Office of Communications Bill [Lords]

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Dr. Howells: Will the hon. Lady tell the Committee whether this new demand for a small, dynamic board came before or after the sumptuous Carlton lunch? I seem to recall that before that lunch, the hon. Lady was calling for a huge board comprising people with all sorts of expertise? The Committee deserves to know the answer to that question.

Miss McIntosh: I welcome that question. The Minister, as ever, shows a keen interest in the Opposition's modest and humble submissions. He will recall that, before the said lunch, we tabled an amendment requesting the deletion of the reference to a minimum of between three and six members of the board. I am sure that the record will show that we wanted a ''lean, mean fighting machine'' for regulating. We tabled that amendment because we believed that the Government's global power to enlarge the board to a maximum number not specified in the Bill should be limited.

The Minister will recall that, because he is a very bright chap. I am looking forward to meeting him tomorrow in different circumstances, in the Committee considering a statutory instrument on Apsley house. I shall work on that subject after this sitting.

We believed that a maximum of 10 board members fitted in with our philosophy of a small board. The Minister will have received even more representations than we have. He would have been wise to accept our amendment, which changed the maximum number of board members to 10, to put down a marker that he does not want Ofcom to have an unwieldy, unmanageable board. I am most grateful to him for that intervention.

I was talking about ITV's views on the need for Ofcom to consult. The Minister will appreciate that it is not my intention to act as an advocate for any particular company or organisation that either is subject to the present regulatory scheme or will be subject to the scheme that will eventually be introduced under the communications Bill. However, ITV has a good point. The better regulation taskforce states that

    ''Proper consultation should take place before creating and implementing a regulation.''

Brian White (Milton Keynes, North-East): As the hon. Lady knows, I chair an organisation called EURIM—the European Informatics Market group—

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of which the hon. Member for Esher and Walton (Mr. Taylor) is also a member. We have been holding discussions with the industry, civil servants and parliamentarians, bringing various aspects of the communications Bill together. Consultations have been going on for months, and companies such as ITV, Sky and the BBC are involved. Is the hon. Lady aware that what she is asking for is already happening?

Miss McIntosh: I do not have the hon. Gentleman's wealth and breadth of experience, but something must be wrong if ITV writes to us highlighting concern about the absence of consultation, when the better regulation taskforce, with which the Government are only too familiar, says that it is needed.

A further comment by ITV is that in its regulatory approach Ofcom should have an explicit duty to observe the guidelines issued by the better regulation taskforce to ensure that regulations are necessary, fair, effective and affordable and that they enjoy a broad degree of public support. Its concluding comment on the subject is that all regulatory activity undertaken by Ofcom must accord with the five principles set out by the better regulation taskforce.

As for the introduction of new regulations, given that the functions of the regulator will be conferred on Ofcom by the anticipated communications Bill, ITV is keen that the Office of Communications Bill should facilitate a more effective transition to a single regulatory framework. Its view is that the resources of Ofcom should be sufficient to recruit and retain the best staff with expertise in all necessary fields, but that Ofcom should also be required to produce clear costings and budgets, and that the regulated industries should be consulted on whether they consider the level of expenditure to be appropriate. Ofcom should also stipulate how it intends to raise funds from the regulated industries: any proposed formula should be published for consultation with affected parties before it is adopted.

The Minister must be moved by ITV's argument because it reflects all that has been said by the better regulation taskforce. The Towers Perrin report, too, refers to management practices, best practice, professional development, competition and implications. Chapter 8 of the report—which was commissioned by the five existing regulators—states, on page 27:

    ''There is a distinct job for OFCOM to think strategically about the communications sector and develop joined-up policy. This is an output OFCOM needs to deliver.

    Communications Strategy and Policy would be small in headcount but equal in weight to the other four areas.

    It would comprise no more than 25-30 people excluding its contact centre function. It would be responsible for working with all the operating units to develop a coherent strategic understanding of the Communications sector environment, its markets, consumers/audiences and technology, and in the light of this understanding and OFCOM's objectives to ensure policy is made in an integrated way across specialisms. It would develop a coherent approach to decision-making. It is this framework which will allow OFCOM, where necessary, to trade-off its more complex objectives in a clear and consistent fashion.''

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Early in our consideration of the Bill, the Minister referred most eloquently to the report, which I imagine was rather expensive, that was prepared for and presented to the regulators' steering group, yet the Bill is silent on the issues that those concerned wanted raised. It is important that we consider the responses to the report of some of those who are subject to regulation.

BT said that it would be preferable to compare the five regulators and identify best practice for each process, but better still would be a zero-based approach to build new processes appropriate for a converged sector. BT believes that efficiency savings could come from many aspects of Ofcom by reviewing working practices and creating efficiencies, and especially by dealing with similar issues in the same functional area, rather than spreading expertise more thinly across directorates.

11 am

BT goes on to say that the Government introduced the Competition Act 1998 to prevent anti-competitive behaviour by the threatened use of severe penalties. However the Bill is silent about penalties. BT says that, two years on, Oftel has made little progress in deciding in what markets or market sectors the 1998 Act would be an effective substitute for such rules. BT has already said that the existence of that Act powers creates the risk of divergence between Ofcom and the Office of Fair Trading, which could lead to different standards in the application of competition law across the UK industry. It states that those concerns are greatly increased by the proposals made by Towers Perrin. I do not entirely agree with that, but it is incumbent on the Bill to pay some regard to that.

BT also says that although the report is unclear, it appears that competition law will be applied by at least three separate directorates of Ofcom. As we speak, we do not know what the structure of Ofcom will be. BT says that that will introduce a further significant risk of additional divergence between the various communications market sectors.

On professional development, BT tells us that Oftel has said that it has to do more work to define the circumstances in which competition law powers are more appropriate than central rules, and goes on to say that Ofcom will need to create an environment wherein professionals can work across a wide range of economic and competition issues, learning from each other and keeping fully up to date with both UK and European developments across the whole communications spectrum.

BT then says that secondments in both directions will benefit the UK industry, as lessons learned would be lessons shared. It recommends that institutional arrangements should be put in place to ensure a common approach to economic analysis and competition law throughout Ofcom, and between Ofcom and the OFT. BT says that that could be achieved by the creation of a new directorate inside Ofcom to deal with economic analysis and competition law, wherein major economic and

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competition law analyses would be worked out. It would be interesting to hear the Minister's comments on that.

I have also received representations from NTL, which says that Ofcom will have enormous scope and power, so it will be vital to ensure the right objectives and the promotion of the long-term interest of consumers wherever possible through the promotion of competition as defined in the legislation. It goes on to say that creating Ofcom now presents an opportunity to produce a better result and to streamline regulatory decision making.

NTL supports the creation of a cross-thinking regulator that brings together the strengths of the existing regulators and drops the biases that can sometimes produce poor, inconsistent, or ill thought-out decisions. It is dismayed that there is no suggestion in the Towers Perrin report that the proposed structure will lead to any efficiencies or economies of scale.

In concluding my few preliminary remarks—[Hon. Members: ''No!''] Regrettably, the clause raises more questions than it answers. Will the Minister confirm that the management of Ofcom will meet the principles that I have described, and that there will be in-depth consultation with those who are about to be regulated as well as with the existing five regulators, which are dealt with in the next clause?

Will the Minister also confirm that there will be a framework document, which will be published separately, and that there will be an opportunity for one or both relevant Select Committees to consider it? He might like to say not only that the relationship will be harmonious, but that there will a specific relationship between the two Departments and Ofcom. Will one Minister be charged with the relationship with Ofcom, and if so, from which Department will he come? How often will we hear about Ofcom in the House?

I quote again Minister's comment at our previous sitting:

    ''There are currently 1,111 employees among the five regulators, and the total cost is £118 million.''—[Official Report, Standing Committee E, 29 January 2002; c. 115.]

Is it his intention that costs will be reduced and limited, even during the transitional shadow Ofcom period, before Ofcom takes over the running of the five regulators? Does he imagine that staff will be recruited on the open market, or does he intend that they will simply be seconded for a short-term contract with a view to moving to Ofcom in the long term?

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