Enterprise and Regulatory Reform Bill

Baroness Hayter of Kentish Town Excerpts

Wednesday 12th December 2012 Grand Committee

Moved by

[Baroness Hayter of Kentish Town]

24ZD: After Clause 20, insert the following new Clause—
“Consumer Panel
(1) The CMA must make and maintain effective arrangements for consulting consumers on the extent to which its general policies and practices are consistent with its purposes under section 20.
(2) Arrangements under this section must include the establishment and maintenance of a panel of persons (to be known as “the Consumer Panel”) to represent the interests of consumers.
(3) The CMA must appoint one of the members of the Consumer Panel to be its chair.
(4) The CMA may appoint to the Consumer Panel such consumers, or persons representing the interests of consumers, as it considers appropriate.
(5) The CMA must secure that membership of the Consumer Panel is such as to give a fair degree of representation to those who are using, or are or may be contemplating using, services otherwise than in connection with businesses carried on by them.”

[Baroness Hayter of Kentish Town]

My Lords, for the purpose of this amendment, perhaps we can accept that we are going to have a CMA, not prejudging what might happen later, because this amendment suggests that if we have one there should be a consumer panel attached to it.

One of the most effective ways of helping to ensure that regulation is always in the hands of consumers, whether they be clients of lawyers, customers of financial services, receivers of radio and TV programmes, or purchasers of food, is to ensure that the regulatory body always, and continuously, hears the voice of consumers. This is particularly important with any regulator seeking to promote competition, as consumers are key to the whole competition remit that we seek for our economy. They understand better than anyone how the market really does or does not work for them. They know about non-price barriers to shopping around; they understand about tie-in deals; and they are the best to judge whether providers, whether of goods or services, are part of a competitive, responsive market.

More than that, consumer panels, made up of people experienced in representing, researching or advocating for consumers, in complaint handling, or in policy development, bring to the regulatory table expertise in hearing the unmet needs of consumers and of measuring their experiences, both satisfactory and unsatisfactory. They are alert to likely future trends; they can assess how policy will impact on actual behaviours, whether of providers or users; and they can make a significant difference to the work plan and priorities of statutory regulators. We have seen this with the Financial Services Authority, where the panel will morph into the same role with the new Financial Conduct Authority, at the Food Standards Agency, and, as I know well from my former role as its chair, in the Legal Services Board’s consumer panel. The Civil Aviation Authority has established one, and the Office of Rail Regulation is looking to create one, having had an informal panel for a couple of years.

It is not merely consumer representatives who want an economy that is consumer and client focused. In his first blog, the new chief executive of the Investment Management Association, Daniel Godfrey, says that one of his two priorities for 2013 is to work in collaboration with regulators and Governments to create a framework which, in his words, protects clients.

There can be no better way to create such a framework than having consumers or their representatives embedded in the regulatory architecture—not simply from the outside, so that they must shout and scream, put out press releases and lobby and harry, in the way that we see and, often, welcome outside consumer bodies doing, but as part of evidence-based and thoughtful development of policy and practice to ensure that the regulator never forgets, in this case, that the whole point of regulation is to promote and protect consumers’ interests. Indeed, the embedded nature of consumer panels means that they can provide input at the earliest stages of policy formulation before the regulator consults—when, in truth, it has often made up its mind—influencing the culture of the organisation from the inside and helping colleagues to get things right the first time round.

A further advantage is the ability to share market-sensitive information and analysis, which regulators are unlikely to want to show even to consumer bodies, which they generally trust, as well as to test thinking. This can be useful in processes such as price controlling, and for the CMA could be particularly relevant in market investigations. A consumer panel provides expert advice on tap, whereas generalist, outside consumer bodies tend to move in and out of policy areas over time.

Consumer panels are also an important counterweight, especially in areas where industry is well placed to influence or lobby, which would certainly be the case for the CMA. Panels are also surprisingly cost-effective, as being embedded results in economies of scale. In the case of my former Legal Services Consumer Panel, its £44,000 a year budget was a mere pin-prick in the £25 billion of consumer spending in legal services.

Consumer panels also play a key role in accountability by scrutinising the regulator’s work in the name of those whose interests it is meant to pursue. It is very easy, once regulatory institutions have been established, to forget or become rather complacent about the underlying rationale for regulating an economic sector. Moreover, given the effective “outsourcing” of statutory consumer functions, as outlined earlier today by my noble friend Lord Whitty, to non-statutory bodies, with no organisation other than the CMA to oversee or lead these outside bodies, it will be essential that the CMA has clear consumer input to this part of its remit, and that would be a natural task for a consumer panel.

Placing a panel on a statutory footing also guarantees its independence. It can represent the interests of consumers without fear or favour, as the CMA could not terminate a consumer panel if it found it a trifle uncomfortable. Of course, any such panel would need some powers, such as the right to make representations to the CMA, alongside reciprocal duties on the CMA to give reasons when disagreeing with such advice. This would aid transparency but would also be vital to the panel’s ability to influence.

Given the need, in terms of concurrency, for the Secretary of State to consult consumer bodies before removing a regulator’s competitive powers, a CMA consumer panel could have a specific role to play here. Similarly, as is argued in other amendments before the Committee today, a CMA panel would be broader than individual purchasers of goods and services. In particular, the panel would need members who were able to consider the interests of micro-enterprises and small businesses, for example, which sometimes experience even greater detriment than domestic consumers.

The CMA, if it exists, will be a key player in ensuring that our economy is competitive and therefore flourishing, and that it serves the consumer interest well. The creation of a consumer panel would concentrate minds on the end user—the beneficiary of all this regulation. I know that when the noble Lord, Lord Currie—who is in his place today—was the head of Ofcom, he welcomed, and I believe valued, the role that the consumer panel played in that regulation. Therefore, I do not think that he would fear the creation of a consumer panel for the CMA. I beg to move.

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[Viscount Younger of Leckie]

My Lords, I thank the noble Baroness, Lady Hayter, for this amendment, which seeks to establish a CMA consumer panel, and I note her very considerable experience in chairing consumer panels over many years.

Close co-operation between the CMA and consumer organisations will be essential to ensure that the CMA is well informed on issues that cause consumer detriment, and that it takes action in the right areas. Competition authorities are well used to taking account of consumer welfare in their activities and this will be the case for the CMA in particular, given its objective to promote competition in the interest of consumers. This is why we have established SIPEP, a new strategic intelligence, prevention and enforcement partnership, which will bring together key consumer bodies, including Citizens Advice and representatives from Scotland and Northern Ireland, to work together to identify those issues that impact on consumers and collectively agree priorities for enforcement, information and education. These will assist in guiding the CMA’s policies and priorities.

In addition to this, the Bill already has extensive provisions on transparency and consultation with consumers and other bodies. The CMA must consult stakeholders, including consumer representative bodies and the general public, on a range of issues that guide its policy. For example, paragraph 12 of Schedule 4 to the Bill provides that as part of its annual plan, the CMA must consult on its main objectives for the year and the relative priorities of each of those objectives. The CMA must also consult on statutory and non-statutory guidance which sets out much of the CMA’s policy and processes. The super-complaint process, in which the OFT is required to provide a fast-track response to certain consumer bodies, will also be retained for the CMA.

Given the consultation requirements, the new approach to enhanced working between the CMA and bodies across the consumer landscape, and the super-complaint process, I hope that the noble Baroness will consider that the arrangements for consulting consumers are already sufficient and will agree to withdraw this amendment.

[Baroness Hayter of Kentish Town]

I thank the Minister for that response and my noble friend Lord Borrie and the noble Lord, Lord Skelmersdale, for their comments. As usual, my noble friend Lord Borrie goes straight to the point that the name is wrong. Maybe we can negotiate on “consumer forum” or “consumer round table”. However, right as he is on that, wrong are the Government in their response.

Before I turn to the Minister’s comments, perhaps I may say that the comment made by the noble Lord, Lord Skelmersdale, was interesting. It is about whether one person on a board is sufficient to represent all consumers, an issue which the consumer movement has discussed a great deal. It is like being the only woman in a committee and people assuming that you can speak on behalf of all women. When the noble Baroness, Lady Oppenheim-Barnes, was first at meetings—I hope she does not take this badly—she was very often probably the only woman present. Even women of my age are still experiencing that situation now. As the one woman, it was somehow expected that you would speak for all women. It can be the same with consumers. However, as I found on panels, there were BME consumers, rural consumers, old consumers and young consumers, and you need a broad panel, if you like, to reach in, understand and get to a hearing in that way. A middle-class woman such as myself as a consumer rep does not do it, but a much broader-based panel does.

I hope the noble Lord, Lord Skelmersdale, understands that it makes it easier for one consumer representative on a board if there are mechanisms for a much broader consultation.

[Lord Skelmersdale]

My Lords, if the noble Baroness has finished with her remarks on me, does that mean that she intends to withdraw Amendment 24BA—because, if not, she is speaking against herself?

[Baroness Hayter of Kentish Town]

I am certainly not. I am suggesting that you need a person on the board with experience—I will come to that—but, on its own, this is not a sufficient condition for making the board work.

Let me now comment on what the Minister has said. If he expects the partnership to carry out the kind of role that consumer panels have carried out, he does not understand what consumer panels have done. A partnership that comes together once a month, once a quarter—I do not know how often it is going to meet; I think it has met only twice so far—simply would not be able to bring the right level of detail to the work of the CMA. Some of the matters the Minister mentioned are exactly those outside functions which will not be carried out by the CMA but by others.

I think I have touched on the problem of consultation. When it goes outside the family to Which? or Citizens Advice, it is put out in a pristine and finished way rather than at an earlier stage. It does not solve the problem.

We will need to think about this matter and possibly come back to it because it is vital to make this new authority work well.

[Baroness Oppenheim-Barnes]

Before the noble Baroness withdraws her amendment perhaps I may ask her a question arising from the statement made in advance by the Citizens Advice service, which is going to be the home of information, advice, education and advocacy on general consumer matters under the Regulated Industries Unit. This is one of the best pieces of news in the Bill because it will bring together the technical expertise, Consumer Focus and information gathered by the CABs and a unit to represent consumer interests in the regulated sectors—gas services, electrical services, postal services and so on.

This is very important because the regulatory authorities do not always appear to be sympathetic in areas in which they should be. It is not very gratifying or appeasing for consumers when one of the regulated bodies receives a multimillion pound fine for being in breach of their responsibilities because the consumers who have suffered do not receive a single penny of that. All they hear about is this very big sum and they do not know whether it has made any difference to the practices. Also, it has been a very long-standing argument of mine—and I hope that it will be solved by this—that Citizens Advice and Consumer Focus should be able to take up individual matters. That is important because the big regulators will not take up matters such as how the bill is presented. Very often bills are presented in a most confusing and frightening way. EDF sends out bills that look, at first, very frightening to the ordinary eye and certainly to an aged person—particularly when they see £1,000 appearing in big letters on the front, although it is not what they will in fact have to pay. It is an assumption of what they might have to pay if they used a certain amount of electricity, or whatever. This is an important provision and I hope that the noble Baroness will take account of that before she withdraws the amendment.

[Baroness Hayter of Kentish Town]

I thank the noble Baroness for those comments. The Regulated Industries Unit will be extraordinarily important but, of course, it will cover only post and energy, which is very restrictive. It will not be allowed a role in the sort of areas that the CMA will be dealing with. She raised an interesting question about where the individual goes to. One of the important things about a consumer panel is that it can gather the intelligence, be that from an ombudsman or any other form of individual complaints, and even go into the annual reports of companies to see how they have handled complaints. The panel can then use the intelligence to come to the CMA and perhaps say, “Look, we have done that homework. We know where this market is not working”. My fear is that Citizens Advice, with the best will in the world, will simply be unable to do that. We will have people coming through the door with a lot of debt problems, or who are homeless, or who have just been sacked by their employer, suffered water leaks or whatever. That ability to take intelligence, translate it into policy and feed that into the regulator will be beyond that organisation. That is why we will have to come back to this. However, for the moment, I beg leave to withdraw the amendment.

Amendment 24ZD withdrawn.

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[Baroness Hayter of Kentish Town]

My Lords, the noble Lord has raised some really important issues. Certainly we would like to hear from the Minister why the Government have chosen this particular set-up, which is an argument that we have just been having in relation to the Financial Services Bill. The question remains as to why any panels under this Bill are not hearing cases completely independently of the CMA board.

I am sorry that I went on earlier about my consumer panel experience but I also have to say that I was a member of the determinations panel of the Pensions Regulator. We were completely independent of the Pensions Regulator. We were appointed by it to ensure that we knew something about pensions but that was about it. Other than that, we were completely independent. We did not work there and we did not know the staff, other than bumping into them in the loo and so on, but we were very independent of them. It was therefore more than a Chinese wall—it amounted to a gap of a good few miles.

Similarly, in our discussions on the Financial Services Bill, we have been trying to ensure that the Regulatory Decisions Committee of the FSA is equally independent of and separate from the FSA. That is partly to do with independence but also because it seems that we should look at whether there is a difference between the two roles of serving on the CMA board and doing hearings and taking decisions. The role of serving on the board is really about setting strategy and policy, whereas the work of the panels is often quite different and calls on a slightly different skill set. Therefore, we are interested in knowing why the Government have not made sure that the investigators are separate from the decision-makers and that their roles are not blurred— I think that was the word used earlier by the noble Baroness, Lady Oppenheim-Barnes, in quoting a former chair of the monopolies commission.

I assume that we all want a strong firewall between investigations and decision-making, so perhaps it is better to make them absolutely separate from the start, rather than going through convoluted ways of achieving that end.

[Viscount Younger of Leckie]

My Lords, these amendments affect the provisions that provide for a partial overlap of the CMA board, which is responsible for the CMA overall and phase 1 decisions in mergers and markets in particular, and the CMA panel, whose members are responsible for phase 2 decisions in mergers and markets and regulatory appeals. The governance and decision-making arrangements in Schedule 4 are designed to establish a single, coherent competition authority while retaining the separation of decision-making between phase 1 and phase 2; in particular, merger and markets cases.

Paragraph 1 of Schedule 4 provides that at least one person be appointed to both the board and the panel. In the Government’s response to the competition reform consultation, we said that we intend to appoint two or three such people to the board and the panel. The membership provisions being debated here are designed to ensure that the board includes members with experience of the phase 2 processes, and so to address any reluctance of the board to have a matter referred to a group of independent panellists whose decisions are, under paragraph 49, to be taken independently of it and over which it will have no direct control. Ensuring that there is a steady flow of appropriate market investigation is one of the key intended benefits of the creation of the CMA, so the provisions will play an important role.

I believe that the provisions in the amendment in the name of the noble Baroness, Lady Hayter, will undermine the separation of decision-making by allowing board members to take phase 2 decisions. I assure her that the Government would also be concerned about the risks resulting from some of the same people involved in a decision to make a referral also being involved in final decisions at phase 2. It is for this reason that paragraph 33 prevents this from happening.

Paragraph 33 works prospectively, so that where the board will be considering whether a matter should be referred to the chair of the CMA for the constitution of a group of panellists who will be responsible for a phase 2 inquiry, the chair must first determine whether a member of the board might be expected to be appointed to a resulting group. In these circumstances, the person so identified must not participate in the board’s consideration of the referral.

Finally, because the Government intend to appoint two or three people who will be board members and panellists, even where one board member is excluded from considering a referral, other panellists—who will not be involved in the group taking on an inquiry if the matter is referred—will still be able to participate in the board discussion. This provision therefore protects independence of decision-making, while also ensuring that the board includes members with responsibilities across the CMA’s range of functions, and is therefore able to act, at a strategic level, as a coherent body. I therefore ask my noble friend to withdraw his amendment.

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Moved by

[Baroness Hayter of Kentish Town]

24AA: Schedule 4, page 87, line 22, at end insert—
“(1A) Appointment of a person as chair under sub-paragraph (1)(a) shall be subject to approval by a Select Committee of Parliament.”

[Baroness Hayter of Kentish Town]

My Lords, the first amendment in the group seeks simply to have the appointment of the chair approved by the relevant Select Committee in accordance with the coalition agreement which said:

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

That built on the wording of the Conservative manifesto to,

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

and on the Liberal Democrat manifesto which said:

“We will increase Parliamentary scrutiny of Government appointments”.

It is hard to put it any better than that. However, even if the Conservatives, the Liberal Democrats and the coalition had not supported this, it is still a good thing.

Parliamentary oversight of the performance of the CMA is vital. Our economy depends on a vibrant, competitive market and, given the powers and remit of the CMA, it is important that Parliament checks that it is doing its job. So this amendment is part of that trend of transparency.

Amendment 24AB concerns the key appointment in all of this—the chair of the CMA. We are more than content with the “shadow” chair, if I may call the noble Lord, Lord Currie of Marylebone, who is in his place, a mere shadow. The amendment is about any successor of his in due course and the attributes that we would wish to see in any such appointment.

Competition law is not only for economists and lawyers. What economists choose to measure is not a neutral given but depends on what they judge to be important. A recent OFT review of the estate agency industry decided that we needed more of them—that is, more estate agents. Clearly the authors of the review had never walked up and down our high streets. However, that is what they thought rather than that we needed better regulated, more truthful and cheaper estate agents. There was something lacking in an over-economically driven approach which ignored the experience of home buyers. We would therefore look for someone who understood how markets really worked for consumers and had experience of retail or wholesale markets and, even more, who understood the particular needs of vulnerable consumers and how failing markets hit them particularly hard.

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[Baroness Hayter of Kentish Town]

I thank the Minister for that. The words “not necessary in the Bill” must be in the word processor for the team behind him, because whatever we ask, the answer is, “Don’t worry, we are doing it. It is not necessary to have it in the Bill”. I am not sure that this is always the best way of writing legislation. There are some things that are very important to have in the Bill as signals and they are also important for accountability.

It is interesting that the Minister, if I heard him correctly, said that the list of appointments which it has been agreed should go to a Select Committee was last published in August 2009. That was in the glorious days, of course, of a Labour Government, happy that they were. Given all the work that this Government have done in changing quangos and changing appointments, the idea that it has not been updated since then leaves me a bit surprised and perhaps reinforces the fact that, sometimes, having this in the Bill is really important.

We have no grounds even for raising the first appointment, as I made clear. We are delighted with the first appointment; we could not have done it better ourselves. If you would like to put us in government, we will do it ourselves. However, we are talking about the future and making sure that the commitment to consumers and their interests is there.

The final thing I will say is that I thought our wording “in the direct employment” covered the chief executive. If I did not word the amendment correctly, that was what it was meant to be. Whether that should be an undertaking in a side letter or something, that point remains. I am sorry that the Minister, who I believe speaks on behalf of a coalition Government with a commitment not just to continuing but to strengthening the powers of Select Committees in major public appointments, feels that that does not allow him to do so in this case. I beg leave to withdraw the amendment.

Amendment 24AA withdrawn.

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Moved by

[Baroness Hayter of Kentish Town]

24BA: Schedule 4, page 87, 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 have expertise as a representative of consumers.”

[Baroness Hayter of Kentish Town]

My Lords, the good news for the Committee is that this is the last it will hear from me for a bit. I will hand over to my noble friend Lord Mitchell, whose great success in the Financial Services Bill will, I hope, make the Minister quake as he receives my noble friend’s amendments.

The first of the two amendments in this group, which I move on behalf of my noble friend Lord Whitty and me, concerns the make up of the CMA board, and ensures that, as has already been mentioned, at least one of its members has expertise in representing the interests of consumers. There is a large pool on which to draw for this. For example, they may be former employees or board members of ombudsman schemes or consumer bodies or panels, or else active in the wider consumer movement. I know from the testimony of the financial industry and not just the consumer movement how well received Mick McAteer’s appointment has been, in his work at both the Financial Reporting Council and now the Financial Services Authority. He was formerly with Which?, has been a consumer advocate with long experience of representing consumers at both UK and EU levels, and has brought realism grounded in consumer experience, expertise and a clear consumer focus to the FSA for the past three years—to widespread acclaim. Earlier, a former chair of the National Consumer Council—not one of the two with us today—proved herself to be so invaluable to the FSA that it promoted her to become its vice-chair. Other examples abound.

Our proposal is modest. It is for just one such person, but having that in the Bill also reinforces the fact that the CMA is all about consumer interests and that consumers’ voices must be heard at the highest level. As I said previously in response to a question by the noble Lord, Lord Skelmersdale, this is not instead of a consumer panel. No one person can represent all consumer interests. What is interesting is that that person can be a channel and focus, albeit that they take the full corporate responsibility for the whole board.

The second amendment in the group, Amendment 24BK, is based on the assumption, which we do not necessarily share, about the proposed panels and the tiers mechanism in the new architecture. We have argued that that might not be for the best. For the moment, accepting that that structure is there, our proposal is again to emphasise the need for consumer and competition experts on CMA panels to avoid the risk of making their deliberations insufficiently consumer focused. That would make sure that the CMA and its decision-making panels represented the interests of consumers throughout their work. I beg to move.

[Viscount Younger of Leckie]

My Lords, Amendment 24BA adds a requirement to appoint at least one person with consumer representative expertise to the CMA board. A similar amendment was proposed by the Opposition in Committee in another place. We share the concern of noble Lords opposite that the reforms promote consumer interests, as mentioned in an earlier debate today. Consumer interests will be at the heart of the CMA. Given this, the amendment is not necessary. It could also undermine the perceived fairness of the CMA. We agree with the point made in the previous Government’s 2001 White Paper on a world-class competition regime that decisions should be made independently on the basis of sound economic analysis of the effects on competition. Independence of government and between the phases enables better decisions, greater certainty for business and more clarity in the regime.

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There are currently more than 30 Competition Commission panellists, including lawyers, economists, accountants and businesspeople. Between them, they have the range and depth of expertise to deliver on the Competition Commission inquiries across the economy, including on financial services and consumer issues. We expect that a sufficient number and range of panellists will also be appointed to the CMA for it to be able to cover consumer welfare and financial services-related functions. In fact, many of these will transfer from the Competition Commission. This means that the specific appointments called for by this amendment are unnecessary. I trust, therefore, that the noble Baroness will withdraw her amendment.

[Baroness Hayter of Kentish Town]

I thank the Minister for that. How interesting it is that we can have sector specialists such as lawyers and accountants, and they are not conflicted, but you can talk about someone coming from a consumer background and it is immediately assumed that they will be conflicted. Everyone in this Room is a consumer, and consumer representatives speak on our behalf, whether to individual providers, regulators or anyone else. Just because they have done that and built up that expertise, they may be conflicted, but a sector specialist such as an accountant who no doubt has worked with some of these companies is not—I find that very interesting.

It has been very clear that having people from a consumer background on the Legal Services Board and the FSA is valued by people from the industry. To write that into the requirement seems the least that we can do. I see that most of the words that the Minister read were actually written before I had spoken, so perhaps when he looks again at what we have actually said, he may be able to be a little more responsive should we need to bring this back. For the moment, I beg leave to withdraw the amendment.

Amendment 24BA withdrawn.

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Moved by

[Baroness Hayter of Kentish Town]

24BD: Schedule 4, page 89, 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 paragraph (a)”

[Baroness Hayter of Kentish Town]

My Lords, these amendments speak for themselves, so I hope that I can be brief. They are to remind the CMA, and to be certain that it includes in its reports, that it must set out the consumer benefit to be achieved and then monitor and evaluate it in its objectives and priorities. That will make its accountability for achieving this easier to ensure and will enable Parliament, the public, consumer groups and others to have clear evidence on which to assess progress.

Amendment 24BE means checking that the staff are up to the task set for them and that the resources are properly allocated to meet key objectives. Amendment 24BF is to allow Parliament and others to evaluate the cost of this merger into a single body, not just in money, important though that is, but on whether competition is healthier and that cases are being heard more quickly. We all, I assume, support post-legislative scrutiny. This amendment would produce the evidence on which to base that work. I beg to move.

[Viscount Younger of Leckie]

I am grateful once again to the noble Baroness, Lady Hayter, for the suggested amendments. Amendment 24BD would impose a requirement on the CMA that its annual plan for a forthcoming financial year should contain the consumer benefit that will be achieved as a result of the CMA’s main objectives for the year, and the prioritisation of those objectives.

Under the OFT spending review settlement, the OFT is currently required to provide an estimate of direct savings to consumers from its activities and to assess the associated benefit cost ratio against the current target of 5:1. In 2011 this figure was exceeded to deliver a benefit to cost ratio of 7:1. For the OFT, such a requirement serves to encourage it to maximise benefits to consumers in deciding what work to take forward. By comparison, however, a requirement for the CMA to assess the impact of its future work would be considerably less precise. As well as difficulties in assessing the future benefits of particular cases, the CMA’s caseload itself is not predictable. This amendment could therefore incentivise the CMA to underestimate and underachieve and could also potentially leave the CMA at risk of judicial review if forecasted consumer benefits were not realised.

Amendment 24BE seeks to provide a statutory requirement for the CMA to report in its annual performance report on the skills of its staff and to estimate the resources needed to perform its functions in the following two financial years. As drafted, the Bill provides a statutory requirement for the CMA to produce an annual plan and performance report in which it must set out its objectives for the coming year and the relative priorities, and how it has delivered against these. In addition, both the OFT and the Competition Commission already publish information relating to their staff, such as the development, diversity and engagement of their staff. We expect the same of the CMA. While it is imperative that the CMA has a skilled workforce to carry out its functions, to report on the skills of its workforce on an annual basis will be unnecessarily burdensome to the CMA, we believe.

Finally, Amendment 24BF proposes that the CMA’s first performance report provides an assessment of the transition costs and the impact of reforms on the speed of referrals. Evaluating whether the policy delivers the objectives is essential to ensuring that the CMA is getting it right, as is an assessment of the transitional costs against benefits. However, such an evaluation must provide an assessment of the costs against benefits over an appropriate time period: to do otherwise would not provide an accurate picture of the impact of the policy. A requirement to assess the costs and benefits to the competition regime within the first financial year of the reforms would be far too soon for a realistic assessment of the transition costs and benefits in either financial or competition terms. The Government’s impact assessment of the proposed reforms to the UK competition regime, which includes the transition to the CMA, commits government to a review of the policy in 2018. That is an appropriate point at which to consider the impact of the transition to the CMA in both financial and competition terms. For this reason, we do not consider that it is right for there to be a statutory requirement for the CMA to include within its first annual performance report an assessment of transition costs in both financial and competition terms.

While I welcome the intention behind these amendments, their practical impact could serve to hinder the efficient and smooth working of the CMA as a high-performance organisation. I therefore request that the noble Baroness withdraw these amendments.

[Baroness Hayter of Kentish Town]

I thank the Minister for that. I assume from what he just said that the requirement on the OFT to measure the balance of its saving to consumers will continue into the CMA.

[Viscount Younger of Leckie]

Yes.

[Baroness Hayter of Kentish Town]

In case Hansard did not record that, the answer was a very welcome “yes”, for which I thank him.

The Minister talked about the requirement for reporting on diversity of staff. Needless to say, we welcome that, but it seems to me that if you set up an organisation to do a job, making sure that it has the appropriate staff is central. Its human resources department will know if it is not got enough IT people, it will know if it is short of various staff. All we are asking is that it should share that knowledge with us. For those who say that this is extra work, I believe that a well run organisation knows about staff turnover, who it is recruiting and who it cannot recruit.

Finally, I welcome the fact that there will be a review in 2018. Of course, it is a bit late by then to do anything about it if the Government have made a mistake in doing this. I suppose that it is better late than never, but I hope that the Ministers at the time will at least be asking those questions, even if it is not a statutory requirement. I beg leave to withdraw the amendment.

Amendment 24BD withdrawn.

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Moved by

[Baroness Hayter of Kentish Town]

24BH: Schedule 4, page 91, line 27, at end insert—
“Consumer research16A (1) The CMA must make arrangements for ascertaining information with regards to—
(a) the state of public opinion about the manner in which financial services are provided to consumers;(b) consumer experiences of consumers in relation to the provision of financial services, including—(i) handling of complaints by financial institutions, and(ii) resolution of disputes with financial institutions.(2) The CMA shall consult concurrent regulators where necessary.
(3) The CMA shall publish the conclusions from research carried out under sub-paragraph (1) every two years.
(4) The CMA shall report to the Secretary of State its conclusions and any recommendations arising from research carried out under sub-paragraph (1) every 2 years.
(5) The Secretary of State shall publish a response to any such report within 60 days and lay a copy of that response before Parliament.
(6) This section does not restrict the CMA’s power to make any arrangements that it considers to be incidental or conducive to the carrying out of any of its functions.”

[Baroness Hayter of Kentish Town]

My Lords, despite the financial sector nominally being competitive—in that there is a choice of banks—we have seen a real lack of satisfaction with banks among consumers.

We do not need to rehearse the mis-selling scandals, with unwitting customers, including small businesses, being sold—as a nice little earner—products that they do not need. We have a reminder of the banks’ record in the newspapers today. Furthermore, we know how hard it has been for people to switch bank accounts— a case made very strongly by the noble Lord, Lord Flight, who is not in his place now, during the discussions on the Financial Services Bill. We know that banks have been unbelievably slow to react to complaints about bank charges—in fact, without the OFT a number of malpractices would still be going on—and that they remain resistant to transparency on fees and charges. Indeed, what I find odd is that no other supplier of a service can simply remove money from one’s bank account without first submitting an invoice or agreeing the amount with the customer.

Banks are slow to deal with complaints, they are resistant to the ombudsman’s activity, and it sometimes feels as though they exist for their staff and their bonuses, rather than to serve the consumer. This smacks of a failing market. Therefore, Amendment 24BH seeks to test that allegation by asking the CMA not to rely on a collection of anecdotes—which does not evidence make—but to undertake some serious consumer research into this market, and to present that, together with any recommendations flowing from it, to the Secretary of State, who should then report back to Parliament.

The other evidence of the lack of a functioning competitive market is the virtual seizing up of finance for small and medium-sized enterprises, and indeed for high-growth businesses, as set out earlier by my noble friend Lord Mitchell. Yet we know that our economic regeneration, and our future, rest on their shoulders. Something is amiss.

This does not feel like a competitive industry when customers cannot get what they want: money for investment. Thus Amendment 24BJ seeks to force the CMA to undertake some serious research on competition in the financial services sector. When we discussed these issues during our debates on the Financial Services Bill, we were told that the CMA would be the lead regulator on competition—the FCA’s role being to promote competition, it seems, rather than deal with its absence—so now we ask the CMA to do just that. I beg to move.

[Viscount Younger of Leckie]

I thank the noble Baroness, Lady Hayter, for these amendments.

To be effective, the CMA needs to be able to independently determine its own priorities, but its ability to do this would be undermined by the obligation under Amendment 24BH to undertake regular reviews of one particular sector. As we have discussed, the Government are of course determined to improve financial regulation. Markets and market regulation evolve and, by requiring the CMA to carry out studies every two years, this amendment might have the effect of limiting the ability of the CMA to carry out higher-priority work.

The CMA also needs to be able to choose which tool to deploy. During the course of a targeted investigation, Amendment 24BH could require the CMA to produce a general report on the financial sector. In these circumstances, the reporting requirement could waste resources, interfere with an investigation or even act as a disincentive to initiate a separate investigation in the first place.

Finally, while the CMA will be the central competition authority, the FCA will be the lead regulator in the financial services sector, funded by an industry levy. It would be duplicative for the CMA to be required to carry out detailed scrutiny of conduct in the financial services sector at taxpayers’ expense, as required by Amendment 24BH. The OFT and the Competition Commission’s scrutiny powers will be transferred to the CMA by order, under this Bill. New arrangements for co-operation between the CMA and the Financial Conduct Authority will ensure that the two bodies work well together. They will both, of course, have the power to carry out research and publish reports, as envisaged by these amendments. I therefore ask the noble Baroness to withdraw her amendment.

[Baroness Hayter of Kentish Town]

I thank the Minister for that. There is one bit of that which I can accept—that it may not be necessary to do this every two years. But there is a major problem in this sector of financial services, and it is time that the Government accepted that. In the Financial Services Bill they are rejigging the architecture, a bit like this, taking the FSA and splitting it in two, sending one bit to Threadneedle Street and letting the other bit stay in Canary Wharf. None of that will seize the problem of the banking industry. I wonder whether the Government are ever going to do it. This was another way to say that this is an industry, and a market, that needs looking at. If it is not going to be done by the FCA, which is not going to have the same powers, surely it should be done by the CMA—if not every two years, even as a one-off now—to see whether we can sort this industry.

This is something that we will certainly need to come back to. The Minister referred to arrangements between the CMA and FCA, but so far the Government have absolutely refused even to accept the obligation to have an MoU between those two. We will come back to that in this Bill. There is something fundamentally wrong in this enormously important sector, which is failing to serve consumers and industry, small companies in particular, and no one seems willing to do anything about it. We will come back to this, maybe without the reference to “two years”. For the moment, I withdraw the amendment.

Amendment 24BH withdrawn.

--- Later in debate ---

[Lord Deben]

My Lords, I refer to my entry in the House of Lords register of interests. This gives me a good opportunity to ask one question of the Minister: has he noticed that this Part of the Bill refers to many things which were in the Financial Services Bill and that both are entirely different from everything else the Government are doing? In every other part of the Government’s actions we are reducing the amount of regulation. Much of the Bill is about that, but when we get on to the financial services arrangements, we are laying more and more emphasis upon more and more regulation and there is no indication, in my view, that it is going to be any better. It is really beginning to bug me that much of what has gone wrong was, of course, the fault of the financial services—I am not for one moment denying that—and certainly the fault of the banks, but I cannot honestly say that the regulator has come out of it with a great deal of praise. Indeed, a number of the things that went wrong can be laid directly at the door of the regulator. So the regulator then comes back and says, “Well, the only way to solve these problems is to have more regulation and more powers, so we can get it more wrong.”

My worry is simply that everywhere else in the Government’s programme, the Government have made the argument that if we have too heavy regulation, we do not have innovation, we do not have new things, we do not have new ideas and new mechanisms to meet the new circumstances of Britain, which after all is in competition with the rest of the world. That is the logic, that is the argument; an argument I buy into. The one area in which that is evidently not true is this one. So now we have had two Bills which interrelate and in this Part of the Bill, which is otherwise an admirable Bill, it has merely gone on doing what the Financial Services Bill had so wrongly done elsewhere. So we have an attitude to regulation which is entirely inconsistent.

We have just had two Bills going through the House of Lords and noble Lords may have noticed that the passage of the Civil Aviation Bill was entirely filled with speeches by Ministers about how wonderful it was that the public was now going to have a great deal more say and more appeal, and the regulators were not going to be able to ride roughshod over customers, businesses and the like. At exactly the same time, we introduced another Bill saying there are going to be no appeals, the public are not going to have a say, businesses are not going to have a say but instead we will have tougher and tougher regulations. I find this incomprehensible and as I have tried on several occasions to raise it in detail it would help me a great deal if the Minister would explain the rather curious mismatch.

Of course, the party opposite has not raised this very much because it wants more regulation in every circumstance: we know that. I raise it at this opportunity because I cannot do it on the amendments of the noble Baroness, Lady Hayter, but I think that in 10 years’ time—probably in five years’ time—people will look back at this period in Parliament and say, “What the blazes were they doing making the British financial industry less able to compete and less able to innovate, when they were doing so much good stuff in the whole of the rest of British industry?”.

[Baroness Hayter of Kentish Town]

I shall try to resist temptation. As to spectacles, of course it was the consumers who most wanted opticians not to be regulated. It has benefited us all because we have been able to buy much cheaper glasses than we used to.

I would like to ask the Minister, in the complete secrecy of this room, with only a few Hansard writers and television watchers present, that if his Government had not wanted a bonfire of the quangos, would this merger ever have gone ahead? Was it just another number in the bonfire of the quangos or did BIS always want this?

[Viscount Eccles]

Before the Minister replies, I would like to thank the noble Baroness for her comment. There may well be another, very general, explanation. I have worked in the public sector in a number of different bodies. I once received a letter saying that the Minister understood that I did not wish to be reappointed to this body because I was too busy—it was a Department of Trade and Industry body—but that was not the reason. The reason was that I had attended a meeting and voted against a grant to a company because I thought it was not a sound company. However, the grant was passed and paid out and the business went bust. I was too clever because I had got it right and so I had to be removed.

There are few of us here but this important general explanation will be reported in Hansard. There is a strong wish in departments—this is a general comment—to reduce the independence of public bodies, to centralise their activities and to get them back as close to the Ministry as they can. The Competition Commission has been an independent body for 60-something years, so how did it get into the Public Bodies Act that these two organisations would be merged? It cannot have got in as a result of the Cabinet Office saying, “Have you got any good ideas?” There must have been somewhere in the purlieus of BIS a document saying, “Would it not be a good idea to reform the competition regime?”

I believe that this merger has not ever been given the proper consideration by the Government that it needs to assess the risk in what is proposed, and to offset that risk against the apparently negligible benefits.