Enterprise and Regulatory Reform Bill

Lord Razzall Excerpts

Wednesday 12th December 2012 Grand Committee

[Viscount Eccles]

I have found it pretty difficult to be sure that I understand exactly what the Bill is trying to do. You practically need a trolley for the papers. It is built on previous Bills, and is still extremely dependent on the 2002 and 1998 Acts. My position on the previous debate would be that if I cannot find it anywhere else it must still be in one of those Acts, and that must be the law of the land.

My interest is in Parts 3 and 4 doing different things. Part 3, in Clause 20, introduces institutional change, whereas Part 4 modifies the competition regime and, in doing so, has a very large number of schedules and is almost completely dependent on previous Acts. It does very little that is not an amendment to an existing Act. The question that I want to probe is why the Government have chosen this particular step of institutional change. There is to be a body corporate known as the Competition and Markets Authority. I thank the Bill team and the Minister very much for trying to settle some of my misunderstandings and doubts in a long correspondence, but I am not entirely reassured.

I go back to the Public Bodies Act, which is quite a recent Act—passed in 2011. Section 2 says:

“A Minister may by order merge any group of bodies or offices specified in Schedule 2 … In this section, to ‘merge’ a group means … to abolish all the bodies or offices in the group, create a new body corporate or office and transfer some or all of the functions of the abolished bodies or offices to the new one, or … to abolish all but one of the bodies or offices in the group and to transfer some or all of the functions of the abolished bodies or offices to the remaining one”.

My question is: why have the Government chosen subsection (2)(a) and not subsection (2)(b)? There does not seem to be a strong case for going any further than abolishing all but one of the bodies and transferring the functions to the remaining one. That is in effect what is happening. We are not getting a new body. I know that the noble Lord, Lord Whitty, was welcoming the new body and trying to make sure that it has new things to do, but that is not the Government’s intention. This is simply the Office of Fair Trading with its name changed. Following the scheme of the Public Bodies Act, which the Government have done, even though they say they are not depending on it, they have at some stage to take account of the reason, purpose and conditions, as in Section 8. In the exercise of public functions, they must have regard to efficiency, effectiveness, economy—the familiar three Es—and accountability. At the moment, I do not think there has been any attempt to describe to Parliament why the creation of this new body would achieve the purpose and conditions of the Public Bodies Act.

Indeed, that seems quite strange at a time when we have to try to restrain expenditure. We would all agree with that: if we saw a reasonable opportunity for restraining expenditure, we would take it. It is a time when, if we can have minimum disruption and allow as many people as possible to carry on doing the things with which they are familiar without being told that they face great change, we should. It is also a time when it is probably better to have the maximum of reality. The reality is that we are being presented with a beefed-up OFT. I have no objection to that as an idea but do not see why it should be sold as a new body. That does not seem to be what it is. I have a piece of evidence that leads to a question. Am I right that under Part 4 of the Bill—which deals with the modification of the competition regime—if the draftsman was to substitute “OFT” in every instance for “CMA”, the modification would be perfectly installed by Parliament and there would be absolutely nothing wrong with it? That demonstrates that what is happening is a change of name and a beefing up of the powers of the OFT, and not the creation of a new body.

[Lord Razzall]

My Lords, I obviously listened to what my noble friend Lord Eccles said at Second Reading when he made very similar points. I am not clear: does he accept the fundamental need to reform the structure and institutional nature of our competition regime? It is a very straightforward issue, with which—

[Viscount Eccles]

Perhaps I may just answer that question. I do not accept that, no.

[Lord Razzall]

Well, that seems to be the fundamental difference between my noble friend and other members of the coalition. I suspect, having heard the Second Reading remarks of a number of members of the Labour Party, that it is also their view that there is a need for such reform. I will not labour the point because it was made at Second Reading, but it is universally regarded throughout the world that our competition regime has all the attributes that every competition regime should have except for being the slowest. That is the real issue that this part of the Bill attempts to deal with. It does not matter if you call it a beefed-up OFT or a beefed-up Competition Commission. What is being reformed is the necessity for practitioners, companies and people involved in the whole competition process to go through two organisations to get the decision that they are likely to require. That is the purpose of the Bill. I am still puzzled as to whether my noble friend, Lord Eccles, who was a distinguished member of one of the bodies that is being abolished, wants to maintain the system as it was when he was that distinguished member.

--- Later in debate ---

[Lord Razzall]

I am sorry to interrupt the noble Viscount’s flow. What is his answer to the argument that all the major business organisations and the Law Society are in favour of this recommendation?

[Viscount Eccles]

My Lords, I have looked quite carefully at what has been said, and it has been quite qualified. In fact, I have had a bit of dialogue with the CBI over recent weeks, and it seems to have been in the same position as me when it started out: it did not understand the Bill. I am not overimpressed—I am never overimpressed—by what lobby groups are said to have said. One has to try to make up one’s own mind—that is possibly why we are here.

The other point made by my noble friend on the Front Bench concerned the varying workload on the Competition Commission. Of course, I completely take that point on board. It has been referred to that I was a member of the Monopolies and Mergers Commission. At one time, I was on three days’ equivalent and I was there all five days; I was on five inquiries and I was chairing three of them. When we had a heavy load of work, we just worked harder. When we did not have such a heavy load of work, we did not work quite so hard. To be serious, that question comes down to what you do about the cost of the commission at times when it is not so busy.

I have not consulted the commission at all on this; I have done all my own research. It has reduced its costs by 23% since the onset of the crisis. I have no doubt that there are ways in which the costs of the commission, if it really does not have so much work, could be reduced further. It has a board and it tends to have more deputy chairmen than it did in my day, and they are rather better paid than we were in my day, even if you go into real terms. Therefore, there are ways in which the cost could be flexed by both the OFT and the Competition Commission. It does not necessarily follow that putting them under one roof and cutting some back-office expenses—and I do not remember that we had much of a back office in the monopolies commission—will do the trick. So I am not persuaded that the opportunity to reduce the cost of the Competition Commission from £17.7 million net to something else is adequate to match the risk being taken if this regime falls to pieces.