Motion Moved on Consideration of Commons Reason No.1a
Lord Hunt of Wirral (Conservative)
Lord Hunt of Wirral (Conservative)
My Lords, the Minister and his colleagues have underestimated the widespread concern that exists on the question of who regulates the regulators. I refer not just to the newly-created Office of Fair Trading, because I have received several representations from others affected by regulators, including David Green, the director of the Combined Heat and Power Association, in respect of Ofgem.
One way to meet that widespread concern would be to ensure that corporate bodies such as the OFT, created by the Bill, had a separate chairman and chief executive. As Melanie Johnson said in the other place last week, there are two separate roles: they should be carried out by two separate people. I beg to move.
Lord Borrie (Labour)
My Lords, this House is often and very rightly concerned when Ministers take powers to themselves in a Bill that are more appropriate for Parliament—for example, the wide legislative powers in so-called Henry VIII clauses.
Your Lordships will recall that only last week there was a major controversy on that score on Second Reading of the Nationality, Immigration and Asylum Bill. This amendment—passed by your Lordships on Third Reading and disagreed with by the other place—does the opposite. It seeks to give Parliament power that is more appropriate to the executive, in terms of either the Government or the government agency concerned. The amendment passed in this House on Third Reading sought to compel Ministers to appoint two persons to head the Office of Fair Trading—one as chairman and the other as chief executive.
The Bill as originally drafted and to which the Government amendment proposes a return was more flexible in setting up the new corporate body, the Office of Fair Trading, to replace the original Fair Trading Act position of the Director-General of Fair Trading. The Bill as it originally stood meant that there would be a chairman and at least four other persons appointed by the Secretary of State. The Government said openly and in the advertisement for non-executive directors, which has been referred to many times, that they wanted to appoint the present Director-General of Fair Trading, John Vickers, as both chairman and chief executive for the remainder of his five-year term.
Thereafter, it would be possible—my noble friend the Minister repeated this today—to separate the two roles or not as thought best at the time, in 2005 or whenever. The amendment passed by this House wants an inflexible rule that the roles be separated embodied in legislation. That, to my mind, is Parliament engaging in unduly detailed and prescriptive legislation.
The emphasis placed by spokesmen for Her Majesty's Loyal Opposition on corporate governance for public listed companies was rather beside the point. In any case, as they did not admit in the course of debate, the rules such as they are—recommendations as they really are in the combined code for plcs—are not embodied in legislation. It is only a code of practice. Nobody can deny that several public limited companies considering their own circumstances—rightly or wrongly you may think—have combined the offices of chairman and chief executive or, increasingly, have separated them.
It is important that the board of the Office of Fair Trading and for that matter of all regulators should be adequately accountable for its work. The question of who regulates the regulators has been put in relation to this debate in both Houses and it is a perfectly valid question.
Who will regulate the Office of Fair Trading under the Bill? There is a very long list and I will not try to make a comprehensive one. It will be accountable in various ways and in various circumstances to the courts, the parliamentary ombudsman, through its annual plan and report to the Public Accounts Committee, and to Select Committees. There are references to and appeals to the Competition Commission and Competition Appeals Tribunal. For its budget, it is accountable to the Treasury. In the graphic phrase of Melanie Johnson, my honourable friend the Minister in another place, there are also the mad and bad provisions whereby the Secretary of State can dismiss members of the board for incapacity or misbehaviour.
There are, very properly, numerous ways in which the Office of Fair Trading and its board will be accountable under the Bill. The inflexible approach of Her Majesty's Opposition in desiring to insist and compel by law that there be two people, as it were, at the top of the Office of Fair Trading is prescription by legislation too far.
Lord Hodgson of Astley Abbotts (Conservative)
My Lords, I rise briefly to support my noble friend. This issue has been widely discussed and forked over at least twice before in this House, so I do not wish to go through the corporate governance arguments. Nor do I wish to go through the question of the separate roles of the chairman and chief executive—about which the noble Lord, Lord Marsh, made a powerful speech the last time we discussed it.
The Government's argument seems twofold. First, the argument that the Minister puts forward is that the Bill does not prohibit a separation of the two roles. It merely does not make a separation mandatory. When one creates a body as powerful as this, permitting the two roles to be held by one person, there has to be the danger that it becomes established practice. Furthermore, it is very unlikely that a person having taken up this role will want to give up half his particular task. Listening to the Minister today, it seems to me that we are really doing this to get the Government off the hook over a commitment made to John Vickers.
The second argument advanced by the noble Lord, Lord Borrie, is that there is no read-across between the plc sector and these types of regulatory bodies. The noble Lord has a good point. Read-across does not necessarily occur but can occur. I draw the Minister's attention to a recent report, Private Action, Public Benefit—a review of charities and the wider not-for-profit sector produced by the Strategy Unit in September.
Chapter 7 suggests the establishment of a new, more powerful Charity Commission to oversee that huge slice of British public life. Chapter 7.64 talks about governance and the dangers of a small board. Some of the arguments made earlier about the size of the board are addressed in a very direct way:
"A small board...has the advantage of manageability and ease of decision-making, but is open to the accusation that it is narrowly focused and that the interests of some groups of stakeholders are not fully represented in discussions".
The real point is at paragraph 7.66:
"The Chief Commissioner is currently both Chair and Chief Executive of the Commission . . . With the . . . higher public profile that the Commission is to adopt, there is a strong case for introducing separate Chair and Chief Executive posts. The Chair's particular role would be in ensuring good corporate governance and the smooth functioning of the enlarged board, and in representing the Commission in public and at high level within Government and the charitable sector".
I could not have put the argument better myself.
The Government, by sticking obstinately to their position, are flying in the face of good practice in the private sector. It is also clear from the Strategy Unit report produced by the Government that, when governing a non-statutory body, they believe that the roles should be split as part of the way forward. In those circumstances, I do not see how the Government can object to my noble friend's amendment.
Lord Razzall (Liberal Democrat)
My Lords, as the Minister will understand, I rise to indicate the complete agreement of noble Lords on these Benches with the amendment moved by the noble Lord, Lord Hunt. I have two small points to make. First, on Third Reading I raised the analogy of the BBC. I was not then persuaded by the Minister's response. I am sure that noble Lords recognise the outrage that would be expressed at any suggestion that Mr Greg Dyke should be both chairman and chief executive of the BBC.
The Minister's argument—namely, that the BBC is a trading entity with large commercial interests—is not the point: the BBC is clearly a public body. We believe that public bodies appropriately have both a chairman and a chief executive. Secondly, unlike his predecessor, the noble Lord, Lord Borrie, it appears from an article in yesterday's Sunday Telegraph that Mr John Vickers agrees with us.
Lord Sainsbury of Turville (Parliamentary Under-Secretary (Science and Innovation), Department of Trade and Industry; Labour)
My Lords, before the noble Lord sits down, perhaps I may correct him on his latter point. I believe that John Vickers was wrongly reported in the Sunday Telegraph. His view is that what goes into this Bill is a matter for Parliament. He rightly, therefore, does not wish his own views to be brought into the debate. I can assure the House that the Government appointed John Vickers as head of the OFT as executive chairman for a period of five years. That is the post that John Vickers accepted, and that is the position that he hopes to continue to carry out. His views were not correctly reported.
Viscount Allenby of Megiddo (Crossbench)
My Lords, the original Question was that this House do not insist on their Amendment No. 1 to which the Commons have disagreed for their reason numbered 1A, since when an amendment has been moved to leave out "not". The question is that this amendment be agreed to.