I remind the Committee that with this we may take the following amendments: No. 4, in page 2, line 24, at end insert–
'(d) an assessment of the additional costs to business of the exercise of its functions.'.
No. 2, in page 2, line 26, at end insert–
'(3A) The Government will arrange a debate in each House of Parliament on the annual report within three months of its publication'.
On a point of order, Mr. Beard. I welcome you to the Chair. It would be appropriate at this early stage to ask the Under-Secretary for some guidance. As with many such Bills, there are provisions under which significant regulations will be made. It was helpful to have the stop now orders guidance from the Office of Fair Trading on Second Reading. Can the Under Secretary say now, or let us know later, when draft regulations may be available for the different stages of the Bill? There is little point in receiving them on the day of the debate.
Thank you, Mr. Beard. I join the hon. Gentleman in welcoming you to the Chair. I appeared before you more often when you were a member of the Treasury Committee, so it is pleasant to see you in the Chair of this Standing Committee.
I shall reflect on the answer to the hon. Gentleman's question, as many things might be affected by it. There are matters that need to go to Committees in the other place and we shall consider what the time scales might be. I am minded to help the Committee as far as I can to get information to hon. Members in advance of the debate, rather than on the day that it takes places, as that is next to useless to members of the Committee. It would be useful to know if there was anything that hon. Members wanted to see in advance, although I cannot promise that I shall be able to respond to their requests. However, I will at least know what hon. Members think would be useful to have in advance of our discussions.
Further to that point of order, I am grateful for the Under-Secretary's invitation. An obvious, and major, example is clause 202, which, under the new programme, we will reach quite quickly. There is much speculation by consumer organisations about the regulations that will be made in that clause, which we will probably debate at our next sitting on Thursday or on the following Tuesday. We need to have the information in good time for the debate but it would be useful if it could be circulated to the bodies that are intimately involved in the Bill.
Further to your remarks, Mr. Beard, and those of the hon. Member for Eastbourne, work in relation to clause 202 is in preparation and it might be possible to lay that before the Committee by the end of the week. I hope that that will help hon. Members, and not prejudice the speed with which the Committee moves.
As I was saying this morning, concern for costs is imperative; sometimes it is a life-and-death issue for small companies. In the example that I gave, a small company, together with a couple of larger companies, started trading in a new market. A letter was received from the Department of Trade and Industry maintaining that the trade was against the public interest and, effectively, threatening to wind up the company and prosecute the directors. The directors naturally went to a solicitor who took them to a leading counsel, whose opinion was that the company was not trading against the public interest and that if they took the matter through the judicial process, the directors would have a very good chance of trading on.
There was a problem, however. The director concerned could not afford to go through the process that would have been required to clear the company. The matter never went to court because the director settled with the DTI, the company was wound up and various other measures were taken.
If there had been a judicial process, the director might have lost his case. No one can say for sure what the outcome would have been, but what is sure is that any rational business man in his situation would have followed the same course. He had the choice of going through a judicial process that would have taken years and probably bankrupted him as well as the company, or of taking the easy option of agreeing with the DTI, initiating a settlement, getting out of the business and starting a new one.
Let us be frank; that is how most business men think. They do not have time to spend years instructing lawyers. They do not want, or have time, to argue against Government; they want to get on and earn a living. In this debate, we are often talking about the rights of consumers, but it is important to realise that tens, if not hundreds, of thousands of small business men are daily trying to make a living as best they can, free from regulation. When the Government
are oppressive, that can kill their business without the matter ever going to court, because of the cost. That is why I have used this example.
Of course, such examples directly concern the DTI, but what is there in the Bill to show that a new, further empowered OFT will be any better than the DTI can be? I shall return to that theme in various ways as we go through the Bill, because all too often in its provisions we see regulation at a cost to the public purse and without adequate accountability. We see regulation adding to the cost of companies, but that cost is not revealed and they are not allowed to have redress against what an overbearing Government might do in certain circumstances.
We must also realise that in this modern age, the age of the media, newspapers are often looking for stories, and there is always the threat that stories or, worse, bits of information will get out to the press, particularly with regard to consumer issues. We will increasingly face the syndrome of trial by media, and the costs to companies may be even more stratospheric. For all those reasons, the amendment is worthy.
I entirely agree with my hon. Friend the Member for Huntingdon (Mr. Djanogly) about trial by media. Such issues will no doubt play an important part in later discussions, particularly on clause 11.
Before entering this place, I had a brief, meteoric career as a corporate lawyer. I am certainly nowhere near as accomplished as my hon. Friends the Members for Eastbourne and for Huntingdon. In fact, for the last eight years before I became a Member of Parliament, I ran my own small business; I am thankful that at no stage did the OFT investigate us.
I have an important point to make, as someone who has experience of the paralysing effect on business of investigations by the OFT and other regulators. Such investigations are unlikely to affect companies with a dozen or so employees. My concern is that a large investigation may have a paralysing effect especially in specialist sectors that may be subject to an OFT type of inquiry. Such companies will not be much larger; they may have 30 or 40 employees, but will not have the massive infrastructure of many of the international companies who doubtless will have been in direct touch with the Ministry and who will have the protection of that infrastructure, with large regulatory and personnel departments and an enormous number of internal auditors.
The amendment deals with the costs involved in such investigations. Not only is such an investigation costly, it has an affect on the recruitment of new staff across the board. The company cannot take advantage of potential opportunities in its own marketplace for several months. There is increasing step-by-step regulation under this Government, and I ask them to step back occasionally to consider the amount of regulation that they are imposing on companies.
There are often invisible costs, in addition to the large-scale visible ones. Specialist lawyers and financial PR companies are often needed to minimise financial or economic losses because of the increasing trial by media to which my hon. Friend the Member for Huntingdon referred. How can those costs be assuaged? Does the Under-Secretary also recognise that the sheer inconvenience to businesses of OFT or other regulatory inquiries should be minimised as far as possible?
I want to make a negative point about the amendments, although no one can object to amendment No. 3 and the concept of OFT decisions and investigations being paraded for all to see. If that were done correctly, it might make amendment No. 4 unnecessary. A good and accurate list of the work of the OFT will be one of two things; a list of successful remedies applied and rights wronged, or a list that shows several futile and time-consuming investigations. If it is the latter, it is a waste of Government as well as business funds and demands urgent remedy. If it is the former, the cost to business is not a convincing argument.
As I said, it will be difficult to assess true business costs where the OFT is investigating businesses with rigour or is investigating consumer affairs on behalf of the consumer. It is acknowledged that many of the costs are opportunity costs. It is not like the minimum wage, where one can say fairly, accurately and briefly what the cost to business will be. Although there are mechanisms for regulatory assessment, I am not convinced that the mechanism will be uncontestable and easily agreed between the OFT and the businesses concerned. Neither am I convinced that there is an easy way of assessing the costs.
Any method that will accurately establish the cost to business of being correctly observed and investigated by the OFT will be time-consuming. Some of that time will be spent by firms answering questions put to them by the OFT about the investigations that the OFT has conducted. There can be nothing more irritating for a firm that has been investigated with some rigour than to have to fill in another form asking, ''How was it for you?'' and requesting evidence over many pages about how the arrangement went and what it cost. There is no argument in principle against assessing what the business costs will be, but there is a caution about the practice. It would be nice in general, and a good thing in principle, to have some idea of the business costs.
If the hon. Gentleman had listened to me earlier, he would realise that I said that much of the costs were opportunity costs. If it was just a question of lawyers' bills, it would be extremely straightforward, but we will hear about management time taken up in dealing with the issue. In the case of
big firms with highly paid managements, that is an appreciable cost. It is a lost opportunity cost to them and establishing and quantifying that will never be easy. Although I am in favour of the principle of amendment No. 4, it may achieve less than one thinks and cost more than one imagines.
I welcome you to the Chair, Mr. Beard. I apologise for missing the last section of the discussion. I certainly do not want to waste the Committee's time by duplicating comments that have already been made. Since amendment No. 3 stands in my name, I feel that I should say a little about the rationale behind it. I should also like to say a few words about all the amendments in the group.
It is extremely important to have specific reporting on each of the major decisions that is made by the OFT and that the annual report does not contain just a general statement in the annual report of what it did, but a specific analysis of why particular decisions were reached. There are two reasons for that. First, part of the spirit of the legislation should be about transparency. As Members of Parliament, we can inject two elements into the debate; accountability and transparency. We should always insist on transparency and make it clear why decisions have been reached. That is important partly for people who are out in the markets and in companies who are trying to anticipate what will happen if they go into a merger or takeover. They need to understand the thinking of the board and the Director General of the OFT. The only way of assessing how that thinking is evolving is by understanding, case by case, how decisions are reached.
The Bill sets out some general principles such as competition, which is fine, but there are tough choices to make in determining competition. How does one balance competition against monopoly in cases where there are innovations? How does one deal with a takeover case involving a natural monopoly such as a regional electricity company? The thinking of the OFT will be clear only case by case. It is important that it reports in detail, publicly, on the rationale behind its decisions.
The second reason why reporting is important is because we need some performance measure of the board and the director general. We should have some basis for assessing how well they are doing their jobs. I was not entirely clear from some of the answers that the Minister gave this morning about what the executive board would do. I got a sense that it would be involved in individual decisions. There may be split votes on some of those key merger and takeover decisions. If that were the case, as with the Monetary Policy Committee, it would be important for transparency, clarity and understanding that the outside world, particularly the business that is involved in takeovers, understood where the different members of the OFT were coming from. That can be done only through transparency and by setting out, case by case, how decisions have been reached.
I take a slightly different tack on amendment No. 4 from my hon. Friend the Member for Southport (Dr. Pugh). I do not want to open up splits in the Liberal Democrats over clause 4, but I am rather more
sympathetic to some of the Conservative suggestions on the need for being very upfront about the costs of compliance. It can be approached in several ways.
The Government, rightly, have been bullied into accepting a regime of regulatory impact assessment; trying to assess, wherever possible, the cost of regulation. I am unsure what sort of regulatory impact assessment was carried out before the Bill was published, but it is surely right to assess costs imposed on companies being investigated or, more generally, the costs of compliance. That is consistent with the principle of transparency and keeping a check on regulation. I put my name to the starred amendment on this subject on those grounds.
The final amendment relates to parliamentary reporting. It would strengthen the legislation if the requirement to report to Parliament were beefed up and made much more explicit. The period of time appropriate for that has been debated. I would go further and prefer the Select Committee to have the power to call the Director General of the OFT and its members to quiz them on the annual report and the decisions that they have taken. It is for the Under-Secretary to face that issue, as she did membership approvals. Some explicit measures should be built into the Bill to give parliamentary reporting and debate a much clearer focus. I support the spirit of all three amendments.
First, I agree with Opposition Members that the OFT's annual report should include information about its decisions and investigations. However, the level of specific detail proposed in amendment No. 3 is inappropriate for primary legislation. We intentionally included just the broad minimum criteria that the annual report must fulfil for a reason; to allow flexibility and ensure that the primary legislation stands the test of time. I do not disagree with many of the general remarks of Opposition Members.
In reporting on developments in respect of matters relating to its functions, and on the extent to which it has met its objectives and priorities, the OFT will doubtless need and wish to include the sort of information specified by Opposition
Members. Indeed, the DGFT already includes such information in his current annual reports, and I fully expect the new OFT to continue to do so. As I have explained, it is unnecessary to spell it out in the Bill in such detail.
The hon. Member for Huntingdon mentioned this morning that the annual report presently covers the overall costs of OFT activities and, where possible, breaks them down into consumer enforcement, competition activities and so forth. He asked how much detail on expenditure could be expected.
I was going to come on to that in a few minutes and shall do so after I have dealt with the amendments.
Amendment No. 4 would add a further requirement to the OFT's annual report; that it include in its assessment, along the lines suggested by Opposition Members, the costs to business of its activities. While it is right that OFT considers the effects on business of its action, it is inappropriate and unnecessary to include the sort of assessment within its annual report. As several Opposition Members noted this morning and as was argued in the recent debate between the hon. Members for Huntingdon and for Southport, the act of the OFT collecting information required to make such an assessment might well prove an additional cost to business. I agree with the hon. Member for Southport that an element of opportunity cost is relevant; it is not simply a question of adding up the formal bills that are submitted, as the hon. Member for Huntingdon said.
I am sorry to interrupt the Under-Secretary, but it might be even more difficult if I tried to intervene after she had moved on to another issue. Does a regulatory impact assessment of a Bill such as this take account of opportunity costs? If so, is a formula readily available?
I am in danger of losing the thread of my argument, so hon. Members may not receive the answers that they require. I shall come back to regulatory impact assessments in a moment. Let me finish the point that I was making. The decision to investigate markets is taken on the basis of whether the OFT believes that there is a problem. As my hon. Friend the Member for Hemel Hempstead (Mr. McWalter) remarked this morning, such costs are partly determined by the relevant businesses. It is their decision, not the OFT's, whether to employ expensive lawyers and consultants.
That simply does not face the reality of the position. If a business is going to be hit by an expensive and damaging OFT inquiry, it is perfectly understandable for it to employ the very best lawyers to ward off the potentially catastrophic results of a negative finding. Large companies have grave concerns regarding the broadest base of support. The Monopolies and Mergers Commission, for example–
I do not accept the hon. Gentleman's intervention. Those who run both competition authorities–the OFT and the commission–say that legal resources are being deployed increasingly on the other side of investigations. It is a trend, but it is not under their control. It is not a fixed cost that can be quantified. Different elements will apply according to the particular investigation. The businesses will choose which lawyers and how many consultants will be employed. It is not the OFT's choice; that is my main point.
The OFT is given powers for a purpose; to benefit consumers and other businesses where problems with the market are uncovered and remedies are made. As my hon. Friend the Member for Hemel Hempstead argued this morning, where the OFT uncovers a problem with a market and remedies that problem, the benefit goes to other businesses as well as consumers. It is well-nigh impossible to quantify such benefits. It is not simply a matter of sticking a figure into an annual report to provide such information.
As the hon. Member for Eastbourne acknowledged this morning, amendment No. 4 effectively would require the OFT to produce a regulatory impact assessment every year, covering the cost to business of its activities. The OFT will exercise only the powers granted by Parliament; it does not have powers to make regulations as such. As Opposition Members know, all legislation passed by this House is accompanied by a regulatory impact assessment. That is the appropriate time to consider the additional likely costs that new measures will impose.
This morning I was asked about guidance–
I am still trying to deal with issues raised this morning and I want to finish them. I was asked about the nature of regulatory impact assessments. Guidance has been produced by the Cabinet Office, in accordance with which all Government Departments work. It is regularly updated and specifically contains advice about how to produce RIAs. That guidance was used in the construction of assessments for this Bill.
With respect, having heard the past few interventions, I feel that we are talking increasingly at cross-purposes. How can a regulatory impact assessment conducted at the start of a Bill's progress possibly consider the likely costs involved in what is a transactional-based series of costs? If we were in a recession and there happened to be three takeovers in a particular year, the costs may be very low. If we were in a boom and there were suddenly 20 takeovers, the costs would be massive. I do not see how the costs can be assessed today for what will happen in the future.
Indeed, but stating the costs will not give any useful comparative data and, as I outlined, there are many reasons why it is difficult to bring those costs together. On the regulatory impact assessment, hon. Members asked whether we examined the opportunity costs. Yes, we do, as well as the one-off costs and recurring costs. However, we also assess the benefits to business, consumers and the economy as a whole. The figures have been produced on that basis in the regulatory impact assessments of the Bill.
It seems from the Under-Secretary's last comments that she is suggesting that where some individual businesses lose out as a result of an OFT
inquiry, others gain. Are those costs being quantified and is she suggesting that gaining companies should look to compensate those who lose out because of a draconian OFT inquiry?
The hon. Gentleman is missing my point, which is that it is impossible to quantify. We make our best efforts at quantifying the costs and benefits in such situations, but it is well nigh impossible to come up with formulae. In my experience, benefits are more difficult to quantify than costs, which is true in most regulatory impact assessments. I agree with the comments of my hon. Friend the Member for Hemel Hempstead, who said this morning that many other businesses benefit. An economist would have to spend a lot of time quantifying the benefits of specific OFT inquiries or investigations to other businesses that, from a better operation of competition in the market, may gain substantially.
We are talking not about assessing benefits, but about an amendment that concerns assessing costs. I sympathise with the Under-Secretary's comments, but they do not relate to the proposal. Another point is that we are debating an annual report, so the issue will have to be reassessed annually. She seems to be talking about the position today, but this will recur.
Regulatory impact assessments are conducted when Bills are produced. The hon. Gentleman is not arguing for other regulatory impact assessments of the Bill at intervals. As I understand it, he is arguing for the costs to business to be quantified and specifically laid out, and I have given several reasons why I believe it is impossible to quantify the costs to business. The point about benefits is that they must also be taken off the bottom line to work out the net costs. Some benefits are to businesses themselves, and if we were to accept a cost assessment–which I would not–we would need to assess the benefits in some cases. They are benefits not only to others, but to business.
Does the Under-Secretary share my concern that many of the comments made by Opposition Members seem to imply that the information in an annual report about the costs to business of the investigations will be used to discourage the OFT from conducting thorough investigations and that should expensive investigations not produce results, those costs will be used to berate the OFT for undergoing the investigation in the first place? The basis of any effective regulation system is to be prepared for thorough investigations while recognising that some will find nothing wrong.
Indeed. There is a danger that the costs, rather than the operation of the competition authorities, become the direct issue in all cases. Obviously, the authorities will have to maintain their credibility, including producing outcomes that one would expect from worthily undertaken investigations. None the less, there will be occasions when the points made by my hon. Friend the Member for South Ribble (Mr. Borrow) will come into play and the costs could act as a disincentive.
As I said, the Bill has been the subject of a comprehensive and considered regulatory impact assessment. It took into account the responses to the White Paper consultations and concluded that no significant costs will be directly imposed on business from the consumer and competition measures in the Bill. Of course, there will be some additional costs but, as the assessment noted, there will also be benefits for business. That overall picture is the accurate one.
Amendment No. 2 would require a debate in each House of Parliament each year on the OFT's annual report. Again, I agree with Opposition Members that the OFT should be fully accountable, but I am not convinced that the amendment is necessary to achieve that. At present, the Director General of Fair Trading publishes an annual report, which is laid before Parliament. The Bill will strengthen that by requiring the new OFT to publish and lay before Parliament an annual plan as well. As with the current DGFT, the chairman of the board will be the accounting officer and, therefore, accountable to Parliament for how the OFT's resources are used. He may be summoned by parliamentary Committees, and the OFT will have to agree a service delivery agreement with the Treasury for it to obtain resources in the first place. That SDA is also a public document.
All that means that both Parliament and the wider public will be able to hold the OFT to account, and if at any point in the future hon. Members decide that they wish to hold a debate on the OFT's annual report, that can be considered in the normal way at that time. It is unnecessary to decide that now and commit parliamentary time for every future year. Furthermore, there are processes by which Select Committee investigations form the subject of debate, so issues can be brought up in that way.
The amendments are unnecessary, and I trust that having heard my arguments, Opposition Members will feel able to withdraw them. If not, I regret that I shall ask the Committee to oppose them.
I confidently predicted to someone recently that I thought that there would be few, if any, votes in this Committee, but I might be proved wrong. The Under-Secretary is being wholly intransigent.
Let us first consider amendments Nos. 2 and 3, which from any view are less controversial. Amendment No. 3 calls for a summary of OFT decisions, which would help people to see a pattern emerging on how it approaches matters, and amendment No. 2 would require a debate on what the OFT has been up to. I find it inexplicable that the Government would not want to see both those things happen to help their purported agenda for transparency.
The meat of this particular sandwich comes in amendment No. 4.
Before the hon. Gentleman moves away from amendment No. 3, does he accept that I agree entirely with the thinking behind it but do not think that it is appropriate to put the measure into the primary legislation? That is the only difference between us.
I am grateful for that point, but the difference is crucial. The OFT could conceivably take a different view and consider that the details of its investigations should not be reported, in which case the body of precedent would not be available to the outside world, which would be an enormous shame.
Moving on briefly, and finally, to the more controversial amendment, amendment No. 4, I was interested to see that in a group of only two Liberal Democrats, we seem to have two different views. There is a split, as it were, but Liberal Democrats are not unknown for working both sides of the street on any number of issues.
Our debate on the regulatory impact assessment seems to have got rather fraught. As I have said more than once, I do not understand how the Bill can fail to have a significant impact on business. Even if I am wrong about that, it must surely be easier for the OFT in effect to produce its own annual regulatory impact assessment based on real facts rather than on what might happen when the Bill becomes law. The assessment will be based on real investigations, costs and companies.
It is all very well for the Under-Secretary to go on about the slightly airy-fairy notion of there being benefits to ''business'', or the gaffers, as the hon. Member for North-East Derbyshire (Mr. Barnes) might put it. However, if she is making the point that some businesses might benefit from a specific investigation, it is equally unarguable that the business investigated successfully–and even more so in the case of the business investigated to no purpose–will have costs to bear. The hon. Member for South Ribble made an interesting intervention. We seek simply to put information in the public domain. It is entirely neutral of itself what use is made of it. It is not some Tory plot to batter the OFT into not doing any investigations. It is information that should be available and people can make of it what they will.
I wish to take issue with the hon. Gentleman's definition of the benefits here as ''airy-fairy''. For example, it would be enormously beneficial to the person who produces genuine organic milk organically to have the person who produces milk that he calls organic that is not produced organically taken to task. It cannot be an airy-fairy benefit, but a real benefit, that proper businesses competing fairly are retained and those that are not competing fairly and are using all sorts of duplicitous means to undermine others are brought to book.
Ah well, if necessary. I do not think that the OFT regards one of its powers as putting people out of business. As my hon. Friends the Members for Huntingdon and for Cities of London and Westminster (Mr. Field) have both graphically explained, that can be the effect of an investigation, or of repeated investigations. The records industry is a good example of an industry that has been subject to a
series of investigations over a number of years at enormous expense. We might have some data on that for a debate later in our proceedings.
One must look at the worst case, which is a company or a sector that is subject to an OFT investigations at vast expense with nothing at the end of it. Merely being given a clean bill of health may not be enough. It may be enough to sound the death knell of the company or companies and it is impossible for hon. Members on either side to argue convincingly that this information should not be available. It has emerged that we now have this wonderful document that sets it all out. Some boffins in the Cabinet Office have produced a set of rules. Those rules have been applied to the Bill, albeit with a slightly incredible result, but it should be a great deal easier to produce an assessment of the impact of investigations by an actual OFT, rather than the more nebulous investigation of the potential effect of a Bill.
The hon. Gentleman has a firm grip of the wrong end of the stick. We are talking only about what the OFT must disclose. It is a matter for the OFT and we are not going to micro-manage it to that extent. However, I would have thought that the OFT would produce a figure rather than specific details about individual companies. We will come on to that; it is a good point that should perhaps be made later. There is some discussion to be had about the disclosure of information and the safeguards, which we believe are inadequate.
Does not the hon. Gentleman accept that the OFT has no information about the costs to individual businesses of being involved in investigations or cases with which the OFT is dealing?
I presume that whoever produced the assessment for the Bill had no idea of specific costs, so how on earth did they arrive at it? Perhaps we can chat about it later over a drink as it is fascinating in an anorak sort of way. By any account, the impact assessment has been prepared in a total vacuum. No one is complaining, except about the result, which seems a little weird. The Under-Secretary was brandishing a nice, thick document that sets out how to approach it. I presume that a slimmer document could be prepared for, and by, the OFT.
I briefly remind the hon. Gentleman of two points that I made. I ask him to take them into consideration in his remarks, as he does not seem to be doing so. Of course, the existing regime has costs for business. My first point was about additional extra costs. The second is that the OFT does not make regulations. The regulatory impact assessment is for authorities, which make regulations and are therefore in control of the degree of regulation and the costs of the regulatory process, to consider the costs and the benefits. The OFT does not make those regulations.
''an assessment of the additional cost to business of the exercise of its functions.''
There is a cost to be assessed if the OFT decides to exercise its function by having yet another investigation into, say, the record industry, and has a result or no result–end of story. This is not rocket science–I did not think that it was when I tabled the amendment–but information that should legitimately be in the public domain. The CBI is concerned about that. It is not something that I dreamed up on the beach in Eastbourne; it is a concern of business people. I am amazed that the Government are not prepared to accept the amendment, let alone the two less controversial amendments. I urge hon. Members to support the amendments.
Question put, That the amendment be made:–
The Committee divided: Ayes 5, Noes 11.
With this we may discuss the following amendments: No. 6, in page 2, line 32, leave out
'so far as is practicable'.
No. 7, in page 2, line 34, leave out 'in its opinion'.
No. 8, in page 2, line 34, leave out
'seriously and prejudicially affect the'
'significantly harm the legitimate business'.
No. 9, in clause 6, page 3, line 17, leave out
'shall have regard to the need for excluding'
and insert 'shall exclude'.
No. 10, in clause 6, page 3, line 18, leave out
'so far as is practicable'.
No. 11, in clause 6, page 3, line 20, leave out 'in its opinion'.
No. 12, in clause 6, page 3, line 20, leave out
'seriously and prejudicially affect the'
'significantly harm the legitimate business'.
I hope that we are moving on to less controversial territory, but let us see. This series of amendments is designed to tighten up the provisions of clause 4. They are all supported and sponsored by the Confederation of British Industry, which is again expressing through us its legitimate concerns about the clause.
Amendment No. 5 would remove from subsection (5) the rather woolly phrase
''shall have regard to the need for excluding'',
because that places too subjective a discretion in the hands of the OFT when it comes to disclosing sensitive information. We agree with the CBI that there should instead be a clear requirement, hence our wish to insert the words ''shall exclude''.
The disclosure of sensitive information arises at several points in the Bill. Indeed, the hon. Member for Leigh (Andy Burnham) touched on that issue in an intervention a moment ago. It is desperately important to business that sensitive information that could make or break a commercial organisation is not spread around as my hon. Friend the Member for Huntingdon described, but is kept confidential as far as is necessary or possible.
Amendment No. 6 would remove the words
''so far as is practicable''.
Again, we are trying to tighten the obligation on the OFT in respect of how it treats sensitive business information.
Clause 4(5)(b) allows the OFT to exclude information from its annual report if, in its opinion, publishing that information might seriously and prejudicially affect the interests of a particular person. That is welcome, as the CBI agrees, but again the discretion on the part of the OFT is too subjective. Amendment No. 7 would remove the words ''in its opinion''.
Under amendments Nos. 8 and 12, the words
''seriously and prejudicially affect the'',
which are also in clause 4(5)(b) and clause 6(3)(b), would be removed and replaced with
''significantly harm the legitimate business''.
The reason for the change is that that phrase is in clause 235 and it makes enormous sense for the same wording to be replicated here. That would provide clarity and consistency. Frankly, it seems odd to use two different standards for disclosure in the same Bill. In other words, parts 1 and 9 should be harmonised. That makes excellent sense.
The OFT has a function to make the public aware of the ways in which competition may benefit consumers and the United Kingdom economy. Again, we propose a series of amendments that would tighten the obligation on the OFT. These constitute sensible precautions. In today's debates, we have touched on the harm that can be done to companies if information is spread around where it should not be. I am sure that that will not happen, but one must consider all possibilities. One would not want a newly reconstituted OFT, flush with its new powers and functions, to impress the legislators and
public at large with its effectiveness and usefulness by conducting dawn raids with massive publicity and tipping off chosen journalists, resulting in large spreads in the media about a particular investigation. I referred a few days ago to dawn raids on pharmaceutical companies. Clearly, some of the media were briefed.
It was certainly not the OFT. When I mentioned the case earlier, I referred to the Serious Fraud Office. I am simply reflecting that one public body might behave like another in the same circumstances. An investigative body with wide powers and a large budget and staff might be tempted to behave in that fashion. I concede that I was talking about a different body–we have not even set up the OFT yet–but in the case to which I referred a great deal of information seemed to be in the public domain early on without any criminal charges being levelled. I hope that the Under-Secretary and other members of the Committee agree that that was an unhelpful way to proceed. In any event, we are adamant in pressing for tight restrictions on disclosure of information to people who have no business receiving it.
Clearly, the fact that the Serious Fraud Office was involved is relevant because it is highly likely that it will be used again in future when an OFT investigation is under way. It would not be the first time that an investigation had been botched. The arrest of the Maxwells springs to mind–an appalling release leaked to the press prejudiced the trial in that case.
My hon. Friend provides a good example from the recent past. I have no doubt that the Serious Fraud Office will become involved in some of the same matters as the OFT. If the Under-Secretary believes that I am wrong, she will no doubt intervene to say so. The concern is legitimate: it is not just ours, but that of the CBI and other business organisations that appreciate the need not only for annual reports, but for making information about the OFT available in the public domain. I shall not labour the point, but as I explained earlier, that would be helpful. We need to see what pattern emerges as the OFT discharges its functions. No one disagrees about that, but we must ensure that sensitive information does not leak out and unfairly cause commercial harm to any of the bodies or companies involved. That is the rationale behind the amendments. I hope that they will fare better than the last group.
I want to ask some questions–not loaded questions–because I do not entirely understand the purpose of the amendment or, indeed, the clause that precipitated it. The hon. Member for Eastbourne made sensible remarks about the disclosure of confidential information, but the part of the Bill to which he and the CBI have taken exception does not relate to confidential information. It refers us to subsequent clauses and the exclusion of
''the affairs of the particular person''.
It then goes on to talk of disclosure of information affecting
''the interests of that person''.
Why is it a problem to relate to particular individuals in this context? Let me take one or two provocative examples. Let us imagine hypothetically that Mr. Berlusconi decided to diversify out of Italy–he is doing so in any case–and bought into British commercial radio or local newspapers. A competition reference would, as I understand it, have to take place in terms of the companies that are vehicles for him as an individual. Why would there be a problem about talking about that individual? He is the issue.
Let me take another case. Enron has effectively departed this world, but if it were still a going concern and making bids for British energy companies, why would there be a problem in the OFT publicly discussing the behaviour of Mr. Skilling? He was not the owner but the chief executive, with many interests and options; it was his operations in the company that presented the problem. Why should reference to a particular individual be highly sensitive? I do not understand.
Perhaps I may help the hon. Gentleman and save him from listing many examples. Under the Interpretation Act 1978, ''a person'' includes companies, so the word ''person'' does not relate only to individuals.
May I make a general point? There is a case for saying that newspapers should not publish the name of anyone who has been charged or is on trial until they have been proved guilty. It is not a strong case and would be part of a slippery slope towards the public never knowing the details. In cases in which there is a general rule of non-disclosure to the press, public or any written report, we may find that the nature of the offence being investigated and the previous record of the person involved are both so serious that a disclosure should be made in the public interest. I will not quote particular cases, but the world of business has not been without rogues and confidence tricksters operating and proving a considerable danger to the general public.
I am listening intently to the hon. Gentleman's thoughtful contribution. There are two arguments. First, it may be right to prevent the disclosure of people's names when there has been no charge, let alone a conviction. Secondly, as my hon. Friend the Member for Huntingdon mentioned, it may be sensible to prevent such disclosure because the publicity may prejudice an investigation or, more seriously, a subsequent prosecution.
That is absolutely correct, but the Bill includes a discretion, which the hon. Gentleman argued against. I am arguing in favour of the discretion because it is important for a judgment to be used at the time on whether to publish. We must look for responsible decision making on that, but on
the point of principle, to close off any possibility of protecting the public by disclosure would be wrong and would weaken the purpose of the Bill, which is essentially about consumer protection. In debating the first measure this morning, the hon. Gentleman referred to the importance that his party placed on consumer protection and so I assume that we are as one on this matter.
The clause deals with the annual report of the OFT, so it does not touch on the outcome of any individual case or investigation. If a major investigation concluded that there had been breaches, I assume that there would be any amount of reference to the facts of the case and the people involved. We are debating merely what should be contained in the annual report, which by definition is produced at a fixed point each year, and not at the end of an investigation into one particular company.
Of course, the vast majority of cases will be civil, not criminal. A civil penalty may be involved where a company, or part of its business, has been deemed on balance to be anti-competitive. In such a case, the company will have good reason to want to protect the rest of its business.
I agree. My experience of long-term ownership of businesses is that, by and large, people are honest and try to conduct their business according to the rules of the game. However, we are talking about the discretion or the right for a business to be named if the need arises. That discretion will be exercised properly and it need not hold any horrors for us at this stage. I urge the Under-Secretary to reject the amendments.
I want to deal with a particular point before I go on to other issues. Amendments Nos. 11 and 7 relate to the key issue of the word ''opinion''. The test should be as objective as possible, rather than subjective. There are many ways of looking at that. It seems to be assumed that the OFT will know everything about a company while it conducts its investigation. However, in the vast majority of cases it will not. The OFT will find out about only a small part of the company–a product that it is selling, for example–which it is investigating. The OFT may not know that by releasing certain information, it will damage another part of that company's business. The release of a particular piece of information may have a negative impact on a different product that the company is preparing.
We all agree that a disclosure is a serious matter. Does not the hon. Gentleman accept that in the event of a disclosure, extensive inquiries would have been made and the company or individual consulted beforehand about the need to publicise their name? We should give credit to those who conduct the investigation.
The hon. Gentleman makes a good point that I was about to deal with. That is what should happen, but the legislation does not provide for that. The opinion of the OFT may become irrelevant to the damaging effect of the release of the information. As the hon. Gentleman mentioned, there should be a mechanism whereby the proposed
release of the information to the public is notified to the company in advance, so that it has the opportunity to appeal. There may be circumstances in which a decision against the commercial interests of the company and the public must be debated, and there should be a forum to do that.
The wider issues also relate to the release of information.
Before the hon. Gentleman leaves that point, does he not agree that it is most unlikely that that sort of information would be released where a company co-operated fully with an OFT investigation? It should be necessary to protect consumers and other businesses from a company's actions only where it is clearly obstructing the investigation or being unco-operative.
I should like to think that the hon. Gentleman is right, but we have to consider where trials by media often emanate from, for instance. Leaks happen and companies are right to be concerned about their possible implications. It would be helpful if the Under-Secretary could clarify what rights other people or other companies have to request company information held by the OFT in either published or unpublished form. I appreciate that several other pieces of legislation are probably involved, but I should be grateful if she could help me on that issue.
Clause 7 provides for the release of information to Ministers. Once the information has crossed over from the OFT to the relevant Minister, does the status of the information change so that people have a different right of access to it? One concern is whether the Human Rights Act 1998 could be used to obtain information.
We are talking mainly about companies being regulated and breaking the law, but it is also important to talk about protecting companies, because in modern life, access to information is vital. It must be appreciated that, in other jurisdictions, particularly ones with more liberal access-to-information laws, the law is increasingly being used as a sword as much as a shield. In other words, companies are getting confidential information–
I seek clarification, Mr. Beard. Should I respond to amendments Nos. 5 to 12? I understand that we have been debating all of them.
Thank you. We agree on the importance of ensuring adequate protection of individual and business interests. However, there is a need to strike a balance between excluding information that seriously prejudices the interests of individuals and businesses and enabling the OFT to carry out its functions, such as explaining a decision fully and in context in the annual report. Clauses 4(5)(b) and 6(3)(b) in particular have been drawn to our attention. Those clauses achieve a balance,
providing adequate protection of individual and business interests without unduly impeding the OFT's provision of information and advice to the public, or its publication of reports.
On amendments Nos. 7 and 11, and the words ''in its opinion'', I may have to seek your advice about voting, Mr. Beard, because those are part of one group. The OFT is in any case bound by a duty to act reasonably. The amendment would make no difference to that duty, so I would be happy to accept amendments Nos. 7 and 11. I shall deal separately with amendments Nos. 8 and 12, which are different. For the reasons that I have given, amendments Nos. 5, 6, 9 and 10 do not add anything and I ask the Committee to oppose them.
I will try to be as helpful as I can on amendments Nos. 8 and 12. We agree that the legitimate business interests should be protected. The current provisions achieve that in many ways. They are in line with clause 235(3) and (4) although the wording and context differ slightly. We agree, however, that there may be some benefit in consistency across the clauses if the amendments are accepted.
As we said this morning, we should be constructive and aim to work together to make this a better Bill. Achieving consistency across the clauses would indeed make it better. Amendments Nos. 8 and 12 would restrict the provision only to business interests. To align the provisions fully we would want protection for non-business interests too and therefore I would be happy to consider amendments Nos. 8 and 12 further and to come back on Report with something that takes on board both the points that Opposition Members made and our need to ensure that consistency works across both business and non-business interests.
I am delighted that we are making progress on this. Of course, it would be churlish not to withdraw the amendment. I look forward to seeing the improvements that the Minister and her officials make to amendments Nos. 8 and 12. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Amendment made: No. 7, in page 2, line 34, leave out 'in its opinion'.–[Mr. Waterson.]
Clause 4, as amended, ordered to stand part of the Bill.
Clause 5 ordered to stand part of the Bill.