Examination of Witnesses (Questions 940-959)|
WEDNESDAY 5 NOVEMBER 2003
940. Yes, I agree with that. I think most of
the examples Mr Vickers gave are rather case-specific and probably
very effective in that context but it is rather more the broad
strategy, it is the annual plan, it is the sort of stand back
and have a look approach which I think is needed. Ms Boys said
that you publish your annual plan and anyone who is interested
in it can react to it. This is the area I was thinking of. Would
you like to see a mechanism in place whereby some body, be it
a Select Committee or a group of MPs or a group of public individuals
or bodies automatically did every year cross-examine you on it
and pronounce on it possibly?
(Mr Vickers) Of course questions like that
are for Parliament to decide. I think for myself there would be
merit in systematic and comprehensive scrutiny across the range
of what is a wide range of activities. I could see in many respects
that that would be a positive development. If I could add to what
Penny said about the process with the annual plan. It is not just
a question of us publishing an annual plan for everyone to look
at, there is an extensive process involving public consultation
and a public meeting which goes into the formulation of that plan.
Of course the way it is put together now by the OFT with our board
it means that there are seven who are responsible for the plan
and the internal scrutiny and internal accountability, when one
has a board structure, is different from and better than it can
be under the sort of structure which went before.
Lord Lang: Thank you very much.
941. Just on the consultation, because there
is the output side once the plan is in the public domain and the
prospect of parliamentary scrutiny and the DTI memorandum draws
attention to the value of parliamentary scrutiny and would like
to see that extended, so one can see the case for, say, an annual
session with a dedicated committee. But on the input side you
stress the public consultation and it is in your paper as well.
If you could just flesh that out slightly for the benefit of the
Committee in terms of the form it takes and the extent of the
input and how do you know it is representative of anybody out
there. You create a fair deal for the consumers but the people
having an input may have very special views which are not reflective
of consumers in general. Do you make allowance for that and what
is the extent of the input itself and the mechanisms to provide
for that input?
(Mr Vickers) The past year was the first
year when we had produced a forward looking annual plan as distinct,
of course, from the annual report which looks back. Because of
the statutory timetable we had slightly less time than we would
normally have for this exercise but nevertheless there were many
things that we did in this process. There was a lot of preparatory
work and this took place in the months before the board came formally
into being but it involved all seven board members very closely
and of course many others within the office putting together the
elements of the draft plan, which then went out to consultation
not simply in the form, "Here is a draft plan. Comments welcome,"
but we went out there actively to seek comments and to hold this
public meeting where we invited a diverse range of people representing
different interests, bringing comments and ideas from a variety
of viewpoints. We were keen to get every relevant comment and
suggestion that we could, so in that sense it was a very open
process. Of course we are conscious that different organisations
represent different positions and the consumer voice, because
it is the most diffuse and dispersed, is in some ways the most
difficult to hear so one needs to try extra hard and there are
various ways in which we do that. Of course there are consumer
organisations like the Consumer Association, Citizen's Advice,
the National Consumer Council. We hear a lot about consumer concerns
of course directly from the general public but also through trading
standards departments in local authorities. The super complaint
issue, which is really separate from your question, again goes
to this issue of how can we be sure that we are hearing and being
properly responsive to the voice of the general public as consumers.
Chairman: Indeed. There are probably
several points I would like to pursue on that but I have several
members of the Committee who would like to put questions.
Lord Holme of Cheltenham
942. Following Lord Lang's question about an
overall review of your activities and the plan, of course to plan
is what you intend to do and that raises strategic issues on which
you might be meaningfully questioned, but on the other hand at
the end of the year there is the question of whether you have
met the objectives of the plan and how far you have performed
according to the strategy that you set out. Bringing those two
points together, I wondered, although you were very courteous
in saying it is up to Parliament to decide how to do this, if
you were to be able to write your own script for parliamentary
accountability do you see an annual review bringing those two
elements of ex post facto and looking forward together
on one occasion and what sort of parliamentary review do you think
would be appropriate? While I have the floor, could I just ask
a different point, reverting to the corporate structure, how does
Ms Boys's role now differ from what you did a year ago? What value
does the board add to what was a director general function before?
(Mr Vickers) Let me try to take first
the question about assessment of whether what is set out in the
annual plan is achieved or not. Of course, for many years the
office has produced annual reports which are laid before Parliament.
Because this is the first year in which we have had an annual
plan we have not yet reached a point where the two can be compared
and that is coming up for the first time. I have to say I have
not thought through how parliamentary scrutiny might operate in
that context. I think part of the value of a comprehensive review
of what the office does is that we do have competing priorities
and of course we have, and should have, finite resources. The
question of whether we have made good, sensible strategic judgments
about the allocation of resources to competing ends can be considered
in a comprehensive review; it cannot so readily be done in a more
(Ms Boys) If I could add my thoughts there, I think
that the more effective scrutiny would be through whatever sort
of committee was chosen, it being reasonably the same people year
by year so that one could see progress over time and whether certain
aspirations had been achieved and if it was more sort of piecemeal
or more issue-specific then one loses that advantage of forming
(Mr Vickers) If I could just echo that, I think to
work most effectively it needs to be searching scrutiny, which
is best from those with relevant expertise because a very wide
range of expertise is relevant to what we do. I think one of the
possible risks, now we have moved to a situation where competition
law and consumer law are, I believe, now widely and properly perceived
as being manifestly independent from party political considerations,
is that it would be regrettable if there was a perception that
such a review process dented that in any way but I think that
risk could be guarded against very safely.
943. The second question was on the corporate
(Ms Boys) Perhaps I could answer on how
my role has changed. When the board structure was put in place
John and I re-thought the particular roles that we were playing.
We had one document that we had drawn up which allocated responsibilities
between us. We have redefined that. I now take responsibility
for all senior staff in the OFT and therefore see myself as both
a board member with a strategic role but also someone who is the
link between the board's strategy and seeing that that strategy
is implemented and reporting on it regularly to my fellow board
members, on what progress is being made and what difficulties
we are encountering. There are specific areas where John and I
have chosen to lead but that is non-specific to our role; it is
just what suits us and plays to our various strengths. Lastly,
of course, as an independent board member I have an equal vote
along with everybody else on the board.
Lord Holme of Cheltenham
944. Would you consider yourself a non-executive
chairman or an executive chairman, and if you are an executive
chairman how do you relate to an executive director?
(Mr Vickers) I would consider myself
to be an executive chairman, not a non-executive chairman. Penny
has described key elements of the executive director role as it
is now. Correspondingly, there was a shift in my own role. It
used to be the case that some of the senior directors reported
in a management sense to me, now that is to Penny, because I have
very important responsibilities in relation to the running of
the board, relations with the non-executive directors and so on.
In terms of the way that Penny and I work together, I think in
essence it is fair to say that Penny is responsible for running
the OFT. I have leadership and representational responsibilities
as well as the board responsibilities. As far as case work is
concerned (and a lot of the day to day work is case work), I am
substantially involved in quite a large body of case work so that
is a sense in which I am an executive chairman.
Lord Holme: Could I just say, as a member of
the Committee, how reassuring I find the last bit of that. I am
very glad, given your experience, you are still involved in the
case work because that is clearly part of the value that you personally
add to this important job. So I am relieved to hear that.
Lord MacGregor of Pulham Market
945. Just following up the question of Lord
Holme about the parliamentary scrutiny, I was interested in your
response because you were indicating that continuity would be
of benefit in looking at these sorts of issues and one of the
issues which has been put to us is whether there would be sense
in having a parliamentary committee, whether a joint committee
of both houses or this house, or whatever, which looks at regulation
as a whole and all the regulatory bodies. The difficulty about
a lot of the House of Commons committees, as I know only too well,
is that the membership changes rather regularly for all sorts
of House of Commons reasons. Do you see any advantage in that
from your point of view?
(Ms Boys) Well, that would fit with my
understanding of what would go with more effective scrutiny, yes.
946. It is the effective scrutiny aspect really.
Thank you. Now to the two questions I mainly wanted to raise.
I recognise, of course, that you are very different from a number
of the individual sector regulators who have been set up as a
result of privatisation or whatever, but I am interested in any
read-across to what can be done with them from your experience,
particularly in relation to appeals. There has been criticism
of the fact that with some regulators it is only judicial review
that can occur and that is very limited in its scope. What impact
does the fact that you are always aware that there is a right
of appeal to the Competition Appeal Tribunal have on the way in
which you operate and approach things?
(Mr Vickers) It has a tremendous influence, together
with the point I mentioned earlier about the requirement in the
Competition Act for consistency with the relevant EC competition
jurisprudence. So everything that we do, both in terms of substantive
decision making and the way we go about making decisions is disciplined
in a very healthy way by that prospect.
947. You say "healthy". Would you
not find sometimes that it would be easier for you if you did
not have this other avenue of appeal which was always hanging
(Mr Vickers) I think the answer is, probably it would
be easier and that is partly why it is healthy that it is not
948. Then on the board, I am interested in the
case-specific issues rather than the general strategy from this
point of view. How often does the board consider your decisions
on individual cases?
(Mr Vickers) The decisions which are reserved to the
board are decisions about strategy and about monitoring the implementation
of that strategy. There are certain kinds of case decision, such
as whether a market investigation reference is made to the Competition
Commission, which is also reserved to the board. In terms of the
general flow of case work the board, of course subject to conflict
of interest safeguards, is kept informed in various ways: Penny
provides a monthly report at our meetings and through the general
flow of information to board members about the progression of
cases. Some board members have individually come to discussions
of cases at various stages and some key issues in cases have been
discussed at collective meetings of the board. I should of course
stress that there are great teams. We are 650 people, not seven
people, and so there is the teams' great expertise there in investigation,
economics and on the legal side. That is how it has worked so
far in terms of the board. I hope that is fair
(Ms Boys) Yes. I think you asked how often and I am
trying to recall all our board agendas and I think it would be
fair to say that roughly about 50 per cent of a typical board
agenda is a progress report, management issues, the HR strategy
and about 50 per cent would be specific case-related issues.
949. I recognise you have got 650 staff and
a great deal of expertise and industry knowledge there but what
is at the back of my mind is that there are some regulators who
still do not have the full board structure. I am seeking to see
whether, recognising also the conflict of interest point, there
is an advantage in having experienced business people or consumer
representatives on the board who can perhaps shed some light on
the decisions you are about to make and have some input into it.
If 50 per cent do go the board it suggests that you do seek that?
(Mr Vickers) Just one thing on this footnote point.
The board members are there not as representatives of particular
interests and of course the range of experience comes from various
quarters. I think at times questions do arise in cases where it
is very useful to take the mind of the board or outside a board
meeting to consult an individual board member who has relevant
expertise. It is also important that the board collectively is
aware of the development of the major cases and that it understands
the decisions which have to be taken. The case decisions, for
example, under the Competition Act or in the merger area, I would
take responsibility for those and I would in a sense be the decision-maker
but it is always very valuable to have the views of others for
when decisions like that get taken. As I mentioned, other kinds
of decisions like market investigation references to the Competition
Commission, those are board decisions.
950. Lord Holme and Lord MacGregor have just
about covered my questions. I wanted to ask one specific though,
following up your last answer to Lord MacGregor. You said seven
heads are better than one. What happens if the seven do not agree?
Can a non-executive director dissociate him or herself from one
of your decisions on specific cases?
(Mr Vickers) The case decisions, for
example, in the merger areathe same is true under the Competition
Actoften it would be the case that I would be taking responsibility
for those decisions rather than the board collectively. We have
in general resolved matters without voting. That has not always
been the case and I think the principle of collective responsibility
applies in the sense that if there is a discussion and a vote
on the matter then that is the decision of the board. Any individual
is freeyour question about dissociating themselvesand
they could certainly vote against a proposition, but I think perhaps
you meant more than that?
951. I meant a little bit more. You said that
collective responsibility, or words to that effect, operates but
I would imagine that as a board the non-executive directors would
want to know whether or not that doctrine of collective responsibility
does operate or not?
(Mr Vickers) It is early months with the board and
I think the spirit is that we recognise we have to take these
decisions. Not everybody agrees on every occasion, though for
the most part it has been
952. It will no doubt be put to the test at
(Mr Vickers) That is very possible.
Lord Fellowes: Thank you.
953. The system of regulation has developed,
broadly speaking, to arm's length government from certain duties
which had been governmental duties in the past, as I see it, and
therefore the length of that arm is of interest. I see that you
are set up under a formidable amount of statue, quite prescriptive,
and that in your memorandum of agreement with the department it
says that the OFT will have regard to the consultation it has
had with the Secretary of State and ministers during the previous
year and the issues raised when developing the annual plan. Then
I noticed that the Committee, I am not sure that it was at the
Committee's instance, received a document starting with, "The
DTI has seen the OFT's submission to the Committee," and
then gives a view on it and says that it needs to be added to
in respect of, it appears mostly, accountability to Parliament.
I wonder how you would categorise your relationships with the
department and the extent to which you are actually free agents
where the statue provides for you to be free agents.
(Mr Vickers) I feel that we are totally
independent from ministerial government in the making of the decisions
that we have to make under the law. One of the changes in not
so much the length of the arm but the arm itself. With the recent
legislation, especially the Enterprise Act, is that on some questions
where we used to give advice to the Secretary of State for the
Secretary of State to take decisions, for example in the merger
area, we now take those decisions, on the clearance of mergers.
With very narrow exceptions in particular defined areas, ministers
are not part of that process at all since the Enterprise Act came
into force in June. An intermediate step, which started under
my predecessor, was that our advice on the main merger cases was
published with the confidential material taken out. Before that,
in the public scrutiny, it was rather an opaque process. So in
short, we are completely independent from ministerial government
but of course subject to the law and the accountabilities that
we have discussed previously and of course we are accountable
for the expenditure of public money through the Public Accounts
Committee process and otherwise.
954. Thank you. Just one other question at the
other end of the process really. I was wondering what proportion
of your energy goes into section 92 activities, the duty of the
OFT to monitor undertakings and orders (ie seeing that what is
decided actually happens) and has that revealed any tendency to
escape undertakings and orders?
(Mr Vickers) I think the review of undertakings and
orders has two elements. That is one, the other is whether undertakings
and orders put in place years ago continue to make sense and we
are systematically reviewing that latter question. I believe it
is true that in the case of many orders and undertakings if there
were breaches then we would hear rapidly from third parties adversely
affected by those breaches. So it is very important that we monitor
compliance, but I confess I am not able to give a figure on how
many of our resources go in that direction.
(Ms Boys) It would be a comparatively small percentage.
It is about half the workload of one of the four branches in our
markets and policy initiatives division.
955. Therefore, you are fairly heavily dependent
upon the whistle-blower?
(Ms Boys) Except in the sense, as John said, that
we do have a systematic programme for revisiting these old undertakings
and saying, "Are these at all serving any useful purpose?"
956. But those are ones you do not wish to see
honoured or enforced?
(Ms Boys) We are looking to see what has happened
as a result, what is going on in the market, whether they are
actually serving any useful purpose and taking them away and lifting
them if not.
(Mr Vickers) Of course we wish to see all orders and
undertakings enforced. There is the question of reviewing undertakings
which may have been put in place a while ago.
957. I was actually asking about enforcement
and you have told me about review.
(Mr Vickers) I understand. Penny, your answer, was
that related to both elements of the review?
(Ms Boys) Yes, though I think you are right that for
ongoing review we are fairly dependent upon complaints.
958. If I can encapsulate what you said, your
experience is that broadly when a decision is make or an undertaking
given it is honoured?
(Mr Vickers) Broadly. There are some circumstances,
though, where one would be unwise to rely on third parties bringing
this information to light. To give one example of responsibility
which is about to move from us to Ofcom, there is the annual question
of whether the BBC has complied with a requirement on the percentage
of programmes it has commissioned from independent producers.
That is quite a substantial annual monitoring effort which we
have been responsible for and on which we recently reported.
Lord Elton: Thank you very much.
959. I am conscious of time and I just have
one or two quick questions to conclude. Fundamental to your activity,
indeed any regulator, is maintaining some balance between independence
and accountability and getting that balance right and I wonder
whether you felt that balance was roughly right in your case.
Also, really following up Lord Elton's first point, if you look
at accountability you can argue there are different kinds of accountability.
One is simply answerability, which is explaining what you are
doing and responding but where decisions remain in your control.
The other is accountability where others can challenge and you
may be overturned. I suppose there obviously the court is the
primary means of that and I suppose there is financial accountability
as well through the NAO. If one is to distinguish between answerability
and accountability where would your relationship with Government
fall? Do you see yourself as answerable to Government but not
necessarily accountable because ministers cannot necessarily overturn
what you are doing?
(Mr Vickers) First, I am not sure that
I would see a tension between independence and accountability.
It is our job independently (ie free from outside influences)
to make what we believe are the right decisions, whether about
strategy or case work. We consult very widely where appropriate,
informing the information base to inform those decisions, but
they are taken absolutely independently in that sense. Nevertheless,
there are all sorts of accountabilities, such as those that you
mention, which then follow but I do not see those as being at
odds with the independence with which decisions should be taken.
In terms of answerability to Government, I think the answerabilities
are perhaps more primarily to Parliament, for example financial
accountability through the National Audit Office and the Public
Accounts Committee. I cannot readily think of a context where
we are answerable to Government in a different way from that in
which we are answerable generally for what we do.
(Ms Boys) I agree.