HC Deb 08 July 1998 vol 315 cc1169-73
Mr. Nigel Griffiths

I beg to move amendment No. 69, in page 53, line 38, leave out 'which'.

Mr. Deputy Speaker (Sir Alan Haselhurst)

With this, it will be convenient to discuss Government amendments Nos. 70 to 72, 11, 16, 26, 15, 28 to 32, and 38.

Mr. Griffiths

These are minor and tidying amendments. Government amendments Nos. 69, 70, 71 and 72 tighten the definition of "trading practices" in relation to the European economic area regulated markets, and bring it into line with the definition of practices in relation to recognised investment exchanges in the Financial Services Act 1986.

Government amendments Nos. 11 and 15 tidy up a matter which was dealt with in Committee. Clause 50, which was inserted in Committee, enables the Secretary of State by order to provide for any provision of part I to apply in relation to land or vertical agreements, with such modifications as may be prescribed.

Government amendments Nos. 16, 26, 28 to 32 and 38 are minor, and are part of the overhaul of the transitional provisions. I hope that the House will accept the amendments.

Amendment agreed to.

Amendments made: No. 70, in page 53, line 39, after '(a)', insert 'which'.

No. 71, in page 53, line 41, leave out '(b)' and insert 'and which'.

No. 72, in page 53, line 43, after '(c)', insert 'which'.—[Mr. Nigel Griffiths.]

9.45 pm
Mr. Redwood

I beg to move amendment No. 6, in page 53, leave out lines 44 to 49.

Mr. Deputy Speaker

With this, it will be convenient to discuss amendment No. 51, in page 54, line 37, leave out from beginning of line to end of line 6 on page 55.

Mr. Redwood

It was a pity that the Minister of State, in responding to my intervention in the previous debate, chose to make a crude and inaccurate political point during what was meant to be a civilised exchange to elicit information about whether The Times was in a dominant position under different definitions.

The Minister of State alleged that the Opposition are keen to water down the competition legislation, and that, by implication, we favour anti-competitive practices. One of the principal purposes of this amendment is to show that the contrary is true. As we argued in Committee, so we argue on the Floor of the House; we believe that, in several important respects, the Bill is sadly lacking. It does not have sufficient bite to deal with potential abuses of the marketplace by monopolies. Indeed, the Bill could be more accurately called the competition and protection of monopolies Bill, particularly if one looks at schedule 3 and the enormous loophole it contains. That is what we are trying to excise with our amendment.

The House will know that I have declared two interests and my wife's interest in the Register of Members' Interests. The House should know that I am not furthering those interests by anything that I say or do in these debates.

Mr. Nigel Griffiths

The right hon. Gentleman must clarify the statement he made in Committee on 21 May. He said: The Minister must know that our case against the Bill is that it is either unnecessary or premature …we are against it in principle."—[Official Report, Standing Committee G, 21 May 1998; c. 48.]

Mr. Redwood

That is quite right. We made it clear that we are against the Bill because we do not think that it fulfils what the Government say is a joint aim, which is to have a strong and fair competition policy in our country. We have said that we do not think that the Bill can fulfil the Government's aim of clarifying between European and British law and avoiding double jeopardy. We do not think that it would sharpen the attack of the British competition authorities on those revenue-producing monopolies that are most undesirable.

I am conscious, Mr. Deputy Speaker, that at this relatively late hour you will want me to keep strictly in order. With the Under-Secretary's agreement, I shall deal with the words that we are seeking to excise from the schedule.

We wish to leave out paragraph 4 of schedule 3 on page 53. It might be for the convenience of the House, since not all hon. Members have the schedule before them, to remind the House of the words. It is headed: Services of general economic interest etc. It states: Neither the Chapter I prohibition nor the Chapter II prohibition"— the two effective prohibitions that the legislation is about— applies to an undertaking entrusted with the operation of services of general economic interest or having the character of a revenue-producing monopoly in so far as the prohibition would obstruct the performance, in law or in fact, of the particular tasks assigned to that undertaking. I accept that the last line and a half offers some limitation on what is otherwise a breathtakingly wide definition of exceptions. However, I think that it would be possible for clever lawyers operating for revenue monopolies or even companies with a dominant position who claim that they have a general economic interest that they are delivering through their services, to draw the attention of the courts to the big loophole in the legislation. Some will doubtless use it to good effect.

In Committee, we moved a specific amendment to try to improve competition in the water industry. The Opposition are strongly committed to the idea that water services could be improved, and that water prices could be lowered if proper competition was introduced into the industry. We had an interesting debate in Committee, and I was delighted that the Under-Secretary expressed some sympathy for the general thrust of my argument about the need for more competition in the industry.

It is well known that the Labour Government have been critical of the standards and practices of some in that industry, and of some companies in the industry. The Opposition are no friend of poor services or of anti-competitive practices. We would like to see rapid progress in the case of water. It is one very big example where we think that paragraph 4 of schedule 3 would make the Under-Secretary's task more difficult in the courts, and perhaps in persuading his colleagues in the Government that some action should be taken. Indeed, with the Bill before the House, this is the obvious time, and the Bill is the obvious vehicle, to make the water industry more competitive, but the Government seem to want to throw away that heaven-sent opportunity, and they voted against our amendment accordingly.

I urge the Under-Secretary, even at this late stage, to see the wisdom of removing the words that we seek to excise from the Bill, or tabling another amendment so that the words will not be as damaging as I fear they could be. We must think again.

Dr. Ladyman

How nice it is to be arguing with the right hon. Gentleman again, rather than with my hon. Friends. The right hon. Gentleman said that the last line and a half of paragraph 4 provide some limitation. If he means the words beginning "in so far as", they provide an absolute limitation on the schedule. Why does he not believe that?

Mr. Redwood

There is nothing absolute about those words. They provide limited circumstances for the competition authorities to counter-argue that a monopoly is going too far. They are limited, because the monopoly could always say that, if it were not allowed to continue with its price fixing or special agreement or deal, it could no longer fulfil the tasks assigned to it.

If a water company wanted to defend a particular agreement or pricing practice, it would argue that it could no longer supply clean water in the required quantities to all households. That would be a serious threat, and the court might believe the company, because it is the monopoly producer. It presumably has some credibility, and knows whether it can provide water on different bases. The court might judge that the company was right, and allow it to continue its anti-competitive practice.

How much better it would be if there were a market test for that practice. If another company could enter the market and provide a better service without such a restriction, it would be allowed to do so, and it would not be possible to argue through the courts in defence of the restrictive practice or the special agreement.

I was pleased, after my recent discussion of the subject in Committee, to discover that some leading companies in the water industry agree that more competition could be introduced, and that they might benefit because they are active and innovative. They believe that if there were more freedom in the market, they might be beneficiaries. That is a good sign that there would be an entirely positive response to more competition. In that case—I could think of many others—we should like the words in the amendment removed, or modified by the Government's statements, so that there is scope for introducing competition.

Before the House votes on whether to retain the words, we should also learn a little from the Government about what services they have it in mind to exempt under this wide-ranging paragraph. They must have had something in mind when they drafted it.

In Committee, it was suggested that such words are found in the treaty, so they had to be found in the Bill, but I am sure that the Government have done a little more research and thinking than that. The Bill creates a British law for British markets, as we have often argued, so we need the Government to tell us what would be permissible by way of a general economic interest service or a revenue-producing monopoly to exempt companies from the otherwise sensible provisions of the Bill and earlier competition legislation.

I am sure that my hon. Friend the Member for South Cambridgeshire (Mr. Lansley) will eloquently argue the case on his amendment No. 51, which attempts to test out or achieve something similar on the Bill's other substantial loophole, which relates to public policy. The House is owed an explanation of how often the public policy rubric would be used, and why we need it as well as the conditions of revenue-producing monopoly and general economic services, which might cover similar cases. Certainly the cases that I have in mind could be covered by either of those conditions.

I am sure that my hon. Friend has tabled his amendment partly to test out the exclusion and how wide it will be. The competition authority and the Bill will be very weak if those large loopholes remain and are generally used, so we shall urge the House to vote for the amendments.

Mr. Lansley

I am grateful for the opportunity to support my right hon. Friend the Member for Wokingham (Mr. Redwood) on amendment No. 6, and to speak briefly to amendment No. 51, which would delete from schedule 3 paragraph 7, relating to issues of public policy. I want to add a few points in relation to paragraph 4, which relates to services of general economic interest.

My right hon. Friend is right to say that, in Committee, there was speculation about the purposes for which the Government were proposing paragraph 4. It was suggested—I confess that I cannot remember by whom—that the paragraph was inserted at the request, or at the behest, of the Post Office, which, in United Kingdom circumstances, may be regarded as both a service "of general economic interest" and "a revenue-producing monopoly". That raises the question whether, in any case, the Post Office would be allowed to carry on its activity without infringing a chapter 1 prohibition by virtue of paragraph (5), which relates to a legal requirement, as, if the Post Office is obliged by legal requirement to provide a universal service at a uniform tariff, it might be exempted for that reason.

My right hon. Friend is right to say that the Government have taken that path ostensibly, as argued in Committee, because there is parallel text in the treaty on European Union: article 90. However, we should reconsider the matter, not only to repeat the argument that my right hon. Friend eloquently made about the desirability of promoting competition and not giving the Government a let-out to protect monopolies when it suits them, but to question in this context—as I believe was not done in Committee—whether, even in their terms, the Government have gone about the process of introducing article 90 into the UK context appropriately. I question that, for three reasons.

First, it is obvious that the Government have not gone about the process appropriately in the context of article 90, which consists of three limbs. Limb 1 makes it clear that one is talking about public undertakings and undertakings to which member states grant special or exclusive rights. That rubric, which introduces article 90 and makes clear the circumstances in which article 90 and questions of services of general economic interest are to be interpreted, is not carried through into schedule 3 or paragraph (4).

As a result, it is not obvious, in the context of the language used in paragraph (4), that we are dealing with essentially public undertakings, or those that exercise public functions. We are simply talking about services of general economic interest or revenue-producing monopolies, entrusted—the paragraph does not say by whom—with the operation of those services, and where the "particular tasks" are "assigned to that undertaking." Again, the paragraph does not say who assigns those particular tasks. It is all implied that it is the state that assigns those tasks. In the context of the treaty, it is perfectly clear, under article 90, that the tasks are assigned by the state, but that is not carried through into the Bill.

The second problem is the manner in which the Bill is constructed. It would be tedious of me to go on about the form of the language, but essentially there is a difference between the form of article 90, which effectively applies the rules except in so far as that would obstruct the performance of the duties, and that of paragraph 4, which disapplies the rules except in so far as the prohibition would obstruct the performance of those tasks.

It is not simply a case of asking whether the bottle is half full or half empty. It is important in law that the prohibitions are applied, but with limits—as distinct from the prohibitions being disapplied, except in so far as they could be reapplied, as it were. That may, in practice, come to be quite a different distinction, and the Minister did not address that in Committee.

A third matter is that, in the context of article 90, the paragraph has a final sentence, which is not carried through into paragraph 4. That sentence reads: The development of trade must not be affected to such an extent as would be contrary to the interests of the Community. I understand why the Government have not tried to carry that sentence through into the Bill: it would not make sense, in the context of UK domestic legislation, to talk about the interests of the Community. They could have left that out, and said that the development of trade must not be affected to an extent that would be contrary to the public interest. They could apply an overall public interest test.

In the Community context, the protection that is offered to member states should not be allowed to go so far as to hinder trade unduly, but the Government have not taken that important factor into account. I appreciate that the Government should not look at the widespread application of the measure in the way that, for example, the EU contemplates the protection of tobacco or alcohol monopolies in some member states. However, it is important to know under what circumstances the Government wish to proceed.

Amendment No. 51, which deals with public policy, is more straightforward. By their own admission, the Government have introduced paragraph 7 as a catch-all, or perhaps I should say a catch-nothing, because in Committee—