Clause 1 — Office of Fair Trading

Part of Orders of the Day — Enterprise Bill – in the House of Commons at 5:15 pm on 30th October 2002.

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Photo of Vincent Cable Vincent Cable Shadow Spokesperson (Trade and Industry), Liberal Democrat Spokesperson (Trade and Industry) 5:15 pm, 30th October 2002

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.