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Baroness Miller of Hendon moved Amendment No. 23:

"( ) Borrowings under subsection (6) shall not exceed £5 million until legislative effect has been given to the proposals about the regulation of communications referred to in subsection (3)."

The noble Baroness said: In moving Amendment No. 23, I shall speak also to Amendments Nos. 58, 59, 60 and 61. All the amendments in this grouping are probing amendments and relate to the financing of Ofcom. We need to learn more about this aspect of the Bill than is available in the sparse information provided so far. Amendment No. 23 seeks to put a cap on the borrowing power of Ofcom.

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Like most new bodies set up by the Government, Ofcom will have a wide remit and a grand set of objectives. Many of the details regarding those objectives will not be readily apparent because of the Government's practice of introducing paving Bills, such as the legislation before the Committee, or enabling Bills, where the details are set out in subsequent secondary legislation. Such legislation is not subject to the same level of scrutiny by Parliament. In this case, we are glad that primary legislation will be brought forward in due course.

The amendment seeks to ensure that the worthy and diligent individuals who will be charged with the task of setting up Ofcom and making it ready for business do not become so intoxicated with the grandness of the scheme and with the important job that they are going to do for the nation that they choose opulence over prudence. It would ensure that they do not spend more than they need to until they are functioning with their permanent purpose.

The Explanatory Notes to the Bill make two important points. First, I shall paraphrase paragraph 15:

    "Subsection 3 ... imposes limits on what Ofcom may do ... under the Bill".

More important, paragraph 24 of the Explanatory Notes states that:

    "The Government envisages that the extra costs of establishing OFCOM will be of the order of £5 million spread over the period of transition".

I am not sure how elastic is the phrase, "of the order of", but I am open to the Minister offering a slightly higher figure to allow for minor and unforeseen contingencies. However, for the moment I shall use the Government's own figure and thus seek to ensure that the law says what they say they mean.

The amendment would ensure that neither the taxpayer nor the industry, who between them will foot the bill, are saddled with unnecessary costs, in particular if, for some reason, the substantive Bill is not passed and the whole exercise to set up Ofcom proves to be abortive.

Amendment No. 58 seeks to remove paragraph 8 from the schedule. While we do not disagree in the least with the laudable instruction to Ofcom to ensure that its revenues cover its expenses, as stated in paragraph 8(1), what is objectionable begins with the words, "at least sufficient". Why should Ofcom charge more than sufficient to cover its expenses? Without those words, the sub-paragraph, taken alone, might not have been objectionable and, on a reasonable construction, would have enabled Ofcom to create a contingency fund to cover foreseeable future commitments.

However, the words "at least sufficient" lead ominously to the conclusion that Ofcom could be encouraged to collect in more money than it requires. What will it do with the surplus? Noble Lords will not be surprised to learn that paragraph 8(4) proposes that the surplus should go to the Treasury. In other words, as the Bill stands, whenever the Government so choose, they can ensure that Ofcom raises surplus funds as a means of imposing yet another hidden tax.

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There is no reason that Ofcom should become a tax gatherer for the Inland Revenue. Any surplus funds should be returned to the industry, and hence indirectly to the consumer. We will obviously be prepared to consider, without any commitment, a provision to be introduced at a later stage by the Government requiring Ofcom to balance its books.

I turn now to Amendments Nos. 59 and 60. Both amendments are proposed on the assumption that the blanket amendment to delete the whole of paragraph 8 of the schedule is not accepted. Amendment No. 59 is purely a paving amendment for Amendment No. 60.

Amendment No. 60 seeks to require Ofcom, in exercising the powers it is to be given, to make the punishment fit the crime and not to use whatever offence has been committed as a means of raising additional revenue for Ofcom or, indeed, for the Treasury. The provision does not prevent Ofcom including in the penalty the reasonable costs of investigating and prosecuting the offending conduct.

Turning to Amendment No. 61, paragraph 10 of the schedule requires Ofcom to pay interest on any amount the Secretary of State may advance to it. We consider that to be perfectly right and proper. However, the Bill does not specify a rate of interest, which means that, as Ofcom is not a government department, the Secretary of State could virtually charge what he likes, thereby swelling the coffers of his department or of the Treasury. As I pointed out earlier, this seems to be an ambition of the Government. This amendment seeks to ensure that Ofcom is charged only a reasonable rate, not in excess of the commercial rate that would be charged in the open market to a concern of Ofcom's status and creditworthiness.

When I introduced this group of amendments with Amendment No. 23 and tried to suggest that it could be necessary to cap the limit of Ofcom's borrowing, I started by saying that it should not be allowed to borrow too much; however, it would be equally fair to limit the interest that Ofcom will have to pay for that same borrowing. That is why I came to my other conclusion towards the end of my remarks. I beg to move.

9.45 p.m.

Lord McIntosh of Haringey: Again I am grateful to the noble Baroness, Lady Miller, for these amendments and for the way in which she has explained them. I am sorry that the noble Viscount, Lord Astor, is not in his place. He raised these matters at the beginning of the Committee stage and we had to refer forward to matters which are much better discussed in their place on the Marshalled List with proper amendments; and these are indeed proper amendments.

Amendment No. 23 seeks to place a strict limit on Ofcom's borrowings. I should make it clear--this is relevant also to later amendments--that Clause 2(6) specifies that borrowings can be only from the Secretary of State. There is no question of Ofcom going out to the market and borrowing for any purposes of its own.

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The figure which we have put into the Explanatory Memorandum is indeed of the order of £5 million. It can only at this stage be, "of the order of £5 million"; we cannot make a precise estimate. The actual cost may turn out to be somewhat higher or lower, which is why we cannot accept an amendment that seeks to impose a rigid limit of £5 million. The work to determine what practical steps are needed to make Ofcom operational has begun, but it is only when Ofcom begins to take those steps next year--in other words, when the chairman, chief executive and so on are in post--that we will have a clear idea of what the extra costs of transition are likely to be.

We have some useful guidance from the Towers Perrin report, but those who have read the report will agree that it does not give us a basis for saying that £5 million is a magic figure and that the sum will not be £5.1 million or £5.5 million. The Government intend to bring forward the communications Bill as soon as possible, but we do not know exactly when that will be. Therefore, the transitional period is of an indeterminate length. We need to be confident that the transition will be effected smoothly; therefore, we need that degree of flexibility in the legislation, rather than the rigid figure that would be provided by Amendment No. 23.

Amendment No. 58 seeks to remove the whole of paragraph 8 of the schedule. I understand the fears that the noble Baroness, Lady Miller, has in relation to the phrase "at least". "At least" is a precaution. It is not our intention that Ofcom should raise more money than it needs. Obviously, the Secretary of State does not want Ofcom borrowing more than is absolutely necessary, but the figure must inevitably be somewhat imprecise.

For example, there is always the possibility of income to Ofcom from the auction of surplus spectrum. That would affect the figure. It could be affected upwards or downwards. We have included this provision in the Bill to give a clear indication of how we propose that Ofcom's finances should be managed, both when it is first established and in the future when it is carrying out its regulatory functions.

The duty under sub-paragraph (1) will be essential right from the outset. We expect Ofcom to conduct its affairs to ensure that its revenues are enough to meet its obligations. That is just as important when Ofcom is borrowing from the Secretary of State as it is in the later period when it is raising its revenues and charges from the industry through the exercise of its regulatory functions.

The other parts of paragraph 8 may be slightly less relevant during the initial phase, but they have been included in the Bill in order to give Parliament a full picture of how we propose that the revenues of Ofcom will be treated in the future.

As set out in sub-paragraphs (2), (3) and (4), any excess revenues will be applied in such manner as the Secretary of State may direct and include the whole or part of the excess being paid back to the Consolidated Fund. It has come from the Secretary of State; it is only

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right that any surplus should be returned to the Government. That answers the question of why the money has to be returned if there is a surplus of the kind that has been suggested.

Amendments Nos. 59 and 60 refer to penalties. There are no penalties. Under the Bill, Ofcom does not have any power to impose penalties. Again, this is a matter for the main Bill.

Finally, Amendment No. 61 seeks to specify the interest rate that the Government are to charge on loans. I am not aware of any legislation that goes into that detail. I hope that the noble Baroness, Lady Miller, does not think that we should be guilty of usury. I hope, therefore, that she will not press the amendment.

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