United Kingdom Internal Market Bill

Lord Fox Excerpts

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

[Baroness Ritchie of Downpatrick (Non-Afl) [V]]

My Lords, I am very pleased to support these amendments, the first in the name of the noble Baroness, Lady McIntosh of Pickering, and the other two in the name of the noble Baroness, Lady Bowles. In relation to the amendment on legal privilege, I note that the Lords Constitution Committee report on the UK internal market Bill says:

“We welcome the confirmation by the Lord Chancellor that information protected by legal professional privilege will not be required to be disclosed to the Competition and Markets Authority under the information-gathering powers in clause 38.”


Can the Minister provide any further detail from the Lord Chancellor in relation to this particular issue? Can he say how and when the Government will bring amendments on Report dealing with this specific request to allow protection for clients in respect of the information-gathering powers?

In relation to the two amendments in the name of the noble Baroness, Lady Bowles, I would say that the last thing we need, particularly with Brexit hitting so many businesses and with the impact of Covid and the lockdown, are any more limits to business or on businesses. They have already suffered considerably, particularly the small businesses of sole traders or freelancers.

I think simply of the Northern Ireland situation, where the majority of businesses are small and, combined with the impact of Covid, many could close, resulting in loss of jobs and trading. There are some 148,300 small and medium-sized enterprises in Northern Ireland out of a total population of 1.8 million. This is the fewest of any UK region, as recorded in September of this year.

Another worrying factor is that research by Ulster Bank, a subsidiary of NatWest, shows that any hope of a V-shaped recovery in Northern Ireland has been snuffed out with Covid. I can understand and agree with the sentiments conveyed by the noble Baroness, Lady Bowles, that we do not want to see any further limits on businesses. In that regard, can the Minister advise noble Lords on what discussions he and his colleagues in BEIS have had with the devolved regions regarding these measures in the UK internal market Bill? Maybe he will surprise us and illustrate that there has been quite a bit of discussion.

[Lord Fox (LD)]

My Lords, I support Amendments 150 and 156, and indeed broadly support Amendment 149. My noble friend Lady Bowles, in characterising the information-gathering powers that are attempted to be brought in through this Bill, ably described the wide, broad remit that is being given to the CMA. I fully support and share her case, which was well put, as to why we should be concerned about this.

This is not just a burden on small businesses. Like the noble Baroness, Lady Neville-Rolfe, I have experienced the sharp end of a market study. It is a lot of work. This Bill envisages more than that for all businesses. No such undertaking should be given lightly without understanding what it will do—particularly, as many speakers have said—for smaller and medium-sized businesses. There should be limits.

More broadly, as prefaced by my noble friend Lady Bowles, during the debate on Clause 31, my noble friends and others raised the potential for universities to be dragged into the ambit of the CMA and the OIM—not least because of the different tuition fee regimes that exist within our nations. As we all know, this is a devolved responsibility. Despite their efforts, Ministers did not satisfactorily explain how this would happen, including in the letter.

We now turn to Clause 38, which, once again, broadens the powers of the CMA and enables it to be involved in these matters. The powers which are envisioned, though extensive and with little or no restraint, further stoke the fears harboured by Scottish universities. It could work the other way around. It could be the English university fee policy that is being challenged. This power is wider, with very few limitations.

I wish to probe the potential role of the office for the internal market under Part 4 of the Bill in relation to tuition fees. According to Universities Scotland’s brief, the powers in the Bill could

“give the OIM/Competition and Markets Authority (CMA) the power to investigate and reach a view on whether differential student fees represent a distortion of the new UK internal market. Regardless of the non-binding nature of the reports and advice of the OIM/CMA, it would have to be taken seriously by Parliament (Holyrood or Westminster). This could introduce new and greater basis for individual challenges to the variable fee regime within the UK, brought by individuals who feel they are discriminated against. … If this understanding is correct, this would apply in both directions, with possible challenges brought by Scottish domiciled students/individuals who consider the fee policy as administered by universities in England to discriminate against their options.”

That is one example of the consequences of this Bill. Will the Minister tell your Lordships’ House whether it is intended or unintended? If it is intended, why do Her Majesty’s Government see fit to mess with this devolved responsibility? If it is unintended, can the Minister acknowledge the issues that pervade this Bill?

In the Minister’s letter to my noble friend Lord Purvis of Tweed, which I hope has been placed in the Library, the Government accept that there are issues about university services. It highlights the power to amend exclusions after the Bill is enacted. This should be clarified by a government amendment before Report, not afterwards.

There are many other examples. In the short time we have had to examine this Bill, we have uncovered anomalies, irregularities and mistakes not just in relation to universities but in the food, alcohol and energy sectors. The noble Baroness, Lady McIntosh, also raised queries about the legal profession. In the spirit of whack-a-mole, I can add more, such as the water industry. Powers under Clauses 31 and 38 could mean that the CMA could be asked by an investor in an English water service company to investigate, let us say, the mutual Welsh Water company. Water is to be considered as a UK market, where it was not before. Once a case is opened, who knows where it will end up? Is this accidental or deliberate?

At the same time as the Government accrue these badly-defined powers to the new OIM and CMA, corporate lawyers on behalf of big businesses headquartered in the UK and beyond are sharpening their pencils. As the Government seek to regulate on a UK-wide basis services that until now have managed very well without Her Majesty’s Government’s help, consumer lawyers are looking into their practice development strategies and preparing to sell litigation ideas to future clients. As the noble and learned Lord, Lord Falconer, put it, this will be “a lawyer’s paradise”. At its heart is the Government’s decision to sideline the flexibility of the common frameworks and pursue the central ambition of trying to create a rigid one-size-fits-all regulatory structure to deliver a one-size-fits-all United Kingdom. The persistent and obvious flaws in this Bill demonstrate that this one-size-fits-all approach is impossible, even if it were desirable, which it is not.

[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?

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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.

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[Baroness Neville-Rolfe (Con)]

My Lords, this Committee is nearing its end, apart from Part 5. I support the noble Baroness, Lady Bowles, in her forensic efforts to probe the purpose of Clauses 38 to 40. I welcome my noble friend Lord Tyrie to today’s debate. Although I do not agree with him on fines or general powers, he makes a very good point about digital information. I am sorry he was not here for the debate on where the OIM sits. As he says, that is something we hope to debate again on Report.

On the plus side, these clauses give a great deal of detail. I usually complain to the Minister that EU exit Bills fail to do just that and leave too much to regulations. On the minus side, these are extremely strong powers of enforcement with very high penalties—for example, fixed fines of up to £30,000 would make many a small company bankrupt. There is no due diligence defence that I can see or provision allowing a reasonable excuse. The CMA can use its own discretion to decide whether a request for information has been complied with and can impose a financial penalty if it thinks there has been obstruction or delay. Such powers are fiercer than those of the police. The Minister will be able to tell us whether the CMA has those powers in relation to competition law and perhaps explain in each case why they are justified in the internal market Bill which, as many have said, is a little different from competition law.

Moreover, we do not know to which regulations these various measures and penalties will apply. Can the Minister kindly take us through some examples of their proposed use? He may have done this elsewhere; if so, I am sorry if I missed that. Perhaps more importantly, could he lay some sample regulations for us to review before Report, as his predecessor did so helpfully on the Bill relating to nuclear issues on EU exit?

I worry that both Houses of Parliament have been distracted by unease with Part 5 of the Bill into agreeing wide-ranging, open-ended and burdensome powers in these clauses and, for the first time, on services, the beating heart of the economies in all four nations of the UK. All this has been relatively lightly scrutinised despite our efforts, and experience shows that some nasty surprises might be in store. I am keen to work with others to minimise those while generally supporting the Bill’s direction of travel.

[Lord Fox (LD)]

My Lords, once again this has been a short but important debate. I congratulate noble Lords on speaking on this. Once again, I find myself in complete agreement with the noble Baroness, Lady Neville-Rolfe, and my noble friend Lady Bowles. It was good to hear from the noble Lord, Lord Tyrie, whose experience is important.

During her speech, my noble friend Lady Bowles sought to characterise the difference between getting information from potential recalcitrants—people who are suspected of or known to have distorted the market—and getting information from people to create a picture of a market. I hope the noble Lord, Lord Tyrie, will not mind me saying that the sort of language used about needing more sanctions and similar issues is coming from the mindset of dealing with recalcitrants. That is where the experience of the CMA has lain to date. There is a real concern that in creating this new role the culture of having to fight to get what you need is transferred into this second activity, and that is not appropriate.

I was interested to hear the point of the noble Lord, Lord Tyrie, about Clause 28 and looking again at the positioning of the OIM and CMA. I would be very keen to hear what he has to say.

[Lord Tyrie (Non-Afl)]

My Lords—

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[Lord Tyrie (Non-Afl)]

May I not respond? What a shame.

[Lord Fox (LD)]

Perhaps the noble Lord can put his point in writing, or speak after the Minister if it is a question to him.

Enormous care is needed, at the very least, but it is not clear in the Bill where that care is and how careful the Bill is; it seems quite careless. We come back to whether the Bill is deliberately underwritten or accidentally underwritten because there was not enough time. There is plenty of scope for the Minister to answer the questions set out by my noble friend Lady Bowles, the noble Baroness, Lady Neville-Rolfe, and the noble Lord, Lord Tyrie, and to nail how this will work, what it is for and how small and medium-sized businesses in particular will be protected from an overzealous information-gathering process.

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

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

[Lord Fox (LD)]

My Lords, I thank the Minister for his answer. I have two questions. First, does the Minister understand the difference between a voluntary activity and a voluntary activity where there are potential fines? It is the difference between cleaning the house voluntarily and cleaning the house knowing that I could have my tea withdrawn if I did not. There is a very big difference. That needs to be understood in terms of the culture of the way in which this information is sought. Does the Minister understand that difference?

Secondly, my noble friend Lady Bowles asked a series of questions about what is permissible as a reason for not delivering information. There was a huge multiple choice question and an overarching question. I think that the Minister dodged—sorry, I withdraw that word. The Minister did not answer any of those points. They were an important element of my noble friend’s questions so will he address them, perhaps generally today and more specifically, bearing in mind the very specific questions that she asked, in one of his letters?

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[Baroness Ritchie of Downpatrick (Non-Afl) [V]]

My Lords, I support the new clause in the name of the noble Baroness, Lady Hayter of Kentish Town. As she said, it would insert into the CMA’s powers a clear and specific reference to the need, in the new internal market and the regulation of takeovers, to promote research, development and innovation in new and existing industries and enterprises, and to act in the interests of UK public policy.

We already know that the CMA has a number of responsibilities, including protecting consumers from unfair trading practices, investigating mergers between organisations to prevent a reduction in competition and taking enforcement action in relation to anti-competitive practices by businesses and individuals. It will have more burdens as a result of the Internal Market Bill. Put simply, it will be responsible for strengthening business competition and preventing and reducing anti-competitive practices. 

The new clause seeks to nail down the role by referring to promoting research, development and innovation in new and existing enterprises. It would also assist with business development and innovation and in so doing, help to encourage overseas investment with job creation and sustainability—central facets of UK economic policy. It could also help to steady the market.

The Institute for Government has already stated that there is a clear gap in the Government’s plans for how governance of the internal market will function at a political level, and it is not clear how disputes concerning the functioning of the internal market will be managed. It is therefore important that this power be inserted to ensure greater protections where there may be hostile takeovers.

In devolved Northern Ireland, companies are generally small. However, the agri-food sector would sit under the new dispensation via the Northern Ireland protocol. There have been takeovers by companies based in the Republic of Ireland, so how would that fare if there were problems with the competition elements in the internal market Bill? The new clause in the name of the noble Baroness might assist in this regard.

The Institute for Government also notes that the office for the internal market within the CMA has very limited powers and, in many cases, can choose not to exercise them. It is worth noting that it can also request specific documents from any individual, business or public body to support its functions. Although it will be able to impose certain financial penalties, it will not be able to request any information that a business, individual or public authority would not be compelled to reveal in court, hence this new clause, on the need to promote the better operation and improvement of the UK internal market.

I therefore have no hesitation in supporting the new clause. It would promote much-needed research, development and innovation in new and existing industries and enterprises, and pump-prime UK public policy on the economy and finance in particular.

[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.