Previous Section Back to Table of Contents Lords Hansard Home Page

Lord Fraser of Carmyllie: Perhaps I may say to the noble Lord, Lord Desai, that if I anticipated that the utility review was going to drift away from a January publication date and disappear into the middle of the year, or later, I should have greater sympathy with him. It is a constructive approach to say at the end of November that we are at least prepared to see what comes out of such a review, although I agree with him, especially in the area of telecommunications, that I have grave doubts whether it is possible to so define the activity that we can see Oftel continuing to regulate indefinitely. Indeed that is why we have what might be described as the "sunset" clause in Amendment No. 211.

Lord Skelmersdale: I rather feel today as though the scales have been lifted from my eyes, not so much as a result of this debate but because I am no longer an adviser to BG plc. That means that I can contribute on these subjects in a fuller and less inhibited way than I have been doing in recent months, if not years. It occurs to me that there is another reason to wait for the review; that is, there is another mischief which has not been mentioned in the debate so far today, although I believe that it was mentioned in my absence on Second Reading. It is that where under the current legislation a reference is made as a result of a disagreement between the regulator and the utility to the MMC, and it makes its decision, writes its report and we all see it, on occasion the regulator can virtually ignore that report, as happened in the cases of Transco and Northern Ireland Electricity. I accept that that has nothing to do with the Bill, but it is a good reason for delaying the subject until after the review when all these matters can be wrapped up together.

Lord Simon of Highbury: We have certainly had a wide enough debate for this to be considered to be a most important part of the Bill. I agree with that. For that reason, I really do not wish to leave doubts in people's mind at this stage.

This group of amendments would remove from the Bill the provisions for the sectoral regulators--telecoms, water, electricity, rail and gas--to apply and enforce the prohibitions concurrently with the Director General of Fair Trading. Let us be quite clear on the purpose.

Let us be clear also that that would represent a major change from the established policy, adopted under the previous Administration, that sectoral regulators should be able to exercise functions concurrently with the Director General of Fair Trading under general competition law. In the Government's considered view, it would be quite inappropriate to use the present Bill--dealing with the general competition framework--to make such a major change to the arrangements for

25 Nov 1997 : Column 914

sectoral regulation, least of all while the Government are engaged in a general review of utility regulation, as many Members of the Committee have commented.

I should like to confirm to the noble and learned Lord, Lord, Lord Fraser, as I did in a previous reply to him, that we expect the review to be available early in the new year. Perhaps that is a slightly wider definition of "winter scope" than he would wish at this stage, but that is consistent with my earlier advice.

This subject is sufficiently important for me to set out a little more background about the issue of general competition. Whatever the merits of the original privatisations and their structures, strong sector regulation has played a major part in securing consumer benefits in the regulated sectors. That has been possible only because the sectoral regulators have had the powers they need to do the job: to regulate in order to protect the consumer now; and, where feasible, to promote competition in order to protect the consumer in the future. It is implicitly recognised in the privatisation statutes through a duty on the sectoral regulators to promote or facilitate competition. That is the general issue.

Consequently, there is no clear distinction between sectoral regulation and the promotion of competition in those sectors. The one merges seamlessly into the other and the sectoral regulators are drawn inevitably into competition issues. That is reflected in the regulators' responsibilities to enforce certain licence conditions which are aimed at market power issues. For example, there are licence conditions concerning price caps and prohibiting undue discrimination.

It is reflected also in the concurrent functions conferred on the sectoral regulators under certain aspects of general competition law; namely, the monopoly provisions of the Fair Trading Act 1973 and the provisions of the Competition Act 1980 which relate to the control of anti-competitive practices which this Bill repeals. Clarity about the responsibility for applying the legislation in the sectors--ensuring no regulatory gap or overlap--has been achieved through bilateral "concordats" or understandings between most of the sectoral regulators and the Director General of Fair Trading, by which the sectoral regulators are responsible for the application of the relevant provisions of general competition law within their own sectors.

In the Government's view, and that of the regulators, the availability of those powers has been an important fall-back which has added to the credibility and therefore to the effectiveness of the regulators. One remembers the example of President Teddy Roosevelt who extolled the virtues of speaking softly while carrying a big stick. Indeed, that may have been the impression which the noble and learned Lord, Lord Fraser, had of Clare Spottiswoode. He did not use those words but she does indeed speak softly. The sectoral regulators' general competition functions are indeed a stick without which they would be severely hampered.

Let us now deal with the question of consistency. I would echo many of the statements made by Members of the Committee that consistency is important in the issue. It is part of the debate when it is asked why we

25 Nov 1997 : Column 915

cannot achieve more consistency by lumping everything together and having one person involved. That may indeed be--I hate to say it--the nirvana of the noble Lord, Lord Desai. We may reach the position of having an over-arching great power which is all-seeing and all-powerful; but we are not there yet. These are dynamic and changing markets. I never hesitate to remind the Committee that I have come lately from a field in which I was able to observe those markets developing in extraordinary ways. In my view, to try to have an overarching capacity to master all those specialties in one fell swoop is not credible yet. One day I may stand at this Dispatch Box, if I am a lucky and privileged man, and be able to say that an overarching structure is desirable, but I do not see it yet.

But in terms of the ability to promote an answer to questions on consistency, I say to the Committee that there is already a systematic body of law with which the regulators must ensure that they do not act inconsistently. Consistency in the applications of the prohibitions by regulators is thus built in from the outset. It will be supported by a single set of procedural rules to be drawn up by the director general and by a process for the director general and the sectoral regulators to work together. As my noble friend Lord Borrie has already emphasised, they are already setting up the working group. In developing advice and information about the application and enforcement of the prohibitions, we shall gain more insight into the developing capacity to achieve consistency. The tribunal will also have an important role as all appeals from directors and regulators' decisions will end up there.

In saying that there will be consultation between the regulators and the director general on cases where concurrency is an issue, I do not believe that I am minimising the importance of the informal debate. It may not be a lunch or dinner table; indeed, it may be something as boring as a meeting room. But there must be an informal capacity for concurrency to be dealt with. As has already been intimated by the noble and learned Lord, Lord Fraser of Carmyllie, there is already a requirement under each of the utility statutes that there must be only one way to apply and follow-up a dispute. There cannot be overlap and two cases running at the same time. The noble and learned Lord pointed out that that was the case in the gas regime. It is true of all regimes. That is a protection.

Furthermore, I have already indicated (on 17th November at col. 415 of the Official Report) that I would reflect on whether an amendment to the Bill may be needed to provide flexibility for a regulator and the director general to work together on investigations where both agree that that would be helpful. I very much take the point made by the noble Lord, Lord Ezra, about the widening of the scope of companies where two or three utility sectors may be in the ownership, in some form, of one company structure--a conglomerate of utilities. I do not believe that the Bill would rule out action by the director general, no doubt in the light of agreement between the director general and the regulator or regulators concerned that action would be taken at the level of the director general rather than of one of the utility

25 Nov 1997 : Column 916

regulators or three of the utility regulators. There is nothing in the Bill which would prevent the process of informal consultation.

Therefore, in the developing process of consistency, by way of advice, procedures and rules, I believe that we will understand better how there is a development of the ability of the director general and the sectoral regulators both to co-ordinate their capacities to understand and, at the same time, their individual ability to act. As I said, there is already a great deal in the body of the law to ensure that they do not act inconsistently.

I move on now to the point made by the noble Lord, Lord Mottistone. I very much agree that in some sectors--the telecommunications sector in particular--it is absolutely vital, given the structure of the market, that we do not hamper the capacity of the director general and of the telecommunications regulators to ensure that competition is still in place and developing. It needs a great deal of care.

In general, when talking about the role of the regulators in relation to the concurrency debate, there has been wide acceptance of the fact that there should be a continuation of the expertise and no blurring of the lines which currently exist. However, if I may say so, it has not been an issue in many of the sectors where we have had a response, but it has certainly been an issue in the telecommunications sector. That is why I wish to underline the remarks made by the noble Lord, Lord Mottistone. I believe that it is instructive to quote the words of a respondent that we have had from within the telecommunications industry:

    "The principle of concurrency should be supported. It is likely to be opposed only by those who have a strong interest in weakening rather than strengthening competition law".

That is specifically in the telecommunications sector, which is probably less balanced in competitive terms than some of the other markets given the dynamic of the general market place.

Against a very clear background, I have tried to reflect on what I believe is the rather too accelerated view of how we can develop the capacity to protect competition and, at the same time, develop a different structure of regulatory powers to protect consumers in the market place. There are many interesting ideas of where we may go in the future. However, my basic response to the noble Lord, Lord Ezra, is that the ideas are premature bearing in mind the state of the developing markets.

There are two central points that I commend to Members of the Committee. First, not conferring concurrent functions in relation to the prohibitions would be a major policy change which would inevitably weaken the roles of the sectoral regulators at this time. Secondly, conferring concurrent functions would enable the sectoral regulators' specialist expertise and knowledge of their sectors to be directly tapped as the key asset in applying the prohibitions leading at this stage to a better quality of sectoral regulation all round.

I therefore submit that this is not the time or indeed, if I may say so, the Bill to make a major reduction to the sectoral regulators' functions, least of all while the Government are reviewing the whole area. Irrespective

25 Nov 1997 : Column 917

of the timing of the utility review, I do not believe that it would be wise to prejudge the issues that that review will bring forward. There will be a time when we will debate the matter further. However, on the basis of my two submissions and for the reasons I have given, I invite the noble Lord to withdraw his amendment.

Next Section Back to Table of Contents Lords Hansard Home Page