Moved by Baroness Neville-Rolfe
110: Clause 28, leave out Clause 28 and insert—“Office for the Internal Market“(1) An Office for the Internal Market (“OIM”), which will report to the Department for Business, Energy and Industrial Strategy, is established.(2) The functions of the OIM are as follows—(a) monitoring the health of the internal market, and(b) advising and reporting on proposals and regulations, and their actual and potential impact on the internal market.”Member’s explanatory statementThis amendment seeks to probe why the OIM is established within the CMA and instead attaches it to BEIS.
My Lords, I rise to move Amendment 110 in my name and that of my noble friend Lady Noakes. My noble friend the Minister has been kind enough to write to me following the debate on where the new office for the internal market should sit. However, I remain to be convinced that the Competition and Markets Authority is its appropriate home. For this reason, I have tabled an amendment attaching it to BEIS. To make that effective, I am also supporting the noble Baroness, Lady Bowles of Berkhamsted, in opposing Clauses 28 and 29.
I will put it simply and bluntly: no case has been made for locating the new office in the CMA, except, I suppose, that it is already an independent agency and the department has some involvement in the appointment of its well-paid top brass. However, the CMA is generally highly sceptical of business, especially the bigger businesses that operate across the UK, which need to flourish if the economy is to recover. That is my past personal experience with various different hats on.
We need an office—call it what you will—that can do two things: it needs to be able to monitor objectively and to advise sensibly on difficult and developing internal border issues. These are highly politically charged, as we can see from experience during Covid. Therefore, we need an office that reports directly to BEIS and, arguably, we need a Minister for the Single Market, in the same way that we had a commissioner in Brussels when we were an EU member. Actually, I prefer the notion of a single market to that of an internal market. Most of us, including the devolved Administrations, had a great deal of time for the single market when we operated within it. Indeed, I devoted some of my career to advancing it because of its benefits to consumers, manufacturers, services, other businesses and, of course, GDP.
I am sure the Minister would agree that not everything done in Brussels is wrong, and I believe we need an in-house and a political dimension. Therefore, for me, the right model for this office is the Intellectual Property Office, which has a chair and a board from outside but also a strong CEO reporting to a BEIS Minister and advising on both policy and enforcement as well as negotiating internationally and across the UK. If BEIS, for some reason, cannot do all of those things in an in-house office, the monitoring role could go to the ONS, which is well regarded in statistical matters. However, above all, the office must be subject to ministerial direction. Recent experience with Ofqual, PHE and even the CMA itself does not persuade me that the approach in this Bill is right. It is not too late to make a change.
I note that Amendment 155 in the name of the noble Baroness, Lady Hayter, has been added to this group. I have a great deal of respect for the noble Baroness and worked with her successfully on consumer legislation in the past. However, I am not convinced that a consumer duty makes sense here, certainly not without balancing provisions on business and the economy. Business stands to lose so much from this new legislation already and from the inappropriate appointment of the CMA as the office of the internal market, and this is at a time when business is more and more adversely affected by the never-ending Covid nightmare. I think we should reflect further, but, for now, I beg to move.
My Lords, I have given notice of my intention to oppose Clauses 29, 30 and 41 standing part. This is part of a full set of not stand part notices that signals concerns, in principle and to specifics, throughout Part 4 and Schedule 3. I will also probe what has been left unsaid about what the CMA or the OIM will do in total regarding the internal market. I thank the noble Baroness, Lady Neville-Rolfe, for supporting my opposition to the clauses standing part. We have some common concerns, but we are not entirely in the same place. I will be interested to hear her response to some of the points I will make as the debate develops.
There are three parts to my concern. First, as I said at Second Reading, it seems odd to use the powerful investigatory might of the CMA—or a lookalike OIM—whose information-gathering powers, with accompanying enforcement and penalties for non-compliance, bear down on individuals and companies, but where the main purpose, from weighing up the clauses’ wording, is to advise administrations about their own and one another’s regulation, and not anything the companies themselves have caused. This is extraordinary.
Secondly, there are aspects in the Bill that relate to business activity. However, this is not articulated, except that businesses are presumably among those who could make a proposal to the CMA for it to undertake a review under Clause 31. I am left asking: what else is happening that has not been said? Thirdly, there is the matter of making the CMA or the OIM properly representative of the four nations.
Overall, this seems an authoritarian, unexplained and unfinished state of affairs. The use of the CMA is a hangover from when Mrs May envisaged a corresponding body to the European Commission for all competition and state aid matters. State aid considerations have now dropped away to WTO-type considerations of distortive and harmful subsidies that will not be looked at by anyone; the Trade Remedies Authority might have to respond on incoming international complaints, but the domestic side is bare. That still leaves the market access principles to be enforced somewhere.
The Government’s response to the internal market consultation says that the expansion of the CMA’s remit will not position it as an enforcer. In a letter to my noble friend Lord Purvis after last Monday’s debate, the Minister confirmed that the OIM will provide expertise in scenarios where the economic impacts of particular regulations lead to disagreement between one or more administration, and that the non-binding assessments will ensure a technical underpinning to otherwise political discussions. Under the heading:
“On the Office for the Internal Market, disputes and governance”,
the letter to my noble friend Lord Purvis says:
“The Bill does not introduce new enforcement bodies, but instead relies on enforcement of regulatory compliance provisions in existing goods regulation to ensure that enforcement of regulatory compliance takes account of the opportunities offered by the market access principles of mutual recognition and non-discrimination”.
Does that mean that the CMA or the OIM will take account of the opportunities offered by market access principles? Does the CMA enforce the regulatory compliance provisions in existing goods regulation?
The impact assessment also mentions businesses and stakeholders. Page 29 says that stakeholders can “raise complaints” on internal market matters. This could arise by way of Clause 31 and seeking a review. However, the word “complaints” smacks of adjudication. It would be helpful if the Minister could explain whether that will be the case. Is it related to the mentioned regulatory compliance? How will that work?
The impact assessment goes on to say:
“Any dispute resolution mechanism will be based on existing arrangements … However, these processes do not replace a potential court challenge; businesses and individuals might choose to enforce their rights in a court if a UKIM matter remains unresolved, potentially incurring substantial legal costs, time and effort.”
I do not dispute that the courts are a final point of recourse, but what is the implied prior process? Is it business disputes with national administrations, business on business, or both? Is this related to the CMA enforcing or underpinning compliance in goods regulation?
Those are some of the issues and questions that sit behind my opposition to the clauses, and behind my amendments. My Amendment 113 would delete the separate provision of the CMA being an adviser to the Secretary of State. Along with later amendments, this would avoid the suspicion that the body will become captured by the UK Government by both volume of work and physical location. If such a provision is kept in, it must be available on equal terms to all nations. Indeed, that is what was promised on page 9 of the response to the internal market consultation.
Amendment 111 says that the CMA
“must not engage in dispute resolution.”
I tabled the amendment because I want to probe on the business side of things, as I have explained, who is doing the regulatory compliance with the market access add-on and where. What, if anything, has been or will be agreed with the devolved Administrations to enable this?
A great deal needs explaining, without which the powers provided later in this part are disproportionate and unjustified. Although this is early in our debate on this part of the Bill, I am prepared to return to this matter on Report.
My Lords, I have added my name to my noble friend Lady Neville-Rolfe’s amendment. Like her, I am concerned that the CMA has been chosen as the home for the office for the internal market with very little substantive discussion and certainly no proper consultation. The White Paper the Government consulted on in the summer did not even mention the CMA, and the best the Government could report in their September policy response was that
“a few respondents suggested that the UK Internal Market functions would be a natural fit with the CMA”.
When I say that I do not believe the CMA is the right home for the internal market functions, I hope that will not be taken as a criticism of the CMA. It has done good work over the years, building on that of its predecessor bodies, and its work is respected here and abroad. However, it is not a body that has won universal acclaim. The time it takes on some of its market studies and the lack of impact of some of its findings are often cited against it.
I have three main grounds for seeking a different solution, of which my noble friend’s amendment is one constructive suggestion. First, the CMA’s existing functions are adjacent to the issues that will arise in the UK’s internal market, but they are by no means coterminous. The CMA is fundamentally about competition impacts, whether through mergers and acquisitions or market behaviour. It is also about the protection of consumers. The UK’s internal market is about trade and the avoidance of unnecessary barriers to trade. These are quite different things. The danger is that the CMA could move from being a focused competition and consumer organisation to one that is more diffuse and less targeted. Many organisations have lost their way when they have sought to expand their footprint and have ended up as a jack of all trades but master of none. We cannot afford to take that risk.
While it is planned for there to be a separate panel for the office for the internal market within the CMA, it is inevitable that the functions of the office, and the resources to deliver them, will be intermingled with the CMA’s other functions. It is also clear from the Bill that it is the CMA, and not the office for the internal market itself, which will carry responsibility for the various functions set out in the Bill. We run a very serious risk of the office for the internal market disappearing into the CMA’s back room.
My second reason is that the CMA really has too much on its plate at the moment to contemplate adding such an important new area of responsibility as oversight of the UK’s internal market. There are aspects of its current workings that are not beyond criticism, as I have already mentioned. Importantly, it is about to take on a number of additional activities as we finally exit the EU at the end of the year. If anyone doubts the extent of these additional responsibilities, there are 50 pages of draft guidance on these new activities which the CMA is currently consulting on. These competition functions have already led to a very significant increase in the CMA’s resources and I believe that it was expected that overall staff numbers would increase by 40% as a result. Against that background, it would be crazy to add on significant additional responsibilities. There is only so much change that any organisation can safely accommodate in a given period.
A final reason for wanting to see the office for the internal market set up outside the CMA is to ensure that it has a real presence in our internal market as a respected source of impartial data, analysis and advice. These seem to be the things that the Government want, as set out in this Bill, but setting it up as a mere panel of a much larger, differently focused quango cannot be the right way to achieve that.
My Lords, my purpose in speaking today is to support Amendment 111, which I have signed, and the detailed comments made by my noble friend Lady Bowles. Amendment 111 aims to clarify that the role of the CMA and the office for the internal market is not the resolution of disputes. We already have common frameworks; we do not need a topdown resolver of disputes.
Last week, the Minister said clearly that the office for the internal market is to provide “monitoring, advice and reports”. He said that it will
“have no direct role in dispute resolution”—[
“must not engage in dispute resolution”.
The important role of dispute resolution can realistically be achieved only by discussions and compromises between the nation states of the UK. The amendment seeks to make clear what the OIM can and cannot do. In responding to this debate, will the Minister clarify these powers, or lack of them? Clarification, along with dealing with complaints and inconsistencies, is what is needed. That is what your Lordships’ House is set up for and does so well. The various explanatory documents only confuse even further and imply some resolution powers for the CMA and OIM.
Amendment 111, which puts the CMA and its plethora of civil servants back in the box, is necessary if the Bill is to be approved. The Bill is a mistake; the noble and learned Lord, Lord Falconer, summed it up when he said that it was “unthought-out”. I support the amendment.
My Lords, when I first read through the Bill, I had some reservations about the CMA, not least because of the number of its investigations that have not exactly gone smoothly, as my noble friend Lady Noakes referred to. As all noble Lords are aware, it arose from its antecedent, the old Monopolies and Mergers Commission. I voiced some of those reservations at Second Reading. I then had another look at the OIM and could not for the life of me understand why it did not have its own status. How could it be right for it to be almost subservient to the CMA? I could immediately see a clash of interests. As has just been said, its role is to monitor, advise and report. That may well clash with the basic element of the CMA. While this amendment may not be exactly right, there is a strong case for it.
I will give an example. I have recently been approached by some outside people because they know that I take an interest in the credit lending market, principally credit unions. It is a difficult market because there is the FCA, which does a good job on the whole, but there is also the ombudsman. People who are in difficulty with credit are prone to appeal to the ombudsman for better treatment, as it goes beyond the normal provisions under which the FCA works. That created a real problem for the genuine lenders—not the fly-by-night operators—because of a clash of interests.
I would not expect my noble friend on the Front Bench to respond in any detail today, but the OIM has to have its own status. It should not be in a position where it is embarrassed by the CMA going against what the OIM thinks is appropriate in any situation.
My Lords, the noble Baroness, Lady Bowles, referred to a letter to the noble Lord, Lord Purvis, following an earlier discussion. I have not received a copy of that. Could all the letters sent following these debates be circulated to all Members of the Committee?
I think all speakers in these debates ought to get them. Unless, of course, it is a very private letter to the noble Lord, Lord Purvis—in which case we will leave that between the two of them—all noble Lords should see all the letters that arise from these debates.
When I started thinking about this group, I thought that there were two divergent views, but they are not as divergent as I thought. It looked as if some amendments wanted the OIM, which is an observatory rather than an office, to be almost part of BEIS, with little independence. Our view is to the contrary. Amendment 113 in my name, which is obviously probing, signals that the CMA should not be advising the department but using its powers to intervene as necessary. That did not mean that it should not send messages to the Secretary of State, as the noble Lord, Lord Tyrie, did when, as its chair, he sought more powers for the CMA to intervene. He wanted a proper consumer duty adding to it. The amendment does not say that it should not advise the department but makes the point that it should not be subservient to it.
What we really wanted to emphasise—and here I feel the similarity with what everyone who has spoken has said—was that the CMA should not be subservient, which was the word used by the noble Lord, Lord Naseby. He said that the OIM should not be subservient to the CMA, but we also feel that it should not be subservient to BEIS, especially given that it is really important that the new Office for the Internal Market will not be beholden to any one of the four Governments. That is what is really important: there are four Governments trying to make this invigorated internal market work, not just one of the four Governments. In particular, although I agree with quite a lot of what the noble Baroness, Lady Neville-Rolfe, said, her suggestion that it was akin to—I think she said—the Intellectual Property Office is not right, because that does not have this very strong pull towards the other three Governments, whereas the OIM will have that. I can see why it looked as if it might fit in that model, but I do not think it is right, given that this has a four-nation remit.
My Amendment 155 would, in a sense, add in the consumer duty desired by the noble Lord, Lord Tyrie, into the CMA’s guiding principles. In truth, it is hard not to think—and I think it was the noble Baroness, Lady Neville-Rolfe, who said that the CMA was about consumer representation; I beg her pardon if it was not—that this is about consumer protection, but interestingly enough that is not written into its overarching objectives. I do not think there is much between us on that.
We will come to the exact status of the OIM in a later group with Amendment 115, in the name of my noble friend Lord Stevenson, but I agree with what the noble Baroness, Lady Neville-Rolfe, said that no case has been made for the OIM to be in the CMA. The noble Baroness, Lady Noakes, said there had been no consultation; it just sort of appeared. In fact, I share with her the view that it could disappear into the CMA’s back room. Even if our solution happens to be a different one, we share a diagnosis of that problem. We will discuss in a later group whether we want it to be outside of the CMA, but for now the important point that we are trying to signal is that the OIM should have some independence. We want to make sure that it is not in any way in hock to just one of the four Governments, who must work very closely together if we are to make this internal market work and thrive, as we all wish to see.
My Lords, I thank everyone who has participated in this group. I will seek to take forward the suggestion of the noble Baroness, Lady Hayter, that letters be copied around—I have another batch on my desk to approve once we have finished this debate, many of which, I am sure, are to my Liberal Democrat colleagues. I will ensure that they are circulated to all the protagonists. They are not particularly secret; they just help to clarify and explain the Government’s role and answer the many questions that we have been asked. I hope that is helpful.
I will start with Amendment 110, which seeks to replace Clause 28 with a new clause on the establishment of the Office for the Internal Market. As noble Lords will know, this Bill will create an Office for the Internal Market within the Competition and Markets Authority to carry out a set of independent advisory, monitoring and reporting functions to support the effective operation of the UK internal market. The proposed new clause seeks to create a new and separate public body that reports to the BEIS Secretary of State. The effect would be not to establish the Office for the Internal Market within the Competition and Markets Authority.
Let me say in response to my noble friends Lady Neville-Rolfe and Lord Naseby and the noble Baroness, Lady Hayter, that the Government did consider a wide range of delivery options for the advisory, monitoring and reporting functions of the UK internal market, as set out in the Bill. We concluded that the Competition and Markets Authority is best suited to house the OIM to perform these functions. The CMA is an independent non-ministerial department that currently operates at arm’s length from the Government. It is sponsored by BEIS and Her Majesty’s Treasury and—to answer the question posed by my noble friend Lady Neville-Rolfe—Ministers will be responsible to Parliament in reporting on the work of the CMA and the Office for the Internal Market, even though they operate at arm’s length.
The Competition and Markets Authority has built up a wealth of expertise and experience that makes it a natural fit to take on these additional functions. It has a global reputation for promoting competition for the benefit of consumers and for ensuring that markets work well for consumers, businesses and the wider economy. It will also build on the CMA’s existing technical and economic expertise, which will now support further development of the UK internal market.
I should also explain that it is government policy that new arm’s-length public bodies should be only set up as a last resort and when consideration of all other delivery options has been exhausted. Other delivery options that should be considered include utilising existing bodies in order to deliver any new functions. New public bodies should be created only if there is a clear need for the state to provide the function or service through a public body and if there is no viable alternative—effectively establishing new public bodies as a very last resort. For the reasons that I have set out, we are not able to agree with this amendment. I hope that my noble friend Lady Neville-Rolfe will feel able to withdraw it.
Regarding Clause 28 stand part, this clause defines regulatory provisions on which the CMA, through the OIM, will monitor and provide reports and advice. The purpose is to set out the areas where the OIM will perform functions under the Bill, in order to ensure certainty and transparency for Administrations, businesses and the general public in connection with the effective operation of the UK internal market. Regulatory provisions are within scope if they set requirements for the purposes of the mutual recognition and non-discrimination principles of the Bill for the sale of goods and the equivalent for services. Moreover, regulatory provisions are within scope if they apply to one or more nations but not the whole of the United Kingdom. Clause 28 as it stands forms an integral part of the provisions for the OIM to carry out its independent, advisory and reporting duties in respect of the UK internal market. For these reasons, therefore, I am unable to accept the proposal that Clause 28 should not stand part of the Bill.
On Clause 29 stand part, removing Clause 29 would remove the Competition and Markets Authority’s objective when exercising its functions as the Office for the Internal Market. This clause designates the CMA, in its capacity as the OIM, as having a specific role in the operation of the UK internal market. It is additionally important to note that this clause establishes the statutory objectives of the CMA in its capacity as the OIM. This clause will ensure that the CMA in its OIM role is able to operate effectively as the monitoring body for the internal market, and will ensure there is no confusion between the pre-existing powers of the CMA and those newly conferred upon it as the OIM. Distinct objectives will prevent any operationally problematic blurring of functions. Clause 29 as it stands forms an integral part of the provisions for the OIM, and therefore we are unable to leave it out of the Bill.
Moving on to Clause 41 stand part, removing this clause would leave out vital definitional provisions. This clause provides key definitions for the purposes of this part of the Bill. This includes a definition of the Competition and Markets Authority itself and sets out how widely the operation of the internal market in the United Kingdom should be understood. This clause also defines “Relevant competence” in Part 4 as meaning both reserved and devolved competence so that executive and legislative competence in each territory is included. Clause 41 as it stands forms an integral part of the provisions for the CMA in its capacity as the Office for the Internal Market: it ensures legal clarity and certainty on technical terms used throughout this part. For all those reasons, therefore, I am unable to accept the removal of this clause.
Amendment 111 would require the CMA to not engage in any form of dispute resolution while fulfilling its responsibilities as outlined in Part 4. This addresses the points made by the noble Lord, Lord Palmer. In cases of disagreement between one or more Administrations, the OIM, within the CMA, could be called upon to provide a non-binding report to support intergovernmental discussion. An assessment of economic impacts will ensure a technical underpinning to an otherwise political discussion.
Ultimately, the OIM only supports the resolution of disputes among the Administrations politically, and it does not adjudicate. The Government believe that building upon existing intergovernmental arrangements is the best approach to resolving any potential disputes, and this includes mechanisms such as common frameworks and intergovernmental relations, according to a clear and agreed process. The OIM will have its role in disputes between individuals and businesses, but businesses can request that the OIM consider disputes as part of its regular reporting. It is under no obligation to do so, nor will it have the authority to adjudicate on the specific issues.
Amendment 113 would prevent the necessary flow of information from the Competition and Markets Authority to the Secretary of State as the policy’s sponsor. The clause in question allows the CMA to alert the Government when it thinks adjustments may be needed to the way it fulfils its statutory functions, or it wishes to raise issues of particular concern. This is in line with precedent for similar public bodies and mirrors provisions in the existing legislation underpinning the CMA. Removing this provision would hamper the necessary communication between the Government and the CMA across all the other provisions in Part 4. For that reason, we are unable to accept the amendment.
Amendment 155 would make it an explicit statutory duty of the CMA, under its existing duties within the Enterprise and Regulatory Reform Act 2013, to protect and promote the interests of consumers in respect of the internal market. The clause in question establishes the statutory objective of the Competition and Markets Authority in its capacity as the OIM. It will ensure that the office is able to operate effectively as the monitoring body for the internal market and that there is no confusion between the pre-existing powers of the CMA and those newly conferred upon it. Distinct objectives will prevent any operationally problematic blurring of functions. The OIM will operate for the benefit of all those with an interest in a smoothly functioning internal market, be they regulators, businesses, professionals, the four legislatures or consumers. Explicitly narrowing its focus to consumers would, in our view, be to the detriment of all the other stakeholders I have listed. Therefore, I am unable to accept the amendment.
My Lords, I am grateful for the Minister’s response. In her speech, the noble Baroness, Lady Bowles, asked some very specific questions, particularly in the stand part bit of her speech. I listened hard but I could not hear any answers to them, so perhaps the Minister could review her speech and write a letter, promptly, making sure that I and the noble Baroness, Lady Hayter, get a copy.
I see the request has the enthusiastic endorsement of the noble Lord, Lord Foulkes. Therefore, as his biggest fan in the House, I am obliged to follow the idea put forward. I will of course write to the noble Lord, Lord Fox, on that.
My Lords, this has been a good debate on an important group of amendments. We are not all agreed, but most of us are doubtful about the decision to allocate the office for the internal market to the CMA in the way the Bill proposes. I favour an office with ministerial leadership—there is a parallel with the EU’s single market commissioner, which has worked well in many ways.
The noble Baroness, Lady Bowles, made an expert and very strong case from a different perspective. She rightly pointed to the huge powers and penalties involved in giving this role to the CMA, and explained useful background as to why it ended up in the CMA, linked to an earlier time when state aid rules were going to be part of the portfolio. She also highlighted a concern about how the arrangements will work for the devolved Administrations, which the noble Lord, Lord Palmer of Childs Hill, developed in more detail and which was referred to by the noble Baroness, Lady Hayter.
My noble friend Lady Noakes, in an intervention full of wisdom and experience, underlined the lack of consultation, the time that tends to be taken by the CMA to decide things and the risk of it being a jack of all trades and master of none as its responsibilities and staffing grow following EU exit. My noble friend Lord Naseby reminded us of the impact of double regulation in the financial services sector, and favoured a self-standing office for the internal market. The noble Baroness, Lady Hayter, does not want the office to be lost in the CMA either, although she wants it to be independent of BEIS. The commissioner dealt with 28 member states satisfactorily, and they always used to fight for their own independence if I recall correctly.
I am grateful to the Minister for his summing up. He rightly emphasised the international reputation of the CMA, a point I would certainly concede, but that does not mean it is the right body for this task. In any event, there has not been a proper consultation and no published assessment of the pros and cons, which the Minister kindly referred to when he looked at the options. So, I look forward to reflecting further on any letters the Minister is kind enough to write to us and perhaps to further discussion across the House.
We want to get this right: it is a very important matter. We have had some answers on how the details of this quite complicated Bill will work, which I will certainly study, but I give notice that I am likely to return to this issue on Report. I beg leave to withdraw my amendment.
Amendment 110 withdrawn.
Clause 28 agreed.
Clause 29: Objective and general functions
Amendments 111 to 113 not moved.
Clause 29 agreed.
We now come to the group beginning with Amendment 114. I remind noble Lords that anyone wishing to speak after the Minister should email the clerk during the debate. Anyone wishing to press this or anything else in this group to a Division should make that clear in debate.