Queen’s Speech

Lord Hunt of Wirral Excerpts

Monday 16th May 2022 Lords Chamber

[Lord Hunt of Wirral (Con)]

My Lords, I draw attention to my entry in the register of interests, particularly to my partnership in DAC Beachcroft and my role as senior independent director of LINK.

I want to focus today on competitiveness, although it is a pleasure to follow the noble Lord, Lord Bilimoria, with his compendium of ideas for how we can build stronger foundations for the long term. As we seek to emerge from the pandemic and deal with the immediate problems of economic stagnation, falling real incomes and the situation in Ukraine, it is vital that we look to the longer term.

I strongly agree with my noble friend Lord Forsyth about the dangers that lie ahead, but I welcome the financial services and markets Bill and the commitment by Ministers to require regulators to take account of the need to promote competitiveness, although I am fearful that this is all going to end up as another missed opportunity. As my noble friend the Minister stressed, we all recognise how vital financial services are to our economy. More needs to be done to ensure that the UK, and the London market in particular, not only maintains its position but advances it significantly.

The remarkable concentration of capital and expertise in the London market attracts business from right across the world. That capital and expertise is highly mobile, and the international insurance market is innately competitive. Consequently, our regulatory system—not only its statutory powers but its character—is inevitably a factor in both the perception and the reality of the UK as a place to do business. What is needed is not yet another reorganisation and rebranding of the regulators. The system of regulation created in the wake of the 2008 financial crisis is not fit for purpose and is not working in the best interests of the nation.

If, once this new legislation is on the statute book, the same people then turn up to the same offices and the same desks, with much the same powers and, all importantly, the same culture and attitudes, nothing will have been achieved. A profound change in culture is required, and transparent and generally accepted metrics must be in place to enable us to measure and scrutinise the true extent of that change.

Creating a competitiveness duty for the regulators in the UK is a core part of maintaining the UK as a leading global and international insurance and reinsurance market—but words are not enough. Our own Lords Industry and Regulators Committee, in its letter to the Economic Secretary on 6 April, rightly observed that the introduction of a competitiveness objective alone would not be sufficient to tackle concerns around the inflexible regulatory structure.

Success depends on establishing an approach to regulation that focuses on risk and sets the right rules for the right firms in the right way. That has to be accompanied by publicly disclosed performance criteria so that Ministers and Parliament can rightly hold regulators to account. This must include annual reporting against clear objectives. It should also include international benchmarking against other regulators. So there has to be real clarity within the Bill about delivery, setting out the parameters and reporting requirements in some detail, just to ensure that this is no tick-box exercise. This legislation is an ideal candidate for pre-legislative scrutiny. Ideally, this would be undertaken by Members of both Houses—all the expertise we have is already in place.

The Bill will seek to underpin the provision of cash across the UK. In my capacity as a director of LINK, I look forward to hearing more about that, and I am confident that the good work that has already been done will be fully acknowledged and built on.

In closing, I dare say that the Government will be able to muster sufficient support in another place for whatever they propose, but I implore my noble friend the Minister to take full advantage of the considerable expertise that is available in this House, sooner rather than later.

United Kingdom Internal Market Bill

Lord Hunt of Wirral Excerpts

Committee stage & Committee: 5th sitting (Hansard) & Committee: 5th sitting (Hansard): House of Lords
Monday 9th November 2020 Lords Chamber

[Lord Naseby (Con)]

My Lords, I am not a lawyer. Nevertheless, I am in my 47th year in Parliament, of which 23 were as the Member of Parliament for Northampton South. My first majority was 179. As an aside, bearing in mind what has been happening in the States, on the first count I lost by 183. On the second count, I won by seven and on the third count by 179—so who knows what might happen in the States?

In 1979, I was honoured to be a Parliamentary Private Secretary in Northern Ireland. It was a delightful two years, I have to say. It taught me patience and understanding, and it taught me to understand the sensitivities and, above all, the commitment of the vast majority of the citizens of Northern Ireland to the United Kingdom.

In May 1992, I was proposed, unopposed, to be Chairman of Ways and Means and Senior Deputy Speaker in the other place. A couple of months later, I found myself facing the Maastricht Bill—one of the two longest Bills on the Floor of the House since the war. There were 500-plus amendments and four clauses. It was on the Floor of the House for 25 days, including three all-night sittings.

Three principles drove me and my two deputies. First, there should be no tedious repetition—I wonder whether that should not be included in your Lordships’ House. Secondly, the House should make progress. We did, but we only had four clauses. Above all, the clerk said to me, “You have to remember, Michael”—I was Michael Morris then—“that the basic principle of our constitution is that ultimate sovereignty lies with the Crown in Parliament”. She drilled that into me and I have never forgotten it. It is that sovereignty to which the Government are answerable and which the rule of law upholds.

Bearing in mind this debate, during the weekend I decided to investigate in depth the legality of any Government introducing any Bill that may or would breach a treaty obligation. As it happens—because I have a few friends in the law—my attention was drawn to an article written by a highly respected QC, David Wolfson. On 10 September, he wrote an article in the Spectator. I will quote from one or two paragraphs. He says:

“The mere act of laying a bill before Parliament which, if it were passed into statute, would breach a treaty obligation (and would amend domestic legislation bringing that treaty obligation into effect in domestic law) is not itself a breach of the treaty or of international law. Nor would merely laying such a bill be itself a breach of the rule of law.


“If the legislature passed such a bill and it became an Act of Parliament, the rule of law requires the Government to proceed in accordance with it. That is what parliamentary sovereignty, or to be more precise the sovereignty of the Crown in Parliament, means. Whether passing such an Act of Parliament gives rise to a claim under the treaty ... is a separate issue. But again, there is no breach of the rule of law.


“And what is the alternative proposition? That a government is precluded by the rule of law from even laying a bill before parliament which, if passed, would put the UK in breach of a treaty obligation? Or is it to be said that the rule of law requires that such an Act of Parliament should itself be deemed by our courts to be unlawful or of no consequence?


“I see no legal basis for any such proposition. Such a bill and resultant Act of Parliament might be unwise or foolish or damaging to the UK’s interests (or wise or clever or a show of strength)—those are matters of political debate. But those are not legal questions. Nor can it make any principled difference to the analysis that—to take two points which have been made repeatedly over the past few days—the treaty in question was signed recently, or by the same government.”


Contracts—yes, they should be honoured. He says so and I believe that they should. I understand that there is a phrase: “pacta sunt servanda”. I had some difficulty passing O-level Latin. But a breach of contract does not of itself entail a breach of the rule of law. I certainly learned that in the commercial world. Breaching a treaty obligation because Parliament has so legislated does not do so either.

So none of this is to suggest, as some still say, that international law does not exist, nor that treaties do not matter. Of course it does—and they do. But for their part, the Government will argue that preventing part of the territory of the UK from being cut off economically justifies their approach, and I—and I suspect the vast majority of the British people—totally concur.

I also found out over the weekend, because I take a great interest in aeronautical matters, that Boeing is challenging the EU in the World Trade Organization court for breaking state aid rules regarding Airbus. To go back to the QC, he asserts

“a more basic—and (at least formerly) orthodox proposition: in our constitution, ultimate sovereignty lies with the Crown in Parliament. It is that sovereignty to which the government is answerable, and which the rule of law upholds.”

He then says quite clearly:

“I do not consider there is a breach of the law in the Government’s approach”


and, frankly, nor do I.

People are saying that we must remind ourselves occasionally that we are not the elected House. Some of us have had the privilege of serving in the other place. They have that responsibility, not us. We are a revising Chamber, and we should do so properly. At this juncture, I see no evidence that my Government are in breach of the rule of law.

The people of Northern Ireland require our understanding. I was so grateful to listen to the speech from a former friend, the noble Baroness, Lady Hoey, who has joined us.

[Lord Hunt of Wirral (Con)]

My Lords, I declare my interests, as set out in the register. I am very pleased indeed to follow my noble friend Lord Naseby. How right he has been to remind us, through his ministerial experience in Northern Ireland and by quoting the article by David Wolfson QC, of the importance of the issue of Northern Ireland, which has been evidenced by some very powerful speeches.

Even at Second Reading, as we discussed the underlying principles of this Bill, our focus was heavily drawn to Part 5. The principle underlying it is very clear: it sets out powers and requirements which I am sure that all of us, including the Minister, hope will never come into play. The intention—and this is a point of vital importance, especially as the Brexit trade negotiations enter the final furlong—is to send a clear signal about what is ultimately acceptable to the United Kingdom and what is not.

The term “backstop” has been deployed somewhat excessively during the protracted Brexit process, but this part of the Bill is just that—a backstop. It is no secret that I have always seen the democracies of western and central Europe as allies and friends— our most proximate and, increasingly, our most important allies and friends. The new Administration in the United States, when President-elect Biden takes office in January, will also very much want to see us in that context. None the less, in any negotiation, even with good friends and allies, it is vital to be absolutely clear from the outset, and consistently thereafter, about any “red lines”, any “lines in the sand”, or however else one might term points that are simply off limits and non-negotiable.

The Good Friday agreement, which I avidly support, acknowledges that Northern Ireland is part of the sovereign territory of the United Kingdom. The clear implication must surely be that Northern Ireland is, and shall remain, fully integrated into the UK single market.

United Kingdom Internal Market Bill

Lord Hunt of Wirral Excerpts

2nd reading & 2nd reading (Hansard): House of Lords
Monday 19th October 2020 Lords Chamber

[Lord Hunt of Wirral (Con)]

My Lords, I draw attention to my outside interests as set out in the register. In this important debate, it is vital that we do not lose sight of the bigger picture in two important respects. First, our society and our economy have been and continue to be battered this year by the effects of the global pandemic. All the Government’s deeply held fiscal aspirations have necessarily and rightly been jettisoned, as the Chancellor has done everything in his power to protect jobs, economic activity and the National Health Service. Our society and our economy are one and the same thing.

In 2016, the British people voted to leave the European Union and last December the Government won a clear mandate to see that policy through. In so doing, they are inevitably involved in complex negotiations, both with the European Union and, in practice, with individual member states, each with their own particular interests. Defending our economic interests is, and must always be, the paramount concern for Ministers, and that priority has never been more important.

A satisfactory trade deal with the EU was never going to be easy to achieve, with so many competing interests at play. Of course, there must be give and take on all sides. I have stated on many occasions that I believe a constructive and comprehensive post-Brexit trade deal between the UK and the EU is not only the best outcome but an outcome we must all avidly support. I think we all also agree that any repudiation of a treaty, or any action that might be seen as a breach of international public law, must be avoided if at all possible and used only as a last possible recourse in the most extreme situations. I strongly support the tribute paid by the noble and learned Lord, Lord Wallace of Tankerness, to my noble and learned friend Lord Keen of Elie. We certainly miss him in this debate. However, after the damage inflicted by Covid-19, we surely cannot afford to allow anyone, internally or externally, to jeopardise the integrity or efficiency of our internal market in the United Kingdom. That seems to be the actuating principle behind the Bill. Of course, in a Second Reading debate, it is the principle that we are considering.

There is a second point, which is the role of this House. I never cease to be impressed by the exceptionally erudite and public-spirited contributions we hear, week in, week out, from these Benches, especially today with the brilliant maiden speech of the noble Baroness, Lady Hayman of Ullock. None the less, we must not lose sight of where we stand in the delicate constitutional settlement of this land. It is our obligation fairly to consider propositions sent to us by the House of Commons and, where possible, to improve them. On the assumption that that convention is honoured and the Bill progresses, there will be bountiful opportunities to return to the details of this legislation. For now, however, with Her Majesty’s Ministers engaged in highly technical and demanding negotiations, the outcome of which is of the utmost importance to us all, I hope we will find ways of strengthening the hands of those who represent us, rather than seeking to tie them.

Corporate Insolvency and Governance Bill

Lord Hunt of Wirral Excerpts

2nd reading & 2nd reading (Hansard) & 2nd reading (Hansard): House of Lords
Tuesday 9th June 2020 Lords Chamber

[Lord Hunt of Wirral (Con) [V]]

My Lords, I draw attention to my interests as set out in the register. I strongly welcome the Bill and wish it a safe passage, for it is timely, practical and much needed. The principal legislation in this field is of course the Insolvency Act 1986 but it has already been substantially amended by the Enterprise Act 2002. When that Enterprise Bill arrived in the House of Lords, our late and much-missed colleague Baroness Miller of Hendon said:

“Perhaps a measure along the lines of the American Chapter 11, which has given many ailing companies a breathing space to recover from a temporary setback, is needed.”—[Official Report, 2/7/02; col. 147.]


As colleagues will know, I have advocated a similar approach for many years.

Chapter 11 of the United States Bankruptcy Code, as mentioned by the noble Baroness, Lady Blower, a few moments ago, enables a struggling company to stabilise itself by a number of means, including: renegotiating union and retiree obligations; authorising loans; and the rejection of executory contracts. In replacing Schedule 1 to the 1986 Act, the Enterprise Act 2002 went some way in a similar direction by introducing a new responsibility for an administrator of

“rescuing the company as a going concern.”

I believe it is vital we should go with the grain of what we already know to work, here and abroad. We must also, despite the necessary alacrity, ensure that this Bill is fit for purpose.

In another place my own Member of Parliament, Stephen Hammond, raised a very valid concern about new Section A6(1)(e) of the Insolvency Act 1986 and I reiterate his point. Consideration of a struggling concern necessarily involves high-pressure and speedy consideration of the relevant facts—not unlike the passage of this legislation—so we must take care to get the thresholds right. That new section contains proposed criteria for “relevant documents” that a company might file with the court in seeking a moratorium. One would be a statement from the new monitor, to the effect that

“in the … monitor’s view, it is likely that a moratorium for the company would result in the rescue of the company as a going concern.”

I suggest this might risk setting the qualifying threshold rather high. If the principle behind the Bill is to give every firm that might survive the crisis an opportunity to recover and consolidate, should not this legislation say just that; in other words, might not “would” in that new section be more effectively replaced with “could”?

I am also concerned that a monitor who is an insolvency practitioner might potentially have a perceived conflict of interest, unless the legislation states explicitly that they may not be appointed as administrator or liquidator if the rescue plan fails. I have had considerable involvement with the credit union sector and am concerned that the proposed moratorium will not apply there. Perhaps my noble friend the Minister might provide a few words of reassurance. These may be details but they go to the very heart of the legislation and the admirable motivating principles behind the Bill, which I so strongly support.

Covid-19: Businesses and the Private Sector

Lord Hunt of Wirral Excerpts

Thursday 21st May 2020 Lords Chamber

[Lord Hunt of Wirral (Con)]

My Lords, in declaring my interests as set out in the register, I am delighted that my noble friend Lord Dobbs has initiated this debate to ensure that everyone who has played their part is appropriately acknowledged and celebrated.

In these dark and challenging times, there are, mercifully, so many positives. Supply chains have held up remarkably well, even during the toughest period of the lockdown. All those involved, including those on supermarket tills and helplines for home wi-fi, call-out engineers, delivery drivers and emergency plumbers, have made their own vital contribution to our national resilience. It has been, and continues to be, a truly inspiring effort.

However, I hope that we all do whatever we can to help and support those sectors that have had little or no ability to carry on during the period of lockdown and social distancing. I think of course of hotels, tourism, restaurants, pubs and cafés, and, in particular, theatres.

In my last speech in the House—really in the House—I referred to the press night I had just attended for the new cast of the marvellous West End show, “Come From Away”. It is an inspiring tale of how, at a time of crisis, human beings adapt and co-operate and the boundaries between private and public, and stranger and stranger, suddenly no longer mean so much. Every time we go online, turn on a light, go into a shop, or receive a delivery of provisions during this dark and unnerving time, we should be grateful for the innovation, doggedness and resilience of millions of our fellow citizens in the private sector, such as my noble friend Lord Dobbs. They deserve our undying thanks.

Domestic Gas and Electricity (Tariff Cap) Bill

Lord Hunt of Wirral Excerpts

Report stage (Hansard): House of Lords
Wednesday 27th June 2018 Lords Chamber

[Lord Hunt of Wirral (Con)]

My Lords, I listened with great care to the noble Lord, Lord Grantchester, but I have to tell him that I do not think that this amendment makes sense. I very much agree with the noble Lord, Lord Redesdale.

The noble Lord, Lord Grantchester, stressed the importance of getting this right. It takes me back to our earlier debates on the Bill. Noble Lords will be aware that I have broad concern that the Government, in partnership with Ofgem, are facilitating a major regulatory intervention into the energy market without proportionate oversight. I have on several occasions during the proceedings of the Bill drawn attention to the absence of any mechanism whereby the CMA can adjudicate on whether, in the words of the noble Lord, Lord Grantchester, a cap is placed in the right place. I remind noble Lords that the CMA is there for a clear purpose. The Government set this out in the consumer markets Green Paper, saying:

“We have an independent expert competition body, the Competition and Markets Authority … to promote competition in the interests of consumers and business across the economy”.


We all agree with that, but where is the role of the CMA in adjudicating on this cap, however long it lasts? There are huge dangers in setting off in the wrong direction. Noble Lords may say that Ofgem does get it right. However, we have already seen examples whereby the CMA has had to roll back poor regulation around the retail market review; it had to deliver £105 million back to consumers through their scrutiny of network pricing. That is just one example of why we need the CMA.

Once again, my noble and learned friend Lord Mackay of Clashfern—I put my name to the amendment to which he spoke earlier—had it absolutely right about how important it is for technical experts to scrutinise this cap. I have reservations about having a cap in the first place, but what I am sure about is that it has to be right. I am much more concerned about the start of this process than about looking forward, as the noble Lord, Lord Grantchester, is doing, to what will happen further down the line. It will be a huge tragedy for consumers if the cap is put in the wrong place. The situation is fraught with extensive difficulties and dangers.

Although I can understand why the noble Lord has proposed the amendment and why the noble Baroness, Lady Kennedy, said what she did, it does not make sense, particularly if the whole technical process has not been managed properly, with adequate control mechanisms and oversight scrutiny. Therefore, I will vote against the amendment.

[Lord Teverson (LD)]

My Lords, it seems to me that the noble Lord, Lord Hunt of Wirral, should have voted against the Bill at Second Reading because he clearly does not believe in it. I have my own reservations about how this absolute price cap will work, but the relative price cap proposed in the amendment is a much better way of doing things. Ofgem will not have to set a cap under that regime; the companies themselves will set the cap by their entry rate. That is why this system works.

The only reason I disagree with the amendment, although I support it because it would make the Bill much better than it would be otherwise, is because we should have a relative cap immediately and not worry so much about the absolute cap. In fact, we could have both at the same time. At least the amendment would introduce a relative cap. As the noble Baroness, Lady Kennedy, has said, it would remove the “tease and squeeze” factor, which is one of the worst aspects of the energy market and price comparison sites. We would achieve our long-term aim of having rates that reflect market conditions, leading to competition on an even playing field that people can understand. It seems to me that the relative price cap is hugely superior to the absolute price cap that Ofgem is being asked to implement.

I support this amendment. I just wish that the relative price cap could be brought forward to now rather than after the present price cap ends, but this is a way for the future and the right approach. All Ofgem has to decide is what the maximum differential should be, and then the energy companies would decide their own cap. What could be better? I cannot understand any argument against a relative price cap. It just makes so much sense.

Domestic Gas and Electricity (Tariff Cap) Bill

Lord Hunt of Wirral Excerpts

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.

[Lord Brown of Eaton-under-Heywood (CB)]

My Lords, I regret I took no part in Second Reading. Indeed, I ought to say at the outset that I defer to no one in my claim to the profoundest possible ignorance about this area of the law and all the technical know-how that underpins it. As my noble friend Lord Carlile says, over the years I have had considerable experience of judicial review. My object is to support and echo rather than add substantively to the arguments already canvassed ably by all of the Lords who have spoken at Second Reading and again today. There are threefold basic advantages, which strike me as perfectly obvious, between the appeal sought in the amendment and judicial review, which, obviously, but for the amendment, would be the fall-back position of anybody wishing to challenge the authority’s decision.

First, there is the question of the expertise of the tribunal in question. As the noble and learned Lord, Lord Mackay, said, judicial review judges have no more expertise in this area than I myself have already recognised I lack. In fact, the criteria by which this judgment falls to be made are, as set out in the statute, highly problematic and not obviously soluble by judges as opposed to an expert custom-built tribunal already in place to take appeals.

Secondly, there is the focus of challenge. As has been said, judicial review focuses essentially on the process by which the decision was arrived at. There is not a substantive challenge to the merits. As the noble Lord, Lord Carlile, said, only perversity could allow a judicial review challenge on the substantive merits basis. That is not a likely or fruitful way ahead here.

Thirdly—this links with the second point—there is the form of relief. If you succeed on a judicial review challenge in this circumstance, you set aside the decision under challenge but remit the matter back to the body so that it can, without the deficiencies of the process that you have identified, or on a non-perverse basis, reach a different decision. It is not open to the judicial review court to say, “Well, this is plainly a wrong process. They didn’t take account of this, that or the other consideration. So we will impose instead a different cap”. That is not open to it so you simply have a further decision, with, again, all the problems and delays that that would bring in its wake.

Finally, on Amendment 6, I observe only that costs can be a useful sanction and it really should be left to the CMA itself—assuming there is to be a provision for an appeal to the CMA—to decide whether in the particular circumstances it can be empowered to provide, as the amendment would, that the costs should be borne by the Exchequer, but that should not necessarily be the outcome. There may be circumstances which make that inappropriate.

Domestic Gas and Electricity (Tariff Cap) Bill

Lord Hunt of Wirral Excerpts

2nd reading (Hansard): House of Lords
Tuesday 22nd May 2018 Lords Chamber

[Lord Hunt of Wirral (Con)]

My Lords, I declare my interests as set out in the register, in particular as a partner in the global commercial law firm, DAC Beachcroft LLP and as one of the Ministers who took through the Gas Act 1986. Introducing price controls into the energy market was indeed included in the last Conservative manifesto and codified in a draft Bill published last year. Today’s debate should therefore focus on how a price cap can be implemented in the most appropriate way, not on whether it should be.

The Bill represents a major intervention in the energy market with significant implications for competition and consumers. It is therefore essential that the Bill provides for strong oversight of how the cap is formulated and introduced. The noble Lord, Lord Stevenson of Balmacara, has already mentioned my noble and learned friend Lord Mackay of Clashfern; I know I am not alone in feeling that the Bill does not include the long-established precedent that organisations should be able to appeal to the Competition and Markets Authority against a price control set by a sector-specific regulator. This right exists in every comparable example of sector-specific regulation, including in the energy sector, and plays an important role in driving better regulatory decisions.

The Bill directs the energy regulator, Ofgem, to introduce a price control on default energy tariffs. It also states that the regulator must have regard to ensuring that the market remains competitive, incentivising switching and allowing suppliers to finance their operations while inducing them to operate efficiently. This will be an extremely complex balance for Ofgem to strike. It is clear that greater competition has been vital to improving this market; Ministers have indicated that this trend should not be reversed. There are now 60 suppliers in the market, compared with just six in 2010. Consequently, there is more choice of tariff than ever before, with 17% of customers switching supplier last year. On a historical basis, these switching rates are better than those of broadband, mobiles and fixed-line telephone markets.

Ofgem will also need to undertake a detailed analysis of the cost of major national infrastructure programmes when constructing the cap, including the smart meter rollout programme, which is central to innovation and future competition. Her Majesty’s Treasury estimates that there will be £100,000 million of investment in critical infrastructure between now and 2021. Ofgem’s approach must ensure that a cap does not impede these large investments. Recent regulatory interventions in the energy market show that meeting this balance of regulation and competition is difficult to achieve. Regulators occasionally err in their decisions. I remember that the CMA concluded in 2016 that Ofgem’s previous attempts to regulate the number of retail tariffs that could be offered by a supplier—the Retail Market Review —had damaged competition and should be removed. We have also seen that the introduction of a prepayment meter price cap led to prices bunching to within £15 of a cap. Like any major intervention in a competitive market, the introduction of price regulation therefore needs a strong system of scrutiny and oversight.

Appeals to the CMA are the long-established way of providing such scrutiny and ensuring that any errors can be corrected efficiently. The CMA is a specialist economic regulator, established to review regulatory decisions and ensure that they are well founded. Price control decisions in every other comparable sector—such as telecoms, water, aviation and post—can be appealed to the CMA, as can other price control decisions made by Ofgem. Price regulation for network companies can also be appealed to the CMA by third parties, including consumer organisations. An appeal to the CMA in 2015 on the level of price control imposed by Ofgem found that Ofgem had made an error. As a result, £105 million was returned to consumers.

There are currently 26 panel members on whom the CMA may draw for any price control appeals. There is also a specialist utility panel within the CMA. The CMA and its predecessor, the Competition Commission, have more than two decades’ experience in assessing such matters across any number of industries. My noble friend the Minister may say that there are specific examples, such as payday loans and the PPM price cap, where CMA appeals are not allowed. I do not believe that those are analogous. The FCA is not comparable to Ofgem and has not been tasked with the same challenges of setting a complex price cap that assesses the cost of the provision of service and maintaining competition. The PPM price cap was adopted by the CMA itself, so its scrutiny had already informed the process.

My noble friend the Minister may add that he has concerns that an appeal could delay or frustrate the introduction of a cap. Ministers have made clear their desire that this legislation should be passed by July and implemented by next winter, but there is no precedent for CMA appeals delaying the implementation of a price control. In the last 11 price control appeals, no delay took place. CMA appeals typically take place while the regulator’s original decision remains in place. Any remedies are then implemented prospectively. The Bill could easily make provision to ensure an appeal could not delay or stop the implementation of a cap—no doubt my noble and learned friend Lord Mackay of Clashfern will have all sorts of ideas about how we might do that, particularly in Committee.

On stopping a price cap being introduced at all, this is not possible in practice, because the Bill imposes an explicit duty on Ofgem to impose a cap. No appeal process could override the will of Parliament. A CMA appeal would be less burdensome, more straightforward and less costly than the alternative route of legal challenge; namely, the judicial review. Since 2000, CMA appeals have taken on average a little under nine months end to end, compared to around 10 months for JR cases. The CMA’s procedural rules and the rules on costs deter litigants from bringing vexatious challenges.

Equally significantly, the CMA is able to make changes immediately, while a court would need to remit the matter to the regulator, potentially extending the process by a number of months. Based on my experience, judicial review does not seem the appropriate standard for an assessment of a price control. A judge would be focused primarily on the process through which a price control was set and not on the type of complex considerations relating to the level of the cap that should be taken into account. Additionally, judges are not adequately equipped to assess this type of decision. The CMA was established and equipped with the appropriate resources and specialist expertise to undertake such work. It must be better and more helpful in alleviating the burden on the courts to have a specialist body looking at these technical issues.

In summary, the Bill introduces a significant intervention into the energy market, and recent history shows that care is needed to support competition and consumers. Price interventions are complex and should not be taken lightly. It is our responsibility to ensure that the appropriate checks and balances are in place to provide for a fair measure of legal and regulatory certainty, which is essential to underpin vital confidence and investment in the energy sector. I do not believe the usual mechanism for such oversight, CMA appeal rights, would delay, obstruct or frustrate the implementation of a price cap—on the contrary. I hope the Government will reconsider to ensure that a more proportionate, efficient and appropriate form of intervention is achieved.

[Lord Teverson]

My Lords, although it is a non-financial interest, I should have declared that I am a trustee of Regen SW.