Earl of Courtown
Main Page: Earl of Courtown (Conservative - Excepted Hereditary)(7 years, 6 months ago)
Lords ChamberMy Lords, I thank the noble Baroness, Lady Hayter, for enabling me to respond to this interesting debate. Some important points were made both by the noble Baroness and by the noble Lord, Lord Stevenson.
I agree with the noble Baroness that it is important that markets work in the best interests of consumers. That issue is at the heart of what the Government believe. My right honourable friend the Prime Minister has said:
“Where companies are exploiting the failures of the market in which they operate, where consumer choice is inhibited by deliberately complex pricing structures, we must set the market right”.
The UK’s independent watchdog for competition, the Competition and Markets Authority, along with the economic regulators, is a key player in making sure that we achieve this goal.
My department is in the front line of making markets work for consumers. Empowering consumers is critical to delivering the department’s aims and objectives. The departmental vision includes a commitment to secure better outcomes for consumers by creating a more competitive business environment. I recognise that it is important that we live up to that vision. That is why, in the Autumn Statement, my right honourable friend the Chancellor announced that the Government will produce a Green Paper that will closely examine markets which are not working fairly for consumers.
The Government are working up proposals to step in to strengthen competition where markets fail and consumers may not be getting a good deal. This provides support to the CMA’s statutory objective to make markets work in the best interests of consumers. As Her Majesty’s Government we are keen to give the CMA the right resources and the right incentives to help it deliver on its statutory goal. This is why we have set the CMA the target of achieving £10 of consumer benefit for every £1 it spends.
The Government continue to challenge the CMA to deliver more for consumers. Through the Government’s strategic steer to the CMA we have made clear where we think it should focus its efforts to ensure that competition thrives for the benefit of consumers. It is important, though, that the CMA remains free to use its resources as it considers most appropriate, to get the best deal for consumers. To help achieve this goal, the CMA uses a set of prioritisation principles to decide which work it should undertake to have the biggest impact. The principles include impact and strategic significance.
Every year, the CMA consults on and publishes its annual plan, which sets out its strategic goals for the year. In the annual plan on which it has recently consulted, the CMA commits to,
“continue to prioritise work that has the greatest impact on ensuring a good deal for consumers—including the most vulnerable”.
This approach has led the CMA to tackle some key markets in recent years. It has recently concluded two of the largest and most complex market investigations that the United Kingdom has seen—into the energy and retail banking markets, as mentioned by the noble Baroness and the noble Lord. It has also undertaken important market studies into higher education and the provision of legal services, and it recently announced a new study looking at the operation of the care homes market. The CMA continues to assess mergers to make sure that they do not create market conditions which could lead to poor consumer outcomes or a lack of choice or competition. It has also upped its game on cartel and anti-trust enforcement, concluding high-profile cases—for example, in the pharmaceutical sector—and issuing substantial fines.
It is clear that this work is not a purely academic exercise and it is important that the CMA and the Government assess and measure the impact of the CMA’s work. To this end, the CMA assesses its total impact on consumers as part of its annual report. Between 2013 and 2016, the CMA demonstrated that it delivered on average £687 million-worth of benefit to consumers per year on an annual budget of £65 million, exceeding its 10:1 target. The NAO has also recently looked at the operation of the UK competition regime. It found that overall the regime is working well. However, it identified that the CMA could do more. The CMA is keen to build on its success and has committed to review the way that it conducts market investigations to ensure that they are as efficient and effective as they can be and improve the CMA’s brand. That review will conclude in the next financial year, and the CMA hopes to use it to develop this important tool to help make the greatest difference to the largest number of consumers and businesses.
The Government also take very seriously their obligation to review the operation of legislation to ensure that it is achieving its objectives in the best possible way. We consulted on a number of measures last year to improve the regime. A response will be issued in due course. That is why we are committed to review the operation of the parts of the Competition Act 1998, the Enterprise Act 2002 and the Enterprise and Regulatory Reform Act 2013 which give the CMA its powers. These reviews must be concluded by April 2019. Over this Parliament the Government will continue to keep under review whether the CMA has the right powers and whether it is using them to achieve its statutory goal.
The noble Baroness mentioned the connection between the CMA and Brexit. On 4 February the CMA’s chief executive outlined its role as the UK exits the European Union. This speech is published online and, if it would help, I can give information about where the noble Baroness can find it.
I referred to it; it was the one given in Miami, which I read with great care.
To continue with the Brexit theme, we fully take the point that the effects of Brexit on consumers must be an important part of the Government’s planning. Ministers had a consumer round table before Christmas, and there is a lot of engagement at official level.
The noble Baroness also mentioned the CMA’s energy market investigation, as did the noble Lord, Lord Stevenson. The Government are continuing to consider their response to the CMA’s report and will respond soon. Following npower’s announcement that the cost of annual dual fuel bills was to increase by 9.8% on average from 16 March, the Government repeated their commitment to getting the best deal for households. Suppliers are protected from the recent fluctuations in the wholesale energy prices in which they are buying up to two years in advance. The Government therefore expect energy companies to treat all their customers fairly, not just those who switch. We want to see suppliers come forward with clear actions to treat their customers fairly.
The noble Baroness raised the point about ensuring that the CMA undertakes its work for the benefit of consumers. The CMA is the independent, expert competition body. It is the body best placed to assess the likely impacts on competition and business behaviour. Consumer advocacy groups have a valuable and vital role to play in helping to identify markets that may not operate in the best interests of consumers. To ensure that its voice is heard, the CMA works closely with consumer advocacy groups, including Which? and Citizens Advice. The CMA is also an active member of the Consumer Protection Partnership, which brings together publicly funded consumer enforcement, advocacy and advice organisations to share, compare and interpret intelligence to identify trends in the causes of consumer detriment.
The noble Baroness also mentioned bank overdrafts being more expensive than loans. The Government will continue to engage closely with the FCA to understand the issues in this market and to ensure that it has the appropriate tools to take action where problems are identified. The FCA’s current review will examine the rest of the high-cost credit market, including overdrafts, and will enable the FCA to assess whether there is evidence of consumer detriment.
The noble Baroness, Lady Hayter, also mentioned the 2010 OFT study into house buying and selling. As well as the open letters to the sector, the CMA has produced materials tailored for SMEs to emphasise competition as an essential part of doing business and that companies can themselves be victims if their rivals or suppliers flout the law. Obviously, we must not forget the consumers in this equation.
It was suggested that the CMA’s retail banking market investigation did not address the real problems. The Government welcome the CMA’s final report on that investigation as an important step towards the goal of a highly competitive banking system. Taking forward this kind of high-impact work is exactly why we have created this authority. The noble Lord, Lord Stevenson, asked what the CMA was doing on ticketing. The CMA announced on 19 December last year that it is launching an enforcement investigation following a review of compliance with the Consumer Rights Act provisions and the undertakings it had received from the major secondary ticketing platforms.
The noble Lord, Lord Stevenson, referred to the Higher Education and Research Bill. I will, of course, pass all his comments on to my noble friend Lord Younger. He mentioned in particular the Office for Students. The Bill requires the Office for Students to have regard to the principles of the best regulatory practice. This will include taking account of requirements such as the Regulators’ Code, and the Bill requirements are consistent with the code. Once the OfS is established, the Government can decide to make it formally subject to the Regulators’ Code by making an order under the Legislative and Regulatory Reform Act but, whether it is applied formally or not, the OfS must operate under the same principles.
The noble Baroness asked a number of other questions. If she will excuse me, I shall arrange to write some answers. I shall also arrange for them to copied to the noble Lord, Lord Stevenson, and for copies to be put in the Library.
I reassure the House that the CMA has consistently acted in line with the statutory duty to improve competition for the benefit of consumers. The CMA’s published prioritisation principles put consumer impact at the centre of its decision-making about the way that it uses its resources. While it is right that the CMA is independent of government, it is also right that it is held accountable for the way that it uses public money. The CMA routinely assesses its competition and consumer work to establish its impact on consumers. It publishes an annual impact assessment, judging its performance against its statutory duty and against the target set by the Government to realise £10 of consumer benefit for every £1 spent.
The NAO has also recently published a report into the operation of the UK competition regime, which found that, in the most part, the regime operates well. The CMA is now assessing its market investigation processes to see whether it can build on its current, effective approach to competition issues.
Finally, the CMA’s powers to investigate mergers and markets will be reviewed before the end of March 2019 to assess whether they are appropriate and are achieving their aims and objectives.