Examination of Witnesses (Questions 949-959)
THE RT HON PATRICIA HEWITT MP AND THE RT HON TESSA JOWELL MP
MONDAY 8 JULY 2002
Chairman: Thank you both very much for coming to answer questions for us. Can we start with a question from Lord Crickhowell.
949. Perhaps as a former Secretary of State I can ask you whether you mind being called collectively "Ministers", which I think will make life simpler as we address our questions?
(Tessa Jowell) We answer to many things. That will be fine.
950. No doubt you will have to decide which of you will respond. For us it has been a pretty arduous process. I do not think I remember a heavier workload on any single project. What do you see as the benefits so far of this process of pre-legislative scrutiny and are you confident that the final Bill that emerges will be better and significantly different in consequence?
(Tessa Jowell) Perhaps I can start with that question and say that I think we have learned an enormous amount about the benefits of pre-legislative scrutiny from the work of your Committee. We both know that it has been very onerous and you have taken it very seriously. We are entirely convinced that the quality of the legislation that will emerge will be improved by the effects of your deliberations and your hard work, and I should say particularly your hard work at the end of July into August when I know that both Houses will have risen and you will be finalising your report. We are enormously grateful to you for being prepared to work to that deadline. In parallel with the process of pre-legislative scrutiny is, as you know, a process of further consultation with the industry. I think that by the time we get this Bill to the point of introduction it will have been one of the most consulted on pieces of legislation in most people's memories. And that is important. It is important because in the normal sense of politics this is not a party political Bill; it is a Bill which is very important to secure the confidence and broad consensus of the industry, and I think it is also important to learn some of the lessons of previous, more limited, broadcasting legislation about the pace of change and therefore the need for inherent flexibility within the legislation to adapt to that change and not to constrain it.
(Ms Hewitt) I would certainly echo Tessa's thanks to all of you for taking on this job. When I was Economic Secretary at the Treasury I was responsible in the early stages for the Financial Services and Markets Bill and, of course, was responsible for it at the point it went through pre-legislative scrutiny by a Joint Committee and I and my colleagues found that process absolutely invaluable. It did force us to think through more clearly some of the issues that were causing concern and I have no doubt at all that the output result was better as a result of having the pre-legislative scrutiny.
951. It is nice to hear that our work is being properly considered. I think I must warn you I doubt if it will shorten the Committee stage because at the Procedure Committee at the House of Lords we gathered so much evidence I suspect that others will use it as material for a whole raft of amendments in due course. Can I just make one point. You will be aware that there are two parts of the Bill and the other part carries newspaper ownership clauses that we have not actually seen. All I am going to ask at this moment is that if we are not therefore able to cover that as adequately as we would like, that you will consider very carefully any points we do make because there may need to be some further thought on those matters.
(Ms Hewitt) I do want to apologise again to the Committee, through you Chairman, because we wrote to you on this, for the fact that we were not able to get draft clauses to you on newspaper ownership, which of course originally we had hoped to do. We have tried to set out in the memorandum we gave you last Wednesday as full as possible a note of the precise policy position and objectives that we are aiming for, but what has become very clear is that it makes sense to draft those clauses absolutely in line with the work that is being done on the Enterprise Bill and it means using the team of draftsmen and lawyers on the Enterprise Bill so the two sets of provisions marry up in the way that they need to. Unfortunately, because of the work that is already going on on the Enterprise Bill, we have not been able to get the instructions to counsel and then the drafting done in time for you. I apologise for that but it does mean that we will take extra care both with the policy conclusions once we have received your report and then with the drafting of the clauses of the Bill.
Lord Crickhowell: It is not just that we have not been able to give it as much consideration but we have not been able to call evidence from people who might like to have commented to this Committee and that might be the biggest gap. We are all going to have to take account of that.
952. May I make one point for the record. What is very clear is that the entire Committee understands and appreciates the reasons lying behind the Bill and, indeed, the tone and thrust of the Bill quite generally, so any of the questions you receive in the next hour and a half, although they may sound critical, are picking up very specific areas and should not be applied to the generality. Much of the evidence we have heard has strongly suggested that the mantra of "light touch" regulation will be more of a burden than a benefit for OFCOM, discouraging the tough regulation of dominant players that may be necessary, and providing fertile ground for judicial review. Do you accept that proportionate and targeted regulation is more important than any theoretical commitment to light touch, no matter how attractive that might sound?
(Ms Hewitt) When we talk about "light touch" regulation I think we mean exactly what those people do who use the phrase "appropriate and proportionate". Certainly in relation to OFTEL, for which I have had policy responsibility for some time, I have been very clear that light touch regulation means rolling back regulation where you no longer need it because you have competitive markets so you do not need to rely on regulation any longer but, equally, where you do not yet have competition and where perhaps you have a bottleneck in the way of competition, then you need the regulator in a very focused way to be as tough as is needed to get competition. We had a classic example of that over quite some period with the whole issue of local loop unbundling and trying to open that up as a source of greater competition in telecommunications. There if you had not had a regulator with the necessary panoply of powers you would not have been able to get greater competition in the market. I would make the observation, which the companies have heard me make before now, that British Telecom, who will often complain about what they see as excessive regulatory zeal by OFTEL, would also say that they wish they had OFTEL in Germany where they are new entrants seeking to break into a market where there is a much less effective pro-competition regulatory regime.
(Tessa Jowell) Can I add to that and sayand no doubt we will come back to this at a further stage in this sessionthat if you take, for instance, the proposals that we have made on liberalising media ownership, there you have a very clear balance between deregulation of ownership but, arguably, proportionate and targeted regulation in order to safeguard content. I think that is a very good example of where the two work in balance.
Lord Pilkington of Oxenford
953. There will almost certainly be judicial reviews of the regulators. Do you not think you are making a hostage to fortune in going before the courts with the words "light touch", because when the regulators come down hard these people will have very good lawyers? Are you not a little worried about hostages to fortune?
(Tessa Jowell) You are right to sound a note of warning about that. That makes the case for the Bill being well-scrutinised and the Bill being well-drafted and the reasonableness test that would apply in relation to judicial review being one which is anticipated in areas where challenge may be made, I think that the potential threat or theoretical threat of judicial review in some areas is, first of all, a discipline, as I have said, in relation to the proper drafting of the Bill but, secondly, it is not of itself a reason for not pursuing the pro-competition, deregulatory thrust of the Bill.
954. Could I explore this question of the balance of the Bill. At the moment we are slightly flying blind in that we do not know the Chairman, we do not know the Director of OFCOM, and we do not really know yet its ethos. There is genuine concernand we have received evidence on thisthat the interests of the consumer/the interests of the citizen will not be safeguarded sufficiently, it will be a body that knows the price of everything and the value of nothing and, therefore, there is great emphasis on some of the evidence that we have had that more precise duties should be written into Clause 3 of the Bill in terms of the citizen, in terms of the consumer. Do you find the Bill weak at that point?
(Tessa Jowell) No, I do not think so. I think that it is important to recognise that OFCOM will have twin functions in relation to economic regulation and the oversight of competition in the relevant market, but will also have a key area of responsibility for content regulation and oversight of that. The Consumer Panel, which is specifically constructed and designed to be slightly independent of OFCOM, will be an important forum for developing those public interest consumer concerns that you suggest. I think that we have got to look to two things in getting this balance right. One is the drafting of the legislation and the clear articulation of these twin economic and content responsibilities of OFCOM, but, secondly, also to recognise that the culture and nature of OFCOM will develop, as you rightly suggest, with the appointment of a Chairman, which is imminent, the appointment of the Board, which we hope will be imminent, and then the development of the organisation itself because, as we have both said many times before, we are quite determined that OFCOM as the new single regulator should be more than simply the sum of its parts. Part of the function of OFCOM, which is on the face of Bill but I think not yet sufficiently developed, which I think speaks very directly to the citizenship agenda/public interest agenda you have identified, is the development of media literacy. This will be a function that will be pursued, I expect, by the Content Board which will be different from the main Board of OFCOM because of the breadth of their geographical representation.
(Ms Hewitt) I have heard these criticisms. If one talks to people, particularly in broadcasting, they worry that they will be a bunch of philistine economic regulators. If you talk to people who are concerned with competition on the infrastructure side, they worry it is going to be entirely a group of people concerned with cultural interests who will have no knowledge or awareness of the economic importance of competition. I am very clear that we are not going to have a Board that is created all of one or all of the other, nor do I accept that individuals are not capable of being both cultured and interested in the economic importance of competition, so we will have a Board that quite properly reflects the breadth of OFCOM's duties. But, equally, I would be completely opposed to the idea that we should give primacy to one particular objective or another. Whether it was the competition objective, which some of the telecommunications companies would go for, or whether it was a cultural access to content objective on the other hand, you have got to have that range of objectives, and where there are tensions or possibly even cases of conflict of interest between them, then the Board needs to confront that very directly and set out publicly why it has made the judgment it has.
955. The total divergence of views that have come into this Committee have probably convinced us that you have got it just about right.
(Ms Hewitt) Good.
956. Picking up slightly on what was said there, the first two subsections of Clause 3 impose no fewer than 15 general duties on OFCOM. Is it not a case for Parliament clarifying its expectations of OFCOM by setting out one principal duty, perhaps "furthering the interests of citizens and consumers, wherever possible through competition", or something of that sort?
(Tessa Jowell) With respect, I am not sure that that would necessarily add anything to the clarity of purpose which presumably would be your objective. We would obviously look very carefully at any specific suggestions in relation to that which you might propose, but I think there might be a frustration that we need to contain at this stage which is that the legislative framework is going to be only part of the story. It is like building a body but having only the skeleton. You have not got the personality or the other things that make it work or make it distinctive. That will come with the appointment of the Chairman of the Board and, of course, the staff. So I do not think we would be keen on any re-drafting which implied that there is a hierarchy as between the competition role and the broader content role, but if the Committee comes up with a drafting which neatly and elegantly elides those two functions, then obviously we would look at that gratefully and seriously.
957. There is a challenge for you!
(Ms Hewitt) Perhaps I should just add there are seven dutiesI think 14 would be a little too manywhich are OFCOM's statutory duties. They then have principles to which they have to pay regard. It is very much as they are under the Financial Services and Markets Bill and Clause 4, of course, adds some very specific stuff that flows from the European Telecoms Directives.
Lord Pilkington of Oxenford
958. I speak as a former regulator of the unfairness and infringement of privacy and I realised the passions involved in thatI bear my wounds to this dayand therefore I turn to the Content Board because it is going to include these very sensitive issues. Do you not feel that there is a case for more clarity on the face of the Bill for the Content Board which will deal with sensitive areas of individuals, of unfairness, privacy, but also content in general, and would it be executive or advisory? I am a little worried that it is a Christmas tree on which everybody is hanging a bauble. What do you feel about that?
(Tessa Jowell) The Content Board will be, if you like, a sub-committee or a board that will operate with certain clear, delegated executive functions from the OFCOM main Board but will also carry a number of advisory functions. Clearly the balance between the two will be established in time. So the Content Board will be fully part of OFCOM. It will be OFCOM that will have to take responsibility for any challenge to decisions of the Content Board. Where the Content Board's advice to OFCOM may be particularly valuable is in relation to issues such as the definition of negative minimum content standards, accuracy, impartiality standards, the approval of codes in relation to complaints, OFCOM's programme of research in relation to content issues. So the Content Board will have a crucial role in relation to the effective implementation of the deregulatory structure set out in tiers one, two and three of the proposed Regulation. In relation to accountability, the Content Board would report through OFCOM to Parliament. No doubt, OFCOM's Annual Report to Parliament will include a report on the work of the Content Board. Were, for instance, OFCOM to be summoned to appear in front of a Select Committee, obviously then the Chair of the Content Board might well come and give evidence. I hope that makes clear the accountability structure within and the relationship between the Content Board and the OFCOM main Board. In relation to the Christmas tree that you describe, again, I would say that on the face of the Bill we have a very clear regulatory structure for public service broadcasting in particular and that will obviously fall heavily to the Content Board to have oversight of. In relation to other functions then, yes, I would expect those to develop as the role of the Content Board develops, but I think that the structure is clear, the accountability is clear, and certainly rambling all over the place in an undisciplined way which does not bear direct relationship to the regulatory structure as set out on the face of the Bill would be a sign of weakness, not a sign of strength.
959. I do not want to harp on about this judicial review, but the passion that is aroused by unfairness, particularly where an individual is concerned, might mean there could be a conflict of interest if the parts of the Content Board that dealt with this were not ring-fenced because the Content Board, having such a vast range of functions, could fail to satisfy the courts that it had behaved in an unbiased way. Have you given thought to this conflict of interest?
(Tessa Jowell) I am very happy to look at this again and will obviously look at the way you deal with this particular risk in the report. I go back to what I was saying