Clause 5 - Winding up of OFCOM on abandonment etc.

Office of Communications Bill [Lords] – in a Public Bill Committee at 4:30 pm on 5th February 2002.

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Amendment moved [this day]: No. 59, in page 4, line 34, at end insert—

'after consultation with and consideration by a Joint Committee of both Houses of Parliament.'.—[Miss McIntosh.]

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

Good afternoon, Mr. Gale, and welcome back to the Committee.

We tried to keep the debate on amendment No. 59 brief to allow a short debate on the clause and I was about to sum up on the amendment when the Committee was adjourned.

The purpose of the amendment is to ensure that it is not just the Secretary of State who decides whether Ofcom is no longer necessary and that its winding up and dissolution comes before Parliament in primary legislation. My hon. Friend the Member for Tewkesbury (Mr. Robertson) and I tabled the amendment because it is more appropriate to have consultation with and consideration by a Joint Committee of both Houses of Parliament, rather than allowing the Secretary of State to make that decision alone. A Joint Committee is more appropriate than a Select Committee of this House, of the other place or of both.

Photo of Michael Fabricant Michael Fabricant Conservative, Lichfield

I support the amendment because it would help to bring accountability back to the House of Commons. The explanatory notes to the Bill state that clause 5 allows the Secretary of State to wind up Ofcom at any time, but if that happens after 2003, she has a duty to lay a draft order before Parliament. We have heard that there is doubt about the extent and powers of the shell organisation of Ofcom and that people will be seconded to it from the existing regulators, but we do not know how long the shell Ofcom will exist because it is not clear when the communications Bill will receive Royal Assent. For that reason, I suggest that ''the end of 2003'' is an arbitrary date. In any event, there should be full consideration by a Committee, as the Select Committee on Culture, Media and Sport recommended.

I do not know whether my hon. Friend the Member for Vale of York (Miss McIntosh) will press amendment No. 59 to a Division, but it is right and proper that it should at least be discussed as a probing

amendment. I shall be interested to hear, yet again, what the Minister says. He will be aware of the Select Committee's recommendation that there should be full accountability to Parliament. However, I shall speak at greater length on this when we come to the debate on clause stand part.

Photo of Laurence Robertson Laurence Robertson Opposition Whip (Commons)

I, too, would prefer to speak on clause stand part if you allowed that, Mr. Gale, so my comments now will be brief.

Under the Bill, it will be quicker and easier to wind up Ofcom than to set it up. My concern is the possibility that other regulations may not be in place when that occurs, which would cause confusion and mayhem to regulation of the industry. For that reason, the winding up of Ofcom deserves more than just an order before the House. I shall expand on those words if we have a stand part debate.

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

As we made clear previously, the Government do not anticipate the need to use the provisions to wind up Ofcom. They are there purely as a safeguard and an assurance. The Government remain committed to having Ofcom operational by the end of 2003.

Should the Secretary of State reach the conclusion that it is no longer necessary for Ofcom to continue to exist, clause 5(3) of the Bill already makes provision for any order made by her to wind up Ofcom to be laid in draft before Parliament and approved by resolution of each House. That provision was made at the behest of the Delegated Powers and Regulatory Reform Committee of another place. In its report, the Committee said that it considered it important for there to be sufficient opportunities for Parliament to discuss the fate of Ofcom before any order was made to abolish it and that it

considers the affirmative procedure would be appropriate for this power.

I agree. In the unlikely event that the Secretary of State were ever to need to use the power to wind up Ofcom, existing provisions in the Bill would allow Parliament adequate opportunity to consider whether that was reasonable. That is why the Government oppose amendment No. 59.

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

I am grateful for the contributions made by my hon. Friends and by the Minister. In view of the fact that we shall, I hope, consider the procedures that, in the Minister's view, are more appropriate, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

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

In the very timely debate that we have just had, my hon. Friend the Member for Lichfield (Michael Fabricant) raised a point that was very supportive of the earlier argument that I made on what the transitional period should be. He helpfully referred to the end of 2003 and I agree that that should be the cut-off. I hope that we can obtain the Minister's agreement that that time scale will be strictly adhered to. I have some hesitation in accepting clause 5 as it

stands. I tabled an earlier amendment, which would have meant that the Bill would fall after one year, but the Minister felt unable to accept it and it failed. As he and the Committee will recall, he said that a period of one year from the date of the Bill being enacted was insufficient time.

I imagine that this Bill will reach the statute books in a matter of weeks but, speaking realistically, the main communications Bill might not do so until, say, June 2003. I do not think it unreasonable for my hon. Friends to seek a commitment from the Minister that, after the end of 2003, should the main communications Bill not have been introduced or should it have reached some insurmountable hurdle, he will seek to apply the draft order.

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

Perhaps the hon. Lady will explain to me why, having failed in her first attempt to impose a time limit, she is now so insistent in trying to impose another. What would happen if a terrible disaster like the events of 11 September were to occur and the House were preoccupied with legislation that we cannot even envisage right now?

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

With the greatest respect, I am only trying to help the Minister. It is his Bill that imposes a time scale, unless I am reading clause 5(2) incorrectly. It clearly states:

If . . . it appears to the Secretary of State at any time after the end of 2003.

I would prefer it to say that it should be soon after the end of 2003. However, that point has been well made and I do not wish to be repetitive. There are other issues that we wish to discuss on this final day of our proceedings.

Will the Minister clarify the affirmative procedure? I understand that to exercise any objection to an affirmative resolution, one has to enter a prayer against it within a very short time scale.

I hope that the Minister will accept those few comments in the spirit of helpfulness in which they were made.

Photo of Michael Fabricant Michael Fabricant Conservative, Lichfield

Of course I support the inclusion of clause 5. A mechanism to wind up Ofcom will be required if the communications Bill, which has not yet been published, receives Royal Assent. However, it is also right and proper to consider what would happen in the unlikely event of it not receiving Royal Assent. As the Minister said, unanticipated circumstances could arise—heaven forbid—that not only delayed its introduction, but prevented it from receiving Royal Assent.

Conservative Members support the establishment of a communications agency for all the reasons set out in the White Paper, which was preceded by the report of the Select Committee on Culture, Media and Sport. However, I want to pick up on a couple of points and raise a new point about clause 5. I agree with my hon. Friend the Member for Vale of York that

at any time after the end of 2003

should be rephrased. The word ''by'' should have been used. Whether 2003 is the date is another matter—it

could be 2004 or 2005—but there must be a sunset clause to provide some limitation. That is not in order to constrain us here in the House of Commons, but to give some reassurance to people in the industry that the Government have set themselves a realistic target for the establishment of the communications agency.

Everything that has come out of the Committee so far suggests that the Government are unclear about their timetable, about how Ofcom will be funded during the transitional stage and about how the regulatory bodies will be funded in terms of their providing people to be seconded to the shell Ofcom and of the extra work that will be required, which we discussed under clause 4.

Subsection (6) deals with the procedures that will apply in relation to the shell Ofcom's assets if—I accept that it is unlikely—it were to be wound up. Subsection 6(a) refers to the

power to provide for the transfer of property, rights and liabilities of OFCOM to the Secretary of State, to any of the existing regulators or to any other such person as may be specified in the order.

Who will be the arbiter where there is a dispute? If assets are owned by the shell Ofcom organisation, a dispute may arise from the ITC, the Department for Culture, Media and Sport or from the Department that is not represented here in Committee; the Department of Trade and Industry. Who will be the arbiter of where the liquidated assets are disposed? It is important that the Minister clarifies that.

Paragraph (b) refers to the power to provide for the property, rights and liabilities of Ofcom to be divided between different persons. There might be arguments from regulators, who could say that they will not accept liability. Who will be the arbiter? Similar questions relate to paragraph (c).

The part of the Bill that makes no attempt to address a particular problem—I wonder why, because it could have been anticipated—concerns compensation for the operating costs of Ofcom. I shall clarify what I mean. Earlier in Committee, it was established that Ofcom, in its shell form, would initially be funded either by the Treasury or by the Department of State.

Photo of Kim Howells Kim Howells Parliamentary Under-Secretary, Department for Culture, Media & Sport 4:45 pm, 5th February 2002

I have told the Committee on a number of occasions that the only source of funding will be loans made to Ofcom by the Secretary of State on behalf of the Department for Culture, Media and Sport. Either the hon. Gentleman is deaf, or he is forgetful.

Photo of Michael Fabricant Michael Fabricant Conservative, Lichfield

I thank the Minister for a customarily polite and generous intervention, for which he is known; I found it very helpful. The Minister may not be deaf or forgetful, but he has not fulfilled his promise to write me a letter, which he faithfully promised to do.

Photo of Michael Fabricant Michael Fabricant Conservative, Lichfield

He says he will. He told me that he was going to do it quickly, and that has not happened. However, he is neither forgetful nor rude, so I will not pursue that line of argument because it would be out of order.

We established that funding would be from loans. That was teased out of the Minister like a wisdom tooth; he had not volunteered the information until my hon. Friends probed him. Eventually, he told us that the money would be a loan, but was unable to tell us at what rate of interest. However, it is irrelevant whether the loan is from the Treasury, his Department or the DTI. I am grateful to the Minister for saying that it will be from his Department, but the end of the story is that it will be a loan that must be repaid.

Despite all the drafting, clause 5 makes absolutely no reference to who will repay the loan that will undoubtedly arise from the operating costs of Ofcom. Will that be a burden on the regulatory bodies, or on the bodies that are regulated? Why has that information been omitted from the clause? Is it a drafting error from the dysfunctional Department, or is it deliberate?

I appreciate that the Minister is becoming heated because the Committee has rightly exposed inconsistencies in the Bill. Proposed legislation is never perfect, which is why we have scrutiny in Committee. However, it is important in this final sitting that the Minister finally gives us real and tangible answers, rather than brief replies that are written by his officials. How are the operating costs to be dealt with? The assets and liabilities are dealt with in detail, but the operating costs are not. Why not, and who will be liable?

Photo of Laurence Robertson Laurence Robertson Opposition Whip (Commons)

I shall not add much to what I said earlier about the need for the winding-up process to be seriously considered. The customarily wide-ranging speech of my hon. Friend the Member for Lichfield covered many issues that concern us. We are setting up a body that will have potentially important duties and a large role. We need clarification on the points raised by my hon. Friend, such as what will happen to the body's assets.

The Bill gives a lot of power to the Secretary of State. I shall not go over the ground covered by my hon. Friend the Member for Lichfield, but subsection (5)(b) provides

power to make such incidental, supplemental, consequential and transitional provision as the Secretary of State thinks fit.

Will the Minister clarify whether that will include only assets, or whether it will include responsibility for regulation? I am unsure what is intended, and I do not mean to trip him up by asking the question.

On the transfer of property, liabilities, rights, interests and other things that are listed, will the Minister clarify what sort of organisation and/or person those rights and obligations would be transferred to if the other regulators were no longer to exist? Because Ofcom cannot be wound up until beyond 2003, we must assume that the other regulators will not exist.

Photo of Angela Watkinson Angela Watkinson Conservative, Upminster

I support the clause, but the power to wind up Ofcom is too great to lie with the Secretary of State. We cannot possibly know what period of time will have elapsed—it will be beyond 2003, and could be considerably beyond that—because clause 5(2) states:

at any time after the end of 2003.

It is impossible to know what will have happened to either the industry or the former regulators by that time. They may have suffered financial loss or there may have been unforeseen developments in what is a fast-moving industry. A Committee of both Houses acting as an additional brake on such a decision before it were made would be a wise precaution because both the former regulatory bodies and the industry need that protection.

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

Last week, the Committee discussed the need for a sunset provision in the Bill. Members of the Committee argued forcefully that such a provision was essential, and although the proposals that they made were inappropriate, we had a full discussion. Clause 5 will provide precisely what Opposition Members were arguing for. We do not anticipate having to use the powers provided in the clause, but it has been included in the Bill to provide a means by which Ofcom could be wound up should, for some unforeseen reason, insufficient progress be made.

Clause 5 gives the Secretary of State the power to wind up Ofcom. If it is no longer necessary for it to continue to exist, the duty to wind it up will be open to her after the end of 2003. The hon. Member for Upminster (Angela Watkinson) asked about the affirmative resolution procedure—[Interruption.] Sorry, it was the hon. Member for Vale of York. Clause 5(3) provides that no order shall be made unless a draft order has been laid before Parliament. A debate will have to take place in each House, followed by a resolution. I hope that that satisfies the hon. Lady. It is a strong power that we have considered carefully.

Other provisions allow property, other assets and liabilities to be transferred to the Secretary of State from Ofcom, the existing regulators or other specified persons. The Secretary of State will be able to provide compensation to persons who suffer loss or damage because of a decision to wind up Ofcom.

Photo of Laurence Robertson Laurence Robertson Opposition Whip (Commons)

The Minister seems to have skipped over one of my questions. After 2003, it is likely that no regulator will remain other than Ofcom. To whom would he envisage transferring assets and responsibility under those circumstances?

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

The hon. Gentleman is right to ask that question. The regulators would remain because no transfer of power would have taken place. The present five regulators, including the Department of Trade and Industry, will remain, and no powers will be transferred because Ofcom will exist only as a body, not a regulator.

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

I am missing something. I am grateful to my hon. Friends for pointing out that the Bill does not permit the transfer. The Minister says that the transfer will be provided for in the main communications Bill. Without being asked, we are told that we are going to authorise the Secretary of State to make the transfer.

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

I am sure that the hon. Lady understands that that is not true. The Secretary of State will have the power to wind up Ofcom should it not be needed; for example, if the main communications Bill fails. That is what the hon.

Lady pressed for in earlier amendments. The Bill will allow the Secretary to State to ensure that Ofcom does not remain in perpetuity.

Photo of Laurence Robertson Laurence Robertson Opposition Whip (Commons)

The Minister is trying to be helpful. Is he saying that the Secretary of State will not have the power to wind up Ofcom after existing regulators have been abolished?

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

I am saying exactly that. It will not be possible to wind up Ofcom after it takes over the regulatory functions from the existing regulators. The powers in clause 5 are confined to cases in which proposals have been abandoned or modified in a way that meant that Ofcom were no longer necessary. The provisions of clause 5 are a sensible precaution against substantial changes in the circumstances of communications regulation.

Photo of Michael Fabricant Michael Fabricant Conservative, Lichfield

Who will have to repay the operating costs?

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

The hon. Gentleman knows that the regulators are in the public sector. They are paid for by Government, except where they levy fees from those they regulate. Initially, the Secretary of State will provide loans to set up Ofcom. She must ensure that assets and any moneys paid are repaid to the Department. This is not a commercial deal and does not involve an outside bank or body. The Secretary of State will have to make the decision because Government resources are involved and, ultimately, the DTI and DCMS will have to decide on how best to use those resources.

Photo of Anne McIntosh Anne McIntosh Shadow Spokesperson (Culture, Media and Sport) 5:00 pm, 5th February 2002

I notice that, quite late on, an amendment has been tabled to delete clause 7(5). Can the Minister explain the relationship of that amendment to our discussion? I am worried that the Government will run into difficulties.

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

That is not what this debate is about. It is as unlikely as could be that the provisions will be ever needed, but they provide a necessary safeguard and should form part of the Bill for all the reasons expressed by Opposition Members.

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

I shall not go over the ground already covered, but the Minister and the Committee feel our anxiety.

Photo of Michael Fabricant Michael Fabricant Conservative, Lichfield

The Minister was helpful in his response to my intervention, but he did not explain how the shortfall will be met if disposal of the assets does not cover the cost of the loan.

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

I have as much difficulty with that point as my hon. Friend and I regret that the Committee is still in the dark.

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

The assets will not be disposed of. They are paid for by taxpayers. The Secretary of State, ultimately, is responsible for disbursal of the funds and loans. He or she will decide at the time how best those moneys and resources should be used. I hope that the hon. Lady understands my answer.

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

That is clearer than the Minister's previous answer. I think that my hon. Friend the

Member for Lichfield was trying to say that the money should revert to the industry whence it came.

Photo of Michael Fabricant Michael Fabricant Conservative, Lichfield

No, because at the stage of the shell organisation the regulatory bodies will still exist. Taxpayers will have given money to the shell organisation for buildings and so on, but there will be operating costs also. If the shell organisation were dissolved—we accept that that is unlikely—and the assets and buildings were disposed of, but the total cost of the assets and operating costs was greater than what can be recovered from liquidating the shell organisation, there would be a shortfall. Will taxpayers ultimately pick up the bill, or will the cost be forwarded to the regulators, and thence to the people they regulate? That has not been made clear.

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

My hon. Friend makes a pertinent point and I am sorry that I was so slow to get there.

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

May I confirm for the third time that taxpayers will pick up the costs?

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

Right. This is a matter to which we want to return and I give notice of that. I hoped that the Minister could give us a timetable for the transfer of the assets.

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

Yes, and I shall do so again. I shall not give up so easily. I want to know what the timetable will be for the transition phase and the final phase, but it is appropriate to return to that at a later stage.

Question put and agreed to.

Clause 5 ordered to stand part of the Bill

Photo of Michael Fabricant Michael Fabricant Conservative, Lichfield

On a point of order, Mr. Gale. You are an experienced Chairman and I would like some clarification. When a husband and wife are not speaking, they may ask questions of each other through an intermediary. Is it normal in Committee for an hon. Member such as myself to have to ask the Minister questions through my hon. Friend, who then has the Minister intervening to answer them?

Photo of Roger Gale Roger Gale Vice-Chair, Conservative Party

I am not entirely sure that that is a genuine point of order. It is up to the Member who has the Floor to decide whether to give way to a Member who is seeking to intervene, and it is up to the Member who is intervening to make his point briefly. It is not up to the Chair at all.Clause 6 Interpretation