Enterprise Bill

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Miss Johnson: To a degree, the hon. Gentleman is right. I was making a wider point about the fact that there was a general duty to trade in a number of member states, but the interpretation of that could be different. We could end up with different views. It is not a parallel situation.

Dr. Cable: I thank the Under-Secretary for that clarification. We need to be careful that rules and principles do not diverge too greatly, whether they relate to consumer protection, cartel legislation or mergers.

Mr. Field: The hon. Gentleman rightly introduces the issue of subsidiarity. I should not like to agree with everything that the Under-Secretary says, but surely a stronger argument suggests that, at consumer level, there is more of a push towards, and a greater burden placed on, the idea of subsidiarity. However, at corporate level, particularly in relation to mergers, I agree with my hon. Friend the Member for Eastbourne. It makes sense in an increasingly interdependent world—in which we have strong trading links with the European Union—to move towards making certain decisions at an EU rather than a subsidiary level.

Dr. Cable: Yes, the hon. Gentleman is right, and he makes his point well. The constantly deepening trade and investment relations between European countries in the single market mean that the overlap between British and European corporate behaviour is becoming increasingly fuzzy. If we join the single currency—which may not happen soon, but could happen in the lifetime of the legislation—it will deepen

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commercial relationships and make the overlap still less clear. We need to be careful about setting a wholly different test and set of principles for British, as opposed to European, legislation. I fully support the amendment.

I should like to say a few words in support of the hon. Member for North-East Derbyshire. What he said was essentially right, and he began from the correct position. He said that we must be careful not to throw out the baby of democratic accountability with the bathwater of political interference. I have said on several occasions that we do not want direct daily ministerial or political intervention in competition policy decisions, because Ministers will always be tempted to use that ability for party political reasons, or to favour special interests. The Government have accepted that, and we are heading in the direction of greater independence for competition authorities.

The hon. Member for North-East Derbyshire was absolutely right that many legitimate political considerations must be borne in mind when merger decisions are made, and they are not simply those relating to competition. A merger on the borderline of proof—on that only just passed the competition test, say—could have major implications concerning redundancies in a part of the country where there is high unemployment, so it would be legitimate to take a political angle on that decision. Currently, a Minister can intervene to take such a factor into account, but it is difficult to see how, if the Bill is enacted, the OFT would be entitled to do the same. We need a provision that makes that possible.

I shall offer a hypothetical example. Britain might produce a British Bill Gates, who creates a company with vast technological potential to benefit this country. As a result of expansion, it could run into trouble with the competition authorities and fail the competition test. However, the legislation makes no provision for the competition authorities to consider the long-term national interests that would arise from such a successful venture.

Mr. McWalter: The hon. Gentleman is considering the protection of employment, but perhaps the issue is not that of a foreign company coming in and undercutting us on shady grounds. What if we protected employment—say in a pipe company in Clay Cross that produced inferior pipes to a company in Wales—on the ground that lots of jobs would be lost in Derbyshire? All things being equal, is it not fair to permit the company that is doing well to prosper, and to let the one that cannot cope with the market to be driven out of business?

Dr. Cable: The hon. Gentleman is right, if I understood him. I think that he was talking about competition within the UK rather than making a case for protection through trade. He is right that the competitive process would be very important in that sense, but none the less it would be useful and important to have competition authorities that at least understood the employment implications and wider social costs of a decision.

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Mr. Barnes: The argument also applies to competition in the UK. There is not only the hypothetical case in which the plant in Wales is more productive than the plant in Derbyshire, but what actually happened: the plant in Derbyshire reached a higher level of production and used its technology better than its competitors.

Dr. Cable: I do not want to go too far into the matter of that particular plant in Derbyshire, which has had a reasonable airing; the principle is right.

I shall cite one or two examples of recent legislation to which the same arguments applied but the Government did not listen and landed themselves in difficulties as a result. In the previous Parliament, I was involved with three pieces of legislation in which that exact issue arose. The Utilities Bill was generally a good piece of legislation which, since it has been enacted, has increased competition in the utilities field. The Government insisted that it was essential that a competitive test replaced regulation for electricity, gas and the rest. No one questioned the general thrust of that policy, but during proceedings on the Bill we considered what would happen if a broader public interest, such as the environment, were involved. How could the regulator be required to take that into account? The Government said that they wanted to keep the simple, basic principle of a competitive test because there was no need to consider the public interest. Subsequently, as Members of all parties feared, that principle did not work. With the introduction of the new electricity trading arrangements, competition has ruled, but the combined heat and power industry—the renewables industry—has effectively been driven out of business.

Some of us have been along to the regulator and said, ''Surely you can make some allowance for long-term environmental sustainability.'' He has said, ''No. You people in Parliament have passed legislation that tells me, as a regulator, that my only responsibility is to take account of competition. I am sorry, but you are an MP, you have passed that legislation and I cannot have a conversation with you about it—end of problem.'' The Government have landed themselves with the sacrifice of a major public interest—environmental accountability—due to lack of thought during the legislative phase about how to capture the public interest.

Mr. Lansley: I am afraid that the hon. Gentleman has ventured into a subject for which I do not have my bits of paper. In the past few days, however, I recall seeing a piece of paper from the Director General of Ofgem—the Office of Gas and Electricity Markets—that expressed his view that in the course of implementing the new electricity trading arrangements and having achieved consumer benefits through substantial reductions in price, he was hoping to address the adverse consequences for combined heat and power by further revision of NETA. The matter is not quite as simple as the hon. Gentleman states.

Dr. Cable: The hon. Gentleman is right that there have been major consumer benefits, and to that extent the thrust of the legislation was right. However, my

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understanding—perhaps the hon. Gentleman has more advanced information—is that the legislation prevents the Director General of Ofgem taking account of those wider factors. If I am wrong, I am happy to be corrected.

Another example, about which the Under-Secretary knows very well, was the Financial Services and Markets Bill. I tried to introduce a clause into that legislation to take account of the social aspects of financial services provision. The Government said that that was not necessary because the aim was too vague, and that we should stick to giving the Financial Services Authority a clear economic mandate. On Tuesday, the reports on social exclusion and the role of the banking sector in the provision of basic bank accounts revealed a complete failure by the banking sector voluntarily to come up with the kind of improvements that I and other hon. Members had sought to have written into the legislation. The same thing has happened with Post Office legislation and the Post Office regulator.

Miss Johnson: I should like to comment on some of the hon. Gentleman's remarks about the Financial Services and Markets Act 2000. First, it is not right to characterise the objectives of the Financial Services Authority as economic. That is too broad a term. Secondly, the FSA's consumer panel is out there arguing the case on basic bank accounts and how the industry should be taking them up more. Is that not a vindication of the structures that were put in place around the FSA?

Dr. Cable: The consumer panel is indeed arguing vehemently, and I referred to its report. The consumer panel made it very clear that the banking sector had totally failed to meet any test of social responsibility. I do not want to go down any of those byways in great details, but I have cited them as examples of the danger of passing legislation that does not give extremely powerful regulators, who have very limited political accountability, any formal responsibility for public interest.

Although there is a temptation to characterise the amendments of the hon. Member for North-East Derbyshire as a wild fling from the far left, there is a sensible and important democratic principle behind them, with which all parties in the House, if they stretched their minds a little, should have some sympathy. Although the language might not be right and work needs to be done on them, the amendments would repay revisiting and sympathetic discussion.

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