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Lord Phillips of Sudbury: My Lords, I refer to the much quoted remark by the noble Lord, Lord Borrie, about there being no necessary read-across from a public limited company and a body such as that which we are debating. That is true but the role of the Office of Fair Trading—much expanded by this 500-page Bill—will make it a much more difficult organisation to run than the typical PLC. Its judgments will be highly sensitive, often contentious and always political. If ever there was a need for the extra resource that the twin-officer approach provides, it is here.

For the Minister to suggest that it will be sufficient to have a deputy director is so far wide of the mark that I beg him to reconsider. A deputy is a deputy—an inferior answerable to the person for whom he or she deputises. The post will have to minister to four constituencies—the consumer lobby, the business lobby, the government and political lobby, and the public at large. That will make the job hugely difficult and Amendment No. 1 seems to be common sense.

The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Sainsbury of Turville): My Lords, I much appreciated the survey by the noble Lord, Lord Hunt, of the various reports on corporate governance and the views of the noble Lord,

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Lord Marsh. I totally agree, from my experience in industry, that it is entirely right that there should be a split and that is the best way to run companies.

However, the point made by the noble Lord, Lord Borrie—it was his argument as well as his great distinction in his former post that count on this occasion—was entirely right. There is no direct comparison to be made between how one runs a public limited company and a non-ministerial department. The issues are quite different. The reason for having the split between chairman and chief executive in a public company has to do with its relationship with shareholders, which is clearly different from the relationship between the head of a non-ministerial department and the Government. I agree with the noble Lord, Lord Razzall, that we should forget about that unrealistic comparison and look at the subject on its own merits.

The noble Lord drew an interesting comparison with the BBC but again, that is a completely different situation. The BBC is a big organisation with large operations. Where there are large operations as well as a need for strategic thinking, the model is closer to a public company.

4 p.m.

Lord Marsh: My Lords, I cannot follow the Minister's argument. There are numerous organisations in the public sector where the Government of the day—whatever the rules and regulations say—will wish to speak to someone in the organisation about the way it is managed. All of us who have been Ministers have done that sort of thing. There must be someone to whom Ministers can speak. To talk to the chap in charge of the organisation's management specifically and solely is not always productive and reliable. Over the years, Ministers, in my experience, have talked to the chairman.

Lord Sainsbury of Turville: My Lords, the situation does not parallel that of a public company. It is much easier for a Minister or someone else to discover what is thought about the performance of a public body. The Minister does not need the intermediary of a chairman who can be used to take action on the executive side. I do not believe that the situation is parallel to that or that one can make that comparison. All these situations must be considered on the basis of the particular kind of organisation and the job which it does. In that context I shall deal with the situation here.

Amendments Nos. 1, 4, 5 and 8 to 16 would create a separate post of chief executive of the OFT. At present the Bill provides for a chairman and no fewer than four other members appointed by the Secretary of State, with the Secretary of State consulting the chairman before appointing any other member.

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We have taken account of the OFT's particular circumstances in deciding not to separate the roles of chairman and chief executive at this time. The Secretary of State will appoint John Vickers as chairman for the remainder of his current term as Director-General of Fair Trading, honouring the commitment made to him when he was appointed to that post. John Vickers will work together with the other members of the OFT. Given his position, and to provide for some continuity through this period of great change, I do not think that the OFT should necessarily separate the roles of chairman and chief executive at this time. However, while the Bill does not provide for a separate post of chief executive, nor does it preclude it. If at any time the OFT wished to go down that route, it could create a separate post of chief executive and select the appointee.

That raises another important point. The amendments would create a post of chief executive appointed by the Secretary of State. In contrast, the approach we propose, where the OFT could, if it wished, appoint a separate chief executive in the future, gives the board much more independence and discretion. It is also consistent with the approach taken throughout the Bill and with other regulators. The chief executive of Postcomm is appointed by the chairman, which is a Secretary of State appointment, and the chief executive of Ofcom will be appointed by the board.

Amendment No. 3 would require the appointments of chairman and chief executive to be approved by the Treasury Select Committee. I have already given my reasons for not creating a statutory post of chief executive in the Bill. As regards Select Committee approval of the post of chairman, I would point out that John Vickers was appointed as Director- General of Fair Trading in line with the Nolan principles, and through an open competition. He was appointed on the understanding that in due course he would become the first chairman of the OFT. His successors as chairman will similarly be appointed in accordance with the Nolan principles and after a fair and open competition. In my view giving a Select Committee the power to veto this appointment would serve to undermine the operation of the Nolan procedures. It would make a fair and open competition meaningless.

I would also point out that the OFT will be a non-ministerial government department; a part of the executive branch. It would introduce a wholly new constitutional principle for appointments in government departments to be subject to such scrutiny.

Amendment No. 2 would oblige the OFT to have regard to the generally accepted principles of good corporate governance in its affairs. We discussed that point in Committee. I said then that I would certainly expect the OFT to act in accordance with the principles of good governance insofar as they are relevant to the OFT, but that I considered that a matter of good administration rather than something to go on the face of the Bill. I remain of that view. The OFT is a

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government department, not a public limited company, and many of the principles of good corporate governance are aimed at business practices which do not have an obvious equivalent in government.

The OFT's strategy and activities will be set out publicly in its annual plan and annual report. Under Amendments Nos. 19 and 20, to which we shall come shortly, its draft proposals for the annual plan, which may take the form of a draft plan, will have to be consulted on publicly and laid before Parliament. The annual report must also be laid before Parliament. The combination of the plan and the report will ensure that both Parliament and the public are engaged in the OFT's work; that they can influence it and can monitor its performance. The chairman of the OFT, like the DGFT at present, will be accountable to Parliament through his appearances before Select Committees, especially the Trade and Industry Select Committee and the Public Accounts Select Committee.

The OFT will also publish other reports of its work (Clause 4) to keep the public informed of its activities. Indeed, currently the DGFT's office publishes decisions, advice and a range of materials on its website, which we expect the OFT will continue to do, as well as to run roadshows for consumers and business, and participate in outside events to get its message across.

To conclude on this group of amendments, I emphasise that we are already depersonalising competition and consumer regulation by creating a statutory authority with at least five members. We expect the board to have a majority of non-executives and we are giving the OFT significant independence from Ministers. With the appointment of John Vickers as chairman, we are providing some continuity, which in this case is enormously important. If in time the OFT should decide that it would prefer a separate post of chief executive, it will be able to select one. I believe that that is the best way forward. In the light of those arguments I invite the noble Lord to withdraw the amendment.

Lord Mackay of Clashfern: My Lords, before the noble Lord sits down, can he help as to the power under the Bill by which the Secretary of State has appointed a chief executive?

Lord Sainsbury of Turville: My Lords, if I understand the noble and learned Lord correctly, he is asking which power there is in the Bill?

Lord Mackay of Clashfern: My Lords, yes.

Lord Sainsbury of Turville: My Lords, I cannot answer that exactly, but if it is a matter of concern, I shall write to the noble and learned Lord and set that out.

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