Business and the Economy

Jonathan Evans Excerpts

Monday 14th May 2012 Commons Chamber

[Vince Cable]

The unions certainly have a part to play, and I will continue to discuss the proposals with the TUC and affiliated unions, as well as with the employers’ groups.

One area in which good regulation strengthens a market economy is competition policy, so the Bill establishes a new competition and markets authority, bringing together the competition functions of the Office of Fair Trading and the Competition Commission. It will be the principal competition authority with a remit to tackle anti-competitive behaviour and to ensure dynamic and open markets. Competition processes will be faster, with clearer time frames bringing greater certainty and reduced burdens on business.

[Jonathan Evans (Cardiff North) (Con)]

It is not only the structure of the competition authorities which is important, but their budget. Over the past five years there have been a number of areas in which the OFT has not investigated because of resource constraints under the previous Government, so what will happen to the resources of the competition authorities?

[Vince Cable]

Bringing the two organisations together will in itself produce some efficiencies, but I cannot assure the hon. Gentleman that they will be protected from the efficiency savings that the rest of the public sector is having to undergo. We are confident, however, that with the reforms that we are undertaking, competition procedures will be faster, not slower.

The same concerns about competition underpin our decision to bring forward a separate Bill, establishing an independent groceries code adjudicator, which will protect suppliers—small firms and farmers—from unfair treatment. In doing so, we will support investment and innovation in the groceries supply chain, and support British food manufacturing and British farming. The measure has been welcomed by the Food and Drink Federation, the National Farmers Union and the Association of Convenience Stores.

The case of a highly concentrated industry buying from and selling to large numbers of suppliers and customers is a classic, economic textbook case in which intervention is needed to prevent monopoly profits. Retailers should not of course be prevented from securing the best deals and passing on the benefits to consumers, but equally retailers should be required to treat their suppliers fairly and lawfully. An independent adjudicator will ensure that the market is working in the best long-term interest of consumers. It will have the powers to intervene proactively and to name and shame offenders. In such a competitive market we consider that those powers will be an effective tool, but if it appears that they are not adequate, I, as Secretary of State, will be able to grant the adjudicator the power to impose financial penalties.

--- Later in debate ---

[Jonathan Evans (Cardiff North) (Con)]

I begin by congratulating the hon. Member for Houghton and Sunderland South (Bridget Phillipson) on a well-constructed contribution. May I crave her indulgence? I see that the right hon. Member for Birkenhead (Mr Field) is just leaving the Chamber, and I wish to say how much I enjoyed his contribution. I obviously did not agree with the conclusion he reached, but he gave the best critique of Government policy I have heard from the Opposition Benches. It was certainly a more constructive one than we heard from the shadow Secretary of State.

I, too, have a registered interest to put on record, as chairman of companies that are active in the life insurance sector.

My focus will be on the expectations that have been aroused by the proposal to introduce a new competition and markets authority, essentially merging the responsibilities and functions of the Office of Fair Trading and the Competition Commission. My views are informed by my experience of serving in the previous Conservative Government as the UK Minister responsible for competition and consumer policy—interestingly, a role also occupied by my right hon. Friend the Member for Wokingham (Mr Redwood), who spoke earlier.

As you will know, Mr Deputy Speaker, I later had the advantage during my 10-year sabbatical from the House of acting as the European Parliament’s rapporteur on the modernisation of EU competition policy during the time when the whole of EU law and policy in the area underwent a significant, highly transformational experience. The key individuals driving that process were Mario Monti, the Competition Commissioner, who is now the Italian Prime Minister, and the current European Commission vice-president Neelie Kroes. From Monti’s actions in blocking the GEC-Honeywell merger through to Mrs Kroes’s effective challenge to Microsoft’s abuse of its market power, they ensured that those seeking to undermine proper competition and open markets throughout Europe had a really strong adversary.

We all support open-market competition; it is the bedrock on which our economic growth depends. I have noted many of the positive responses to the Government’s plans for the new unitary markets authority. The plans are driven by a common view that the current processes are just too lengthy. The shadow Secretary of State’s extraordinary claim that everything was absolutely fine when Labour left office does not match the view in the market. The Government’s aim is to remove duplication and delay and to streamline the system and produce a more efficient and speedier quality service, but the question is: if we cannot argue with that ambition, will it be delivered by the proposal?

The first phase of current arrangements requires a detailed analysis at the OFT by teams of experts before a decision on whether there should be a reference to the Competition Commission. Unless these concerns can otherwise be addressed to the OFT’s satisfaction, the matter will pass to the commission itself, where a second and completely different set of experts looks at the same analysis all over again. This duplication is one of the factors that is supposed to drive a significant part of the delay, but it is my understanding that the Government’s proposal is to retain completely different teams between phases 1 and 2. It is difficult to see, therefore, how this streamlines anything or produces any efficiencies of the sort that the Secretary of State said, in response to me, he anticipated would create more resources to tackle market abuse.

Another area of concern relates to the Government’s plan to improve the conviction rate for individuals by creating criminal offences that no longer require that dishonesty be proven. As parliamentarians, we should always be particularly cautious about the creation of new, absolute criminal offences. A wrongful act and a guilty mind lie at the heart of our criminal justice system, and we should be weary of arguments suggesting that for cases otherwise difficult to prove we need to remove the dishonesty element.

I want the House to be in no doubt that I fully support punitive administrative financial penalties on companies that breach laws against creating cartels, price fixing or abusing market power. The Competition Commission often imposes fines of many millions of pounds on such companies and has taken sweeping investigative powers in such cases. Mario Monti always maintained to me that it was completely inappropriate for the European Commission to have that sort of absolute criminal law power. I cannot imagine the reaction of my hon. Friend the Member for Stone (Mr Cash), who is beside me, if the Commission ever proposed taking such an absolute power. We should question strongly any proposal to do the same in this country.

It is difficult to escape the conclusion that the Government are responding to the OFT’s failure in a high-profile case involving British Airways. However, the fact that to date the OFT has never succeeded in bringing any criminal prosecution to the point of being considered by a jury leads me to the view not that the criminal law in this area is wrong but that the OFT itself might not possess the necessary resources. I hope that the creation of this new markets authority improves the landscape for open markets, but I hope, too, that the Government bear in mind my concerns.