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5 Nov 2002 : Column 244—continued
BUSINESS OF THE HOUSE
Motion made, and Question put forthwith, pursuant to Standing Order No. 15 (Exempted business),
That, at this day's sitting, the Enterprise Bill may be proceeded with, though opposed, until any hour.—[Mr. Woolas.]
Enterprise Bill
Lords Reasons for insisting on amendments to which the Commons have disagreed, considered.
10.30 pm
The Parliamentary Under-Secretary of State for Trade and Industry (Miss Melanie Johnson): I beg to move, That this House insists on disagreeing with Lords Reasons 1C and 176C to 186C.
Mr. Speaker: With this it will be convenient to discuss Government amendments (a) and (b) in lieu thereof.
Miss Johnson: We have always been clear that the Bill allowed the Office of Fair Trading to create a separate post of chief executive if it wanted to do so. Last week I reassured the House that I envisage reviewing the arrangements at the top of the OFT when John Vickers retires in 2005, so we would consider at that time whether a separation of the roles of chairman and chief executive was desirable. However, given the concerns expressed that the OFT should definitely have a chief executive, the amendment that I have tabled in lieu of the Lords amendment makes express provision for such a post in the Bill.
The amendment also provides for a transitional period of two years during which a combined chairman and chief executive at the OFT could be appointed. Hon. Members will know that the OFT's particular circumstances have been critical to our decision not to separate the roles of chairman and chief executive between two different people at present. We are conscious that the OFT is about to enter a period of substantial change as a result of the Bill, and we want to ensure that there is continuity to lead the OFT through that change.
We have already said that the Secretary of State will appoint John Vickers as chairman of the OFT 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. Given that commitment, and to provide the desired continuity while the OFT's new arrangements bed down, I remain of the view that the OFT should not separate the roles of chairman and chief executive immediately. The transitional provision will ensure that the commitments given to John Vickers are honoured, and it will assist the OFT.
I remind hon. Members that in creating this new statutory authority the Bill is providing for a significant depersonalisation of competition and consumer regulation, and I have said before that I expect the OFT to have a majority of non-executive members. A two-year transition during which a combined chairman and chief executive may be appointed therefore seems to me to be sensible and apt.
Mr. Andrew Robathan (Blaby): We return to this amendment, which we discussed only last Wednesday. This Bill has been a bit of a marathon, although I have not been involved with it for very long. This may, of course, be the last time that we discuss it in this House. The Bill has had nearly 750 amendments, largely from the Government, and nine new clauses. That is no way to prepare legislation. It was badly thought out and
badly prepared. There is confusion in the mind of the Government, as demonstrated by this amendment, and a lack of direction on their part.We have many reservations remaining but we think that the Bill is now, in part, sensible and useful. It deals largely with competition, insolvency and consumer protection, not with enterprise. This is a Government who stifle enterprise, wrapping business in red tape and regulation. They do not understand enterprise or business, and their Back Benches are largely populated by those who have made a career of opposing free enterprise.
Amendment No. 1 shows the confusion in the Government's mind. The Cadbury report says:
- XThe 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 ... Given the importance and particular nature of the chairman's role, it should in principle be separate from that of the chief executive."
- XIf the two roles are combined in one person, it represents a considerable concentration of power."
- XOur view 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."
- Xcurrently has a wide range of functions in the areas of competition and consumer protection, many of which are being reformed in the Bill. The Government believe that in the light of the reforms, it is no longer appropriate for all those powers to be vested in one individual."—[Official Report, Standing Committee B, 16 April 2002; c. 12.]
If we want companies to be run in a certain way, I suggest that the Government body that regulates and looks after them should be run in the same way. The chief executive considers the detail and the day-to-day operations, and the chairman oversees the strategy and provides the checks and balances on the chief executive. In the debate last Wednesday, the hon. Member for Twickenham (Dr. Cable), like many others, asked who regulates the regulator. That is an important question, because he will be extremely powerful. The OFT post will have a tremendous impact on business and on the enterprise of this country.
A report produced by the Strategy Unit in September entitled XPrivate Action, Public Benefit" is about the Charity Commission but it can be applied to the same position in the Office of Fair Trading. It says:
- XThe Chief Commissioner is currently both Chair and Chief Executive of the Commission ... With the ... higher public profile that the Commission is to adopt, there is a strong case for introducing separate Chair and Chief Executive posts. The Chair's particular role would be in ensuring good corporate governance and the smooth functioning of the enlarged board, and in representing the Commission in public and at high level within Government and the charitable sector."
Mr. Phil Woolas (Oldham, East and Saddleworth): Lord Razzall is a Liberal Democrat.
Mr. Robathan: He is indeed a Liberal Democrat. I do not often quote Liberal Democrats or pray them in aid, however yesterday in the House of Lords he used the analogy of the BBC, and I think that it is a rather good one. It is also a public body. We may have our own views on the BBC, but would we want Greg Dyke to be both chairman and chief executive? I suggest that almost all hon. Members would answer no to that question.
Sir John Vickers is an excellent man. Not only did he go to my college at Oxford, Oriel, but he was a fellow of All Souls, as we were reminded last Wednesday by my right hon. Friend the Member for Wokingham (Mr. Redwood). I am sure that the Government will heartily deny the comments in an article in last Sunday's edition of The Sunday Telegraph, which says:
- XThe Government is heading for further embarrassment over sweeping powers to be given to the overhauled Office of Fair Trading, after it emerged that John Vickers, the designated chairman and chief executive, is willing to give up one of these roles. ... an OFT spokesman confirmed that Vickers is 'neutral' on whether the roles should be split, adding: 'The decision is for Patricia Hewitt"—
- Xand Parliament.' ... The Government's supporters say that best practice in a private sector boardroom is not necessarily applicable to that of a regulator."
I am sure that Sir John Vickers will do the job well, but confusion continues because, having denied our argument until last night, the Government have now largely accepted it. After Sir John Vickers there will be a chief executive and a chairman, separate and distinct.
The Government have accepted our argument. I think that it is much better for good corporate government, and for the oversight of good corporate government by the OFT, for there to be two separate roles and two separate occupants of the posts involved.
Dr. Vincent Cable (Twickenham): I do not want to make a meal of this, because many of the arguments about the split functions of the chief executive and the chairman were aired the other day, and I understand that the Government amendments largely cover the principle for which we argued—that the roles should be separated. I accept that that considerable step has now been taken, and I do not see much purpose in prolonging the debate indefinitely.
It is unfortunate that the Government prejudged the legislation, and that we are now having to build legislation around one individual's contract, but that is
a fact of life. There was a contract, which had to be honoured. I understand that the Government have now largely accepted that the legislation will have to be changed, and in the way that we have sought.I will say, however, that throughout our discussion of accountability I have been concerned with a slightly different point: the extent to which the key appointment of the chief executive will be subject to effective parliamentary scrutiny. Lord Borrie, who performed that role in the past, tried to address the issue when it was debated in the House of Lords. He gave a long list of ways in which he felt that this powerful appointment was accountable to Parliament. He listed the parliamentary ombudsman, the report to the Public Accounts Committee, the Competition Commission and the competition appeals tribunal, and asked rather wearily why on earth we needed more parliamentary accountability when all those bodies were available.
Although obviously a distinguished man, Lord Borrie may not have quite got the point that has concerned many of us. The key issue is the process of appointment. Mr. John Vickers—I do not want to be pedantic, but I must tell the hon. Member for Blaby (Mr. Robathan) that I do not think he has reached the knighthood stage yet—is clearly an outstanding individual, but if a future Government appointed a complete dud or made a blatantly political appointment, at what point could the House exercise some control or scrutiny?
This is not an issue that could be taken to the ombudsman, to the Competition Commission—another quango—or to one of the courts. Scrutiny can only be exerted here. That is why I, along with other Members, have urged that when an appointment is made, Mr. Vickers's successor should be brought before the Select Committee on Trade and Industry. We do not need to legislate for that; all we need is some assurance from the Secretary of State, for reasons of courtesy as much as anything else, that the appointment will be referred to Parliament for scrutiny. I am not saying that Parliament should necessarily be able to veto the appointment, but I think it should be referred to a Select Committee for proper oversight.
I am disappointed that that relatively small concession to parliamentary scrutiny has not been made, and I hope the Minister will make it. I do not think it necessarily affects our attitude to the amendment: it is couched in terms of the split functions, and that point has been conceded. But I would like to leave the Bill feeling that the Government had taken account of the concern about the considerable power vested in this appointment, and the view that it should be subject to more scrutiny.
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