House of Commons - Trade and Industry

Select Committee on Trade and Industry First Report

FIRST REPORT

The Trade and Industry Committee has agreed to the following Report:—

THE WORK OF THE COMMITTEE IN THE 1997 PARLIAMENT

12. In March 2000 the Liaison Committee agreed to its First Report of the 1999-2000 Session, entitled Shifting the Balance: Select Committees and the Executive.[1] Among its other recommendations and conclusions, it suggested that each select committee should by the end of 2000 compile a report on its recent work, and should discover from departments the latest state of play on some of the recommendations and conclusions it had reached.[2] In the course of this Parliament to the end of the 1999-2000 session on 30 November 2000, we had agreed to 36 Reports and 32 Special Reports. All but two of those in the latter category have been a vehicle for printing Government Replies to Reports.

Outcome of Reports

13. Previous Liaison Committee guidance required a detailed record to be compiled of the outcome of each recommendation and conclusion. In many cases the matter they cover is no longer of direct relevance, or has been overtaken by events. In other cases, we are pursuing the issues in the course of our regular inquiries. For example, we heard evidence on electronic commerce in December 2000 from the E-Minister and acting E-Envoy. We have not sought to follow up those Reports agreed towards the end of the 1999-2000 session, to which replies have only recently been received. We have selected from Reports those matters where a progress report might be of interest to a wider audience, in a few cases in the form of a general update on the subject matter of a Report. In some cases we had already sought and obtained such an update before the Liaison Committee Report.

14. For ease of reference we have grouped our Reports into eleven broad subject headings. Each is the subject of a separate Annex to this Report, containing a brief analysis of the origin and outcome of each of the inquiries concerned, followed by the information provided by the department in response to our queries. We hope that our successors in a new Parliament will be able to use these Annexes as a basis for monitoring developments in a number of areas.

Assessment of outcome

15. It is not for us to assess on the basis of this exercise our success or failure in fulfilling the task laid upon us by the House of examining the work of the DTI. That is in our view better done by well-informed external assessment. We are aware of failures as well as successes. It is next to impossible to demonstrate the exact role played by a Select Committee in raising the profile of a particular issue or procuring a specific outcome. Within the limitations of time and resources, including staff resources, we feel broadly satisfied that we have in three years produced a mix of Reports which has informed the House and the wider public and which has kept the department on its toes. We have often found that the exercise of taking evidence and asking questions has produced results prior to making any Report to the House. Select Committee inquiries concentrate the minds of all those involved, including Ministers and officials.

Delayed action

16. We have also noted that the wheels of Government may grind slowly in responding to recommendations, but that they do sometimes grind to effect.

In December 1999 the Government accepted the recommendation we made in December 1998 that, in advance of the legislation to give effect to the Scott Report, it should lay before Parliament Orders made under the Import, Export and Customs Powers (Defence) Act 1939.[3]

On 21 November 2000, we learned from the Minister of State at the Cabinet Office that the Government had accepted a recommendation made in our September 1999 Report on the Post Office that primary or secondary legislation seeking to implement European Directives should henceforth be accompanied by a detailed memorandum on implementation of the Directive, along the lines of that provided to us in the course of that inquiry.[4]

Live issues

17. We draw the attention of the House to the following issues as examples of those which have remained "live", to which we or our successors in a new Parliament may wish to return —

the costs of domestic electricity liberalisation, which electricity suppliers can recoup in charges to domestic consumers, criticised in our July 1998 Report as unduly high, have turned out to be even higher than projected;[5] we understand that the Public Accounts Committee will be hearing evidence on this topic shortly;

the fitting by each major generator of Flue Gas Desulphurisation to at least one of their coal-fired power stations, which the Government stated in 1998 should be the norm, is proceeding very slowly;[6]

although in May 2000 the EU Council of Ministers rejected the idea of alterations to the Community trademark exhaustion regime, so as to allow parallel imports, there is a prospect of the Swedish Presidency taking up the cause.[7]

Endorsement and criticism

18. A number of our inquiries have been undertaken in response to criticisms made of decisions taken by Ministers or to allegations against public authorities. On several occasions we have found ourselves supporting the Government's position.

We looked into allegations that there had been damaging bidding-up between public authorities anxious to attract inward investment, and found little evidence to support this.[8]

We endorsed the decision taken by Ministers to accept Georgian nuclear material at Dounreay and provided an objective analysis of allegations made by the former Chief Constable of the UKAEA Constabulary about security at Dounreay and other UKAEA sites.[9]

We generally endorsed the decision taken to abandon the Horizon Benefit Card project and referred the matter to the National Audit Office. The Public Accounts Committee is to take evidence on the basis of the NAO Report.[10]

We supported much of the Government's negotiating position on reform of European Structural Funds.[11]

We found much to agree with in the Government's announcement in December 1999 on support from the ECGD for the Ilisu dam project.[12]

We examined in considerable detail suggestions that the Secretary of State had or should have known in advance of BMW's intention to dispose of Rover, and found them to be largely without foundation.[13]

We have recently reported broadly in favour of a Public Private Partnership for BNFL.[14]

19. On other occasions we have responded to the concerns of consumers or of commercial interests and found them to be well-founded.

We concluded that the difference between the retail prices charged for motor vehicles in the UK and in continental Europe could not be justified, and helped procure the recent inquiry and report by the Competition Commission.[15]

We concluded that the prevailing European regime preventing parallel trading by using trademark law to be unsatisfactory and recommended changes, which the Government has since been seeking to implement in Europe.[16]

We found some substance in the concerns expressed by business on the climate change levy and were able to help bring about substantial changes in the proposals as originally presented.[17]

We found much to criticise in the Government's proposals for regulating electronic commerce. As a result, the proposals for a Government scheme of licensing of trusted service providers was dropped and our compromise suggestion adopted.[18]

Following complaints by a group of freephone service providers, we achieved a rethink of parts of the proposed reorganisation of telephone numbering.[19]

We were critical of aspects of the recently presented UK space strategy.[20]

20. Publicity is of course readily obtained by taking up extreme and simple positions. There is a temptation to come to quick and easy conclusions, particularly where these are critical of Ministers or departments. We have sought to resist this temptation, believing that criticism is the more effective when clearly justified by the evidence.

Responses and memoranda

21. We are entitled to expect from the department whose affairs we shadow a proper respect for our views. Most of the Replies we have received have been either adequate or better, as have most of the memoranda received from the DTI. There are no complaints on this score to which we consider the attention of the Liaison Committee need be drawn.

Pre-legislative scrutiny

22. We have examined three draft Bills, with varying results.

The principal effects of our Report on the draft Limited Liability Partnership Bill were to confirm the general justification for the new legal entity it proposed to create; to validate the conclusion reached by most respondents to the consultation that it should be available to all; and to raise the issue of the desirable balance between primary and secondary legislation in giving statutory effect to the proposals. Most of our detailed recommendations reflected points raised in consultation by the many expert respondents. The few "policy" recommendations we made — such as disclosure of partners' drawings — were not accepted. Subsequent examination of the Bill as presented in both Houses raised several important issues raised neither by respondents nor in our Report.

The draft Electronic Communications Bill was published in late July 1999 together with the Government's Reply to our Seventh Report on the Government's policy proposals which, as amended, formed the basis of its contents. We had therefore had occasion to influence the content of the draft Bill before its publication. We had, for example, set out a compromise scheme whereby Ministers would take powers to establish a statutory scheme for registering Trusted Service Providers (TSPs) of cryptographic services, but which would only be brought into effect if an industry-run voluntary scheme failed. We had also recommended a radical reversal of the original proposals on electronic signatures. Both recommendations were accepted and incorporated in the draft Bill. In drawing up our Report, which we agreed during the summer adjournment in September 1999, we relied on evidence already taken, on written responses to the consultation, and on the department's answers to our Written Questions. Our Report made a number of recommendations, some of which were accepted prior to the Bill's presentation. The draft Bill was divided into two, the Electronic Communications Bill presented by the Secretary of State for Trade and Industry and the Regulation of Investigatory Powers Bill presented by the Home Secretary. We ensured that our concerns about the proposed use of negative resolution procedure to bring into effect the "reserve" Government approval scheme were conveyed to the House of Lords Delegated Powers and Deregulation Committee, which was able to ensure that the Electronic Communications Bill was amended in the House of Lords to provide for affirmative procedure.

In the autumn of 1999, we embarked on scrutiny of draft Clauses on Insolvency which had been informally circulated by the department. Our Report made several major recommendations, including the deletion of two clauses. One clause was dropped from the Bill: the other was not. We made a number of recommendations of a lesser level of significance. The Government's Reply was brief and dismissive in tone. In one case, we drew our concerns to the attention of the Lords Delegated Powers and Deregulation Committee, which was able to get the Bill amended in the Lords. Another recommendation referred to the significance of the provisions relating to, among others, landlords of companies during a moratorium. The Reply dismissed this issue in a cursory sentence. During the passage of the Bill through the Lords, the Government then engaged in a rapid consultation on the very issue to which we had drawn attention — the unfettered right of a landlord to effect peaceful repossession — and towards the end of the Bill's passage in the Commons brought forward Amendments to the Bill to constrain that right. During Standing Committee and Report stages in the Commons, Members of the Committee were also able to press some of the detailed points made by the Committee, to which no satisfactory response had hitherto been given. Even then, the points remained substantively unanswered.

23. Our experience suggests several general issues which we hope that the Modernisation Committee and the Liaison Committee might examine.

While it is of course open to any Member to table Amendments to give effect to specific recommendations giving effect to a Committee's recommendations, specific recommendations from departmental Select Committees for amendments to draft Bills deserve some special status during the process of examination of the presented Bill.

There is too often insufficient time given for pre-legislative scrutiny, leading in turn to a hurried and inadequate Government reply, which may have been overtaken by presentation of the Bill. Detailed recommendations do not always receive the attention they deserve, in part perhaps because of the focus of attention having moved to finalising the text of the Bill. We received an admirably full reply to our Report on the draft Limited Liability Partnership Bill. If it can be done once, it can be done again. The Government should ensure that as a matter of standard practice each Committee recommendation on a draft Bill which has been the object of pre-legislative scrutiny receives a full and considered response.

Linked secondary legislation may well be more significant than the primary legislation presented in a draft Bill, as was demonstrated in our examination of the draft Limited Liability Partnership Bill: there would be advantage in a standard procedure for publication in draft of key secondary legislation associated with draft primary legislation.

Experience with the draft Electronic Communications Bill and the draft Insolvency Clauses suggest that scrutiny of draft legislation presented to Parliament — or, in the case of the draft Insolvency Clauses, not presented to Parliament — can be too late to influence Government. Ministers and officials may be already wedded to the details of the Bill, making them unduly defensive towards suggested changes. Our scrutiny in the autumn of 1998 of the 1998 White Paper on Strategic Export Controls, for example, may have given us a better chance of influencing the outcome than the forthcoming scrutiny of the draft Bill. Some means of pre-legislative scrutiny is required which engages the details of future legislation at a stage before even avowedly provisional decisions are arrived at.

Supplementary estimates

November 1999: Horizon expenses

24. On 8 November 1999, we sought information in writing on a Supplementary Estimate for £8 million, described in the accompanying notes as being for "a payment to the Post Office for Horizon re-negotiation costs". Having recently reported on the Horizon Project, we found this additional sum puzzling. We asked for a response from the Department by 18 November. The answer was repeatedly delayed, despite reminders, and was eventually received on 7 December 1999. It confirmed the impression conveyed in a written answer of 11 November 1999 that the sum was to reimburse the Post Office for payments it had agreed to make to ICL for additional expenses in May 1999 while Ministers pondered on whether to terminate the Benefit Card project, as they eventually did at the end of May 1999.

25. We sought a delay in putting the sum to the House for its approval, pending further inquiry, and possible wider debate on the Estimate as a peg for a debate on the Horizon project. It would have been possible simply to reduce the total sum voted and seek authorisation of the Supplementary Estimate early in 2000 as part of the process of authorisation of the Spring Supplementary Estimates. The Treasury refused to accede to this request, pleading the urgency of making the payment in view of the fact that the Post Office had already made the payment to ICL. The Estimate was duly voted on and passed on 16 December 1999.

26. We had found ourselves effectively powerless. We had no desire for a full-blown debate at that stage, which would in any event have been difficult to organise at such short notice. We could have produced a Special Report to the House but to little practical effect. It seemed that Ministers could, in the absence of a full Report to put to the House for debate on an Estimates Day, simply override concerns on a Supplementary Estimate expressed by a Committee.

November 2000: Dounreay

27. We took no further action, however, judging that this was an isolated and exceptional incident. We were wrong. In November 2000 we examined the Supplementary Estimates sought by DTI, as is our normal practice, and sought details of several of these. One was for an additional sum of £45 million for nuclear decommissioning. The response from the DTI explained that it was a sum for the programme of decommissioning and waste management at Dounreay, for which a sum of £90 million had been appropriated in the Main Estimates.

28. The increase sought was on a substantial scale. Based on our previous detailed work on Dounreay, it seemed highly improbable that additional and hitherto unplanned expenditure on such a scale should be required in the few remaining months of the current financial year. We therefore sought further details, in a letter sent on 17 November 2000. We requested these further details by the end of November 2000. They were not provided until 8 December 2000.

29. The December response was in the form of a short table listing a dozen programmes for decommissioning and waste management at Dounreay, showing the apparent baseline financing in the Main Estimates and the additional sums now sought. A number of the detailed programmes for which no money had apparently been allocated in the Main Estimates had to our certain knowledge already got underway in the previous financial year. The baseline level of expenditure assumed for the 2000-01 Main Estimate seems to antedate even the June 1998 incident which led to the closure of the Fuel Cycle Area. For example, it assumed income from processing and reprocessing of £9 million, although there has never been the slightest suggestion that these activities would be restarted this financial year.

30. All in all, the details provided raised as many questions as they answered, and suggested an alarming level of departmental ignorance of the decommissioning and waste management programme at Dounreay. As in the previous year, however, there was little in practice which we could do. We had no desire to obstruct the payment to UKAEA of funds which informal inquiry confirmed were indeed needed. Oral evidence from the department is time-consuming, and would have little result. The sum was duly voted in December 2000.

Conclusions

31. The Chairman and Clerk of this Committee gave oral evidence to the Procedure Committee in July 1998 on committees and Government Expenditure Plans. The Procedure Committee reported in July 1999.[21] Although it concluded that there was no need for formal referral of Supplementary Estimates to committees, apparently because it felt that there would be insufficient time for their consideration, it regarded it as "vital" that explanations should be provided to committees as promptly as possible.

32. The system is failing, judging from our experience. We have the time, the expertise and the will to do our job, even within the largely unnecessary constraints of the timetable for considering the Winter Supplementary Estimates. But the absence of any formal powers means that departments can get away with delay and obfuscation. We consider that no Supplementary Estimate should be capable of being put to the House for decision until reported on by the relevant Departmental Committee. We give notice that we do not intend to be obstructed for a third time in our examination of the department's Supplementary Estimates.

Visits

33. In common with most committees, we have made use of our powers to travel within the UK and overseas. Several of our Reports have been primarily based on the results of meetings abroad with a range of people and organisations.[22] We have found it particularly valuable to pursue the same issues in visits to different countries. For example, we have held useful meetings with the senior management of the national post offices of Sweden, Finland and the Netherlands, which has helped inform our Reports on postal services. We have undertaken an annual two-day visit to Brussels for a programme of meetings with Commissioners and officials, which has helped inform us on subjects of past, present or future inquiries. We have made paid a number of visits within the UK. Some of them — for example, to individual vehicle manufacturing plants and to telephone exchanges — have been made by one or two Members in a "representative capacity". That power was also used to enable the Chairman and Clerk to visit Brussels in May 1998 to pursue our European Structural Funds inquiry, and, together with Members of the other Committees engaged in the Quadripartite Committee, to visit Sweden and Washington DC as part of that Committee's inquiries.

34. On most of our overseas visits we divide into two, or even on occasions three, groups for a significant part of the time. For example, we were able to undertake visits to each of the three Baltic states at the same time by sending a party of three Members to each, resulting in our report to the House in July 2000.[23] On our recent visit to Turkey, one group of Members spent a day in south eastern Anatolia in pursuit of our continuing inquiry into the Ilisu dam project, while another group visited Yalova to be briefed on UK involvement in post-earthquake reconstruction there. We have found that visits by small groups of Members often work best. Large groups can present difficulties for hosts. Division into smaller groups enables the Committee to increase the number of subjects it can cover in a limited timescale. It makes better use of that scarcest of commodities, the time of Members, and gives individual members a greater opportunity to participate in discussions. We would welcome the removal of any practical or financial obstacles to division of committees for the purposes of visits in the UK or abroad, even to below quorum levels.

Cross-cutting inquiries and overlap with other committees

35. We conducted a joint inquiry with the Defence Committee in 1998 into defence procurement and industrial policy.[24] We held a joint oral evidence session in June 2000 with the Foreign Affairs Committee. We have also formed part of the so-called Quadripartite Committee inquiries into Strategic Export Controls; our secretariat has provided the support for that inquiry. We have heard evidence on several occasions from Ministers from departments other than DTI, including one unusual session of three Ministers from the DTI, the Treasury and DETR. There have been occasions where the work of other departmental select committees has impinged on our work somewhat more than we might have wished; the same may well be true in reverse. Our greater concern arises from the potential for overlap of a potentially destructive sort with committees in the House of Lords. Although we have avoided most problems through one or the other committee standing aside, we consider that the Liaison Committee might give some thought to mechanisms to avoid overlap between the two Houses, all the more as the reformed House of Lords may seek to expand the scope of its committee operations.

1 HC 300 of Session 1999-2000 Back

2 ibid, paras 51-5 Back

3 See p 24 for list of Orders so laid Back

4 p 8 Back

5 pp 1-2 Back

6 p 4 Back

7 p 28 Back

8 p 40 Back

9 p 5 Back

10 p 8 Back

11 p 42 Back

12 p 22 Back