Caroline Flint
Main Page: Caroline Flint (Labour - Don Valley)
Caroline Flint (Don Valley) (Lab)
With the greatest respect, I say to the Secretary of State that no amount of tariff simplification or sorting out retail at the pump will deal with the problem that we face today, which is allegations about how energy and petrol are bought and sold, and the way in which the market works.
The allegations that have been made about the three oil companies, BP, Royal Dutch Shell and Statoil, as well as the price reporting agency, Platts, are extremely concerning. They suggest that those companies have both colluded in reporting distorted prices and prevented others from participating in the price assessment process, with a view to distorting the published price. If the allegations are true, there has been shocking behaviour in the oil market which should be dealt with strongly. I therefore have three questions for the Secretary of State.
First, the Secretary of State will know that the OFT inquiry concluded at the end of January that the UK fuel market was operating fairly, and that a Competition Commission inquiry was not needed. Given the amendment that has been tabled for debate later today, it will not be lost on hon. Members that it is the European Commission, not any British authority, that is investigating this situation. In light of today’s allegations, will the Secretary of State say whether any British authorities have plans to revisit their own investigations? If the EU investigation uncovers any wrongdoing, it will raise serious questions about the effectiveness of our authorities.
Secondly, last year we tabled amendments calling for commodities such as oil and gas to be part of the Financial Conduct Authority’s regulatory net, but Ministers refused to act. We argued that the regulatory perimeter needed to be explicitly set out in the Financial Services Act 2012, and that it was insufficient just to add references to LIBOR. Does the Secretary of State now accept that the Office of Fair Trading and the FCA should be explicitly equipped to tackle attempts at rigging commodities trading, whether spot trading, forward contracts, futures contracts hedging or benchmark pricing indices?
Thirdly, when the allegations of price fixing in the gas market were made last year, we warned that opaque over-the-counter deals and a reliance on price reporting agencies left the market vulnerable to abuse. The latest allegations of price fixing in the oil market raise similar questions. I tabled a parliamentary question in February asking for an update on the earlier investigations, but the Government were unable to provide any more information. Can the Secretary of State give us any assurance that progress is being made, and that we will not need another EU investigation to get to the bottom of what is happening in the gas market?
As we all know, LIBOR was a massive scandal, but global commodity markets include a vast range of products, including grains, fibre, other food, precious metals and energy, affecting every household. Consumers need to know that the prices they pay for their energy or petrol are fair, transparent and not being manipulated by traders. I hope that the Secretary of State will assure the House that no stone will be left unturned to establish the truth behind the allegations.
Mr Davey
I thank the right hon. Lady for her reply. May I make it absolutely clear to her and the House that we take the allegations extremely seriously? If it turns out that hard-pressed motorists and consumers have been hit in the pocket by the manipulation of markets, the full force of the law should come down upon those responsible. Let there be no doubt about that.
However, I am surprised that the right hon. Lady wishes the Government to interfere directly in competition investigations. It was her Government who rightly moved competition authorities on to an independent basis. We believe it is very important to have independent competition authorities, because that strengthens their ability to act. [Interruption.] She asks from a sedentary position what they are doing, but arguably we could ask what they were doing under the Labour Government. I hope that we can get cross-party consensus that competition authorities should be independent.
It is good news that the European Commission directorate-general for competition has acted, and I would have thought that the right hon. Lady would welcome that. When there are cross-border allegations, it is important that the European Union can act.
The right hon. Lady asked whether we would act on the effectiveness of competition authorities. We have. Indeed, I was the competition Minister who proposed the changes to the competition regime inherited from the previous Government, which are strengthening it. Bringing in the Competition and Markets Authority will make our competition bodies and regime far more robust, so we have a very good record on the issue.
The right hon. Lady asked whether there should be wider powers to deal with commodities trading. An issue to be considered—we have seen it with LIBOR and the gas market manipulation allegations and now we see it today—is how price reporting agencies operate. They are unregulated bodies, as they were under the previous Government. She will know that the International Organisation of Securities Commissions has been looking into both price reporting agencies in general and oil markets specifically. It reported to the G20 last November, stating that it had potential concerns about the operation of the global market. It did not refer to any particular allegations of manipulation, but there is an ongoing debate, globally as well as in this country, about how we deal with price reporting agencies given that there have been instances of market manipulation. We are taking action; the previous Government did not.
The right hon. Lady’s final question was what was the state of play with respect to the Ofgem review of gas market manipulation. She described it as an investigation, but I clarify that it is a review of the allegations. She will also know that Ofgem is independent. We do not expect an independent investigator or regulator to give the Government day-by-day reports as that would go against its independent nature and reduce its power. I would be surprised if the Labour party wanted to reduce the power of our independent regulators. These are serious allegations, and we stand behind our independent competition authorities and believe they will take action on behalf of the consumer, as they should.