Lords Sitting of 15 October 2002

Preamble
The House met at half-past two of the clock: The CHAIRMAN OF COMMITTEES on the Woolsack.
Prayers—Read by the Lord Bishop of St Albans.

Married Women's Pensions
Baroness Greengross>Baroness Greengross> asked Her Majesty's Government:
What plans they have to review the impact on women of the married women's reduced rate national insurance contribution.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Hollis of Heigham): My Lords, the number of married women on the reduced rate stamp, which was 3,500,000 in 1978 and is now 80,000, will be 3,000 in 2010. We have no plans at this stage to review the rates.
Baroness Greengross: My Lords, I thank the Minister for that Answer, with which I have some sympathy, despite my former role with Age Concern. I think the Minister knows that. No one paying reduced contributions could expect to get the same benefits as people who paid the full stamp. It is not like the scandal that affected inherited SERPS in 1999–2000. However, many women probably did not fully understand the rules or their impact. After all, who does? Even the noble Lord, Lord Lawson of Blaby, a former Chancellor of the Exchequer, admitted that pensions were extremely complicated.
Is there any possibility that women adversely affected by ill informed decisions made prior to 1977 will be allowed to buy back their missing contribution record or, at least, part of it, given the 25 per cent rule? That would go some way to addressing their concerns and help with their problems.
Baroness Hollis of Heigham: My Lords, the noble Baroness has a proud record, particularly on issues such as inherited SERPS. However, I cannot help her on this issue. This is a pay-as-you-go scheme. Most married women who continued to enjoy the reduced stamp after 1977–78 did well financially out of it. Obviously, that was not the case for some individuals. To recalculate now on a PAYE basis and decide whether there were adverse consequences would be difficult practically, and I am not sure that it would be fair. It would be like saying that a married woman who opted to pay the full stamp in 1978 but who, over the next 25 years, had low or intermittent earnings—with the result that her state pension was no higher than she would have got on her husband's contribution—should also be allowed to revisit her choice. We cannot do that.
Baroness Turner of Camden: My Lords, is my noble friend the Minister aware that there are anomalies in the situation? For example, a woman can qualify for a pension on her husband's contributions. However, if she reaches 60 before he reaches 65, she will have no pension, as she must wait until he is 65. That leaves women with no pension at all.
Baroness Hollis of Heigham: My Lords, my noble friend is right. As your Lordships will understand, the problem is that the reduced married women's stamp dates back to 1948 when the presumption was that women were dependent on their husband's earnings and on his pension. The assumption behind the situation described by my noble friend is that, if the husband is under 65, he will still be in work and his wife will enjoy the support of his wages.
Earl Russell: My Lords, can the Minister say what benefits, if any, were received by women who paid the reduced contribution after 1977? What was done to explain the situation after 1977 to women? Does the Minister accept that it is no excuse for not remedying an injustice to say that it is only a little one?
Baroness Hollis of Heigham: My Lords, I am not saying that it is an injustice. Most women who took the reduced married women's stamp saved thousands of pounds—something like £18,000 for someone on mean average earnings over that time. If such a sum had been invested, it would have produced an alternative return.
The noble Earl also asked what women knew. I have a copy of the leaflet that I had when I chose to continue with the reduced married women's stamp. It says, in bold type:
"The contribution choice… Why your choice is important".
It goes on to say:
"The choice you make about paying contributions can effect your future entitlement to benefits such as maternity allowance, sickness, invalidity and unemployment benefits and retirement pension. This is explained in paragraphs 12–21 of this leaflet and you should read these carefully before you make up your mind".
That is in the simplest conceivable English. It certainly allowed me to make an informed choice at the time.
The noble Earl's first question was about the benefits enjoyed by people who took the married women's reduced stamp. They receive statutory sick pay, statutory maternity pay, industrial injuries benefit and the 60 per cent of the pension that goes to the wife of a man who makes a full national insurance contribution.
Baroness Billingham: My Lords, I was one of the people in the predicament of having to opt back in. Does the Minister agree that there was enormous publicity about the perils of not re-entering the full system, not only in leaflets, but in media of every description—newspapers, radio and so on? None of us was left in any doubt about the outcome.
Baroness Hollis of Heigham: My Lords, I am grateful to my noble friend for making that point. Women first entering the labour market in the 1960s and 1970s had to sign to elect to receive the reduced stamp; secondly, in 1977–78, they had all the information described by my noble friend; thirdly, they received further information in 1989; and, fourthly, they were given further information in 2000 associated with the changes in the lower earnings limit. So, on four occasions, married women paying the reduced stamp received fairly straightforward—I do not say that it was brilliant—accessible information on which to make an informed choice.

Qualifications and Curriculum Authority
2.43 p.m.
Lord Naseby: I beg leave to ask the Question standing in my name on the Order Paper. In doing so, I declare an interest as chairman of governors of Bedford School.
The Question was as follows:
To ask Her Majesty's Government whether, in the light of the difficulties over A-level results, there have been any changes in the senior management or board of the Qualifications and Curriculum Authority.
The Parliamentary Under-Secretary of State, Department for Education and Skills (Baroness Ashton of Upholland): My Lords, in her Statement of 27th September, the Secretary of State for Education and Skills announced that she had removed Sir William Stubbs from his post as chairman of the QCA. Since then, there have been no further changes in the membership of the senior management or the board as a consequence of the difficulties over A-level results.
Lord Naseby: My Lords, should not the whole educational team of Ministers resign—in recognition of the trauma, heart-searching and career stunting that this fiasco has caused for over 90,000 young people? Is not the real truth that it was Ministers' insistence on a new, unproven and untrialed examination that caused the fiasco? Rather than "Education, education, education", ought not the epitaph of this Government in this area to be: "Failure, failure, failure"?
Baroness Ashton of Upholland: My Lords, I do not recognise what the noble Lord has said. My answer is simply: no, they should not resign.
Baroness Blatch: My Lords, will the Minister explain to the House on what grounds Sir William Stubbs was sacked?
Baroness Ashton of Upholland: My Lords, my right honourable friend the Secretary of State, in looking at what needed to be done to restore confidence in the A-level system, believed that it was appropriate to dismiss Sir William Stubbs.
Baroness Walmsley: My Lords, will the Minister confirm that during last summer a senior civil servant was acting chief executive of the QCA and that, currently, 22 per cent of DfES civil servants are seconded to other organisations? Will she accept that under such circumstances it is inappropriate to claim that the QCA is completely independent? Does not the whole thing smack of micro-management of the system by her department? Will the Minister agree with me that, for the sake of future A-level students, the QCA should be seen to be entirely independent?
Baroness Ashton of Upholland: My Lords, in answering Questions in this House last week, I made it clear that the QCA is an independent statutory body. No doubt noble Lords will look forward to the Statement that I shall repeat later today, when we shall discuss the issues that have arisen. It is common practice for secondments to take place both from the DfES and to the DfES. We believe—and previous governments employed this practice—that it is the best way of ensuring that we have the best possible knowledge. Mike Tomlinson's review was quite clear: there has not been government interference by any Minister.
Lord Pilkington of Oxenford: My Lords, is the Minister confident that her officials and experts can produce an examination system—designed to deal with about 20 per cent of the ability range, now designed to deal with 50 per cent of the ability range—that will not give rise to the anomalies produced by the present system?
Baroness Ashton of Upholland: My Lords, I do not believe that the system that the noble Lord is looking for would produce the anomalies that he describes in these circumstances—the very particular circumstances, as the noble Lord will be aware from Mike Tomlinson's work, which arose in this case. It is the desire of government to make sure that students who are able to go to university have the opportunity to do so. We believe that it is important that students are given those opportunities. It is for the health and benefit not only of the students but of the economic life of this country.
Earl Russell: My Lords, what leads the Government to suppose that academic standards in A-levels or anywhere else are a matter within their competence to judge?
Baroness Ashton of Upholland: My Lords, the Government do not necessarily believe that. We have academic institutions whose job it is to judge the academic standards of our students. I think that noble

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Lords will join me in supporting and congratulating the students who this year have done so well in their academic life.
Lord Rotherwick: My Lords, I, like many other parents, have children who are about to enter upon the A-level curriculum. What confident actions will the Government take to ensure that those students who are about to embark on a two-year preparation for an examination will not undergo the same fiasco as that suffered by students this year?
Baroness Ashton of Upholland: My Lords, Mike Tomlinson is continuing his work to ensure that we address the issue of standards for next year. In addition, Ken Boston has announced that he is setting up a task force. I have great confidence that, between the work of these two eminent gentlemen, we shall have in place a robust system in which we can all have the sense of security that the noble Lord has every right to expect for his children.
Lord King of Bridgwater: My Lords, does the Minister accept that many of us find it difficult to understand why Sir William Stubbs was dismissed before the Tomlinson inquiry had reported—the full consequences of which are apparent only today? While the Secretary of State seems to have acted speedily over that, she seems to have been extremely slow to take action over the clearance of staff for recruitment. There was considerable delay in reaching the obvious sensible decision to leave the matter to head teachers if they took on staff as yet uncleared. What is the number of staff still awaiting appointment to schools who have not yet been cleared?
Baroness Ashton of Upholland: My Lords, the noble Lord will understand that, as I am answering questions on the QCA, I do not have the precise figures. I shall be delighted to write to him with the exact figures for those still awaiting clearance. We were dealing with two entirely different situations. The noble Lord will recognise that, in the case of schools that were waiting for clearance, we took the decision that in the interests of all the children, we would allow those staff to be in schools. But that is always in the context of child protection, which, I am sure, is paramount to all noble Lords. I have already stressed that my right honourable friend took the decision that she did on Sir William Stubbs because she believed that, as there had been a loss of confidence, it was appropriate to make sure that it was restored. On that basis she dismissed him.
Baroness Thomas of Walliswood: My Lords, let us suppose that schools continue to produce more and more highly successful A-level students. Does the Minister anticipate any difficulty in reconciling the number of students who get very good A-level results with the number of funded places available at universities?
Baroness Ashton of Upholland: My Lords, it is a problem that I would look forward to and relish, and
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it demonstrates the ability of our young people. We work very closely with Universities UK and universities in general to address the issues. The noble Baroness will be aware that many discussions on higher education are ongoing in order to ensure that we can accommodate students in a variety of ways, at different institutions and on different degree-level and other courses that they wish to take.
Lord Roberts of Conwy: My Lords, can the noble Baroness give an assurance that the Government will bear any additional costs incurred by universities as a result of revised grades and the movement of students between universities or to different subjects?
Baroness Ashton of Upholland: My Lords, I shall say more about that in the Statement on A-level results later today. However, I assure the noble Lord that we are working with universities to ensure that no student suffers financial hardship and that every student goes to university. The Government will make sure that the appropriate finances are available.
Lord Brooke of Sutton Mandeville: My Lords, resignation, which the Minister ruled out, is a subjective matter. But, what is her response to the point by my noble friend Lord Naseby that the introduction of the new examination system was flawed in its conduct?
Baroness Ashton of Upholland: My Lords, as I said in your Lordships' House last week, there is evidence that perhaps we should have looked more carefully at the piloting of the A2. We are looking at what we can do to make sure that we learn from that. My right honourable friend has been very clear about accepting responsibilities and about learning from this. I shall leave the matter there.

Theft: Law Enforcement
2.53 p.m.
Earl Attlee Earl Attlee asked Her Majesty's Government:
Whether the police have any discretion in applying the laws relating to theft; particularly in relation to the handling and receipt of stolen goods.
The Minister of State, Home Office (Lord Falconer of Thoroton): My Lords, the enforcement of the law is an operational matter for chief constables. A police officer will need to interpret and assess the particular circumstances of any one incident and apply his or her discretion in considering whether an offence has been committed and what action to take.
Earl Attlee: My Lords, I thank the Minister for that reply. Is he satisfied by the ability of the police to recover stolen vehicles and equipment that they know to be held at a travellers' encampment?
Lord Falconer of Thoroton: My Lords, if a vehicle is identifiably stolen, the police have entirely adequate powers to go in and recover that material, subject to the proper steps being taken. As to whether there are difficulties in relation to particular encampments of an operational sort, it is plainly a matter for individual chief constables in each police authority area to determine the appropriate steps, but they certainly have the powers to do so.
Lord Bradshaw: My Lords, does the Minister agree that, although the police have powers, in the counties around London in particular they do not have the manpower to follow up very many cases of theft and misappropriation? What is being done in Surrey, Thames Valley and Hertfordshire to overcome this great shortage of manpower as people transfer to other forces, including the Metropolitan Police? What is being done about the recruitment and payment of Specials, which the Government have been considering for as long as they have been in office?
Lord Falconer of Thoroton: My Lords, on the first question about the size of the police force, as the noble Lord, Lord Bradshaw, knows, the number of operational members of the police force is the highest that it has been since 1921 at just under 130,000. As the noble Lord also knows, we have committed ourselves to a further 2,500, which obviously will increase the figure yet further. The noble Lord will also know that we have committed ourselves to funding community support officers to whom the police will be able to leave certain tasks so that they can concentrate on mainstream policing activity. The noble Lord will also know that local authorities are funding significant numbers of street wardens, which will also help to reduce the burden on the police. Those are the steps that we are taking. It is plainly right that individual police constables must prioritise what goes on in their area. The Government are providing them with the support, money and manpower that they need to do the best job possible.
Lord Waddington: My Lords, can the Minister assure us that the police do not treat travellers' encampments as no-go areas, that it would be wrong for them to do so, and that if it is necessary to enter such encampments in furtherance of detecting crime they do not hesitate to do so?
Lord Falconer of Thoroton: My Lords, of course there are no no-go areas for law enforcement in this country. As to how individual encampments are approached and treated in the context of individual crimes, I must make it clear that it is a matter for individual chief constables to determine how best to deal with the matter. It is not for central Government to give direction in that respect.
Viscount Bridgeman: My Lords, is the Minister aware that the Construction Plant-hire Association estimates that thefts of plant throughout the United Kingdom amount to about £600 million per annum,
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that frequently these are the work of organised crime through the theft to order of high-value equipment, and that the police recover only around 10 per cent of it? Does he agree with the public perception, as outlined by my noble friends Lord Attlee and Lord Waddington, that there is a lack of motivation by certain police forces to pursue this type of stolen equipment? Will he encourage chief officers to devote more resources to addressing this substantial problem?
Lord Falconer of Thoroton: My Lords, I was not aware of the precise figure until the noble Viscount said it. I am aware of the problem of plant theft. In different police force areas it is for the chief constable to determine priorities and how best to deploy manpower. The problem is serious, and its seriousness will vary between police areas. Again, I emphasise that it is for chief constables to determine their priorities.
Lord Marlesford: My Lords, if the Government can lay down priorities for street crime, why cannot they do so for this sort of crime?
Lord Falconer of Thoroton: My Lords, in relation to street crime the Government identified that there was a significant increase in that type of crime and brought together those, including chief constables, who could best advise on how to deal with it. That led to greater co-operation. In the 10 areas where street crime was at its worst there was a 16 per cent drop, comparing the six months to the end of September 2002 with the previous parallel six-month period.
Lord Elton: My Lords, the Minister introduced the figures for 1921, stating that we have the same number of police as we had in 1921. What was the population of this country in 1921, and what is it now?
Lord Falconer of Thoroton: My Lords, the number in the police force is the highest since 1921. Unfortunately, I do not have the population figures available. But I anticipate from the wily way in which the question was asked that the population might have been lower then.
Lord McNally: My Lords, does the Minister believe that sufficient powers are now in place and that there is sufficient co-operation from banks, solicitors, accountants and other professions to provide a necessary response to enable the police to pursue money laundering and other white-collar crime involving the handling of stolen goods?
Lord Falconer of Thoroton: My Lords, in the Proceeds of Crime Act that was passed in the last Session, significant powers were given. We need to look to see how those powers work out before we answer the question of whether more powers are required. It is an incredibly important area of law enforcement that needs real concentration.

Transport Strategy in London
3 p.m.
Lord Peyton of Yeovil Lord Peyton of Yeovil asked Her Majesty's Government:
What recent discussions they have had with the Mayor of London concerning his proposals for the movement of both people and vehicles in the area within his control.
Lord McIntosh of Haringey: My Lords, the proposals of the Mayor of London for the movement of both people and vehicles are his responsibility, not the Government's. However, Ministers have regular meetings with the Mayor at which a wide range of transport matters are discussed. The most recent of those was between the Secretary of State and the Mayor on 26th September.
Lord Peyton of Yeovil: My Lords, I would very much like to be present at one of those meetings. Is the Minister aware that there is general surprise and disappointment that the warmth and intimacy which one would expect in relationships between Ministers and the Mayor of London seem somehow to have evaporated? Is he also aware that the present operations of the Mayor on the roads of London have had the remarkable result of increasing the congestion while at the same time the traffic has been diminishing? Not everybody could do that.
Lord McIntosh of Haringey: My Lords, I shall see whether I can obtain an invitation for the noble Lord, Lord Peyton, to attend the next meeting. There are of course public meetings in which the Mayor is involved and I am sure that he would be happy to invite the noble Lord to them.
Yes, I am aware because I have read today's Evening Standard and I admire the noble Lord's self-publicity in advance of his Question. Of course these matters are serious, but they are devolved to the administration of London. I do not believe that the noble Lord, Lord Peyton, or anyone else would wish this House to become an urban district council.
Lord Winston: My Lords, is the Minister aware of evidence regarding changes to the phasing of traffic lights in London? If so, under whose authority was that done? Is he also aware that the current congestion in London has caused a huge amount of extra energy to be wasted in the form of spent fuel; a vast amount of wasted man-hours at work because people are unable to travel to their workplace; and huge pollution of London's environment?
Lord McIntosh of Haringey: My Lords, the phasing of traffic lights is a matter for the Mayor of London. I understand that he is working within guidelines, which have been accepted for many years, on the balance
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between pedestrians and vehicles. Of course, my noble friend's remaining comments will be communicated to the Mayor, as always.
Lord Bowness: My Lords, does the Minister agree that many transport policies in Greater London have an impact on areas outside? If so, does he agree that the Greater London Authority Act gives the Secretary of State power, where the transport strategy is inconsistent with national policies and the inconsistency is detrimental to areas outside Greater London, to direct the Mayor to make revisions to his transport policies? It is hard to believe that the state of transport in London is consistent with any government objectives and it certainly affects areas outside Greater London. What action is the Secretary of State proposing to take under that section?
Lord McIntosh of Haringey: My Lords, I agree with the noble Lord, Lord Bowness, about the provisions of the Greater London Authority Act. These matters are discussed between Ministers and the Mayor when they meet and they were discussed by the Secretary of State when he met Ken Livingstone and Bob Kiley on 26th September. I do not accept that we are in a position in which the "reserve powers" in the Act need to be invoked.
Lord Richard: My Lords, did I understand my noble friend to say that as regards traffic lights the Mayor is operating within well recognised guidelines? If so, and if that is what the Mayor has told the Government, my experience of driving around London is precisely the opposite. I recently found myself at a junction with the Vauxhall Bridge Road and Rochester Row where we had five seconds—five; I counted them—to get across Vauxhall Bridge Road. It was not that the traffic was moving down that road; it was stationary!
If and when these meetings take place, will my noble friend take back to the Mayor the thought that the obviously intentional way in which the congestion has been caused to London is irritating many normal, law-abiding citizens? He has gone over the top and he ought to be told so.
Lord McIntosh of Haringey: My Lords, I understand the temptation which noble Lords have to intervene in matters which have been devolved to the government of London. I share that temptation—I was chairman of the transport and planning central area board of the GLC in 1976 and I have my views, which have been boiling up inside me for 25 years. But I believe that we ought to behave as a second Chamber of Parliament and not as an urban district council. I will communicate my noble friend's views to the Mayor.
Lord Addington: My Lords, the Government's plans suggest that 20 major towns and cities will introduce congestion charges. Many of them are awaiting the

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results of London's introduction. Are the Government still committed to the principle of congestion charges as a way of controlling traffic?
Lord McIntosh of Haringey: My Lords, yes, the Government have always been supportive of congestion charges and we have been supportive of the plans for congestion charges put forward by the Mayor of London. That matter was discussed with the Secretary of State on 26th September.
Lord Lloyd-Webber: My Lords, I must—
Viscount Astor: My Lords, perhaps I may—
The Lord Privy Seal (Lord Williams of Mostyn): My Lords, the noble Lord, Lord Lloyd-Webber, has been trying to ask a question for some time.
Lord Lloyd-Webber: My Lords, I must declare an interest in that I am co-owner of 13 West End theatres. I want to bring to your Lordships' attention the mood of despair that exists in the West End, with St Martin's Lane and Charing Cross Road closed southbound and the chaos that that is inducing.
Yesterday I had lunch with the coach operators who bring people to West End theatres and learnt that several of them have permanently abandoned using London as a theatre destination. The traffic and drug problems are rendering London a no-go area for theatre-goers. Will the Government urgently address the health of London as a major capital city and world destination?
Lord McIntosh of Haringey: My Lords, the noble Lord speaks with great authority and his views are taken seriously. If he would care to act as an intermediary for the coach operators and communicate with the Government and the Mayor, I have no doubt that those views will be taken extremely seriously.

Business of the House
3.7 p.m.
Lord Grocott: My Lords, with the leave of the House, three Statements will be repeated from another place today. The first, on Bali, will be repeated by my noble and learned friend the Leader of the House at a convenient time after 3.30 p.m. The other two will be repeated at a convenient time after 6.30 p.m. The second Statement, on Northern Ireland, will be repeated by my noble and learned friend the Leader of the House, and the third Statement, on A-levels, will be repeated by my noble friend Lady Ashton.
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It may be for the convenience of the House if I take this opportunity to mention that the date of the State Opening is to be Wednesday 13th November.

Borough Freedom (Family Succession) Bill [H.L.]
Read a third time, and passed, and sent to the Commons.

Enterprise Bill
3.9 p.m.
Report received.
Clause 1 [The Office of Fair Trading]:
Lord Hunt of Wirral Lord Hunt of Wirral moved Amendment No. 1:
Page 1, line 5, after "corporate" insert "with both a chairman and a chief executive"
The noble Lord said: My Lords, we return to a subject which we have debated on many occasions; namely, good corporate governance. I want to speak to a number of amendments which are set out on the Marshalled List. Amendment No. 1, which is at page 1, line 5 of the Enterprise Bill, inserts after the word "corporate" the words "with both a chairman and a chief executive". Clause 1(1) will therefore read as follows:
"There shall be a body corporate with both a chairman and a chief executive to be known as the Office of Fair Trading (in this Act referred to as 'the OFT')".
Amendment No. 2 seeks to insert at the end of Clause 1 a new subsection (4) which states:
"In managing its affairs the OFT must have regard to the generally accepted principles of good corporate governance".
The noble Lord, Lord McIntosh of Haringey, may recall that he moved a similar amendment to the Financial Services and Markets Bill which was incorporated into that legislation.
Amendment No. 3 would insert a new subsection (5) to the effect that,
"The appointments of the chairman and the chief executive shall not take effect until they are confirmed by the House of Commons Treasury Select Committee following a public hearing".
That is another issue which we debated in relation to the Financial Services and Markets Bill. That debate was an opportunity for the Minister to outline the way in which the appointments were to be made—to which I shall return in a moment. Although the issue of whether the House of Commons Treasury Select Committee will confirm the appointments is of course a matter for the other place, as the issue has arisen previously, I make no apologies for mentioning it again.
Amendments Nos. 4 and 5 would insert the words "a chief executive" and "and the chief executive" on page 195, lines 5 and 7. I shall not go in detail into the remaining amendments in this group. Suffice it to say that they insert the words "the chief executive" after

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the word "chairman" where it appears on page 195, with the exception of Amendment No. 13, which would delete the word "either" and insert "any".
I hope that I have therefore explained this rather extensive group of amendments. This group may be large in number, but it is in effect arguing the case for good corporate governance.
I recall that when we debated this issue before, we had a look at the Cadbury report. This is a good opportunity to remind ourselves of that groundbreaking report which set out a number of aspects of corporate governance that have since been adopted almost completely. I think that the Cadbury report did a great deal of good in setting out some of the basic principles of good corporate governance. Paragraph 4.7 of the report, on page 21, addresses the whole issue of the chairman and envisages the chairman's role as follows. It states:
"The chairman's role in securing good corporate governance is crucial. Chairmen are primarily responsible for the working of the board, for its balance of membership subject to board and shareholders' approval, for ensuring that all relevant issues are on the agenda, and for ensuring that all directors, executive and non-executive alike, are enabled and encouraged to play their full part in its activities".
At paragraph 4.9, the report continues:
"Given the importance and particular nature of the chairman's role, it should in principle be separate from that of the chief executive. If the two roles are combined in one person, it represents a considerable concentration of power".
When we last debated the Cadbury report, at the Committee stage of the Financial Services and Markets Bill, I recall that the noble Lord, Lord McIntosh of Haringey, said:
"I doubt whether they"—
the Cadbury rules—
"are the most recent thinking on current good practice".—[Official Report, 16/3/00; col. 1717.]
As that was an interesting observation, I have turned to the Hampel report, which also dealt with the chairman and chief executive, in 1995.
The Hampel report was established to review the Cadbury code. On page 28 of the report, however, the chairman's job is described in exactly the same terms as Cadbury had described them. It states:
"The chief executive officer's task is to run the business and to implement the policies and strategies adopted by the board. There are thus two distinct roles".
The report went on to say that it endorses the Cadbury description.
At paragraph 3.17, the Hampel report continues:
"Cadbury recommended that the roles of chairman and chief executive officer should in principle be separate… We agree with Cadbury's recommendation and reasoning, and we also note that in the largest companies there may be two full-time jobs".
Cadbury, of course, spoke of a non-executive chairman and not a full-time chairman.
"Our view", said Hampel,
"is that, other things being equal, the roles of chairman and chief executive officer are better kept separate, in reality as well as in name. Where the roles are combined, the onus should be on the board to explain and justify the fact.
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Cadbury also recommended that where the roles of chairman and chief executive officer were combined, there should be a strong and independent element on the board, with a recognised senior member…But even where the roles of chairman and chief executive officer are separated, we see a need for vigorously independent non-executive directors".
So that was Hampel. In order to persuade the Minister that this is the bang-up-to-date view, I wanted to submit two further pieces of evidence. The Chartered Institute of Management Accountants produced a report—a guide to corporate governance—in which, on page 9, it made it absolutely clear that it endorses that position on chairman and chief executive. It states:
"The chairman of the board is responsible for the efficient running of the board… He… is therefore responsible for ensuring that the… Code's principles and provisions are followed. These require that there should be a clear division of responsibility at the head of the company so that no one individual has unfettered powers of decision".
On page 10, in describing the chief executive, the report states:
"The chief executive is responsible for the efficient running of the company's business. He has, therefore, quite a different role from that of the chairman of the board. The Combined Code states that 'a decision to combine the posts of chairman and chief executive officer in one person should be publicly justified'".
So we come to today.
The second piece of evidence is from the National Association of Pension Funds, which only last week produced a report in which it criticised the failure of a number of companies to observe the code. In an article in the Evening Standard entitled, "Drop those dual roles at the top says NAPF", it criticised companies which were still seeking to combine the roles of chairman and chief executive here, a decade after corporate governance pioneer Sir Adrian Cadbury criticised the practice. NAPF is described as the City's most powerful shareholder group, and it made it clear that it regarded that as unacceptable behaviour.
The Minister may seeks once again to persuade us that the new Office of Fair Trading is unique in the world of corporate governance or—I refer to subsection (1) of Clause 1—in the world of bodies corporate. It is to be a body corporate. Therefore, I believe that the Government should pay more heed to the principles of good corporate governance.
Some would say that the principles of control freakery run so deep in this Government and in the institutions they create that that could constitute an explanation. However, it would be a brave Minister who would justify the matter in such terms before the House on Report. I hope, therefore, that the Minister might consider—if he wishes to intervene I may be able to cut short an otherwise long explanation in dealing with the other amendments—saying at the Dispatch Box, "Don't worry, we will observe the principles of good corporate governance and have a chairman, and a chief executive". However, he shows no sign of leaping to his feet. Therefore, I shall now say why I thought that he would not do so.
We have the advantage of reading in the Sunday press an advertisement for the new Director-General of Fair Trading which stresses what an important job

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he or she will do and the fact that he will be given many more powers than the existing Director-General of Fair Trading. The advertisement seeks to attract non-executive directors to what is termed "the strategic board". As I understand it, that is the only board of the Office of Fair Trading but perhaps the Minister will explain the word "strategic". However, it certainly spells out the importance of that body.
In seeking to persuade people to apply, the advertisement states that the OFT has wide-ranging enforcement powers and will in future carry out some cartel investigations under the criminal law regime. The new director-general will have more wide-ranging powers than the existing director-general. But where is the strong independent element? The advertisement is for non-executive directors. What kind of commitment will they give? Will it be for most of the week or most of the month? No, non-executive directors will need to commit 30 days a year. If one divides that by 12, it is about two-and-a-half days a month. However, the advertisement states that that commitment will be dependent on their involvement in committee work. So, board members may well not commit as many as 30 days per year if they are involved in various OFT committees.
To compound our concern—this may appear a rather unnecessarily aggressive comment for this House when we have yet to decide the matter—apparently the Government have already decided not only that the new chairman will also be chief executive but also—as we discussed at earlier stages—that John Vickers, the Director-General of Fair Trading, will be the full-time chairman and the full-time chief executive of the board. But where is the independent element that is so necessary in a board which is to have these wide-ranging powers? The Minister may well come to the Dispatch Box and say, "Ah, we have a similar situation to the Financial Services and Markets Act in that we have someone who will not take the post unless he is chairman and chief executive". That was the argument used with Sir Howard Davies which carried a great deal of weight with the House as we all considerably respect Sir Howard. He has done an outstanding job as chairman and chief executive of the Financial Services Authority.
However, when we debated the then Financial Services and Markets Bill I recall that the Liberal Democrats commented that they detected that although the Government were not prepared to move on the issue at that moment, they were prepared to consider appointing a chairman and a separate chief executive of the Financial Services Authority when Sir Howard Davies retired. I recall that the noble Lord, Lord McIntosh of Haringey, did not seek to contradict that assumption from the Liberal Democrat Benches. Therefore, I hope that during the course of this debate or elsewhere, the Minister will indicate whether that is still the Government's intention.
After having done an outstanding job in setting up the Financial Services Authority, Sir Howard Davies has indicated that he wishes to retire. I challenge the Minister and his ministerial colleagues to consider
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appointing a separate chairman or, if Sir Howard is to remain chairman, a separate chief executive of the Financial Services Authority. I believe that that would be a wise move in any event to enable the overlap from one chief executive to another to be more satisfactorily dealt with, if, indeed, the Government are now persuaded to have two separate posts, as I hope they are. I believe that it would greatly assist the governance of the new Financial Services Authority if it were to have a separate chairman and chief executive.
I return to the new Office of Fair Trading. It seems to fly in the face of all the speeches that were made during the course of the then Financial Services and Markets Bill for the Government to insist that the chairman and chief executive should be the same person. I know John Vickers who has been an exceedingly good director-general, but I am sure—as I believe Sir Howard Davies will have found—that it is very helpful indeed to have a non-executive chairman to assist one in handling the extensive responsibilities not only of the Financial Services Authority but also of the new Office of Fair Trading. It would be a good move if the Government were able to accept the amendments we are discussing.
In conclusion, I hope that the Minister will accept Amendment No. 2 which states that,
"the OFT must have regard to the generally accepted principles of good corporate governance".
I said previously that it is similar to the amendment which the Minister moved—under considerable pressure from these Benches and the Liberal Democrat Benches—at a late stage in the then Financial Services and Markets Bill. We are giving the Government a slightly earlier opportunity to spell out the matter. I hope that they will accept the Cadbury recommendation on chairmen and chief executives, endorsed as it has been not only by Hampel but also Greenbury, Turnbull and various other commentators. Indeed, the consultation paper on company law, which I believe was issued only yesterday or at the weekend, endorsed strongly the code and the principles of good corporate governance. Therefore, I hope that the Minister will accept Amendment No. 2. Under the present principles of control freakery I doubt that the Government will hand over the confirmation of the appointments to the Treasury Select Committee in another place. However, if the Minister wishes to surprise me by indicating acceptance of Amendment No. 3, no one would be more thrilled than this noble Lord. I would be surprised, thrilled and also exceedingly satisfied that I had been able to persuade the Minister how important that would be. I urge the Minister to consider that.
Finally, I hope that the Minister will listen to noble Lords on all sides of the House who seek in some way to entrench in a new and exceedingly powerful body the principles that I have outlined. There is a feeling in the Houses of Parliament and outside them that the question of who regulates the regulators must be addressed. A number of regulators have sprung up. I take full responsibility for the creation of a number of such posts, having been a junior Minister at the Department of Energy and having held various other

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ministerial posts. However, that was at a different stage. Since then, a number of regulators have been appointed. We must now address much more clearly the question of who regulates the regulators. If the principles of good corporate governance are involved, I wish the new Office of Fair Trading well. I beg to move.
3.30 p.m.
Lord Borrie: My Lords, I rise to oppose Amendment No. 1 and the consequential amendments grouped with it.
I need hardly refer to Amendment No. 3 because the noble Lord, Lord Hunt of Wirral, has already indicated that he does not expect it to be agreed to. That is right because it would be wholly undesirable, in this Bill and in relation to this particular post, if a broad change of that kind were made; it would involve making the appointment acceptable to a House of Commons Select Committee although no other appointment would be made on that basis. A much broader discussion across the general world of public appointments is needed before agreeing to that substantial change of principle, which I am sure fascinates all of us. We should consider the example of the United States, where Senate approval is needed. However, to introduce that concept in relation to one official in this country on this one occasion would be very odd; we should discuss the proposal on a much broader basis.
I turn to the main amendment. All of the noble Lord's points related to public limited companies. A discussion of corporate governance has been through all of the splendid committees to which he referred, including Cadbury, Hampel and Turnbull; all of them were concerned with the governance of public limited companies. There is no necessary read-across from the governance of public limited companies to government agencies, whether we are discussing the Office of Fair Trading or others. One must consider what is required of each of them. The noble Lord surely cannot argue that Cadbury, Hampel and the rest of them were thinking of bodies such as the OFT, the Office of Gas and Electricity Markets or the Financial Services Authority when it contemplated the problem of the governance of private and public limited companies.
In any case, the noble Lord completely omitted the point that there is no statutory requirement for public limited companies to have the posts of chairmanship and chief executive in separate hands. That is laid down as a recommendation in the combined code that followed Hampel. I have for some years been a sort of serial non-executive director of various companies and I fully agree with those proposals and with the idea that, normally speaking, companies should have a non-executive chairman and a chief executive and that those posts should be held by different persons. However, there is no statutory requirement, and rightly so. The noble Lord wants to introduce a statutory requirement that, irrespective of the particular needs of the moment—or, for that matter, the longer-term needs of the country in relation to the
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governance of the OFT—there should be a rigid requirement that the posts of chairman and a chief executive should be held by two persons.
The Bill as it stands does not have any rigid requirements to the contrary. It does not require that the posts of chief executive and chairman should be held by one person. The board is described in Schedule 1 and the advertisement for non-executives is part of the process of getting the other members of the board together. The Bill allows for the possibility of those two posts to be held by one person. As the noble Lord, Lord Hunt, accurately pointed out, the Government have indicated that they have it in mind that the first chairman should be not only chairman but also chief executive, and that it should be Mr John Vickers, the current Director-General of Fair Trading. The Bill leaves open the possibility that two persons should hold those two posts, as and when circumstances suggest that that would be better. That flexibility is much more desirable than the rigid requirement for which the noble Lord, Lord Hunt of Wirral, is asking in the amendment; that is, that once the Bill is enacted and without any question, two persons should hold those two separate posts.
Of course there are practical arguments for suggesting that the roles are different. That is shown by examples of the corporate governance of public limited companies. It could be desirable for the chairman to have someone else to take the full burden of administrative and managerial responsibility. There is nothing in the Bill to prevent a deputy from being appointed. The noble Lord will remember that the Minister said in Committee that one or more of the members of the board might be executive members of the board. One of those executives could be a deputy who could be given charge of administrative and managerial responsibilities, and the chairman and chief executive could take the broader role. That seems perfectly sensible.
In order to distinguish the OFT from public limited companies, in relation to which the principles of corporate governance suggest that normally speaking the two roles should be in separate hands, I point out that decision-making under the Bill—we will discuss such matters later—and, for that matter, decision-making under the Competition Act 1998, should be speedy and effective. I believe that the Government have indicated that it is likely that the board will need to delegate to the chairman many executive decisions about mergers and whether there should be an investigation of a particular industry; I support that. I should not like to see diffusion or confusion between two persons of equal authority. One can have a person in charge, of whom it can be said, "the buck stops here", and a deputy, but at this early stage, when the Bill will be beginning its operations, it is desirable, as the Government suggest, that the posts of chief executive and chairman should be held by one person.
Lord Marsh: My Lords, like many noble Lords, I have held a number of chairmanships. I have also held the post of chairman/chief executive and of full-time chairman with a chief executive. Moreover, I held that

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post of chairman with a chief executive in a non-public company. I am strongly of the view that the separation of the two posts should be maintained wherever possible.
The job to which I refer in particular was that of the chairmanship for some six years of the British Railways Board. There was a full-time chairman and a full-time chief executive and both of us would have claimed to be fully occupied, although I am sure that that was not always the view of the staff.
The two posts carry two clearly separate sets of responsibilities. A full-time chairman has a very close relationship with the board. That does not mean that he does not have a relationship with the executives; it means that he does not become involved in the detail of the business. He is basically concerned with strategy and the monitoring of progress. The chief executive has responsibility for the mechanics and motivation of the business. As a chief executive, he will spend his time in the guts of the organisation, ensuring that it is running properly. Of course, he will also be directly responsible to the board, but that is a different responsibility from that of the chairman.
Perhaps I may give a classic example of why I feel so strongly about this issue. Over the years, I have been involved with the removal of four chief executives or chairmen. In each case, the pattern was the same. Two or three of the non-executive directors talked to the chairmen, who then talked to the institutions or, in hard times, the bank. If the chief executive is also the chairman, there is no way that the executive directors will put their head on the line because their future employment will be in the hands of the chief executive. They will have nowhere else to go.
I do not believe that this is a deeply philosophical matter; it is an organisational and structural issue. Large companies do not necessarily have available to them supermen, and I include in that some of the signatories to some of the studies quoted. I believe that, wherever possible, the line should be clear, as should the responsibilities. Key organisations, such as institutions, should be able, for example, to talk freely and in confidence with the chairman without involving the chief executive.
Lord Clinton-Davis: My Lords, the noble Lord referred to the situation that is desirable "wherever possible". What would happen if it were undesirable? Would the noble Lord make an exception? Does he not recognise that in the amendment moved by the noble Lord, Lord Hunt, a chairman and chief executive should be appointed in all cases?
Lord Marsh: My Lords, I am bound to say that I start from the point that I cannot think of a strong argument against the proposition. I have seen it working. There is a long history of companies which do amazingly well, then suddenly a fashionable gladiator of the day begins to emerge and things begin to go wrong. We have seen that occur in some very well-known companies and very often when that situation arises, it does so where the chairman is also
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chief executive. There is no one else to talk to if one is an outsider. I find it difficult to envisage that a serious organisation would find that the ideal way to administer a company.
3.45 p.m.
Lord Razzall: My Lords, I rise in support of the amendment moved by the noble Lord, Lord Hunt. I do not want to repeat the arguments that he made so eloquently and with which I entirely agree.
I turn to the remarks of the noble Lord, Lord Borrie. It is always difficult to argue with someone who has held with such distinction the position—or the equivalent position—that we are discussing. Indeed, I believe it is axiomatic among noble Lords that, were the noble Lord, Lord Borrie, in post and were it possible for him to be in post in perpetuity, the noble Lord, Lord Hunt, would not have tabled the amendment and I would not be supporting it. I do not want that to be taken as a criticism of John Vickers, but of course we are not talking about the experience of personalities. Indeed, we all recognise the enormous contribution that the noble Lord, Lord Borrie, made to the post without a separate chairman being in place.
I agree with part of the noble Lord's fundamental analysis, although I disagree with his conclusion. Those of us who argued this point during both the passage of this Bill and that of the previous Bill establishing the Financial Services Authority may perhaps have made a slight error in trying to establish a cross-over from Cadbury—from corporate governance—into this area. It is obvious that there is no exact parallel between the private sector and what we are discussing today in relation to government bodies and government regulators.
One fundamental reason for the current desired structure for chairmen and chief executives in publicly-owned companies is that the chairmen and non-executive directors have responsibility for the shareholders. In this case, no one is suggesting that there is a cross-over and no one is asking who the shareholders are of the Office of Fair Trading—whether they are the public or the Government. No one is suggesting that and I am not supporting the amendment of the noble Lord, Lord Hunt, in some strange quasi-shareholder way.
A fundamental point was made by the noble Lord, Lord Hunt, and it behoves the Minister to answer it. Let us forget the comparison with Cadbury. I believe that, to an extent, it has been a red herring that has led us down paths that have agitated the noble Lord, Lord Borrie, and we would always want his support on an issue such as this. The fundamental question raised by the noble Lord, Lord Hunt, is that of control of the regulators. Contrary to the concerns that existed in the days when the noble Lord, Lord Borrie, performed this function, a serious concern now exists as to the amount of power given to Sir Howard Davies and the Financial Services Authority and to John Vickers as Director-General of Fair Trading. There is a significant issue here which the Government must address. I hope that when the Minister responds, he

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does not simply demolish the Cadbury argument. Let us take it as accepted that this is not a cross-over from Cadbury into the Office of Fair Trading. I hope that the Minister examines the matter in the context to which I refer; that is, the control of the regulators.
When this issue was discussed in Committee, my noble friend Lord Sharman, who unfortunately cannot be here today, referred to the long-standing fight that the Conservative and Liberal Democrat opposition put up in relation to the creation of the Financial Services Authority. They tried to build into the legislation the split between chairman and chief executive but failed.
In Committee, my noble friend drew your Lordships' attention to the annual report of the Financial Services Authority. The report justified the combining of the titles of chairman and chief executive, now vested in Sir Howard Davies, by reference to the fact that executive responsibility is divided among other members of the board, including those who are managing directors. Contrary to the point that I have just made, the report of the Financial Services Authority went on to say that, as verified by the independent auditors of that body, it was in compliance with the Cadbury code, which recommends the division of those separate responsibilities.
The FSA report recognised the need for a division of those responsibilities. I suspect that the noble Lord, Lord Hunt, is leading the Minister to indicate that as and when Sir Howard Davies stands down, there might be a split in the FSA. The real issue is that to satisfy the Conservative and Liberal Democrat oppositions, the Bill must do that which the FSA requires—divide responsibility among other members of the board. We see no evidence of that in the Bill and if its structure does not provide for responsibility to be divided among other members, we would press the point that there needs to be a separate chairman and chief executive.
Let us accept that Cadbury does not apply—we are not considering a commercial enterprise. Take the BBC as an example. How would your Lordships feel if the suggestion were made in revising the BBC charter that Greg Dyke should run the lot—with no chairman of the governors—and that separation of the roles in a quasi-public body should not exist? Answer: your Lordships would be horrified. That is a fair analogy. When the Minister responds, he should not demolish the Cadbury argument because we can move on from that—but he ought to deal with the BBC argument. What is the difference, on this issue, between the Office of Fair Trading and the BBC?
Lord Hodgson of Astley Abbotts: My Lords, I am surprised that the Government have taken the position they have. We had an interesting debate in the summer, introduced by the noble Lord, Lord Brennan, on the Government Benches, on the subject of corporate governance. The emphasis placed by the Government on the Higgs committee as being the development of corporate governance makes a striking comparison with their proposals.
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It is not just a question of public confidence, which requires that best practice is not just followed but seen to be followed. The noble Lord, Lord Borrie, said that there is not necessarily a read-across to public organisations from PLCs. He is absolutely right—but that does not mean that there cannot be a read-across. On this issue there is a read-across on the arguments powerfully made by the noble Lord, Lord Marsh, about the twin pressures at the top of an organisation or company. They are the strategy, which is the setting of the overarching approach that the organisation or company will follow, and the day-to-day implementation that requires the strategy to be carried through in the detail. Those are not separate roles but strategy and implementation do overlap,
It is easy within an organisation or company for one or the other to predominate. Either the company or organisation becomes obsessed with strategy and the big picture, without thinking about the detail, or the company becomes immersed in the detail and loses sight of the wood for the trees. My noble friend is right that each function needs its own champion. The structure of a board, whether of a company or of the OFT, demands two different people.
It might be unfair to say this but the suggestion originally that the two roles should be split was not in Hampel or Cadbury but in Greenbury. The chairman of that committee was of course the chairman and chief executive of Marks and Spencer. When Mr. Greenbury was asked the reason for making that recommendation when he held both roles, he replied, "This is a special case"—rather like the noble Lord, Lord Borrie, saying that this is a special case. The history of Marks and Spencer may have nothing to do with the combination but it is a warning that the Minister should bear in mind.
Lord Phillips of Sudbury: My Lords, I refer to the much quoted remark by the noble Lord, Lord Borrie, about there being no necessary read-across from a public limited company and a body such as that which we are debating. That is true but the role of the Office of Fair Trading—much expanded by this 500-page Bill—will make it a much more difficult organisation to run than the typical PLC. Its judgments will be highly sensitive, often contentious and always political. If ever there was a need for the extra resource that the twin-officer approach provides, it is here.
For the Minister to suggest that it will be sufficient to have a deputy director is so far wide of the mark that I beg him to reconsider. A deputy is a deputy—an inferior answerable to the person for whom he or she deputises. The post will have to minister to four constituencies—the consumer lobby, the business lobby, the government and political lobby, and the public at large. That will make the job hugely difficult and Amendment No. 1 seems to be common sense.
The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Sainsbury of Turville): My Lords, I much appreciated the survey by the noble Lord, Lord Hunt, of the various reports on corporate governance and the views of the noble Lord,

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Lord Marsh. I totally agree, from my experience in industry, that it is entirely right that there should be a split and that is the best way to run companies.
However, the point made by the noble Lord, Lord Borrie—it was his argument as well as his great distinction in his former post that count on this occasion—was entirely right. There is no direct comparison to be made between how one runs a public limited company and a non-ministerial department. The issues are quite different. The reason for having the split between chairman and chief executive in a public company has to do with its relationship with shareholders, which is clearly different from the relationship between the head of a non-ministerial department and the Government. I agree with the noble Lord, Lord Razzall, that we should forget about that unrealistic comparison and look at the subject on its own merits.
The noble Lord drew an interesting comparison with the BBC but again, that is a completely different situation. The BBC is a big organisation with large operations. Where there are large operations as well as a need for strategic thinking, the model is closer to a public company.
4 p.m.
Lord Marsh: My Lords, I cannot follow the Minister's argument. There are numerous organisations in the public sector where the Government of the day—whatever the rules and regulations say—will wish to speak to someone in the organisation about the way it is managed. All of us who have been Ministers have done that sort of thing. There must be someone to whom Ministers can speak. To talk to the chap in charge of the organisation's management specifically and solely is not always productive and reliable. Over the years, Ministers, in my experience, have talked to the chairman.
Lord Sainsbury of Turville: My Lords, the situation does not parallel that of a public company. It is much easier for a Minister or someone else to discover what is thought about the performance of a public body. The Minister does not need the intermediary of a chairman who can be used to take action on the executive side. I do not believe that the situation is parallel to that or that one can make that comparison. All these situations must be considered on the basis of the particular kind of organisation and the job which it does. In that context I shall deal with the situation here.
Amendments Nos. 1, 4, 5 and 8 to 16 would create a separate post of chief executive of the OFT. At present the Bill provides for a chairman and no fewer than four other members appointed by the Secretary of State, with the Secretary of State consulting the chairman before appointing any other member.
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We have taken account of the OFT's particular circumstances in deciding not to separate the roles of chairman and chief executive at this time. The Secretary of State will appoint John Vickers as chairman for the remainder of his current term as Director-General of Fair Trading, honouring the commitment made to him when he was appointed to that post. John Vickers will work together with the other members of the OFT. Given his position, and to provide for some continuity through this period of great change, I do not think that the OFT should necessarily separate the roles of chairman and chief executive at this time. However, while the Bill does not provide for a separate post of chief executive, nor does it preclude it. If at any time the OFT wished to go down that route, it could create a separate post of chief executive and select the appointee.
That raises another important point. The amendments would create a post of chief executive appointed by the Secretary of State. In contrast, the approach we propose, where the OFT could, if it wished, appoint a separate chief executive in the future, gives the board much more independence and discretion. It is also consistent with the approach taken throughout the Bill and with other regulators. The chief executive of Postcomm is appointed by the chairman, which is a Secretary of State appointment, and the chief executive of Ofcom will be appointed by the board.
Amendment No. 3 would require the appointments of chairman and chief executive to be approved by the Treasury Select Committee. I have already given my reasons for not creating a statutory post of chief executive in the Bill. As regards Select Committee approval of the post of chairman, I would point out that John Vickers was appointed as Director- General of Fair Trading in line with the Nolan principles, and through an open competition. He was appointed on the understanding that in due course he would become the first chairman of the OFT. His successors as chairman will similarly be appointed in accordance with the Nolan principles and after a fair and open competition. In my view giving a Select Committee the power to veto this appointment would serve to undermine the operation of the Nolan procedures. It would make a fair and open competition meaningless.
I would also point out that the OFT will be a non-ministerial government department; a part of the executive branch. It would introduce a wholly new constitutional principle for appointments in government departments to be subject to such scrutiny.
Amendment No. 2 would oblige the OFT to have regard to the generally accepted principles of good corporate governance in its affairs. We discussed that point in Committee. I said then that I would certainly expect the OFT to act in accordance with the principles of good governance insofar as they are relevant to the OFT, but that I considered that a matter of good administration rather than something to go on the face of the Bill. I remain of that view. The OFT is a

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government department, not a public limited company, and many of the principles of good corporate governance are aimed at business practices which do not have an obvious equivalent in government.
The OFT's strategy and activities will be set out publicly in its annual plan and annual report. Under Amendments Nos. 19 and 20, to which we shall come shortly, its draft proposals for the annual plan, which may take the form of a draft plan, will have to be consulted on publicly and laid before Parliament. The annual report must also be laid before Parliament. The combination of the plan and the report will ensure that both Parliament and the public are engaged in the OFT's work; that they can influence it and can monitor its performance. The chairman of the OFT, like the DGFT at present, will be accountable to Parliament through his appearances before Select Committees, especially the Trade and Industry Select Committee and the Public Accounts Select Committee.
The OFT will also publish other reports of its work (Clause 4) to keep the public informed of its activities. Indeed, currently the DGFT's office publishes decisions, advice and a range of materials on its website, which we expect the OFT will continue to do, as well as to run roadshows for consumers and business, and participate in outside events to get its message across.
To conclude on this group of amendments, I emphasise that we are already depersonalising competition and consumer regulation by creating a statutory authority with at least five members. We expect the board to have a majority of non-executives and we are giving the OFT significant independence from Ministers. With the appointment of John Vickers as chairman, we are providing some continuity, which in this case is enormously important. If in time the OFT should decide that it would prefer a separate post of chief executive, it will be able to select one. I believe that that is the best way forward. In the light of those arguments I invite the noble Lord to withdraw the amendment.
Lord Mackay of Clashfern: My Lords, before the noble Lord sits down, can he help as to the power under the Bill by which the Secretary of State has appointed a chief executive?
Lord Sainsbury of Turville: My Lords, if I understand the noble and learned Lord correctly, he is asking which power there is in the Bill?
Lord Mackay of Clashfern: My Lords, yes.
Lord Sainsbury of Turville: My Lords, I cannot answer that exactly, but if it is a matter of concern, I shall write to the noble and learned Lord and set that out.
Lord Hunt of Wirral: My Lords, I am grateful to the Minister for his response. However, I believe that a question raised by the noble Lord, Lord Marsh,
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exposed a paradox in the Government's case. In response to the noble Lord the Minister stated that Ministers do not need an intermediary, as if the OFT was not an independent public body and the Minister would fulfil the role of being a recipient of representations, which would then be communicated to the chief executive or, as is proposed, the chairman and chief executive. I remind the Minister that the advertisement, which presumably he authorised, states clearly that the Office of Fair Trading is an independent public body.
In response to the noble Lord, Lord Razzall, who made an important point about Cadbury, perhaps I may say that my point is not to embrace Cadbury alone. I tried to combine it with the pamphlet on corporate governance produced by the Chartered Institute of Management Accountants (CIMA), which was responsible for the combined code. As the noble Lord, Lord Marsh, and my noble friend Lord Hodgson of Astley Abbotts pointed out, CIMA states that that should apply to all organisations. That is the intrinsic point I sought to make. I recognise that the noble Lord, Lord Borrie, belongs to that exclusive club of existing or past director generals of fair trading. I bow to his knowledge of the organisation. However, I believe that the noble Lord, Lord Razzall, made an important point. We are asking the question, "Who regulates the regulators?" Therefore, this has been an important debate on that subject.
As the noble Lord, Lord Phillips, stated, we are dealing with a highly sensitive, political and controversial body, which will have to make a whole range of decisions. Therefore, I urge the Government to practise what they preach and to have a separate chairman and chief executive. I recognise that the noble Lord, Lord Borrie, stated that they may do so at some stage in the future, and the Minister seemed to urge that. However, we are dealing with today. The Government made clear in an advertisement that the first chairman will also be chief executive. That is why I believe I should test the opinion of the House.
4.9 p.m.
On Question, Whether the said amendment (No.1) shall be agreed to?
Their Lordships divided: Contents, 134; Not-Contents, 123.

Division No. 1

CONTENTS

Aberdare, L.

Bowness, L.

Addington, L.

Bradshaw, L.

Anelay of St Johns, B.

Bridges, L.

Arran, E.

Brooke of Sutton Mandeville, L.

Ashcroft, L.

Brookeborough, V.

Astor of Hever, L.

Buscombe, B.

Attlee, E.

Campbell of Alloway, L.

Avebury, L.

Campbell of Croy, L.

Beaumont of Whitley, L.

Carnegy of Lour, B.

Biffen, L.

Carrington, L.

Blaker, L.

Cavendish of Furness, L.

Blatch, B.

Clement-Jones, L.

Boardman, L.

Coe, L.

717

Colwyn, L.

Newby, L.

Cope of Berkeley, L. [Teller]

Northover, B.

Craig of Radley, L.

O'Cathain, B.

Cuckney, L.

Oakeshott of Seagrove Bay, L.

Dean of Harptree, L.

Oppenheim-Barnes, B.

Denham, L.

Oxfuird, V.

Dholakia, L.

Park of Monmouth, B.

Eccles of Moulton, B.

Peel, E.

Elliott of Morpeth, L.

Perry of Walton, L.

Elton, L.

Phillips of Sudbury, L.

Ezra, L.

Platt of Writtle, B.

Freeman, L.

Plummer of St. Marylebone, L.

Glenarthur, L.

Prior, L.

Goodhart, L.

Rawlings, B.

Gray of Contin, L.

Razzall, L.

Greaves, L.

Reay, L.

Hayhoe, L.

Redesdale, L.

Henley, L.

Renfrew of Kaimsthorn, L.

Higgins, L.

Renton, L.

Hodgson of Astley Abbotts, L.

Roberts of Conwy, L.

Hogg, B.

Rodgers of Quarry Bank, L.

Howe, E.

Rogan, L.

Howe of Aberavon, L.

Roper, L.

Howell of Guildford, L.

Rotherwick, L.

Hunt of Wirral, L.

Russell, E.

Jellicoe, E.

Ryder of Wensum, L.

Jenkin of Roding, L.

Sandwich, E.

Jopling, L.

Scott of Needham Market, B.

Kimball, L.

Seccombe, B.

King of Bridgwater, L.

Selborne, E.

Kingsland, L.

Sharples, B.

Lamont of Lerwick, L.

Shaw of Northstead, L.

Lane of Horsell, L.

Skelmersdale, L.

Liverpool, E.

Smith of Clifton, L.

Livsey of Talgarth, L.

Stevens of Ludgate, L.

Lucas, L.

Stewartby, L.

Luke, L.

Strathclyde, L.

McColl of Dulwich, L.

Swinfen, L.

MacGregor of Pulham Market, L.

Taverne, L.

Taylor of Warwick, L.

Mackay of Clashfern, L.

Thomas of Gwydir, L.

Maclennan of Rogart, L.

Thomas of Walliswood, B.

McNally, L.

Thomson of Monifieth, L.

Maddock, B.

Trefgarne, L.

Mar and Kellie, E. [Teller]

Trumpington, B.

Marlesford, L.

Vinson, L.

Marsh, L.

Waddington, L.

Michie of Gallanach, B.

Wallace of Saltaire, L.

Molyneaux of Killead, L.

Walmsley, B.

Monro of Langholm, L.

Walpole, L.

Mowbray and Stourton, L.

Weatherill, L.

Moynihan, L.

Wigoder, L.

Murton of Lindisfarne, L.

Wilcox, B.

Naseby, L.

Williams of Crosby, B.

NOT-CONTENTS

Acton, L.

Brooks of Tremorfa, L.

Ahmed, L.

Burlison, L.

Allenby of Megiddo, V.

Campbell-Savours, L.

Amos, B.

Carter, L.

Ampthill, L.

Christopher, L.

Andrews, B.

Clarke of Hampstead, L.

Ashton of Upholland, B.

Clinton-Davis, L.

Bach, L.

Cohen of Pimlico, B.

Barnett, L.

Corbett of Castle Vale, L.

Bassam of Brighton, L.

Crawley, B.

Bernstein of Craigweil, L.

David, B.

Billingham, B.

Davies of Oldham, L.

Blease, L.

Desai, L.

Bledisloe, V.

Dixon, L.

Borrie, L.

Donoughue, L.

Bragg, L.

Dormand of Easington, L.

Brooke of Alverthorpe, L.

Elder, L.

Brookman, L.

Erroll, E.

718

Evans of Parkside, L.

McIntosh of Haringey, L. [Teller]

Evans of Temple Guiting, L.

Evans of Watford, L.

MacKenzie of Culkein, L.

Farrington of Ribbleton, B.

Mason of Barnsley, L.

Faulkner of Worcester, L.

Milner of Leeds, L.

Fyfe of Fairfield, L.

Morris of Aberavon, L.

Gale, B.

Morris of Manchester, L.

Gavron, L.

Murray of Epping Forest, L.

Gibson of Market Rasen, B.

Orme, L.

Gladwin of Clee, L.

Ouseley, L.

Golding, B.

Patel, L.

Goldsmith, L.

Patel of Blackburn, L.

Gordon of Strathblane, L.

Paul, L.

Goudie, B.

Pendry, L.

Gould of Potternewton, B.

Peston, L.

Graham of Edmonton, L.

Ponsonby of Shulbrede, L.

Gregson, L.

Prys-Davies, L.

Grenfell, L.

Radice, L.

Grocott, L. [Teller]

Ramsay of Cartvale, B.

Hardy of Wath, L.

Rea, L.

Harrison, L.

Rendell of Babergh, B.

Haskel, L.

Richard, L.

Haskins, L.

Rooker, L.

Hilton of Eggardon, B.

Sainsbury of Turville, L.

Hogg of Cumbernauld, L.

Sandberg, L.

Hollis of Heigham, B.

Sawyer, L.

Hoyle, L.

Serota, B.

Hughes of Woodside, L.

Sheldon, L.

Hunt of Kings Heath, L.

Simon, V.

Islwyn, L.

Smith of Leigh, L.

Jay of Paddington, B.

Stallard, L.

Jeger, B.

Stoddart of Swindon, L.

Jones, L.

Stone of Blackheath, L.

Jordan, L.

Taylor of Blackburn, L.

King of West Bromwich, L.

Tenby, V.

Kirkhill, L.

Thornton, B.

Laird, L.

Tomlinson, L.

Lea of Crondall, L.

Turnberg, L.

Lipsey, L.

Turner of Camden, B.

Lloyd of Berwick, L.

Varley, L.

Lofthouse of Pontefract, L.

Whitty, L.

McCarthy, L.

Williams of Elvel, L.

Macdonald of Tradeston, L.

Williams of Mostyn, L. (Lord Privy Seal)

Williamson of Horton, L.

Woolmer of Leeds, L.

Resolved in the affirmative, and amendment agreed to accordingly.
4.20 p.m.
Lord Hunt of Wirral Lord Hunt of Wirral moved Amendment No. 2:
Page 1, line 8, at end insert—
"(4) In managing its affairs the OFT must have regard to the generally accepted principles of good corporate governance."
The noble Lord said: My Lords, I have already spoken to Amendment No. 2. I should like to test the opinion of the House on it. I beg to move.
The Deputy Chairman of Committees (Lord Dean of Harptree): Amendment proposed: page 1, line 8 at end insert the words as printed on the Marshalled List. As many of that opinion will say, "Content". To the contrary, "Not-Content". Clear the Bar.
Division called.
Tellers for the Not-Contents have not been appointed pursuant to Standing Order 53. A Division therefore cannot take place, and I declare that the Contents have it.

Bali
4.24 p.m.
Lord Williams of Mostyn: My Lords, with the leave of the House, I shall now repeat a Statement made in another place by my right honourable friend the Prime Minister. The Statement is as follows:
"With your permission, Mr Speaker, I should like to make a Statement on the bombings in Bali, Indonesia.
"Two bombs went off near the Sari club in Kuta, Bali, just after 11 p.m. Indonesian time on the night of 12th October. At the same time a bomb exploded in Denpasar, capital of Bali, near the United States consulate, and another at the Philippines consulate in Sulawesi. The Sari club was packed with people, mainly young, enjoying themselves on a Saturday night. The attacks appear to have been timed deliberately to cause the maximum possible injury and loss of life.
"First of all, I should like to express my deep sympathies and condolences to the families who have lost loved ones in this appalling terrorist outrage. The final toll of the dead and injured is unlikely to be confirmed for several weeks. But as of this morning, more than 180 people are confirmed dead, with hundreds more injured. Many of those who died were young Australians. Up to 30 British people may have died. Nine Britons are confirmed dead, with a further eight bodies yet to be identified, and 13 people still missing. Eight have been medically evacuated from Bali. Many more received hospital treatment at the scene. We are providing assistance, as we did after September 11th, to the relatives of British victims. This will enable those who wish to, to travel to Bali. We will provide help and support to them while they are there.
"This was an act of pure wickedness—horrific and brutal attacks which have left hundreds of families here and all around the world in shock and grieving. Last night the United Nations Security Council condemned the bombings in the strongest terms, calling them a threat to international peace and security. At the weekend I spoke to Prime Minister Howard and to the Premier of Western Australia to express my condolences, and I hope to speak to President Megawati later this week. I have also spoken to President Bush. My right honourable friend the Foreign Secretary spoke at the weekend to his Australian and Indonesian counterparts and is discussing the issues with Secretary of State Powell in Washington today.
"A team of specialist officers from the Metropolitan Police Service Anti-Terrorist Branch has already flown to Bali, and more are on their way. United States and Australian experts are also on the scene.
"I should also like to place on record the Government's gratitude for the help extended by both the Indonesian and Australian authorities to all those from the United Kingdom who have been caught up in these dreadful events.
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"We had no specific intelligence relating to the attack in Bali. We do not yet know for certain who carried it out. But we do know that there are groups of extremists active in the region, some of which have strong links to Al'Qaeda. These groups have worked with Al'Qaeda on attack plans in the past. We know that they have tried before to carry out major terrorist atrocities in the region, including in Singapore last December, when a massive attack planned against targets including the British High Commission was thwarted by the Singaporean authorities. I discussed this with the Prime Minister of Singapore when he visited London in April this year. He told me that had the authorities not discovered those plans, hundreds of people could have died.
"The Indonesian authorities have been conscious for some time of the growing threat from extremists in the region. Indonesia is a secular country, with a tradition of tolerance and moderate Islam of which Indonesians are rightly proud. But prior to 11th September, and especially afterwards, we identified the south east Asian region, including Indonesia, as an area with a real and present threat from groups linked to Al'Qaeda. The most prominent is Jemaah Islamiyah, which has a network stretching across a number of countries in the region, and which has to be one of the groups under suspicion for this atrocity. We are urgently considering proscribing that organisation under the Terrorism Act 2000.
"Earlier this year we put in place an enhanced package of counter-terrorism assistance for Indonesia, including specific programmes on intelligence, crisis management and aviation security. We offered assistance with bomb disposal and bomb scene management training.
"In June I met President Megawati in London to discuss how we could fight terrorism in Indonesia more effectively and we agreed to expand our existing programme further, drawing on the wide range of expertise in counter-terrorism that Britain can offer. We will do so in close co-operation with the United States and Australia as well as with the Indonesian authorities. We have set up programmes to help other governments in the region. In the Philippines we are training in counter-terrorism, hostage negotiation and police investigations. In Malaysia we are setting up training by Scotland Yard's anti-terrorism branch, and in bomb disposal. We fully support the tripartite counter-terrorism agreement signed by Malaysia, Indonesia and the Philippines earlier this year, which is designed to combat money laundering, illegal border crossing and the illegal trade in arms.
"Since 11th September, here in Britain we have enhanced our intelligence efforts, strengthened protection against rogue aircraft and shipping and clamped down on sources of terrorist financing. We have passed new anti-terrorist legislation. Internationally, we have put a new United Nations framework in place under United Kingdom chairmanship to ensure effective national and international action against terrorism and we have

721
increased intelligence co-operation, strengthening existing partnerships and putting in place new ones across the world.
"So we have had a fresh reminder, if we needed one, that the war against terrorism is not over. During the past 10 days, there have been attacks in Kuwait and in Yemen. The threat to all people, at any time and at any place in the world is real.
"In the end, it is not just the families now grieving for their loved ones who suffer, but also the people of Indonesia, many of whom are already in poverty, who will have to face the devastating economic consequences of the attack. For the bombs and the fanatics who use them do not discriminate between young and old, East and West, black and white, Christian and Muslim. They will kill anyone of any race, creed or colour. They respect no frontier. They have no inhibitions in murdering the innocent; indeed, they rejoice in it. Because of the way in which they work, in small cells of fanatics; because their victims are the most vulnerable, people in a pub or a cafe, on a street or on holiday, discovering where and how they may strike next is hard.
"But the message that we send out is once again the same: one of total defiance—of determination, in the face of evil, to prosecute the fight against them the world over until, in time, they are defeated. Defeated, of course by intelligence, by police and even military action, but defeated also in the triumph of our values of tolerance, freedom and the rule of law over those of terror designed to produce bloodshed, fear and hatred.
"Some say that we should fight terrorism alone and that issues to do with weapons of mass destruction are a distraction. I reject that entirely. Although different in means, both are the same in nature. Both are the new threats facing the post-Cold War world. Both are threats from people or states who do not care about human life and who have no compunction about killing the innocent. Both represent the extreme replacing the rational; the fanatic driving out moderation. Both are intent on not letting people live in peace one with another; not letting us celebrate our diversity and work out our differences in an orderly way. They want to produce such disorder and chaos that from it comes a world in which religions, nations and peoples fight each other for supremacy. That is the true measure of what is at stake.
"The war on terrorism is indeed a war, but one of a different sort to the ones to which we are used. Its outcome, however, is as important as that of any that we have fought before".
My Lords, that concludes the Statement.
4.33 p.m.
Lord Strathclyde: My Lords, I thank the noble and learned Lord the Leader of the House for repeating the Statement. It is indeed a sombre day when a Statement on such a terrorist atrocity abroad will be followed later by one about terrorist intransigence here at home.
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As the Prime Minister said, never has vigilance and firmness of purpose been more needed. He is right to say that the threat is global, constant and urgent. However distant it is geographically, it is very near to us all.
I shall not seek to add to the words poured out in response to the massacre in Bali, but the hearts of all of us go out to the families and friends of those young British people who died—some of whom are to be found in this place. Our sympathy goes to those of all nations who have been struck down, but perhaps the noble and learned Lord might consider sending a particular message of sympathy and solidarity from this House to the Senate of the good and brave people of Australia—for so long our most close and trusted friends—who have been so brutally scarred. It must be our common resolve not to rest until we have seen the perpetrators of this crime brought to justice.
The nation expects unity at this time. It also deserves realism. I have been dismayed to hear certain voices say that the outrage in Bali somehow shows that we were wrong to be concerned about a threat from Iraq. As the noble and learned Lord mentioned during his repetition of the Prime Minister's Statement, the word "distraction" has been freely used by some here at home and by depressingly many in Europe. Like the Prime Minister, I repudiate that view. It fails to reflect the grim realities of the global challenge that we now face or the daily realities of what this country and the United States have been trying to do.
I see no evidence that a concern about weapons of mass destruction held by a dictator who has assaulted four of his neighbours and who rewards the families of suicide bombers is either ill-founded or a distraction. The Government are right to put pressure on Saddam Hussein to give up weapons of mass destruction and we on the Conservative Benches hope that they will maintain that pressure. Saddam Hussein knows all about terror. Bring together weapons of mass destruction and global terrorism and all mankind is threatened. So that is not a distraction; it is essential to our future security.
We must also have no illusions about the terrorist mentality. Terrorists do not read the manuals of human rights; for them, the sanctity of human life means less than nothing. Some laugh behind their sleeves at the idea of a war on terrorism. But it is a war. It is not a war that we declared; but it is a war that we must win. For if we do not win it, all the values in which we believe will be put in peril.
Perhaps I may ask some specific questions arising from the Statement that I hope that the noble and learned Lord will be able to answer, within the constraints of the need to protect our intelligence sources. Can he say more about the links between Al'Qaeda and Jemaah Islamiyah? Why was Jemaah Islamiyah not placed on the list of foreign terrorist organisations published by the United States' State Department, the European Union or, indeed, our Government? Should that not now be done urgently? What is the status of Jemaah Islamiyah today, according to the Government? What are we now doing

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to ensure that Indonesia deals with militant Islamic groups as effectively as have Singapore and Malaysia in recent years?
Does the noble and learned Lord know whether Jemaah Islamiyah has any resources in this country? If so, have its assets been frozen, before they are moved offshore? Finally, is he satisfied that organisations and agitators in Britain who declare the same support for the aims of Al'Qaeda pose no threat to our people?
We are again reminded by these events that the war on terrorism is a global war. It affects us all. We cannot dismiss it as some quaint American eccentricity—a view that itself is too often a by-product of anti-Americanism—because we must now believe that we are all targets. Scores of our citizens have already been made victims. We must fight back, and we must be ready to carry that fight to the enemy for as long as it takes to win. If the Government have the resolve for that, they may be sure that we on these Benches will not be found lacking.
4.38 p.m.
Baroness Williams of Crosby: My Lords, I, too, thank the Leader of the House for repeating a Statement made in another place by the Prime Minister on the terrible events in Bali. Perhaps I may also associate our party with the deep sympathy extended to the families and friends of those British citizens who lost their lives, but also of the many young Australians who lost their lives, and pay particular tribute to the courage of patients in the Darwin hospitals who cleared their beds to enable them to be used for casualties returning from the scene of the crime in Bali. Perhaps I may say a word about the Indonesians who lost their lives and, not least, the people of Bali itself, who will weep not just for the loss of paradise but the loss of their livelihoods.
In addition, I should add that this is not the first paradise that has been lost. Only a week ago I returned from Kashmir, another beautiful place that is being continually attacked by terrorists with help and support from outside. We would be very foolish not to recognise just how extensive is the terrorist network, and the way in which it particularly fastens itself upon those areas of the world that may well be the best hope for their citizens as regards moving out of a life of poverty. Indeed, both Bali and Kashmir are very good examples of the latter.
I believe that there was a strong indication that Indonesia was likely to become the scene of further terrorist activities. I should declare an interest as a member of the board of the International Crisis Group, which, on 8th August of this year, produced a study entitled, Al-Qaeda in Southeast Asia: The Case of the 'Ngruki Network' in Indonesia. The study sets out in great detail the way in which that network was created, and the way in which it has already been engaged over many months in terrorist activities, many of which were intended to create communal strife.
Literally thousands of Indonesians, both Muslim and Christian, have lost their lives in Aceh, in Kalamantan, in West Papua, and in Molucca, just to
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mention four of the islands that have virtually moved towards anarchy over the past few months. I believe that Western governments did not pay sufficient attention to the way in which this situation was building in Indonesia, not least because that country is now attempting, with great difficulty, to embark upon some necessary political reforms. The Prime Minister has let us know that he is in touch with President Megawati, the recently-elected president of Indonesia.
Can the Leader of the House say whether the Government still strongly support the attempts that President Megawati is making—for example, to establish civilian control over the police and to train the police to work with, not against, civilians, which is a very important part of dealing with terrorism? There is always a danger that we deal with terrorism by entirely military means and fail to recognise that cutting off the support on which it feeds is absolutely essential. Therefore, helping Indonesia towards political reform is an important part of that strategy.
When repeating the Prime Minister's Statement, the Leader of the House rightly said that Indonesia has been proud of being a tolerant and moderate Islamic country. It is vitally important that we do not lose the support of that moderate Muslim majority. I trust that the Government will identify with some of the aspirations of the democratically-elected Indonesian Government who are handling an extremely fragile and delicate situation. Can the noble and learned Lord assure us that careful attempts will be made to ensure that the paramilitaries in Indonesia, who have created tremendous opposition against the government of that country, will be reined in and not used as the major method of controlling terrorism? The paramilitaries in Indonesia have huge casualties among civilians to answer for.
Can the noble and learned Lord assure us that we shall continue to support, with aid, the efforts to train the Indonesian police in the proper handling of order? Can he also assure us that, as a crucial part of the second strategy against terrorism, we shall look again with our international partners at the disastrous consequences of reducing the help for education in that country that flowed from the economic crisis of 1998? That has led to a very substantial number of Indonesian Muslim children now being trained in what are known as madrasas in Pakistan and in Indonesia as pogroms—that is, religious fundamentalist schools—because they are free and there is often no secular educational alternative for these children to attend.
I have one further question for the noble and learned Lord with regard to the absolute importance of retaining the united support of the international community for the war on terrorism. The noble Lord the Leader of the Opposition in this House made reference to the comments made by my right honourable friend in another place about the distraction from the war on terrorism caused by the massive concentration on the issue of Iraq. I simply want to say that that concentration has been extreme. Although all of us agree that Iraq is an evil regime, this is a moment when we must use every last ounce of our

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effort and energy to try to get agreement in the Security Council on a common resolution to bring back the inspectors, without any conditions—a view that we all share. The alternative would be a divided international community and it is precisely on those divisions that terrorism most feeds.
Can the noble and learned Lord respond to a question about the Prime Minister's reference to the illegal trade in arms by telling us whether, following the outrage in Bali, Her Majesty's Government will now look again at the supply of legal arms to Indonesia because it is both legal and illegal arms that today feed so much of terrorism in South East Asia? We need to reconsider that extremely dangerous situation.
4.46 p.m.
Lord Williams of Mostyn: My Lords, I am grateful for the remarks made by the noble Lord, Lord Strathclyde, and the noble Baroness, Lady Williams. The noble Lord made a most graceful suggestion that I shall adopt. I shall, today, have a letter sent on behalf of all of us. I am most grateful to the noble Lord for his imaginative suggestion. The noble Lord was absolutely right to speak about the necessity for continuing constant vigilance and firmness. I have to agree with him that our focused concentration on Iraq has not been a distraction. Iraq and international terrorism are not alternatives; they are both common threats, not only to those countries immediately affected but also to the United Kingdom, which is the prime responsibility of Her Majesty's Government.
Her Majesty's Government keep under constant review the sale of arms, but I remind myself that it is not illegal arms of any sort that caused the death and destruction that we are discussing this afternoon; to the best of my knowledge, we are talking about manufactured bombs.
The noble Baroness, Lady Williams, asked a number of questions about whether or not we had recognised over the past year or so the threat from extreme terrorism in South East Asia. I can tell your Lordships that we have. Along with our colleagues in the United States, and others, we have encouraged all governments in that region to act against networks on their own territory. There was significant success in the disruption of planned attacks in Singapore, to which I referred earlier. We have strengthened intelligence co-operation on counter-terrorism with the key countries in the region, as well as with our allies active there. Indeed, to deal with a particular point raised by the noble Baroness, we have set up specific programmes to help governments in the region; for example, training in the Philippines on counter terrorism crisis management, hostage negotiations, and police investigations.
In Malaysia training courses are being organised by Scotland Yard's anti-terrorism branch, and there is also training in bomb disposal. In Indonesia we have planned aviation security training, crisis management training, and have offered bomb disposal and bomb-scene management training. In addition, officers from
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the Metropolitan Police have already arrived in Indonesia to offer their detailed, specialist expertise. So we have not been slow, though we have not been entirely successful because that is the nature of opportunistic terrorism.
As the Prime Minister indicated in his Statement, the Government are urgently considering the proscription of Jemaah Islamiyah under the Terrorism Act 2000, which is under active consideration. The noble Lord, Lord Strathclyde, asked about that organisation in this country. He was very scrupulous to advise me to keep within the limits of what might prudently be said about, for example, its assets. As on such occasions in the past, I am perfectly happy to have discussions on Privy Council terms with the noble Lord, Lord Strathclyde, the noble Baroness, and the noble and gallant Lord, Lord Craig of Radley, in which I shall give such information as I have.
I should point out to the House that we are in the very early stages of investigation. It is prudent sometimes not to jump to conclusions, which experience may sometimes show are not justified. I have information that there are connections and cross-connections between that organisation and Al-Qaeda, but I do not think it would be prudent of me to go further on this particular occasion.
I think that I have dealt with the questions put to me. I am deeply grateful to noble Lords on behalf of those who suffered. They are entirely innocent, young, carefree, guileless and guiltless. I echo what the noble Baroness said. We have to remember the terrible wounds which have been caused in Bali, a country, as many of us know, dependent on innocent tourism. The economic effects seem gloomy. We do not need to consider only death and injury but the wider ripples: the intended consequences of this mindless terrorism.
4.51 p.m.
The Lord Bishop of St Albans: My Lords, I thank the noble and learned Lord for repeating the Statement. I am sure I can speak for my fellow bishops on these Benches in saying how much we deplore this barbaric and evil act of violence perpetrated on the island, its visitors and its people. There will be families throughout the United Kingdom—sadly, some are known already to us today—who will face the future with broken hearts but who, while in mourning, will long that the deaths of their loved ones should somehow be part of a new creation of meaning in our world. While feeling shock, anger and despair they will not want those who have been killed to have died in vain.
One of the awful paradoxes and ironies of the violence is that an extremist terrorist group may claim religious justification for its actions. If that happens, I earnestly hope and believe that the leaders of all religious faiths in this country, Christian, Muslim, Jewish, Hindu, Buddhist, Sikh and others, will want publicly and wholeheartedly to join in condemning this terrible act and this twisted abuse of the name of religion.

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Terrorists want to blow us apart, literally and metaphorically. They want to injure, fragment and destroy. It seems to me, therefore, that it is the bounden duty of all religious and political leaders, and others, in our own country to make sure that those terrorists can never, ever achieve their aims. We do this not simply by condemnation but by doubling and redoubling our efforts to create just, peaceful and tolerant neighbourhoods in the UK and a just, peaceful and tolerant United Kingdom.
Evil—it is the only word that will do in these circumstances—thrives in darkness. To keep the light of truth, understanding and love burning—it requires much moral courage to be exhibited by believers and non-believers alike—is ultimately the only way to defeat evil. We on these Benches are totally committed to that way. Along with everyone else in this country, we would wish to extend our profoundest sympathy to all those who are bereaved and injured and offer them our heartfelt prayers.
Lord Williams of Mostyn: My Lords, I am deeply grateful to the right reverend Prelate for those remarks. I am sure we all concur with the theme. He is right. The appetite for terror is insatiable. Religious motives are not the motive engine. It is hate and envy. It is hate of something better than terrorists can conceive of; and it is envy for innocent happiness.
Lord Biffen: My Lords, the appalling nature of the incident in Bali chills one when contemplating this latest development in the dispute relating to terrorism. I appreciate the somewhat measured references to Al'Qaeda by the noble and learned Lord the Lord Privy Seal. Is there not plenty of evidence that Indonesia has been suffering from great discontent and conflict stretching back over a number of years? The noble Baroness, Lady Williams, mentioned the disputes in Aceh, the Christian-Muslim conflict in Amboina, and the fighting in West Irian, all of which underline the fact that Indonesia is not a natural economic or political entity. It is a creation of western imperialism.
One of the underlying anxieties must be the inability of an Indonesian state to play its part in dealing sufficiently effectively with terrorism. Perhaps I may ask this of the noble and learned Lord the Lord Privy Seal. At some early date, perhaps we may be presented with an assessment of the underlying political and economic situation in Indonesia so that that may be taken into account as well as the specific tragedies in Bali.
Lord Williams of Mostyn: My Lords, I shall give the most careful attention to the suggestion in the latter part of the noble Lord's remarks.
I have been deliberately cautious about attributing blame because blame needs to be attributed on the basis of evidence not speculation. The recent history of Indonesia, about which the noble Lord and the noble Baroness spoke, is a matter of fact, and not of
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comment from me. On these occasions, one should sometimes guard, and advise one's self, against the temptation to jump to conclusions. I am grateful.
Lord Desai: My Lords, I want to look to the future rather than dwell on the immediate tragedy. When such an accident takes place, people are often advised not to go in future to that country for tourism purposes. While such caution may be right immediately after the event, I hope that we shall reverse the advice as soon as possible and ask people to go to Bali. One way to fight terrorists is not to be bullied by them and to continue to act normally. I hope that the Foreign Office will do that as soon as possible.
Lord Williams of Mostyn: My Lords, because I know my noble friend so well, I know that he made a slip of the tongue when he referred to "accident". If he said "incident", I am grateful. It is murder, wilful murder carried out deliberately, of young people who happen to be enjoying themselves. At present the Foreign Secretary has to adopt an extremely prudent stance. He has a duty to British nationals. The Foreign Office advice at present must be to advise against all travel to Bali, and holiday and non-essential travel to Indonesia. Plainly our diplomatic representatives on the ground there are liaising closely with the business community derived from the United Kingdom. I am happy to reassure my noble friend that as a matter of policy the Foreign Office reviews and re-reviews constantly its advice to travellers. We have seen that recently, for example, in Pakistan and India. However, at the end of the day if our nationals ask the Foreign Office for advice we must err on the side of caution and prudence. I take my noble friend's longer term point. The importance of tourism as an industry to Bali, where the income is very modest indeed, cannot be overstated.
Lord Howe of Aberavon: My Lords, I echo the expressions of horror and of sympathy conveyed already to the House. I hope that I shall not be misunderstood if I refer to one point which can give rise to anxiety. I refer to the risk of being confused or ill judged in our reaction to the complex of problems we are discussing. The threat posed by weapons of mass destruction is one important issue, not least in Iraq. Terrorism almost world-wide is a different threat. I hope that the noble and learned Lord will agree, in the calm, deliberate way in which he is responding to questions, that we must, at all costs, avoid confusion between those two components, which can—I do not mean to disturb my noble friend the Leader of the Opposition—be implicit, if we focus too much on the idea of a war against terror. They are two different problems, and we must avoid being provoked into any ill judgment on one side or the other by any possible confusion.
On the issue of weapons of mass destruction, we must, of course, unflinchingly sustain deliberate, well judged, united pressure along the lines already laid out, with as much support from the international community as possible.

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On a longer timescale, the multi-headed hydra of terrorism will require co-operation on an even wider scale. I am particularly grateful for the sympathetic way in which the noble and learned Lord defined the way in which we are struggling to help Indonesia. I agree with everything that was said by my noble friend Lord Biffen about the difficulties that face that country. I am also glad that the international partnership against terrorism is embracing the wisdom that can be derived from a more stable society, such as Singapore. I had the opportunity of discussing some aspects of the situation with the chief minister there not long ago. He can give us enormous help, just as we can help a country such as Indonesia.
I urge the greatest possible caution. We must avoid confusion between the two problems in judging our reaction to each.
Lord Williams of Mostyn: My Lords, I take the point made by the noble and learned Lord, Lord Howe of Aberavon. However, the noble Lord, Lord Strathclyde, did not exhibit confusion. The noble Lord said that vigilance must be determined, if we are to produce a proportionate response. I agreed with him on that. I also agree with the noble and learned Lord, Lord Howe of Aberavon, that that proportionate response will be different. It may, as the Prime Minister said in the Statement, involve a military response, or it may involve detailed, careful co-operation of the kind to which the noble Baroness, Lady Williams of Crosby, referred. I hope that I was able to fill in some of the picture.
It is essential that the approaches taken should be multilateral. It is in our interest that they should be so. We must co-operate not in a spirit of dictation but in a spirit of true understanding and give any logistic support that we can.
International terrorism—or internal Indonesian terrorism, if that is what it proves to be—must be discussed and deliberated on differently from the question of weapons of mass destruction. However, they may elide one into the other; we do not know. Although I can point to the success in Singapore, one of our difficulties is that the failures of our vigilance—to use the words of the noble Lord, Lord Strathclyde—exhibit themselves in the deaths and injuries that occurred in Bali. The successes of our intelligence efforts cannot, in the nature of things, be trumpeted, nor should they be.
Lord Craig of Radley: My Lords, on behalf of all Cross-Benchers, I convey sympathy and condolences to the families of the victims of this appalling outrage. I also thank the noble and learned Lord the Leader of the House for his intention to include the Convenor in any extra briefing.
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Can the noble and learned Lord reassure the House that the good relationship that we have had with the Indonesian authorities in the immediate aftermath of this appalling disaster will continue? Is he satisfied that there will be good relations in the future?
Lord Williams of Mostyn: My Lords, I am grateful to the noble and gallant Lord, Lord Craig of Radley. I can confirm that we have had an increasingly productive relationship with the Government of Indonesia, particularly after 9th September. We are developing particular support by way of exchanges and training in areas in which the Metropolitan Police, in particular, are extremely well regarded all over the world. That is very useful.
Lord Blaker: My Lords, I am sure that noble Lords will agree that it is important that we do what we can to assess the extent to which Al'Qaeda is connected with the attacks that we have been discussing. My noble friend Lord Biffen referred to attacks in other parts of Indonesia. Do we have evidence to connect Al'Qaeda, in addition, to the foiled attempt in Singapore or with the attacks in Yemen and Kuwait?
Lord Williams of Mostyn: My Lords, I have no evidence that I can offer to your Lordships. The attacks in Kuwait and Yemen were very recent. There is a document, of which the noble Lord, Lord Blaker, will be aware, that purports to support the attack on the American marines in Kuwait and the attack on the French oil tanker in the Gulf of Yemen. I am always cautious. I do not regard such statements as being entirely based on truth. The statement may be an opportunistic attempt to muddy the waters; I do not know. I doubt that evidence will be forthcoming.
We must be cautious. In such murky waters, people play strange games, and, sometimes, it is foolish to be taken in by them.
Lord King of Bridgwater: My Lords, I support the suggestion made by my noble friend Lord Strathclyde about the message to be sent to the Australian Senate. In one report, I saw that many New Zealanders were involved as well. I hope that the Foreign Office will consider to whom the messages should be sent, so that they cover all our concerns.
I also support what the noble Lord, Lord Desai, said. The noble and learned Lord the Leader of the House gave the impeccable reply that it was a matter of balance, and I accept that, at this stage, the action of the Foreign Office is correct. However, one of the real tragedies that could emerge from this situation is the economic collapse of Bali. Nothing that we seek to address today will be made any easier by an economic disaster that would affect all the people in that beautiful territory. Obviously, it is a question of judgment, but I hope that the Foreign Office will listen to the representations made by two noble Lords—to which the noble and learned Lord the Leader of the House properly responded—and that it will, at the

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earliest possible date, give some permission and encouragement. The announcement made today has been shattering for the people in Bali.
Lord Williams of Mostyn: My Lords, I am grateful, as always, to the noble Lord, Lord King of Bridgwater. He will remember that it was on the initiative of the noble Lord, Lord Strathclyde, that I sent a letter on behalf of the whole House to the Senate of the United States, immediately after 11th September. I know that it was well received. I will do as the noble Lord suggests and relate the message through my noble friend Lady Amos, who is in her place next to me. We shall see to that.
The issue of tourism does require a difficult balancing act. As it happens, I know Bali, having spent an extremely happy holiday there. One can see how important tourism is as one pays what are, in our context, relatively small sums to people whose daily life depends on it. I agree that, if one of the long-term consequences were to be economic collapse, it would be a firm victory for those who caused such wicked consequences.
Mayor Giuliani said that people in New York should go out and shop, go out and spend, go to the theatre and make New York what it was. We can learn from that.
Lord Lea of Crondall: My Lords, I do not intend to detract from the need to reinforce the war against terrorism. However, I must refer to the point made by the noble Baroness, Lady Williams of Crosby, about the training of fundamentalists, the lack of education and the way that, even in a democracy such as Pakistan is becoming, fundamentalists are winning increasing support. There are millions of hearts and minds that are not with us.
Does my noble and learned friend agree that, side by side with reinforcing the war against terrorism, we must consider what we must do in Yemen, Egypt, Pakistan, Indonesia, in parts of Africa and elsewhere to win over those hearts and minds? The incidents take place against a background in which—it is painful to say—millions are not with us.
Lord Williams of Mostyn: My Lords, what my noble friend says is absolutely right. I tried to accept that in the propositions advanced by the noble Baroness. I can reassure my noble friend and the whole House that the Government's policy, through DfID and the FCO, is to stress the important factor that our aid must go in significant part to education, to take up the noble Baroness's point. So I do not dissent from what my noble friend said—although in the all countries he mentioned the problems are not uniform; they need to be dealt with in a subtle and discriminating way.
Lord Marlesford: My Lords, does the Minister agree that, in its wickedness and lack of discrimination, this terrible act compares all too closely with the Omagh bomb of August 1998? By a horrible coincidence, it compares also in terms of the number of United
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Kingdom citizens killed. At Omagh, 28 were killed, including a pregnant woman and two small children; the figure in this case is apparently 30.
The Minister referred to the need to protect this country. I for one believe that the arrangements for immigration and passport control in this country leave a great deal to be desired. I have given details, but as yet have received no reply from the Home Office. I should like to have the opportunity at some stage of talking to the noble and learned Lord privately.
Lord Williams of Mostyn: My Lords, I am not privy to the correspondence between the noble Lord and the Home Office. I can say truthfully and conscientiously that I try to reply to letters by return. If it takes more than a week, I regard that as a personal disgrace. I am more than happy to speak privately to the noble Lord.
As I said earlier, terror has an appetite which is both insatiable and irrational. I draw the noble Lord's parallel between Omagh and this incident. It is the slaughter of the innocents to make an allegedly political point. It is monstrous. We should be careful not to say in the press that "no one has claimed responsibility". I prefer the phrase: "No one has admitted these crimes".

Enterprise Bill
5.12 p.m.
Consideration of amendments on Report resumed on Clause 1.
[Amendment No. 3 not moved.]
Schedule 1 [The Office of Fair Trading]:
Lord Hunt of Wirral Lord Hunt of Wirral moved Amendments Nos. 4 and 5:
Page 195, line 5, after "chairman," insert "a chief executive,"
Page 195, line 7, after "chairman" insert "and the chief executive"
On Question, amendments agreed to.
Lord Graham of Edmonton Lord Graham of Edmonton moved Amendment No.6:
Page 195, line 8, at end insert—
"( ) The chairman and members shall be broadly representative of interests in the area of responsibility of the OFT."
The noble Lord said: My Lords, in moving this amendment, I shall speak also to Amendment No. 7, which relates to line 8 on page 195. It reads:
"Members shall be appointed on the basis of their expertise in areas of responsibility of the OFT and such expertise shall not disqualify them on the grounds of conflict of interest".
I begin by declaring marginal interests: I continue to have active links with the Co-operative Movement and with the British Retail Consortium, with both of which I have had useful consultations.
In striking at this aspect of the Bill, perhaps I may say how pleased I was to be present for the earlier debate when Members on all sides of the House spoke clearly and with authority. They did the Bill proud—I

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do not refer to the result of the vote, but to the intelligence that they brought to the debate from their experience elsewhere. I was delighted to be present.
These matters were raised at an earlier stage. I simply want to remind the Minister that I welcome the main thrust of the reform of the OFT; namely, its transformation into a board, the requirements for an annual plan and its new remit for promoting the benefits of competition for consumers and the economy.
These amendments take up an idea introduced in earlier amendments by the noble Lord, Lord Hunt. They support the Bill, but attempt to shape or re-shape its provisions by obtaining from the Minister intelligence and advice on what he and his colleagues have in mind as regards those who will carry out its provisions.
The noble Lord, Lord Hunt, posed the 64,000 dollar question: who regulates the regulators? It is no good saying after the event that we ought to have done such and such; or the Minister saying, "If only you had only mentioned this, I could have taken it into account". The purpose of my amendments is to seek assurances from the Minister that the thrust of what I seek is taken care of in the Bill in general—in which case he will no doubt be kind enough to point that out to me.
I should be interested in hearing from the Minister how, for example, the process of selecting the members will take place. The noble Lord, Lord Hunt—that is the third and last time that I shall mention him in this debate—drew attention to the advertisement that had appeared giving some indication, but that is not sufficient to satisfy me.
The Minister is aware of my strong connection with the Co-operative Movement, which is a consumer movement. I am naturally interested in hearing from him the steps that he and his colleagues have in mind to ensure that those who have wide experience of consumer matters will be considered. I do not mean opening the drawer of the great and the good, pulling out names and saying that it is the turn of this or that person. I should like to hear what he has in mind in terms of trawling over the wide range of people—north and south, male and female, black and white—who are prominent in the consumer movement. A great deal of legislation comes to us these days from Brussels. Do the Minister and his colleagues have the European dimension in mind when considering who will serve on boards?
We should not be looking for people who are "experts" or even "authorities" in these matters. I am always prepared, when reading a list of people who are to serve on a committee, not to know any of them. Then, when I look into their credentials, I am pleasantly surprised to see how well qualified they are, even to my untutored mind. Within the confines of the Bill, the Minister has a great deal to offer to us. I beg to move.
Lord Sainsbury of Turville: My Lords, I shall speak to Amendments Nos. 17 to 21. These amendments respond to points made by noble Lords in Committee
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and fulfil commitments I made to agree to consider these points further. I shall speak also to Amendments Nos. 6 and 7.
Amendments Nos. 17 and 18 require the OFT to publish a summary of its rules and procedures for dealing with conflicts of interest. The OFT is already required to consult the Secretary of State when drawing up these rules and procedures. The publication of a summary of them under this amendment will ensure transparency in how the OFT conducts itself in this important area. The amendments are in response to an amendment tabled in Committee by the noble Lord, Lord Kingsland, the noble Baroness, Lady Miller, and the noble Lord, Lord Hunt.
Amendments Nos. 19 and 20 require the OFT to lay the proposals for its annual plan, as well as the final version, before Parliament and to hold a public consultation on the proposals at least two months before the final version is published. This removes the discretion that the OFT currently has under the Bill to consult such persons "as it considers appropriate", and, I hope, satisfies noble Lords' concerns that the OFT should consult widely on the plan. These amendments respond to an amendment by the noble Lords, Lord Kingsland and Lord Hunt, and the noble Baroness, Lady Miller, in Committee.
Amendment No. 21 provides additional requirements for the content of the OFT's annual report. Noble Lords expressed concern in Committee that more detail should be placed on the face of the Bill. The amendment provides for significant new requirements covering the main activities and investigations over the year, the allocation of financial resources and enforcement practices and performance. This last requirement would include, for example, an assessment of how OFT has complied with the Enforcement Concordat, which I believe will be welcomed by business. This amendment responds to amendments tabled by my noble friend Lord Graham, the noble Lords, Lord Kingsland, Lord Hunt, Lord Razzall and Lord Sharman, and the noble Baroness, Lady Miller, in Committee.
Amendments Nos. 6 and 7, tabled by my noble friend Lord Graham, seek to ensure that the OFT board is made up of people who are representative of the key areas of OFT responsibility and that such people will not be disqualified from taking up board appointments on grounds of conflict of interest. We will be holding a fair and open competition for non-executive board posts in accordance with Nolan procedures. In answer to the points made by my noble friend, I hope very much that this will not consist of the great and the good but of people who can bring some real skills to this area.
The range of skills and qualities that we are looking for may mean that some members of the board will be drawn from, for example, competition, consumer or business backgrounds, and it is to be hoped that some will have experience of European matters. Our aim is to appoint the best candidates, not to have quotas or de facto appointments representing certain interests. Although board members are likely to have other

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outside interests, they will be appointed to the board in their own right, not as representatives of a particular interest. Their role on the board will be to see that the OFT takes the right strategic decisions to fulfil its functions effectively and to achieve its goal of making markets work for consumers.
We want to appoint the best people to give the OFT a strong and strategic board with a balance of skills, expertise and abilities. Experience of, for example, general management or strategic skills will be as valuable to the board as a wide-ranging and in-depth experience of competition and consumer issues, but not every candidate need necessarily have all these qualities, skills and expertise in all these areas.
I reassure my noble friend that candidates with backgrounds relevant to OFT's responsibility will not automatically be disqualified from taking up board appointments on grounds of conflict of interests. Provided that they comply with the OFT rules and procedures on conflicts of interest, which I mentioned, there is no need for them to be disqualified. It is unnecessary to set this out on the face of the Bill. If noble Lords agree with the amendments that I am moving in this group, the Bill will be clear that OFT will have published rules and procedures for dealing with conflicts of interest, and board members will have to act in accordance with these or face removal by the Secretary of State. I do not think that there is any need to add anything more to the Bill. In view of these arguments, I hope that my noble friend will feel able to withdraw his amendments.
Baroness Oppenheim-Barnes: My Lords, before the Minister sits down, can he make it clear that there is no intention to impose any kind of positive discrimination in the appointments, and that the best people for the job will be chosen, regardless of whether they are all men, all women, all black or all white?
Lord Sainsbury of Turville: My Lords, I can give the assurance that the best people for the job will be appointed.
Lord Graham of Edmonton: My Lords, I am grateful to the Minister, in particular for moving his amendments, which go further along the road towards what I was asking for. I get the impression that he is looking for a balance in which there is not a predominance of those with experience in retailing, production, finance or any other field. I was heartened by his reference to the possibility that there would be someone, or perhaps more than one person, with experience of the European regulatory regime. The Minister can be satisfied that I intend to withdraw my amendments, and I am grateful to him for his comments on his own amendments.
Amendment, by leave, withdrawn.
[Amendment No. 7 not moved.]
Lord Hunt of Wirral Lord Hunt of Wirral moved Amendments Nos. 8 to 16:
Page 195, line 10, after "chairman" insert ", the chief executive"
Page 195, line 12, after "chairman" insert ", the chief executive"
Page 195, line 14, after "chairman" insert", chief executive"
Page 195, line 16, after "chairman" insert ", chief executive"
Page 195, line 21, after "chairman" insert ", chief executive,"
Page 195, line 22, leave out "either" and insert "any"
Page 195, line 23, after "chairman" insert ", chief executive"
Page 195, line 29, after "chairman" insert ", chief executive"
Page 195, line 33, after "chairman" insert ", chief executive"
On Question, amendments agreed to.
Lord Sainsbury of Turville Lord Sainsbury of Turville moved Amendments Nos. 17 and 18:
Page 196, line 11, at end insert "rules and"
Page 196, line 12, at end insert—
"(3) The OFT shall from time to time publish a summary of its rules and procedures for dealing with conflicts of interest."
On Question, amendments agreed to.
Clause 3 [Annual plan]:
Lord Sainsbury of Turville Lord Sainsbury of Turville moved Amendments Nos. 19 and 20:
Page 2, line 13, leave out subsection (2) and insert—
"(2) The OFT shall for the purposes of public consultation publish a document containing proposals for its annual plan at least two months before publishing the annual plan for any year."
Page 2, line 15, leave out from "lay" to end of line and insert "before Parliament a copy of each document published under subsection (2) and each annual plan"
On Question, amendments agreed to.
Clause 4 [Annual and other reports]:
Lord Sainsbury of Turville Lord Sainsbury of Turville moved Amendment No. 21:
Page 2, line 24, at end insert—
"(c) a summary of the significant decisions, investigations or other activities made or carried out by the OFT during the year;
(d) a summary of the allocation of the OFT's financial resources to its various activities during the year; and
(e) an assessment of the OFT's performance and practices in relation to its enforcement functions."
On Question, amendment agreed to.
Clause 6 [Provision of information etc. to the public]:
Lord Phillips of Sudbury Lord Phillips of Sudbury moved Amendment No. 22:
Page 3, line 3, after "competition" insert "within a context of social community and environmental responsibility"
The noble Lord said: My Lords, this amendment is comparable to the one moved in Committee, when a number of your Lordships spoke in support of it. Clause 6, entitled "Provision of information etc. to the public", is divided into two parts.
We have no quarrel whatever with Clause 6(1)(b), which gives the OFT the function of
"giving information or advice in respect of matters relating to any of its functions to the public".
That seems to us on these Benches to be absolutely sensible. It is Clause 6(1)(a) that concerns us. It talks of
"making the public aware of the ways in which competition may benefit consumers in, and the economy of, the United Kingdom".
That provision is buttressed by Clause 6(2)(a), which gives the OFT the power to publish educational material and, in the following subsection, to

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commission any independent group, body or organisation to produce materials or carry out education. In simple terms, the concern on these Benches is that for education, particularly in schools, one needs a broader matrix than the bare one provided by Clause 6. That is particularly the case given that Clause 6 refers only to promoting public awareness of the benefits of competition. Much heat was generated at Committee stage, during which the Minister expressed himself to be passionate about competition. He said that competition does indeed benefit consumers. We agree. He added that the best form of consumer protection is choice. We agree.
The argument on this amendment is not about free marketeers and anti-free marketeers; it is about the simple fact, which is no great secret, that competition comes in many forms and not all of it is desirable. Let me give a couple of examples of competition that is lawful and certainly red of tooth and claw. What about a firm that exploits foreign workers in their working conditions and pay? That is perfectly lawful. Indeed, one could say that if one were a real competitor in the real, tough economic world, the more we exploit foreign workers to produce cheap products for the shelves here, and to make a profit, the better. But plainly that is not the view of the majority in this House, and I would be staggered if it were the Minister's view. What about, for example, environmental issues? The reckless despoliation of the environment is not unlawful, but it could be highly competitive if one takes a narrow view of that concept. I know that the Minister does not and I read his words only because I want to suggest that both the quotes I gave need to be couched within a broader context of social, community and environmental awareness and responsibility.
I have used those words in the amendment because they appear in the model Companies Bill, which was published after a huge amount of work by the commission sitting on the reform of company law under Dame Mary Arden. Those three words are to be found in Clause 75 of the draft Companies Bill, which talks about the duties to consider, including other matters, in operating and financial reviews of larger companies. Those matters include,
"the companies' policies on environmental issues; the companies' policies on social and community issues".
There is therefore no doctrinal difference between us and the Government on this clause. The difference lies simply and solely around the issue of education in schools. It has nothing to do with the regulation of business or anything else, but with education in schools. And it is the Government's firm policy that education in schools, which will come as part of the citizenship curriculum, must be broad, impartial and fair.
I refer to what was said by the noble Lord, Lord Borrie, in Committee. The Minister may say that nothing the OFT will do will be less than unbiased and fair and non-propagandist. The noble Lord said:
"it strikes me that the specific functions of the OFT in the Bill and in the Competition Act are partisan in the promotion of competition. More balanced judgments are made by the
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Competition Commission and others. In future, it will be part of the job of the Office of Fair Trading, as it has been in the past 30 years, to be partisan in those respects".—[Official Report, 16/6/02; col. 1156.]
We are saying, "Fair enough in all that it does, but not fair enough in schools". It runs directly counter to the obligations which the Government have imposed on themselves statutorily. I read that the statutory order imposing citizenship education directs that pupils should be taught about,
"how the economy functions, including the role of business and financial services…the rights and responsibilities of consumers, employers and employees…the wider issues and challenges of global interdependence and responsibility, including sustainable development".
That last phrase replicates in crude terms what the amendment puts into the Bill.
I urge the Government to take a step back and accept that if they are taking, as they are, a specific power on the part of the OFT to educate in schools—or, worse, to get others to do it for them—they must accept that in that regard, if no other, they ought to couch it in a wider social, moral and environmental context. I beg to move.
5.30 p.m.
Baroness Oppenheim-Barnes: My Lords, I apologise in advance to the noble Lord, Lord Phillips, if I sound churlish about the amendment. When I first looked at the amendment, I said to myself, "Oh dear". When I looked at it again, I said, "I absolutely hate this amendment".
At one time I had responsibility for these matters. In order to demonstrate to your Lordships how prejudiced I was in this respect—and the noble Lord, Lord Borrie, will remember it well—I confess that I used to complain bitterly about the public interest criteria in Monopolies and Mergers Commission findings. I felt that it was not narrow enough; I wanted, purely and simply, public interest struck out and the consumer interest put in.
To become too diverse in this matter is to take away from the consumer interest. It is a pure interest and one which is already covered well in the Bill, as quoted by the noble Lord. Employment legislation deals with a great deal of what he has said and other legislation deals with other factors he has raised. In my experience, it is difficult enough to teach children in schools their simple rights and obligations as consumers. So many people have tried to do it and I challenge the noble Lord to go into schools and to question children—even those in the upper classes—about their rights and obligations as consumers. Even today, with all the work that has been done, few will have the slightest idea. That is due in part to the fact that we have had a great deal of confusing legislation, but the fact remains. I would be against any amendment which in these matters sought in any way to mitigate against the pure consumer interest and which would go further than the other issues named in the Bill.
Baroness Howe of Idlicote: My Lords, I support the amendment tabled by the noble Lord, Lord Phillips,

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and I do so for two reasons. First, I declare an interest in that I chair a foundation for the environment which was set up some 10 years ago by BOC. We have funded the encouragement of the dissemination of information on the environment to schoolchildren. I therefore believe that this is an important area as regards good governance, social responsibility and the environment. I must also report that from everything the foundation has picked up subsequently we know that children and young people are far more alive to the benefits for the consumer of having such issues taken into account.
The second reason I support the amendment is the importance to competition. Without doubt, the bottom line benefits from the growing acknowledgement by companies that their customers, the citizens of their country, want them to be good corporate, community-involved bodies in the broad sense and to follow good environmental practices.
I therefore warmly support the amendment and I hope that if it is not accepted at least the OFT, with its new responsibilities in this regard, will take on board the aims behind it. I warmly approve of them.
Lord Hodgson of Astley Abbotts: My Lords, my Amendment No. 23 is in this group. I have a great deal of sympathy with what the noble Lord, Lord Phillips, is trying to achieve. I do not want to go over issues debated in Committee, but I have read carefully what the Minister said on that occasion. I did not find his words convincing.
The amendment refers to Clause 6, the heading of which is,
"Provision of information etc. to the public".
It is not the provision of information; it is the provision of one side of the argument. Therefore, the heading of the clause is misleading in terms of what is contained in the clause. My amendment seeks to remove the word "benefit" and insert the word "effect", which is a more even-handed way of dealing with the issue.
The OFT is a regulatory body; it holds the reins. It needs to be seen to be even-handed, not a propagandist for one side of the argument. That is not to say that the operation of the market is not important and is not supported by me and all other noble Lords in the House. It is an educational role, but not a propagandist role. Let the public know about competition. In Committee, replying to the noble Lord, Lord Phillips of Sudbury, the Minister said:
"Quite simply, I believe that we should require the OFT to concentrate and focus on its primary task; namely, the promotion of competition. We should have the confidence to let it promote the benefits of competition, because that is its role".—[Official Report 16/7/02; col. 1159.]
The Minister, however, has given only half its role. The OFT's role is actually to hold the ring, not to speak in that particular way.
We have already referred today to the Financial Services and Markets Act 2000. As I was a member of one of the regulatory bodies—the Securities and Futures Authority—subsumed under the FSMA, I learned a little about the discussions in your
740
Lordships' House, before I became a Member, about the roles given to the Financial Services Authority. Section 2(2)(b) of the Act states that one of the FSA's regulatory objectives is to promote "public awareness", which is a perfectly fair objective. The Act goes on, in Section 4, to explain what is meant by "public awareness". It states:
"The public awareness is: promoting public understanding of the financial system… It includes, in particular—promoting awareness of the benefits and risks associated with different kinds of investment or other financial dealings".
The duty to inform and educate the public and to help them understand what happens in the financial services arena is therefore absolutely fairly and squarely defined and imposed on the Financial Services Authority. It is Clause 6 of the Bill that is lopsided and should be made much more even-handed.
Lord Hunt of Wirral: My Lords, I rise with some trepidation because I think that I am about to disagree for the first time with my noble friend Lady Oppenheim-Barnes. I feel trepidation because, in 1979, as Parliamentary Private Secretary to the then Secretary of State, I was one of my noble friend's very junior administration members when she took through, against all the odds, the Price Commission (Amendment) Act 1979 which abolished the Price Commission. I have always had the profoundest respect for all that she utters—at least until today when she said that she did not agree with these amendments, particularly Amendment No. 22. I agree with her on the issue of consumers, but I think that the attraction of this amendment is that it seeks to put competition itself in a context of responsibility as expressed by the noble Lord, Lord Phillips of Sudbury.
I listened to my noble friend Lord Hodgson of Astley Abbots when we debated this issue in Committee. Now that we have had some tautological discussion about "affect" or "effect", I think that it is entirely apposite to insert the word "affect" in place of "benefit". I agree with the noble Baroness, Lady Howe of Idlicote, that these two amendments would be beneficial to the way in which the OFT will perform its functions. I hope that the Minister will see the amendments as genuine attempts to try to present a balanced approach. As my noble friend Lord Hodgson of Astley Abbots put it, we have to try to strike a proper balance between competition per se for its own sake and the more interesting discussion of ways in which it can affect consumers either positively or negatively.
While I am on my feet—I wanted to do this in our debate on an earlier group of amendments—I should like to thank the Minister for listening in Committee to my noble friends and to other noble Lords We are grateful to him for having listened and coming forward with those amendments on Report. I hope that he will listen and be as positive about these two amendments as well.
5.45 p.m.
Lord Borrie: My Lords, I have rather enjoyed the intra-party disagreement on the other side of the Chamber. I come down on the side of the noble Baroness, Lady Oppenheim-Barnes. I thought that the noble Lord, Lord Hodgson of Astley Abbots, was quite wrong to say that, in either the past or the future, it is intended that the OFT should "hold the ring". The OFT is a partisan body which determines whether there is a prima facie case that a matter requires investigation. Subsequently, someone else will do the balancing and hold the ring and reach a conclusion. In this Bill, for the very first time, there is even provision for something called a "cartel offence" in which the OFT, with the Serious Fraud Office, will be the prosecutor. It will be the courts, however, that determine whether that case is justified.
Lord Hodgson of Astley Abbotts: My Lords, I understand the noble Lord's point about holding the ring. He will appreciate, however, that the Financial Services Authority is also a prosecuting authority.
Lord Borrie: Indeed, my Lords. However, my point is to undermine the argument of the noble Lord, Lord Hodgson, and indeed that of the noble Lord, Lord Phillips of Sudbury. I do not disagree at all with the type of educational materials that the noble Lord, Lord Phillips, would like school children and even adults to receive; what I dispute is whether the OFT—with its partisan role, as I said, in the sphere of consumer and competition affairs—is the appropriate body to fill that role. I do not think that it is. To include the type of words that the amendment seeks to introduce would be to ask the OFT to fill a role that is not really apt for that body to perform.
Lord Sainsbury of Turville: My Lords, Amendments Nos. 22 and 23 seek to amend the Office of Fair Trading's function of making the public aware of the ways in which competition may benefit consumers and the economy. I begin by reminding noble Lords of the purpose of Clause 6. A key role of the OFT is to make markets work for consumers. This is reflected in the clause which gives the OFT the function of promoting to the public the benefits that competition has for consumers and the economy and providing the public with information or advice on matters relating to its functions.
Competition does indeed benefit consumers: the best form of consumer protection is choice. The aim of the clause is to help to create assertive and knowledgeable consumers who are aware of the importance of competition. There is much to be done in this sphere. The DTI peer review of the UK's competition regime showed that while more than 83 per cent of respondents in the United States thought that competition policy was important to the US public, the equivalent figure in the UK was just 10 per cent. So there is a very substantial job to be done.
I turn to the two amendments. I have great sympathy with Amendment No. 22, but rather little sympathy with Amendment No. 23. Amendment
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No. 23 proposes that the OFT should have the function of making the public aware of the ways in which competition may affect, rather than benefit, consumers and the economy. I find that an extraordinary statement. We are establishing this body because we believe that competition is a good thing. The alternative would be to say that we do not think that competition is a good thing—that we think that some monopolies and a few cartels would be an excellent thing. In establishing this body, we are clearly making the judgment that competition is a good thing.
To ask the body established to make that statement to express the view that competition is other than a good thing would be to make an extraordinary assumption. We did not, for example, establish the Equal Opportunities Commission and tell it, "By the way, you should put forward a balanced view about equal opportunities. Perhaps equal opportunity is not always a good thing". Rather, we said to the EOC: "We expect you to promote equal opportunities". The same applies to the treatment of racial discrimination. I do not know what we are doing in this legislation if we are not starting with the assumption that competition is a good thing. We should therefore refer to the "benefits" and not just the "affect" of competition.
When consumers understand the benefits of competition—which include quality, choice and accessibility as well as price—I believe that they become more powerful, more confident of their rights and more demanding. I understand from what the noble Lord, Lord Phillips, said in Committee that he believes that competition may have adverse consequences for consumers. I beg to differ. Of course, competition can be abused but that does not alter the fact that, overall, competition is a good thing. Anti-competitive behaviour constitutes abuse but competition does not. Anti-competitive behaviour harms consumers. However, competition benefits consumers and the clause should reflect that.
Amendment No. 22 falls into a different category. I have a great deal of sympathy with it, particularly as regards the context of school education. However, I wish to explain why the Government do not want to accept the amendment. It seeks to amend Clause 6 to give the OFT the function of making the public aware of the role of competition within a context of social community and environmental responsibility. As I am sure the House is aware, I certainly accept the importance of social community and environmental responsibility. Indeed, those are matters which the Government actively promote. I also accept that consumer and competition policy must function within the broader framework of social welfare. We are not saying that competition which in any way detracts from legislative, social or environmental frameworks should be excused or condoned. However, I do not believe that it is right to broaden the specific focus of the OFT which is rightly focused on

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making markets work for consumers. To broaden the OFT's general function as proposed in the amendment would seem to be a rather arbitrary choice.
Lord Clinton-Davis: My Lords, does not the argument that has been made fit well with what is in the Bill which does not merely mention competition but also the economy of the United Kingdom of which the environment is an important part?
Lord Sainsbury of Turville: My Lords, I totally agree with the noble Lord. The economic framework is important. However, the point I am trying to make is that if one singles out particular aspects of the social and economic contexts in which competition policy operates and states that the OFT must also focus on those matters, an almost endless list arises of other issues of which it must take account: for example, health and safety issues, employment law and all the other contexts within which competition policy operates.
Lord Phillips of Sudbury: My Lords, I am obliged to the Minister for giving way. There is, of course, a big difference here in that employment law and health and safety issues constitute laws. However, we are talking about a moral framework which is never susceptible to legal intervention within which this matter should be addressed. The Minister makes his own point that a great deal of industrial business and service activity, whilst being competitive and lawful, can be deleterious in other respects.
Lord Sainsbury of Turville: My Lords, that leads me to my next point. If one refers to a moral framework, one should ask what is the competence of the OFT to give views or, indeed, materials on a whole range of other issues. I should place the matter in a realistic context in terms of how it would operate in schools. I believe that our main concern is similar in that context. Citizenship is already taught in schools. It is for schools to decide what materials they use in educating their pupils and the appropriate context for those materials. The noble Lord, Lord Phillips of Sudbury, commented that citizenship covers a much broader area than simply competition. The noble Lord should not worry that this matter will be placed within an inappropriate framework. It is not envisaged that the OFT will allocate significant resources to providing educational materials specifically aimed at schoolchildren. Its efforts will be aimed principally at educating the public at large.
Although I have great sympathy with the viewpoint that has been expressed, if we introduce the other matters that are proposed, we distract the OFT from the job that it is competent to perform and from its important focus; namely, to inform the public with regard to competition. We risk taking the OFT into other waters. I accept that it is proposed that that should be done within a certain framework. However, the OFT should focus on informing the public of the benefits of competition as that is what it is set up to do.
Lord Phillips of Sudbury: My Lords, I am grateful for the Minister's response. I believe that there is a
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difference here. I believe that a great deal of the value judgments that have to be made even within the framework of the Bill involve decisions that are not purely economic. The notion of fair trade, for example, is not based on a purely economic concept but on the concept of what is fair. There is no way round that problem. The Minister suggests that by introducing concepts of social community and environmental awareness, one is opening a Pandora's box. First, that is not the case as I have used only those three adjectives in the amendment. Secondly, I agree with the noble Baroness, Lady Howe, that any education, whether offered by the OFT or anyone else, that disregards that matrix of considerations is doomed to failure because it will not achieve its purpose.
I am a little surprised that the Government are not happy to accept the amendment as I believe that it would enforce the work of the OFT. Finally, it does not extend the scope of the OFT; it simply states that if the OFT is to engage in education as opposed to giving information or advice, it must do so in a broader context. Therefore, I wish to seek the opinion of the House.
5.57 p.m.
On Question, Whether the said amendment (No. 22) shall be agreed to?
Their Lordships divided: Contents, 75; Not-Contents, 126.

Division No. 2

CONTENTS

Addington, L.

Jacobs, L.

Allenby of Megiddo, V.

Jopling, L.

Astor of Hever, L.

Kingsland, L.

Avebury, L.

Lindsay, E.

Barker, B.

Livsey of Talgarth, L.

Blackburn, Bp.

McColl of Dulwich, L.

Blaker, L.

MacGregor of Pulham Market, L.

Boardman, L.

Bradshaw, L.

Maclennan of Rogart, L.

Buscombe, B.

Maddock, B.

Byford, B.

Mar, C.

Carlile of Berriew, L.

Mar and kellie, E.

Clement-Jones, L.

Marlesford, L.

Coe, L.

Michie of Gallanach, B.

Craigavon, V.

Moynihan, L.

Dahrendorf, L.

Newby, L.

Dholakia, L.

Newton of Braintree, L.

Falkland, V.

Northover, B.

Geddes, L.

Oakeshott of Seagrove Bay, L.

Goodhart, L.

Perry of Walton, L.

Goschen, V.

Phillips of Sudbury, L. [Teller]

Greaves, L.

Razzall, L.

Hamwee, B.

Reay, L.

Hanningfield, L.

Redesdale, L.

Harris of Peckham, L.

Roberts of Conwy, L.

Harris of Richmond, B.

Rodgers of Quarry Bank, L.

Hayhoe, L.

Rogan, L.

Higgins, L.

Roper, L.

Hodgson of Astley Abbotts, L. [Teller]

Saltoun of Abernethy, Ly.

Scott of Needham Market, B.

Howe, E.

Seccombe, B.

Howe of Aberavon, L.

Sharp of Guildford, B.

Howe of Idlicote, B.

Sharples, B.

Hunt of Wirral, L.

Skelmersdale, L.

745

Smith of Clifton, L.

Thomas of Walliswood, B.

Stewartby, L.

Tope, L.

Stodart of Leaston, L.

Vinson, L.

Taverne, L.

Wallace of Saltaire, L.

Wilcox, B.

NOT-CONTENTS

Acton, L.

Howie of Troon, L.

Ahmed, L.

Hoyle, L.

Alli, L.

Hughes of Woodside, L.

Alton of Liverpool, L.

Hunt of Chesterton, L.

Amos, B.

Hunt of Kings Heath, L.

Andrews, B.

Islwyn, L.

Bach, L.

Janner of Braunstone, L.

Barnett, L.

Jay of Paddington, B.

Bassam of Brighton, L.

Jeger, B.

Berkeley, L.

Jones, L.

Bernstein of Craigweil, L.

Kilclooney, L.

Billingham, B.

King of West Bromwich, L.

Blease, L.

Kirkhill, L.

Borrie, L.

Layard, L.

Bragg, L.

Lea of Crondall, L.

Brooke of Alverthorpe, L.

Lipsey, L.

Brookman, L.

Lofthouse of Pontefract, L.

Brooks of Tremorfa, L.

McCarthy, L.

Burlison, L.

Macdonald of Tradeston, L.

Campbell-Savours, L.

McIntosh of Haringey, L. [Teller]

Chandos, V.

Christopher, L.

MacKenzie of Culkein, L.

Clarke of Hampstead, L.

Marsh, L.

Clinton-Davis, L.

Masham of Ilton, B.

Cohen of Pimlico, B.

Mason of Barnsley, L.

Corbett of Castle Vale, L.

Merlyn-Rees, L.

Craig of Radley, L.

Milner of Leeds, L.

Crawley, B.

Morris of Aberavon, L.

David, B.

Oppenheim-Barnes, B.

Davies of Coity, L.

Orme, L.

Davies of Oldham, L.

Patel, L.

Desai, L.

Patel of Blackburn, L.

Dixon, L.

Paul, L.

Donoughue, L.

Pendry, L.

Dormand of Easington, L.

Peston, L.

Elder, L.

Plant of Highfield, L.

Evans of Parkside, L.

Prys-Davies, L.

Evans of Watford, L.

Radice, L.

Farrington of Ribbleton, B.

Ramsay of Cartvale, B.

Faulkner of Worcester, L.

Rendell of Babergh, B.

Fitt, L.

Richard, L.

Fyfe of Fairfield, L.

Rooker, L.

Gale, B.

Sainsbury of Turville, L.

Gavron, L.

Sawyer, L.

Gibson of Market Rasen, B.

Sheldon, L.

Gilbert, L.

Simon, V.

Gladwin of Clee, L.

Smith of Leigh, L.

Golding, B.

Stoddart of Swindon, L.

Goldsmith, L.

Stone of Blackheath, L.

Gordon of Strathblane, L.

Strabolgi, L.

Goudie, B.

Taylor of Blackburn, L.

Gould of Potternewton, B.

Temple-Morris, L.

Graham of Edmonton, L.

Thornton, B.

Greenway, L.

Tomlinson, L.

Grenfell, L.

Turner of Camden, B.

Grocott, L. [Teller]

Varley, L.

Hardy of Wath, L.

Walker of Doncaster, L.

Harrison, L.

Warwick of Undercliffe, B.

Haskel, L.

Weatherill, L.

Haskins, L.

Whitty, L.

Healey, L.

Williams of Mostyn, L. (Lord Privy Seal)

Hilton of Eggardon, B.

Hogg of Cumbernauld, L.

Williamson of Horton, L.

Hollis of Heigham, B.

Woolmer of Leeds, L.

Resolved in the negative, and amendment disagreed to accordingly.
6.7 p.m.
[Amendment No. 23 not moved.]
Clause 11 [Super-complaints to OFT]:
Lord Hunt of Wirral Lord Hunt of Wirral moved Amendment No. 24:
Page 5, line 4, at end insert—
"( ) In the event that the OFT decides to take no action, and an undertaking has incurred costs as a result of the complaint, the OFT upon the application of the undertaking may make an order that the consumer body which made the complaint shall contribute to the costs of that undertaking."
The noble Lord said: My Lords, investigations by the competition authorities often impose huge costs and other burdens on business. I make no apology for moving this amendment. When there is no action by the competition authorities following a super-complaint against an undertaking, the undertaking should at least be given the opportunity of seeking a contribution to its costs. I cannot foresee that the noble Lord will have any argument against that; there are surely many arguments in favour of it. It would deter frivolous or vexatious complaints. I see no other provision in the Bill that would have that effect. Once again, I stress that investigations impose huge costs and other burdens on business. There is therefore every right for an undertaking, when a business has had to incur considerable cost, to at least have an opportunity to try to get some contribution to its costs. I beg to move.
Lord Kingsland: My Lords, I hope that the Minister will forgive two speakers rising from the Front Bench. The main reason that I do so is to apologise to him for tabling two manuscript amendments: Amendments Nos. 27A and 158A. I take full responsibility for the fact that they are late. I do not know whether the Minister is in a position to respond to them. I see that the noble Lord is nodding. I thank him for preparing himself so swiftly for the coming ordeal.
I spoke to Amendment No. 27A during the Committee stage. In reply, the noble Lord, Lord McIntosh of Haringey, stated that the Government did not propose to add any new category of appealable decisions, save category (m), which concerned decisions not to grant interim measures under Section 35.
The noble Lord continued that the other proposed additions were not appropriate as they would extend the category of appealable decisions to intermediate or investigatory steps taken by the OFT. The noble Lord further added that parties at the stage of intermediary investigatory steps could still use judicial review, which, I entirely accept, carries with it the possibility of quashing interim measures.
In the course of my speech supporting this amendment in Committee, I relied heavily on a recent case of the Competition Appeal Tribunal called Bettercare. The Minister will be relieved to know that I do not intend to take your Lordships through the details of that case again. I shall make only one additional observation.

747
If one takes, for example, our proposed paragraph (1)—a category which refers to a decision by the OFT not to investigate a complaint under Chapters I or II—and compares it with an investigation started by the OFT but terminated because, for one reason or another, there are no good grounds to continue it, then that comparison, in my submission, is a distinction without a difference. In both cases, the OFT is deciding not to continue to investigate a matter. The only difference is that one decision is made in the course of an investigation and the other is made not to make the investigation at all. I believe it is difficult to see why, in making those decisions, the criteria of the OFT should differ. If my analysis about that is correct, it seems to me curious that in one case a person has a right to a full appeal to the Competition Appeal Tribunal but, in the other, only to judicial review in the High Court.
I would add that it was my impression that, under this legislation, the Government were striving to find some unifying judicial themes in dealing with competition law. That, in turn, suggests to me that the Government should, so far as possible, concentrate litigation in one place rather than two.
There is a second manuscript amendment in this group—Amendment No. 158A—Which concerns delay by the Office of Fair Trading. If there is delay by the OFT in any investigation that it undertakes from time to time under Chapters I or II, the only way that a person under investigation can respond to that situation is to make an application to the High Court. This amendment seeks to enable an approach to be made to the Competition Appeal Tribunal in order both that the OFT can be reminded that it has been considering a matter for some while and that the Competition Appeal Tribunal can be empowered to give directions to the Office of Fair Trading to expedite the investigation.
Again, I recognise that the Minister has had very little time to consider this matter, and I shall understand if he wants to defer a response until Third Reading. However, if he has something to say on it, I shall of course be very grateful to hear him.
Once again, I apologise to the Minister for the fact that these amendments are in manuscript.
6.15 p.m.
Lord Borrie: My Lords, I am among those who have only just seen these manuscript amendments. It may be due to my own inadequacy that I cannot understand why they are coupled with Amendment No. 24, which relates to Clause 11. They seem to deal with entirely different matters. Perhaps there has been a slip-up somewhere. I do not know whether I am the only person who has had that difficulty.
However, I want to speak to Amendment No. 24. It is somewhat similar to amendments that we discussed in Committee and, indeed, is somewhat less extreme than one proposed by the noble Lord, Lord Sharman, at that stage. But there was an interesting division on the Liberal Democrat Benches. For some reason, several noble Lords on those Benches have deserted us
748
at this moment. But I noticed that, in relation to the similar amendment moved by his colleague, one other member of the Liberal Democrat team—the noble Lord, Lord Phillips of Sudbury—said that it would put a torpedo under Clause 11 if it were passed.
To my mind, that is an appropriate phrase because, if this amendment were carried, it would seriously inhibit the work of consumer bodies, which are meant to promote super-complaints and which must be designated—no doubt after careful consideration by the Secretary of State. According to my knowledge of consumer bodies, it is very unlikely that they are rolling in money and are able easily to manage to pay the type of costs that might be envisaged by the amendment.
Surely the whole point of Clause 11 is that such bodies have special expertise. They are given a remit in Clause 11 to assist the public interest in bringing forward complaints that deserve closer investigation. It would seem a great pity to hobble that work by the proposed costs deterrent provided by the amendment.
I remind your Lordships that the guidance that will come from the Office of Fair Trading will ensure—indeed, it will insist—that super-complainants present a reasoned case. That, surely, is sufficient to dispel any notion that vexatious complaints will arise which would be a thorough nuisance and cause a cost problem to the businesses or undertakings concerned.
Lord Sainsbury of Turville: My Lords, I shall speak to Amendment No. 25, which is also in this group. This amendment would make it a requirement for the Secretary of State to publish criteria which bodies would have to meet in order to be designated as super-complainants. It has always been the Government's intention to publish those criteria, and the amendment responds to a similar one tabled by the noble Lords, Lord Razzall and Lord Sharman, in Committee, which I agreed to consider.
We shall consult fully on the criteria after the Bill has received Royal Assent. I have written to the noble Lord, Lord Kingsland, and others with copies of the latest draft of the criteria, which I hope they have found helpful.
Amendment No. 24 seeks to make consumer bodies contribute towards the costs incurred by the business where the OFT has decided that there is no case to answer following its consideration of a super-complaint. I am afraid I believe that the amendment is based on a false premise. It treats the super-complaints process as if it were a litigious one. Super-complaints are not about taking businesses to court; they are about providing designated consumer groups with a quick and effective route into the OFT system for complaints about market features that are harming consumers. If a super-complaint is submitted with inadequate evidence or which is clearly without foundation, it will not take the OFT long to announce that it intends taking no further action. I cannot imagine that it would require much work either, if any, by the companies in the affected market.

749
We have already put in place checks to prevent against frivolous or vexatious super-complaints being submitted in the first place. Consumer bodies, to be designated to bring super-complaints, will have to meet criteria drawn up by my department. A body will have to produce evidence of experience and acting responsibly—and of the ability to put together reasoned super-complaints.
The cost of putting together a reasoned super-complaint is likely to be considerable. Taking that into account, together with the damage to a body's reputation if the OFT publicly dismissed a super-complaint as frivolous, it is unlikely that the making of a super-complaint will be entered into lightly. The OFT has begun consultation on draft guidance on the making of super-complaints and I wrote to noble Lords about that in September.
We expect that there will be informal consultation between the body bringing the super-complaint and the Office of Fair Trading before the OFT accepts the complaint. It is highly unlikely that a frivolous super-complaint will be submitted but if that does happen, the OFT will not take further action beyond the initial consideration. I do not think that should take long or require much from the companies concerned.
In all super-complaint cases, the OFT will publish the reasons for what action, if any, it proposes to take—which will ensure that consumer groups submit decent super-complaints. They will not want the bad publicity and subsequent damage to their reputation from the OFT discarding one of their super-complaints as wasteful.
The super-complaint process does not impose new burdens on companies. It will only consider whether action is justified—just as with any other complaint. The process involves no sanctions or judgments of its own. Super-complaints are simply a new route into the OFT system—an initial "fast tracking" to ensure that complaints about market failure that harm consumers are given consideration within a fixed period. The options that the OFT has for follow-up action to super-complaints are the same as for any other complaint.
It is therefore right that all parties should follow the same procedure in terms of costs. Parties do not get their costs back when other complaints are submitted to the OFT and investigations are carried out that result in no action being taken. It would be an unnecessary additional burden and unfair to have that condition attached to complaints made via the super-complaints procedure. It would almost certainly discourage designated bodies from bringing super-complaints and make the new procedure meaningless. The bodies would surely opt instead for submitting a normal complaint, where the threat of costs does not exist. I am confident that the checks that we have already put in place will be sufficient to guard against frivolous super-complaints.
Similar arguments on costs have not been made in respect of super-complaints where the complaint is found by the Office of Fair Trading to be legitimate
750
and results in further action by the OFT to make markets work properly and protect consumers. I did not hear any calls for the businesses concerned to contribute towards the costs of the super-complainant in such cases. In view of those arguments, I invite the noble Lord to withdraw the amendment.
I have been briefed efficiently and quickly by DTI civil servants on Amendments Nos. 27A and 158A. My comments this morning on the movers of this amendment and on the procedures of the House of Lords will, I hope, remain confidential to myself and the civil servants.
Amendment No. 27A would add to the list of decisions by the OFT that could be appealed to the Competition Appeal Tribunal under the Competition Act 1998. Section 46(3) lists a number of decisions of the OFT that can be subject to a full appeal to the tribunal and further decisions may be added by regulation. In our earlier debate, I accepted an amendment in the category covered by Section 46(3)(m) and we are working to bring forward secondary legislation as soon as practicable to add that new right to Section 46(3) and Section 47.
I am convinced that the remaining proposals that form Amendment No. 27A should not be taken forward. Paragraphs (i) to (k) relate to intermediate steps in the OFT's investigative procedures and are not substantive decisions of the OFT. Granting a right of appeal on interim investigatory steps would be highly unusual, significantly increase the length of OFT investigations and reduce the office's discretion to deploy resources to areas where it can be most effective. There would be a concurrent deleterious effect on the operation of the competition regime as a whole.
Subsection (1) concerns OFT decisions not to investigate complaints. It is essential that a right of appeal to the CAT is only granted against substantive decisions of the OFT, as was always the clear intention during the passage of the Competition Bill.
Amendment No. 158A would provide for persons who had submitted material to the Office of Fair Trading alleging infringement of Chapters I and II prohibitions of the Competition Act 1998 to seek a direction from the Competition Appeal Tribunal that the OFT's investigation of the alleged infringement is determined without any unnecessary further delay, where the court is satisfied that there has been undue delay on the part of the OFT.
The investigation of complaints alleging infringement of Chapters I and II prohibitions of the Competition Act 1998 is the responsibility of the Office of Fair Trading. Some of the allegations that the OFT will receive will be dismissed at an early stage, whereas some will lead to findings of a serious breach under the Act.
To ensure that the most serious and harmful cases are dealt with effectively, the OFT needs the discretion to deploy its resources accordingly. The amendment would restrict the OFT's ability to prioritise its caseload and would hamper the investigation of serious breaches of the Act. Furthermore, many

751
elements of an investigation are outside the OFT's control—for example, where it is dependent on further information from third parties. That can affect the time it takes the OFT to gather the material necessary to further an investigation, which would not be assisted by the amendment. I am not minded to take forward either of the amendments and hope that they will be withdrawn.
Lord Hunt of Wirral: My Lords, I am grateful to the Minister for responding to Amendment No. 24. In the light of his remarks, I will reflect carefully on his points and those of the noble Lord, Lord Borrie. I thank the Minister most warmly for his response to the manuscript amendments. We will carefully consider not only what he said publicly but also that which he is reputed to have said privately to his officials about the procedures of the House. In all those circumstances, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Sainsbury of Turville Lord Sainsbury of Turville moved Amendment No. 25:
Page 5, line 9, leave out subsection (6) and insert—
"( ) The Secretary of State—

(a) may designate a body only if it appears to him to represent the interests of consumers of any description, and

(b) must publish (and may from time to time vary) other criteria to be applied by him in determining whether to make or revoke a designation."

On Question, amendment agreed to.
Schedule 4 [Tribunal: procedure]:
6.30 p.m.
Lord Sainsbury of Turville Lord Sainsbury of Turville moved Amendment No. 26:
Page 205, line 16, after "particular" insert"—

"(a) provide for time limits for making claims to which section 47 A of the 1998 Act applies in proceedings under section 47A or 47B;

(b) provide for the Tribunal to extend the period in which any particular proceedings may be brought; and

(c)"

The noble Lord said: My Lords, I am conscious that this is a large group of amendments but they are all similar, in that they primarily make technical changes to the Bill to improve its functioning. They reflect work that has been done over the summer to respond to certain points raised by noble Lords in Committee and to check through the Bill for accuracy. Our hope is that none of the amendments in this group will cause your Lordships any difficulty. Given the size of the group, I will keep my commentary to a minimum and focus on those amendments that are likely to be of most interest.
I said in Committee that we would consult on what would be the appropriate period for bringing an action following a decision in a merger or market investigation. We have now launched our consultation
752
on the tribunal's rules. Part of that seeks views on whether the periods should be one month for a merger and six weeks for a market.
I emphasise that we have not yet come to any view on the appropriate length of either period. However, we have decided that as we may end up changing these periods in the tribunal's rules at an early stage in the life of the legislation, it would be better to remove the reference to three months from the face of the Bill. Amendments Nos. 26, 79 and 141 guarantee that whatever the outcome of the consultation we have the flexibility we need.
There are 28 technical amendments aimed at improving the clarity of the public interest regimes under the Bill. The most significant changes to the EPI scheme are Amendments Nos. 50 and 117, which clarify that there is a power to add new public interest considerations, unrelated to any considerations already specified in Clauses 57 and 148. That was always our clear policy intention.
Amendments Nos. 89, 90, 143 and 144 are technical amendments to provide for the situation where an order effecting a change to the public interest considerations specified in Clause 57 or 148 is subsequently not approved by Parliament. These amendments ensure that the changes are reversed.
We are also tabling 20 amendments to improve the enforcement regime in Parts 3 and 4 of the Bill. Of those, 14 are required to ensure that more than one undertaking can be accepted—for example, when the OFT is considering accepting undertakings in lieu. The remaining six make minor technical changes to other parts of the regime.
Amendment No. 64 is concerned with the interaction between the special regime for water mergers and the general mergers regime. Mergers between conglomerates and multi-utility companies can involve the merger of a range of different businesses. It is possible that a merger between two water enterprises falling to be assessed under the special regime could be a component of a bigger merger. The amendment clarifies that the general Part 3 mergers regime can apply to the bigger merger but, where that happens, excludes from consideration any merger between water enterprises that is subject to the separate mandatory assessment under the Clause 67 regime.
In Committee, the noble Lord, Lord Hunt of Wirral, moved an amendment to the definition of "business" in what is now Clause 178, which I agreed to consider further. The purpose of the noble Lord's amendment was to make clear that the conduct of public bodies, where it has an impact on competition in a market, can be taken into account in the context of a market investigation.
In our view, amending Clause 178 is not the best way of resolving that point. We propose instead to delete the words "in the course of business" from Clause 126(2). That means that the conduct of public bodies supplying or acquiring goods or services in a market will always be capable of being taken into account as a "feature" of a market within the meaning of this

753
clause. Given that the conduct of public bodies is capable of having a significant impact on competition in many markets, we believe that that is appropriate.
Clause 191 provides for professional privilege in respect of legal and banking material in the context of investigations of the cartel offence. Amendment No. 157 provides a different way of accounting for the equivalent in Scotland of legal professional privilege. I am grateful to the noble Lord, Lord Hunt of Wirral, and to his colleagues who drew attention to that matter in Committee.
The Government's intention throughout Part 6 has been to model the OFT's investigatory powers and safeguards for those under investigation on those contained in the Criminal Justice Act 1987. The original Clauses 191 and 197 followed the Criminal Justice Act 1987 precedent. That was done to ensure consistency in approach regardless of whether the OFT or SFO are investigating or prosecuting.
However, having considered the matter further, we recognise the concerns that current Scottish customs and practice be properly reflected in the Bill. I am therefore pleased to move the amendment which draws on the opposition amendment brought forward in Committee. It follows the more recent precedent of the Proceeds of Crime Act 2002 and provides a definition which corresponds more closely with Scottish practice.
Amendments 149 and 150 allow for the appointment of independent members to the Competition Commission's governing council. The function of those independent members will be solely and specifically to sit on the council. We see the addition of independent members to the council as a way of strengthening the leadership of the Competition Commission and reflecting best practice in corporate governance. The council would now consist of the chairmen, the deputy chairmen, the chief executive and one or more independent member.
A number of other amendments are being made, but as I stressed at the outset I do not intend to go into any more detail now. I re-emphasise the minor and technical nature of the amendments. I beg to move.
On Question, amendment agreed to.
Lord Sainsbury of Turville Lord Sainsbury of Turville moved Amendment No. 27:
Page 205, line 19, leave out sub-paragraph (3).
On Question, amendment agreed to.
[Amendment No. 27A not moved.]
Lord Davies of Oldham: My Lords, I beg to move that consideration on Report be now adjourned. In moving the Motion I suggest that the Report stage begin again not before 8 p.m.
Moved accordingly, and, on Question, Motion agreed to.

Northern Ireland
6.36 p.m.
Lord Williams of Mostyn: My Lords, with the leave of the House, I shall now repeat a Statement made in another place by my right honourable friend the Secretary of State for Northern Ireland. The Statement is as follows:
"As the House knows, over the past weeks and months the political process in Northern Ireland has encountered increasing difficulties. I do not need to remind the House of the magnitude of the project on which we are embarked in Northern Ireland, nor that in any great historic process of this kind there will be setbacks and difficulties. My sincere hope, therefore, was that we would be able to overcome those challenges in the short term. That is why the Prime Minister and I have had intensive discussions in recent days with the Northern Ireland political parties and the Irish Government. However, it had become clear that an impasse had been reached and that decisive action was needed in order to safeguard the progress made and tackle the remaining challenges.
"Because of the difficulties we have encountered, I yesterday made an order under the Northern Ireland Act 2000 suspending devolved government in Northern Ireland. It came into effect at midnight yesterday.
"The real losers here are the ordinary people of Northern Ireland, those who appreciate and deserve local decisions which affect local people being made by local politicians, not least because the devolved administration has achieved so much on their behalf, and in their interest. I take this opportunity to pay warm tribute to the First Minister, the Deputy First Minister and his predecessor, and to their ministerial colleagues, for all they have done. I very much hope that the devolved institutions can be restored quickly.
"I would stress that this impasse affects one aspect of the Belfast agreement, albeit an important one. As the joint statement by the Prime Minister yesterday made clear, this Government remain totally committed to the full implementation of the agreement. It has already brought great benefits to the people of Northern Ireland.
"In their statement, the Prime Minister and the Taoiseach also recognised that the recent difficulties in Northern Ireland stemmed from a loss of trust on both sides of the community. There has been much apportioning of blame and there is no doubt there is a lack of confidence on both sides of the community. However, at the heart of the recent political difficulties have been concerns about the commitment to exclusively democratic and non-violent means.
"Let us be clear that we have seen violence from all sides of the community, including a campaign, sometimes murderous in its intent and effect, from the so-called loyalist paramilitaries. Let it be quite clear that the Chief Constable and I are combating it

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and will combat it with all the means at our disposal, wherever it happens, whoever is behind it. We will go wherever the evidence leads. That is why I have recently redoubled our efforts by setting up the new Law and Order Action Group bringing together the key agencies to strengthen our drive against all forms of racketeering and violence, from wherever it may come.
"I have to tell the House that an arrest was made this morning in connection with the shooting of Danny McBrearty in Londonderry on 29th September. Police inquiries are continuing.
"I have absolutely no doubt that episodes such as the trial of republicans in Colombia and the break-in at Castlereagh have seriously damaged confidence in the power-sharing arrangements. It would, of course, be entirely improper to prejudge the outcomes of any cases involving outstanding criminal charges. But it would be naive for any politician to ignore the impact on political and public opinion of the recent charges brought against republicans, including members of Sinn Fein, as a result of the police operation on 4th October.
"Like me, the House will be particularly concerned about the position of prison officers and others and their families, for whose assistance the police have now established a special unit. The Prison Service is working closely with the police and has established a helpline.
"And I say this to the House: there is no authority, no legitimacy, no morality and no political basis for anyone, in today's Northern Ireland, to have recourse to violence or paramilitary activity. Whatever may have happened 30 years ago or 300 years ago, in today's Northern Ireland the path to power through democracy is open to everyone.
"It is also essential, as the Prime Minister and the Taoiseach noted, that each community has confidence in the commitment of the other to the agreement. That is now our challenge; that is now our task. Yesterday was, not surprisingly, filled with recrimination. Today, we should be about rebuilding. But that rebuilding has to be done on foundations which are firm, sound, and lasting.
"It is against this background that the Prime Minister and Taoiseach said yesterday that,
'it must be clear that the transition from violence to exclusively peaceful and democratic means, which has been ongoing since the Agreement, and indeed before, is being brought to an unambiguous and definitive conclusion'.
They also said:
'It is now essential that the concerns around the commitment to exclusively democratic and non-violent means are removed. The time has come for people to clearly choose one track or the other'.
"We face some difficult and challenging weeks ahead of us. Our tasks are threefold. First, we need to move rapidly and decisively from the recent weeks of political uncertainty. I have no doubts that the people of Northern Ireland—who should be always
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the ones at the front of our minds in all that we are doing—welcome, appreciate and deserve devolved government.
"Like them, I would have much preferred devolved government continuing, with local Ministers making local decisions. But until it can be restored, I and my colleagues will dedicate ourselves to working for the good of all the people of Northern Ireland to the best of our abilities. In the meantime, we will carry on the process of government in Northern Ireland proactively, and in the interests of all of its people.
"This must not be a matter of mere care and maintenance. We owe it to the people of Northern Ireland that effective government should be moved forward. We will not duck the difficult issues. And we will be able to build on the progress made by the devolved administration in many areas, taking careful account of the "Programme for Government" and the principles of re-investment and reform on which it is based. I have already met yesterday with the First and Deputy First Ministers.
"The Policing Board is widely agreed to have been one of the finest achievements of the agreement. I want its work to continue. I have invited all the existing board members to continue providing their excellent service to the community. I sincerely hope that they will all accept reappointment.
"In this context, I welcome two members of the ministerial team. I am making available separately the details of ministerial responsibilities under suspension. In broad terms, the Minister of State's additional responsibilities will focus on education and those of the Under-Secretary of State on social issues including health. The portfolios of my honourable friends the Member for Dudley South and the Member for Basildon will centre respectively on economic affairs and environmental issues.
"Secondly, under the terms of the agreement, we need to embark on a process of review. I will be in touch with the parties and the Irish Government about how that should be taken forward. I want to stress that this is an impasse—I hope, short-lived—in one aspect of the agreement. It is not the whole agreement. It is not the whole peace process. We will continue, in co-operation with the parties and our colleagues in the Irish Government, to carry forward that process and the implementation of the agreement.
"Thirdly, we will bend every effort to find a basis on which to bring back the devolved institutions, and as quickly as possible. The role and responsibility of the political parties in achieving this is vital. It is our aim to find a basis on which all the institutions of the agreement can be brought back into operation as soon as possible. The election date scheduled for 1st May stands.
"These three priorities: the good governance of Northern Ireland; carrying forward the agreement; and addressing the present impasse, will inform the approach of the Government over the coming weeks

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and months. In those tasks we will call upon the co-operation and support of the parties, our colleagues in the Irish Government and those far beyond our shores like the President and people of the United States who have been unstinting in their support.
"For our part, I can promise the House that we will bear ourselves with determination and endurance, because we recognise that the magnitude of the prize we seek is commensurate with the challenges we face.
"We have come an enormous distance in recent years. The peace process and the agreement have increased prosperity, revitalised society, safeguarded rights, and—above all—saved lives. I am determined that these benefits should not be lost, but should increase. The agreement will remain a template for political progress in Northern Ireland. I hope the decision I have explained to the House today creates a breathing space—a chance to gather strength—before that progress moves forward once again".
6.46 p.m.
Lord Glentoran: My Lords, I thank the noble and learned Lord the Lord Privy Seal for repeating the Statement made by the Secretary of State for Northern Ireland in the other place earlier this afternoon. This is undoubtedly a sad day for Northern Ireland. Four and a half years after the signing of the Belfast agreement, with all the hopes and aspirations that surrounded it, devolved government has had to be suspended for a fourth time and direct rule imposed from Westminster.
It is all the more tragic because the political institutions that flowed from the agreement—the Assembly, the Executive, the North/South Ministerial Council and the British-Irish Council—were generally considered to be working well. As someone who lives in the Province I am convinced that devolution, with locally elected politicians taking decisions over local matters, will always be a much more responsive form of government for Northern Ireland than will ever be the case under direct rule.
We hope that this period of direct rule will not only be short but will also be the last. It must be our intention, as the noble and learned Lord said, to return powers to locally elected politicians as soon as is practically possible. However, as things stand today none of us can be confident about when that might be. In the meantime, we trust that the Ministers in the Northern Ireland Office, including the two new appointees, will exercise their responsibilities in an impartial and even-handed manner in the interests of all sections of the community.
The House will have noted, perhaps with surprise, that both the new Ministers in the Northern Ireland are from another place. As for as I know this the first time there has been direct rule without a Minister from the House of Lords. Perhaps the Prime Minister considers these two to be far better than anyone
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available to be appointed from the Government Benches here. I do not know the new Ministers, but I would dispute that conclusion
Lord Graham of Edmonton: They are both very good.
Lord Glentoran: My Lords, I thank the noble Lord. The reason why direct rule has had to be re-imposed today is clear. There has been a complete breakdown of trust between the parties that signed the agreement. Does the noble and learned Lord the Lord Privy Seal agree that we are here today entirely because of the republican movement's failure to fulfil its commitments under the Belfast agreement to make the clear and unambiguous transition to exclusively peaceful and democratic politics?
The agreement called for the complete disarmament of all paramilitary organisations. In his speech during the referendum campaign in May 1998 the Prime Minister said that there had to be "progressive abandonment of paramilitary structures". However, since the agreement Sinn Fein has continued to pursue a twin-track policy of serving in government while remaining inextricably linked to the terrorist organisation known as the IRA.
Does the noble and learned Lord agree that this is completely unacceptable? Does he also agree that the time has come to operate the same threshold for Sinn Fein's participation in the government of Northern Ireland as the Taoiseach insists on in the Republic of Ireland; namely, no private army?
The catalogue of republican breaches of the ceasefires over the past year is compelling. We had the arrest of three republicans in Colombia suspected of collaborating with the narco-terrorist group FARC; we had the break-in at Castlereagh police station, strongly suspected as being the work of the IRA, which has led to hundreds of people being re-housed across the Province; we had the discovery of target lists of members of my party and updated information on military targets in Great Britain; and we had a summer of street violence in which, according to the police, known republicans—along with loyalists—were among the main protagonists. We have the paramilitary beatings and shootings, the exiling of people from their homes—again carried out on both sides—that are a daily feature of life in parts of Northern Ireland. And, a week last Friday, we had the discovery of a republican spy ring in the heart of government at Stormont. I hope that it is not in Westminster.
Among the documents uncovered in the police raid on Sinn Fein's offices—a party in government—were transcripts of conversations between the British and Irish Governments, the Government and the Northern Ireland parties, and even transcripts of conversations between the Prime Minister and the President of the United States. Does the noble and learned Lord agree that all of this is clearly incompatible with a commitment to what the Belfast agreement calls "exclusively democratic and peaceful means"? If he

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does, then is it not also the case that by suspending the institutions, and restoring direct rule, the Government are punishing the innocent along with the guilty?
Would not the right response to this crisis have been for the Secretary of State to have fulfilled the commitment he gave to Parliament in July to take action against the one party—Sinn Fein—that is in breach of its obligations? In my party's view, the Secretary of State should have tabled a Motion before the Northern Ireland Assembly this week for the exclusion of Sinn Fein. And had that failed he should have done what we have been urging him to do for a year now and taken powers here at Westminster to exclude any party in breach of the cease-fire and the agreement.
This is a power that we believe should be available to the Secretary of State. Therefore, will the Lord Privy Seal now urge him to take it so that devolved government can be restored with an Executive comprised of those parties, Unionist and nationalist, that are committed to peaceful and democratic politics?
It is clear that the political process in Northern Ireland is in a deep crisis. The next few months will be critical. But we remain committed with the Government to the implementation of the Belfast agreement, and we want to see devolved government re-established on as inclusive a basis as possible. Yet that can be done only on the basis that all parties operate under the same rules and on a level playing field.
There can be no place in a democracy for private armies. Responsibility now rests with those who have for too long been ambiguous in their attitude to violence to make the transition. Otherwise, as things stand, direct rule will, regrettably, be with us for some time to come.
6.53 p.m.
Lord Smith of Clifton: My Lords, I, too, thank the Lord Privy Seal for repeating the Secretary of State's Statement.
We have, of course, been here before. The politics of intransigence has triumphed yet again. One wonders whether it will always surface to torpedo the process of Northern Ireland ever becoming a mature and stable democracy. We must always hope and pray that the politics of transcendence, to borrow Professor Paul Arthur's felicitous phrase, may one day allow an enduring democratic system to exist.,
History seems to be repeating itself with monotonous and depressing regularity, but it is vital to note that the present crisis is not the same in all respects as that which erupted previously. What occurred in 1999 led to a three-month suspension of the Executive and the Assembly. On that occasion, both institutions were in possession of a relatively fresh mandate from the elections of 1998. Now, by contrast, both have a fast waning mandate that, in the normal course of events, would have been refreshed or changed with the elections that were due next May.
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The second difference is that this time the suspension of Stormont is likely to be considerably longer than three months. That means that what is left of the various parties' mandates in practice has now been snuffed out. Therefore, I would argue strongly that unless the Assembly and the Executive can be reconvened within a month—and, as I say, that is very unlikely—all salaries be terminated.
I raised this issue in an amendment that I proposed at the Committee stage of the Northern Ireland Bill 2000. I was given assurances then that salaries would be kept under review by the Secretary of State. This time, I understand, the Executive will lose all their ministerial emoluments, and Assembly members will have token reductions in the already disproportionately inflated salaries they voted themselves with unseemly alacrity.
There is an unanswerable case for terminating their salaries after a month on two grounds: first, one of principle in that they are not doing the business; and, secondly, particularly in the context of Northern Ireland, it is the quickest way to concentrate minds.
Can the noble and learned Lord say what the policy of Her Majesty's Government will be on this issue in the event of a prolonged suspension? It looks as though they may be waiting six months. That, frankly, is far too long.
Another difference between now and two years ago is that the political vacuum created by the suspension of devolution will not lead to a re-imposition of direct rule of the kind that has traditionally obtained. It will not be a return to the status quo pre-1998 as the Unionist opinion fondly hopes. As I have said previously in your Lordships' House, without a speedy restoration of devolution the only practical alternative is some form of condominium arrangement operated between London and Dublin. If that was true earlier, I believe it is much more so now. In the two years that have elapsed, there has been much sensible cross-border collaboration in tourism, waterways, agriculture and in other practical ways.
It is inconceivable that the two governments of the UK and Ireland would allow such constructive activity to be halted or mothballed now. A momentum has been established and the achievements are there to be seen. I predict that what we shall observe is a quickening in the pace of such partnership activity between London and Dublin in the governance of Northern Ireland. The future will be "Maryfield with knobs on", as Dr Maurice Hayes so graphically described it in his column last week in the Irish Independent.
Such a development is inherent in any prolonged suspension of the Assembly and power-sharing Executive. The principle of power sharing is here to stay. If it ceases to be practised via the conduit of the Assembly and the Executive, then it will be carried on by a London/Dublin condominium. I am pleased that that was, to some extent, re-affirmed in the Statement. But I would ask the Leader of the House to be more specific and to give us some details on how he sees this collaboration with Dublin developing.

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For some time, perhaps for most of the time since 1998, there has been, what I shall call an implicit prevailing consensus within governing circles at all levels that all was manageable for so long as the UUP and the SDLP held the reins of power in the form of the First Minister and Deputy First Minister posts. Unfortunately for this view, both parties have been losing their electoral support at an increasing rate to the DUP on the one hand and to Sinn Fein on the other. The so-called middle ground of politics, on which the prevailing consensus relied, has fast been disappearing.
All of this has clearly undermined the rationale of the prevailing consensus which, in recent months, has been valiantly attempting to shore up a false political equilibrium. There have been press reports of late that London and Dublin have been considering prolonging the life of the Assembly beyond its constitutionally prescribed limit, for fear of the likely outcome of the scheduled elections in May. If the press is to be believed, one reason perhaps for supporting suspension now is the rather perverse one that it would at least pre-empt any such gerrymandering. Tinkering with scheduled elections in this way should be unthinkable to any democratically elected government in all contexts, but particularly so in that of Northern Ireland. I trust that the press rumours are totally without foundation. I invite the Leader of the House to say so.
Propping up a false equilibrium is not a viable option in the long run. What is going to happen after next May if Stormont remains suspended? It may be that the London/Dublin condominium will have been reasonably successful and may become entrenched and in some way acceptable to general opinion. Given the zero-sum nature of Northern Irish politics that leads to inevitable impasse too regularly for democracy to prevail, perhaps a condominium arrangement is Pareto-optimal, as the economists say. In other words, there may be enough of a trade-off for there to be something in it for everyone. At a pinch one could live with that.
However, as a passionate believer in representative parliamentary democracy, my preference would be for the restoration of Stormont with fresh elections next May at the latest. If that means the DUP and Sinn Fein become the main parties, so be it. The people will have spoken. They should be given a voice. I do not think it is beyond the bounds of possibility or ingenuity that the DUP and Sinn Fein could contrive a working modus operandi. After all, the day-to-day working of the Executive has not been impeded by widely differing political viewpoints around the table. If such a deal proved to be impossible, the London-Dublin condominium could prevail. Will the Leader of the House confirm unequivocally that elections will take place in May at the latest? The Statement says that they still stand. That is too weak a commitment.
We on the Liberal Democrat benches will support the suspension of devolution with a heavy heart and because it seems to be the only realistic option available at present. But the future may be fraught.
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Minds must now be concentrated among the parties and between the two Governments in broad and imaginative ways to get devolution back on track.
7 p.m.
Lord Williams of Mostyn: My Lords, I am grateful to the noble Lords, Lord Glentoran and Lord Smith, for their comments. In different ways they have both said that, four and a half years on, this is a sad day. It is, but it is a set-back; it is not a catastrophe. It is a blemish; it is not a terminus. I entirely agree with what the noble Lord, Lord Glentoran, said: devolution will always be the most responsive—and therefore the most appropriate—method for the governance of Northern Ireland.
I must gently chide the noble Lord, Lord Glentoran, on one thing, if I may. I think that it is well known to your Lordships that I asked my right honourable friend the Prime Minister if I might speak on Northern Ireland matters in this House. I hope that all of your Lordships—of whom there are many with different views and different backgrounds—with an interest in Northern Ireland feel that we have worked co-operatively together over a long time. I invited my right honourable friend Dr. Reid to allow me to continue to do that work. In no sense has he slighted this House by responding to my invitation. Of course, that may not be entirely to the satisfaction of all of your Lordships, but if blame there is, it is mine, not that of Dr. Reid.
The noble Lord, Lord Glentoran, asked what had brought about the suspension. There is no doubt that its proximate cause was the fact of the activity in the Northern Ireland Office and the discovery of what had been taken from there. We must be careful, because several people have been charged—there may be more; I do not know—who are entitled to a trial not bedevilled by allegations or assertions that may be the subject of criminal proceedings.
It is not a landscape wholly painted in sepia tones of gloom. It is as well to remind ourselves that we have all previously agreed that sometimes in Northern Ireland there are the dual disadvantages of too short and too long a memory. Since the peace process started, we have had the lowest troop levels in 30 years and 102 cross-border roads have been opened. Living standards, measured by the number of dwellings, have risen by 6,000 since last year. Jobs rose from 557,000 in June 1994 to 656,000 in June 2002—the highest employment figure on record for June. Unemployment fell by 62 per cent between April 1994 and April 2000. There has been the record of the fastest economic growth in the United Kingdom.
Devolved government has delivered a good deal. Tourism has increased to 1.6 million in 2000, compared to fewer than 500,000 in 1976. There is the new high-speed ferry service to Scotland, the new terminal at Belfast city airport—which is an exceptionally friendly airport that works a good deal better than Heathrow, if I may say so sotto voce. The Belfast-Dublin rail service has been upgraded; the M3 Lagan bridge has been opened, as has the Newry bypass and the new Foyle bridge.

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A great success has been the police board. As he said in his Statement, the Secretary of State has asked all 19 members to retake their responsibilities. Two of them have been uncontactable because they are abroad—I do not know whether they have been in Spain. The 17 who have responded have responded positively and will resume their functions.
Those are not bad achievements. Too short a memory? On 24th July, Dr. Reid made it perfectly plain that, as the Prime Minister and the Taoiseach have made plain on innumerable occasions, no one can ride both horses if one is violence and the other is democracy. No Secretary of State could have been plainer than that.
I turn to one or two questions of ignoble detail asked by the noble Lord, Lord Smith of Clifton. First, he asked: what about the salaries? The Secretary of State has said that salaries will be reduced with effect from next month to the levels that applied before the Assembly took powers. The effect is that salaries will fall by about a quarter. Representatives will for the time being function as constituency representatives and will receive some pay and allowances, but, to take the point made by the noble Lord, the Secretary of State has recognised that that cannot continue without review. If necessary, the Secretary of State will need to review that at the end of the year—which, of course, is not far away.
To state that the May elections still stand is not a weak way to put our position, and I stand by that.
The other questions asked relate to joint rule, to which the noble Lord, Lord Smith referred as the Dublin-Westminster condominium. He is a braver man than I. There is no question of joint rule; it features nowhere in the agreement and is not in the Government's thinking.
We want, after as brief a period of suspension as possible, to return to an Assembly that was working. It was working a good deal better than many of us had expected. It was a salutary, object lesson to go there to see what was happening. It was by no means perfect. I spent a day there during the summer talking to those of reasonably disparate views—starting the day with Mitchel McLauglin and finishing it with the Rev. Dr. Paisley. One way or another, that Assembly was working. We should not be too gloomy.
7.7 p.m.
Lord Rogan: My Lords, perhaps I may remind the noble and learned Lord, the Lord Privy Seal, and your Lordships' House of the Statement that he delivered to this House on 24th July at column 409. He said:
"In reviewing the cease-fires, I will give particular weight to any substantiated information that a paramilitary organisation is engaged in training, targeting, acquisition or development of arms or weapons, or any similar preparations for a terrorist campaign in Northern Ireland or elsewhere. I say to the House—lest there be any doubt on the matter—that I will not hesitate to use the powers Parliament has given me if the circumstances require it".—[Official Report, 24/7/02; col. 409.]
Given the events of the past two weeks, with the arrest of four Republican activists on suspicion of involvement in spying against the Government—our
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Government—at the very heart of the Northern Ireland Office, how can the Government justify their failure to exclude Sinn Fein/IRA Ministers from the Northern Ireland Executive?
Why have the Government decided, by suspending the political institutions, to punish all of the people of Northern Ireland, rather than those who are at fault? Have the Government considered the possibility that, by taking what some might describe as the easier option, they have risked dealing a final and fatal blow to Unionist confidence in the agreement itself?
On a practical level, as the duration of direct rule is open-ended, can the Government reassure us that the development of various projects, especially capital projects in areas such as health and education, will continue?
7.9 p.m.
Lord Williams of Mostyn: My Lords, I remember repeating the Statement on 24th July and there have undoubtedly been setbacks since then. Since 1st January 2002, 40 assaults and 47 shootings have been attributed to Republicans. Since the same date, attributable to loyalists have been 77 assaults—almost double that number—and 93 shootings, which is about double that number. So we need here to have a context that is not limited to the failings of one set of law-breakers or another. The noble Lord, Lord Glentoran, mentioned four-and-half years. It is a long time if you are living somewhere in deeply unsatisfactory circumstances. However, I respectfully point out that it is a short time within which to have accomplished what has undoubtedly been accomplished.
The noble Lord, Lord Rogan, made a very good point in his final remarks. He seeks my assurance that development projects and capital inflows, especially on health and education, will not cease. As my noble friend Lord Graham said, the Secretary of State has chosen two admirable Ministers who are both energetic and committed. Of course we want those capital inflows to continue. But external capital, international capital, will continue to go into Northern Ireland only if there is some prospect of hope towards a resumption of a democratic, devolved assembly. I do not believe that it was the easier option. It was the more scrupulous option. The option that Dr Reid and the Prime Minister took is best calculated to bring about what everyone wants; namely, a developing, increasingly stable democracy in Northern Ireland.
Lord Hylton: My Lords, I apologise to the noble and learned Lord the Leader of the House for the fact that I allowed myself to be detained in a Committee Room so that I missed the opening phrases of the Statement. However, I can assure the noble and learned Lord that I have read the Statement from start to finish.
I was delighted that the noble and learned Lord was able to give the House good news from the police authority. That, in itself, is a form of power sharing. However, I regret that the possibility of retaining the substance of power sharing was not grasped. I had hoped that new direct-rule Ministers could have been

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found from both the Unionist and the nationalist traditions. This might have been accomplished through another place, the European Parliament, or even through your Lordships' House. However, I should like to be more positive than that.
Can the noble and learned Lord give us an assurance that the north-south and east-west dialogue between this country and Ireland and between the North and the South of Ireland will continue at full strength? This is surely the wider context established by the Belfast agreement. It is vital that both dimensions of dialogue should be strengthened. If that can be done, the chance of internal agreement in Northern Ireland will be improved.
I have another thought; namely, that an analytical conflict resolution process facilitated by independent third parties could be helpful. Does the noble and learned Lord agree that such a process could assist the very necessary dialogue across the sectarian interfaces, notably in Belfast? If such a process proved successful there, I believe that it could be applied more widely.
Lord Williams of Mostyn: My Lords, I am most obliged to the noble Lord, Lord Hylton. Due to time running out, I do not believe that I gave full justice to all the questions put to me by the noble Lord, Lord Smith of Clifton. I am grateful to the noble Lord, Lord Hylton, for giving me the opportunity to return to those points. I can confirm that we shall continue to work in close co-operation with the Irish Government. Apart from anything else, by virtue of the 2000 Act, taken in conjunction with the Belfast agreement, we shall have to carry out the statutory review in due time in co-operation and partnership with the Government of the Irish Republic. Under suspension, it is clear that there will be no meetings of the North/South Ministerial Council. The implementation bodies are not affected by the suspension order. The British-Irish Intergovernmental Conference will continue to work in close co-operation with us and the Irish Government.
We shall look at the institutional formats to which the noble Lord, Lord Hylton, referred. He spoke about third party intervention, which has occurred in past years and which can be either formal or informal. I have to say that the United States Administration have been extremely helpful. Of course, we have had third party involvement in Northern Ireland over the years; I have in mind, for example, Senator Mitchell.
It is most important for Her Majesty's Government, the Government of the Irish Republic, and the Administration in Washington to continue to work together as closely and as faithfully as possible. However, there comes a time when the institutions in Northern Ireland will have to stand on their own two feet. I still believe that this is not an occasion of deep gloom and pessimism as can be seen if one puts one's mind objectively to the part recitation that I gave of the
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progress that has been made. That was just a small selection—perhaps 50 per cent—of what I could have recited.
Lord Fitt: My Lords, since the promulgation of the Good Friday agreement in this House I have found myself in a rather difficult position. At all times I should have liked to support the Labour Government in their objective in Northern Ireland; but living in Northern Ireland and being aware of its politics for many decades, I always had sincere doubts as to whether that agreement was ever going to work.
When the Government called upon everyone to vote in the referendum to support the Good Friday agreement, a great friend of mine—a very prominent and eminent trade unionist and historian—wrote a letter to a newspaper in Northern Ireland stating that he could not support the agreement for various reasons, which he then outlined. Over the years since then I have watched the unfolding of the situation in Northern Ireland and my friend has been proved right in every aspect of his objections. The main one being that the Good Friday agreement institutionalises Catholic and Protestant tribes. Where you have a Catholic as opposed to a Protestant tribe, you will never readily find agreement.
The agreement has created two Unionist parties, one more extreme than the other; and it has created two nationalist parties, one more extreme than the other. I have heard it said here today that it would have been possible for the Government to promulgate a motion at the Northern Ireland Assembly calling for the eviction of Sinn Fein because it had been engaged in violence. However, that would never have been passed by the Assembly, because the SDLP (the moderate Catholic party) could not afford to run away and desert the extreme Catholic party.
I know that the Minister, and other spokesmen for the Government, are saying in press releases and so on that we should not indulge in pessimism because the agreement can be resurrected. I have to stand here and tell the Leader of the House that I do not believe that the Good Friday agreement can be resurrected in its present form because the Unionist politicians will be playing to their electorate to get extreme votes and you will have the Catholic electorate—the Catholic MLA.
Here we have a continuation of the most divisive things in Northern Ireland politics. I agree almost line by line with what has been said by the noble Lord, Lord Smith of Clifton. The Government should find the means not to cling tenaciously to an agreement that has so often failed and is doomed to failure; they must try to resurrect some other constitutional means. This one has gone. I believe that it has gone for ever.
Lord Williams of Mostyn: My Lords, I always pay careful attention to what my noble friend Lord Fitt says. I recognise that he has a much greater reservoir of experience and of courageous political activity than any of the rest of us. I approach his comments with, I believe, appropriate regard. My noble friend said that his colleague, the historian, had written a letter to a

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newspaper giving many reasons why the agreement would fail. One year there were 500 reasons why the agreement must not fail: 500 dead.
This is a difficult time, but it is not a lost time. I turn, for example, to the police service. The PSNI has cross-community support. It has 50:50 recruitment. My noble friend Lord Fitt talked about institutionalised tribes. The board and the Chief Constable have agreed a workforce plan for the next eight to 10 years. There is in existence in Northern Ireland—not, I believe, in the remainder of the United Kingdom—an independent police ombudsman. We have had a review of the criminal justice system. We have had a successful passage of the Justice (Northern Ireland) Act. There is an organised crime task force. A single equality commission has been established. Again, I do not think that obtains in the remainder of the United Kingdom.
Enormous steps have been taken. We should not diminish the progress which has been made. It is not perfection. Nevertheless, it is very substantial.
Baroness Farrington of Ribbleton: My Lords, I hope that the noble Baroness, Lady Park, the noble Lord, Lord Kilclooney, and the noble Lord, Lord Laird, will be able to speak in the time available.
Baroness Park of Monmouth: My Lords, I was pleased to hear the reference to the arrest of the IRA men who shot, beat and tried to kill Mr O'Breavty when he was driving a busload of pensioners. He was attacked after appealing in vain to Martin McGuinness for help, his nephew having been exiled from Northern Ireland for refusing entry to a bar to Mr McGuinness's son. I hope that Sinn Fein-IRA will be required to end the exile rather than pressing them further on the stale and unprofitable issue of decommissioning.
I realise that we shall have a review. I hope sincerely that that review will address itself to the violence on the streets carried out by the paramilitaries against their own people on both sides. I wish also to be reassured that from now on we shall hear no more about proposals to allow the "on-the-runs" to return to the community.
Lord Williams of Mostyn: My Lords, I shall not comment about the details of the arrest made this morning and about the shooting of Danny O'Breavty. I stress that everyone—whether we like or despise him or her—is entitled to a fair trial in any part of the United Kingdom. What are or are not the facts about the attack on Mr O'Breavty on 29th September must be the subject of an independent inquiry—it is called a police investigation—and then an independent trial of which the judges in Northern Ireland have been exemplars. So I shall not be drawn into that matter. I am sure the noble Baroness will not be displeased at my not going into those details.
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In the past, the noble Baroness has asked me frequently about "on-the-runs". That matter will have to be dealt with at some stage and within the law.
Lord Kilclooney: My Lords, I listened with great disappointment to the Statement repeated by the noble and learned Lord the Lord Privy Seal. The Government have made the wrong decision. As the noble Lord, Lord Glentoran, said, they should have continued with devolution in Northern Ireland.
Most people in Northern Ireland support the principle of devolution/administration of Stormont. There will be disappointment at the Government's decision. None the less, the greater number of people in Northern Ireland will welcome the fact that due to the continued activities of Sinn Fein-IRA, inextricably linked as they are, Northern Ireland now returns to direct British rule from London. That will be welcomed throughout Northern Ireland.
The comments of the spokesman for the Liberal Democrat Party concerned me in two respects, in particular his implied suggestion that politicians in Northern Ireland can be bought off by salaries and money. That is an insult to the elected representatives of Northern Ireland. It demonstrates a total lack of knowledge of nationalists and Unionists. Their feelings and political opinions are so strong that some have even paid the supreme sacrifice, They are not the kind of people to be bought off by simply doing away with their salaries. You will not solve the problems of Northern Ireland through the salaries of elected representatives.
I was even more concerned at his suggestion that Northern Ireland should cease to be governed as part of the United Kingdom: that the sovereignty of the United Kingdom should cease. I was concerned that the Liberal Democrats now suggest that Northern Ireland should become a condominium, jointly ruled by Dublin and London. I find that most upsetting and I am quite sure that members of the Alliance Party, linked with the Liberal Democrats, will find it equally upsetting. I shall be interested to hear the reaction in Northern Ireland when those comments are heard.
Four years ago, the Prime Minister sent a letter in his own handwriting to the people of Northern Ireland saying that those who were not exclusively committed to peaceful and democratic methods would be excluded from the democratic government of Northern Ireland. Why has the Prime Minister's letter not been honoured?
Lord Williams of Mostyn: My Lords, I believe that I responded to the question of a condominium as robustly as I possibly could on behalf of the Government, with whose authority I speak. I am grateful for the support from a sedentary position from the noble Lord, Lord Kilclooney. I agree with him, and as the noble Lord, Lord Glentoran, said, that most people in Northern Ireland would support devolution. I wish to say as strongly as I can that devolution is not abandoned. This is a setback. But I hope that the commitment demonstrated by Dr Reid,

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and in particular the Prime Minister, over many years is powerful evidence that we want to see a devolved solution.
As Dr Reid said on 24th July, and later, you cannot ride two horses if one is democracy and one is violence. The recent events brought him inevitably, although sadly as he said in the Statement, to the conclusion that there must be a suspension for a time. However, I hope and pray that devolution will be the opportunity that offers itself, and that in the historical context it will be seen as an aberration, not a defeat.
Lord Laird: My Lords, I thank the noble and learned Lord the Lord Privy Seal for repeating the Statement and for his undertaking that there will be a continuance not just of government in Northern Ireland on a care and maintenance basis but also of hard work on many programmes.
I thank the noble and learned Lord for his point about dismissing the concept of a condominium. Perhaps he will consider this irony. We are brought to today's situation by the inactivity of Sinn Fein, the republican party. Yet this House and another place now have a responsibility for and an ability to look into some aspects of policy in the Irish Republic. I am the chairman of a cross-border body. We receive our mandate, funding and direction from the Dail in Dublin and the assembly in Northern Ireland. If the assembly is done away with, we shall receive our funding and direction from this Parliament. So it is interesting to note that, after 80 years, some aspects of policy which are looked after in the cross-border bodies will be answered here by British Ministers at British Dispatch Boxes.
Lord Williams of Mostyn: My Lords, I take the noble Lord's point: that irony is not a commodity in short supply in the recent history of Northern Ireland. I cannot gainsay what the noble Lord said. From my experience of him I know he realises that there is a wider dimension which involves co-operation with the Government of the Republic or possibly institutions in the Republic. I pay tribute to him for that and for the many efforts of the noble Lord and his colleagues who sit in this Chamber. I repeat: this is a disappointment but it is not a fatal blemish.

A-Levels
7.29 p.m.
The Parliamentary Under-Secretary of State, Department for Education and Skills (Baroness Ashton of Upholland): My Lords, with the leave of the House, I shall now repeat a Statement made in another place by my right honourable friend the Secretary of State for Education and Skills. The Statement is as follows:
"Mr Speaker, with permission, I would like to make a Statement on A-level grading.
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"As the House will know, following the publication of examination results in the summer of this year there have been concerns about the grading of A and AS level examinations and about the way exam standards are set and maintained.
"I recognise the anxiety and uncertainty that this has caused. Students have been left unsure about whether their grades in A and AS-levels this year accurately reflect the standard of their work. On behalf of the education service, I apologise to all those students who have been affected.
"My responsibility has been to make sure that the concerns have been carefully and thoroughly investigated, the recommendations acted on as rapidly as possible and clear action taken to avoid the situation ever happening again.
"Early last month, head teachers' representatives and some examiners raised concerns about the grading of some students' work in this year's A and AS-level examinations. The complaints focused, in particular, on changes that had been made to grade boundaries in some of the papers.
"Given the seriousness of the allegations, on 19th September, I set up an independent inquiry under Mike Tomlinson, the former Chief Inspector of Schools.
"Mike Tomlinson's interim report, published on 27th September, identified weaknesses in the way the exams had been assessed this year and recommended a process of re-grading.
"This work has now been completed. Letters went from the Universities and Colleges Admissions Service (UCAS) last night to all students on their records whose grades had been revised, and, since 10 o'clock this morning, a UCAS helpline has been in operation.
"Mike Tomlinson announced this morning that a total of 9,800 candidate entries had had unit grades raised. All the adjustments relate to the Oxford, Cambridge and RSA board. In the majority of cases, this has not resulted in a change to overall grades, but 1,945 candidates have had their overall grades raised: 733 for AS-levels and 1,212 for A2-levels.
"UCAS holds a record on 1,089 of these students. Of these, 689 are already in their first-choice university, although a small number are not on their first-choice course. A further 232 had no offer from their first or second-choice universities, so they are unlikely to be affected by a grade change. This leaves, on the current UCAS estimates, around 168 students who may be eligible to transfer university. UCAS has told us that there are no more than eight possible new students for any single university.
"I shall briefly outline what action these 168 students now need to take. Students who think they may be eligible to move institution are being advised to contact their preferred university or college. Universities have been advised by their own representative body, Universities UK, to honour all offers made to students prior to the publication of

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A-level results in August, and I am confident that they will do so. As I said on 27th September, the fact that institutions have already admitted their full number of students for this year may well mean that students wishing to transfer will be offered places for next year, rather than this. Clearly, the fact that the numbers are much lower than some have speculated will make things more manageable. Universities and colleges have agreed to make final decisions no later than 31 st October. Universities and students will not be disadvantaged financially if students move university due to re-grading.
"In his report of 27th September, Mike Tomlinson also gave his preliminary views on what had gone wrong. In particular, the QCA had not issued guidance on the level of attainment expected for a particular grade in individual papers; nor had it provided a clear, consistent view about the standard required to make sure that the overall GCE A-level standard was maintained. In addition, although AS units were piloted, A2 units were not.
"I also asked Mike Tomlinson to investigate the allegations that external pressure had been put on the examining boards to lower the number of A-level passes to protect against the allegation of lowering standards. Mike Tomlinson concluded that no pressure had been applied by Ministers or the department. He concluded that officers at QCA had acted within their guidelines but went on to say that,
'on the evidence available, the actions of the boards during the grading exercise arose from the pressure they perceived that they were under from the QCA both to maintain the standard and achieve an outcome which was more or less in line with the results in 2001'.
"On 27th September, I decided that the confidence of the examining boards and the head teacher representatives in the leadership of the QCA was damaged and the future of the QCA would be best served by a new chairman. We will shortly announce the name of a new interim chair.
"I recognise that a major task for the QCA and my department now is to re-build confidence in QCA and our examinations system. Ken Boston, the new chief executive of the QCA has announced a timetable for implementing the recommendations in Mike Tomlinson's report. By the end of October, there will be additional guidance on AS and A2 standards. By mid-November, further work on the statistical issues underlying assessment and a revised code of practice for the conduct of the process will be completed. The QCA will also put in place improved communications with all partners. Current students on AS and A2 courses can be reassured by these actions that the marking and grading standards in 2003 will be robust.
"Ken Boston has also announced that he is to set up an examinations task force whose job will be to oversee the effective delivery of the AS and A2 exams in January and July 2003. The task force meets for the first time this Friday and will have on it representatives of head teachers, as well as the exam boards. I welcome this decisive action.
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"Mike Tomlinson's report also provided wider lessons for how government plan and implement major changes of this type. My department will act on these lessons.
"Mike Tomlinson now turns to the second part of his remit, to review more generally the arrangements for setting, maintaining and judging A-level standards. He will report to me and to the QCA in November.
"The announcements made today are supported by the head teacher and teacher organisations, including those who raised the original concerns. All students who have taken examinations this year can be confident that the re-grading process has been independent and fair.
"I recognise the importance of exams as a means of measuring achievement and giving young people a currency for higher education and the world of work. It is therefore particularly important that our assessment system is fair, transparent and efficient.
"While it is important that we acknowledge the difficulties this year, it is also important to remember that Mike Tomlinson reported that the principles behind Curriculum 2000 were wholeheartedly endorsed. That must not be lost.
"Mike Tomlinson has given us a clear way forward for re-establishing confidence in the A-level system in future and for ensuring that standards are clear. I hope that this will enable us to avoid the sterile annual debate about exam standards, when better results should be a cause of celebration for young people and their teachers.
"I put on record my thanks to all those in the education service who brought the original concerns to our attention. Their co-operation and approval for the process we have undergone have been crucial. I am also grateful to UCAS and to Universities UK for their helpful and constructive approach. Finally, I should like to thank Mike Tomlinson and his team for the speed of their actions, their thoroughness and their integrity".
My Lords, that concludes the Statement
7.38 p.m.
Baroness Blatch: My Lords, I thank the Minister for repeating the Statement but, having listened to the Secretary of State in another place, one can only be impressed by the energy put into passing the blame for what happened to anyone other than the department, any Minister or the Secretary of State herself. At almost every criticism, the Secretary of State hid behind the Tomlinson report.
One recognises that, in the time allowed, Tomlinson performed well the task that he was given by the Secretary of State, as the Minister said. However, we were all witnesses to Mr Tomlinson's comment that the introduction of the AS-levels was,
"an accident waiting to happen".
I shall return to his more extraordinary comments, reported today.

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We also know that the A2-level was not trialled at all. Students, teachers and parents believed that the two parts—AS and A2-levels—were equal and that 50 per cent of the marks would be given for each part. Certainly, they were of equal worth in that respect, but they were not equal in terms of the work that they represented. We now know that the A2 was subject to more stringent marking than the AS-level. In itself, that begs another question: does the Minister agree that students amassing points for university entry would find it easier to take only AS-levels, rather than complete the full A-level by taking the A2 examinations?
It was Ministers who introduced AS-levels—too fast and too soon. I do not accept, as the Secretary of State claimed in another place, that because the previous Conservative government were contemplating the introduction of AS-levels, as a result of findings in the Dearing report, the Government can speculate about what might have been. The Government are in their sixth year of office and must, therefore, accept responsibility for their own policies, their implementation and any resulting mistakes.
AS-levels, far from broadening the education of students, have resulted in an unacceptable proliferation of examinations and have reduced many of the rich non-examination activities, such as music, drama and sport. In my view it is now time to consider abolishing AS-levels.
I repeat a question that I asked earlier today: what exactly is the basis for the dismissal of Sir William Stubbs? I return to Mr. Tomlinson's reported remarks. He said today:
"I think it is remarkable—and remarkably worrying—that we could have an examination system where AS and A2 standards, which are part of this new qualification, have not been adequately defined, not only for examiners but also for teachers and pupils".
He went on to say:
"I do think it is amazing, yes".
He added:
"I still don't know what the standard of AS and A2 is in terms of what QCA think it ought to be".
Is the Minister saying that the Secretary of State was completely unaware until last month that no one knew what the standard of AS-levels and A2-levels were in terms of what the QCA thought they should be? Were the Secretary of State, Her Majesty's Chief Inspector of Schools and the Minister for Schools all unaware of that? Where have they been for the past two years?
The Prime Minister is quoted in today's press as having said:
"What's important is that we look forward and now start to rebuild confidence in the A-level system".
That is after more than five and a half years in office.
If the QCA was alleged to have created the perception of pressure on examination boards, why was only one board affected? The 2,000 students involved will welcome the news that their results have been upgraded—of course they will. But what about the uncertainty caused for the other 88,000 students,
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many of whom possibly delayed applying to have their papers re-marked because of this exercise? Even though the date for requesting the, re-marking of papers has been extended to the end of this month, much valuable time has been lost.
Confidence will need to be restored. As part of that, will the Government make the QCA entirely independent? That includes an end to departmental secondments to the QCA—a point made earlier today from the Liberal Democrat Benches.
This has been a dreadful time for teachers, students and parents. The situation was made much worse by the dismissal of Sir William Stubbs even before the re-grading was complete.
Finally, what comfort is there for this year's students—for those starting AS-levels this term, but more particularly for those studying for the A2-level, who are already more than halfway through their course? We know that the Secretary of State was unaware of the standards expected—otherwise, she would have acted much sooner. We know that the former Chief Inspector of Schools, by his own admission, was unaware of the standards expected. How on earth could teachers and students know what standards were expected?
Apologies, however sincere—I have no doubt as to the Secretary of State's sincerity in this matter—are not enough. The Secretary of State and the Government should accept responsibility for this débaĉle. It has blighted the careers of many students and has created a serious loss of confidence in the sixth form education system.
7.44 p.m.
Baroness Sharp of Guildford: My Lords, I join the noble Baroness, Lady Blatch, in thanking the Minister for repeating the Statement. I am glad to know that, after all the fuss, the numbers affected by the re-grading are relatively small, and in particular that only 168 students now settled in universities of their second choice may be involved in changes. I am glad that the number involved for any one university is eight—a manageable number. Having worked in a university, I know that it is possible to squeeze in "extras" at those sorts of numbers. It is good to know that, after all the uncertainties of the summer, not that many students are affected.
However, we should not forget the uncertainties that have arisen. I suspect that for many of the students involved it has been a "summer from hell". Ten-thousand papers were re-graded, but there were probably 100,000 students who were wondering and worrying about whether their results were to be re-graded and what that might mean. We now know that, of the 10,000 students whose papers have been re-graded, 2,000 have been upgraded. Nevertheless, for them it has been a summer of great uncertainty. I am glad that the Secretary of State has apologised on behalf of the education service for the problems caused.
In the longer term, it is clear that this fiasco has undermined the confidence that people have had in A-level. In particular, it has raised doubts about

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Curriculum 2000 and the new AS-levels and A-levels. It will take many years to restore that confidence. It is clear that the Secretary of State recognises that, and has to some extent set in train mechanisms by which confidence can be restored.
I am glad, too, that there is no question at present of abandoning Curriculum 2000. Schools have had enough change. Too many new initiatives have been poured upon them. The last thing they want now is for us to abandon the system of AS and A2-levels. It is, therefore, right and proper that we should carry on with this system but make sure that such a fiasco never occurs again.
The Tomlinson report begins to give us some idea of why the fiasco occurred. I echo the words of the noble Baroness, Lady Blatch. I find it extraordinary that the QCA did not, as the Secretary of State said, issue guidance on the level of attainment expected for a particular grading in terms of individual papers; nor did it provide a clear and consistent view of the standard required to make sure that the overall GCSE/A-level standard was maintained. Why do we have a QCA if it is not to do that job? Whether the blame lies with the QCA or with Ministers, I do not know. At the end of the day, in our system it is Ministers who take the rap. It is extraordinary that there was no previous recognition of that.
Above all, it is extraordinary that A2 was not piloted. We know that the QCA had been warned that it should be. I believe that that is one of the reasons why the fiasco occurred. Perhaps that is a lesson to be learnt for other occasions; namely, where such new initiatives are proposed, it is essential that they are carefully piloted.
A further aspect is the question of the examination boards "perceiving" there to be pressure upon them not to increase the proportion of those receiving A grades at A-level. Given that this was a cohort who had achieved very well at GCSE, partly perhaps because of some of the reforms that were coming through the system—we know that they were the guinea pigs—and, in addition, having taken AS-levels in a wider range of subjects and then dropped those that they were least good at, we all knew that they would do better. Yet no one seems to have taken that into account. That is extraordinary. Why was the board so paranoid about this? Why did it make what seems in retrospect to have been rather ham-fisted adjustments to the grading boundaries in order to cope with the situation?
A point was raised by Mr Phil Willis, the Liberal Democrat spokesman on education in the other place, about the ministry's issuing of press releases over the summer. He questioned Ministers running a press campaign in late July and early August stressing the importance of A-levels and the fact that the gold standard was not being eroded because they were so worried about what the tabloid press was saying. Did that merely feed the board's perceptions and add to its own trouble? It probably did, and Ministers need to think very hard about how they play their PR on such matters.
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I have two further questions for the Minister. So far, grade boundaries have been adjusted, but many of the original complaints came from students whose coursework had been given a "U" grade even though in other modules they had all gained very high grades. The coursework had been marked by teachers, who did not expect the students to gain a "U" grade. In these cases, will there be remarking of scripts as distinct from regrading or will normal complaint procedures be followed?
If we are to restore confidence in the examination system, the QCA must be seen to be totally independent of Ministers. Whether we like it or not, cronyism has influenced job appointments. That must stop, and people must be seen to be appointed as independent experts rather than because they happen to know the right people in the right places. Only if we get away from that will confidence in the system be restored.
Baroness Ashton of Upholland: My Lords, I am grateful to the noble Baroness, Lady Blatch, for her support for Mike Tomlinson, which is important. Responsibility for standards must rest with the QCA. I will try to deal with the specific points that the noble Baroness raised, starting with the weighting between the AS- and A2-level. The full weighting of the new A-level is the same as that of the historical one. The AS-level has been set to recognise that students are in the first year of their two-year course and to give weighting appropriately. That has meant effectively that the AS-level is slightly easier and the A2 level is slightly harder, which reflects the fact that students will have completed a two-year course. On Curriculum 2000 overall, as I repeated in my right honourable friend's statement, Mike Tomlinson is very clear that the principles were wholeheartedly endorsed. I was grateful to the noble Baroness, Lady Sharp, for adding her weight to the endorsement of the principles behind the breadth of the curriculum.
Turning to the question that the noble Baroness, Lady Blatch, asked about Sir William Stubbs, I recognise his record. As my right honourable friend said, the way in which the QCA was perceived and the confidence in the system required a change of leadership in the organisation. We expect shortly to announce an interim chair for the QCA.
I am afraid that I will have to leave for Mike Tomlinson's further discussion the question of why only one board was affected. The issue is one of perception rather than reality, but it is very important that we look carefully at it. We accept that we must examine carefully the role of the QCA. We have every confidence in the new chief executive, Ken Boston. As I said, he is putting forward his task force and looking very carefully at what needs to happen.
We have never claimed, and never would do, that there has been no contact between the QCA and the department. As I said earlier, there is a policy in the department of promoting secondments in and out of a wide range of organisations. Secondments are an

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important process in creating a level of understanding and recognition. I have never known secondees to have behaved other than with propriety in this regard.
We will want to look carefully at the matter, but I accept the points raised by the noble Baronesses, Lady Sharp and Lady Blatch. Mike Tomlinson will be considering further the question of more QCA independence. We do not want to make any instant decisions at present; the matter is open for discussion. The key principle is that the exam system must match public expectations of integrity, fairness, objectivity and consistency, as noble Lords would expect.
I am grateful for the comments of the noble Baroness, Lady Sharp. I agree that the uncertainty for students over the summer has been very difficult. Although we are, in a sense, relieved—I use that word advisedly—that the 168 students affected is a smaller number than some speculated, I add immediately that one student put in this position is one student too many.
As a Government and as a group of Ministers, we asked Mike Tomlinson to look very carefully at whether there had been any interference by Ministers or officials. A resounding answer that there was none came back to Ministers and to your Lordships' House now in this Statement. I ask noble Lords to accept the word of the former Chief Inspector on the matter and I assure them that we asked that question to ensure that nothing had been done to put any pressure on the QCA. We recognise that there are lessons to be learnt and that the piloting of A2 might have been done better. As my right honourable friend said, we will learn the lessons from that.
Some of those who received a "U" in their coursework were part of the regrading process. A separate exercise related to remarking is going on. It is worth repeating that when the inquiry was called the number of requests for remarking was consistent with those of previous years. To return to the final point of the noble Baroness, the independence of the QCA will be discussed as part of Mike Tomlinson's further work.
Baroness Warwick of Undercliffe: My Lords, as chief executive of Universities UK, I welcome the generous spirit and the content of the Minister's Statement. We should remind ourselves that, given the attacks on the Secretary of State, the Tomlinson report was clear. This House needs to remind itself of how important it was to the integrity of the exam system that there was no political interference in the process. I echo the view of the noble Baroness, Lady Sharp, in expressing my hope that there will not now be a knee-jerk reaction to abandon AS- and A-level combinations. Many teachers and schools have put huge effort into making the combination work, and it would be inappropriate for us to say that the system should be abandoned now. The system has broadened the curriculum in a way that schools and universities welcome.
I made a point about the Minister's generosity because there are lessons to learn. The Minister and the Secretary of State have made it abundantly clear
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that those lessons will be learnt, and we should accept that. Universities UK and universities generally are enormously pleased that this period of uncertainty has ended. We are working with students and their families to resolve the many questions that will obviously arrive. I am delighted that the problem is much smaller than originally we had been led to believe it might be. We are pleased that the Secretary of State has provided assurances that neither student nor university will lose out financially as a result of any students changing institution. That was an enormously helpful and positive thing to say. Finally, I hope that we will all now work to restore to the confidence of schools and students the integrity of the examining board and the QCA. We should all be working to that end now.
Baroness Ashton of Upholland: My Lords, I am grateful to the noble Baroness, Lady Warwick, and I have already paid tribute to the work done by Universities UK in this process. I am also grateful for her support for the continuation of the AS-level and the A-level. Last evening, I heard a head teacher say that in his view the group which had just left the school was perhaps the broadest and best educated he had seen.
I recognise that the period of uncertainty for students has been extremely difficult and we are all relieved that it is over. We need to work hard to ensure that any loss of confidence in the system is restored. Furthermore, I repeat that we have available special funds to ensure that no student or university is financially disadvantaged by the process.
8.p.m.
Lord Brooke of Sutton Mandeville: My Lords, given the number of Ministers in the department, both in the previous Parliament and in this; given the fact that there were no ministerial resignations after the fiasco of the individual learning accounts; and given that no resignations are occurring in the present context, some might say that the cat's nine lives are beginning to run out. However, I acknowledge that I said today that resignation is a subjective matter.
Perhaps I may ask a practical question. The Statement refers to the 168 students who might be able to apply to a university on the basis of the results that they have been given. I followed that advice. However, in terms of students entering a university which they have not previously been able to enter, the Statement refers to a small number of students among the 689 who are already at their first-choice university and to a small number who are not on their first-choice course. As no advice is given on that matter, is it possible under the system for those students to ask whether they can be put on their first-choice course?
Baroness Ashton of Upholland: My Lords, the most recent figure I have indicates that 73 students are currently at the university of their first choice but not on the course of their first choice. They will be getting in touch with their tutors and with the university admissions body to see whether a transfer would be possible. They will be making a decision in the same light as the 168 students; that is, considering whether

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the university can accommodate them this year, whether they should take a gap year or whether to apply next year. That is the number in total.
Baroness Warwick of Undercliffe: My Lords, perhaps I may assist my noble friend. I believe that the same criteria will apply. If there is a place available I am sure that that will be accommodated. However, it may be enormously difficult because of over-recruitment.
Baroness Carnegy of Lour: My Lords, I am not sure that it is in order for a Back Bencher to answer another Back Bencher, even when the chief executive of Universities UK happens to sit on the government Benches. I am not sure that that is correct, but if I am wrong I shall stand corrected.
Baroness Warwick of Undercliffe: My Lords, I apologise.
Baroness Carnegy of Lour: My Lords, I ask a question as someone who lives in another part of the United Kingdom and has not had direct involvement in A-levels. Listening to the whole debate and following what has happened, I can understand why the universities are relieved that the changes do not affect them a great deal. I can also understand why students are fairly satisfied that not too many of them will have to change their plans. However, in view of the massive operation of marking A-level papers and grading them, and the way in which that is done, and in view of the fact that adjustments had to be made to the marking when the results were published, how do we know that the re-grading is right? Have all the marks of the thousands of students been looked at or only those up for remarking?
What about the people who did better than the staff expected and therefore did not ask for re-grading? Could many of them have had better marks but did not? How do we know that the re-grading is correct? The process makes me anxious.
Baroness Ashton of Upholland: My Lords, the issue for the re-grading is to look at the way in which the A/B and E/U boundaries are determined. We begin working out the grading around those two boundaries and, in a sense, the other grades are then slotted in. The question raised was whether, after all the papers had been examined, the recommendations the examiners put forward for the boundaries were not what was expected.
After all the exams had been marked and all the students examined, the process looked at what happened to the boundaries to fit in the various grades. Mike Tomlinson's team went back and looked at that issue in order to ascertain whether it was done in a way that deflated the grades. The process was therefore looked at across the board; it was not restricted only to those students who had asked for remarking because that is a separate process. The process looked at specific areas of concern in relation to specific subjects.
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Mike Tomlinson could give the noble Baroness a better technical answer and I am sure that he would be delighted to do so if she would like that. However, I am confident in saying to the noble Baroness that the boundaries have been examined, that the re-grading has been effectively done and that students can be absolutely assured that the marks they now have are accurate.
Baroness Walmsley: My Lords, I am surprised to find that this year's group of A-level students have not sprouted whiskers and tails because I know of no group of students who have been treated so much like guinea pigs. These students have been experimented on from the beginning of their school life. In view of that, it is surprising that they have achieved so much. We appear to have a very able group of students.
I am also surprised that their achievements were not predicted, given the explanation outlined by my noble friend Lady Sharp about the number of people who dropped out after the AS-level. Often the best predictor at A-level is the achievement of the same group two years previously at GCSE-level, when these students achieved a pass rate of 94.4 per cent. And guess what—at A-level they achieved 94.3 per cent. That is about 4.5 per cent higher than the previous two years. There was therefore two years' notice of the problem and clearly there was no need to worry about a perception of grade inflation. The group was achieving and from the beginning it was expected to achieve.
How will the Minister ensure that no future cohort of able children will be suffering from the same concerns about grade inflation and the same perceived pressure to change the grades around? Furthermore, can she reassure the House that no group of children will go through their school career as guinea pigs, as has been the case with this group?
Baroness Ashton of Upholland: My Lords, the noble Baroness will not be surprised to hear me say that I would not describe this group of students as guinea pigs but rather as recipients of a new strategy. It is interesting that despite the fact that noble Lords and the press have described the group as guinea pigs, they have been great achievers. One might therefore say that they have achieved so much not despite the new strategy but because of it. I am sure that we can debate that matter another time and no doubt at length.
I recognise the noble Baroness's understanding that one of the outcomes of the AS-level should be that students would be either awakened to work harder for the A2 or to make decisions about which subjects to continue with. That is one of the issues that Mike Tomlinson and the QCA need to examine very carefully. A perceived problem is also a perceived success and we must ensure that we address these issues firmly and properly. We have great faith that Ken Boston will be able to look at the issue constructively. He had been in post only a week or two at the beginning of the problem and he is now dealing with it most effectively.

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We must look at the matter carefully to ensure that we recognise the achievements and that Curriculum 2000 delivers for us and our students some good results.
Lord Burnham: My Lords, following a matter raised by my noble friend Lady Carnegy, if the whole exercise has been totally even-handed and not just a patch-up, there will have been a number of "downs" in the re-gradings as well as all the "ups". How many "downs" were there?
Baroness Ashton of Upholland: My Lords, I do not have the information about the downs and the ups. The issue was, as I said, whether students who should have received higher grades received deflated grades. The question of regrading has therefore focused on what happened at the boundaries between A and B and between E and U. We have made it clear that no student will suffer as a consequence of the regrading in relation to the results that he or she has already received. If I subsequently find more information which is relevant to the noble Lord, Lord Burnham, I shall indeed write to him and place a copy of the letter in the Library.
Baroness Seccombe: My Lords, if there was only a perception that there had been pressure from the QCA, and if the outcome of the exercise reveals that there had been no large-scale downgrading of examination results, would the Minister, with hindsight, think that it was right that Sir William Stubbs was dismissed so quickly? Why were the Secretary of State and the former chief inspector not aware that the standards expected for AS and A2 levels had not yet been determined?
Baroness Ashton of Upholland: My Lords, I turn first to the noble Baroness's second point. The issue of paramount importance raised by Mike Tomlinson is the guidance issued by the QCA on how the standards should be applied. Although that issue by itself might seem minor, it is absolutely critical in ensuring that the grades are applied effectively. We and the QCA will have very carefully to examine its future in relation to that point.
On Sir William Stubbs, as I have said in your Lordships' House several times, my right honourable friend believed that there had been a loss of confidence in the leadership of the QCA and, after much deliberation, determined that the best way forward would be to have a new chairman to lead the organisation. On that basis, she dismissed him.
Baroness Blatch: My Lords, before the noble Baroness sits down, may I point out that the question that both my noble friend Lady Seccombe and I asked was why the former chief inspector and the Secretary of State were not aware of the standards expected by the QCA?
Baroness Ashton of Upholland: My Lords, the noble Baroness needs to understand that, in all the dialogue
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with the QCA, there was a great amount of information and understanding about what was happening. We are saying that it is the QCA's responsibility to issue the guidance on standards. As I said, when Mike Tomlinson has completed his work, I shall undoubtedly have more to explain to the House and be able to examine these issues in detail. I am giving the noble Baroness the benefit of all the information that I currently have. The issue for the QCA is the guidance that accompanied the standards. As Mike Tomlinson and Ken Boston continue their work, we shall be able to provide noble Lords with more information. I shall do so with pleasure.

Enterprise Bill
8.15 p.m.
Consideration of amendments on Report resumed.
Lord Kingsland Lord Kingsland moved Amendment No. 28:
After Clause 16, insert the following new clause—
"TRIBUNAL: REGULATIONS

(1) The Lord Chancellor and the Secretary of State may together make regulations—

(a) empowering the courts to transfer to the Tribunal for determination by it any issue arising in any civil proceedings the determination of which depends on whether provisions of Chapter I or II of the 1998 Act or Article 81 or 82 of the Treaty have been infringed where, in the opinion of the court making the transfer, the transfer would be conducive to the efficient conduct of the proceedings;

(b) making any rules that the Lord Chancellor and the Secretary of State may deem to be appropriate as ancillary to the power to make such transfers or to be reasonably required in connection therewith and in particular, but without prejudice to the generality of the foregoing, to the effect that—

(i) on making such a transfer, the court making the transfer may state facts that the Tribunal shall then treat as established for the purposes of determining the issues transferred to it;

(ii) after having made its determination, the Tribunal shall remit the matter to the court that made the transfer to it, declaring the determination of that issue by the Tribunal, which, subject to any clarification or amplification by the Tribunal of its determination that may be requested by the court that made the transfer, shall be then treated as a determination of that issue by that court;

(iii) enabling courts that have made, or have in contemplation the making of, such transfers and the Tribunal to co-operate together in any way that they deem to be appropriate to enable issues arising in the proceedings before them to be determined as efficiently as possible.

(2) The Lord Chancellor may appoint as president and as chairman of the Tribunal judges of any of the courts provided that, before appointing a judge of the Court of Session or sheriff courts under this subsection, the Lord Chancellor shall first consult the Lord President of the Court of Session.

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(3) In this section references to "the courts" are to the High Court of Justice and the county courts in England and Wales and Northern Ireland, and the Court of Session and the sheriff courts in Scotland.

(4) The power to make regulations under this section is exercisable by statutory instrument subject to annulment in pursuance of a resolution of either House of Parliament.""

The noble Lord said: My Lords, some of you may recall from our consideration in Committee that what is now Amendment No. 28 sought to grant the civil courts the power to transfer to the Competition Appeal Tribunal competition issues that arise in private law claims based on alleged breaches of European Community and national competition laws.
The noble Lord, Lord McIntosh of Haringey, I believe, agreed to give consideration to the content of this amendment during the summer Recess. He obviously reflected long and hard, because it was not until 9th October that I received the result of his deliberations. I think that I can do no better than to quote from the communication that I received. The letter was in fact signed by the noble Lord, Lord Sainsbury of Turville, whom I am delighted to see on the government Benches today. It states:
"We do not see the practical need for such a power. The effect of the Competition Act 1998 regime and, in due course, 'modernisation' on the number of Article 81 and 82-related cases heard in the courts is uncertain. We are confident that, where such cases arise, the courts will be able to deal efficiently with them. It is the role of the courts to build up the specialist body of law in a particular area. It is not necessary to create a specialist body or court on each occasion that something new and complex arises. Judges, particularly those in the High Court, where such cases could expect to be heard, already have to weigh technical evidence, including that relating to economic effects, presented by experts in a variety of cases. Economic evidence related to the consideration of Article 81(3), which has been highlighted as a particularly complex area, could be handled in the same way.
"It is important to bear in mind, too, that, under the regulations being developed as part of the 'modernisation project', the competition authorities of the Member States will be able to submit written observations to the national courts on issues relating to the application of Article 81 and 82. With the permission of the court in question, they will also be able to submit oral observations to the courts. For these reasons, we cannot support an amendment along the lines suggested".
I would like to thank the Minister for giving this matter such careful consideration. However, I have to express considerable surprise at his conclusion. The European Court of Justice itself, sitting in Luxembourg, has decided that competition matters can be satisfactorily dealt with only by a specialist court. That is why the Court of First Instance was established.
The Court of Justice recognises that it is only by the concentrated and sustained development of skills by European judges that the jurisprudence on competition law will properly develop.
I should have thought that that lesson would not have been lost on the Minister with regard to our own judicial system. Indeed, there are many precedents for it in the High Court. The emergence of the commercial court is a classic illustration of how it was necessary to develop a specialist part of the High Court to deal with a particular type of case. Equally, in more recent times, it has been found appropriate to establish an
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employment appeals tribunal—another specialist branch of the High Court—to deal with employment matters.
Competition cases require an intimate knowledge of complicated national and international economic law. Given the wholly appropriate development of careers on the High Court bench, I see no prospect of any individual judge, in the course of his time at that level, developing anything like the necessary skills to handle complicated competition cases.
I therefore urge the Minister to reflect again on the conclusions that he has reached and set out so starkly in his letter to me; otherwise, the increasing momentum of domestically generated competition cases and the new approach of devolving European competition cases on the national court systems of the European Community will, together, result in a severe gap between the demands of the market for judicial guidance and the capacity of our judges to provide it. I beg to move.
Lord Razzall: My Lords, I support the comments of the noble Lord, Lord Kingsland. I believe that the amendment he is moving is the same as that which I moved in Committee. We clearly are both in thrall to Sir Jeremy Lever QC who is, of course, the author of the amendment.
I do not want to repeat the remarks made by the noble Lord, Lord Kingsland, with all of which I agree. However, the fundamental issue on which he perhaps did not touch is that in producing the amendment we look forward to a Competition Act regime under which significant powers that are currently vested in Brussels are devolved to the United Kingdom. I believe that it is common ground on all sides of the House, first, that that is a likely outcome—namely, that many competition decisions that are currently determined in Brussels will be devolved to the United Kingdom authorities—and, secondly, that that is a desirable outcome. I believe that noble Lords on all sides of the House share that view. The concern that is reflected in the amendment is that when that happens—all the indications are that it will happen soon—and if the Minister is not prepared to move on this issue, in due course either his noble and learned friend the Lord Chancellor will be forced to alter the pattern of appointment of judges or he will have to produce primary legislation to deal with this point.
Judges are in danger of being asked to determine issues they are not really equipped to deal with as they do not have expertise in competition law. They will be asked to deal with issues that they are not competent to deal with. The tribunal will be asked to deal with issues with which it is not competent to deal; that is, the whole damages issue. There is no one better than any High Court judge to determine a damages issue but there is no one less equipped than a High Court judge to determine the complex issues of economics, law and fact which are bread and butter to the experts on competition law.
I have no pride of authorship of the amendment, as I have indicated. The amendment was drafted by Sir Jeremy Lever QC. He lobbied the noble Lord, Lord

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Kingsland, myself and, no doubt, the Minister heavily on the amendment about which he feels strongly. Sir Jeremy predicts that if this amendment or something like it is not enshrined in the legislation, either the Minister in due course will have to introduce further primary legislation or his noble and learned friend the Lord Chancellor will have to alter the pattern of recruitment of High Court judges. For that reason I support the amendment.
Lord Borrie: My Lords, I have no doubt at all that in the enforcement of competition law private actions for damages have a useful role to play in the public interest alongside the enforcement role of the Office of Fair Trading and the European Commission. The OFT and the European Commission simply do not have limitless resources and are bound to have to prioritise as regards which cases they take up. I believe that that point is probably generally agreed.
The important question raised by the amendment, as by that proposed in Committee, is what is the best body to determine, when an action for damages is brought, first, whether there has been an infringement of competition law, UK or EU, and, secondly, if there has been such a breach, who should determine and quantify the amount of damages? The question of whether there has been a breach of competition law is generally a mixed issue of law, economics and fact, as the noble Lord, Lord Razzall, explained, which the mixed membership of the Competition Appeal Tribunal is most appropriate to determine. However, as regards the question of who is most appropriate to determine damages, that is a typical issue for a High Court judge sitting alone; hence the proposals for the possibility of transfer—I interpret part of the amendment as a provision for retransfer as well—between the High Court judge and the Competition Appeal Tribunal.
At first sight—I believe that my noble friend Lord McIntosh made a similar comment in Committee—it is odd that a body entitled the Competition Appeal Tribunal should have the role of deciding at first instance, without anyone else having decided the matter before, whether there has been a breach of competition law. But the role of the Competition Appeal Tribunal under the Government's own Clause 17 is not an appeal role. Clause 17 as it stands gives the Competition Appeal Tribunal jurisdiction to handle at first instance private claims for damages provided that there has already been a public law determination of a relevant infringement. That is not an appeal; it is intended to be a decision—if Clause 17 comes into effect—of a court of first instance.
I have a great deal of sympathy with the amendment proposed by the party opposite which emanates, as has been said, from Sir Jeremy Lever, a fellow of All Souls, whom I have known for at least 30 years as being pre-eminent in UK and EU competition law and who has obviously given a great deal of thought to this matter. I submit that the proposed subsection (2) of the amendment on appointments is probably not needed as my noble friend Lord McIntosh clarified in
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Committee that the appointment of High Court judges to the Competition Appeal Tribunal can be made under the present legislation and the Bill as it stands. If there were a vote, I would not enter the Lobby with the opposition parties on this matter. However, I hope that between now and Third Reading the Minister will give the amendment close consideration with a view to positively bringing forward a measure on similar lines.
Lord Sainsbury of Turville: My Lords, as we have heard, the amendment would give Ministers a power to make regulations allowing the courts to transfer to the Competition Appeal Tribunal issues arising in civil proceedings that require the determination of whether there has been an infringement of competition law. The tribunal's determination of that competition matter would then be binding on the court.
I listened carefully to the arguments. We certainly do not dispute that once the jurisdiction to handle civil proceedings involving breaches of both Articles 81 and 82 is devolved to national courts and national authorities, this may well become an increasingly important area of work. The fundamental issue in this regard is whether it is realistic and desirable for the courts themselves to build up a specialist body of law in this area. In our view, it is both realistic and desirable and we do not want to see the fragmentation that the amendment would cause. We are confident that where such cases arise, the courts will be able to deal efficiently with them. It is already the case that national courts are empowered to take decisions on Articles 81(1) and 82 and they can apply the equivalent provisions of the Competition Act 1998. It is true that few such cases have been dealt with by the courts hitherto. It is also true that in future Article 81(3) issues will be added to the mix of matters with which the courts will have to deal.
However, judges at all levels and in particular those in the High Court, where we would expect the vast majority of these cases to be heard, are expected to handle—and, if necessary, become expert in—a wide range of areas of law as and when they come their way. They already have to weigh technical evidence, including that relating to economic effects presented by experts in a variety of cases. The Judicial Studies Board is there to ensure appropriate training in new areas of law.
I should add the important point that the EU regulations being developed as part of the EU competition law modernisation project cater for the fact that national courts may need access to expert advice. Regulations will enable the competition authorities of the member states—in our case, primarily the Office of Fair Trading—to submit written observations to the national courts on issues relating to the application of Articles 81 and 82. Further, with the permission of the court in question, they will also be able to submit oral observation to the courts as an expert witness.
The OFT will not act in that expert capacity on every occasion but it is likely to want to offer views where a case is particularly important or is likely to set

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important precedents. That will represent an important source of advice for the courts when the occasion demands.
The alternative envisaged by the amendment to give the Competition Appeal Tribunal a new role and additional powers would have a number of important disadvantages. It would entail an unnecessary degree of fragmentation in the judicial system. The consideration of civil proceedings would be split between the courts and the CAT. There would be increased uncertainty for parties about the path that their case would take because that would depend on the readiness of individual judges to refer matters to the CAT. We believe that it would also be a significant obstacle to the development of relevant expertise by the High Court for any cases to be transferred to the CAT.
There are other more technical difficulties. It would, for example, be highly unusual for a tribunal to make decisions on an issue arising in a case before the High Court or Court of Sessions judge that is binding on that judge, not least because tribunal decisions are subject to judicial review, with the court exercising the power of judicial review.
I shall add one final but important point. This whole area is obviously a matter of judgment. Although we currently do not believe that it would be appropriate to take the power contemplated in this amendment, if such provision proves necessary when we come to examine the implementation of the proposed EU modernisation regulation, we believe that it will be possible to use the powers under Section 2 of the European Communities Act, combined with those in Clause 204, to secure the goals of the amendment. We believe that we could use those powers to give the CAT the jurisdiction that it would need and the courts the powers needed to enable matters and issues to be transferred to the CAT to determine or for the CAT to assist the courts in appropriate cases.
As I said, we do not want to send the signal that that is the direction in which we expect to have to go by taking a specific power. However, an alternative power exists. I do not wish to rule out the possibility of using it if it proves appropriate to enable us to implement our Community obligations. The amendment is therefore unnecessary. For those reasons, I ask the noble Lord to withdraw the amendment.
8.30 p.m.
Lord Kingsland: My Lords, I thank the Minister for his very full reply in which he sought to contradict all of the points made by myself and the noble Lord, Lord Razzall. I was much encouraged by the speech of the noble Lord, Lord Borrie, who rightly referred to Sir Jeremy Lever—who is really the author of this amendment—as the outstanding competition lawyer of his generation.
No one knows the field of competition law and courts like Sir Jeremy. He has no self-interest whatever in promoting one particular pattern of jurisprudence rather than another. His proposal is the result of deep
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reflection on the current system and fears about how we might be inadequately resourced to face the challenges ahead.
I shall reflect between now and Third Reading on what the noble Lord the Minister said. I am slightly reassured by his reference to the possibility of using a power that the noble Lord believes he already has to cope with what is likely to happen in the European Community in the next two or three years. I should have preferred the noble Lord to have taken that power now in the Bill.
I shall reflect on the Minister's response and I thank him for his full reply. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 21 [Duty to make references in relation to completed mergers]:
Lord Sainsbury of Turville Lord Sainsbury of Turville moved Amendment No. 29:
Page 12, line 12, leave out paragraph (e) and insert—
"(e) the European Commission is considering a request made, in relation to the matter concerned, by the United Kingdom (whether alone or with others) under article 22(3) of the European Merger Regulations, is proceeding with the matter in pursuance of such a request or has dealt with the matter in pursuance of such a request."
The noble Lord said: My Lords, this group of amendments covers issues related to the interaction between domestic and European competition law.
Throughout the process of updating the UK's competition framework, the Government have had to set the updated regime within its wider—European—context. European competition law, where it applies, has primacy over domestic law. That fact means that it is not necessary in the Bill to spell out the detailed interaction between Community and domestic law. Users of the legislation, of course, will need a clear understanding of the interactions. That will be secured by the new requirements introduced by Amendments Nos. 82 and 134 for the OFT and the Competition Commission to provide advice and guidance on the interaction between Community law and the new domestic mergers and market investigations regimes. We believe that that approach has the benefit of simplicity. It will also help to "future proof" the Bill against developments in European competition law. Amendments Nos. 91, 92, and 135 are consequential on the new requirement to provide advice and they define the term "Community law".
In very exceptional circumstances, it is possible that a merger case handled initially in Brussels can fall subsequently to domestic jurisdiction. It is important that the domestic authorities are not time-barred from considering cases that may have been delayed by European Community merger regulation proceedings. The new clause introduced by Amendment No. 82 ensures that the OFT retains the power to refer such cases. That does no more than update the existing provision set out in regulations to bring it into line with the new regime and ensure that the impact is clear from the face of the Bill.
I now want to turn to the amendments involving provisions for the OFT's duty to refer mergers. Those mergers that fall to Europe exclusively will not in fact be in the frame for consideration under the domestic merger regime. Amendments Nos. 29, 35, 36, 38, 47, 73 and 74 therefore correct the current text of the Bill to ensure that the exceptions to the duty to refer—and the associated timetabling provisions—cover only those mergers that would fall to the OFT. The effect is to narrow the exception to only those UK mergers that the OFT decides to refer to the European Commission, on the grounds that the European Commission is better placed to consider their competitive impact under the European Community merger regulation. The previous, wider exception would have prevented references also in those very rare instances where the UK merger regime and provisions of Community competition law can legitimately apply in parallel.
A further, related amendment is Amendment No. 41, which clarifies that the Secretary of State will not give an intervention notice under Clause 41 in a case where Community law prevents a reference from being made.
Moving on from the power to refer cases under the domestic regime, I would like to turn to new Clauses 62 and 63 and consequential Amendments Nos. 85, 86, 87 and 93, which all deal with those mergers that fall to the European Community merger regulation—the ECMR. These new clauses and amendments seek to close an unintended gap in the current Bill. They ensure that the Enterprise Bill provides a vehicle for the UK to act in ECMR cases to protect important non-competition interests—the primary concern being national security. That is specifically foreseen by the European Community merger regulation itself. The European Commission has exclusive jurisdiction over the competition aspects of all European Community merger regulation cases, but member states are allowed to take action to protect a strictly limited range of recognised "legitimate interests", including public security.
Our intention is to preserve the current position, which is that, where necessary, the UK can use the domestic merger control regime to take action on matters other than competition, such as defence, in relation to cases that fall to the ECMR. It is important to note, however, that the power to protect legitimate interests will not range any wider than the public interest considerations that may be taken into account under the new UK merger regime.
Amendment No. 62 introduces a new clause which ensures that the Secretary of State can give a European intervention notice in an ECMR case. The Secretary of State will be subject to similar disciplines as those that will operate under the Clause 41 intervention arrangements.
Amendment No. 63 introduces a further new clause which provides a power to establish the scheme for protecting legitimate interests along the lines of the domestic public interest and special public interest regimes.
Finally in this group, I want to touch on Amendments Nos. 168 and 169. Clause 204 gives the Secretary of State a power, exercisable by the affirmative procedure, to make regulations modifying the Competition Act 1998 so as to bring it more closely into line with the reformed arrangements for the enforcement of Articles 81 and 82 of the EC treaty—commonly known as "modernisation". We expect the treaty to be implemented in 2004 and it will devolve much of the work of enforcing Articles 81 and 82 to national competition authorities.
Two amendments that we propose—Amendments Nos. 168 and 169—will, together, make it clear that regulations made for the purposes of modernisation can confer the power to make rules, such as procedural rules governing how the UK competition authorities will handle various aspects of the investigation and decision-making process under Articles 81 and 82. At present, the rules governing the enforcement of the Competition Act by the OFT are made by the director-general and approved by the Secretary of State. The power would remove any doubt as to the ability to allow for the director-general to make such rules in relation to Articles 81 and 82.
The interactions between the two pieces of legislation are fairly complicated. However, I believe that, by setting out these amendments, we provide additional clarity to the position. I beg to move.
Lord Kingsland: My Lords, most telegraphically, I want to say to the Minister that the amendment to Clause 21 seems to us to be very sensible. It gives the OFT the power not to make a reference in the event that the UK and other member states are contemplating referring a merger to the EC Commission under the ECMR.
I want to raise only one question in relation to this matter. It is possible that the noble Lord has already answered it but that, inadvertently, I did not hear him. Presumably, once the European Commission ceases to consider such a request—that is, after it has made up its mind—the power would revert to the OFT to make a reference again. I am sorry not to have given the Minister notice of that question. He may want to reflect on it and return at Third Reading.
Lord Sainsbury of Turville: My Lords, the noble Lord is right that I should like to reflect on the matter. Perhaps I may write to him because the point becomes rather technical and I do not want to mislead the House. Therefore, if I may write to the noble Lord, that would be the easiest way to proceed.
Lord Kingsland: My Lords, if there is a lack of clarity about this, perhaps I may respectfully suggest to the noble Lord that he should reflect on inserting a new clause after Clause 118 in order to clarify the point.
On Question, amendment agreed to.
Lord Sainsbury of Turville Lord Sainsbury of Turville moved Amendment No. 30:
Page 12, line 36, after "of" insert "a notice or possible notice under section 41(2) or 58(2) or"
On Question, amendment agreed to.
Clause 22 [Relevant merger situations]:
8.45 p.m.
Lord Hunt of Wirral Lord Hunt of Wirral moved Amendment No. 31:
Page 12, line 43, leave out "£45" and insert "£100"
The noble Lord said: My Lords, we now turn to the subject of relevant merger situations under Clause 22. We also return to the question of the turnover test, which we debated for a short time in Committee. Perhaps I may stress that the purpose of Amendment No. 31 is to ensure that we avoid the imposition of excessive burdens on both business and the OFT by making certain that the whole system is not clogged up by the OFT having to review transactions which are unimportant in competition terms.
The Government do, indeed, propose to remove the assets test in the Fair Trading Act 1973 and replace it with a turnover test. At present, Clause 22(1)(b) refers to,
"the value of the turnover in the United Kingdom of the enterprise being taken over exceeds £45 million".
I have discussed this clause with the CBI and with several of my noble friends and colleagues. Whereas we favour removal of the assets test from the scope of the UK's merger regime, since assets are not the best test of the market strength or otherwise of a company, and as the Government acknowledged back in 1999 when the reforms were first floated, asset structures are changing.
However, we believe that if the assets limb is to be replaced with a turnover test, it is vitally important to achieve the appropriate level. Therefore, I asked the CBI what figure would be arrived at today if it were to take the £70 million gross assets figure, which was last set in 1994 by RPI, and increase it through the mechanism of the price index. The answer was £85 million.
If one applies a ratio of average turnover to gross assets from, say, a sample of 500 companies, by using the same database as the Government, we then arrive at a figure of £100 million. That is the justification for the view that, if £45 million were replaced by £100 million, that would ensure that transactions which were not important in competition terms did not clog up the system.
A key difference between that analysis and the calculations used by the Government is that, as I explained, the figure to which I refer was arrived at by the use of indexation through the application of the RPI. Things have changed a great deal since 1994 so I suggest to the Minister that £100 million is a more realistic and reliable figure to adopt.
Grouped with Amendment No. 31 is Amendment No. 33 which seeks to leave out on page 13 subsections (3) to (8) inclusive and to insert a new subsection (3) to state:
"The condition mentioned in this subsection is that the merger would create or strengthen a share of 25 per cent or more in any relevant market in the United Kingdom or a substantial part of the United Kingdom".
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Of course, the concept of "relevant market" underpins modern competition law. It is used elsewhere in the Enterprise Bill and, so far as I can gather, the test is applied in all other jurisdictions.
The share of supply test, which dates from the old Fair Trading Act 1973, is an anachronism, never even adopted in other jurisdictions. While share of supply and market share may sometimes be the same, they are often different. If the substantial lessening of competition—SLC—test is adopted, a share of supply threshold will require the OFT to analyse the relevant market on a multi-basis in any event. A separate test would be required and that is a confusing and unnecessary aspect of the Bill. The share of supply test is a classic example of the old formalistic approach, long-since abandoned in favour of a more substantive approach to such issues.
Also in this group are Amendment No. 37, on which I look forward to hearing the Minister, and Amendments Nos. 83 and 84. No doubt the Minister will explain the reasoning behind Amendment No. 83, which would give Ministers the power to alter the share of supply test. I still contend that if the noble Lord were to accept Amendments Nos. 31 and 33, a great deal of confusion would be removed. There would be clarity and a lot of situations not necessary to investigate and which would clog up the system could be avoided. I beg to move.
Lord Sainsbury of Turville: My Lords, I will deal first with the amendment that would raise the turnover threshold to £100 million. We fulfilled the commitment that I gave in Committee to look again at the evidence underpinning our preferred £45 million figure. We shared that second set of analyses with the CBI, which in turn undertook some alternative analysis. We are grateful to the CBI for its contribution to this debate. The letter that I sent earlier this month summarised the data and why we think they showed that the lower threshold is still the right one.
We now have figures based on two independent sets of data. Our original analysis, based on the One Source Database, showed that the number of UK companies with total assets of £70 million or more was 7,473. The number of companies with a turnover of £45 million or more was only 7,057. That would, a priori, seem to suggest that using the turnover test brings slightly fewer companies into the net.
The second analysis carried out by officials over the summer using the Fame database, which holds data relating to company returns made in 2000 and 2001, identified 9,966 UK companies with total assets of £70 million or more but only 7,806 companies with a turnover of £45 million or more. If anything, those findings show that we have pitched the turnover threshold too high rather than too low.
I am not certain that I understand the basis of the noble Lord's alternative figures. I believe that he took the £70 million assets test and indexed that up, but I am

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not sure how he got from assets of £85 million to a turnover figure. One cannot index the asset figure, then add on a bit more to make it a turnover figure.
Lord Hunt of Wirral: My Lords, the figure of £70 million becomes £85 million by indexation. Then applying a ratio of average turnover to gross assets from a sample of more than 500 companies brings one closer to the figure of £100 million.
Lord Sainsbury of Turville: My Lords, the problem with that figure—which I believe was the basis of the CBI analysis—is that it is based on measuring the average turnover only of those companies that happen to meet the assets test. Changing the test inevitably means covering a somewhat different range of companies. For example, new technology companies, whose turnover may significantly exceed their asset base, may be covered by the test for the first time—but property companies with the opposite assets-to-turnover ratio may drop out. The calculation is difficult to make, in terms of going from an assets test to turnover. It is by no means clear that ours is a foolproof method but at least it is clear that it simply looks at the number of companies that are caught by the two different tests. The new test, if anything, will catch fewer companies than before.
As I said in Committee, we are dealing essentially with an informed estimate. We remain confident that a figure of £45 million comes closest to our original goal of identifying a turnover threshold that would bring within the scope of the merger regime roughly the same number of companies as are currently covered by the £70 million worldwide assets test. We have built into the new legislation a mechanism for keeping the level of the threshold under review and for adjusting it through secondary legislation in the light of experience. If that shows that we are bringing too many harmless mergers within the scope of the mergers regime, we can adjust the figure.
As to Amendments Nos. 32 and 33, the share of supply test is being retained from the Fair Trading Act 1973 and will apply to mergers that create or enhance a 25 per cent share of supply in the UK or a part of the UK. It ensures that competition authorities can scrutinise those mergers that do not necessarily involve the biggest companies but can nonetheless narrow the market—for example, in a region. That definition covers the two broad types of sector—goods and services. If the share of supply test did not cover services, only the turnover test would be applicable to those companies. We consider that that may leave an unacceptably large hole in the merger regime. For example, broadcasting businesses such as regional radio stations may not meet the turnover threshold. Further, it is not always clear cut whether a business provides goods or a service. The current drafting allows the OFT the discretion to allow for that reality.
When we debated a proposal identical to Amendment No. 33 in Committee, I set out why the share of supply test is the better one to use as a jurisdictional threshold. It has several advantages.
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First, it is a straightforward test. Compared with the more complex market share test, it is easy to apply. Secondly, we are wary of introducing the more substantive market share test at this point because of the potential burden that would entail for businesses. They are less likely to know whether their merger would qualify on market share grounds and may feel pressed to employ economic advisers at an early stage in an investigation. There would be additional burdens for the OFT, whose workload would increase for similar reasons.
The share of supply test is a commonsense threshold that complements the turnover threshold. Together, they provide a sound jurisdictional structure for the competition authorities, which has worked well over the years.
Government Amendments Nos. 83, 84 and 88 relate to the share of supply test. Amendment No. 83 would give the Secretary of State the power to alter the share of supply test by affirmative resolution. As I explained earlier, the share of supply test has served us well over time. Business is used to it and the test has been effective in capturing cases where enterprises will have a substantial share of supply following a merger.
The amendment is designed to ensure that we can keep the threshold accurately targeted on the mergers that we wish to scrutinise, by being responsive to changes in the economic environment. It complements the power to make changes to the other jurisdictional test—the turnover test—in light of experience. The power obliges the Secretary of State, in consultation with the OFT and the Competition Commission, to consider in particular the desirability of ensuring that any amended or new condition continues to operate by reference to the degree of commercial strength that results from the merger.
Amendments Nos. 84 and 88 are consequential on the introduction of the new power. Amendment No. 37 is a minor amendment to the turnover test clause. The amendment is in the same spirit of ensuring that these thresholds are relevant and practical. It allows us to ensure that the competition authorities have a degree of discretion in making the calculation, within the boundaries of the provisions mentioned in draft legislation. I beg to move.
9 p.m.
Lord Hunt of Wirral: My Lords, the Minister and I obviously beg to differ, particularly over Amendment No. 33, where I believe that the share of supply test is an anachronism. That is probably a polite way of describing it. It is a classic example of the old formalistic approach, which has never been adopted in any other jurisdiction. However, I shall consider carefully the Minister's comments, in particular regarding Amendment No. 31.I shall reflect on some of the figures he put forward and consult those who put forward the alternative figures. I believe that we are moving ahead with the same objective; the important thing is to get there. Meanwhile, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments No. 32 and 33 not moved.]
Clause 24 [Extension of time-limits]:
Lord Hodgson of Astley Abbotts Lord Hodgson of Astley Abbotts moved Amendment No. 34:
Page 14, line 27, after "to" insert "take reasonable steps to"
The noble Lord said: My Lords, Amendment No. 34 also deals with relevant merger situations. In the relevant subsections in Clause 23 we come across time limits and prior notice. However, Clause 24 carries the weasel words "extension of time-limits". That is an issue about which people have written to me expressing their concern.
Under subsection (2) the OFT has the right to extend the time limit if the person has,
"failed to provide, within the period stated in a notice under section 30 and in the manner authorised or required, information requested of him in that notice".
It has been suggested to me that that wording is particularly inflexible and prescriptive and could be used in future by asking for information to be provided in a manner with which it was not possible to comply as precisely as is laid down. That issue has given rise to a number of concerns and letters addressed to me. The Minister will say that that will never happen, that the OFT will be perfectly reasonable, that it will use a format which is fair, under which such information could always be supplied.
My amendment seeks to insert the words "take reasonable steps", so that if a firm involved takes reasonable steps to provide reasonable information, even if it cannot be done in precisely the format or manner authorised or required, it will have complied with the provision and therefore there will not be an extension to the time limit. It must be in all our interests that these relevant merger situations are resolved as quickly as possible. Without that, the period of uncertainty for the firms, their suppliers, creditors and employees, would be unduly elongated. I believe that the words "take reasonable steps" would meet the concerns that have been expressed. I beg to move.
Lord Sainsbury of Turville: My Lords, Amendment No. 34 relates to the power of the OFT to extend the deadlines for its investigation pre-reference where requested information has not been supplied. The amendment proposes that no extension should be possible where the relevant person has taken reasonable steps to provide the information.
However, in this case it is important to draw a distinction between the power to extend the timetable for reference and any punitive action, such as is available to the Competition Commission in the form of monetary penalties. The powers to extend timetables have been introduced to ensure that the regime works effectively. Where the OFT does not have adequate information to conclude that a merger will not result in a substantial lessening of competition, it will be faced with no option but to refer the merger unless it has this power to extend the timetable for reference.
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In this case there is a community of interest between the OFT, which requires the information, and is therefore looking for an extension, and the provider of the information, who would like the decision to be made by the OFT on a proper basis of information. If it is not, there is always the danger that the OFT will say, "We are coming up against a deadline and in those circumstances we shall have to refer". I am totally behind the idea that we must ensure that that is not used as an excuse for delay. However, if the power to extend the deadline is removed, we could fall into a situation where the information is not provided and the OFT would have to refer. That would not be desirable from anyone's point of view.
Lord Hodgson of Astley Abbotts: My Lords, I am grateful to the Minister, in particular for his assurance that the information required would not be asked for in a form which is so prescriptive that firms would find it hard to comply. With that assurance I am happy to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Sainsbury of Turville Lord Sainsbury of Turville moved Amendments Nos. 35 and 36:
Page 15, line 7, leave out "or is" and insert "(but is not yet"
Page 15, line 15, leave out from "Kingdom" to end of line 16.
On Question, amendments agreed to.
Clause 27 [Turnover test]:
Lord Sainsbury of Turville Lord Sainsbury of Turville moved Amendment No. 37:
Page 17, line 24, at end insert—
"(3A) An order under subsection (2) may, in particular, make provision enabling the decision-making authority to determine matters of a description specified in the order (including any of the matters mentioned in paragraphs (a) to (c) of subsection (3))."
On Question, amendment agreed to.
Clause 32 [Duty to make references in relation to anticipated mergers]:
Lord Sainsbury of Turville Lord Sainsbury of Turville moved Amendment No. 38:
Page 21, line 5, leave out paragraph (e) and insert—
"(e) the European Commission is considering a request made, in relation to the matter concerned, by the United Kingdom (whether alone or with others) under article 22(3) of the European Merger Regulations, is proceeding with the matter in pursuance of such a request or has dealt with the matter in pursuance of such a request."
On Question, amendment agreed to.
Clause 34 [Questions to be decided in relation to completed mergers]:
Lord Hodgson of Astley Abbotts Lord Hodgson of Astley Abbotts moved Amendment No. 39:
Page 21, line 31, at end insert "for which the annual output exceeds £500 million"
The noble Lord said: My Lords, Amendments Nos. 39 and 40 concern questions to be decided in relation to completed mergers and parallel a discussion held in

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Committee. I am grateful to my noble friend Lord Hunt for having moved the amendments then. Unfortunately, I was unable to be present on that day. I have read carefully the debate and agree with my noble friend's comments on clogging the system.
However, I am anxious that we should reconsider an issue which I raised at Second Reading, which is of a different order. I raised then the desirability of having based in Britain as many world class companies as possible. At Second Reading the Minister chided me about that. He seemed to think that "world class" and "national champion" are the same phrase. It may be in his mind, but it is not in mine. The "national champion" concept implies a laying on of hands by the Government on a particular firm. It is a proactive selection of a company. I agree with the Minister that it is bound to fail; it has failed and will continue to do so.
"World class" means creating a supportive environment in which business can prosper so that businesses grow of their own volition to be world competitors. It is an enabling, permissive approach focused on 'the overall environment, not on single firms.
It is a commonplace that the United Kingdom is a tiny market by world standards. If UK firms are to compete in the new technologies within the European Union, let alone in the wider world, they need to achieve scale. The tests are the £45 million turnover test that we discussed under Clause 22(1)(b) and the 25 per cent of a market test under Clause 22(3) which, if exceeded, leads to a "relevant merger situation".
In an infant industry such as biotechnology, a sector of the UK market might have an assumed value of no more than £250 million—tiny by world standards, but fairly large in a UK context. The Minister may correct me, but as I understand it a UK company in this sector with a turnover of over £65 million; that is, more than a quarter of the market, could not make any acquisition without creating a "relevant merger situation". That is unnecessarily prescriptive.
An overseas firm could make such an acquisition. In this case the Bill actively disadvantages UK companies in achieving the scale that would enable them to compete on the world stage. My amendment—I do not suggest that it is perfectly drawn—seeks to exclude from consideration UK markets worth less than £500 million; that is, half a billion pounds. That would allow single firms to dominate markets, but only those that are so small as to be insignificant in the overall economy; certainly in the world economy. It would create an environment in which UK-based high-tech companies could compete more effectively on the world stage.
When the Minister replied in Committee he drew attention to Clause 21(2), where the OFT has,
"a discretion not to refer a merger where the market or markets concerned are not of sufficient importance to justify making a reference".—[Official Report, 18/7/02; col. 1453.]
I accept that as a way out, but the issue is whether such a fundamental choice, which might radically affect the UK's world competitive position in a particular
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industry, should be left with the OFT. I think not. Flexibility has its attractions but there is a danger that the OFT will come down on the side of caution and not use its wider discretionary powers under Clause 21(2). I beg to move.
Lord Sainsbury of Turville: My Lords, in the previous debate I tried to point out that world class today is not created by reducing competition. All the evidence shows that where world class companies have been created—this is true of America as much as Japan—it is because there is intense national competition. Companies grow and become world competitors on that basis.
Any world class biotech company of such a size will be considering operating on a world scale and will probably already have offices in America and parts of Europe. World class companies are those that have already broken out of looking only at the UK market.
Amendments Nos. 39 and 40 would prevent the Competition Commission from taking any remedial action against mergers which are expected to result in a substantial lessening of competition, but where the market concerned has an annual output of less than £500 million.
We think that this is the wrong approach. A merger that results in a substantial lessening of competition will have a serious impact on consumers and other businesses flowing from the fact that the merged business is now in a position to exercise market power. It does not matter whether the market is small or large—the impact on the consumers affected will be the same.
We are cautious about de minimis thresholds because markets are dynamic and not static. They are all at different stages of economic development. As I said in Committee when similar issues were raised, the current size of a market might not be a reliable indicator of its economic importance. Some markets, for example, might be large but declining and about to be superseded by new technology. Conversely, a small market in an emerging technology may have considerably greater longer-term significance, such that remedial action might very well be justified. This is an area where we think it would be unwise to make hard and fast rules for the competition authorities.
I should stress, however, that the new mergers regime does allow for, and in places makes extra provisions allowing the size or importance of markets to be taken into account. First, we have the basic jurisdictional tests—in other words, the turnover threshold and the share of supply test. These provide a rough and ready assessment of size and importance. We have, of course, taken powers in the Bill to adjust these basic jurisdictional thresholds in the light of experience.
As the noble Lord also said, once through the jurisdictional gateway, there is an express discretion in Clause 21(2)(a) for the OFT to decide not to refer a merger if it believes that the market concerned is not of sufficient importance to justify one. This discretion will ensure that trivial mergers are not given any

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further attention. Once a merger is referred, there is no further specific reference to the size or importance of the merger in the tasks that the Competition Commission has to perform. However, the commission is required only to take the remedial action that it considers "reasonable and practicable". In certain rare cases, therefore, the commission would have scope to apply no or lesser remedies if it felt that remedies would be unreasonable because, for example, the costs would be disproportionate to the size of the markets concerned. That should ensure that the duties are exercised sensibly and only in an appropriate case.
I hope that I have persuaded the noble Lord, Lord Hodgson, that it is unnecessary to make further express provision for factoring in the size and importance of markets and that this is a matter where it is sensible to leave the commission and the OFT with a limited, but none the less real discretion to make their judgments. I urge the noble Lord to withdraw the amendment.
9.15 p.m.
Lord Hodgson of Astley Abbotts: My Lords, I am grateful to the Minister. He has prayed in aid the example of the United States and the extreme competition there as producing benefits for the consumer. He is absolutely right. But in an economy that is 10 times the size of ours, the eleventh largest US firm will, ipso facto, probably be larger than the largest UK firm. Therefore, they have advantages of scale—to a lesser extent, the same applies in the Japanese markets—which will enable them to outgun, in terms of research and development and their power base, UK firms.
My amendment seeks to make sure that UK firms are not disadvantaged if they want to agglomerate to try to reach that level of scale in order to compete more evenly.
I do not suspect that I shall convince the Minister of my point of view today. We shall have to rely on the discretion of the OFT under Clause 21(2). I therefore seek leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 40 not moved.]
Clause 41 [Intervention by Secretary of State in certain public interest cases]:
Lord Sainsbury of Turville Lord Sainsbury of Turville moved Amendments Nos. 41 to 46:
Page 27, line 42, at end insert "or
(ii) Community law or anything done under or in accordance with it"
Page 28, line 21, at end insert—
"(aza) in relation to the making of a report by the OFT under section 43, the time of the making of the report;"
Page 28, line 42, after "State;" insert—
"(ga) the powers to extend time-limits under section 24 as applied by subsection (5) above, and the power to request information under section 30(1) as so applied, were not exercisable by the OFT or the Secretary of State before the giving of an intervention notice but the
800
existing time-limits in relation to possible references under section 21 or 32 were applicable for the purposes of the giving of that notice;
(gb) the existing time-limits in relation to possible references under section 21 or 32 (except for extensions under section 24(4)) remained applicable on and after the giving of an intervention notice as if any extensions were made under section 24 as applied by subsection (5) above but subject to further alteration by the OFT or the Secretary of State under section 24 as so applied;
(gc) in subsection (1) of section 30 for the words "section 21" there were substituted "section 44(2) or (3)" and, in the application of that subsection to the OFT, for the word "deciding" there were substituted "enabling the Secretary of State to decide";
(gd) in the case of the giving of intervention notices, the references in sections 22 to 31 and 33 to the making of a reference or a reference were, so far as necessary, references to the giving of an intervention notice or an intervention notice;"
Page 29, line 16, at end insert—
"(1A) Where the Secretary of State believes that it is or may be the case that two or more public interest considerations are relevant to a consideration of the relevant merger situation concerned, he may decide not to mention in the intervention notice such of those considerations as he considers appropriate."
Page 29, line 24, after "undertaking" insert "or group of undertakings"
Page 30, line 4, after "undertaking" insert "or group of undertakings"
On Question, amendments agreed to.
Clause 45 [References under section 44: supplementary]:
Lord Sainsbury of Turville Lord Sainsbury of Turville moved Amendment No. 47:
Page 32, line 32, leave out paragraph (b) and insert—
"(e) the European Commission is considering a request made, in relation to the matter concerned, by the United Kingdom (whether alone or with others) under article 22(3) of the European Merger Regulations, is proceeding with the matter in pursuance of such a request or has dealt with the matter in pursuance of such a request."
On Question, amendment agreed to.
Clause 53 [Decision of Secretary of State in public interest cases]:
Lord Sainsbury of Turville Lord Sainsbury of Turville moved Amendment No. 48:
Page 40, line 6, leave out "or" and insert "and"
On Question, amendment agreed to.
Clause 57 [Specified considerations]:
Lord Hodgson of Astley Abbotts Lord Hodgson of Astley Abbotts moved Amendment No. 49:
Page 42, line 42, leave out subsections (3) and (4).
The noble Lord said: My Lords, I return to an issue which we have covered before. That is, the specified considerations about national interest. In part the amendment relates to Clause 57 and the powers of the Secretary of State to modify the section by order. The Minister has already spoken to an amendment which inserts additional words in Clause 57(3). My concern is the way in which the wording overlaps and duplicates Clause 41(3), and appears to achieve the same outcome.
Secondly, my amendment seeks to remove the open-ended nature of Clause 57, subsections (3) and (4). Therefore, the subsections are duplicative and open-ended. The concept of national security is easily understood. I support it. But this catch-all seems to be a very blunt instrument. I find catch-alls dangerous.
The Minister earlier was after me about the importance of the market and how my suggestion, when speaking to amendments with the noble Lord, Lord Phillips, was soft on the importance of the market. I assure the noble Lord that I am not soft on the importance of the market. Subsections (3) and (4) of Clause 57 seem to me to say that the market is very important, but that if we do not like the way that the market is working we have subsections (3) and (4) and we can offset the market by using our powers under those subsections. What the Minister said in Committee did not give me huge confidence that the provisions might not be used in that way. If we are going to be marketeers let us be marketeers. We should not have clauses where there is an open-ended issue. National security is fine, but we should stick to national security and not have the ability to bring in all kinds of other criteria as per that clause. I therefore beg to move.
Lord Sainsbury of Turville: My Lords, I hasten to say that there is no weakening at all of our belief in competition, but there is a question of whether we can at present foresee all circumstances in which a Secretary of State may have legitimate grounds to intervene. The provision deals with that uncertainty about issues that we cannot today foresee. The amendment would remove the mechanism to amend the list of public interest considerations. We believe that that power is a necessary safeguard to ensure that the Bill can be adjusted in future.
As we have previously said, only national security will be defined as a consideration by the Bill, but we cannot predict all future circumstances. During consideration of the Bill in Committee, I tried to give a flavour of how the power could be used in future, with respect to new technology that we may need to control. I can do no more than that. National security is clearly provided for in the Bill and the forthcoming Communications Bill will make provision for plurality in newspaper mergers. We cannot foresee further specific considerations. However, we believe that it is sensible to provide for a transparent mechanism to deal with unforeseen circumstances.
Our clear intention is to deliver a system in which the vast majority of cases are decided by the independent competition authorities against a competition-based test. We have, however, recognised that the interests of national security need to be provided for in the regime, and we think it sensible to provide a mechanism for further public interest considerations to be specified in future. I understand the concern that the Government should not be able to abuse that power, but we have ensured safeguards in the Bill. The power to alter the considerations specified will operate transparently and the Secretary of State will publish her reasons for any
802
order. Most importantly, the Secretary of State is prevented from taking a final decision based on a non-finalised public interest consideration.
I hope that I have been able to give sufficient reassurance. I invite the noble Lord to withdraw his amendment. I repeat that there is no weakening in our belief in competition.
Lord Hodgson of Astley Abbotts: My Lords, before the Minister sits down, there is one thing that I could not understand from our earlier debate. Will the order be made by affirmative or negative resolution?
Lord Sainsbury of Turville: My Lords, I believe that it will be by affirmative resolution of Parliament. I shall check that point and, if I am not right, I shall write to the noble Lord.
Lord Hodgson of Astley Abbotts: My Lords, I am grateful to the Minister for that and grateful that he has understood people's concern about the open-ended nature of Clause 57(3) and (4). If there is an affirmative resolution, at least we will have an opportunity to debate the order fully when the new powers come to be used. In the light of that, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Sainsbury of Turville Lord Sainsbury of Turville moved Amendment No. 50:
Page 42, line 43, leave out "adding to," and insert "specifying in this section a new consideration or"
On Question, amendment agreed to.
Clause 58 [Intervention by Secretary of State in special public interest cases]:
Lord Sainsbury of Turville Lord Sainsbury of Turville moved Amendments Nos. 51 to 55:
Page 43, line 15, leave out paragraphs (b) and (c).
Page 43, line 21, leave out "a" and insert "one or more than one"
Page 43, line 28, at end insert "and the conditions mentioned in subsection (3A) are satisfied.
(3A) The conditions mentioned in this subsection are that, immediately before the enterprises concerned ceased to be distinct—

(a) at least one of the enterprises concerned was carried on in the United Kingdom or by or under the control of a body corporate incorporated in the United Kingdom; and

(b) a person carrying on one or more of the enterprises concerned was a relevant government contractor."

Page 43, line 39, at end insert—
"(aza) in relation to the making of a report by the OFT under section 60, the time of the making of the report;"
Page 44, line 8, after "State;" insert—
"(fa) the powers to extend time-limits under section 24 as applied by subsection (4) above, and the power to request information under section 30(1) as so applied, were not exercisable by the OFT or the Secretary of State before the giving of a special intervention notice;
(fb) in subsection (1) of section 30 for the words "section 21" there were substituted "section 61(2)" and, in the application of that subsection to the OFT, for the word "deciding" there were substituted "enabling the Secretary of State to decide";

803
(fc) in the case of the giving of special intervention notices, the references in sections 22 to 31 and 33 to the making of a reference or a reference were, so far as necessary, references to the giving of a special intervention notice or a special intervention notice;"
On Question, amendments agreed to.
Clause 59 [Special intervention notices under section 58]:
Lord Sainsbury of Turville Lord Sainsbury of Turville moved Amendments Nos. 56 to 58:
Page 44, line 38, at end insert—
"(1A) Where the Secretary of State believes that it is or may be the case that two or more considerations specified in section 57 are relevant to a consideration of the special merger situation concerned, he may decide not to mention in the special intervention notice such of those considerations as he considers appropriate."
Page 45, line 1, after "undertaking" insert "or group of undertakings"
Page 45, line 28, after "undertaking" insert "or group of undertakings"
On Question, amendments agreed to.
Clause 60 [Initial investigation and report by OFT]:
Lord Sainsbury of Turville Lord Sainsbury of Turville moved Amendments Nos. 59 and 60:
Page 46, line 3, leave out ", in particular,"
Page 46, line 4, after "believes" insert "(disregarding section 58(3A)(b))"
On Question, amendments agreed to.
Clause 65 [Decision and enforcement action by Secretary of State]:
Lord Sainsbury of Turville Lord Sainsbury of Turville moved Amendment No. 61:
Page 49, line 19, after "the" insert "special"
On Question, amendment agreed to.
Lord Sainsbury of Turville Lord Sainsbury of Turville moved Amendments Nos. 62 and 63:
After Clause 65, insert the following new clause—
"EUROPEAN MERGERS: INTERVENTION TO PROTECT LEGITIMATE INTERESTS

(1) Subsection (2) applies where—

(a) the Secretary of State has reasonable grounds for suspecting that it is or may be the case that—

(i) a relevant merger situation has been created or that arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a relevant merger situation; and

(ii) a concentration with a Community dimension (within the meaning of the European Merger Regulations), or a part of such a concentration, has thereby arisen or will thereby arise;

(b) a reference which would otherwise be possible under section 21 or 32 is prevented from being made under that section in relation to the relevant merger situation concerned by virtue of Community law or anything done under or in accordance with it; and

(c) the Secretary of State is considering whether to take appropriate measures to protect legitimate interests as permitted by article 21(3) of the European Merger Regulations.

804

(2) The Secretary of State may give a notice to the OFT (in this section "a European intervention notice") if he believes that it is or may be the case that one or more than one public interest consideration is relevant to a consideration of the relevant merger situation concerned.

(3) A European intervention notice shall state—

(a) the relevant merger situation concerned;

(b) the public interest consideration or considerations which are, or may be, relevant to a consideration of the relevant merger situation concerned; and

(c) where any public interest consideration concerned is not finalised, the proposed timetable for finalising it.

(4) Where the Secretary of State believes that it is or may be the case that two or more public interest considerations are relevant to a consideration of the relevant merger situation concerned, he may decide not to mention in the intervention notice such of those considerations as he considers appropriate.

(5) No more than one European intervention notice shall be given under subsection (2) in relation to the same relevant merger situation.

(6) Where the Secretary of State has given a European intervention notice mentioning a public interest consideration which, at that time, is not finalised, he shall, as soon as practicable, take such action as is within his power to ensure that it is finalised.

(7) For the purposes of deciding whether a relevant merger situation has been created or whether arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a relevant merger situation, sections 22 to 31 (read together with section 33) shall apply for the purposes of this section as they do for the purposes of Chapter 1 but subject to subsection (8).

(8) In their application by virtue of subsection (7) sections 22 to 31 shall have effect as if—

(a) references in those sections to the decision-making authority were references to the Secretary of State;

(b) for paragraphs (a) and (b) of section 22(9) there were substituted ", in relation to the giving of a European intervention notice, the time when the notice is given";

(c) the references to the OFT in section 23(2)(a) and (b) included references to the Secretary of State;

(d) sections 24, 30 and 31 were omitted; and

(e) the references in sections 22 to 28 and 33 to the making of a reference or a reference were, so far as necessary, references to the giving of a European intervention notice or a European intervention notice.

(9) Section 41(3) shall, in its application to this section and section (European mergers: scheme for protecting legitimate interests), have effect as if for the words "intervention notice" there were substituted "European intervention notice"."

After Clause 65, insert the following new clause—
"EUROPEAN MERGERS: SCHEME FOR PROTECTING LEGITIMATE INTERESTS

(1) The Secretary of State may by order provide for the taking of action, where a European intervention notice has been given, to remedy, mitigate or prevent effects adverse to the public interest which have resulted from, or may be expected to result from, the creation of a European relevant merger situation.

(2) In subsection (1) "European relevant merger situation" means a relevant merger situation—

(a) which has been created or will be created if arrangements which are in progress or in contemplation are carried into effect;

(b) by virtue of which a concentration with a Community dimension (within the meaning of the European Merger Regulations), or a part of such a concentration, has arisen or will arise; and

805

(c) in relation to which a reference which would otherwise have been possible under section 21 or 32 was prevented from being made under that section by virtue of Community law or anything done under or in accordance with it.

(3) Provision made under subsection (1) shall include provision ensuring that considerations which are not public interest considerations mentioned in the European intervention notice concerned may not be taken into account in determining whether anything operates, or may be expected to operate, against the public interest.

(4) Provision made under subsection (1) shall include provision—

(a) applying with modifications sections 22 to 31 (read together with section 33) for the purposes of deciding for purposes of this section whether a relevant merger situation has been created or whether arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a relevant merger situation;

(b) requiring the OFT to make a report to the Secretary of State before a reference is made;

(c) enabling the Secretary of State to make a reference to the Commission;

(d) requiring the Commission to investigate and report to the Secretary of State on such a reference;

(e) enabling the taking of interim and final enforcement action.

(5) An order under this section may include provision (including provision for the creation of offences and penalties, the payment of fees and the delegation of functions) corresponding to any provision made in, or in connection with, this Part in relation to intervention notices or special intervention notices and the cases to which they relate.

(6) In this section "European intervention notice" has the same meaning as in section (European mergers: intervention to protect legitimate interests)."

On Question, amendments agreed to.
Clause 67 [Water mergers]:
Lord Sainsbury of Turville Lord Sainsbury of Turville moved Amendment No. 64:
Page 51, line 42, at end insert—
"(4) Where two or more enterprises have merged or will merge as part of transactions or arrangements which also involve an actual or prospective merger of two or more water enterprises, Part 3 of the 2002 Act shall apply in relation to the actual or prospective merger of the enterprises concerned excluding the water enterprises; and references in that Part to the creation of a relevant merger situation shall be construed accordingly.
(5) Subject to subsections (3) and (4), Part 3 of the 2002 Act shall not apply in a case in which the OFT is required to make a reference under section 32 above except as applied by virtue of Schedule 4ZA."".
On Question, amendment agreed to.
Clause 71 [Effect of undertakings under section 70]:
Lord Sainsbury of Turville Lord Sainsbury of Turville moved Amendments Nos. 65 to 67:
Page 54, line 30, after "undertaking" insert "or group of undertakings"
Page 54, line 32, after "undertaking" insert "or group of undertakings"
Page 54, line 36, leave out "the" and insert "any"
On Question, amendments agreed to.
Schedule 7 [Provision of information and advice to Ministers etc.]:
Lord Sainsbury of Turville Lord Sainsbury of Turville moved Amendments Nos. 68 to 70:
Page 217, line 37, after "undertaking" insert "or group of undertakings"
Page 217, line 41, after "undertaking" insert "or group of undertakings"
Page 218, line 1, leave out third "the" and insert "any"
On Question, amendments agreed to.
Schedule 8 [Promoting good consumer practice]:
Lord Sainsbury of Turville Lord Sainsbury of Turville moved Amendment No. 71:
Page 228, line 38, at end insert—
"(4) An order may—

(a) make different provision for different cases or classes of case or different purposes;

(b) make such transitional, transitory or saving provision as the person making it considers appropriate."

On Question, amendment agreed to.
Schedule 10 [Part 2 of the 1973 Act]:
Lord Sainsbury of Turville Lord Sainsbury of Turville moved Amendment No. 72:
Page 246, line 24, leave out "revokes an order under that enactment" and insert "is a revoking order of the kind dealt with by paragraphs 6 to 8 below"
On Question, amendment agreed to.
Clause 94 [Section 94: supplementary]:
Lord Sainsbury of Turville Lord Sainsbury of Turville moved Amendments Nos. 73 and 74:
Page 70, line 13, leave out "or is" and insert "(but is not yet"
Page 70, line 21, leave out from "Kingdom" to end of line 22.
On Question, amendments agreed to.
Clause 104 [Further publicity requirements]:
Lord Sainsbury of Turville Lord Sainsbury of Turville moved Amendment No. 75:
Page 79, line 6, after "shall" insert "(after the acceptance of the undertaking or (as the case may be) the making of the order)"
On Question, amendment agreed to.
Clause 106 [Attendance of witnesses and production of documents etc.]:
Lord Sainsbury of Turville Lord Sainsbury of Turville moved Amendment No. 76:
Page 79, line 43, leave out "it" and insert "the Commission"
On Question, amendment agreed to.
Clause 108 [Penalties]:
Lord Sainsbury of Turville Lord Sainsbury of Turville moved Amendment No. 77:
Page 81, line 37, leave out from "earlier," to end of line 39 and insert "the day on which the report of the Commission on the reference concerned is published (or, in the case of a report under section 49 or 64, given) or, if no such report is published (or given) within the period permitted for that purpose by this Part, the latest day on which the report may be published (or given) within the permitted period."
On Question, amendment agreed to.
Clause 117 [Review of decisions under Part 3]:
Lord Hunt of Wirral Lord Hunt of Wirral moved Amendment No. 78:
Page 86, line 14, at end insert—
"( ) For this purpose "any person aggrieved" shall mean any person who is a party to the relevant merger situation or special merger situation."
The noble Lord said: My Lords, when I first read what is now Clause 117, entitled "Review of decisions", I could not quite believe what the Government propose, which is that "any person aggrieved" by a decision of the Office of Fair Trading may apply to the Competition Appeal Tribunal for a review of that decision. As I have already said, this is one of the most damaging clauses in this entire part of the Bill. Just to check that I have not been subject to an idiosyncratic quirk, I have consulted widely outside the Chamber. I discovered that that is also the view of an overwhelming proportion of business and commerce. In particular, in the view of the Confederation of British Industry, it is one of the most damaging clauses in this entire part of the Bill.
However, I then turned my attention to government Amendment No. 79. Whereas I was going to say that there is a safeguard because "any person aggrieved" does have to comply with a three-month time limit, I found to my horror that the Government propose to remove even that safeguard so that at any time "any person aggrieved" may apply to the Competition Appeal Tribunal for a review of the decision.
I am well aware that sitting on the Government Front Bench are people who know a great deal about business and commerce. I find incredible the idea that they would be party to legislation that will allow "any person aggrieved" to apply for a review, especially now that we have that safeguard removed. In future, it will mean that parties whose mergers are approved will not have a definite ruling but will instead face the risk that someone somewhere will appeal. Of course, as with any appeal, there is the opportunity for success. This will cause huge, unnecessary uncertainty to business and risks undermining the competition focus of merger control by potentially placing excessive reliance on the views of others.
I suppose that the Minister will say that the only people aggrieved will be competitors. But given that competition law is about protecting competition and not competitors, that surely is entirely appropriate. This issue is not resolved by the wording in paragraph 11 of Schedule 4, Part 2, which deals with tribunal rules. These proposed rules are permissive in nature and not adequately restrictive of the persons who may apply for a review. Of course it is accepted that it will always be open to a third party to seek judicial review under established procedures, but the lack of such actions in the past shows that the risk of successful challenge is very small and that it is seen as such in the market-place. But this clause now opens the way for third party challenges; it opens the door. I give way.
Lord Borrie: My Lords, I thank the noble Lord for giving way. I wonder whether the problem is being exaggerated. If one refers to subsection (6) of Clause
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117, one reads that the application is confined to grounds on which judicial review could be sought. The noble Lord will no doubt also speak to Amendment No. 80 on this very subject. But only if he is successful with that amendment would the alarm that he is expressing be justified. If the application is confined to judicial review grounds as set out in subsection (6), does not a good deal of what the noble Lord has been speaking about fall to the ground?
The Deputy Speaker (Lord Ampthill): My Lords, if the noble Lord would not mind, I think I should put the amendment that has been moved before he continues, which we shall wait anxiously for him to do—
9.30 p.m.
Lord Hunt of Wirral: My Lords, I believe that I was giving way to the noble Lord, Lord Borrie. If I may, I should like to continue to address the House for a little while longer.
I have the good fortune to be senior partner of a firm of solicitors that specialises in judicial reviews. Therefore, I am well aware of the situation as explained by the noble Lord, Lord Borrie. However, it is no restriction when one is allowing anybody to make an application for judicial review and, indeed, encouraging anybody who believes that he is aggrieved—not just any corporate body, but any person who is aggrieved. What one needs is certainty. I suppose that I am now referring back to the 16 years when I had the honour and privilege of being a member of successive governments. Judicial review is something of a nightmare for Ministers. It can result in hugely important decisions being delayed and enormous costs being incurred, which is just part and parcel of the democratic/judicial process.
Judicial review is a procedure to which Ministers are subjected. Perhaps I may explain to the noble Lord, Lord Borrie, that it is not here a question of judicial review of a ministerial decision. As the clause is drafted—the noble Lord rightly points out that I shall seek in a moment to amend that part of the clause—anyone can go through those enormously complex processes of judicial review if he is aggrieved by a decision of the OFT. It widens hugely the basis for judicial review.
Outside business and commerce were somewhat horrified by the clause. The Minister has removed even the safeguard that anyone aggrieved would have to make an application within three months. A person who feels aggrieved can apply for judicial review at any time. That imposes enormous uncertainty in a complicated process.
I am grateful to the noble Lord, Lord Borrie, for trailing what I shall now say. I seek to leave out subsection (6) and in Amendment No. 80 insert the words on the Marshalled List. I do so only in these circumstances. If the Minister is not disposed to accept Amendment No. 80 I do not wish to change the existing wording in subsection (6). I believe that the Minister should accept Amendment No. 80. Then

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judicial review becomes something of the past. The clause then provides that the test for review of a merger decision should be the same as that applied in judicial cases; that is, concerned more with matters of procedure than of substance. If Amendment No. 78 were accepted,
"'any person aggrieved' shall mean any person who is a party to the relevant merger situation or special merger situation".
Only if Clause 117(1) is amended as suggested in Amendment No. 78 would I wish the Minister to amend Clause 117 so that any appeal could consider also the substantive merits of the decision. Judicial review is a narrow focus. It can be time consuming, particularly when it is brought by a member of the public. I shall not mention the cases but I speak with the scars of months of delay caused by one single, aggrieved person testing a ministerial decision. It is too narrow a basis for review of what are substantive economics-based findings and is inconsistent with the position under the 1998 Act under which decisions may be appealed on their merits. A right of appeal on the merits to a tribunal which is skilled in competition law would represent a necessary safeguard in those cases where economic analysis and legal principles have been incorrectly applied by an administrative body. As a case in point, perhaps I may mention the European Commission's conduct of the Airtours case. Amendment No. 80 is based on the assumption that the Government will accept Amendment No. 78. I beg to move.
The Deputy SpeakerMy Lords, Amendment No. 78 has now been moved. The noble Lord has, of course, spoken to Amendment No. 80, which is grouped with it.
Lord Sainsbury of TurvilleMy Lords, at almost every stage of the Bill's progress we have discussed the issue of whether there should be a full appeal on merits in merger cases. At every stage, we have put the case that judicial review was, and remains, the appropriate basis for reviewing decisions taken in merger investigations. One of the reasons why we keep coming back to the matter is that the Opposition have still not recognised just how effective a judicial review-type appeal would be in holding the competition authorities to account for their actions.
I shall give some examples. If the OFT or the Competition Commission misinterpreted their duties under the Enterprise Act, they would be caught by a judicial review-type appeal. If a panel of the Competition Commission failed to observe due process, such as failing to comply with the chairman's procedural rules, and that amounted to a material procedural unfairness, a judicial review-type appeal would cover that. If the OFT or the Competition Commission had, to a material extent, based a decision on an incorrect factual assessment of the conditions of competition in a market affected by a merger, the appeal mechanism that we propose would, again, catch that. If the authorities acted unreasonably, if their decision fell outside the range of conclusions that
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could reasonably be reached on the evidence before the competition authorities or if the remedies were disproportionate in the circumstances, a judicial review-type appeal would pick that up.
The right of review therefore provides a high level of protection for the parties—more, perhaps, than noble Lords might have realised, although the noble Lord, Lord Hunt of Wirral, will be aware of the situation, given the work that he has done. It is also sufficient to protect their rights under the Human Rights Act 1998. We recognise that a full right of appeal, as envisaged, would go even further in allowing the parties to revisit all the issues discussed during a merger investigation and to hold a full hearing of the merits of the case. However, as we have said before, that is not the best way to deal with such decisions.
The problem, as we have tried to explain on numerous occasions, is that there is no right or wrong answer on whether a merger should be allowed to go ahead. Two groups of competition experts looking at the same merger situation could well come to different conclusions as to whether there was a competition problem and what the remedies should be. That means that a full rehearing would merely substitute one set of views for another, which may or may not make for a more just outcome. The more workable appeal mechanism is one that considers whether the decision was reasonable and was based on a fair process.
The right to bring an action should be open to more than just the parties to the merger in question. Some third parties—for example, customers, suppliers and competitors—may have an interest in a case and should, therefore, have access to the tribunal. However, we are keen to prevent frivolous or vexatious applications or those from parties with no direct interest in a case. That is why Schedule 3 provides that tribunal rules may be made to allow the Competition Appeal Tribunal to reject proceedings if it considers that the person instituting them does not have a sufficient interest in the decision or has disclosed no valid grounds for bringing the proceedings. The tribunal will also be able to reject proceedings that it considers vexatious. A time-limit will be specified in the tribunal's rules. We are consulting on the length of time, but it will be three months or less. We have removed that from the clause to avoid confusion.
We are also aware that any limit that we place on the scope of any review mechanism in the Bill will not affect the rights of third parties to seek judicial review of decisions in the High Court. We should, therefore, create a two-tier system, in which merger parties would have access to the tribunal, while third parties relied on the High Court. We cannot stop the judicial reviews taking place; the only question is whether we create a two-tier system.
In general, I am surprised that the noble Lord is pushing so hard for full appeal. I should have thought that, from a business perspective, full appeal would be more of a concern. It could well cause delays and add to the costs; it would create a two-tier approach, with

811
third parties relying on judicial review through the courts; and it would not necessarily always lead to what the parties would regard as a more just outcome.
Finally, the review mechanism should not be seen in isolation. It needs to be assessed alongside the wide array of safeguards we are introducing to strengthen decision-making; the new requirement on the Competition Commission to have clear procedural rules; greater transparency requirements, including the publication of reasons for decisions; and other safeguards, such as the two-thirds voting requirement for key decisions. Backed by these, we are convinced that a judicial review type appeal mechanism is the right one. It leaves the taking of these complex decisions to the competition authorities, which will build up a body of expertise in the effective discharge of their functions. It leaves the tribunal to become expert at policing their decisions, ensuring that the process is fair and the outcome reasonable; and it leaves those businesses and others affected by the decisions with a clear, fast and effective mechanism for resolving any disputes. On that basis, I ask the noble Lord to withdraw the amendment.
Lord Hunt of Wirral: My Lords, I have listened carefully to the Minister's response. All I can deduce is that he has not yet been subjected to a judicial review of any of his decisions. The noble Lord laughs and indicates that he has not. It is good to hear that, and I admire him for it. However, he might have a word with one or two of his ministerial colleagues who have been so subjected. He might then understand better some of the points that I have sought to make.
On the point that he has made about Amendment No. 80, I am arguing for the situation as it applies under the 1998 Act, where an appeal can be on merit. With some of these highly complicated decisions, which are very much based on economics, the narrow confines of judicial review are inappropriate. I shall, of course, take time to reflect on what the Minister has said and we may return to this subject yet again. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Sainsbury of Turville Lord Sainsbury of Turville moved Amendment No. 79:
Page 86, line 20, leave out subsections (3) and (4).
On Question, amendment agreed to.
[Amendment No. 80 not moved.]
Clause 118 [Fees]:
Lord Sainsbury of Turville Lord Sainsbury of Turville moved Amendment Nos. 81;
Page 87, line 36, at beginning insert "special"
On Question, amendment agreed to.
Lord Sainsbury of Turville Lord Sainsbury of Turville moved Amendments Nos. 82 and 83:
After Clause 118, insert the following new clause—
"PRIMACY OF COMMUNITY LAW

(1) Advice and information published by virtue of section 103(1) or (3) shall include such advice and information about the effect of Community law, and anything done under or in accordance with it, on the provisions of this Part as the OFT or (as the case may be) the Commission considers appropriate.

(2) Advice and information published by the OFT by virtue of section 103(1) shall, in particular, include advice and information about the circumstances in which the duties of the OFT under sections 21 and 32 do not apply as a result of the European Merger Regulations or anything done under or in accordance with them.

(3) The duty or power to make a reference under section 21 or 44(2) or (3), and the power to give an intervention notice under section 41, shall apply in a case in which the relevant enterprises ceased to be distinct enterprises at a time or in circumstances not falling within section 23 if the condition mentioned in subsection (4) is satisfied.

(4) The condition mentioned in this subsection is that, because of the European Merger Regulations or anything done under or in accordance with them, the reference, or (as the case may be) the reference under section 21 to which the intervention notice relates, could not have been made earlier than 4 months before the date on which it is to be made.

(5) Where the duty or power to make a reference under section 21 or 44(2) or (3), or the power to give an intervention notice under section 41, applies as mentioned in subsection (3), references in this Part to the creation of a relevant merger situation shall be construed accordingly."

After Clause 118, insert the following new clause—
"POWER TO ALTER SHARE OF SUPPLY TEST

(1) The Secretary of State may by order amend or replace the conditions which determine for the purposes of this Part whether a relevant merger situation has been created.

(2) The Secretary of State shall not exercise his power under subsection (1)—

(a) to amend or replace the conditions mentioned in paragraphs (a) and (b) of subsection (1) of section 22;

(b) to amend or replace the condition mentioned in paragraph (a) of subsection (2) of that section.

(3) In exercising his power under subsection (1) to amend or replace the condition mentioned in paragraph (b) of subsection (2) of section 22 or any condition which for the time being applies instead of it, the Secretary of State shall, in particular, have regard to the desirability of ensuring that any amended or new condition continues to operate by reference to the degree of commercial strength which results from the enterprises concerned having ceased to be distinct.

(4) Before making an order under this section the Secretary of State shall consult the OFT and the Commission.

(5) An order under this section may provide for the delegation of functions to the decision-making authority."

On Question, amendments agreed to.
Clause 119 [Orders and regulations under Part 3]:
Lord Sainsbury of Turville Lord Sainsbury of Turville moved Amendments Nos. 84 to 90:
Page 88, line 32, at end insert—
"(2A) The power of the Secretary of State under section (Power to alter share of supply test) (including that power as extended by subsection (2) above) may be exercised by modifying any enactment comprised in or made under this Act, or any other enactment."
Page 88, line 34, after "57(3)" insert ", (European mergers: scheme for protecting legitimate interests)"
Page 88, line 37, after "27" insert "(including that enactment as applied by section 41(5), 58(4) and (European mergers: intervention to protect legitimate interests)(7))"
Page 88, line 41, after "section" insert "(European mergers: scheme for protecting legitimate interests)",.
Page 88, line 41, after "99" insert ", (Power to alter share of supply test)"
Page 89, line 5, after "repealed" insert "(and the previous enactment revived)"
Page 89, line 7, at end insert "and without prejudice to the making of a new order"
On Question, amendments agreed to.
Clause 124 [Other interpretation provisions]:
Lord Sainsbury of Turville Lord Sainsbury of Turville moved Amendment No. 91:
Page 92, line 13, at end insert—
""Community law" means—

(a) all the rights, powers, liabilities, obligations and restrictions from time to time created or arising by or under the Community Treaties; and

(b) all the remedies and procedures from time to time provided for by or under the Community Treaties;"

On Question, amendment agreed to.
Clause 125 [Index of defined expressions]:
Lord Sainsbury of Turville Lord Sainsbury of Turville moved Amendments Nos. 92 and 93:
Page 93, line 29, at end insert—
"Community law
Section 124(1)"
Page 94, line 26, leave out "Section 41(3)" and insert "Sections 41(3) and (European mergers: intervention to protect legitimate interests)(9)"
On Question, amendments agreed to.
Clause 126 [Power of OFT to make references]:
Lord Hunt of Wirral Lord Hunt of Wirral moved Amendment No. 94:
Page 95, line 24, after "competition" insert "to a significant extent"
The noble Lord said: My Lords, perhaps I may explain that on Amendment No. 791 was reassured by the Minister's statement that this will now form part of the tribunal's rules. Although I expressed the doubt that these would only be permissive in nature, I should like to reflect further on the position. That is why we did not oppose Amendment No. 79.
Turning to Amendment No. 94, market investigations impose significant costs on business. It is important that they are initiated only where there are sound reasons to believe that there is a significant adverse effect on competition. I emphasise the word "significant". That is a principle which is commonly found in UK and EC competition law. Without this change, conduct outside the market concerned could be grounds for making a reference, and any effect, however minor, can be referred by the OFT.
The Government seem to agree that only important cases should be referred to the Competition Commission. If that is the case, I hope that the Minister will recognise that that is not reflected on the face of the Bill but it will be if he is disposed to accept
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this amendment. I contend that business needs clarity, and this clause does not provide it. I therefore hope that the Minister will accept this amendment, which I beg to move.
9.45 p.m.
Lord Hodgson of Astley Abbotts: My Lords, I support my noble friend's amendment. The use of the word "significant" is critical. I once had the dubious pleasure of being a director of a company that was being bid for by another company and which became the subject of an OFT investigation. The position of companies in victim mode, as we were, is unenviable. In trying to hold the company together, management and staff are very concerned, so such investigations are not to be entered into lightly for reasons of data-gathering or in response to political or economic pressure. The insertion of the word "significant" is entirely in keeping with the thrust of the Bill to ensure that we have a fully competitive market in this country. I hope that the Minister will look upon it favourably.
Lord Borrie: My Lords, I have been surprised that the noble Lord, Lord Hunt, has not produced any examples of the OFT over the years failing to comply with what he wants; that is to say that investigations are sought and references made only when it is likely that competition will be restricted "to a significant extent". He wants those words on the face of the Bill, yet only a few moments ago he expressed concern on behalf of those who might be subject to judicial review that it can be a painful process. The only effect of inserting "to a significant extent" would be that the OFT would proceed as it invariably has done, namely in line with the sensible policy that the noble Lord advocates, but it would face a greater possibility of judicial review if someone wanted to argue about the precise meaning of those words in a precise situation.
Lord Sainsbury of Turville: My Lords, the trouble with having the noble Lord, Lord Borrie, on one's side on these matters is that all the best lines are taken before one can speak. He put the point extremely well.
Amendment No. 94 provides that the OFT may make a market investigation reference only when it has reasonable grounds to suspect that one or more features of market prevents, restricts or distorts competition in the UK market to a significant extent. We have made it clear in both this House and the other place that we intend that market investigations should be used only to pursue potentially significant competition problems. For its part, the OFT states clearly in its draft guidance on making market investigation references that it will take account of the scale of any suspected adverse effects on competition and the extent to which they are likely to have significant detrimental effects on customers before making a reference. The draft guidance goes on to outline some of the factors that the OFT will take into account when deciding whether a reference is an appropriate response to the apparent scale of any competition problem; for example, the size of the market and the proportion of the market affected by the feature giving rise to the adverse efforts.

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In our view, it would be unreasonable for market investigation references to be used to look at trivial competition policy, there is no reason to suppose that the OFT will attempt to use them in such a way, and nothing would be gained by referring explicitly to the "significance" of potential adverse effects in Clause 126.
I reiterate the two important points that the noble Lord, Lord Borrie, made. No evidence has been given that the OFT's role has been abused in the past, therefore there is no reason to suppose that it will be in the future. I am not certain that to introduce "to a significant extent" would add any clarity, but it would leave more room for debate, argument and judicial review. On that basis I ask the noble Lord to withdraw the amendment.
Lord Hunt of Wirral: My Lords, it is curious that the noble Lord, Lord Borrie, argues that it is unnecessary to include the word "significant" in the Bill because that has always been the way in which the OFT has operated. We are dealing with a new body and with legislation that will stand for a significant time. It is important to ensure that the good practices of the past continue into the future.
The noble Lord says that it would give additional ammunition to the lawyers who no doubt would be seeking judicially to review the decision. However, surely it is important to have on the face of the Bill the situation as it is and as it ought to be and to leave whatever the processes—I failed to persuade the Minister as to the correct process—to take their course if they are called into effect.
I agree with my noble friend Lord Hodgson of Astley Abbotts that it is important to ensure that, as the noble Lord, Lord Borrie, described it, the practice of the past continues into the future. However, I shall reflect not only on all the best lines, which the Minister seemed to believe were possessed by the noble Lord, Lord Borrie, but on his comparatively good lines. I shall go away and think further and, in the mean time, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Phillips of Sudbury Lord Phillips of Sudbury moved Amendment No. 95:
Page 95, line 26, at end insert—
"( ) In considering the making of a reference under subsection (1) affecting the regulation or obligations of the legal profession the OFT shall have regard to the duties of lawyers in relation to the sound administration of justice and to the interests of consumers of legal services and of those lacking the same."
The noble Lord said: My Lords, first, I must declare an obvious interest as a solicitor. Amendments Nos. 95, 102 and 105 are relevant to the legal profession. Similarly, the noble Lord, Lord Brennan, who is unavoidably absent, was a former chairman of the Bar Council. It is relevant to point out that the Bar Council and the Law Society are taking an interest in the amendments, although they were tabled before that was apparent.
The overall purpose of the amendments is to give the legal profession in the shape of the Law Society, which is responsible for solicitors, and the Bar Council, which is responsible for barristers, the power to make regulations for the two professions in the public interest. They will write on to the face of the Bill allowances which would mean that anti-competitive references made under Clause 126 can be considered in the light of the special and particular position of legal services.
In turn, the amendments will allow the Competition Commission, in deciding market investigation references, to make the same allowance. Without these amendments, or something like them, there would be no power for either the OFT or the Competition Commission to have regard to the particularities and importance of legal services.
I want to comment briefly on the special nature of legal services. Lawyers pleading their own cause, pleading a special position in relation to any legislation, will be a sensitive task, but it is not we who have made the legal profession and the services it renders special. All solicitors and barristers are officers of the Supreme Court. They have special obligations with regard to the court and to justice. They have special duties and are subject to statutory discipline. They have a special role as advocates. They have special obligations to clients; for example, the cab-rank rule which applies to barristers. They are subject to special accounts rules and to special indemnity arrangements. Perhaps most importantly, they have a unique legal privilege in terms of the confidence they can maintain vis-a-vis their clients' affairs. All those aspects of the nature of the legal profession, whether solicitor or barrister, relate to the importance of their function at the heart of society; namely, in relation to the courts.
I should like to say a few words about the particular importance and nature of legal services. In a law-bound culture and an age when this place seeks daily to legislate rights for citizens, access to requisite legal services is not an optional extra—it is not any old other service. The delivery of social rights, for example, whether in terms of housing or social welfare or whatever else, is nugatory and pointless without the availability of lawyers who are both affordable and accessible geographically. Equality before the law, one of our proudest boasts, becomes a sham unless we recognise that the provision of legal services occupies a very particular position. That is the background.
I should like to refer briefly to the case of Klopp, which was heard in the European Court in 1984. This case confirmed a point that has been consistently upheld—that in the absence of specific community rules in the field, each member state is in principle free to regulate the exercise of the legal profession in its territory. Consequently, the rules applicable to the legal profession differ greatly from one member state to another, so that, for all the reasons I have mentioned, EU jurisprudence puts the legal profession into a special position. The other point is that the provisions dealt with in these amendments—Clauses

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126 and 129—hark back to Article 81, formerly Article 85, of the Treaty of Rome, which is the central pro-competition section of the treaty.
We need these amendments for the following reasons, which are only illustrative. The regulatory borderline between solicitors and the Bar, maintaining the two as separate professions, is one competition issue; an issue of anti-competitive arrangements. Partnerships at the Bar currently are not allowed. Although one might regard the fact that every barrister must act on his or her own as a competitive ideal, some might say that that is an anti-competition issue. The position on partnerships between barristers and solicitors is another such issue, as is the matter of multidisciplinary partnerships between solicitors, barristers and accountants, for example. All of those are potentially anti-competition issues. Without these or similar amendments, we cannot address those issues in a manner that pays proper regard to the circumstances of the UK legal profession and the particular circumstances of the client.
Each of the three amendments in this group deals expressly with the issue of availability. At the end of Amendment No. 95, for example, we talk not only about the interests of the consumers of legal services, but about "those lacking the same". The same wording is used in Amendment No. 102. The words that Amendment No. 105 proposes will enable the Competition Commission, in considering a market reference from the OFT, to have regard not only to the possibility of a detrimental effect on the price of legal services, the quality of legal services and the choice of legal services, but also to the availability of legal services. One might think that that is a quibble, but it is not. One is not a consumer of anything if one cannot purchase the item to be consumed.
As we know, legal services in this country are, like those in other countries, hugely expensive. The legal aid scheme, sadly, is being run down. The truth is that an increasing minority of our population are not consumers of legal services when they need them because those services are not in truth available. The question of availability is central to these three amendments and central also to the current disposition of legal services between small and medium-sized, cheap high street solicitors firms on the one hand and, on the other, a populous Bar with a cheap end.
I shall not say more than that as the issues are complex. However, I considered that I needed to illustrate why the amendments are necessary. It is not a question of prejudging the issues but merely of allowing them to be properly judged when the time comes, if the time comes, by the Office of Fair Trading and, indeed, by the Competition Commission.
Finally, I am reluctant to drag in another European Court case at this time of night but I believe that it is necessary. I refer to the case of Wouters which was decided in February of this year. That case made abundantly clear that as regards Article 81—formerly Article 85—the key anti-competitive provision, so long as the domestic legislation of the member state
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involved allows, the court can take account of these public interest factors. I have short-handed the key elements of the Wouters decision in mentioning in my amendments the,
"duties of lawyers in relation to the sound administration of justice and to the interests of consumers of legal services and of those lacking the same".
In order more vividly to explain why Wouters is relevant, I wish to quote from paragraph 97 of the judgment. The case involved the refusal of the Netherlands Bar to allow multidisciplinary partnerships. The European Court at the highest level upheld that anti-competitive—as some would say—provision because, as it stated,
"account must first of all be taken of the overall context in which the decision of the [Netherlands Bar] was taken or produces its effects".
It is crucial that we consider the whole context, social as well as economic. The judgment continues,
"More particularly, account must be taken of its objectives, which are here [in the Wouters case] connected with the need to make rules relating to organisation, qualifications, professional ethics, supervision and liability, in order to ensure that the ultimate consumers of legal services and the sound administration of justice are provided with the necessary guarantees in relation to integrity and experience".
I hope that I have not wholly confused the House in trying to explain a none-too-easy set of amendments. I also hope that the Government will be sympathetic to the purpose of the amendments which I assure the Government is not driven by a professionally self-interested motivation. I beg to move.
10 p.m.
Lord Sainsbury of Turville: My Lords, I am grateful to the noble Lord, Lord Phillips of Sudbury, for raising in these amendments issues which are of great importance not only to members of the legal profession but also to society as a whole. The sound administration of justice and the promotion of access to justice are matters of the utmost concern to this Government, as, of course, is the promotion of competition. I wish to quote from a consultation document recently issued by the Lord Chancellor's Department in response to the work which the OFT has been doing on competition in the legal and other professions:
"The Government starts from two propositions. First, the professions should be fully subject to competition law and unjustified restrictions on competition should be removed. Second, when considering competition in the legal professions, the need to keep clearly in view the public interest in maintaining an independent, honest and diverse profession and ensuring the protection of consumers, while encouraging healthy competition to promote new, better and affordable services and wider consumer choice".
The amendments relate to the considerations that the OFT should bear in mind when making any market investigation reference relating to the legal profession, to the circumstances in which the Competition Commission may make a finding of adverse effects on competition when considering such a reference and, where there is such a finding, on the definition of customer benefits that may be held to outweigh such adverse effects. I shall deal with each of those in turn.

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As regards any future reference decision affecting the legal profession, the amendment requires the OFT, in essence, to take account of the non-competition-related public interest considerations which underlie the regulation of that profession. The noble Lord, Lord Phillips, is concerned that in its zeal to promote competition, the OFT may initiate a process that could be damaging to the administration of justice and the ultimate interests of consumers. Those concerns are entirely proper, but in my view they are unfounded.
Some rules that regulate the provision of professional services clearly restrict competition in the provision of such services, but are so essential to other aspects of the public interest that one would not expect the OFT to found a market investigation reference on them. For example, the importance of ensuring that professional services are supplied only by those properly qualified to supply them clearly outweighs the restrictions on competition that result from rules requiring doctors or lawyers to be properly qualified. Of course, one may take issue on the question of whether particular qualifying requirements laid down by the regulatory bodies are justified in those terms, but the basic principle is beyond dispute.
Suppose, then, that the OFT was considering the effects on competition of certain Law Society rules, and believed that the restrictions that exist on solicitors entering into partnership with accountants significantly restricted competition. The OFT might take the view, as the Court of Justice did in the Wouters case, that a complete ban on the formation of such partnerships was a reasonable way of maintaining the integrity of the legal profession. On the other hand, it might take the view that it was at least worth exploring in more detail whether there was not some less absolutely restrictive means of achieving the same goal; in other words, whether strict rules governing the conduct of solicitors who entered into such partnerships would not adequately safeguard the interests of clients and the sound administration of justice.
I stress that I cite that as a hypothetical example and that I have no wish to be drawn into a discussion of the competition or public interest effects of any existing professional rules. What matters, I believe, is that that is the kind of thought process that we would expect the OFT to go through with regard to Clause 126 as currently drafted. There is no need for Amendment No. 95, any more than there is any need to include in Clause 126 a provision explicitly permitting the OFT to take account of relevant customer benefits generally when making a reference decision. The power to make market investigation references necessarily involves the exercise of a wide-ranging discretion to take into account all matters that it is reasonable to take into account in the circumstances of any particular case. Given the many markets and issues within those markets that the OFT may have occasion to consider under this legislation, we believe that making special provision for what it should consider in one particular market or in relation to one particular profession, or even specifying that certain matters should be
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considered in all cases, would call the breadth of the OFT's discretion as regards other matters into question.
Moreover, as the OFT makes clear in its draft guidance, when it is considering making a market investigation reference, it will have particular regard to the suitability of a reference as against other investigation or enforcement options, and to the availability of remedies through the market investigation process to any competition problems that it perceives in the market concerned. While we would not wish to prejudge the decisions that the OFT might make in any future proceedings involving rules governing the provision of legal services, there are at least reasons to doubt whether a market investigation reference is likely to be a useful way of dealing with such matters. Those rules are generally made either by statute or by professional associations with a regulatory function, such as the Law Society. Statutory rules that the OFT could address by making its own report and recommendations to government under Clause 7, or any recommendations to change such rules—whether made by the OFT or by the Competition Commission following a reference—would have to be interpreted by the Government in the light of other public interest concerns, such as the administration of justice.
On the other hand, rules made by a professional association may well amount to a "decision of an association of undertakings" within the terms of Article 81 of the EC treaty or Section 2 of the Competition Act 1998. They would thus be more appropriately dealt with by a consideration under the relevant EC law or the Competition Act.
I turn now to the amendments to Clause 129. Let us suppose that the OFT has referred one or more markets for legal services to the Competition Commission and that the commission is considering certain regulatory provisions which restrict competition. If those provisions are imposed by law or are required in order to comply with a legal requirement, it will be for Ministers or those responsible for the requirement to decide whether to implement any recommendations for change which the commission may make. If not, first, the commission will have to consider whether they should be examined by the OFT rather than by itself on the basis that they may be decisions of association of undertakings. Such decisions should be considered either under Article 81, where they affect inter-state trade and where the so-called "modernisation" of EC competition law has given the OFT the power to apply Article 81, or under the Competition Act 1998, where they do not affect inter-state trade.
Alternatively, there may be cases where the Competition Commission should assess the matter further. However, in that event, whether or not a rule is found to have an adverse effect on competition and whether or not it is within the legal power of the commission to do anything about it, we believe that there would be ample scope to consider the public policy justifications for such a rule under the customer benefits provisions.

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Ultimately, the sound administration of justice is inseparable from the quality of the legal services provided. Quality is one of the set of relevant customer benefits which may, in so far as they result from a feature of a market which prevents, restricts or distorts competition, outweigh an adverse effect on competition.
The last amendment in this group—Amendment No. 105—proposes to qualify the reference to "choice of goods or services" in the context of detrimental effects on customers by adding a reference to the "availability" of goods and services. I do not consider that to be necessary. If particular services are less available to customers than they might otherwise be, that must be because the total supply of such services is limited, or because the variety of types of such services is limited, or because the number of different providers of such services is limited.
All those possibilities are covered by the existing drafting. A restriction in total supply will result in higher prices, while restrictions in the types of service available or the number of suppliers on the market are both covered by the concept of choice. Therefore, we do not believe that the amendment adds anything of substance to Clause 129(5).
I hope that the noble Lord will accept that we have considered this issue very carefully. However, we believe that there is currently sufficient within the legislation to protect the whole issue of equality of legal services and the access to them. Therefore, there is no need for the amendments because what they seek to achieve is already built into the legislation.
Lord Phillips of Sudbury: My Lords, I am most grateful to the Minister for his extremely careful and detailed response. I hope that he will forgive me if I do not respond instantly to all that he has said. I, along with other people, will consider it very carefully. If necessary, we shall return and, if necessary, we may come to the Minister to talk about certain matters. However, in the meantime, I am happy to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Sainsbury of Turville Lord Sainsbury of Turville moved Amendments Nos. 96 and 97:
Page 95, line 31, leave out ", in the course of business,"
Page 95, line 34, leave out ", in the course of business,"
On Question, amendments agreed to.
Clause 127 [Ministerial power to make references]:
Lord Kingsland Lord Kingsland moved Amendment No. 97A:
Leave out Clause 127
The noble Lord said: My Lords, this amendment seeks to remove the ability of the Minister to make references to the commission. This matter was debated in Committee.
The noble Lord, Lord Sainsbury, stated that the prime aim of the Bill is to take Ministers out of the final decision-making process in competition cases. We
822
accept that, with the exception of public interest criteria, that has been done for market investigations and mergers.
Clause 127, of course, only gives the appropriate Minister the power to refer to the Competition Commission. We nevertheless believe that there is a serious risk of politically motivated references, requiring companies and bodies to incur considerable expenditure. All references should be left to the expert competition body. I beg to move.
10.15 p.m.
Lord Sainsbury of Turville: My Lords, it has been clear for some time that there is a difference of views on Clause 127, which we see as providing a sensible backstop provision—a reserve power to be used in exceptional circumstances. Others have portrayed the clause as contradicting a policy pursued in the Bill of taking Ministers out of decision making in competition cases.
Ministerial references are permitted under the Fair Trading Act 1973 and monopolies regime but have only been made rarely. We do not expect that they would be a more regular feature of the operation of the new regime. Primary responsibility for considering possible references and deciding what references to make lies with the OFT and those sectoral regulators with the relevant concurrent powers.
We expect that only very rarely will Ministers have reasonable grounds to be dissatisfied with a decision of the OFT not to make an investigative reference or with the speed or apparent failure of the OFT in reaching a decision one way or the other on a possible reference. It would be imprudent, however, to assume that such circumstances will never arise or, given the complexity of the economic issues that can arise in potential market investigation cases, that both the OFT and a Minister who disagrees with an OFT decision may not have valid points of view. In such a borderline case, it is appropriate that the Competition Commission should look at the matter thoroughly, rather than risk potentially significant competition problems going uninvestigated.
In no sense is the role that we are proposing for Ministers determinative. They are merely being given the right to ask a question. The valid exercise of that right depends on Ministers having a reasonable and reasoned economic assessment of competition in the market or markets concerned. Ultimately, all reference decisions will stand or fall not on their political merits or demerits but on the economic justification. If Ministers make an unreasonable market investigation reference, they will—like the OFT—be open to the possibility of challenge before the CAT. Their decision and the reasoning behind it will have to be capable of withstanding that level of scrutiny if a ministerial reference is to be validly made. Any ministerial reference decision would no doubt receive some degree of publicity. As Ministers will be accountable to Parliament in respect of such decisions, they would be expected to defend them in Parliament.

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On that basis, the power is justified and does not contradict the policy pursued in the Bill of taking Ministers out of decision making in competition cases. I ask the noble Lord to withdraw the amendment.
Lord Kingsland: My Lords, I am partially reassured by the noble Lord the Minister. He indicated that the circumstances would be rare, indeed, in which the power to intervene would be exercised. I wonder whether the Minister can go further and speculate on the kind of circumstances in which he would expect this rarely exercised power to be used.
Lord Sainsbury of Turville: My Lords, I cannot really add anything. There may be situations where there is disagreement by the Secretary of State, who ultimately may feel that there is a competition issue that needs seriously to be examined. The key issue is that the clause offers the possibility only of making a reference—it is not determinative. There are no circumstances in which Ministers would not take great care in making references. Because they might be thought to be political, Ministers would be carefully scrutinised. Unless the references can withstand the review which takes place by the Competition Commission, they will fall and in that case will not be valid. The fact that it is not determinative—it is the power only to make a reference—should give everyone security that this power will be rarely used: only where the Secretary of State feels strongly that a competition situation has not been properly considered.
Lord Kingsland: My Lords, I am grateful for that further explanation by the Minister, which has helped me to understand the circumstances in which the noble Lord foresees the power being exercised. I shall reflect on his comments. Meanwhile I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 128 [Contents of references]:
Lord Sainsbury of Turville Lord Sainsbury of Turville moved Amendments Nos. 98 and 99:
Page 97, line 16, after "persons" insert "by or"
Page 97, line 16, after "or" insert "by or"
On Question, amendments agreed to.
Clause 129 [Questions to be decided on market investigation references]:
Lord Hunt of Wirral Lord Hunt of Wirral moved Amendment No. 100:
Page 97, line 21, after "market" insert "significantly"
The noble Lord said: My Lords, we now turn to the determination of references and to the questions to be decided on market investigation references. Here we return to the word "significant". I suppose I could go away satisfied with the words of the noble Lord, Lord Borrie, that one should read in the word "significant" because that describes the attitude of mind of the previous regime in that it would not seek to decide a matter unless it was a significant measure which restricted, distorted or prevented competition.
However, it would be a great reassurance to the world of business and commerce if the word "significantly" could appear in Clause 129(1) as is suggested by Amendment No. 100, after the word "market", so that it would read:
"The Commission shall, on a market investigation reference, decide whether any feature, or combination of features, of each relevant market significantly prevents, restricts or distorts competition".
I believe that without that qualifier on the face of the Bill the commission would have to decide the issue no matter how minimal the effect on competition, which would be an unreasonably wide test.
Subsection (2) contains the definition of the phrase "adverse effect on competition", which is used throughout Part 4. Here, again, Amendment No. 101 seeks to insert the word "significantly" after the word "market", to read:
"For the purposes of this Part, in relation to a market investigation reference, there is an adverse effect on competition if any feature, or combination of features, of a relevant market significantly prevents, restricts or distorts competition".
Subsection (5) reads;
"For the purposes of this Part, in relation to a market investigation reference, there is a detrimental effect on customers".
Amendment No. 103 would insert the word "significant", to read:
"there is a significant detrimental effect on customers".
The subsection then continues to explain the circumstances in which that would be found.
I believe that that change is also needed to prevent insignificant effects driving action which would be costly and burdensome for business. I hope that the Minister will accept the amendment. I beg to move.
Lord Hodgson of Astley Abbotts: My Lords, I support my noble friend. Noble Lords will probably have received the CBI's briefing on this point—certainly the Minister's officials will have—about how this meshes with the European Court of Justice's decisions and the implications drawn from a number of cases that the CBI describes as John Deere, New Holland-Ford and the 1999 Italian banks case, where it was decided that where restrictive agreements have an insignificant effect on competition they fall outside the prohibitions.
The CBI draws attention to the publication last year of the
"Commission Notice on agreements of minor importance which do not appreciably restrict competition under Article 81(1)…".
The CBI makes the powerful case that a de minimis test is an important principle of competition law, helps to free businesses from regulatory burden and gives them some security that small-scale activities will not be subject to investigation. I therefore support my noble friend and I hope that the Minister, seeing that it will mesh closely with the decision of the European Court of Justice, will see fit to accept the amendments.
Lord Sainsbury of Turville: My Lords, these amendments share a common theme with Amendment

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No. 94, except that Clause 129 is concerned not with a threshold for investigation but with the final finding by the Competition Commission of adverse effects on competition and any detrimental effects on customers arising from them.
There are two aspects to these findings: they are the formal record of the competition problems which the commission has found in its investigation, and they trigger the Competition Commission's duty to take remedial action.
It would not be right to limit the formal conclusions of the commission's economic analysis of the markets which it has investigated to setting out only those adverse effects or detrimental effects which the commission considers "significant". These are lengthy and detailed investigations, and the commission should reach formal conclusions on the existence of any adverse effects on competition, or detrimental effects on customers which it has found.
It has long been recognised that the published analysis provided by Competition Commission reports has an importance independent of any remedial action taken as a result of that analysis, and it would not be appropriate to blunt the sharpness of that analysis by excluding some of its conclusions by reference to some criterion of "significance".
With regard to remedial action, I agree that the commission should not intervene in markets without adequate justification. But we believe that the way the commission's duty to remedy is framed provides an adequate safeguard against excessive regulatory interference. The commission's remedies must be "reasonable and practicable". As the commission has recognised in its draft guidance on market investigations, a remedy cannot be reasonable if it is not proportionate to the magnitude of the adverse effects on competition or detrimental effects on customers that it addresses.
That means that it is possible for the commission to find that a particular adverse or detrimental effect is so negligible that no proportionate remedy can be found to address it—and so leave it unremedied. On the other hand, if a remedy can be found which is proportionate to some relatively minor adverse or detrimental effect, by virtue of being sufficiently unintrusive, and having a sufficiently low implementation cost, we think it right that the adverse or detrimental effect should be remedied. There is no need for "significance" to be included in either aspect and therefore no need for the amendments.
Lord Hunt of Wirral: My Lords, I thank my noble friend Lord Hodgson of Astley Abbotts for his supportive words. We are facing a difficult and slightly paradoxical situation where the Minister seeks to reassure us that there is no need to insert the word "significant" because the commission would go down this road only if there was a significant effect. Therefore, I ask myself—probably too simplistically—why "significant" cannot be inserted.
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However, the Minister has sought to reassure me about the proportionate effects and the proportionate situation which would govern the way that the commission would operate. I shall take time to reflect on what he has said. But I say once again that there are some strong views held outside this place that instead of implying the word "significant", it should be expressly on the face of the Bill. As I said, I shall take time to consider. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 101 to 103 not moved.]
Lord Sainsbury of Turville Lord Sainsbury of Turville moved Amendment No. 104:
Page 98, line 12, after "customers" insert "or future customers"
On Question, amendment agreed to.
[Amendment No. 105 not moved.]
Lord Sainsbury of Turville Lord Sainsbury of Turville moved Amendment No. 106:
Page 98, line 27, after "customers" insert "or future customers"
On Question, amendment agreed to.
Clause 133 [Duty to remedy adverse effects]:
10.30 p.m.
Lord Sainsbury of Turville Lord Sainsbury of Turville moved Amendment No. 107:
Page 101, line 12, leave out paragraph (a) and insert—
"(a) no detrimental effect on customers has resulted from the adverse effect on competition; and"
On Question, amendment agreed to.
Clause 135 [Intervention notices under section 134(1)]:
Lord Sainsbury of Turville Lord Sainsbury of Turville moved Amendments Nos. 108 and 109:
Page 102, line 23, at end insert—
"(1A) Where the Secretary of State believes that it is or may be the case that two or more public interest considerations are relevant to the case, he may decide not to mention in the intervention notice such of those considerations as he considers appropriate."
Page 103, line 16, at end insert—
"(6) In subsection (5)(d) the reference to the acceptance of the undertaking concerned or the making of the order concerned shall, in a case where the enforcement action under section 142(2) involves the acceptance of a group of undertakings, the making of a group of orders or the acceptance and making of a group of undertakings and orders, be treated as a reference to the acceptance or making of the last undertaking or order in the group; but undertakings or orders which vary, supersede or revoke earlier undertakings or orders shall be disregarded for the purposes of subsections (4)(g) and (5)(d)."
On Question, amendments agreed to.
Clause 142 [Remedial action by Secretary of State]:
Lord Sainsbury of Turville Lord Sainsbury of Turville moved Amendments Nos. 110 to 112:
Page 107, line 11, at end insert "; and
(b) has published his decision within the period required by subsection (3) of that section."
Page 107, line 19, leave out "resulting" and insert "it has resulted from, or may be expected to result"
Page 107, line 41, leave out from beginning to second "and" in line 43 and insert "no detrimental effect on customers has resulted from the adverse effect on competition"
On Question, amendments agreed to.
Clause 143 [Reversion of the matter to the Commission]:
Lord Sainsbury of Turville Lord Sainsbury of Turville moved Amendments Nos. 113 to 115:
Page 108, line 3, after "make" insert "and publish"
Page 108, leave out line 8.
Page 108, line 13 after "137" insert "(if still unpublished)"
On Question, amendments agreed to.
Clause 144 [Intervention notices under section 134 (2)]:
Lord Sainsbury of Turville Lord Sainsbury of Turville moved Amendment No. 116:
Page 109, line 13, at end insert—
"(1A) Where the Secretary of State believes that it is or may be the case that two or more public interest considerations are relevant to the case, he may decide not to mention in the intervention notice such of those considerations as he considers appropriate."
On Question, amendment agreed to.
Clause 148 [Specified considerations: Part 4]:
Lord Sainsbury of Turville Lord Sainsbury of Turville moved Amendment No. 117:
Page 111, line 15, leave out "adding to" and insert "specifying in this section a new consideration or"
On Question, amendment agreed to.
Clause 149 [Undertakings in lieu of market investigation references]:
Lord Sainsbury of Turville Lord Sainsbury of Turville moved Amendment No. 118:
Page 112, line 4, leave out paragraph (a) and insert—
"(a) no detrimental effect on customers has resulted from the adverse effect on competition"
On Question, amendment agreed to.
Clause 151 [Effect of undertakings under section 149]:
Lord Sainsbury of Turville Lord Sainsbury of Turville moved Amendments Nos. 119 to 122:
Page 113, line 38, after "undertaking" insert "or group of undertakings"
Page 113, line 40, after "undertaking" insert "or group of undertakings"
Page 114, line 1, leave out "the undertaking" and insert "any undertaking concerned"
Page 114, line 4, leave out "the undertaking" and insert "any undertaking concerned"
On Question, amendments agreed to.
Lord Kingsland Lord Kingsland moved Amendment No. 123:
Page 122, line 21, after "section" insert "and in sections (Regulations relating to appeals against decisions of sectoral regulators) and (Preliminary consultation on regulations),"
The noble Lord said: My Lords, I rise to move Amendment No. 123. As noble Lords know, the Bill contains some provisions which are specific to the activities of the utility sector.
The sector provides goods, services and facilities whose combined value accounts for about one-quarter of our gross domestic product. They are all heavily
828
regulated under their own sectoral statutes by agencies which are Crown bodies: so in these industries there is effectively state control over prices, the quality of service and market conduct. There is one unique feature to the regulation of the utility sector, and that is the limited scope for appeal against regulatory decision.
Our amendments seek to remedy that situation by providing for more effective rights of appeal against the sectoral regulators. We believe that such mechanisms would encourage better decision-making by regulators because their decisions would be subject to the ultimate sanction of proper scrutiny on appeal. We also believe that this would improve the transparency and consistency of regulation and strengthen its accountability across the whole utility sector. In turn that would bring the sector more into line with the evolving principles of legal due process and fundamental fairness, improve both the credibility and legitimacy of regulatory decision-making and enhance investor confidence in the long-term stability of regulated industries.
Our concern is not about decisions that sectoral regulators may be entitled to take under their competition law powers; it is about the inadequate rights of appeal available to regulated companies against the much more extensive range of decisions taken by regulators acting under their sector-specific statutes. With only slight differences between the various industries, the current position is that challenges to such decisions or actions of a utility regulator can be mounted only in one of two ways: by forcing the referral of a disputed matter to the Competition Commission, on terms of reference drafted by the regulator alone; or via judicial review of the regulator's decision. It is increasingly clear that neither option is helpful to resolve disagreements between utility companies and their regulators.
In making that generalisation, perhaps I should make an exception for price control reviews. But even there, forcing a reference of a disputed price cap to the commission has come to be known among the industries as the "nuclear" option. That is because the aggrieved company must submit to a fresh examination by the commission of all the elements in the price cap—although many of those may not be in dispute with the regulator. Meanwhile, the introduction of collective licence modification procedures in gas and electricity has restricted the ability of those industries to have disputed issues examined by the Competition Commission.
On the other hand, judicial review can normally be used only to challenge regulators on limited grounds, such as misinterpretation of their legal powers or a failure to observe due process. It cannot be used to attack the substance of their decisions. Even challenge by way of judicial review is excluded in relation to some important types of regulatory action, such as enforcement proceedings, where sectoral statutes provide only for a so-called appeal on even narrower grounds. In most utility industries, the regulators also exercise quasi-judicial powers to determine customer-company disputes about terms of service, legislative

829
powers to set standards of performance under virtually unchecked subordinate legislation and entrenched rights to modify parties' rights and obligations under a bewildering array of industry operating agreements and formal codes of practice.
Even where companies mount an appeal, regulators have been unwilling to accept the decisions of the appellate body. For example, during its most recent price control review, the Office of Water Services, the water industry regulator, consulted companies on a financial concept known as "broad equivalence". Put simply, that means aligning the allowance for accounting depreciation in a water company's price limits with the projected profile of its maintenance spending.
The industry opposed that approach, and two companies forced a reference of Ofwat's proposals to the Competition Commission. The commission rejected the proposals on the grounds that Ofwat had no good case for using the broad equivalence approach—not just for the two companies but in principle. However, Ofwat would not then apply that finding to all the other companies on which it had imposed the methodology, although the impact of doing so would have been materially favourable to their price limits.
In a similar vein, three years ago the Northern Ireland electricity service had to go all the way to the Court of Appeal to force its regulator to accept the findings of a public interest report by the Competition Commission about the prices that its network businesses could charge. More recently, the Office of Gas and Electricity Markets, the mainland electricity and gas regulator, also tried to ignore a finding by the commission that the public interest did not require a so-called market abuse licence condition to be inserted into generation licences. That campaign was stopped in its tracks only because the Secretary of State was unwilling to help Ofgem to impose that condition.
That last incident also revealed an unsatisfactory state of affairs concerning the cost of regulatory reference to the Competition Commission. After the commission had rejected the case for a market abuse licence condition, Ofgem sought to impose all of the costs of the commission's inquiry on the two referred generating companies—although they had roundly defeated Ofgem and although the issues involved in the reference were clearly of general relevance to the industry as a whole.
On any reasonable view of the matter, such action would have been perverse. But this was only a particularly acute example of a significant defect in the current position. For, whichever industry is involved, the regulator, besides being a party to the proceedings, also has discretion over how to allocate the costs of the reference. This approach is fundamentally flawed. It is unfair to referred companies, and it also makes the method of allocation that will be used, in any particular case, wholly unpredictable.
It seems quite wrong for such critically important industries to be regulated by agencies that are effectively able to operate in their own cause as
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policeman, prosecutor, judge, and jury. This almost seamless mingling of functions within one executive body appears to deny the industries the right to have their obligations determined by an independent and impartial tribunal.
I am aware that the Minister for Competition, Consumers and Markets in the DIT has already informed the Electricity Association in her letter of 22nd September that,
"it is simply not practicable to regard the Enterprise Bill as a potential vehicle for any legislation on this matter".
I find that impossible to believe. After all, the only direct legal effect of these amendments is to provide a regulation-making power that the Government could exercise at any appropriate time after consulting extensively with all relevant stakeholders in the utility sector.
In brief, deficiencies in the present regulatory treatment of the utility sector could be remedied, while also taking account of actual or potential inconsistencies between individual regulatory regimes, so as to achieve an optimal outcome for all relevant interests.
Some important procedural issues are raised here. Under the amendments, very thorough public consultation and parliamentary scrutiny are necessary before the Government are permitted to make any regulations at all. This process is set out in three proposed new clauses—Clauses 163B to 163D—which specify detailed requirements for consultation on any proposals to make regulations, the contents of the proposals document to be laid before Parliament, and the nature and duration of the process for parliamentary consideration.
The procedure to be followed under these clauses is closely modelled on that laid down in Sections 4 to 8 of the Regulatory Reform Act 2001—an Act passed by the Government. It includes provision for a published cost-benefit analysis of the effect of any proposed regulations—in other words, the Government's proposals would be subject to a formal impact assessment of the kind that the sectoral regulators persistently fail to provide for their own pet projects.
The House can, therefore, see that, in addition to specifying a robust consultation process, these special requirements are also designed to afford a substantially greater degree of parliamentary scrutiny than that which ordinary affirmative resolution orders usually receive. On this side of the House, we regard such a procedure as an essential safeguard, since, under the empowering clause, the Government would be able to amend, extend, or, indeed, repeal any relevant piece of regulated utility legislation in order to achieve the purpose of the appeals regulations.
These amendments are specifically supported by the energy and water industries, and have wider general support from other great utility industries that are equally concerned about the limitations and injustices of the existing system. We believe that a better structured appeals regime will provide the right checks and balances between regulators' discretion and companies' interests. It would deliver optimal

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incentives on both sides and would also address growing inconsistencies between the appeals framework in the utility sector and that in other sectors. I beg to move.
10.45 p.m.
Lord Sainsbury of Turville: My Lords, I congratulate noble Lords on a brilliant and ferocious attack on the legislation produced by previous Conservative governments. The noble Lord made many telling points about the weaknesses in that legislation.
Lord Kingsland: My Lords, I am most grateful to the Minister. He has no doubt heard what the Conservative Party Conference has been saying about the previous Conservative government.
Lord Sainsbury of Turville: My Lords, presumably this is the new Conservative government. I congratulate also the Electricity Association on this ingenious and elegant amendment. However, this is not the way to remedy any defects which may exist in the current legislation. One should be clear what one wants to do; and legislation should carry out that aim whereas permissive legislation allows a range of issues to be inserted in it.
The systems of regulation which exist in the water, electricity, gas, postal services, telecommunications, railway and air navigation sectors are of great economic importance to the UK. The decisions which the sectoral regulators in these areas take can and do have significant effects on all of us. It is important, therefore, that we achieve the best regulatory procedures we can, and to that end we have given and continue to give considerable attention to the regulatory framework, including appeal mechanisms. While we are grateful to the noble Lord for bringing to the House's attention some of the concerns raised in some sectors about the present appeal arrangements, we would prefer to look at any possible changes to those arrangements in the context of the wider regulatory issues to which they are linked and the sectors in which they operate.
We want a secure, long term, stable and effective regulatory framework. It is important that we achieve the right balance and make changes only where it is clear that there will be real benefits. Further work would be needed before we can contemplate any kind of across-the-board, potentially wide-ranging changes to the appeals mechanisms.
The Government are already keeping the appeals mechanisms under review. The proposed amendment takes us no further in developing the appropriate policies or framework for appeals mechanisms. It might facilitate some changes in the future, and we appreciate that those responsible for drafting the proposed new clauses have been at pains to draft a power which is permissive rather than prescriptive, at least in so far as it does not force the Secretary of State to adopt one possible approach to reform of the appeals processes rather than another. However, no decisions have yet been taken as to whether change is
832
in fact desirable in this area and, if so, what the correct approach to reform is. It is possible, therefore, that the new clauses might act as a constraint on possible future reforms.
Even if the proposed clauses were to prove appropriate in taking forward any desirable and across-the-board changes these do not seem likely for some little time yet. In the meantime, the new clauses would create an expectation of action on appeals without it being clear what form such action would take, or when it might be taken. This would inevitably create uncertainty for everyone involved: and we are talking here about very large sectors of the economy, some of which are already in the throes of significant regulatory or commercial changes. Rather, we prefer streamlined, clear and efficient regulation that is well targeted.
We are aware of the work which has been done by and on behalf of various utility firms and associations in this area which will no doubt assist us in addressing a number of questions in relation to regulatory appeals mechanisms. However, the work done to date is only a start: a large number of stakeholders would be affected by any change to the regulatory regimes and they would need to be fully involved at every stage of policy development and any eventual change would need to be considered and consulted on fully.
It might seem odd for one government Minister to decline to accept on behalf of another a power to modify substantial parts of nine Acts of Parliament. On the other hand, Ministers are usually criticised for wanting to take too many powers to amend primary legislation, not too few. It may be argued that the amendment does not itself change the appeals mechanism: it merely facilitates change in the future after appropriate consultation. So why do we object to it? My answer is that for all the sophistication of their drafting, the new clauses take us no further in developing the policy or making any substantive changes to the regulatory frameworks. They could act as a constraint on future changes. Further, the clauses are—no doubt, deliberately and for good reasons—unspecific on certain points and are likely to create uncertainty for firms and those involved. Providing for changes to be made before it is clear which changes, if any, are even needed would, in this instance, lead to poor legislation.
I stress that I am not saying that the Government are simply opposed to the appeals mechanisms. We want to ensure that the best and most appropriate mechanisms are established for each regulatory regime in a coherent manner and according to the needs of the individual sector. The new clauses do not help us to do that. Rather than make legislative changes now, we should be clear about whether the proposed changes are needed.

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The amendment is not needed to ensure the success of the other provisions in the Bill. For the reasons that I have given, it would be best if the amendment were withdrawn.
Lord Kingsland: My Lords, I am most grateful for the Minister's full response. In particular, I know that the industry will be pleased to have been complimented on the ingenuity of its drafting.
I am surprised that the Minister is not prepared to take up the remarkable opportunity offered by the amendment. It would provide for a flexible approach to the issues. Not only does it allow for differential treatment between the utilities, but it caters for temporal variation in the introduction of any provisions that the Minister might contemplate.
I am also surprised that the Minister is not struck, to a greater degree, by the huge imbalance between the kind of protective powers given to companies subject to the competition regime and those granted to utilities under the regulatory regimes. The powers wielded by regulators under those regimes are draconian compared to the powers exercised by the Competition Commission and the OFT. In Committee and today, noble Lords have heard Her Majesty's Loyal Opposition complain frequently that the protective powers given to firms subject to the scrutiny of the OFT and the competition regime are not as great as they should be. However, compared to the protective powers given to the utility industries suffering under the lash of the regulators, they are most generous.
The Minister must be aware of that contrast. He must recognise that there is an urgent need to change the balance of power between the regulators and the regulated companies. To use the word "distressed" would, perhaps, be to over-emphasise the sentiments that I am experiencing; but I am certainly sad that the Minister has not taken the opportunity that we offered to insert the clauses, so that he can move swiftly, once the Bill is on the statute book, to a long and careful consideration of the balance of power between the regulators and the regulated in the utility sector.
Between now and Third Reading, I shall reflect on what the Minister said tonight. Meanwhile, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Sainsbury of Turville Lord Sainsbury of Turville moved Amendments Nos. 124 and 125:
Page 122, line 34, after "(c. 44)" insert "or section 6 of the Electricity Act 1989 (c. 29)"
Page 122, line 42, at end insert "or (as the case may be) section 3A(4) of the Act of 1989"
On Question, amendments agreed to.
[Amendments Nos. 126 to 129 not moved.]
Schedule 9 [Certain amendments of sectoral enactments]:
Lord Sainsbury of Turville Lord Sainsbury of Turville moved Amendments Nos. 130 to 133:
Page 230, line 26, leave out from "is" to second "or" in line 28 and insert "carried on by an airport operator"
Page 230, line 41, at end insert—
"(b) for "the reference" there shall be substituted "references"; and
(c) for "a reference" there shall be substituted "references"."
Page 236, line 25, leave out from "is" to second "or" in line 27 and insert "carried on by an airport operator"
Page 236, line 40, at end insert—
"(b) for "the reference" there shall be substituted "references"; and
(c) for "a reference" there shall be substituted "references"."
On Question, amendments agreed to.
Clause 166 [Advice and information: Part 4]:
Lord Sainsbury of Turville Lord Sainsbury of Turville moved Amendments Nos. 134 and 135:
Page 124, line 43, at end insert—
"(5A) Advice and information published by virtue of subsection (1) or (3) shall include such advice and information about the effect of Community law, and anything done under or in accordance with it, on the provisions of this Part as the OFT or (as the case may be) the Commission considers appropriate."
Page 125, line 7, at end insert—
"(10) In this section "Community law" means—

(a) all the rights, powers, liabilities, obligations and restrictions from time to time created or arising by or under the Community Treaties; and

(b) all the remedies and procedures from time to time provided for by or under the Community Treaties."

On Question, amendments agreed to.
Clause 167 [Further publicity requirements: Part 4]:
Lord Sainsbury of Turville Lord Sainsbury of Turville moved Amendment No. 136:
Page 126, line 26, at end insert "(after the acceptance of the undertaking or (as the case may be) the making of the order)"
On Question, amendment agreed to.
Clause 169 [Investigation powers of OFT]:
Lord Sainsbury of Turville Lord Sainsbury of Turville moved Amendments Nos. 137 and 138:
Page 126, line 37, leave out "(6)" and insert "(5)"
Page 126, line 41, leave out "(6)" and insert "(5)"
On Question, amendments agreed to.
Clause 171 [Investigation powers of the Commission]:
Lord Sainsbury of Turville Lord Sainsbury of Turville moved Amendments Nos. 139 and 140:
Page 128, line 15, leave out "subsection (2)" and insert "subsections (2) and (3)"
Page 128, line 29, at end insert—
"(3) Section 108(5)(b)(ii) shall, in its application by virtue of subsection (1) above, have effect as if—

(a) for the words "section 49 or 64, given" there were substituted "section 137, published or given under section 138(1) or (3)"; and

(b) for the words "(or given)", in both places where they appear, there were substituted "(or published or given)"."

On Question, amendments agreed to.
Clause 174 [Review of decisions under Part 4]:
Lord Sainsbury of Turville Lord Sainsbury of Turville moved Amendment No. 141:
Page 129, line 23, leave out subsections (3) and (4).
On Question, amendment agreed to.
[Amendment No. 142 not moved.]
Clause 176 [Orders under Part 4]:
Lord Sainsbury of Turville Lord Sainsbury of Turville moved Amendments Nos. 143 and 144:
Page 130, line 43, after "repealed" insert "(and the previous enactment revived)"
Page 131, line 2, at end insert "and without prejudice to the making of a new order"
On Question, amendments agreed to.
Clause 178 [Interpretation: Part 4]:
Lord Sainsbury of Turville Lord Sainsbury of Turville moved Amendments Nos. 145 to 148:
Page 132, line 1, leave out "Section" and insert "Sections 122(1)(b) and (4) to (6) and"
Page 132, line 1, leave out "it applies" and insert "they apply"
Page 132, line 5, after "notice" insert "under section 134(1)"
Page 133, line 13, at end insert—
"(5A) In subsection (4)(c) the reference to the acceptance of the undertaking concerned or the making of the order concerned shall, in a case where the enforcement action concerned involves the acceptance of a group of undertakings, the making of a group of orders or the acceptance and making of a group of undertakings and orders, be treated as a reference to the acceptance or making of the last undertaking or order in the group; but undertakings or orders which vary, supersede or revoke earlier undertakings or orders shall be disregarded for the purposes of subsections (3)(a)(iv) and (b)(viii) and (4)(c)."
On Question, amendments agreed to.
Schedule 11 [The Competition Commission]:
Lord Sainsbury of Turville Lord Sainsbury of Turville moved Amendments Nos. 149 and 150:
Page 249, line 27, after "of"" insert—
"( ) in sub-paragraph (1), after paragraph (d) there is inserted—
"(e) one or more members appointed by the Secretary of State to serve on the Council.";"
Page 249, line 38, after "Commission"" insert—
"( ) in sub-paragraph (2), before paragraph (c) there is inserted—
"(bb) the member or members appointed under paragraph 2(1)(e);""
On Question, amendments agreed to.
Clause 182 [Commission rules of procedure]:
Lord Sainsbury of Turville Lord Sainsbury of Turville moved Amendment No. 151:
Page 135, line 24, leave out "section" and insert "paragraph"
On Question, amendment agreed to.
Schedule 12 [Competition Commission: certain procedural rules]:
Lord Sainsbury of Turville Lord Sainsbury of Turville moved Amendment No. 152:
Page 252, line 41, after "under" insert "section 59 of the Fair Trading Act 1973 (c. 41), section 32 of the Water Industry Act 1991 (c. 56) or"
On Question, amendment agreed to.
Clause 183 [Cartel offence]:
Lord Hunt of Wirral Lord Hunt of Wirral moved Amendment No. 153:
Page 137, line 8, at end insert—
"( ) "Dishonestly agrees" means, for the purposes of subsection (1), making an agreement knowing that it has one or more of the consequences set out in subsections (2) to (6) in breach of the prohibition contained in section 2 of the 1998 Act (agreements etc. preventing, restricting or distorting competition) and not meeting the criteria in section 9 of that Act (the criteria for individual and block exemptions), with the dishonest intention of causing detriment to consumers or customers."
The noble Lord said: My Lords, we turn now to the cartel offence. In this amendment, we seek to insert a definition of the phrase "dishonestly agrees".
Perhaps I may make it clear once again that these Benches do not oppose the principle of criminalisation. Although I have made the comment that it is moving to some extent in the opposite direction to the rest of the European Union, it is nevertheless right that those who engage in hardcore cartels should be punished severely. Criminalisation will indeed boost deterrence. That is a very important aspect of this debate.
So, if we do have the cartel offence, it must be made absolutely clear to all those who become aware of this legislation exactly what sort of activity could lead a business person to gaol. We therefore believe that some amendments are required to clarify the scope and effect of the proposed offence.
The concept "dishonestly agrees" will be difficult to explain in court in the context of competition law. It is important, therefore, to include the concept of intent. That is the purpose of Amendment No 153, which would insert a definition of "dishonestly agrees", which means:
"for the purposes of subsection (1), making an agreement knowing that it has one or more of the consequences set out in subsections (2) to (6) in breach of the prohibition contained in section 2 of the 1998 Act…and not meeting the criteria in section 9 of that Act…with the dishonest intention of causing detriment to consumers or customers".
So, not only does the offence need to include the concept of intent; it should also be directly linked to infringements of the Competition Act, to make clear that normal business activities are not caught. I very much hope that the Minister will agree to include this definition in the clause.
Amendment No. 154 seeks to delete the words in Clause 183(2):
"if operating as the parties to the agreement intend, would",
so that the subsection would state simply:
"The arrangements must be ones which"—
followed by paragraphs (a) to (f). Unless the words referred to in the amendment are deleted, it would appear that the offence could theoretically be committed, even where the relevant arrangements provided for in the agreement could not in practice lead to any of the circumstances set out in paragraphs (a) to (f).
If the agreement should have any of those consequences unintentionally, the parties would presumably not be acting dishonestly. So we seek to improve the definition of a cartel offence in the way I have described. I beg to move.
11 p.m.
Lord Razzall: My Lords, I support this amendment. The issue was discussed at significant length in Committee, and it is a simple one. Those from the Conservative Benches and ours who support the amendment do so not because we are against the principle of criminality for cartelisation. We believe that legislation to criminalise cartel activity in this country is long overdue.
No doubt the Minister, when he replies to the amendment, will indicate, as he did in Committee, that two approaches to tests for cartelisation were considered in the consultation document. No doubt he will say, as he did in Committee, that the definition of dishonesty in the Ghosh case ought to prevail because it is long tried and tested in case law. That is true. However, the concept of the offence of dishonesty, which could lead to significant criminal offences, touches upon areas of activity that hitherto have not normally been subject to criminal penalties in this country. We support the Conservative Benches' view that it is much better to have the definition of dishonesty with the requisite intent described on the face of the Bill than to rely on a case that did not originally apply to this type of activity, and which, had it done so, may not have been applied as the Government intend.
Lord McIntosh of Haringey: My Lords, I am grateful to both noble Lords for their support for the criminalisation of hardcore cartels. The noble Lord, Lord Razzall, is trying to anticipate what I will say, and he is doing so with reasonable accuracy. Amendment No. 153 alters the new offence by defining a dishonesty on the face of the Bill rather than relying on the Ghosh case in case law. The definition in Amendment No. 153 would require the prosecution to prove that the defendant had made an agreement knowing both that it fell into one of the categories of hardcore cartel and that it breached Section 2 of the Competition Act 1998 and did not meet the criteria for exemption in Section 9 of that Act.
The second part of the definition is a real problem. A requirement of knowledge of a breach of the Competition Act would render the offence virtually unprosecutable. It would be extremely difficult, if not impossible, for the Crown to prove beyond reasonable doubt that the defendant who had concluded a cartel agreement did so knowing that he was breaching particular sections of the Competition Act 1998. That would undermine our ability to create a real deterrent. I note the points that the noble Lord, Lord Hunt, made about the need to boost deterrence.
838
We do not have the same problem with the first part of the amendment. However, it is not necessary, as the Bill already provides that for the offence to be committed, the agreements must be ones which,
"if operating as the parties to the agreement intend",
would result in one of the cartel activities. The Bill requires the Crown to prove that the defendant acted with a dishonest state of mind, which is a critical part of the Ghosh definition. That implies both intent and knowledge of the consequences of the agreement.
We share the concern that these new offences should be tightly drawn. The offence as it stands targets "dishonest" agreements precisely in order to avoid catching bona fide activity which would be exempted under existing competition law; for example, Article 81 of the EC treaty or the equivalent provisions in the Competition Act 1998.
"Dishonesty", as we use it, creates a high hurdle for the prosecution. In any event, the Serious Fraud Office would not prosecute where the agreement would not be anti-competitive under existing civil competition law.
Amendment No. 153 also seeks to require the prosecution to prove that the agreement is made,
"with the dishonest intention of causing detriment to consumers or customers".
The problem is that as soon as one brings "dishonest" into the definition it becomes circular. One would have to reintroduce the "Ghosh" test meaning of "dishonesty" in order to defend it. I do not know whether that is what is intended, but that is what it does. In any event, one does not need to refer to the detrimental effect on consumers or customers. The primary intention of the defendant is likely to be to earn supra-normal profits, not detriment to consumers. We are criminalising cartels because of their damaging effect, but bona fide business agreements which do no harm will not be "dishonest" agreements. As can be seen, I am unhappy with Amendment No. 153.
I turn to Amendment No. 154. The policy intention behind the words which would be removed is specific and important. The intention is that the offence should criminalise individuals who reach agreements to operate the various sorts of hard-core cartels, which are set out in paragraphs (a) to (f) If we were to leave it until they were implemented, we would find a prosecution knowing that it was going to take place and having to sit on its hands waiting for the detriment to occur.
Where individuals have entered into a dishonest agreement to operate a cartel, none of this reduces the seriousness of what they have done. An offence is committed whether or not the agreement reached between the individuals is implemented by the undertakings as the individuals intended. It is only right that they should be exposed to criminal sanctions, whether or not circumstances mean that the agreement is not implemented. I do not agree with the noble Lord, Lord Hunt, that that includes where they could not in practice be implemented.

839
I hope we all agree that a key purpose of the offence is to deter agreements being reached in the first place. The proposed amendment would undermine the deterrent effect.
Lord Razzall: My Lords, before the Minister sits down, will he accept that in the Ghosh case the definition of dishonesty, on which the Government are relying in this case, is that juries must ask themselves, first, whether what was done was dishonest by the standards of reasonable people and, secondly and more importantly, whether the defendant understood that that was the case?
As regards prosecutions in this area, the defendant in order to be caught by the Ghosh case must understand that it was dishonest in the context of the provisions referred to in the amendment. Otherwise, no reasonable person could regard it as being dishonest. If the Minister believes that it is impossible to prosecute under the amendment proposed by the noble Lord, Lord Kingsland, would he not accept that the arguments apply equally to those two tests in the Ghosh case?
Lord McIntosh of Haringey: My Lords, I said that the Ghosh case implies both intent and the knowledge of the consequences of the agreement. Under Amendment No. 153, the Crown would have to prove beyond reasonable doubt that the defendant who had concluded a cartel agreement did so knowing that he was breaching particular sections of the Competition Act 1998. That does not make sense.
Lord Hunt of Wirral: My Lords, at this late hour I have no wish to engage in semantics with the Minister, and certainly no wish to engage in circular semantics. Therefore, I will take time to reflect on what he said and on the perceptive questioning and interesting points made by the noble Lord, Lord Razzall. Therefore, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 154 not moved.]
Clause 185 [Cartel offence: penalty and prosecution]:
Lord Kingsland Lord Kingsland moved Amendment No. 155:
Page 138, line 42, leave out ", or (b) by or"
The noble Lord said: My Lords, in Committee, the noble Lord, Lord McIntosh of Haringey, stated that the SFO and the OFT would work together both in cartel investigations and on decisions to prosecute. However, it will be the SFO that will undertake any prosecution in England, Wales and Northern Ireland. As I understand it, the Government believe that this approach will link the SFO's expertise in criminal prosecution with the OFT's expertise in competition investigations. We also learned from the noble Lord that the Government do not expect a large number of prosecutions. He said that on 18th July 2002 at col. 1542 of the Official Report.
The envisaged procedure appears to be that the OFT will undertake the initial investigation using powers broadly modelled on the SFO powers in the
840
Criminal Justice Act 1987. The OFT will inform the SFO as soon as the case appears likely to lead to a criminal prosecution. At that point, either the decision may be taken to hand over the case to the SFO to prosecute, or the OFT may remain involved for a period—called "extended vetting"—before a decision is taken.
In fact, even though the OFT is included as an additional prosecutor of the offence, it is neither expected nor adequately resourced to do so. The OFT has only been included to facilitate any change of circumstances in the future that will justify it being able to perform a prosecution role. This was made clear on 18th July 2002 at col. 1542 of the Official Report and on 22nd July at col. 134.
We remain of the view that there is a serious risk of confusion over the exercise of these powers if the OFT is to have both criminal investigatory powers under this Bill and civil investigatory power under the Competition Act 1998. These are different procedures and, perhaps of even greater importance, engage different rights of defence. If the Government intend the SFO to be the lead prosecutor, in my most respectful submission, the Bill should say so. If this proves inappropriate, extending the powers to the OFT can be debated as an amendment to the Bill as enacted at a later stage.
We believe, firmly, that criminal investigations of cartel offences should be carried out exclusively by the SFO. The OFT has no experience of criminal investigations. It should not, therefore, have the burden and responsibility of complying with the different standards that apply in criminal matters. Its responsibility should be limited to the enforcement of civil remedies. I beg to move.
Lord Razzall: My Lords, I support Amendment No. 155, which is identical, I think, to the one that my noble friend Lord Sharman moved in Committee. When, quite late at night, this matter was debated in Committee, the Minister gave a rather extensive explanation of how in his view the SFO and the OFT would operate in this sphere, giving those of us who proposed the amendment some food for thought.
The critical remarks of the noble Lord, Lord McIntosh, are set out at col. 1542 of the Committee stage debate where, having explained in detail that it was envisaged that the SFO and OFT would operate very much in the way that my noble friend Lord Sharman and the noble Lord, Lord Kingsland, wanted, he said that it was nevertheless necessary to have the Bill drafted in the way that it is for the following reasons. He stated:
"The OFT is included in the Bill as an additional named prosecutor but it is neither expected nor resourced to prosecute initially. It has only been included so that if circumstances justify it in future, the OFT will be able to perform a prosecution role. That might arise if the number of cartel prosecutions created a conflict with other SFO priorities".—[Official Report, 18/7/02; col. 1542.]
What the Minister will say, if he is not on this occasion prepared to accept the noble Lord's amendment, is that he accepts that the matter will be tackled in the

841
way that we want but just in case in the future it might be necessary because of resource implications for it to be done another way, we have to have the Bill phrased in the way that it is.
I doubt whether the noble Lord, Lord Kingsland, or I will be able this evening to persuade the Minister to give any ground. However, perhaps I may draw to his attention the fact that as we have progressed through the Bill and we on this side of the House have produced amendments with regard to what might happen in the future, we have always been told, "We do not need to do that because the Government will be able to deal with the situation in a different way were that eventuality to arise". I cast noble Lords' minds back to the debate that we had on what could be called "the Sir Jeremy Lever amendment" where the noble Lord, Lord Sainsbury of Turville, told us that were the situation we were considering likely to arise, the Government would be able to deal with it in a certain way.
I was persuaded completely by what the Minister said in Committee about how he envisaged that the measure would operate. However, I was not persuaded that that was a reason for not accepting what was the amendment of my noble friend Lord Sharman and what is now the amendment of the noble Lord, Lord Kingsland. Therefore, I support the amendment.
11.15 p.m.
Lord McIntosh of Haringey: My Lords, I do not know why the House needs me as the noble Lord, Lord Razzall, makes my speeches for me and anticipates what I am going to say. That saves time up to a point. However, I still have to make the points.
Amendment No. 155 seeks to amend the arrangements for the prosecution of the new offence by making the SFO the sole prosecutor, but subjecting its prosecutorial role to the consent of the OFT. That is a new element on the amendment of the noble Lord, Lord Sharman.
The Bill provides for the SFO and the OFT to prosecute the new offence in England, Wales and Northern Ireland, but it is our expectation, as the noble Lord, Lord Razzall, anticipated, that the SFO will carry out all prosecutions in the first instance. It has the necessary resources and experience for the criminal prosecution of this type of case, having prosecuted other white-collar crime such as insider dealing for many years.
However, it may become appropriate at some time in the future for the OFT, whose role initially will be as investigator, to take on a prosecutorial role. I believe that the noble Lord, Lord Kingsland, suggested that there might be a conflict between the prosecutorial role and the investigatory role. I remind the noble Lord that we commissioned an independent review of OFT procedures carried out by Sir Anthony Hammond and Roy Penrose. They concluded that if the OFT were to prosecute,
"it would be possible to ensure, by creating suitable internal structures, the separation of the investigatory from the prosecutorial function, thus complying with what has become
842
known as "the Phillips Principle" ie: that those taking the legal decision to prosecute should be seen to be separate from and independent of the investigators".
Therefore, I believe that we have already answered that question.
The OFT would have to take time to develop the necessary capability and resource before it could take on a prosecution role. That is consistent with the Government's stated policy in the response to consultation; namely, that the SFO should be the lead prosecutor in England, Wales and Northern Ireland with the OFT as an additional named prosecutor. The amendment also proposes to give the prosecution role to the SFO but to deny it the discretion to take the final decision on which cases to prosecute. I do not know whether that is intended but that is what it would do. It will of course work closely with the OFT on cartel cases that look likely to lead to criminal prosecution but the final decision will rightly be its own. On that basis, I hope that the amendment will not be pressed.
Lord Kingsland: My Lords, I thank the noble Lord the Minister for his reply and the noble Lord, Lord Razzall, for the sharp illumination that he focused on the dustier corners of the analysis that the noble Lord, Lord McIntosh, made in Committee.
I am not as happy as I would like to be about the reply of the noble Lord, Lord McIntosh, but I am aware that I am unlikely to make much more progress. I shall reflect on this matter between now and Third Reading. Meanwhile, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 190 [Exercise of powers by authorised person]:
[Amendment No. 156 not moved.]
Clause 191 [Privileged information etc.]:
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No. 157:
Page 141, line 27, leave out paragraphs (a) and (b) and insert "the reference in subsection (1)—

(a) to proceedings in the High Court is to be read as a reference to legal proceedings generally; and

(b) to an entitlement on grounds of legal professional privilege is to be read as a reference to an entitlement by virtue of any rule of law whereby—

(i) communications between a professional legal adviser and his client, or

(ii) communications made in connection with or in contemplation of legal proceedings and for the purposes of those proceedings,

are in such proceedings protected from disclosure on the ground of confidentiality."
On Question, amendment agreed to.
Clause 194 [Surveillance powers]:
Lord Kingsland Lord Kingsland moved Amendment No. 158:
Leave out Clause 194.
The noble Lord said: My Lords, we believe that the surveillance powers that were introduced by the RIPA to combat serious crime and terrorism should not be available to a public authority whose responsibilities

843
are the regulation of competition. Protection of our liberties justifies the security forces having these new intrusive surveillance powers. But surely it is not right to grant the same powers to OFT officials. Surely the fight against terrorism cannot be equated with the task of eliminating the more dubious commercial practices of, for example, a cartel of provincial taxi drivers. I beg to move.
Lord Razzall: My Lords, I support the noble Lord, Lord Kingsland. This is probably a rare example in this House on which I can observe that everything has been said that I wanted to say; I have certainly said it.
Lord McIntosh of Haringey: My Lords, I accept that with gratitude.
I do not believe that the noble Lord, Lord Kingsland, or, de facto, the noble Lord, Lord Razzall, are saying that we do not need appropriate surveillance powers to investigate cartels. The very nature of cartels is that they involve agreements reached between private individuals in private places. If one does not have surveillance powers one will simply not learn what is happening. That is very often a matter not even of documentation but of verbal agreement.
Clause 194 amends the Regulation of Investigatory Powers Act 2000 to grant the OFT access to intrusive surveillance powers for the United Kingdom. With those powers the chairman of the OFT may authorise the planting of surveillance devices in residential premises, including hotel accommodation, and private vehicles. In the chairman's absence and in an urgent case, a senior officer of the OFT designated for the purpose may also grant an authorisation.
As I indicated, cartels operate under cover and are notoriously difficult to detect. I shall not resist the temptation to talk about the cartel that I know best. In the 1960s I worked in the electric lamp industry, which was one of the most blatant cartels. Everything was written down, and that was achieved by the heads of the company that I worked for and of the other companies that produced electric lamps in this country going to a luxury hotel in Switzerland and agreeing the prices of all electric lamps and the discounts for super-wholesalers, wholesalers and retailers. As they went to Switzerland, they probably would not even be caught by these provisions.
Lord Kingsland: My Lords, in those circumstances, the Minister must be most relieved that the new provisions on the criminalisation of cartels will not be made retrospective.
Lord Razzall: My Lords, is the Minister going to confirm that this evening?
Lord McIntosh of Haringey: My Lords, they are not retrospective and I had no personal part in reaching these agreements. I hasten to add that they went back even before my time to the Phoenix agreements of the 1920s. However, the point is still the same. The meetings are held on neutral territory and records are
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not necessarily kept. Surveillance powers could provide irrefutable evidence in court of participation in a cartel. It is in the public interest to gain evidence about a cartel which can lead to a successful prosecution. In the case of the cartel for Lysine, an additive widely used in animal feed, the US authorities obtained video evidence which showed cartel members in hotel rooms concluding their deals. They provided decisive evidence in securing convictions for offences that were committed over a period of four years.
Of course, the powers are strong. They will be used only in the most serious cases and where the OFT has specific information about a meeting from an informant. But there are important safeguards, which come from the Regulation of Investigatory Powers Act 2000. The RIPA establishes a framework under which the powers can be operated to uncover crime.
For an application for intrusive surveillance under the RIPA to be authorised, its use must be proportionate to what is sought to be achieved and it must meet one of three criteria. The one that will apply for the cartel offence is that the intrusive surveillance is necessary,
"for the purpose of preventing or detecting serious crime".
It must be the case that the information could not reasonably be obtained by other means. All applications for authorisations are subject to the scrutiny and approval of the surveillance commissioners.
The clause restricts the purpose for which the OFT can use intrusive surveillance to preventing or detecting the cartel criminal offence. The OFT is not able to apply the powers for the purpose of any of its civil investigations. When an authorisation is granted, the OFT intends to outsource the technical deployment of the intrusive surveillance activity to other public authorities which already have access to the powers and experience of exercising them.
The powers are strong but they are necessary and proportionate. Cartels are secretive arrangements which can be successfully detected and prosecuted only with adequate powers of investigation.
Lord Kingsland: My Lords, I thank the Minister for his very full reply. I find this one of the most worrying clauses in the whole Bill. The powers that the Government seek' under the clause are, in my submission, wholly disproportionate to the objective that they wish to achieve. Even in circumstances where the powers, as exercised, exceed the purported control framework, there is very little that the object of their use can do about it.
There is a real possibility that we shall bring back this matter at Third Reading and put the Government to the test on it. Meanwhile, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 158 A not moved.]
Clause 199 [Disqualification]:
[Amendments Nos. 159 to 166 not moved.]
11.30 p.m.
Lord Hunt of Wirral Lord Hunt of Wirral moved Amendment No. 167:
Leave out Clause 199.
The noble Lord said: My Lords, I make no comment on the nearly five pages of complicated provisions on director disqualification. My purpose is to seek an explanation of why the clause differs so dramatically from the White Paper, by extending director disqualification orders to directors of companies infringing competition law.
In last year's White Paper, the Government suggested that disqualification would only come into operation for those who had committed a serious breach of competition law. Clause 199 goes much further, by extending disqualification to any breach of competition law—not only UK but European. Any such breach, however minor, could be used as a basis for disqualification. Does the Minister think that is an appropriate balance between the alleged offence and the punishment? Also, can the Minister confirm that the OFT draft guidance envisages seeking disqualification of entire boards of directors?
Given that competition law is seldom easy to determine and is never black and white, there are often legitimate differences of opinion as to whether conduct is pro-competition or anti-competitive. The blanket approach could be extremely unfair. If disqualification is to be introduced in the way suggested, changes are needed to limit it to serious breaches. I beg to move.
Lord Hodgson of Astley Abbotts: My Lords, we began the afternoon talking about corporate governance and a key part of that is a board that has independent members—non-executive directors in the modern parlance. Under Clause 199, non-executive directors, who perforce are members of the board, are equally liable. As the noble Lord, Lord McIntosh' said, things are often done secretly, away from non-executive directors. It is not always easy to determine rights and wrongs but such directors could still be the subject of a disqualification order.
In my experience—not direct experience, I hasten to add—the operation of the Company Directors Disqualification Act 1986 is sometimes capricious in the way that it lands on a particular individual. The power is likely to deter people of probity and integrity from taking on non-executive directorships because they may run foul of Clause 199. It must be in all our interests that high-quality people take up such posts, because that is an essential part of good corporate governance. Unless the clause can be made a great deal more sensitive, it is likely to deter such people.
Lord McIntosh of Haringey: My Lords, I have a number of difficulties with the amendment and with the arguments put forward. My fundamental area of disagreement is with the assumption that disqualification is somehow a form of punishment. It is not intended as a punishment; it is intended to protect the public from directors whose actions or omissions have shown them to be unfit to be involved in the management of a company.
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Breaches of competition law do real harm to consumers and other businesses and may indicate that the people involved are unfit to be company directors. This is not so different from the White Paper published in July 2001, which referred to breaches of UK and EC competition law. The clause defines a breach of competition law as a breach of either the Competition Act 1998 prohibitions or Articles 81 and 82 of the EC treaty.
Disqualification will not be automatic. In order for a disqualification order to be made, the court must be satisfied that two conditions have been fulfilled. First, the company must have committed a breach of competition law. As I have stated, that is defined as either a breach of the prohibition on anti-competitive agreements contained in Chapter 1 of the Competition Act 1998 or Article 81 of the EC treaty, or a breach of the prohibition against abuse of a dominant position in Chapter 2 of the Competition Act 1998 or Article 82 of the EC treaty.
Secondly—this is most important—the court must consider that the person's conduct in respect of the competition breach makes him unfit to be involved in the management of a company. In considering whether that condition is fulfilled, the court will consider whether the director was actively involved in the competition breach; or while not actively involved in the breach, the director had reasonable grounds for suspecting the breach but did nothing; or whether the director did not know but should have known about the competition breach. If under those definitions someone is found by the court to be unfit to be involved in the management of a company, I find it difficult to argue on what basis there should be no disqualification of that director.
There are a number of safeguards in the clause. It is for the court to decide on the facts of each particular case whether or not the person is fit to be involved in the management of a company. If the court is not satisfied it will not make a disqualification order. In addition, before any disqualification application can be made, the director must be given notice and an opportunity given to make representations.
We have to consider this in perspective. The vast majority of companies in business operate responsibly. The disqualification provisions will potentially apply only to the small minority of directors whose companies have been found to have breached competition law. It is right that disqualification should be available to protect the public where a director's conduct in breach of competition law has shown him to be unfit to be involved in the management of a company.
I turn to the question raised regarding a board of directors as a whole. A board of directors might resolve that the company should engage in an activity which constituted a breach of competition law. I suggest that the OFT would view that as a particularly serious case. It might consider applying for orders against each member of the board of directors of the company in question, but when doing so it is likely to take into account the conduct of each individual

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director in relation to that resolution. However, that is in those cases where there is a formal resolution of the board which is thought to be in breach of competition. Therefore, it is possible for a whole board to be disqualified, but only under the specific circumstances I have outlined. Fundamentally, the proposal to remove this clause suggests that a person who is found by the court to be unfit to participate in the management of a company should not be disqualified. I cannot believe that that is the case.
Lord Hunt of Wirral: My Lords, I always believe that it is not a good idea for those responding to debates to move to an extreme position. I shall make two points. First, I shall look again at last year's White Paper. However, it was certainly my understanding that in that document the Government suggested that disqualification would be available only to those who have committed a serious breach of competition law. As I understand it, the Minister is saying that that is not the case. I do not have the White Paper to hand; obviously I should like to re-read it to see whether he is correct.
Lord McIntosh of Haringey: My Lords, I do not have the White Paper either. I do not want to deny what the noble Lord, Lord Hunt, says. I base my argument not on that, but on the unfit argument.
Lord Hunt of Wirral: My Lords, the Minister wriggles. He even denies that he wriggles, but he does, because that was my basic question. If the Government in their White Paper said that disqualification would be available only for those who committed a serious breach of competition law, why have they changed their mind? The Minister rested his case on the fact that he did not believe the Government had changed their mind. We need to reflect on that matter.
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I endorse the remarks of my noble friend Lord Hodgson of Astley Abbotts: who would be a non-executive director in these turbulent times? My good friend at university Mr Derek Higgs is considering that question at present. He is eminently well qualified to produce recommendations. But that is a key question given the state of law on liability; the way in which the corporate veil is being lifted; the extent of responsibilities as well as rights; the Turnbull report and all the previous reports; and now a criminal sanction and possible disqualification where a non-executive director might not have known of the anti-competitive behaviour, but should have done.
There are all sorts of problems, but the Minister has taken a great deal of time and trouble in responding. I would like to take an equal amount of time to consider the effect of what he said. In those circumstances I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Grocott: My Lords, I beg to move that consideration on Report be now adjourned.
Moved accordingly, and, on Question, Motion agreed to.

City of London (Ward Elections) Bill
Reported from the Select Committee without amendment and a Special Report made; the Chairman of Committees directed pursuant to Private Business Standing Order 121(1)(b) that the Bill be not recommitted to an Unopposed Bill Committee; it was ordered that the Special Report be printed. (HL Paper 171)
House adjourned at seventeen minutes before midnight.