United Kingdom Internal Market Bill

Lord Callanan Excerpts

Committee stage & Committee: 4th sitting (Hansard) & Committee: 4th sitting (Hansard): House of Lords
Wednesday 4th November 2020 Lords Chamber

[Lord Stevenson of Balmacara (Lab) [V]]

My Lords, this debate has raised some interesting and important issues. I have listened with care to all the speakers and particularly to the contribution of the noble Baroness, Lady McIntosh, based on information provided by the Scottish Law Commission, whose help I also acknowledge. I look forward to the Minister’s response. The noble Baroness, Lady Bowles of Berkhamsted, raised a number of issues to which I wish to return. Other speakers have made small but important points on SMEs and the role of Northern Ireland.

The noble Lord, Lord Fox, picked up on the recent letter from Ministers about university fees, particularly in Scotland, and questioned whether this could constitute indirect discrimination. This was also raised in an earlier group. Like the noble Lord, I wonder why this could not be better dealt with by the common frameworks approach. This should be applied to all aspects of managed divergence, in relation not just to goods but also to services and the regulation of professions. We will return to this on Report.

In respect of the amendments tabled by the noble Baroness, Lady Bowles of Berkhamsted, the powers included in Clauses 38,39 and 40 are quite extensive and detailed. Do they go beyond the existing powers of the CMA? Are they new because of the responsibilities that will accrue to the CMA or the office for the internal market under this Bill? Or do they simply repeat existing powers reframed in some way to suit the new circumstances? I would appreciate the Minister’s response. As other speakers have said, this additional activity is very detailed and gives specific examples of what can and cannot be done and how it is to operate. Does this not play to the concerns raised by the noble Baroness, Lady Noakes, in an earlier amendment that asking the CMA to extend its focus and the range of its work might blur the good work it does at the moment? Does the Minister accept that there might be a problem here?

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

My Lords, I thank all noble Lords who have taken part in this debate. The noble Lord, Lord Fox, raised issues around university tuition fees and water services. As he said, I have written to him and to the noble Lord, Lord Purvis, about the points they raised in earlier debates. I am told that these letters have been submitted to the Library but there may be a slight delay in their publication. I confirm what I said there about the exemption in the legislation for public services. More details are set out in the letters. If for some reason they have not yet been published, the noble Lords, Lord Fox and Lord Purvis, should get in touch with my office, which will be happy to furnish them with a copy.

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[Lord Fox (LD)]

I much appreciate the Minister’s answer. The questions I asked about university tuition fees were in the light of having read his letter, which my noble friend Lord Purvis made available to me—there is no need to send it to me. In it the Minister states that,

“we are aware of the questions raised in relation to university services and how they may interact with the Bill”,

which is good. The letter continues:

“We have the power to amend the exclusions Schedule and will keep the area of higher education under close review.”


It therefore seems that the Government are planning to do that after Report. My point is that it would be a boon to our process on the Bill if the Government were to consult before Report and come back with something that I am sure, given what the Minister said, would merely fulfil their ambition for the Bill while settling concerns in the university sector.

[Lord Callanan (Con)]

I thought that I had put the matter to rest by writing the letter to the noble Lord, Lord Purvis, on which the noble Lord, Lord Fox, has commented. In our view, there is no doubt that the regulation of tuition fees is outside the scope of the Bill and, therefore, beyond the scope of the office for the internal market’s functions. But as the letter to him confirmed, we will keep the matter under review and not hesitate to take action if there is a problem, which we do not believe exists.

[The Deputy Chairman of Committees (Baroness Henig) (Lab)]

The noble Lord, Lord Stevenson, and the noble Baroness, Lady Neville-Rolfe, also wish to speak after the Minister.

[Lord Stevenson of Balmacara (Lab) [V]]

I asked the Minister a specific question on whether the framing of Clauses 38 to 40 was exactly the same, or differed from, the existing powers of the CMA. He did not answer that. I do not want to delay us too much today but perhaps he could write to me about it.

[Lord Callanan (Con)]

I would be happy to write to the noble Lord but, as I said, the powers to date have functioned effectively and are based on the CMA’s existing powers.

[Baroness Neville-Rolfe (Con)]

I have another couple of points for clarification by my noble friend. First, does legal privilege apply to in-house counsel, provided that they are properly qualified lawyers? I would be happy for the Minister to write to me about that. Secondly, he referred in the debate about small business to Clause 32(4), and helpfully explained that the CMA will advise on regulatory proposals before laws are made, which provides an opportunity for small business interests to be taken into account. However, my concern was also about enforcement of the law, which would bear particularly harshly on small businesses that do not have the same fancy legal departments as others. I am not sure that the clause deals with that but would be delighted if I was wrong.

[Lord Callanan (Con)]

On my noble friend’s first question, she will notice that Clause 38(8) states:

“A notice under subsection (2) or (3) may not require a person … to produce or provide any document or information which the person could not be compelled to produce, or give in evidence, in civil proceedings before the court”.


I hope that that resolves the matter. I will write to her on her second point.

[Baroness McIntosh of Pickering (Con)]

I thank everyone who has contributed, including my noble friend the Minister in summing up the debate. We had an excellent discussion on the issues, and I am grateful to the noble Baroness, Lady Bowles, for raising them because they are pertinent. I am slightly confused as to why it is necessary to include in the Bill powers that already exist. We are told that they are not new, yet my noble friend will not agree to include in the Bill a matter that is already causing alarm.

I am grateful to the noble Baroness, Lady Ritchie, for alerting me to the Constitution Committee report in that regard. It has highlighted its concern and received a verbal undertaking from the Lord Chancellor. I should repeat that we are referring to the Law Society of Scotland, not the Scottish Law Commission. If both the committee of this House and the Law Society of Scotland are concerned, that verbal reassurance is not enough. I may well reflect on the matter and come back on Report. However, for the moment, I am grateful for having had the opportunity to debate this matter and I beg leave to withdraw the amendment.

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[Baroness Hayter of Kentish Town (Lab)]

My Lords, this debate is perhaps even more important than some of the others that we have had. The real advantage of a stand part debate is that one can question the purpose of a clause rather than getting down into the weeds of amendments.

The issue that the noble Baroness, Lady Bowles, has raised is fundamental to how we have been looking at this. She asked—these are actually my words, although the noble Baroness, Lady Neville-Rolfe, said much the same—whether the competition regime was appropriate for work on the internal market. I am sorry that the noble Lord, Lord Callanan, gave away in an earlier debate that this may have been written hastily over the summer; it certainly sounds like a cut-and-paste job, done without stopping to think. Just because it is the same organisation at the same address in Holborn, or wherever the CMA is these days, you cannot just cut and paste it; as the noble Lord, Lord Fox, was saying, it is about the culture of that organisation as well as whether the structure is available. There is a fundamental question here, which my noble friend Lord Stevenson dealt with under Amendment 115, of whether the OIM should be within this framework, as well as the even broader subject of whether these sorts of penalties are appropriate for such a different role.

There are some specific issues in these clauses, such as whether it is appropriate for the Government to be able to amend the list of exclusions without any involvement of the devolved authorities. We have discussed such matters before, but under this legislation the fixing of penalties could again be altered without any involvement of the devolved authorities. This is serious stuff. They are a part of the overall governance and working of the new internal market, yet the Bill is written as if this is simply a Westminster responsibility.

I come to what the noble Baroness, Lady Neville-Rolfe, was saying: exactly what is covered by these clauses? In an earlier debate I asked the Minister to set out what services were covered, but obviously I was mumbling at the time because he wrote me a very nice letter on 2 November telling me about the services that are excluded, which of course already exist in the Bill. The question that I was trying to ask is: what services will be covered? I still cannot get a handle on that. This is really important given what has been said about whether the demands and penalties applying to services that are covered are appropriate.

Obviously I was not very clear about what I wanted but I had talked about housing and whether someone organising a register of housing would count as a service. I was talking about landlords but the letter refers to social housing. We are talking not about social housing but about landlords of private housing. I am involved with another part of the Government, the Ministry of Housing, Communities and Local Government, in chairing something to try to set up a code for property agents for when the Government are ready to fulfil what they have already promised—that is, to set up a regulator of property agents. They are already a service but the circumstances are different—buying and selling a house in Scotland is very different from England; if you buy there, you tend to go to a solicitor rather than an estate agent—so there are different ways of a service being developed or in existence. Once they are regulated, perhaps property agents will count as a profession, which is a different issue, but before then, as a service, are they going to be covered by these sorts of requirements?

If that is the case—and this is the main thrust of what I want to say on this group— how will these services know that they are covered by this provision? It is important for anyone risking breaking the law, in the sense of civil law, and being charged a penalty to know that that law applies to them. If they do not define what they are doing as a service and therefore do not know that they are captured by this provision, they may find it difficult to understand that they could be required to provide information. I can imagine that this could really affect property agencies. They need to know that it covers them, which is quite an issue, but it is also unclear to me whether the level of penalties is appropriate for this area. For a small housing management group, for example, this daily rate of £15,000 will basically wipe out its business if it has an £80,000 annual turnover. We are talking about levels of penalty.

It seems to me that those agents are covered by this, but I am unclear about the appeals process. If they are asked a question, how do they know that it has legal force behind it? Even if they are told that—most of these people will of course not have lawyers —and there is a penalty, do they have any appeal? I could not find one in the Bill but I am sure the Minister will be able to tell me; it is quite unusual to have a penalty without any sort of appeal. I could not work this out but I am sure the Minister will.

My main ask is: can we know the sort of services that will be covered? Perhaps we could hear more—not in legal language but in language that I can understand—about how they would know and about their rights to appeal any fixed penalty.

[Lord Callanan (Con)]

I thank all noble Lords who have taken part in this debate. I apologise to the noble Baroness, Lady Hayter, if she found my letter disappointing; I will try to do better next time. The noble and learned Lord, Lord Falconer, looks disapproving; I am not going to write him any more letters if that is the case.

With regard to exclusions on services, all services subject to the authorisation requirements or the regulatory requirements are affected under the Bill unless they are specifically excluded from some or part of the rules under Part 2. I hope that that clarifies the noble Baroness’s question—if not, I will be happy to write her another letter. She is shaking her head in disbelief.

I say to the noble Baroness, Lady Bowles, with regard to her question on consultation, that we consulted on the general office, what enforcement provisions there should be and whether or not it should be included as part of an arm’s-length body. Once we had made the decision that it should be located within the CMA, there was of course extensive discussion between officials and the CMA on the powers and how they will be enforced. I say to my noble friend Lord Tyrie that I am of course aware of the proposals that he refers to on the CMA and I will be happy to take another look at them.

Addressing the specific questions on this clause stand part debate, I will set out the rationale for these clauses. Clause 38, as I believe we already discussed in the previous group, sets out the powers that the Competition and Markets Authority will have to gather information in support of its monitoring, advisory and reporting functions. As I said previously, in order to carry out its functions the OIM must have access to high-quality information to produce accurate, relevant and credible reports. Clause 38 will ensure that the CMA is able to require the assistance of third parties to perform its functions and is able to independently gather evidence in a timely manner.

I hope that the noble Baroness, Lady Bowles, agrees with me that presenting analysis based on partial or inaccurate information could be detrimental to the regulatory decisions taken as a result of OIM reporting and monitoring and would damage the reputation of the OIM among many key stakeholders in these fields. The powers in this clause are therefore put on a strong statutory footing. They will ensure that the reporting that the OIM undertakes will be as effective and comprehensive as possible for the benefit of policy-makers in the UK Government and the devolved Administrations, significantly strengthening existing stakeholders’ ability to navigate the new UK internal market.

Clause 39 describes what action the CMA is able to take in response to non-compliance with the information requests described in Clause 38. As noble Lords said, the CMA has existing powers under the Enterprise Act 2002 regarding non-compliance with its information requests. This is necessary to enable the CMA to carry out its functions effectively. As with Clause 38, the provision for the OIM in Clause 39 is modelled on those powers. The clause will allow the CMA to determine the most appropriate policy approach and the amount of any financial penalty to be imposed within the limits that have been prescribed. The clause also sets out the conditions where financial penalties may not be imposed because more than four weeks has expired since the CMA exercised its relevant functions.

Clause 40 sets the parameters that the CMA should consider for financial penalties in cases of non-compliance with an information-gathering request notice. Let me first say that I understand the concerns of noble Lords, but the preference and expectation will always be that information gathering is on a voluntary basis. The Government do not anticipate that the CMA will need regularly to fall back on the information-gathering and non-compliance powers. However, it is important to ensure that this facility is available to the CMA to detail how penalties will be set. As with other provisions, the Government have chosen to mirror the relevant provisions of the Enterprise Act 2002.

I can say to the noble Lord, Lord Tyrie, and my noble friend Lady Neville-Rolfe that the Secretary of State will make regulations specifying the maximum amounts in practice within the specified ceilings for these penalties in consultation with the CMA and other interested parties. I can confirm for the benefit of the noble Baroness, Lady Hayter, that the devolved Administrations will of course be consulted as part of this. In addition, and as noted in our debates on previous groups, I confirm to the noble Baroness, Lady Bowles, and the noble Lord, Lord Tyrie, that the CMA will not be able to issue a financial penalty against the UK Government or any devolved Government. Let me be very clear about that. Let me also assure the noble Baroness, Lady Bowles, that the Government are committed to not taking any steps to bring in the financial penalties until there is credible evidence that there is a need do so, so we will not commence these provisions without that credible need being demonstrated.

I will deal with a couple of other questions. The noble Baroness, Lady Bowles, asked about third-party requests. Such requests would be permissible if they were within the scope of Clause 31 and the CMA thought that they were appropriate. As I confirmed earlier, the White Paper invited consultation responses on how the functions to be delivered should be implemented as well as on whether an existing arm’s-length body should deliver them or bespoke arrangements should be established. As is obvious, we decided after that consultation that the OIM should be situated within the CMA.

With the reasons I have set out, I hope that I have been able to reassure noble Lords on their legitimate concerns and on why this clause should stand part of the Bill. I hope that the noble Baroness will feel able to withdraw her amendment.

[The Deputy Chairman of Committees (Baroness Henig) (Lab)]

I have had a request to speak after the Minister from the noble Lord, Lord Fox.

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[Lord Callanan (Con)]

With regard to the noble Lord’s first question, I understand why his cleaning abilities might not be up to standard and he might not get his tea. With regard to the questions asked by the noble Baroness, Lady Bowles, on reasonableness, we certainly do not intend to create disparity within the CMA over the functions it carries out and the processes it follows.

To be serious, of course I understand the difference between being asked to do something voluntarily and being asked to do something voluntarily with the back-up of potential penalties. The powers and penalties in question are similar to those used by the CMA for its existing functions, such as conducting market studies. This will ensure consistency in the way that the CMA, under its existing and its OIM capacities, interacts with stakeholders across all its functions. We do not intend to commence the powers on fines until it is proved that they are necessary, as I said.

[The Deputy Chairman of Committees (Baroness Henig) (Lab)]

I have had a request to speak from the noble Baroness, Lady Neville-Rolfe.

[Baroness Neville-Rolfe (Con)]

I thank my noble friend for his assurance on commencement. He did not answer my specific questions, but I think that the answer in general terms was that the Government have taken the same powers as the CMA has on competition and applied them pro rata. Perhaps I can pick up something that the noble Lord, Lord Stevenson, said earlier. I wonder whether we could look at this line by line to see whether things are or are not all the same; that would be a helpful Committee-type process.

I really got up to ask a question about examples. The Minister helpfully gave an example of a penalty regulation—he said that he might make regulations with penalties under £30,000, perhaps at a lower level for particular things—but I am confused about what kind of regulations are going to be made here. That may be an impossible question to answer but if my noble friend could give us some more examples, perhaps ones that are in draft or have gone out to consultation, it would be incredibly helpful.

[Lord Callanan (Con)]

I referred in my earlier speech to the need to make regulations setting the maximum penalty, which the Secretary of State will do, but I will write to my noble friend if there are any other examples of regulations that we feel we may need to make.

[The Deputy Chairman of Committees (Baroness Henig) (Lab)]

Does the noble Baroness, Lady Bowles, wish to respond to any of the points made?

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[Lord Fox (LD)]

My Lords, at the outset I should say that, because of my past but discontinued interests, I will not be speaking to the specifics of the example that the noble Baroness, Lady Hayter, brought up; rather, I will speak generally on this issue.

I speak to support the spirit of this amendment. It is a shame that the noble Lord, Lord Tyrie, is not still here because I would have welcomed his view on this issue. As the noble Baroness, Lady Neville-Rolfe, said, there are examples of Secretaries of State who wanted to do more but were constrained, and Cadbury is a good example of that.

However, after two dozen or more hours in Committee, I find myself at last coming to agree with something that the noble Lord, Lord Naseby, said, and that is that this issue goes wider than simply the nature of the Bill. The noble Baroness, Lady Neville-Rolfe, said the same thing. It is an important issue, so we should be thankful that the noble Baroness, Lady Hayter, has brought it up. It is clearly inadequate; the Secretary of State needs a better armoury to assess the public interest and deal with what will undoubtedly be, as the noble Lord, Lord Naseby, said, a flood of potential acquisitions and hostile takeovers.

This may not be the right Bill to be doing it in, but it is a big issue. That said, it also opens up the question of how the new office for the internal market relates to the Secretary of State and the CMA when it is dealing with a hostile takeover that the Secretary of State has called in. As the Bill stands now, allowing for the fact that the Minister may not accept the amendment, how do the Government envision the interactivity between the office for the internal market, the CMA and a hostile takeover bid that the Secretary of State has called in? Who does what, and where?

[Lord Callanan (Con)]

I thank the noble Baroness, Lady Hayter, for her amendment. I understand her concerns but, as I am sure she is aware, the internal market Bill is concerned with protecting the flow of goods and services across the UK after the end of the transition period. It is not concerned with the general merger regime, nor with Ministers’ powers to intervene in mergers. Noble Lords should be aware that they will have the opportunity to debate these matters further in the Government’s forthcoming national security and investment Bill.

[A noble Lord]

Will that be soon?

[Lord Callanan (Con)]

It is forthcoming. Noble Lords will know that I cannot go further in terms of dates. It was flagged up in the Queen’s Speech and is forthcoming.

The grounds for ministerial intervention in mergers are deliberately precise and limited, in order to maximise transparency and predictability for businesses. The effect of the amendment would be to broaden the grounds upon which Ministers may make a public interest intervention in mergers. This would constitute a significant change to the UK’s approach to merger control which, as noble Lords observed, currently puts the emphasis on competition-based assessments by the Competition and Markets Authority, with narrow and specific grounds for ministerial intervention.

It is not clear how such a change would materially assist with the effective operation of the UK internal market which is, of course, the focus of this part of the Bill. The CMA already has significant powers and expertise to investigate the benefits and risks of mergers in relation to competition. An excessively broad power to intervene in the affairs of investors, shareholders and company boards risks stifling competition, innovation and creativity. This could lead to worse outcomes for both businesses and consumers, as well as stifling inward investment. For these reasons, I cannot accept the amendment and hope that the noble Baroness will withdraw it.

Before I sit down, I will answer the other question which the noble Baroness asked about the previous group. The power for the Secretary of State to specify the maximum penalties for breach of information-gathering notices will be brought in by negative SI. This mirrors Section 111(4) of the Enterprise Act 2002.

[Baroness Hayter of Kentish Town (Lab)]

The Minister is very polite. What he really wanted to say to me was: “Nice try”. There is a serious point here. As I said in my introduction, I know that the basic power is outwith the scope of this Bill, but there is some urgency to this question. The noble Baroness, Lady Ritchie, used the words “greater protections are needed against hostile takeovers”. They may not be exclusively from outwith the UK, but those are some of the ones where there have been particular problems. I think it is agreed that, as the noble Baroness, Lady Neville-Rolfe, said, there is a weakness in our armour because you cannot argue against them on the grounds of competition. I thank the noble Lord, Lord Naseby. The problem is that it is not within the tools of the CMA. It cannot use as a ground the need to either respond to public policy or promote particular industries. If it does not affect competition, it is not within its powers.

This does need to be added. The noble Lord, Lord Fox, is right that this is perhaps not quite the right mechanism, but we are delighted to know that there is a Bill coming and I look forward to the Minister accepting an equivalent to Amendment 153 at that point. I will, needless to say, use today’s Hansard to support that amendment to get this in then. I look forward to the noble Lord, Lord Naseby, and other noble Lords supporting me at that time.

I wanted to table the amendment to this Bill because of the changes there will be when we have got the internal market growing and we are looking for new investments. Even those who think everything is going to be wonderful after Brexit know that we are going to need a lot of support to get the economy going again after Covid. There is a slight weakness, so it would have been nice to have been able to put this clause in at this point. It was a nice try, but I beg leave to withdraw the amendment.