Office of Communications Bill [Lords]

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Dr. Howells: I have told the Committee on a number of occasions that the only source of funding will be loans made to Ofcom by the Secretary of State on behalf of the Department for Culture, Media and Sport. Either the hon. Gentleman is deaf, or he is forgetful.

Michael Fabricant: I thank the Minister for a customarily polite and generous intervention, for which he is known; I found it very helpful. The Minister may not be deaf or forgetful, but he has not fulfilled his promise to write me a letter, which he faithfully promised to do.

Dr. Howells: I will.

Michael Fabricant: He says he will. He told me that he was going to do it quickly, and that has not happened. However, he is neither forgetful nor rude, so I will not pursue that line of argument because it would be out of order.

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We established that funding would be from loans. That was teased out of the Minister like a wisdom tooth; he had not volunteered the information until my hon. Friends probed him. Eventually, he told us that the money would be a loan, but was unable to tell us at what rate of interest. However, it is irrelevant whether the loan is from the Treasury, his Department or the DTI. I am grateful to the Minister for saying that it will be from his Department, but the end of the story is that it will be a loan that must be repaid.

Despite all the drafting, clause 5 makes absolutely no reference to who will repay the loan that will undoubtedly arise from the operating costs of Ofcom. Will that be a burden on the regulatory bodies, or on the bodies that are regulated? Why has that information been omitted from the clause? Is it a drafting error from the dysfunctional Department, or is it deliberate?

I appreciate that the Minister is becoming heated because the Committee has rightly exposed inconsistencies in the Bill. Proposed legislation is never perfect, which is why we have scrutiny in Committee. However, it is important in this final sitting that the Minister finally gives us real and tangible answers, rather than brief replies that are written by his officials. How are the operating costs to be dealt with? The assets and liabilities are dealt with in detail, but the operating costs are not. Why not, and who will be liable?

Mr. Robertson: I shall not add much to what I said earlier about the need for the winding-up process to be seriously considered. The customarily wide-ranging speech of my hon. Friend the Member for Lichfield covered many issues that concern us. We are setting up a body that will have potentially important duties and a large role. We need clarification on the points raised by my hon. Friend, such as what will happen to the body's assets.

The Bill gives a lot of power to the Secretary of State. I shall not go over the ground covered by my hon. Friend the Member for Lichfield, but subsection (5)(b) provides

    power to make such incidental, supplemental, consequential and transitional provision as the Secretary of State thinks fit.

Will the Minister clarify whether that will include only assets, or whether it will include responsibility for regulation? I am unsure what is intended, and I do not mean to trip him up by asking the question.

On the transfer of property, liabilities, rights, interests and other things that are listed, will the Minister clarify what sort of organisation and/or person those rights and obligations would be transferred to if the other regulators were no longer to exist? Because Ofcom cannot be wound up until beyond 2003, we must assume that the other regulators will not exist.

Angela Watkinson (Upminster): I support the clause, but the power to wind up Ofcom is too great to lie with the Secretary of State. We cannot possibly know what period of time will have elapsed—it will be beyond 2003, and could be considerably beyond that—because clause 5(2) states:

    at any time after the end of 2003.

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It is impossible to know what will have happened to either the industry or the former regulators by that time. They may have suffered financial loss or there may have been unforeseen developments in what is a fast-moving industry. A Committee of both Houses acting as an additional brake on such a decision before it were made would be a wise precaution because both the former regulatory bodies and the industry need that protection.

Dr. Howells: Last week, the Committee discussed the need for a sunset provision in the Bill. Members of the Committee argued forcefully that such a provision was essential, and although the proposals that they made were inappropriate, we had a full discussion. Clause 5 will provide precisely what Opposition Members were arguing for. We do not anticipate having to use the powers provided in the clause, but it has been included in the Bill to provide a means by which Ofcom could be wound up should, for some unforeseen reason, insufficient progress be made.

Clause 5 gives the Secretary of State the power to wind up Ofcom. If it is no longer necessary for it to continue to exist, the duty to wind it up will be open to her after the end of 2003. The hon. Member for Upminster (Angela Watkinson) asked about the affirmative resolution procedure—[Interruption.] Sorry, it was the hon. Member for Vale of York. Clause 5(3) provides that no order shall be made unless a draft order has been laid before Parliament. A debate will have to take place in each House, followed by a resolution. I hope that that satisfies the hon. Lady. It is a strong power that we have considered carefully.

Other provisions allow property, other assets and liabilities to be transferred to the Secretary of State from Ofcom, the existing regulators or other specified persons. The Secretary of State will be able to provide compensation to persons who suffer loss or damage because of a decision to wind up Ofcom.

Mr. Robertson: The Minister seems to have skipped over one of my questions. After 2003, it is likely that no regulator will remain other than Ofcom. To whom would he envisage transferring assets and responsibility under those circumstances?

Dr. Howells: The hon. Gentleman is right to ask that question. The regulators would remain because no transfer of power would have taken place. The present five regulators, including the Department of Trade and Industry, will remain, and no powers will be transferred because Ofcom will exist only as a body, not a regulator.

Miss McIntosh: I am missing something. I am grateful to my hon. Friends for pointing out that the Bill does not permit the transfer. The Minister says that the transfer will be provided for in the main communications Bill. Without being asked, we are told that we are going to authorise the Secretary of State to make the transfer.

Dr. Howells: I am sure that the hon. Lady understands that that is not true. The Secretary of State will have the power to wind up Ofcom should it not be needed; for example, if the main communications Bill fails. That is what the hon.

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Lady pressed for in earlier amendments. The Bill will allow the Secretary to State to ensure that Ofcom does not remain in perpetuity.

Mr. Robertson: The Minister is trying to be helpful. Is he saying that the Secretary of State will not have the power to wind up Ofcom after existing regulators have been abolished?

Dr. Howells: I am saying exactly that. It will not be possible to wind up Ofcom after it takes over the regulatory functions from the existing regulators. The powers in clause 5 are confined to cases in which proposals have been abandoned or modified in a way that meant that Ofcom were no longer necessary. The provisions of clause 5 are a sensible precaution against substantial changes in the circumstances of communications regulation.

Michael Fabricant: Who will have to repay the operating costs?

Dr. Howells: The hon. Gentleman knows that the regulators are in the public sector. They are paid for by Government, except where they levy fees from those they regulate. Initially, the Secretary of State will provide loans to set up Ofcom. She must ensure that assets and any moneys paid are repaid to the Department. This is not a commercial deal and does not involve an outside bank or body. The Secretary of State will have to make the decision because Government resources are involved and, ultimately, the DTI and DCMS will have to decide on how best to use those resources.

Miss McIntosh: I notice that, quite late on, an amendment has been tabled to delete clause 7(5). Can the Minister explain the relationship of that amendment to our discussion? I am worried that the Government will run into difficulties.

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Dr. Howells: That is not what this debate is about. It is as unlikely as could be that the provisions will be ever needed, but they provide a necessary safeguard and should form part of the Bill for all the reasons expressed by Opposition Members.

Miss McIntosh: I shall not go over the ground already covered, but the Minister and the Committee feel our anxiety.

Michael Fabricant: The Minister was helpful in his response to my intervention, but he did not explain how the shortfall will be met if disposal of the assets does not cover the cost of the loan.

Miss McIntosh: I have as much difficulty with that point as my hon. Friend and I regret that the Committee is still in the dark.

Dr. Howells: The assets will not be disposed of. They are paid for by taxpayers. The Secretary of State, ultimately, is responsible for disbursal of the funds and loans. He or she will decide at the time how best those moneys and resources should be used. I hope that the hon. Lady understands my answer.

Miss McIntosh: That is clearer than the Minister's previous answer. I think that my hon. Friend the

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Member for Lichfield was trying to say that the money should revert to the industry whence it came.

Michael Fabricant: No, because at the stage of the shell organisation the regulatory bodies will still exist. Taxpayers will have given money to the shell organisation for buildings and so on, but there will be operating costs also. If the shell organisation were dissolved—we accept that that is unlikely—and the assets and buildings were disposed of, but the total cost of the assets and operating costs was greater than what can be recovered from liquidating the shell organisation, there would be a shortfall. Will taxpayers ultimately pick up the bill, or will the cost be forwarded to the regulators, and thence to the people they regulate? That has not been made clear.

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