finance. There is a lack of competition in the market, and I often think, “Thank goodness for the Co-operative bank that there is some competition.”

The Minister also slightly misses the point made by my hon. Friend the Member for Newcastle upon Tyne Central about this part of the Bill not focusing on long-term benefits. We often see that what may appear to be a short-term gain to the consumer can, in the long term, disadvantage them. I hope that the Minister takes those comments with the good nature with which they are intended, but I feel disappointed by the ambition of this area of the Bill.

Geraint Davies (Labour, Swansea West)

It is a great joy to have you in the Chair, Mr Bayley. I want to make a few quick points.

Introducing the idea of the long term does not negate the obligation to consider short-term issues. Before I refer to an example, I should express my personal interest and history, as I have a background as a director of a small travel company. I mention that because of the enormous growth of low-cost airlines, and because people are unaware that charter airlines are protected by ATOL—air travel organisers’ licence. Therefore, if a charter airline goes bust people get their money back, but low-cost scheduled airlines, which most people use to go on holiday, have no cover. The point is that, so far so good, one of those companies has not gone bust, but in the current economic circumstances, with growing competition, falling demand and the eurozone crisis, it is likely that something will happen.

In the longer term, we should be looking towards scenario planning and whether obligations need to be introduced for consumer protection on the scheduled low-cost side, which is highly competitive and high risk, given that the case has been made historically for such protection on the charter side. That example lends support to the amendment and the idea of the long term, because although such a problem has not occurred, it is likely to. What will happen, as with charter airlines, is that when one of the companies goes bust, thousands of people, who assume they are covered but are not, will come to the Government. Many years back—in the 1970s—the Government had to step in for Clarksons and suddenly had to pay for everyone’s holiday, after which the law was changed so that that could not happen again. Such an outcome is predictable as a medium to long-term prospect. The idea behind the amendment is to focus the civil service and the industry towards the long term, in the knowledge that there will rightly be obligations in the short term, as the Minister has said. The amendment would not rule out those obligations, but I have used one example to make my case about the medium to long term.

Hugh Bayley (Labour, York Central)

It might help if I tell members of the Committee that there will be a stand part debate. If they want to put broader questions to the Minister about the role of the Competition and Markets Authority, they will have the opportunity to do so then.

Norman Lamb (Liberal Democrat, North Norfolk)

I shall briefly respond on the issues raised by Opposition Members. The hon. Member for East Lothian—[ Interruption. ] It did stick; I got there. It is the East Lothian question, indeed.

The hon. Member for East Lothian raised concern about anticompetitive behaviour, particularly in financial services. The Bill’s whole purpose is to create an effective regime to deal with anticompetitive behaviour in any sector. It is important that the organisation can commit its resources to wherever there is a problem, and that it has the capacity and the independence to decide on where the focus should lie, which may be in financial services or in other sectors. I reassure the hon. Lady that the whole purpose of the reforms is to put in place a very robust regime that can deal most effectively with anticompetitive behaviour, and do so in a timely way—we have already debated that key concern, and there is an acceptance that that is a problem.

The hon. Member for Swansea West raised the issue of airlines and the potential risks of low-cost airlines going bust and leaving consumers stranded. I can tell him that action is being taken at the European level. This is a single market issue, and it is important for the economy that the single market operates very effectively. Over recent years, because of effective action on airlines, the market has been opened up and there has been a massive reduction in fares for consumers, which is broadly a good thing. That has enabled us to go on holiday and to travel far more cheaply than we ever could in the past. Work is under way at the European level to consider the updating of the directive to ensure that appropriate protections are in place for consumers, while not—this is the concern of this Government—excessively burdening business with regulation. His concerns will be addressed in that forum.

On the hon. Gentleman’s broader point about the importance of the long term, I have made it clear that we accept the sentiment behind the amendment about ensuring that consumers are protected by and benefit from a robust regime in the long term. However, in many cases immediate action will be necessary and appropriate, and consumers must benefit in the short term. We do not want an in-built bias towards the long term because, in all its work, the organisation must simply look at acting on anticompetitive behaviour in the interests of the consumer, which is the important thing. The introduction of such a duty for the first time is a significant advance.

Chi Onwurah (Labour, Newcastle upon Tyne Central)

I welcome the Minister’s acknowledgment of and support for the sentiment behind the amendment. In his opening remarks, he made many points about the Bill. In my desire to follow your guidance to stick closely to the amendment and the clause, Mr Bayley, I did not raise such issues, but I look forward to addressing them in later debates.

I want to make two points that are slightly wider than the amendment. First, to set the record straight, with your guidance, Mr Bayley, I did not deny our shared responsibility for the light-touch regime in banking. As the Minister said, the shadow Chancellor has said that more and better regulation was needed. What I denied was the ridiculous proposition that the Opposition at that time called for more regulation, when in fact the opposite was true.

I move on swiftly to the important point about financial services raised by my hon. Friend the Member for East Lothian. I was surprised to hear the Minister say that the main purpose of the new organisation, the CMA, was to address competition issues in financial services. Please correct me, but my understanding, shared by others, is that the newly formed Financial Conduct Authority, to be created by the Financial Services Bill, would have a competition responsibility. We will have future debates on that, but will the Minister clarify the point raised by my hon. Friend about whether the responsibility for financial services will rest with the CMA or the FCA?

Norman Lamb (Liberal Democrat, North Norfolk)

Regarding the CMA, John Vickers pointed out in his evidence to the Committee that one would not expect the competition aspects of the Bill to refer specifically to banking. It would be ridiculous to identify one specific sector. This is about the general competition and consumer law of the land and the institutions that administer it. It is about the principle, setting up the architecture of how the organisation will operate. The new Financial Conduct Authority will have a duty to promote competition in financial services, but will work closely with the CMA, the overarching competition body for the UK.

Chi Onwurah (Labour, Newcastle upon Tyne Central)

I thank the Minister for that clarification. We look forward to clarifications of that type, to probe and understand what will be achieved by the Bill. As my hon. Friend the Member for East Lothian pointed out, competition in financial services is of such great importance that we need to be clear about the measures to improve that, and that the Financial Conduct Authority will be effective.

To return to the amendment, I am disappointed that the Minister, while acknowledging that we share the sentiment, will not consider some rewording of the duty. The principal duty does contain the word “consumers.” The Minister is right about that. The CMA is to further competition in the long term in the interests of consumers and the economy. My point is that consumers are not given sufficient importance. For example, the duty could have been to further the interests of consumers through competition. Consumers need to be at the heart of the organisation. Competition in and of itself is not the end objective. The benefit of consumers is the objective.

Norman Lamb (Liberal Democrat, North Norfolk)

The duty is incredibly clear: it is

“to seek to promote competition…for the benefit of consumers”.

That is the purpose of promoting competition. The link between the promotion of competition and the benefit to the consumer is absolutely clear.

Chi Onwurah (Labour, Newcastle upon Tyne Central)

I thank the Minister for that intervention and the emphasis on the importance of consumers, which I know we share. I feel that the duty does not go far enough in promoting the long-term benefit to consumers. It is of great importance to the Opposition, as the Minister will know from the interventions.

The hon. Member for North West Leicestershire raised a point that goes to the heart of what may be a misunderstanding. He said that interests include short, medium and long-term interests, but as I said in my opening remarks, and indeed as was supported by the example given by my hon. Friend the Member for Swansea West, there may be a conflict between an apparent short-term gain and the long-term interests. The Minister was concerned that there would be cases in which there was a short-term gain that the CMA would not be able to investigate, because its duty was to the long term, but the fact is that a short-term gain remains in the long term. If someone gains £10 tomorrow, they will still have that gain in five years’ time.

The important point that we are trying to make is that the CMA should always look to the long term. Equally, that sends a strong message that that is the kind of competition and those are the kind of benefits that we are looking to support.

Geraint Davies (Labour, Swansea West)

Would my hon. Friend agree that in fact the Minister confirmed a trade-off? He explicitly said of my example that consumers benefited from lower prices and he implied that if insurance was provided for their protection, they would have to face slightly higher prices, but they would be secure in the knowledge that if the company went bust they would not be stranded abroad. He has prioritised short-term gains over the long-term interests of consumers. That is why the amendment is right.

Chi Onwurah (Labour, Newcastle upon Tyne Central)

I thank my hon. Friend for that intervention. He has highlighted that point more concisely and with greater passion than I was able to do.

Norman Lamb (Liberal Democrat, North Norfolk)

It might help if I add an additional point. The OFT, through its business plan, has a particular focus on the long-term approach to consumer benefit. Through administrative arrangements like that, one would anticipate that the new body would have a clear steer about its importance. I have said that the Government share the ambition of ensuring that there is a focus on the long term. Guidance will be available through the business plan.

Chi Onwurah (Labour, Newcastle upon Tyne Central)

I thank the Minister for that intervention, although I am not sure that it provides the reassurance that he intended. Part of my concern with the wider proposals in the Bill is that the OFT loses all its consumer powers and all its consumer interests, which are passed to the FCA, Citizens Advice or other bodies. I acknowledge that there would be ways of ensuring that long-termism was reflected in the organisational culture, but I am afraid that that particular example does not help. Again, I ask the Minister to take our amendment away and consider how the long term can be best reflected. If not, I would wish to test the opinion of the Committee to see which Members do not wish to support the long term.

David Mowat (Conservative, Warrington South)

It is clear that everybody agrees about long-term benefits. The effect of the hon. Lady’s amendment is to specifically exclude the short and medium term, because the current wording allows short, medium and long. It may be that she wants to do that, because, as she said, if a short-term benefit is worth having, it should still be a long-term benefit, and I understand that logic. However, if we put that wording in, it allows somebody to argue that a referral is out of scope, because that referral has only a short and medium-term benefit, and therefore the CMA cannot consider it. Is that not a risk in the amendment?

Chi Onwurah (Labour, Newcastle upon Tyne Central)

I thank the hon. Gentleman for that intervention, which shows that he is considering the merits of the amendment and is inclined to support it, as far as I can see. He makes an important point. While I am not an economist, I remember studying as part of my MBA various assessments of the long-term value of present value. A short-term gain remains in the long term unless it is undermined by a longer-term loss, which is exactly the kind of situation we wish to avoid. A short-term gain that has a longer-term loss, would be a long-term loss. If there is short-term gain with no associated longer-term loss, it is also a long-term gain. Having set out very clearly the importance of long-termism in the CMA and the strength of feeling on our side, I wish to test the opinion of the Committee.

Hugh Bayley (Labour, York Central)

We have had quite a broad debate on the amendment but I guess there could still be more general questions that Members wish to raise on the establishment of the CMA, so we will have a stand part debate.

Chi Onwurah (Labour, Newcastle upon Tyne Central)

It has been a good debate on the amendment. I am disappointed that so few, indeed none, of the Members on the Government Benches wished to support long-termism in the CMA. Long-termism in the CMA is but a small part of what this clause sets out to achieve and therefore it is important to have a stand part debate. The clause gives life to a new body, the Competition and Markets Authority. In choosing the CMA as a title for the new organisation the Government have shown a certain appreciation of the importance of competition. Googling CMA brings ups the Communication and Managers Association, the Complementary Medical Association, the Cardiomyopathy Association, the Christian Motorcyclists Association, not to mention the Community Media Association. In picking so popular—

David Anderson (Labour, Blaydon)

Will my hon. Friend give way?

Iain Wright (Labour, Hartlepool)

Declare your interest.

David Anderson (Labour, Blaydon)

I will. The Country Music Association was missing from that list. Why?

Chi Onwurah (Labour, Newcastle upon Tyne Central)

I thank my hon. Friend for that intervention and can find no possible excuse for my oversight. As we can see, there will be significant competition among those laying claim to the initials “CMA,” so while I may not welcome that particular choice of initialism, I welcome the Government’s intent to improve competition in this country.

Competition is a key basis underpinning the market economy. In neo-liberal terms—I am sure many Government Members are dying to speak in such terms—it is competition and competition alone that can deliver consumer benefits. It is through competition that markets deliver the most efficient allocation of resources and the proper pricing of products. Consumers therefore benefit from lower prices. In theory, competition encourages firms to invest in developing new products in order to distinguish themselves, so consumers also benefit from innovation. Lower prices and innovation are what competition delivers for consumers.

David Anderson (Labour, Blaydon)

Far be it from me to disagree with my hon. Friend, but does she agree that the example of utilities, where companies have been unbridled for 25 years, has not delivered low prices and certainly not innovation? It is quite clearly an industry that is unfit for purpose in many ways.

Chi Onwurah (Labour, Newcastle upon Tyne Central)

I thank my hon. Friend for that intervention. Indeed, he raises a point that I am just about to come to, because it is here that I and many in the Opposition part company with the neo-liberals. There are some things that the market cannot deliver, such as universal education and health care, and there are other so-called natural monopolies, because the investment costs involved are so great that only one company can make a profit. Many such natural monopolies, such as electricity, gas, telecoms and railways, were privatised by the last Conservative Government, who took—

Norman Lamb (Liberal Democrat, North Norfolk)

Surely the hon. Lady is not suggesting that they should be renationalised.

David Anderson (Labour, Blaydon)

I hope she is.

Chi Onwurah (Labour, Newcastle upon Tyne Central)

The last Conservative Government took the money but left the difficult challenge of regulating—

Norman Lamb (Liberal Democrat, North Norfolk)

I am just interested to know whether the shadow Minister agrees with her hon. Friend the Member for Blaydon that the utilities should be renationalised.

Chi Onwurah (Labour, Newcastle upon Tyne Central)

I thank the Minister for that intervention. There are, as I will continue to set out, natural monopolies that cannot function effectively in a competitive market without significant regulation. In some cases, although not all—I am thinking particularly of the railways—the level of regulation required is such that it may be more cost-effective to bring them back into some kind of national ownership.

Ian Murray (Labour, Edinburgh South)

My hon. Friend is making a compelling case about the complexities of the competitive market and what does and does not work, but does she agree that the Government have stepped in where markets have failed? It could be argued that the east coast main line franchise, Network Rail and, in fact, the two biggest banks in the country were renationalised by Governments because of market failure.

Chi Onwurah (Labour, Newcastle upon Tyne Central)

My hon. Friend makes an excellent point. It is somewhat strange that the Minister expressed such surprise from a sedentary position at the concept of organisations that have so dramatically failed being brought back into public ownership, because that is exactly what happened to the east coast main line. A large proportion of the banking sector is also publicly owned. We must also be clear that competition has been successful in certain utilities, such as the telecoms industry. It has not been successful in other utilities, such as energy, but it may not be cost-effective or practical to bring them back into public ownership.

David Mowat (Conservative, Warrington South)

Will the hon. Lady give way?

Hugh Bayley (Labour, York Central)

Order. Before we take further interventions, which we undoubtedly will, I am perfectly content for Members to debate further the role and purpose of the Competition and Markets Authority, but if we stray into a wider debate on the merits or demerits of public or private ownership of utilities, we would be stretching a bit wide. I am happy to give a little licence to a couple of Government Members, because I have done the same for Opposition Members, but I hope that within two or three minutes we can get back to the CMA itself. The hon. Member for Newcastle upon Tyne Central, who has the floor, may decide whether to take interventions.

Chi Onwurah (Labour, Newcastle upon Tyne Central)

I will take one intervention.

David Mowat (Conservative, Warrington South)

I want to press the hon. Lady on natural monopolies, particularly in energy gas. Does she believe that to be a natural monopoly that should be renationalised? If so, will she explain why we have the 25th lowest gas prices in Europe?

Chi Onwurah (Labour, Newcastle upon Tyne Central)

I thank the hon. Gentleman for his intervention, although it was somewhat disappointing. In strict network economics terms, the distribution of gas and electricity is a natural monopoly. That is not to say that they should or could now be brought back into public ownership. Talking about the lowest energy prices is fantastic, but Opposition Members are also concerned about the long-term benefits. We have seen energy prices rise dramatically over the past few years.

Neil Carmichael (Conservative, Stroud)

Will the hon. Lady give way?

Chi Onwurah (Labour, Newcastle upon Tyne Central)

I will take one more intervention from each side, and then we should make some progress.

Neil Carmichael (Conservative, Stroud)

We are straying a bit off the point. Competition is not about ownership but about what happens within the industries. If we take energy, for example, that is not so much gas but gas versus other sources of energy production. That is the kind of competition that we need to stimulate, which she will find in the draft Energy Bill.

Chi Onwurah (Labour, Newcastle upon Tyne Central)

I thank the hon. Gentleman for his intervention. When he mentioned gas, I wondered whether he was referring to what I was saying, but clearly not; he was referring to the underlying industry.

Ownership is key in competition; I do not wish to disagree with the hon. Gentleman, but I am afraid that, to correct him, ownership is key in competition because, where there is a monopoly, the fact of its ownership and how it competes will be part of the responsibilities of this organisation.

Geraint Davies (Labour, Swansea West)

I should point out that the 25th lowest price is a pretty high price. Putting that to one side, does my hon. Friend agree that in the case of natural monopolies such as water, where clearly there is not a choice of taps to switch and where there are strategic issues with leakages, investment and variation in the amount of rainfall—there is a lot of rain in Swansea while there is a drought in the south-east—there should be a strategic approach that eventually lends itself, certainly for consumer protection, towards possible public ownership? An incoming Labour Government would not have any money, after the economic mess of the Tories, to do that sort of thing, but in the long term the strategic interests of the consumer may well be with the public ownership.

Chi Onwurah (Labour, Newcastle upon Tyne Central)

My hon. Friend raises a very important point. The approach of the IMF and others to water privatisation across the world, requiring developing countries to privatise their water, has had terrible consequences. An understanding of network economics is really important to any competition authority.

Chris Ruane (Labour, Vale of Clwyd)

I do not want to water down my hon. Friend’s argument. On whether there should be a halfway house between public ownership and private ownership, I give the example of Glas Cymru—Welsh Water—which is more of a social enterprise. The profits raised go back into it, not necessarily to the shareholders.

Chi Onwurah (Labour, Newcastle upon Tyne Central)

My hon. Friend is absolutely right, inasmuch as considering different forms of ownership is one way of mitigating the detrimental economic consequences of a natural monopoly. To dwell on that point, a natural monopoly is in a position to raise prices and consumers cannot change where they go, so consumers suffer real detriment when a natural monopoly is allowed, unregulated.

On the functions of the CMA, the last Conservative Government—

Andrew Bridgen (Conservative, North West Leicestershire)

Does the hon. Lady agree that the CMA’s function is to ensure that consumers have choice? With choice comes competition, which will drive down prices and drive up service levels in the marketplace. As has been mentioned, the consumer needs to have choice.

Chi Onwurah (Labour, Newcastle upon Tyne Central)

That intervention simplifies the complexity of the competitive environment. I agree that choice is important, and with competition comes choice, but the consumer needs—

Andrew Bridgen (Conservative, North West Leicestershire)

That is the wrong way round.

Chi Onwurah (Labour, Newcastle upon Tyne Central)

Not necessarily. The consumer needs to be able to make well-informed choices, and companies do not always give consumers all the information that they need to make the right choice. We have had many examples in many industries, which I will not enumerate.

It is important to note that we have a large number of ex-nationalised companies that are now in the private sector, requiring heavy regulation. Ofcom is one such regulator for the telecoms industries, and there is Ofwat and Ofgem. Those regulators will need to work closely with the Competition and Markets Authority.

Chris Ruane (Labour, Vale of Clwyd)

What does my hon. Friend think about the supermarket regulator, Offtrolley?

Chi Onwurah (Labour, Newcastle upon Tyne Central)

My hon. Friend has a talent for marketing. I may be censured by the Chair if I give my opinion on all the possible names of the groceries adjudicator.

The previous Labour Government recognised the importance of competition, and therefore the current Government have a golden inheritance on competition law, as the Minister acknowledged to a certain extent. The competition regime is made up of four main elements: first, market studies and market investigation, which we will discuss in future sittings; secondly, merger control, to which the takeover of Cadbury by Kraft, mentioned by my hon. Friend the Member for Leyton and Wanstead, is relevant; thirdly, there is antitrust; and finally, there is competition advocacy.

As the Bill says, the UK’s competitive environment is considered in the top three with the US and Germany, with KPMG’s independent review of competition regimes ranking the competition regime in the UK third behind the US and Germany. The strengths noted include technical competence, independence from the political process, which is very important, transparency, access to decision makers, as well as accountability and robustness. The National Audit Office also concluded that the competition regime is generally effective in meeting its aims and is well regarded internationally. For example, the OFT, the Competition Commission and my ex-employer, Ofcom, have great international standing and are considered the best in their class. Ofcom oversees a competition regime, in which there had been a monopoly provider, that saw the average cost of monthly broadband halved in the five years between 2005 and 2010.

Today’s competitive landscape, which the clause seeks to reform, was put in place by the previous Labour Government through the Competition Act 1998, the Enterprise Act 2002, as well as sector-specific Acts such as the Communications Act 2003. The CC and the OFT have estimated that there will be direct financial benefits to consumers of £465 million for the market investigation regime and £127 million for mergers in 2010-11.

However, in his evidence to the Committee, Malcolm Nicholson, a panel member of the Competition Commission, described that valuation as being “for the birds”. All the witnesses agreed that a competition environment could not be measured in such a way. One said that

“a vigorous and efficient competition system increases business confidence, saves money for the economy and attracts inward investment.”––[Official Report, Enterprise and Regulatory Reform Public Bill Committee, 21 June 2012; c. 107, Q243.]

Competition is therefore a key part of our economy. Thanks to the last Government, we have one of the most competitive markets in the world, and we will not allow this Government to undermine that legacy through a lack of scrutiny or because of their closeness to powerful vested interests.

There are measures in the clause and the Bill that appear to be sensible, and we will not object to them. On that point, I want to respond to the Minister’s apparent surprise that, after my hon. Friends rightly called the Bill a ragbag of measures, we say that we will support some of the measures. It is perfectly possible to see the qualities of individual rags in a ragbag and not, on that account, to overlook the absolute lack of any coherently woven strategy to address the double-dip recession made in Downing street.

Ian Murray (Labour, Edinburgh South)

Over the past two and a half weeks, we have failed miserably to get any answers from Ministers about how many jobs will be created. Will my hon. Friend give us her analysis of how many jobs might be created?

Chi Onwurah (Labour, Newcastle upon Tyne Central)

My hon. Friend makes a very good point, and if it is in order I want to consider the objective of the changes proposed in the Bill. It is called the Enterprise and Regulatory Reform Bill, but where are the measures to promote enterprise? We all agree that enterprise is important for growth and therefore for jobs, and competition and markets are essential to enterprise, but we already have one of the best competition regimes in the world. Of course, it could be improved, and we support measures to improve it, but our competition regime did not cause the double-dip recession.

Norman Lamb (Liberal Democrat, North Norfolk)

The hon. Lady asks where the measures are to promote the economy and jobs. Does she not agree—she appears already to have done so—that having a robust competition regime to ensure that we address anticompetitive behaviour is absolutely central to having a good, competitive economy that generates jobs?

Chi Onwurah (Labour, Newcastle upon Tyne Central)

I thank the Minister for his intervention, because I agree. I have said that having a robust competition regime is essential, but we do have one. Clearly, it could be improved, but it is one of the best competition regimes in the world.

David Mowat (Conservative, Warrington South)

The shadow Minister is right that we have one of the best competition regimes in the world, but that does not mean that it cannot be improved. The one area in which it is a little weak is timeliness. If we accept that better competition creates jobs and all that goes with that, we must also accept that enabling us to move more quickly will itself create jobs and be a good outcome, which is precisely the effect of the clause.

Chi Onwurah (Labour, Newcastle upon Tyne Central)

I have said that I agree that we can improve the competition regime and that we will support some measures, but to call the Bill the Enterprise and Regulatory Reform Bill and to have some measures to perfect the regime—by improving timeliness, for example—is not, given the gravity of the situation we are now in, the best use of Government time in relation to creating jobs.

I will not talk about our party’s five-point plan for jobs, but there is a significant number of measures that would certainly create jobs, whereas the measures in the Bill, although they are important in themselves, will not lead directly to any given number of job creations. Instead of writing and rewriting the clauses, the Minister could have used his time to develop a comprehensive industrial strategy, which we know is wanted by the Secretary of State, as he said so in his letter to the Prime Minister in March. However, the Minister has chosen to tinker with our excellent competition environment, risking much. Top-down organisational change risks much in order to gain—what?

The impact assessment from the Department for Business, Innovation and Skills states that the Office of Fair Trading and the Competition Commission

“are required to make significant savings to meet their 2010 Spending Review settlements and the merger savings are not expected to exceed those required by the SR.”

Basically, there will be no financial savings above what the spending review would in any case bring. Is the Minister certain that the risks associated with such a top-down organisational change do not outweigh the benefits? The Government seem rather obsessed with upsetting existing organisational structures rather than supporting and improving our public services—

Iain Wright (Labour, Hartlepool)

The NHS.

Chi Onwurah (Labour, Newcastle upon Tyne Central)

My hon. Friend, from a sedentary position, mentions the example that I was going to give. I would also add schools. There is an obsession with free schools and academies rather than with improving education.

Focusing on market reform, there is one market that we know has failed, and failed spectacularly—the banking market, as my hon. Friend the Member for East Lothian pointed out. Banking is a key part of growth for small businesses, and there is a lack of competition in the banking market. The National Endowment for Science, Technology and the Arts found that finance is an important obstacle for high-growth firms. Some 18% of such firms consider funding to be the most important barrier to growth.

The Minister tells us that the Bill aims to deliver growth, but one of the most important parts of growth—access to finance—is not directly addressed by the Bill. It mentions other sector-specific regulators, such as Ofcom and Ofwat, but does not mention the new financial services regulator. It leaves us in confusion about how financial services will be directly addressed by the Bill.

Julian Smith (Conservative, Skipton and Ripon)

The shadow Minister is making a compelling speech. On her point about savings from the merger, Simon Pritchard from Allen and Overy was quite compelling about the potential benefits of having the human capital of both organisations working more productively together and creating greater output as a result. I urge her not to focus solely on the numbers.

Chi Onwurah (Labour, Newcastle upon Tyne Central)

I was concerned that, given the hon. Gentleman’s almost obsession with employment law in the past few weeks, I might not benefit from his contributions when discussing competition and market reform. I am reassured to find that not to be the case.

The hon. Gentleman is right to point out that there can be benefits from bringing together two organisations, but I have significant concerns about the way in which the two organisations will be brought together, seemingly without much regard for the organisational culture of each. It will not enable the benefits to be fully released.

Andrew Bridgen (Conservative, North West Leicestershire)

I share the hon. Lady’s concerns about bringing two organisations together. I remind her of the disaster left to the country when the previous Government merged Inland Revenue with Customs and Excise. I urge the Minister to learn from that huge mistake and ensure that it does not happen on this occasion.

Chi Onwurah (Labour, Newcastle upon Tyne Central)

I should also hope that the Minister and we all can learn from the great success that the previous Government had in bringing together all the individual communications sector regulators, such as Oftel and the television and radio regulators, into one organisation, Ofcom, which, as we have already discussed, is one of the most respected regulators in the world.

Jobs and growth are the Opposition’s priorities. Although this is the Enterprise and Regulatory Reform Bill, it is clear that its measures do not directly contribute to that priority. The Government have their own priorities and we will deal with them and scrutinise them, but it is clear that those priorities must appear out of touch with the real concerns of people up and down the country, who are focused not on improving the already excellent competitive regime but on jobs, public services and growth in the economy.

Finally, will the Minister tell me what is it that this merger is trying to achieve that makes it such a worthy priority?

Iain Wright (Labour, Hartlepool)

It is a pleasure to serve under your chairmanship, Mr Bayley. It is good to have you back. It is good to be back from the Stone Roses concert, too, but I will not dwell on that. I support what my hon. Friend the Member for Newcastle upon Tyne Central has said. I refer in particular to subsection (3), which says:

“The CMA must seek to promote competition, both within and outside the United Kingdom”—

and this is the key point—

“for the benefit of consumers.”

Many hon. Members have mentioned the industries that need this measure, such as energy, utilities and the rail industry. I want to mention one—I hope the Minister will respond to this in his summing up—which is the bus industry. It is not necessarily a natural monopoly, but it is clear from my local area and from those of other hon. Members that the business model for the bus industry is simply not working. Crucially, it is not working in the interests of passengers or potential passengers and, given that we are considering an enterprise Bill, of the local and wider economy.

Ian Murray (Labour, Edinburgh South)

My hon. Friend has made a critical point in this debate. The bus company in Edinburgh, Lothian Buses, which is 97% owned by the city of Edinburgh council and 3% owned by the surrounding authorities, has won best bus company in the UK for five out of the last eight years. It is run publicly and in the interests of consumers.

Iain Wright (Labour, Hartlepool)

That is a fair point, and I am glad that my hon. Friend has mentioned that example. Since 1985-86, when deregulation of the bus industry took place, passengers in Hartlepool and elsewhere have seen a decline in services, an increase in costs and no choice whatever.

Norman Lamb (Liberal Democrat, North Norfolk)

What did you do about it?

Iain Wright (Labour, Hartlepool)

The Minister asks from a sedentary position what he does about it. We need to see some degree of re-regulation of the bus industry.

Norman Lamb (Liberal Democrat, North Norfolk)

What did you do about it?

Iain Wright (Labour, Hartlepool)

The Minister asks what we did about it. We introduced something called the quality contract partnership, which, unfortunately, is not being used by local authorities to the extent that it should be.

On the interests of consumers, which comes under subsection (3), passengers and potential passengers are getting short shrift from the bus providers. Stagecoach in my constituency is making huge profits, which are far in excess of other operations within their group. It is cutting services, isolating communities in my area and ensuring that people are not able to get to work or to leisure activities, which is leading to a contraction of the local economy and a decline in competitiveness in Hartlepool and in other towns as well.

John Cryer (Labour, Leyton and Wanstead)

There is an area in which the bus service is an exception to what my hon. Friend is accurately describing, and that is London. The system there is not perfect; nobody would argue that it is. None the less, the buses in London are of a high standard and they run pretty efficiently. They have disabled access, which is not the case in the rest of the country. When Labour was in power, we should have re-regulated the rest of the country in line with London, which has never moved away from regulation. We would see far improved bus services had we done that.

Iain Wright (Labour, Hartlepool)

My hon. Friend is absolutely right. London is an important market to consider when it comes to the bus industry.

Hugh Bayley (Labour, York Central)

Order. Probably not a minute too soon.

Iain Wright (Labour, Hartlepool)

It is a pleasure, and a surprise, Mr Caton, to see you chairing our proceedings this afternoon. I was worried, given my speech this morning, that Mr Bayley would do a runner this afternoon, and I see that he has. Perhaps I may give you a little bit of advice. I know that it is usually given the other way round, but Mr Bayley asked me to speak at some length on these matters, and I intend to follow his guidance closely.

We are discussing clause 18, and I have mentioned the importance of the new Competition and Markets Authority considering the bus industry, certainly if it is to fulfil successfully its obligations set out in subsection (3). I said that in Hartlepool and throughout the country the bus market is not operating effectively, and passengers do not have the choice that an efficient market would provide. That is because bus services are dominated by one powerful provider. In my case that is Stagecoach, which provides between 80% and 85% of services, although the situation is different in other parts of the country. The company deploys a business model that cherry-picks lucrative routes, and squeezes cash out of local authorities, while reducing the level of bus provision throughout the area and providing a poorer service in terms of punctuality. The traffic commissioners’ target is that 95% of buses should be on time. In my constituency, the level is 81%.

In its interim report for the six months to 30 October 2011, the Stagecoach Group posted profits of £87.4 million, of which £80 million were derived from its UK regional bus operations. The profit margin on those bus operations, at a time when services were being cut in Hartlepool and elsewhere, was 17.7 %, up from 16.4% the previous year. That allowed the company to boast in its interim report:

“We are continuing to deliver sector-leading profit margins”.

Fiona O'Donnell (Labour, East Lothian)

I am grateful to the former Minister for giving way. Would he care to speculate on the fact that part of those profits are donated to the Scottish National party in Scotland, which may relate to its failure to act on re-regulation of buses in Scotland?

Iain Wright (Labour, Hartlepool)

My hon. Friend can hear from my contribution why I am a former Minister, but I agree with her. She makes an important contribution.

We are discussing an enterprise Bill, and the cutting of bus services is having a detrimental effect on enterprise and the local economy because, certainly in my constituency, the stopping of services early in the morning, late at night and throughout the weekend prevents people from going to work; for example, those doing an early shift at a factory, or evening bar work. Consumers are deterred from accessing the night-time economy—having a few pints, or going to the local theatre—because there is no bus service in the evening. Cutting bus services has a disproportionately detrimental knock-on effect on enterprise, businesses, jobs and the economy.

A cheap, reliable and co-ordinated transport system is an essential foundation for improving competitiveness and growing the number of businesses and people in work, yet in its interim report, Stagecoach was able to state:

“We do not expect the recent Competition Commission review of the local bus market in the UK to result in any significant changes to the industry or our operations specifically.”

Well, Mr Caton, I think it should.

On the basis of the characteristics of the local bus industry—dominant players who cherry-pick routes and make excessive profits at the expense of choice, provision and punctuality of service for consumers—will the Minister acknowledge that the industry and its business model are not conducive to effective choice, which in turn hinders the competitiveness and enterprise that the Bill is helping to achieve? I hope that the Minister will reassure us that clause 18 and the CMA will be able to do something about the issues and the industries that I have referred to.

Fiona O'Donnell (Labour, East Lothian)

It is a delight, Mr Caton, to serve under your chairmanship for the first time. I am assured that you are every bit as generous and kind in your chairing of the proceedings as your predecessors. I may be in need of that gentle approach given my inexperience, having previously sat only on the historic recommitted Health and Social Care Bill Committee. I am grateful to have the opportunity to contribute to the debate, and to follow the former Minister, my hon. Friend the Member for Hartlepool.

On bus regulation, I would be interested to hear from the Minister whether the Bill will improve the quality of public transport. Will he reflect on whether public interest or competition would take precedence, where they were in conflict? He may remember, although it seems like several years ago, that I raised the issue during evidence taking.

Although transport is devolved, there is still an impact from competition legislation passed in this place on service provision in my constituency and throughout Scotland. When one operator recently decided to pull out of several routes it was proposed that the council should establish a bus company and start operating on some of the loss-making routes, to ensure that many rural and smaller communities would still have access to a bus service.

Our understanding is that, because of competition law, the minute a council starts to charge a fare it is in breach of competition law and cannot provide those services. That poses a difficult choice for many rural communities when under the present regulation, or lack of it, it can mean that services disappear. That of course makes access to work and services, and all the things eloquently set out by my hon. Friend the Member for Hartlepool, more of an issue for communities such as mine.

A Member from the coalition side boasted about how low gas prices are in this country, and there can be no doubt that an element of competition in various sectors has improved choice and brought prices down; but there is choice only if the consumer has access to the goods in the first place. Many parts of my constituency are not connected to the gas grid, so that choice does not exist for them. Does the Minister have any plans to examine both competition law and equity of service provision across the UK?

Similarly, my hon. Friend the Member for Newcastle upon Tyne Central spoke about telecommunications and how the liberalisation, let us say, of that sector has led to improvements; but, again, many communities have been left behind, without access to superfast broadband, which is so important to driving growth in a constituency such as mine, with many rural communities where people now choose to set up in business and work from home. It is also important in attracting companies, possibly from Scotland’s capital city—although I promise my hon. Friend the Member for Edinburgh South that I do not have my eye on any companies in his constituency. There would be a benefit to companies that moved out, but for all the competition, choice and access are still not there.

Something in the Bill that is most welcome is the speeding up of the decision-making process, with the caveat that it is welcome as long as quick judgment does not take the place of right judgment. Does the Minister think extra resources will be required for the new body that he is creating, so that we can ensure that quick judgments will also be the right ones?

There is much to welcome in the clause, but it is not a panacea. It will not solve all the ills of the country, although I sure that the Minister, in all his modesty, would never claim that. I will welcome the Minister’s response, especially on the issue of public transport in rural communities.

I welcome the Minister’s response, especially on the issue of public transport in rural communities.

John Cryer (Labour, Leyton and Wanstead)

It is a pleasure to serve under your chairmanship for the first time, Mr Caton.

I want briefly to raise a point that I mentioned earlier when I intervened on the Minister. It concerns the vexed question of Kraft’s takeover of Cadbury three years ago, which is still controversial. It may seem a specific point, but it still grates with a lot of people who remember it. If I remember rightly, a number of newspapers ran considerable campaigns against the takeover of Cadbury, and that has been reinforced since then. We discovered, however, that it was not possible for the then Government to intervene and prevent such a takeover, and I think that would still be true for this Government should the same thing happen again.

Let me explain a bit of the background. At that time I was the political officer of Unite the Union, formerly the Transport and General Workers Union—[Interruption.] I notice the hon. Member for Skipton and Ripon flinching slightly when trade unions are mentioned. I arranged to take some people from the union, including people from a number of the plants owned by Cadbury, to see the then Minister, the noble Lord Mandelson—I use noble in the broadest possible sense.

When we went to see the then Secretary of State for Business, Innovation and Skills, we took with us a large box of fruit and nut chocolate, which was apparently his favourite form of chocolate. It was a bit lighter when we got into the office than it had been outside because I decided that a couple of bars were surplus to requirements and kept them.

The Secretary of State was very grateful, and told us that he had every sympathy with the idea that a British Government—or indeed any Government—should be able to intervene in that sort of takeover in the national or public interest, however we describe it, but that the legislation was not adequate to allow the Secretary of State to intervene in such circumstances.

Cadbury was a hugely successful company that had, I think, grown through its own efforts in each of the previous six years, whereas Kraft was perceived—accurately, I think—as a large, sclerotic company that expanded only by taking over other companies and closing down plants. Almost as soon as it bought out Cadbury, it closed down a plant in the west country that it had indicated—even if it had not given a concrete undertaking—it would keep open.

Ian Murray (Labour, Edinburgh South)

My hon. Friend will be aware of the two hugely critical reports by the Business, Innovation and Skills Committee into the takeover of Cadbury by Kraft, and the insistence of the chief executive of Kraft at the time on not attending that Committee to answer questions from Members of the House. That continued to the extent that the Committee actually considered serving a subpoena on the chief executive, which highlights the issues and the processes that took place during the takeover of Cadbury.

John Cryer (Labour, Leyton and Wanstead)

I had forgotten that the chief executive refused to appear, and I am grateful to my hon. Friend for bringing it back to mind. We gave evidence to the Select Committee, broadly in line with the issues that several members of this Committee have raised today. My concern is that the regulatory regime at the time was inadequate to cope with that sort of takeover, and looking through the Bill, I still cannot see how the CMA will be adequate for dealing with such an event.

David Mowat (Conservative, Warrington South)

The hon. Gentleman is right to say that the regime in those days made no allowance for such takeovers to be challenged on an anticompetitive basis, and neither does the legislation before us. If that is such an issue, however, why have the Opposition not tabled an amendment to allow such takeovers to be challenged on the grounds of public interest? That would have been perfectly possible.

John Cryer (Labour, Leyton and Wanstead)

I think that something may be tabled in the future, so I will be speaking about the issue again.

Chi Onwurah (Labour, Newcastle upon Tyne Central)

My hon. Friend is making some excellent points. I wish to make it clear that we have tabled an amendment that we expect to help deal with the issue he raised. In addition to the points raised by my hon. Friend, there was concern that the takeover was driven by debt and that the resulting company was laden with debt.

John Cryer (Labour, Leyton and Wanstead)

That is absolutely true. Kraft’s expansion had been based very largely on debt for a number of years, with closures and the sacking of large numbers of people all over the world.

I remember vividly the meeting with Lord Mandelson. As far as I know, he is not exactly a revolutionary Prometheus ready to bring down capitalism from within—

Chi Onwurah (Labour, Newcastle upon Tyne Central)

He’s changed. [ Laughter. ]

John Cryer (Labour, Leyton and Wanstead)

Yes. He said, “We’ve got to take a look at the takeover regulations, because we or a future Government should be in the position where we can say that, on the basis of the national or the public interest, we can intervene in such takeovers.” The election then intervened and the rest is history, but we should now consider doing as many other countries do, and base some element of the legislation on being able to say, “Look, in the national interest, we are going to allow ourselves to intervene and prevent this takeover,” whatever it may be. Germany has that sort of legislation, as do several other countries that have been pretty successful— certainly Germany has been. I wanted to raise that today, because it will come up again, and my suspicion is that future Secretaries of State will be in exactly the same position as the present one.

Norman Lamb (Liberal Democrat, North Norfolk)

Like other hon. Members, I find it a pleasure to serve under your chairmanship, Mr Caton. I am grovelling just as much as everybody else so far has done—but I mean it. That is the difference—it is entirely sincere and from the heart.

I welcome the shadow Minister’s welcome for the purpose of the reforms; that is clearly noted. I was slightly concerned when she began, in a sense, to make the case for a return to public ownership of some companies that previously went into private ownership. I do not know whether a future Labour Government are planning a programme of renationalisation. She did not give any details of the sort of organisations—[Interruption.] I see frantic efforts by the Opposition Front Benchers to suppress the natural instincts—

Mr David Anderson (Blaydon) (Lab) rose—

Norman Lamb (Liberal Democrat, North Norfolk)

And they have failed. [ Laughter. ]

David Anderson (Labour, Blaydon)

I would just like to remind the Minister that in the previous Parliament, his party pushed passionately for the nationalisation of the banks.

Norman Lamb (Liberal Democrat, North Norfolk)

There are circumstances where action has to be taken, and that was clearly the case, but I think the hon. Member for Newcastle upon Tyne Central was talking about a more strategic decision to bring back into public ownership. I just say to the hon. Lady that she clearly has strong support from behind her, if not from beside her, for her plans for a return to a programme of renationalisation.

It was a little bit rich for one Opposition Member to suggest that the only thing that would prevent a renationalisation programme was the economic strategy of this Government, given that Labour’s own Chief Secretary to the Treasury left office saying, “There is no money left,” and the outgoing Government were spending £150 billion a year more than they were bringing in, in taxes—hardly a sustainable position. That in itself would probably deny them their natural instinct to start a renationalisation programme. The hon. Lady’s argument appeared to be that she supported the reforms, but actually this was not the priority; the implication was that if Labour were in government, they would not be doing this. It strikes me as complacent to, essentially, simply support the status quo.

The hon. Lady cited a report by KPMG in support of the existing regime, but in fact she was referring to its comments about the merger regime. The comments over the page, on the non-merger regime, are more critical and recognise that there are real flaws in the system. The graph, which I can show the Committee, of the length of time it takes for antitrust cases to be enforced shows that the UK is one of the slowest of the countries on the graph.

Julian Smith (Conservative, Skipton and Ripon)

I am sorry to interrupt the Minister so early in his speech, but does he agree that the UK has had plaudits for the independence of its current regime? Also, the evidence during the witness sessions was strongly in favour of a very robust spilt between the initiation and the remedy section of the new organisation. Will he impress upon the new organisation the need to ensure that that happens?

Norman Lamb (Liberal Democrat, North Norfolk)

The framework is designed to ensure that the separation is maintained absolutely, and that has been welcomed by not only witnesses to the Committee, but others who made submissions. I completely agree with my hon. Friend that it is essential that it is maintained and that the institution as a whole maintains its clear independence.

The Competition Commission has spent two years looking at local bus markets across the UK, excluding London, which as its own special rules, and Northern Ireland. Its report, published in December, found that competition actually pushes up standards for passengers—this from the Competition Commission, which the Opposition have spoken so fervently in favour of—but that in many areas bus operators face little or no competition. The key therefore is to improve the level of competition. I accept the point the hon. Member for Hartlepool made that in some areas lack of competition is very much the case, which leads to unsatisfactory services.

The Government believe that they have identified suitable remedies to remove the barriers to competition that the Competition Commission identified. The package of remedies is only one part of the Government’s wider plan to improve bus services across local markets, set out in “Green Light for Better Buses”, published on 26 March. We will reform the way in which we pay bus subsidy, to get better value for taxpayers’ money; we will incentivise partnerships between bus firms and local transport authorities, which is important; and we will support local councils in tendering for supported bus service contracts.

I should also note that the CMA will take over the Office of Fair Trading’s specific role under the Transport Act 2000 in applying competition tests that apply when local transport authorities form schemes or make agreements with bus operators.

Fiona O'Donnell (Labour, East Lothian)

May I ask for clarification on the specific point I raised? Will it be possible for a local authority to establish a bus company and tender for routes itself?

Norman Lamb (Liberal Democrat, North Norfolk)

I am not an expert on the operation of the law relating to local bus schemes, so I run the risk of misleading the Committee if I give a definitive answer now. I will try to ensure that we get a written response to the hon. Lady.

The hon. Member for Newcastle upon Tyne Central also mentioned public interest set against competition. The regime for both markets and mergers will provide that the public interest can be considered in appropriate circumstances. For mergers, there are defined areas of public interest that can be taken into account; in markets, the only public interest that can be taken into account at the moment is national security. That could be added to. The previous Government chose not to do so, and under the current Government the list remains as it is. However, there is the capacity to intervene in those defined circumstances.

Chi Onwurah (Labour, Newcastle upon Tyne Central)

I rise to correct the statement that the list of public interest reasons to intervene had not been added to. Long-term financial stability was added during the financial crash of 2008.

Norman Lamb (Liberal Democrat, North Norfolk)

I meant that this Government had not changed the list inherited from the previous Government. I fully accept that that was added then specifically to address the situation in the banking sector

Let me also deal with the points made about the Cadbury case. I do not recall all the details in play at that time, but it is important to be clear that this country has a robust mergers regime in place. That takeover was considered at European level, and it was determined that no competition issues were at stake. Whatever the then Secretary of State said in the meeting over the fruit and nut bars, he chose to do nothing about it in the entire period between then and the general election, although I detected a degree of disunity between the Opposition Members present and the former Secretary of State, which concerned me greatly. It cannot be true—I am sure I was somehow misled by the body language—but that was the impression I gained.

I stress the importance of foreign investment. We should not be seduced by any argument that foreign takeovers, by their nature, are wrong. Take Tata and its investment in Jaguar Land Rover, which has been incredibly important for jobs in this country. Japanese companies in particular have invested enormously in the automotive industry. We benefit in jobs from inward investment into the UK. An ambition of the Government is to make the UK the most attractive place in Europe to invest, given the levels of skills in the economy, corporate taxation, regulation and so forth. That has to be the objective.

Graham Evans (Conservative, Weaver Vale)

Does the Minister agree that Tata is most welcome in this country? In my constituency it rescued a long-standing chemicals company, previously known as ICI. Tata has invested significantly, not only in my constituency but throughout the UK, protecting exports and jobs.

Norman Lamb (Liberal Democrat, North Norfolk)

My hon. Friend makes a good point well, reinforcing the case that we should welcome investment from overseas, rather than be protectionist or resistant to such investment in any way.

Ian Murray (Labour, Edinburgh South)

The point that my hon. Friend the Member for Leyton and Wanstead was making about takeovers is about the public interest test and ensuring that the new CMA is strong enough to deal with it. I do not discount the examples of Tata and so on, but the circumstances can be different: for example, in its takeover of Scottish and Newcastle, Heineken gave undertakings that it would be good for the company and the employees, but then there were huge issues around pension entitlements. We are seeking reassurance that the CMA competition regime will be robust and ensure that the public interest tests—looking after workers and their rights—are enshrined in the operation of the new CMA.

Norman Lamb (Liberal Democrat, North Norfolk)

But there has to be a relevant public interest. The Labour Government chose not to extend the list of public interests that could be considered in this regard and, as I have said, this Government have not added to that list. It is important that we facilitate interventions in the public interest, but in narrowly defined circumstances. There is great danger in extending that principle and thereby undermining competition.

Iain Wright (Labour, Hartlepool)

I absolutely agree with the Minister about protectionism and attracting foreign direct investment, which has been a great help to the automotive industry and others. He is making some very important points. May I take him down the route of considering the principle that applies when a successful iconic British company with stable and regular cash flows is being undermined by debt repayments, because the acquiring company has loaded it up with debt? What does he think, for example, about Manchester United and what is happening there?

Norman Lamb (Liberal Democrat, North Norfolk)

As a Norwich City fan, anything that undermines another premiership club—I have no doubt that Norwich will be competing with Manchester United to win—

Iain Wright (Labour, Hartlepool)

Does the Minister realise that he shares his support of Norwich City football club with the shadow Chancellor?

Norman Lamb (Liberal Democrat, North Norfolk)

That is the one thing we have in common.

Chris Ruane (Labour, Vale of Clwyd)

And with the chief pairing Whip in the Labour Whips Office.

Norman Lamb (Liberal Democrat, North Norfolk)

I should not stray, but it is interesting to note that I had lunch with the shadow Chancellor at Norwich City during the last Parliament, in the spirit of Christmas good cheer—his parents are my constituents. Another Labour MP in Norfolk did not have lunch with us. I wondered whether there was an element of conflict within the Opposition, but I was not in a position to inquire further. I will leave them pondering on who it might have been.

Julian Smith (Conservative, Skipton and Ripon)

I am delighted that the Minister has given a clear message from the Government that Britain is open for trade and that we are not going to accept any of these camouflaged protectionist arguments. Britain is open for business, including for companies such as Kraft, which I hope will invest for the future in this country.

Norman Lamb (Liberal Democrat, North Norfolk)

I completely agree. It is very interesting and pleasing that, in discussions at EU level—I am on the Trade Council and therefore regularly discuss protectionism compared with free trade—the UK is always out there in front, arguing the case for free trade and opposing protectionism, along with Sweden and one or two others. I should acknowledge that that is a continuation of the previous Government’s position. There are protectionist threats out there, particularly from some European countries, and in times of economic difficulty, there is always a temptation to go down that route, but it would be completely wrong to do so. We must ensure that we always make the case for open markets.

Neil Carmichael (Conservative, Stroud)

It is a great pleasure and surprise to serve under your chairmanship this afternoon, Mr Caton—a surprise, because I thought you were at the Environmental Audit Committee today, which is where I and perhaps the shadow Minister should be, too.

The argument about extending the public interest presents us with the problem of being too prescriptive. Although it is good to hear about the discussion about Cadbury—I was involved in that to some extent because it affected some employees near my constituency—the fact remains that we cannot prescribe what is going to happen next. However, as the Minister just said, we do need to ensure that we protect free trade. Does he agree?

Norman Lamb (Liberal Democrat, North Norfolk)

I totally agree and I am grateful to my hon. Friend for that helpful intervention.

Let me make some progress. The UK has one of the best competition regimes in the world, but in the current economic environment we need to strive for improvement. We are not complacent, as I sense Labour might be. We will not simply allow the regime to remain unreformed when we know that there are weaknesses in it that have been drawn strongly to our attention. We need to strive for improvement and further to embed conditions in which companies can operate freely in competitive markets that encourage innovation, investment and growth and in which consumers secure the benefits of competition. Securing that generates jobs. Competition and a well functioning regime to promote competition establish the conditions in which jobs will be created.

Despite the current UK regime’s world-class ranking, there are problems. Alexander Ehmann from the Institute of Directors said to the Committee:

“The UK may have one of the best competition regimes in the world, but it also has one of the slowest.”––[Official Report, Enterprise and Regulatory Reform Public Bill Committee, 19 June 2012; c. 6, Q11.]

I have already referred to the chart showing the UK’s relative position. Data published by the Global Competition Review show that we were one of the three slowest countries for conducting investigations into anticompetitive agreements, and in the bottom four for investigating abuse of dominant cases. The current regime has also led to problems in the length of time it takes to conduct market studies and market investigations, which prolong consumer detriment and uncertainty in markets. For example, between 2002 and 2011, OFT market studies took between three and 21 months, and the end-to-end process of market investigation, including the time taken for the OFT to make a referral and the appeals process, ranged between 33 and 67 months. That, surely, is not acceptable, and it makes the case for reform.

The clause establishes a new Competition and Markets Authority, which will bring the Competition Commission and the competition and markets functions of the OFT together into one body. The creation of the CMA will provide a single strong voice for competition that can provide leadership for the sector; regulators on competition enforcement; a one-stop shop for businesses to help them understand and comply with competition law; and greater certainty for business for faster and clearer timetables and more robust decision making.

The CMA has been welcomed by business groups and practitioners, including the CBI, the Federation of Small Businesses, the Forum of Private Business and the City of London Law Society, so there is widespread support for it. They all think that it will provide efficiencies and boost business confidence. As Simon Pritchard of Allen and Ovary said to the Committee,

“you will get more bang for your buck.”

Creating a single body will lead, as he put it, to

“productivity gains—more output and more cases.”

That means that it will be good for competition, good for the economy and good for jobs. Similarly, Robert Bell of the City of London Law Society said of the CMA:

“It will help competition policy be more cohesive, and it will help streamline the regulatory process, which, in turn, will provide efficiencies and boost business confidence in the rigour of the competition system in this country.”––[Official Report, Enterprise and Regulatory Reform Public Bill Committee, 21 June 2012; c. 93, Q208; c. 103, Q234.]

The CMA will be the UK’s premier competition authority and will have at its disposal a full range of approaches to tackle anti-competitive behaviour and to make markets work better for consumers and businesses. The clause gives the CMA a duty to seek to promote competition for the benefit of consumers.

Fiona O'Donnell (Labour, East Lothian)

I am sure that the Minister will answer my question about resources. Those are all laudable aims, but will the CMA be resourced so that it can actually deliver on them?

Norman Lamb (Liberal Democrat, North Norfolk)

I confirm that we are confident that the CMA will have the resources it needs to do the job that it is being created to do.

In support of the creation of the CMA, Katja Hall of the CBI told the Committee:

“We very much welcome the proposed merger...It should help to reduce duplication, in particular, which is our members’ key frustration with the current system”,

and Mike Cherry from the FSB said:

“We would very much welcome the merging of the Office of Fair Trading and the Competition Commission.”––[Official Report, Enterprise and Regulatory Reform Public Bill Committee, 19 June 2012; c. 6, Q10; c.18, Q49]

The Government are committed to ensuring a smooth transition process and will work closely with the OFT and the CC to minimise disruption to the organisations while they continue to carry out their important roles and services. The new CMA will be sufficiently resourced to deliver its functions, but will not be immune from wider pressures to help deal with the UK’s massive deficit, which, I remind the hon. Lady, we inherited from the previous Government. Savings delivered by the creation of the CMA will be mainly from streamlining and eliminating overlaps between phases 1 and 2 of investigations. Those savings will help deliver the Government’s existing spending review targets.

The clause gives the CMA the duty to seek to promote competition for the benefit of consumers, both within the UK and internationally. It will be concerned with how firms interact with each other—the supply side; and with customers—the demand side. In creating the CMA we have drawn from the best of the OFT and the Competition Commission. I again pay tribute to the work of those two organisations. The CMA will retain the separation of decision making between phase 1 and phase 2, referred to by the my hon. Friend the Member for Skipton and Ripon, in merger and market cases, with independent expert panellists taking the phase 2 decisions. Those features were highlighted as key strengths of the current regime by John Vickers and some other witnesses to the Committee, and we shall protect them. The provisions are set out in detail in schedule 4.

Schedule 4 - The Competition and Markets Authority

Chi Onwurah (Labour, Newcastle upon Tyne Central)

I beg to move amendment 73, in schedule 4, page 60, line 22 at end insert—

‘(1A) The Chair shall be subject to approval by a Select Committee of Parliament.’.

Martin Caton (Labour, Gower)

With this it will be convenient to discuss the following:

Amendment 75, in schedule 4, page 62, line 11, at end insert—

‘(2A) The Chief Executive shall be subject to approval by a Select Committee of Parliament.’.

Amendment 79, in schedule 4, page 62, line 40, at end add

‘and brought to the attention of the relevant select committee.’.

Chi Onwurah (Labour, Newcastle upon Tyne Central)

We all agree that this is a very important Bill. There has been a lot of talk of the opportunity that the Bill represents, but we believe it also represents a missed opportunity. The poverty of ideas, mentioned by my hon. Friend the Member for Hartlepool, is evident.

While we do not have the radical changes we need to stimulate growth and deliver jobs and long-term sustainability in this part of the Bill, there are important changes to the competition environment. We believe that those changes merit real parliamentary scrutiny. I have been in the House for only two years, but I have long believed that as the representatives of the people, parliamentarians’ scrutiny is an essential force for democratic accountability. Simply put, the amendments would introduce some parliamentary oversight into how the proposed CMA will be managed.

I do not want to get off on the wrong foot with the Minister—

Chris Ruane (Labour, Vale of Clwyd)

Too late.

Chi Onwurah (Labour, Newcastle upon Tyne Central)

—by implying that I do not trust his or his bosses’ judgment when it comes to the appointments. By the time the merger takes place it might well be one of my hon. Friends sitting in that chair.

Chris Ruane (Labour, Vale of Clwyd)

Which one, though?

Chi Onwurah (Labour, Newcastle upon Tyne Central)

My hon. Friend the Member for Hartlepool, the former Minister, and my hon. Friend the Member for Edinburgh South are both undeniably future Ministers. Regardless of who holds the office, Parliament should have the right of approval through the Select Committee. We all recognise, and I hope would wish to promote, a general trend towards ever greater transparency in public life. I will surprise some of my colleagues by taking the opportunity to congratulate the Government—

Iain Wright (Labour, Hartlepool)

Sit down!

Chi Onwurah (Labour, Newcastle upon Tyne Central)

It is a rare experience for me and I will not dwell on it. I will say that, with the very notable exception of the Secretary of State for Health’s disaster, the Government generally seem to be moving in the right direction when it comes to scrutiny and openness. I would say that the Secretary of State for Business, Innovation and Skills and a certain Minister at the Cabinet Office may have taken things a bit too far when they were discovered disposing of confidential documents in public.

I welcome trends to transparency and propose that the CMA should be at the heart of that. Amendments 73 and 75 would subject ministerial appointments of the posts of CMA chair and chief executive to a parliamentary Select Committee. Paragraph 12 of the schedule requires the CMA to lay an annual plan before Parliament, and amendment 79 requires that report to be brought to the attention of a Select Committee.

We are familiar with some of the Minister’s achievements, but members of the Committee may not be aware that in a previous life he was a keen user of the Freedom of Information Act. I am not sure whether he is still as enthusiastic now that he is in office in Victoria street. I hope he welcomes the amendments, as they strengthen Parliament’s scrutinising function. Indeed, I was slightly surprised that the amendments were not already included the Bill. I am sure that is an oversight.

The coalition agreement may seem a long time ago, but allow me to refresh people’s memories on the subject of scrutiny of public bodies. Page 21 of the agreement states:

“We will strengthen the powers of Select Committees to scrutinise major public appointments.”

The amendments achieve that aim. For the sake of clarity, I also looked at the manifestos of each of the coalition parties. I keep a copy close by. The Conservative party stated that it would

“give Select Committees the right to hold confirmation hearings for major public appointments, including the heads of quangos”.

The Liberal Democrat manifesto said something similar. Some might say that that manifesto does not mean an awful lot these days.

Norman Lamb (Liberal Democrat, North Norfolk)

There is no need for that.

Chi Onwurah (Labour, Newcastle upon Tyne Central)

I am not one of them. For the sake of clarity, I will read from the Liberal Democrat manifesto:

“We will increase Parliamentary scrutiny of the budget and of government appointments”.

The Minister’s colleague, the Chancellor of the Exchequer, has promised the Chair of the Treasury Committee a veto over the appointment of future chairs of the Office for Budget Responsibility. The Minister sat on the Committee for two years. I am sure he would have enthusiastically welcomed the extra power of scrutiny. We should be in absolutely no doubt that the chair and chief executive of the CMA will be major public appointments. As they are responsible for our competitive environment, I do not see how anyone could argue otherwise.

The independent OBR exists to examine and report on the sustainability of public finances—that will be subject to parliamentary scrutiny—whereas the CMA has the equally important task of overseeing the competition and market regime for one of the world’s largest economies. Furthermore, if parliamentary protocol allows me to mention it, similar amendments have been considered favourably in another place with regard to the groceries code adjudicator. I know, because the Government recently told me so, that this House has absolute precedence. Nevertheless, I hope to excite a little competitiveness in the Minister with regard to parliamentary scrutiny so that this House can go at least as far as the other place has.

So, we have relevant precedents set by the Government and we have the public manifesto commitments of both coalition parties. It is strange that it is Her Majesty’s Opposition who have tabled the amendments, but we are happy to help in this particular case. I am sure we will have speedy agreement from the Minister.

Martin Caton (Labour, Gower)

Perhaps I should advise you, Ms Onwurah, that you can move only one amendment at a time. If you want to press amendments 75 and 79 to a Division, you will have to move those formally.

Chi Onwurah (Labour, Newcastle upon Tyne Central)

Thank you, Mr Caton.

Fiona O'Donnell (Labour, East Lothian)

I shall make a brief contribution, if I may. I hope that not including openness and transparency in the appointment of senior public servants has been an omission on the Minister’s part. Let us not forget that the public will be paying their wages. I can feel the presence of the Minister as he was before—that idealistic young man—in so many of the Bill’s clauses, but not in this one. Although I have been paying close attention to the proceedings, I have had time to muse on a short ditty, which I would like to share with the Committee—a short ditty to share with the Committee—

Chris Ruane (Labour, Vale of Clwyd)

Which is very witty.

Fiona O'Donnell (Labour, East Lothian)

I feel, perhaps, the hand of another presence in the Bill. The ditty goes: “The Chancellor had a little lamb, its fleece was white as snow, and everywhere the Chancellor went, the lamb was sure to go.” I wonder if we are feeling more not right, but right-wing, pressure. I hope that the Minister will concede that there has merely been an oversight, and that he will welcome the amendment.

Norman Lamb (Liberal Democrat, North Norfolk)

I am very grateful for that contribution. I thank the shadow Minister for the amendment, and I was pleased to hear her say that this is a very important Bill; her refrain is rather different from that of other Opposition Members who have called this a ragtag Bill. It is an important Bill—she is absolutely right—which is doing important things to improve the competitiveness of our economy, and I am pleased that she accepts that.

I am also pleased that the shadow Minister accepts that the Government are going in “the right direction” on both scrutiny and openness. She is absolutely right. As someone who has always campaigned for freedom of information, transparency and accountability, I am pleased to be in a Government who are pursuing the case for greater scrutiny and openness. We have a proud record of achieving that. She made a proposal that is designed to improve transparency, which is rather strange coming from a Labour Member, because when her party was in government it was the very opposite of transparent in so many respects. I am sure that, on reflection, the Opposition will share that view.

The Government are absolutely committed to increasing transparency and accountability in the public appointments process, and strengthening the ability of Select Committees to scrutinise major public appointments and hold Ministers to account for their decisions is essential to achieving that.

Ian Murray (Labour, Edinburgh South)

I do not doubt anything the Minister says about the transparency of the Government, but how does he reconcile that with the fact that the other place has just decided not to allow the BIS Committee to approve the new head of the groceries code adjudicator?

Norman Lamb (Liberal Democrat, North Norfolk)

I am waiting for inspiration on that, because I am not up to date with the developments in the other place. Hopefully, I will be in a position to respond later, and if not I will write to the hon. Gentleman.

A system is already in place, which was introduced by the previous Administration, for agreeing between Parliament and the Executive which of the Government’s public appointments will be subject to a pre-appointment scrutiny hearing. Under the system, the Secretary of State discusses and agrees with the Chair of the relevant Select Committee which appointments will have such a hearing. The Cabinet Office publishes a list of the appointments—the most recent one is from August 2009. A document entitled, “Pre-appointment Hearings by Select Committees: Guidance for Departments” was published by the previous Government in August 2009, and this Government will follow those guidelines. There is nothing between us and the previous Government on our commitment to the scrutiny of important public appointments.

In their response to the Liaison Committee’s “Select Committees and Public Appointments” report, the Government encourage Ministers to engage with Select Committee Chairs to ensure that the right appointments receive Select Committee pre-appointment scrutiny. The current system works well. The Government do not believe that there is any advantage in formalising the process in legislation, and there is no case for doing so in respect of individual roles such as that of the chair of the CMA. We will follow the guidelines laid down under the previous Government.

Under the current system, a pre-appointment hearing process is already in place for the chairs of the Competition Commission and the OFT. We are currently recruiting a chair-designate to the CMA. I should like to make it clear that that appointment will also require a pre-appointment hearing by the BIS Committee. However, the amendment tabled by the hon. Member for Newcastle upon Tyne Central would go further than her Government’s guidelines in saying that there would, in effect, be a veto. That is not appropriate. There should be proper scrutiny but not a veto. The Office for Budget Responsibility is the exception, not the rule; it is right that the head of that body, given its specific role, should be appointed as they are.

The Commissioner for Public Appointments code of practice for ministerial appointments to public bodies, which I have mentioned, requires the Government to state clearly in all publicity relating to the post that it is subject to a pre-appointment hearing by the relevant Select Committee. BIS has complied with that code during the recruitment process of the CMA chair-designate.

As with the appointment of the chair, the chief executive of the CMA will be appointed by the Secretary of State, but it will not be a public appointment. That is an executive post, not one where the post holder is regulating the Government or holding them to account, so there is a difference in terms of the appropriateness of scrutiny hearings before a Select Committee. The Government agree with the Liaison Committee that the key aim of the pre-appointment hearing is to establish the independence of the candidate from government. That would not be appropriate for a chief executive role, which is, by definition, a part of the executive and not a regulator of it. That is the distinction.

The chief executive will hold office as a member of staff of the CMA, as provided for in paragraph 9(5) of schedule 4 and, as such, he or she will be a civil servant. The recruitment process for civil servants is regulated by the civil service commissioners and is subject to full, fair and open competition. The CEO will, like any civil servant, be required under the terms of their employment to comply with the civil service code, which is the appropriate code for the position.

The Government believe that, generally, senior non-executive posts should be subject to pre-appointment hearings, because the post holders will play a key role either in regulating government or in protecting and safeguarding the public’s rights and interests, particularly in relation to the actions and decisions of government. It is vital for the reputation and credibility of the public body in question that the post holder is seen to be independent of Ministers and government. That is why it is not necessary for there to be a statutory requirement, as proposed in amendments 73 and 75, for a pre-appointment hearing by a Select Committee on the appointment of the chair or the chief executive of the CMA—and it is certainly not necessary for there to be an effective veto.

On amendment 79, it is not necessary for there to be legislative provision for the CMA to bring the annual plan to the attention of the relevant Select Committee. Opposition Committee members will have noted that paragraphs 12 and 14 of schedule 4 require the CMA to publish an annual plan, containing a statement of its main objectives and priorities for the year ahead, and to publish a report on its performance against those objectives, which must be laid before Parliament and is therefore subject to parliamentary scrutiny, both in Westminster and the devolved Administrations, for example, through investigations by a Select Committee. A Select Committee is within its rights to scrutinise the plan setting out the objectives, but it is not necessary for there to be a separate provision requiring it to be served on the Select Committee.

As the OFT must now, the CMA will have to account for its use of resources in its annual accounts, which will be audited by the National Audit Office. Given the transparency and accountability requirements, we do not consider that a legislative provision, such as that proposed by amendment 79, is required. I therefore ask hon. Members to withdraw their amendments.

Chi Onwurah (Labour, Newcastle upon Tyne Central)

I was surprised to learn that the proposals regarding the groceries adjudicator had been refused in the other place. It is perhaps a sign that the Government are not going as far in transparency and accountability as their manifestos or words intend.

Will the Minister clarify this point? I understand that he intends to follow the guidelines, but does he expect the chair of the CMA to be subject to Select Committee scrutiny?

Norman Lamb (Liberal Democrat, North Norfolk)

We are currently recruiting a chair-designate to the CMA. The appointment will also require a pre-appointment hearing by the Business, Innovation and Skills Committee.

I also pointed out that the code, published by the hon. Lady’s Government in 2009, makes it clear that during a recruitment process, we should be clear and open with applicants that that process will happen. We have been clear throughout the process of recruitment of the chair-designate. Whoever is appointed will expect that process to happen.

Chi Onwurah (Labour, Newcastle upon Tyne Central)

I appreciate that clarification. While I wish the Government would go further in accepting that the Select Committee should have approval, I am assured that there will be a Select Committee hearing. Regarding the CMA’s plan, it would be much more appropriate if it was laid before a Select Committee.

What is changing about the CMA specifically, in comparison with the OFT and the CC, is that there will no longer be any consumer duties in the CMA. As we have heard from the Minister, the OFT’s consumer duties will be transferred to Citizens Advice and the FCA—that is my understanding, and the Minister may wish to clarify. There will be no direct consumer protection duties, but the interests of the consumer are supposed to be paramount. In order to ensure that that is the case on a year-by-year basis, does the Minister not agree that direct scrutiny by a Select Committee would be the most appropriate form?

Norman Lamb (Liberal Democrat, North Norfolk)

Just to be clear, the hon. Lady is right that the responsibility of consumer education and advocacy will go to Citizens Advice, but consumer responsibilities, such as for unfair contract terms, will remain with the CMA. It will continue to have a role in safeguarding consumers’ interests where competition issues are at play in a market.

The CMA will be required by paragraphs 12 and 14 in schedule 4 to publish an annual plan containing the statement of its objectives and priorities for the year ahead, looking forward, and a report on its performance against the objectives, looking back. They have to be laid before Parliament. It seems entirely appropriate that the duty should be to Parliament as a whole.

Once the plan and the report are laid before Parliament, the Select Committee is absolutely at liberty to scrutinise either the plan or the report. It would be odd to impose a duty on the Select Committee; surely, it should be for the Select Committee to determine its priorities and work programme. It is at liberty to scrutinise the documents that are properly laid before Parliament, and I ask the hon. Lady to accept that that is appropriate.

Chi Onwurah (Labour, Newcastle upon Tyne Central)

I thank the Minister for his comments and clarifications. I hope that, in future debates, we will explore the CMA’s exact level of consumer duties. It was not my understanding that, as a competition authority, it would have consumer protection duties, so I look forward to receiving further clarification.

Given the Minister’s assurances about the appearance of the chair of the CMA and his concerns about the Select Committee’s work load or its freedom, as it were, I beg to ask leave to withdraw the amendment.

Chi Onwurah (Labour, Newcastle upon Tyne Central)

I beg to move amendment 71, in schedule 4, page 60, line 27, after ‘one’, insert

‘and no more than three’.

Martin Caton (Labour, Gower)

With this it will be convenient to discuss the following:

Amendment 85, in schedule 4, page 68, line 19, at end insert—

(f) at least three persons (“specialist consumer competition panel members”) appointed to the CMA panel under paragraph 1(1)(b) for the purpose of being available for selection as members of a group constituted to carry out specialist consumer competition welfare functions on behalf of the CMA;

(g) at least three persons (“specialist financial competition panel members”) appointed to the CMA panel under paragraph 1(1)(b) for the purpose of being available for selection as members of a group constituted to carry out specialist financial services competition functions on behalf of the CMA.’.

Amendment 90, in schedule 4, page 67, line 24, at end insert—

‘(2A) No person who participated in the CMA Board’s consideration of whether to refer the matter to the chair shall form part of a group selected by the chair to investigate the matter.’.

Chi Onwurah (Labour, Newcastle upon Tyne Central)

In March 2011, Laura Carstensen, the deputy chairman of the Competition Commission, said in response to the Government’s initial proposals that

“the design of a single authority and the stipulations for its operation should embed procedural fairness in the form of a two-phase procedure across its remit”.

The Minister has said that the two-phase procedure will be embedded, but we need more reassurances and, indeed, amendments to ensure that the procedure is embedded in such a way that it is reflected in the organisational culture, because there is a real risk.

Although an editorial in the Financial Times took the overall view that the Secretary of State’s proposals were sensible, particularly on the anti-cartel regime, it was far less convinced about the wisdom of a merger. It stated that

“while some of the recommendations contained in his review of the UK’s competition regime…are sensible, others may actually undermine policy rather than strengthen it. The biggest worry is the government’s proposal to approve a merger between the OFT and the Competition Commission.”

The Minister has quoted several experts in support of the merger, but others are more concerned about the risks. The Financial Times also stated that

“the expected savings…of some £1.3 million per annum could be smaller than the cost to consumers and businesses of getting a single merger decision wrong. That might not matter if it were clear that the new regime would be much more effective than the old one. But this is far from clear.”

The current merger and markets regime is structured around three decision-making stages—phase 1, which is undertaken by the Office of Fair Trading and sector regulators; phase 2, which is undertaken by the Competition Commission in markets and mergers cases; and phase 3, which is the appeal stage. If we are to merge the CMA and the OFT, it is essential that the combined organisation nevertheless achieves organisational separation between the first two phases.

Organisational separation is sometimes called Chinese walls, for reasons I am not entirely clear about, or firewalls, which is a rather clearer metaphor. The idea is that one part of the organisation should not contaminate the other parts. As Sir John Vickers put it in his evidence to the Committee:

“When you have two organisations under one roof, you need an extra strong wall between the two parts.”––[Official Report, Enterprise and Regulatory Reform Public Bill Committee, 21 June 2012; c. 83, Q186.]

In the Minister’s comments on the potential savings because of the overlap between phase 1 and phase 2, he did not reassure me that that wall would be strong enough and clear enough to ensure that we have the fresh pair of eyes in phase 2, which will be so important in promoting fair decision making.

One of the key ways in which organisational separation between phase 1 and phase 2 activities is to be achieved is through the make-up of the CMA panel and the separation of it from the CMA’s other duties. That division of responsibilities is made in part 2 of schedule 4. Phase 1 decisions in mergers and market cases are assigned to the CMA board, whereas phase 2 cases are undertaken by the CMA panel.

The CMA panel is to be appointed in the same way as Competition Commission member groups are at present, so they are independent panel members. It is for that reason that amendment 71 would limit the number of members who are on both the panel and the board. I would think that stands to reason, because otherwise my understanding is that in theory the entire board could be made up of panel members. If that was the case, they would naturally have an interest in promoting the same conclusions at phase 2 as at phase 1, effectively storming and overcoming the firewall. The Bill has a requirement that at least one member is a member of both the panel and the board, but it has no limit on the maximum number who can be on both.

Amendment 85 would further strengthen the panel by ensuring that there are consumer experts and financial experts on it. The Bill has requirements that there should be sector specialists, such as telecoms experts, or water experts or aviation experts, on the panel, but I strongly argue that the areas of consumers, finance, competition and welfare are equally technically complex and if we want to require the right diversity of specialist skills, we should ensure that we have consumer experts and competition experts there. That is all the more important because the loss of the OFT’s direct consumer protection activities will have a tendency to make it less consumer-focused.

I will just observe here that while Monitor, the NHS regulator, is now one of the sector-specific regulators with competition powers, no NHS specialists are required to be on a panel. As we as the Opposition do not believe that Monitor should have competition powers, we do not seek to remedy that. We will discuss Monitor’s powers in more detail in a later amendment.

Those are the proposed changes to the panel. While the panel is important, as it is the decision-making authority at phase 2, it is not enough to ensure separation. I am sure that many hon. Members are aware that in organisations different departments may win additional resources based on the charisma or strength of their department head. We see that in the Department for Business, Innovation and Skills today—or its inverse.

We want to ensure that any great movement of human resources from phase 1 to phase 2 activities can be externally tracked and identified. It is for that reason that we tabled amendments 76, 80 and 61. The first two would require that the annual plan and the annual report show not only the allocation of financial resources, as the Bill states, but also of human resources. We want to see whether people—because it is people who do the work—are being moved across these invisible, internal firewalls or Chinese walls. We are not proposing that the resources should be tracked at case level—

Martin Caton (Labour, Gower)

Order. The amendments that you have most recently referred to are not in this group. You can address those later.

Chi Onwurah (Labour, Newcastle upon Tyne Central)

I apologise for confusing the two sets of amendments; I think that they were previously together.

Finally, I hope that the Minister will agree that strengthening the panel members and ensuring that they are not confused with the board members will strengthen the panel and make the separation between phase 1 and phase 2 activities stronger.

Norman Lamb (Liberal Democrat, North Norfolk)

I thank the shadow Minister for the amendments. The Government share the sentiment behind them. A clear separation between phase 1 and phase 2 is important, and the Government’s purpose is to seek to preserve the distinction between the two phases that currently exists within the new organisation. The separation of phase 1 and 2 decision making, and phase 2 decision making by independent panellists, are great strengths of the current system. The Government intend to preserve those features in the new CMA and have proposed arrangements that provide for panellists to undertake the key functions of the Competition Commission panellists.

Amendment 71 would limit to three the number of CMA panel members who could be appointed to the board. The Bill specifies that at least one panel member must be appointed to the board and preserves the separation of phases by requiring panellists who are likely to be part of a group that considers a phase 2 merger or market inquiry to be excluded from board discussions of a potential referral at the end of phase 1. I am pleased that the Opposition appear to accept the retention of the separation of phases and independent panellists, as well as the importance of ensuring that at least one member of the board has experience of phase 2 processes.

Amendment 71 is unnecessary, though, as the Secretary of State is unlikely in practice to want to appoint more than three panel members to the board. The Government said in our response to the competition consultation that we expect two or three panellists to be appointed to the board. That will ensure that the board has appropriate phase 2 expertise, which is important, without becoming too unwieldy.

Particular circumstances might arise, however, in which the Secretary of State wants to appoint more than three panellists to the board, for example because of the evolution of competition or corporate governance practice. Alternatively, where there are already three panellists on the board and none is available to participate in board discussions of a referral, perhaps because of a conflict of interest—they are likely to be on the phase 2 panel—the Secretary of State might want to appoint an additional panellist to the board. In those circumstances, it would be wrong to place an artificial constraint on the number of panellists on the board.

In effect, the amendment is too prescriptive. We fully accept that it is unlikely that there will be more than three panellists on the board, but to be prescriptive on the face of the Bill and prevent it in all circumstances would be wrong. I hope that the hon. Lady will withdraw amendment 71, although we share the sentiment involved.

Amendment 90 would add a further provision to strengthen the separation of phase 1 and phase 2 in merger of markets cases. The amendment would prohibit board members who have participated in board discussions of a referred matter from sitting on a phase 2 group that makes the final decisions. We agree with the intent of the amendment, which is designed to strengthen the important separation of decision making between phase 1 and phase 2. The amendment is, however, unnecessary. Paragraph 33 of schedule 4 already specifies:

“If the chair determines that…a member of the CMA Board might reasonably be expected to be a member of such a group, that person is not to participate in the CMA Board’s consideration of whether to refer the matter”.

Paragraph 33 is designed to achieve exactly the same effect as amendment 90, but it does so prospectively, looking ahead at whether there is likely to be a risk in the board’s discussion if an individual panellist is part of that discussion.

Given the provision in paragraph 33, we think it is unlikely in practice that a board member could participate in the board’s decision on a referral and then be considered for appointment to the group to which the matter is referred. Even if that did occur, we expect the chair would always want to exercise the power to appoint members of a group under paragraph 36 in a way that preserves the separation of phases. We also expect the board’s rules of procedure made under paragraph 31 and the rules of procedure for phase 2 inquiry groups made under paragraph 51, on which the CMA must consult interested parties, will further reinforce the separation of phases. I therefore hope the hon. Member for Newcastle upon Tyne Central will not press amendment 90.

Amendment 85 would add a requirement to appoint at least three consumer competition panellists and at least three financial competition panel members.

The CMA will be equipped with a number of tools, such as the markets regime and consumer enforcement powers, which I referred to earlier, to ensure that consumer benefits are considered across the economy, including in financial services. The Bill carries over many features of the panel structure under the Competition Act 1998 and sectoral legislation, which include certain requirements to appoint sector specialists who are available to sit on groups that determine appeals and references in the regulated sectors. The new regime also retains generalist panellists who may sit on any type of group.

The Competition Commission has more than 30 panellists, including lawyers, economists, accountants and business people. Between them they have the range and depth of expertise to deliver the commission’s responsibilities for inquiries across the economy, including financial services and consumer issues. The Opposition have already made clear the high regard in which they hold the Competition Commission. If they accept the current regime with the current number of panellists, I would have thought they can accept our proposed regime.

We expect a sufficient number and range of panellists will be appointed to the CMA for it to be able to cover consumer welfare and financial services-related functions. The specific appointments called for by amendment 85 are therefore unnecessary. Including particular sectors in the Bill seems inappropriate. At any point in time there may be a particular focus on a sector, and there certainly is on financial services now, but in a few years’ time the focus may be entirely elsewhere. We want to ensure that there is a range of expertise on the panel so that a group selected from the panel can undertake and discharge its responsibilities. I therefore hope that the hon. Member for Newcastle upon Tyne Central will not press amendment 85.

Chi Onwurah (Labour, Newcastle upon Tyne Central)

I thank the Minister for those clarifications and for confirming that he shares our sentiments on ensuring a separation between phase 1 and phase 2.

On the number of appointees to the board who can be on a panel, I will accept the Minister’s reassurances on the guidelines and expectations. However, with regard to ensuring that those who are part of the decision-making process in phase 1 are not also part of the decision-making process in phase 2, I did not find his assurances entirely convincing. I had identified that those paragraphs are designed to achieve the same thing as our amendment 90, but they are written in such a way that they need to be read at least 10 times before one can conclude that that is their objective. I speak from bitter experience here.

In describing the effect of those paragraphs, the Minister used phrases like “we would expect that”, “if it was not caught here, it would be caught there” and “ultimately the chair would not want to see”. What we have all agreed in Committee is that the separation between phase 1 and phase 2 is not only important, but should be sacrosanct. If that is the case, why does the Minister object to making it explicit? If amendment 90 seeks to do what the other paragraphs seek to do, it does so much more concisely and clearly for the benefit not just of those who are reading the Bill, but those who are working for the CMA in future.

On Amendment 85, it is not I who picks out certain sectors, it is the Bill that does that. It identifies certain specialists who must sit on the panel and it identifies the sectors where there are concurrent competition powers between the CMA and the sector, for example Ofwat or Ofcom. Apart from the three other areas that I mentioned: finance, where there are concurrent powers; consumer welfare—

Norman Lamb (Liberal Democrat, North Norfolk)

I think the distinction is that the hon. Lady is talking on the one hand about regulated sectors, where there are sector-specific regulators with whom the CMA has to work, and the broader economy where there is not naturally a monopoly that is regulated.

Chi Onwurah (Labour, Newcastle upon Tyne Central)

I thank the Minister. It is interesting that he raises the issue of a monopoly as being the driver for whether there should be sector-specific expertise. The financial sector has, or will have, a sector-specific regulator, the FCA, and there are also concurrent powers. I would therefore argue that the status is very much the same as with telecoms or water, apart from the fact that there was no monopoly operator in finance. I am not sure that that is relevant to the question of expertise.

When it comes to consumers, I recognise that that is a wider question, but I have already given the reasons why it is important for consumers and consumer expertise to be at the heart of the panel. I do not understand why the financial sector, which is a sector of such great importance, is being treated differently from the other regulated sectors where there are sector-specific concurrent powers. Could the Minister take amendments 90 and 85 away to consider them or give further reasons why we should not press them to a vote?

Norman Lamb (Liberal Democrat, North Norfolk)

I would repeat that we are absolutely at one in terms of the sentiment behind amendment 90: the separation between phase 1 and phase 2 and ensuring that individuals are not conflicted who then serve on a group selected from the panel to deal with a phase 2 investigation. I still believe that the amendment is unnecessary, because the board’s rules of procedure on quorum and conflicts would be expected to deal with that issue. The CMA would be keen to preserve the separation of powers. It is part of the DNA of the organisation, and those aspects of the procedural rules will also be subject to the Secretary of State’s approval. I say on the record that we absolutely recognise the importance of the separation of those powers.

On the final point about specialist financial competition members, there is a distinction between those sectors that have a regulator, where it is absolutely right that the Bill deals with the relationship between the CMA and that sector regulator, because of a non-competitive situation in that sector—utilities is often such an example, as we have discussed already—and the financial sector. I have already made it clear that there will be close liaison between the work of the new Financial Conduct Authority and the CMA. It is inappropriate, however, for specific panel members to be appointed.

I ask the hon. Lady to reflect on the fact that she has said clearly that she regards the Competition Commission as a highly effective body. That commission has a range of some 30 panellists to call on, including lawyers, economists, accountants and business people. It is widely recognised that they have the range and depth of expertise to deliver the Competition Commission’s responsibilities for inquiries across the economy, including financial services. If the hon. Lady is so complimentary about the existing body and its effectiveness, she should be equally satisfied that bringing that model into the new body will meet her concerns.

Chi Onwurah (Labour, Newcastle upon Tyne Central)

I thank the Minister, although I am somewhat disappointed by his apparent reluctance to take away genuine constructive suggestions for the improvement of the Bill. While I accept that the Bill sets out to do what amendment 90 does, the concern about the confusing and drawn-out language remains.

On amendment 85, I do not understand the Minister’s distinction between the financial sector and the other regulated sectors, where he said there was a competition issue. If the Minister does not believe that there is a competition issue in the financial sector, I fear that he is somewhat out of touch with the concerns of many small businesses and, indeed, individuals.

However, given that the Minister is so reluctant and that we have many amendments to go, I will not test the Committee’s patience by pressing for a vote, but I hope that the Minister will consider changes to improve the language of the Bill in order to achieve real separation. I beg to ask leave to withdraw the amendment.

Chi Onwurah (Labour, Newcastle upon Tyne Central)

I beg to move amendment 72, in schedule 4, page 60, line 35, at end insert—

‘(8) Of the persons appointed to membership of the CMA Board under sub-paragraph (1)(b) at least one must be a member of the Consumer Focus board or other representative of consumers as designated by the Secretary of State.’.

Martin Caton (Labour, Gower)

With this it will be convenient to discuss amendment 77, in schedule 4, page 62, line 39, at end insert—

(c) set out the consumer benefit which will be achieved as a result of the objectives and priorities as set out in 2(a).’.

Chi Onwurah (Labour, Newcastle upon Tyne Central)

We are making startling progress. In less than an hour, we have gone through many amendments and now better understand much of competition law and the markets.

The Government propose that the OFT and the Competition Commission should merge. We understand that. They hope to make cost savings, of which we are slightly sceptical, and to strengthen the overall regime, which we certainly support. We also believe that it is possible for the merger to make more efficient use of resources. However, as the Minister has acknowledged, and as is clear from the breadth and number of Opposition interventions, we believe that the CMA must focus on consumers and on using competition to achieve the welfare of consumers. Consumer welfare must be the key objective of the CMA and all its interventions.

The Bill proposes that the OFT will lose its consumer activities to citizens advice bureaux. We have concerns about the resourcing of Citizens Advice, but we recognise that it is well qualified to be a consumer champion. There is a parallel consultation on the consumer landscape; the Opposition want to see more powers for consumers, so we will seek to ensure that that is the consultation’s result. As part of those better outcomes, it is consequent that consumer activities currently held by the OFT would be better placed elsewhere.

Leaving the consumer entirely out of the CMA risks creating a technocratic organisation focused on process rather than the consumer. Consumer welfare must be the key policy objective of the new organisation. The Government have rejected our amendment aimed at emphasising the long-term interests of the consumer, which is a decision that we feel the consumer will regret. The Government, however, will surely accept the importance of ensuring that the loss of consumer activities from the OFT does not result in a technocratic organisation without consumer focus.

The impact assessment by the Department for Business, Innovation and Skills states:

“Whether or not a new CMA retained responsibility for OFT’s consumer functions there would be consequent risks: if they were retained, it would be necessary to ensure that consumer concerns received due weight in a body with a primary focus on competition; if they were removed,”—

which is the proposal before the Committee—

“the risks would result from transition issues and a potential loss of integration between competition and consumer issues.”

It is essential that we have complete integration between competition and consumer issues, because competition without consumer welfare at its heart does not deliver the consumer benefits that we need. The Opposition strongly believe, and I understand that the Minister agrees, that competition must not be an end in itself; it must be directed entirely at delivering benefits for consumers.

In order to help achieve that, we have tabled amendment 72, which requires that the CMA board has at least one member from Consumer Focus. That would put a consumer champion on the board, and we would know that the consumer is represented at the heart and head of the CMA’s deliberations. We would have far more confidence that consumer welfare will be given due focus in each and every decision made by the CMA.

That proposal would not be enough, however. One person on the board cannot do everything, so to ensure that the consumer will be entirely embedded in the organisational culture of the CMA we have proposed amendment 77, which relates to the annual plan. A number of priorities are set out in paragraph 12(2) of schedule 4, although I note that assessment of the consumer benefit is not included. Paragraph 12(2)(a) states that the plan must

“set out the CMA’s main objectives for the year and indicate the relative priorities”,

while paragraph 12(2)(b) states that it must

“provide a summary of the proposed allocation of the CMA’s financial resources”.

The word “consumer” is not there, but the consumer should be at the heart of the CMA’s plans. To achieve that, we propose that consumer welfare should be considered in the plan.

The Competition Commission and the OFT already estimate the consumer benefits that they generate, and we heard earlier that it is estimating a £465 million benefit for the market investigation regime, for example, so surely it is not a significantly additional burden to ask it to plan for the consumer benefit that it should be generating, and to share that transparently with all its stakeholders. The advantage of putting that in the plan is that it would be in the CMA’s performance report. Without the amendment, there will be no real reflection of the consumer welfare generated by the CMA in its plans. Is that acceptable for an organisation whose sole purpose, we agree, is to deliver consumer welfare?

Norman Lamb (Liberal Democrat, North Norfolk)

I am grateful to Opposition Members for their suggested amendments. I was pleased to hear the shadow Minister say specifically that Citizens Advice is well qualified to be a consumer champion. There is absolute agreement on that. She referred to leaving the consumer entirely out of the CMA, and I am completely confused by that. The Bill introduces in the very creation of the CMA a duty on it to promote competition for the benefit of the consumer. All its work on competition is for that purpose, so it must be central to—not absent from—its work.

Chi Onwurah (Labour, Newcastle upon Tyne Central)

We have discussed the duties of the CMA, so I recognise that the word “consumer” was somewhere at the back end of the organisation’s duties, but those of us who have worked in the real world and in organisations know that having a duty somewhere in a document is not the same as having a day-to-day accountable responsibility that provides contact with consumers, and their issues and concerns. Right now, that is what the OFT has. I do not understand how the CMA has those same duties, experiences and activities, but if I have missed something about the CMA’s consumer duties and responsibilities, perhaps the Minister will enlighten me.

Norman Lamb (Liberal Democrat, North Norfolk)

I am grateful for the hon. Lady’s intervention. In her speech she raised the question whether the CMA has consumer functions. She said that the word “consumer” is somewhere at the back end of its responsibilities, but it is in the very first clause of part 3 of the Bill, which sets out the duties of the organisation. It is up there in lights in clause 18 that the purpose and responsibility of the organisation is

“to promote competition…for the benefit of consumers.”

Neil Carmichael (Conservative, Stroud)

I find it fascinating that the shadow Minister thinks that the word “consumer” is absent. Can the Minister imagine deliberations about competition that would not have the interests of the consumer firmly in the list of priorities?

Norman Lamb (Liberal Democrat, North Norfolk)

I am grateful for my hon. Friend’s intervention. He makes the point perfectly. It is central to the CMA’s purpose when considering whether a market is working effectively, or whether a merger might be anticompetitive, to think in terms of consumers’ interests.

The CMA will also act as the single liaison office for the EU regulation of consumer protection co-operation and have an international consumer role, for example, to represent the UK in the OECD’s committee on consumer policy. The CMA will be centrally interested in the consumer, and the way in which competition works for the benefit of the consumer.

I shall comment on amendments 72 and 77, which relate to the CMA’s consumer role. In our discussion on amendment 70, I set out the important role that the CMA will have in ensuring that markets work well for consumers and the tools that it will have available with which to deliver that. I will not repeat the details, but will reiterate the importance that the Government place on the CMA’s role in delivering benefits for consumers.

Amendment 72 would add a requirement to appoint a consumer representative to the CMA board. We share the concern of Opposition Members that the reforms promote consumer interests. That is why the CMA’s objective will be to seek to promote competition for the benefit of consumers as the main duty in clause 18. The CMA will have consumer enforcement and market powers; it will work closely with other consumer bodies, for example, through the strategic intelligence, prevention and enforcement partnership; and it will inherit the OFT’s super-complaint function, which provides a fast-track process for complaints by consumer bodies.

Given those arrangements, which I set out in detail in our discussion on amendment 70, amendment 72 is not necessary. Consumer interests will be at the heart of the CMA. The amendment would also undermine the effectiveness of the CMA. We agree with the point made in the Opposition’s own 2001 White Paper, “A World Class Competition Regime.” I am sure they will all be very familiar with that. Decisions should be made independently, on the basis of sound economic analysis of the effects on competition. The OFT was given independence of decision making, and politics was largely removed, so that there would be greater certainty for business and more clarity in the regime.

As I am sure we will discuss further, independence also means that there should be independence between phase 1 and phase 2, merger and markets processes, and independence of decision makers from investigators in antitrust cases. Independence also applies to particular sectoral interests. To be absolutely clear: the board will have a quasi-judicial role. When it is deciding on a case originally raised by a consumer body in a super-complaint, its decision must be free of any perception of bias. That is really important, I am sure the hon. Member for Newcastle upon Tyne Central would agree.

While I would expect that the board and the panellists of the CMA will have great expertise on consumer issues, it would be inappropriate to put any person purporting to represent a particular interest, consumer or otherwise, on the board of the CMA, given its quasi-judicial function. As I mentioned earlier in connection with amendment 70, in any event we will transfer the OFT’s super-complaint function to the CMA, so that consumer bodies, such as Consumer Focus—which the hon. Lady wants inappropriately to put on to the board—Which? and Citizens Advice can make a complaint to the CMA on issues that significantly harm the interests of consumers and expect it to be fast-tracked. There would also be a conflict of interest where a representative of such an organisation, with a super-complainant status, also sat on the board of the CMA. I am sure the hon. Lady, on reflection, would accept that.

Amendment 77 would require the CMA to set out the consumer benefit that will be achieved as a result of the objectives and priorities set out in its annual plan. In the current regime, the OFT is not subject to a statutory requirement to estimate impacts in relation to its work. The OFT is currently obliged to do that by virtue of its spending review settlement, not under legislation, which requires it to publish annually an estimate of direct savings to consumers from its activities and to assess the associated benefit-to-cost ratio against the current target of 5:1. That requirement also encourages the OFT to maximise benefits to consumers in deciding what work to take forward. Indeed, the OFT’s figures for 2011 show that it had delivered a benefit-to-cost ratio of 7:1, which was well ahead of its target. That is a good performance.

At present, the OFT and the Competition Commission estimate the impact of their past work over a rolling three-year period, using a common approach. Looking backwards over three years helps to make the impact estimates more precise and helps level out any peaks or troughs in impact. Requiring the CMA to estimate the impact of its future work would be significantly less precise. Besides methodological difficulties in making forward-looking estimates on particular cases, the CMA’s case load cannot be predicted. Merger cases are, self-evidently, responsive to market developments and the CMA cannot pre-empt the outcome of independent market inquiries. The amendment could also leave the CMA at risk of judicial review, if forecasted consumer benefits were not realised, and could incentivise the CMA to underestimate and then underachieve.

I hope that, having heard the arguments about why the amendments would be unhelpful and unnecessary, the hon. Lady will ask leave to withdraw the amendment.

Chi Onwurah (Labour, Newcastle upon Tyne Central)

I thank the Minister for his comments, but I get the impression that he has no intention of accepting any improvements to the Bill.

Norman Lamb (Liberal Democrat, North Norfolk)

If they come along, we will. We are waiting for them.

Chi Onwurah (Labour, Newcastle upon Tyne Central)

Well, let me address a few points. The hon. Member for Stroud asked whether the Minister could imagine a circumstance in which consumers would not be at the heart of the CMA’s investigations. That is absolutely relevant. For example, consumers are not directly involved in wholesale markets. I could provide many other examples, including the concrete market. Direct consumers are not necessarily involved in such markets, but clearly the consumer interest needs to be represented. To achieve such representation, I should have thought that it would be helpful for any organisation to have a consumer representative on the board.

Norman Lamb (Liberal Democrat, North Norfolk)

But will the hon. Lady accept—this is a central point and it is important that we get a clear, direct answer—that it must be inappropriate and would be a conflict of interest if, on the one hand, there was the potential for a super-complaint to be raised by Consumer Focus, and on the other hand, for a representative of Consumer Focus to sit on the board?

Chi Onwurah (Labour, Newcastle upon Tyne Central)

I am not a lawyer, so I have not spent as much time with lawyers as some have. I hoped that the Minister would propose a relevant organisation, or a way of doing that, perhaps with representatives and board members recusing themselves as appropriate, to achieve the aim. He talked about independence and expertise. I am sure that we should be able to find a consumer representative who is both independent and expert in those areas, and who is able to act in a quasi-judicial role.

Neil Carmichael (Conservative, Stroud)

Will the hon. Lady give way?

Chi Onwurah (Labour, Newcastle upon Tyne Central)

No; I have taken many interventions.

Given the Minister’s approach, I will not press the amendment to a vote. I beg to ask leave to withdraw the amendment.

Chi Onwurah (Labour, Newcastle upon Tyne Central)

I beg to move amendment 74, in schedule 4, page 61, line 26, at end insert—

‘(4) No member of the CMA shall receive remuneration that is more than 20 times that of another member of the CMA.

(5) No person shall hold any position set out in sub-paragraph 1(1) and sub-paragraph 9(1) (the “chief executive”) for longer than a period of six months without being in the direct employment of the CMA.’.

Martin Caton (Labour, Gower)

With this it will be convenient to discuss the following:

Amendment 76, in schedule 4, page 62, line 38, after ‘financial’, insert ‘and human’.

Amendment 80, in schedule 4, page 63, line 23, after ‘financial’, insert ‘and human’.

Amendment 82, in schedule 4, page 63, line 26, at end insert—

(i) an assessment of the adequacy of staff skills in relation to the performance of the CMA’s functions;

(b) an estimate of the resource needed adequately to perform its functions for the two financial years following the year in which the annual report in 14(1) refers.’.

Amendment 84, in schedule 4, page 63, line 26, at end insert—

‘(2A) The first annual report of the CMA following Royal Assent must include an assessment of transition costs in both financial and competition terms.’.

Amendment 61, in schedule 12, page 188, line 4, at end insert—

‘(d) the resources which will be assigned to the market study.’.

Chi Onwurah (Labour, Newcastle upon Tyne Central)

We have made remarkably good progress, but we still have more to consider. The amendments have been grouped together because they address a key aspect of the CMA that the Bill seems to ignore. The Government are smashing the OFT and the CC together and giving almost no attention to the necessity of keeping the best characteristics of each of the different organisations, or to setting out the key principles and values on which the organisations should be based.

Organisational culture is defined as the collective behaviour of humans who are in a part of that organisation. It is also formed by organisational values, visions, norms, working language, systems and symbols. It is a pattern of collective behaviour. Organisational culture affects the way people in groups interact with each other, with clients and with stakeholders. I think we have seen clearly failings in organisational culture. The most recent example is Barclays bank, where the organisational culture led to the LIBOR scandal. I cannot emphasise enough how important it is to ensure that an organisation of such importance to our economy as the CMA starts out with the right kind of organisational values.

We want to ensure that we start with a statement of what the organisation is about and what its values are, so we start with a statement of inclusivity, which I know has the support of the Minister, as well as the Prime Minister. Amendment 74 states that

“No member of the CMA shall receive remuneration that is more than 20 times that of another member of the CMA.”

I understand that the Prime Minister himself has expressed general support for that principle in the public sector. Will Hutton reported back more than a year ago on his review of fair pay in the public sector, and although he did not recommend a cap, he did recommend transparency. Is it not appropriate that a radical Liberal Minister, such as the Under-Secretary of State, should lead where others less courageous may fear to tread? Do we not want to send a strong message to industry, particularly at this time, by saying that the CMA will start off with inclusivity and fairness at its very heart?

The amendment would also ensure that the scandal of indirect payments for tax avoidance reasons in the public sector is not repeated in the organisation, by providing that anyone holding a position for more than six months should be directly employed by the CMA. I am sure all members of the Committee wish to crack down on tax avoidance wherever it occurs—it occurs far more in the private sector than in the public sector. As cracking down on tax avoidance is Government policy, I was surprised to find that it was not already part of the founding character of the CMA, but I am happy to help correct the oversight.

In discussing amendment 71, I spoke of the importance of the new organisation’s culture and in particular of retaining the separation between first and second phase activities. The Minister has refused to accept the amendment to clarify phase 1 and phase 2, but we can at least improve the transparency of the new organisation so that independent observers can decide whether the right organisational separation is in place. For that reason, amendments 76, 80 and 61 would ensure the tracking of human resources, but not at a case level, which would be over-burdensome and could lead to litigation if respondents considered that their resource allocation was unfair. Tracking at a general level, however, in the annual plan and in relation to phase 1 and phase 2 activities seems an appropriate balance. I hope the Minister agrees.

Amendment 82 addresses the widespread concern that the CMA will not have adequate resources. Failure to ensure proper resourcing will cost businesses dearly in time and have a negative effect on consumers. Remember the Financial Times observation that getting things wrong in only one merger case could cost more than the entire savings achieved.

Neil Carmichael (Conservative, Stroud)

To make a general point, the amendment is not the first to require reports and considerations within the CMA, but if we have too many of them the CMA will find itself doing so much internal work that it will not have any time to examine issues of competition. Does the shadow Minister not recognise that as a potential danger?

Chi Onwurah (Labour, Newcastle upon Tyne Central)

The reporting requirements are already significant. I am sure that the hon. Gentleman agrees that public sector organisations need to be transparent and to give an account of themselves. We are seeking to prioritise what is in those reports, which is generally information that should be available within the organisation —if the organisation does not know where its resources are, it is already in difficulty. I take his point, but our proposed amendments are about ensuring the transparency of information that has already been collected within the organisation.

Amendment 82 is about ensuring that the CMA has adequate resources, and the easiest way to do that—considering the hon. Gentleman’s point—is to enable the CMA to give an assessment of its own resources and of whether they are sufficient to perform its functions adequately in the following two financial years. That might lead to conflicts of interests in as much as the CMA will not want to be seen to criticise the Government of the day, be that the coalition or the future Labour Government for which we all hope. By recognising that conflict of interest, however, it becomes a key advantage of the proposal because it ensures that a strong chair will have to take responsibility for whether he or she has assured the right level of resources for the organisation over the ensuing two years.

I hope that the Minister will accept the need, again, to let sunlight shine—the Prime Minister’s slogan, I believe—

Chris Ruane (Labour, Vale of Clwyd)

It has not been doing too well, recently.

Chi Onwurah (Labour, Newcastle upon Tyne Central)

I know, but we can all hope for a last-minute change. To encourage greater transparency, let the CMA be the poster boy for transparent, open organisations with the right values of inclusivity and fairness enshrined.

Norman Lamb (Liberal Democrat, North Norfolk)

I thank hon. Members for their proposed amendments, which suggest changes to schedules 4 and 12. The hon. Lady expressed disappointment that I have not been willing to accept any Opposition amendments, but I am desperately waiting for one that we can accept—one that makes sense and would enhance the Bill.

In an environment of economic austerity, fair play in the public sector is essential, as is public bodies being transparent and accountable for setting their objectives and allocating financial resources. I therefore welcome the sentiment of the amendments. Over the past decade, however, under the previous Government, there have been far too many examples of public sector fat cats. When I spoke for my party on health matters, I came across so many cases of people within the NHS receiving ridiculously large payments and being paid off, apparently for failure, with enormous payouts and pension payments. The era of enormous rewards for failure in the public sector has to end, and this Government are taking action to ensure that it does.

Following the publication of the “Hutton Review of Fair Pay in the Public Sector”, the Government have already implemented some measures to support its recommendations. For example, public bodies, such as the OFT and the Competition Commission, publish details about pay, including the names of the most senior civil servants with salaries of more than £150,000. Too often in the past, there was a complete lack of transparency; there certainly was about the very large payments for the termination of employment in the health service and elsewhere.

The rest of the debate is in Hansard.