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However, Amendments 251 and 251A assume that even those safeguards are not sufficient. They would require a market investigation by Ofqual before a fee cap was imposed and would then allow awarding bodies to appeal to the Competition Commission if they were still unsatisfied with Ofqual's decision. That really is taking a couple of sledgehammers to crack a nut. We have gone through the process of ensuring that Ofqual's approach is not arbitrary. If you wanted to introduce a delay in the procedure, that would be the way to go-to require a full market investigation and then an appeal to the Competition Commission. Of course, Ofqual may choose to conduct an analysis similar to a market investigation. It has the power to do so, but requiring such an investigation and requiring that investigation to come to specific conclusions would make for an unduly protracted process. If done properly, a full market investigation could take more than the six months specified in the amendment, and we do not think that that is reasonable in assessing whether the fees charged by an awarding body are reasonable in the circumstances. In practice, these amendments might make it very difficult to use the fee-capping power and therefore much harder for Ofqual to achieve its efficiency objective. The taxpayer would not thank us.

Finally, Amendment 233 would change Ofqual's efficiency objective so that it related not just to the activities of recognised awarding bodies but to the regulated qualifications system more generally. Ofqual has the power to deliver its efficiency objective as currently drafted because it relates to regulated qualifications, but it has no powers over any parts of the wider qualifications system which do not relate to regulated qualifications. Therefore, the amendment would give Ofqual responsibility without power, which is not a prerogative that we would wish to award. It would not be able to do anything to secure the efficiency of the wider system.

I want to respond to some of the comments and questions that have been put. The noble Baroness, Lady Walmsley, talked about qualifications procured

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and the whole market. My information on the whole market is that something like four main awarding bodies account for approximately 90 per cent of the market. We will come back to the noble Baroness on the criteria for fee increases, but we have gone through the process of how Ofqual would go about imposing such increases.

Reluctantly, much as I would love to give the noble Baroness, Lady Perry, the birthday present of accepting her amendment, I cannot do so. She coined the phrase a "perfect market", which I thought was a new example of an oxymoron. In today's circumstances, I think that there is just a tad of cynicism about whether free and unfettered markets are always perfect or whether they need just a little regulation. Getting regulation right is absolutely necessary but I must admit that I was surprised at such strong advocacy for free and unfettered markets in today's circumstances. I thought that we had learnt one or two lessons about the dangers of going too far down that road.

There is a suggestion that I am being unduly cynical, but I do not mean to be. I am being serious. The qualifications market is worth hundreds of millions of pounds a year, much of which comes from the taxpayer. We do not know whether the taxpayer gets value for money for that, but we are entitled to know. Many awarding bodies have argued against these provisions and indeed are the instigators of some of the amendments. Of course, they would say that, wouldn't they? I would do the same in their position. But that is not what the Committee should be looking at. We should be considering whether we have a perfect market-if such a thing exists, and I venture to suggest that it does not-and is it right that we should regulate accordingly and fairly? It has been adjudged that on occasion the market has acted against the interests of customers and consumers.

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There are absolute grounds for this, considering the sums of money involved, and for doing it in such a way that encourages efficiency. We are looking not to penalise awarding bodies but for Ofqual to work with them to ensure that they can raise their game. I see nothing wrong with that. We do not need a weaker regulator but one with the necessary powers, and the ability to work with the awarding bodies and to act when necessary on behalf of customers, consumers and taxpayers to ensure value for money. That should make us all the more determined to give the regulator the power it needs. Just in case we reach the situation where some awarding bodies might seek to take advantage of the taxpayer, the regulator should be in a position to expose and tackle that.

I do not want to end on a negative note; I want to end on a positive note. For Ofqual to operate in the way that we want, it has to be a constructive body and one that works with awarding bodies to raise their standards and efficiency to ensure that everyone benefits. I have endeavoured to answer all the questions that have been put to me, except on the criteria referred to by the noble Baroness, Lady Walmsley. In the light of the comments, I invite noble Lords not to press the amendments.

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Lord Elton: The noble Lord and my noble friend have almost equal, and certainly opposite, passion about this. I wonder whether there may be some compromise and whether it would be possible for the provisions to which the noble Lord objects to be implemented by an affirmative order when it is decided that the market failure that he predicts has taken place. An affirmative order would give both Houses a chance to consider whether the market had failed, and for those affected by the decision to make their views known to Parliament.

Lord Lucas: That is an immensely sensible suggestion. I very much hope that our Front Bench will take this group of amendments seriously in going forward to Report. There are some deep-seated problems. First, it is clear from what the Minister said that small, specialised qualifications will be squeezed out by this process. They are necessarily more expensive, particularly if a young body is trying to develop a qualification in competition with one of the big established bodies. It has to provide something that is notably better but it will inevitably be more expensive, at least to begin with. If a fee cap is in place, that body will be unable to develop it. I suspect that fee capping will also suppress innovation in existing awarding bodies, which will find that their profitability is limited not in relation to the whole expenditure of their enterprise but merely to the costs of providing that particular examination.

That is not the way in which the public sector deals with, say, the cost of medicines, where it is recognised that companies require substantial funds to innovate and advance their business. We have not applied that sort of mechanistic cap in that case, although it is similar to the public sector buying substantial amounts of privately produced commodities. I do not think that it is any more workable here than it would be with medicines.

The Minister said that there could be a review to a third party. I see nothing in the Bill about what the basis of that review would be. If he has information on that, I should be interested to hear it, because it seems crucial. He objected to one of the Liberal Democrat amendments on the basis that conducting a full investigation would take too long and be too expensive. He is saying that Ofqual will reach its judgments on the basis of an inadequate investigation, a short and improperly researched investigation. In other words, it will be an arbitrary decision and it will just impose the caps and see what happens to the examination system.

Most of all, I object because of the inherent conflict that Ofqual would face if it had those powers. Ofqual is setting the rules. Ofqual is essentially saying what an examination has to be like to maintain sufficient quality, so it is involved in influencing the whole system of examinations-how they are carried out how they are marked-all of which will have immense cost implications for the awarding bodies. Then, on the other hand, it is supposed to apply a cap to the costs. How on earth is it to resolve the conflict? Should it reduce its requirements on the examination bodies to reduce the costs, even if that would conflict with its other objectives? Or is it to pursue the route that John Prescott took when he was the Minister in charge of British Rail, putting so many obligations on it that the poor thing went bankrupt?

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It is ridiculous to make Ofqual face conflicts to which there is no sensible resolution. Ofqual needs to be clean. It needs a clean set of objectives. It needs absolute clarity and purity in what it is setting out to do. Giving it the capping powers is a pollution.

Lord Young of Norwood Green: I feel that must respond to what I have come to recognise sometimes-only sometimes-as what I would describe as Lucasian hyperbole. We have no desire-I am sure that the noble Lord recognises this-in any way to undermine or penalise small, specialist bodies. They have a vital and essential part to play in awards. Nothing that I have said and nothing in the provisions can in any way lead you to deduce that conclusion.

The idea was posed that we are giving Ofqual, as a regulator, powers that other regulators do not have. That is absolutely untrue. We are not polluting anything; we are doing what we should be doing as a Committee, as a House-ensuring that customers and consumers of the product get a fair deal. They are not necessarily always able to judge whether the market is absolutely perfect, or whether there is some kind of cartel operating. There may or may not be. We do not presume to judge the situation. I find it surprising that, given that many of the amendments come from or are, shall we say, supported by the awarding bodies, there is not just a touch of concern about what I could describe as a vested interest.

We have a duty to look at both sides of the equation. As I said, we want to encourage the development of high-quality awards, but we also want them to be provided at a reasonable cost. I should have thought that my noble friends on all the opposition Benches would have supported that premise. Although I am an admirer of his imaginative responses, it is unnecessary to say, as the noble Lord, Lord Elton, suggested, that somehow for this regulator to operate at all, we need an affirmative resolution. We do not say that of Ofgem or other regulators. It is not a viable, necessary or practical way forward. If we are serious about ensuring that we give value for money for schools, colleges and learners, and I believe this Committee is, we have an obligation to ensure that they get a fair deal, that we drive up the quality of the awards and that they are delivered in an efficient manner.

Given my previous comments and the assurances about the role of Ofqual and the safeguards, I hope the noble Baroness will withdraw the amendment.

Baroness Perry of Southwark: There is no parallel with Ofwat or Ofgem because they deal with individual households, which do not have the expertise or knowledge to do any bargaining themselves. The position of Ofqual is different. It deals with powerful institutions. Secondary schools have budgets of several million pounds and are very high powered. Their examinations officers are expert and know exactly what they are doing. I agree there are lots of imperfect markets, and we have seen a lot of them in the past few years, but this is a perfect market in the sense that there are very sophisticated consumers and highly competitive providers. The OFT would prevent any cartel developing among

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the examination bodies. However, I recognise that the argument is falling on very deaf ears, so I am happy to leave it at that.

Lord Lucas: The Minister said that this will not affect small, innovative producers. If someone were to start, say, an English GCSE from scratch as their first qualification, would that have to be priced at the same price as the main awarding bodies, or would the Minister expect Ofqual to allow that GCSE to have a higher price? In other words, are these caps to be individual to each awarding body and qualification or general for a qualification? Which regulator is the Minister drawing on in his comparisons? What set of powers and rules is he comparing Ofqual with? He mentioned Ofwat. That relates to a commodity where there is no competition. You have to get your water from the tap you have, and of course that requires careful price regulation, but where there is serious competition as, say, with buying broadband or something like that, I am not aware that the price is capped in any useful way. Which regulator forms the pattern that we are supposed to be following here?

Lord Young of Norwood Green:For the record, I mentioned Ofgem, not Ofwat. I merely gave an example. We are talking about the principle of regulation in this market. There is no way that noble Lords can deduce that there is any attempt to stifle innovation. If somebody comes along with a new and innovative product, Ofqual will of course want to take that into account. I do not know why we are making such a negative presumption about the role of Ofqual. We believe it will have a constructive and positive approach when working with awarding bodies and will encourage innovation and efficiency. I shall leave it at that.

Baroness Walmsley:This has been a fascinating debate. The Minister asked a few minutes ago, in a somewhat pained voice, whether we really want examinations to be offered at a reasonable price. Yes, we do. In Amendment 233, we ask for value for money and in Amendment 234, we ask for rises within inflation, yet the Minister will not accept them. He suggests that both opposition parties have perhaps been listening a little too closely to the awarding bodies. The Minister is aware that both opposition parties have been lobbied by all the awarding bodies, and of course we have listened to them; that is our job. When a piece of legislation comes before us, we have a duty to listen to the people who are affected by it, but the Minister underestimates the brains and independence of mind of both opposition parties if he suggests that we are just the mouthpieces of such organisations. If he wants to dispute that, he only has to look at the amendments in this group that have been tabled by both opposition parties on fee-capping and he will find that those amendments lie perfectly within the political philosophies of those parties. He will find that the Conservative Party wants to get rid of fee-capping altogether, but we on these Benches do not agree with that. We on these Benches have agreed that it may be necessary to use fee-capping very selectively; however, we ask not for a sledgehammer, as the Minister has suggested, but a very reasonable review of the marketplace

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and of the need for such fee-capping before it is put into place. There should also be a proper appeals process to an appropriate person.

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The Minister has not yet replied to my question about the criteria that Ofqual will use to decide whether fee-capping is required, but I accept that he will write to me. I very much echo the words of the noble Lord, Lord Lucas. He took the words right out of my mouth when he said that it is inconceivable that Ofqual would have to start from scratch when reviewing the marketplace in order to decide whether fee-capping was necessary. Ofqual should have this information at its fingertips all the time, and it should not take it very long to review the marketplace and decide whether fee-capping is genuinely necessary without stifling innovation.

Of the three stages-the three hoops, as the Minister put it-that Ofqual would have to jump through before fee-capping, the third is a review by a suitable independent person. I can think of no one more appropriate to be that independent person than the competition commissioner-the person to whom the awarding bodies should have recourse in our Amendment 251A.

Clearly, our appeals on both sides of the fence on fee-capping are falling on the Minister's deaf ears this evening, so we will have to think carefully about what to do with these amendments before Report. I beg leave to withdraw the amendment.

Amendment 233 withdrawn.

Amendments 234 to 236 not moved.

Clause 125 agreed.

Clause 126 : General duties

Amendment 237 not moved.

Amendment 238

Moved by Lord Lucas

238: Clause 126, page 76, line 41, leave out paragraph (a)

Lord Lucas: My Lords, in moving Amendment 238 I shall also speak to Amendment 241.

I had some very helpful correspondence from the Minister over the holidays on this. My concern is to find out the objective of these subsections. My understanding is that of the Government's objective is to reduce confusion in the marketplace, so that, where there are a number of very similar qualifications bearing different names, they should be jammed together and the awarding bodies made to be called simply "Edexcel's English" or "AQA's English", rather than having different names that create confusion in the marketplace. That is something which Ofqual should be able to do something about. I do not have much difficulty with that.

Creating clarity is a reasonable objective for Ofqual, but I do not see how this does not apply to A-levels and Pre-U examinations. They are similar in outline and the transition between them so far as schools are

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concerned is not difficult. However, the Pre-U evolved because A-levels could not contain what the Pre-U wanted to do, and because of the restrictions implied by calling something an A-level, it was necessary to differentiate in order to innovate. It seems that we are giving Ofqual a power that again will tend to reduce innovation and competition in an area where those qualities should be sought out. A little extra comfort from the Minister would be much appreciated. I beg to move.

Lord De Mauley: My Lords, while we agree that the number of regulated qualifications available is important, as is required in Clause 126(2)(a), we would argue that the reason it is important is that it should offer sufficient choice for the learner rather than that it should be limited in any way, which the Government's qualifying use of the word "appropriate" at the end of the subsection appears to contemplate. Our concerns are heightened by the wording of subsection (3)(b), highlighted by my noble friend Lady Perry in her Amendment 242, but unfortunately she is not in her place to speak to it. We need to probe what the Government mean by the use of the words "appropriate" and "excessive" in these respective subsections.

I thank my noble friend Lord Lucas for his careful and probing questions on the issue, and I hope the Minister will be able to give us some answers. Can he tell us, for example, how many qualifications he thinks would be considered appropriate or indeed excessive? Can he also explain what this will mean in terms of Ofqual's functions? Does it mean that at a certain point Ofqual will be able to stop recognising and accrediting qualifications because it feels that there are too many? Surely, as in a market situation, if there is no demand for a qualification, it will simply fall away.

City and Guilds has pointed out that it would be,

because, and again I quote,

We have spent a great deal of time in our debates on this Bill ensuring that the needs of all learners are met, that suitability of qualification is taken into account and that personal need is catered for. Can the Minister account for a clause that could allow Ofqual to reduce the options available?

Ofqual is supposed to be a regulator of qualifications. Employers, learners and universities are the consumers of these qualifications. Surely, therefore, it would make more sense for their concerns about the number of regulated qualifications available to be represented and taken into account. We feel that they, rather than Ofqual, have a greater interest and more appropriate expertise in this area. In this instance, a demand-led approach seems more suitable. I look forward to the Minister's response.

Baroness Garden of Frognal: My Lords, we support these amendments. The clause in its original form would unnecessarily and artificially restrict the number of qualifications available, minimising innovation and distorting the market to the detriment of the learner,

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as noble Lords on the Conservative Benches have pointed out. It is also interesting to note that, while currently there are only approximately 6,600 accredited vocational options, some 50,000 different options are available in higher education, a figure that does not include part-time degrees. One way to avoid confusion in the multiplicity of qualifications might be for the Government to resist the temptation to create new ones. I think of the diploma, for instance, or the introduction of AS-levels. While we welcome the establishment of an independent regulator, we have strong concerns about its independence from the Secretary of State and its ability to interfere in the qualifications marketplace in this way. We support the amendments.

Viscount Eccles: May I express a general worry? The noble Lord, Lord Ramsbotham, who is not in his place, reinforced the point that, if you are the chief executive of a non-departmental public body, you are very conscious of how much independence you have. Your independence can be circumscribed, of course, by a long and complicated Act of Parliament that sets out all sorts of criteria to cover what you should think about and what you should do or not do in certain circumstances; it can also be circumscribed by the ability of the Secretary of State to change the rules in the middle of the game. Given my experiences in non-departmental public bodies, I think that there is too much in this list of instructions. Our recent debates seem to indicate that, if the Minister could find some way of reducing the amount of imperatives contained in these clauses between now and Report, that would be enormously helpful.

Lord Young of Norwood Green: My Lords, the Leitch report on skills in 2006 recommended that we simplify the complex and confusing world of vocational qualifications. Reflecting regular calls from employers for simplification, the Confederation of British Industry, for example, has commented:

"The skills system is seen by many as an 'alphabet soup'-difficult to navigate, even for highly sophisticated employers".

I can reassure the noble Lord, Lord Lucas, that these provisions do not seek to reduce choice or innovation; they seek to organise that alphabet soup to make qualifications easier to understand.

We need to distinguish between two technical terms in the Bill. First, "qualification" is the title of a qualification-for instance, "Level 3 Engineering". Under Clause 126(3)(a), Ofqual must seek to ensure that there is a reasonable level of choice between different qualifications. We want there to be enough qualifications to reflect the range of skills and knowledge that employers and others need. Secondly, the form of a qualification is a particular awarding body's version of that qualification. Under the same provision, Ofqual should seek to ensure that there is a choice between different forms of each qualification-there should be plenty of awarding bodies competing to offer engineering, for example. So there is no attempt to restrict choice or diversity.

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