I know that noble Lords have questioned whether the FCA should have concurrent competition powers. However, the Government accepted the recommendation of the Treasury Select Committee that the case for market investigation reference powers had not yet been made and that the issue should be reviewed when the FCA had bedded into its new role. The Financial Services Bill instead gives the FCA a new competition remit which provides the mandate for the FCA to use its powers to promote effective competition and it will be able to carry out reviews of financial markets. The Financial Conduct Authority will have a tailored power to refer matters to the CMA, which may conduct market investigation or bring Competition Act enforcement proceedings. This mechanism was widely supported by consumer groups and industry and by the Treasury Select Committee.

In addition, the Financial Services Bill includes provision for the competition authorities independently to scrutinise the impact of both the FCA’s and the PRA’s actions on competition. It will of course be important that the FCA and OFT co-ordinate. The FSA and OFT already have an MoU in place and a new one will be put in place between the FCA and the CMA. The CMA, FCA and PRA will be required to report on their performance in their annual reports. I therefore ask the noble Lord, Lord Whitty, to withdraw his amendment.

Lord Whitty: My Lords, I am afraid I do not really accept either of those two propositions. On the financial side, it is true that the FCA does not have the whole

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range of concurrent powers that all the other regulators do, or in the same form, but it has a substantial number of powers in relation to its treatment of market abuse and consumers and its ability to conduct market studies. I hoped the Minister would say, “We will wait until the Financial Services Bill has passed and then at a later stage in this Bill we will produce a clause that deals with the relationship between the CMA and the FSA as will be, and possibly other parts of the financial regulation side”. I fear that what he actually said is that the abyss has been rolled over by the Treasury.

Quite often in consumer law, we find that general consumer propositions are deemed by the Treasury and the Bank of England not to apply to them. That may indeed be part of the reason why the previous system of regulation of the banking system fell flat on its face. The Minister and his colleagues in this need to be a bit braver in facing up to the Treasury and ensuring that it is subject to the same possibilities of market and consumer abuse as other sectors and therefore should be covered by the same propositions, even though there would be some slight variation in the range of powers. I hope that at some stage in the Bill there will be a point where we take on board the final version of the Financial Services Bill and put that back in.

On Monitor, I fear the Minister is making a serious political misjudgment. It is true that during the course of the NHS Bill the House eventually accepted that there should be a significant increase in competition within the health service structure, but when you look at the actual decisions that will have to be taken by the individual bodies within the health service, their prime concern is that patients and patient groups get the best integrated service for their condition. Therefore, for example, commissioning bodies will need to ensure that, where they commission services from one particular trust or specialist service, that will continue without competitive challenge through the course of treatment for those patients for a number of years. Otherwise, the specialisms within the health service will be destroyed and the seamless journey that is part of Monitor’s objectives for the individual patient will be interrupted by somebody saying, “Actually, you have not observed competition rules in this respect”.

That is not to say that there are not some aspects where there is an overlap. I am saying that the relationship between the CMA and Monitor is different from that for the other sector regulators. I would take it out of that list and the other lists that appear here. If there needs to be a separate memorandum of understanding, let us provide for that, but it will not be the same. If the Government hint that it is the same, I am afraid that there will be a reaction out there that they will find difficult to contain. That will be at best an embarrassment and at worst a threat to the other changes they are trying to make within the health service. I plead with them on this. It is in the interests of Monitor to devise its own structures and relationships and not to assume that it will operate in the same way as a competition authority in other markets. I hope that the Government will change their attitude on this in the course of the Bill. Meanwhile, I beg leave to withdraw the amendment.

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Amendment 24BFA withdrawn.

Amendment 24BG not moved.

7.15 pm

Amendment 24BH

Moved by Baroness Hayter of Kentish Town

24BH: Schedule 4, page 91, line 27, at end insert—

“Consumer research

16A (1) The CMA must make arrangements for ascertaining information with regards to—

(a) the state of public opinion about the manner in which financial services are provided to consumers;

(b) consumer experiences of consumers in relation to the provision of financial services, including—

(i) handling of complaints by financial institutions, and

(ii) resolution of disputes with financial institutions.

(2) The CMA shall consult concurrent regulators where necessary.

(3) The CMA shall publish the conclusions from research carried out under sub-paragraph (1) every two years.

(4) The CMA shall report to the Secretary of State its conclusions and any recommendations arising from research carried out under sub-paragraph (1) every 2 years.

(5) The Secretary of State shall publish a response to any such report within 60 days and lay a copy of that response before Parliament.

(6) This section does not restrict the CMA’s power to make any arrangements that it considers to be incidental or conducive to the carrying out of any of its functions.”

Baroness Hayter of Kentish Town: My Lords, despite the financial sector nominally being competitive—in that there is a choice of banks—we have seen a real lack of satisfaction with banks among consumers.

We do not need to rehearse the mis-selling scandals, with unwitting customers, including small businesses, being sold—as a nice little earner—products that they do not need. We have a reminder of the banks’ record in the newspapers today. Furthermore, we know how hard it has been for people to switch bank accounts— a case made very strongly by the noble Lord, Lord Flight, who is not in his place now, during the discussions on the Financial Services Bill. We know that banks have been unbelievably slow to react to complaints about bank charges—in fact, without the OFT a number of malpractices would still be going on—and that they remain resistant to transparency on fees and charges. Indeed, what I find odd is that no other supplier of a service can simply remove money from one’s bank account without first submitting an invoice or agreeing the amount with the customer.

Banks are slow to deal with complaints, they are resistant to the ombudsman’s activity, and it sometimes feels as though they exist for their staff and their bonuses, rather than to serve the consumer. This smacks of a failing market. Therefore, Amendment 24BH seeks to test that allegation by asking the CMA not to rely on a collection of anecdotes—which does not evidence make—but to undertake some serious consumer research into this market, and to present that, together

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with any recommendations flowing from it, to the Secretary of State, who should then report back to Parliament.

The other evidence of the lack of a functioning competitive market is the virtual seizing up of finance for small and medium-sized enterprises, and indeed for high-growth businesses, as set out earlier by my noble friend Lord Mitchell. Yet we know that our economic regeneration, and our future, rest on their shoulders. Something is amiss.

This does not feel like a competitive industry when customers cannot get what they want: money for investment. Thus Amendment 24BJ seeks to force the CMA to undertake some serious research on competition in the financial services sector. When we discussed these issues during our debates on the Financial Services Bill, we were told that the CMA would be the lead regulator on competition—the FCA’s role being to promote competition, it seems, rather than deal with its absence—so now we ask the CMA to do just that. I beg to move.

Viscount Younger of Leckie: I thank the noble Baroness, Lady Hayter, for these amendments.

To be effective, the CMA needs to be able to independently determine its own priorities, but its ability to do this would be undermined by the obligation under Amendment 24BH to undertake regular reviews of one particular sector. As we have discussed, the Government are of course determined to improve financial regulation. Markets and market regulation evolve and, by requiring the CMA to carry out studies every two years, this amendment might have the effect of limiting the ability of the CMA to carry out higher-priority work.

The CMA also needs to be able to choose which tool to deploy. During the course of a targeted investigation, Amendment 24BH could require the CMA to produce a general report on the financial sector. In these circumstances, the reporting requirement could waste resources, interfere with an investigation or even act as a disincentive to initiate a separate investigation in the first place.

Finally, while the CMA will be the central competition authority, the FCA will be the lead regulator in the financial services sector, funded by an industry levy. It would be duplicative for the CMA to be required to carry out detailed scrutiny of conduct in the financial services sector at taxpayers’ expense, as required by Amendment 24BH. The OFT and the Competition Commission’s scrutiny powers will be transferred to the CMA by order, under this Bill. New arrangements for co-operation between the CMA and the Financial Conduct Authority will ensure that the two bodies work well together. They will both, of course, have the power to carry out research and publish reports, as envisaged by these amendments. I therefore ask the noble Baroness to withdraw her amendment.

Baroness Hayter of Kentish Town: I thank the Minister for that. There is one bit of that which I can accept—that it may not be necessary to do this every two years. But there is a major problem in this sector of financial services, and it is time that the Government accepted

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that. In the Financial Services Bill they are rejigging the architecture, a bit like this, taking the FSA and splitting it in two, sending one bit to Threadneedle Street and letting the other bit stay in Canary Wharf. None of that will seize the problem of the banking industry. I wonder whether the Government are ever going to do it. This was another way to say that this is an industry, and a market, that needs looking at. If it is not going to be done by the FCA, which is not going to have the same powers, surely it should be done by the CMA—if not every two years, even as a one-off now—to see whether we can sort this industry.

This is something that we will certainly need to come back to. The Minister referred to arrangements between the CMA and FCA, but so far the Government have absolutely refused even to accept the obligation to have an MoU between those two. We will come back to that in this Bill. There is something fundamentally wrong in this enormously important sector, which is failing to serve consumers and industry, small companies in particular, and no one seems willing to do anything about it. We will come back to this, maybe without the reference to “two years”. For the moment, I withdraw the amendment.

Amendment 24BH withdrawn.

Amendments 24BJ and 24BK not moved.

Schedule 4 agreed.

Clause 21 : Abolition of the Competition Commission and the OFT

Debate on whether Clause 21 should stand part of the Bill.

Viscount Eccles: My Lords, this is a draconian clause. It follows a scheme of the Public Bodies Act in abolishing the Competition Commission and the Office of Fair Trading. It is not an even-handed abolition, because, as I have argued previously, the Office of Fair Trading really continues. It is changing its name to the Competition and Markets Authority, but it is in effect the OFT. I asked about Part 4 and did not get an answer to it. I asked why the Government had made the choice of creating a new body as opposed to continuing with the OFT, and did not get an answer to that either.

At the moment, I am yet to be convinced that these dramatic changes to the structure of the competition regime are justified. That needs to be seen against a background in which the annual cost of the OFT is somewhat over £70 million and the cost of the Competition Commission is somewhat over £15 million. So in the actual money figures, it is 80% the OFT and 20% the Competition Commission. I cannot accept that any argument has been made about money. It is not really claimed in the impact assessment—“ultimately” is the word that is used. I simply do not see that this is an important consideration in the change in structure, and I am conscious of the need to restrain public expenditure. It is said in several places in the Bill that

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all that this provision is intended to do is to make it somewhat more straightforward for the two organisations to reduce their costs in line with the existing government public spending targets.

We are left with a situation whereby the OFT is taking over the Competition Commission. The commission is disappearing as an executive body and will have no management role—it will not manage itself. It is being turned into panel of mostly, if not all, part-time members—we have not been told—who are part of the Office of Fair Trading. The risk that this will go wrong greatly outweighs any benefits. We have already talked about the need to do things in a more timely fashion. How could I disagree with that? I remember carrying out investigations and coming up with an answer pretty quickly, and it can of course be done under the existing regime. There is nothing wrong with the law.

The money and the timeliness have gone. What else is left? Something is said about the duplication of the provision of information but, unfortunately, I do not see how that holds because if you make a reference, surely the people who will come to some form of judicial judgment have to start from a zero base. They simply cannot rely on what has been done before. Of course they will gather as much information as they can, but that will not stop them needing to obtain self-standing information of their own, in order to come to a semi-judicial decision.

I ask my noble friend: has the department taken legal advice? Has it been to the Attorney-General? The risk that this regime will be challenged is real. I am not just making it up. I cannot see where the benefits outweigh the risk. It seems to me that the risk outweighs the benefits by many times in terms of both time and money. I urge my noble friend to go back and give this another thought because, quite honestly, the game is not worth the candle, the risk is far too great, and the benefits do not exist—and if they do, I have not been told about them. I cannot even imagine what they will be when I am told about them, but I should like to hear them.

I remain unconvinced, as my noble friend Lord Razzall, who is no longer in his place, said. I conclude by saying that I am not in any way casting the smallest of aspersions on the noble Lord, Lord Currie of Marylebone. How could I do that? I was born in the borough of Marylebone. What he has done was done in good faith—being taken on as chairman-designate of something that, at the moment, I believe to be a greatly mistaken structure.

Baroness Oppenheim-Barnes: My Lords, the Committee will be delighted to hear that because I have already made a number of points regarding Clause 20, which obviously related to Clause 21 also, I will not repeat them. However, I must continue to express the concern that was not answered, although I made the point, about the period of hiatus between enactment and the appointment of the new board. None of that can take place. I do not know what the housekeeping requirements are regarding new buildings or offices, but the fact remains that it will be a very damaging hiatus. In particular, as I mentioned at the time, is the effect that

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the Bill will have on the Consumer Credit Act. Appeals that are brought under the Consumer Credit Act will be in some sort of abeyance. Nothing will happen until the new legislation is enacted and all parts of the various appointments to the two bodies that we have been discussing this afternoon have been made. A lot of concern has been expressed by those in the financial sector about this and we deserve some sort of answer at this stage.

7.30 pm

Lord Deben: My Lords, I refer to my entry in the House of Lords register of interests. This gives me a good opportunity to ask one question of the Minister: has he noticed that this Part of the Bill refers to many things which were in the Financial Services Bill and that both are entirely different from everything else the Government are doing? In every other part of the Government’s actions we are reducing the amount of regulation. Much of the Bill is about that, but when we get on to the financial services arrangements, we are laying more and more emphasis upon more and more regulation and there is no indication, in my view, that it is going to be any better. It is really beginning to bug me that much of what has gone wrong was, of course, the fault of the financial services—I am not for one moment denying that—and certainly the fault of the banks, but I cannot honestly say that the regulator has come out of it with a great deal of praise. Indeed, a number of the things that went wrong can be laid directly at the door of the regulator. So the regulator then comes back and says, “Well, the only way to solve these problems is to have more regulation and more powers, so we can get it more wrong.”

My worry is simply that everywhere else in the Government’s programme, the Government have made the argument that if we have too heavy regulation, we do not have innovation, we do not have new things, we do not have new ideas and new mechanisms to meet the new circumstances of Britain, which after all is in competition with the rest of the world. That is the logic, that is the argument; an argument I buy into. The one area in which that is evidently not true is this one. So now we have had two Bills which interrelate and in this Part of the Bill, which is otherwise an admirable Bill, it has merely gone on doing what the Financial Services Bill had so wrongly done elsewhere. So we have an attitude to regulation which is entirely inconsistent.

We have just had two Bills going through the House of Lords and noble Lords may have noticed that the passage of the Civil Aviation Bill was entirely filled with speeches by Ministers about how wonderful it was that the public was now going to have a great deal more say and more appeal, and the regulators were not going to be able to ride roughshod over customers, businesses and the like. At exactly the same time, we introduced another Bill saying there are going to be no appeals, the public are not going to have a say, businesses are not going to have a say but instead we will have tougher and tougher regulations. I find this incomprehensible and as I have tried on several occasions to raise it in detail it would help me a great deal if the Minister would explain the rather curious mismatch.

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Of course, the party opposite has not raised this very much because it wants more regulation in every circumstance: we know that. I raise it at this opportunity because I cannot do it on the amendments of the noble Baroness, Lady Hayter, but I think that in 10 years’ time—probably in five years’ time—people will look back at this period in Parliament and say, “What the blazes were they doing making the British financial industry less able to compete and less able to innovate, when they were doing so much good stuff in the whole of the rest of British industry?”.

Baroness Hayter of Kentish Town: I shall try to resist temptation. As to spectacles, of course it was the consumers who most wanted opticians not to be regulated. It has benefited us all because we have been able to buy much cheaper glasses than we used to.

I would like to ask the Minister, in the complete secrecy of this room, with only a few Hansard writers and television watchers present, that if his Government had not wanted a bonfire of the quangos, would this merger ever have gone ahead? Was it just another number in the bonfire of the quangos or did BIS always want this?

Viscount Eccles: Before the Minister replies, I would like to thank the noble Baroness for her comment. There may well be another, very general, explanation. I have worked in the public sector in a number of different bodies. I once received a letter saying that the Minister understood that I did not wish to be reappointed to this body because I was too busy—it was a Department of Trade and Industry body—but that was not the reason. The reason was that I had attended a meeting and voted against a grant to a company because I thought it was not a sound company. However, the grant was passed and paid out and the business went bust. I was too clever because I had got it right and so I had to be removed.

There are few of us here but this important general explanation will be reported in Hansard.There is a strong wish in departments—this is a general comment—to reduce the independence of public bodies, to centralise their activities and to get them back as close to the Ministry as they can. The Competition Commission has been an independent body for 60-something years, so how did it get into the Public Bodies Act that these two organisations would be merged? It cannot have got in as a result of the Cabinet Office saying, “Have you got any good ideas?” There must have been somewhere in the purlieus of BIS a document saying, “Would it not be a good idea to reform the competition regime?”

I believe that this merger has not ever been given the proper consideration by the Government that it needs to assess the risk in what is proposed, and to offset that risk against the apparently negligible benefits.

Baroness Oppenheim-Barnes: To add to what my noble friend has said—we are fortunate to have him here today—I would like to know whether the Bill ever went through Cabinet. I find it difficult to believe that some of these points would not have been raised at that time, and properly so.

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Viscount Younger of Leckie: My Lords, the CMA will be equipped with a wide range of tools to remedy anti-competitive practices and to promote effective competition in markets across the UK economy. It has been somewhat of a challenge today to answer the questions raised by my noble friend Lord Eccles, but I am prepared to have another go.

At the beginning and at the end of the day, my noble friend raised the question: why reform the current institutional structure; why make the change? I reiterate that bringing the Competition Commission and the competition functions of the Office of Fair Trading together in a single body provides the opportunity for greater coherence in competition policy and practice, a more streamlined approach to decision making, a stronger oversight of the end-to-end case management process, as I mentioned earlier, more flexibility in resource utilisation and better incentives to use anti-trust and markets tools to deal efficiently with competition problems.

Furthermore, it provides a single powerful advocate to speak for competition across the economy in Europe and globally. While it is not a central driver for the creation of the new CMA, there will be scope for some long-term savings, in particular in corporate governance, back-office functions and accommodation costs. I reiterate that this process is not solely about saving on costs. Some costs will be saved, and it is fully expected that some synergies will be made, but a vast number of skills will be transferred over to the new CMA. I hope that that helps somewhat to allay my noble friend’s fears.

My noble friend Lady Oppenheim-Barnes also raised some questions about the fundamental concept of setting up the CMA. Ministers consider competitive markets to be vital to the economy. That has been said many times in recent weeks and months. BIS Ministers have consistently made it clear that the main purpose of the exercise is to strengthen the competition regime and to support growth rather than to cut costs. The new CMA will be sufficiently resourced to deliver its functions but will not be immune from wider pressures to help deal with the UK’s massive deficit. Savings delivered by the creation of the CMA will mainly be from streamlining, which I mentioned earlier, and eliminating overlaps between phase 1 and phase 2 of investigations. These savings will help to deliver the Government’s existing spending review targets.

The Government are committed to ensuring a smooth transition process and will work closely with the OFT and the Competition Commission to minimise disruption to the organisations while they continue to carry out their important roles and services. I wish to reassure the noble Baroness, Lady Hayter, that this whole process was looked at most carefully in Cabinet.

In response to a question raised by my noble friend Lady Oppenheim-Barnes on the transition, as we are aware, the Government have appointed the noble Lord, Lord Currie of Marylebone, as chair designate of the new CMA and is in the process of recruiting the chief executive designate. Together they will lead the transition to the new CMA. During our Second Reading debate,

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the noble Lord, Lord Currie, said that in addition to creating a high-performance organisation he was committed, in transition terms, to ensuring,

“that the casework of both the Office of Fair Trading and the Competition Commission continues unimpeded and that the transition of work in progress to the new authority is entirely seamless”.

He assured noble Lords:

“We will safeguard business as usual.’—[

Official Report,

14/11/12; col. 1561.]

Finally, I shall answer a question raised by my noble friend Lord Deben about what will happen to the Financial Services and Markets Act in relation to the OFT oversight of the regulatory regime, if I read him correctly. Consideration of competition must be a central feature of the new financial services regulatory regime so we will therefore retain a regime for scrutiny of the regulation of financial services by the CMA. This will apply to both the Financial Conduct Authority and the Prudential Regulation Authority.

Clause 21 and Schedules 5 and 6 provide for the transfer of relevant tools and functions of the OFT and the functions of the Competition Commission to the CMA. The new authority will operate the anti-trust mergers and markets regimes and will determine regulatory appeals and references made to it in the major regulated sectors. It will carry out various ancillary competition scrutiny functions and provide businesses with advice and guidance to help them to understand and comply with competition law. Schedule 5 also provides that certain functions under the Enterprise Act, in particular phase 2 of the mergers and markets processes, will be the responsibility of groups of independent panellists. I commend Clause 21 to the Committee.

Viscount Eccles: Before my noble friend sits down, could I ask that my questions that have not been answered are dealt with in writing? I would appreciate that. As far as I am concerned, this is definitely not the end of the matter. I will review my very real worries about what is being done here and no doubt come back to them at the next stage of the Bill.

Viscount Younger of Leckie: I did not necessarily expect to answer all my noble friend’s questions. However, I have attempted to address on many occasions the question that he has put in terms of the fundamentals of setting up the CMA. I hoped that I had answered him. Clearly I have not and I will certainly write to my noble friend to address the questions that he feels are unanswered.

Viscount Eccles: For the last time, the fundamental question is: are the Government sure that the supposed benefits outweigh the risks? We have not really coped with that at all today. There is a real risk. When the thing is not broken, why try to mend it? The competition regime has been very good over many years. In my opinion, the Government are taking a quite unjustifiable risk of running that regime into a brick wall. That is the question and that is why I am not satisfied that the Government have really thought this through if they cannot tell me that they have taken proper legal advice

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about the risk they are running. For a very long time, the whole of business and industry has understood that this was done in two places. There was a reference from here and an investigation and determination over there. Change that and—believe you me—a lot of people, when they find out that that is what has happened, are not going to like it. If their lawyers come with them, there could be real trouble. I feel very strongly that the matter of risk needs to be dealt with. It is not a matter of efficiency or effectiveness—you can imagine all sorts of efficiencies, effectiveness and even economies—but a matter of risk.

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Clause 21 agreed.

Schedule 5 : Amendments related to Part 3

Amendment 24BL not moved.

Baroness Stowell of Beeston: My Lords, this may be a convenient moment for the Committee to adjourn until Tuesday next week at 3.30 pm.

Committee adjourned at 7.47 pm.