Clause 3 - Management of OFCOM

Office of Communications Bill [Lords] – in a Public Bill Committee at 10:30 am on 5th February 2002.

Alert me about debates like this

Question proposed [31 January], That the clause stand part of the Bill.

Question again proposed.

Photo of Anne McIntosh Anne McIntosh Shadow Spokesperson (Culture, Media and Sport)

I regret that this is our last day, but I am sure that Committee members will contain their disappointment about the fact that we are not to convene after today.

The clause is about the management of Ofcom. We are disappointed that we did not succeed in gaining the Committee's agreement to decisions being made public, so I shall take this opportunity to examine how Ofcom should manage its affairs.

The clause and the explanatory notes—I shall quote from the clause—tell us that Ofcom shall

''in managing their affairs, have regard . . . to such general guidance concerning the management of the affairs of public bodies as OFCOM consider appropriate; and . . . subject to any such guidance and only to the extent that they may reasonably be regarded as applicable in relation to a statutory corporation, to generally accepted principles of good corporate governance''.

It is appropriate that the reference to those principles has been added.

The White Paper states in chapter 8, on page 77, that

''OFCOM will ensure that regulation is effective.''

We should take the opportunity to define and discuss what ''effective'' means and should be for the purposes of Ofcom. The White Paper continues:

''To achieve this aim it''—


''will develop and maintain the necessary regulatory rules, in full consultation with industry and representatives of citizens and consumers''.

Clause 3 does not specify how that consultation will take place. We are then told that those rules will be developed

''within a broad framework of guiding principles established in statute'', and that there are to be

''transparent and effective appeals processes.''

Good management is required to achieve all that, and the management will need to follow good management principles.

The White Paper tells us that Ofcom's

''work on content issues should take into account a wide variety of interests and reach consensual judgements. It will resolve any conflicts between its content-related objectives and its other objectives in a clear and transparent way . . . the quality of its staff will be vital to the delivery of its functions. It will require sufficient managerial and financial flexibility to retain and recruit the necessary highly skilled managerial and professional personnel in competitive labour markets.''

The Minister helpfully told us—it seems some time ago—that

''There are currently 1,111 employees among the five regulators, and the total cost is £118 million.''—[Official Report, Standing Committee E, 29 January 2002; c. 115.]

Some of the regulators are larger employers than others, with the Radio Authority being the smallest. I assume that £118 million is the figure for one year. As we are debating the management of Ofcom, I would like to question the Minister further about precisely how many staff he envisages the new regulator having. I will return to that in a moment.

At page 80, the White Paper states that Ofcom

''will operate in accordance with the best principles of corporate governance''— as referred to in clause 3—''and better regulation.'' We should therefore consider the principles of better regulation. On page 13 of the report of the better regulation taskforce, which I obtained from the Library, the principles of good regulation are set out in a checklist. Outlining the principle of transparency—a theme that is referred to in several different reports—the taskforce's list states:

''The case for a regulation should be clearly made and the purpose clearly communicated. Proper consultation should take place before creating and implementing a regulation . . . Regulations should be simple and clear and come with guidance in plain English.''

On the principle of accountability, the list states:

''Regulators . . . should be clearly accountable to government and citizens and to parliaments and assemblies.''

The Committee has already debated those matters to some extent. The list continues:

''There should be a well-publicised, accessible, fair and efficient appeals procedure.''

On that point, the Opposition have been disappointed. The Bill does not tell us what publicity will be given to the new body's decisions, how accessible the management and the board will be, or what the appeals procedure will be. We would like the Minister to elaborate on those subjects.

Under the heading of proportionality, the better regulation taskforce states that

''Compliance should be affordable to those regulated—regulators should 'think small first'.''

That probably applies to all the activities of Government. The taskforce goes on:

''As far as possible, a light regulatory touch is used, with strict penalties when failures occur.''

The Opposition tabled a deregulatory amendment, but unfortunately it has not been selected for debate. Among those who have contacted us about the Bill there is a groundswell of opinion that it should emphasise a light regulatory touch. However, we are not told how such a light touch is to be achieved, or what strict penalties will apply when failures occur.

The better regulation taskforce also refers to consistency, stating that

''New regulations should be consistent with existing regulations.''

That is acutely important. The Bill is silent on how Ofcom, working with the existing regulators, is to ensure that the new regulations are consistent. In my view, the new regulations should replace the existing ones rather than coexist with them. The taskforce also states that

''Departmental regulators should be consistent with each other.''

The Bill fails to define the relationship between the two relevant Departments and Ofcom in terms of the management of the regulator. It is also silent on the responsibilities of the two Departments in monitoring the shadow Ofcom.

Photo of Kim Howells Kim Howells Parliamentary Under-Secretary, Department for Culture, Media & Sport

I would like confirm that, as I said in a previous debate, the relationship between the Department of Trade and Industry, the Department for Culture, Media and Sport and Ofcom will be nothing less than harmonious and productive.

Photo of Anne McIntosh Anne McIntosh Shadow Spokesperson (Culture, Media and Sport)

That will certainly make me sleep easier at night. However, it is important not only that their relations should be harmonious but that the Bill should specify their precise nature.

The final principle that the better regulation taskforce sets out is targeting. First, it states that:

''Regulations should be aimed at the problem and avoid a scattergun approach . . . Where possible, a goals-based approach should be used, with the enforcers and those being regulated given flexibility in deciding how best to achieve clear, unambiguous targets.''

Again, we come back to consultation. Ofcom is to prepare for its main task of replacing the regulators under the shadow of the imminent communications Bill, but we are not told what the relationship between Ofcom and the regulators is to be. The Minister did not respond warmly, coolly or even lukewarmly when I expressed the fear that for a year or 18 months we will have six regulators—the existing five plus Ofcom—rather than the existing five being replaced by Ofcom.

Photo of Kim Howells Kim Howells Parliamentary Under-Secretary, Department for Culture, Media & Sport

I must have tried to reassure the Committee on this point on 10 or 12 occasions. If the hon. Lady reads the Bill, she will see that the creature that we are creating will have no regulatory powers until Royal Assent is given to the communications Bill, when the transfer becomes complete.

Photo of Anne McIntosh Anne McIntosh Shadow Spokesperson (Culture, Media and Sport)

Is the Minister suggesting that Ofcom is to have no relationship with the existing regulators? That is what I was saying, albeit apparently not as directly or eloquently as the Minister wanted. If Ofcom is to have a relationship with the five regulators, we ought to know how it will be organised.

Secondly, on targeting, the taskforce says:

''Where possible, a goals-based approach should be used, with enforcers and those being regulated given flexibility in deciding how best to achieve clear, unambiguous targets.''

Thirdly, it states:

''Regulations should be reviewed from time to time to test whether they are still necessary and effective. If not, they should be modified or eliminated.''

I hope that the Minister will confirm that will be one of the management requirements of clause 3. The better regulation taskforce helpfully elaborates on what is intended.

The explanatory notes, at paragraph 18, state:

''Guidance on the running of public bodies includes that provided by the Cabinet Office, for example the Guidance on Codes of Practice for Board Members of Public Bodies (February 2000). Principles of good corporate governance are set out in the Combined Code published by the Committee on Corporate Governance in June 1998, which combines the provisions of the Cadbury and Greenbury codes on corporate governance with Committee's own work. Since guidance on the management of public bodies is more likely to be relevant to OFCOM, it will take precedence over principles of good corporate governance.''

That begs the question. What does the guidance on codes of practice tell us? Although the explanatory notes are helpful in other respects, neither they nor the Bill elaborate.

I have obtained from the Library a copy of ''Guidance on Codes of Practice for Board Members of Public Bodies''. It sets out a model code of practice for board members of executive non-departmental public bodies and similar organisations. It is intended to provide a framework, which the public bodies concerned should use. They should agree necessary modifications with their sponsoring Department—there are two sponsoring Departments for the Bill—to take account of their own characteristics and circumstances.

The guidance sets out several principles of good practice, the first of which relates to public service values. When the Minister sums up, will he confirm that the Government intend such values to apply in clause 3? The guidance states:

''Public bodies and their boards must at all times . . . observe the highest standards of propriety involving impartiality, integrity and objectivity in relation to the stewardship of public funds and the management of the bodies concerned''.

They should also ''maximise value for money'', a theme to which I shall return. Several of the regulators and of those regulated have said that they are less concerned that Ofcom will not give value for money, than that it will not seek the most economical and efficient way forward or apply cost-saving measures, as Opposition Members hope it will.

In keeping with the guidance, Ofcom should also ''be accountable to Parliament'' and to ''users of services''. We have had several representations from those who are not satisfied that Ofcom will be accountable to them. Ofcom should also be accountable to

''individual citizens and staff for the activities of the bodies concerned, their stewardship of public funds and the extent to which key performance targets and objectives have been met.''

The guidance goes on to say that public bodies must,

''in accordance with Government policy on openness, comply fully with the principles of the Citizen's Charter and the Code of Practice on Access to Government Information.''

The key paragraph sets out guidance on the relationship with the sponsor Department. It states:

''The Minister of the relevant department is answerable to Parliament for the policies and performance of all public bodies sponsored by the department, including their use of resources and the policy framework within which they operate. The respective roles of the sponsor department and the public body should be set out in a Framework Document, Management Statement or agreed Memorandum of Understanding. In the case of grant-aided bodies, this information should be supplemented by a Financial Memorandum specifying the terms on which the body receives and spends its funds.''

That raises an important question, especially in connection with clause 3. Does the paving Bill constitute one of the documents mentioned in the guidance? Should there be, or is there, a framework document that complies with the specification in the guidance? We require satisfaction from the Minister because although the guidance is clear on the issue, clause 3 and the explanatory notes are silent about it. I therefore welcome this opportunity to question him and to seek satisfaction.

The guidance goes on to refer to the role of the chairman, saying:

''The chairman has particular responsibility for providing effective strategic leadership'' on certain matters. He

''should ensure that the board meets at regular intervals throughout the year'', which begs the question of how often it should meet. The guidance continues:

''Communications between the board and the Minister of the sponsor department''— or Departments, in Ofcom's case—

''will normally be through the chairman except where the board has agreed that an individual member should act on its behalf.''

Like, I am sure, other Committee members, I have received several representations from those who are deeply concerned that the Bill does not elaborate on any of those points. The guidance states that

''The chairman should ensure that all members of the board, when taking up office, are fully briefed on the terms of their appointment and on their duties, rights and responsibilities.''

It proceeds to deal with the corporate responsibilities of board members, strategic planning and control, delegation on the part of board members who serve part-time, the responsibilities of individual board members and the handling of conflicts of interest.

The key issue is that we must know whether the paving Bill is meant to act as

''a Framework Document, Management Statement or agreed Memorandum of Understanding''.

Is there a framework document or, indeed, should there be one? Should an appropriate body, such as the Select Committees that shadow the Department for Culture Media and Sport and the Department of Trade and Industry, have the opportunity to review that provision?

I mentioned that we have received several representations from external bodies. I would like to share their concerns with the Committee. In connection with clause 3, ITV welcomes the logic of the merger of the five regulators to address the unnecessary regulatory overlap. However, it goes on to warn of the danger that Ofcom will become an

umbrella body for the existing five regulators, for the reasons that I set out last week. ITV also believes that a small board of swift and effective decision makers is a good thing in a fast-moving industry.

ITV believes that a duty should be placed on Ofcom to consult the industry about any internal working arrangements and structures that it proposes to create. Although ITV supports the need for Ofcom to have the flexibility to adapt its organisational structure, it says that it is important that the industry is given an early opportunity to comment on any initial blueprint. As I mentioned earlier, the requirement for such consultations is set out in both the better regulation taskforce report and the explanatory notes.

Photo of Kim Howells Kim Howells Parliamentary Under-Secretary, Department for Culture, Media & Sport 10:45 am, 5th February 2002

Will the hon. Lady tell the Committee whether this new demand for a small, dynamic board came before or after the sumptuous Carlton lunch? I seem to recall that before that lunch, the hon. Lady was calling for a huge board comprising people with all sorts of expertise? The Committee deserves to know the answer to that question.

Photo of Anne McIntosh Anne McIntosh Shadow Spokesperson (Culture, Media and Sport)

I welcome that question. The Minister, as ever, shows a keen interest in the Opposition's modest and humble submissions. He will recall that, before the said lunch, we tabled an amendment requesting the deletion of the reference to a minimum of between three and six members of the board. I am sure that the record will show that we wanted a ''lean, mean fighting machine'' for regulating. We tabled that amendment because we believed that the Government's global power to enlarge the board to a maximum number not specified in the Bill should be limited.

The Minister will recall that, because he is a very bright chap. I am looking forward to meeting him tomorrow in different circumstances, in the Committee considering a statutory instrument on Apsley house. I shall work on that subject after this sitting.

We believed that a maximum of 10 board members fitted in with our philosophy of a small board. The Minister will have received even more representations than we have. He would have been wise to accept our amendment, which changed the maximum number of board members to 10, to put down a marker that he does not want Ofcom to have an unwieldy, unmanageable board. I am most grateful to him for that intervention.

I was talking about ITV's views on the need for Ofcom to consult. The Minister will appreciate that it is not my intention to act as an advocate for any particular company or organisation that either is subject to the present regulatory scheme or will be subject to the scheme that will eventually be introduced under the communications Bill. However, ITV has a good point. The better regulation taskforce states that

''Proper consultation should take place before creating and implementing a regulation.''

Photo of Mr Brian White Mr Brian White Labour, North East Milton Keynes

As the hon. Lady knows, I chair an organisation called EURIM—the European Informatics Market group—

of which the hon. Member for Esher and Walton (Mr. Taylor) is also a member. We have been holding discussions with the industry, civil servants and parliamentarians, bringing various aspects of the communications Bill together. Consultations have been going on for months, and companies such as ITV, Sky and the BBC are involved. Is the hon. Lady aware that what she is asking for is already happening?

Photo of Anne McIntosh Anne McIntosh Shadow Spokesperson (Culture, Media and Sport)

I do not have the hon. Gentleman's wealth and breadth of experience, but something must be wrong if ITV writes to us highlighting concern about the absence of consultation, when the better regulation taskforce, with which the Government are only too familiar, says that it is needed.

A further comment by ITV is that in its regulatory approach Ofcom should have an explicit duty to observe the guidelines issued by the better regulation taskforce to ensure that regulations are necessary, fair, effective and affordable and that they enjoy a broad degree of public support. Its concluding comment on the subject is that all regulatory activity undertaken by Ofcom must accord with the five principles set out by the better regulation taskforce.

As for the introduction of new regulations, given that the functions of the regulator will be conferred on Ofcom by the anticipated communications Bill, ITV is keen that the Office of Communications Bill should facilitate a more effective transition to a single regulatory framework. Its view is that the resources of Ofcom should be sufficient to recruit and retain the best staff with expertise in all necessary fields, but that Ofcom should also be required to produce clear costings and budgets, and that the regulated industries should be consulted on whether they consider the level of expenditure to be appropriate. Ofcom should also stipulate how it intends to raise funds from the regulated industries: any proposed formula should be published for consultation with affected parties before it is adopted.

The Minister must be moved by ITV's argument because it reflects all that has been said by the better regulation taskforce. The Towers Perrin report, too, refers to management practices, best practice, professional development, competition and implications. Chapter 8 of the report—which was commissioned by the five existing regulators—states, on page 27:

''There is a distinct job for OFCOM to think strategically about the communications sector and develop joined-up policy. This is an output OFCOM needs to deliver.

Communications Strategy and Policy would be small in headcount but equal in weight to the other four areas.

It would comprise no more than 25-30 people excluding its contact centre function. It would be responsible for working with all the operating units to develop a coherent strategic understanding of the Communications sector environment, its markets, consumers/audiences and technology, and in the light of this understanding and OFCOM's objectives to ensure policy is made in an integrated way across specialisms. It would develop a coherent approach to decision-making. It is this framework which will allow OFCOM, where necessary, to trade-off its more complex objectives in a clear and consistent fashion.''

Early in our consideration of the Bill, the Minister referred most eloquently to the report, which I imagine was rather expensive, that was prepared for and presented to the regulators' steering group, yet the Bill is silent on the issues that those concerned wanted raised. It is important that we consider the responses to the report of some of those who are subject to regulation.

BT said that it would be preferable to compare the five regulators and identify best practice for each process, but better still would be a zero-based approach to build new processes appropriate for a converged sector. BT believes that efficiency savings could come from many aspects of Ofcom by reviewing working practices and creating efficiencies, and especially by dealing with similar issues in the same functional area, rather than spreading expertise more thinly across directorates.

BT goes on to say that the Government introduced the Competition Act 1998 to prevent anti-competitive behaviour by the threatened use of severe penalties. However the Bill is silent about penalties. BT says that, two years on, Oftel has made little progress in deciding in what markets or market sectors the 1998 Act would be an effective substitute for such rules. BT has already said that the existence of that Act powers creates the risk of divergence between Ofcom and the Office of Fair Trading, which could lead to different standards in the application of competition law across the UK industry. It states that those concerns are greatly increased by the proposals made by Towers Perrin. I do not entirely agree with that, but it is incumbent on the Bill to pay some regard to that.

BT also says that although the report is unclear, it appears that competition law will be applied by at least three separate directorates of Ofcom. As we speak, we do not know what the structure of Ofcom will be. BT says that that will introduce a further significant risk of additional divergence between the various communications market sectors.

On professional development, BT tells us that Oftel has said that it has to do more work to define the circumstances in which competition law powers are more appropriate than central rules, and goes on to say that Ofcom will need to create an environment wherein professionals can work across a wide range of economic and competition issues, learning from each other and keeping fully up to date with both UK and European developments across the whole communications spectrum.

BT then says that secondments in both directions will benefit the UK industry, as lessons learned would be lessons shared. It recommends that institutional arrangements should be put in place to ensure a common approach to economic analysis and competition law throughout Ofcom, and between Ofcom and the OFT. BT says that that could be achieved by the creation of a new directorate inside Ofcom to deal with economic analysis and competition law, wherein major economic and

competition law analyses would be worked out. It would be interesting to hear the Minister's comments on that.

I have also received representations from NTL, which says that Ofcom will have enormous scope and power, so it will be vital to ensure the right objectives and the promotion of the long-term interest of consumers wherever possible through the promotion of competition as defined in the legislation. It goes on to say that creating Ofcom now presents an opportunity to produce a better result and to streamline regulatory decision making.

NTL supports the creation of a cross-thinking regulator that brings together the strengths of the existing regulators and drops the biases that can sometimes produce poor, inconsistent, or ill thought-out decisions. It is dismayed that there is no suggestion in the Towers Perrin report that the proposed structure will lead to any efficiencies or economies of scale.

In concluding my few preliminary remarks—[Hon. Members: ''No!''] Regrettably, the clause raises more questions than it answers. Will the Minister confirm that the management of Ofcom will meet the principles that I have described, and that there will be in-depth consultation with those who are about to be regulated as well as with the existing five regulators, which are dealt with in the next clause?

Will the Minister also confirm that there will be a framework document, which will be published separately, and that there will be an opportunity for one or both relevant Select Committees to consider it? He might like to say not only that the relationship will be harmonious, but that there will a specific relationship between the two Departments and Ofcom. Will one Minister be charged with the relationship with Ofcom, and if so, from which Department will he come? How often will we hear about Ofcom in the House?

I quote again Minister's comment at our previous sitting:

''There are currently 1,111 employees among the five regulators, and the total cost is £118 million.''—[Official Report, Standing Committee E, 29 January 2002; c. 115.]

Is it his intention that costs will be reduced and limited, even during the transitional shadow Ofcom period, before Ofcom takes over the running of the five regulators? Does he imagine that staff will be recruited on the open market, or does he intend that they will simply be seconded for a short-term contract with a view to moving to Ofcom in the long term?

Photo of Ian Taylor Ian Taylor Conservative, Esher and Walton 11:00 am, 5th February 2002

For the Minister's benefit, I should declare a lack of interest—a lack of interest in me by Carlton. I was not invited to its lunch. There is nothing like being an ex-Minister: not only does the Mondeo stop, but lunches cease as well. I give that gentle warning so that he will ensure that he gives birth to a splendid Ofcom.

My hon. Friend the Member for Vale of York (Miss McIntosh) has excelled herself this morning. She has gone well beyond a normal probing speech and has thrown shafts of enlightenment on to the possible

management of Ofcom. The Committee should be grateful to her for the opportunity to explore one or two questions relating to the impending management.

The opening phrase of the clause is striking. It reads:

''OFCOM shall, in managing their affairs'', although, as the Minister said , there will be no affairs in one sense until the communications Bill receives Royal Assent later this year, or next year. We are in a strange world. Clearly, the paving Bill for the ultimate Ofcom envisages affairs, but we are not to know what those will be until we have the substantive Bill later in the year.

That is an intriguing dilemma. None the less, it is right that affairs, whatever they are, are properly managed according to the right principles. Perhaps a more important question is what the culture will be. Will pulling together the existing agencies be merely a bolt-together job, with each retaining departments and offices, or will the culture of Ofcom be genuinely radical, in which case the whole culture of management and attitude will change?

Much of the Committee's time has been spent on broadcasting, but communications in their broader sense are more intriguing. What we consider to be ''broadcasting'' in the context of television is merely part of the content of communications these days. Soon, one will be able to receive video streams and get audiovisual reception via mobile phones, television sets and many other platforms. That will require a different culture, rather than merely requiring people to come from a discrete agency into a new, enlarged body, Ofcom.

There have been some differences between the agencies in the past, and I am worried that they will not gel under radical thinking. There are also some technical differences. The Radiocommunications Agency is on a separate path because it comes under the Secretary of State for Trade and Industry and is a next steps agency; that means that Ministers have more direct responsibility for it than for the ITC or the Radio Authority.

I was never a Minister in the higher echelons—or any other part—of the Department for Culture, Media and Sport, so I do not know its culture but, as the Minister said, Department of Trade and Industry Ministers have always attempted to have a good relationship with that Department. For the Minister's benefit, I stress the word ''attempted.''

Some key decisions will have to be taken when forming the management to tackle Ofcom's affairs, and I hope that the Minister ensures that the challenge is met, because I would not want Ofcom to be created as a bolting-together exercise. Unless we seize the opportunity for a radical new approach, incorporating responsibilities and seeking new opportunities to stimulate competition in communications, we shall not make the right advances, and the forthcoming communications Bill will be undermined.

Photo of Mr Simon Thomas Mr Simon Thomas Plaid Cymru, Ceredigion

I am trying to understand how the present regulators fit into Ofcom and how we shall ensure answerability in the intervening period before the communications Bill

comes into force. When hon. Members table questions about the management of Ofcom in that intervening period, will the Minister reply or will their questions be passed on to Ofcom?

Photo of Ian Taylor Ian Taylor Conservative, Esher and Walton

That is an extremely astute question, and I suspect that no one knows the answer to it.

Photo of Kim Howells Kim Howells Parliamentary Under-Secretary, Department for Culture, Media & Sport

Let me assure the hon. Members for Esher and Walton and for Ceredigion (Mr. Thomas) that I will get lumbered with answering those questions.

Photo of Ian Taylor Ian Taylor Conservative, Esher and Walton

That is not the answer. The Minister may be called to account at the Dispatch Box, but agency status means that a body can engage in direct communication with Members of Parliament—unless the Minister is going to tell us that the rules have changed since I was a Minister. That is why it was such a shrewd question. The Director General of Telecommunications would not have expected me to answer for him in the House of Commons, even though I had overall responsibility for competition policy in telecommunications. That is an important distinction—[Interruption.] The Minister is nodding, although I do not know whether he is nodding at me. That interesting intervention has allowed us to clarify an important line of communication and ministerial responsibility, so I am grateful to both hon. Gentlemen.

Transparency and public awareness of the decision-making process will be of interest not only to the companies involved, but to the wider public. A point was made earlier about salaries and costs. I do not want to make a public expenditure commitment, but I hope that we understand that it is best to have the best people in the regulator for the communications industry, rather than those who have not cut it in their professional or media-driven lives. Salaries will have to be commensurate with the degree of ability that we want to attract.

It will be important to have a free flow of new talent into Ofcom, rather than simply transferring staff from the existing agencies. After all, the new body will be regulating a fast-moving industry, and technical skills will be as necessary as an understanding of regulatory skills. I am not overly concerned with the size of the board—size is not everything. I am more interested in the culture and entrepreneurial spirit.

Light-touch regulation can be defined in different ways, depending on which part of the spectrum one comes from. My understanding is that it means ensuring that regulation and competition policy gel. We never really applied the competition elements of articles 85 and 86—if I am wrong about those numbers, I am sure that everyone knows which ones I mean—of the treaty of Rome to United Kingdom competition law, because we were slightly worried about the European connotations. I lost all the arguments in favour of doing so when I was at the Department of Trade and Industry. Nevertheless, the Labour Government have introduced them.

A stable competitive environment ensures that people are able to make investment decisions without finding that the regulator is trying to uplift them. It also ensures that the regulator, in its management approach, tries to stimulate investment instead of indulging in short-termist apparent protection of the consumer. For example, it will be interesting to see how Oftel reacts to any announcement that BT might make about ADSL pricing and rollout. That is a key question if we are to achieve some of the objectives of the broadband stakeholders group. I know that the Government are well aware that as a country we are slipping behind in meeting our broadband targets.

Those are interesting matters for the Minister to mull over. Will there be a real change in management culture?

Photo of Michael Fabricant Michael Fabricant Conservative, Lichfield 11:15 am, 5th February 2002

I have been following my hon. Friend's discourse with considerable interest. As he will know, I have just come from a hearing of the Select Committee on Culture, Media and Sport, which has been interviewing representatives of BT. At the interview, Sir Christopher Bland, the chairman of BT, said that he felt that Ofcom would be helped if it were responsible to just one Minister, and that the division of responsibilities between the Department of Trade and Industry was a hindrance. In light of my hon. Friend's earlier remarks that broadcasting is a part of communication and not the other way round, what is his view on the matter?

Photo of Ian Taylor Ian Taylor Conservative, Esher and Walton

I happen to share Sir Christopher Bland's view. It is interesting that the portfolio that I held during the previous Conservative Government, if we can throw our minds back that far, was subsequently divided into three. That created further problems. As I hinted earlier, responsibilities for key areas have always been split between the Department of Trade and Industry and what was, in my day, the Department of National Heritage. It was a mistake that music, of which I was in charge at the DTI, was subsequently transferred to the DCMS. We could have a debate on that, but you would certainly not allow it, Miss Widdecombe. However, I hope that you will allow me to take an intervention from the Minister.

Photo of Kim Howells Kim Howells Parliamentary Under-Secretary, Department for Culture, Media & Sport

I rise on a point of information. [Interruption.] However, I am told that we do not do that in Committee. I shall sit down.

Photo of Ian Taylor Ian Taylor Conservative, Esher and Walton

I am open-mouthed with astonishment. I thought that the Minister was going to give me some information.

Photo of Kim Howells Kim Howells Parliamentary Under-Secretary, Department for Culture, Media & Sport

The DTI still retains responsibility for intellectual property rights, and the DCMS is responsible for music. The terrible splits that occurred under the previous Administration are still here.

Photo of Ian Taylor Ian Taylor Conservative, Esher and Walton

As a former DTI Minister, the hon. Gentleman will know that most DTI Ministers firmly believe that they hold all intellectual property. They are also responsible for it.

As evidenced by the intervention of my hon. Friend the Member for Lichfield (Michael Fabricant), and as I outlined in what I said about culture, in a changing world one cannot split things off and have different lines of command. Intellectual property is vital to safeguarding investment in content. Without that investment, insufficient numbers of consumers will be attracted. People will not invest in something that they feel is not secure.

It is not just a matter of ensuring stability in this country. I know that the Minister has been fighting hard through the WTO to defend intellectual property in countries that have been less than good at defending it, such as Italy, the Czech Republic, India and. until now—hopefully—China.

Photo of Kim Howells Kim Howells Parliamentary Under-Secretary, Department for Culture, Media & Sport

I agree with every word that that the hon. Gentleman says. His words are important. The great problem is that, until now, the regulators have often had different views about the protection of intellectual property, despite the fact that it is the lifeblood of so many creative industries, including the new industries. The most important point about Ofcom is that it will have a single view on how we should deal with intellectual property once the Bill is enacted.

Photo of Ann Widdecombe Ann Widdecombe Conservative, Maidstone and The Weald

Order. Before the hon. Member for Esher and Walton is tempted to reply to that in detail, I draw the Committee back to the scope of the clause, which certainly does not include the matters now under discussion. Whereas it is perfectly possible for an intervention to include the giving of information, it is not proper for interventions to lead the Committee down paths that are not under consideration. The hon. Gentleman will, I am sure, take that carefully into account.

Photo of Ian Taylor Ian Taylor Conservative, Esher and Walton

Waving your glasses at me like that, Miss Widdecombe, means that I am very apprised of the dangers. Another reason why I must not attempt to answer the Minister is that it would be a slight role reversal. I shall not be tempted further.

Photo of Anne McIntosh Anne McIntosh Shadow Spokesperson (Culture, Media and Sport)

I would hate to tempt my hon. Friend down any path that was not strictly within order. Does he not believe that the Minister has the opportunity to specify the relationships between Ofcom and Oftel and between the DTI and the DCMS on competition policy without going down the specific route of intellectual property?

Photo of Ann Widdecombe Ann Widdecombe Conservative, Maidstone and The Weald

Order. The issue of the relationship between Ofcom and other bodies has been thoroughly debated on earlier clauses, including debates on some of the hon. Lady's amendments. It will not be debated again.

Photo of Ian Taylor Ian Taylor Conservative, Esher and Walton

I will not be tempted by my hon. Friend. However, the debates to which she refers go to the heart of our debate on management, which is the subject of clause 3.

It is crucial that Ofcom is able to conduct its affairs properly. We need to get it right because if we are merely bolting together the existing agencies with a supervisory board, I doubt that we shall ever make the

progress that the country needs in this modern digital communications era. The culture must change. We must get rid of the old demarcations and mould the agencies together. How that might affect ministerial influence and power and answerability is the subject for another debate. It is crucial that we tackle the management issue early. I hope that the Minister will respond positively.

Photo of Kim Howells Kim Howells Parliamentary Under-Secretary, Department for Culture, Media & Sport

I am very grateful to the hon. Member for Vale of York for her comprehensive recitation—page after page of it—of the lobbying material sent to her by private companies that may or may not have treated her to sumptuous lunches. For example, we heard that she was prepared to snatch from the starving lips of Mr. Clive Jones and Mr. Michael Green of cash-strapped Carlton the very last crumbs that they had to offer.

I assure the hon. Lady that we made it clear in the communications White Paper that Ofcom would be expected to operate under the best principles of good governance. Clause 3 places Ofcom under a duty to have regard to such guidance on the management of the affairs of public bodies as appropriate. I emphasise that when we refer to good governance, we are thinking of the commercial principles of good corporate governance as far as they are relevant to a statutory corporation such as Ofcom, but also, and perhaps more important, to guidance on the conduct of public bodies, again in so far as they are relevant to Ofcom. It seems to us that the guidance on the management of public bodies is more likely to be relevant to Ofcom. Hence, it takes precedence in the clause.

Photo of Laurence Robertson Laurence Robertson Opposition Whip (Commons)

Does the Minister consider that the final words, ''as Ofcom considers appropriate'' weaken the clause? I know that the research paper is not an official document, but it says that the clause does not appear to limit Ofcom very much, since it has only to follow the general guidance on public bodies as it considers appropriate.

Photo of Kim Howells Kim Howells Parliamentary Under-Secretary, Department for Culture, Media & Sport

No, I do not, and I shall try to make my case. The main source of guidance to which Ofcom will need to have regard is that issued by the Cabinet Office for the use of public bodies; in particular the guidance on codes of practice for board members of public bodies. That guidance sets out the need for board members of public bodies such as Ofcom to follow the seven principles of public life, which I shall not rehearse again.

Photo of Anne McIntosh Anne McIntosh Shadow Spokesperson (Culture, Media and Sport)

We have spent some time discussing the principles. We need to know how they apply to the Bill and how, in particular, clause 3 encapsulates them. I have asked about the number of staff, whether they will be seconded, whether they will be sought on the open market and whether there should be a framework document. We need an answer to those questions.

Photo of Kim Howells Kim Howells Parliamentary Under-Secretary, Department for Culture, Media & Sport

If we look at the guidance on codes of practice for board members of public bodies, we shall see the answers clearly. The guidance states the need

for board members of public bodies, such as Ofcom, to follow the seven principles of public life, which many Conservative Members are keen to see applied.

As Ofcom will be a statutory corporation, clause 3 also places it under a duty to have regard to generally accepted principles of good governance, to the extent that such principles could reasonably be regarded as applicable to a statutory corporation. Those principles are currently set out in the combined code, published by the Committee of Corporate Governance, which combines the Cadbury and the Greenbury codes with the Committee's guidance.

The clause will require Ofcom to operate in a responsible and transparent way. The hon. Member for Vale of York laid a great deal of stress on the need for that. I made it clear earlier that we expect that to include ensuring that a publicly available register of members' interests is kept. That, too, is a requirement of the Cabinet Office guidance. The Committee will have noticed that the schedule contains provisions about the governance of Ofcom, including those regarding conflicts of interest, recording decisions and the publication of procedural amendments.

Clause 3 provides that Ofcom will operate in accordance with the highest principles of good management and public service.

Photo of Anne McIntosh Anne McIntosh Shadow Spokesperson (Culture, Media and Sport)

It is not good that we have heard the Minister repeat what I said the principles were without relating how the principles of the better regulation taskforce and the rules of the Cabinet Office should apply here. I stand by the questions that I have asked. The Government, whether in the person of the Minister or of one of his colleagues, did better in their response to Select Committee report, which said that the Government considered it vital, not least on grounds of public accountability, for the internal structure of the new regulator to be set out in the legislation giving effect to the proposals in the White Paper, rather than being left to the governing body of the new regulator to determine. That is precisely what the Minister seems to be saying he wants to do. The Select Committee recommended that the legislation establish a mechanism to provide for greater lay involvement in content regulation than in competition regulation and create a distinct body, within the new regulator, responsible for radio.

Photo of Michael Fabricant Michael Fabricant Conservative, Lichfield

My hon. Friend raises an interesting point. She mentioned the Select Committee. May I draw to her attention that, in written evidence, Sir Christopher Bland, the new chairman of BT, has said that he is concerned that the main provisions of the Ofcom Bill should not be developed in the closed environment of Whitehall, as they might look good on paper but fail in practice? Is this not an example of that very issue?

Photo of Anne McIntosh Anne McIntosh Shadow Spokesperson (Culture, Media and Sport)

I am grateful to my hon. Friend. The purpose of the short time that we have spent scrutinising the Bill is to define what mechanism there should be—in particular for the governing body and the new regulator, Ofcom—to manage itself. It is

deeply disappointing that while we have had a lively debate, the Minister fails to respond. The Government response to the conclusions in the report of the Culture, Media and Sport Committee stated:

''The Government is creating in OFCOM a convergent regulator to deal with fast-changing markets. It will operate within a clear framework of duties''.

We still do not know, after the Minister's derisory and disappointing summing up, whether there is to be a framework agreement or whether what is proposed will be subject to parliamentary approval. He is being very coy.

We are also told by the Government that the powers will be ''agreed by Parliament'', but this is the last chance that Parliament will have to agree on the management structure. Similarly, with regard to the underpinning

''by a framework of general duties'' we still do not know what those general duties will be. According to the Government,

''OFCOM as an organisation will need substantial flexibility in the way in which it implements these statutory functions, if it is to be well placed to respond to rapid changes in the market and in the public interest issues which arise from these.''

We still do not know what level of flexibility is envisaged. We are being asked to give a blank cheque with respect to its managerial role, its structure and its staffing numbers. That is not just disappointing; it is unacceptable.

The Government response continues:

''These are strong arguments for leaving the details of the internal structure of OFCOM to its Board, and avoiding unnecessary rigidity.''

How does the Minister respond to the real concerns raised by BT, NTL and ITV that I have raised today?

Photo of Glenda Jackson Glenda Jackson Labour, Hampstead and Highgate 11:30 am, 5th February 2002

Is the hon. Lady really praying in aid that same BT whose share price—like that of its most recently-formed offshoot, mmO2—we have seen consistently falling? The hon. Member for Lichfield also prayed in aid BT, and the hon. Lady prayed in aid ITV, although I understand from an earlier discussion that her party was concerned that regional ITV was losing not only its advertising share, but its audience. Perhaps the hon. Lady is looking in the wrong direction for support.

Photo of Anne McIntosh Anne McIntosh Shadow Spokesperson (Culture, Media and Sport)

I am sure that the hon. Lady was in the Room when I said that it was not for me to advocate these arguments, but simply to put them forward. I have put my interest in BT on the record. I am a shareholder and, as a spin-off, I now own mmO2 shares, so I have suffered a double money loss. The important point is that we are in Committee for a very short time to scrutinise primary legislation. This is the only opportunity that we shall ever have to discuss the framework of Ofcom before it departs on a frolic of its own to set up its internal structure. I understand that Parliament, whether by way of a Committee providing pre-legislative scrutiny or any of the Select Committees in this House or another place, will have no opportunity to consider that matter.

Photo of Michael Fabricant Michael Fabricant Conservative, Lichfield

BT gave evidence that its debt is falling, so my hon. Friend's investment in it may prove wise. Does she agree that it is better to take advice from those who work in the industry—particularly when similar advice is being given by NTSL, NTL and similar organisations that are in competition with BT—than to take advice from failed actresses?

Photo of Ann Widdecombe Ann Widdecombe Conservative, Maidstone and The Weald

Order. Before the hon. Member for Vale of York is tempted even remotely to answer that intervention, I remind the Committee of what we are discussing. We are not discussing the investments of the hon. Member for Vale of York, or the performance of BT. We are discussing strictly how Ofcom should manage its affairs. Will the hon. Lady confine her remarks to that? The Chair is beginning to lose patience.

Photo of Anne McIntosh Anne McIntosh Shadow Spokesperson (Culture, Media and Sport)

I am grateful for that explanation. The Government said:

''This general approach has been widely adopted in the development of regulatory arrangements for other sectors.''

I do not understand why the Government have failed, in response to this fulsome debate, to answer our questions on what arrangements were being made to recruit staff and whether those staff would be recruited on the open market. Those are legitimate questions. They were raised by several of those who made representations to us, who, because this Committee does not operate like a Select Committee, are unable to put their arguments themselves. Pages 15 and 16 of the Towers Perrin report show the exact staffing levels. As I mentioned, the Radio Authority was found to be one of the smallest employers. The largest employer is the Radiocommunications Agency, which has 631 staff.

Photo of Angela Watkinson Angela Watkinson Conservative, Upminster

Does my hon. Friend agree that it is essential to establish clear lines of communication between the Ofcom board, the Minister, Ofcom management and its substructure of committees and the existing regulators, so that everybody knows exactly to whom they are responsible, to whom they are to report and whom they must keep informed?

Photo of Anne McIntosh Anne McIntosh Shadow Spokesperson (Culture, Media and Sport)

That is the key to the clause. It is short and very silent on the issues raised by my hon. Friend. This is the only opportunity we have to consider the interim structure. I do not believe that it is appropriate to leave the entire interim organisation of Ofcom to the new regulator itself. We will consider the costings elsewhere, but will the Radiocommunications Agency, which currently employs 631 staff, second some of them? Will Oftel, which employs 241 staff, keep a large number of its current employees because it will be working in conjunction with Ofcom? The clause is silent on that. The ITC currently employs 172 people, the Radio Authority employs 47 and the British Broadcasting Standards Commission employs 20. It is legitimate to ask how many staff Ofcom will manage overall, and to question the extent of Ofcom's scope to achieve economies in the exercise of its duties.

The Towers Perrin report assumes that all existing activities will be continued. Is that the case, or will Ofcom look for synergies and common approaches? There is a need to establish working relationships with the Office of Fair Trading. We still do not know what those relationships will be. It is also important that the existing regulators should be able to cease to perform regulatory activities that are no longer necessary. Economy should be exercised in the engagement of external consultants—

Photo of Ann Widdecombe Ann Widdecombe Conservative, Maidstone and The Weald

Order. It seems to me that the issues that the hon. Lady is raising relate to amendment No. 66, which has not been selected for debate. I have now had to ask the Committee on several occasions to confine itself to the scope of the clause under discussion. I have given considerable latitude, but I will not do so any more. Will the hon. Lady please bring her remarks within the scope of the clause?

Photo of Anne McIntosh Anne McIntosh Shadow Spokesperson (Culture, Media and Sport)

I am grateful for those strictures, Miss Widdecombe. In conclusion, the debate, which covered some relevant ground, has established that the Cabinet Office rules take precedence over accepted principles of good corporate governance. I regret that Ofcom will be permitted to issue such general guidance with regard to its own affairs, without regard to Parliament or those who are regulated, and seemingly without regard to the other regulators. I conclude our debate on the clause with immense disappointment.

Question put and agreed to.

Clause 3 ordered to stand part of the Bill.

Photo of Ann Widdecombe Ann Widdecombe Conservative, Maidstone and The Weald

Before we come to clause 4, I want to make some general comments. We have only limited time to bring our deliberations to a conclusion. I give latitude in the course of debates, because I know that it can allow for a more coherent debate if a Chairman lets one touch on matters that strictly belong to other parts of the Bill. However, the previous debate abused that latitude considerably.

We should not redebate issues. We should not debate issues that have not been selected for debate by the Chairman. If the debate on the group of amendments that I shall now call goes wider than it should, it will prejudice a stand part debate on clause 4. I ask hon. Members to be aware of that.