Domestic Gas and Electricity (Tariff Cap) Bill

Debate between Lord Carlile of Berriew and Lord Hunt of Wirral

Committee: 1st sitting (Hansard): House of Lords
Monday 11th June 2018 Grand Committee

[Lord Carlile of Berriew]

My Lords, I support the amendment in the name of the noble and learned Lord, Lord Mackay; indeed, I put my name to it. I declare two rather different but relevant interests. I spent eight years as a chairman of the Competition Appeal Tribunal, sitting with experts and expert witnesses, analysing the interstices of whichever competition issues were placed before us and being enabled to reach judgments that were carefully considered, although dealt with at extraordinary speed—much more speedily than many High Court cases. For a number of years, I also sat as a deputy High Court judge, dealing mainly with judicial review. In that role, I deferred at once to the much greater experience of the noble and learned Lord, Lord Brown, who was the king of judicial review in his time. Nevertheless, in my years in that role I was able to see the difference between the discipline of judicial review and the competition, evidence-based discipline.

As I listened to the noble and learned Lord, Lord Mackay of Clashfern, I had a horrible feeling—or perhaps a pleasant one, I am not sure—of déjà vu. Way back in the last century I used to appear as junior counsel in a fair number of cases in the Court of Appeal. I was often led by very distinguished leading counsel, though none more so than the noble and learned Lord. Indeed, three of them aside from me ended up as Members of your Lordships’ House so I look back on those days with pleasure. One of the most terrifying things that used to happen in those days was that if you were appearing as junior counsel in the Court of Appeal, when your distinguished leader had finished, the judge in the chair uttered words that I think were, “Do you follow, Mr Carlile?” They were uttered in a tone that included, “If you dare, don’t you dare and I’ll murder you if you dare”, at least intellectually. So, one followed rarely; I follow the noble and learned Lord, Lord Mackay, with great trepidation. I will be very brief because I feel like his junior on this occasion. I will not go through the substantive points that he made, which he did with his usual extraordinary cogency. I agree with every word that he said. These arguments were rehearsed at Second Reading by all of us who spoke—the noble and learned Lord, me, the noble Lord, Lord Hunt, and others. I just want to provide a couple of headlines, as it were.

What kind of appeal do we want to give? Do we want to give one that allows the decision to be corrected if it is plain wrong or do we want to allow an appeal that only allows the decision to be corrected, even if it is wrong, if it is perverse and no reasonable authority would have reached it? For the latter option is the judicial review test. We should aim for what Amendment 5 suggests: that within time limits and the other restrictions described by the noble and learned Lord, Lord Mackay, the answer can be corrected quite simply if it is incorrect. That is what the public expect and that is what this amendment provides.

[Lord Hunt of Wirral (Con)]

My Lords, I rise to support my noble and learned friend Lord Mackay of Clashfern in his amendment, and in doing so I declare my interests as set out in the register, in particular as a partner in the global commercial law firm, DAC Beachcroft LLP. As the noble Lord, Lord Carlile, has pointed out—we enjoyed his journey through history— this amendment will ensure that the Bill meets the Government’s ambition to have a cap in default-rate energy tariffs in place by the winter while also ensuring that the correct scrutiny of such a major intervention in the energy market will be in place; namely, the CMA being able to review and improve the methodology if an appeal is brought.

I want to put forward three core reasons why the Bill in its current form does not provide appropriate scrutiny. First, setting a price cap that maintains competition and innovation will be extremely difficult. Competition is improving and a range of important policy costs such as the smart meter rollout and subsidies for renewable and vulnerable policies are included in energy bills. There are material risks to consumers if the methodology is not correct, and I welcome the amendment proposed to Amendment 5. The CMA clearly possesses the necessary expertise to hear an appeal on the cap, and there is no better source in support of that than the Government themselves. I shall quote from their recent Green Paper, Modernising Consumer Markets:

“We have an independent expert competition body, the Competition and Markets Authority (CMA), to promote competition in the interests of consumers and business across the economy … The work of the CMA from 2014-2017 is expected to achieve benefits to consumers well in excess of £3 billion”.


I agree with this endorsement and I believe that appeal rights to the CMA will provide a reassurance to consumers and the industry alike.

Secondly, removing the right of appeal to the CMA from the provisions of this Bill would undermine the established approach which has been in place since privatisation. Some noble Lords may remember that as a junior Minister I took through the Gas Bill in 1985 and I still bear the scars, particularly on setting up a system of regulation which at the time was quite innovative. Since privatisation there has been an approach that underpins investor and consumer confidence. Moreover, the CMA already has a track record of improving regulatory decisions. In 2016 it set out that Ofgem’s previous attempts to regulate retail tariffs in its retail market review had damaged competition and should be removed, while in 2015 the CMA heard an appeal, supported by Citizens Advice, on the level of the energy network price control. It found that Ofgem had made an error and £105 million was returned to consumers.

Thirdly, the Government have suggested that the courts, through judicial review, would be better placed to hear an appeal. I do not agree with that. JR is concerned only with the process for making a decision, not the substance. The CMA is a specialist competition body that is designed to look at these issues. It has teams of experts within the organisation and the Government announced in the Budget last year around £3 million-worth of funding to ensure that the CMA could continue to support competition and consumers. This makes the CMA better qualified and resourced than the courts to review a price control. I hope that noble Lords will understand that those are three very clear reasons in support of my noble and learned friend’s amendment.

Perhaps I may anticipate, if I dare, what the Minister may say. Looking at his initial response at Second Reading, I recall his main concern was delay. As my noble and learned friend explained, the amendment explicitly rules out the potential for a CMA appeal to delay or block the introduction of a price control. Delay is not usual anyway. In the past 11 price control decisions the CMA has not caused a delay and the amendment would now make that impossible.

My noble friend also may say we have concerns that a right of appeal could be used by certain of the major players to frustrate a price control. We know, however, that delay will not be possible via the amendment and the energy sector overwhelmingly supports CMA appeal rights, as do investors in the utilities sector. Furthermore, consumer groups would be able to exercise the right of appeal.

Thirdly, in the Official Report at col. 1018, if I recall, the Minister raised the fact that the Select Committee had considered the matter and recommended judicial review as an appropriate route of appeal. I believe there is a capability question here. However, I would also point out that judicial reviews actually take longer to resolve than CMA appeals—9.7 months versus 8.8 months. That is a comparison since the year 2000. As my noble and learned friend pointed out, the amendment would commit the CMA to resolve a case in four months. We rest our case.