Clause 1 — Office of Fair Trading

Orders of the Day — Enterprise Bill – in the House of Commons at 4:59 pm on 30th October 2002.

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Lords amendment: No. 1, in clause 1, page 1, line 5, after Xcorporate" insert

Xwith both a chairman and a chief executive"

Photo of Sylvia Heal Sylvia Heal Deputy Speaker

With this we may discuss Lords amendment No. 2 and Government amendment (a) thereto, Lords amendments Nos. 3 to 6, Lords amendment No. 176 and Government motion to disagree thereto, Lords amendments Nos. 177 to 186 and Government motions to disagree thereto, and Lords amendments Nos. 187 and 188.\

Photo of Miss Melanie Johnson Miss Melanie Johnson Parliamentary Under-Secretary, Department of Trade and Industry

Lords amendments Nos. 1 and 176 to 186 provide for a statutory post of chief executive to the Office of Fair Trading. The Bill provides that the OFT consist of a chairman and no fewer than four other members appointed by the Secretary of State, who would consult the chairman before appointing any other member. That is a depersonalisation of consumer and competition regulation. We expect the OFT to have a majority of non-executive members and are giving it significant independence from Ministers.

We have taken account of the OFT's particular circumstances in deciding not to separate the roles of chairman and chief executive at this time. The Secretary of State will appoint John Vickers as chairman for the remainder of his current term as Director General of Fair Trading, honouring the commitment that was made to him when he was appointed to that post. John Vickers will work with other members of the OFT. Given his position and the need to provide some continuity in this period of great change, I do not think that the OFT should necessarily separate the roles of chairman and chief executive. Although the Bill does not provide for a separate post of chief executive, it does not preclude it either. If the OFT wishes at any time to take that route, it can create a separate post of chief executive and select the appointee.

The amendments would create a post of chief executive appointed by the Secretary of State. By contrast, our approach ensures that the OFT could appoint a separate chief executive if it wished to do so and gives it much more independence and discretion. It is also consistent with the approach taken throughout the Bill and with other regulators. The chief executive of Postcomm is appointed by the chairman, who is appointed by the Secretary of State, and the chief executive of Ofcom will be appointed by the board. That is why I urge the House to accept the Government motions to disagree.

On Government amendment (a) to Lords amendment No. 2, I am very happy to accept the principle of the proposal that the OFT should have regard to generally accepted principles of good corporate governance in its affairs, but after much consideration, we consider it necessary to amend the Lords amendment to ensure that the OFT must have regard only to the principles of good corporate governance that may reasonably be regarded as relevant to it and that it must also have regard

Xto such general guidance concerning the management of the affairs of public bodies as the OFT considers appropriate."

The OFT will be a non-ministerial Department and not a public limited company, and many of the principles of corporate governance are aimed at business practices that do not have obvious equivalents in government. I believe that the changes that I recommend reflect the will of the Lords to ensure that the OFT has regard to the principles of good corporate governance, but achieve that in a way that is appropriate to it as a public body.

Finally, Lords amendments Nos. 3 to 6, 187 and 188 were tabled in response to points made in Committee. They improve the accountability and transparency of the OFT and require the Secretary of State to publish criteria for designating bodies as super-complainants. I am happy to speak in more detail about those amendments if hon. Members wish me to do so.

Photo of Andrew Robathan Andrew Robathan Shadow Spokesperson (Trade and Industry)

I come to the Bill rather late in the day after it has undergone a marathon. I pay tribute to my predecessor, my hon. Friend Mr. Waterson, who represented the Opposition in earlier proceedings, and my colleagues in the House of Lords who have done sterling work.

The Bill tackles many issues; enterprise is only an incidental part of it. It deals with consumer protection, insolvency and competition. The question of how to stimulate enterprise has taxed Governments and others throughout the ages. Not many have succeeded in answering it. The Bill returns to the Commons in a much better state than when it went to the Lords. However, it should be a grave embarrassment to the Government that it left the House of Commons with 420 amendments and nine new clauses. In the House of Lords, 326 amendments were made, the majority being Government so-called technical amendments.

The Bill is highly complex and deals with people's livelihoods. Like so much legislation, it may have serious unintended consequences. It is a gross understatement to describe it as ill prepared and badly drafted. The Government should be ashamed of themselves. However, it was examined in detail in the House of Lords and we broadly agree with the Government about some of the amendments that were forced upon them in the other place.

The amendments that we are considering deal with good corporate governance. The Government should be particularly interested in that, especially in view of the Enron scandal and others which have occurred since the Bill was first drafted. Those scandals have brought corporate governance into not only the public eye but that of Governments everywhere.

Let us consider the two amendments with which the Government disagree. First, on what basis do the Government believe that the chief executive officer and the chairman should be the same person? We believe that it is important to emphasise the chairman's independence because the heart of the Bill involves the creation of a body that is free from political interference.

I appreciate that the Office of Fair Trading will not be a public limited company, but apart from the Financial Services Authority, where else does no separation of power exist between chairman and chief executive officer?

Photo of Miss Melanie Johnson Miss Melanie Johnson Parliamentary Under-Secretary, Department of Trade and Industry

The hon. Gentleman appears not to have been listening. I provided two further examples in my remarks only a moment ago.

Photo of Andrew Robathan Andrew Robathan Shadow Spokesperson (Trade and Industry)

I was listening, but the examples did not appear relevant.

I want to consider important sources that were cited in the House of Lords, including the Cadbury report. The Minister will claim that the report referred to public limited companies, but it is nevertheless relevant. It stated:

XThe chairman's role in securing good corporate governance is crucial. Chairmen are primarily responsible for the working of the board, for its balance of membership subject to board and shareholders'— they will not exist, of course—

Xapproval, for ensuring that all relevant issues are on the agenda, and for ensuring that all directors, executive and non-executive alike, are enabled and encouraged to play their full part in its activities . . . Given the importance and particular nature of the chairman's role, it should in principle be separate from that of the chief executive."

The principle is vital. The report continues:

XIf the two roles are combined in one person, it represents a considerable concentration of power".

After that report, the Hampel report was published in 1995. It was established to review the Cadbury code. It states:

XThe chief executive officer's task is to run the business and to implement the policies and strategies adopted by the board. There are thus two distinct roles".

The report continues:

XCadbury recommended that the roles of the chairman and chief executive officer should in principle be separate . . . We agree with Cadbury's recommendation and reasoning, and we also note that in the largest companies there may be two full-time jobs . . . Our view is that, other things being equal, the roles of chairman and chief executive officer are better kept separate, in reality as well as in name. Where the roles are combined, the onus should be on the board to explain and justify the fact."

In the case that we are considering, the onus is on the Government to explain and justify the fact"

We know from the advertisements in the Sunday newspapers that the Government will appoint a strategic board. As the Minister said, it has already been decided that Sir John Vickers will take the post of chairman and chief executive, if the Government have their way. I am sure that Sir John Vickers is an excellent man. I do not know him, but he attended my college in Oxford, and that must be a recommendation, although he is younger than me. However, the question remains: should all the powers be vested in one person?

If I could call on one person to pray in aid the idea that the powers should not be vested in one person, that person would be the Minister. There is certainly a great deal of confusion in the mind of the Government on this matter. In Committee, she said that the Director General of Fair Trading

Xcurrently has a wide range of functions in the areas of competition and consumer protection, many of which are being reformed in the Bill. The Government believe that in the light of the reforms, it is no longer appropriate for all those powers to be vested in one individual."—[Official Report, Standing Committee B, 16 April 2002; c. 12.]

Perhaps the Minister will explain how it is that she seems to have changed her mind.

Photo of Miss Melanie Johnson Miss Melanie Johnson Parliamentary Under-Secretary, Department of Trade and Industry

I am happy to reiterate something else that I remarked on earlier. The Director General is to be backed up by a strategic board of four or five members who will oversee the work of the Office of Fair Trading under the new arrangements proposed in the Enterprise Bill.

Photo of Andrew Robathan Andrew Robathan Shadow Spokesperson (Trade and Industry)

The Minister did indeed say that earlier, but she has not quite explained how the powers currently vested in the Director General of Fair Trading will not be vested in the same person, although there will be non-executive directors, as she said. We believe that it is a good principle in corporate governance that there should be two people for two posts. That is true of public limited companies, and I suggest that it should also be true here, especially in a body that is required to oversee so many plcs and to consider fair trading. The Government have certainly not convinced me or my hon. Friends, or, I suggest, the Lords, otherwise.

The second amendment under discussion is like unto the first. It talks about Xgood corporate governance", and I find it strange that the Government should want to change it at all. It states:

XIn managing its affairs the OFT must have regard to the generally accepted principles of good corporate governance."

I sat in this Chamber only the week before last and listened to the introduction of a ten-minute Bill that lauded the merits of good corporate governance and stated how important it was that we all adhered to them. I do not understand why the Government want to change this proposal. Their amendment is woolly, it dilutes the purpose of having such a statement in the Bill, and it is rather meaningless. It follows the same basic idea but dilutes the principle. I do not think that it is worth opposing, but I would like the Government to explain why they intend to change the wording because the Minister has not explained, whatever she may say.

Photo of Vincent Cable Vincent Cable Shadow Spokesperson (Trade and Industry), Liberal Democrat Spokesperson (Trade and Industry)

I support the previous contribution and the Lords amendments generally. This is an important issue. We are talking not about a technical change but a fundamental issue of principle involving the question, XWho regulates the regulators?" The Bill has implications for others—the way that we shall deal with Ofcom in due course, for example.

We are considering an extraordinarily powerful post that has very little public accountability and mechanisms to address that problem. I suggest that there are two fundamentally different ways of doing that, involving two models. It does not really matter which we adopt, and I think that we should be open-minded. The first model is the one that the Conservatives have been promoting. I would not necessarily adopt it, but it has merits and it certainly improves the Bill. It uses the model based on corporate governance. We are clearly not dealing with a plc here—there is no direct read-across—but there are lessons to be learned from the way in which good business practice operates, and if this is the amendment on offer, I will happily support it.

The alternative approach, for which I have argued right from the beginning of this legislation, is to strengthen public accountability. That is partly captured, rather weakly, in Lords amendments Nos. 3 and 4, but the principle of involving Parliament more directly in scrutinising the appointment of the Director General is a matter to which I shall return.

Why is the issue of who regulates the regulators so important here? The appointment of John Vickers has already been mentioned. He is an admirable individual, whose work I have encountered professionally. As an economist, he is a very clever guy, and I have no doubt that he has complete integrity. That is not the issue here. This post is very important in different ways. It inherits the discretionary powers that used to be held by Ministers. It has substantial enforcement powers—we debated at some length the power to initiate criminal action against cartels.

The Government seem to believe that this new approach to competition will radically raise the productivity of the United Kingdom economy. If that is to happen, this post must have enormous powers. The underlying trend in growth of productivity has remained pretty much unchanged since the Napoleonic wars. We are talking about revolutionary changes in the way in which the British economy functions. The person who drives that must have a great deal of power.

There are analogies with other appointments. Reference has been made to the Financial Services Authority. When the FSA legislation went through, the Opposition had legitimate concerns that Howard Davies would have unfettered powers. He is also an admirable public servant, but he has a great deal of power. There is some qualification in his case, because he is working alongside managing directors, so there is divided responsibility. Some heavy hints have been dropped that, when he moves on, a chairman will be appointed alongside the head of the FSA, so that problem is perhaps on the way to being resolved. The Office of Communications presents many of the same problems as this legislation.

The approach that I have advocated is to follow in the footsteps of the Chancellor of the Exchequer when he introduced the Monetary Policy Committee. It would be possible for the Minister to deal with this problem at any point through a statement, so no provision would have to be built into legislation. As we know, the Chancellor has boundless intellectual and political self-confidence. He obviously felt able to submit his appointments to the scrutiny of Parliament, and has done so. The process of confirmatory hearings has done an enormous amount to strengthen the credibility of the Bank of England's Monetary Policy Committee and the Chancellor. It has been a great success story. I do not understand why other Ministers have not had the self-confidence to do the same.

As regards the approach taken in this legislation, which I think is weaker but none the less a positive step and an improvement, the argument for using the corporate governance approach is partly based on the analogy with what has happened in industry. Post-Maxwell, there has been a considerable improvement in corporate governance. The system of split responsibility prevents megalomaniacs from dominating institutions. That lesson has been widely learned.

It is not merely a question of using a business model. One of my more illustrious constituents is Mr. Greg Dyke. I suspect that, whatever people think about him, there would be considerable apprehension if he were to have unfettered executive authority over the BBC. The BBC is not a plc, and has a chairman as well as a chief executive. Split responsibility provides a balance of power: there are checks and balances in the BBC. That public agency is in some ways analogous to the Office of Fair Trading.

We are not arguing that we should adopt this approach because it works well in plcs in the private sector, although that is a useful source of inspiration. Split responsibility is a sensible way of dealing with over-powerful, public officials who are not sufficiently accountable. I commend the Lords amendments, and will support them.

Photo of Jonathan Djanogly Jonathan Djanogly Conservative, Huntingdon 5:30 pm, 30th October 2002

At the start of the Bill, the Office of Fair Trading is described, separately from its current constitution, as a body corporate. As such, I fully support hon. Members' suggestion that it should be subject to, and have regard for, the principles of good corporate governance.

For a listed company, it is accepted practice, as set out clearly in the combined codes of corporate governance, that the role of chief executive and chairman should be separated. The chief executive is at the coalface and the chairman has a detached role. The chairman can stand back, whereas the chief executive may not be able to do so. The chairman can review the wider picture, resolve conflicts within the board, act as a public interface and ensure a good balance of representation on the board.

Having heard hon. Members' comments, I have a sneaking suspicion that the Government wish to keep the chairman's role for themselves. As the Minister would doubtless be the first to say, that is not the intention behind the Bill, but it appears to be the implication of, for example, the Governments retaining the role of selecting the chairman. The principle of separation would certainly be enhanced by separating the roles of chairman and chief executive.

Yesterday, the Trade and Industry Committee held an inquiry into corporate governance in relation to the White Paper on the new companies legislation. We looked carefully at corporate governance and the way in which this rapidly advancing area of regulation has moved forward. In the context of that discussion, today's debate sounds very regressive. If institutional shareholders are to make a recommendation to shareholders in circumstances in which there is no split between a company's chief executive and chairman, they will almost automatically vote against, or recommend that shareholders abstain. If that is good enough for companies, why is it not good enough for public bodies?

The Government's amendment (a) contains certain irregularities. According to subsection (a), the OFT can make up whatever guidance it wants, but despite that fact, subsection (b) implies that some note should be taken of corporate governance best practice. However, the Government are not saying that corporate governance best practice should apply in the private sector. They use the phrase Xapplicable . . . generally", which presumably could imply the same level of best practice that applies in the Post Office, for instance. Furthermore, we know that that principle will not extend to the splitting of the roles of chairman and chief executive, because the Government oppose that.

This is not an esoteric element of corporate governance; in fact, it is one of the primary elements that institutions would consider, and which the combined code deals with in the private sector. It would therefore be appropriate to head for best practice by, for instance, splitting the roles of chairman and chief executive. Moreover, if it is the Government's intention that what constitutes best practice be decided on the hoof by the OFT, they should instead adopt a more open approach and set out what constitutes best practice.

The combined code itself is not a compulsory document; it is a very fluid document, and if companies do not wish to adhere to any aspects of it, they need not do so. What they must do is to say how they derogate from best practice. Such items need to be set out in their annual accounts—a perfectly proper approach, which should be followed by the OFT. In other words, its principles of best practice and good governance should be set out, and if it derogates from them, that derogation should be explained in its annual report. In that way, people could tell whether it had moved away from best practice in a perhaps appropriate context at a given time.

If the Government are going to let the OFT go its own way and pick and choose particular elements of best practice and corporate governance, will the Minister please explain what such practice is likely to consist of? We have heard precious little about it so far, and the Government's amendment looks like a reaction to the Lords proposal rather than a clearly thought-out provision.

In considering the future of corporate governance, we should take note of Lords amendment No. 188, which states that the OFT should

Xfrom time to time publish . . . its rules and procedures for dealing with conflicts of interest."

That is loosely worded and is—I should have thought—an acceptable way in which to proceed. If it is not acceptable, it would be appropriate for the Minister to comment on the procedure that the OFT is likely to follow when dealing with conflicts of interest for its members or those of its committees. That does not appear to have been dealt with previously.

Photo of Mark Field Mark Field Conservative, Cities of London and Westminster

I, too, wish to endorse the words of my hon. Friend Mr. Robathan. We should seek to divide the role of chairman from that of chief executive as an integral part of good corporate governance. My concerns include the potential power of the regulator, which could be immense, especially given the criminal sanctions against individuals for cartel offences. That point was discussed at great length in Committee.

I also endorse the words of Lord Hunt of Wirral, who did splendid work in the other place on this issue, and of Dr. Cable, who said that the crux of the matter was who regulates the regulator. More importantly, how will that regulation operate? We have discussed that issue on several occasions, and the Cadbury code recommends separation. That is especially important for the OFT, given the sensitive and political nature of what it will do. It is staggering that Lord Sainsbury was complacent enough to say, in the other place:

XThe OFT is a government department, not a public limited company, and many of the principles of good corporate governance are aimed at business practices which do not have an obvious equivalent in government."—[Hansard, House of Lords, 15 October 2002; Vol. 639, c. 714–15.]

We have similar grounds of dispute on Lords amendment No. 2, and I wished to tease out of the Minister what the Government amendment means when it says:

Xthey may reasonably be regarded as applicable in relation to a statutory corporation, to generally accepted principles of good corporate governance."

The Government appear to be saying that what is good for the Government is not so good for business. That appears to be breathtakingly complacent, in the aftermath of the disgraceful behaviour over the Penrose inquiry into Equitable Life. The inquiry's delay has meant that tens of thousands of our constituents have not had an opportunity to take their cases to the ombudsman. Because it is a Government inquiry, it is also taking place under a veil of secrecy.

We see parallels with the distinction between the requirements for the OFT and those for bodies in the private sector, in respect of the divide between the roles of chief executive and chairman. Given the recent scandals in both the public and the private sectors, the Minister will understand why the OFT and all other public bodies must be beyond reproach. How can the Government exhort business to get its act together if they are not willing to do so themselves?

Photo of Andrew Lansley Andrew Lansley Conservative, South Cambridgeshire

I apologise to the Minister and to you, Madam Deputy Speaker, for not being here for the opening speech on this group of amendments. I hope that the Minister will forgive me if I reiterate a point that she has already made.

I had thought that I understood what the Government were trying to do when we discussed in Committee the issues related to Lords amendment No. 1. The Government had previously vested the powers in one person—the Director General of Fair Trading—but had resolved that it would be better in future for powers to be vested in a board, or body corporate, rather than a single individual. It is therefore suggested in the schedule that there be a chairman and not fewer than four other members.

The other place helpfully explored the underlying intention of that change. The intention is, of course, to try to ensure corporate responsibility—a division of powers that does not allow their arbitrary exercise by an individual. No one is accusing the Director General of Fair Trading of acting in such a way, but there is a tendency in the media, if not in the business community, to personalise matters and to suggest that the exercise of powers by a single regulator relies excessively on that person. That is especially true when a regulator might be replaced.

Corporate responsibility makes possible a sense of continuity and consistency on the part of a body corporate over a period of time, regardless of changes of personnel. That is a positive move, but it is curious that the Minister, in her response to my hon. Friend Mr. Robathan, seemed to be reinventing the idea that the OFT chairman would be its director general. However, although the chairman may act as chief executive, under the Bill it is possible for the chairman to be appointed and for another OFT member to be the chief executive.

Photo of Miss Melanie Johnson Miss Melanie Johnson Parliamentary Under-Secretary, Department of Trade and Industry 5:45 pm, 30th October 2002

I hope that I can help the hon. Gentleman. I pointed out earlier that the Bill allows the OFT to have a separate post of chief executive.

Photo of Andrew Lansley Andrew Lansley Conservative, South Cambridgeshire

I thank the Minister, whose intervention reinforces my point. That possibility—of the OFT having both a chairman and a chief executive—is entirely consistent with the structure of schedule 1. I presume that the chief executive would be one of the other board members.

However, the Government seem to be contemplating that their objective will be frustrated, initially at least. The fact that the chairman of the OFT will be its chief executive reinforces the sense that the office is governed by an individual more than by a set of corporate responsibilities. That is a pity. Business people say that experience tells them that it is desirable to separate the roles of chairman and chief executive, and they believe that that separation should be evident in a body with so much power over them.

There is no notion that it is best practice among regulators to separate the roles of chairman and chief executive. There are good examples of people combining those roles in a satisfactory manner, but we are moving away from that structure and towards having a board in which the roles are separated.

Photo of Andrew Robathan Andrew Robathan Shadow Spokesperson (Trade and Industry)

This issue is so complex that it is beyond the grasp of some very clever accountants and lawyers, but does my hon. Friend agree that the checks and balances governing the relationship between a chairman and a chief executive are especially desirable in respect of the OFT?

Photo of Andrew Lansley Andrew Lansley Conservative, South Cambridgeshire

It is not just a question of complexity. Indeed, that complexity suggests that the technical nature of a problem might be understood better by an extremely able person such as John Vickers than by a board comprising some part-time members. The point of separating the roles of chief executive and chairman is to allow the chairman not to become immersed in detail. The chief executive needs competence when it comes to technical factors, but the chairman should be able to see the strategic wood rather than the trees. That is not to say that the chief executive should not have a role in strategy, but that can happen more satisfactorily if the chairman is distanced a little from the chief executive's responsibilities.

I had understood that that was the direction in which the Government wanted to go. Lords amendment No. 1 seems merely to reinforce that intention on the Government's part and is consistent with the structure of clause 1 and schedule 1. I am surprised, therefore, that the Government are resisting something that is in line with their intentions.

Photo of John Redwood John Redwood Conservative, Wokingham

I have declared my interest in the register. I was a fellow of an Oxford college that received an application from Mr. John Vickers for a fellowship by examination. As one of those who voted when he became a fellow of that college, I have the greatest regard for his intellectual ability and the high standard of his written work. I have since got to know him rather better and I also have a high regard for his fairness of mind and his independence, so my remarks are in no way an aspersion upon the present personality in the role. When legislating on such a powerful position, however, it is incumbent on the House to think about what might be needed were a less suitable candidate to be in the position at some future date, or were some unexpected events to transpire that, by definition, we cannot—and would not—forecast today given the personalities involved. To have good and fair law, it is important to think about what would happen should there be problems with the personality and decisions of the director general. I do not think that that has been adequately covered so far by the legislation or by ministerial statements.

The most obvious way in which power is sensibly limited in a pluralistic democracy is through competition. The irony of this post is that we are creating a monopoly to enforce competition on the commercial world. It is a paradox rather than a contradiction. Much as I admire competition, I would not want to advocate two or three offices of fair trading. That might be taking a good thing a little too far. However, that means that the most obvious way to control power, which we are rightly recommending to the private sector, cannot apply in this case.

The Minister may say that legal action could be taken if individual companies or industries do not like the way in which verdicts and judgments are going. There are legal remedies, but often it is not good practice, even for a powerful company, to take a regulator to court— it prejudices the relationship considerably. Many businesses and industries understand that they have to live with these regulators for the foreseeable future and are naturally reluctant to go to court.

There are appeals procedures against the judgments of the competition authorities, which are welcome and very necessary, but which are not sufficient for all the circumstances that might arise if a director general has gone wrong and the concentration of power is being abused. That is the situation that my hon. Friends the Members for Blaby (Mr. Robathan), for Cities of London and Westminster (Mr. Field) and for Huntingdon (Mr. Djanogly) rightly said requires special attention.

Splitting the roles could be of some assistance. There would be another senior figure to whom Ministers, the public and others could turn if it were felt that a director general had become unreasonable or unfair and was pushing the power too far. That provision would provide a balance or check in addition to the court and appeal system, which applies in some cases but not others. I want the Minister to reconsider all those factors because the Government have removed one of the most obvious ways in which this used to be done. They have decided that Ministers and politicians are particularly dangerous beings—I can understand why, given some of the Ministers that we have, although I am not commenting particularly on the present Minister. As a democrat before anything else, I believe that the correct way to control the power of powerful regulators is through democratic accountability to Ministers and this House, but the Government have made a series of legislative manoeuvres that will limit the power of politicians to intervene and, therefore, the power of the House to hold the regulator to account. That is a pity. In that context, I urge the Minister to think again about the Opposition's reasonable suggestion that a countervailing power should perhaps be introduced by having another senior person in the regulatory system who could be a court of appeal—a second place where one could go for informal redress and someone who could ultimately take action if the director general went over the top, became systematically unreasonable or became too powerful a figure.

I can understand why the Minister might not want to retrace steps by increasing the accountability of the regulator to this House and to Ministers, although that is a pity, so the second best answer is the one that my colleagues recommended so strongly and I urge the hon. Lady to think again.

Photo of Miss Melanie Johnson Miss Melanie Johnson Parliamentary Under-Secretary, Department of Trade and Industry

First, the vast majority of the Lords amendments are minor drafting amendments. About 40 or 50 amendments were accepted in the other place in direct response to arguments put forward by the Opposition—indeed, some were Opposition amendments. I hope, therefore, that this Chamber will agree that the passage and consideration of the Bill has improved it as appropriate and that the Lords have played a useful role in that.

Mr. Lansley mentioned the strategic board, which is to be a minimum of four plus the Director General of Fair Trading, and Dr. Cable mentioned accountability. First, it is not necessarily the case that it is easier to hold to account a chairman whose role is separate to that of the chief executive. Whether there is one person occupying two roles or two people with two different roles, they will still have to answer in the role in which accountability has to be exercised. We have improved that accountability in many ways, not least through the provision for public consultation on an annual plan and a report. Although it is obviously a matter for this House and its Committees, we expect that an appropriate Select Committee, or Select Committees, will exercise scrutiny powers. A whole range of provisions have improved accountability rather than weakened it.

Photo of Vincent Cable Vincent Cable Shadow Spokesperson (Trade and Industry), Liberal Democrat Spokesperson (Trade and Industry)

According to the press, the subjects of the Lords amendments were referred to the Cabinet for discussion. Can the Minister confirm that? Can she also explain why the amendments were thought so threatening to the Government that they had to involve senior Ministers and the Prime Minister?

Photo of Miss Melanie Johnson Miss Melanie Johnson Parliamentary Under-Secretary, Department of Trade and Industry

I can neither confirm nor disconfirm that. I am not a member of the Cabinet as the hon. Gentleman is aware.

This is not a question of accountability—

Photo of Andrew Lansley Andrew Lansley Conservative, South Cambridgeshire

Perhaps the Minister will clarify something. She referred once again to the Director General of Fair Trading, which is confusing. I understood that we were to have a chairman at the Office of Fair Trading and that the post of director general was to be abolished under clause 2, so I do not understand why she referred to the director general.

Photo of Miss Melanie Johnson Miss Melanie Johnson Parliamentary Under-Secretary, Department of Trade and Industry

It is current speak. If the hon. Gentleman will forgive me for doing so, I am referring to the individual. It may be more helpful if I simply refer to Professor John Vickers, the current occupant of the role, and we would expect him to occupy both new roles, as I explained in my opening remarks, which the hon. Gentleman missed—

Photo of Andrew Robathan Andrew Robathan Shadow Spokesperson (Trade and Industry)

Was it just a slip of the tongue when the Minister referred to both new roles? Does she see them as separate roles, as we do? If so, why not have two separate people to carry them out?

Photo of Miss Melanie Johnson Miss Melanie Johnson Parliamentary Under-Secretary, Department of Trade and Industry

I have already explained that there is a possibility of splitting the roles. It is easy to argue whether there are two roles or one, but arguing how the role is divided is largely academic. It has strategic and operational aspects. The point is whether there is a separate strategic post. I could argue in different terms, but I am using those that have been put to me in the debate.

The concerns expressed by several hon. Members, including Mr. Redwood, were mainly about individual decisions taken by the office. We see the role of any chairman, whether or not it is separate from that of the chief executive, exercised as part of a strategic board arrangement and providing strategic oversight. There would not be a decision-by-decision oversight of matters to do with the operation of the office.

Photo of John Redwood John Redwood Conservative, Wokingham 6:00 pm, 30th October 2002

I was interested in the abuse of power by the office-holder. That could take many forms. It might be a run of unfair decisions, unfair treatment in a particular case or pursuit of a line that did not tally with the normal policy. All those things are theoretically possible and the Minister needs to tell us how they would be handled.

Photo of Miss Melanie Johnson Miss Melanie Johnson Parliamentary Under-Secretary, Department of Trade and Industry

I have already explained that there will be an annual plan, an annual report, and mechanisms for accountability. Those were discussed at considerable length during the Bill's proceedings. If serious problems arose or if a future chairman acted inappropriately and abused their power, the Secretary of State has the power under paragraph 3 of schedule 1 to remove from office the chairman or any other board member

Xon the ground of incapacity or misbehaviour".

We thus have provisions to deal with the Xmad and bad" under the proposed arrangements.

The other main issue raised by hon. Members relates to aspects of corporate governance. We propose to amend those provisions because not all the principles of corporate governance are relevant to a public body or a Department. For example, the principles refer to remuneration practices and relations with shareholders, which are obviously not relevant to the Office of Fair Trading. The amendment simply ensures that the OFT has regard only to what can reasonably be considered relevant to it.

To respond to the remarks made by Mr. Djanogly, the amendment is intended to ensure that the guidance, which was originally aimed at private companies, does not override for the OFT any guidance specifically for public bodies. The OFT is a public body, not a private company. Indeed, all the Hampel provisions were designed for public, listed companies. Clearly, the OFT is not a public, listed company.

To reassure hon. Members, I stress that we expect the OFT to have regard to the combined code principles in so far as they relate to it. However, it will also have to act in accordance with rules and guidance: for example, that on public accounting, which is a different area. As I explained in response to the questions of the right hon. Member for Wokingham, if there is abuse we can deal with it.

Under the present arrangements, it is possible for the OFT to appoint a separate chief executive officer. Currently, that is true. We envisage that we shall reconsider those arrangements in 2005 when John Vickers retires from his post to assess whether they will be appropriate after that time. They are entirely appropriate at present, however, and I hope that the House will support the motion.

Question put, That this House disagrees with the Lords in the said amendment:—

The House divided: Ayes 325, Noes 181.

Division number 343 Orders of the Day — Enterprise Bill — Clause 1 — Office of Fair Trading

Aye: 325 MPs

No: 181 MPs

Ayes: A-Z by last name


Nos: A-Z by last name


Question accordingly agreed to.

Lords amendment disagreed to.

Government amendment (a) to Lords amendment No. 2 agreed to.

Lords amendment No. 2, as amended, agreed to.

Lords amendments Nos. 3 to 6 agreed to.