United Kingdom Internal Market Bill

Baroness Bowles of Berkhamsted Excerpts

Report stage & Report: 3rd sitting (Hansard) & Report: 3rd sitting (Hansard): House of Lords
Wednesday 25th November 2020 Lords Chamber

Clause 40 provides for a holistic, thorough approach to penalties, when evidence and consultation with other relevant persons necessitates it, by the CMA as OIM, whenever it needs a person to provide documentation to carry out its functions and it is clear that a voluntary approach will not work. For these reasons, I hope I have reassured noble Lords and hope the noble Baroness, Lady Bowles, will not move her amendments. I beg to move.

[Baroness Bowles of Berkhamsted (LD) [V]]

My Lords, I thank the Minister for some of the considerations on which he elaborated around some of the penalties, but I find it hard to accept this in principle. The information-gathering procedures in the Bill seem without any limit on them in the Bill—an unreasonable measure. To try to find a way to tackle that, I tabled three amendments. I thank the noble Baroness, Lady Altmann, and the noble Lord, Lord Vaux, for signing Amendment 62A on the small business exemption. From among the amendments, we hoped the Minister might consider adopting that one or come forward with a version for Third Reading.

Understanding why the penalty provision is unreasonable requires analysis of the background. Section 5 of the Enterprise Act 2002 gives the CMA an information-gathering function for obtaining, compiling and keeping under review information about matters relating to the carrying out of its functions; it does not give a fining power in order to compel businesses to respond. Such compulsion can come later, at a stage when a market study is undertaken, but the circumstances then are that some suspicion exists that businesses themselves have contributed to failures in the market. In contrast, Clause 38 of this Bill gives the CMA, in connection with reports under Clauses 31 to 34, or under Section 5 of the Enterprise Act when it concerns those clauses, the power to collect information and impose penalties on individuals and businesses in order to make them respond.

This power exceeds what the CMA can do for ordinary information gathering, and the provisions are a copy and paste of the powers that accompany the stronger measure of a CMA market study. But there has not been any corresponding copying of the other conditions that surround a market study; nor is it a comparable situation to a market study, because there is no suggestion that the things being investigated might be happening because of what businesses themselves are doing.

The powers in this Bill are about investigating regulations, which is entirely beyond the control of business, and there is no wrongdoing by business. These investigations are about circumstances created by legislatures and which legislatures wish to investigate. It is more comparable to a departmental consultation than to a market study, so what is the justification for coercing and burdening businesses, even if the Minister says there will be rules making that perhaps a bit less onerous? In Committee, the noble Lord, Lord Tyrie, said of these powers:

“The argument that they were derived from legislation the purpose of which was very different is well taken and might point to further amendment.”—[Official Report, 4/11/20; col. 726.]


That is the view of the recent, former chair of the CMA.

One of my amendments would delete the penalties clause, which is really what I think should be done, although I see little hope of persuading the Minister. My second attempt, Amendment 63B, tried to recreate some of the circumstances of a market study, but as the Minister recently confirmed that only regulations can be investigated, not business cases, it does not fit and it does not work. So my third attempt—Amendment 62A—concentrating where it really matters, exempts small businesses from the penalties. It uses the small business definition from the Companies Act, expanded to cover non-company structures. The Companies Act recognises that small businesses should have a lesser public interest burden by exemption from some filings and it recognises that in primary legislation—it does not rely upon regulations or codes of conduct. Why not apply similar logic here?

Small businesses do not all have the wherewithal to respond to onerous consultations, although many will help when they can, but the information requirements in this Bill can require work to be done or attendance at a given place, both causing financial loss. There is no compensation save travel expenses. Yes, there is a “without good reason” defence, but the smallest businesses cannot afford a legal challenge even if they knew of the defence.

Perhaps the CMA will be reasonable itself in setting its code of practice. The Minister hopes so, but there is no certainty, and a notice detailing applicable penalties is a frightening thing. Of course, it belongs to another culture, in which the CMA’s core functions require confrontation with business and suspicion that businesses and companies are doing wrong.

In Committee I asked the Minister what would constitute a reasonable excuse, giving a wide range of examples relative to small businesses. I got no reply, nor have I had a written reply despite having asked for one—although I know the Minister is very busy, not least writing to colleagues.

This is a huge encroachment on civil liberties and the freedom to conduct business. I hope that, at this 11th hour, the Minister will listen and come back with something at Third Reading to put in the Bill that reinforces the statements he has made. But, if there is not that prospect, this is a matter of deep principle—and I speak as somebody who ran a small business for 30 years—and I must give notice of my intention to call a vote on Amendment 62A if negotiations cannot proceed at Third Reading.

[Baroness Altmann (Con) [V]]

My Lords, I am delighted that my noble friend has listened to many of the concerns raised in Committee. I also welcome his saying that the Government will consult carefully on penalties, and the penalties will be limited. I thank him for saying that the needs of small businesses will be taken into account as well.

However, I cannot help but continue to support the amendment in the name of the noble Baroness, Lady Bowles, which I have added my name to, alongside the noble Lord, Lord Vaux, because the points she made seem most persuasive. She has clearly explained that the proposed penalty regime is not comparable with that of the current CMA, despite my noble friend indicating that it is.

The penalties under the CMA would apply in cases where firms are suspected of wrongdoing or unfair competition or practices. But it has already been acknowledged by my noble friends Lord True and Lord Tyrie that the Bill is concerned here merely with data gathering itself, such as would occur in consultations or calls for evidence, rather than information requests that follow from suspected failures. Therefore, I urge my noble friend the Minister to reconsider the position that many small businesses could find themselves in if information is demanded of them under these powers. It would take scarce corporate resources away from operating the business and is likely to pose significant difficulties for firms that do not have lots of employees available to comply with such an information request.

I point out to my noble friend the Minister from these Benches—as a member of a party that has always been the friend of small business and has promoted the value and virtue of people starting up businesses and running small firms themselves—that there is a significant risk here of imposing unreasonable burdens. I echo the call from the noble Baroness, Lady Bowles, for a meeting with him before Third Reading to see if we can find a form of words that the Government could accept, to avoid the need for a vote on Report.

I hope my noble friend understands that this is about a fear that the Bill imposes unreasonable and abnormal demands. For example, on pensions, the Pensions Regulator has not previously had the power to demand information from schemes unless it suspected wrongdoing. I hope we can find a way in this Bill to exempt small businesses from this burden and the potential threat of penalties.

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Moved by

[Baroness Bowles of Berkhamsted]

62A: Clause 40, page 32, line 7, at end insert—
“( ) Penalties under section 39(1) or (2) may not be imposed on small companies, as defined in section 382 of the Companies Act 2006 (companies qualifying as small: general), or on partnerships or other businesses with similar criteria.”

[Baroness Bowles of Berkhamsted (LD) [V]]

In moving this amendment, I am sorry that the Minister is not prepared to negotiate further about small businesses. I am also sorry that the noble Baroness, Lady Hayter, and Labour do not seem to think that small businesses—which are the backbone of jobs and the economy in this country—are a sufficiently serious matter. I consider that allowing businesses to have the freedom to conduct their business without obstruction when they have done no wrong is quite a serious constitutional matter. Therefore, I wish to test the opinion of the House and to record my vote and those of my colleagues.

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Moved by

[Baroness Bowles of Berkhamsted]

68A: After Clause 43, insert the following new Clause—
“State aid and the Office for the Internal Market
(1) Within the period of six months beginning with the day on which section 30 comes into force, and within the existing budget, the Secretary of State must by regulations establish the Office for the Internal Market (“the OIM”) as independent of the CMA.(2) The Secretary of State must consult and seek the consent of Scottish Ministers, the Welsh Ministers, and the Department for the Economy in Northern Ireland on appointments to the OIM.(3) Following public consultation about the United Kingdom’s state aid provisions and with the consent of the Scottish Ministers, the Welsh Ministers and the Department for the Economy in Northern Ireland the Secretary of State may by regulations make the OIM the competent body for—(a) investigating harmful and distortive subsidies and subsidy races made by any administration within the United Kingdom and relating to harm in the United Kingdom;(b) recommending to the Secretary of State and the Devolved Administrations changes to the test for a harmful subsidy, remedies, the scope of exemptions and time limits on approvals;(c) recommending changes in its powers and functions.(4) After two years and before three years, beginning with the day on which section 30 comes into force, there shall be a review of the competences of the OIM.(5) Regulations under this section are subject to the affirmative resolution procedure.”

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[Baroness Bowles of Berkhamsted (LD) [V]]

My Lords, the amendment in my name and that of the noble Lord, Lord Stevenson, borrows much from other amendments tabled in Committee and on Report, and credit is due to the authors of those amendments.

This amendment has three purposes. The first is to take the OIM out of the CMA after six months and set it up independently, using the budget already allocated for that purpose. For appointments to the OIM the Secretary of State must consult and seek the consent of Scottish and Welsh Ministers and the Department for the Economy in Northern Ireland.

The second purpose is enabling, not compulsory. It is to allow the OIM to become the competent body to investigate harmful and distorted subsidies and subsidy races made by any Administration within the United Kingdom that relate to harm within the United Kingdom. This can happen only after public consultation about state aid provisions, which the Government have already said will take place, and requires the consent of the devolved Administrations. The OIM will also, subject to the devolved Administrations’ agreement, be empowered to make recommendations to the Secretary of State for changes to the tests for harmful subsidies, and to its powers and functions. Finally, there is to be a general review of the competence of the OIM between three and five years after Section 30 comes into force.

The changes, following the devolved Administrations’ agreement, can be brought about by affirmative regulation. Overall, the amendment solves the problem of the unsatisfactory location of the OIM in the CMA and gives a vision for the consensual evolution of the OIM in its investigations of subsidy effects.

We have already debated, in Committee and since, why the CMA is not the right body. The mismatch stems from three sources. First, the CMA is expert in matters that are reserved, not devolved. Secondly, the CMA deals largely with disturbances to the market caused by market participants, whether that be through anti-competitive activities such as cartels, or through market concentration—which is culturally very different from looking at the actions of Administrations as they affect markets in the context of devolution. Thirdly, the tie to BEIS does not make it neutrally positioned in how it is embedded, or perceived, no matter what its objectives may be.

To some extent this proposal follows the TRA precedent of setting up in one location and spinning off, utilising whatever preliminary work has been done. Furthermore, if there is to be a body to examine subsidies —and it is an ‘if’ that can develop in the light of experience—an independent OIM, specialising in the workings of devolution, would seem the right home. As required, I give notice that it is my intention to test the opinion of the House on this amendment. I beg to move.

[Lord Wigley (PC) [V]]

I support this amendment, the remarks of the noble Baroness, Lady Bowles, on these matters, and the need to have the OIM and CMA working at arm’s length. I have spoken several times on the need to have an office of the internal market that is at arm’s length from all government and is responsive to the needs and reservations of every nation—Wales, Scotland, Northern Ireland, and, yes, England. I would prefer the OIM to be required to obtain the consent of all four nations, but I accept the wording in this amendment as a significant step in the right direction. I am very happy to support it and to vote for it if a vote is taken.

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[Baroness Bowles of Berkhamsted (LD) [V]]

My Lords, I thank all those who have participated in this short debate. Some very telling points have been made, yet again, regarding separating the OIM from the CMA.

As noble Lords will know, this is not the first amendment to include proposed subsections (1), (2) and (5); indeed, we had hoped to be able to vote on that amendment, but the timing did not work. I will not conceal from your Lordships that this amendment was constructed so that we had something to vote on.

It is important. The parts that extract the OIM from the CMA are immediately functional. The rest is written so that it is fail-safe—and perhaps, as the noble Baroness, Lady Neville-Rolfe, astutely pointed out, it may never happen. It does not stop there being some further primary legislation to make it happen, but, of course, there are restrictions on what it is possible to put in when there are identical amendments already tabled. Therefore, this is not the end of the road on the wording of this amendment, but it does a lot more good than harm by inserting it into the Bill at this stage. I wish to test the opinion of the House.