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Written Ministerial Statements

Wednesday 18 March 2009

Business, Enterprise and Regulatory Reform

Merger Fees

The Minister for Trade, Development and Consumer Affairs (Mr. Gareth Thomas): In 2006, the then DTI announced that it was increasing the level of the fees charged to merging parties in order to recover the costs incurred by the competition authorities in undertaking their statutory merger control functions. It was decided that the increase would be introduced in two stages with an initial increase coming into effect in April 2006 and a further stage coming into effect in April 2009.

I have decided to postpone introducing that second stage of the planned increase in merger fees. Having reviewed what has happened in the period since the first stage of the increase came into effect, it is clear that there has been a change in circumstances which suggests the planned increase would not, in fact, generate sufficient funds to recover the full cost of operating the merger control regime.

We therefore propose to re-examine the costs involved in operating that regime and to consult on a suitably revised fee structure as soon as possible with the aim of making an appropriate order to introduce revised merger fees at the earliest opportunity.


There are currently three merger fee bands set at £15,000, £30,000 and £45,000, respectively. The lower fee band applies to mergers where the UK turnover of the enterprise being acquired is £20 million or less; the middle fee is applicable where the UK turnover of the enterprise being acquired is more than £20 million but less than £70 million; and the highest fee is applicable where the UK turnover of the enterprise being acquired exceeds £70 million.

The increase that had been planned for implementation in April 2009 would have increased fee levels to £30,000, £60,000 and £90,000, respectively.

Based on an assessment of the number of mergers taking place during the two to three year period prior to 2006, it appeared likely that this fee structure would generate an amount approximately equivalent to the average annual expenditure of the Office of Fair Trading and Competition Commission in undertaking their merger control functions. We consider it appropriate that those costs should be met by the companies involved in carrying out mergers rather than by the taxpayer.

Having reviewed what has happened in the period since 2006, it is clear there has been a considerable reduction in the total number of mergers being considered by the competition authorities—while the annual costs of operating the merger control regime have remained
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largely unchanged as fixed costs represent a substantial proportion of the total costs. The result is that the proposed increase in fees is likely to generate only about two thirds of the total costs allocated to merger control activity—a gap of some £3 million to £4 million. In the light of this, we propose work with the competition authorities to examine the prospects for reducing costs; to re-examine the cost base used as the basis for setting the fees and then to develop a revised fee structure that provides for full cost recovery in future based on that cost base.


Provisional Debt Management Report 2009-10

The Economic Secretary to the Treasury (Ian Pearson): The “Provisional Debt Management Report 2009-10” is being published today as required by the “Code for Fiscal Stability”. Copies are available in the Library of the House. The final “Debt and Reserves Management Report 2009-10” will be published alongside the Budget in the usual way.


Surface Ship Support (SSS) Programme

The Secretary of State for Defence (Mr. John Hutton): Hon. Members will wish to be aware of an update to the progress being made with the alternative contracting arrangements for surface warship maintenance and repair. These arrangements were signalled in December 2005 as part of the wider defence industrial strategy and today’s announcement is an important step towards ensuring that the capability requirements of the Royal Navy continue to be met now and in the future.

Surface warship upkeep contracts were awarded following competition while operational (or fleet) time support was delivered through partnering arrangements under the warship support modernisation initiative. While these arrangements have delivered clear value for money benefits to the Ministry of Defence (MOD), force level reductions coupled with over capacity in the surface ship repair market prompted a review. The MOD, in consultation with industry, undertook a study (the surface ship support study) to identify the optimum approach for the future maintenance and repair of surface warships (aircraft carriers, major amphibious vessels, destroyers, frigates and mine warfare vessels) that would deliver the most efficient, effective and sustainable support policy and offer best value for money for defence as well as to taxpayers.

In 2005, the study concluded that the option best able to meet the needs of both the Department and industry would be the formation of a surface warship support alliance, which would include current providers of surface warship upkeep and fleet time support. To take this forward, the MOD entered into detailed dialogue with industry to explore the feasibility of delivering such
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support through an alliance. The written ministerial statements made on 14 February 2006, Official Report, columns 72-73WS, announced this exploratory phase. During this time competition policy would be suspended to enable the alliance concept to be developed and tested progressively in a controlled manner. An order was made by my right hon. Friend the then Secretary of State for Trade and Industry (now Business Enterprise and Regulatory Reform), the Member for Kingston upon Hull, West and Hessle (Alan Johnson), excluding the maintenance and repair of surface warships from the UK Competition Act 1998. These arrangements were subsequently extended in 2008, and announced in a written ministerial statement on 25 March, Official Report, columns 3-4WS.

Over the past 12 months, good progress has continued to be made in this crucial warship support area. Working closely with the two dockyard companies—Babcock and BVT Surface Fleet Ltd—MOD has confirmed that the alliance option is the optimum solution for providing effective, affordable and sustainable support to Royal Navy surface warships. As a result, we have signed a non-legally binding accord with the two companies that set out the principles by which the alliance will operate. The alliance, subject to successful completion of the concept phase and further approvals as well as consultation with the trades unions, is expected to be fully implemented by 2011.

Once the alliance has initially stood up, expected to be later this year, the SSS programme will be implemented in phases. It will commence with a proof of concept phase to allow demonstration of success against agreed criteria as a pre-requisite for moving to the subsequent phases. This approach will minimise risk to MOD, Babcock and BVT Surface Fleet Ltd, and will allow the necessary assurance and scrutiny to take place as the programme develops, experience grows and benefits are realised. For that reason, the regulatory impact assessment (RIA) that supports the exclusion of surface warship support work on public policy grounds from the UK Competition Act has been extended for a period of up to 24 months.

The new arrangements help to promote a sustainable industrial base that retains key operational support and system upgrade capabilities within the UK, and are therefore vital to our ability to maintain and support the Royal Navy. We will continue to work closely with industry in a spirit of transparency and trust to ensure more effective joint planning for the longer-term and that the alliance delivers benefits to the Royal Navy, industry and British taxpayers.

The SSS programme remains a key tenet of the overall maritime change programme and it will play an important part in meeting the needs of the Royal Navy in the future.

Joint Strike Fighter Aircraft

The Secretary of State for Defence (Mr. John Hutton): We have decided to procure three instrumented test aircraft and associated support equipment to enable UK participation in the joint Initial Operational Test And Evaluation (IOT&E) of the Joint Strike Fighter (JSF) Air System alongside the US Services, and to
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continue our contributions to the production sustainment and follow-on development (PSFD) memorandum of understanding (MOU).

This decision will allow the UK to fulfil our plans to participate fully in the IOT & E programme alongside the USA and represents the next crucial stage in the UK’s incremental plan to introduce JSF into service and fully to understand the aircraft through-life. In particular it will enable us to confirm that we will fully meet the UK’s operational sovereignty requirements for JSF and also to fulfil our obligations for UK release to service, proving the general airworthiness of the aircraft and its ability to operate safely and effectively, in combat conditions.

Acquisition of JSF will provide the UK with an unrivalled “fifth-generation” tactical air system, designed with stealthy characteristics and advanced sensors, which will afford the UK a “step change” in capability. Through conducting the IOT & E programme jointly with our US partners, who have many years of experience in operating this type of capability and the technologies inherent within it, we will gain a unique opportunity to optimise our use of this new combat system. This decision is fully coherent with our earlier decision to procure the UK’s new aircraft carriers and will enable us to move forward effectively in developing our carrier strike capability.

With approximately 100 UK companies currently in the supply chain, there is significant UK industrial interest in the JSF programme ranging from major UK JSF industrial partners such as BAE systems and Rolls-Royce to providers of key sub-systems such as Martin Baker and GE Aviation, and down to lower tier suppliers of composite materials. The potential UK return on investment is substantial. Over the lifetime of the JSF programme, depending on aircraft costs and numbers ordered, overall expenditure with UK industry is likely to outweigh by far the UK MOD’s investment in the programme.


Bernard Lodge Inquiry

The Parliamentary Under-Secretary of State for Justice (Mr. Shahid Malik): Barbara Stow, a former Assistant Prisons and Probation Ombudsman, was appointed to Chair an investigation into the death in custody of Bernard Lodge, who died in HMP Manchester on 28 August 1998. Public hearings were held in September and October 2008.

On 23 February 2009, I agreed to convert the Bernard Lodge investigation to an inquiry held under the Inquiries Act 2005, following representations from the Chair. The investigation was so converted in accordance with section 15 of the Inquiries Act 2005. Barbara Stow shall remain Chair and no other members are to be appointed to the inquiry panel. The terms of reference of the inquiry, as detailed in Annex 1 of the Chair’s procedures dated 10 January 2008, shall remain the same. The terms of reference can be found at :


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Prime Minister


The Prime Minister (Mr. Gordon Brown): Our security and intelligence services and armed forces do an outstanding job. They take significant personal risks to make Britain more secure and operate across the world in circumstances they do not control. I have seen for myself their success in preventing terrorist attacks. We are all safer today because of the work they do with integrity and bravery. In the last months, the involvement of the security services and armed forces in detention activities has been under intense scrutiny while they have been unable to reply.

Britain condemns without reservation the use of torture for any purpose. Torture has no place in a modern democratic society. We will not condone it. Nor will we ever ask others to do it on our behalf.

It is to protect the reputation of our security and intelligence services and to reassure ourselves that everything has been done to ensure that our practices are in line with United Kingdom and international law that we will do four things:

We are fortunate to have the best security and intelligence services and armed forces in the world. They are highly effective, widely respected and operate unselfishly on our behalf. It is vital that we allow them to act to protect our country. But we must do so in a way that is
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consistent with our unequivocal commitment to human rights. I am confident that this is the case.


Criminal Proceedings for Fraud

The Solicitor-General (Vera Baird): My right hon. Friend the Attorney-General has made the following Written Ministerial Statement:

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