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(b) the desirability of facilitating innovation . . .
(c) the desirability of maintaining a competitive market in consumer credit in the United Kingdom; and
(d) the need to minimise the adverse effects on competition that may arise from anything done in the discharge of its functions."
Michael Fabricant: Earlier on my hon. Friend and others of us on the Opposition Benches talked about the need to protect individuals in relation to language and the use of language so that people could understand what conditions they were letting themselves in for by borrowing. Does he think that the OFT might be more focused by virtue of new clause 3(2)(b), which talks about "the protection of consumers"? Would that direct the OFT in turn to direct lenders that language must be clear, plain and, where appropriate, in the language understood by the borrower?
Charles Hendry: I am even more grateful than usual to my hon. Friend for that timely intervention. Our concern is that the OFT may go all over the place. It may decide to draw its remit as it chooses. We believe that Parliament has a clear idea of what it wants the OFT to do, so the establishment of duties would be helpful to the OFT in knowing what is expected of it. If the Minister disagrees with any of the duties set out in the new clause, perhaps he could let us know. If he agrees with them, again it would be helpful to know. If he does not yet know whether he agrees, perhaps we should know that. Through the new clause we are trying to give lenders and borrowers much more clarity about the role of the OFT. By ensuring that the industry is clear on what is expected of it by the OFT, it will be enabled to do more to meet the interests of consumers. That is what the Bill is all about, but at present that clarity is missing.
The Minister has stressed that improving transparency is one of the fundamental aspects of the Bill. We fully support that aim, but feel that in certain aspects transparency is lacking and improvements could be made. That is the object of new clause 5. It is a further attempt to address our concerns about the OFT's unfettered powers. It will be operating at considerable length from Government and Parliament, there is a lack of any check against its actions and behaviour in relation to licensees, and it will be both judge and jury.
New clause 5 attempts to go some way towards bringing a degree of balance and control back towards Government and therefore Parliament. It places a
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requirement on the OFT to produce an annual report, reviewing its work and the work of the enforcement authorities acting on its behalf. It further requires the Secretary of State to take the reports into account before issuing any regulations in relation to the Bill.
The annual report will give Parliament a real opportunity every year to see how the OFT is performing in its extended role and will put an early warning system in place if it is not achieving what is hoped and expected of it. It is but one small measure that does not impose any substantial costs or time on the part of either the OFT or the Secretary of State. It would ensure that the work of the OFT is regularly reviewed and monitored, and that the public, consumers and the credit industry have access to information regarding its operation. It is fair and right, given the extensive powers that the OFT is being granted, and I hope that the Minister will accept it.
Norman Lamb: I am absolutely in agreement with the hon. Member for Wealden (Charles Hendry) in terms of the objectives of the new clause, but I am not entirely with him in terms of its content. I know where he is coming from, but I have concerns with subsection (3).
There needs to be a legislative framework for the exercise of these onerous powers; unfettered discretion is dangerous. There is an absence in the Bill of any guidance for the OFT in terms of the exercise of its powers. The case for setting a framework for the discharge of those duties is entirely right. I shall be interested to hear the Minister's response to that case. These issues will inevitably end up being considered by the courts, whether or not there is a framework. It is unattractive, however, to leave everything to the courts—if the courts set the framework without Parliament having any influence over it.
Michael Fabricant: Does the hon. Gentleman agree that it is not only undesirable because Parliament should define to a greater degree precisely what is right and wrong in this instance, but there is the question of time? If we can get the Bill right now—no Bill is ever totally right—businesses will have a clear understanding of where they stand. The courts can take months, sometimes years, to resolve these issues.
Norman Lamb: That is a fair point. I have often known occasions where a case is pending, either in the High Court, the Appeal Court or the House of Lords, and it creates uncertainty. I suspect that these provisions will be tested in the courts, whether or not there is a framework, but the prospects of uncertainty are increased if there is no framework in place. There is a strong case for a framework.
Subsection (2) strikes the correct balance. It clearly identifies the central importance of the protection of the consumer, but it also addresses the need for lender confidence and for having an efficient and innovative consumer credit section. I am not entirely sure what "section" means; I think I understand it, but it is not precise.
Subsection (3) presents me with more of a problem. It is the "have regard to" provision. It is entirely appropriate for the clause to set out a number of factors that the OFT should have regard to in exercising its
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powers, but they seem to be weighted in favour of the industry. Subsection (3)(c) concerns the importance of maintaining a competitive market. One could say that that is important for the consumer, but paragraphs (a), (b) and (d) all relate to protecting the interests of the industry. In that sense it is unbalanced.
It is right for there to be a framework for the OFT to exercise its functions but the new clause does not balance well enough, in terms of the factors that the OFT must have regard to, the interests of the consumer and the interests of the industry.
2 pm
Mr. Sutcliffe: I am glad that normal service has been resumed and that the usual relationship between Front Bench spokesmen has been restored. May I nail down the tactic that the hon. Member for Wealden (Charles Hendry) has used quite charmingly throughout Committee? He argued that the Bill is too general and that there is not enough detail, conveniently forgetting the process that has produced it. A White Paper was published, and there was a full consultation on the issues that it raised. We spoke to all the stakeholders, including the industry and consumer groups. The Bill was introduced, and we tried to get it into good shape through the parliamentary process. He accuses me of lack of detail, but the aim of those procedures is to look at the detail of the Bill. Secondary legislation will flow from the measure and, again, there will be detailed consultations and discussions with industry and consumer groups on any statutory instruments. The hon. Gentleman cannot have it both ways. He cannot accuse the Government of a lack of detail while asking for a full consultation with everyone involved. We must strike a balance.
We had an interesting discussion in Committee about an amendment that closely resembled new clause 3. I explained how the Office of Fair Trading should act with regard to its consumer credit functions, as set out in sections 1 to 5 of the Consumer Credit Act 1974. That includes keeping under review both the Act and relevant social and commercial developments; the enforcement and operation of the Act; the production of information and advice; and annual reporting obligations on the operation of the Act. The provisions of the 1974 Act should be read in conjunction with some of the general provisions in the Enterprise Act 2002, particularly the provisions relating to corporate governance and the OFT board; the requirement for an annual plan and report; and the OFT's more general functions, which are set out in sections 1 to 8 of the Enterprise Act. The ground rules for the way in which OFT operates were laid down when Parliament debated and passed the Enterprise Act in 2002, and they recognised the nature of the role given to the OFT. It was not to be a narrow regulator operating within the terms of a strictly defined remit that could limit its approach to problems. There had to be one set of coherent objectives for the OFT, and the Enterprise Act provided it.
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We should remember that the OFT is subject to the usual range of accountability measures such as scrutiny by the National Audit Office and appearances before House Committees. It presents an annual report to Parliament and, in addition, it is a signatory to the Cabinet Office enforcement concordat, which commits it to minimising the costs of compliance for business by ensuring that any action it requires is proportionate to the risks.
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