Lords Sitting of 25 November 1997

Preamble
The House met at half-past two of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Exeter.

The Lord Bishop of Bradford
David James, Lord Bishop of Bradford—Was (in the usual manner) introduced between the Lord Bishop of Norwich and the Lord Bishop of Ely.
The Earl of Verulam—Took the Oath.

War Veterans
2.45 p.m.
Lord Molloy Lord Molloy asked Her Majesty's Government:
What action they will take in support of war veterans who in later life develop disabilities as a result of injuries suffered whilst on active service.
The Parliamentary Under-Secretary of State, Department of Social Security (Baroness Hollis of Heigham): My Lords, under the generous provisions of the War Pensions Scheme, awards may be made at any time after the termination of service in respect of any disablement due to service in the Armed Forces. Where a claim is made more than seven years after the termination of service, the claimant is given the benefit of any reasonable doubt as to whether the disablement is due to service.
Lord Molloy: My Lords, I am grateful to my noble friend for her reply, which is partially welcome. It is proving extremely costly to the Royal British Legion in terms of consultation and representation fees when these cases have to come to court. Many ex-servicemen would not be receiving pensions if it were not for the Royal British Legion. I am sure that all Members of the House applaud the endeavours of the Royal British Legion.
Noble Lords: Hear, hear!
Lord Molloy: My Lords, if my noble friend were able to make a financial contribution, we should be most grateful.
Baroness Hollis of Heigham: My Lords, I am not sure if I am being asked to make a personal contribution or a government one. I am not sure that I can afford a personal contribution; and I am not sure whether I should be allowed to offer a government one.
I do not think anyone would dissent from the comments of my noble friend. Not only are war pensioners greatly indebted, but the country as a whole is greatly indebted, to the work of the Royal British
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Legion and the Royal British Legion (Scotland) on behalf of people who, through illness or injury, are often unable to be their own best advocates.
The Countess of Mar: My Lords, is it not the case that the Royal British Legion is having to fight for veterans of various wars, mainly because medical and service records are missing? Can the Minister say whether Her Majesty's Government have learnt the lessons of the Gulf War and previous wars with regard to medical records and whether they will ensure that in future all medical records relating to servicemen are retained until their death?
Baroness Hollis of Heigham: My Lords, the noble Countess has correctly raised the serious question of records with defence Ministers because it is a matter for them. The lack of adequate records and therefore of adequate evidence has often hampered the MoD in dealing not only with Gulf veterans but with other cases as well. That is why on 14th July my ministerial colleagues, led by Dr. John Reid in another place, announced a package of measures relating to Gulf veterans, among which the quality of record-keeping was a matter of highest priority.
Lord Campbell of Alloway: My Lords, was there not at some time a six-year rule relating to the destruction of records? If so, has that been abrogated?
Baroness Hollis of Heigham: My Lords, I am not aware of that rule. If I can provide any information on that matter to the noble Lord, I shall certainly write to him.
Lord Burnham: My Lords, in view of the demise of the service hospitals, what action has been taken by Her Majesty's Government to maintain the priority of treatment for war pensioners which was promised by statute and which has been maintained by successive governments since World War I?
Baroness Hollis of Heigham: My Lords, the noble Lord is right to say that, all things being equal, war service pensioners have priority of treatment within NHS hospitals as a result of the negotiations in 1948. That agreement is respected and observed and NHS hospitals were reminded by circular recently that they are expected to respect it.
The Earl of Carlisle: My Lords, is the noble Baroness aware that when a serviceman or servicewoman leaves the service he or she must have a medical test? Those tests are often of a very perfunctory nature. Will she make representations to her opposite number in the Ministry of Defence to review the system so that full medical inspections are carried out when the serviceman or servicewoman leaves the service?
Baroness Hollis of Heigham: My Lords, I shall discuss this issue with my colleagues in the MoD. If the situation is as presented by the noble Lord, we shall try to see that the matter is properly reviewed.
Lord Molloy: My Lords, I thank my noble friend for her comments and am grateful to her for her

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consideration. Will she consider having discussions with the Royal British Legion? That is the organisation which best knows the ins and outs of the difficult cases that it is trying to help. My noble friend would be made extremely welcome because we feel that she sympathises with us.
Baroness Hollis of Heigham: My Lords, it will come as no surprise to my noble friend Lord Molloy that I see the Royal British Legion, the Royal British Legion (Scotland) and the other ex-service organisations on a regular and frequent basis. I suspect that I have had at least two or three meetings since the summer with RBL, both of a formal and informal nature. My predecessor, the noble Lord, Lord Mackay of Ardbrecknish, would be the first to say that the RBL is not backward in coming forward when there are issues affecting the service community that it feels should be drawn to a Minister's attention.

Student Fees in Scotland
2.51 p.m.
Baroness Carnegy of Lour Baroness Carnegy of Lour asked Her Majesty's Government:
What legal advice they received before making their decision on tuition fees for non-Scottish United Kingdom students taking honours degrees at Scottish universities.
The Parliamentary Under-Secretary of State, Scottish Office (Lord Sewel): My Lords, it is not the practice to reveal internal legal advice on any matter.
Baroness Carnegy of Lour: My Lords, with due respect, I did not ask the noble Lord where the legal advice came from; I asked whether the Government had had any legal advice. It is a Question that I asked on 4th November. I received no reply then and I have had no letter since. Is it possible for the Minister to tell us now whether the arrangements we are discussing are legal under the Maastricht Treaty, the equal opportunities Act, the Race Relations Act and the European Convention on Human Rights?
Lord Sewel: My Lords, I recognise the interest that the noble Baroness takes in this matter, which she has raised before. I regret that I am forced back to my original Answer, that it is not the practice to reveal the internal advice that the Government receive. The Question the noble Baroness asks specifically says,
"What legal advice they received".
I must stick by the terms of my original Answer.
Lord Taylor of Gryfe: My Lords, can my noble friend say whether it would be right and proper for other organisations, such as the National Union of Students, to take this matter to the European courts? In addition to seeking legal advice, has the Minister taken the
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opportunity to discuss with his colleague in the other place the expression of view, which was universal in this House, condemning this specific practice?
Lord Sewel: My Lords, I do not believe that the view was universal. When I participated in that debate in your Lordships' House, contributions came from both sides of the question. On my noble friend's first point, it is clearly open, and rightly open, to any organisation or individual to take action in any court that is available to them to challenge the decision of government.
Lord Rawlinson of Ewell: My Lords, am I correct in believing that it is acceptable for the Minister to say whether or not he sought advice from the law officers of the Crown in Scotland on this matter? Yes or no?
Lord Sewel: My Lords, I am back to the conventional position that was accepted by previous governments. The Government do not reveal either the content of advice or whether or not they have sought it.
Lord Avebury: My Lords, does the Minister recall, in the days of the previous government, when challenges were made to some of the immigration legislation on the basis that it contravened the European Convention on Human Rights, the reply from Ministers was that they were satisfied that an adequate answer would be brought to the court if litigation occurred? Can the Minister at least say that in relation to this question?
Lord Sewel: My Lords, I can say that if there is a challenge in the court, the Government will be in a position to make their case to the court.
Lord Glenamara: My Lords, can my noble friend say whether the Government received any advice, legal or otherwise, before deciding to impose this tax of £1,000 a year on all undergraduates?
Lord Sewel: My Lords, I can assure my noble friend that the Government did indeed receive advice; what he may dispute is its quality.
Baroness Young: My Lords, does not the noble Lord recognise that his Answer is incredibly unhelpful to the House? After all, this is an extremely serious point. When this matter was raised by my noble friend Lady Carnegy in an Unstarred Question, the difference and the unfairness of treatment between English, Welsh and Northern Ireland students in Scottish universities compared with EU students—when we had all assumed that England, Wales and Northern Ireland were in the EU—was shown to be unbelievable. This stonewalling hardly contributes to settling what is an extremely worrying issue.
Lord Sewel: My Lords, I regret that the noble Baroness feels that I am stonewalling. I am bound by the conventions and practices in that the tradition is that the Government do not reveal either whether they have sought advice, whether they have received advice or the content of that legal advice. I recognise that the positions

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of both the noble Baronesses, Lady Young and Lady Carnegy, are deeply and sincerely held. Every opportunity will be available for noble Lords to make their contributions on this substantive issue when the Bill is before us.
Lord Beloff: My Lords, will the Minister answer a question of policy? Is it correct that Scottish students in turn are being discriminated against in the extent of the disallowance for parental income in awarding maintenance grants and in the disallowance of their right to a loan to meet costs when they go to English universities? Is that simply a way of separating Scotland from England once and for all?
Lord Sewel: My Lords, I am grateful to the noble Lord for raising that issue, though it may be slightly wide of the Question. I am grateful to be able to resolve the question and, in doing so, declare something of an interest in that one of my children may be attending a Scottish university next year.
I was slightly put off by the report that I read in one of the Scottish papers saying that the parental income figures would be different in Scotland than in England. When I investigated the matter, it became clear that the paper concerned had failed to distinguish between net and gross when looking at parental income. I can therefore assure the noble Lord that the figures in Scotland are the same as the figures in England and Wales. There will be no difference between Scotland and elsewhere in the United Kingdom.
Lord Mackay of Ardbrecknish: My Lords, has the Minister taken anybody's advice on this subject, lawyer or otherwise? Am I right in thinking that, whether they be Scottish or non-Scottish students, on top of the £3,000 or £4,000 they will have to pay in fees, if they come from modest backgrounds they will also run up a debt of £14,000 by the end of their four year honours degree course? Is the Minister and his party comfortable with that?
Lord Sewel: My Lords, of course the Government take advice. We have taken the advice of experts in higher education in coming forward with these proposals. We believe the proposals to be fair. We believe that they address the basic and fundamental issue that we cannot have a mass system of higher education paid for purely out of taxation. Those who benefit from higher education should be expected to make a fair and reasonable contribution. That is the aim of our proposals.
Lord Mackay of Drumadoon: My Lords, the Minister will be aware of the provisions of the Human Rights Bill, which includes a clause to the effect that, when a Minister introduces a Bill into this House, he should make a statement to the effect that in his view the provisions of the Bill are compatible with convention rights. Can the
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Minister assure the House that when he introduces the legislation relating to these proposals, he will be in a position to make such a statement?
Lord Sewel: My Lords, I do not know who will be introducing the Bill, but I am sure that whoever does so will do whatever is necessary in the terms that the noble and learned Lord outlines.
Lord Pilkington of Oxenford: My Lords, in view of the fact that the noble Lord said that the Government took advice, why did they reject in such a cursory manner the Dearing recommendations which did not suggest a policy the Government follow?
Lord Sewel: My Lords, in Scotland it was the Garrick Report rather than the Dearing Report. We took what we thought were the best and strongest parts of the Garrick Report and built upon them.
Lord Selkirk of Douglas: My Lords, would it not be easier for the Government to avoid any threat of legal challenge by spending the £1.5 million required for the English students and the £45,000 required for the Welsh students entering into these four-year degree courses? After all, these are very small sums relative to the total education budget.
Lord Sewel: My Lords, the Government are clearly prepared to withstand and rebut any legal challenge on this issue. The noble Lord again goes into areas of wider policy. He will have an opportunity to make his point when the Bill is before us.

EU: Tax Code of Conduct
3.1 p.m.
Lord Bruce of Donington Lord Bruce of Donington asked Her Majesty's Government:
What is their policy towards the proposals of the European Commission in its communication Towards tax-coordination in the European Union(COM(97)/495/Final) sent to the Council of the European Union on 6th October 1997, and whether they will indicate their responses to the four requests made at paragraph 23 of the communication.
Lord McIntosh of Haringey: My Lords, the Government deposited an Explanatory Memorandum on 17th November on the Commission communication of 5th November 1997—A Package to Tackle Harmful Tax Competition in The European Union—which superseded the document to which my noble friend refers in his Question.
The four questions posed by the Commission in its communication of 1st October sought the endorsement of the ECOFIN Council to its plans for handling the proposed package of measures to tackle harmful tax competition. The ECOFIN Council, at its 13th October meeting, discussed the Commission's communication, focusing on the code of conduct.

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The UK recognised that a voluntary code might play a helpful role in tackling harmful tax competition, but would only agree to a code that respected member states' continued competence in the field of tax. The UK and other member states called for several changes to be made to the draft code. Discussion on the code has subsequently continued in the taxation policy group and in the Council working group. We expect the harmful tax competition package to be on the table for political agreement at the 1st December meeting of the ECOFIN Council.
Lord Bruce of Donington: My Lords, I am most grateful for the noble Lord's reply and his indication of the Government's caution towards proceeding in this matter. He will doubtless be aware that for the past 21 years the European Commission has been seeking to pass measures for tax harmonisation, thereby assuming some control of fiscal matters formerly in the hands of member states. Is he also aware that I have seen the latest memorandum—COM(97)/564—which supersedes the one referred to in my Question? I should like to have the Minister's assurance that he will resist any temptation to accept the agreement with guidelines as being of little policy significance. Is he aware that these guidelines can always be referred to in the preambles and recitals to individual pieces of legislation issued by the Commission and that they are used by the courts—by the European Court in particular—as indicating the drift of the legislation? Will he therefore please give the House an assurance that he will be extra cautious before leading the country into a position where its own fiscal measures in terms of taxation can be determined by the European Commission?
Lord McIntosh of Haringey: My Lords, I hoped that I had made it clear that there is no question of the Government's taxation policy being determined by Europe. That is a matter for all member states. At the same time, I have to say to my noble friend in response to his first question that there are advantages in the harmonisation of taxes between European countries because there would otherwise be the possibility of evasion by potential taxpayers moving their assets and their liabilities from one member state to another. So we do not reject the thrust of the European Commission towards tax harmonisation. However, as I made clear in my first Answer, these matters are within the competence of member states and a code of conduct is advisory only.
Lord Lawson of Blaby: My Lords, will the Minister assure the House that the Government will resist, as indeed I resisted when I was Chancellor, the move within the Community, prompted by the Commission, for a common withholding tax? Does he not agree that if there were to be a common withholding tax the effect would simply be for capital to flow away from the European Union and into tax havens in countries outside the European Union, which would be to no one's benefit within the Union? Will they resist that proposal?
Lord McIntosh of Haringey: My Lords, I recognise the force of what the noble Lord says and his long
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standing interest in this subject. The proposals currently on the table would require member states to take action on the taxation of savings. They would have the option either to provide information—reciprocal information—or to withhold tax on interest payments. Given this choice, the United Kingdom has made it clear that it would take the first option—reciprocal information.
Lord Stoddart of Swindon: My Lords, is my noble friend aware that many people, including myself, have been very concerned about the remarks made on 20th November by M. Pierre Moscovici, the French Minister for Europe, that taxes would have to be harmonised within the next 10 years? Even if the British Government resist, is this not a further move to establish tax harmonisation through the single market, which would mean that tax harmonisation could take place by qualified majority vote and we would not have a veto?
Lord McIntosh of Haringey: My Lords, the Government are not in control of off-the-cuff statements or indeed any statements made by finance Ministers of other countries. The present position—and the only basis on which I can answer these questions—is that taxation is a matter for member states. I remind my noble friend that at the Council the question will have to be decided on the basis of unanimity.
Lord Mackay of Ardbrecknish: My Lords, am I being too suspicious when I wonder whether the decision to impose a pensions tax of £5 billion a year on pension funds has something to do with the desire to harmonise the tax on savings? Furthermore, will the so-called harmful tax competition include corporation tax? We in this country have a corporation tax level of 31 per cent. In Germany, it is 45 per cent. Will our tax be considered harmful? Will we be forced to increase it to 45 per cent.?
Lord McIntosh of Haringey: My Lords, the answer to the noble Lord's first question is, yes, he is being too suspicious. The answer to his second question is that, indeed, a lot of the thrust for the harmonisation of taxation relates to corporate taxation, but none of that implies that we can be forced to change our corporate tax levels.
The Earl of Lauderdale: My Lords, can the noble Lord tell the House whether the Government have taken or will take legal advice—
The Lord Privy Seal (Lord Richard): My Lords, I am sorry to intervene, but we have seven minutes left for the fourth Question.

Pedestrianisation: Benefits
3.9 p.m.
Lord Campbell of Croy Lord Campbell of Croy asked Her Majesty's Government:
What encouragement they are giving to proposals for pedestrianisation in city centres in the United Kingdom.
The Parliamentary Under-Secretary of State, Department of the Environment, Transport and the Regions (Baroness Hayman): My Lords, the decision to pedestrianise areas of city and town centres is a matter for individual local authorities rather than central government. The Government welcome the improved safety, convenience and environmental benefits a well-designed scheme can bring to local communities. Government advice in Planning Policy Guidance Note 6 encourages local authorities to give greater priority to pedestrians, including pedestrianisation in town centres. Detailed advice has also been given on planning, design and legal implications in Local Transport Note 1/87,Getting the Balance Right.
Lord Campbell of Croy: My Lords, I thank the noble Baroness for her reply. While such plans deserve general encouragement, has she visited some cities abroad where pedestrianisation has made the centres no-go areas for disabled people who are dependent on wheels? Will efforts be made to ensure access for vehicles for those who cannot do without them because the publicity and reports seldom mention that factor?
Baroness Hayman: My Lords, I have visited very few places since 1st May. However, the point the noble Lord makes as regards access for disabled people is very important. In the local planning guidance note we make very clear that the key to a successful scheme is that it achieves a sound balance between all users and that the authorities ensure reasonable access for disabled people. In fact, a well designed scheme can provide benefit for disabled people by reducing their exposure to traffic and extending their mobility.
Lord Berkeley: My Lords, has the Minister had time to visit the exhibition next door on the pedestrianisation proposals for Old Palace Yard and Trafalgar Square? I do not know whether any other noble Lords have had time to visit it as well. Does the Minister agree that if the scheme is implemented it will provide a much better environment for pedestrians, for tourists and for those of us who work in the area, and a much enhanced opportunity to view the wonderful buildings there? Does she agree that the key to a successful scheme is the restriction of most traffic except buses and, in some cases, taxis, as proposed?
Baroness Hayman: My Lords, I have indeed visited the exhibition. I know that other noble Lords have done so. There has been some lively debate about the two proposed schemes. I believe that the World Squares Initiative is very exciting; it could do a great deal to improve the central and historic areas of London which at the moment suffer from congestion and pollution. However, it is important, as in all pedestrianisation schemes, to get the balance right. That is why Westminster City Council, which
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is taking the lead in this area, is inviting comment and undertaking the consultation process.
Lord Inglewood: My Lords, can the noble Baroness confirm that a proper scheme for pedestrianisation must include a supporting part played by private vehicles and public transport?
Baroness Hayman: My Lords, I have made clear the importance of achieving a balance and of making sure that there are no unintended consequences of pedestrianisation. That can happen in ill-designed schemes, resulting, for example, in town centres that are empty at night or not available for people who need to use them. I believe that public transport is central to maintaining access to town centres.
Lord Avebury: My Lords, I recognise that arrangements for the pedestrianisation of Parliament Square are matters for the local authority. However, does the noble Baroness agree that there is a particular reason for both Houses of Parliament considering this matter and making sure that access to Parliament, especially for the disabled, mentioned by the noble Lord, Lord Campbell of Croy, is not denied? Is there any way in which the Government, without impinging on the prerogative of the local authority, can ensure that taxi drivers in particular are consulted about proper access for the disabled so that they can reach both Houses of Parliament?
Baroness Hayman: My Lords, I take the noble Lord's point. While it is the responsibility of local authorities, the World Squares Initiative is being led by Westminster City Council. The client group involved includes the Government Office for London, the Department for Culture, Media and Sport, English Heritage, London Transport and others. So we have very much taken on board that this issue is not simply a matter for one local authority. The senior officials of the Parliamentary Works Group sit on the steering group for the world squares study. The steering group is well aware of the needs and concerns of the House both in terms of access for Members and particularly the needs of disabled Members.

Business
Lord Carter: My Lords, at a convenient moment after 3.30 p.m. my noble friend Lord McIntosh of Haringey will, with the leave of the House, repeat a Statement that is to be made in another place on the Pre-Budget Report.

Competition Bill [H.L.]
3.15 p.m.
The Minister of State, Department of Trade and Industry (Lord Simon of Highbury): My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.
Moved, That the House do now again resolve itself into Committee.—(Lord Simon of Highbury.)
On Question, Motion agreed to.
House in Committee accordingly.
[The CHAIRMAN OF COMMITTEES in the Chair.]
Clause 49 [Rules]:
Lord Lucas Lord Lucas moved Amendment No. 191:
Page 24, line 35, leave out ("may") and insert ("shall").
The noble Lord said: I believe that the purpose of these amendments is self-evident. I shall be very grateful to hear the Minister's reaction to them. I beg to move.
Lord Simon of Highbury: I am speaking to Amendment No. 191, but I take the grouping to include Amendments Nos. 192 and 193.
Lord Fraser of Carmyllie: Perhaps the noble Lord would also like to speak to the next group of amendments, Amendments Nos. 194 to 197, because, as far as we are concerned, they are all linked.
Lord Simon of Highbury: I shall try to catch up with the speedy movement of amendments. I am always encouraged to be moved along rather than hindered. I am grateful to the noble and learned Lord for giving me this opportunity to explain to the Committee our thinking on a timetable for dealing with applications, and on giving business adequate notice of the rules and the general advice and information under Clause 50. These are important matters, and as a former businessman I am well aware of the need to give business adequate time to prepare for the application of the prohibitions.
Schedule 9 to the Bill elaborates on the kind of rules that may be made under Clause 49, although it is not binding that such matters will be covered or exhaustive. Paragraph 2 of the schedule says, among other things, that the rules may make provision for an application for a decision and an application for guidance to be dealt with according to a timetable. I can confirm to the Committee that the Secretary of State intends that the director should make rules setting himself a timetable once the system has bedded down. She has a power in Clause 49(9) to direct the director to make rules about a particular matter if she thinks he ought to do so.
Turning to the question of preparation time for business, I accept entirely that the main elements of the new regime should be in place in good time before the prohibitions are brought into effect. We would not expect to commence the prohibition clauses until about a year after Royal Assent. Early in that period I would expect the rules under Clause 49 to be made.
At this point it will be helpful for me to refer the Committee to a letter I have received from John Bridgeman, the Director-General of Fair Trading, a copy of which I have had placed in your Lordships' Library. The letter concerns his office's work, in consultation with the sectoral regulators, on drawing up rules under Clause 49 and the advice and information under Clause 50. It provides useful background to the Committee's discussion of several groups of amendments today. So far as rules are concerned, the letter explains the consultation that has begun with other sectoral regulators, and confirms the director's intention to consult with business
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and its advisers on the draft rules. He says that he aims to publish a consultation draft of the rules as soon as possible, perhaps by late spring.
Given what I have said about a year's delay to the commencement of the prohibitions, this should give business adequate time to prepare for the new regime. There will, of course, also be a transitional period for agreements, but I see that there are amendments down to that schedule to the Bill and it may be best to discuss those transitional arrangements, as opposed to the period between Royal Assent and entry into the law base of the prohibitions, later in our deliberations.
The making of rules must necessarily allow proper time for consultation and for consideration of the points raised during consultation. If for any reason the rules could not be issued early in the period after Royal Assent, I would expect the Government to consider carefully the case for delaying the commencement date for the prohibitions.
To sum up, I am satisfied that the regime will provide businesses with both adequate preparation time before the prohibitions are brought into force and with a timetable by which they can expect their applications to be dealt with once they are in force. On that basis, I ask the noble Lord whether he is prepared to withdraw his amendment. I understand that he was speaking also to Amendment No. 194.
Lord Lucas: I am extremely grateful to the Minister for that explanation and for the opportunity to go through it in detail before we return to this matter after Christmas. In the context of the time that we shall have to digest what he said which, to my mind, will require going over several times before we can understand the nuances of the various let-outs which the noble Lord has allowed himself and the Government, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 192 to 197 not moved.]
Clause 49 agreed to.
Lord Ezra Lord Ezra moved Amendment 198:
After Clause 49, insert the following new clause—
CONSUMER REPRESENTATIVE
(" . The Director shall establish an office of the consumer representative which will represent the consumer interest when he carries out his duties under this Act, and in particular will—

(a) advise the Director, when he is conducting an investigation under section 25, of the impact on consumers of any possible infringement of Chapter I or Chapter II prohibitions;

(b) advise the Director, when he is making a decision following an investigation under section 30, of the impact of such a decision on consumers;

(c) advise the Director, when he is considering granting exemptions under section 4, of the impact of such exemptions on consumers;

(d) assess the impact on consumers of exemptions granted under section 4 which he considers appropriate, and at a time which he considers appropriate; and

(e) publish the results of such assessments.").

The noble Lord said: This amendment refers to the role of consumers in the implementation of the Bill. Although it could be argued that supporting the interests

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of consumers is the fundamental objective of the legislation. nonetheless there is a feeling, particularly on the part of the National Consumer Council, that in achieving that objective of supporting the interests of consumers it would be helpful if consumers were formally involved in the process of applying the legislation. Therefore, it is proposed that within the competition office there should be some consumer representation in some form or another to enable consumers to participate in the consideration of developments which affect their interests. I very much hope that the Government will take on board this attempt to formalise the position of consumers' interests and that they will give it serious consideration. I beg to move.
Lord Borrie: I fully understand the noble Lord's references to the consumer interest. As he rightly said, the whole purpose of competitive activity is, or should be, for the benefit of the consumer. If my noble friend Lord Peston were in his place, he would no doubt be able to quote appropriately from Adam Smith's words to that effect. As the noble Lord, Lord Ezra, knows (because he has often referred to the matter in your Lordships' House), existing legislation allows some form of consumer representation with regard to the specific industry regulators dealing with gas, water and electricity. When referring to these matters on other occasions, the noble Lord has stated a preference for what I think he has called "the gas industry model" whereby the Gas Consumers' Council is independent of the regulator, which is known as Ofgas. However, when it comes to the regulation of the water industry, the consumer committee or council—I forget its correct title—is part of the organisation of the regulator; namely, Ofwat, which, as I recall, the noble Lord does not find quite so satisfactory.
I find the new clause which the noble Lord is proposing slightly odd because it refers to the type of model of consumer organisation which in those other areas the noble Lord has not previously thought the most desirable. The new clause states that the director—that is, the Director-General of Fair Trading—
"shall establish an office of the consumer representative".
That suggests that it is part of the Office of Fair Trading. The noble Lord will correct me if I am wrong.
I would question the value of the new clause on certain other matters. First, in Section 2 of the Fair Trading Act, which is the governing Act of 1973 which set up the Office of Fair Trading and that of the director general, two general duties are specified. One is pro-competition and relates to examining any business matters which might adversely affect competition, and the other, which is given equal importance, is the duty to review the economy to see whether there are any practices which are adverse to the consumer's economic interest. The director general's office contains two main policy divisions. One is concerned with competition policy and the other with consumer affairs. Therefore, in a sense, the Office of Fair Trading, unlike the organisation of the regulatory bodies for the gas, electricity and water industries, already has a consumer affairs division.
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I wonder also whether the new clause is suitably worded. It refers to,
"an office of the consumer representative".
We all like to be representative, but we cannot make someone "representative" simply by calling him such. It is a little difficult to imagine an official of a government agency, such as the Office of Fair Trading, being thought of as a representative of the consumer. I was hoping that the noble Baroness, Lady Wilcox, a former distinguished chairman of the National Consumer Council, would be in her place because—I hesitate to say this—even the NCC would not really claim to be "representative". It is a body that is appointed by appropriate Ministers.
Be that as it may, there is a choice to be made in these matters. A government official, such as the Director-General of Fair Trading—and he has a consumer affairs division—ought to consult with consumer organisations to do the various things which the noble Lord, Lord Ezra, has specified as necessary if he is to carry out his functions under this new Bill. Choice is involved as to whether the director should go direct to the Consumers Association, the National Consumer Council and the various more specialised consumer bodies which now exist, or whether he should have the consumer's point of view filtered to him through some official or some part of his own office. As I see it, that is what would happen if we were to accept the new clause in its present form.
Without, I hope, overdoing it, although I greatly sympathise with the objective of the noble Lord, Lord Ezra, who wants to ensure that the consumer's interests are well understood by those who will make decisions under the Bill and that industry and consumers are consulted about the carrying out of these functions, I am not sure that this device is the best way of achieving that objective.
Baroness Oppenheim-Barnes: I apologise for arriving a few moments late and not hearing the noble Lord, Lord Ezra. I have, however, had the pleasure of hearing the noble Lord, Lord Borrie. In the absence of my noble friend Lady Wilcox, who was my distinguished and committed successor at the National Consumer Council, I must apologise to the NCC for saying that I am very much against this type of amendment, although not so much on the grounds that were put forward by the noble Lord, Lord Borrie, who has recommended the existing bureaucracy and the way in which it works in the interest of consumers. The more he explained it the more bureaucratic it sounded. I do not blame him for that because it was our legislation that created the Office of Fair Trading.
The noble Lord, Lord Ezra, spoke about placing a poultice on to the bureaucracy (if such a mixed metaphor can be used). That is not the point at all. This Bill is near to my heart. When I dealt with these matters at the Department of Trade I certainly intended to do this. My point is far more revolutionary than either of the suggestions that have been put forward. The noble Lord, Lord Borrie, knows what I am about to say.

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I believe that the whole Bill and the criteria within it should relate only to the consumer interest and not the public interest. The public interest is too diffuse and all kinds of considerations come into decisions that may or may not be in the consumer's interest. If this is a Bill to protect consumers then the basic criteria throughout should relate solely to the consumer interest. A decision would have to be made as to what was and what was not the consumer interest. I do not believe that business or industry would have anything to fear from it. Industry knows that good consumer practices mean good business. One rarely finds among successful businesses bad consumer practices, for the simple reason that they do not pay. I do not believe that business has anything to fear from those much simplified criteria. I hope that the noble Lord will be able to take a sympathetic look at this matter when he comes to reply.
3.30 p.m.
Baroness O'Cathain: Having listened to my noble friend Lady Oppenheim-Barnes, I remain unpersuaded that the National Consumer Council's suggestion that has been so well articulated by the noble Lord, Lord Ezra, should be thrown out. Even if one had a consumer interest in the Office of Fair Trading one would have the National Consumer Council, plus the consumer associations if necessary. They have a long pedigree, working extremely hard and diligently for the consumer. They are grounded in reality. They are close to the consumer and always have the consumer interest in mind. It would have been better had the Bill focused completely on the consumer. If I recall correctly, my noble friend said that it would have been better if it had dealt with the consumer interest rather than the public interest because many matters in the public interest might not necessarily be in the consumer interest. However, in the end we have the responsibility of guarding the public interest rather than just the consumer interest. I do not believe that they necessarily conflict but there is a point to be considered here.
Further, I hope that the director general gives weight to this suggestion. Both the National Consumer Council and the Consumers Association are large organisations. They have shown an openness and willingness to have a dialogue with industry. Compared with single issue groups, which tend to be politically motivated and do not necessarily speak for consumers as a whole, I believe that there is merit in getting these organisations more closely involved within the Office of Fair Trading. It is fine to say that a public servant should have responsibility for consumer interests. I do not believe that any public servant can have the same experience vis-à-vis the consumer interest as the NCC and CA.
Lord Haskel: At the risk of disappointing my noble friend Lord Peston, who is not in his place, instead of quoting Adam Smith perhaps I may quote my right honourable friend the President of the Board of Trade,
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Margaret Beckett. In her foreword to the consultation document published with the draft Bill in August she said:
"Effective and fair competition is essential to ensure value and choice for customers".
The whole purpose of this legislation is to protect competition more effectively than we do at the moment. This will benefit UK competitiveness and, as Margaret Beckett has emphasised, it will benefit the consumer.
I say to the noble Baroness, Lady Oppenheim-Barnes, that this is a Bill concerned with competition. The consumer's interests are at the heart of this legislation. As my noble friend Lord Borrie has said, the Director General of Fair Trading must take full account of the impact on consumers in assessing whether behaviour is anti-competitive. I hope that that reassures the noble Baroness, Lady O'Cathain. The same applies under the new Bill when the director is considering whether to grant an exemption from the Chapter I prohibition. Indeed, the exemption criteria set out in Clause 9 expressly require that consumers should enjoy a fair share of the benefits. The ultimate objective of the Director General of Fair Trading's work as a competition authority is to benefit consumers. In his annual report the director describes the aim of the OFT as to protect the economic interests of consumers in the UK by safeguarding effective competition. I am therefore sure that the interests of consumers will be constantly at the forefront of the director's mind.
My fundamental objection to Amendment No. 198 is that it appears to undermine these principles. A discrete consumer representative within the OFT would be a permanent question mark over the director's willingness and ability to take proper account of all the relevant factors, particularly the consumer's interests. I have no wish to undermine the director's role in this way. Moreover, if consumer interests were to be given special representation in the OFT, would not other interest groups such as trade union interests also have a case for separate representation? More prosaically, a discrete office would require additional resources within the OFT, and it would add another layer to the decision-making process. In short, I do not think that it would be right for a body charged with the enforcement of the prohibitions to incorporate specialist interest groups. But we believe that it is absolutely crucial that the consumer has a clear voice under the new regime. The Bill ensures that this will be the case. We believe it is an essential part of a fair and transparent system that there is recourse to effective appeal. We have extended this right under the Bill to consumers.
We have therefore ensured that third parties with a sufficient interest will be able to appeal to the tribunal against decisions by the director. We have gone further to ensure that organisations representing affected consumers will be able to appeal on their behalf. There is nothing in the Bill to prevent people being appointed to the appeal tribunal panel and sitting on tribunals to hear appeals on the basis that they have a particular expertise in consumer matters. We are also including provision in Clause 56 of the Bill to facilitate private actions in the courts by those harmed by breaches of the prohibition. All of this is in the new Bill. The interests

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of the consumer are at the heart of the new prohibitions and the enforcement and appeal arrangements under the Bill will ensure that the consumer has a clear voice in their application.
I hope that what I have said will satisfy the noble Lord, Lord Ezra. Knowing that he is indeed a champion of the consumer, I hope that he will feel able to withdraw his amendment.
Lord Ezra: I thank the noble Lord for his considered reply. I am however a little concerned about its main drift, which emphasised the possibilities of an appeal. The whole point of the amendment is to get in before one has to appeal against a decision which appears to be unsatisfactory. I find it difficult to understand why the Government resist the idea of a consumer advisory body. It may be that it should not be placed within the OFT as proposed; it may be that such a body can be placed elsewhere, perhaps with the competition commission. As the noble Lord, Lord Borrie, suggested, perhaps it can be set up independently, for it to be consistent with other proposals that have been made, to be consulted during the formulation of decisions reached by the director general.
I am a little worried that the emphasis should be put on appeal being available to the consumer interests rather than on consumer interests being brought into the decision-making process. Can the noble Lord, Lord Haskel, comment on that matter?
Lord Haskel: The appeal is a failsafe mechanism to which consumers can resort if everything else goes wrong. Prior to that there are all the safeguards which I explained in my response. The Director General of Fair Trading has a special department within his office for looking after consumer interests and the appeal is a failsafe process at the very end of the line.
Lord Ezra: I would like to think very carefully about this matter. In the meantime I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Schedule 9 [Director's Rules]:
Lord Kingsland Lord Kingsland moved Amendment No. 199:
Page 67, leave out lines 44 and 45.
The noble Lord said: This amendment refers to a matter which the Opposition raised on the second day of the Committee stage. We tabled amendments to Schedules 5 and 6 which proposed removing the power of the director general to convert unilaterally an application for guidance into an application for a decision. To be consistent with that, we have to do the same thing in relation to this schedule. That is the reason for wishing to excise paragraph (c) at the bottom of page 67.
The Minister will note that in paragraph (b) the director, having issued the guidance, can thereafter relieve a company from either the impact of Chapter I or Chapter II prohibition. However, paragraph (c) is much more onerous because it concerns a company which, having requested guidance, suddenly finds half-way through consideration of that request that the
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director has decided to convert it into a full-scale application. Not only does that situation offend the Opposition's sense of sportsmanship; it also breaks the principle that, all things being equal, if an investigation is started by the director there is a proper procedure which includes warning the potential victim that the director is going to undertake the task. That is the spirit in which the amendment is tabled. I beg to move.
Lord Haskel: I speak to Amendment No. 199 together with Amendment No. 200. Amendment No. 199 relates to the director's ability to convert an application for guidance into an application for a decision. The noble Lord referred to the Opposition's sense of sportsmanship. I refer the noble Lord to my earlier response when I gave a solemn and binding undertaking to reflect upon the issue.
Lord Kingsland: I thank the noble Lord for reminding me that he agreed to reflect upon the matter. I wonder whether his reflections have yet matured.
Lord Haskel: I am afraid that my reflections have not matured. We have been reflecting on the further amendments. The result of our reflections will be put forward at the next stage of the Bill.
Lord Kingsland: In thanking the Minister for that reflective reply, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Kingsland Lord Kingsland moved Amendment No. 200:
Page 68, leave out lines 34 to 47.
The noble Lord said: The amendment corresponds to a previous amendment to Clause 10 which sought to delete subsections (5) to (8) which gave the director power to cancel an EC exemption. This power, which is reflected in our further amendment to a different part of the Bill, contradicts what we understood to be the fundamental principle behind the Bill, namely, that our domestic provisions should dovetail with the European provisions in such a way that the minimum burdens are imposed upon British industry in order to enhance competitiveness. If these provisions dovetail and if they reflect the same kinds of obligations, we do not understand why, if the EC has granted an exemption, we should second guess them. I beg to move.
Lord Haskel: The issue of dovetailing with EC regulations will arise later in the debate. Can we leave that question until we debate the whole matter on later amendments? Amendment No. 200 relates to a discussion we had on the first day of Committee in relation to Clause 10 concerning the director's ability to impose conditions with respect to parallel exemptions or to cancel them. I made it clear then that the director should be able to take action against an agreement which was exempt.
If the noble Lord withdraws the amendment we can perhaps deal with the issue of dovetailing when we discuss the later amendments.
Lord Kingsland: I understand entirely what the Minister says. I am sure he will understand that we have

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to take the amendments as we find them. We have progressed through the Bill in an orderly fashion. I do not say that the Bill repeats itself because it is extremely well drafted, but it deals with the same issue in a number of different waysthe circumstances I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Schedule 9 agreed to.
Lord Haskel: My Lords, I beg to move that the House do now resume.
Moved accordingly, and, on Question, Motion agreed to.
House resumed.

Pre-Budget Report
3.47 p.m.
Lord McIntosh of Haringey: My Lords, with the leave of the House I shall now repeat a Statement being made in another place by my right honourable friend the Chancellor of the Exchequer. The Statement is:
"The purpose of this, the first annual pre-Budget Statement, is to report the Government's assessment of the economy; to outline our Budget aims; and to encourage an informal debate on the detailed choices before us. To achieve our national economic objectives—high and stable levels of growth and employment—the next Budget must address three challenges. "The first challenge is to increase our productivity. Britain today is some 20 per cent. less productive than our main competitors and has been for years; secondly, the challenge of employment: 3.5 million working age households—almost 20 per cent—have no one earning a wage; and, thirdly, the challenge of stability. For 40 years our economy has an unenviable history, under governments of both parties, of boom and bust. Stop-go has meant higher interest rates, less investment, few successful companies and lost jobs. It has been the inevitable result of a failure to take the long-term view.
"So the real choice facing Britain in the coming Budget and beyond is between, on the one hand, muddling through as we have done for decades from one stop-go cycle to another, or, on the other hand, breaking with our past, burying short-termism and securing long-term strength through stability, sustained increases in productivity, and employment opportunity for all.
"This is not a challenge for government alone; it is a challenge that must also engage both the understanding and the commitment, and indeed, the energies of all of us, government, managers, investors, and workforce together. So at the heart of this pre-Budget report is the recognition that only by greater openness and informed debate can this country achieve that shared understanding of the tasks ahead and that shared sense of national economy purpose that has eluded us for so long.
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"First, stability: the major industrialised countries are expected to grow by 2.75 per cent. this year and 2.5 per cent. next year, despite the recent turbulence we have seen in Asian economies and financial markets. It is imperative that governments and central banks around the world remain vigilant. But it is the task of government, at all times, to ensure a long-term and stable framework, exactly the approach this Government are pursuing.
"When we came to power, the economy was already facing yet again the very pressures that have produced the boom-bust instability of the past. Consumer demand was accelerating, growing three times as fast as industrial production, as over £30 billion was released in building society windfall payments. Inflation was predicted to go far beyond its 2.5 per cent. target and expected at that time to rise towards 4 per cent. next year. All this was happening because the necessary decisions on monetary and fiscal policy had not been taken. It is because this Government have learned the lessons from past instability when interest rates rose into double figures that, starting in May, we put in place a new monetary and fiscal framework. Following our reforms at the Bank of England, long-term interest rates have come down. No one doubts the Bank of England's determination to achieve the Government's inflation target.
"With our five-year deficit reduction plan, public borrowing, which was £23 billion last year, is now forecast, excluding the windfall tax revenue, to be £12 billion this year and £6 billion next year. We said in our manifesto that we would work within existing spending limits. This we are also achieving, as we promised. The deficit has fallen from 4.5 per cent. of national income two years ago to just 1.5 per cent. this year, and 0.75 per cent. in 1998-99, well within the Maastricht criteria.
"There is a risk that the structural deficit—which takes account of the economic cycle—may turn out to be larger. So we will be both cautious and prudent, and I can tell the House we will learn the lessons of 1988 when it was wrongly assumed that the structural deficit had disappeared, and the penalty was the return of boom and bust. And while I recognise the concerns of exporters about the exchange rate, I also understand that what companies fear most is a return to the boom-bust instability of the past. So this summer and autumn, hard decisions have had to be made on both interest rates and deficit reduction and I am now more optimistic that we are on course to put the economy on track for stable and sustainable growth. And it is to reinforce our commitment to the long term that we will publish proposals for a code for fiscal stability.
"We will legislate so that there is a duty on government to report to Parliament on how they are meeting their fiscal rules. In that way everyone can plan for the future on a much clearer and better informed basis. Let me explain why meeting our fiscal rules matters so much, and why they are essential preconditions for long-term social and economic progress. It is because the borrowing levels

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we inherited are costing the country £25 billion a year in interest payments alone, which is more than our country's total budget for schools, that we had to act.
"Our aim is to reduce the huge sums spent simply servicing debt, in order that more of our money can be spent on meeting the people's priorities. The prize for this country—valued especially by a Government who are committed to good public services—is sustainable public finances that allow consistent and long-term investment in our priorities. By reallocating resources we will be investing an additional £2.3 billion in education. And this year we will invest an extra £300 million in patient care in the NHS—and next year an extra £1.2 billion—over and above that planned by the previous government.
"And I can tell the House that—as our comprehensive spending review re-allocates resources towards higher priority areas—there will be real year on year increases in spending on front-line patient care.
"The key to strong public services is long-term prosperity through higher productivity. Government, industry and people together must now work systematically to remove all barriers to productivity: in product markets through encouraging competition and innovation; in capital markets through measures to enhance growth and investment, not least for innovative small businesses; and in the workplace through encouraging the creativity and flexibility of inventors, managers and workforces.
"After our successful Budget initiative of July to encourage one of the most neglected of our creative industries—film—it is time to do more to encourage other creative industries where from science, computer software and communications to design, fashion and music, our British genius for creativity has made Britain a world leader. This year, entrepreneurs in small and medium-sized companies can draw on our £200 million doubling of capital allowances to invest in new technology. From next year the new National Endowment for Science, Technology and the Arts will make grants to encourage creative talents.
"But I can also say today that in advance of the Budget, the President of the Board of Trade and I are examining how, to improve productivity, we can help leading-edge businesses gain funds to develop new technologies; how we can improve Britain's poor record of investment in research and development; and how we can make it easier for small businesses to draw on venture capital to create jobs and a more entrepreneurial culture. And it is to encourage and reward long-term investment that we are completing a review of capital gains tax, the conclusions of which will be announced in the Budget.
"Our poor record on investment in Britain also reflects our low level of national saving. Half the adult population has hardly any savings at all. To encourage more people to save we will introduce from April 1999 new individual savings accounts, the details of which will be put out to consultation next Tuesday. But there is one decision on investment that
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should not be delayed. In July we implemented the first stage of corporate tax reform, cutting the main rate of corporation tax by 2 per cent. to 31 per cent., its lowest level ever. And, following the abolition of payable tax credits, we began to consult, as promised, on the second stage.
"Advanced corporation tax, it has become abundantly clear, is now a hindrance to sensible business planning and investment decisions. Britain needs a reformed system that matches the needs of modern companies and favours the long term. So to allow companies to plan ahead I can confirm today that in April 1999 advanced corporation tax will be abolished. At that point, we will begin the move to paying corporation tax by quarterly instalments. Small companies will be exempt from this change and special arrangements will be made for medium-sized companies. We will phase in the change over four years and we will substantially preserve companies' expectations for using their existing surplus ACT.
"This afternoon the Inland Revenue is publishing full details of the proposed changes. And we will now start consultations on their implementation. To help ease the transition, and to take one stage further our pro-business and pro-investment agenda, I can announce that in the Budget, the main rate of corporation tax will be cut again by 1 per cent. to 30 per cent. from April 1999—the lowest tax rate of any major industrialised country.
"The July Budget started from the understanding that the greatest waste of our economic potential and the most serious cause of poverty is unemployment, denying opportunity to 3.5 million working age households where no one works.
"In July we said that instead of simply compensating people for unemployment, our priority is to tackle the root causes of unemployment and poverty by providing new opportunities for work.
"In the last few months, with the help of Martin Taylor, the Government have been systematically addressing all the obstacles that prevent people taking up and benefiting from work: the absence of marketable skills; the failure of the tax and benefits system to make work worth while; the poverty and unemployment traps that for far too many mean that work does not pay; the lack of employment opportunities; and the scarcity of affordable child care.
"We have concluded that to help people move from benefits to wages, nothing less than a comprehensive tax and benefit reform and the modernisation of the welfare state is required. This strategy involves three basic elements: providing skills for work; making work pay; and creating new job opportunities.
"First, to offer skills for work, the Secretary of State for Education and Employment will shortly publish proposals for individual learning accounts and for the University for Industry. Secondly, I want everyone who can work to be better off in work than on benefit. So the Government now propose an integrated tax and benefit plan involving action at every level.

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"To maximise the rewards from work, a 10p starting rate of tax and a reform of benefit tapers will be introduced when it is prudent to do so. To ensure that work pays for families with children, we propose a working families tax credit, backed up by affordable childcare; and to ensure the rewards of these reforms flow directly to the employee we are committed to a statutory national minimum wage.
"We will now consider in detail the working families tax credit—cash paid through the wage packet directly to families on low incomes, side by side with the national minimum wage. The proposal would build on the successful elements of family credit, and involve better help through the tax system for child care costs.
"We will now also consider the future structure of national insurance for the low paid. Under the current system, some low-paid employees face marginal tax rates of over 100 per cent. To improve rewards from work, to simplify administrative burdens on employers, as we want to do, and to encourage them to take on more people, it is now right to consider the scope for bringing the national insurance structure for the low paid more closely into line with income tax.
"And finally, there are men and women who have been excluded for too long and who need extra help to get back into work. In the Budget we made a start by announcing a new deal worth £4 billion that provides jobs for young unemployed, the long-term unemployed, lone parents and the disabled.
"The new deal for the young unemployed will start in pilot form in January and extend nationwide for the young unemployed in April, with the support of some of our best known companies. I can also announce today that some of Britain's leading bus and rail companies have agreed to play their part by introducing a new travel pass for young people on our new deal, cutting by at least 50 per cent. their travel fares.
"Disabled men and women who want to should also have the right to work. As the first step in implementing the £195 million programme for people with disabilities, the Secretaries of State for Social Security and Education and Employment will be now inviting bids for the first wave of new projects to start in spring 1998.
"Helping lone parents into work is the most effective long-term way to tackle their family poverty. The new deal for lone parents began in eight areas in July. Already it is yielding results where it counts—in higher living standards for lone parent families. So from next year our welfare to work programme will be extended to help every lone parent who wants advice and help. And from April every single parent coming on to benefit will be offered help to find work if that is what she or he wants.
"Lone parents need and have a right to expect affordable childcare. Indeed, since May the Secretaries of State for Social Security and Education and Employment have been working with the
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Treasury on plans to make a reality of a national child care strategy. And, paramount in our family policy, are the interests of the child.
"Tomorrow they will announce a five-year plan to extend out-of-school childcare clubs to every community in Britain. Funds will be available to set up as many as 30,000 new out-of-school clubs, which will provide places for nearly 1 million children.
"The total cost—£300 million over five years—now budgeted for in our plans, the biggest ever investment in childcare, will be shared between the Exchequer and the new opportunities fund. To staff the new clubs 50,000 young people across Britain will be offered training as childcarers through our welfare to work programme.
"Under our plan, every lone parent who needs it will be able to find an out-of-school club in their community. A national child care strategy is no longer the ambition of workless parents. It is now the policy of this country's Government.
"Today while nearly one in five working-age households have no one working, we also have extensive skill shortages throughout our economy. The proportion of manufacturing firms reporting skill shortages is up 70 per cent. on a year ago.
"We will now introduce pilot projects nationwide under which any employer who takes on and trains a young or long-term unemployed person and keeps them on, can now receive up-front three-quarters of their new deal allocation, thus giving immediate help with training costs—in the case of young people about £1,700 and for the long-term unemployed, £1,500.
"These skill shortages are a clear sign of the short-term pressures in the economy today that have to be tackled.
"At around this point in every recovery, when inflation, and interest rates have risen, a second wave of wage inflation has brought a recurrence of stop-go instability. Past governments have allowed themselves to be diverted from their long-term aims because of their inability to deal with short-term pressures. This time we must do everything we can to make sure that the long term takes priority. It is because the last government held a simplistic and over-rigid view of the relationship between levels of inflation and levels of employment that they told us that high unemployment was a price worth paying.
"There are three reasons to believe that provided reform and responsibility go hand in hand it is possible to lay the foundations to deliver both low inflation and high employment over the long term.
"First, the more our welfare to work reforms allow the long-term unemployed to re-enter the active labour market, the more it will be possible to reduce unemployment without increasing inflationary pressures.
"Secondly, tax and benefit reforms, which remove the barriers to work, and structural reforms which promote the skills for work—in other words, government intervention to create a more responsive

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labour market—can make possible long-term increases in employment, without fuelling inflationary pressure. The more people return to the world of work, and the more we tackle skill shortages, the less pressure there is on employers to bid up wages in the short term.
"But thirdly, the reality of the more complex and flexible labour markets of Britain today is that pay decisions are made not by the few in smoke filled rooms but by millions of employees and employers across the country. And the more that we all take a long-term view of what the economy can afford, the more we will be able to have job creation and keep inflation and interest rates as low as possible. So we must all be long-termists now.
"The reforms we are introducing will take time. But it is in no one's interest if today's pay rise threatens to become tomorrow's mortgage rise. The worst form of short-termism would be to pay ourselves more today at the cost of fewer jobs tomorrow and lower living standards in the very near future. So wage responsibility is a price worth paying to achieve jobs now and prosperity in the long term. It is moderation for a purpose.
"The choice is between responsibility and reform that would give us higher growth and more jobs; and shortsighted, short-termism, which will inevitably mean less growth and fewer jobs.
"In our forecasts for the coming two years, we demonstrate clearly this choice we all face. If the economy works in the same way as in the past, growth might be 2.25 per cent. next year. But, if we can combine our reforms with responsibility across the economy it is possible to achieve growth of 2.75 per cent. next year. Similarly, growth can be 1.5 per cent. or 2 per cent. in 1999-2000. In either case the Bank of England will ensure that inflation comes down to the Government's target. So the more successful we are in tackling skill shortages and ensuring the success of the new deal and the more effective the exercise of responsibility in pay determination, the more we can achieve our goals of sustained growth and employment. I have today submitted this new evidence to the public sector pay review bodies and met their chairmen to explain the choices before us.
"Just as the Government are offering leadership with responsibility in their monetary policy and the management of the public finances so that we can achieve higher levels of growth and employment, so must business leaders and workforces match this with responsibility throughout the whole economy. This means responsibility, not just on the shopfloor but also from Britain's board rooms outwards—where, in the interests of all, there must be moderation not excess and where an example should be set.
"But we recognise that if we are to achieve our long-term goals and secure a new sense of economic purpose, then fairness and openness must be at the heart of the approach to every Budget. Tax avoidance harms those who pay their fair share of taxes. I give notice today that the Budget will introduce those measures which are needed to root out tax avoidance.
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"A fair and open approach to taxation will also be central to our Budget consultations now under way—on North Sea oil, on alcohol and tobacco where the review will conclude early next year, and on charities where the review is working towards a consultation document next spring.
"In securing the long term, nothing is more important than our approach to the environment. On Thursday my right honourable friend the Deputy Prime Minister will publish a consultation paper on ways to help deal with water pollution with a view to making proposals in the Budget. Together we are also looking at how the tax system can reflect our environmental objectives, and will do so in the light of decisions at Kyoto.
"So in this pre-Budget Statement we are consulting in all areas where it is right to consult, taking action in all those areas where action is needed, and putting to the country the choices for debate—choices that can be made only by all of us.
"There is one announcement that I promised to make today. Following a review by Customs and Excise, which will be published tomorrow, I have decided that VAT on the installation of energy-saving material under existing grant schemes, such as the home energy efficiency scheme, will be cut from 17.5 per cent. to 5 per cent. in the spring Budget. This will mean that the funds under those schemes will go further, helping to insulate 40,000 more homes per year. The Government will now explore with our European partners the possibility of a reduced rate of VAT for a wider range of energy-saving materials.
"Our spending review, like our tax policy, is based on allocating resources according to the priorities of investment, employment and fairness. So already, within this Government's tough spending limits, we have redistributed resources to priority areas: from the assisted places scheme to cutting class sizes; from the windfall tax paid by the utilities to creating jobs and repairing our schools; and from defence and the nuclear programme to the National Health Service. After the publication of the National Asset Register yesterday, there will be new scope to re-allocate resources to high priority spending.
"I can announce one further re-allocation today. I now expect our net payments to the European Union to be some £400 million lower than budgeted. Our pensions review is looking at the long-term future of pension provision in Britain, including how we can do more to support Britain's poorest pensioners. We must help the thousands who do not claim benefits and who need them most.
"My right honourable friend the Secretary of State for Social Security is announcing today that she will finance a number of pilot projects so that we can find the best ways of encouraging improved benefits take-up by the poorest pensioners.
"We have already cut VAT on fuel and power to 5 per cent., as we promised. But it would be wrong to wait until we have the results of our pensions review to take action to help the elderly with winter

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fuel bills. At the moment, although the poorest do get some help through cold weather payments, the payments only go to those on income support and they generally have to wait until after the cold weather until help is available. They are of no help at all to most pensioners, including the million not getting their income support entitlements; no help to those on the margins of poverty; and are of doubtful help even to those who do qualify who often do not know whether they can afford to spend extra money on fuel when it is cold.
"My right honourable friend the Secretary of State for Social Security and I are simply not prepared to allow another winter to go by when pensioners are fearful of turning up their heating even in the coldest winter days because they do not know whether they will have the help they need for their fuel bills.
"The pensions review will report next year. But we must act in the meantime to help pensioner households. For this winter and next every pensioner household will receive £20 extra to help with their bills. Every pensioner household on income support—nearly 2 million—will receive £50 extra. The cost will be met from reallocating the savings on our contributions to the European budget and the money will be paid in time to meet winter fuel bills. So every pensioner household will now see the benefits of this Government's cut in VAT on fuel, our abolition of the gas levy, new competition and tougher regulation of the utilities and, now, the Government's new fuel payment. As a result of those changes, the average pensioner household will be helped by up to £100 a year, and poorer pensioner households on income support will be helped by up to £130 a year.
"This is a Government who, in contrast to the last government who put VAT on fuel, keep their promises and are prepared to take action where action needs to be taken. A government that is meeting the people's priorities, even as we confront the most difficult choices our country must take to build for the long term.
"This year, in 1997, we have made a start and we will do more year on year. Our approach to the coming Budget shows that we are already setting a new course for Britain and building a united country where everyone has opportunity and everyone a contribution to make. I commend the Statement to the House."
My Lords, that concludes the Statement.
4.16 p.m.
Lord Mackay of Ardbrecknish: My Lords, I am sure that the whole House is grateful to the noble Lord, Lord McIntosh, for the fairly mammoth task of repeating the Statement which took 28 minutes. Indeed, I believe that that may be close to a record for the repetition of a Statement because, of course, Budget Statements in the past have not been repeated in this House. Therefore, we can start off by being grateful to the noble Lord, Lord McIntosh. We are discussing a very detailed paper and
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one which is accompanied by an equally detailed booklet—although, I suspect, I should say a book—which outlines much of the proposals and fills in some of the detail.
I would have asked for a debate on the subject, but I was pleased to see that I have been pre-empted in that respect as the noble Lord, Lord Graham of Edmonton, has tabled a debate on economics. So we shall shortly have an opportunity—on Wednesday next, I believe—to debate the proposals in detail.
When noble Lords were sitting listening to the repetition of the Statement, they could have been forgiven for thinking that many things were missed out and that there really was not a great deal of meat in it. When the Chancellor of the Exchequer started out on this project, I suspect that he intended to share a great many ideas with us about tax rates, and so on. However, as he became more knowledgeable about the workings of the Treasury and how such things happen, he probably realised that it is not entirely safe for Chancellors of the Exchequer to do too much organised leaking of their Budget secrets something like six months before we actually have the Budget.
Here we have a Statement with, frankly, a few important bits but all held together with the cement of a great deal of waffle and much repetition of what we already know. Indeed, that struck me most. Most of the material and the paragraphs are actually repackaging of what we have already been told. Last July, the Government painted a rather blacker picture of the economy than they painted today. There was no sign last July that revenues were buoyant and that the PSBR was narrowing. In fact, if I remember rightly, they accused my right honourable friend Kenneth Clarke of being over-optimistic. Well, it turns out that my right honourable friend was not over-optimistic; indeed, he could have been much more optimistic. But there you are. That begs the question of why we needed 17 extra taxes last July if the economy was doing as well as the Government now tell us that it is.
As usual, the Government tried to paint a bit of a black picture; but, as always, they failed to note that unemployment rates in this country have been coming down for five years. I am delighted to say that they are still doing so. That is in stark contrast to our European friends many of whom are seeing their unemployment rates still rising to heights which I should have thought would be pretty well unacceptable in this country. However, they seem to be quite acceptable in the countries of many of our continental friends.
However, I wish to pick out one or two points in the Statement and ask the Minister one or two questions. Perhaps the Minister will tell me why the Government felt obliged to impose 17 extra taxes including the £5 billion hit on pensions last July when it appears that the PSBR is going into balance rather quicker than the optimistic Kenneth Clarke said it would. The code of fiscal stability is an interesting concept. I suspect that it has much to do with protecting the Chancellor from his more spendthrift Back-Benchers. He makes a rule and then says, "I am sorry this rule cannot be broken and therefore I cannot spend the extra money you want."

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That may be a clever device, but there you are. I notice there will be legislation to oblige the Government to report to Parliament on how they are meeting their fiscal rules. Will the Minister go a little further on that? Will there be legislation to oblige the Government not to break their own PSBR limits? I understand that that is what happens in the United States. Those two concepts are poles apart. The one concept consists of reporting and apologising if PSBR targets are not met; the other concept dictates that one jolly well must meet one's PSBR targets. That is an interesting question.
The first part of the Statement mentions money for education and for the NHS. However, we have heard about that money before. How many times shall we hear about that money? Dare I use an expression I have heard for 20 years: is this new money? The short answer is that it is not new money; it is the money we have heard about. I believe we first heard about it last July. I hope that none of the Government Back-Benchers think that this is extra money for health and education over and above the money that they heard about—and no doubt cheered—last July. This is not new money; it is simply the same money re-announced.
As regards productivity, perhaps the Minister would like to tell us what the productivity rates were in 1996; what the Government envisage they will be this year and to predict—given all their high-sounding policies—what they intend the productivity rates will be next year so that we can make a judgment as to whether all these fine phrases become reality. The Government intend to encourage creative industries and others, as they call it. Has that been cleared by the Commission? Is it allowed under the state aid rules? I refer to the taxation rules that we discussed at Question Time. Are the Government sure that none of these inducements will fall foul of the Commission as regards state aids?
I notice that there is to be a capital gains tax review. Shall we see the details of the review so that there can be a public debate? I was not sure about that when the Minister mentioned it. I am certainly looking forward next Tuesday to seeing the detail of the individual savings accounts. I hope that we shall also see some firm proposals about what the Government intend to do about PEPs and TESSAs as there is a huge amount of uncertainty surrounding them and what the tax arrangements for them will be in the future and how they will be linked into the individual savings accounts. I hope that the Government will put some flesh on the bones of that next Tuesday. I had rather hoped that that would be one of the concrete issues we might have heard about today.
I now turn to the extension or the repackaging of family credit. This is an interesting matter and we shall have to study the details of it. Do I take it that the proposals will go beyond child benefit and will build on the proposals that we put forward and the pilot schemes that we started to give the equivalent of family credit to couples without children and to single people? Perhaps the Minister can tell me that. He talked about bringing national insurance structures into line with income tax but he did not tell us what that comprised. We shall be interested to see how that works and to study the proposals.
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As regards the new deal for the unemployed, I was pleased to hear the Government pay tribute to the privatised bus and rail companies. That must have stuck in their throats a little as normally they tell us there is nothing worse on earth than the new privatised bus and rail companies. I am pleased to see that these new companies are showing the kind of imagination that we on this side of the Chamber have been telling the Government for some months now they are showing in every other way. They are showing imagination in helping young people with their travel to work costs. I fully agree that that is important. There are a number of pilot schemes. However—I make this serious point to the Government—there is no point in having a pilot scheme unless you have a clearly defined control group. One of the worries as regards a recent pilot scheme was that there was no clearly defined control group. I ask for an assurance that there will be clearly defined control groups for all the pilot schemes so that we can see whether a pilot scheme is either not working, is not making any difference one way or another, or is making a difference and therefore should be extended. I am pleased to see the Government building on pilot schemes as it is a concept that we introduced. We felt that it was important, especially in the social security field, not merely to believe that an idea would "fly" because it was a bright idea and we had thought about it. We believed we should test it to try to ensure that it "flew". To that extent I am pleased that the Government are continuing to use pilots, but I hope that they will ensure there are control groups.
The Labour Party has had a 20 year learning curve on the need to control wages. I suppose that some noble Lords may have wondered whether it was the Labour Party they were hearing talking this way because for the past 20 years the one thing one could be sure of was that the Labour Party was out there supporting people demanding wage increases. It did not much matter whether that involved people in the public sector or the private sector. The Labour Party used to criticise Conservative governments when Chancellors gave evidence to public sector pay review bodies and said that wages had to be kept under control. It is nice to have some converts on these matters.
Fairness in taxation is important. Next Monday I have a Question on North Sea oil taxation. Will we have a discussion about this taxation or shall we just see the results of an internal review? The noble Lord is sitting beside his noble friend who knows a little about the oil industry. I caution the noble Lord to watch the interaction between tax regimes in the North Sea and in the new oilfields to the west of Shetland and the employment prospects there as they are expensive fields to develop and taxation plays an important part in that process. I hope that the Government do not think they can obtain more tax revenue from the North Sea without considering the consequences for unemployment.
I am not a great supporter of the tobacco industry as I do not really approve of the habit. If the Minister is not aware of the research, his noble friend Lady Hollis of Heigham will certainly remind him; namely, that increased tobacco taxes fall inevitably hardest on the poorest. The previous government and this Government

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have a distinct problem as regards swingeing increases in tobacco duties because they fall hardest on the poorest.
I am not trying to compete with the noble Lord as regards the length of time I have spoken. I do not wish to speak for too long. However, if we are to have environmental taxes can I be assured that just as we tied the landfill tax into a reduction in national insurance, any increases in taxes for good "green" reasons are offset by decreases in taxes on measures which are good for the environment, such as the reduction in VAT on energy saving measures mentioned by the noble Lord, which I have no doubt will please the noble Lord, Lord Ezra? Will that be backdated as it seems to me that people may be tempted not to continue with energy saving projects between now and the Budget if they know that VAT on those schemes will be reduced from 17.5 per cent. to 5 per cent? Perhaps the Minister can answer that question.
I have probably said as much as I need to. The abolition of advance corporation tax and its replacement by quarterly payments and the reduction by another 1 per cent. of corporation tax intrigues me given the matter that we discussed at Question Time. I hope that that measure will be accepted by the European Commission and will not be seen as harmful tax competition. However, I suspect the reason the Government are introducing that measure is because of all the damage they did to industry by the decision they took last summer on ACT. However, that does not negate the fact that the pensions industry remains damaged, and will continue to be damaged, as will pensioners, by the £5 billion hike. I am sure that we are all looking forward to the debate that the noble Lord, Lord Graham, indicated. We can then perhaps get down to some of the detail. In the meantime, I thank the Minister for repeating the Statement.
Lord Ezra: My Lords, I, too, thank the noble Lord for repeating the Statement and express great pleasure that the Government have embarked on what is a fairly courageous route: to anticipate a Budget so far in advance; and to initiate a public debate on many of the issues. Unlike the noble Lord, Lord Mackay of Ardbrecknish, I was impressed by the number of practical and positive measures which the Government saw fit to announce with this preliminary Statement. I had not expected them to do more than raise issues, bearing in mind the tax implications and other implications of announcing measures in advance.
The Government are absolutely right to say that the nation faces the three challenges of productivity, employment and stability. The document logically follows on from that opening gambit. I should like to pay particular attention to the issue of investment—an area where we have fallen behind other countries over the years, and the Government are committed to putting that right. As regards investment in public services, if there was one part of this Statement which slightly disappointed me it was what it said about the reallocation of resources in public services. What we have been told is what the Government have already
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decided on. We are further told that, as comprehensive spending reviews are carried out, there will be more resources allocated towards higher priority areas. That is fine, excellent wording. But I would have hoped that we could have had more indication of what the Government have in mind for the essential public services of health, education, and let us not forget public transport, and, for those who live and work in London, the London Underground, which has been starved for so long of resources. I should like to have seen some reference to that issue among other things.
The other aspect of investment is investment in productive enterprise. The Government have already moved positively in that direction by increasing the capital allowances for smaller firms and by reducing corporation tax. There is the welcome announcement of a further reduction in corporation tax. There is no doubt that with the measures which the Government will take to encourage savings—as the noble Lord, Lord Mackay pointed out, we have to find out what will happen to existing saving schemes; no doubt that will emerge in due course—there must be measures to encourage investment in the right ways. I am glad that a start has been made. It is very necessary to have the right fiscal framework to encourage enterprise to invest.
The noble Lord, Lord Mackay, said that I would undoubtedly be pleased at the Government's announcement about reducing VAT on energy-saving materials. Indeed, I am, I have been campaigning for that for years. I never in my wildest dreams expected that we would hear today that the Government have taken this step. I must say that I welcome that very much indeed. Furthermore, I welcome what the Government are doing as regards pensioners and their heating allowances. I have spent many years seeking to improve the conditions and insulation of the homes of elderly people on low incomes. This announcement undoubtedly will be a big step forward in that direction.
I conclude by welcoming the step which the Government have taken in initiating this pre-Budget discussion. I hope that they will persevere in what they have started. I hope in due course that we shall hear more about encouraging investment in essential public services. I hope that the Government will persevere with stimulating investment in the productive sector.
Lord McIntosh of Haringey: My Lords, I am grateful to both noble Lords for their response to this Statement, as usual in differing degrees.
The noble Lord, Lord Mackay, said that this was one of the longest Statements before this House. I have to tell him that at 28 minutes it was stakhanovite. At the Budget speed of 125 words a minute, the Statement was timed at 32 minutes and 50 seconds. I reckon that the House owes me almost five minutes of time and I propose to take that up in due course!
The noble Lord was right to welcome the debate that we shall hold next Wednesday. I can confirm that all the questions he raised can and no doubt will be raised next Wednesday. That does not mean that I shall not try to answer his points today. The noble Lord warned against what he called organised leaking by the

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Chancellor. I assume that he was talking about the danger that there could be some forestalling of Budget measures if they are announced too far in advance. If the noble Lord reads the Statement, I think that he will recognise that, although there is, as the noble Lord, Lord Ezra, kindly confirmed, a great deal that is positive and practical in the Statement, I cannot identify a single occasion where any of the announcements will result in forestalling or in damage to the Chancellor's flexibility and freedom of action when he comes to the Budget itself.
The noble Lord, Lord Mackay, asked me why we put forward a blacker picture in July when we accused Mr. Kenneth Clarke of being over-optimistic. In July, when we increased some taxes, it was a fact that inflation was overshooting its targets and that we had to plan for the long term and avoid boom and bust. But since that time we can confirm, as we could not have done then, that our deficit reduction plan is on target and it is therefore possible to be—I do not use the word relaxed; one would never accuse the Chancellor of being relaxed—able to make some of the positive points to which noble Lords have referred.
The noble Lord asked me about the code of fiscal stability and whether it was going to be binding on government. I assume he meant in the sense that the Gramm-Rudman Act in the United States is binding on governments. I have to tell the noble Lord—I am sure that he and the House know—that the Gramm-Rudman Act has not worked. Over many years deficit reduction programmes have bedevilled politics but have not helped economics very much. Our model is rather different. It is that of Australia and New Zealand, where the model is one of openness and debate rather than compulsion. That model appears to work. It is that transparency in economic and fiscal debate that we seek to achieve.
The noble Lord asked me—these are different parts of his speech; I shall try to bring them together—about whether what we are doing will fall foul of harmful tax competition rules in the European Union and state aids. I can say to him without concern that they do not fall foul of the code of conduct which we discussed earlier. Indeed, I remind the House that the code of conduct which is to be debated and decided on at ECOFIN next Monday will not in any way damage the ability of this country and any member state to determine its own tax and spending policies. The removal of harmful tax competition, which is not an unworthy objective, is one which will be achieved to gain certain specific advantages in reducing tax avoidance and evasion and is not intended to lead to harmonisation of all tax policy.
The noble Lord asked me whether the capital gains tax review referred to in the Statement will be made public. The answer is yes. He asked whether the future of PEPs and TESSAs will be made clear when the Statement is made next Tuesday on individual savings accounts. The answer is yes. Therefore there will be an opportunity to debate them next Wednesday.
The noble Lord also asked whether family credit will go beyond child benefit. The answer is slightly more complicated. It could go beyond the child benefit, but it
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does not have to go beyond it. This point relates to the noble Lord's remarks about pilot schemes. We need the research from the pilots to see whether these in-work benefits affect, for example, local wage levels. We also need them to provide us with judgment not so much on levels of credit but on administration. As a social researcher myself, I entirely agree that pilot schemes are necessary before we go national with major changes in social policy. I pay credit to the previous government for having done the same on a number of occasions.
I was interested in the noble Lord's point about the need to offset increases in green taxes by decreases. I am not sure that I know the answer. If I am told anything, I will write to the noble Lord. Again, the matter can be raised in debate.
The noble Lord, Lord Ezra, was extremely complimentary about large parts of the Statement. I am tempted to say: "What else can I say, except that I love him?" The noble Lord drew attention to the importance of investment and of reallocation of resources in the public service. He is quite right. It has always been difficult for me to understand the rationale of some public investment decisions in a situation where we have cash accounting by the Treasury rather than resource accounting. The noble Lord will be pleased to be reminded—although I am sure he already knows—that within the next two years we shall be accompanying cash accounting with resource accounting in the public sector; and by the year 2001 we shall have gone over to resource accounting, with traditional cash accounting acting as a cashflow statement rather than as a substitute for an income and expenditure account.
On energy saving materials, there is nobody by whom I would rather be congratulated than the noble Lord.
4.42 p.m.
Lord Ashley of Stoke: My Lords, is my noble friend aware that I understand the financial problems of the Government and support the broad thrust of the Chancellor's policies? However, if any move is made to cut the benefits of disabled people, it will be totally unacceptable. Those benefits are to pay for the extra costs of disability. To cut them would be to place disabled people at a double disadvantage. Such a move would incur the implacable hostility of 6½ million disabled people and their supporters in Parliament. To penalise those people is the very thing that I could never countenance. They would find it impossible to believe that that is the policy of the Labour Party against many people who are unable to work as a result of severe disability. Let the Government get people to work if they can, but severely disabled people cannot work. Therefore, cutting benefits would be counter-productive.
Lord McIntosh of Haringey: My Lords, as the House knows, I respect no one more than my noble friend, particularly when he speaks on this subject. I respect not only the strength and sincerity of his argument but the degree to which it is founded on personal experience.

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I hope that he will agree that the content of the Statement concentrates more on the encouragement that is given to those disabled people and those lone mothers who wish to take advantage of it to find work for themselves.
Clearly there are wide ranges of severity of disability. My noble friend is right in saying that there are very many disabled people for whom no earning work is possible. I can only say that a very thorough review of the matter is in progress. It will be completed in the late spring. All options will be considered at that time, and no decisions have been taken.
Lord Desai: My Lords, while I welcome the Statement, perhaps my noble friend will say rather more about the fiscal framework that the Chancellor hopes to adopt. I see from the useful background document that government projections for 1998-99 are for investment of £8.7 billion in net capital spending, and the PSBR is only £4.5 billion. That would mean that we are doing better than the golden rule. Is the Government's intention to produce a surplus even by the golden rule, rather than merely a surplus by the old Treasury rules?
Lord McIntosh of Haringey: My Lords, I believe it was David Heathcoat-Amory, who, during his service at the Treasury for the Conservative Party, said that the thing about the golden rule was that it was neither golden nor a rule. I agree.
We do not deliberately seek to improve on the golden rule. The difficulty with the golden rule is that, when we say we are to be constrained by the economic cycle, none of us knows at what stage in any economic cycle we find ourselves. It is not deliberate, but there may be occasions when it may be possible to have higher investment.
Lord Clark of Kempston: My Lords, does the noble Lord agree that the present Government are extremely fortunate in inheriting a very strong economy, in fact the strongest in Europe? Will he explain why, given the buoyancy of our economy—with falling unemployment, increased production and so on—it was necessary to increase taxation by 17 taxation matters, and particularly so far as the long-term economy is concerned? There are long-term savers in pension funds—which are the long-term investors. Why was it essential to penalise them by £5 billion per year so far as income is concerned? Finally, will the noble Lord give the House an assurance that, if there is any harmonisation in taxation between this country and our European partners, there will not be an extension of VAT on food?
Lord McIntosh of Haringey: My Lords, on reflection, I am glad that both I and my right honourable friend the Chancellor refrain from the sort of "yah-boo" cross-party, cross-Chamber comment that has given rise to the noble Lord's contribution. We did not abuse the previous government. We recognised, as I have always recognised, where there was virtue in what they did. At the same time, we have to recognise that the boom-and-bust instability that was characteristic of the
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previous government resulted in the loss of thousands of businesses and millions of jobs; that we inherited productivity at a level more than 20 per cent. lower than that of our major competitors; that we inherited an economy in which 3.5 million families have no one in work; and that we inherited a tax system that is blatantly and apparently unfair and is seen to be unfair by everybody who pays tax. Under those circumstances, and for the reasons that I have already given, we believe that our judgment on tax policy in the July Budget was correct.
Lord Monson: My Lords, perhaps I may take up one small point in the Statement. One can well understand why the Government propose giving £50 a year towards the fuel costs of pensioner households on income support. Nobody would quarrel with that. But will the noble Lord, Lord McIntosh, say why the Government propose to give £20 a year, which is presumably not taxable, to all other pensioner households, including those pensioners, of whom there are a great number, who can afford to take round-the-world trips on the "QE2" or 20-minute lunch-time flights on Concorde for £350? Is not the idea that all men become poverty stricken at the age of 65 and all women at the age of 60 a relic of the days of Andy Capp?
Lord McIntosh of Haringey: My Lords, as one who is five months off the age of 65, I would say that perhaps there is some sense in which people become more poverty stricken at the age of 65. The balance between means-tested and universal benefits contained in the fuel policy announcements which I have just repeated seem to me to be about right. The biggest challenge is that so many pensioners who, because of their economic circumstances, are entitled to benefits do not take advantage of them. One of the measures which my right honourable friend proposed was increased efforts to secure better take-up of benefits. I hope that the noble Lord would agree that that is right and that the balance is right.
Baroness Thomas of Walliswood: My Lords, perhaps I may ask the Minister a question on a slightly different subject allied to the previous question. He repeated the Government's commitment to their priorities of education and health, with which I do not disagree. When will improving personal social services for the elderly become a government priority? How do the Government expect to assist that arm of social care when authorities are criticised if they do not concentrate all their care on those most desperately in need, thereby leaving large numbers of people who could be helped to a healthier lifestyle completely unattended?
Lord McIntosh of Haringey: My Lords, it is not a question of when; it has already happened. Announcements already made about further funding for the National Health Service made it clear that a considerable part of that funding is to be allocated by health authorities to the social services departments of local authorities for the needs of those who are in a better position and prefer to be at home rather than in hospital when they do not need medical treatment. The

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issue of long-term care for the elderly—to which I think the noble Baroness is referring—is not one to be solved in six months. It is one of the major problems of developed societies; we take it with a great deal of seriousness. But we are not in a position to give answers to these major questions at this time.
Baroness O'Cathain: My Lords, I welcome the openness of the Statement and the fact that there will be continuing debate on the suggestions raised in it. I look forward to reading it. I believe that the Statement included the words "pro-business" and "pro-investment". Does that mean that the Government are prepared to reconsider some of the taxation measures taken in the last Budget which are neither pro-business nor pro-investment?
Lord McIntosh of Haringey: My Lords, I challenge the premise of the noble Baroness's question. I believe that the measures that we took in the last Budget were pro-business and that there is wide acceptance among the business community that that is so.
Baroness O'Cathain: My Lords, the real point is the effect of the measures upon pension funds. Many people say they are neither pro-business nor pro-investment.
Lord McIntosh of Haringey: My Lords, I rather thought that the noble Baroness was going to return to the removal of double tax credits. I do not in any way apologise for the removal of those. They were an anomaly that had to be dealt with quickly. I believe that the announcement which I have just repeated of the abolition of advance corporation tax will be welcomed by the business community and I think that it puts our decision in July into the proper context.
Lord Davies of Oldham: My Lords, my noble friend is to be congratulated on his riposte to the Opposition. He might have added that a sense of unfairness and gross inequality has been felt by the nation over the past 18 years about the general distribution of income and wealth.
One point raised by the Opposition today deserves further consideration. The problem with an early consultation exercise is that people may make dispositions against their judgments of what the Chancellor intends to do. For example, will not the proposal with regard to reducing VAT on the insulation of houses lead people to delay such work until that proposal is implemented? Or is there an indication that the measure will be backdated?
Lord McIntosh of Haringey: No, my Lords, there is no indication that it would be backdated. But we are talking about a period of only a few months. My understanding is that most energy-saving improvements take place in the second half of the year rather than in the first half when people are expecting the weather to get better rather than worse.
My noble friend is right in saying that there has been a sense of unfairness and injustice about economic policies over a considerable period of years. The
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Government believe that the most direct way to relieve poverty and therefore to remove injustice is by getting more people back to work.
Lord Davies of Coity: My Lords, I should like to take this opportunity of welcoming the Statement, particularly with regard to the measures to increase productivity. Those measures are concerned with high technology, high skills and high levels of employment. They contrast with the productivity increases that have sometimes been gained in the past with low wages and high levels of unemployment, placing a considerable burden on the country as a whole.
The introduction of a statutory minimum wage, if not implemented correctly, could create a poverty trap in that people may obtain an increase in wages but lose whatever income support they currently receive. Can the Minister assure us that, with the introduction of a national minimum wage, any reduction in supplementary benefits would take place over a period of time in proportion to an increase in the level of the national minimum wage?
Lord McIntosh of Haringey: My Lords, my noble friend will not expect me to anticipate the results of the investigation being carried out under the chairmanship of Professor George Bain. However, he can be assured that the problem of the interrelationship between wages and benefits is at the heart of Professor Bain's inquiries. He will have noticed that there is a reference in the Statement to reforms to benefits and, for example, to the tapers on benefits which will undoubtedly be necessary when a minimum wage is introduced.
Baroness Hogg: My Lords, I wonder if the Minister can help me with a point relating to public expenditure. Normally, in the autumn Statement we receive details, programme by programme, of what is happening to the profile of public expenditure. I am disappointed that this time the supporting material contains no such detail by department. However, there is one clue in the supporting material: we are told that there has been a classification change which should have had the effect of reducing total public expenditure on the control total by some £700 million. However, in the control total this year it is reported as unchanged. The implication is clear. There must have been a discretionary increase of £700 million in public expenditure since the Budget Statement. Can the Minister explain where this net discretionary increase has taken place?
Lord McIntosh of Haringey: My Lords, with regard to the noble Baroness's first question, the nation will not be deprived of statements of public expenditure; but no final decision has been taken about whether we shall continue with the unified Budget and Public Expenditure Statement or about the timing.
Baroness Hogg: My Lords, I was referring to the autumn Statement and with it regular publication, programme by programme, of out-turns.
Lord McIntosh of Haringey: My Lords, I appreciate that. But this is not an autumn Statement in the classic

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sense and was not intended to be so. I hope that the House will have found it a good deal more wide-ranging than an autumn Statement and a good deal more conducive to constructive debate.
As to the second point regarding the gap which the noble Baroness calculated, the Statement contains a number of examples of resource re-allocation. I have not added them up. The noble Baroness is entitled to have them added up and I shall write to her in that regard.
Lord Mackie of Benshie: My Lords, I am grateful to the noble Lord for his efforts to keep me warm this winter. But can he say, if there are figures, how many pensioner families are actually in need of support in the winter and how many are not?
Lord McIntosh of Haringey: My Lords, not off-the-cuff, I am afraid. I am sure that I ought to have known, but I do not. I shall write to the noble Lord.
Lord Dixon-Smith: My Lords, the Minister has had to take us through a complex Statement and a number of phases. He began by expressing concern over the rate of GDP at present being relatively unsustainable. We will not go into the reasons why the Government are of that opinion. He then went through a series of investment suggestions which should increase productivity and therefore, one would have thought, in due course impact on GDP and give it an inclination to increase. The noble Lord then went through a further set of steps which should increase the volume of employment by taking people off the unemployment register. Those factors are extremely welcome.
However, at the end of the Statement, unless I misheard, the noble Lord came up with figures for the range of growth in GDP next year of 2.25 per cent. to 2.75 per cent., which is less than the current rate of GDP growth. Did I miss something?
Lord McIntosh of Haringey: No, my Lords. The contrast which the Statement makes is between GDP growth without the measures which we are proposing and GDP growth with the measures we are proposing. The Statement makes clear that we inherited a pattern of GDP growth which was unsustainable without further action to avoid the kind of "boom and bust" situation which we inherited and which had been the pattern for a number of years. Without subscribing in every detail to the summary the noble Lord kindly gave of what he agrees is a complex Statement, he is right in his understanding of the figures for GDP growth.

Competition Bill [H.L.]
5.3 p.m.
House again in Committee.
Clause 50 [Advice and information]:
Viscount Astor Viscount Astor moved Amendment No. 200A:
Page 25, line 16, after("practicable") insert ("and in any case not later than three months").
The noble Viscount said: In moving Amendment No. 200A, I shall speak also to Amendments Nos. 201 and 274. When one looks at Clause 50(1) the wording is:
"As soon as is reasonably practicable after the passing of this Act".
Whenever one reads the words "reasonably practicable" in a Bill, it invariably raises one's hackles. One knows that they often mean "unreasonably" and "impracticable"—the very opposite of what they are supposed to mean. We know that, as always with these matters, the words are put in the Bill with the best of intentions but that, when a director is put in place and looks at these things, he will face problems of priorities—staffing, funding and having to agree with the Department of Trade and Industry on various matters. That seems to be rather unsatisfactory.
I tabled a probing amendment with a time limit of three months. That period is not important; it was included to obtain a reply from the Minister. My noble friends on the Front Bench, being marginally more clever than I am at tabling amendments, tabled a much better amendment in Amendment No. 201, which says,
"before applying the provisions of this Act".
That is preferable because it means that the provisions do not come into force until the advice and information have been published. That is what we need. On a number of recent Bills before your Lordships we have had the problem of being faced with a Bill without any of the guidance or information necessary to make it work.
On an earlier amendment this afternoon the noble Lord, Lord Simon, said, if I heard him correctly, that the director would publish draft rules in the late spring or soon after a period of Royal Assent and, if that was not possible, he would look at the timetable again. If I am right, the rules must be published first and advice and information can be published afterwards.
Can the Minister say when he replies how the timetable will work and when we can see it? There is anxiety in industry that it is to be faced with a Bill which has an important effect on trade and industry but that the information to make the whole thing work may not be available. I beg to move.
Lord Kingsland: I want to speak on Amendment No. 274. I would have said something in relation to Amendment No. 201 were it not for the fact that my noble friend Lord Astor expressed himself so well in introducing the amendment that it would be superfluous for me to add anything. Amendment No. 274 is extremely important because it refers to the transitional provisions that ought or ought not to be allowed to industry and commerce before the Act bites.
The transitional period ought to be generous. If it is not, we shall not only be faced with a period of confusion and uncertainty, but it will also have a potentially costly impact on both industry and the OFT. Industry will have to protect itself by making a series of unnecessary notifications and the OFT will have to cover many eventualities which will ultimately turn out to be imaginary.

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The scheme of my amendment is as follows. First, the rules of procedure should be in place; then the guidance should be in place; then any exemptions on a block basis should be in place; and then a period of a year—it may be longer or shorter—should elapse before the provisions bite. That will give everyone a chance to get themselves ready.
In addition to that—here I anticipate an amendment that will not be taken until the end of the day but that is germane to Amendment No. 274 certain classes of agreement as set out in Amendment No. 273 ought to be allowed to survive the remaining term of the agreement before the director general turns his attention to them. I listed them in Amendment No. 273 and we will come to them when we deal with that amendment. They fit in with the concept that underlies this amendment.
Baroness Nicol: I support what the noble Lord, Lord Kingsland, has just said about the need for generosity in the time allowed. What is being proposed will impose a severe burden, particularly on small businesses. Larger businesses, which may have had to meet this kind of exercise before, particularly in relation to European legislation, will be familiar with the exercise. However, it will be quite different for smaller businesses which have not had to do it before. They quite often have complicated agreements which they need to examine in detail. I hope that the Minister will look kindly on this amendment and will try to be as generous as possible with the time allowed for businesses to prepare.
Lord Simon of Highbury: I am in sympathy with what I believe to be the intention behind Amendment No. 200A and also with the general intention of Amendment No. 274. It is important that the main elements of the regime should be in place in good time before the prohibitions start to apply.
Clause 50 and these amendments deal with the preparation and publication of advice and information. I hope that Members of the Committee will forgive me if I refer to such advice and information as guidelines. That seems to be the more generally accepted term. Indeed, it is the one used in the letter from the Director General of Fair Trading that I referred to in the discussion on Clause 49. It may be helpful if I repeat my remarks made in relation to Clause 49, since we have had the break and the Statement, on the Government's proposals in this area.
First, if the Bill is granted Royal Assent, there will be a period between Royal Assent and the coming into force of the prohibitions. I would expect this period to be about one year. I would also expect rules under Clause 49 and guidelines under Clause 50 to be issued early in that period. The OFT has already begun this task and is focusing on drawing up the guidelines which will be of most interest to business. That is stated in the letter placed in the Library. The director general has committed himself to full consultation both with the other regulators and with business and practitioners on guidelines and procedural rules. The director general says that it is his firm intention to issue consultation drafts before Royal Assent where practicable. He goes
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on to say that he would want to concentrate on those guidelines which would be of most immediate use to business. It is essential to recognise that the guidelines will not be a single publication. They will be a developing series. The director general is focusing on getting the more important guidelines out first and getting them out in good time.
The issuing of the guidelines must necessarily allow proper time for consultation and consideration of the points raised in consultation. If, for any reason, adequate guidelines could not be issued early in the period after Royal Assent, I would expect the Government to consider very carefully the case for delaying the commencement date for prohibitions. I should perhaps add that, as a general rule, the transitional period from the Chapter I prohibition will not begin until the prohibition itself has been brought into effect. The transitional period itself will be one year for agreements generally, subject to the points in Paragraphs 9 and 10 of Schedule 13.
Accordingly, the transitional period will not in any case start until a date after the rules, advice and information are issued. On the basis of those commitments, I believe the amendment is unnecessary and I invite the noble Viscount to consider withdrawing it.
Viscount Astor: I am extremely grateful to the Minister for his constructive and helpful reply. However, there is one point I do not quite understand. I wonder whether he can enlighten me. He said, very reasonably, that if the consultation period were delayed, the Government would consider delaying commencement. What powers does the noble Lord have to do that? How will that happen under the Act? What is the mechanical process and how will it work? Perhaps the Minister will briefly explain that.
Lord Simon of Highbury: I cannot explain it now, but I shall write to the noble Viscount and explain it very carefully.
Viscount Astor: I am grateful to the noble Lord. I cannot speak for my noble friend Lord Kingsland and his amendment but I have no intention of pushing mine. We have cast some light on a rather foggy situation but more answers are certainly required from the Government. If the noble Lord is right in what he says about the process happening and the timetable he laid out, it begs the question of why my noble friend's amendment is not acceptable. However, I shall leave it for my noble friend to make that point. In the meantime, unless my noble friend wishes to intervene, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 201 not moved.]
5.15 p.m.
Lord Ezra Lord Ezra moved Amendment No. 202:
Page 25, line 28, at end insert—
("( ) In preparing the advice and information required by this section the Director should consult interested parties including those representing industry, consumers and enforcement bodies.").
The noble Lord said: The purpose of this amendment is to ensure that, in preparing the advice and information required by this clause, the director should consult interested parties, including those representing industry, consumers and enforcement bodies. I may well get the answer that, "Of course he will do that: he would be out of his mind if he did not". Nevertheless, I would feel happier if it were on the face of the Bill.
I am particularly concerned with enforcement. One of the things that the director will have to do in this general advice and information is to include the details on the enforcement of these prohibitions. The enforcement of anti-competitive measures has tended to be very much not only in the hands of the OFT but also in the hands of the trading standards officers. Both the noble Lord, Lord Borne, and I have been closely involved in the work of the Institute of Trading Standards Administration. There is also a body called LACOTS, the local authorities' co-ordinating body on trading standards, which was set up in 1978 to try to get some co-ordination in the way in which enforcement in this area is carried out.
The problem that the Bill raises in the matter of enforcement is that there are so many enforcement authorities. There is the OFT itself, there are the regulators in the utilities and there are the various layers of local government which have their own trading standards officers. Therefore, it seems to be highly desirable that there should be some attempt at co-ordination in this area of enforcement. In my opinion, that could best be achieved if the director had, as a matter of course, to be in regular consultation, particularly for the purposes of this clause, with the enforcement organisations.
I very much hope that the Government will see fit to accept this modest amendment. I beg to move.
Lord Kingsland: Two other amendments have been joined to this amendment—Amendments Nos. 204 and 205. I have nothing to add to what the noble Lord, Lord Ezra, said.
Lord Borrie: Perhaps I may associate myself with the remarks of the noble Lord, Lord Ezra, as he mentioned my name. I had the honour to succeed him as president of the Institute of Trading Standards Administration, a post which I gave up last year, to be succeeded in turn by the noble Baroness, Lady Wilcox. So three political parties have represented it and all of us highly value its work.
As a result of this Bill the Office of Fair Trading does not have, and will not have, any local or regional resources of any kind. Therefore, when it comes to enforcement it may be no more than information or quite a lot more in terms of identifying what has taken place in respect of local cartels or anti-competitive practices. It will be reliant on local officials who are trading standards officers. I specially mention that point although I anticipate, like the noble Lord, Lord Ezra,
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that since the director general will do all sensible things in the way of consultation, there is a degree to which this amendment is not absolutely essential.
Lord Simon of Highbury: I feel a certain force in the directions from which the amendments are being supported. This is perhaps the first time that I have felt a 360 degree force on a matter. However, at this stage the director general's letter, to which I have already referred, helpfully addresses a number of the issues raised by these amendments. I recognise the points made by the noble Lord, Lord Ezra, and by my noble friend Lord Borne in terms of the real value that representative organisations have and place into the arena of consultation.
Effectively, Amendments Nos. 202, 204 and the new subsection (9) of Amendment No. 205 would require the director, in preparing guidelines, to consult interested parties. In his letter the director general says that it is vital to get the guidelines right and that this can only be achieved by thorough and timely consultation with industry representatives and practitioners. He also says that he intends to place the consultation drafts in the Libraries of both Houses as soon as they are ready. The director general has committed himself to full consultation. So I do not believe that there is no need for a provision in the Bill to require it.
The first part of Amendment No. 205 would require regulators to consult the director general and to ensure that their guidelines do not conflict with his. The DGFT in his letter refers to the joint working arrangements with regulators for the production of guidelines. A joint working party of the Office of Fair Trading and regulators, chaired by OFT, is being set up and will establish a programme. Clause 50(7) of the Bill already requires a regulator to consult the director general as well as other regulators in the preparation of guidelines. I believe that the joint working arrangements are a better way to proceed than any further formal requirements in the Bill.
The last part of Amendment No. 205 would enable the Secretary of State to make an order requiring guidelines to be treated as if they were rules made under Clause 49. I do not agree with that. What is appropriate for procedural rules will not be appropriate for what the director general describes as,
"interpretation by the sector regulators and myself of the legislation and associated jurisprudence".
He also rightly says that guidelines do not have legal effect or determine the scope of what is prohibited. They need to evolve and change over time, to reflect case law and developments in EC jurisprudence. This sort of evolution is not consistent with an order-making process. Indeed, any attempt to give legal force to guidelines might risk the UK prohibitions getting out of step with EC case law, with a consequent increase in burdens on business.

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Despite the 360 degree pressure that I felt coming across the Chamber, I hope that with these explanations and particularly with the director general's helpful assurances, the noble Lord will be willing to withdraw the amendments.
Lord Ezra: I am most grateful to the noble Lord, Lord Simon, for that answer and also for drawing our attention to the director general's letter. However, as regards his quotation from the letter, although there was reference to the intention of the director general to consult with industry and practitioners—I believe that those were the words used—there was no reference to enforcement agencies. I hope that that omission will be repaired and that the director general will feel a special responsibility for being in touch with the two bodies that I mentioned; namely, ITSA and LACOTS. They are the co-ordinating bodies for local enforcement agencies upon which, as the noble Lord, Lord Borne, pointed out, the director general will be dependent for local enforcement as he will be unable to carry it out himself. Can I have an assurance that that will be so? If I can have that assurance, I shall be very happy to withdraw the amendment.
Lord Simon of Highbury: I shall take the noble Lord's suggestions back to the working party and the director general for their consideration.
Lord Ezra: I thank the noble Lord. With that assurance I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness O'Cathain Baroness O'Cathain moved Amendment No. 203:
Page 25, line 28, at end insert—
("( ) In preparing general advice and information in accordance with this section, the Director shall, notwithstanding the exclusion of any cases pursuant to sections 4 and 20, take into account the effect of vertical restraints on competition on the relevant market, in particular where suppliers independently or collectively have significant market power.").
The noble Baroness said: I need to declare an interest in that I am a director of Tesco. The amendment applies not only to that company because it is very wide-ranging. In fact, it is supported by the National Consumer Council.
In moving the amendment, I greatly welcome the provisions of Clause 50 which require the director to prepare and publish general advice and information about the prohibitions. It is imperative that business is provided with certainty and this can only be enhanced by clear, authoritative and early guidance from the director on the interpretation of the prohibitions.
It is worth noting that the widely recognised Dobson and Waterson Report on vertical restraints and competition policy, which was commissioned by the OFT, contained detailed economic analysis of effects on the market. I would commend this report to the director when he in turn is giving guidance.
While recognising the generality of the provisions of Clause 50, I believe that the director should be specifically required to have direct regard to the economic effect on the market of these agreements.
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That would be particularly valuable to the director when considering the effect of selective distribution arrangements and in exercising his right to vary, remove or cancel parallel exemptions under the provisions of Clause 10(5).
Is the Minister satisfied that the prohibitions within the Bill enable the director to deal effectively with selective distribution arrangements that act contrary to the consumer interest? I suppose that he will say yes. If that is so, does the Minister accept that the time and cost of pursuing such a claim, without clear guidance, could be extremely damaging to business, particularly to small and medium-sized enterprises? I fear that this is a replay of my old record about costly burdens.
While acknowledging that certain selective distribution arrangements may result in a consumer benefit in those product sectors where technical or specialist sales advice or after service are required—that has been referred to already in discussions in Committee on this Bill—does the Minister agree that where those agreements are concerned only with the preservation of "image", or "allure" as I referred to it on the first day of Committee on 13th November, they are, in reality, acting contrary to the consumer interest? I beg to move.
Lord Haskel: We have already had many discussions on the subject of selective distribution agreements and on vertical agreements generally. We had such discussions on the first day of Committee stage. I believe that the noble Baroness is trying to ask how advice and information from the director might bear on the issue of vertical agreements. I think that that is the point of the amendment.
Baroness O'Cathain: I thank the noble Lord for giving way. The amendment seeks to ensure that we take account of the economic effect. That is very important.
5.30 p.m.
Lord Haskel: I thank the noble Baroness for that elucidation. We have said that we hope to exclude vertical agreements from the scope of the Chapter I prohibitions. We will only be doing this, however, on the basis that any harmful competition problems associated with them can be considered under the Chapter II prohibition or the Fair Trading Act. As my noble friend Lord Simon explained on the first day of Committee:
"A refusal by a dominant supplier to supply certain outlets, a problem sometimes associated with selective distribution agreements, would, if found to be abusive, remain subject to the Chapter II prohibition. Equally, I am advised that there is EC jurisprudence that differential pricing by dominant firms which is abusive may be tackled under Article 86 … such jurisprudence will apply in the interpretation of the Chapter II prohibition as a result of Clause58".—[Official Report, 13/11/97; col. 284.]
We are confident, therefore, that the problems the noble Baroness has described would be dealt with under the Chapter II prohibition. In framing his advice and information in respect of the Chapter II prohibition, I have no doubt that the director will be covering the definition of relevant markets and how market power may effectively be exercised, whether independently or

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collectively, both issues having been raised by the noble Baroness. In view of these assurances and our earlier discussions, I hope that the noble Baroness feels that we have her concerns very much in mind and that she will feel able to withdraw her amendment.
Baroness O'Cathain: I am glad that the Minister has these concerns very much in mind, but quoting the continental European experience has not benefited us in terms of this problem. The European Commission has allowed special exemptions to the competition rules for both Yves St. Laurent and Givenchy in respect of fine fragrances despite the fact that those agreements can impact on price competition between retailers. That happens to be a fact. The Commission has not come down strongly enough. I suppose that I am trying to make our competition legislation stronger than the European legislation because, although the European legislation looks strong, it is not being supported.
There are issues at stake which militate against consumers. I shall not run through again all the arguments that I have put previously, but this is a question of the economic effect. I can see no evidence to date that competition authorities are having serious regard to the economic effect and I honestly feel that there would be advantages in the director being specifically directed to have regard to the economic effect, hence this amendment. Does the noble Lord wish to reply? As he does not, I shall read in Hansard what has been said, but I must alert the noble Lord to the fact that I shall return to this matter at a later stage if I feel that the point has not been properly covered. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 204 and 205 not moved.]
Clause 50 agreed to.
Lord Fraser of Carmyllie Lord Fraser of Carmyllie moved Amendment No. 205A:
After Clause 50, insert the following new clause—
RELEVANT TRIBUNAL TO HAVE REGARD TO RULES OR GUIDANCE BY DIRECTOR
(" .—(1) In determining any matter under this Act a relevant tribunal shall take account of any—

(a) rule made by the Director under section 49; or

(b) advice or information prepared and published by the Director in accordance with section 50.

(2) For the purposes of this section "relevant tribunal" means any court or the Competition Commission Appeals Tribunal.").
The noble and learned Lord said: This is essentially a probing amendment. It may be that the noble Lord, Lord Simon, in answering the Committee on Amendments Nos. 202, 204 and 205 has at least partially answered my concerns, but it would nevertheless be helpful to know from the Government just what status there would be in legal proceedings attaching to rules made by the director under Clause 49. I doubt whether there is much difficulty about the rules. In Clause 50 I would prefer to use the language of the Bill, which is "advice and information" rather than "guidelines". We are keen to discover also what legal status, if any, such published
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advice and information might have in any subsequent legal proceedings either before the appeal tribunal of the competition commission or any other court.
The purpose of the amendment is to introduce an express requirement on the relevant tribunal to take into account such rules or advice and information when determining matters before it. Accordingly, I should be grateful if the Government could spell out exactly what they intend if such legal proceedings should occur and if such rules, advice and information are before the court. I beg to move.
Lord Haskel: As the noble and learned Lord said, Amendment No. 205A returns to the issue of the status of the rules made by the director under Clause 49, and of the information and advice issued by the director under Clause 50. Perhaps I may deal first with the question of the director's information and advice and then with the tribunal. We have already discussed the reasons for not giving legal force to his general advice, and I will not restate them here. However, if I am correct, the purpose of this amendment appears to be only that the tribunal and the courts should "take account of" this information and advice, and not that they should be bound by it.
I entirely agree that the appeal tribunal and the courts should have to take account of the general information and advice issued by the director, when assessing cases. However, I am advised that this is the position under the Bill as it already stands. The director's views, as expressed in his general advice, would have considerable persuasive effect in the tribunal and the courts. This being the case, it would be unhelpful to make express provision in the Bill. Such a provision would only beg the question as to the intention behind the provision, over and above what the Bill would do anyway.
I turn now to the question of the procedural rules issued by the director. It is already the case under the Bill that the tribunal or the courts would be able to overturn a decision of the director on the grounds that he had failed to follow the rules, if that failure was material to the decision.
Turning to the question of the tribunal, the tribunal and the courts would be expected to take account of the information and advice issued by the director under Clause 50. Moreover, the tribunal or the courts must have regard to the guidance issued by the director under Clause 37 on the appropriate level of penalty. We would expect such guidance to say that if a firm had been acting in accordance with the general advice issued by the director under Clause 50, little or no penalty should be imposed on it, even if it is eventually found to have infringed one of the prohibitions. I hope that that explanation satisfies the noble and learned Lord and that he will be prepared to withdraw his amendment.
Lord Fraser of Carmyllie: I shall certainly seek to withdraw my amendment. However, the answer just provided by the noble Lord invites a further amendment when the matter gets to Report stage. I had not appreciated before that guidance was used in some parts of the Bill and advice and information was used in others. Perhaps at a later date one might usefully probe

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the fine distinction to be drawn between the activities of the director in providing guidance on the one hand and advice and information on the other. I am grateful to the noble Lord. He will appreciate that this is a matter to be taken into account. Some concerns have been expressed to us on this matter and it is as well to understand and have on the record what the Government propose to do in the Bill. With those remarks, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 51 [Fees]:
On Question, Whether Clause 51 shall stand part of the Bill?
Lord Borrie: I should like to ask a question on Clause 51 which is not subject to any amendments. My question is concerned with fees. Can the Minister say how fees will affect firms of different sizes and whether the size of the fees will reflect ability to pay?
Lord Haskel: The question of any fees under Clause 51 relating to a person's ability to pay has been put to us by the Competition Law Association. We are considering whether the power in the clause might be broadened, in particular to allow different charges to be set for different persons, for example relating to their turnover. This matter is under consideration.
Clause 51 agreed to.
5.45 p.m.
Clause 52 [Regulators]:
Lord Ezra Lord Ezra moved Amendment No. 206:
Page 26, line 6, leave out from ("10") to end of line 7 and insert ("makes consequential provision in relation to the functions of regulators.").
The noble Lord said: We come to the important question of the concurrent exercise of functions under the Bill by the utility regulators. The essential amendment is Amendment No. 206. A rather impressive array of amendments is grouped with it but all of them are consequential amendments in Schedule 10. The key amendment is Amendment No. 206. The purpose of this amendment is to ensure that the functions of the director general under the Bill are not exercised concurrently by the seven sectoral regulators referred to in Paragraph 1 of Schedule 10. The effect of these amendments is to separate the statutory regimes for the regulation of water, electricity, gas, rail and telecommunications from the new competition law introduced by the Bill. The amendments would not affect the substantive provisions in the Bill.
There are three main reasons for these amendments. First, there is a need to promote consistency and avoid overlapping jurisdictions. With eight different UK authorities exercising jurisdiction under the Bill there would undoubtedly be a risk of inconsistent interpretations and applications of the Chapters I and II prohibitions. The likelihood of overlapping jurisdictions would cause not only inconsistency but also uncertainty and possible conflict.
Secondly, the Government are now conducting a review of legislation. Their conclusions are unlikely to be published before the early part of next year. A consultation period will follow and important changes in the regulatory system may ensue. It would surely not be desirable to give regulators within the existing regime additional powers under the Competition Bill until the regulatory system had been clarified by this review.
Thirdly, there is the question of conglomerates. With the opening up of the utilities market a number of companies cover more than one sector. For example, there are companies that now cover electricity, gas and water. It is quite possible that they will also cover telecommunications and railways. The emergence of these conglomerates can well raise questions about which particular regulator should act in connection with the Competition Bill. It may well be that the competitive problem will stray over the boundaries of one sector into the areas of one or more other sectors. How do they set about deciding who should deal with it? Do they just have an informal lunch and decide that A, B or C should take it on? Do they deal with it jointly or promptly hand it back to where I believe it should belong anyway—the Director General of Fair Trading? Clearly, this uncertainty, which I believe will grow as time goes on with the evolution of the market, would be avoided if the amendment proposed were agreed to.
If the director general were given this authority—which I believe properly belongs to him—he would necessarily consult the regulators when it was appropriate. If a conglomerate was being dealt with he would consult more than one regulator. I suggest that this is an amendment that will improve the effectiveness of the Bill and take account of the realities of the evolving market place. I beg to move.
Lord Desai: Although my name does not appear on the face of this amendment I rise to support it. During Second Reading I said that sooner or later in the competition field we would need an overarching structure. I drew an analogy with the FSA. For a while we messed about with SROs in different parts of the City. We finally found that overlapping jurisdiction and other matters required us to go for an overarching structure. I know that that analogy is not exact, but I believe that we are entering the same kind of phase in the Competition Bill.
The amendment in the name of the noble Lords, Lord Ezra, Lord Kingsland and Lord St. John of Bletso, is not a positive accumulation of power. It is being said that we should sort it out nicely at the initial stage of the Competition Bill so that we do not have a problem in the future. I believe that from that point of view it is very desirable because it introduces an element of co-ordination and avoids overlap. But, given the pace of technological innovation in this field. sectoral boundaries are bound to become very peculiar indeed. One will have conglomerates, changing technologies and many more overlaps. If the Government are minded to accept this amendment it will make life in future

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much easier; otherwise, they will have to introduce more primary legislation at a later stage in this Parliament, which would not be a good thing.
Lord Mottistone: I am very concerned about another aspect—the telecommunications field. Together with other noble Lords, I was very much involved in the passing of the Telecommunications Act 1984. My concern then was that it did not go far enough in ensuring that British Telecom was properly competitive. I found it strange that 3 per cent. of the market which was specifically provided for Mercury had such a far-reaching effect. Indeed, it changed British Telecom from one of the doziest public affairs into a quite competent—but not yet competent enough—telecommunications business.
I am concerned about all of the amendments linked with Amendment No. 206, those linked with Amendment No. 207 and many others in this part of the Bill. I understand the arguments put by the noble Lord, Lord Ezra. Perhaps this is something to which the Government should give very careful thought. I suspect that they have done so already in that they have endeavoured to draft the Bill so that it goes as far as it can at this stage in this particular area. It will take time for this new legislation to take full effect. It is important to realise that it would be exceptionally dangerous if the regulators' powers were diminished, particularly as a result of the amendment of the noble Lord, Lord Ezra, Amendment No. 210, which strikes at the very powers of Oftel.
We should not arrive at a situation where British Telecom could happily say: "We are the experts in this field; we do not have a regulator with any powers left; we know our subject, and the Office of Fair Trading will listen to us because we are the only experts". I detect that that kind of feeling will arise if these groups of amendments are accepted by the Government. Therefore I hope that the noble Lords will withdraw their amendments and think again about how important the regulators are at this moment. That is the point.
There may come a time when they will not be necessary. Amendment No. 211 talks about powers existing until 2001. That is four years away. In 2001 we shall see whether the regulators have too much power, and that will be the time for further legislation to restrain them, if necessary. Now is not the time and I hope that the amendments will not see their way onto the statute book.
Lord St. John of Bletso: A recurring theme in several amendments, and one which was emphasised by the noble Lord, Lord Ezra, is that legal certainty is essential and that those applying the law must do so in a consistent fashion. The prohibitions in the Bill contain wide discretions and it is vital that those discretions are applied consistently. That is why Clause 58, the general principles clause importing European jurisprudence, is very important.
That, however, does not solve the problem. In our deliberations on Clause 50, on guidelines, we heard it suggested that neither will remove the problem. For
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those reasons, I am concerned that Schedule 10 gives powers of adjudication to sectoral regulators in addition to the courts and the DGFT.
The problem is compounded by the fact that Schedule 10 makes the objectives of the sectoral regulators matters to which they may have regard when they apply the regulations. That statement departs from the European approach, where competition policy is centralised in DGIV.
Those features of the Bill will mean more uncertainty and inconsistency rather than less. Even if the Minister demonstrates a case for complexity and duplication in the utility sectors, I do not believe that such a case should be brought in the information technology field. I and several other noble Lords at Second Reading stressed that the communications, computing and broadcasting industries are of vital importance to the economy and to international transactions. The right body to apply competition law in this field is the United Kingdom's national competition authority and not a regulator of a particular sector. For those reasons, I support the amendment.
Lord Borrie: The noble Lord, Lord Ezra, made a powerful case, particularly on consistency, for there being one regulator, the Director General of Fair Trading, instead of eight regulators, to exercise significant powers with important penalties attached to the prohibitions.
At Second Reading I drew attention to one important area of competition policy which is not covered by the Bill, namely mergers and takeovers, where consistency is achieved by the Director General of Fair Trading being the sole channel through which advice is given to the Secretary of State for Trade and Industry for making references to the Monopolies and Mergers Commission. If a problem arises relating to a merger or takeover in the field of water, telecommunications or mixed utilities, then the different regulators express their points of view. Those views are encouraged and welcomed by the Director General of Fair Trading, they are fed in to the process of advice and, if the Secretary of State agrees, there is a reference to the Monopolies and Mergers Commission. That is a very strong case.
We want to achieve consistency not only with actions but also with advice and guidelines. I have had a few more days than your Lordships to think about the letter that was quoted by the Minister today because it was referred to at a conference that I attended last week on the subject of the Competition Bill. I was impressed by the fact that the Office of Fair Trading is already engaged, through a working party, in consultation and discussions with the other regulators to try to achieve consistency now in terms of advice and information. There will therefore be no lack of consistency.
The other arguments put forward by the noble Lord, Lord Ezra, were also strong. There are now multi-utility conglomerates. We already have a problem when there are several different utility regulators, let alone the Office of Fair Trading, concerned with companies like United Utilities and HYDER.

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I do not think that I can support the amendment because, like the noble Lord, Lord Mottistone, I feel that the noble Lord, Lord Ezra, is before his time. We do not yet have the report, let alone the outcome, of the Government's review of the utilities.
Since Second Reading I have thought about whether we should wipe out all other regulators in terms of their having any powers under the Bill or allow them to have concurrent powers which are subject to the review, and, in the light of that, for reasons of conglomeracy and other reasons that have been argued, whether some of those regulators should be merged. It might be desirable to reduce the number of different regulators. All the Bill does is to preserve the status quo until the review of the utilities is completed. If the Minister can say that the Government reserve the right to revise and amend what will be in the Competition Act 1998 in the light of the utilities review, I would be satisfied if the specific regulators were to retain concurrent jurisdiction in these matters. They have concurrent jurisdiction under the existing law on competition policy matters apart from mergers. I would prefer that course rather than to go along with the view of the noble Lord, Lord Ezra, that the Bill should bring all of these powers into the hands of the Director General of Fair Trading.
6 p.m.
Lord Fraser of Carmyllie: Although my name is not attached to the amendment, I associate myself with the remarks of the noble Lord, Lord Ezra. As he said, this is an important group of amendments. It relates to one of the central themes within the Bill which, I have no doubt, for the public good we must resolve as best we can. Having said that. I am hound to say that I agree in large measure with the noble Lord, Lord Borrie. It is difficult to reach a settled view about overlap or concurrence when we do not know what will be the outcome of the utility review. In such circumstances, I would not be inviting the noble Lord to take the mood of the Committee on the amendment, but that does not make it any the less important.
As the noble Lord rightly pointed out, we are seeing almost on a daily basis a greater and greater involvement of a number of conglomerate companies across a wide range of utility activity. If that is the case, there may be problems in trying to determine who should or should not undertake the necessary investigations and do the necessary work. If these matters are to be settled over lunch, I have no doubt that it would have to be a table for more than two if we look at the way that things are now developing.
At the same time, I am conscious that there are powerful, effective and formidable regulators who are confident that, as things are proposed in the Bill, there is such a scheme that there would not be problems. From time to time I regard myself as courageous, but I do not cross swords with Clare Spottiswoode in any foolhardy fashion. She has indicated that she is satisfied with the powers that she has and is confident that in the way the scheme is settled there will be no risk of double jeopardy or duplication.
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There is a question I should like to ask the Minister which stems from my correspondence with Clare Spottiswoode. She states:
"Concurrent powers will not lead to the Director General of Fair Trading and the DGGS both taking action under the new legislation in relation to the same conduct because the Gas Act will specifically require them not to do so and to consult before exercising their concurrent powers".
I shall take her word for it that such powers exist under the Gas Act, but what I do not know—I should he grateful for an answer—is whether in all the other statutes establishing such regulators in particular sectoral utilities there is the same power.
There is not just that problem. Even were I to be wholly satisfied that between the director general and the regulators there was no such problem, part of the scheme of the Bill is again to give powerful rights to third parties. That still troubles me. We started on this debate on Second Reading. Even if a satisfactory agreement is arrived at between the regulator and the director general as to who should take the matter forward, that would seem not to be an end to the matter because third parties could intervene. I should again be grateful if the Minister could give some explanation and contradict me on that or, if I have understood it correctly, acknowledge that that is indeed a complication in the scheme of things.
I do not follow my noble friend Lord Mottistone into the world of telecommunications because, as he correctly identified, there are subsequent amendments which deal with telecommunications. For the reasons others have given, I believe that telecommunications should be dealt with separately. With the way telecommunications have expanded, it is difficult to see how having just one regulator attempting to deal with all that might be described as telecommunications remains as valid as it was when Oftel was first set up. I should be grateful to the Minister if he would reply on that point. I should like to return to this matter at some later stage, and acknowledge that because of the expected utility review, the publication of which I hope we shall still see in January before we reach Report stage, this is not something that we could hope to settle this evening.
Lord Desai: I should like to ask a question on what the noble and learned Lord, Lord Fraser, and my noble friend Lord Borne have said. They know much more about practical things than I do. It seems to me that we are being told that the time is not right. But that we should not worry because it soon will be because the utility review will be published. Given all that we have said about the pace of technological change and the overlap, the balance of probabilities suggests to me that the review will more or less come to the conclusion to which we are now coming. For once a little foresight will not hurt in the area of legislation, because with the previous government every year we had either an education Bill or a crime Bill to obviate the mistakes of an earlier Bill.

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I want to ask my noble friend the Minister, my noble friend Lord Borrie and the noble and learned Lord whether it is not now time to anticipate future developments a little, give the amendment a fair wind and save ourselves a great deal of time.
Lord Fraser of Carmyllie: Perhaps I may say to the noble Lord, Lord Desai, that if I anticipated that the utility review was going to drift away from a January publication date and disappear into the middle of the year, or later, I should have greater sympathy with him. It is a constructive approach to say at the end of November that we are at least prepared to see what comes out of such a review, although I agree with him, especially in the area of telecommunications, that I have grave doubts whether it is possible to so define the activity that we can see Oftel continuing to regulate indefinitely. Indeed that is why we have what might be described as the "sunset" clause in Amendment No. 211.
Lord Skelmersdale: I rather feel today as though the scales have been lifted from my eyes, not so much as a result of this debate but because I am no longer an adviser to BG plc. That means that I can contribute on these subjects in a fuller and less inhibited way than I have been doing in recent months, if not years. It occurs to me that there is another reason to wait for the review; that is, there is another mischief which has not been mentioned in the debate so far today, although I believe that it was mentioned in my absence on Second Reading. It is that where under the current legislation a reference is made as a result of a disagreement between the regulator and the utility to the MMC, and it makes its decision, writes its report and we all see it, on occasion the regulator can virtually ignore that report, as happened in the cases of Transco and Northern Ireland Electricity. I accept that that has nothing to do with the Bill, but it is a good reason for delaying the subject until after the review when all these matters can be wrapped up together.
Lord Simon of Highbury: We have certainly had a wide enough debate for this to be considered to be a most important part of the Bill. I agree with that. For that reason, I really do not wish to leave doubts in people's mind at this stage.
This group of amendments would remove from the Bill the provisions for the sectoral regulators—telecoms, water, electricity, rail and gas—to apply and enforce the prohibitions concurrently with the Director General of Fair Trading. Let us be quite clear on the purpose.
Let us be clear also that that would represent a major change from the established policy, adopted under the previous Administration, that sectoral regulators should be able to exercise functions concurrently with the Director General of Fair Trading under general competition law. In the Government's considered view, it would be quite inappropriate to use the present Bill—dealing with the general competition framework—to make such a major change to the arrangements for
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sectoral regulation, least of all while the Government are engaged in a general review of utility regulation, as many Members of the Committee have commented.
I should like to confirm to the noble and learned Lord, Lord, Lord Fraser, as I did in a previous reply to him, that we expect the review to be available early in the new year. Perhaps that is a slightly wider definition of "winter scope" than he would wish at this stage, but that is consistent with my earlier advice.
This subject is sufficiently important for me to set out a little more background about the issue of general competition. Whatever the merits of the original privatisations and their structures, strong sector regulation has played a major part in securing consumer benefits in the regulated sectors. That has been possible only because the sectoral regulators have had the powers they need to do the job: to regulate in order to protect the consumer now; and, where feasible, to promote competition in order to protect the consumer in the future. It is implicitly recognised in the privatisation statutes through a duty on the sectoral regulators to promote or facilitate competition. That is the general issue.
Consequently, there is no clear distinction between sectoral regulation and the promotion of competition in those sectors. The one merges seamlessly into the other and the sectoral regulators are drawn inevitably into competition issues. That is reflected in the regulators' responsibilities to enforce certain licence conditions which are aimed at market power issues. For example, there are licence conditions concerning price caps and prohibiting undue discrimination.
It is reflected also in the concurrent functions conferred on the sectoral regulators under certain aspects of general competition law; namely, the monopoly provisions of the Fair Trading Act 1973 and the provisions of the Competition Act 1980 which relate to the control of anti-competitive practices which this Bill repeals. Clarity about the responsibility for applying the legislation in the sectors—ensuring no regulatory gap or overlap—has been achieved through bilateral "concordats" or understandings between most of the sectoral regulators and the Director General of Fair Trading, by which the sectoral regulators are responsible for the application of the relevant provisions of general competition law within their own sectors.
In the Government's view, and that of the regulators, the availability of those powers has been an important fall-back which has added to the credibility and therefore to the effectiveness of the regulators. One remembers the example of President Teddy Roosevelt who extolled the virtues of speaking softly while carrying a big stick. Indeed, that may have been the impression which the noble and learned Lord, Lord Fraser, had of Clare Spottiswoode. He did not use those words but she does indeed speak softly. The sectoral regulators' general competition functions are indeed a stick without which they would be severely hampered.
Let us now deal with the question of consistency. I would echo many of the statements made by Members of the Committee that consistency is important in the issue. It is part of the debate when it is asked why we

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cannot achieve more consistency by lumping everything together and having one person involved. That may indeed be—I hate to say it—the nirvana of the noble Lord, Lord Desai. We may reach the position of having an over-arching great power which is all-seeing and all-powerful; but we are not there yet. These are dynamic and changing markets. I never hesitate to remind the Committee that I have come lately from a field in which I was able to observe those markets developing in extraordinary ways. In my view, to try to have an overarching capacity to master all those specialties in one fell swoop is not credible yet. One day I may stand at this Dispatch Box, if I am a lucky and privileged man, and be able to say that an overarching structure is desirable, but I do not see it yet.
But in terms of the ability to promote an answer to questions on consistency, I say to the Committee that there is already a systematic body of law with which the regulators must ensure that they do not act inconsistently. Consistency in the applications of the prohibitions by regulators is thus built in from the outset. It will be supported by a single set of procedural rules to be drawn up by the director general and by a process for the director general and the sectoral regulators to work together. As my noble friend Lord Borrie has already emphasised, they are already setting up the working group. In developing advice and information about the application and enforcement of the prohibitions, we shall gain more insight into the developing capacity to achieve consistency. The tribunal will also have an important role as all appeals from directors and regulators' decisions will end up there.
In saying that there will be consultation between the regulators and the director general on cases where concurrency is an issue, I do not believe that I am minimising the importance of the informal debate. It may not be a lunch or dinner table; indeed, it may be something as boring as a meeting room. But there must be an informal capacity for concurrency to be dealt with. As has already been intimated by the noble and learned Lord, Lord Fraser of Carmyllie, there is already a requirement under each of the utility statutes that there must be only one way to apply and follow-up a dispute. There cannot be overlap and two cases running at the same time. The noble and learned Lord pointed out that that was the case in the gas regime. It is true of all regimes. That is a protection.
Furthermore, I have already indicated (on 17th November at col. 415 of the Official Report) that I would reflect on whether an amendment to the Bill may be needed to provide flexibility for a regulator and the director general to work together on investigations where both agree that that would be helpful. I very much take the point made by the noble Lord, Lord Ezra, about the widening of the scope of companies where two or three utility sectors may be in the ownership, in some form, of one company structure—a conglomerate of utilities. I do not believe that the Bill would rule out action by the director general, no doubt in the light of agreement between the director general and the regulator or regulators concerned that action would be taken at the level of the director general rather than of one of the utility
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regulators or three of the utility regulators. There is nothing in the Bill which would prevent the process of informal consultation.
Therefore, in the developing process of consistency, by way of advice, procedures and rules, I believe that we will understand better how there is a development of the ability of the director general and the sectoral regulators both to co-ordinate their capacities to understand and, at the same time, their individual ability to act. As I said, there is already a great deal in the body of the law to ensure that they do not act inconsistently.
I move on now to the point made by the noble Lord, Lord Mottistone. I very much agree that in some sectors—the telecommunications sector in particular—it is absolutely vital, given the structure of the market, that we do not hamper the capacity of the director general and of the telecommunications regulators to ensure that competition is still in place and developing. It needs a great deal of care.
In general, when talking about the role of the regulators in relation to the concurrency debate, there has been wide acceptance of the fact that there should be a continuation of the expertise and no blurring of the lines which currently exist. However, if I may say so, it has not been an issue in many of the sectors where we have had a response, but it has certainly been an issue in the telecommunications sector. That is why I wish to underline the remarks made by the noble Lord, Lord Mottistone. I believe that it is instructive to quote the words of a respondent that we have had from within the telecommunications industry:
"The principle of concurrency should he supported. It is likely to he opposed only by those who have a strong interest in weakening rather than strengthening competition law".
That is specifically in the telecommunications sector, which is probably less balanced in competitive terms than some of the other markets given the dynamic of the general market place.
Against a very clear background, I have tried to reflect on what I believe is the rather too accelerated view of how we can develop the capacity to protect competition and, at the same time, develop a different structure of regulatory powers to protect consumers in the market place. There are many interesting ideas of where we may go in the future. However, my basic response to the noble Lord, Lord Ezra, is that the ideas are premature bearing in mind the state of the developing markets.
There are two central points that I commend to Members of the Committee. First, not conferring concurrent functions in relation to the prohibitions would be a major policy change which would inevitably weaken the roles of the sectoral regulators at this time. Secondly, conferring concurrent functions would enable the sectoral regulators' specialist expertise and knowledge of their sectors to be directly tapped as the key asset in applying the prohibitions leading at this stage to a better quality of sectoral regulation all round.
I therefore submit that this is not the time or indeed, if I may say so, the Bill to make a major reduction to the sectoral regulators' functions, least of all while the Government are reviewing the whole area. Irrespective

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of the timing of the utility review, I do not believe that it would be wise to prejudge the issues that that review will bring forward. There will be a time when we will debate the matter further. However, on the basis of my two submissions and for the reasons I have given, I invite the noble Lord to withdraw his amendment.
Lord Ezra: I should like to thank all noble Lords who have participated in the discussion. I believe that each contribution has been most important. We have covered different angles of the issue and it is clearly an essential part of the Bill. While I am most grateful to the noble Lord, Lord Desai, for his very firm support, which I welcome—indeed, I only wish that the Government were swayed by it—I gain the impression that the feeling is that, while this could come, this might not be the right time. The question that then arises is: when will the right time be? Will it be when the Government's eagerly waited review of the regulatory system is completed and has been discussed? Am I to take it that we shall then return to the issue? Is it the Government's intention to reconsider the whole question of concurrent jurisdiction in the light of the conclusions which will be reached in that review? If that is so. I am happy to wait until then, assuming that it will be sometime next year. That means that we will return to the matter.
Regrettably, the weakest part of the Minister's response was where he dealt with the conglomerate situation. He said that no doubt they would all get together and that, possibly, they could leave it to the director general to deal with. That immediately injects an area of uncertainty. If I were the chairman of one of those conglomerates—and I rush to point out that I am not—I would be in a state of grave uncertainty as to whom I should be dealing with in such matters.
Let us assume that I am covering all the utility sectors—indeed, that is perfectly conceivable—the lines and the operations are being merged, gas and electricity are indistinguishable in my operations, and railways are coming into it, with telecommunications overarching the whole lot. I would be in difficulty as regards knowing to whom I should turn for advice, let alone knowing who would finally decide whether or not I was contravening the legislation. I find that a rather unsatisfactory situation.
When this particular section of the Bill was drawn up, it does not seem to me that sufficient attention was paid to the way in which the market is developing. I have but two thoughts in my mind. The first is that I gain the impression that we shall return to the matter when the review is complete; and, secondly, I feel grave concern as to how the developing number of conglomerate companies will be dealt with. However, this is not the time to be pressing Members of the Committee for a decision on the matter. We have had an extremely useful debate. I shall reflect carefully on everything that has been said, while leaving those two thoughts in the mind of the noble Lord, Lord Simon. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Ezra Lord Ezra moved Amendment No. 207:
Page 26, line 7, at end insert—
("(1A) When exercising the functions under this Part which a regulator has concurrently with the Director, the regulator shall consult and follow the advice of the Director in order to ensure consistency in the application of this Part.").
The noble Lord said: The amendment brings us back to the question in a different way. Whereas the amendment that we have just debated proposed that there should not be concurrent jurisdiction, Amendment No. 207 assumes that there will be such jurisdiction but suggests that the risk of overlap could be overcome by requiring the regulators on the face of the Bill to consult and follow the advice of the director general when exercising their functions under the legislation. The director general would thereby take a leading role which would ensure consistency in the application of the legislation. The obligation to consult and to follow the advice of the director general would also apply when the regulators exercise their functions under monopoly provisions of the Fair Trading Act 1973.
I hope that even though the Government were not prepared to accept a more far-reaching proposal in Amendment No. 206, they will, in the interests of trying to avoid overlap—which they say they want to avoid—accept the less far-reaching proposal in Amendment No. 207. I beg to move.
6.30 p.m.
Lord Mottistone: I trust that the Government will resist this amendment with the same strength as they did the previous amendment because it seems to me that it just says the same thing all over again and weakens the power of the regulators at the wrong time.
Lord Simon of Highbury: I find it difficult to resist the urge to be brief that was revealed in the statement of the noble Lord, Lord Mottistone. I shall not resist it. I feel that I have made the arguments before. We think that overlap is inevitable. Indeed it may be helpful under certain circumstances. Therefore we do not believe that the amendments are necessary in the light of the arguments that I made with regard to the previous amendments.
Lord Ezra: This is all part of the same debate. I shall take on board what the noble Lord. Lord Simon, has just said. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Simon of Highbury Lord Simon of Highbury moved Amendment No. 207A:
Page 26, line 8, after second ("in") insert ("paragraphs (a) to (g) of").
The noble Lord said: In moving Amendment No. 207A I wish to speak also to later amendments standing in my name, Amendments Nos. 236A. 240A, 242A and 252A. These amendments do no more than rectify minor drafting deficiencies in the Bill. Amendments Nos. 207A and 252A clarify the definition of "regulator". Amendments Nos. 236A, 240A and 242A correct cross-referencing errors.
In moving these amendments I should like to add that we may also wish to make minor amendments to those provisions in Schedule 10 which make consequential amendments flowing from the establishment of the new competition commission. There are further matters on which we may wish to bring forward amendments to Schedule 10 at Report stage. The first of these concerns the way that the disclosure provisions of this Bill and the utility statutes interact in governing information obtained by regulators exercising concurrent functions. Some clarification may be needed on this.
The Bill provides for regulators to be able to exercise concurrent functions in relation to Part I of the Bill. However, it does not at present provide for them to exercise concurrent functions in relation to the transitional arrangements in Schedule 13, even though some of these are related to functions under Part I. I believe that the Bill needs to be amended in this regard and accordingly I would expect to come forward with amendments. I beg to move.
On Question, amendment agreed to.
Lord Ezra Lord Ezra moved Amendment No. 208:
Page 26, line 9, at end insert ("other than the Director General of Telecommunications").
The noble Lord said: This amendment again forms part of the various amendments relating to a concurrent jurisdiction. We have already debated that matter and I shall speak briefly. This measure deals specifically with the concurrent powers of Oftel. It is considered by many that the massive expansion of telecommunications in its various forms is such that it will be difficult to draw the line where the concurrent authority of the Director General of Telecommunications ends and the functions of the Director General of Fair Trading begin.
Almost every large concern, and indeed the majority of small ones, are involved in one way or another in telecommunications. Therefore it is felt that this matter requires a different treatment. I can guess the kind of answers I will receive on this matter because I am sure that, if nothing else, the noble Lord, Lord Simon, is consistent today, although what we are aiming for is to obtain consistency in the application of this legislation. He seems to be consistent in rejecting that desirable objective. When he replies after other Members of the Committee have spoken, as I hope they will, I hope he will tell us how this issue is treated in other countries of the European Union. How do they treat the telecommunications industry in relation to competition law? Is it handled by the government organisation set up to deal with competition law, or is handled by a separate directorate? It would be interesting to know what others do in this matter before we come to a conclusion. I beg to move.
Lord St. John of Bletso: I also wish to support this amendment. We have already debated the position of regulators generally. Amendments Nos. 210 and 213 are particularly relevant to Amendment No. 208. As I said on Second Reading, I am interested in a simple and workable competition law. I support the centralisation of the application of the new law in the DGFT, who has wide experience of competition matters in all sectors,
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including his dealings with mergers and acquisitions. That point has already been made by the noble Lord, Lord Borrie.
As I mentioned when we discussed Amendment No. 206, I am not convinced, however, that the information technology field should be the subject of sectoral rather than national scrutiny as regards competition. The IT field is a dynamic and evolving field with strong international features. The DGFT's expertise and experience in this field are already strong and should be built upon. However, this Bill seems to envisage that the de facto competition authority for this field would be Oftel. It appears to me that that is not the best way forward, despite the concerns of the noble Lord, Lord Mottistone. The arrangement would possibly undermine the effectiveness of the DGFT's position. I support the comments of the noble Lords, Lord Ezra and Lord Desai, on Amendment No. 206 that these important decisions should not be taken before the results of the Government's review of the utilities are known. As the Minister has mentioned, it is hoped that we shall have those results by the end of January next year. Oftel's submission on the review of utility regulation states on page 3:
"The changes in competition law will have the most profound impact on the work of the DGT".
One reason for this might be that under Clause 10, the Bill proposes to change fundamentally the current position under the 1984 Telecommunications Act.
Under that Act competition powers—that is, the powers to exercise the Fair Trading and Competition Acts—are kept separate from the Telecommunications Act powers. Under Section 3 of the Telecommunications Act, Oftel is not allowed to take into account its telecommunications objectives when exercising its competition law functions. Despite the anxieties of the noble Lord, Lord Mottistone, and the strong words of rejection by the Minister, I have received information about a number of concerns, and support, from a number of organisations. The Federation of Electronics Industries has expressed its concern and broad support, along with a number of its members. They include—I mention a few—Erikson, ICL, Digital, IBM, Intel, Norton, Phillips, BT, Racal, Fujitsu and Xerox. I hope that these concerns are taken into consideration and that we shall receive a more encouraging reply from the Minister.
Lord Mottistone: I need hardly say that I hope the Government do not accept the amendment. I understand that Amendment No. 211 was also spoken to. As I said, Amendment No. 211 is premature. We do not know what the situation will be in January 2001. No doubt it will be a suitable time to have another look at this Competition Bill. I hope therefore that Amendment No. 211 will be rejected.
I am somewhat surprised at the large companies which are ganging up against the very skilful management by Oftel of the telecommunications position. I suspect that those companies are not giving attention to the basic point: that we have to make certain that the large telecommunications companies are made properly competitive. I think that they would agree with

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that, as will the noble Lord, Lord St. John. I find the noble Lord's great effort to take Oftel out of the picture very strange.
Lord Fraser of Carmyllie: I entirely agree with my noble friend Lord Mottistone, as I think we all do, that without the powerful presence of regulators—in the case of telecommunication it is Oftel—the competition in that industry which we now see would not have been established as quickly and effectively as it has been. There is no dispute about that. We recognise the value of those who have held the office.
However, the real issue was neatly encapsulated in a remark of the noble Lord, Lord Ezra. Do we know where the line of concurrency will be drawn? If we know now, will we know it in a year's time; or, if we know now, do we believe that it falls at a worthwhile point? Such has been the speed of change that clearly telecommunications is no longer a discrete sector, as the noble Lord, Lord Ezra, said. It is for that reason that we believe that it is right to explore this issue now; and I have no doubt we shall explore it again at a later date.
We must be clear that the issue will be properly covered for all the anti-competitive purposes of the Bill. There is a powerful argument for saying that, as regards competition provisions, so broad is the activity of telecommunications now that authority is better invested in the Director General of Fair Trading.
Amendment No. 211 is grouped with Amendment No. 208. It is the "sunset" provision. It restricts the functions of the Director General of Telecommunications until 1st January 2001. I accept that there is no magic about the year 2001 in terms of telecommunications. However, as I see it, the amendment signals the realisation that even at the time of the passage of the Bill there may yet be arguments about the continuing value of having Oftel in place over competition. It must be obvious to anyone with even half an appreciation of the change that has been undertaken, that sooner or later we would wish to see the industry subject to broader competition and not restricted in this sectoral way.
Even if the noble Lord, Lord Simon, cannot give us comfort tonight—I should be surprised if he were to do so—I hope that, nevertheless, he will be in a position to recognise that the concerns on this issue are more keenly felt than they might be on the broader issue of concurrency which we dealt with in the earlier, larger group.
6.45 p.m.
Lord Simon of Highbury: I can start with a positive statement. It is not on any of the amendments, in case anyone becomes overexcited. It is on the question of regulators in Europe. I answer in general to the noble Lord, Lord Ezra.
It is my experience in general that, in particular in the telecommunications field, we are way ahead. I find that an extremely good position for our industry. The capacity of our regulators and the effective communication in the market place have put us in a
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strong position. If the noble Lord wants more detail, perhaps he will apply to me separately. But we are effectively leading the world in the regulatory process in creating competition in the market place. I would not defer even to our American friends in a number of sectors on the way that we have increased the dynamic of the market.
Perhaps I may respond to the noble and learned Lord, Lord Fraser, as to where the guidelines are drawn. Where is an industry regulator relevant in his field? As I said earlier in talking about the development of guidelines from the director general and the sector regulators, it has to be a moving series. The guidelines have to reflect the dynamics of the market place. They will not be cast in stone. Therefore we shall have to adjust to an understanding that the process of advice and guidance can change over time as the market place changes over time. Those are general points that are worth making.
I can offer a less warm response on the specific amendments. The amendments concern Oftel's concurrent powers. Amendment No. 208 in the name of the noble Lord, Lord Ezra, excludes the Director General of Telecommunications from the list of regulators mentioned in Schedule 10 who are able to exercise concurrent functions under Part I of the Bill. The purpose would seem to be to remove the ability of the Director General of Telecommunications to exercise concurrent functions under the prohibitions, under Part I of the Bill. The effect of Amendment No. 211 would be to limit Oftel's concurrent functions under the Fair Trading Act and the Competition Bill to the period until January 2001.
The reason for this choice of regulator, and the terminal date of 2001, in relation to Amendment No. 211 is not entirely clear. It may be related to the development of competition in the telecoms retail market, and to the fact that the Director General of Telecommunications has said that, in view of this, he expects BT's current retail price cap to be the last one. It will expire in August 2001.
Implicit in the amendments seems to be the assumption that the central competition function of the regulators is imposing price caps, and that when the need for price caps falls away so will the case for the sectoral regulators to be involved in wider competition issues. Amendment No. 208 in fact implies that the sectoral regulators can retreat from wider competition issues even while price caps still apply.
With respect, this is not the Government's view. As I have explained in the earlier discussion on concurrency, it is appropriate that the regulators, including the Director General of Telecommunications, should have concurrent functions under general competition law because there is no clear distinction between sectoral regulation and the promotion of competition in those sectors. The regulators have competition-related duties so that sectoral regulation merges seamlessly into competition issues and the regulators are inevitably drawn into competition issues.
One of the purposes of price caps is to prevent one kind of abuse of a dominant position—namely, excessive, exploitative pricing. The policy of the

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Director General of Telecommunications is to remove retail price caps as quickly as possible as competition develops. In fact BT's current retail price cap already applies to only about 40 per cent. of BT's services in terms of the revenue generated. But abuse of the dominant position can also take other forms which could be relevant, even after retail price caps no longer apply. Predatory pricing could easily be used to squeeze people out in this sector. The telecommunications system is a mosaic of interconnecting networks, and access to networks is an area where it will be market power that can be exercised. There is no doubt a whole variety of other ways, subtler than network access or the retail pricing or predatory pricing strategies, and therefore more difficult to foresee in advance. The range of potential strategies, particularly in this sector, is limited only by human ingenuity, which is not currently a great limiting factor.
The broad position remains that sectoral regulators have certain duties under the utility statutes to promote competition where that is feasible. This issue goes wider than the price cap. It is an issue which—
7 p.m.
Lord Fraser of Carmyllie: I understand the Minister's point that, under the existing scheme of arrangement, the sectoral regulator has a duty imposed upon him to examine competition issues. As the scheme of the Bill is presently laid out, that is a concurrent jurisdiction.
What we are trying to probe is the issue of what is his sector, and whether there is a risk that in the foreseeable future, if Oftel sought to exercise those competition powers to examine the conduct of some player in what the regulator believed to be the telecommunications sector, it might then be met with the complaint, "This goes beyond your statutory powers". Our concern is that it would be no fault of the regulator and no criticism of him, but such is the speed of change that trying to maintain a definition of that sector is becoming an increasingly artificial exercise. Since it is so artificial, it would be safer in the public interest simply to vest investigation of competition law, anti-competitive practice and abuse of dominant market position in the director general himself rather than take the risk of there being any challenge to the Director General of Telecommunications.
Lord Simon of Highbury: I thank the noble and learned Lord for his intervention. But I still see at this time that the special capacities of the Director General of Telecommunications, as specified, must be maintained. If there has to be testing of the limits, it can be handled in other ways. But it is not an appropriate approach now to ask him to give up his special capacity powers on the way to developing the new legislation.
Lord Kingsland: There is nothing to prevent the Minister, in any one of the separate utility regimes, inserting a simple clause stating that where, in the judgment of the utility regulator, one regime is preferable to another he can opt for that regime, and to cast that clause so clearly that, at some given moment
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in the application of competition law or the licence conditions, the regulator has to take a position. From that moment he goes down whichever one of the two paths he selects. Surely, not only is that not beyond the technical abilities of the parliamentary draftsman, but also it cannot be beyond the Minister's vision for a system which is as certain and clear as possible for the companies concerned.
Lord Simon of Highbury: Again, I thank the noble Lord for his inventiveness. It seems to me that the appropriate locus for addressing this question is precisely the working group for the director general and the existing sector regulators. If during the process of consultation after the guidelines have been published we find that many people say, "This is a new sector of industry developing under the broad aegis of telecommunications which needs to be regulated by a different regulator", or indeed, "We wish to redefine what the telecommunications director general is responsible for", that is the appropriate time for that to be done. I would note the point and put it to the working group that that is a test for the particular sector.
Lord Kingsland: In a few amendments' time, in relation to another sector, this point will arise again. By implication, the amendment proposes a much more clear-cut way of dealing with the situation than that proposed by the Minister. I am sorry to anticipate an amendment, but I have to shoot at my pheasants when they fly over me. I hope that I do it rather more effectively with respect to this legislation than I do in other circumstances. I submit that there are ways of doing this under the Bill that are preferable to simply hiving matters off for discussion under a working party and delaying a decision which, if it is not taken before the Bill comes into effect, will undoubtedly result in a great deal of uncertainty.
Lord Simon of Highbury: The noble Lord leaves me all of a tremble at the thought of yet another discussion around this matter on an amendment that I cannot yet foresee. I was racking my brains. However, perhaps dinner will intervene. I await the argument when it comes.
Currently, the idea that we should specify in the Bill that markets are developing in such a static way (in fact, "static" and "development" are not words that go well together) that we need to re-define already on the face of the Bill how this particular market place—telecommunications—has differed in applying the new prohibitions seems premature. I would let the people who are expert in the sector, who are expert regulators, and the director general, take account of this debate and consider whether, in issuing guidelines and advice, they need to revise the scope of the sector in any way. I certainly do not think that we can do it here on the Floor of the House. Under those circumstances perhaps the noble Lord is prepared to withdraw the amendment at this stage.
Lord Ezra: Once again, I express appreciation for the lively debate we have had on this issue. It is clearly

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not the last time during consideration of the Bill that we shall debate this subject. What has emerged clearly is the jurisdictional uncertainty which covers these issues. With market places evolving, conglomerates forming up and technology in telecommunications developing rapidly, the situation is far from static. It is difficult to see where the lines will be drawn today, tomorrow and the day after. Undoubtedly, we shall need to return to this issue from time to time.
I wish to study carefully the remarks of all noble Lords, and in particular the contribution of the noble Lord, Lord St. John, who referred to a number of matters stated by Oftel. I got the impression from the noble Lord's clearly devoted reading of the background material that, far from the existing situation continuing, the powers of Oftel could be considerably strengthened under the new arrangements, and that could add to the degree of uncertainty. I should like to study that matter. I do not wish to detain the Committee any longer and beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 209 not moved.]
Clause 52, as amended, agreed to.
7 p.m.
Schedule 10 [Regulators]:
Lord Simon of Highbury Lord Simon of Highbury moved Amendment No. 209A:
Page 69, line 25, leave out ("64") and insert ("65").
The noble Lord said: Amendment No. 209A is a consequential amendment to Schedule 10 which flows from the substantive amendments which I have tabled to Clauses 63 and 65. With the leave of the Committee, we shall speak to those substantive amendments when we reach Clause 63. In the meantime, I beg to move.
On Question, amendment agreed to.
Lord Fraser of Carmyllie Lord Fraser of Carmyllie moved Amendment No. 209B:
Page 70, leave out lines 4 to 8.
The noble and learned Lord said: The purpose of the amendment is to increase certainty regarding the scope of Part I functions and their application by the Director General of Telecommunications to clarify the purposes for which the functions under Part I, in particular the prohibitions, may be applied by that sectoral regulator to achieve a better alignment of Part I of the Bill with EC law and principles and a better consistency of decision-making. The amendments would not prevent the director general from exercising functions under Part I but would simply remove the bridge created in Schedule 10 between the objectives of the relevant sectoral statute and the prohibitions in Part I. They would therefore maintain the present position—they would not introduce the change to which the noble Lord, Lord St. John, referred a moment ago—under which the Director General of Telecommunications wears two
926
hats, as regulator and as a competition authority, but those hats would have to be kept separate and would not be worn simultaneously. I beg to move.
Lord Simon of Highbury: The question of regulators' general duties under their utility statutes and their relationship to concurrent functions under the Bill takes us into the territory of conflict. The provisions that these amendments would delete have two purposes. The first is to make clear that in applying the prohibitions a regulator must regard his functions under the Bill as paramount. In other words, in carrying out his functions he must act in accordance with the governing principles set out in Clause 58. That is vital to ensure that the principles upon which the Bill rests are not undermined and that they are to be followed by each of the regulators when applying the prohibitions. That may well be the effect without specific provision in the Bill, but it is such an important issue that we wish to put beyond doubt that that is the prime function.
The second purpose is to enable, but not to require, each regulator to have regard to his general duties in the utility statutes, subject to the crucial point about functions under the Bill being paramount. We consulted the regulators in the development of this provision and received differing views as to whether they should be required to have regard to the general duties in their utility statutes or whether those duties should be disapplied. We decided that the right course was to enable a regulator to have regard to those duties, where appropriate, but not to require him to do so. The effect of the amendments would be to require a regulator to have regard to his utility statute duties without making clear that he is to regard his functions under the Bill as paramount. That would create a risk of conflict and inconsistency.
A particular area that we are reflecting upon is the interaction between the duties in the Channel Tunnel Rail Link Act and those in the Railways Act 1993. I may wish to return with an amendment on that point on Report.
I hope that the noble and learned Lord, Lord Fraser, finds this explanation helpful and is under those circumstances prepared to withdraw the amendment.
Lord Fraser of Carmyllie: I am grateful to the noble Lord for anticipating what I was going to say about the Channel Tunnel Act. I say more seriously to the noble Lord that I shall reflect on what he said. I am not sure that it is quite an answer to the point that concerns us. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 210 and 211 not moved.]
Baroness Dean of Thornton-le-Fylde Baroness Dean of Thornton-le-Fylde moved Amendment No. 211A:
Page 70, line 17, at end insert ("and activities preparatory or ancillary thereto").
The noble Baroness said: In moving the amendment, I wish to apologise to the Committee for not being present at the Second Reading of this important Bill. It was impossible for me to attend. I shall not kid you that it was business; it was actually a holiday abroad.
My amendment deals with the concurrent powers and the application of those powers by the Director General of Telecommunications. The amendment is specifically in the area of telecoms regulation. I almost hesitate to use the word "telecommunications" because the impact of the amendment is to face the challenges of much of the convergence of which we shall enjoy the benefits now and in the future.
As presently worded, the Bill will limit the regulator's powers to the area of,
"commercial activities connected with telecommunications".
I suggest that those words are almost outdated in their general usage. I am aware too that my noble friend Lord Cocks of Hartcliffe complained at Second Reading of the Bill that those powers were too wide. I approach it from a different direction and think that they are too narrow and too restricting for the director general to ensure access and true competition in this sector.
The words are from the Telecommunications Act 1984. The world has moved on a long way since 1984. We are now seeing convergence as between telecoms and broadcasting; it is with us and is poised to take off in a big way. The advent of digital transmission technology and the developments in information technology software provide us with the opportunity for our television sets to deliver interactive, on-line services, with the use of telecommunications too. Already our PCs in our homes and offices deliver live sound and pictures to users, again on-line services. The two are converging. It is for this reason that I propose my amendment.
Some may argue that these services will not be widely available for a number of years yet at prices which the public can afford. I suggest that that is debatable. The average shelf-life of a competition Act seems to be about 15 years. I am trying to project us not into the immediate future but a little further on. That is necessary when we consider the speed at which technology is developing. On past experience, the words in the Telecommunications Act 1984, which are repeated in the Bill, have been interpreted very narrowly by lawyers. I suggest that in the best interests of competition, of the consumer and of the developing industries we can no longer afford a very narrow interpretation.
I am drawn to the amendment from debates that we had during the passage of the Broadcasting Bill 1996 which clearly brought out the concern that we could face an increasing possibility of dominant market players—they now exist—determining for the consumer future availability of access to the emerging services from the set-top box on the television. Though the Broadcasting Act, as it became, recognised that it would probably have a short shelf-life, developments in the sector made many feel that the problem had been alleviated by the powers which the DTI sensibly granted to the DGT at Oftel.
We hoped that those powers would ensure that access to information about proprietary technology was readily available to the people who wished to enter the market. I suggest that experience over the past year fell short of
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our expectations. For instance, I gather that the information on what is called the "applications programme interface" only recently became available, despite new players in the sector wishing to have that information to plan their involvement in the medium and longer term. That demonstrates clearly that, where gateways are controlled by organisations which are content providers, there are significant commercial incentives for anti-competitive behaviour. The Director General of Telecommunications had no power to force the release of that information in the face of protected anti-competitive behaviour.
I put forward a simple analogy. When privatisation of telecoms took place, no one imagined that the privatisation would permit or prevent any of us using a handset to make a telephone call to any number in the land irrespective of who the service provider or network operator was. Legislation ensured that the public, and indeed business, had that access. This is not a dissimilar situation. It is the principle of access in a way that ensures that the regulator has the authority to take steps which will enable a competitive situation to exist.
The powerful position of the controllers of gateway technology was recognised by the DTI when it established the system of class licences for the running of telecommunications services for the provision of conditional access services. Those licences, which are issued and regulated by the DGT, place on the holders a "duty to co-operate with" content service providers wishing or entitled to use their network to reach audiences in order to prevent the abuse of a dominant position of network controllers who are also content service providers.
That narrow definition of conditional access services includes encryption services and subscriber manager services. Those were two issues debated in this Chamber during the passage of the Broadcasting Bill. The wider definition that the regulator has rightly chosen to interpret includes software and middleware which support the navigation and selection of services for the public. Amendment No. 211A will put on a statutory basis the broad interpretation of those powers to ensure that we have competition in this sector. It is a competition amendment.
The amendment is consistent with EC jurisprudence in this area. It reflects the approach of the advanced television services regulations in the UK, jointly sponsored by the DTI and the Director General of Oftel. And it echoes the sentiments of the Minister, my noble friend Lord Simon, in our considerations on this Bill on 13th November when he pointed out that it is wrong to make the assumption that a utilities company licence conditions deal with all competition concerns which can arise,
"particularly in a dynamic market place".—[Official Report, 13/11/97; col. 334.]
In that same contribution my noble friend went on to say that if anti-competitive conduct takes place which is not covered by explicit licence conditions, the prohibitions contained in the Bill should be applied as rigorously and effectively as elsewhere. My amendment is designed to achieve just that in what is probably the most dynamic market place in our country today. It

929
ensures that effective action can be taken in relation to activities which are preparatory or ancillary to licensed telecommunications activities in their widest sense.
I appreciate that in not being here for the Second Reading the Minister has not had prior indication of my general anxieties in this matter. It may be that he will wish to consider the points that I put forward. If so, I fully accept that. And if that is the case, might I suggest that when he considers the amendment he might also consider that Section 50(3) of the Telecommunications Act grants the Director General of Telecommunications concurrent powers under the Competition Act 1980—the Act which will be superseded by this Act—and it would be worth including more words from that Act into this Bill. That would give us legislation which truly provides competition both for the consumer and for the emerging players in this sector. It will also prevent dominant market players from taking full advantage, as I am sure they would wish. I beg to move.
7.15 p.m.
Lord Mottistone: I support in principle the amendment of the noble Baroness, Lady Dean. I am told that the Director General of Telecommunications has a certain anxiety about the definition of his powers under the Competition Bill and believes that the amendment raises an important point. However, he is not sure that the wording is quite right and suggests that the Government may like to study the point to see whether better wording can be achieved.
In the same connection, the director general believes that the scope of his powers as currently defined in the Bill probably also need amending to match Oftel's scope under the Telecommunications Act, to which the noble Baroness referred. I am not sure whether the noble Baroness was on the same point as myself, but the Government may wish to consider it so as to ensure consistency between this Bill and the Telecommunications Act regimes. I hope that the Minister will feel that that is something he can willingly take up.
Lord Simon of Highbury: I certainly recognise the general points made by my noble friend Lady Dean in relation to the pace of redevelopment in this marketplace and the fact that, not only we in this Chamber, but also the regulators will probably always be just behind the game rather than ahead of it.
I particularly recognise the anxieties that prompted the amendment. However, I can assure my noble friend that proposals are already in hand to extend the regulatory regime for conditional access services—a key point in the specific issue raised by my noble friend. The DTI and Oftel issued a joint consultation document in July of this year on this issue, and a new version of a draft standard telecommunications class licence has just been circulated for comment. That includes licence conditions to provide a similar regulatory framework for access control gateways to non-broadcast and non-television broadcast digital services, as already applies to broadcast digital television services. The process of consultation is already under way on that point.
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The amendment as drafted could be a significant widening of the scope of the concurrent functions of the director general in respect of prohibitions. That was a point made by my noble friend Lady Dean and was also perhaps behind the intervention the noble Lord, Lord Mottistone. I believe I have already argued that it would be wrong to pre-empt the outcome of the utilities review or indeed any sector specific consideration of the future of regulation by provisions in this Bill that would undermine the Director General of Telecommunications' functions as they now stand. By the same token it would be wrong to pre-empt the outcome of the review by provisions that could significantly widen the scope of his concurrent functions.
We took a great deal of advice from the director general in the consultation process. I note from that consultation process that the Director General of Telecommunications has, as the noble Lord, Lord Mottistone, pointed out, argued that the scope of his concurrent functions under the Bill is narrower than the scope of his existing concurrent functions in relation to the Competition Act 1980. I am not convinced that any change is needed to the provisions of the Bill, but I would certainly be willing to reflect further on this matter as part of the consultation process.
In the light of my specific response on the conditional access position and the general wish not to prejudge at this stage the sector review, and in the light of the fact that we are in consultation with the director general, I hope that my noble friend will be willing to withdraw the amendment.
Baroness Dean of Thornton-le-Fylde: I thank my noble friend for that response. I am aware of the consultation document which came out some months ago from Oftel. I am heartened by the Minister's assurance that he will reflect on the debate. This is a key part of what is a dynamic market. There are tremendous opportunities in this sector. It would be sad if the Competition Bill did not ensure competition in the sector. I shall willingly withdraw the amendment. However, I would ask the Minister to consider some of the points that have been put forward in the debate. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
The Deputy Chairman of Committees (Lord Skelmersdale): I understand that Amendments Nos. 212 to 218 are not to be moved. Therefore, unless any noble Lord objects, I declare them not moved.
[Amendments Nos. 212 to 218 not moved.]
[Amendments Nos. 219 to 236 not moved.]
Lord Simon of Highbury Lord Simon of Highbury moved Amendment No. 236A:
Page 76, line 6, leave out ("6") and insert ("1").
The noble Lord said: I have already spoken to this amendment. I beg to move.
On Question. amendment agreed to.
[Amendments Nos. 237 to 239 not moved.]
Lord Kingsland Lord Kingsland moved Amendment No. 239A:
Page 77, line 45, at end insert—
("( ) In section 25 (orders for securing compliance), in subsection (5)—

(a)after paragraph (b), omit "or";

(b)after paragraph (c), insert "or

(d)that the steps which he is taking, or proposes to take, under the Competition Act 1998 will be more, or equally, effective to secure compliance with the relevant licence obligation.".").

The noble Lord said: This is another episode in the saga of concurrent powers, this time, the Committee will be relieved to know, not in the field of telecommunications but in the field of electricity. The point can be fairly simply put. Under Section 25 of the Electricity Act the DGES has an obligation to take enforcement action against a relevant company that is in breach of its licence conditions. The matter which is enforced against might also breach Part I or Part II of the Competition Bill, no doubt soon to become the Competition Act. The director general may take the view that the better way of dealing with the situation is to pursue the procedure under Part II of the Competition Bill rather than the procedure under Section 25 of the Electricity Act. However, except in very limited circumstances, he cannot do that because he is obliged to act under Section 25. That is the background against which my amendment must be assessed.
It is true that under Section 25 of the Electricity Act there are certain limited circumstances in which the director general can forgo his obligation to enforce. However, in my submission, those are too limited. Therefore, the amendment seeks to add a further heading (d). This is the formula that provides the option for the director general to choose which course he thinks is better pursued in the public interest. It states,
"that the steps which he is taking, or proposes to take, under the Competition Act 1998 will be more, or equally, effective to secure compliance".
In fact, in the amendment I use the words "with the relevant licence obligation". However, if the Minister were prepared to accept the amendment, it might be better concluded with the expression "with the relevant condition or requirement".
This is a concrete example of the general proposition to which I alluded about half an hour ago when I intervened in the general debate on telecommunications. It is an extremely attractive way of dealing with the problem of concurrent powers because one can see it extended not just to telecommunications but to the operations of all the other regulators as well. To have to face both the procedures together is confusing not only for the regulator but for the regulated party. I beg to move.
Lord Simon of Highbury: The noble Lord has now arrived at what he announced a little earlier. I waited with great pleasure because I am now able to say that I am truly grateful to him for elucidating the earlier point and for putting down an amendment which seems to make an extremely valid point about the interaction between Section 25 of the Electricity Act and the enforcement of prohibitions. However, as he will be aware, the
932
amendment was put down only yesterday. I should therefore like to reflect on the issue it raises and come back to the matter at Report. It is a valid point but we want to consider it more widely, as the noble Lord intimated. With that consideration in mind, perhaps he will be willing to withdraw the amendment.
Lord Kingsland: I am most grateful to the Minister for that response. In the circumstances, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 240 not moved.]
Lord Simon of Highbury Lord Simon of Highbury moved Amendment No. 240A:
Page 78, line 6, leave out ("6") and insert ("1").
On Question, amendment agreed to.
[Amendment No. 241 not moved.]
Baroness Farrington of Ribbleton: I beg to move that the House do now resume. I suggest that the Committee stage of this Bill be resumed not before half past eight.
Moved accordingly, and, on Question, Motion agreed to.
House resumed.

Supreme Court (Offices) Bill
7.30 p.m.
The Lord Chancellor (Lord Irvine of Lairg): My Lords, I beg to move that this Bill be now read a second time. The office of Lord Chancellor, of which I am the 258th holder, is more than 1,000 years old. The office of Permanent Secretary to the Lord Chancellor does not have quite as long a heredity. It has existed a mere 100 years or so, and the present incumbent is only the eighth holder.
Qualifications for the office of Permanent Secretary are prescribed by the Supreme Court Act 1981. Those provisions are unique for a Permanent Secretary post. They have the effect of barring from appointment any person who is neither a barrister nor solicitor of at least 10 years' standing, nor a civil servant with at least five years' experience in the Lord Chancellor's Department. The purpose of the Bill is to remove these restrictions so that future appointments may be made from as wide a field as possible from all the talents.
When the present restrictions were discussed on 5th February 1990, in Committee on the Courts and Legal Services Bill, the noble and learned Lord, Lord Ackner, described the Permanent Secretary to the Lord Chancellor as "the permanent head" of an "immensely powerful department." The noble and learned Lord added. however, that,
"a civil servant who has served at least five years in that department qualifies. I imagine that includes from the tea boy upwards".—[Official Report, 5/2/90; col. 631.]

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This change is necessary because the present restrictions limit unreasonably the field of candidates from which future appointments may be made. I doubt that there are tea boys as such in the Lord Chancellor's Department but the noble and learned Lord's point is well made in principle. There are over 1,000 members of the Government Legal Service, and many more members of the Lord Chancellor's Department, of whom hundreds are likely, formally, to fulfil one or both of the statutory criteria.
But the Lord Chancellor's Department itself has a staff of nearly 12,000, a budget of £2.25 billion and an estate of nearly 500 buildings. Its responsibilities are wide ranging. They include the administration of the entire court system of England and Wales; the legal aid budget; the appointment of judges and lay magistrates; and the reform and modernisation of the civil law. Also, the Lord Chancellor is responsible for the Public Record Office, the Land Registry and the Northern Ireland Court Service, whose combined staff total over 9,000. So the Lord Chancellor is ultimately responsible for 20,000 employees.
To lead this organisation, the Permanent Secretary must have the ability, experience and all the qualities required of the official head of a major department of state. Proven experience and ability in management of strategic policy development and implementation is obviously desirable; a successful track record of leadership and management at the head of a large organisation would be useful; and familiarity with, and perhaps, preferably, direct experience of, the processes of government at the highest level. There are at any time few who could qualify. But the additional requirements of 10 years' standing as a lawyer or five years' experience in the Lord Chancellor's Department reduces their number to a tiny handful.
Very few members of the Government Legal Service have the standing and experience to be contenders for this post. Nearly all of them have been exclusively occupied with pure legal work for the whole of their careers and have little or no management experience. In my own department the staggering fact is that there is only one official of the requisite experience who also meets the existing statutory criteria. I am advised that, over the whole senior Civil Service, only one other candidate has so far been identified who is similarly eligible for appointment. In years gone by, the existence of only one or two candidates might have sufficed. Successive Lord Chancellors have been served well by Permanent Secretaries, appointed subject to the existing restrictions. But nowadays it is held, rightly in my view, that a wider field of choice is necessary for so senior a post, so that there is sufficient competition to ensure that a really strong candidate is appointed.
It may turn out that the best candidate is a lawyer, who could come from the professions, or a person with five or more years' experience in the Lord Chancellor's Department. The statutory requirement that all candidates be one or the other, however, can only be justified if the duties of the post are such that they cannot properly be performed without one or other of the mandatory qualifications.
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The Lord Chancellor's office was originally very small, comprising only five officials, and the Permanent Secretary performed many legal duties. As long as this was so, it was justifiable that the Permanent Secretary should be required to be a lawyer. After the Courts Act 1971, however, the Lord Chancellor assumed overall responsibility for the administration of the court system as a whole, and the organisation was restructured as the Lord Chancellor's Department. The department has since developed increasingly along the lines of other major departments of state. Following on further changes in the last decade, it is now structured around an administrative and policy-making core receiving advice from a separately managed group of legally qualified civil servants headed by a legal adviser answering directly to the Permanent Secretary.
The old arrangement, under which a small number of legally qualified staff undertook all duties whether legal or administrative, has disappeared. Along with it has gone the historical reason for requiring the Permanent Secretary to be a lawyer. The Permanent Secretary is no longer responsible for providing legal advice to the Lord Chancellor. This was recognised in part by changes made by the Courts and Legal Services Act 1990 which allowed a non-lawyer with at least five years' experience in the department to be considered for the post.
The Lord Chancellor is at a critical cusp in the separation of powers between Parliament, government and the judiciary. He is the natural conduit for communications between the judiciary and the executive, so that each fully understands the legitimate objectives of the other. Under the previous government the public were disturbed that the separation of powers was not alive and well because the judiciary and the executive appeared to be at war. It is for the Lord Chancellor to ensure that the public can have continuous confidence that our system, based on the separation of powers, is working. I am referring of course in particular to the well-publicised unhappy relations between the former Home Secretary and the judiciary. That kind of thing will not happen under this Government. I believe that the higher judiciary would be the first to agree that since 2nd May strong co-operative arrangements have been in place which are working well in practice.
It is also a major duty of any Lord Chancellor to uphold the independence of the judiciary upon which the rule of law depends. It is the fact that Ministers' or governments' strongly held views, and their judgment of the interests of their departments, or of the interests of government, or of the public interest, can easily conflict with the judgments of the courts within the courts' independent sphere. That is why any Lord Chancellor, supported by a Permanent Secretary who must be fully conscious of these crucial values, is the guardian within government of judicial independence.
The Permanent Secretary to the Lord Chancellor has a major role in maintaining contact between the Lord Chancellor and the judiciary. He must have a lively awareness of the unique, pivotal position of the Lord Chancellor and the importance of upholding judicial independence. The Permanent Secretary must fully comprehend legal, judicial and constitutional

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values, as well as those of government and Parliament. No person will be appointed to be my Permanent Secretary who does not have the fullest appreciation of these traditions and values. I firmly believe, however, that this breadth of appreciation is not limited to those with legal qualifications or who have served for five years in my department. No such rigid statutory restriction exists within the department serving the judiciary in Scotland.
This vacancy is being filled under the established procedure for open competition and selection on merit. In accordance with published practice for posts of this kind, I have approved the specification of the post and the qualities required of the successful candidate. The process will be presided over by the First Civil Service Commissioner who is entirely independent. I have no doubt that he would not place as a high order candidate for this position anyone who did not possess the qualities and values which I have specified. The process will proceed independently and will result in advice to the Prime Minister. I, as the responsible Minister, will be involved and, in the last resort, I could decline to accept the lead candidate. Without interfering with the independence of the appointments process, I am therefore able to ensure that my future Permanent Secretary will have the qualities and attributes that are so essential to this important post.
There is some concern that, if the Permanent Secretary to the Lord Chancellor is not a lawyer or someone with extensive departmental experience, the Lord Chancellor and Permanent Secretary should continue to have the benefit of advice from a senior official or officials who have those qualifications. It was even suggested in another place that the Bill should be amended to introduce a statutory requirement that if the Permanent Secretary does not meet the existing statutory criteria, the Deputy Permanent Secretary should meet them.
I understand the proposal—and the thinking behind it—but it is not practicable. In the first place, there is no Deputy Permanent Secretary in the Lord Chancellor's Department. There has been no such position since the Lord Chancellor's office became a department following the Courts Act 1971. General deputies are generally regarded as contrary to modern management practice, and they are now very rare in government departments. A post of Deputy Permanent Secretary is particularly impracticable in departments of significant size and wide-ranging responsibilities, such as the Lord Chancellor's.
Also, to require any one post within the senior management structure to be held by a lawyer would put in place the very kind of shackle the Bill aims to remove. It would tie the hands of a future Permanent Secretary in seeking to appoint the best possible senior management team. It would also undermine the position of the Permanent Secretary. To require the Permanent Secretary to have a deputy who is a lawyer, simply because he himself is not a lawyer, will inevitably raise expectations that the Permanent Secretary would be second-guessed by his deputy.
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That is not to say that I would begin to disagree with the proposition that there should be available to the Lord Chancellor and Permanent Secretary a senior team in which long-standing legal and departmental experience feature strongly. At present, five group heads, including the Legal Adviser to the Lord Chancellor, answer directly to the Permanent Secretary, together with two agency chief executives. Five of these posts are presently held by qualified lawyers. Four are held by officials with lengthy experience within the department. I do not envisage any significant change in these arrangements under me or any other Lord Chancellor. I am completely confident that there will always be a strong legal element in the upper reaches of the Lord Chancellor's Department.
The Bill operates simply by removing from Schedule 2 to the Supreme Court Act 1981 the reference to the Permanent Secretary to the Lord Chancellor and Clerk of the Crown in Chancery. This has the effect of removing from that office special provisions which are, by virtue of Sections 88 and 92 of the 1981 Act, applied to certain offices of the Supreme Court set out in Schedule 2. The provisions which are removed concern not only restrictions on appointment, but also tenure of office. The Bill will thus also bring the provisions governing the retirement age of the Lord Chancellor's Permanent Secretary into line with those applicable to other permanent secretaries.
Some concern was expressed in another place that this would result in the Permanent Secretary to the Lord Chancellor having to retire at 60 when it might be in the interests of the Lord Chancellor and the department to benefit from his experience for a longer period. I can assure the House that in these circumstances it will be possible to arrange for the Permanent Secretary to remain in post for up to another year or two with the agreement of the Head of the Civil Service. It is right that there should be this degree of flexibility, as there is for all other permanent secretaries. There is nothing inherent in the post of Permanent Secretary to the Lord Chancellor, however, which justifies its holder being given, by statute, a later retirement age than any other permanent secretary.
The Bill does not affect the office of Permanent Secretary to the Lord Chancellor in any other way. The Permanent Secretary will continue to hold the office of Clerk of the Crown in Chancery. In that capacity he will continue to be the head of the permanent staff of the Crown Office, which supports the Lord Chancellor in his capacity as Keeper of the Great Seal. The duties of that office will be unchanged. The only change for that office is that its holder will no longer be required to be a lawyer or a civil servant with experience in the Lord Chancellor's Department. That requirement arose solely because the office was joined with that of Permanent Secretary in 1885.
Finally, your Lordships may ask why this Bill commenced its passage in another place when at first blush it would certainly have been more appropriate for me to bring it before your Lordships first. I would myself have preferred it to start here had that been practicable. The reason it did not was simply one of timing. The present Permanent Secretary, who has

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already been persuaded to remain in office longer than originally planned, is to retire next April. For his successor to be properly selected, the existing statutory restrictions must be removed by the end of the year. It was necessary, by convention, for the Bill to have passed through another place before a selection process seeking applications from a wider field of candidates could be commenced prior to the passage of the Bill. The same despatch is not required in your Lordships' House, and your Lordships will have a further opportunity to consider the Bill in Committee and on Report if appropriate. I commend the Bill to the House.
Moved, That the Bill be now read a second time.—(The Lord Chancellor.)
7.48 p.m.
Lord Woolf: My Lords, this is a Bill of modest physical dimensions, but the considerable care with which my noble and learned friend the Lord Chancellor has introduced its Second Reading perhaps indicates that it contains a point of some significance.
I fully understand the desirability of having available the widest possible pool of suitable candidates for the post of Permanent Secretary to the Lord Chancellor. There is no doubt that the modern Lord Chancellor's Department, with its increased functions and supporting a Lord Chancellor with greater responsibilities than any other Lord Chancellor in recent times, needs to have at its head a Permanent Secretary of the highest quality and experience. However, it must be remembered that the Lord Chancellor's constitutional position is unique. Nowhere in the world is there a similar office. Among his other roles, he is head of the judiciary as well as of his great department of state.
The relationships between the judiciary and the courts and government are extremely sensitive. The office of Lord Chancellor itself can be justified only if the distinction between the Lord Chancellor and other Ministers is meticulously observed. This distinction is at present supported by a statutory restriction on the person who can fulfil the role of Permanent Secretary to the Lord Chancellor. The Bill proposes to remove that statutory distinction and bring into line the permanent secretary's appointment with that of other permanent secretaries to other departments. Until 1990 the Lord Chancellor's permanent secretary had to have a 10-year legal qualification which required that he should be able to act as an advocate in the higher courts.
In 1990 the restriction was amended so that a civil servant having served at least five years in the Lord Chancellor's Department could be appointed. That statutory restriction recognised the importance of the permanent secretary of the department either having experience of the court system which service in the department would give or having a right of audience for 10 years, which would also provide experience of the court system. It recognises the need for the Lord Chancellor to have the advice of a permanent secretary who has an acute awareness of the sensitive and pivotal position which the Lord Chancellor and his department occupy in the constitution. It underlines the Lord Chancellor's unique position.
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This Bill removes that restriction. By doing so, it will open up the field of candidates to follow in the distinguished footsteps of Sir Thomas Legg when he retires. I understand and accept the need for a successor of the highest calibre to be found. But removal of the restriction does not alter the fact that the position of permanent secretary to the Lord Chancellor is exceptional. In selecting the best possible person for this unique position, I believe that the desirability of that person having appropriate experience to enable him or her to advise the Lord Chancellor on matters affecting the relationship between the Executive and the judiciary is of great importance. I emphasise that this does not arise in relation to other permanent secretaries.
With time, a high-flying civil servant could certainly acquire the requisite experience. But it would be a disadvantage to have to acquire the experience in office rather than before taking up office. Bearing in mind the position of the Lord Chancellor as head of the judiciary, the judiciary have a real interest in who is to hold the office.
The permanent secretary is the permanent head of a department which, to use the words of the Lord Chancellor, is at the cusp of the department and its relationship with the judiciary. It is the responsibility of the holder of the office to tell the Lord Chancellor—discreetly of course—that he should remember which of his many hats he is wearing at any particular time. I am sure that in future there will be a safeguard if there is then the very close consultation that now takes place between the Lord Chancellor and the senior judiciary on all issues that can seriously affect the judiciary.
I have no doubt that the current Lord Chancellor appreciates the need for care to be taken in selecting the right person for this position. He is well aware that he is not only a minister of justice but also head of the judiciary. We are in agreement that appropriate experience will be an important factor to consider in deciding on Sir Thomas Legg's successor.
My concern is not with any appointment that is to be made through the appropriate procedures to which the Lord Chancellor has referred but with appointments in the future. Once this constitutional safeguard has been removed, it is most unlikely that it will ever be restored. To have a situation where a Lord Chancellor is without the benefit of an experienced permanent secretary with the necessary qualifications to give the appropriate advice can have serious implications for the sensitive relationship between the judiciary and the Executive.
I hope that a file will be opened in the Lord Chancellor's Department labelled "Appointment of the Permanent Secretary" and that it will have a non-removable cover that expresses the sentiments which the Lord Chancellor has recognised and which I have expressed about the importance of the constitutional position of the permanent secretary. I am opening a file in which the words that I have uttered today will be included, together with the views expressed by the Lord Chancellor. I hope that it will be passed to my successors in office and that they

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will take the interest in the appointment to this very high office of state that I believe all members of the judiciary should take.
7.55 p.m.
Lord Ackner: My Lords, I too should like to emphasise that the Lord Chancellor's Department is a very special department of state. It is headed by a Minister, the Lord Chancellor, with unique constitutional characteristics. He is in a very different position from Ministers who are responsible for services such as education and health matters—hence the special provision as to the qualifications of a permanent secretary.
In many common law countries the independence of the judicature is protected by a written constitution. In this country its independence depends upon a combination of rules and conventions and parliamentary practice backed by the force of public opinion and the important tradition that it is the duty of the Lord Chancellor to prevent any interference with that independence by members either of the legislature or the Executive.
Quite by chance, I came across a reference in The Times of 25th September 1963 to an address given to members of the West German Federal Court in Karlsruhe by Lord Dilhorne, then Lord Chancellor. He rebuked Mr. Harold Wilson, then Leader of the Opposition, for alleging that the British Government had improperly influenced the judiciary. He said:
"In my country the judges are independent of the Executive and not subject to the influences of the Executive. If I were to be asked what I thought was the Lord Chancellor's chief job I should tell you without hesitation that it was to preserve the independence of the judiciary to make absolutely certain that judges of the land are completely independent and to protect them from every attempt, however indirect, to undermine that independence".
A similar note was struck by the noble and learned Lord, Lord Hailsham, the pre-eminent Lord Chancellor of the post-war years, in a lecture given by him in 1989 when he observed:
"The essential function of the Lord Chancellor in the working of the constitution remains the same. He is in the business of defending and preserving the independence and integrity of the judiciary. If he does it well then he is a good Lord Chancellor, whatever his other defects; if he does it ill, whatever his other qualities, he is not".
Thus it would appear that everyone supports judicial independence. It is, after all, the judges and the judges alone who stand between the power of the state and the freedom of the individual under the law. But does everyone support judicial independence? That very question was answered by my noble and learned friend Lord Hailsham in the selfsame lecture in these terms:
"Certainly not the public or the Back-Benchers in the House of Commons, who constantly revile, frequently from inconsistent standpoints, individual judges on particular decisions, or what they imagine to be judicial qualities, and daily demand that individual judges be directed or rebuked, presumably by the Executive Government, to move in this direction or that or even that they should be removed from office; certainly not the Opposition, whatever party happens to be on the Speaker's left; certainly not party conferences of any hue, and least of all, I assure you, individual members of the Cabinet whose departmental interests from time to time basically conflict not only with the view of the judiciary where they arc entitled to differ but in the provision of the means necessary to enable the courts to discharge their functions."
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Those revealing observations give strong support to the reservations expressed by my noble and learned friend the Master of the Rolls, with whom I agree.
There are occasions when Homer himself nods, and that is why such particular care has to be taken. I remind your Lordships of a clause in the Judicial Pensions and Retirement Bill which came to be debated in this House in 1992. Under Clause 25 power was to be taken by the Lord Chancellor at his sole discretion to continue the senior judiciary in office beyond a new compulsory retirement age of 70 from year to year up to a period of five years, a system which has been described critically as "judges on contract". That proposal, which the Executive can so easily abuse to the detriment of the judges' independence, as has occurred in warmer climates, was emphatically rejected some 60 years ago by a Royal Commission, the Peel Commission, of which Sir Claud Schuster, later Lord Schuster, an outstanding Permanent Secretary in the Lord Chancellor's Department, was a member. Homer nodded. The Lord Chancellor and/or his department was apparently unaware of its existence and the views of the commission.
In the debate on the report my noble and learned friend Lord Simon expressed his astonishment "that this unconstitutional provision ever appeared in the Bill". The Lord Chancellor had second thoughts and ultimately withdrew the offending clause.
I hope that among the compulsory reading that a Sir Humphrey would wisely accept was essential if he arrived in my noble and learned friend's department at its very top without prior experience, will he this copy of today's Hansard.
Lord Simon of Glaisdale: My Lords, I follow three speeches of great constitutional moment with which I respectfully agree. I support the Bill as a measure of necessity in the circumstances described by my noble and learned friend the Lord Chancellor.
We often speak of the constitution being one of separation of powers. That is true of the American constitution. Strictly speaking it is not true of ours; our constitution is based on something much more delicate and much more frangible in the end, unless it is a balance of powers. At the point of balance stands the Lord Chancellor and his Permanent Secretary. That is why the post is of such importance, as has been recognised by every speech this evening.
I only desire to add one thing. The American legal system is in one respect superior to ours, namely, in the greater flexibility with which people can move from academic life to judicature, to government service, to private practice, and so on. An extreme case would be a very bright young lawyer from the Harvard Law School who might spend a few years in private practice, then go into government legal service and then on to the Bench, and then back again into the government legal service and finally end up as a judge of appeal. I do not know whether he is still in office, but quite recently the Professor of Laws at the University of San Francisco was appointed Chief Justice of California. I know that my noble and learned friend is sympathetic to that kind

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of flexibility because he has told me so in a letter. I would, with respect, ask him to do all that he can to encourage that in our system. In the meantime, the measure proposed by my noble and learned friend the Lord Chancellor seems to be necessary.
Lord Hooson: My Lords, we support the Bill because it seems to he necessary and a matter of common sense. The noble and learned Lord, Lord Ackner, referred to the fact that the Lord Chancellor's Department is a unique department, and so it is, but it is also now a major department of state. It has grown as much in size during my parliamentary career as any department proportionately. It would be contrary to conventional wisdom not to have the widest choice in the selection of a future Permanent Secretary because the administrative experience and on overall appreciation of the skills that are necessary in government seem to be more important than legal background.
Having said that, the growth of the Lord Chancellor's Department is also indicative that the Bill is necessary at this time. The Master of the Rolls, the noble and learned Lord, Lord Woolf, has mentioned the problems that that situation creates.
In a wise move the noble and learned Lord the Lord Chancellor sent to various people interested in the Bill a covering letter outlining his view concerning its necessity and explaining the reasoning behind it. He said, and virtually reiterated today:
"No person would be appointed to be my Permanent Secretary who did not have the fullest appreciation of these traditions and values".
He spelt out those traditions and values in his letter and in his speech this evening. That is a matter that is fully appreciated. No one could possibly think that he would not respect them. The concerns expressed today do not relate to what the noble and learned Lord the Lord Chancellor will do, but what might be done in the future after his day.
The noble and learned Lord, Lord Woolf, said that he was sure that safeguards would exist in the future if there were a continuation of the close consultation which now takes place between the Lord Chancellor and the senior judiciary on all issues which might seriously affect the judiciary. I understand that informal discussions take place now and that they are important. The noble and learned Lord, Lord Ackner, also referred to the conventions which have guided the Lord Chancellor and his department in their relationship with the judiciary.
The time may be approaching, if it has not already arrived, when we must consider whether some of those conventions should be institutionalised; that there should be an institutionalised meeting between the Lord Chancellor and senior members of the judiciary. If we have reached the stage where it is no longer necessary, as I do not believe that it is, for the Permanent Secretary to the LCD to be a lawyer, we may later reach a stage, with the great expansion of the LCD, when it may be argued that the Lord Chancellor himself need not be an eminent legal figure.
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Therefore the time is rapidly approaching when we may have to rationalise the relationship between the two hats, as it were, which the Lord Chancellor wears: that which he wears as a head of an important and rapidly expanding department, and that which he wears as head of the judiciary, and as the conduit between government and the whole judicial system.
My noble friend Lord Lester of Herne Hill wanted to be here this evening. As the noble and learned Lord the Lord Chancellor knows from correspondence, he was anxious to raise the possible institutionalisation of relations with regard to certain aspects of his department. It is my party's policy, and until recently, if not still, that of the Labour Party, that there should be a judicial appointments commission. It would reassure those who have taken part in this short debate, and who approve of the move being made by the Lord Chancellor this evening, if he could indicate that there will be wider discussions on an all-party basis, and a non-party basis, to consider the LCD and what safeguards there will be, not when the department is in his hands—we know of his own dedication to the independence of the judiciary—but in the future.
8.14 p.m.
Lord Kingsland: My Lords, in the context of the many other government initiatives in the constitutional area, this seems a remarkably modest one. I am aware that the Conservative Party, when it was in government, in 1990 introduced legislation to ensure that in future the permanent secretary need not be a lawyer. So I accept that from where I am coming in this debate, I am not in a strong position to argue that the permanent secretary's status as a lawyer should be restored. I am further aware that everything the noble Lord the Lord Chancellor said about the LCD today is true: it is a big department, employing many people, with an immense budget, and with huge administrative tasks.
The other day I glanced at the introduction of Professor Heuston's great book on the lives of the Lord Chancellors. He tells us that just before the first permanent secretary was appointed in 1885, the Lord Chancellor had four or five employees. It was customary, when each Lord Chancellor surrendered the Great Seal, that one of them should destroy all the papers in the Lord Chancellor's office on the grounds that his successor should not see the way in which his patronage was exercised. The LCD has, in that sense, now become a department of state like any other.
On the other hand, as so many noble Lords, especially the noble and learned Lord, Lord Simon of Glaisdale, have said, the LCD is constitutionally unique. It is at the hinge of the constitution, particularly in the context of the separation of powers. It seems to me that the separation of powers in our country depends upon mutual self-restraint between the legislature and the judiciary. The legislature restrains itself from interfering in the judicial process, and equally the judges restrain themselves from questioning the contents of any Bill as it works its way through Parliament. That self-restraint depends for its successful operation upon the personalities of the people who are, on the one hand, in Parliament, and, on the other hand, on the Bench. It is

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of course the Lord Chancellor's responsibility to select those who are on the Bench; to guarantee their independence; and to ensure that the decisions they take respect our tradition of the separation of powers.
The modern Lord Chancellor is a busy man. He is a Cabinet Minister. Indeed, he is the only Cabinet Minister who can call into question any decisions that his colleagues are about to take that might breach constitutional or legal rules. He has the obligation—pleasant, I hope—of presiding over your Lordships' House. He also administers the court system and, above all, chooses our senior judges. With all those responsibilities, it is usual for the Lord Chancellor, even our present Lord Chancellor—bearing in mind that he has practised regularly at the Bar and has a good knowledge of those who are ready for promotion to the Bench—still to need good and fearless advice from his department.
I am not suggesting that members of the LCD who are not lawyers are not capable of being fearless. I make no such suggestion. But the Lord Chancellor needs fearless people in his department who know what is going on in the courts; who know what is happening at the Bar; and who know people of the stature to be promoted to the High Court Bench and above. He needs therefore high quality, able, dedicated, and, above all, independent-minded officials at a senior level to give him that good advice.
My right honourable friend the shadow Attorney-General in another place introduced an amendment which provided that if the Permanent Secretary of the Lord Chancellor's Department is not to be a lawyer, then the next senior person in that department should be a lawyer. That was an imaginative amendment but I can see the force of the objections of the noble and learned Lord the Lord Chancellor. For example, for very practical reasons, it would be difficult to ensure that at the point when the permanent secretary changed over from lawyer to non-lawyer, the deputy permanent secretary, or whatever he is to be called, changed over from non-lawyer to lawyer. Indeed, that would be undesirable because one would not wish to see a coincidence of change between the two. It would be better for one to overlap the other.
The noble and learned Lord pointed out that of the five department heads who answer to the permanent secretary, one is the department head who personally advises the noble and learned Lord. I can see that that was a reassuring point for him to make. But the person who advises the noble and learned Lord on legal matters is not the person who is responsible for judicial appointments. I wonder whether the noble and learned Lord the Lord Chancellor would consider this possible approach. I assume that one of the five people who answer to the Lord Chancellor is the head of judicial appointments. If I am right in that assumption, surely it must be right, except in the most exceptional circumstances, which I trust would need justification to your Lordships' House and indeed to another place, that that individual should be a lawyer and indeed a lawyer who has great experience of, and regular contact with, the kind of people one would expect to fill the higher reaches of the judiciary in this country.
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I recognise the difficulties of the noble and learned Lord the Lord Chancellor in the modern world, managing his great department. I respect his judgment in this matter. I hope that in making this new appointment, which I understand will have to be made by the middle of next year, he will bear in mind the other comments made in this debate, and not just by me; in fact, perhaps less by me than by anyone else because so many noble and learned Lords have spoken with such distinction and authority. I hope that the noble and learned Lord will bear in mind the concerns which have been expressed in the way that he approaches appointments during his tenure of office.
Lord Ackner: My Lords, before the noble Lord sits down, I wonder whether he is aware of the extent of the consultation which goes on between the Lord Chancellor's office and the senior judiciary with regard to appointments. It would be wrong to take the view that an official in the Lord Chancellor's Department is making the major input as to who should be appointed. As I understand it, having been a judge, like other judges, who was consulted when I was a judge, that input comes from regular consultation with the senior judiciary and then further consultation with the heads of division, as I understand it, supplemented by the views of the senior presiding judge and any other judge whom the Lord Chief Justice considers should form that group.
I should not like it to be thought for one moment that the appointment owes its recommendation to an official in the Lord Chancellor's Department because that would be, as I understand it, quite wrong.
Lord Kingsland: My Lords, I thank the noble and learned Lord, Lord Ackner, for his very helpful intervention. He will be relieved to hear that I am aware of the extensive consultations which the noble and learned Lord the Lord Chancellor, and his predecessors, wish to take, and have taken, with senior judges. I am aware that the Master of the Rolls is here this evening.
However, I remind the noble and learned Lord that sometimes the advice which the noble and learned Lord the Lord Chancellor will receive from his senior judges will conflict; and that conflicting advice will have to be resolved in some way. I should reflect also that since the noble and learned Lord the Lord Chancellor has so many other matters to which he must devote his scarce time he will need somebody to co-ordinate the process of consultation. That figure will be aware of many matters in respect of the views of senior judges which the Lord Chancellor will need to hear from him.
Therefore, while I entirely take the point made by the noble and learned Lord, nevertheless I believe that the point which I have sought to promote in my speech remains important and one of which I hope the noble and learned Lord the Lord Chancellor will take account.
8.26 p.m.
The Lord Chancellor: My Lords, we have had a good and important debate, to which I believe a good deal of attention will be paid in future. I can respond directly to what the noble and learned Lord, Lord Ackner said. Of course the judiciary is involved

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as a result of quite massive and extensive consultations with it in the consideration of those who should be elevated to judicial office. Certainly the Heads of Division are involved in regular meetings. The presiding judges are involved. The judiciary in general is involved as is the profession. The fact is that one of the most impressive aspects of the work of my department which I have learned about in close detail over the past seven months is the quality and extent of that consultation.
However, any Lord Chancellor has to be very hands-on himself in relation to that process to ensure its integrity and that it is full and comprehensive and not affected by any bias of any kind at all. It is an extremely important function of a Lord Chancellor effectively to make all those judicial appointments. So far, I have been concerned in the elevation of one Law Lord, four Lords Justice, five High Court judges and 10 circuit judges, and all that in a very short space of time. As the years roll on, I dare say the turnover will become more daunting. But one is entirely dependent upon maintaining a constant flow of reliable information which must primarily come from the judges who sit daily in the courts.
I well appreciate that all your Lordships who have supported the Bill have done so, understandably, with a greater or lesser sense of caution and have given that support basically on the basis that it is a measure of necessity and common sense. Along with the noble and learned Lord, Lord Simon of Glaisdale, I could wish that there was the ease of movement within our legal profession which allowed distinguished lawyers to move easily and comfortably from practice into government, into the Civil Service at high levels and then away from the Civil Service and back into the profession, so that there was a wide pool of lawyers who were well qualified to fulfil all the obvious and natural criteria for the important office of permanent secretary. But that is simply not the way of the world which we inhabit in this country and I was faced with a very limited pool of candidates for this extremely important post.
I am enormously conscious of the constitutional significance of the office which I occupy. It can perhaps only be occupied by someone who is both a minister of justice and head of the judiciary. Otherwise, that confidence in the free flow of information in both directions so as to create mutual understanding between the judiciary and the Executive could not take place—unless through a single individual who commanded the confidence of the professional judiciary at the same time as the confidence of his Cabinet colleagues.
I believe that tonight's debate will be paid close attention to by those to whom it must naturally be most closely directed. I cannot think that the first Civil Service Commissioner himself will do anything other than pay close regard to our debate and the important statements which have been made in it about the appreciation of the constitutional significance of my office and the attendant constitutional importance of the office of Permanent Secretary to the Lord Chancellor.
I also believe that it would indeed be imprudent and highly unlikely if all those who aspire to be appointed permanent secretary were to do anything other than pay
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close attention to this debate and the strong statements that have been made in it in support of the values which must be adhered to by any candidate who is to succeed.
On Question, Bill read a second time, and committed to a Committee of the Whole House.

Competition Bill [H.L.]
8.32 p.m.
House again in Committee on Schedule 10.
[Amendment No. 242 not moved.]
Lord Haskel Lord Haskel moved Amendment No. 242A:
Page 79, line 12, leave out ("6") and insert ("1").
On Question, amendment agreed to.
[Amendments Nos. 243 to 246 not moved.]
Schedule 10, as amended, agreed to.
Clause 53 [General restrictions on disclosure of information]:
Lord Kingsland Lord Kingsland moved Amendment No. 246A:
Page 26, leave out lines 30 and 31.
The noble Lord said: The amendment deals with the confidentiality and immunity from defamation provisions in the Bill. Clause 53(1) sets out the general rule that information which has been obtained under the Bill's provisions relating to the affairs of a particular individual or undertaking and which has been disclosed in the course of investigation will be treated as confidential. That provision matches the general rule in the European Community.
However, Clause 53(1) subjects that general rule to very wide exceptions. I would draw the Minister's attention in particular to subsection (3) which says that subsection (1), which is the general rule,
"does not apply to a disclosure of intbrmation…facilitating the performance of any relevant functions of a designated person".
If the Minister looks at subsection (4) of Clause 53, he will see that the definitions of "relevant functions" and "designated person" are given in Schedule 11. If the Minister then turns to Schedule 11, he will see that both definitions cover virtually every competition provision on the statute book operated by nearly every person who is authorised to oversee the application of those provisions.
We are talking about very wide exemptions. In particular, bearing in mind Clause 58 of the Bill, they do not conform with the jurisprudence of the competition authorities in the European Community. The Minister will be aware that the competition rules are contained in Regulation 17 (1962). He will be aware that information which is required as a result of an application of Articles 11, 12, 13 and 14 of that regulation can only be used for the purpose of the relevant part of the investigation.
The Minister will also be aware that the European Court of Justice and the European Court of first instance have extended that rule to Articles 2, 4 and 5 of Regulation 17 to which I have just referred. He will also be aware that any information falling under those articles of that regulation which is passed on to member

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states also obliges those member states to respect that rule. In my submission, in order to meet the requirement in Clause 58—namely, that the Bill respects the jurisprudence of the European Community in general and the European Court of Justice in particular—the exemption contained in Clause 53(3) will, at least in respect of that paragraph, have to be substantially modified and narrowed. I beg to move.
The Deputy Chairman of Committees (Lord Ampthill): No doubt Members of the Committee, and certainly noble Lords on the Opposition Front Bench, are aware that if this amendment is agreed to it will pre-empt Amendment No. 246B.
Lord Haskel: Clause 53 prohibits the disclosure of information obtained under the Bill, except with consent or for the particular purposes specified in the legislation. It states that unlawful disclosure of information will be a criminal offence. As drafted, Amendment No. 246A would prevent all disclosure of information for the purposes of functions under the Bill, except with consent.
The amendment would delete the gateway for disclosure for information contained in subsection (3)(a)(ii). The noble Lord mentioned subsection (3)(a)(i), and I am not quite sure of its relevance. The gateway to which I referred enables disclosure of information obtained under the powers in Part I of the Bill to the persons listed in Schedule 11 and for functions listed in that schedule. The noble Lord says that the exemptions are very wide. I am not sure that we agree with that. This provision enables, for example, disclosure of information between the Director General of Fair Trading and the Competition Commission to assist the commission to hear appeals. It also enables the director general to include relevant information in his published decisions or his draft decisions. The Committee will therefore readily see that without this gateway the new regime would be unworkable.
We have already debated the principle of concurrency at length and I do not see the need to rehearse these arguments again now. However, I shall deal with the question of disclosure of information between the regulators and the Director General of Fair Trading. The first point to make is that enabling disclosure of information between the regulators and the director general is clearly necessary for the principle of concurrency to work. The different authorities need to be able to exchange information on cases in order to determine which is best placed to deal with potential infringements of the prohibitions and to ensure that there is no unnecessary duplication of work between them.
The gateway which this amendment would remove also enables information obtained under the Bill to be used in relation to different regulatory functions. This is standard practice in the UK regulatory environment. There are, for example, similar provisions in the Fair Trading Act, the Competition Act, the Restrictive Trade Practices Act, the utility statutes, the Financial Services Act and the Companies Act, to name but a few. Clause 53 therefore provides gateways for the disclosure of information obtained under the Bill between the
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Director General of Fair Trading, the utility regulators and the other regulatory authorities listed in Schedule 11.
I make no apologies for this. The noble Lord thinks that the provisions are rather wide, but they are necessary. Information may be disclosed only in order to assist the recipient to perform his statutory functions. If one of these regulators has evidence of a potential infringement of, say, a licence regime supervised by another regulator, it would be quite wrong to require him to keep the information to himself. We need to ensure that the different regimes work coherently and efficiently together.
The noble Lord referred to EC information. We do not believe that the EC precedent in this respect is relevant to UK circumstances. There are not the equivalents of the utilities regimes and regulators at EC level. It is important that the UK regulatory regime viewed as a whole operates in a coherent and sensible fashion. Preventing the disclosure of information between regulators, and its use for different statutory functions, would frustrate that objective.
I wish to correct an earlier statement. The noble Lord was absolutely right to refer to Clause 53(1).
If I may summarise my remarks, this amendment attacks the principle of concurrency—we have given that question a good airing—but also risks undermining the coherent and efficient co-existence of the utility regimes with general competition law. I hope that the noble Lord will accept this argument and see fit to withdraw his amendment.
8.45 p.m.
Lord Kingsland: First, I wish to thank the noble Lord for his elucidation of this part of the Bill. I thank him also for bravely correcting his earlier assertion.
In looking at the text it seems to me—notwithstanding the point that the noble Lord makes about concurrent responsibilities and the need for regulators and other regimes to see what information the director general has—that the drafting of this provision goes way beyond what he has said. In my submission, as the provision is drafted it would remove any restriction on the director general to disclose this information to anyone.
Lord Haskel: This is a complex area. Perhaps the best course would be for me to write to the noble Lord about it.
Lord Lucas: I wish to make a point in support of my noble friend. It seems to me that the way this provision is drafted gives all these designated persons listed in Schedule 11 access to the immense powers which are contained in this Bill and which they do not have under their own Acts. Effectively it enormously enlarges the powers of these regulators, because if information is produced using the enormous investigative powers under this Act, it then becomes available to the regulators and it therefore becomes a channel, which they did not have before, through which to obtain information and effectively to act in ways which Parliament had not allowed them to do.

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If that is to be the case, it requires the closest scrutiny. I would much prefer to see this clause drafted more narrowly so that the kind of information which these Schedule 11 designated persons can obtain has not been obtained by means which they would not normally have access to under their own regulations.
Lord Haskel: But this clause prohibits the disclosure of information obtained under the Bill except with consent or for the particular purposes specified in the Bill. As I said at the beginning, unlawful disclosure of information will be a criminal offence. Surely that is a safeguard.
Lord Kingsland: I am grateful that the noble Lord is prepared to take the trouble to write to me on this matter. However, I hope that before he writes to me he will reflect again on the points that I have made, not just with respect to the breadth of the interpretation to which I believe the words used in the clause are subject, but also the wider issue of the EC law. If Clause 58 means what it says, in my submission the confidentiality ingredients of the Bill cannot go wider than those contained in EC law.
The Minister has already spoken on this matter and I do not wish to weary him with the prospect of having to respond again. In writing his letter to me I should be much obliged if he will cover that point too. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Fraser of Carmyllie Lord Fraser of Carmyllie moved Amendment No. 246B
Page 26, line 31, at end insert ("other than those of the Director General of Telecommunications under the Telecommunications Act 1984").
The noble and learned Lord said: In view of the offer by the noble Lord to write to us about this matter I think I would be labouring the point if I were to address any argument to him now. This matter depends not only on the argument which has already been addressed to the Committee by my noble friend, but also carries further the argument we addressed earlier this evening about the separation between the regulatory and competition functions of the Director General of Telecommunications. I suggest that the noble Lord needs to say nothing more to me than, "Yes, he will", if I invite him to add, when he writes to my noble friend, the response he would otherwise have provided to me on the Floor of this Chamber. I beg to move.
Lord Haskel: Yes, I will.
Lord Fraser of Carmyllie: I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Kingsland Lord Kingsland moved Amendment No. 247:
Page 26, leave Out lines 32 and 33.
The noble Lord said: In moving the amendment, I wish to speak also to Amendment No. 248. The amendment again deals with the issue of confidentiality under Clause 53(3). We are not considering subsection (3)(a)(i) but subsection (3)(a)(ii) which provides for,
"facilitating the performance of any functions of the Commission in respect of Community law about competition".
in the context of subsection (3)(d),
"which is required to meet a Community obligation".
Is there some overlap between those two provisions? If not, what is the distinction between the two?
Amendment No. 248 refers to subsections (5) and (6) of Clause 53. It is intended to be a probing amendment to find out what the Minister has in mind. Subsection (6) states,
"'specified' means specified in an order made by the Secretary of State".
In what circumstances does he envisage the Secretary of State making that order? I beg to move.
Lord Lucas: Perhaps I may raise a point on subsection (3)(a)(ii). One of the dangers in this and the previous subsection is that once the information is released to other parties without guarantee by them that they will respect the confidentiality in their turn, it is effectively releasing the information to the world. I know that the Commission keeps confidences sometimes, but under the regulations set out in the Bill it would have no obligation to keep confidences. It would not be bound by anything in the Bill, unless we have a requirement in the Bill that anyone receiving information will express themselves bound by the confidentiality provisions contained in the Bill.
The clause continues to worry me. I shall appreciate it if at the very least the noble Lord, Lord Haskel, will "copy me in" on his letters.
Lord Haskel: I can promise that we shall copy the noble Lord in on the letters. We dealt with confidentiality on the last amendment. It is a criminal offence to misuse such information. I turn to the question of European law. The amendment deletes subsection (3)(a)(ii) which enables information to be disclosed to the Commission to help the Commission perform its functions under European law. We believe that it is right to give the director the power to help the Commission to enforce Community competition law. After all, this law is directly applicable in the UK too. If the UK authorities have information about possible contraventions of EC competition law, is it right that they should have to keep the information from the Commission? Surely they should be free to give this information to the Commission. If they had to withhold the information from the Commission, the result would be that the Commission would have to duplicate the work by the UK authorities. The Commission would have to use its own investigation powers to obtain the information. All that would create a lot more work. Frankly, that outcome would be contrary to the sensible

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dovetailing of the UK and the EC regimes that we intend to achieve, a point which the noble Lord, Lord Kingsland, raised earlier.
Clearly, we need to be able to disclose information to the Commission where that is required to meet a Community obligation in order to ensure that we are able to meet our duties under the EC treaty.
We considered carefully whether the power in subsection (3)(a)(ii) was needed in addition. We concluded that it was, partly because of the experience under the Fair Trading Act. This is because, as I said, there may be circumstances where it would be sensible and right for the director to give to the European Commission information about a case which he has obtained under his powers in the Bill. While there may be situations in which the UK's Community obligations would require the director general to provide the information, that may not always be the case. Further, it would not always be clear whether there is a Community obligation to provide particular information. We do not wish to place the director at risk of committing the criminal offence in making disclosures about which I spoke earlier. On the one hand, unlawful disclosure of information is a criminal offence under the Bill. On the other hand, if the director got the judgment wrong, the UK might find itself in breach of its Community obligations. I am sure that Members of the Committee do not want that to be the case.
On Amendment No. 248, the noble Lord, Lord Kingsland, asked about subsections (5) and (6). These enable the Secretary of State to specify additional persons and purposes to whom and for which disclosure is to be permitted. However, this power is exercisable by order subject to annulment by either House. So there is some protection to deal with the noble Lord's concerns. The purpose of the power is to ensure that there is sufficient flexibility in the Bill to respond to development in regulatory and competition policy without need for fresh primary legislation. I hope that that explanation will satisfy noble Lords.
Lord Lucas: The noble Lord has not addressed in the slightest the point that I raised. In case the Box has not had time to send an answer, the question is this: does the duty of confidentiality under the Bill extend to the Commission if the Commission is given information obtained under the Bill? If it does not, there should be provision in the Bill to ensure that it does.
The same argument applies to people specified in Schedule 11 who receive information under the Bill. It does not appear obvious that they are bound by the confidentiality provisions under the Bill. As they are UK entities, perhaps they are. But the Commission surely is not, because it is not subject to the Bill. Therefore there is need for the safeguard that information given to the Commission will be treated confidentially.
Lord Haskel: I am sorry if I did not address the noble Lord's question. If the information is given to the
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Commission, as the noble Lord, Lord Kingsland said, it will be subject to European law which will restrict its disclosure by the Commission.
Lord Lucas: Perhaps the noble Lord would like to specify exactly which sections of European law will provide that function, and exactly how that function will be exercised. What action would an aggrieved party be able to take were information that he had given to the director disclosed by the Commission? I am sure that the noble Lord will be able to write a letter to me on that subject.
Lord Haskel: I am not sure that I need to write a letter. The European law under which this is done will surely be Articles 85 and 86 which are the items we are debating.
Lord Kingsland: In considering the various answers given by the noble Lord to my amendments on Clause 53, I must confess to being extremely unhappy about them. Despite the firmness of his response to me, I hope that the noble Lord will reflect nevertheless on what he and I have said. Bearing in mind the context of European Community law, and the European Convention on Human Rights which is about to be incorporated in our law by this Government, on sober reflection on the clauses, does he really believe that they conform with those international obligations? I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 248 not moved.]
9 p.m.
Baroness Nicol Baroness Nicol moved Amendment No. 249:
Page 27, line 8, at end insert—
("( ) Subsection (3) shall not apply to disclosure of information by a person other than a person who is party to an agreement which offends against the Chapter I prohibition or Chapter II prohibition.").
The noble Baroness said: I must remind the Committee that I have declared an interest as chairman of the All-Party Retail Group.
The purpose of my amendment is to safeguard commercially sensitive information which is provided by innocent third parties. None of the very interesting debates so far has covered particularly the interests of innocent third parties which may emerge during an investigation. The amendment reflects a concern that the British Retail Consortium has in relation to the Bill and the sweeping powers that it gives to the director general to order the production of documents considered relevant to the investigation. As the Committee knows, the director general can require persons to give an explanation of the documents. By virtue of those provisions, a director could obtain a considerable amount of commercially sensitive information provided by third parties who are not party to the agreement or course of conduct which infringes either of the prohibitions.
Although Clause 53(1) provides for such information to remain confidential, as we heard several times from my noble friend, Clause 53(3) permits disclosure in a wide range of circumstances. The amendment would require

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the exception in Clause 53(3) not to apply to commercially sensitive information provided by innocent third parties. Those arguments also apply to Clause 63, which we shall debate later and to which I have not tabled an amendment. I hope that the Minister will take these arguments on board in relation to Clause 63 as well, so that we need not return to the matter on Report. I beg to move.
Lord Graham of Edmonton: I hope that the Minister will listen sympathetically to the points made. I, too, declare an interest as an officer of the All-Party Retail Group; I also declare my Co-operative interests, which are registered. I do not speak directly on behalf of any of those interests.
It is undesirable that information given in the strictest confidence in order to assist the director to reach a view should then appear, be referred to and be publicised by the director in his findings. I can well imagine people considering exactly to what extent they are prepared to disclose information to the director. They may well think twice. Not being party to the action and acting as good citizens they are in the position of knowing that anything they say—not at their own discretion but at the discretion of the director—could find itself in the public domain.
The Committee is well aware of the extreme sensitivity of commercially sensitive information. It is right and proper that the director should have power to seek it. But in exercising his discretion, the director ought also to recognise that the free flow of information given by good citizens may well dry up unless an undertaking is given. Information given by people innocent of any charge (that does not mean to say that others are guilty) who are trying to do what is best may find that the information that they have given, which is not only helpful to the director but might be helpful to a great many of their competitors, appears publicly in print. Perhaps the Minister will recognise the point that we are making.
The amendments may not be well enough drafted to take care of the precise point. However, if the Minister will indicate that he has sympathy with the point made, I am sure that my noble friend will be very happy to be collaborative.
Lord Haskel: I assure my noble friends that I have sympathy with the point that they are making. The issue of innocent third parties is a very difficult one. I fully appreciate the concerns that businesses have over the confidentiality of commercially sensitive information. However, at the same time it is important that the operation of the new legislation is transparent. We have tried to take great care in balancing those two imperatives.
The Bill contains two clauses to protect information obtained under the new regime. Under Clause 53 it prohibits the disclosure of any information obtained under the Bill except to specified persons for specified purposes or with consent. Criminal sanctions attach to unlawful disclosure.
Clause 54 imposes duties on the Secretary of State and the Director General of Fair Trading in relation to that information where disclosure could damage the
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legitimate interests of businesses or individuals. The clause requires the director general to have regard to the need to protect such confidential information and the extent to which disclosure of such information is necessary to achieve the purpose for which disclosure is proposed.
Therefore, before disclosing information obtained under Bill, the director general will have to give careful consideration to the factors set out in Clause 54. He will have to balance the need for disclosure against the public interest and the significant harm which innocent third parties might suffer. He will need to take a long, hard look at how necessary it is to do so.
Schedule 8 provides that the tribunal rules may provide for a tribunal to sit in private when information of the kind to which Clause 54 applies is being considered. The provisions in relation to appeals also provide for a tribunal to apply Section 54 in respect of its written decisions if they are to be published. So there are clear safeguards to protect innocent third parties and to protect confidential and commercially sensitive information.
At the same time, however, it would be wrong absolutely to forbid the disclosure of confidential information even where it was provided by firms which had not infringed the prohibitions. It may, for example, be necessary to disclose information so that an undertaking which is accused of having infringed the prohibitions is aware of the case against it. Further. it may be needed to make reasoned decisions understandable. Reasoned decisions will be a key part of the transparency of the new regime and will be an important indicator for business as to the application of the prohibitions.
Disclosure of information may also be important to facilitate civil actions by third parties to obtain redress under the prohibitions. Firms and individuals who have been harmed by infringements of the prohibitions ought to be able to obtain redress. We believe that, where the director has information which would help them to do so, he should be able to release it to them. That would again be subject to the test in Clause 54.
I sympathise with my noble friends for raising this important issue but I assure them that there are protections within the Bill. I hope that my explanation will satisfy their concerns and that they will be able to withdraw the amendment.
Lord Graham of Edmonton: I am grateful to the Minister for the care he has taken in giving an explanation. However, I have been told that it has come as a shock to third parties to find information which they gave in confidence appearing in public print. In other words, they assumed, wrongly, that the information that they gave in confidence would remain confidential.
The Minister tells us that there are careful checks and balances and that it is a matter of judgment as to how much is disclosed. Is there within the mechanism a procedure whereby the director who intends to disclose confidential information would advise a third party of his intention before the information was published? To that extent, the person would be forewarned and might be able to take some measures to militate against it.

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I am sure that some individuals would think twice about willingly responding, or responding 100 per cent., to an invitation to disclose frankly all that they know. We do not want to get into a situation where people are hedged in with potential actions, inquiries, tribunals and appeals. I hope the Minister wants something which is seen to he fair.
I do not think that the general public—whom, after all, we represent—and business would think it fair that something given in all innocence and in confidence should be revealed without their having the opportunity to reflect or to withdraw the information. Many people will say things in confidence that they would not be prepared to see in public print. That may well condition the veracity and integrity of the information. I hope that when my noble friend responds she may say that the matter ought to be revisited.
Lord Haskel: This is indeed a very difficult issue. I should have thought that, if a third party were involved in an investigation, they would receive some kind of notice that the information would be disclosed. I understand that the Bill does not provide for that and I think we should reflect on the point about disclosing to third parties if information which they provide is to be disclosed.
Baroness Nicol: I am greatly encouraged by my noble friend's last sentence; before I heard that, I was feeling distinctly uneasy. The point arose because, even under existing legislation, problems have been caused to third parties in this kind of investigation where information has not been treated as confidential by those to whom it was disclosed. I am grateful for the ray of hope contained in my noble friend's final sentence and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 53 agreed to.
Schedule 11 agreed to.
Clauses 54 and 55 agreed to.
Clause 56 [Findings of fact by Director]:
On Question, Whether Clause 56 shall stand part of the Bill?
Lord Graham of Edmonton: Can the Minister confirm that findings of fact made by the director in decisions resulting from complaints would benefit from this clause?
Lord Haskel: I thank my noble friend for raising that point. I confirm that it is the Government's intention that Clause 56 should apply to findings of fact made by the director in all decisions. It should not be limited to decisions resulting from a notification for a decision. The Government intend to bring forward an amendment at Report stage to address this point.
As I explained to the House on 17th November, third parties have a right of private action. Our clear intention in framing this Bill is that third parties may seek injunctions or damages in the courts if they have been adversely affected by the action of undertakings in
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breach of the prohibitions. This is an important element of the regime. There is no need to make explicit provision in the Bill to achieve that result. Third party rights of action under the domestic regime are to be the same as those under Articles 85 and 86.
Clause 56 has been included in the Bill in response to comments made in the consultation process. There were calls for measures to ensure that private actions in the courts should work as far as possible in tandem with the application of the prohibitions by the director.
Therefore, for example, parties who have obtained a decision that their agreement is not restrictive of competition will not have to prove again findings of fact made by the director if there were ever court proceedings attacking the agreement under the prohibition. Such facts could not be contested in such court proceedings. The court does, however, have a discretion to require the facts to be established in the normal way.
In explaining the private right of action under the Bill, I hope now to have answered one of the questions posed by the noble Lord, Lord Lucas, at the end of the second day in Committee. I should also like to take this opportunity to answer his second question, as to whether a minor allegation of error of fact would trigger, in his words, the full "panoply" of a commission investigation. In such a case, it would be the alleged error of fact which would be re-examined. It would not have to involve a re-hearing of the entire case. Paragraph 3(1) of Schedule 8 provides for the appeal to be determined by reference to the grounds of appeal.
More generally, I believe that there are adequate powers in the Bill to safeguard against unmeritorious appeals. As we said last Monday, the competition commission may reject an appeal because there is no valid ground of appeal. In addition, paragraph 7(2) of Schedule 8 would enable vexatious appeals to be dismissed. Paragraph 8 of Schedule 8 is also relevant. It would enable the competition commission to demand "up-front" security before allowing an appeal to proceed. In other words, we intend the tribunal to have the ability to require an appellant to "put his money where his mouth is". That could be very sobering for someone with weak grounds of appeal. I believe that these powers, together, will provide an adequate safeguard against unmeritorious appeals.
9.15 p.m.
Lord Graham of Edmonton: I am grateful to the Minister. I never realised that such a little question would bring such a big answer and, in the same way as I support the Co-operative movement, the dividend is much appreciated.
Lord Lucas: I too thank the Minister for his unexpected answer to a question which, for the moment, I had forgotten I asked.
Clause 56 agreed to.
Clause 57 [Interpretation]:
[Amendments Nos. 249A and 250 not moved.]
Lord Simon of Highbury Lord Simon of Highbury moved Amendment No. 251:
Page 28, line 37, at end insert—
(""the EEA Agreement" means the Agreement on the European Economic Area signed at Oporto on 2nd May 1992 as it has effect for the time being;").
The noble Lord said: This amendment has already been debated. I beg to move.
On Question, amendment agreed to.
Lord Fraser of Carmyllie Lord Fraser of Carmyllie moved Amendment No. 252:
Page 29, line 5, leave out from second ("premises") to end of line 10.
The noble and learned Lord said: Amendment No. 252 seeks to limit the interpretation or definition of what are "domestic premises". Without unduly repeating what has been previously said as we have gone through the earlier stages of the Bill, our view is that this is an excessive power. It goes too wide. It is not available to EU level and the ECJ has already recognised that fundamental rights exist in respect of the inviolability of the home.
I ask the Minister to reflect on this: at any time while he was a senior executive or indeed the chairman of BP, can he think of any place where he put down his weary head at night which could not have been included within the description of premises also used in connection with the affairs of an undertaking? That description is so wide that, should the noble Lord take home a briefcase full of papers and sit in front of his television set with his briefcase open looking at his papers, it would be permissible to enter those premises.
I suggest that, before we return to this matter on Report, the draftsman should look at it again to see if he can secure a more narrow definition of what are "domestic premises". I understand the circumstance where people have an office attached to their home, in which case it may be desirable to enter it. But it seems to us to be an extraordinarily wide definition and it ought to be restricted in some way. I beg to move.
Lord Borrie: A few weeks ago it was reported that the President of Iraq, Saddam Hussein, was putting into his private palaces a number of weapons of destruction, no doubt with the aim of ensuring that they would not be subject to inspection by United Nations observers and certainly would not be attacked from the air at any time in view of the fact that there were women and children in those palaces.
That may seem a long way from our discussions today but Saddam Hussein is certainly not the only person who would wish to hide in domestic premises or put in domestic premises material which might be important evidence for an inquiry made under the Bill, in accordance with the provisions we discussed earlier, by the Director General of Fair Trading or his officials. It would seem to be quite a crazy hobbling of the powers of the director general if the only premises which could ever be investigated were those 100 per cent. used for trade, industrial or commercial purposes.
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What the clause allows for is an investigation of domestic premises which are in part used for business purposes or where documents relevant to, perhaps, anti-competitive practices or cartel agreements are to be found. To accept the amendment moved by the noble and learned Lord would be to restrict the powers of investigation and simply encourage people not just to leave their briefcase but regularly to leave on a semi-permanent basis any documents of any materiality relating to malpractice in relation to competition.
Lord Lucas: Given the breadth of the way the clause is drawn, I would be intrigued if the Minister could give the Committee an example of a domestic premise which might be excluded. If, as is my understanding, the dog kennel is possibly the only part of a building which is likely to be excluded under the clause, why is the clause here at all?
Lord Simon of Highbury: I have acknowledged before in these debates the concern about the strength of the investigation powers in the Bill. I can only underline again the words carefully used by my noble friend Lord Borrie. The Bill would allow entry to any premises during an investigation. But "premises" does not include domestic premises unless

"(a) they are also used in connection with the affairs of an undertaking, or

(b) documents relating to the affairs of an undertaking are kept there".

It is true that on one's travels one is likely to take a briefcase. I agree with the noble and learned Lord on that. But I do not want to be dragged into this. I would never have taken any documents that would ever have caused me to have a moment's guilt. I want to put that on the record since it was nearly put on the record that I might have done.
Seriously, the Government have considered carefully the case for these powers. They have not been included in the Bill lightly. We are, as my noble friend Lord Borrie reminded us, talking here about the secrecy which is needed to operate cartels or to engage in anti-competitive practices. In particular, individuals may strive to keep relevant documents and information out of the hands of anyone investigating what would normally be considered to be a business site. That is how these things are organised.
In the debates on the Bill I have stressed the need for strong powers to enable the director to get access to information. I think my noble friend Lord Borrie would confirm that one of the key reasons why the current regime is unsatisfactory—I think that that is universally acknowledged—is that the director does not have these powers currently. I fear that in accepting the amendment that would be stepping back into an ineffective regime. It would signal to those concerned who are prepared to go to the limit in order to make these cartels effective that an investigation process was in place which could be easily defeated by the simple expedient of asking someone to take papers home and put them there for a

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period of time. On that basis I believe that the power is justified. I urge the noble Lord to reconsider and to withdraw the amendment.
Lord Fraser of Carmyllie: I find that a rather unsatisfactory answer. What I really object to is that a rather phoney libertarian exception is being offered here. Page 29, line 5 of the Bill states,
"'premises' does not include domestic premises".
It continues by saying,
"unless—
"(a) they are also used in connection with the affairs of an undertaking".
I hope that the noble Lord was being lighthearted and appreciated that I offered no imputation of his conduct while he was chairman of BP. I am absolutely certain that there could scarcely have been a night when he did not take home with him papers in connection with the affairs of the undertaking of which he was chairman. If that is what the Government want to do and if they are going to say, "We consider this to be such a problem that we are going to allow people to enter premises of all types and in all circumstances" then they should say so. There should not be this rather false idea that domestic premises are to be excluded. With this particular definition it seems to me that the government advisers are saying that if one has papers relating to a cartel when one goes home, one should leave them in the motor car. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Simon of Highbury Lord Simon of Highbury moved Amendment No. 252A:
Page 29, line 13, leave out ("in paragraph 1 of Schedule 10") and insert ("by section 52").
On Question, amendment agreed to.
Clause 57, as amended, agreed to.
Clause 58 [Principles to be applied in determining questions]:
Lord Kingsland Lord Kingsland moved Amendment No. 253:
Page 29, line 20, leave out from ("that") to end of line 25 and insert ("all those having functions under this Part discharge those functions so as to ensure that so far as is possible questions arising under this Part are dealt with and determined in a manner which is consistent with the treatment of corresponding questions arising in Community law").
The noble Lord said: In moving this amendment I shall speak also to Amendments Nos. 254 to 257. The purpose of these amendments is to clarify the nature of the relationship between Part I of the Bill and European Community law. Clause 58(1) is more preambular in content rather than dealing with a specific obligation. The amendment seeks to rectify that situation.
In particular Amendment No. 253 deals with a number of concepts which seem excessively vague. The expression "compatible" is not explained; nor is the expression "corresponding questions". A need for consistency is rehearsed, but consistency between what differing regimes?
There are four particular matters to which I wish to draw the attention of the Committee. First, the expression, "to decide matters with a view to securing
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consistency" seems to us to be much better stated by the expression, "to ensure consistency." That makes the obligation absolutely clear.
The expression "corresponding questions" is too vague. Why not simply say that "The application of Part I must conform with the jurisprudence of the European Court of Justice in relation to Article 85 of the Treaty"? That is what I understand is being said.
In our submission the Bill must make it plain when Parliament intends to take a different approach from the European Community and Article 85. The expression used in the Bill is "incompatibility", but we believe that that is too loose-limbed; in other words, where the Minister is asking the Committee to accept that we differ, he ought to say so. The principles of European Community law comprise certainty, non-discrimination. objectivity and proportionality. Those principles ought not just to be enshrined in the substance of the law relating to the competition regime; they ought also to infect the way in which it is drafted. I beg to move.
9.30 p.m.
Lord Simon of Highbury: I shall respond to Amendments Nos. 253 to 257 as a group. Indeed, in responding to the amendments of the noble Lord, Lord Kingsland, I think it would be helpful, first, if the noble Lord will bear with me, to explain the purpose of Clause 58 and how it is intended to operate.
The purpose of the governing principles clause is to ensure as far as possible that the UK and EC prohibitions are interpreted and develop consistently with the EC competition law system. This is of critical importance in minimising burdens on business. The problems for business in having two similar, but in their detail different, prohibitions interpreted according to two different bodies of case law could be very burdensome.
The clause will, subject to one qualification I shall discuss further, require those determining questions under Part I to avoid inconsistency with Community law. They are also to have regard to the decisions and statements of the Commission. This will also apply to interpretation of the rules made by the DGFT under Clause 49. This importation extends not only to the substantive law but also to the general procedural safeguards developed under EC law; for example, the right against self-incrimination. That right developed by the European Court of Justice in Orkem v. Commission will be available to individuals who are asked by the DGFT for an explanation of a document under the powers in Clauses 26 to 28.
However, this principle of Community law importation will apply only to the extent that the provision of Community law in question is not inconsistent with the provisions of the Bill or the rules made by the DGFT under Clause 49. Let me give an example of a departure on the face of the Bill. Clause 29 confers a greater degree of legal professional privilege against production of documentation than exists under EC law. This is deliberate. Indeed, such an approach has wide-ranging support in this House as we debated earlier.

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In making the procedural rules, the DGFT is not obliged to secure that there is no inconsistency with EC procedural law since he will not be "determining a question" under Part I. The Bill provides that the rules made by the DGFT are not to come into effect until they have been approved by order made by the Secretary of State. These orders are to be subject to annulment by a resolution of either House.
That was by way of a general introduction and I turn now to the specific amendments tabled by the noble Lord, Lord Kingsland. I must start by saying that I believe that there is much common ground between us. I have considered the alternative language proposed, but I still feel that our objectives are best served by the clause as it is drafted—despite the excellence of the proposals. Let me try to explain why.
Turning first to Amendments Nos. 253 and 254, it is quite right that business should be granted as much certainty as possible about the application and interpretation of the prohibitions. The governing principles clause forms a central plank in achieving this objective. We have been clear on the face of the Bill where we are departing from the EC model; for example, the UK appeal system is clearly different from the EC system since appeals are not limited to the narrow judicial review-type grounds applicable to European Commission decisions.
Outside these specific areas of departure, business can look to the EC system for the interpretation of the prohibitions. I believe that the language in subsection (2) requiring the director and any court or tribunal to act with a view to securing that there is no inconsistency with Community law is a sufficiently tight test. It meets our objective of ensuring that the UK and EC prohibitions remain on parallel tracks.
I do not believe that the test should be made yet tighter as proposed by the noble Lord, Lord Kingsland. It is not possible to create an exact copy of the EC system. EC competition law has certain elements which cannot simply be transposed into the domestic system. For example, the Community objective of ensuring a common internal market for 15 different national states simply does not make sense in a purely domestic context. Therefore, those applying the prohibitions must be able to produce a sensible translation of the EC rules into the domestic system. This explains the reference to consistency between questions arising in relation to "competition within the UK" which correspond to those arising in Community law in relation to "competition within the Community". Once again I emphasise that the language in subsection (2) is very tight, and rightly so. In addition, those applying and interpreting the prohibitions must always act with the purpose set out in subsection (1) in mind; that is, consistency with the EC approach. Subsections (2) and (3) must therefore be read as a package together with the purpose in subsection (1). Finally, to put the matter beyond doubt the duty on the director or UK court or tribunal under subsection (2) is to apply not only the principles applied in a corresponding question but also any relevant decision of the Court.
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Amendment No. 257 seeks to give precision to the meaning of corresponding questions of Community law. However, I consider this to be far too narrow a definition. By way of example, I refer to the study prepared by Professor Whish which I mentioned when we debated Clause 9. I have placed copies in the Library of this House. As Professor Whish has noted in the study on the breadth of Article 85(3), the exemption criteria are interpreted against the backdrop of the underlying principles and objectives contained in the EC Treaty. Treaty objectives such as those to protect the environment contained in Article 130 may be relevant in considering whether an exemption can be granted. If we adopted the narrower definition proposed, the director might not be able to grant an exemption in respect of a type of agreement which the Commission would have had power to exempt. Such a definition could therefore lead to divergence with EC law and, worse still, prevent the director from exempting restrictive agreements which had worthy countervailing benefits.
As for the question of importation of the general principles of Community law such as the principle of proportionality, I can confirm to the noble Lord that it is our clear intention that they are included within the principles applied by the European court referred to in this clause. I am advised that this is the effect of the clause as drafted and that there is no need for specific reference to them.
I turn now to Amendment No. 255 which deletes the reference to the relevant EC principles and decisions being those applicable at the time the UK decision is being taken. The reference to "as applicable at that time" is to make clear that if there is a decision of the European Court which conflicts with the latest interpretation of the point by the UK courts, those applying the prohibition must follow the EC interpretation. It is also the case that if, as can happen, the jurisprudence of the ECJ changes over time it is the latest decision which prevails. We cannot rely on the European Communities Act to achieve either of these results because we are borrowing, not applying, EC law. Amendment No. 255 might therefore force the courts and the director to apply the prohibition inconsistently with the EC approach and thereby defeat the very objective of the governing principles clause.
Finally, I deal with Amendment No. 256 which makes the Secretary of State subject to the governing principles clause. We did not apply Clause 58 to the Secretary of State simply because we considered that she did not have functions under the Bill where it would be relevant and right to apply EC law. For example, the power of exclusion under Clause 3 might often involve doing something different to EC law. That is the main purpose of the clause. We want to have the right, for example, to exclude vertical agreements. The Bill provides for that by secondary legislation. I know that the noble Lord, Lord Kingsland, pressed for such an exclusion to be on the face of the Bill and, as I said, I shall reflect most carefully on that point. However, in the event that such an exclusion is written into the Bill there will

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remain a need to vary or fine-tune it by secondary legislation and make further exclusions as appear necessary.
Our view is that the exercise of exclusion powers would not be "determining a question" for the purpose of Clause 58. However, applying the clause to the Secretary of State could cast doubt on the way she could exercise that power. That is a detailed response to a matter where I started by saying that there would be a lot of common agreement. I hope that in the light of that explanation the noble lord, Lord Kingsland, will reconsider his amendment.
Lord Kingsland: I am relieved to hear that the noble Lord did not apply this section to the President of the Board of Trade because he thought that she was above the law. I thank the noble Lord for his response. However, I would like to probe one passage in the text to see whether I have understood the spirit, if not the letter, of his reply. In the penultimate sentence of Clause 58(2) there is the expression "with a view to securing that there is no inconsistency between". Am I right in thinking that as a result of his reply, that expression can be taken to be the equivalent of the expression "to ensure consistency?"
Lord Simon of Highbury: I admit to the noble Lord, Lord Kingsland. that they seem to be saying very much the same thing.
Lord Kingsland: I am much obliged. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 254 to 257 not moved.]
Lord Fraser of Carmyllie Lord Fraser of Carmyllie moved Amendment No. 257A:
Page 29, line 43, at end insert—
("( ) When adjudicating upon the application of the Chapter I and Chapter II prohibitions, the Director or a regulator shall be regarded as a court or tribunal for the purposes of Article 177 of the Treaty and may make requests to the European Court for preliminary rulings as provided for in that Article.").
The noble and learned Lord said: All we are hoping to have confirmed for us is that when adjudicating upon the application of either Chapter I or Chapter II prohibitions either the director or a regulator shall be regarded as a court or a tribunal for the purposes of the important Article 177 of the Treaty and will accordingly be in a position to make requests to the European Court for preliminary rulings as provided for in that article. If the Minister's answer is that they will be able to do so, I shall immediately withdraw my amendment.
9.45 p.m.
Lord Simon of Highbury: I am able to confirm.
Lord Fraser of Carmyllie: That is the most satisfactory answer the Minister has given all evening. I am pleased to beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 58 agreed to.
Clause 59 agreed to.
Clause 60 [Power to enter premises: Commission investigations]:
Lord Fraser of Carmyllie Lord Fraser of Carmyllie moved Amendment No. 258:
Page 30, line 38, leave out ("A justice of the peace") and insert ("The President of the Tribunal").
The noble and learned Lord said: At the risk of irritating some Members of the Committee this amendment relates to the deletion of the words "A justice of the peace" and the insertion of "The President of the Tribunal". This is a theme that we have explored previously. I hope the Government appreciate that in the circumstances of this complicated legislation we feel that it would be appropriate to upgrade the status of those to whom application should be made. So long as we are confident that the Government are appreciative of our desire to return to this point at the next stage of the Bill, I hope that the Minister will feel able to deal with it briefly.
Lord Haskel: I can deal with the matter briefly. As the noble and learned Lord will recall, on 17th November I undertook to consider the amendment to provide for the issue of warrants by a High Court judge rather than the president of the competition commission tribunal. I see no reason to go over the same ground again. The same principle applies. We will consider it within the same context.
Lord Fraser of Carmyllie: I am grateful to the Minister. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Haskel Lord Haskel moved Amendment No. 258A:
Page 31, line 2, leave out ("prevented from doing") and insert ("unable to do").
The noble Lord said: For the convenience of the Committee I shall speak also to Amendments Nos. 261 A and 263A. These are amendments to ensure that Clauses 60 and 61 reflect the corresponding provisions relating to investigations under the domestic regime. It is a matter we have already debated. I beg to move.
Lord Lucas: I should like to know whether the new phrasing incorporates the old one; in other words, if I am standing at the door of the offices and preventing the poor man from coming in, presumably, if he were to push past me, he would be able to get in. However. he chooses not to do so. So he is able to do so, but chooses not to do so. I am preventing him. I am not sure that the new wording is an improvement on the old. I appreciate the attempt that is being made to turn the active into the passive but the word "unable" begs the question whether an official, who is able but chooses not to, will find that this clause no longer applies to him, whereas the previous clause would have done.
Lord Haskel: It will apply, because the purpose of Amendment No. 261A is to ensure that not just the commission official who is being obstructed but any

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other commission official who has been authorised to conduct the investigation can carry it out and can be named on the warrant.
On Question, amendment agreed to.
[Amendments Nos. 259 to 261 not moved.]
Lord Haskel Lord Haskel moved Amendment No. 261 A:
Page 31, leave out line 20 and insert—
("(c) any official of the Commission authorised for the purpose of the Commission investigation,").
On Question, amendment agreed to.
[Amendment No. 262 not moved.]
Clause 60, as amended, agreed to.
Clause 61 [Power to enter premises: Director's special investigations]:
[Amendment No. 263 not moved.]
Lord Haskel Lord Haskel moved Amendment No. 263A:
Page 31, line 44, leave out ("prevented from doing") and insert ("unable to do").
On Question, amendment agreed to.
[Amendments Nos. 264 to 267 not moved.]
Clause 61, as amended, agreed to.
Clause 62 agreed to.
Clause 63 [Monopoly investigations: general]:
Lord Haskel Lord Haskel moved Amendment No. 267A:
Page 33. line 6, leave out ("subsections (2) and (3)") and insert ("subsection (2)").
The noble Lord said: In moving this amendment, I shall speak also to Amendments Nos. 267B to 267G, 269A to 269E, 271A to 271C, and 276A and 277A. My remarks also cover Amendment No. 209A, which is a consequential change to Schedule 10 flowing from these amendments. These amendments relate in substance to Clauses 63 to 65 of the Bill.
The Government's amendments are intended to achieve four goals: first, to remove redundancies resulting from the Bill as currently drafted; secondly, to clarify the intended scope of the powers; thirdly, to maintain consistency between the Director General of Fair Trading's powers to require information under the Fair Trading Act and those of the Monopolies and Mergers Commission, or the competition commission as it will become; fourthly, to reflect changes already made to the investigation and enforcement powers provided in Clauses 26, 27 and 41 in relation to the prohibitions.
I shall go through these changes briefly. Amendment No. 267D repeals Section 44(2) of the Fair Trading Act. We have concluded that the powers in Section 44(2) will become redundant with the introduction of the wider powers provided by Clause 63.
Amendment No. 271A repeals Section 45 of the Fair Trading Act. As with the previous amendment, we have concluded that the investigation powers in Section 45 will become redundant with the strengthening of the powers under Section 44. The
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amended Sections 44 and 45 would therefore be duplicatory. While this would not be unworkable, it would not be good legislation.
The Committee will, I am sure, appreciate that with the deletion of Section 45 of the Fair Trading Act, Clause 64 of the Bill becomes redundant. Clause 64 was intended to enhance the powers provided for the director under Section 45. As a result of the amendments I have tabled, therefore, we propose that Clause 64 should not stand part of the Bill.
Amendments Nos. 267B and 269A are intended to clarify that the director may use the investigation powers provided by Clause 63 to help him to decide whether he should either make a monopoly reference or propose undertakings in lieu. The powers are not intended to be limited to when the director is deciding one or other of these things. It was always the intention that this should be the case, but it is clearly important that the drafting of the legislation is not ambiguous on the point.
Amendments Nos. 267E to 267G and 269E are needed to make the powers provided by Clause 63 consistent with those provided in relation to the prohibitions. They are analogous to changes we had previously made to the prohibition powers but which we had not had time to reflect in Clause 63. So Amendment No. 267F deletes the power to search for documents, which is a change we made in light of the consultation responses, in relation to the powers of entry without a warrant when investigating suspected infringements of the prohibitions. Amendment No. 267G replaces the power to require persons to produce such information as the director may require, with the requirement to provide an explanation of documents. Amendment No. 267E enables the director to specify categories of document that he requires to be produced. That is in line with the power in Clause 26. And Amendment No. 269E amends the sanctions and the defences provided in relation to non-compliance in line with those in Clause 41.
Amendment No. 269B provides, with Schedule 10, paragraph 1, that the amendments made to the director's powers under the FTA also apply when those powers are being exercised concurrently by the regulators. Amendments Nos. 271B and 271C amend the MMC's Fair Trading Act powers to require information and documents to maintain alignment with the director's powers.
Finally, Amendments Nos. 267A, 267C, 269C and 269D are consequential changes to Clauses 63 and 65. Amendments Nos. 209A, 276A and 277A are consequential amendments in Schedules 10, 12 and 14 and in the Long Title of the Bill.
Perhaps I may now return to the purpose of these clauses. The powers of investigation currently provided under the Fair Trading Act are widely agreed to be unsatisfactory. The changes introduced by the Bill are needed to ensure that the director's powers under the FTA are adequate for him to establish quickly and effectively what action needs to be taken.
In particular, we consider that the director should be able to require the production of relevant information on due notice, as provided for in the Bill. We also believe that the director general should have a right of entry in pursuing his enquiries under the Fair Trading Act, although, as I have said, we do not believe that this should extend to a right of forcible entry. It is also right that parties under investigation should be under a statutory duty to give all reasonable assistance to the director general in carrying out his functions.
In short, these clauses put right a widely recognised weakness in the Fair Trading Act regime. They fit within the Government's overall determination to establish a modern and effective system of competition law. The amendments that I have tabled tidy up various loose ends in the clauses. I beg to move.
On Question, amendment agreed to.
Lord Haskel Lord Haskel moved Amendments Nos. 267B to 267G:
Page 33, line 7, leave out ("taking any") and insert ("determining whether to take either").
Page 33, line 15, leave out subsection (4).
Page 33, leave out line 21 and insert ("For subsection (2) substitute—").
Page 33, line 26, after ("documents") insert ("or
(ii) any document which falls within a specified category,").
Page 33, leave out line 35.
Page 33, line 39, leave out from ("premises") to ("as") in line 40 and insert ("to give the Director such explanation of the documents").
On Question, amendments agreed to.
[Amendments Nos. 268 and 269 not moved.]
Lord Haskel Lord Haskel moved Amendments Nos. 269A and 269B:
Page 34, line 37, leave out ("taking") and insert ("determining whether to take").
Page 34, line 43, at end insert—
("(6) The amendments made by this section and section 65 have effect in relation to sectoral regulators in accordance with paragraph 1 of Schedule 10.").
On Question, amendments agreed to.
Clause 63, as amended, agreed to.
Clause 64 [Investigations: complex monopolies]:
On Question, Whether Clause 64 shall stand part of the Bill?
Lord Fraser of Carmyllie: I must record this first minor victory in the course of the Committee stage of the Bill. I congratulate the Government on shooting our fox.
Clause 64 negatived.
Clause 65 [Enforcement]:
Lord Haskel Lord Haskel moved Amendments Nos. 269C to 269E:
Page 35, line 28, leave out subsection (2) and insert—
("(2) Omit subsections (1) and (2).").
Page 35, line 32, leave out ("44(3) or 45(4)(b)") and insert ("44(2)").
Page 35, line 37, at end insert—
("(5) If a person is charged with an offence under subsection (4) in respect of a requirement to produce a document, it is a defence for him to prove—

(a) that the document was not in his possession or under his control; and

(b) that it was not reasonably practicable for him to comply with the requirement.

(6) A person who intentionally obstructs the Director in the exercise of his powers under section 44 is guilty of an offence and liable—

(a) on summary conviction, to a fine not exceeding the prescribed sum;

(b) on conviction on indictment. to a fine.

(7) A person who wilfully alters, suppresses or destroys any document which he has been required to produce under section 44(2) is guilty of an offence and liable—

(a) on summary conviction, to a fine not exceeding the prescribed sum;

(b) on conviction on indictment, to imprisonment for a term not exceeding two years or to a fine or to both." ").

On Question, amendments agreed to.
Clause 65, as amended, agreed to.
Clause 66 [Services relating to use of land]:
10 p.m.
Lord Haskel Lord Haskel moved Amendment No. 270:
Page 35, line 40, at end insert ("made by statutory instrument").
The noble Lord said: This amendment relates to Clause 66. I am aware that Members of the Committee opposite have given notice of their intention to oppose the Question that this clause stand part of the Bill. It may therefore be helpful if—
Noble Lords: No, we shall not.
Lord Haskel: In that case, I beg to move.
On Question, amendment agreed to.
Clause 66, as amended, agreed to.
The Viscount of Falkland The Viscount of Falkland moved Amendment No. 270A:
After Clause 66, insert the following new clause—
TRADE MARKS, NAMES ETC: UNFAIR COMPETITION
(" .—(1) Any of the acts and practices referred to in sections (Trade marks, names etc: confusion) and (Trade marks, names etc: damage to goodwill or reputation) of this Act shall constitute an act of unfair competition and shall be actionable as such.
(2) In an action for unfair competition under this Act all such relief by way of damages, injunctions, accounts or otherwise shall be available to the plaintiff as is available in respect of the infringement of any property right.
(3) Nothing in this Act affects any of the laws relating to passing off or malicious falsehood or to the protection of any intellectual property right.").
The noble Viscount said: In moving Amendment No. 270A I wish to speak also to Amendments Nos. 270B, 270C and 270D. I speak on behalf of my noble friend Lord McNally, who has important business tonight at the Liberal Democrat ball. I hope that I am not a Cinderella on this occasion because if I am dragged off to the ball I shall go reluctantly.
These amendments tackle the problems of manufacturers and retailers when they are faced with look-alike products which have been placed on the market by competitors. Look-alike products seek unfairly to gain market share, usually but not exclusively for retailers, through copying the packaging of a brand leader. They cause confusion among consumers and thus represent unfair competition.
The Committee will know that the issue has been raised in the Chamber on other occasions, most notably during the passage of the Trade Marks Bill. At that time the then government urged that the problem might be resolved by the changes made by that Bill. However, the measures introduced at that time have proved inadequate. Unfair competition has continued and the year 1996 in particular saw a rash of look-alike products launched onto the market, which included Tesco's assault on Kellogg's products and Asda's Puffin biscuit which is clearly modelled on the Penguin biscuit which is familiar to the Committee. In addition, the Nestle company spent many millions of pounds entirely repackaging its brands to escape from the ever closer mimic brands being launched by its competitors.
We feel that no one can deny that look-alikes represent unfair competition and that they are a competition issue. The adoption of a close imitation of another's trade dress to boost sales surely cannot be fair competition. As well as being a blatantly parasitic practice which distorts effective competition between competitors, it also damages consumers directly. A recent poll by NOP showed that 41 per cent. of consumers believe that look-alike packaging indicates that the product probably has the same origin as that of the brand.
The Department of Trade and Industry appears not to know who is responsible for the issue. After quite adamantly informing brand owners during the passage of the Trade Marks Act in 1994 that this was a competition issue in 1994, my noble friend understands that the department has recently told the British Brands Group that this is, after all, not a competition issue and that it should be dealt with by trade mark law. Amendment No. 270A establishes the notion that unfair competition will be actionable in the same way as any infringement of property rights. Amendment No. 270B tackles the problem of confusion. It outlaws unfair competitive practices which are likely to cause consumer confusion, in particular in relation to the products and services of another.
Amendment No. 270C prohibits practices which will dilute the good will and reputation of an enterprise. Look-alikes copy the general trade dress and appearance of brands, seeking to suggest that they have the same qualities and values of the brand being copied and that the product shares its origins. By using look-alike packaging and product identification, some products trade on a reputation which has been established by leading brands over a number of years—a reputation built on continued positive consumer experience of those products. Amendment No. 270C would prevent such parasitic trading on brand goodwill and reputation.
We believe it essential that the Government accept that this is a significant issue. Current legal remedies have failed. Brand owners through the British Brands Group have expressed their concern about the lack of legal protection under current laws. There is ample evidence of consumer confusion about the origin of look-alike products. My noble friend's past included a period working for the British Retail Consortium. My noble friend Lord McNally would not be party to any measure which damaged the ability of retailers to compete vigorously with own-label products against brands. That would be normal and acceptable. But look-alikes are not a legitimate business practice. Other European countries have laws against the use of look-alikes, and that does not inhibit the growth of own-label products. We seem to be the odd ones out in Europe in not giving protection to consumers and brand manufacturers, many of whom are major inward investors, against unfair business practices of this kind.
In the absence of effective remedies through trade mark law, passing off or competition law, we ask that the Government use this Bill as an opportunity to tackle these problems.
Recent governments of both hues have been looking at this issue for some time. There seems now little excuse for inaction on the ground of lack of forewarning about the issue. The United Nations World Intellectual Property Organisation has produced model law on the issue, on which these amendments are based, which are being considered by the DTI Standing Advisory Committee on Intellectual Property. However, we have yet to learn the department's response. Brand owners have been pressing Ministers for some time on the issue and would like to see some action. I hope that the Minister will prove forthcoming in his response. I beg to move.
Baroness O'Cathain: This issue has been running and running. I wish to make two points. The National Consumer Council does not seem to have as much concern as the noble Viscount expressed. Indeed, a recent survey by the Consumers' Association confirmed that customers are not confused by look-alikes. I think that we all realise that most customers consider price. Mechanisms are already in place for resolution of the issue. I do not deny that there was a period when this sort of thing occurred. But the industry supports the Standing Advisory Committee on Intellectual Property's contention that the Trade Marks Act 1994 needs time to work. There are mechanisms for the registration of distinctive signs and packaging. Tort provides measures for the passing-off issue.
As I am sure the noble Viscount knows, a strong, informal relationship between manufacturers and retailers has resulted in a code of practice. I believe that the issue should not be dealt with in this Bill. The mechanisms under the Trade Marks Act 1994 should be given time to work.
Lord Borrie: There is no doubt that it is a difficult question. There is the matter of what is fair and unfair competition. For many years as Director General of Fair Trading I laboured under the disadvantage that people would often make complaints to me ending with the

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question, "Is this fair?" When I studied the Fair Trading Act, there was no definition of fairness. Indeed, there was mention of the word "fair" or "fairness" in only two places: one was in the title of the Fair Trading Act; and the other was in the title of the office which I held, the Director General of Fair Trading. Otherwise there was no mention of, and no powers to deal with, what people might call fair or unfair trading. What is anti-competitive under the Bill, as indeed has been anti-competitive in terms of previous legislation, has never gone as wide as anything that could be regarded as unfair.
Yet the noble Viscount has a point in pushing the amendment; namely, that if customers are confused between two goods, one produced by one manufacturer, another produced by a different manufacturer, and they are made to look alike in terms of packaging, an anti-competitive practice may arise out of the confusion and certainly a form of conduct that might be regarded as reprehensible.
However, it does not automatically follow that, because goods look fairly alike in the way they are presented by way of their packaging, that is necessarily anti-competitive or even unfair. Many consumers, when searching in the supermarket for a packet of cornflakes or a particular form of liquid, will be looking for a certain type of package, because that is the way in which, over the years, that particular article has been packaged. It is in a bottle of a certain shape, or a certain type of cardboard package, indeed with a certain colour. If any manufacturer were to produce a bottle or package of an entirely different colour, that would not be competitive or very successful.
There are certain cues which a consumer has in his or her mind when shopping which prompt him or her to look for packaging of a certain type. It is what tells a customer that that is the product that he or she seeks. Part of the penalty of success, as in the case of, for instance—if I dare use the name of one manufacturer—Kellogg's is that anybody who wants to produce cornflakes. in order to make any kind of impact on the market, will almost certainly have to produce cornflakes with a package that looks rather like the Kellogg's packet. So there is a certain inevitability in there being a look-alike package. That is the difficulty in the case made by the noble Viscount.
However, I am tempted to say, since the previous speaker quite properly declared an interest as a director of Tesco, that I have examples in front of me of which Tesco ought to be ashamed. The packaging is not merely similar to the packaging of well-known manufacturers but is so incredibly similar that I do not believe it is entirely a matter of chance—or is entirely a matter of "cue", as I mentioned. The noble Baroness said that there may have been a problem in the past, but not at present. I hope that she is right. I hope that the information I have received from the British Brands Group is not entirely up to date and therefore there is no need for any change in the law. In any case, I agree with the noble Baroness that I do not believe that this is the appropriate Bill for the introduction of any such change. The law of trade marks, the law of passing off and so on, is far more appropriate than this particular vehicle.
10.15 p.m.
Lord Graham of Edmonton: As the noble Baroness said, we have discussed this matter before. My noble friend Lord Borrie quoted Kellogg's. This is a cereal that will run, and run, and run! While we do not welcome having to be here at a quarter-past 10 at night, the noble Viscount has done the Committee a service—although I think that going over the top or being too precipitate puts the issue out of court.
We in this House are great believers in taking careful note of committees of some standing and authority. I am told that the Standing Advisory Committee on Intellectual Property recently indicated that in its view it was too early to take a decision on this point—not that there may not be a case or that there are not things which need to be put right. I do not rest on the argument that this may not be the right Bill. If there were a general view that something needed to be done, this would be the right Bill.
I am indebted for background information to the British Retail Consortium, which has a direct link with the All-Party Retail Group, of which my beloved Co-op is a part. It has not advised me directly, but we all have our own experience. I am bound to say that in Edmonton, or in Loughton, where I live, they do not talk of little else but this issue. However, this is undoubtedly an issue to those in the trade who aim to expand their sales and their profits. Whether it is looked upon by the general public with humour, ridicule or interest is a difficult balance.
I understand where the noble Viscount and the organisation to which he referred are coming from. They refer to damage as included in the dilution of good will and reputation which precludes the necessity of demonstrating consumer confusion. I am not at all certain about it. These people firmly believe in fair competition but the nexus that motivates them is the desire to drive their competitors out of business. That is how they become bigger. They are not in the business of retaining what one might call a perfect market; they are in the business of becoming bigger, fatter, more profitable and more loved by the public. Therefore they ought not to be too upset at competition that I would call maybe a little shady, maybe a little on the margin.
We know all about the trademarks legislation in this country. We also know that the design of packaging is already governed by a number of factors to ensure that passing off is very difficult. Standard EC sizes, acceptability, technology, protection, portability, ease of opening and storage all condition what one can and cannot do. With regard to this aspect of competition one needs to look at the register of marks that we already have. The category of unregistered marks has also been raised. I do not believe that there should be no differentiation between the quality or acceptability of goods which are registered and those which are unregistered. If there were no difference, it would prove a disincentive to anybody—manufacturers or producers—to register a trademark. At one time a trademark was a very limited thing, almost a logo. Now there is a range of things which can be included in a trademark.
In what it has said tonight, the Committee is not denying that there is an area which needs to be teased out. As the noble Lord said with regard to the recent Trade

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Descriptions Act, a run was given in. This is a further one. No doubt the matter will come back again. In the meantime, my suggestion is to keep taking the tablets but be sure of where you get them from.
Lord Fraser of Carmyllie: Perhaps I may make a few remarks in support of the noble Viscount on the clauses he proposes should be added to the Bill. I am bound to say that this is a serious matter and your Lordships' Chamber would not do a great deal of good or enhance its reputation if we were to attempt to conclude discussion on it this evening. If the noble Viscount wishes to return to it at a later stage, I signal to him our support for such an approach.
I shall be interested to hear about one technical matter from the Government Benches. If there is an argument on their part that the inclusion of such clauses within the Bill would be beyond it, it would be helpful to know that now. I shall be surprised if that is the case, given the fact that Amendment No. 270A refers to the action of unfair competition. In such circumstances it ought to be permissible for such clauses to come within the Bill.
All I wish to say at this stage is this. With my noble friend sitting behind me and the noble Lord sitting opposite, I generally agree that the British Retail Consortium provides your Lordships with sensible, helpful briefing. However, on this occasion it does not seem to me to be the most satisfactory briefing that I have ever received from that organisation, for this reason. It seems to me that the BRC is prepared to undertake the risk of confusing the issue of own brands with look-alikes. Nobody would suggest that supermarkets or anyone else should not avail themselves of the opportunity, often if not invariably, of providing own-brand goods at a price cheaper than better known brands—Kellogg's cornflakes or whatever it may be. But I am not prepared to accept that there is no distinction between the issue of own-brand goods and look-alikes.
The noble Lord, Lord Borrie, clearly has in his possession a set of photographs which I too possess. I shall not detain the Committee with them at this stage, but from looking at the photographs, it is not simply a matter of providing the product in the type of packaging which gives the customer a cue to the range of goods within which it is dealing. It is pretty conclusive, even from a superficial examination of the photographs, that the intention must be to try to convey to people that it is the same product. If that is not the intention, then legislation should be put in place to ensure that people are never misled.
With those few remarks, I simply indicate to the noble Viscount that we should leave the matter now. But it is an important issue. It affects some important companies in this country and we should not dismiss their concerns lightly.
Lord Haskel: I begin by saying to the noble Viscount that he should listen to the advice he receives from the Department of Trade and Industry. It is good advice. It is advice that works. The advice from the Department of Trade and Industry was that either the Trade Marks Act
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1994 dealt with the problem that he raised or the common law tort of passing off could be used. Those avenues have proved effective.
The noble Viscount mentioned the case Penguin v. Puffin. In that case Mr. Justice Walker found in favour of United Biscuits on passing off and an injunction was granted to restrain Asda from selling the Puffin biscuit in any get-up which amounted to a passing off of the Penguin biscuit. The legislation worked, so the advice from the DTI was probably sound.
Equally, the noble Viscount mentioned the Nescafe jar. Shapes are protected under the provisions of the Trade Marks Act 1994 and since the introduction of that Act there has been an increasing number of applications for shapes and trade dress. For example, the Nescafe jar is based on a registration for the shape of the jar and that is its protection. Invariably it takes time for brand owners to establish such marks as distinctive by use, but some delay is needed to ensure the quality and value of the trade marks registered.
The House debated this matter during proceedings on the Trade Marks Bill in 1994. On that occasion the House decided that the measure should not be included and that a full consultation had not taken place. Since that time opportunities to discuss unfair competition have arisen, notably before the Standing Advisory Committee on Industrial Property. The committee has considered the need for unfair competition legislation. Its members consist of organisations with a cross-sectorial interest in industrial property and its membership can be enlarged to address specific issues if that is the will of the committee. I draw the Committee's attention to the fact that this issue was touched on at the recent hearing of the Select Committee on Trade and Industry on 4th November. The president, when asked at the hearing whether she thought that further legislation was required in this area, replied:
"There is not a consensus yet that further legislation is required".
Our problem with the amendments is that they would add a substantial new dimension to the Bill. This issue is really outside the scope of the Bill. The noble and learned Lord, Lord Fraser, asked me about this. I say to him that this matter is very different from the Bill as it is currently drafted. The Bill is primarily concerned with the introduction of prohibitions on anti-competitive agreements and abuse of a dominant position. The amendments tabled address a rather different concern. Indeed, Amendment No. 270C in particular goes well beyond providing protection for branded goods from look-alikes. It would create a new intellectual property right of an extremely wide scope. It would define unfair competition as any action or practice likely to damage good will and reputation, even when this did not cause confusion among consumers. The amendments would effectively make redundant almost all existing trade mark legislation because of the much larger range of activities that would be actionable than is currently the case.
In view of the implications the amendments imply, and on the basis of my explanation, I invite the noble Viscount to withdraw his amendment.
Lord Fraser of Carmyllie: Before the noble Viscount does whatever he wishes to do, perhaps I may say that

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I am a little surprised by the Minister's response. I carefully avoided using the word "scope". My understanding of the procedures of the House is that if the set of amendments had been outwith the scope of the Bill, that would have been communicated in one way or another and we might not have been permitted to debate it at all. I hope that the noble Lord will reflect on that point and that if there is a rather more refined argument than simply whether an amendment is within or outwith the scope of the Bill, we shall have that communicated to us.
The Viscount of Falkland: The hour is late. I shall take the advice of the noble and learned Lord and recommend that to my noble friend Lord McNally. We shall certainly come back to it again. I particularly note what the Minister said. I thank all noble Lords who have taken part in what has been a fascinating debate. I am glad that I was here and not at the Liberal Democrat ball. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 270B to 270D not moved.]
Lord Simon of Highbury: Because Clause 58 is central to the Bill, I wish to put something on the record. In my haste to respond quickly to Amendments Nos. 257A and 272F, to which the noble and learned Lord, Lord Fraser, spoke in place of the noble Viscount, Lord Trenchard, I said, in order to move on, that I confirmed. I believe that was my answer. I want to put on record that I confirm that we believe that the tribunal and the commission would come within the scope of Article 177 of the EC treaty but we do not believe that the Director General of Fair Trading or the regulator necessarily would. I believe that was the purpose of the amendment. I answered too quickly because I was thinking of the tribunal. I shall naturally write to the noble and learned Lord if he needs further information on that.
10.30 p.m.
Lord Fraser of Carmyllie: I say immediately to the Minister how much we appreciate his courtesy in returning to the matter so quickly. If he says only that they do not necessarily fall within the definition of being a court or a tribunal to enable them to seek a preliminary ruling under Article 177, we might engage in some correspondence about it subsequently.
Clause 67 [Regulations and orders]:
Lord Simon of Highbury Lord Simon of Highbury moved Amendment No. 271:
Page 36, line 14, at end insert—
("( ) The power to make rules which is conferred by section 47 is exercisable by statutory instrument.").
The noble Lord said: This amendment corrects an omission in the Bill. Clause 67(1) provides that any power to make regulations or orders under the Bill is exercisable by statutory instrument, but that provision does not cover the rules the Secretary of State may make under Clause 47 with respect to appeals and appeal tribunals. The amendment provides that the power to make such rules is also to be exercisable by statutory instrument. I beg to move.
On Question, amendment agreed to.
Clause 67, as amended, agreed to.
Clause 68 agreed to.
Clause 69 [Crown application]:
On Question, Whether Clause 69 shall stand part of the Bill?
Lord Borrie: It seems particularly refreshing that a major Bill of this sort should be specifically said to bind the Crown. Have Her Majesty's Ministers any comment on that and is it something that we may look forward to as regards other major Bills?
Lord Simon of Highbury: I do not particularly want to generalise in responding to my noble friend Lord Borrie. The Government believe that it is right that the prohibition should apply to some bodies where they are acting as undertakings. They should not be treated differently from normal commercial undertakings in that respect. I should add that Crown bodies are already subject to Community competition law if they are undertakings. We are reviewing the extent to which it is necessary or desirable to have entry powers in relation to the Crown. I may wish to come back with an amendment on this matter at Report stage.
Clause 69 agreed to.
Clause 70 agreed to.
Schedule 12 [Minor and consequential amendments]:
Lord Simon of Highbury Lord Simon of Highbury moved Amendments Nos. 271A to 271C:
Page 84, line 14, at end insert—
("( ) Omit section 45 (power of the Director to require information about complex monopoly situations).").
Page 84, line 14, at end insert—
("( ) In section 85 (attendance of witnesses and production of documents on investigations by Competition Commission of references under the Fair Trading Act 1973), in subsection (1)(b)—

(a) after "purpose", insert "(i)";

(b) after the second "notice", insert "or

"(ii) any document which falls within a category of document which is specified, or described, in the notice,".").
Page 84, line 14, at end insert—
("( ) In section 85, after subsection (1), insert—
"(1A) For the purposes of subsection (1) above—

(a) "document" includes information recorded in any form;

(b) the power to require the production of documents includes power to take copies of, or extracts from, any document produced; and

(c) in relation to information recorded otherwise than in legible form, the power to require it to be produced includes power to require it to be produced in legible form, so far as the means to do so are within the custody or under the control of the person on whom the requirement is imposed."

( ) In section 85(2), for "any such investigation" substitute "an investigation of the kind mentioned in subsection (1)".").
On Question, amendments agreed to.
Lord Stanley of Alderley Lord Stanley of Alderley moved Amendment No. 272:
Page 84, line 17, at end insert—
("(6) In Schedule 7, Part II (which lists goods and services partly excluded from monopoly references), omit paragraph 12 (potatoes to which no process of manufacturer (other than dressing or dyeing) has been applied.").
The noble Lord said: This is a technical amendment, or at least I believe it is. The intention behind it is to ensure that the potato industry, as mentioned in Schedule 7 to Part II of the Fair Trading Act 1973, is open to the same level of competition as other parts of the agriculture industry.
As I understand it, the Director General of Fair Trading does not have the power to intervene with any non-competitive action under the 1973 Act in the case of the potato industry whereas he does, for instance, in the milk industry. It may be that most cases of possible non-competitive action would be subject to this Bill. However, it seems to me to be inconsistent to exempt the potato industry from the 1973 Act by itself and it could lead to misunderstanding and possible litigation.
I have a sneaking feeling that that inconsistency may have been aided and abetted by an amendment which the Minister's present Chief Whip and I moved during the passage of the Agriculture Act, for which I apologise profusely and also, I hope, on behalf of the noble Lord, Lord Carter. I beg to move.
Lord Simon of Highbury: I have been waiting for some help from my Chief Whip but I see that he is nobly on his Bench. I thank the noble Lord, Lord Stanley, for highlighting the treatment of certain forms of supply of potatoes under the Fair Trading Act. I agree that this treatment should be reviewed in the light of the fact that the potato marketing scheme has now been revoked. I will therefore reflect further on the position in conjunction with relevant ministerial colleagues.
There are already powers in the Fair Trading Act itself to remove the limitation on the director making monopoly references by secondary legislation. If it is to be removed, use of such power would be more appropriate than an express removal on the face of the Bill.
Of course, the Bill will introduce new powers to tackle anti-competitive practices; for example, if a potato seed grower were dominant and was abusing such a position it could be dealt with under the Chapter II prohibition. In addition, the Chapter I prohibition could apply to anti-competitive agreements in the potato sector. However, in applying the Chapter I prohibition, account would have to be taken of any exclusion which the Government might bring forward following the discussion of the amendment tabled by the noble Lord, Lord Stanley, on the first Committee day. As I said on 13th November, there is a good case for providing an exclusion based on EC Regulation 26/62. I also said that I would consider the matter between Committee and Report. That consideration will need to include whether or not to allow the exclusion to be brought to an end in individual cases if there were good reason to do so. Finally, of course the current special treatment of potatoes under the Fair Trading Act does not prevent a monopoly
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reference being made by relevant Ministers. I therefore invite the noble Lord, Lord Stanley, to withdraw his amendment.
Lord Stanley of Alderley: Yes, but not quite, in so far as I still think that paragraph 12 should be omitted in common with other provisions in the 1973 Act: otherwise we shall have confusion. If the noble Lord, Lord Renton, were here, I know that he would quote what I call his "rule" which is that if one matter is removed—I refer to the 1981 Act when we removed certain birds from the provisions—it is assumed that the others stay in.
Therefore, I very much hope that the Minister will recognise that the position with regard to the 1973 Act should be regularised. I hope that he will do that by statutory instrument. Indeed, I gathered from his remarks that that is what he will do. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Simon of Highbury Lord Simon of Highbury moved Amendments Nos. 272A to 272E:
Page 84, line 34, leave out ("19(2)(a)") and insert ("20(2)(a)").
Page 85, line 38, leave out ("paragraph (d)") and insert ("paragraphs (d) and (e)").
Page 85, line 40, leave out ("(p)") and insert ("(q)").
Page 85, line 41, leave out ("(q)") and insert ("(r)").
Page 86, line 46, at end insert—
("The Financial Services Act 1986 (c.60)
In Schedule 11 to the Financial Services Act 1986, in paragraph 12—

(a) in sub-paragraph (I), Omit "126";

(b) omit sub-paragraph (2).").

On Question, amendments agreed to.
[Amendment No. 272F not moved.]
Lord Simon of Highbury Lord Simon of Highbury moved Amendment No. 272G:
Page 88, line 20, leave out ("(6)") and insert ("(7)").
On Question, amendment agreed to.
Schedule 12, as amended, agreed to.
Schedule 13 [Transitional Provisions and Savings]:
Lord Graham of Edmonton Lord Graham of Edmonton moved Amendment No. 272H:
Page 90, line 13, at end insert—
("( ) On the commencement date continuing proceedings under the RPA shall automatically be discontinued").
The noble Lord said: In moving this amendment, I should like to speak also to the other amendments grouped with it. As colleagues will see, these relate to the interests of community pharmacists. At an earlier

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stage I spoke about the problems presented by the Bill. Although the matters that I raise now are not directly related to those problems, they still affect their interests.
I deal now with paragraphs 5, 8 and 9 of Schedule 13 relating to continuing proceedings. The purpose of this group of amendments is to ensure that the Bill minimises the risk of a community pharmacy facing the double jeopardy of both court proceedings under the Resale Prices Act 1976 (RPA) and proceedings soon after under the new competition regime to be established by this Bill. I cannot believe that that is the intention if the department and Minister on reflection see that that point has validity.
The provisions in paragraphs 5, 8 and 9 of Schedule 13 allow for court proceedings initiated by the Director General of Fair Trading under the 1976 Act begun prior to the commencement date of the new Bill to be continued after it comes into force. This provision made better sense when the initial Competition Bill was drafted by the previous administration, as it was then anticipated that proceedings in the Restrictive Practices Court would be well under way by the time this House considered proposals for a new competition regime.
However, the Director General of Fair Trading has not yet commenced proceedings. It now seems somewhat onerous and oppressive to require a community pharmacy to face two sets of proceedings in quick succession, one under the old regime and another at the end of the transition period under the new regime. Supporters of RPM on over-the-counter medicines would prefer, if no specific exemption for the arrangement were included in the Bill, to move straight to consideration of the matter under the new regime at the end of the five-year transition period. This would avoid the unnecessary expense of fighting two sets of proceedings, the first under the 1976 Act, which all sides in this debate recognise is out of date, and the second under the new competition regime.
The Community Pharmacy Action Group, of which Co-op Pharmacy, with 400 branches scattered throughout the country, is an integral member, will fight both cases if necessary. However, it believes that it would make better sense to concentrate its efforts on fighting to protect a viable network of community pharmacies under the new competition regime rather than under a regime which the Government have signalled they no longer support. There are also resource implications for the Government in allowing lengthy and expensive court proceedings to be carried on by the Office of Fair Trading under an Act which is said to expire the moment those proceedings end.
I hope that the Minister will look closely at these amendments. They can easily be incorporated in the Bill and will go some way to reassure community pharmacies that the Government are alive to their concerns. They also recognise the change in circumstances since the initial draft of the Bill was published; that is, the fact that court proceedings have not yet commenced.
Within the second group are amendments directly related to the issues raised in the first group of amendments. In the preamble to the draft Competition Bill published in August 1997, the Department of Trade and Industry stated:
"We believe the following arrangements should benefit from a transitional period of five years. These are … agreements to the extent they relate to goods which at the time the prohibition conies into force are exempted under Section 14 of the Resale Prices Act 1976";
that is. RPM on OTC medicines.
The inclusion of an extended transition period for RPM on OTC medicines was in recognition of the fact that the arrangement had been explicitly sanctioned by the Restrictive Practices Court and had,
"already been investigated and favourably assessed against public interest criteria".
A guaranteed five-year transition period under the new regime is essential if the community pharmacy is to adjust to changes in the current arrangements of RPM on OTC medicines. It is clear from the above statement that Ministers intend the five-year transition to he secure. However, the Bill provides the Director General of Fair Trading with the power to investigate the five-year transition period and bring it to an end prematurely. Putting this power in the hands of the director general, who has already indicated that he is not personally committed to RPM on REC medicines, only achieves the opposite of the reassurance that Ministers were clearly seeking to give.
The amendment would guarantee that the five-year transition period for RPM on OCT medicines could not be terminated early by a premature challenge from the director general.
I hope Ministers will consider the amendment favourably. The reassurance that is intended by the granting of a five-year transition will only be achieved if it is made clear that the transition period cannot be threatened. I am advised that, given the reassurance of a fixed five-year period, community pharmacies can work hand-in-hand with the Government to prepare for the challenges that lie ahead as the revolution in primary health care services continues. I beg to move.
Lord Fraser of Carmyllie: I need say little more than that at an earlier stage we indicated considerable sympathy for the position of community pharmacies, not least because in our view, as a matter of health policy, to allow for a special position for community pharmacies would meet the priorities that this. Government are continuing with in their development of primary care in the National Health Service. I do not think we need to consider this matter in any great detail at this stage, but it is one of the more important issues that has been raised during the Committee stage of the Bill.
10.45 p.m.
Lord Simon of Highbury: I listened with great interest to what my noble friend Lord Graham and the noble and learned Lord, Lord Fraser, have said. It is very clear that this is an important issue. We have already discussed it in general terms, and the arguments

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were well taken on the first Committee day. I do not intend to repeat our balanced arguments, but I would like to focus on the transitional arrangements for agreements, decisions and concerted practices which are the subject of proceedings before the Restrictive Practices Court under the Resale Prices Act 1967 at the commencement date. Under the Bill, if there are continuing proceedings—and as my noble friend has said the director has announced his intention to ask the court to review resale price maintenance in over-the-counter medicines so there are likely to be such proceedings—the transitional period will begin when the proceedings have been brought to a conclusion. The transitional period applies if the continuation of resale price maintenance is found to be in the public interest. I should, perhaps, add that if resale price maintenance were not found to be in the public interest there should be no entitlement to a transitional period. The Bill as drafted is not clear on this point and I believe that it should be amended accordingly. This is a matter which we will wish to return to on Report.
I note carefully the point made by my noble friend Lord Graham about the burden of subjecting the industry to two regimes in quick succession. However, I believe this concern is—subject to one point which I shall make in a moment—dealt with by ensuring that the traditional exclusion from the scope of the Chapter I prohibition commences after the conclusion of proceedings, assuming that the continuation of resale price maintenance is found to be in the public interest.
Although the director general has not yet sought leave to make an application to the court to review the exemption, the director has already announced his intention to initiate proceedings. In those circumstances I do not believe it would be right for me to intervene, in effect to say that nothing further should be done for the next six years when the transitional period would expire. That would be the result of the amendment.
I would, however, like to deal specifically with the issues raised by Amendment No. 275A, which would deprive the director of his ability to investigate during the transitional period certain agreements, decisions or practices and to issue a notice proposing a date on which the transitional period is to end.
I emphasise that that power which applies generally in the transitional period is intended to be a reserve one which we would expect the director to use in limited, serious cases only. Moreover, the power is subject to veto. The Secretary of State will be able to cancel the director's proposal to terminate the transitional period. The Secretary of State may, for example, consider that the competition concerns are not of sufficient gravity to outweigh the presumption that the transitional exclusion should apply and should be capable of being relied upon in normal circumstances.
While I am satisfied that that reserve power is right for the generality of agreements which are to enjoy a transitional period, I can see some force in my noble friend's concern that following a court ruling in favour of resale price maintenance for those medicines, that reserve power could in principle lead to it being looked at again at an early date. That is not my intention. I
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believe I should therefore reflect again carefully on whether retention of that power is appropriate in the case of resale price maintenance in over-the-counter medicines. In the light of that response, I hope that my noble friend will be able to withdraw the amendment.
Lord Graham of Edmonton: I am grateful to my noble friend. I listened carefully to what he said. It sounded hopeful. It is not that there is an open door, but I gather that my noble friend understands some of the points made. I will take advice from colleagues who will reflect upon what he has put on the record. Consultations can take place if necessary, and we may need to come back at a later stage. I am grateful to my noble friend; I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 272J to 274A not moved.]
The Viscount of Falkland The Viscount of Falkland moved Amendment No. 275:
Page 91, line 14, at end insert ("or until the expiry of such agreement, whichever is the later").
The noble Viscount said: I speak on behalf of my noble friend Lord Ezra. The purpose of the amendment is to preserve the existing legal validity and prevent unnecessary uncertainty arising by correcting what otherwise would be retrospective legislation in respect of a number of contracts relating to the UK gas business.
The amendment will also avoid the unnecessary review and notification of those existing agreements thereby removing significant, unwarranted burdens on the industry and the Government. It is recognised in the UK and internationally that joint arrangements between competitors are necessary to allow the efficient development and production of petroleum resources. Companies form joint operating arrangements from their initial application for offshore petroleum licences to develop fields and transport gas to the shore.
Until the early 1990s British Gas was effectively the monopoly purchaser of gas. It insisted on joint sales contracts for those jointly owned fields. Those gas contracts, known as depletion contracts, are typically for the full life of a field and can last for over 20 years. The Gas Act 1986 recognised the special features of the gas industry and provided in a related exemption order for the exclusion of gas contracts from the notification and registration requirements of the restrictive trade practices legislation.
The Act and order covered both existing and new gas contracts of any description referable to offshore gas fields The Bill does not renew the current exclusion for gas contracts. Instead, in Schedule 13, it proposes a five-year transitional period of continuing validity for existing contracts. The loss of the Restrictive Trade Practices Act exclusion amounts to retrospective legislation. There will be several hundred contracts affected by the denial of the current exclusion since the majority of those will continue beyond the proposed five-year transition period. If companies have to apply for individual exemptions for such contracts, the burden on business and government will be immense. Companies will wish to make individual contract

983
applications since the regime created by the new legislation; that is, the risk of such agreements being declared void and the scope for investigations and the potential for significant fines could not be ignored.
The amendment—to use my noble friend's term—will "grandfather" contracts already excluded under the 1986 exemption order from the provisions of the Bill until their expiry date.
I turn now to the position of new contracts which are also covered by the existing 1986 exemption order, as mentioned. Chapter I, Clause 6 provides for the possibility of block (or individual) exemptions, although it specifies neither conditions nor terms. In order to avoid the need for individual contract exemptions for new gas contracts, a block exemption would be the most appropriate method of ensuring certainty and continuing validity. Given the long-term nature of the gas business, such an exemption would need to be for a long period, certainly for no less than 15 years. I would therefore seek an assurance or statement from the Minister that the Government will be willing to grant a block exemption for gas contracts for a minimum 15-year period.
The breadth of the prohibition contained in Chapter I, Clause 2 does not include any "appreciability" test. That will create uncertainty over the status of all current and prospective joint contracting arrangements across the oil as well as the gas industry. Such joint arrangements are common worldwide and are entered into primarily to provide operational efficiencies. I would therefore also seek some assurance from the Government that the new prohibitory regime would only apply to such arrangements where there was an "appreciable" (and adverse) effect on completion.
In summary, to avoid wholesale uncertainty in an important United Kingdom industry, with the attendant burdens on that industry and government, I seek assurances in respect of the need for a long-term block exemption for new gas contracts and that the Government accept the need for an "appreciability" test in viewing joint arrangements in the oil and gas industry. I beg to move Amendment No. 275, which will have the effect of "grandfathering" existing gas contracts.
Lord Simon of Highbury: I am aware that Amendment No. 273 was not moved but Amendment No. 275 was moved. Before I turn specifically to the question of the gas industry, I should like to say a few words about the schedule.
Had both the amendments been placed before us, they would have given extended traditional exclusions from the Chapter I prohibition in respect of certain classes of agreement. It would be helpful to make some general points about that.
I turn first to those cases where agreements have been determined under Section 21(2) of the Restrictive Trade Practices Act not to be of such significance to call for investigation by the court. There is a good case for exclusion in that regard. As I have indicated already, we believe that an exclusion for the generality of agreements which have received directions under
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Section 21(2) is the right approach. However, I said that there is a possibility that there may be agreements which have received Section 21(2) directions but which turn out in practice to have anti-competitive effects. That is why I said an exclusion should be subject to a power for the Director General of Fair Trading to claw back the exclusion in certain circumstances. If that amendment had been before us, it would not have included this important protection.
For some time after the new regime is in operation it will be important for interested parties to be able to inspect the register of agreements and determine the status of agreements under it. Keeping the register is resource intensive. It would not be sensible to maintain it in perpetuity. At present, the Bill does not make explicit provision for the register: we will need to correct that omission on Report.
A second area where exclusion is merited is in relation to electricity and gas agreements from which the RTPA has been disapplied by the use of powers under the Electricity Act 1989 or the Gas Act 1986. In this area, Amendment No. 275 is relevant. Like Amendment No. 273, it would extend the exclusion of agreements in this category to the expiry of the agreement.
The Government's position is that a permanent exclusion is inappropriate. Unlike cases dealt with under Section 21(2) which have been examined and found not to contain significant restrictions, these other types of agreements may contain restrictions which are significant in effect but for other reasons are exempted. Those agreements need to be scrutinised under the new regime after an appropriate transitional period. We have set this at five years.
It has been put to us that exclusion of these existing agreements (under the electricity and gas Acts) does not cater for the natural evolution and change that are necessary for many of the key agreements in these sectors. I believe that this is a valid point. I therefore believe that we should improve our proposals in the area by continuing the current arrangements for scrutiny in orders which are made before commencement but providing for the effect to be disapplication of the Chapter I prohibition rather than the RTPA; and by providing a power to make new orders. I am prepared to come forward on Report with a government amendment to that effect. I believe that that will be welcomed by the industries concerned.
However, additional flexibility of that nature for a transitional period—which we have set at five years—makes it all the more important that in due course there should be a proper examination under the new prohibition. Neither of the two amendments would permit that additional flexibility.
Another area that we have already debated relates to the professions. Here the Government's position is that the wide-ranging exclusion of professional services should not be continued. Instead, we have proposed a narrow exclusion relating to professional rules. Here we have proposed in paragraph 5 of Schedule 4 a mechanism for withdrawing the exclusion if in an individual case there is good reason to do so.

985
I should also like to take this opportunity to mention two other areas of the schedule where minor amendments are, I believe, needed. First, the Bill currently provides that the director may give guidance in relation to an agreement made between Royal Assent and the coming into force of the prohibition of anti-competitive agreements. However, as the Bill is drafted, such guidance would not confer immunity from penalty. I believe that it should confer immunity and I expect to bring forward an amendment on Report to that effect. Secondly, consideration needs to be given to whether explicit provision is needed in the Bill to provide for orders by the restrictive practices court to lapse when the prohibition comes into force.
Finally, I turn to the issue of special arrangements for long-term gas purchase contracts. Gas purchase contracts which contain restrictions necessary, for example, to enable the efficient development of the field should in principle be capable of exemption if the exemption criteria are satisfied. The Bill provides for classes of agreement to be given block exemptions. Gas purchase agreements may well merit an early block exemption. I do not, however, see any need to make special provision for those agreements in the Bill. Consultation is under way with the industry. I believe that we need to await the maturing of that process.
For the reasons that I have given, I hope that Members of the Committee will feel slightly more widely instructed on Amendment No. 273 which was not moved. I also hope that the noble Viscount will see fit to withdraw Amendment No. 275.
11 p.m.
Lord Fraser of Carmyllie: Before the noble Viscount withdraws the amendment, perhaps I may express my sorrow that I did not move Amendment No. 273. Indeed, if I had known that the noble Lord would be in such a positive and constructive mode, I may have done so. However, I am grateful to him for his response and shall read carefully what he said. I also welcome the proposals that he made.
As regards the other amendments, I was most interested to hear the Minister's comments. I am sure that he will realise that I did not intervene because it might have been necessary for me to declare an interest. I shall nevertheless read what he had to say on that, also with keen interest.
The Viscount of Falkland: I thank the noble Lord for his complete and helpful response to the amendment which I moved. I am sure that his remarks will be scrutinised with great care by my noble friend Lord Ezra and he and other interested parties will no doubt consider the noble Lord's remarks and we shall return to the matter at a later stage as appropriate. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 275A not moved.]
Lord Graham of Edmonton Lord Graham of Edmonton moved Amendment No. 276:
Page 91, line 44, at end insert ("; or
(c) any of the parties concerned have appealed to the Competition Commission within the 28 day period.").
The noble Lord said: Paragraph 10(3) of Schedule 13 gives the director general power to issue a notice terminating the transitional arrangements in respect of an agreement which the director general believes would, but for the transitional period, infringe the Chapter I prohibition. The transitional period will end in respect of that agreement on the date proposed in that notice unless the director general withdraws the notice or the Secretary of State cancels it. The date specified in the notice will be a date not earlier than 28 days after the service of the notice.
The amendment I move would suspend the operation of the director general's notice if a party to the agreement appeals to the commission, thus keeping the agreement in force and valid during the period of the appeal. I beg to move.
Lord Simon of Highbury: Schedule 13 provides for transitional periods to ensure a fair and orderly transition to the new prohibition based regime. For example, most agreements made before the Chapter I prohibition comes into effect would have a transitional exclusion from that prohibition for one year.
The purpose of paragraph 10 of the schedule is to ensure that the transitional period is not abused. As I argued in speaking to the amendments of my noble friend Lord Graham a few minutes ago, if a seriously anti-competitive agreement came to light it is not right that it should be allowed to continue unchecked. I note, incidentally, that the investigation powers in paragraph 10 do not include those of Section 27; nor do the offences provided for in Clauses 41 to 43 apply to them either. We shall need to correct those omissions at Report.
As I have said, the power to end the transitional period early is a reserve power for the director which we expect him to use only in limited, serious cases; and, as I also said, the Secretary of State has a power to veto the director's proposal to terminate the transitional period early. Amendment No. 276 would prevent the director from ending the transitional period early if any of the parties had appealed to the competition commission. I believe it is right that the Secretary of State rather than the competition commission should determine whether to over-ride the director's proposal to terminate the transitional period early. I have explained how I expect the power to be used.
However, any decision—which one might expect to follow the termination of transitional period—that the particular agreement infringed the prohibition or as to whether it merited an exemption would be appealable to the commission. This decision would be an assessment against the terms of the Chapter I prohibition. It is therefore appropriate that it should be appealable to the tribunal. The Bill provides that the rules that may be made under paragraph 13 of Schedule 8 may provide for a tribunal to suspend the effect of a decision of the

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director on an interim basis. Similarly, any interim measures under Clause 34 or directions under Clause 31 made by the director would be appealable to the competition commission.
I am satisfied that the combination of these measures provides the proper route for protecting the rights of undertakings alleged to have infringed the prohibition during the transitional period. I believe, however, that the amendment prompts a wider question relating to the expiry of the transitional period in normal circumstances, rather than in serious cases where early termination of the transitional period is at issue. I can see that there could be a case for the transitional period to be extended in cases where appeal has been made against a decision by the director—for example, an appeal against a decision to refuse an exemption. I shall review the provisions on the extension of transitional periods with a view to returning to the matter on Report. I therefore invite my noble friend to withdraw the amendment.
Lord Graham of Edmonton: I am grateful to the Minister for what he said. He is understanding and I believe that he has taken the point. In those circumstances, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Schedule 13 agreed to.
Schedule 14 [Repeals and Revocations]:
Lord Simon of Highbury Lord Simon of Highbury moved Amendment No. 276A:
Page 94, line 13, column 3, at end insert—

("Section 45")

On Question, amendment agreed to.
Schedule 14, as amended, agreed to.
Clause 71 agreed to.
Clause 72 [Short title, commencement and extent]:
Lord Fraser of Carmyllie Lord Fraser of Carmyllie moved Amendment No. 277:
Page 38, line 16, at end insert ("but does not extend to Scotland").
The noble and learned Lord said: This appears to be a small, innocuous amendment at the end of a long and complex Bill. However, it is clearly one of some considerable constitutional significance. When I reflect how over the summer months I worked on a referendum campaign, when the rest of the world was away with its bucket and spade, I have some temptation to hold the Committee for as long as it took me to discover some of the details of what was proposed for Scotland! However, even with the Chief Whip in his place, I shall not exercise that right too extensively. But it is our view that as we try to untangle and unravel what is proposed to be reserved, and what is to go to the Scottish parliament, every piece of legislation which comes before this House will be subjected to this separate and new form of scrutiny.
This is a particularly interesting Bill on which to start. I would accede immediately to the view that nothing was clearer in the Government's White Paper on Scotland's government than that competition law was to be reserved for Westminster. It would accordingly
988
apparently follow that anyone who was in the least bit interested in where the division of future legislative or executive power lay would be able to set aside this Bill, once it is a statute, with no concern that any part of it would ever be within the powers of the Scottish parliament.
I believe—it is one of the matters with which we shall have to concern ourselves—that that happy hope will never be realised. There are extremely complicated provisions. I understand now that we shall not see the proposed Bill until at least Christmas and probably later. If the Chief Whip wishes to intervene I shall of course, as always, give way to someone of such a high and mighty office in Government. However, even if he cannot give us that information, we shall still wish to scrutinise these matters whenever the Bill arrives.
I can think of a number of matters where there will be political tensions over what is contained within the Bill. I shall not go over again the issues of community pharmacies. But if community pharmacies are an issue of some political sensitivity in England, they are an issue of keen sensitivity in Scotland and, from what was said earlier, in Wales. That is the kind of issue on which we shall have concern as regards the Scottish parliament. In dealing with such matters as small agreements, there will also be some keen interest in knowing whether the Scottish parliament will have powers. I turn at random to Clause 63(7)(a) and find a provision which relates to what is or is not required of an individual appearing before the Court of Session.
I wish briefly to focus on one issue. It is the issue of warrants. As noble Lords know, if there is one aspect of the Bill that has caused us concern, it is the warrants that are allowed for under its provisions.
Under one of the provisions, where warrants are granted in Scotland, they are to be granted by a sheriff. If we have indicated at this time that in the way the warrants have been put together they are far too extensive in their terms, it might be hoped that, even if there is a lack of libertarian zeal in this present Government, at one point a Scottish parliament might assert the right to restrict the powers of those who enter domestic premises or empty premises and so on. If we are dealing with warrants, that would undoubtedly fall within the power of a Scottish parliament—giving the Scottish parliament the right to restrict the circumstances in which a warrant is to be exercised.
If I am wrong in that, and if the circumstances in which warrants are granted and the basis on which they are issued are not to fall in future within the remit of the Scottish parliament, it is incumbent on the Government to make that clear at the earliest possible stage. Otherwise, if their genuine intention in this constitutional change is to strengthen the Union rather than weaken it, they should at least make clear where they believe powers are to lie.
Otherwise, I keenly fear that if the Scottish parliament believes it has a wide range of powers, and then subsequently discovers that it has no right to change or influence what is going on, far from there being a strengthening of our Union, the consequence of it all will be that separation will become a matter of

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inevitability. That seems to be the most obvious example in the Bill, in an area of policy which the White Paper quite specifically spells out as a matter to be reserved for Westminster. Nevertheless, even a brief examination of the Bill's provisions reveals that there is one key area in which there a real prospect of conflict with the proposed Scottish parliament.
I propose to leave the matter there for now. However, there are other aspects of the Bill—what falls within the remit of a Scottish parliament and what falls within the remit of Westminster—which I have no doubt could be explored at great length. I hope that the Government appreciate that we want these matters to be clearly and carefully analysed. However, the Chief Whip may go home to his bed now. I promise him that under no circumstances do I have any intention of dividing the House. I beg to move.
Lord Simon of Highbury: At this very late hour I do not wish to risk even a hint of division between two people who over three days of debate in Committee have spoken in a spirit of co-operation in an attempt to bring a good Bill before the House. I should like to thank the noble and learned Lord, Lord Fraser, and his team, and also the noble Viscount, Lord Falkland, and the noble Lords, Lord Ezra and Lord McNally. We have greatly appreciated the spirit in which the whole of the Bill has been debated and the way in which the arguments have been conducted. There is more to come, but we have enjoyed our opportunity for three days of debate.
Having laid all the roses on this large table, here come the thorns. I can appreciate the sentiment behind the noble and learned Lord's amendment. At this late hour, I think that there only two points to be made. I have always felt that one of the great benefits of the way that our countries within these islands have operated is that they have had a single market. I have often heard from the other side of the Chamber that even in Scotland they regard Europe as a single market in a more progressive manner than some of us south of the Border have been given to understand of late. I believe both of us understand that the impact of the Bill should be felt across Border, in toto, to enhance the qualities of the single market in these islands and indeed to enhance the qualities of the single market with our European
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partners. I know that that does not answer the questions of where all the legal niceties lie between who will and who will not issue warrants for going into what premises, and I am sure that we shall return to that point.
To finish on a high note, I celebrate our single market and its improvement and I celebrate our European market, in which I hope we shall play a greater part. With these fine thoughts to send us to bed, I hope that the noble and learned Lord will see fit on this occasion to withdraw the amendment.
Lord Fraser of Carmyllie: I shall certainly do so. The noble Lord will undoubtedly have recognised that my amendment was a device. Far from wishing this Bill not to extend to Scotland, I wish almost all legislation passed by Westminster in the years ahead to extend to Scotland without interruption by some small puppet organisation in Edinburgh.
If it is not seen by the noble Lord as being paradoxical, I join with him in celebrating what I regard as being the most successful political and monetary union in the history of the world. With those words, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 72 agreed to.
In the Title:
Lord Haskel Lord Haskel moved Amendment No. 277A:
Line 5, leave out from ("information") to the first ("to") in line 7 and insert ("which may be required in connection with investigations under that Act;").
On Question, amendment agreed to.
Title, as amended, agreed to.
House resumed: Bill reported with amendments.
Lord Carter: In moving the adjournment of the House, may I, as Chief Whip, congratulate noble Lords on all sides of the House on the extremely efficient and expeditious way in which they have conducted the Committee stage of the Bill, particularly today, with 43 groups of amendments, interrupted by a long government Statement. It is an example which I shall draw to the attention of other noble Lords on other Bills.
House adjourned at twenty-two minutes past eleven o'clock.