Lord Whitty
Main Page: Lord Whitty (Labour - Life peer)Enterprise and Regulatory Reform Bill
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Lord Whitty
“( ) In all its operations the issue of benefit or detriment to consumers shall be paramount, and where appropriate consumers shall be held to include small businesses.”
Lord Whitty
My Lords, we now move to the competition and consumer part of this Bill. I move Amendment 40 and speak to the other amendments in this group, all of which are in my name. I have been briefly promoted to the Front Bench for this section and I should declare my past and present interests. I am a former chair of Consumer Focus and of the National Consumer Council, and I am very pleased to see one of my distinguished predecessors, the noble Baroness, Lady Oppenheim-Barnes, here for this section. I am also currently an honorary vice-president of the Trading Standards Institute.
Most of this group of amendments are designed to ensure that consumer interest runs through the whole of this part of the Bill and the whole of the operations of the new Competition and Markets Authority. The Bill starts out very well. Clause 20 states commendably and unequivocally:
“The CMA must seek to promote competition”—
here and abroad—
“for the benefit of consumers”.
It is clear in this part of the Bill that competition is not an end in itself or an ideological description of what the capitalist system should look like; it is about the benefit of consumers and avoiding detriment to them. There may be wider public interest issues in relation to mergers, cartels and anti-trust issues, but this part of the Bill deals with the competition dimension, and the definition right at the beginning relates to the benefit of consumers.
I regret, however, that once that declaration is past, the operational requirements placed on the CMA hardly mention consumers. They are not mentioned in Clause 23 on mergers, not in Clause 24 on interim measures, not in Clause 27 on cross-market issues, not in Clause 31 on anti-trust, and so on. After Clause 23, no clause mentions consumers in the main part of the Bill. There is an amendment from the Minister that does, but there is no formulation here.
Moreover, there are in this Bill 50 pages of detailed prescriptions as to how the CMA should carry out its task. I find that very odd in the first instance. Indeed, I think it was to the noble Lord, Lord Marland, that I suggested that Schedules 4 and 5 be scrapped entirely except for one paragraph, which says in effect that the CMA board should conduct its own procedures. The detailed laying down of procedures is perhaps slightly tangential, as it offers a target to the very litigious oligopolists who have to deal with regulators. I am sure that the sector regulators, the OFT and the Competition Commission have experience of people picking up tiny bits of the regulations and catching the regulators out on these competition and cartel issues. By extension, it is also important for legal reasons that there is a reference to consumers throughout these clauses and schedules, if indeed we are maintaining them.
There is one reference to consumers, in Schedule 5, paragraph 63, which simply says “Omit section 8” of the Enterprise Act 2002, which it states promotes good consumer practice. This is very odd, and it is clear that the way the people who have designed how the CMA will operate have not ensured that consumer interest runs through the whole DNA of the new CMA. These amendments attempt to change that.
Amendment 40, the key amendment in this group, says that benefit or detriment to consumers is paramount in all operations. This is my basic theme for this evening. Incidentally, my amendment also includes a reference to small businesses. Much of the trading and some of the detriment of oligopolistic and monopolistic practices affects small businesses as much as it affects individual consumers. I have therefore explicitly put that point in. Indeed, I received a letter today from the Federation of Small Businesses very much supporting that reference.
Amendments 42 and 43 would make it explicit that the chair of the CMA is subject to the appropriate Select Committee of another place. This is partly so that it can judge whether the putative chair has consumer interest at heart in his or her approach to the job. Amendment 44 would require the CMA’s annual plan to include an assessment of the benefits to consumers of its actions and investigations. Amendment 47 would require CMA panel members to have experience or knowledge of consumer affairs. Amendment 48 takes it slightly further and would require that three members of the panel have direct experience of consumer representation or of consumer law.
It is particularly important to state this here about the panel operations, because although Schedule 4 does not prescribe any consumer experience, it prescribes a lot of other experience that people on the panel should have. It says that some should have experience of newspapers, an interesting point to which I may return at a later stage. It says that some should also have experience of communications, utilities, other business, and Northern Ireland specifically, but there is no reference to experience in the consumer world.
Amendment 51 deals with the deletion which I just mentioned: that of Section 8 in the OFT’s responsibility for promoting good consumer practice. That general requirement on the new body to inherit the OFT’s responsibilities for promoting good consumer practice surely should be located somewhere in the remit of the new body.
We need to rectify the omission of consumer references. My Amendments 41 to 44, 47, 48 and 51 need to be treated as a batch, because they all attempt to do so and to put the consumer first.
Two other amendments in this group deal with a slightly different issue. Amendment 52 deals with the issue, which I have raised with the Minister before, of how some of the other functions that are currently with the OFT are devolved to other organisations. Clause 22 allows the OFT to hand on and transfer functions to the CMA or Ministers, but in practice a lot of what the OFT currently does is going elsewhere: to trading standards, to Citizens Advice, to the National Trading Standards Board, which has no clear corporate identity let alone a statutory identity. The Minister has written to me, this issue has been addressed in papers on the consumer landscape, and I am not necessarily against it, but surely if we are looking at what is happening to the end of the OFT and the rise of the CMA, we ought to be clear in this Bill where those current issues are going.
Some have already happened; Consumer Direct has already gone to Citizens Advice. Some are being talked about; scams procedures are being dealt with by Trading Standards. But some are going to bodies that are themselves under serious pressure. According to UNISON members in Trading Standards—I have no reason to dispute this—Trading Standards across England and Wales has suffered a 13% cut in funding and a 15% cut in staff, which has led to a 26% cut in inspections and a 29% cut in prosecutions. If we are loading further functions on to Trading Standards, we need to ensure the resources are there to do so.
The Minister is likely to say—indeed, it may even be scheduled in our forward business—that some of this is going to be dealt with by orders under the Public Bodies Act. However, for a complete picture of what is happening to the OFT’s responsibilities, surely we need some reference in this Bill. We need to be clear where those responsibilities are going and that the new CMA, wherever it is devolved to, will ensure that those responsibilities have a national focus as well. While the day to day operation may go down to Trading Standards or to Citizens Advice, there needs to be a statutory body that is responsible for the effective overall delivery of consumer education, consumer information and inspection and for dealing with widespread consumer scams.
Viscount Younger of Leckie
I thank my noble friend for that point. Given that it is a very specific question, I will most certainly write to her.
Lord Whitty
My Lords, I thank the Minister for that reply and the noble Baroness, Lady Oppenheim-Barnes, for her interventions. I am afraid that I am not hugely reassured. If the Minister is correct in saying that the issue of the consumer interest or the protection against consumer detriment runs through the Bill, it is important that that is reflected in it at various points. I did not expect him to accept all my amendments, but I thought that he might be a little more benignly disposed towards one or two of them than he appears to be. Part of the problem is that the detailed prescriptions as to how the CMA will work, running to 50 pages with no mention of consumers at all, will be seized upon by corporate lawyers and people representing those who wish to continue anti-competitive and anti-consumer activities. They will say, “You have to abide by this and never mind about the general broad principles. That is what it says here, and it does not mention consumer detriment or protection at all”.
There is a lack of specific reference in the procedural aspects to consumer experience in terms of the membership of the board and the panels. I would not mind so much if other expertise was not mentioned, but consumer expertise is not mentioned. As the noble Baroness, Lady Oppenheim-Barnes, has said, early on there were reassuring noises that the access that consumers have to OFT services will not be diminished, but nothing in what the Minister said actually explained how that would be the case when everything else is shifting things away from the OFT down the line to trading standards offices, citizens’ advice bureaux and so forth. They may well be able to do a decent job. I hope that they will, and that they have the resources, funding and staffing needed to do so, but there must be some responsibility centrally to make sure that that happens. That is not reflected in this Bill and it is not reflected in the terms of the new CMA. I think that the Minister really ought to accept at least some of my amendments. Amendment 40 summarises all of this, and therefore I shall seek the opinion of the House.
Lord Whitty
Lord Whitty
My Lords, Amendment 45 is a more straightforward amendment in which I am trying to save the Government from themselves. I hope they will see the sense of that.
The meaning of this amendment may be a bit obscure from reading it on paper because it simply says “leave out paragraph (g)”. It would actually delete the reference to Monitor which, as noble Lords will know, is the expanded economic regulator for the National Health Service. The Government would really be very wise not to allow the terms of this Bill and the role of the Competition and Markets Authority to get entangled in the issues of the health service. It is therefore quite strange to me that the Government have kept the reference to Monitor. Paragraph 16 gives the CMA responsibility for writing a report every year on the other regulators as to how they have conducted their concurrent competition regulations and enforcement, and how they have been using their competition powers. Given that we are constructing a new organisation it is understandable that it is going to do that.
We have had some serious issues in relation to some of the sector regulators using other powers rather than their competition powers. For example, Ofgem has tended to use its licence powers rather than competition powers and has been very resistant to a referral to the Competition Commission; one could argue that Ofwat has managed to introduce hardly any competition into the sector at all, and so on. But those are very different from the issues that are going to confront Monitor, and to ask the CMA, in looking at these other regulators, to have a periodic assessment that applies the same terms as the utilities and transport regulators to the health service seems extremely foolish.
In part, the Government recognise this because their amendment in Committee also included Monitor, in terms of the ability of the Secretary of State to instruct the CMA to take over the competition responsibilities of the sector regulators, and they dropped that. That was extremely wise. This is a lesser issue but it is important, because during all the debates on the Health and Social Care Bill, Ministers here and in another place said that while they were introducing a degree of competition into the health service, competition would not outweigh other considerations.
Competition has a place in the National Health Service. One can argue about how much but it is never paramount. I do not think that even the most ardent advocates of a change in the National Health Service would regard competition as being more important to patients and the delivery of the National Health Service than the integration of services and the assurance that the quality of services in physical and social terms was important, and the degree to which competition existed was very much a secondary or tertiary issue. To give the CMA powers of supervision of a complex regulator such as Monitor, the prime consideration of which is to deliver a National Health Service that is integrated, available and flexible for the patient, and to try to override that with competition assessments that are equivalent to those used in the gas or electricity industries or the railways is not a sensible move.
Regrettably, this is also part of a wider picture. Orders are being produced under the Health and Social Care Act that also give rise to anxieties about the assurances given to us during the passage of the Act—I am looking particularly to the Liberal Democrat part of the coalition because the assurances were primarily directed at them—that competition would not outweigh other considerations in the regulation of the health service and that in particular the health service would not be open to the introduction of general competition policy, particularly EU competition law. That was a clear reassurance given us by the noble Earl, Lord Howe, and Ministers in another place throughout the difficult period when we were dealing with the Bill. It may be that the Government have changed their mind but certainly the combination of Monitor appearing in this Bill, supervised by the CMA, and the pushing of the boundaries of competition in some of the draft orders that are coming under the Health and Social Care Act seems to be a worrying tendency.
Tonight we are dealing with only this Bill. There is no reason at all why the effectiveness of the CMA is affected one way or another by whether it judges and marks Monitor, but the anxieties of having Monitor in that list are considerable. Any debate on the National Health Service is always highly emotive and not always entirely rational, but it would be wise for those who are promoting the role of the CMA in this respect to keep out of that area. I hope that the Minister and his colleagues will see the sense of doing just that. I beg to move.
Viscount Younger of Leckie
My Lords, the Bill strengthens the regime for the competition powers that will be held concurrently by the Competition and Markets Authority and sector regulators. The CMA will have stronger powers to co-ordinate Competition Act enforcement work and sector regulators will have explicit duties to consider using the Competition Act.
As part of these arrangements, and to ensure appropriate transparency and accountability, the CMA will be obliged to publish an annual report on the operation of the concurrency arrangements and the use of concurrent competition powers by the CMA and the sector regulators with concurrent powers. Amendment 45, moved by the noble Lord, Lord Whitty, would exclude Monitor from the scope of this report.
After lengthy debate on the Health and Social Care Act, Parliament decided that Monitor should have concurrent competition powers. Under the reforms being implemented through that Act, competition will not be pursued as an end in itself. We have said that competition will be used to drive up quality and will not be based on price. Nothing in this Bill affects this—certainly not the requirement to publish a report on how the concurrency arrangements have worked and the use of concurrent powers—or the Government’s commitment that Monitor will have concurrent competition powers so that a sector-specific regulator with healthcare expertise can apply competition rules.
However, Monitor’s concurrent competition powers in relation to the provision of healthcare services in England need to be co-ordinated with the CMAs, which can apply competition law in wider markets than Monitor; for example, in cases affecting the whole of the UK and in markets for pharmaceutical products or mobility aids. It is therefore quite right that Monitor be included within the concurrency regime and the CMA’s report on concurrency in particular.
I will address the question raised by my noble and learned friend Lord Mackay of Clashfern. I hope I can go some way towards allaying his fears, particularly regarding the application of competition law in health services, which was also alluded to strongly by the noble Lord, Lord Whitty. Competition law will not apply to the NHS Commissioning Board or clinical commissioning groups in their roles as commissioners of services because the case law is clear that, where public bodies carry out an activity of an exclusively social nature, neither that activity nor the bodies’ purchase of goods or services for the purpose of that activity will generally be treated as an economic activity. Also, a significant proportion of services delivered by foundation trusts would not be subject to competition law, as these NHS services are not provided in a market. They include accident and emergency, trauma, maternity, obstetrics, critical care and many others, particularly in remote rural areas.
A foundation trust will typically deliver some services to which competition law potentially applies and some to which it will not. If the intention or effect of an agreement was to prevent, restrict or distort competition, Monitor will, in considering a case, look at the benefits to patients alongside the detrimental effects to competition. When deciding on a remedy or penalty, Monitor will take into account the beneficial deterrent effect of a formal decision and possible fine against the impact that its payment might have on the public body and ultimately the taxpayer. Therefore, I ask the noble Lord, Lord Whitty, to withdraw Amendment 45.
Lord Whitty
My Lords, I thank the Minister and I thank the noble and learned Lord, Lord Mackay, for his intervention, which posed the question more succinctly than I did. The Minister has not effectively answered it. He has underlined that the situation in the health service is complex, but saying that the commissioning groups and others are exempt in their monopsonic dimension as buyers does not mean that other entities in the health service are exempt as providers. The aim of the health service is to look after the interests of patients, whereas consumers in most markets are served, with some exceptions, by greater competition. In the vast majority of situations the default position must be that consumers are better off if there is more competition. That is not the case when you need integrated and specialist services, and a whole chain of different services for different conditions in the health service. This is not equivalent to railway companies competing through franchises, or to gas and electricity companies, or even banks, competing; they are covered by the other concurrent regulators.
This situation is different and the report would have to be different. I am not against the CMA and Monitor co-operating but you should not have the CMA, with the kind of approach that it has to competition policy, being a sort of prefect, marking Monitor’s extremely complex task in relation to its competition powers. I know that I shall not persuade the Minister tonight but I ask him to reflect on this, and on how this could look to the public and to the professions in the health service. The Government are adopting an unnecessary rod for their own back and they would be wise to reconsider. However, for the moment, I withdraw my amendment.
Lord Whitty
“( ) the Financial Conduct Authority”
Lord Whitty
My Lords, I beg to move Amendment 46, which also deals with concurrent regulators. There are two aspects to my amendments. Amendments 46 and 64 deal with the opposite issue to the one that I was discussing with Monitor. Amendment 69 deals with general relations between the CMA and concurrent regulators. The Government have also introduced a raft of amendments in this area and, broadly speaking, they are welcome. As they deal to a large extent with Amendment 69, I shall leave that to the end.
The first two amendments deal with the issue of the Financial Conduct Authority, which has just been established by the Financial Services Act. Strictly speaking, this is not quite about concurrent powers, but if we establish a new competition and marketing authority with wide-ranging powers across markets in different sectors, it is odd that the financial sector is not mentioned in this Bill. Some of the biggest consumer, competition and quasi-cartel issues that have arisen in the financial sector, particularly over the past few years, are among the most important issues of market structure and consumer protection. Somehow, the CMA does not seem to have a relationship with that new authority. Indeed, there are two authorities here. There is the Prudential Regulation Authority, which has some impact on the consumer side as well, but let us focus on the FCA.
If they are not to be put together at the end of a list of other concurrent regulators, there ought to be a reference somewhere in the Bill to the role that the CMA plays in relation to the FCA and the financial sector. Its omission is very odd. Maybe the Treasury has seen off BIS in a way that bodies such as DECC, Defra, the DCMS and the Department for Transport cannot in relation to their regulators, but it is wrong. If you talk to the average consumer at the moment, the markets, consumer interests and consumer protection issues are primarily about the financial sector—from the failure of the banks through to debt and insurance issues. To exclude mention of that sector from the Bill is very odd. Simply adding it to this list may not be the correct solution, but I hope that the Minister can tell me why it is not there and how it could be included.
Amendment 69 deals with general relations between the CMA and the sector regulators. That is important because, as it stands, prior to the Government’s new amendments, Clause 46 suggests a relationship rather like that between the hammer and the nail. It actually provides for the Secretary of State to take all the competition powers from the sector regulators and hand them over to the CMA. Stated starkly in that way, it seems wrong. My amendment began from the point that the relationship should be based on co-operation and perhaps reporting systems, and should move only in extremis to the possibility of the CMA taking over those powers. As I read the noble Lord’s Amendment 70 and some other amendments, it goes a long way towards that. I shall listen to what the Minister says but I will withdraw my amendment in favour of his. I beg to move.
Viscount Younger of Leckie
My Lords, the Bill will strengthen the concurrency regime. I have already noted that the CMA will have stronger powers to co-ordinate Competition Act enforcement work and sector regulators will have explicit duties to consider using the Competition Act before taking regulatory enforcement action. We also expect that the CMA will work in close co-operation with the sector regulators in applying their concurrent powers.
Consistent with this approach, the Government also want to send a further signal about the need for strong and effective use of competition powers across the regulated sectors. They have proposed that, if the new concurrency arrangements do not work and if a regulator, other than Monitor, which the Government have excluded from the scope of the power, fails to produce better outcomes, the Secretary of State will have a power to ensure that the OFT and then the CMA take sole responsibility for applying concurrent competition powers in that regulated sector.
There was a debate in Grand Committee about providing a more explicit focus on co-operation between the CMA and regulators, and ensuring that the power is not used without early warning to the regulator. We have considered these points carefully and have therefore proposed Amendments 62, 63, 65, 66, 67, 68 and 70. These amendments require that regulators, the CMA and relevant devolved Administrations be consulted on the potential use of the power prior to the launch of a more public consultation on a proposal to use it. This ensures that there will be early discussions with regulators on any concerns giving rise to a proposed use of the power and allows them an opportunity to respond.
The amendments will also set out a purpose for the power: the promotion of competition within any market or markets in the United Kingdom for the benefit of consumers. This prevents the use of the power for any purpose other than improving the competition regime and ensures the focus of the competition regime remains benefitting consumers.
Lord Whitty
My Lords, I thank the Minister for that very full reply. As I indicated, as far as the general issue of co-operation between the CMA and the sector regulators is concerned, while his amendments do not go quite all the way and omit one or two things from my amendments, they represent a major advance and a clear requirement on the CMA, so when we come to them I certainly will not press my amendments dealing with that area. The one oddity about his reply was that, in terms of assessing whether there was a need for the Secretary of State to intervene, the concurrency report which is required under the earlier section would not be relevant or detailed enough. I would have thought that the whole power to produce a concurrency report was so that it would identify where there were some serious failings that needed to be addressed and might need to be addressed in a fairly draconian way by the Secretary of State handing the power over the CMA, so I find that lack of linkage a bit odd. On the other hand, the totality of what the Minister said about co-operation and the process that you have to go through before you use the powers in Clause 46 is a very positive move, and I thank him for it.
As far as relations with the FCA are concerned, the Minister referred to a memorandum of understanding between the two. My recollection and, I think, that of my noble friend Lady Hayter is that during the passage of the Financial Services Bill the Government, in the form of the Treasury rather than BIS, were deeply resistant to us putting in the requirement that there should be some co-operation between the new FCA and the then competition authorities. There is no reference in this Bill to a memorandum of understanding. The Minister referred to existing powers, but with effect in both directions in terms of handing things from the FCA to the CMA and the CMA coming back to double-check the way in which the FCA is carrying out its powers in relation to the financial sector. I think this omission is significant. I am worried about it, and if anybody out there knew about it, they also would be worried. Whereas this new super-duper competition authority has clear powers and clear relationships with all sorts of markets, the one market where it is not clear that it has a relationship, a power and an ability to second-guess is the financial services area, the one area which everybody has been worried about for at least the past five years. That I find odd. While there may be the odd reference here or in preceding legislation that helps, I think the Government probably need to have another look at this, but tonight I beg leave to withdraw the amendment.